DRAFT RED HERRING PROSPECTUS

Transcription

1 DRAFT RED HERRING PROSPECTUS Dated January 21, 2011 Please read Sections 60 and 60B of the Companies Act, 1956 The Draft Red Herring Prospectus will be updated upon filing with the RoC 100% Book Built Issue Joyalukkas India Limited Our Company was incorporated as a private limited company under the Companies Act, 1956 on April 22, 2002, under the name and style of Joy Alukkas Traders (India) Private Limited. Subsequently, pursuant to a fresh certificate of incorporation dated December 23, 2009, the name of our Company was changed to Joyalukkas India Private Limited. Our Company was converted into a public limited company on December 9, 2010, and consequently, our name was changed to Joyalukkas India Limited and our Company was allotted a fresh corporate identity number U51398KL2002PLC For details of changes in our constitution, name and registered office, see History and Corporate Structure on page 87. Registered and Corporate Office: Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi , Kerala, India. Tel: (91 484) ; Fax: (91 484) Company Secretary and Compliance Officer: Varun T. V.; Website: investors@joyalukkas.com PROMOTER: ALUKKAS VARGHESE JOY PUBLIC ISSUE OF 18,000,000 EQUITY SHARES OF ` 10 EACH OF JOYALUKKAS INDIA LIMITED (THE COMPANY OR THE ISSUER ) FOR CASH AT A PRICE OF ` [ ] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF ` [ ] PER EQUITY SHARE) (THE ISSUE ) AGGREGATING TO ` [ ] MILLION. THE ISSUE WOULD CONSTITUTE 26.46% OF THE POST ISSUE PAID UP EQUITY CAPITAL OF OUR COMPANY. THE FACE VALUE OF THE EQUITY SHARES IS ` 10. THE FLOOR PRICE IS [ ] TIMES THE FACE VALUE AND THE CAP PRICE IS [ ] TIMES THE FACE VALUE. THE FACE VALUE OF THE EQUITY SHARES IS ` 10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY THE COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGERS AND WILL BE ADVERTISED AT LEAST TWO WORKING DAYS PRIOR TO THE BID/ ISSUE OPENING DATE. In case of a revision in the Price Band, the Bidding/Issue Period will be extended for at least three additional Working Days after revision of the Price Band, subject to the Bidding/Issue Period not exceeding ten Working Days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited ( BSE ) and the National Stock Exchange of India Limited ( NSE ), by issuing a press release, and also by indicating the change on the websites of the Book Running Lead Managers ( BRLMs ) and at the terminals of the other members of the Syndicate. This being an Issue for Equity Shares representing more than 25% of the post-issue equity share capital of the Company, Equity Shares will be offered to the public for subscription in accordance with Rule 19(2)(b)(i) of the Securities Contracts Regulations Rules, 1957, as amended ( SCRR ). The Issue is being made pursuant to Regulation 26(1) of the SEBI ICDR Regulations through the 100% Book Building Process wherein not more than 50% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers ( QIBs ) ( QIB Portion ). 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 of the QIB Portion 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 shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. All potential investors, other than Anchor Investors, may participate in the Issue through an Application Supported by Blocked Amount ( ASBA ) process providing details about the bank account which will be blocked by the Self Certified Syndicate Banks ( SCSBs ) for the same. For details, please see the section titled Issue Procedure on page 244. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of the Issuer, there has been no formal market for the Equity Shares of the Issuer. The face value of the Equity Shares is ` 10 and the Floor Price is [ ] times of the Face Value. The Issue Price (as determined and justified by the lead merchant banker and the Issuer as stated under the paragraph on Basis for Issue Price ) should not be taken to be indicative of the market price of the specified securities after the specified securities are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares of the Issuer or regarding the price at which the Equity Shares will be traded after listing. IPO GRADING This Issue has been graded by [ ] as [ ], indicating [ ]. The IPO Grading is assigned on a five point scale from one to five, with IPO Grade 5/5 indicating strong fundamentals and IPO Grade 1/5 indicating poor fundamentals. For details, see General Information on page 13. 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. For taking an investment decision, investors must rely on their own examination of the Issuer 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 this Draft Red Herring Prospectus. Specific attention of the investors is invited to the statement of Risk Factors on page x. ISSUER S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING ARRANGEMENT The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the BSE and the NSE. We have received an in-principle approval from the BSE and the NSE for the listing of our Equity Shares pursuant to their letters dated [ ] and [ ], respectively. For the purposes of this Issue, the Designated Stock Exchange shall be [ ]. BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE Enam Securities Private Limited 801, Dalamal Tower Nariman Point Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) joy.ipo@enam.com Investor Grievance complaints@enam.com Website: Contact Person: Anurag Byas SEBI Registration No.: INM Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar Nariman Point Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) joy.ipo@citi.com Investor Grievance investors.cgmib@citi.com Website: Contact Person: Rajiv Jumani SEBI Registration No.: INM Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, L.B.S. Marg Bhandup (West), Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) jil.ipo@linkintime.co.in Website: Contact Person: Sachin Achar SEBI Registration No: INR BID/ISSUE PROGRAMME BID/ISSUE OPENS ON* [ ] BID/ISSUE CLOSES ON: FOR QIB BIDDERS [ ]** FOR RETAIL AND NON-INSTITUTIONAL BIDDERS: [ ] * Our Company may consider participation by Anchor Investors. Anchor Investor Bid /Issue Period shall be one Working Day prior to the Bid/Issue Opening Date. **Our Company may consider closing the Bid/Issue Period for QIB Bidders one day prior to the Bid/Issue Closing Date

2 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 BUSINESS... 4 SUMMARY FINANCIAL INFORMATION... 9 THE ISSUE...12 GENERAL INFORMATION...13 CAPITAL STRUCTURE...23 OBJECTS OF THE ISSUE...31 BASIS FOR ISSUE PRICE...38 STATEMENT OF TAX BENEFITS...41 SECTION IV ABOUT THE COMPANY...54 INDUSTRY OVERVIEW...54 OUR BUSINESS...65 REGULATIONS AND POLICIES...82 HISTORY AND CORPORATE STRUCTURE...87 OUR MANAGEMENT...90 OUR PROMOTER GROUP ENTITIES DIVIDEND POLICY SECTION V FINANCIAL STATEMENTS RESTATED STANDALONE FINANCIAL STATEMENTS MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL INDEBTEDNESS SECTION VI LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS GOVERNMENT APPROVALS OTHER REGULATORY AND STATUTORY DISCLOSURES SECTION VII ISSUE INFORMATION TERMS OF THE ISSUE ISSUE STRUCTURE ISSUE PROCEDURE RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES SECTION VIII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION SECTION IX OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION DECLARATION ANNEXURE GRADING RATIONALE FOR IPO GRADING...314

3 SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS Unless the context otherwise indicates or implies, the following terms have the following meanings in this Draft Red Herring Prospectus, and references to any statute or regulations or policies shall include amendments thereto, from time to time: Term We, us, our Joyalukkas, Issuer, the Company or our Company Description Unless stated otherwise, refers to Joyalukkas India Limited, a public limited company incorporated under the Companies Act having its registered office at Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi , Kerala, India Issue Related Terms Term Allotment/Allot/Allotted Allotment Advice Allottee Anchor Investor Anchor Investor Bid/Issue Period Anchor Investor Bidding Date Anchor Investor Issue Price Anchor Investor Portion Application Supported by Blocked Amount/ ASBA ASBA Account ASBA Bidder ASBA Bid cum Application Form or ASBA BCAF ASBA Revision Form Banker(s) to the Issue/Escrow Collection Bank(s) Basis of Allotment Bid Description Unless the context otherwise requires, the allotment of Equity Shares pursuant to the Issue The advice on intimation of Allotment of the Equity Shares sent to the Bidders who are to be Allotted the Equity Shares after discovery of the Issue Price in accordance with the Book Building process A successful Bidder to whom the Equity Shares are Allotted A Qualified Institutional Buyer, applying under the Anchor Investor category, who has Bid for Equity Shares amounting to at least ` million The date one day prior to the Bid/Issue Opening Date on which bidding by Anchor Investors shall open and shall be completed The date one day prior to the Bid Opening Date, prior to or after which the Syndicate will not accept any Bids from Anchor Investors The final price at which Equity Shares will be issued and Allotted in terms of the Red Herring Prospectus and the Prospectus to the Anchor Investors, which will be a price equal to or higher than the Issue Price but not higher than the Cap Price. The Anchor Investor Issue Price will be decided by our Company in consultation with the BRLMs prior to the Bid Opening Date Up to 30% of the QIB Portion which may be allocated by our 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 allocation is being done to Anchor Investors An application, whether physical or electronic, used by a Bidder to make a Bid authorizing an SCSB to block the Bid Amount in their ASBA Account Account maintained by an ASBA Bidder with a SCSB which will be blocked by such SCSB to the extent of the Bid Amount as mentioned in the ASBA Bid cum Application Form of the ASBA Bidder Any Bidder, other than an Anchor Investor who intends to apply through ASBA The form, whether physical or electronic, used by an ASBA Bidder to make a Bid, authorising a SCSB to block the Bid Amount in the ASBA account maintained with such SCSB which will be considered as the application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus 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 revision form(s) The banks which are clearing members and registered with SEBI as Banker to the Issue with whom the Escrow Account will be opened, in this case being [ ] The basis on which Equity Shares will be Allotted to Bidders under the Issue and which is described in Issue Procedure Basis of Allotment on page 269 An indication to make an offer during the Bidding/Issue Period by a Bidder (including an ASBA Bidder), or on the Anchor Investor Bidding Date by an Anchor Investor, pursuant to submission of a Bid cum Application Form to subscribe to our Equity Shares at a price within the Price Band, including all revisions and modifications thereto i

4 Term Bid Amount Bid /Issue Closing Date Bid /Issue Opening Date Bid cum Application Form Bidder Bidding/Issue Period Book Building Process/Method BRLMs/ Book Running Lead Managers CAN/Confirmation of Allotment Notice Cap Price Citi Controlling Branches Cut-off Price Demographic Details Designated Branches Designated Date Designated Stock Exchange Draft Red Herring Prospectus/DRHP Eligible NRI Enam Description The highest value of the optional Bids indicated in the Bid cum Application Form The date after which the Syndicate will not accept any Bids for the Issue, which shall be notified in [ ] edition of [ ] an English national daily newspaper, [ ] edition of [ ], a Hindi national daily newspaper and [ ] edition of [ ], a Malayalam newspaper, each with wide circulation The date on which the Syndicate shall start accepting Bids for the Issue, which shall be the date notified in [ ] edition of [ ] an English national newspaper and [ ] edition of [ ] a Hindi national newspaper and [ ] edition of [ ] a Malayalam newspaper, each with wide circulation The form used by a Bidder 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 including the ASBA Bid cum Application as may be applicable Any prospective investor who makes a Bid pursuant to the terms of the Draft Red Herring Prospectus and the Bid cum Application Form, including an ASBA Bidder and Anchor Investor The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids Book building process as provided in Schedule XI of the SEBI ICDR Regulations, in terms of which this Issue is being made Book Running Lead Managers to the Issue, in this case being Enam Securities Private Limited and Citigroup Global Markets India Private Limited Except in relation to Anchor Investors, the note or advice or intimation of Allotment of Equity Shares sent to the successful Bidders who have been Allotted Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, including any revisions thereof In relation to Anchor Investors, the note or advice or intimation of Allotment of Equity Shares sent to the successful Anchor Investors who have been Allotted Equity Shares after discovery of the Anchor Investor Issue Price, including any revisions thereof The higher end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted, including any revisions thereof Citigroup Global Markets India Private Limited, having its office at 12th floor, Bakhtawar, Nariman Point, Mumbai , Maharashtra, India Such branches of the SCSB which coordinates with the BRLMs, the Registrar to the Issue and the Stock Exchanges, a list of which is provided on Issue Price, finalised by our Company in consultation with the BRLMs. Only Retail Individual Bidders whose Bid Amount does not exceed ` 200,000 are entitled to Bid at the Cut-off Price. QIBs and Non-Institutional Bidders are not entitled to Bid at the Cut-off Price Demographic details of the ASBA Bidders obtained by Registrar to the Issue from the Depository including address, Bidders bank account, MICR code and occupation details Such branches of the SCSBs which shall collect the ASBA Bid cum Application Forms used by ASBA Bidders and a list of which is available on The date on which funds are transferred from the Escrow Account to the Public Issue Account and the amount blocked by the SCSB is transferred from the bank account of the ASBA Bidder to the Public Issue Account, as the case may be, after the Prospectus is filed with the RoC, following which the Board of Directors shall Allot Equity Shares to successful Bidders [ ] This Draft Red Herring Prospectus dated January 21, 2011 issued in accordance with Section 60B of the Companies Act, which does not contain complete particulars of the price at which the Equity Shares are issued and the size (in terms of value) of the Issue NRIs from jurisdictions outside India where it is not unlawful to make an issue or invitation under the Issue and in relation to whom the Draft Red Herring Prospectus constitutes an invitation to subscribe to the Equity Shares Allotted herein Enam Securities Private Limited, having its office at 801, Dalamal Tower, Nariman Point, Mumbai , Maharashtra, India ii

5 Term Description Equity Shares Equity shares of our Company having a face value of ` 10 each, unless otherwise specified Escrow Account Account to be opened with the Escrow Collection Bank(s) for the Issue and in whose favour the Bidder (excluding the ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount when submitting a Bid Escrow Agreement Agreement to be entered into by our Company, the Registrar to the Issue, the BRLMs, the Syndicate Members and the Escrow Collection Bank(s) for collection of the Bid Amounts and where applicable, refunds of the amounts 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 Revision Form or the ASBA Bid cum Application Form Floor Price The lower end of the Price Band, at or above which the Issue Price will be finalised and below which no Bids will be accepted Gross Proceeds The gross proceeds of the Issue of ` [ ] IPO Grading Agency [ ] Issue Public issue of 18,000,000 Equity Shares each of our Company for cash at a price of ` [ ] per Equity Share aggregating to ` [ ] million Issue Agreement The agreement entered into between our Company and the BRLMs on January 21, 2011, 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 decided by our Company in consultation with the BRLMs on the Pricing Date Issue Proceeds The proceeds of the Issue that are available to our Company Monitoring Agency [ ] Mutual Fund Portion 5% of the QIB Portion or 450,000 Equity Shares available for allocation to Mutual Funds only, out of the QIB Portion Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended Net Proceeds The Issue Proceeds less the Issue expenses. For further information about use of the Issue Proceeds and the Issue expenses see Objects of the Issue on page 31 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 ` 200,000 (but not including NRIs other than eligible NRIs) Non-Institutional Portion The portion of the Issue being not less than 2,700,000 Equity Shares available for allocation to Non-Institutional Bidders Net QIB Portion The portion of the QIB Portion less the number of Equity Shares Allotted to the Anchor Investors, being a minimum of [ ] Equity Shares to be Allotted to QIBs on a proportionate basis Non-Resident A person resident outside India, as defined under FEMA and includes a Non Resident Indian Price Band Price Band of a minimum price of ` [ ] (Floor Price) and the maximum price of ` [ ] (Cap Price) and includes revisions thereof. The price band will be decided by our Company in consultation with the BRLMs and advertised at least two (2) Working Days prior to the Bid/Issue Opening Date in [ ] edition of [ ] an English national daily newspaper, [ ] edition of [ ], a Hindi national daily newspaper and [ ] edition of [ ], a Malayalam newspaper, each with wide circulation Pricing Date The date on which our Company in consultation with the BRLMs, 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 to be opened with the Bankers to the Issue to receive monies from the Escrow Account and the bank account of the ASBA Bidders, on the Designated Date QIB Portion The portion of the Issue being not more than 9,000,000 Equity Shares to be Allotted Qualified Institutional Buyers or QIBs to QIBs Public financial institutions as specified in Section 4A of the Companies Act, scheduled commercial banks, mutual fund registered with SEBI, FIIs and sub-account registered with SEBI, other than which is a foreign corporate or foreign individual, venture capital fund registered with SEBI, state industrial development corporation, insurance company registered with IRDA, provident fund with minimum corpus of ` iii

6 Term Description 250 million, pension fund with minimum corpus of ` 250 million and National Investment Fund set up by Government of India, insurance funds set up and managed by army, navy or air force of the Union of India and insurance funds set up by Department of Posts such as Postal Life Insurance Fund and Rural Postal Life Insurance Fund. Foreign Venture Capital Investors registered with SEBI and multilateral and bilateral financial institutions are not eligible to participate in the Issue. Red Herring Prospectus or RHP The Red Herring Prospectus dated [ ] issued in accordance with Section 60B of the Companies Act, which does not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue. The Red Herring Prospectus will be filed with the RoC at least three (3) days before the Bid Opening Date and will become a Prospectus upon filing with the RoC after the Pricing Date Refund Account(s) 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 ASBA Bidder) shall be made Refund Banker(s) [ ] Refunds through electronic Refunds through NECS, Direct Credit, NEFT, RTGS or the ASBA process, as transfer of funds applicable Registrar/Registrar to the Issue Link Intime India Private Limited having its office at C-13, Pannalal Silk Mills Resident Retail Individual Investor or Resident Retail Individual Bidder Compound, L.B.S. Marg, Bhandup West, Mumbai , Maharashtra, India Retail Individual Bidder who is a person resident in India as defined under FEMA and who has not Bid for Equity Shares for an amount more than ` 200,000 in any of the bidding options in the Issue Restated Financial Statements Our restated standalone financial information as at and for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and the six months period ended September 30, 2010, prepared in accordance with Indian GAAP and the SEBI ICDR Regulations Retail Individual Bidder(s) Retail Portion Revision Form SEBI FII Regulations SEBI ICDR Regulations SEBI VCF Regulations Self Certified Syndicate Bank or SCSB Stock Exchanges Syndicate Syndicate Agreement Syndicate Members Takeover Code TRS/Transaction Registration Slip Underwriters Underwriting Agreement Working Day Issuer and Industry Related Terms Individual Bidders (including HUFs applying through their karta, Eligible NRIs and Resident Retail Individual Bidders) who have not Bid for Equity Shares for an amount more than ` 200,000 in any of the bidding options in the Issue The portion of the Issue being not less than 6,300,000 Equity Shares available for allocation to Retail Individual Bidder(s) The form used by the Bidders to modify the quantity of Equity Shares or the Bid Price in any of their Bid cum Application Forms or any previous Revision Form(s) SEBI (Foreign Institutional Investors) Regulations 1995, as amended SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended SEBI (Venture Capital Funds) Regulations, 1996 as amended The Banks which are registered with SEBI under SEBI (Bankers to an Issue) Regulations, 1994, as amended and offers services of ASBA, including blocking of bank account and a list of which is available on The BSE and the NSE The BRLMs and the Syndicate Members (if any) The agreement to be entered into between the Syndicate and our Company in relation to the collection of Bids in this Issue (excluding Bids from the ASBA Bidders) [ ] SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended The slip or document issued by a member of the Syndicate or the SCSB (only on demand), as the case may be, to the Bidder as proof of registration of the Bid The BRLMs and the Syndicate Members The agreement among the Underwriters and our Company to be entered into on or after the Pricing Date All days other than a Sunday or a public holiday (except during the Bid/Issue Period where a working day means all days other than a Saturday, Sunday or a public holiday), on which commercial banks in Mumbai are open for business Term Articles/Articles of Association Auditors Description The articles of association of our Company The statutory auditors of our Company, B S R & Co., Chartered Accountants iv

7 Term Audit Committee Board of Directors/Board Gold Group Entities/Group Companies Investor Grievance Committee JCK India Joyalukkas Group Key Management Personnel Large Format Store(s) Listing Agreement Memorandum/ Memorandum of Association Premier Store(s) Promoter Promoter Group Registered/Corporate Office Subsidiary Wedding Centre Description The committee of the Board of Directors constituted as our Company s Audit Committee in accordance with Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges The board of directors of our Company or a committee duly constituted thereof Means and includes gold jewellery, used gold purchased from our customers, bullion, standard gold and all other forms of gold held by our Company Includes those companies, firms, ventures, etc. promoted by the Promoter, irrespective of whether such entities are covered under section 370 (1)(B) of the Companies Act, and as enumerated in the section titled Group Entities, beginning on page 104 The committee of the Board of Directors constituted as our Company s Shareholders /Investor Grievance Committee in accordance with Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges JCK India, April 2007 edition, published by the Reed Infomedia India Entities promoted by our Promoter and engaged in the business of retailing of jewellery and/or textiles The officers vested with executive powers and the officers at the level immediately below the Board of Directors and other persons whom our Company has declared as a key management personnel, and as enumerated in the section titled Our Management, beginning on page 90 Our retail stores each having a store area of 12,000 sq. ft. or more Listing agreement to be entered into between our Company and the Stock Exchanges The memorandum of association of our Company Our three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft. Alukkas Varghese Joy Includes such persons and entities who constitute our promoter group pursuant to Regulation 2(1)(zb) of the SEBI ICDR Regulations and are listed in the section titled Our Promoters - Promoter Group on page 102 The registered office of our Company situated at Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi , Kerala, India Joyal Ornaments and Trades Private Limited Our retail stores through which we conduct the business of retailing of textiles, apparel and accessories along with jewellery Conventional and General Terms/Abbreviations Term A/c Act or Companies Act AED AGM AS ASBA AY BRLMs BSE CAGR CAN CARE CARE Report CARE Research CDSL CESTAT CIT Description Account Companies Act, 1956, as amended from time to time United Arab Emirates dirham Annual General Meeting Accounting Standards issued by the Institute of Chartered Accountants of India Applications Supported by Blocked Amounts Assessment Year Book Running Lead Managers The Bombay Stock Exchange Limited Compound Annual Growth Rate Confirmation of Allotment Notice Credit Analysis & Research Limited Report on the Indian Gems and Jewellery Industry dated June 2010 published by CARE Research CARE Research, a division of Credit Analysis & Research Limited Central Depository Services (India) Limited Customs, Excise and Service Tax Appellate Tribunal Commissioner of Income Tax v

8 Term Description CMC(s) Municipal Councils CRISIL Credit Rating Information Services of India Limited Depositories NSDL and CDSL Depositories Act The Depositories Act, 1996 as amended from time to time DIN Director Identification Number DIPP Department of Industrial Policy and Promotion DP/Depository A depository participant as defined under the Depositories Act, 1996 Participant DP ID Depository Participant s Identity EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation NECS National Electronic Clearing Service EGM Extraordinary General Meeting EPS Unless otherwise specified, Earnings Per Share, i.e., Net Profit attributable to equity shareholders as restated divided by the weighted average outstanding number of equity shares outstanding during that fiscal year ESI Act Employees State Insurance Act 1948 FCNR Account Foreign Currency Non Resident Account FDI Foreign Direct Investment FDI Circular The consolidated FDI policy effective from October 1, 2010 FEMA Foreign Exchange Management Act, 1999, as amended read with rules, regulations and notifications issued thereunder, as amended FEMA Regulations FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended FICCI Federation of Indian Chambers of Commerce and Industry FII(s) Foreign Institutional Investors as defined under SEBI (Foreign Institutional Investor) Regulations, 1995, as amended and registered with the SEBI under applicable laws in India Financial Period of twelve months ended March 31 of that particular year Year/Fiscal/FY FIPB Foreign Investment Promotion Board FVCI Foreign Venture Capital Investor registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000, as amended GDP Gross Domestic Product GIR Number General Index Registrar Number GoI/Government Government of India Gratuity Act Payment of Gratuity Act, 1972 HNI High Net worth Individual HUF Hindu Undivided Family ICAI Institute of Chartered Accountants of India IFRS International Financial Reporting Standards Income Tax Act The Income Tax Act, 1961, as amended Indian GAAP Generally Accepted Accounting Principles in India IMF International Monetary Fund IPO Initial Public Offering IS Indian Standard IT Information Technology ITAT Income Tax Appellate Tribunal JGEPC Gem and Jewellery Export Promotion Council JV Joint Venture KPCS Kimberley Process Certification Scheme MF Mutual Fund MICR Magnetic Ink Character Recognition Mn Million MoU Memorandum of Understanding NAV Net Asset Value NEFT National Electronic Fund Transfer No. Number NOC No objection certificate NR Non Resident NRE Account Non Resident External Account NRI Non Resident Indian, is a person resident outside India, who is a citizen of India or a person of vi

9 Term NRO Account NSDL NSE OCB Description Indian origin and shall have the same meaning as ascribed to such term in the Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time Non Resident Ordinary Account National Securities Depository Limited The National Stock Exchange of India Limited A company, partnership, society or other corporate body owned directly or indirectly to the extent of up to 60% by NRIs including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly and which was in existence on October 3, 2003 and immediately before such date was eligible to undertake transactions pursuant to the general permission granted to OCBs under the FEMA. OCBs are not allowed to invest in this Issue per annum Price/Earnings Ratio Permanent Account Number Profit After Tax p.a. P/E Ratio PAN PAT Payment of Bonus Act Payment of Bonus Act, 1965 PF Act Employees Provident Fund and Miscellaneous Provisions Act, 1952 PBT Profit Before Tax PIO Persons of Indian Origin PLR Prime Lending Rate PMLA Prevention of Money Laundering Act, 2002 RBI The Reserve Bank of India RoC The Registrar of Companies, Kerala and Lakshadweep at Ernakulam RONW Return on Net Worth Rs./ `/Rupees Indian Rupees RTGS Real Time Gross Settlement SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SEBI The Securities and Exchange Board of India constituted under the SEBI Act, 1992 SEBI Act Securities and Exchange Board of India Act 1992, as amended from time to time Sq.ft. square feet Stamp Act The Indian Stamp Act, 1899, as amended from time to time State Government The Government of a State of India Stock Exchange(s) BSE and/or NSE as the context may refer to U.S./USA United States of America U.S. GAAP Generally Accepted Accounting Principles in the United States of America USD/US$ United States Dollars VCFs Venture Capital Funds as defined and registered with SEBI under the SEBI (Venture Capital Fund) Regulations, 1996, as amended from time to time WGC World Gold Council WGC Reports India Gold Report India: Heart of Gold and Gold Demand Trends prepared by the World Gold Council vii

10 Financial Data PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated standalone financial information as at and for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and the six months period ended September 30, 2010, prepared in accordance with Indian GAAP and the SEBI ICDR Regulations, which are included in this Draft Red Herring Prospectus, and set out in Restated Standalone Financial Statments on page 113. Our financial year commences on April 1 and ends on March 31. In this Draft Red Herring Prospectus, 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 decimal points. Our Subsidiary Joyal Ornaments and Trades Private Limited, was incorporated on April 28, It has not commenced operations since its incorporation. It has an equity share capital of Rs. 0.1 million and a loss of Rs million for the period from April 28, 2010 to September 30, As the Subsidiary is not material, the consolidated financial statements have not been prepared and presented in the DRHP. For further details please refer Annexure IV to the Restated Financial Statements. There are significant differences between Indian GAAP, US GAAP and IFRS. We have not attempted to explain those differences or quantify their impact on the financials 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 Indian GAAP restated standalone financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader s level of familiarity with Indian GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this DRHP should accordingly be limited. Currency and Units of Presentation All references to Rupees or Rs. or ` are to Indian Rupees, the official currency of the Republic of India. All references to US$, USD or U.S. Dollar are to United States Dollars, the official currency of the United States of America. All references to AED are to United Arab Emirates dirham, the official currency of the United Arab Emirates. All references to GBP or or British Pound or Pounds are to United Kingdom Pounds, the official currency of the United Kingdom. Except where specified, in this DRHP us, all figures have been expressed in millions. Industry and Market Data Unless stated otherwise, industry and market data used throughout this DRHP has been obtained from industry publications and certain public 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. Although our Company believes that the industry and market data used in this DRHP is reliable, it has not been verified by us or any independent sources. Further, the extent to which the market and industry data presented in this DRHP is meaningful depends on the reader s familiarity with and understanding of methodologies used in compiling such data. viii

11 FORWARD-LOOKING STATEMENTS This Draft Red Herring Prospectus contains certain 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, 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 that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: Market price volatility of gold jewellery and bullion; General economic conditions, consumer confidence in future economic conditions and political conditions, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well-being and security, fuel prices, inclement weather, interest rates, sales tax rate increases, inflation etc; Changing industry trends and design preferences of our consumers; Performance of our three Premier Stores situated in Chennai, Bangalore and Coimbatore; Marketing initiatives and brand building exercises; Inventory loss due to third-party or employee theft; Confusion in the minds of customers due to the existence of other Alukkas brands; Failure to manage our inventory; Failure in evaluating the worth, purity and quality of jewellery; Inability to find suitable locations for opening new stores and Wedding Centres; Risks associated with third party suppliers and job-workers; The outcome of legal or regulatory proceedings that we are or might become involved in; Government approvals; Our ability to compete effectively, particularly in new markets and businesses; Our dependence on our Key Management Personnel and Promoter; Conflicts of interest with affiliated companies, the Group Entities and other related parties; Other factors beyond our control; and Our ability to manage risks that arise from these factors. For a further discussion of factors that could cause our actual results to differ, see Risk Factors Our Business and Management s Discussion of Financial Condition and Results of Operations on pages x, 65 and 157 respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company, our Directors, any member of the Syndicate nor any of their respective officers and/or 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 BRLMs and our Company will ensure that investors in India are informed of material developments until such time as the listing and trading permission is granted by the Stock Exchanges. ix

12 SECTION II RISK FACTORS An investment in our Equity Shares involves a high degree of risk. You should carefully consider all the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity Shares. 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 our Equity Shares could decline, and all or part of your investment may be lost. Unless otherwise stated, we are not in a position to specify or quantify the financial or other risks mentioned herein. The numbering of the risk factors has been done to facilitate ease of reading and reference and does not, in any manner, indicate a ranking of risk factors or the importance of one risk factor over another. This Draft Red Herring Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Draft Red Herring Prospectus. Unless otherwise stated, the financial information of the Company used in this section is derived from our restated financial statements included in Restated Standalone Financial Statments on page 113, prepared in accordance with Indian GAAP and requirements of the SEBI ICDR Regulations. Risks Relating to our Business 1. Our Promoter is a party to a criminal proceeding and any adverse development in relation to the same may materially and adversely affect our reputation. Our Promoter is a party to a criminal complaint initiated by the State of Kerala before the Judicial First Class Magistrate, Kottayam alleging the commission of certain offences, including criminal conspiracy, instigating the formation of unlawful assembly armed with weapons, trespass, assault and wrongful confinement within the premises of the defacto complainant. Further, vide order dated March 30, 2009, the High Court of Kerala has dismissed a criminal revision petition filed by our Promoter stating that it is too early in the stage of the proceedings to declare that there is insufficient material produced before the court to prosecute the accused. The court further directed our Promoter to file a discharge petition before the learned Magistrate within three weeks and directed not to insist personal appearance of our Promoter. In the event that any adverse order is passed in relation to the said proceedings or any other unfavourable outcome in connection with the same could materially and adversely affect the reputation of our Company. For further details, see Outstanding Litigation and Material Developments on page Our Company is subject to two independent proceedings before the Directorate of Enforcement, PMLA and FEMA, Government of India and our Promoter has been issued a summons in relation to one of them. Any adverse outcome in relation to these proceedings may materially and adversely affect our income and reputation. Our Company is subject to two independent proceedings initiated by the Directorate of Enforcement, PMLA and FEMA, Government of India (the DoE ). The first of these proceedings was initiated by the Cochin Zonal Office, Thiruvananthapuram pursuant to a notice dated December 13, 2005 and is in relation to an unsecured loan of ` million that was availed by our Company from our Promoter. In that regard, the DoE had required certain details as to the mode of repayment by way of a notice dated December 13, The Company has provided these details as well as those required by the DoE by way of its subsequent letters to the DoE. The last such letter was dated January 12, There has been no further communication from the DoE in connection with this matter. The second proceeding was initiated by way of a summons dated July 5, 2007 issued by the DoE against the then finance manager of our Company and is in relation to the issuance of gift vouchers by stores of the Company that could be issued in x

13 one country and redeemed in another country which has a different currency system. A summons dated October 30, 2007 was also issued to our Promoter to appear in person before the DoE. However, an adjournment to these proceedings was sought by way of a letter dated November 14, 2007 stating that owing to his residence in Dubai, the Promoter would be unable to appear before the DoE. Although we have not received any further communication from the DoE on these matters, any adverse outcome in relation to either of these proceedings may adversely affect our reputation. For further details, see Outstanding Litigation and Material Developments on page Our Company, one of our Group Entities, our Promoter and a Director are involved in certain legal and other proceedings. Any adverse outcome in relation to the said proceedings could adversely affect our business, financial condition, results of operation and/or reputation. Our Company, Group Entity, Directors and our Promoter are currently involved in a number of legal proceedings in India. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. If any new developments arise, such as, a change in Indian law or rulings against us by the appellate courts or tribunals, we may face losses and may have to make provisions in our financial statements, which could increase our expenses and our liabilities. Decisions in such proceedings adverse to our interests may have a material adverse effect on our business, results of operations and financial condition. Legal proceedings initiated against our Company, Promoter Director, other Directors, Group Entities and Promoter Group: Category Company Promoter Director Other Directors Group Entities Promoter Group Amount Involved (In million) Criminal proceedings Nil 1 6 Nil Nil Securities law proceedings Nil Nil 1 Nil Nil Nil Civil proceedings Nil Tax proceedings 4 Nil Nil Nil Nil Motor Vehicle Claims 2 Nil Nil Nil Nil 1.00 Labour proceedings Nil Nil Nil Nil Nil Nil Enforcement Directorate 2 Nil Nil Nil Nil Nil Legal proceedings initiated by our Company, Promoter Director, other Directors, Group Entities and Promoter Group: Category Company Promoter Director Other Directors Group Entities Promoter Group Amount Involved (In million) Criminal proceedings 2 Nil Nil Nil Nil 0.52 Securities law proceedings Nil Nil Nil Nil Nil Nil Civil proceedings 7 2 Nil Nil Nil Tax proceedings 28 5 Nil Nil Motor Vehicle Claims Nil Nil Nil Nil Nil Nil Labour proceedings 1 Nil Nil Nil Nil 1.17 xi

14 Enforcement Directorate Nil Nil Nil Nil Nil Nil For further details of these legal proceedings, see Outstanding Litigation and Material Developments on page Our business depends, in part, on factors affecting discretionary consumer spending that are out of our control. Adverse changes in such factors could result in a reduction in our sales and materially and adversely affect our business and results of operation. Jewellery purchases are discretionary and are often perceived to be a luxury purchase. Consequently, our business is sensitive to a number of factors that influence discretionary consumer spending. In addition, we compete with other retail categories, such as electronics and travel for consumers discretionary expenditure. Therefore, the price of jewellery relative to other discretionary products influences the proportion of consumers expenditure that is spent on jewellery. General economic conditions, consumer confidence in future economic conditions and political conditions, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well-being and security, fuel prices, inclement weather, interest rates, sales tax rate increases, inflation, and war and fear of war also affect consumer s discretionary spending decisions. Most of our customers are individuals who purchase jewellery for personal use and who are generally less financially resilient than large corporate entities, and, consequently can be more adversely affected by declining economic conditions. Adverse changes in factors affecting discretionary consumer spending could reduce consumer demand for our products, resulting in a reduction in our sales and could have a material adverse effect on our business and results of operation. 5. If we fail to anticipate, identify or react appropriately or in a timely manner to trends in the jewellery industry, we could experience reduced consumer acceptance of our products, a diminished brand image, higher markdowns and costs to recast overstocked jewellery. We typically outsource the design and manufacture of our jewellery products. The finished jewellery products purchased from independent jewellers and the jewellery manufactured through job-work arrangements are mostly based on available designs. We cannot assure you that we can consistently keep up with industry trends. If we fail to anticipate, identify or react appropriately or in a timely manner to customer buying decisions, we could experience reduced consumer acceptance of our products, a diminished brand image, higher markdowns and costs to recast overstocked jewellery. These factors could result in lower selling prices and sales volumes for our products, which could adversely affect our financial condition and results of operations. Also, we conduct sales operations in regions which vary significantly in taste. Hence, all our designs may not have comparable demand across all our regions. We are required to constantly create designs that conform to the significantly different taste that is exhibited by our customers across different regions. Any failure to do so could adversely affect our market share. 6. The success of our retail business is dependent on our ability to anticipate and respond to consumer requirements. The growth of the Indian economy has led to changes in the way businesses operate in India and the growing disposable income of India s middle and upper income classes has led to a change in lifestyle, resulting in a substantial change in the nature of their demands for jewellery and textile products. Increasingly, consumers are seeking better quality jewellery and textile products, of varying trends. Our role as a manufacturer and retailer of gold and other jewellery products and as a retailer of textile products is to satisfy different consumer expectations. The growth and success of our retail business depends on the provision of high quality products to attract and retain clients who are willing and able to pay at suitable levels, and on our ability to anticipate the future trends and changing customer demand. Accordingly, our inability to meet our customers' preferences or our failure to anticipate and respond to customer needs and trends accordingly could materially and adversely affect our business and results of operations. xii

15 7. A significant portion of our revenue and operations are related to our Premier Stores situated in Chennai, Bangalore and Coimbatore and any decrease in performance by any of these stores could have an adverse impact on our revenue and results of operations. Our Premier Stores situated in Chennai, Bangalore and Coimbatore together have contributed 43.18%, 40.32% and 36.15% of our total revenues from jewellery sales for Fiscals 2009, 2010 and six month period ended September 30, 2010 respectively. As of Fiscal 2009, 2010 and six months ended September 30, 2010, we maintained an aggregate inventory of kg, kg and kg of Gold, respectively, in addition to platinum, diamond and other jewellery in our three Premier Stores. Any adverse performance by one or more of these Premier Stores could have a material adverse effect on our ability to recover the investment made by us in them as well as on our total revenue and results of operations. 8. Our inability to further continue our marketing initiatives and brand building exercise in the same manner that we have done in the past, could adversely affect our business and financial condition. Our business significantly depends on our marketing initiatives and brand building exercise, including advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, visual advertisements at prominent locations, advertisements in cinema hall, bus terminals, railway stations etc. For Fiscal 2010 and six months ended September 30, 2010, we had expended ` million and ` million respectively, for advertising and sales promotions across various media as part of our marketing initiative, which constituted 2.64% and 2.66% respectively of our total income. Though we have been successful in our marketing initiatives and brand building exercises, there can be no assurance that we would be able to continue such initiatives in future in a similar manner and on commercially viable terms. Failure to do so could adversely affect our business and financial condition. 9. We maintain a relatively large inventory of gold, diamond and platinum jewellery. In the event a material amount of this inventory is lost due to theft and such loss is not covered by insurance our results of operations may be adversely affected. As of September 30, 2010 our aggregate inventory of jewellery including Gold, jewellery with diamond and other precious stones as well as platinum and silver jewellery was ` 5, million. Although we have security systems in place, we have in the past experienced loss of inventory owing to theft, of approximately ` million from our retail store in Hyderabad, and though we recovered a substantial portion of the lost inventory and claimed insurance for the loss incurred, there can be no assurance that we will not experience such loss in future. If we were to incur a significant inventory loss due to third-party or employee theft and if such loss exceeds the limits of, or was subject to an exclusion from, coverage under our insurance policies, it could have a material adverse effect on our results of operations and financial condition. In addition, if we file claims under the insurance policies, it could lead to increases in the insurance premiums payable by us or the termination of coverage under the relevant policy. 10. The brand name, "Alukkas", is also used by other members of the Promoter s family and any inability to distinguish ourselves from such other brand could impact our identity and positioning. We believe that one of the principal factors that differentiate us from our competitors in the jewellery industry is our brand name and brand identity. We believe that our customers associate our brand name with high quality products, unique designs and services. If we do not maintain our brand identity or fail to adequately perform our services or perform our services on a timely basis, we may not be able to maintain our competitive edge. If we are unable to compete successfully, we could lose our customers. Whilst we have applied for registering our mark joyalukkas, the brand name Alukkas continues to be used by other members of our Promoter s family in their business operations, including in the jewellery business. Any confusion due to the existence of xiii

16 another Alukkas brand could negatively impact our business and results of operations. As there are multiple stores bearing the brand name Alukkas and operating in the same geographical locations where we conduct our operations, customers may purchase products from our competitors under the assumption that the entity is a part of our Company. Any loss of customers or confusion due to the existence of different Alukkas brands could adversely impact our financial performance, profitability and our brand. Our ability to control this risk is limited, which could materially and adversely affect our financial condition and results of operations. 11. Our auditors have qualified their opinion on our audited unconsolidated financial statements as at and for the fiscal years ended 2006, 2007, 2008 and The audit report our auditors issued on our audited unconsolidated financial statements for Fiscals ended 2006, 2007 and 2008 contained a qualification which stated that our Company did not have an internal audit system commensurate with the size and nature of our business. Further, the audit report our auditors issued on our audited unconsolidated financial statements for Fiscal ended 2009 contained a qualification which stated that, though our Company had an internal audit system, it had to be further strengthened in order to be commensurate with the size and nature of our business. However, these qualifications did not require any adjustments to be made to our Restated Financial Statements. For details of all audit qualifications we have received and the respective management comments see the section titled Financial Statements - Annexure IV on page Conflicts of interest may arise out of common business objects shared by our Company and certain of our Group Entities. Our Promoter has interests in other companies and entities that may compete with us, including other Group Entities that conduct businesses with operations that are similar to ours. There is no requirement or undertaking for our Promoter, Promoter Group or Group Entities or such similar entities to conduct or direct any opportunities in the retailing of jewellery business only to or through us. As a result, conflict of interests may arise in allocating or addressing business opportunities and strategies amongst our Company and our Group Entities in circumstances where our interests differ from theirs. In cases of conflict, our Promoter may favour other companies in which our Promoter has an interest. While our Promoter has entered into a non-competition agreement dated January 3, 2011 with our Company, there can be no assurance that the interests of our Promoter will be aligned in all cases with the interests of our minority shareholders or the interests of our Company. There can be no assurance that our Promoter or our Group Entities will not compete with our existing business or any future business that we may undertake or that their interests will not conflict with ours. 13. We procure part of our jewellery merchandise as finished products from independent suppliers. Although we carry out quality assurance tests on such products, any deficiency in their quality could adversely affect our reputation and income from operations. A significant portion of the jewellery merchandise we sell is procured in the form of finished products from independent suppliers. For instance, 41.29%, 44.40% and 46.39% of our total jewellery were procured from independent suppliers in Fiscal 2009, 2010 and six months ended September 30, 2010 respectively. While we carry out quality assurance tests on such merchandise before affixing our brand name on them, any deficiency in the quality or purity of the jewellery could adversely affect our reputation and income from operations. 14. Failure to manage our inventory could have an adverse effect on our net sales, profitability, cash flow and liquidity. The results of operations of our retail businesses are dependent on our ability to effectively manage our inventory. To effectively manage our inventory, we must be able to accurately estimate customer demand and supply requirements and purchase new inventory accordingly. If our management has misjudged expected customer demand it could adversely impact the results xiv

17 by causing either a shortage of merchandise or an accumulation of excess inventory. Further, if we fail to sell the inventory we manufacture or purchase, we may be required to write-down our inventory or pay our suppliers without new purchases, or create additional vendor financing, which could have an adverse impact on our income and cash flows. 15. A portion of our business entails the purchase of old jewellery from our customers as part of exchange schemes and any deficiency in the quality of the jewellery so purchased could adversely affect our reputation and income from operations. We purchase old jewellery from our customers. We subsequently manufacture jewellery from the raw material obtained from melting down the purchased jewellery. Although we conduct quality assurance tests on such jewellery before purchasing it, there can be no assurance that the verification of the quality/purity of such products will be accurate. In the event we end up purchasing spurious, defective, or otherwise inferior jewellery, our profits and results of operation may be adversely affected. 16. Appraisal of the merchandise purchased by us from third party vendors and from our customers is subjective and inaccurate appraisal of the same by our personnel may adversely affect our income and profitability. The accurate appraisal of the merchandise that we procure from third party vendors and from our customers is vital to our operations. However, appraisal of gold requires skilled manpower and hence we are dependent upon our workforce for the same. Evaluating the worth, purity and quality of the jewellery purchased for resale is subjective and requires high degrees of expertise and experience. Inaccurate appraisal of the jewellery by our workforce entails the risk of it being overvalued which could result in financial losses as well as damage to our reputation. 17. We do not own our registered and corporate offices and the premises on which most of our stores are situated and we may suffer if we are unable to renew our commercial leases on favourable terms. Out of our 22 retail stores, 18 are not situated on premises owned by us. We typically enter into lease agreements for these stores for a term ranging from five to 25 years. Further, we do not own the premises on which our registered and corporate offices are situated. In the event that we are unable to renew our leases or obtain retail space to satisfy our business requirements on favourable terms, or at all, or are required to vacate the premises, we may have to seek new premises and we may suffer a disruption in our operations, which may adversely affect our business and increase our operating expenses. For further details, see Our Business Property on page Past store performance may not be comparable to or indicative of future performance and there can be no assurance that the opening of new retail stores will result in increased profitability. Various factors affect sales in our retail stores including the location of a retail store and competition. These factors will have an influence on existing and future stores and thus past sales figures may not be indicative of future sales figures. Upon the opening of a new store, there may be an initial period of market adjustment while the store forms a customer base and engages in initial advertising and marketing campaigns. During this period, the sales revenue may not exceed the overall expenses of the store. This could lead to a decrease in the overall profitability of the Company. In addition, even after this initial period, there can be no assurance that a new store will contribute to the overall profitability of our Company. 19. We are subject to risks arising from hedging arrangements. We do not completely hedge our exposure to losses arising from gold price variations. We may, in future, enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales. We cannot xv

18 assure you that the mechanisms we put in place will be able to effectively and/or adequately cover such losses. Further, we cannot assure you that we would not incur losses pursuant to these hedging mechanisms. 20. We may experience difficulties in expanding our business into additional geographic markets in India. As of December 31, 2010, we had 22 jewellery stores, spread across 21 cities in India, including eight in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon, of which four are Wedding Centres. Our Large Format Stores are typically situated at strategic locations in prominent cities, such as Chennai, Bangalore and Coimbatore. We plan to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September We intend to introduce several large retail stores in key cities in India to offer a comprehensive product range of diamond, platinum and other jewellery products to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery. We also evaluate attractive growth opportunities in other geographic areas on a case by case basis, and have recently launched stores in Bangalore and Mangalore. Should we decide to further expand our operations, we may not be able to leverage our experience in south India to expand our operations into other cities. Factors such as competition, culture, regulatory regimes, business practices and customs, customer tastes, behaviour and preferences in these cities where we may plan to expand our operations may differ from our operations in our current locations, and our current experience may not be applicable to such new locations. In addition, as we enter new markets and geographical areas, we are likely to compete not only with national retailers, but also local retailers who have an established local presence, are more familiar with local regulations, business practices and customs, have stronger relationships with local contractors, suppliers, relevant government authorities or are in a stronger financial position than us, all of which may give them a competitive advantage over us. If we plan to expand our geographical footprint, our business will be exposed to various additional challenges, including obtaining necessary governmental approvals under unfamiliar regulatory regimes; identifying and collaborating with local suppliers with whom we may have no previous working relationship; successfully gauging market conditions in local retail markets with which we have no previous familiarity; attracting potential customers in a market in which we do not have significant experience or visibility; being susceptible to local taxation in additional geographical areas of India; and adapting our marketing strategy and operations to different regions of India. Our inability to expand into areas outside the retail market of south India may adversely affect our business prospects, financial conditions and results of operations and could constrain our long term growth prospects. 21. Our inability to find locations to open and operate our retail stores and Wedding Centres on commercially viable terms could adversely affect our results of operation and business. Our Company intends to set up Large Format Stores and Wedding Centres in various locations. The success of these Large Format Stores would be highly dependent on finding optimum retail locations on competitive viable terms. Moreover, our Company has to compete with other jewellery retailers and other retailers to book locations for our retail stores on a continuous basis. There is no assurance that we would be able to find locations that we believe will be necessary for implementing our expansion plans on commercially viable terms or at all. Our inability to find such locations for our retail stores and Wedding Centres could adversely affect our results of operation, financial condition and business. 22. We have made certain issuances of Equity Shares below the Issue Price in the past one year. We have made certain issuances of Equity Shares to a few of our employees in November 2010 at face value. These issuances may thus have occurred at a price below the Issue Price. xvi

19 23. We will be controlled by our Promoter so long as he controls a majority of our Equity Shares. After the completion of this Issue, our Promoter will control, directly or indirectly, a majority of our outstanding Equity Shares. As a result, our Promoter will continue to exercise significant control over us, including being able to control the composition of our board of directors and determine decisions requiring simple or special majority voting, and our other shareholders will be unable to affect the outcome of such voting. Our Promoter may take or block actions with respect to our business, which may conflict with our interests or the interests of our minority shareholders, such as actions which delay, defer or cause a change of our control or a change in our capital structure, merger, consolidation, takeover or other business combination involving us, or which discourage or encourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. We cannot assure you that our Promoter and members of our Promoter Group will act in our interest while exercising their rights in such entities, which may in turn materially and adversely affect our business and results of operations. We cannot assure you that our Promoter will act to resolve any conflicts of interest in our favour. If our Promoter sells a substantial number of the Equity Shares in the public market, or if there is a perception that such sale or distribution could occur, the market price of the Equity Shares could be adversely affected. No assurance can be given that such Equity Shares that are held by the Promoter will not be sold any time after the Issue, which could cause the price of the Equity Shares to decline. 24. We rely on the experience and skills of our Directors and senior management team. Our success depends on our ability to attract and retain skilled personnel. We believe we have a team of professionals to effectively oversee the operations and growth of our business. Our success is substantially dependent on the expertise and services of our Directors and our senior management team. They provide expertise which enables us to make well informed decisions in relation to our business and our future prospects. We cannot assure you that we will be able to retain any or all, or that our succession planning will help to replace, the key members of our management. The loss of the services of such key members of our management team and the failure of any succession plans to replace such key members could have an adverse effect on our business and the results of our operations. Moreover, we do not maintain key man insurance policy for any of our executive directors and our key managerial personnel. For details of our insurance coverage, please see section titled Business Insurance on page 80 of this Draft Red Herring Prospectus. 25. Our Company s indebtedness, inability to make payments or refinance our debt and the conditions and restrictions imposed by the financing arrangements could adversely affect our ability to conduct our business and operations. As of December 31, 2010 our Company s outstanding indebtedness was ` 3, million, out of which ` million was unsecured and ` 3, million was secured. Our Company may incur additional indebtedness in the future. Our Company s indebtedness could have several consequences, including but not limited to the following: a portion of our cash flow will be used towards repayment of our existing debt, which will reduce the availability of cash to fund working capital needs, capital expenditures, acquisitions and other general corporate requirements; our ability to obtain additional financing in the future on reasonable terms may be restricted; fluctuations and increase in prevailing interest rates may affect the cost of our borrowings, with respect to existing floating rate obligations and new loans; and we are required to make certain additional payments with regard to certain financing arrangements in the event of withholding tax being imposed on such financing arrangements. Our Company has entered into agreements with certain banks and financial institution for short term loans, working capital loans, cash credit, letters of credit, and treasury limit facilities which contain restrictive covenants, including, but not limited to, requirements that we obtain consent xvii

20 from the lenders prior to altering our capital structure, further issuing any shares, effecting any scheme of amalgamation or reconstitution, declaring dividends, or creating any charge or lien on our assets. Many of our Company s lenders retain the right to withdraw the payment of the loan amount, and in some cases this could be done without notice to us. One of our lenders is entitled to appoint a nominee director on the Board from time to time. In addition, some of the loan agreements contain financial covenants that require us to maintain, among other things, specified debt equity ratios. There can be no assurance that we will be able to comply with these financial or other covenants or that we will be able to obtain consents necessary to take the actions that we believe are required to operate and grow our business. Furthermore, in the event our Company diverts the funds to purposes not permitted under certain financing arrangements, the lenders have a right to withdraw the facilities forthwith and also impose liquidated damages. Many of our loan agreements allow our lenders to call upon additional security in relation to existing facilities. As of December 31, 2010 our Company had unsecured loans amounting to ` million and repayment of these loans may be recalled by lenders at any time. In such event, we may have to raise funds to refinance these obligations. This requirement to refinance loans on short notice may have a material and adverse effect on our business operations and financial condition. Furthermore, our Company s ability to make payments on and refinance our indebtedness will depend on our ability to generate cash from our future operations. We may not be able to generate enough cash flow from operations or obtain enough capital to service our debt. In addition, lenders under our credit facility could foreclose on and sell our assets if we default under our credit facilities. For further details, see Financial Indetedeness on page Our Promoter and his spouse have given personal guarantees, and one of our Group Entities has executed a corporate guarantee in relation to certain debt facilities provided to us, which if revoked may require alternative guarantees, repayment of amounts due or termination of the facilities. Our Promoter and his spouse have given personal guarantees in relation to certain debt facilities provided to us. One of our Group Entities, Cochin Smart Properties Private Limited, has executed a corporate guarantee in favour of one of our lenders as security for a loan availed by us. In the event that any of these guarantees are revoked, the lenders for such facilities may require alternate guarantees, repayment of amounts outstanding under such facilities, or even terminate such facilities. We may not be successful in procuring guarantees satisfactory to the lenders, and as a result may need to repay outstanding amounts under such facilities or seek additional sources of capital, which could affect our financial condition and cash flows. 27. The requirement of funds in relation to the objects of the Issue has not been appraised, and are based on current conditions which are subject to change. We intend to use the net proceeds of the Issue for the purposes described in the section titled Objects of the Issue on page 31. The objects of the Issue have not been appraised by any bank or financial institution. These are based on current conditions and are subject to changes in external circumstances or costs, or in other financial condition, business or strategy, as discussed further below. Based on the competitive nature of the industry, we may have to revise our management estimates from time to time and consequently our funding requirements may also change. Our management estimates for our operations may exceed fair market value or the value that would have been determined by third party appraisals, which may require us to reschedule or reallocate our expenditure, which may have an adverse impact on our business, financial condition and results of operations. 28. Our operations are subject to risks associated with the engagement of third party job-work contractors. We engage independent third party contractors for the manufacture of gold and other jewellery products from bullion or for re-processing of old jewellery products. We do not have direct control xviii

21 over the day to day activities of such contractors and are reliant on such contractors performing these services. Accordingly, the timing and quality of our products depends on the availability and skills of those contractors. Further, not all our job-work arrangements with third party contractors are not on a written contract basis. If we fail to enter into such arrangements or if the contractors fail to perform their obligations in a manner consistent with such arrangements or to the standards we require, our manufacturing operations may not be completed to the standards required or in the anticipated timeframe, which could cause time and cost overruns. Further, we cannot assure you that skilled contractors will continue to be available at reasonable rates and in the areas in which we conduct our operations. As a result, we may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of contracted services and any such delay could adversely affect our profitability. If we are unable to negotiate with our suppliers and job-workers, it could result in work stoppages or increased operating costs as a result of higher than anticipated wages or benefits. These factors could adversely affect our business, financial position, results of operations and cash flows. 29. Our inability to procure the premises required for our proposed outlets for which a part of the Net Proceeds are proposed to be deployed, in commercially favourable terms, in a timely manner or at all may affect our future growth plans. We intend to expand our retail business by launching new outlets in different parts of the country. Pursuant to the same, we intend to deploy ` 4, million from the Net Proceeds for establishing 14 outlets in 14 cities by September The premises for the proposed new outlets will be taken on lease or on the basis of leave and license agreements. While we have entered into memorandum of understanding/letters of intent/leave and license agreement/lease agreements for the purpose of taking properties on lease or leave and license for seven outlets, we are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds. Further, we have executed memoranda of understanding dated October 8, 2010 and August 24, 2010 with one of our Group Entities, Cochin Smart City Properties Private Limited, for our proposed outlets in Thiruvananthapuram and Kozhikode. For further details see Objects of the Issue on page 31. We cannot assure you that we will be able to obtain undisputed legal title to and possession of such premises best suited for our proposed outlets. Our inability to execute lease and/or leave and license agreements on commercially favourable terms, in a timely manner or at all could adversely affect our competitive position, business, financial condition, results of operation and growth prospects. Further, any failure to enter into formal lease deeds and/or leave and license agreements in connection with the properties with respect to which we have entered into memoranda of understanding and/or letters of intent, and/or to recover the partial payment made by us with respect to such memoranda of understanding and/or letters of intent, could adversely affect our business, prospects, financial condition and results of operations. 30. Our consumer base is comprised of persons who purchase jewellery for use and who are generally more likely to be affected by declining economic conditions. Most of our customer base comprises of individuals who purchase jewellery for use and who are generally less financially resilient as compared to larger corporate entities, and, as a result, they can be more adversely affected by declining economic conditions. In addition to that, gold jewellery is not perceived to be a necessity in the situation of an economic downturn which may result in a significant fall in demand in case of adverse economic conditions as opposed to demand for those goods that are perceived as a necessity by all classes of the public and at all times. Any such fall in demand could adversely affect our income from operations. 31. We are required to obtain, renew and maintain statutory and regulatory permits, licenses and approvals for our business operations from time to time. We require certain statutory and regulatory permits, licenses and approvals to carry out our business operations and applications for their renewal need to be made within certain timeframes. xix

22 While we have applied for a few of these approvals and permits, we cannot assure you that we will receive these approvals in a timely manner or at all. Further, in the future we will be required to apply for renewal of these approvals and permits for our business operations to continue. If we are unable or renew necessary permits, licenses and approvals on acceptable terms, in a timely manner or at all, our business may be adversely affected. For further details, see Government Approvals on page Availability and cost of quality gold and other jewellery and bullion may affect our results of operations. In our business, timely procurement of materials such as gold jewellery or bullion, the quality of the material and the price at which it is procured, plays an important role in the successful operation of our business. We typically execute purchase orders on a spot basis with our suppliers for such materials and have not entered into any long-term contracts with our suppliers. Accordingly, our business is affected by the availability, cost and quality of such materials. The prices and supply of these and other materials depend on factors beyond our control, including general economic conditions, competition, production levels and import duties. There has been a significant increase in the cost of such materials, in the last few months which have resulted in an increase in our operations-cost. We cannot assure you that we shall be able to procure quality materials at competitive prices or at all, which may adversely affect our business. In addition, if for any reason, our primary suppliers of materials should curtail or discontinue their delivery of such materials to us in the quantities we need and at prices that are competitive, our reputation and ability to meet our material requirements for our operations could be impaired, our delivery schedules could be disrupted and our business could suffer. 33. We do not register our jewellery designs under the Designs Act, 2000 and we may lose revenue if our designs are duplicated by competitors. Most of our finished jewellery products procured from independent jewellery suppliers or manufactured through job-work arrangements are based on their designs. We select the jewellery designs from amongst the designs made available to us by the suppliers/job-workers, based on market trends and our requirements in each of our retail stores, or obtain designs through leading design houses. Consequently, jewellery designs change on a frequent basis and these designs are not registered under the Designs Act, Our designs therefore cannot be protected and if competitors copy our designs it could lead to loss of revenue, which could adversely affect our reputation and our results of operations. 34. Our ability to access capital depends on our credit ratings. The cost and availability of capital is, amongst other factors, also dependent on our credit ratings. We are currently rated by CRISIL and our current ratings are A-/Stable for working capital, P2+ for letter of credit and A-/Stable for term loans. Ratings reflect a rating agency s opinion of our financial strength, operating performance, strategic position, and ability to meet our obligations. Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital and lending markets and, as a result, could adversely affect our business. In addition, downgrades of our credit ratings could increase the possibility of additional terms and conditions being added to any new or replacement financing arrangements. 35. Our insurance policies provide limited coverage and we may not be insured against some business risks. Our insurance policies cover physical loss or damage to our stock, cash, furniture and fixtures, building and other fixed assets arising from a number of specified risks including burglary, fire, landslides and other perils. Notwithstanding the insurance coverage that we carry, we may not be fully insured against some business risks and the occurrence of an accident that causes losses in excess of limits specified under the relevant policy, or losses arising from events not covered by xx

23 insurance policies, could materially and adversely affect our financial condition and results of operations. For further details, see section Business - Insurance on page We have entered and may continue to enter into certain related party transactions. We have entered into transactions with several related parties, including our Promoter, Directors and Promoter Group entities. For instance, our Promoter has provided certain bank guarantees as security for some of our borrowings and also we have executed certain lease agreements with our Promoter in relation to three of our retail stores. The transactions we have entered into and any future transactions with our related parties have involved or could potentially involve conflicts of interest. The value of merchandise sold to our overseas Group Entities amounted to ` million, ` million, ` million and ` million for the six month period ended September 30, 2010 and Fiscals 2010, 2009 and 2008 respectively. For more information regarding our related party transactions, see Related Party Transactions on page Our ability to pay dividends in the future may be affected by any material adverse effect on our future earnings, financial condition or cash flows. Our ability to pay dividends in future will depend on our earnings, financial condition and capital requirements, and that of our Subsidiary and the dividends they distribute to us. Our business is working capital intensive. We further propose to incur capital expenditure in setting up more retail stores. We are required to obtain consents from certain of our lenders prior to the declaration of dividend as per the terms of the agreements executed with them. We may be unable to pay dividends in the near or medium term, and our future dividend policy will depend on our capital requirements and financing arrangements in respect of our operations, financial condition and results of operations. 38. Any failure or disruption of our information technology systems could adversely impact our operations. Any delay in implementation or disruption of the functioning of our IT systems could disrupt our ability to track, record and analyze work in progress or cause loss of data and disruption to our operations, process financial information or manage creditors/debtors or engage in normal business activities. This could have a material adverse effect on our operations. Further, bar coding of products enables us to track, record and analyze sales of our products to consumers across all stores owned by us. Any failure, disruption or manipulation of our bar coding system could disrupt our ability to track, record and analyze sales of our products. This could have a material adverse effect on our business. 39. All of our overseas Group Entities use our brand name joyalukkas. Any negative publicity in relation to the same could adversely affect our reputation and results of operations. Our business is dependent on the trust our customers have in the quality of our merchandise and our brand joyalukkas. Out of our 13 overseas Group Entities, 12 use the same brand name and are engaged in the same line of business as ours. Any negative publicity regarding the brand name by virtue of actions of any of the aforementioned Group Entities or otherwise could tarnish our reputation. This could adversely affect the demand for our products as well as our reputation and results of operations. 40. Our contingent liabilities and capital commitments which have not been provided for in our financial statements could adversely affect our financial condition. Our contingent liabilities and capital commitments appearing in our financial statements as of September 30, 2010 aggregated to ` million. The contingent liabilities consist principally of sales tax and service tax claims. In the event that any of these contingent liabilities materialize, our results of operation and financial condition may be adversely affected. For further information, xxi

24 see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 157. As of September 30, 2010, we had the following contingent liabilities that have not been provided for in our financial statements: (` in millions) Claims against the Company not acknowledged as debts - Sales tax Service tax Total Further, as of September 30, 2010, we had the following additional liabilities that have not been provided for in our financial statements: (` in millions) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for 41. Certain of our Group Entities have incurred losses in the past The following Group Entities have incurred losses in the past: Profit/Loss after Tax (` in million) No Name of the company Fiscal 2010 Fiscal 2009 Fiscal Joyal Properties Private limited Mythri Entertainers and Enterprises Private Limited 3 Fusion Technosoft Private Limited 0.07* 0.03* 0.01* Jyothi Aviation and Developers Private 0.08* Non-operative Non-operative 4 Limited 5 Dalia Hotels and Resorts Private Limited 0.04* Non-operative Non-operative 6 Mudita Trades Private Limited 0.03* Non-operative Non-operative 7 Cochin Smart City Properties Private Limited * 0.3* Calender year 2009 Calender year 2008 Calender year Alukkas Exchange LLP, Dubai 14.38** * The company has not started commercial operations and hence profit and loss account has not been drawn. The figure represents the total expenses incurred during the Fiscal, capitalised as pre-operative expenses. ** Loss incurred during calendar year 2007 and converted in to ` at RBI exchange rate as of December 31, 2007 They may continue to incur losses in future periods, which may have an adverse effect on our results of operations. 42. We have experienced negative cash flows in the past We have experienced negative cash flows (only negative flows are indicated for each period), in the past, as follows: September 30, 2010 (` in million) Fiscal 2010 (` in million) Fiscal 2009 (` in million) Fiscal 2008 (` in million) Net cash from/(used in) (118.02) (172.27) Operating Activities Net cash from/(used in) (10.32) (286.19) (6.49) (72.87) Investing Activities Net cash from/(used in) (206.33) xxii

25 Financing Activities Any negative cash flows in the future could adversely affect our financial condition and the trading price of our Equity Shares. During the course of our business, we have entered into various capital commitments. In the event that the proposed Issue is not completed or is delayed and we are unable to make other alternative arrangements to raise funds to meet our cash flows requirements, it could have an adverse effect on our business, financial condition and results of operations 43. Our inability to manage our growth strategy effectively could disrupt our business and reduce profitability. Our business growth strategy includes setting up of new Large Format Stores in select geographic markets across India. As we grow and diversify, we may not be able to execute our business operations efficiently on such increased scale, which could result in delays, increased costs and diminished quality, adversely affecting our reputation. This future growth may strain our managerial, operational, financial and other resources. Growth in our business would require us to expand, train and manage our employee base. Our expansion could cause problems related to our operational and financial systems and controls and could cause us to encounter working capital issues, as we will need increased liquidity to finance the purchase of inventory, establishment of new showrooms and the hiring of additional employees. If we are unable to manage our growth strategy effectively, our business, financial condition and results of operations may be adversely affected. 44. We have not executed definitive agreements with all our jewellery suppliers and job-workers. We have entered into supply agreements with some of our major suppliers of finished jewellery products and job work agreements with some of our major job workers. We have not entered into definitive agreements with all our jewellery suppliers or job-workers. Therefore, in the event of any deficiency in the supply of jewellery by such third party supplier or manufacturer, we may not have any enforceable remedy against them. This could adversely affect our profitability and results of operations. 45. Due to geographic concentration of our operations in the southern regions of India, our results of operations and financial condition are subject to fluctuations in such regional markets. A significant percentage of our total sales are made in the southern regions of India. Our concentration of sales in these regions heightens our exposure to adverse developments related to competition, as well as economic and demographic changes in these regions, which may adversely affect our business prospects, financial conditions and results of operations. 46. We have applied for and are awaiting registration for our trademark, joyalukkas, which may affect our business operations. We believe that the primary factors in determining customer buying decisions in India s jewellery sector include price, confidence in the merchandise sold, and the level and quality of customer service. The ability to differentiate our products from competitors by our brand-based marketing strategies is a key factor in attracting consumers. However our brand joyalukkas and World s Favourite Jeweller, the associated logo and our various sub-brands have not been registered. Our application for registration of our trademark joyalukkas and World s Favourite Jeweller are currently pending before the registry. Therefore, we may not be able to prevent infringement of our trademark and a passing off action may not provide sufficient protection. Additionally, we may be required to litigate to protect our brands, which may adversely affect our business operations. Loss of the rights to use the trademark and the logo may affect our reputation, goodwill, business and our results of operations. External Risks xxiii

26 1. The Finance Act, 2010 has proposed certain changes which may impact our results of operations. The customs duty on gold has changed substantially in the recent years. As per the Finance Act, 2010 the customs duty on serially numbered gold bars and gold coins has increased from ` 200 per 10 gram to ` 300 per 10 gram. Further, the price on all other forms of gold has increased from ` 500 per 10 gram to ` 750 per 10 gram and the customs duty on silver has increased from ` 1,000 to ` 1,500. Such increases in customs duty may impact our business, profits and results of operations. 2. We are subject to risks relating to the economic, political, legal or social environments of the locations in which we operate. Our operations are presently conducted primarily in the states of Kerala and Tamil Nadu which may be subject to political, social, economic and market conditions which may differ significantly from other regions where we have lesser operations. Out of a total of 22 stores in India, 16 are situated in the two aforementioned states. Our business, earnings, asset values and prospects and the value of our Equity Shares may be materially and adversely affected by developments with respect to inflation, interest rates, currency fluctuations, government policies, price and wage controls, exchange control regulations, retail laws and regulations, taxation, expropriation, social instability and other political, legal or economic developments in or affecting the States in which we primarily operate. We have no control over such conditions and developments and can provide no assurance that such conditions and developments will not have a material adverse effect on our operations or the price of or market for our Equity Shares. We are subject to a broad range of specific risks. These risks include, among others, the following: political, social and economic instability; external acts of warfare and civil clashes; government interventions, including tariffs, protectionism and subsidies; the ability of our management to deal with the regulatory regimes; regulatory, taxation and legal structure changes; difficulties and delays in obtaining new permits and consents for our operations or renewing existing ones; arbitrary or inconsistent governmental action, including unexpected changes in governmental laws and regulations; cancellation of contractual rights; expropriation of assets; and inability to repatriate profits and/or dividends. Any unexpected changes in the political, social, economic or other conditions may have a material adverse effect on the investments that we have made or may make in the future, which may in turn have a material adverse effect on our business, financial condition and results of operations. 3. A slowdown in economic growth in India could cause our business to suffer. xxiv

27 Our performance and growth are dependent on the health of the Indian economy. The economy could be adversely affected by various factors such as political or regulatory action, including adverse changes in liberalisation policies, social disturbances, terrorist attacks and other acts of violence or war, natural calamities, interest rates, commodity and energy prices and various other factors. Any slowdown in the Indian economy may adversely affect our business and financial performance and the price of our Equity Shares. 4. Volatility in the market price of gold and other raw materials has a bearing on the value of our inventory and could affect our income, profitability and scale of operations. Since there is a time lapse between the procurement of our merchandise and its sales to our customers, we are exposed to the risk of volatility in gold prices affecting the value of our inventory. Further, the fluctuation in the price of other raw materials required for the manufacture of gold, diamond, platinum and other jewellery may also affect the value of our inventory. A sudden fall in the market price of gold or increase in the price of other raw materials may adversely affect our ability to recover the cost incurred in procuring the same. Further there are no hedging mechanisms provided under our long term arrangements with independent suppliers and job workers. Consequently, any such fluctuation in the price of gold or other raw materials may adversely affect our income, profitability and results of operations. 5. Retail business is subject to extensive foreign exchange regulations. The retail sector in India is regulated by the Government of India, state governments and local authorities. Further, investments made by non-residents into India are governed by the Foreign Exchange Management Act, 1999 ( FEMA ) and the rules and regulations thereunder, the Consolidated Foreign Direct Investment Policy ( FDI Policy ) issued by the Department of Industrial Policy and Promotion ( DIPP ) effective from October 1, 2010 and the provisions of the policy statements issued by the Government of India, through Press Notes. As per the provisions contained in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (the FEMA Regulations ), FDI is specifically prohibited in the retail sector, except to the extent of 51% in single brand product retailing, with prior Governmental approval, subject to the satisfaction of certain conditions. This may potentially affect our Company in obtaining FDI investments into its retail jewellery business and for any broader capital raising exercise. Although we believe that our operations are in compliance with applicable laws and regulations, there could be instances of non-compliance, which may subject us to regulatory action in the future, including penalties and other legal proceedings. Further, due to the possibility of unanticipated regulatory developments, the amount and timing of future expenditure to comply with these regulatory requirements may vary substantially from those currently in effect. 6. Eligible non-resident investors will be able to participate in this Issue only if relevant approvals are received from the regulators. We propose to make an application to the RBI, for allowing eligible non-resident investors, such as FIIs and eligible NRIs to participate in this Issue subject to any conditions that may be prescribed by the RBI in this regard. In the event we are unable to obtain such approval from the RBI, eligible non-resident investors will not be able to participate in this Issue. 7. We face intense competition in our business and we may not be able to compete effectively. We operate in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. The jewellery industry is still an unorganized sector in India and therefore we face competition not only from other jewellery companies, but also from local jewellers and craftsmen, which affects our business prospects and margins. The Indian retail jewellery industry is highly fragmented and dominated by the xxv

28 unorganized sector, from which the organized retail jewellery sector faces intense competition. The players in the unorganized sector offer their products at highly competitive prices and many of them are well established in their local sectors. We also compete against organised national, regional and local players. There can be no assurance that we can continue to effectively compete with our competitors in the future, and the failure to compete effectively may have an adverse effect on our business, financial condition and results of operations. Also, a significant component of our business strategy is the continued establishment and promotion of existing brands. Due to the competitive nature of the diamonds and jewellery industry, if we do not continue to sustain and further develop our brands and branded product lines, we may fail to increase our sales. To promote brands and branded products, we have incurred and will continue to incur substantial expenses related to advertising and other marketing efforts as well as in relation to distribution channels and retail stores. In future, we may introduce a new product category that is not accepted by consumers which could adversely affect our goodwill, sales and result of operations. Although, our operations have historically been focused in south Indian cities, we are expanding in other cities across India. As we intend to diversify our regional focus and grow our domestic operations, we face the risk that some of our competitors, who are also engaged in the jewellery manufacturing and retailing business, may be better known in other regional markets and enjoy better relationships with job-work contractors and suppliers. Some of our competitors may have greater financial resources than we do. They may also benefit from greater economies of scale and operating efficiencies. Competitors may, whether through consolidation or growth, present more attractive and/or lower cost solutions than we do, causing us to lose market share to our competitors. There can be no assurance that we can continue to compete effectively with our competitors in the future, and failure to compete effectively may have a material adverse effect on our business, financial condition and results of operations. 8. Regional hostilities, terrorist attacks, civil disturbances or social unrest, regional conflicts could adversely affect the financial markets and the trading price of the Equity Shares could decrease. Certain events that are beyond our control, such as terrorist attacks and other acts of violence or war, may adversely affect worldwide financial markets and could potentially lead to a severe economic recession, which could adversely affect our business, results of operations, financial condition and cash flows, and more generally, any of these events could lower confidence in India's economy. India has also experienced social unrest in some parts of the country. If such tensions occur in other parts of the country leading to overall political and economic instability, it could have a materially adverse effect on our business, future financial performance and the price of the Equity Shares. 9. Our business is significantly dependent on the availability of financing in India and the failure to obtain financing in the form of debt or equity and adverse changes in financing terms may affect our growth and future profitability. Difficult conditions in the global financial markets and the economy generally have affected and may continue to materially and adversely affect our business and results of operations. Since the second half of 2007, the global financial markets, particularly the credit markets, have experienced, and may continue to experience, significant dislocations and liquidity disruptions which have originated from the liquidity disruptions in the United States and the European Union credit and sub-prime residential mortgage markets. Although economic conditions differ in each country, investors' reactions to any significant developments in one country can have adverse effects on the financial and market conditions in other countries. These and other related events, such as the collapse of a number of financial institutions, have had and continue to have a significant adverse impact on the availability of credit, globally as well as in India. Indian financial markets have also experienced the contagion effect of the global financial turmoil, evident from the sharp decline in the Sensex, BSE's benchmark index. Any prolonged financial crisis may have an adverse impact on the Indian economy, thereby resulting in a material and adverse effect on our business, operations, xxvi

29 financial condition, profitability and price of our Equity Shares. We cannot assure you that global economic conditions will not deteriorate further and, accordingly, that our financial condition and results of operations will not be further adversely affected. On account of the prevailing conditions of the global and Indian credit markets, buyers of our products may remain cautious, consumer sentiment and market spending may turn more cautious in the near-term. If this trend continues, our results of operations and business prospects may be materially and adversely affected. 10. Fluctuations in the exchange rate between the Rupee and the U.S. dollar could have a material adverse effect on the value of the Equity Shares and our financial condition, independent of our operating results. In Fiscal 2010, 3.59% of our revenues were in foreign currencies. The exchange rate between the Rupee and the US dollar has been substantially volatile recently and may fluctuate substantially in the future. We may incur losses due to foreign exchange differences arising from the settlement of forward contracts or restatement/settlement of monetary items at rates different from those at which they were initially recorded in the financial statements. We cannot assure you that investors will be able to effectively mitigate the adverse impact of currency fluctuations on the results of our operations. Consequently, any fluctuation in the exchange rate could have a material impact on our Company s profitability. Further, the Equity Shares are quoted in Rupees on the BSE and the NSE. Any dividends in respect of the Equity Shares will be paid in Rupees and subsequently converted into US dollars for repatriation. Any adverse movement in exchange rates during the time it takes to undertake such conversion may reduce the net dividends to shareholders. In addition, any adverse movement in exchange rates during a delay in repatriating the proceeds from a sale of Equity Shares outside India, for example, because of a delay in regulatory approvals that may be required for the sale of Equity Shares may reduce the net proceeds received by shareholders. 11. Natural calamities could have an adverse impact on the economies of the countries in which we operate. The occurrence of natural disasters, including hurricanes, tsunamis, floods, earthquakes, tornadoes, fires, explosions, pandemic disease and man-made disasters, including acts of terrorism and military actions, could adversely affect our results of operations or financial condition, including in the following respects: (i) (ii) Catastrophic loss of life due to natural or man-made disasters could cause us to pay benefits at higher levels and/or materially earlier than anticipated and could lead to unexpected changes in persistency rates. A natural or man-made disaster could result in losses in our investment portfolio, or the failure of our counterparties to perform, or cause significant volatility in global financial markets. We cannot assure the prospective investors that such events will not occur in the future or that our results of operations and financial condition will not be adversely affected. 12. There may be less information available about the companies listed on the Indian securities markets compared with information that would be available if we were listed on securities markets in developed countries. There may be differences between the level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants and that of more developed countries. SEBI is responsible for approving and improving disclosure and other regulatory xxvii

30 standards for the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about companies listed on an Indian stock exchange compared with information that would be available if that company was listed on a securities market in a developed country. As a result, shareholders may have access to less information about our business, results of operations and financial condition than if we were listed on securities markets in developed countries. 13. Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions. Our articles of association, regulations of our board of Directors and Indian law govern our corporate affairs. Legal principles related to these matters and the validity of corporate procedures, directors' fiduciary duties and liabilities, and shareholders' rights may differ from those that would apply to a company in another jurisdiction. Shareholders' rights under Indian law may not be as extensive as shareholders' rights under the laws of other countries or jurisdictions. Investors may have more difficulty in asserting their rights as shareholder in an Indian company than as shareholder of a corporation in another jurisdiction. 14. Investors may not be able to enforce a judgment of a foreign court against us. We are a limited liability company incorporated under the laws of India. Substantially all of the directors and executive officers named herein are residents of India and a substantial portion of its assets and such persons are situated in India. As a result, it may not be possible for investors to effect service of process upon us or such persons outside India or enforce judgments obtained against such parties outside India. Recognition and enforcement of foreign judgment is provided for under Section 13 and Section 44A of the Civil Procedure Code on a statutory basis. Section 13 of the Civil Code provides that foreign judgments shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii)where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or refusal to recognize the law of India in cases to which such law is applicable; (iv) where the proceedings in which the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the judgment sustains a claim founded on a breach of any law then in force in India. Under the Civil Procedure Code, a court in India shall, upon the production of any document purporting to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court, within the meaning of that Section, in any country or territory outside India which the Government has by notification declared to be in reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the same nature of amounts payable in respect of taxes, other charges of a like nature or in respect of a fine or other penalties. The United Kingdom, Singapore and Hong Kong have been declared by the Government to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code. A judgment of a court of a country which is not a reciprocating territory may be enforced in India only by a suit upon the judgment under Section 13 of the Civil Procedure Code, and not by proceedings in execution. The suit must be brought in India within three years from the date of judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian Court would enforce foreign judgment if it viewed the amount of damages awarded as excessive or inconsistent with public policy. A party seeking to enforce a foreign xxviii

31 judgment in India is required to obtain approval from the RBI under FEMA to repatriate outside India any amount recovered and any such amount may be subject to income tax in accordance with applicable laws. 15. Any downgrading of India s debt rating by an international rating agency could have a negative impact on the trading price of the Equity Shares. Any adverse revisions to India's credit ratings for domestic and international debt by international rating agencies may adversely impact our ability to raise additional financing, and the interest rates and other commercial terms at which such additional financing may be available. This could have an adverse effect on our business and future financial performance, its ability to obtain financing for capital expenditures and the trading price of the Equity Shares. 16. Outbreaks of epidemic diseases may adversely affect our operations. Pandemic disease, caused by a virus such as H5N1 (the avian flu virus), or H1N1 (the swine flu virus), could have a severe adverse effect on our business. A new and prolonged outbreak of such diseases may have a material adverse effect on our business and financial conditions and results of operations. Although the long-term effect of such diseases cannot currently be predicted, previous occurrences of avian flu and swine flu had an adverse effect on the economies of those countries in which they were most prevalent. In the case of any of such diseases, should the virus mutate and lead to human-to-human transmission of the disease, the consequence for our business could be severe. An outbreak of a communicable disease in India or in the particular region in which we have operations could adversely affect our business and financial conditions and the results of operations. 17. Significant differences exist between Indian GAAP and other accounting principles, such as IFRS, which may be material to investors' assessments of our financial condition. Our financial statements, including the restated financial statements provided in this Draft Red Herring Prospectus, are prepared in accordance with Indian GAAP. US GAAP and IFRS differ in significant respects from Indian GAAP. As a result, our financial statements and reported earnings could be different from those which would be reported under IFRS or US GAAP. Such differences may be material. We have not attempted to quantify the impact of US GAAP or IFRS on the financial data included in this Draft Red Herring Prospectus, nor do we provide a reconciliation of our financial statements to those of US GAAP or IFRS. Accordingly, the degree to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader s level of familiarity with Indian accounting practices. Had the financial statements and other financial information been prepared in accordance with IFRS or US GAAP, the results of operations and financial position may have been materially different. Because differences exist between Indian GAAP and IFRS or US GAAP, the financial information in respect of our Company contained in this Draft Red Herring Prospectus may not be an effective means to compare us with other companies that prepare their financial information in accordance with IFRS or US GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited. In making an investment decision, investors must rely upon their own examination of our Company, the terms of this Issue and the financial information relating to our Company. Potential investors should consult their own professional advisers for an understanding of these differences between Indian GAAP and IFRS or US GAAP, and how such differences might affect the financial information contained herein. 18. We will be required to prepare our financial statements in accordance with IFRS in accordance with a specified timeline. 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 xxix

32 adopt IFRS in accordance with the timeline could have an adverse effect on the price of the Equity Shares. The Institute of Chartered Accountants of India, the accounting body that regulates the accounting firms in India, has announced a road map for the adoption of and convergence with the IFRS, pursuant to which some public companies in India will be required to prepare their annual and interim financial statements under IFRS beginning with the fiscal period commencing April 1, 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 results of operations or financial condition and any failure to successfully adopt IFRS in accordance with the aforesaid road map could have an adverse effect on the price of the Equity Shares. Risks Associated with the Equity Shares 1. An active trading market for the Equity Shares may not develop and the price of the Equity Shares may be volatile. An active public trading market for the Equity Shares may not develop or, if it develops, may not be maintained after the Issue. Our Company, in consultation with the BRLMs, will determine the Issue Price. The Issue Price may be higher than the trading price of our Equity Shares following this Issue. As a result, investors may not be able to sell their Equity Shares at or above the Issue Price or at the time that they would like to sell. The trading price of the Equity Shares after the Issue may be subject to significant fluctuations in response to factors such as, variations in our results of operations, market conditions specific to the sectors in which we operate, economic conditions of India and volatility of the BSE, NSE and securities markets elsewhere in the world. 2. The price of the Equity Shares may be highly volatile after the Issue. The price of the Equity Shares on the Indian stock exchanges may fluctuate after this Issue as a result of several factors, including: volatility in the Indian and global securities market; our operations and performance; performance of our competitors and the perception in the market about investments in the retail industry; adverse media reports on us or the Indian retail industry; changes in the estimates of our performance or recommendations by financial analysts; significant developments in India's economic liberalization and deregulation policies; and significant developments in India's fiscal and environmental regulations. There can be no assurance that the prices at which the Equity Shares are initially traded will correspond to the prices at which the Equity Shares will trade in the market subsequently. 3. Economic developments and volatility in securities markets in other countries may cause the price of the Equity Shares to decline The Indian economy and its securities markets are influenced by economic developments and volatility in securities markets in other countries. Investor s reactions to developments in one country may have adverse effects on the market price of securities of companies situated in other countries, including India. For instance, the recent financial crisis in the United States and European countries lead to a global financial and economic crisis that adversely affected the market prices in the securities markets around the world, including Indian securities markets. Negative economic xxx

33 developments, such as rising fiscal or trade deficits, or a default on national debt, in other emerging market countries may affect investor confidence and cause increased volatility in Indian securities markets and indirectly affect the Indian economy in general. The Indian Stock Exchanges have experienced temporary exchange closures, broker defaults, settlement delays and strikes by brokerage firm employees. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment. 4. There is no guarantee that the Equity Shares issued pursuant to the Issue will be listed on the Stock Exchanges in a timely manner, or at all. In accordance with Indian law and practice, permission for listing and trading of the 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 authorizing the issuing of Equity Shares to be submitted. There could be a failure or delay in listing the Equity Shares on either or both the Stock Exchanges. Any failure or delay in obtaining the approval could restrict the shareholders ability to dispose of their Equity Shares. 5. You will not be able to immediately sell any of the Equity Shares you purchase in the Issue on an Indian Stock Exchange. The Equity Shares will be listed on the NSE and the BSE. Pursuant to Indian regulations, certain actions must be completed 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 NSE and BSE. Thereafter, upon receipt of final approval from the NSE and the BSE, trading in the Equity Shares is expected to commence within seven 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. Any failure or delay in obtaining the approval may restrict your ability to dispose of your Equity Shares as allotted. 6. The requirements of being a listed company may strain our resources. We are not a listed company and have not been subjected to the increased scrutiny of our affairs by shareholders, regulators and the public at large that is associated with being a listed company. As a listed company, we will incur significant legal, accounting, corporate governance and other expenses that we did not incur as an unlisted company. We will be subject to the listing agreements with the Stock Exchanges, which require us to file audited annual and unaudited quarterly reports with respect to our business and financial condition. If we experience any delays, we may fail to satisfy our reporting obligations and/or we may not be able to readily determine and accordingly report any changes in our results of operations as timely as other listed companies. Further, as a listed company we will need to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, including keeping adequate records of daily transactions to support the existence of effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. As a result, management s attention may be diverted from other business concerns, which could adversely affect our business, prospects, results of operations and financial condition and the price of our Equity Shares. In addition, we may need to hire additional legal and accounting staff with appropriate listed company xxxi

34 experience and technical accounting knowledge, but we cannot assure you that we will be able to do so in a timely manner. 7. Future issuances or sales of the Equity Shares by any existing shareholders could significantly affect the trading price of the Equity Shares. The future issuances of Equity Shares by us or the disposal of Equity Shares by any of the major shareholders or the perception that such issuance or sales may occur may significantly affect the trading price of the Equity Shares. There can be no assurance that we will not issue further Equity Shares or that the shareholders will not dispose of, pledge or otherwise encumber their Equity Shares. 8. A third party could be prevented from acquiring control of us because of anti-takeover provisions under Indian law. There are provisions in Indian law that may delay, deter or prevent a future takeover or change in control of the Company, even if a change in control would result in the purchase of your Equity Shares at a premium to the market price or would otherwise be beneficial to you. These provisions may discourage or prevent certain types of transactions involving actual or threatened change in control of us. Under the takeover regulations an acquirer has been defined as any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights or control over a company, whether individually or acting in concert with others. Although these provisions have been formulated to ensure that interests of investors/shareholders are protected, these provisions may also discourage a third party from attempting to take control of the Company. Consequently, even if a potential takeover of the Company would result in the purchase of the Equity Shares at a premium to their market price or would otherwise be beneficial to its stakeholders, it is possible that such a takeover would not be attempted or consummated because of Indian takeover regulations. 9. 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, Equity Shares at a particular point in time. Subsequent to listing, our Company will be subject to a daily circuit breaker imposed on listed companies by all stock exchanges in India which does not allow transactions beyond certain volatility in the price of the Equity Shares. This circuit breaker operates independently of the indexbased market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on our Company s 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 are not required to inform our Company of the percentage limit of the circuit breaker from time to time, and may change it without its knowledge. This circuit breaker would effectively limit the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, there can be no assurance regarding the ability of shareholders to sell the Equity Shares or the price at which shareholders may be able to sell their Equity Shares. 10. You may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares. Sale of Equity Shares by any holder may give rise to tax liability in India, as discussed in the section titled Statement of Tax Benefits on page 41. xxxii

35 Prominent Notes 1. The Investors may contact any of the BRLMs who have submitted the due diligence certificate to SEBI, for any complaint pertaining to the Issue. 2. Our net worth is ` 1, million as at March 31, 2010 and ` 2, million as at September 30, 2010, as per our Restated Financial Statements under Indian GAAP in "Financial Statements" on page The average cost of acquisition of our Company s Equity Shares by the Promoter is ` 10 per Equity Share. The average cost of acquisition of Equity Shares by the Promoter has been calculated by taking the average of the amount paid by them to acquire the Equity Shares issued by us. 4. The net asset value/book value per Equity Share is ` as at March 31, 2010 and ` as at September 30, 2010, as per our Restated Financial Statements under Indian GAAP in the "Financial Statements" on page The details of the transactions entered into by the Company with its Group Entities or its Subsidiary, the nature of such transactions as well as the value of the same has been disclosed in Annexure XIV to the Restated Financial Statements on page 113. The following table lists the nature and value of such transactions as per our Restated Financial Statements for the year ended March 31, 2010 and for the six month period ended September 30, 2010: Disclosures of significant transactions with related parties (Rs in millions) Particulars Entity For the year ended 31 March 2010 From 1 April 2010 to 30 September 2010 Sale of goods Managerial remuneration Joy Alukkas Jewellery LLC, Dubai Joy Alukkas Centre LLC, Sharjah Alukkas Ltd. London Alukkas Varghese Joy Joseph Christo Rent paid Alukkas Varghese Joy Cochin Smart City Properties Private Ltd Sale / (Purchase) of Investments Rental deposits placed Joyal Ornaments and Trades Private Ltd., India - (0.10) Cochin Smart City Properties Private Ltd Advances recovered Fusion Technosoft Private Limited Unsecured loans received Alukkas Varghese Joy Jolly Joy xxxiii

36 Unsecured loans repaid Alukkas Varghese Joy Jolly Joy Notes 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, Details of related parties outstanding balances (Rs in millions ) Particulars Entity As at 31 March 2010 As at 30 Septem ber 2010 Sundry debtors Joy Alukkas Jewellery LLC, Dubai Joy Alukkas Centre LLC, Sharjah Alukkas Ltd., London Sundry creditors Cochin Smart City Properties Pvt Ltd Rental deposits Cochin Smart City Properties Private Ltd Investment in subsidiary Joyal Ornaments and Trades Private Ltd., India Loans outstanding Alukkas Varghese Joy Jolly Joy Managerial remuneration payable Alukkas Varghese Joy Joseph Christo 0.04 Note 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. Note 2: Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, Our Company has changed its name from Joy Alukkas Traders (India) Private Limited to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, Our Company was converted into a public limited company on December 9, 2010 with the xxxiv

37 name Joyalukkas India Limited and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC. 7. For changes in the objects clause of the Memorandum of Association, see the section titled History and Corporate Structure on page See the sections titled "Related Party Transactions" and "Group Entities" on pages 150 and 104, respectively, for details of transactions by the Issuer with Group Entities or Subsidiary during the last year, the nature of transactions and the cumulative value of transactions. 9. There are no financing arrangements whereby the Promoter Group, our Directors or their relatives have financed the purchase by any other person of securities of the Issuer 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 this Draft Red Herring Prospectus. xxxv

38 SECTION III INTRODUCTION SUMMARY OF INDUSTRY This section summarizes the Industry Overview on page 54, which in turn summarizes or quotes information set forth in the Indian Gems and Jewellery Industry dated June 2010 ( CARE Report ), prepared by CARE Research, a division of Credit Analysis & Research Limited ("CARE Research ), India Gold Report India: Heart of Gold and Gold Demand Trends prepared by the World Gold Council ( WGC Reports ) and Unlocking the Potential of India s Gems & Jewellery Sector, FICCI and Technopak ( FICCI Technopak Report ). We have not commissioned any reports for purposes of this Draft Red Herring Prospectus. Except for the CARE Report, the WGC Reports and the FICCI Technopak Report, market and industry related data used in this Draft Red Herring Prospectus has been obtained or derived from the websites of and publicly available documents from various industry sources. Neither we nor any other person connected with the Issue has independently verified the information provided in this chapter. The CARE Report, the WGC Reports, FICCI Technopak Report and other industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured and accordingly, investment decisions should not be based on such information. The Indian Economy The Indian economy is one of the largest economies in the world with a GDP at current prices in Fiscal 2010 estimated at ` trillion (approximately US$1.3 trillion) (Source: Ministry of Statistics and Programme Implementation). It is one of the fastest growing economies in the world, with a real GDP growth rate of 5.7% for calendar year 2009 and a projected 9.7% growth rate for calendar year 2010 (Source: International Monetary Fund, World Economic Outlook, October 2010 Update). Per capita GDP at factor cost (at constant prices) in India has grown from around ` 12, billion for the year 1991 at the time of liberalisation to an estimated ` 41, billion for the year 2010 (Source: International Monetary Fund, World Economic Outlook Database, April 2010). During the first quarter of Fiscal 2011, India s GDP grew by 8.8%, compared with a growth rate of 6.0% during the first quarter of Fiscal (Source: Ministry of Statistics and programme Implementation, Press Note Q ) The IMF believes that four principal factors have supported Asia s recovery: first, the rapid normalization of trade, following the financial dislocation in late 2008, benefited Asia s export-driven economies; second, the bottoming out of the inventory cycle, both domestically and in major trading partners such as the United States, is boosting industrial production and exports; third, a resumption of capital inflows into the region has created abundant liquidity in many economies; and fourth, domestic demand has been resilient, owing to strong public and private companies in many of the region s economies. The IMF believes that, in both China and India, particularly, strong domestic demand will support the recovery. In India, the growth in real GDP will be supported by rising private demand, with consumption strengthening as a result of improvements in the labor market, and a boost to investment brought about by strong profitability, rising business confidence and favorable financing conditions. (Source: IMF World Economic Outlook 2010) Indian Gems and Jewellery Industry Precious metals and gemstones have been an integral part of the Indian civilisation throughout its recorded history. Gems and jewellery has been consumed by Indians for centuries for both their aesthetic as well as investment value. India has the distinction of being the first country to introduce diamonds to the world. The country was also the first to mine, cut, polish and trade in diamonds. (Source: CARE Report) The Indian gems and jewellery industry can be classified into various sub segments for diamonds, coloured stones, gold and silver jewellery, pearls, and others. However, the two major industry segments in India are gold jewellery and diamonds. India dominates the diamond processing trade with 11 out of 12 diamonds being cut and polished in India (around 80% in terms of carats and around 55% in terms of volume). India 1

39 also dominates gold and silver consumption globally with consumption of approximately 700 tonnes (gold) per year. As a major foreign exchange earner, the industry also provides employment to approximately 1.5 million people directly and indirectly. (Source: CARE Report) The Indian gems and jewellery industry is one of the world s most competitive markets due to the low cost of production and highly skilled labour. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian Gems and Jewellery industry - consisting of the domestic and the export market has the potential to grow from the current US$45 billion to US$100 billion by As per the FICCI Technopak Report India s current dominant position lies in low value processed raw materials, as depicted on the Gems and Jewellery Value Addition Ladder below: (Source: FICCI Technopak Report) Being on this position also shows that India has a great opportunity to move up and be present across all the points in the value addition chain. Doing so can generate the next wave of growth and profitability as India consolidates its position in low-value gem processing and captures a greater share of high-value gem processing and Jewellery making. This move is also important as other low cost countries like China are striving hard to wrest share from India in its current areas of strength. (Source: FICCI Technopak Report) The domestic market of gems and jewellery is estimated to be in the US$ billion range. Given the fragmented nature of the industry it is difficult to put a finger on the exact size. The industry is expected to grow at around 13% annually and at this rate it could reach US$ billion by Currently the domestic gems and jewellery market is fragmented across the value chain. There are more than 300,000 players across the gems and jewellery sector, with majority of them being small unorganised players who are operating on wafer thin margins. Organised retail of jewellery thus presents a significant opportunity to create additional value through higher margins, which would be possible through differentiation and branding. With the onset of organised retail in the last decade, lots of new players have entered the space. Currently modern retail players in jewellery space have only 5%-7% share of the total jewellery market, but this number would increase considerably in the near future. (Source: FICCI Technopak Report) 2

40 (Source: FICCI Technopak Report) The industry is characterised by a significantly large unorganised sector, labour-intensive operations, high working capital & raw material intensiveness, gold price volatility and export orientation. The demand for gold and diamond jewellery is driven by festivals, weddings and gifts, the increasing affluence of the middle class population and the increase in per capita on luxury items. (Source: CARE Report) Though India plays a dominant role in the gems and jewellery industry in terms of processing and consumption, India s role in mining gold and diamonds is amongst the lowest in the world. Gold is imported from countries like Switzerland, South Africa, Australia and the United Arab Emirates, and rough diamonds are imported from Belgium, the United Kingdom, Israel and the United Arab Emirates. There has been an impact on the demand for gold due to the record high price of gold in the last couple of years, but consumers have continued to demand the precious metal and there is an increased investment-related demand for gold. The key drivers for growth in the industry are increasing disposable income, conscious marketing efforts, rising population with the urge to spend on jewellery as a fashion accessory. The following outlines the changing trends in the Indian retail jewellery market: Traditional Practice Gold jewellery consumption emanates from traditional and investment-related demand. Demand peaks during weddings and festival seasons. Consumption of pure gold s preferred 22-carat. Traditional & ethnic designs preferred. Purchase from neighbourhood jewellers dominated. Hence the industry lacked transparency Pre-dominance of gold (yellow)-based jewellery. Jewellery largely sold on prevailing gold price, per gram, plus labour charges. (Source: CARE Report) Emerging Trend It is regarded as a fashion accessory by the growing young population. They still remain the main demand drivers but its use for regular wearing and gifting has evened out the demand throughout the year. Lower caratage & light-weight jewellery preferred. Trend is more towards fashionable and contemporary designs Growing preference for brands, retail stores & e-retailing. Introduction of hallmarking & certifications. Acceptance of white gold, platinum and diamond-studded jewellery. Even imitation jewellery is gaining acceptance. Branded players sell on a fixed-price basis. 3

41 SUMMARY OF BUSINESS The Company s ability to successfully implement its business strategy growth and exopansion plans may be affected by various factors. The Company s business overview, strengths and strategies must be read along with the risk factors provided in the section entitled Risk Factors on page x. Overview We are one of the leading south India based jewellery companies with focus on Large Format Stores. Our jewellery business consists of the sale of jewellery made of gold, diamond and other precious stones, platinum and silver. We are also engaged in the business of selling textiles, apparels and accessories through our Wedding Centres in Kerala. We offer a wide range of products across various price points and cater to customers across all market segments. In Fiscal 2008, 2009 and 2010, we sold 7, kg, 8, kg and 8, kg of Gold, respectively. In Fiscal 2008, 2009 and 2010, our total income from sale of Gold was ` 7, million, ` 11, million and ` 14, million, respectively, representing a CAGR of 38.89% over the aforesaid period. We conduct our jewellery retail business under the brand name joyalukkas. We started retailing jewellery in India in the year 2002 with the launch of our first retail store at Kottayam in Kerala. The following table depicts the details of our jewellery, and textiles, apparels and accessories business operations as of and for Fiscal 2008, 2009, 2010 and as of and for the six month period ended September 30, 2010: Sr. No. Particulars Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, Number of stores Floor area (sq. ft.) Jewellery 185, , , ,752 Textiles, Apparels and 104, , , ,617 Accessories* 3. Gold Sales (in kg) 7, , , , Revenue (` in million) Jewellery 8, , , , Textiles, Apparels and Accessories 1, , , *As per the certificate obtained from Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai As of December 31, 2010 we had 22 retail stores, of which 10 are Large Format Stores, each having a floor area of 12,000 sq. ft. or more. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area of 12,000 sq. ft. or more. For further details, see Objects of the Issue on page 31. Our Premier Stores are the three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft. We sell our textiles, apparels and accessories through our four Wedding Centres situated in Kerala (Angamaly, Thiruvalla, Kollam and Ernakulam) having an aggregate floor area of 157,593 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, textiles, apparels and accessories for weddings and other festive occasions in the same store. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. Further, our Wedding Centres cater to the textile and apparel requirements of an entire family, with their wide collection of men s, women s and children s apparel. 4

42 As of March 31, 2010 and September 30, 2010, we maintained an aggregate inventory of 2, kg and 2, kg of Gold, respectively. In addition we maintained an inventory of jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. The Joyalukkas Group was established in the year 1988 by our Promoter, Alukkas Varghese Joy and commenced operations in the United Arab Emirates in jewellery retail business. Our Promoter has over 22 years of experience in the jewellery retail business. We have built on his experience and reputation to create strong brand equity and a wide customer base. We received the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We had also received the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai. We also received the first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala, the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala. We were recognized with the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai, the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon, and the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & GoldSouk. We also received an award in Kerala adfest, 2007 instituted by Advertising Industries Media and the award for Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala. As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. In Fiscal 2008, 2009 and 2010, our PAT was ` million, ` million and ` million respectively, while in the six months ended September 30, 2010 our PAT was ` million. In Fiscal 2008, 2009 and 2010, our EBITDA was ` million, ` 1, million and ` 1, million respectively. Our Competitive Strengths We believe that our primary competitive strengths include the following: Large Format Stores and Wedding Centres at strategic locations As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more. Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. As of September 30, 2010, we maintained an aggregate inventory of kg of Gold at our three Premier Stores. This is in addition to the jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. Our store in Chennai has a floor area of 57,430 sq. ft. across five floors with 190 employees as of December 31, Our store in Bangalore has a floor area of 26,314 sq. ft. across five floors with 150 employees as of December 31, Our store in Coimbatore has a floor area of 12,565 sq. ft. across four floors with 138 employees as of December 31, Our Premier Stores with an aggregate floor area of 96,309 sq. ft. display a wide range of jewellery products at any given point in time. Our Large Format Stores enhance our efficiency as they require less managerial staff in proportion to the large inventory of jewellery products. We believe that our Large Format Stores provide a luxury retail shopping experience, in addition to the inventory that these retail stores are able to offer, enables us to attract customers to our product offerings. Of our 22 retail stores, we sell our textile products through four Wedding Centres situated in Kerala with an aggregate floor area of 104,617 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, premium festive clothing and accessories for 5

43 weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of the entire family, with its wide collection of men s, ladies and children s apparel. We believe that this is an innovative concept, which enables us to cross sell a wide range of our product offerings to our customers. Experience of our Promoter and a strong management team Our Promoter, Alukkas Varghese Joy has over 22 years of experience and is well known in the retail jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. The Joyalukkas Group was established in United Arab Emirates in the year 1988 by our Promoter and entered jewellery retailing business in India in the year The Joyalukkas Group includes 39 retail stores and one textile outlet outside of India, 25 of which are situated in United Arab Emirates, two in Qatar, four in Kuwait, two in Bahrain, five in Oman and one in the United Kingdom. We have leveraged on our Promoter s experience, reputation and industry contacts to create strong brand equity in the jewellery sector in India and outside, with a wide customer base. Our Promoter won the NRI Retailer Award of the Year 2007 at the Retail Jeweller Awards We also have a dedicated management team, who are responsible for the overall strategic planning and business development of our Company. Our qualified senior management with significant industry experience has been instrumental in the consistent growth in our revenues and operations. As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. We believe that a motivated and dedicated employee base is key to our success in managing our Large Format Stores and allows us to provide a quality luxury shopping experience for our customer base. Strong track record and established brand equity with robust sales and marketing network Our prominent presence as a jewellery retailer in south India has been a result of our strong branding, our marketing efforts and a favorable response from our customer base. We have further strengthened our brand portfolio with the launch of internal brands aimed at different customer profiles, various markets and price segments and for various uses and occasions. We have won several awards, including, the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We have also won the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai; first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala; the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala; the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai; the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon; the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & Gold Souk; the Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala. Our marketing initiatives also include our customer loyalty programs such as golden rewards program, Business to Business Solutions ( B2B Solutions ), discount sales, easy gold schemes and others. For further details see Our Business-Marketing on page 78. In addition to our sales to a wide range of customers through our retail stores mostly spread throughout south India, our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, advertisements in cinema hall, bus terminals, railway stations and similar displays. Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller ring tones. We believe that effective marketing is an important investment in 6

44 future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive cost-effective manner. Use of efficient internal processes to leverage our sales We rely on our internal processes for activities ranging from the procurement of bullion, finished jewellery and textile products, identification of craftsmen and jewellery suppliers, specifications and design, selection of store location, conduct constant market analysis to ascertain market perception, change and competitiveness, inventory management as well as activities like purity testing, hallmarking, bar coding, branding, packaging, store design and management. We believe that our understanding of the jewellery, textile and apparel industry helps us in assessing market opportunities and positioning ourselves accordingly. Our retail operations network are supported by our inventory management system that enables us to move our inventory to and from, and channel our sales through, our various retail stores depending on the relevant festive and other occasions and the demographic nature of our customers. We have evolved and continue to improve our internal processes which drive our business efficiency and profitability. We believe that our effort to predict market expectations, in-house order projections, customer preferences towards specific stones and jewellery products enables us to undertake effective inventory management, ahead of our delivery schedule. We believe that our internal processes such as an effective Enterprise Resource Planning ( ERP ) system to manage finance and accounting, inventory of gold and other jewellery, internal and external resources, including tangible assets, human resources and financial resources, our internal audit systems, sales and distribution and extensive domain knowledge of our Promoter and Key Managerial Personnel has substantially contributed to the growth of our business operations. Corporate tie-ups with leading companies as part of our Business to Business program We maintain corporate tie-ups with certain key corporate clients through our B2B Solutions program for providing loyalty and retention related services. For the customers or clients of our B2B Solutions, we offer discount vouchers or options to earn loyalty points based on various loyalty programs. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners outlets or stores and to redeem such points on purchase of our jewellery or textile or apparel products at our retail outlets. For instance, we have entered into a similar agreement with a leading hotel group, offering its members the option to redeem their gift vouchers against the purchase of jewellery at our retail stores. We also offer certain customized gifting options for our corporate-partners, based on their requirements. Our B2B Solutions aims at enhancing our corporate clientele and in turn a wide range of customers and also result in the creation of strong brand equity and increase our customer foot fall and revenues. We have followed a structured approach for our product development which involves market research, sales analysis, brand development, media campaigns and promotions. We believe that this has helped us forge strong relationships with key corporate customers and gaining increased business through their customers/clients. We believe that our structured approach towards brand development through our B2B Solutions and our execution capabilities has enabled us to create long term relationships with leading corporate clients. OUR STRATEGY The key elements of our business strategy are as follows: Continue to expand our network of Large Format Stores and Wedding Centres We intend to continue to develop our existing branded jewellery lines and introduce additional sub-brands and product offerings to cater to our customers and price segments in the diamond and platinum jewellery markets through expansion of our retail operations. We intend to capitalize on our significant experience and expertise in developing the branded jewellery market in India. Further we intend to leverage our goodwill associated with our existing brands, to further develop our various sub-brands in target markets and product segments in India. We seek to achieve this through expansion of our retail operations, increased marketing initiatives, innovative promotional campaigns and extensive advertising. 7

45 Our Large Format Stores are typically situated at strategic locations in prominent cities, such as in Chennai, Bangalore and Coimbatore. By September 2013 we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram, each with an estimated floor area of 12,000 sq. ft. or more. Our Large Format Stores in India offer comprehensive product range of jewellery made of gold, diamond and other precious stones, platinum and silver to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery. Our Wedding Centres are Large Format Stores that house a wide range of jewellery, textiles, apparels and accessories that specially cater to customers looking for wedding related purchases. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, apparel and accessories for weddings and other festive occasions under one roof. In Fiscal 2010 and for the six month period ended September 30, 2010, our total income from sale of textiles, apparel and accessories in our Wedding Centres was ` 1, million and ` million respectively, which constituted 7.70% and 5.98% respectively of our total income. Further increase our percentage contribution of diamond and platinum jewellery business to our total revenues The sustained growth of Indian economy coupled with growing employment levels, income levels and availability of credit in India has resulted in greater consumer spending and disposable income. This has boosted the retail business in India and consequently resulted in the growth of retail jewellery business and increasing demand for jewellery made of diamond, platinum and other precious stones. In Fiscal 2009, 2010 and six months ended September 30, 2010, our revenue from the sale of jewellery made of diamond, platinum and other precious stones constituted 10.61%, 11.98% and 13.50% respectively of our total revenue. We intend to continue increasing our diamond and platinum jewellery retailing business and use our ability to provide a wide range of jewellery products of various grades, designs and price segments, our strong branded jewellery lines and our wide retail trade operations to increase our market share in diamond and platinum jewellery in India. We also intend to capitalize on the gradual shift of consumer preferences in India from traditional gold jewellery to jewellery made of diamond, platinum and other precious stones. Continue to invest in our marketing initiatives and brand building exercise We intend to continue investing in our marketing initiatives and brand building exercise, including advertising through various media. In Fiscal 2010, and for the six month period ended September 30, 2010, we had expended ` million and ` million respectively, towards advertising and sales promotions expenses, which constituted 2.64% and 2.66% respectively of our total income. Further we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We believe that effective marketing is important for future revenue growth, to improve our Company s brand visibility, to establish relationships with target markets and to sell a great number of our products in a competitive costeffective manner. Set up service centres in Bangalore and Chennai We intend to set up specialized service centres in our Large Format Stores situated in Bangalore and Chennai. These service centres would cater to our wide range of customers by providing free service on our jewellery products. This may also increase the number of repeat customers, establish long term relationships with our repeat customers and increase the sales of a wider range of jewellery products. Hedging arrangements to mitigate risks associated with gold price fluctuations We do not completely hedge our exposure to losses arising from gold price variations. We intend to enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales. 8

46 Particulars SUMMARY FINANCIAL INFORMATION SUMMARY STATEMENT OF ASSETS AND LIABILITIES, AS RESTATED (` in million) As at 30 As at 31 March September Fixed assets Gross block , Less: accumulated depreciation Net block Capital work-in-progress including capital advances Total Investments Deferred tax assets, net Current assets, loans and advances Inventories 1, , , , , , Sundry debtors Cash and bank balances Current assets, loans and advances Total Liabilities and provisions , , , , , , Secured loans 1, , , , , , Unsecured loans Current liabilities and provisions , , , , Deferred tax liability, net Total , , , , , , Net worth , , , Net worth represented by Share capital Equity share capital Reserves and surplus General reserve Balance in profit and loss account , , Net worth , , ,

47 Particulars SUMMARY STATEMENT OF PROFIT AND LOSS ACCOUNTS, AS RESTATED For the year ended 31 March (` in million) For the period from 1 April 2010 to 30 September Income Sales of: Jewellery (Refer Note 3(E) of Annexure IV) 2, , , , , , Textiles and accessories - traded , , , , Other income Total 3, , , , , , Expenditure Cost of goods sold 2, , , , , , Personnel cost Operating expenses Finance cost Depreciation Total 3, , , , , , Profit before tax , Less: provision for tax Current tax / minimum alternate tax Fringe benefit tax Deferred tax charge / (benefit) (2.16) (9.11) (8.47) 9.91 (4.30) Wealth tax Total provision for tax Net profit as restated Add: Balance in profit and loss account brought forward, as restated Amount available for appropriation (3.25) , , , Appropriations a) Dividend b) Tax on dividend c) Bonus shares issued by capitalization of profits d) Transfer to general reserve Balance carried forward to balance sheet, as restated , ,

48 Particulars SUMMARY STATEMENT OF CASH FLOWS, AS RESTATED For the year ended 31 March (` in million) For the period from 1 April 2010 to 30 September Cash flows from operating activities Net profit before tax, as restated , Adjustments for: Depreciation Interest expense Interest income (0.83) (1.25) (1.01) (4.35) (8.88) (2.04) (Profit) / loss on sale of fixed assets (1.46) 1.40 (1.32) (2.14) Loss on aircraft insurance recovery Insurance claim received (8.99) - Mark to market loss on derivative instruments, net Unrealized foreign exchange loss / (gain) (1.00) (2.43) Operating profit before working capital changes , , , Decrease / (increase) in inventories (777.75) (742.02) (1,112.01) (1,930.00) (1,007.66) Decrease / (increase) in sundry debtors 4.81 (16.53) (13.45) (270.92) Decrease / (increase) in loans and advances and (91.61) 1.32 (26.65) (33.31) (22.74) (100.36) other current assets Increase /(decrease) in current liabilities and (612.38) provisions Cash generated from / (used in) operations (191.31) (155.82) Adjustments for: Income taxes paid Net cash generated from / (used in) operating activities [A] (21.46) (41.41) (144.98) (144.51) (436.21) (261.13) (212.77) (197.23) (172.27) (118.02) Cash flows from investing activities Purchase of fixed assets (159.15) (158.65) (104.96) (31.97) (308.74) (26.01) Proceeds from sale of fixed assets Sale / (purchase) of investments, net (0.10) Interest received Insurance claim received Net cash used in investing activities [B] (150.75) (156.22) (72.87) (6.49) (286.19) (10.32) Cash flows from financing activities: Proceeds from issue of share capital Dividends paid (75.00) Dividend distribution tax paid (12.75) Secured loans availed, net Unsecured loans availed / (repaid), net (110.93) (195.82) (50.59) (1.09) Interest paid (71.73) (129.22) (189.28) (262.47) (257.28) (143.38) Net cash generated from / (used in) financing (206.33) activities [C] Net increase / (decrease) in cash and cash equivalents [A+B+C] Cash and cash equivalents at the beginning of the year / period Cash and cash equivalents at the end of the year / period Cash and cash equivalents comprise: (86.82) (125.80) Cash and bank balances Restricted deposits - - (0.95) (10.39) (11.34) (30.70) Book overdraft (33.37) (4.85) (0.90) (3.25) (6.30) (3.92)

49 The following table summarises the Issue details: THE ISSUE Equity Shares offered: Issue by our Company 18,000,000 Equity Shares Of which A) QIB portion 1 Not more than 9,000,000 Equity Shares Of Which Available for allocation to Mutual Funds only 450,000 Equity Shares Balance for all QIBs excluding Mutual Funds 8,550,000 Equity Shares B) Non-Institutional Portion 2 Not less than 2,700,000 Equity Shares C) Retail Portion 2 Not less than 6,300,000 Equity Shares Equity Shares outstanding prior to the Issue 50,034,200 Equity Shares Equity Shares outstanding after the Issue 68,034,200 Equity Shares Use of Issue Proceeds See Objects of the Issue on page 31 Allocation to all categories except the Anchor Investor Portion will be made on a proportionate basis. (1) Our Company may allocate up to 30% of the QIB Portion, i.e. 2,700,000 Equity Shares, to Anchor Investors on a discretionary basis in accordance with the SEBI ICDR Regulations. For details see Issue Procedure on page 244. (2) Subject to valid Bids being received at or above the Issue Price, under subscription, if any, in any other category would be allowed to be met with spill-over from other categories or a combination of categories, at the discretion of our Company, in consultation with the Book Running Lead Managers and the Designated Stock Exchange. 12

50 GENERAL INFORMATION Our Company was incorporated as a private limited company under the Companies Act on April 22, 2002 under the name and style of Joy Alukkas Traders (India) Private Limited with its registered and corporate office at 42/1385 A, Kurians Cottage, St. Benedict Road, Ernakulam District, Kochi , Kerala, India and was allotted the corporate identity number U51398KL2002PTC The initial subscribers to the memorandum of association of the Company were Alukkas Varghese Joy and Jolly Joy. Subsequently, our name was changed to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, Our Company was converted into a public limited company on November 15, 2010 with the name Joyalukkas India Limited and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC and was allotted a corporate identity number of U51398KL2002PLC Registered and Corporate Office of our Company Door No. 40/2096 A&B, Peevees Triton Shanmugham Road Marine Drive Ernakulam District Kochi Kerala, India Tel: (91 484) Fax: (91 484) Website: investors@joyalukkas.com Corporate Identity Number: U51398KL2002PLC Address of the Registrar of Companies Our Company is registered with the Registrar of Companies, Kerala and Lakshadweep at Ernakulam situated at the following address: The Registrar of Companies Company Law Bhawan BMC Road Thrikkakara Ernakulam District Kochi , Kerala Board of Directors of our Company The Board of Directors comprises the following: Name and Designation Age (years) DIN Address Alukkas Varghese Joy Managing Director Alukkas House Kuriachira P.O. Thrissur John Paul Joy Alukkas Non Executive Director D. K. Manavalan Non executive director Kerala, India Alukkas House Kuriachira P.O. Thrissur Kerala, India Flat No A-231 Shriniketan Society Plot I, Sector 7, Dwaraka New Delhi

51 Name and Designation Age (years) DIN Address C. J. George Non Executive Director A, Skyline Elysium Gardens Stadium Link Road, Kaloor Ernakulam K.P. Padmakumar Non Executive Director Kerala, India F Skyline Topaz, Kaloor Kadavanthara Road Kaloor, Ernakulam Kerala, India For further details of the Directors, see Our Management on page 90. Company Secretary and Compliance Officer Varun T. V. is the Company Secretary and Compliance Officer of our Company and his contact details are as follows: Door No. 40/2096 A&B, Peevees Triton Shanmugham Road Marine Drive Ernakulam District Kochi Kerala, India. Tel: (91 484) Fax: (91 484) Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre or post-issue related problems, including non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account and refund orders. All grievances relating to the ASBA process may be addressed to the Registrar to the Issue, with a copy to the SCSB, giving full details such as name, address of the applicant, number of Equity Shares applied for, Bid Amount blocked, ASBA account number and the designated branch of the SCSB where the ASBA Form was submitted by the ASBA bidders. Book Running Lead Managers Enam Securities Private Limited 801, Dalamal Tower Nariman Point Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) joy.ipo@enam.com Investor Grievance complaints@enam.com Website: Contact Person: Anurag Byas SEBI Registration No.: INM Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar Nariman Point Mumbai , Maharashtra, India Tel: (91 22)

52 Fax: (91 22) Investor Grievance Website: Contact Person: Rajiv Jumani SEBI Registration No.: INM Syndicate Members [ ] 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 For details on designated branches of SCSBs collecting the ASBA Bid cum Application Form, please refer the above mentioned SEBI link. Legal Advisors Domestic Legal Counsel to the Company Amarchand & Mangaldas & Suresh A. Shroff & Co. 201, Midford House, Midford Garden Off M.G. Road Bangalore Karnataka, India Tel: (91 80) Fax: (91 80) Domestic Legal Counsel to the BRLMs J. Sagar Associates Vakils House 18, Sprott Road Ballard Estate Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) International Legal Counsel to the Company Dorsey & Whitney LLP 250 Park Avenue New York NY Tel: (212) Fax: (646) Registrar to the Issue Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West) Mumbai Maharashtra, India Tel: (91 22) Fax: (91 22) jil.ipo@linkintime.co.in Website: Contact Person: Sachin Achar SEBI Registration No: INR

53 Bankers to the Issue and Escrow Collection Banks [ ] Bankers to the Company Citibank N. A. 38/1581, Padma Junction M. G. Road, Ernakulam Tel: (0484) Fax: (0484) ajith.thomas@citi.com State Bank of Travancore Commercial Branch Malankara Centre M. G. Road, Ernakulam Tel: (0484) Fax: (0484) cbernakulam@sbt.co.in ING Vysya Bank Limited No. 185, Anna Salai Chennai Tel: (044) Fax: (044) prathapm@ingvysyabank.com Dhanalaxmi Bank Limited Industrial Finance Branch M. G. Road, Ernakulam Kochi Tel: (0484) Fax: (0484) sunnygeorge@dhanbank.co.in HDFC Bank Limited 1st Floor, Sudha Building Banerji Road Kochi Tel: (0484) Fax: (0484) s.radhakrishnan@hdfcbank.com Union Bank of India Overseas Branch Union Bank Bhavan 1 st floor, P. B. No M. G. Road, Ernakulam Kochi Tel: (0484) Fax: (0484) cbsoverseasernakulam@unionbankofindia.co.in Standard Chartered Bank 4 th floor, 19, Rajaji Salai Chennai Tel: (044) Fax: (044) Sridivya.Ganesan@sc.com IDBI Bank Limited Specialised Corporate Branch Panampilly Nagar P. B. 4253, kochi Tel: (0484) Fax: (0484) b_george@idbi.co.in Yes Bank Limited 2nd Floor, Tiecion House Dr. E. Moses Road Mahalaxmi Mumbai Tel: (022) Fax: (022) mahesh.shirali@yesbank.in ICICI Bank Limited Emgee Square M. G. Road, Ernakulam Tel: (0484) Fax: (0484) deepu.nair@icicibank.com The Royal Bank of Scotland N. V 4th Floor, Sakhar Bhavan Nariman Point Mumbai Tel: (022)

54 Fax: (022) Refund Banker [ ] Statutory Auditors to the Company B S R & Co. Chartered Accountants Maruthi Info-Tech Centre 11/1 & 12/1, East Wing, II Floor Koramangala, Inner Ring Road Bangalore , Karnataka, India Tel: (91 80) Fax: (91 80) zshekary@kpmg.com Monitoring Agency The Monitoring Agency, if required under applicable provisions of the SEBI ICDR Regulations will be appointed prior to the filing of the Prospectus with the RoC. Inter se allocation of responsibilities among the Book Running Lead Managers The following table sets forth the inter se allocation of responsibilities for various activities among the Book Running Lead Managers: Activities Reponsibility Co-ordination Capital structuring with the relative components and formalities such as Enam, Citi Enam composition of debt and equity, type of instruments, etc. Due diligence of the Company s operations/ management/ business Enam, Citi Enam plans/ legal etc. Drafting & Design of offer document containing salient features of the Prospectus. The designated Lead Manager shall ensure compliance with stipulated requirements and completion of prescribed formalities with Stock Exchange, Registrar of Companies and SEBI Drafting and approval of statutory advertisements Enam, Citi Enam Drafting and approval of all publicity material other than statutory Enam, Citi Citi advertisement as mentioned in (3) above including corporate advertisement, brochures, etc. Appointment of Ad Agency, Registrar and Bankers to the Issue Appointment of Printer Enam, Citi Enam Ensure availability of adequate number of forms at all the centres Follow-up on distribution of publicity and issue material including form, Prospectus and deciding on the quantum of the issue material Domestic Institutional Marketing Enam, Citi Enam Finalise the list and division of investors for one to one meetings and Finalising domestic QIB roadshow schedule International Institutional Marketing Enam, Citi Citi Finalise the list and division of investors for one to one meetings and Finalising international QIB roadshow schedule 17

55 Activities Reponsibility Co-ordination Domestic Retail marketing Enam, Citi Enam Formulating marketing strategies, preparation of publicity budget Finalize Media & PR strategy Finalizing centers for holding conferences for brokers, etc. Finalize collection centers Domestic marketing to HNI Enam, Citi Citi Preparation of road show presentation, Preparation of FAQs Enam, Citi Citi Co-ordination with stock exchanges for Book Building Software Enam, Citi Citi Finalizing of Pricing Enam, Citi Enam Post-Bidding activities, which shall involve essential follow-up steps, Enam, Citi including follow-up with Bankers to the Issue and Self Certified Citi Syndicate Banks to get quick estimates of collection and advising the Company about the closure of the Issue, based on correct figures, finalisation of the Basis of Allotment or weeding out of multiple applications, listing of instruments, dispatch of certificates or demat credit and refunds and coordination with various agencies connected with the post-bidding activity, such as Registrar to the Issue, Bankers to the Issue, Self Certified Syndicate Banks, including responsibility for underwriting arrangements, as applicable. The BRLMs shall be responsible for ensuring that these agencies fulfill their functions and discharge this responsibility through suitable agreements with the Company.* * In case of under-subscription in an issue, the lead merchant banker responsible for underwriting arrangements shall be responsible for invoking underwriting obligations and ensuring that the notice for devolvement containing the obligations of the underwriters is issued in terms of these regulations Even if any of these activities are handled by other intermediaries, the designated BRLMs shall be responsible for ensuring that these agencies fulfil their functions and enable them to discharge this responsibility through suitable agreements with our Company. Credit Rating As this is an Issue of Equity Shares, there is no credit rating for this Issue. IPO Grading This Issue has been graded by [ ] a SEBI registered credit rating agency, as [ ], indicating [ ] fundamentals. Pursuant to SEBI ICDR Regulations, the rationale/description furnished by the credit rating agency will be updated at the time of filing the Red Herring Prospectus with the RoC. Trustee As this is an Issue of Equity Shares, the appointment of a trustee is not required. Book Building Process The Book Building Process, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red Herring Prospectus within the Price Band which will be decided by our Company in consultation with the BRLMs and advertised at least two (2) days prior to the Bid/Issue Opening Date. The Issue Price is finalised after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are: Our Company; The BRLMs; Syndicate Members who are intermediaries registered with SEBI or registered as brokers with 18

56 BSE/NSE and eligible to act as Underwriters; Registrar to the Issue; Escrow Collection Banks; and SCSBs. This is an Issue for more than 25% of the post Issue Equity Share capital of our Company and is being made pursuant to Rule 19(2)(b)(i) of the SCRR through the 100% Book Building Process wherein upto 50% of the Issue size will be allocated to QIBs on a proportionate basis. Provided that, our Company may, allocate up to 30% of the QIB Portion to Anchor Investors at the Anchor Investor Issue Price on a discretionary basis, out of which at least one-third will be available for allocation to Mutual Funds only. Further, not less than 15% and 35% of the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and Retail Individual Bidders, respectively, subject to valid Bids being received at or above the Issue Price. Under-subscription, if any, in any category, except the QIB Portion, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLMs and the Designated Stock Exchange. In accordance with the SEBI ICDR Regulations, QIBs bidding in the QIB Portion are not allowed to withdraw their Bid(s) after the Bid Closing Date and are required to pay the Bid Amount upon submission of the Bid. Anchor Investors are not allowed to withdraw their Bids after the Anchor Investor Bidding Date and are required to pay the Bid Amount at the time of submission of the Bid. For further details, see Issue Structure on page 241. Our Company shall comply with regulations issued by SEBI for this Issue. In this regard, our Company has appointed Enam and Citi as the BRLMs to manage the Issue and to procure subscriptions to the Issue. The process of Book Building under the SEBI ICDR Regulations is subject to change from time to time and the investors are advised to make their own judgment about investment through this process prior to making a Bid or application in the Issue. Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for illustrative purposes and is not specific to the Issue) Bidders can bid at any price within the price band. For instance, assume a price band of ` 20 to ` 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 (`) Cumulative Quantity Subscription % 1, , % 1, , % 2, , % 2, , % The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired number of shares is the price at which the book cuts off, i.e., ` 22 in the above example. The Issuer, in consultation with the BRLMs, will finalise the issue price at or below such cut-off price, i.e., at or below ` 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 (For further details see Issue Procedure - Who Can Bid ) on page

57 2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum Application Form or the ASBA Bid cum Application Form, as the case may be. 3. Except for Bids on behalf of the Central or State Government, residents of Sikkim and the officials appointed by the courts, for Bids of all values ensure that you have mentioned your PAN allotted under the I.T. Act in the Bid cum Application Form and the ASBA Bid cum Application Form (see Issue Procedure Permanent Account Number or PAN on page 264). 4. Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red Herring Prospectus and in the Bid cum Application Form and the ASBA Bid cum Application Form. 5. Ensure the correctness of your demographic details (as defined in the Issue Procedure-Bidders Depository Account Details on page 259) given in the Bid cum Application Form and the ASBA Bid cum Application Form, with the details recorded with your Depository Participant. 6. Bids by QIBs shall be submitted only to the members of the Syndicate, other than Bids by QIBs who Bid through the ASBA process, who shall submit the Bids to the Designated Branch of the SCSBs. 7. Bids by ASBA Bidders will have to be submitted to the designated branches of the SCSBs. ASBA Bidders should ensure that their bank accounts have adequate credit balance at the time of submission to the SCSB to ensure that the ASBA Bid cum Application Form is not rejected. Withdrawal of the Issue Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue anytime after the Bid/Issue Opening Date. In such an event our 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. Our Company shall also inform the Stock Exchanges on which the Equity Shares are proposed to be listed of its decision not to proceed with the Issue. Any further issue of Equity Shares by our Company shall be in compliance with applicable laws. Bid/ Issue Programme Bid opens on: [ ]* Bid closes on: For QIB Bidders [ ] For Retail and Non-Institutional Bidders: [ ] * Our 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. *Our Company may consider closing the Bid/Issue Period for QIB Bidders one day prior to the Bid/Issue Closing Date Bids and any revision in Bids shall be accepted only between a.m. and 5.00 p.m. (Indian Standard Time, IST ) 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 shall be accepted only between (i) a.m. to 3.00 p.m. (IST) and uploaded until 4.00 p.m. (IST) in case of Bids by QIB Bidders and in case of Bids by Non-Institutional Bidders and (iii) a.m. to 3.00 p.m. (IST) and uploaded until 5.00 p.m. (IST) or such extended time as permitted by the BSE and the NSE, in case of Bids by Retail Individual Bidders. In the event the Company decides to close the Bidding Period for QIBs one day prior to the Bid/Issue Closing Date, then bids would be uploaded till 5.00 p.m. on the Bid closing day for QIB. It is clarified that the Bids not uploaded in the book would be rejected. Bids by the Bidders applying 20

58 through ASBA process shall be uploaded by the SCSB in the electronic system to be provided by the Stock Exchanges. 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 3.00 p.m. (IST) on the Bid/ Issue Closing Date. 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 Working Days. 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 BRLMs to the Stock Exchange within half an hour of such closure. Our Company, in consultation with the BRLMs, 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 Working Days prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly. In case of revision of the Price Band, the Bid/ Issue Period will be extended for at least 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 websites of the BRLMs and at the terminals of the Syndicate. 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, our 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 BRLMs shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfil their underwriting obligations. The underwriting shall be to the extent of the Bids uploaded by the Underwriters including through its Syndicate/Sub Syndicate. The Underwriting Agreement is dated []. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain conditions specified therein. The Underwriters have indicated its 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 Underwriter Enam Securities Private Limited 801, Dalamal Tower Nariman Point Mumbai Maharashtra, India Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar Nariman Point Mumbai Indicated Number of Equity Shares to be Underwritten [ ] [ ] Amount Underwritten (` in Millions) [ ] [ ] 21

59 Name and Address of the Underwriter Maharashtra, India Indicated Number of Equity Shares to be Underwritten Amount Underwritten (` in Millions) The abovementioned is indicative underwriting and this would be finalised after the pricing and actual allocation. In the opinion of our 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 Underwriters are registered with the SEBI or have been granted a Certificate of Registration by the SEBI to act as an underwriter in accordance with the SEBI (Underwriters) Regulations 1993 or the SEBI (Stock-Brokers and Sub-Brokers) Regulations 1992 or the SEBI (Merchant Bankers) Regulations 1992 and such certificate is valid and in existence and the Underwriters are hence entitled to carry on business as underwriters or registered as brokers with the Stock Exchange(s). Our Board of Directors, at its meeting held on [ ] has accepted and entered into the Underwriting Agreement with the Underwriters. Allocation among the Underwriters may not necessarily be in proportion to their underwriting commitments set forth in the table above. Notwithstanding the above table, the Underwriters 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 subscriptions for/subscribe to Equity Shares to the extent of the defaulted amount. The underwriting arrangements mentioned above shall not apply to the subscriptions by the ASBA Bidders in this Issue. 22

60 CAPITAL STRUCTURE Our Equity Share capital before the Issue and after giving effect to the Issue, as at the date of this Draft Red Herring Prospectus, is set forth below: (in `million) Aggregate nominal value Aggregate Value at Issue Price A) Authorised Share Capital 100,000,000 Equity Shares 1, B) Issued, subscribed and paid up share capital before the Issue 50,034,200 Equity Shares C) Present Issue in terms of this Draft Red Herring Prospectus 18,000,000 Equity Shares fully paid up [ ] D) Equity Capital after the Issue 68,034,200 Equity Shares fully paid up E) Share premium account Before the Issue After the Issue This Issue has been authorised by a resolution of our Board of Directors dated November 15, 2010 and a resolution of our shareholders in their Extraordinary General Meeting dated November 15, 2010 and a resolution of our Board dated January 3, Changes in the Authorised Share Capital of our Company since incorporation Sl. Date of Shareholder Changes in the Authorised Share Capital No. Meeting 1. September 20, 2002 The initial authorized share capital of our Company of ` 1.00 million divided into 2,000 equity shares of ` 500 was increased to ` million divided into 100,000 equity shares of ` 500 each. 2. March 30, 2005 The authorized share capital of our Company was increased from ` million divided into 100,000 equity shares of ` 500 each to ` million divided into 200,000 equity shares of ` 500 each. 3. January 29, 2007 The authorized share capital of our Company was increased from ` million divided into 200,000 equity shares of ` 500 each to ` million divided into 500,000 equity shares of ` 500 each. 4. September 28, 2007 Each equity share of ` 500 was sub-divided into 50 Equity Shares of ` 10 each 5. October 30, 2007 The authorized share capital of our Company was increased from ` million divided into 25 million Equity Shares of ` 10 each to ` million divided into 65 million Equity Shares of ` 10 each. 6. November 15, 2010 The authorized share capital of our Company was increased from ` million divided into 65 million Equity Shares of ` 10 each to ` 1,000 million into 100 million Equity Shares of ` 10 each For details in change of the authorised capital of our Company, see History and Corporate Structure on page 87. Notes to Capital Structure: 1. Share capital history of our Company Nil [ ] (a) Equity share capital history Date of allotment of the Equity Shares No. of Equity Shares Face Value (`) Issue Price (`) Nature of Payment Reasons for allotment Cumulative number of Equity Shares Cumulative Issued Capital (` in million) Cumulative Share Premium (`) 23

61 Date of allotment of the Equity Shares April 22, No. of Equity Shares Face Value (`) Issue Price (`) Nature of Payment Cumulative Reasons for allotment Cumulative number of Equity Shares Issued Capital (` in million) Subscribers to Memorandum (1) Nil Preferential Allotment (2) 100, Nil Further Allotment (3) 200, Nil Further Allotment (4) 400, Nil Subdivision of share capital (5) 20,000, Nil Further Allotment (6) 45,000, Nil Further Allotment (7) 50,000, Nil Preferential Allotment (8) 50,020, Nil Cumulative Share Premium (`) Cash September 25, , Cash March 30, , Cash March 1, , Cash September 28, November 5, ,000, Cash February 19, ,000, Cash November 8, , Cash November Preferential 12, , Cash Allotment (9) 50,034, Nil (1) Allotment of 100 Equity Shares to Alukkas Varghese Joy and 100 Equity Shares to Jolly Joy. (2) Allotment of 89,900 Equity Shares to Alukkas Varghese Joy and 9,900 Equity Shares to Jolly Joy. (3) Allotment of 90,000 Equity Shares to Alukkas Varghese Joy and 10,000 Equity Shares to Jolly Joy. (4) Allotment of 180,000 Equity Shares to Alukkas Varghese Joy and 20,000 Equity Shares to Jolly Joy. (5) Sub-division of each Equity Share of ` 500 into 50 Equity Shares of ` 10 each. (6) Allotment of 22,500,000 Equity Shares to Alukkas Varghese Joy and 2,500,000 Equity Shares to Jolly Joy. (7) Allotment of 4,500,000 Equity Shares to Alukkas Varghese Joy and 500,000 Equity Shares to Jolly Joy. (8) Allotment of 20,900 Equity Shares to 49 employees of the Company. (9) Allotment of 13,300 Equity Shares to 49 employees of the Company. (b) Equity Shares allotted for consideration other than cash There has been no allotment of Equity Shares for consideration other than cash. 2. Promoter s Contribution and Lock-in (a) History of the Share Capital held by our Promoter Face Value (`) Nature of Considerati on Date of Allotment / Transfer No. of Equity Shares Issue/Acquisiti on Price (`) Nature of Transaction Alukkas Varghese Joy April 22, Cash Subscriber to Memorandum September 25, , Cash Preferential allotment March 30, , Cash Further allotment March 1, , Cash Further allotment Pursuant to resolution dated September 28, 2007 passed by the shareholders of our Company at an Annual General Meeting, the equity shares of face value of ` 500 each of our Company were subdivided into the Equity Shares of ` 10 each. Hence, after the sub division, our Promoter held 18,000,000 Equity Shares. November 5, ,500, Cash Further allotment February 19, ,500, Cash Further allotment August 7, 2010 (10,300) (1) Cash Transfer November 12, 2010 (9,000) (2) Cash Transfer TOTAL 44,980,700 (1) Transfer of 10,000 Equity Shares to John Paul Joy Alukkas and 100 shares each to P. P. Jose, P. D. Jose and P. D Francis (2) Transfer of 1,000 Equity Shares each to Elsy Antony, Mary Jacob, Tresa Mathew, Rosily Joseph, Lucy Tomy, Jacintha Johnson, Clara Johnson, Reena Joby and Pauly Antony 24

62 (b) Details of Promoter s contribution locked in for three years The Equity Shares, which are being locked-in are not ineligible for computation of minimum promoter s contribution under Regulation 33 of the SEBI ICDR Regulations. Pursuant to Regulations 32 and 36 of the SEBI ICDR Regulations, an aggregate of 20% of the fully diluted post-issue capital of our Company held by the Promoter shall be locked in for a period of three years from the date of Allotment of Equity Shares in the Issue and the Promoter s shareholding in excess of 20% shall be locked-in for a period of one year. The details of the three year lock in mentioned above are as follows: Name Date of allotment/acq uisition and when made fully paid-up Nature of allotment Nature of considerati on No. of shares locked in* Face value (`) Alukkas Varghese Joy November 5, 2007 Further allotment Issue Price/Purch ase Price (`) Percenta ge of post- Issue paid-up capital Date upto which specified securities are subject to lockin Cash 13,606, [ ] TOTAL 13,606, * Commencing from the date of the Allotment of the Equity shares in the Issue. (a) (b) (c) (d) (e) The Promoter contribution has been brought in to the extent of not less than the specified minimum lot and from the persons defined as promoters under the SEBI ICDR Regulations. Our Company has obtained specific written consent from our Promoter for inclusion of the Equity Shares held by him in the minimum Promoter s contribution subject to lock-in. Further, our Promoter has given undertakings to the effect that he shall not sell/transfer/dispose of in any manner, Equity Shares forming part of the minimum Promoter s contribution from the date of filing the Draft Red Herring Prospectus till the date of commencement of lock-in in accordance with SEBI ICDR Regulations. 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. In terms of Regulation 37 of the SEBI ICDR Regulations, our entire pre-issue Equity Share capital held by persons other than the Promoter consisting of 5,053,500 Equity Shares will be locked-in for a period of one year from the date of Allotment in this Issue except for the Promoter s contribution as specified in clause 2(b) above shall be locked in for a period of three years from the date of Allotment in this Issue. In terms of Regulation 40 of the SEBI ICDR Regulations: the Equity Shares held by persons other than the Promoter prior to the Issue may be transferred to any other person holding the Equity Shares of our Company which are locked-in as per Regulation 37 of the SEBI ICDR Regulations, subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable. the Equity Shares held by the Promoter may be transferred among the Promoter Group or to a new promoter or persons in control of our Company which are locked-in as per Regulation 36 of the SEBI ICDR Regulations, subject to continuation of the lock-in in 25

63 the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as applicable. (f) Locked-in Equity Shares of our Company held by the Promoter can be pledged with scheduled commercial banks or public financial institutions as collateral security for loans granted by such banks or financial institutions provided that the pledge of the Equity Shares is one of the terms of the sanction of the loan. Further, the Equity Shares constituting 20% of the fully diluted post-issue capital of our Company held by the Promoter that is locked in for a period of three years from the date of Allotment of Equity Shares in the Issue, may be pledged only if, in addition to complying with the aforesaid conditions, the loan has been granted by the banks or financial institutions for the purpose of financing one or more objects of the Issue. 3. The shareholding pattern of our Company The table below presents the shareholding pattern of our Company before the proposed Issue and as adjusted for the Issue: Cate gory code Category of shareholder Pre - Issue Post Issue Number of Equity Shares % Number of Equity Shares % A. Shareholding of Promoter and Promoter Group 1. Indian a. Individuals/ Hindu Undivided Family Promoter Alukkas Varghese Joy 44,980, % [ ] [ ] Promoter Group Elsy Antony 1,000 Negligible Mary Jacob 1,000 Negligible Tresa Mathew 1,000 Negligible Rosily Joseph 1,000 Negligible Lucy Tomy 1,000 Negligible Jacintha Johnson 1,000 Negligible Clara Johnson 1,000 Negligible Reena Joby 1,000 Negligible Pauly Antony 1,000 Negligible b. Central Government/ State [ ] [ ] Government(s) - - c. Bodies Corporate - - [ ] [ ] Promoters - - [ ] [ ] Promoter Group - - [ ] [ ] d. Financial Institutions/ Banks - - [ ] [ ] e. Any Other (specify) - - [ ] [ ] Sub-Total (A)(1) 44,989, % [ ] [ ] 2. Foreign a. Individuals (Non-Resident - - Individuals/ Foreign Individuals) - - Jolly Joy 4,999, % John Paul Joy Alukkas 10, % Jolly Joy/ Mary Jeny Joy 500 Negligible b. Bodies Corporate c. Institutions d. Any Other (specify) Sub-Total (A)(2) 5,010, Total Shareholding of Promoter 49,999, % [ ] [ ] 26

64 Cate gory code Category of shareholder Pre - Issue Post Issue Number of Equity Shares % Number of Equity Shares % and Promoter Group (A)= (A)(1)+(A)(2) B. Public shareholding 1. Institutions a. Mutual Funds/ UTI - - [ ] [ ] b. Financial Institutions/ Banks - - [ ] [ ] c. Central Government/ State - - [ ] [ ] Government(s) d. Venture Capital Funds - - [ ] [ ] e. Insurance Companies - - [ ] [ ] f. Foreign Institutional Investors - - [ ] [ ] g. Foreign Venture Capital Investors - - [ ] [ ] h. Any Other (specify) Sub-Total (B)(1) - - [ ] [ ] 2. Non-institutions a. Bodies Corporate - - [ ] [ ] Sub-total (a) - - [ ] [ ] b. Individuals i. Individual shareholders holding nominal share capital up to ` 100,000 Shares arising out of ESOP - - [ ] [ ] Employees 34, % [ ] [ ] Former Employees [ ] [ ] Others - - [ ] [ ] ii. Individual shareholders holding nominal share capital in excess of ` 100, [ ] [ ] Shares arising out of ESOP Employees - - [ ] [ ] Former Employees - - [ ] [ ] Others - - [ ] [ ] Sub-total (b) 34, % [ ] c. Any Other ESOP Trust Sub Total (c) d. Issue of Shares at the IPO Sub-Total (B)(2) 34, % [ ] [ ] Total Public Shareholding (B)= 34, % [ ] [ ] (B)(1)+(B)(2) TOTAL (A)+(B) 34, % [ ] [ ] C. Equity Shares held by Custodians - - [ ] [ ] and against which depository receipts have been issued TOTAL (A)+(B)+(C) 50,034, % [ ] [ ] 27

65 For further details of Equity Shares held by our Promoter, see note one of Capital Structure Notes to Capital Structure on page 23. Except the allotment of 34,200 Equity Shares to 98 employees of the Company, the details of which are indicated under the Section Capital Structure-Notes to Capital Structure on page 23 above, the Company has made no issuance that may be below the issue price during the period of one year immediately preceding the date of this DRHP. Please also see Risk Factors on page x. 4. Equity Shares held by top ten shareholders On the date of filing this Draft Red Herring Prospectus with SEBI: S. No. Name Number of Equity Shares Percentage of Equity Share capital 1. Alukkas Varghese Joy 44,980, Jolly Joy 4,999, John Paul Joy Alukkas 10, Elsy Antony 1,000 Negligible 5 Mary Jacob 1,000 Negligible 6 Tresa Mathew 1,000 Negligible 7 Rosily Joseph 1,000 Negligible 8 Lucy Tomy 1,000 Negligible 9 Jacintha Johnson 1,000 Negligible 10 Clara Johnson 1,000 Negligible Ten days prior to the date of filing this Draft Red Herring Prospectus with SEBI: S. No. Name Number of Equity Shares Percentage of Equity Share capital 1. Alukkas Varghese Joy 44,980, Jolly Joy 4,999, John Paul Joy Alukkas 10, Elsy Antony 1,000 Negligible 5 Mary Jacob 1,000 Negligible 6 Tresa Mathew 1,000 Negligible 7 Rosily Joseph 1,000 Negligible 8 Lucy Tomy 1,000 Negligible 9 Jacintha Johnson 1,000 Negligible 10 Clara Johnson 1,000 Negligible Two years prior to the date of filing this Draft Red Herring Prospectus with SEBI: S. No. Name Number of Equity Shares Percentage of Equity Shares 1. Alukkas Varghese Joy 40,500, Jolly Joy 4,499, Jolly Joy/ Mary Jeny Joy 500 Negligible 5. The Company does not have an Employee Stock Option Plan. 6. Details of Transactions in Equity Shares by our Promoter and our Promoter Group There has been no purchase or sale of Equity Shares by Promoter, Promoter Group, our Directors and their immediate relatives during the six month period immediately preceding the date on which the Draft Red Herring Prospectus was filed with SEBI except as indicated below as well in this chapter under the head Share Capital History of our Company in the section on Notes to Capital Structure : 28

66 Transferor Date of Transfer Transferee No. of Equity Shares Face Value (`) Issue/Acquisition Price (`) Alukkas August 7, 2010 John Paul Varghese Joy Joy Alukkas 10, Cash Alukkas August 7, 2010 P. P. Jose Varghese Joy Cash Alukkas August 7, 2010 P. D. Jose Varghese Joy Cash Alukkas August 7, 2010 P. D. Varghese Joy Francis Cash Alukkas Other Varghese Joy November 12, 2010 relatives (1) 9, Cash Nature of Consideration TOTAL 19,300 (1) Transfer of 1,000 Equity Shares each to Elsy Antony, Mary Jacob, Tresa Mathew, Rosily Joseph, Lucy Tomy, Jacintha Johnson, Clara Johnson, Reena Joby and Pauly Antony 7. Details of Equity Shares held by our Directors and Key Management Personnel The table below sets forth the details of Equity Shares that are held by our Directors and Key Management Personnel as of the date of this Draft Red Herring Prospectus: Number of Equity Pre-Issue Equity Post-Issue Equity S. No. Name Shares Share Capital % Share Capital % 1. Alukkas Varghese Joy 44,980, [ ] 2. John Paul Joy Alukkas 10, % [ ] 3. P. P. Jose 700 Negligible [ ] 4. P. D. Jose 700 Negligible [ ] 5. P.D. Francis 700 Negligible [ ] 6. T. Nandakumar 1,000 Negligible [ ] 7. Deepak Xavier 600 Negligible [ ] 8. H. Sanjay 600 Negligible [ ] 9. Varun T.V. 600 Negligible [ ] 10. Joseph Christo 800 Negligible [ ] This disclosure is made in accordance with Schedule VIII - Part A of the SEBI ICDR Regulations. 8. There are no financing arrangements whereby the Promoter, the Promoter Group, the directors of our Company or their relatives have financed the purchase by any other person of securities of our 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 the Board. 9. Neither our Company, our Promoter, Directors nor the BRLMs have entered into any buy-back, safety net and/or standby arrangements for the purchase of Equity Shares from any person. 10. Our Company has not raised any bridge loans against the proceeds of the Issue. 11. Except as disclosed in this Draft Red Herring Prospectus, there will be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of this Draft Red Herring Prospectus with SEBI until the Equity Shares to be issued pursuant to the Issue have been listed. 12. Our Company presently does not intend or propose to alter the capital structure for a period of six months from the Bid/Issue Opening Date, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise or issue of bonus or rights or further public issue of specified securities or qualified institutional placements, except that if we enter into acquisitions, joint ventures or other arrangements, we may, 29

67 subject to necessary approvals, consider raising additional capital to fund such activity or use Equity Shares as currency for acquisitions or participation in such joint ventures. 13. There are no outstanding warrants, options or other financial instruments or rights that may entitle any person to receive any Equity Shares in our Company. 14. Our Company has not issued any Equity Shares out of revaluation reserves or for consideration other than cash. 15. The Equity Shares held by our Promoter are not subject to any pledge. 16. In terms of Rule 19(2)(b)(i) of the SCRR and the SEBI ICDR Regulations, this being an Issue for more than 25% of the post-issue capital, the Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue will be allocated on a proportionate basis to QIBs. Provided that our Company may allocate up to 30% of the QIB Portion, to Anchor Investors, on a discretionary basis. 5% of the QIB Portion, less Anchor Investor Portion, shall be available for allocation to Mutual Funds only and the remaining QIB Portion shall be available for allocation to all the 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 shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. 17. Under-subscription, if any, in any category other than the QIB Portion, would be met with spillover from other categories or combination of categories at the discretion of our Company in consultation with and the BRLMs. 18. Over-subscription to the extent of 10% of the Issue can be retained for the purpose of rounding off while finalising the basis of Allotment. 19. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor. 20. Our Promoter and members of our Promoter Group will not participate in the Issue. 21. There will be only one denomination of Equity Shares unless otherwise permitted by law and our Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time. 22. The Equity Shares will be fully paid up at the time of allotment failing which no allotment shall be made. 23. The BRLMs do not hold any Equity Shares as on the date of this DRHP. 24. Our Company, our Directors, our Promoter or Promoter Group shall not make any payments direct or indirect, discounts, commissions, allowances or otherwise under this Issue except as disclosed in this Draft Red Herring Prospectus. 25. For details of our related party transactions, see Related Party Transactions on page Our Company has 111 shareholders as of the date of this Draft Red Herring Prospectus. 30

68 OBJECTS OF THE ISSUE The Objects of the Issue are to: a) Finance the establishment of new retail outlets; b) To repay/prepay existing borrowings; and c) General Corporate purposes. The main objects clause of our Memorandum of Association and objects incidental to the main objects as provided therein, enable us to undertake our existing activities and the activities for which funds are being raised by us through this Issue. The estimated Issue related expenditure is as follows: S. No. Activity Expense 1 Fees of the BRLMs, underwriting commission, brokerage and selling commission Amount* (in ` million) Percentage of Total Estimated Issue Expenditure* Percentage of Issue Size* [ ] [ ] [ ] 2 Fees to the Bankers to Issue [ ] [ ] [ ] 4 Advertising and marketing expenses, printing and stationery, distribution, postage etc. [ ] [ ] [ ] 5 Registrar to the Issue [ ] [ ] [ ] 6 Other expenses (Grading Agency, Monitoring Agency, Legal Advisors, Auditors and other Advisors etc: ) [ ] [ ] [ ] Total Estimated Issue Expenditure *To be completed after finalization of the Issue Price [ ] [ ] [ ] The details of the proceeds of the Issue are as follows: (` in million) S. No. Description Amount 1 Gross Proceeds of the Issue [ ] 2 Issue related Expenditure [ ] 3 Net Proceeds of the Issue [ ] Use of Net Proceeds The utilization of the Net Proceeds of this Issue is as follows: Sl. No. Expenditure Items Total estimated cost Amounts deployed/utilized as on December 31, 2010* Amount up to which will be financed from Net Proceeds of the Issue (` in million) Estimated Net Proceeds utilization as on March 31, Finance the establishment of new retail outlets 4, , , , Repayment/prepayment of Existing Borrowings 1, Nil 1, , Nil Nil 31

69 Sl. No. Expenditure Items Total estimated cost Amounts deployed/utilized as on December 31, 2010* 32 Amount up to which will be financed from Net Proceeds of the Issue Estimated Net Proceeds utilization as on March 31, General Corporate purposes [ ] [ ] [ ] [ ] [ ] [ ] TOTAL [ ] [ ] [ ] [ ] [ ] * As per the certificate of C. I. Francis, Chartered Accountant (membership No ) dated January 11, For details, see Material Contracts and Documents for Inspection on page 310. Means of Finance We intend to utilize the Net Proceeds of the Issue estimated at ` [ ] for financing the growth of our business. We propose to finance the establishment of 14 new outlets completely from the Net Proceeds of the Issue. We also propose to utilise a portion of our Net Proceeds towards the repayment of existing debt facilities of our Company. Our fund requirements and deployment of the Net Proceeds of the Issue is based on internal management appraisals and estimates. These are based on current conditions and are subject to change in light of changes in external circumstances or costs, or in other financial condition, business or strategy. In case of variations in the actual utilization of funds earmarked for the purposes set forth above, increased fund requirements for a particular purpose may be financed by surplus funds, if any, available in respect of the other purposes for which funds are being raised in this Issue. If surplus funds are unavailable, the required financing will be through our internal accruals through cash flow from our operations and/or debt, as required. In the event that estimated utilization out of the Net Proceeds in a Fiscal is not completely met, the same shall be utilized in the next Fiscal. In the event of a shortfall in raising the requisite capital from the Net Procceds towards meeting the objects of the Issue, the extent of shortfall will be met by way of incremental debt or through internal accruals. We operate in highly competitive and dynamic market conditions and may have to revise our estimates from time to time on account of external circumstances or costs in our financial condition, business or strategy. Consequently, our fund requirements may also change accordingly. Any such change in our plans may require rescheduling of our expenditure programs and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net Proceeds. Details of the Objects Finance the establishment of new outlets We intend to expand our retail business by launching new outlets in different parts of the country. Pursuant to the same, we intend to deploy ` 4, million from the Net Proceeds for establishing 14 outlets in 14 cities by September The premises for the proposed new outlets will be taken on lease or on the basis of leave and license agreements. The size of our proposed outlets may vary between 2,455 sq. ft. and 80,000 sq. ft. The list of cities where our new outlets are proposed to be launched and the proposed year of launch is as set out below: SI. No City Proposed Year of Launch Built up Area (in square feet) Kerala 1. Thiruvananthapuram September , Thrissur September , Kozhikode September , Kochi December ,455 Tamil Nadu 5. Kumbakonam September ,000

70 6. Nagercoil September , Trichy April ,000 Karnataka 8. Mysore December , Hubli December , Davengere April , Shimoga February ,000 Andhra Pradesh 12. Vizag September , Rajahmundry June ,000 Others 14. New Delhi April ,600 We have entered into letters of intent/leave and license agreement/lease agreements for the purpose of taking properties on lease or leave and license for seven outlets, details of which are as below: For further details, see Material Contracts and Documents for Inspection on page 310. SI No. City Area/Location Built up Area (in square feet) 1. Thiruvanantha puram Manacaud Village, Thiruvananthap uram Taluk 2. Thrissur Survey numbers 1064, 983, 982 and 1063 situated at Thrissur Taluk, Thrissur Village, Thrissur Corporation Ward No Kozhikode Sy. No. 1215/2A, 1216/2, 2A, 3, 4A, 5A, Kasaba Village, Kozhikode Taluk 4. Kochi Lulu International Shopping Mall Private Limited, 50/2392, N. H. 17, Edapally, Kochi New Delhi Door Nos. 2713,2714,2715 & 2716, Bank Street, Karol Bagh, Delhi Kumbakonam No. 3, Nageswaran North Street, Kumbakonam, Expected year of launch Details of Agreements 70,000 September 2013 Memorandum of Understanding dated October 8, 2010 entered into by our Company with Cochin Smart City Properties Private Limited 70,000 September 2012 Memorandum of Understanding dated November 2, 2009 entered into by our Company with Celine Louis and others 80,000 September 2011 Memorandum of Understanding dated August 24, 2010 entered into by our Company with Cochin Smart City Properties Private Limited 2,455 December 2011 Letter of Intent dated May 21, 2010 entered into by our Company with Lulu International Shopping Mall Private Limited 12,600 April 2011 Agreement of Lease dated December 21, 2010 entered into by our Company with Padam Chand Garg and others 12,000 September 2012 Memorandum of Understanding dated May 17, 2010 entered into by our Company with K. Alamelu and others 7. Hubli CTS Ward No. 20,200 December 2011 Memorandum of Understanding dated

71 1, Station Road, Hubli December 17, 2010 entered into by our Company with Prakash and others We are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds. Estimated cost of establishment and deployment of funds The break down of the average cost for establishment of a new outlet is given below: SI. No. Location CAPITAL EXPENDITURE INVENTORY TOTAL RENT DEPOSIT Jewellery showrooms Estimated costs per sq ft. (in `) (a)* Size of the store (in sq. ft.) (b) Total cost (c ) = a*b 34 RENT DEPOSIT PAYABLE (` in million) RENT DEPOSIT PAID*** 1. Kochi 2,600 2, Kumbakonam 2,600 12, Nagarcoil 2,600 5, NIL 4. Trichy 2,600 10, NIL 5. Mysore 2,600 10, NIL 6. Hubli 2,600 20, Davengere 2,600 7, NIL 8. Shimoga 2,600 6, NIL 9. Vizag 2,600 10, NIL 10. Rajamundry 2,600 5, NIL 11. New Delhi 2,700 12, NIL 6.75 Wedding Centres 12. Thiruvananthapuram 1,500** 70, NIL Kozhikode 1,500** 80, NIL Thrissur 1,500** 70, Total , *as per quotation dated December 30, 2010 given by Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai **excluding air conditioning and as per design *** As per the certificate of C. I. Francis, Chartered Accountant (membership No ) dated January 11, 2011 For all the 14 outlets that are proposed to be financed from the Net Proceeds, we have received a quotation dated December 30, 2010 from Molekules Interior Studios for the fitting out of the store on a turn-key basis. For more details, see Material Contracts and Documents for Inspection on page 310. The average cost of establishment of each outlet is approximately ` 2,600 per sq. ft. for a jewellery showroom and ` 1,500 per sq. ft. for the proposed wedding centres as per the estimates contained in this quotation. The total cost is inclusive of the cost incurred on civils, false ceiling, paints, polish, carpentry, glass, hardwares, plumbing, air conditioning, security systems, electrical cables, facade works and other miscellaneous heads. We typically stock all our outlets with sufficient inventory. Based on our internal estimates, the minimum cost of inventory per outlet varies from ` million to ` million, based on the size and location of a particular outlet. We will acquire additional inventory as and when required. The inventory stored in our regular showrooms range from approximately 40 kgs to 123 kgs for gold jewellery and has diamond jewellery ranging approximately from ` 17 million to ` 132 million. The inventory stored in our large format showrooms range from approximately 81 kgs to 325 kgs for gold jewellery and has diamond jewellery ranging approximately from ` 31 million to ` 336 million. In cases where we have an existing store in the same city where a new store is proposed, a part of the inventory for the new store may be transferred from the existing store and only the balance has been taken into consideration to arrive at the estimate. We have arrived at the value of inventory mentioned herein by taking into account the cost incurred in procuring all the inventory displayed at a particular showroom at a particular point in time. We have estimated one kg of gold to be worth ` 2.00 million in arriving at the value of the inventory. We have assumed an inventory worth ` 100 million in the textiles, apparel and accessories for each Wedding Centre.

72 We are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds. We have obtained certificates of prevailing lease rentals in locations where these showrooms are proposed to be situated. The details of the same are as below: SI. No. Location of the proposed showroom Area in sq. ft. Details of the certificate received from the consultant 1. Trichy 10,000 Certificate dated December 29, 2010 from Revival Reals 2. Mysore 10,000 Certificate dated December 29, 2010 from Shri Ram Associates 3. Vizag 10,000 Certificate dated December 29, 2010 from Shri Ram Associates 4. Rajamundry 5,000 Certificate dated December 29, 2010 from Shri Ram Associates 5. Nagarcoil 5,000 Certificate dated December 29, 2010 from Diamond Properties 6. Shimoga 6,000 Certificate dated December 29, 2010 from Chetak Real Estates 7. Davengere 7,000 Certificate dated December 29, 2010 from Chetak Real Estates Rent in ` per sq. ft. 70 to to to to to to to 50 Repayment/prepayment of loans Our business is working capital intensive and we avail majority of our working capital in the ordinary course of business under facilities from various banks and financial institutions. As on December 31, 2010, our Company s working capital facility consisted of aggregate fund based limits of ` 3,650 million and aggregate non-fund based limits of ` 50 million and sanctioned term loan facility of ` 1,000 million. As on that date, the aggregate amount outstanding under the fund based limits excluding vehicle loans of ` million, was ` 3, million and there was no outstanding on non-fund based working capital facilities. For further details of the working capital facility availed by us, see section titled Financial Indebtedness on page 181. Given the nature of these borrowings and the terms of repayment, the aggregate outstanding amount varies from time to time. The Company intends to utilize the proceeds of the issue up to ` 1, million towards repayment and/or prepayment of a portion of debt as given below. Some of the Company s financing arrangements contain provisions relating to prepayment penalty. The Company will take these provisions into considerations in pre-paying its debt from the proceeds of the Issue: Details of outstanding amounts under these borrowings as on December 31, 2010: (` In million) S. No. Secured Loans Amount outstanding as on Pre-payment penalty December 31, Yes Bank Limited Not applicable 2. State Bank of Travancore Not applicable 3. IDBI Bank Limited Not applicable 4. Standard Chartered Bank Limited The facility may be prepaid with prior written consent of the lender and subject to the payment of prepayment costs as may be specified by the lender. 5. Citibank N.A Not applicable 6. The Royal Bank of Scotland N.V. (erstwhile ABN Amro Bank N.V.) All prepayments shall be subject to breakage costs as may be levied by the lender at the lender s sole discretion 7. Union Bank of India 2.17 Not applicable 8. ING Vysya Bank Limited Not applicable 35

73 9. Dhanalaxmi Bank Limited Not applicable Total 3, *As per the certificate dated January 7, 2011 received from C.I. Francis, Chartered Accountant (membership no ) all the aforementioned loans have been utilised for the purposes indicated in the respective loan documents. In addition to the above, we may, from time to time, enter into further financing arrangements and draw down funds thereunder. General Corporate Purposes We, in accordance with the policies of our Board, will have flexibility in applying the remaining Net Proceeds of this Issue, for general corporate purposes including strategic initiatives, brand building exercises and strengthening of our marketing capabilities. The quantum of utilization of funds towards each of the above purposes will be determined by the Board of Directors based on the amount actually available under the head General Corporate Purposes and the business requirements of the Company, from time to time. In case of variations in the actual utilization of funds designated for the purposes set forth above, increased fund requirements for a particular purpose may be financed by surplus funds, if any which are not applied to the other purposes set out above. 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, 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. Interim Use of Funds Our management, in accordance with the policies established by our Board of Directors from time to time, will have flexibility in deploying the Net Proceeds. Pending utilization for the purposes described above, we intend to invest the funds in high quality interest bearing liquid instruments including investment in money market mutual funds, deposits with banks and other interest bearing securities for the necessary duration. Such investments will be approved by the Board or its committee from time to time, in accordance with its investment policies. Our Company confirms that pending utilization of the Net Proceeds, it shall not use the funds for any investment in equity or equity linked securities. Bridge Loan We have not raised any bridge loans which are required to be repaid from the Net Proceeds. Monitoring Utilization of Funds from Issue The Company, if required will appoint a monitoring agency in relation to the Issue. The Board and such monitoring agency will monitor the utilization of the proceeds of the Issue. The Company will disclose the utilization of the proceeds of the Issue, including interim use, under a separate head along with details, for all such proceeds of the Issue that have not been utilized. The Company will indicate investments, if any, of unutilized proceeds of the Issue in the balance sheet of the Company for the relevant Financial Years subsequent to the listing. 36

74 Pursuant to clause 49 of the Listing Agreement, the Company shall on a quarterly basis disclose to the Audit Committee the uses and applications of the proceeds of the Issue. On an annual basis, the Company shall prepare a statement of funds utilised 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 utilised in full. The statement will be certified by the statutory auditors of the Company. In addition, the report submitted by the Monitoring Agency will be placed before the Audit Committee of the Company, so as to enable the Audit Committee to make appropriate recommendations to the Board of Directors of the Company. The Company shall be required to inform material deviations in the utilisation 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. Except in case of the proposed new outlets at Thiruvananthapuram and Kozhikode, which are both situated on the premises owned by one of our Group Entities, and except as otherwise stated in this DRHP, no part of the proceeds from the Issue will be paid by the Company as consideration to its Promoter, Directors, Group Entities or key managerial employees. For further details, see Material Documents Agreements for Inspection on page

75 BASIS FOR ISSUE PRICE The Issue Price of ` [ ] will be determined by our Company in consultation with the BRLMs, on the basis of assessment of market demand from the investors for the offered Equity Shares by way of Book Building Process. The face value of the Equity Shares is ` 10 and the Issue Price is [ ] times the face value at the lower end of the Price Band and [ ] times the face value at the higher end of the Price Band. Qualitative Factors Some of the qualitative factors which form the basis for computing the prices are: Large format retail stores and Wedding Centres at strategic locations Experience of our Promoter and a strong management team Strong track record and established brand equity with robust sales and marketing network Our efficient internal processes to leverage our sales Corporate tie-ups with leading companies as part of our Business to Business program For further details, refer to Our Business and Risk Factors on pages 65 and x respectively. Quantitative Factors Information presented in this section is derived from our restated audited financial statements prepared in accordance with Indian GAAP. Some of the quantitative factors which may form the basis for computing the Issue Price are as follows: Basic and Diluted Earnings Per Share ( EPS ) As per our restated standalone audited financial statements Basic and Diluted EPS: Particulars Basic and Diluted Earning Per Share (Face Value ` 10 per share) Weight Year ended March 31, Year ended March 31, Year ended March 31, Weighted Average months ended September 30, * * Not Annualised Note: EPS calculations have been done in accordance with Accounting Standard 20 - Earning per share issued by the Institute of Chartered Accountants of India Price Earning Ratio (P/E) in relation to the Issue Price of ` [ ] per share o P/E ratio in relation to the Floor Price: [ ] times o P/E ratio in relation to the Cap Price: [ ] times o P/E based on the EPS as per our Restated Financial Statements for the year ended March 31, 2010: [ ] times o P/E ratio based on Weighted average EPS as per our Restated Financial Statements for the year ended March 31, 2010: [ ] times o Peer Group * P/E: a. Highest: b. Lowest:

76 c. Peer Group Average: Source: Capital Markets Vol XXV/22 dated December 27,2010 to January 9,2011, (Industry Diamond Cutting/jewellery, Miscellaneous * Peer Group includes Titan Industries Limited and Thangamayil Jewellery Limited. Return on Average Net Worth (RoNW) as per restated standalone financial statements RoNW: As per our restated standalone audited financial statements Particulars RONW % Weight Year ended March 31, Year ended March 31, Year ended March 31, Weighted Average months ended September 30, * *Not Annualised. Minimum Return on Increased Net Worth required for maintaining pre-issue EPS as at March 31, 2010 is [ ]. Net Asset Value Per Share* o Net Asset Value per Equity Share as of March 31, 2010 is ` 39.09* o After the Issue: [ ] o Issue Price: ` [ ] # * Net Asset Value per Equity Share represents networth, as restated, divided by the number of Equity Shares as at year end. # Issue Price will be determined on the conclusion of the Book Building Process. Comparison with Industry Peers Fiscal 2010 EPS (`) NAV (per share)(`) P/E RONW (%) Joyalukkas India Limited [ ] Peer Group (1) Titan Industries Limited Thangamayil Jewellery Limited Note: The EPS, RONW and NAV figures for Joyalukkas India Limited are based on the restated audited standalone financial statements for the year ended March 31, (1) Source: Capital Markets Vol XXV/22 dated December 27, 2010 to January 9, 2011, (Industry Diamond Cutting/Jewellery, Miscellaneous ). Note: The EPS, RONW and NAV figures for the peer group are based on the latest audited results (standalone) for the year ended March 31, 2010 and P/E is computed based on the market price as on December 20, 2010 and EPS for the year ended March 31, 2010 as reported in Capital Markets, Vol XXV/22 dated December 27,2010 to January 9,2011, (Industry Diamond CuttingJjewellery, Miscellaneous ). The peer group above has been determined on the basis of listed public companies comparable in size to our Company or whose business portfolio is comparable with that of our business. Since the Issue is being made through the 100% Book Building Process, the Issue Price will be determined on the basis of investor demand. 39

77 The face value of our Equity Shares is ` 10 each and the Issue Price is [ ] times of the face value of our Equity Shares. The Issue Price of ` [ ] has been determined by us, in consultation with the BRLMs on the basis of the demand from investors for the Equity Shares through the Book-Building Process and is justified based on the above accounting ratios. For further details, see the Risk Factors on page x and the financials of the Company including important profitability and return ratios, as set out in the Financial Statements on page 113 to have a more informed view. The trading price of the Equity shares of the company could decline due to the factors mentioned in Risk Factors and you may lose all or part of your investments. 40

78 STATEMENT OF TAX BENEFITS To, The Board of Directors Joyalukkas India Limited Marine Drive Cochin Dear Sirs, Statement of possible Tax Benefits available to Joyalukkas India Limited and its shareholders We hereby report that the enclosed statement states the possible tax benefits available to Joyalukkas India Limited ( the Company ) under the Income-tax Act, 1961 presently in force in India and to the shareholders of the Company under the Income tax Act, 1961 and other Direct Tax Laws 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 is based on business imperatives the Company may face in the future and accordingly, 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: 1 The Company or its shareholders will continue to obtain these benefits in future; or 2 The conditions prescribed for availing the benefits have been / would be met with. The contents of the enclosed statement are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. Our views expressed herein are based on the facts and assumptions indicated to us. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to the Company for any claims, liabilities or expenses relating to this assignment except to the extent of fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. We will not be liable to any other person in respect of this statement. The enclosed annexure is intended solely for your information and for inclusion in the Draft Red herring Prospectus in connection with the proposed issue and is not to be used, referred to or distributed for any other purpose without prior written consent. For B S R & Co. Chartered Accountants 41

79 Zubin Shekary Partner Membership No: Firm Registration No: W Place: Bangalore Date: January 3,

80 STATEMENT OF TAX BENEFITS AVAILABLE TO JOYALUKKAS INDIA LIMITED ( THE COMPANY ) AND ITS SHAREHOLDERS I Special Tax Benefits available to the Company The Company is not entitled to any special tax benefits under the Act. 43

81 II. General tax benefits to the Company Under the Income Tax Act 1961 (the Act) 1 Dividend income referred to in section 115O earned by the Company from another domestic Company/ Companies is exempt under section 10(34) of the Act. 2 As per section 10(35) of the Act, the following incomes are exempt from tax in the hands of the Company: Income received in respect of the units of a Mutual Fund specified under section 10(23D); or Income received in respect of units from the Administrator of the specified undertaking ; or 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. The equity shares or units of an equity oriented fund are treated as long term assets if it is held for a period of more than 12 months prior to the date of transfer. However the said exemption will not be available to the Company while computing the book profit and the tax payable under section 115JB of the Act. 4 As per section 112 of the Act, the long term capital gains arising to the Company from the transfer of listed securities or units, as defined, not covered under paragraph 3 above (ie, where the transaction is not chargeable to securities transaction tax) shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10 percent (plus applicable surcharge and education cess) of the capital gains before indexing the cost of acquisition, whichever is lower. 5 The long term capital gains not covered under paragraph 3 and 4 above shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition/ improvement. 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 held by the Company will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess), if securities transaction tax is chargeable on such transaction. 7 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, longterm 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 subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a long term specified asset within a period of six months after the date of such transfer. For the above purposes a long term specified asset inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 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. 9 Under section 35D of the Act, the Company will be entitled to a deduction equal to 1/5th of the expenditure incurred of the nature specified in the said section, including expenditure incurred on present issue, such as underwriting commission, brokerage and other charges, as specified in the 44

82 provision, by way of amortisation over a period of 5 successive years, beginning with the previous year in which the business commences or after the commencement of its business in connection with the extension of its industrial undertaking or in connection with setting up a new industrial unit, subject to the stipulated limits. 10 Section 72 of the Act provides that the business loss shall be carried forward to the following assessment year to be set off against the profits and gains of business and profession and the balance shall be allowed to be carried forward for next 8 assessment years subject to the provisions of the Act. Unabsorbed depreciation, if any, for any assessment year can be carried forward and set off against any source of income of subsequent assessment years as per section 32 of the Act. 11 As per section 74 of the Act, short-term capital loss can be set-off against short-term as well as longterm capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years short term as well as long term capital gains. Long term capital loss suffered during the year can be set-off only against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years long - term capital gains only. 12 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. 13 Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchased within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt. 14 The amount of tax paid under section 115JB by the Company for any assessment year commencing from 01 April 2006 and any subsequent assessment year, will be available as credit to the extent specified in section 115JAA for ten years succeeding the assessment year in which MAT credit becomes allowable in accordance with the provisions of Section 115JAA of the Act. 45

83 III Tax benefits available to the members of the Company (A) Resident Members of the Company (including domestic Companies) General Tax Benefits 1 As per section 10(34) of the Act, income earned by the resident member by way of dividend referred to in section 115-O of the Act from a domestic company is exempt from tax. 2 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. However, the said exemption will not be available to a member being a company while computing the book profit and the tax payable under section 115JB of the Act. 3 As per section 112 of the Act, the long term capital gains arising to the shareholders of the Company from the transfer of listed securities or units, as defined, not covered under paragraph 2 above shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10 percent (plus applicable surcharge and education cess) of the capital gains before indexing the cost of acquisition, whichever is lower. 4 In case of an individual or a Hindu Undivided Family, where the total taxable income as reduced by the long term capital gains is less than the basic exemption limit, the long term capital gains will be reduced to the extent of the shortfall and only the balance long term capital gains will be subject to tax in accordance with the proviso to sub section (1) of section 112 of the Act. 5 Short-term capital gains arising on transfer of the shares (i.e. held for less than 12 months) of the Company will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess) as per the provisions of section 111A of the Act, if securities transaction tax is chargeable on such transaction. In case of an individual or Hindu Undivided Family, where the total taxable income as reduced by short-term capital gains is below the basic exemption limit, the short-term capital gains will be reduced to the extent of the shortfall and only the balance short-term capital gains will be subjected to such tax in accordance with the proviso to sub-section (1) of section 111A of the Act. 6 The short-term capital gains accruing to the shareholders of the Company from the transfer of the shares of the Company otherwise than as mentioned in Paragraph 5 above shall be chargeable to the capital gains tax at the normal tax rate applicable. 7 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, longterm 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 subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a long term specified asset within a period of six months after the date of such transfer. For the above purposes a long term specified asset inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 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, with in 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. 46

84 9 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1)(xv) of the Income- Tax Act. 10 As per Section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming setoff against subsequent years long term capital gains. 11 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Income-Tax Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.. Special Tax Benefits There are no special tax benefits available to the resident members of the Company (including domestic companies). 47

85 (B) Tax benefits available to Non-Resident Indian Members/ Non Resident Shareholders (including foreign companies) [Other than FIIs and Foreign Venture Capital Investors] under the Act General tax benefits 1 As per section 10(34) of the Act, income earned by the shareholders by way of dividend referred to in section 115-O of the Act from a domestic company is exempt from tax. 2 As per section 10(38) of the Act, long term capital gains arising to the shareholder 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 shareholders. However, the said exemption will not be available to a member being a company while computing the book profit and the tax payable under section 115JB of the Act. 3 In accordance with, and subject to section 48 of the Income-Tax Act, capital gains arising on transfer of shares of the Company which are acquired in convertible foreign exchange and not covered under Paragraph 2 above shall be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer into the same foreign currency as was initially utilised in the purchase of shares and the capital gains computed in such foreign currency shall be reconverted into Indian currency, such that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing / arising from every reinvestment thereafter and sale of shares of the Company. 4 The long-term capital gains accruing to the shareholders of the Company from the transfer of the shares of the Company otherwise than as mentioned in Paragraphs 2 and 3 above shall be chargeable to tax at the rate of 20% (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10% (plus applicable surcharge and education cess) of the capital gains computed before indexing the cost of acquisition, whichever is lower. 5 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, will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess), if securities transaction tax is chargeable on such transaction. 6 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, longterm 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 subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a long term specified asset within a period of six months after the date of such transfer. 48

86 For the above purposes a long term specified asset inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 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, with in 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 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1)(xv) of the Income- Tax Act. 9 As per Section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming setoff against subsequent years long term capital gains. 10 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Income-Tax Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt. Special tax benefits 1 The tax rates and consequent taxation mentioned below 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 prevail over the provisions of the Double Taxation Avoidance Agreement ( DTAA ) to the extent they are more beneficial to the non-resident. 2 Besides the above benefits available to non-residents, Non-Resident Indians (NRIs) have the option of being governed by the provisions of Chapter XII-A of the Income-Tax Act which inter alia entitles them to certain benefits in respect of income from shares of an Indian Company acquired, purchased or subscribed to in convertible foreign exchange. 3 As per section 115A of the Act, where the total income of a Non-resident (not being a company) or of a foreign company includes dividends (other than dividends referred to in section 115O of the Act), tax payable on such income shall be aggregate of amount of income-tax calculated on the amount of income by way of dividends included in the total income, at the rate of 20 per cent (plus applicable surcharge and education cess). 4 In accordance with section 115E of the Act, 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% (plus applicable surcharge and education cess). 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% (plus applicable surcharge and education cess). 49

87 5 In accordance with section 115F of the Act, 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 chargeable, 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. 6 In accordance with section 115G of the Act, 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 or both, and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the Act. 7 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 transferred or converted into money. 8 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. (C) Benefits available to Foreign Institutional Investors (FII s) under the Act 1 As per section 10(34) of the Act, income earned by way of dividend 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 Under section 115AD(1)(b)(iii) of the Income-Tax Act, income by way of long-term capital gains arising from the transfer of shares held in the Company not covered under Paragraph 2 above will be chargeable to tax at the rate of 10% (plus applicable surcharge and education cess) without indexation benefit. 4 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% (plus applicable surcharge and education cess). 5 Under section 115AD(1)(b)(ii) of the Income-Tax Act, income by way of short- term capital gains arising from the transfer of shares held in the Company not covered under Paragraph (iv) above will be chargeable to tax at the rate of 30% (plus applicable surcharge and education cess). 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 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against 50

88 long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming setoff against subsequent years long-term capital gains. 8 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1) (xv). 9 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, longterm 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 subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a long term specified asset within a period of six months after the date of such transfer. For the above purposes a long term specified asset inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt. (D) Benefits available to Mutual Funds 1 As per section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorised by the Reserve Bank of India will be exempt from income tax, subject to such conditions as the Central Government may by notification in the Official Gazette, specify in this behalf. 2 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt. (E) Specific benefits available to Venture Capital Companies/ Funds under the Act 1 Any income received by venture capital companies or venture capital funds set up to raise funds for investment in a venture capital undertaking registered with the Securities and Exchange Board of India, subject to conditions specified in section 10(23FB) of the Act, is eligible for exemption from incometax. However, the income distributed by the Venture Capital Companies/ Funds to its investors would be taxable in the hands of the recipient. As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt. (F) Benefits to shareholders of the Company 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 The Wealth Tax Act, Hence the shares are not liable to Wealth Tax. 51

89 (G) Benefits under the Gift Tax Act, 1958 Gift tax is not leviable in respect of any gifts made on or after October 1, Therefore, any gift of shares will not attract gift tax under the Gift Tax Act, However, as per section 56(1)(vii)(c) of the Act, gift of shares to an individual or Hindu undivided family would be taxable in the hands of the donee as Income From Other Sources subject to the provisions of the Act. 52

90 Notes: (i) (ii) (iii) (iv) (v) 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. 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. All the above benefits are as per the current tax laws 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. In respect of non-residents, the tax rates and the consequent taxation mentioned above will be further subject to any benefits available under the relevant DTAA, if any, between India and the country in which the non-resident has Fiscal domicile. 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. 53

91 SECTION IV ABOUT THE COMPANY INDUSTRY OVERVIEW The Industry Overview summarizes or quotes information set forth in the Indian Gems and Jewellery Industry dated June 2010 ( CARE Report ), prepared by CARE Research, a division of Credit Analysis & Research Limited ("CARE Research ), India Gold Report India: Heart of Gold and Gold Demand Trends prepared by the World Gold Council ( WGC Reports ) and Unlocking the Potential of India s Gems & Jewellery Sector, FICCI and Technopak ( FICCI Technopak Report ). We have not commissioned any reports for purposes of this Draft Red Herring Prospectus. Except for the CARE Report, the WGC Reports and the FICCI Technopak Report, market and industry related data used in this Draft Red Herring Prospectus has been obtained or derived from the websites of and publicly available documents from various industry sources. Neither we nor any other person connected with the Issue has independently verified the information provided in this chapter. The CARE Report, the WGC Reports, FICCI Technopak Report and other industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured and accordingly, investment decisions should not be based on such information. The Indian Economy The Indian economy is one of the largest economies in the world with a GDP at current prices in Fiscal 2010 estimated at ` trillion (approximately US$1.3 trillion) (Source: Ministry of Statistics and Programme Implementation). It is one of the fastest growing economies in the world, with a real GDP growth rate of 5.7% for calendar year 2009 and a projected 9.7% growth rate for calendar year 2010 (Source: International Monetary Fund, World Economic Outlook, October 2010 Update). Per capita GDP at factor cost (at constant prices) in India has grown from around ` 12, billion for the year 1991 at the time of liberalisation to an estimated ` 41, billion for the year 2010 (Source: International Monetary Fund, World Economic Outlook Database, April 2010). During the first quarter of Fiscal 2011, India s GDP grew by 8.8%, compared with a growth rate of 6.0% during the first quarter of Fiscal (Source: Ministry of Statistics and programme Implementation, Press Note Q ) The IMF believes that four principal factors have supported Asia s recovery: first, the rapid normalization of trade, following the financial dislocation in late 2008, benefited Asia s export-driven economies; second, the bottoming out of the inventory cycle, both domestically and in major trading partners such as the United States, is boosting industrial production and exports; third, a resumption of capital inflows into the region has created abundant liquidity in many economies; and fourth, domestic demand has been resilient, owing to strong public and private companies in many of the region s economies. The IMF believes that, in both China and India, particularly, strong domestic demand will support the recovery. In India, the growth in real GDP will be supported by rising private demand, with consumption strengthening as a result of improvements in the labor market, and a boost to investment brought about by strong profitability, rising business confidence and favorable financing conditions. (Source: IMF World Economic Outlook 2010) Indian Gems and Jewellery Industry Precious metals and gemstones have been an integral part of the Indian civilisation throughout its recorded history. Gems and jewellery has been consumed by Indians for centuries for both their aesthetic as well as investment value. India has the distinction of being the first country to introduce diamonds to the world. The country was also the first to mine, cut, polish and trade in diamonds. (Source: CARE Report) The Indian gems and jewellery industry can be classified into various sub segments for diamonds, coloured stones, gold and silver jewellery, pearls, and others. However, the two major industry segments in India are gold jewellery and diamonds. India dominates the diamond processing trade with 11 out of 12 diamonds being cut and polished in India (around 80% in terms of carats and around 55% in terms of volume). India 54

92 also dominates gold and silver consumption globally with consumption of approximately 700 tonnes (gold) per year. As a major foreign exchange earner, the industry also provides employment to approximately 1.5 million people directly and indirectly. (Source: CARE Report) The Indian gems and jewellery industry is one of the world s most competitive markets due to the low cost of production and highly skilled labour. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian Gems and Jewellery industry - consisting of the domestic and the export market has the potential to grow from the current US$45 billion to US$100 billion by As per the FICCI Technopak Report India s current dominant position lies in low value processed raw materials, as depicted on the Gems and Jewellery Value Addition Ladder below: (Source: FICCI Technopak Report) Being on this position also shows that India has a great opportunity to move up and be present across all the points in the value addition chain. Doing so can generate the next wave of growth and profitability as India consolidates its position in low-value gem processing and captures a greater share of high-value gem processing and Jewellery making. This move is also important as other low cost countries like China are striving hard to wrest share from India in its current areas of strength. (Source: FICCI Technopak Report) The domestic market of gems and jewellery is estimated to be in the US$ billion range. Given the fragmented nature of the industry it is difficult to put a finger on the exact size. The industry is expected to grow at around 13% annually and at this rate it could reach US$ billion by Currently the domestic gems and jewellery market is fragmented across the value chain. There are more than 300,000 players across the gems and jewellery sector, with majority of them being small unorganised players who are operating on wafer thin margins. Organised retail of jewellery thus presents a significant opportunity to create additional value through higher margins, which would be possible through differentiation and branding. With the onset of organised retail in the last decade, lots of new players have entered the space. Currently modern retail players in jewellery space have only 5%-7% share of the total jewellery market, but this number would increase considerably in the near future. (Source: FICCI Technopak Report) 55

93 (Source: FICCI Technopak Report) The industry is characterised by a significantly large unorganised sector, labour-intensive operations, high working capital & raw material intensiveness, gold price volatility and export orientation. The demand for gold and diamond jewellery is driven by festivals, weddings and gifts, the increasing affluence of the middle class population and the increase in per capita on luxury items. (Source: CARE Report) Though India plays a dominant role in the gems and jewellery industry in terms of processing and consumption, India s role in mining gold and diamonds is amongst the lowest in the world. Gold is imported from countries like Switzerland, South Africa, Australia and the United Arab Emirates, and rough diamonds are imported from Belgium, the United Kingdom, Israel and the United Arab Emirates. There has been an impact on the demand for gold due to the record high price of gold in the last couple of years, but consumers have continued to demand the precious metal and there is an increased investment-related demand for gold. The key drivers for growth in the industry are increasing disposable income, conscious marketing efforts, rising population with the urge to spend on jewellery as a fashion accessory. The following outlines the changing trends in the Indian retail jewellery market: Traditional Practice Gold jewellery consumption emanates from traditional and investment-related demand. Demand peaks during weddings and festival seasons. Consumption of pure gold s preferred 22-carat. Traditional & ethnic designs preferred. Purchase from neighbourhood jewellers dominated. Hence the industry lacked transparency Pre-dominance of gold (yellow)-based jewellery. Jewellery largely sold on prevailing gold price, per gram, plus labour charges. (Source: CARE Report) Emerging Trend It is regarded as a fashion accessory by the growing young population. They still remain the main demand drivers but its use for regular wearing and gifting has evened out the demand throughout the year. Lower caratage & light-weight jewellery preferred. Trend is more towards fashionable and contemporary designs Growing preference for brands, retail stores & e-retailing. Introduction of hallmarking & certifications. Acceptance of white gold, platinum and diamond-studded jewellery. Even imitation jewellery is gaining acceptance. Branded players sell on a fixed-price basis. 56

94 Precious Metals and Gems Gold Gold is more than a precious metal in Indian culture and is truly entrenched in India s culture. For hundreds of years, gold has been an important part of the Indian society and fused well into the psyche of an Indian. There is a tradition of buying gold during auspicious occasions such as Diwali, Akshaya Tritiya, Dussehra, and also during weddings. In rural India, farmers typically buy gold jewellery after a successful harvesting season as it is valued for its investment characteristics and as a hedge against inflation. In 2009, total Indian gold consumption reached US$19bn or ` 974 bn equivalent at the end of Over the past decade, this has increased at an average rate of 13% per year, outpacing the country s real GDP, inflation and population growth by 6%, 8% and 12% respectively. Gold jewellery demand in India, the world s largest gold jewellery market, rose 67% year-on-year to 272 tonnes in the first half of Over the same period, the average domestic gold price surged to almost ` 52,800/oz, before hitting a new high of ` 60,460/oz on October 15, Despite the higher gold price, market sentiment remains positive, especially with the local gold market also benefitting from the strengthening of the rupee against the US dollar. (Source: World Gold Council

95 (Source: World Gold Council - India is the biggest consumer of gold in the world. To meet Indian consumption requirements for jewellery and investments, India imported 590 tonnes of gold in fiscal Almost 95% of the gold imported to India is used for jewellery. The major countries which supply gold to India are Switzerland, South Africa, Australia and the United Arab Emirates. A majority of gold in India is sold in retail sales and a small portion is held as reserves with the central government treasury. Gold imports by value and tonnes Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Gold (` cr) 39,712 52,156 65,889 80,553 88,243 86,140 In Tonnes ` per 10 gm 6,119 6,455 8,916 9,345 12,256 14,600 (Source: GJEPC Annual Report and industry sources) According to the CARE Report, the consumption of gold in India has doubled over the past two decades - going up from approximately 400 tonnes in 1987 to about 800 tons in In 2009, gold demand in India was severely affected due to the global financial crisis, record high prices of approximately ` 18,232 per 10 grams during November 2009 and high volatility in gold prices (with gold prices increasing in the third quarter of fiscal 2010 by an annualised average of 19.7%). During the fourth quarter of fiscal 2010, gold imports in India increased 74% year-on-year to 126 tonnes and the CARE Report predicts that this growth will continue through the third quarter of fiscal 2011 assuming relative gold price stability and the rising demand for gold as an investment. 58

96 Gold demand in India (Tonnes) CY Jewellery Consumption Net Retail Investment Total (Source: World Gold Council) Gold Jewellery Gold jewellery accounted for around 75% of total Indian gold demand in 2009, the remainder being investment (23%) and decorative and industrial (2%). Indian consumers also regard gold jewellery as an investment and are well aware of gold s benefit as a store of value. Wedding-related demand accounts for a substantial proportion of overall jewellery demand. This is particularly true in the south of India, where the most popular wedding jewellery sets tend to be the more traditional, intricate but bulky styles in heavier weights. In the northern cities more western styles, lighter wedding sets, as well as diamond-set pieces, are becoming increasingly popular. (Source: World Gold Council - Silver (Source: World Gold Council - The CARE Report indicates that along with gold, silver enjoys a special place in the psyche of the Indian consumer and is considered the second-best investment option in precious metals. In the last two years, silver prices have grown significantly in line with the rise in gold prices resulting in a decline in demand for jewellery and fashion accessories. Going forward, CARE Research expects that the silver price movement will tend to follow the gold prices as the prices of silver and gold in Rupees have shown a correlation of 0.98 in the last 10 years. Diamonds India is one of the leading diamond processors in the world. With the rise in gold prices, consumers are turning to diamond-studded jewellery which gives them a higher perception of luxury and value. The craftsmanship and low cost of Indian diamond processors has given India a competitive edge in diamond cutting and polishing. The CARE Report indicates that India accounts for approximately 55% of the global polished diamonds market in terms of value, 80% share in terms of caratage and 92% in terms of pieces. 59

97 India s dominance in the cutting and polishing segment has been attributed to superior craftsmanship, low cost of Indian labour and superior technology. (Source: The CARE Report) Due to the global slowdown, diamonds are comparatively less expensive than they were in With only a gradual recovery from developed markets for diamonds, especially the US, Indian manufacturers have now focused in on the ever-growing demand from domestic market for diamond-studded jewellery. Given these new trends for diamond jewellery, diamond jewellery sales have increased by a multiple of four, from USD 1 billion to USD 4.2 billion in the last four years according to industry experts. (Source: The CARE Report) According to some estimates, about 25% of the gold jewellery purchasers have switched to diamondstudded jewellery because diamond-studded jewellery is typically created in less-pure 18-carat gold compared to gold jewellery which is made from 22-carat gold. Demand and Supply India experienced the highest growth in jewellery demand, posting an increase of 36%. A rise in the value of the rupee against the US dollar offered Indian consumers some degree of protection from the full extent of the rise in the US$ price during the quarter. Demand increased to tonnes from tonnes a year earlier. In local currency value terms demand reached a remarkable ` 338bn, 67% higher than the same period of Restocking by the trade ahead of the fourth quarter festive season was a key driver of growth. The India International Jewellery Show (IIJS) in August in particular witnessed enthusiastic demand. Given the dual purpose of Indian jewellery, as both an adornment and an investment, the rising price helped to support demand for jewellery. Furthermore, consumers have adjusted their price expectations and are anticipating yet higher prices. This has had the twin effects of further reinforcing investment-related demand for gold jewellery while also encouraging consumers to purchase gold now rather than defer purchases to a time when prices are higher. (Source: Gold Demand Trends, November 2010) 60

98 (Source: World Gold Council - According to the CARE Report, global retail sales value of jewellery, including diamonds and gemstones, is expected to reach US$185 billion in 2010 and US$230 billion by the year 2015 growing at CAGR of 4.6% between 2010 and In 2005, sales totalled US$146 billion and grew at a CAGR of 4.8% between 2005 and 2010 period. During 2009, the world GDP decreased by 0.8% to US$57, billion while for 2010 and 2011, world GDP is estimated to grow by 3.9% and 4.3%, respectively, according to International Monetary Fund (IMF). Historically, it has been observed that the correlation between the global jewellery sales and world GDP was very high at

99 Of total global sales of US$146 billion in 2005, diamond-studded jewellery was the largest segment, representing 47% of total jewellery consumption. By type of jewellery, diamond-studded jewellery accounted for the largest share of the global jewellery market, followed by plain gold jewellery. According to data from the World Gold Council, the consumption of gold in India has doubled over the past two decades - going up from approximately 400 tons in 1987 to about 800 tons in In 2009, gold demand in India was severely affected due to global financial crisis, record high prices of approximately ` 18,232 per 10 grams during November 2009 and high volatility in gold prices (with gold price volatility increasing in the fourth quarter of calendar 2009 to an annualised average of 19.7%). Consumers have a tendency in India to postpone their purchases until the prices show rationality and restrain from panic buying. It has been observed that consumers lay emphasis on stability of gold prices rather than absolute prices of gold to make their purchases. Demand Drivers for the Gems and Jewellery Industry The CARE Report states that, as of June 2010, CARE Research predicts strong future demand for gems and jewellery will be due to the following demand drivers: The US is the world s largest market for jewellery followed by China, India and the Middle East. Europe, the UK and Italy are the largest consumers. These markets account or about 80% of the total worldwide sales. Since the demand for jewellery is showing only gradual sign of recovery in the US, 62

100 the focus for the future growth in jewellery for future growth in jewellery industry depends on emerging markets like India, China, Latin America, Middle East and South East Asia. CARE Research predicts that these regions will develop as the largest consuming markets for both traditional as well as branded jewellery and overtake the US in gems and jewellery consumption by next decade. (Source: The CARE Report) The global retail sales value of jewellery, including diamonds and gemstones, is expected to reach US$185 billion in 2010 and US$230 billion by the year 2015 growing at CAGR of 4.6% between 2010 and In 2005, sales totalled US$146 billion and grew at a CAGR of 4.8% between 2005 and 2010 period. During 2009, the world GDP decreased by 0.8% to US$57, billion while for 2010 and 2011, the world GDP is estimated to grow by 3.9% and 4.3%, respectively, according to International Monetary Fund (IMF). Historically, it has been observed that the correlation between global jewellery sales and world GDP was very high at (Source: The CARE Report) Increased urbanization, higher percentage of younger population, multiple-income families and more women in the workforce is giving rise to higher disposable income level leading to impulse buying and a preference for improved lifestyle. These factors are currently driving the demand for gems and jewellery, especially diamond-studded jewellery. Individuals with increased disposable income have become more inclined to purchase jewellery in modern and aesthetic designs as a fashion accessory, which is in contrast to rural Indians who buy jewellery as an alternate medium of investment. According to the National Sample Survey, the share of essential items in urban India, such as food, clothing, electricity, fuel and footwear, has decreased in the total average annual per capita consumption, whereas the share of durable goods has increased, reflecting the changing preferences of consumers. The increased consumer awareness and consciousness generated through the vigilant government campaigns are expected to drive the demand for branded and hallmarked jewellery. (Source: The CARE Report) Manufacture of Jewellery Jewellery manufacture, diamond polishing and setting is a process that requires significant skill. Although machines can perform some part of the work, the process is very labour intensive. India, with its availability of low-cost skilled labour is in a position to deliver products of good design and quality at a low cost. India has well-established capabilities in manufacturing hand-made jewellery in traditional as well as modern designs. Indian hand-made jewellery has ethnic demand in various geographies with a high Indian population like Middle East, the US and Canada. With traditional hand-made jewellery, India has also progressed in using the latest technologies in diamond-processing and jewellery-making. Many of India s jewellery manufacturing companies are now equipped with latest Computer Aided Design /Computer Aided Manufacture systems and other advanced software programmes. The diamond processing companies have modern equipment, such as laser machines, automatic and semi-automatic bruiting machines and auto planners. India also has an ample professionally-trained workforce which is well-versed to operate the latest equipment. Jewellery Retail Branded jewellery has been a relatively recent phenomenon in India because most jewellery is sold in the unorganized sector. Consumers have become more informed about the quality and certification of gold jewellery and are now insisting on certification. Traditionally, gold has been purchased because of its investment value along with aesthetic value, unlike in countries other than India, where it is bought only for ornamental purposes. With changing demographics, the branding of jewellery and the retail revolution, young customers (from age groups of years) prefer buying jewellery for fashion rather than for investment. Many companies have started investing in brand-building exercises for their products. All these efforts are expected to result in higher growth in the branded and therefore also organised jewellery market. 63

101 The branding of jewellery in India follows the pattern in the international market where 90% of the jewellery is sold as a fashion accessory or as everyday wear and not as an investment. Branded jewellery in India is positioned as a lifestyle and personality statement. There has also been a shift in consumer preference towards diamond-studded jewellery due to the extensive positioning of diamond-studded jewellery as both affordable and contemporary. Another key development in branded jewellery has been the introduction of value added services such as the certification of gold and diamonds, and lifetime return and buy-back schemes. These trade practices have resulted in the perception of superior quality being associated with branded jewellery. The new generation of jewellery purchasers does not have ongoing relationships with local jewellers and prefers to buy branded jewellery. (Source: The CARE Report) Retail Formats In India, organised retailers account for a mere 4% of the total jewellery retail market. This is because of the buyers preference and trust in their neighborhood goldsmith. Even the standardisation of designs is not possible due to varying local tastes. There are about 15,000 vendors across the country in the gold processing industry, with over 450,000 gold smiths spread across the country. There are also more than 6,000 vendors in the diamond-processing industry (Source: The CARE Report). Organised vendors have been growing steadily, carving a market share of 4% of the industry (Source: The CARE Report). With consumer preference for fine quality goods, branded jewellery, hallmark certification and maturity in the jewellery market, organised retail share is expected to grow. Elevated gold prices, higher borrowing and operating costs, makes the survival of family-owned jewellers difficult as well. Pricing Gold is a renowned metal not only for its traditional use for adornment but also for its stance as a timetested investment-class asset. The price of gold is determined by the fundamental demand-supply dynamics of the gold bullion market. Gold is considered to be a relatively safe investment in times of economic volatility and uncertainty. With the recent weakness and high fiscal debt levels of major western paper currencies, gold has attracted many investors, as evidenced by gold s record high prices in the last two years. The Indian consumer is generally regarded as sophisticated and price sensitive and remains very risk averse when the prices are volatile. When prices are high an increase in sales of scrap gold is often observed and conversely when prices fall or show signs of stability, it results in an increase in demand. (Source: The CARE Report). 64

102 OUR BUSINESS Overview We are one of the leading south India based jewellery companies with focus on Large Format Stores. Our jewellery business consists of the sale of jewellery made of gold, diamond and other precious stones, platinum and silver. We are also engaged in the business of selling textiles, apparels and accessories through our Wedding Centres in Kerala. We offer a wide range of products across various price points and cater to customers across all market segments. In Fiscal 2008, 2009 and 2010, we sold 7, kg, 8, kg and 8, kg of Gold, respectively. In Fiscal 2008, 2009 and 2010, our total income from sale of Gold was ` 7, million, ` 11, million and ` 14, million, respectively, representing a CAGR of 38.89% over the aforesaid period. We conduct our jewellery retail business under the brand name joyalukkas. We started retailing jewellery in India in the year 2002 with the launch of our first retail store at Kottayam in Kerala. The following table depicts the details of our jewellery, and textiles, apparels and accessories business operations as of and for Fiscal 2008, 2009, 2010 and as of and for the six month period ended September 30, 2010: Sr. No. Particulars Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, Number of stores Floor area (sq. ft.) Jewellery 185, , , ,752 Textiles, Apparels and 104, , , ,617 Accessories* 3. Gold Sales (in kg) 7, , , , Revenue (` in million) Jewellery 8, , , , Textiles, Apparels and Accessories 1, , , *As per the certificate obtained from Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai As of December 31, 2010 we had 22 retail stores, of which 10 are Large Format Stores, each having a floor area of 12,000 sq. ft. or more. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area of 12,000 sq. ft. or more. For further details, see Objects of the Issue on page 31. Our Premier Stores are the three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft. We sell our textiles, apparels and accessories through our four Wedding Centres situated in Kerala (Angamaly, Thiruvalla, Kollam and Ernakulam) having an aggregate floor area of 157,593 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, textiles, apparels and accessories for weddings and other festive occasions in the same store. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. Further, our Wedding Centres cater to the textile and apparel requirements of an entire family, with their wide collection of men s, women s and children s apparel. As of March 31, 2010 and September 30, 2010, we maintained an aggregate inventory of 2, kg and 2, kg of Gold, respectively. In addition we maintained an inventory of jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. 65

103 The Joyalukkas Group was established in the year 1988 by our Promoter, Alukkas Varghese Joy and commenced operations in the United Arab Emirates in jewellery retail business. Our Promoter has over 22 years of experience in the jewellery retail business. We have built on his experience and reputation to create strong brand equity and a wide customer base. We received the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We had also received the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai. We also received the first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala, the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala. We were recognized with the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai, the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon, and the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & GoldSouk. We also received an award in Kerala adfest, 2007 instituted by Advertising Industries Media and the award for Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala. As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. In Fiscal 2008, 2009 and 2010, our PAT was ` million, ` million and ` million respectively, while in the six months ended September 30, 2010 our PAT was ` million. In Fiscal 2008, 2009 and 2010, our EBITDA was ` million, ` 1, million and ` 1, million respectively. Our Competitive Strengths We believe that our primary competitive strengths include the following: Large Format Stores and Wedding Centres at strategic locations As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more. Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. As of September 30, 2010, we maintained an aggregate inventory of kg of Gold at our three Premier Stores. This is in addition to the jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. Our store in Chennai has a floor area of 57,430 sq. ft. across five floors with 190 employees as of December 31, Our store in Bangalore has a floor area of 26,314 sq. ft. across five floors with 150 employees as of December 31, Our store in Coimbatore has a floor area of 12,565 sq. ft. across four floors with 138 employees as of December 31, Our Premier Stores with an aggregate floor area of 96,309 sq. ft. display a wide range of jewellery products at any given point in time. Our Large Format Stores enhance our efficiency as they require less managerial staff in proportion to the large inventory of jewellery products. We believe that our Large Format Stores provide a luxury retail shopping experience, in addition to the inventory that these retail stores are able to offer, enables us to attract customers to our product offerings. Of our 22 retail stores, we sell our textile products through four Wedding Centres situated in Kerala with an aggregate floor area of 104,617 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, premium festive clothing and accessories for weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of the entire family, with its wide collection of men s, ladies and children s apparel. We believe that this is an innovative concept, which enables us to cross sell a wide range of our product offerings to our customers. 66

104 Experience of our Promoter and a strong management team Our Promoter, Alukkas Varghese Joy has over 22 years of experience and is well known in the retail jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. The Joyalukkas Group was established in United Arab Emirates in the year 1988 by our Promoter and entered jewellery retailing business in India in the year The Joyalukkas Group includes 39 retail stores and one textile outlet outside of India, 25 of which are situated in United Arab Emirates, two in Qatar, four in Kuwait, two in Bahrain, five in Oman and one in the United Kingdom. We have leveraged on our Promoter s experience, reputation and industry contacts to create strong brand equity in the jewellery sector in India and outside, with a wide customer base. Our Promoter won the NRI Retailer Award of the Year 2007 at the Retail Jeweller Awards We also have a dedicated management team, who are responsible for the overall strategic planning and business development of our Company. Our qualified senior management with significant industry experience has been instrumental in the consistent growth in our revenues and operations. As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. We believe that a motivated and dedicated employee base is key to our success in managing our Large Format Stores and allows us to provide a quality luxury shopping experience for our customer base. Strong track record and established brand equity with robust sales and marketing network Our prominent presence as a jewellery retailer in south India has been a result of our strong branding, our marketing efforts and a favorable response from our customer base. We have further strengthened our brand portfolio with the launch of internal brands aimed at different customer profiles, various markets and price segments and for various uses and occasions. We have won several awards, including, the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We have also won the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai; first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala; the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala; the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai; the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon; the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & Gold Souk; the Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala. Our marketing initiatives also include our customer loyalty programs such as golden rewards program, Business to Business Solutions ( B2B Solutions ), discount sales, easy gold schemes and others. For further details see Our Business-Marketing on page 78. In addition to our sales to a wide range of customers through our retail stores mostly spread throughout south India, our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, advertisements in cinema hall, bus terminals, railway stations and similar displays. Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller ring tones. We believe that effective marketing is an important investment in future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive cost-effective manner. Use of efficient internal processes to leverage our sales 67

105 We rely on our internal processes for activities ranging from the procurement of bullion, finished jewellery and textile products, identification of craftsmen and jewellery suppliers, specifications and design, selection of store location, conduct constant market analysis to ascertain market perception, change and competitiveness, inventory management as well as activities like purity testing, hallmarking, bar coding, branding, packaging, store design and management. We believe that our understanding of the jewellery, textile and apparel industry helps us in assessing market opportunities and positioning ourselves accordingly. Our retail operations network are supported by our inventory management system that enables us to move our inventory to and from, and channel our sales through, our various retail stores depending on the relevant festive and other occasions and the demographic nature of our customers. We have evolved and continue to improve our internal processes which drive our business efficiency and profitability. We believe that our effort to predict market expectations, in-house order projections, customer preferences towards specific stones and jewellery products enables us to undertake effective inventory management, ahead of our delivery schedule. We believe that our internal processes such as an effective Enterprise Resource Planning ( ERP ) system to manage finance and accounting, inventory of gold and other jewellery, internal and external resources, including tangible assets, human resources and financial resources, our internal audit systems, sales and distribution and extensive domain knowledge of our Promoter and Key Managerial Personnel has substantially contributed to the growth of our business operations. Corporate tie-ups with leading companies as part of our Business to Business program We maintain corporate tie-ups with certain key corporate clients through our B2B Solutions program for providing loyalty and retention related services. For the customers or clients of our B2B Solutions, we offer discount vouchers or options to earn loyalty points based on various loyalty programs. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners outlets or stores and to redeem such points on purchase of our jewellery or textile or apparel products at our retail outlets. For instance, we have entered into a similar agreement with a leading hotel group, offering its members the option to redeem their gift vouchers against the purchase of jewellery at our retail stores. We also offer certain customized gifting options for our corporate-partners, based on their requirements. Our B2B Solutions aims at enhancing our corporate clientele and in turn a wide range of customers and also result in the creation of strong brand equity and increase our customer foot fall and revenues. We have followed a structured approach for our product development which involves market research, sales analysis, brand development, media campaigns and promotions. We believe that this has helped us forge strong relationships with key corporate customers and gaining increased business through their customers/clients. We believe that our structured approach towards brand development through our B2B Solutions and our execution capabilities has enabled us to create long term relationships with leading corporate clients. OUR STRATEGY The key elements of our business strategy are as follows: Continue to expand our network of Large Format Stores and Wedding Centres We intend to continue to develop our existing branded jewellery lines and introduce additional sub-brands and product offerings to cater to our customers and price segments in the diamond and platinum jewellery markets through expansion of our retail operations. We intend to capitalize on our significant experience and expertise in developing the branded jewellery market in India. Further we intend to leverage our goodwill associated with our existing brands, to further develop our various sub-brands in target markets and product segments in India. We seek to achieve this through expansion of our retail operations, increased marketing initiatives, innovative promotional campaigns and extensive advertising. Our Large Format Stores are typically situated at strategic locations in prominent cities, such as in Chennai, Bangalore and Coimbatore. By September 2013 we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram, each with an estimated floor area of 12,000 sq. ft. or more. Our Large Format Stores 68

106 in India offer comprehensive product range of jewellery made of gold, diamond and other precious stones, platinum and silver to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery. Our Wedding Centres are Large Format Stores that house a wide range of jewellery, textiles, apparels and accessories that specially cater to customers looking for wedding related purchases. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, apparel and accessories for weddings and other festive occasions under one roof. In Fiscal 2010 and for the six month period ended September 30, 2010, our total income from sale of textiles, apparel and accessories in our Wedding Centres was ` 1, million and ` million respectively, which constituted 7.70% and 5.98% respectively of our total income. Further increase our percentage contribution of diamond and platinum jewellery business to our total revenues The sustained growth of Indian economy coupled with growing employment levels, income levels and availability of credit in India has resulted in greater consumer spending and disposable income. This has boosted the retail business in India and consequently resulted in the growth of retail jewellery business and increasing demand for jewellery made of diamond, platinum and other precious stones. In Fiscal 2009, 2010 and six months ended September 30, 2010, our revenue from the sale of jewellery made of diamond, platinum and other precious stones constituted 10.61%, 11.98% and 13.50% respectively of our total revenue. We intend to continue increasing our diamond and platinum jewellery retailing business and use our ability to provide a wide range of jewellery products of various grades, designs and price segments, our strong branded jewellery lines and our wide retail trade operations to increase our market share in diamond and platinum jewellery in India. We also intend to capitalize on the gradual shift of consumer preferences in India from traditional gold jewellery to jewellery made of diamond, platinum and other precious stones. Continue to invest in our marketing initiatives and brand building exercise We intend to continue investing in our marketing initiatives and brand building exercise, including advertising through various media. In Fiscal 2010, and for the six month period ended September 30, 2010, we had expended ` million and ` million respectively, towards advertising and sales promotions expenses, which constituted 2.64% and 2.66% respectively of our total income. Further we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We believe that effective marketing is important for future revenue growth, to improve our Company s brand visibility, to establish relationships with target markets and to sell a great number of our products in a competitive costeffective manner. Set up service centres in Bangalore and Chennai We intend to set up specialized service centres in our Large Format Stores situated in Bangalore and Chennai. These service centres would cater to our wide range of customers by providing free service on our jewellery products. This may also increase the number of repeat customers, establish long term relationships with our repeat customers and increase the sales of a wider range of jewellery products. Hedging arrangements to mitigate risks associated with gold price fluctuations We do not completely hedge our exposure to losses arising from gold price variations. We intend to enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales. Our Operations Our business operations can be broadly categorized into two verticals, namely, (a) manufacture and retail trading of jewellery and (b) retail trading of textiles, apparels and accessories. 69

107 Our Business Jewellery Textile/Apparels Gold Diamond Platinum and Precious Stones Silver Wedding and other apparels Accessories We conduct our jewellery retail business under the brand name joyalukkas. As of December 31, 2010 we operated 22 retail stores with an aggregate floor area of 270,852 sq. ft. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September These new stores would be Large Format Stores with an estimated floor area of 12,000 sq. ft. or more. The following table summarizes the jewellery retail business of our Company: Sr. No. Store Location Floor Area (sq.ft.) Date of Launch Kerala 1. Kollam 19,771 October 31, Ernakulam 23,358 April 2, Thiruvalla 4,846 May 9, Angamaly 5,002 October 27, Kottayam 12,046 August 18, Thrissur, Palace 7,009 November Road 10, Thiruvananthapuram 6,096 August 16, ,000 March 5, Thrissur, Round, East Tamil Nadu 9. Chennai 57,430 March 16, Salem 29,005 March 25, Coimbatore 12,565 May 30, 2004 Gold Inventory (In Kg) as on September 30, 2010* Fiscal 2008 Sales (In Rupees Million) Fiscal Fiscal Six months ended September 30, , , , , , , , , ,

108 12. Madurai 6,642 December , , Thirunelveli 4,454 June 24, Karur 8,640 January , Kanchipuram 3,800 March 7, Vellore 9,000 January 10, Other Regions 17. Bangalore 26,314 July 4, Hyderabad 4,645 March 26, Puducherry 14,080 February , , Gurgaon 3,949 October , Mangalore 9,100 October , Mumbai 1,100 May 4, TOTAL 270,852 2, , , , , *excludes gold held in our purchase divisions, melting units and with job workers. The following table summarizes store-wise sales of jewellery made of gold, diamond, platinum and precious stones in Fiscals 2008, 2009, 2010 and six months ended September 30, 2010: Sr. No. Store Location Gold sales (In Rupees Million) Diamond, Platinum and Precious Stones sales (In Rupees Million) Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, 2010 Six months ended September 30, Kollam Ernakulam Thiruvalla Angamaly Kottayam Thrissur, Palace Road Thiruvananthapuram Thrissur, Round, East Chennai , , , Salem 1, Coimbatore 1, , , , Madurai Thirunelveli Karur Kanchipuram Vellore Bangalore Hyderabad Puducherry , Gurgaon Mangalore Mumbai TOTAL 6, , , , , , ,

109 The following table summarizes the textiles, apparels and accessories retail business of our Company through our Wedding Centres: Sr. No. Store Location Floor Area (sq.ft.) Sales (In Rupees Million) Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, Kollam 39, Ernakulam 23, Thiruvalla 28, Angamaly 13, Export Sales TOTAL 104,617 1, , , Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area 12,000 sq. ft. or more. Following is the map of India highlighting our existing retail stores: 72

110 Our Jewellery Stores As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more. Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. We believe that the large format, luxury retail shopping experience and the inventory that these stores offer, enables us to attract customers to our product offerings. Our Premier Stores Coimbatore Store - Our Large Format Store situated in Coimbatore was the first retail store that we set up in Tamil Nadu, situated at Cross Cut Road in Coimbatore having an aggregate floor area of 12,565 sq. ft. The store started its operations on May 30, This is one of our Large Format Stores in Coimbatore with ample car parking facility. As of December 31, 2010, we had 138 employees working in the Coimbatore store. The store has four levels, ground plus three floors. The ground floor sells generic gold and antique jewellery. The first floor is exclusively dedicated to jewellery made of diamond, platinum and other precious stones. The second floor comprises regular gold and silver jewellery. The store also has a prayer room, feeding room and restrooms for the convenience of our customers. Chennai Store - Our Large Format Store situated in Chennai is known for its wide collection of jewellery, size of the store and its ambience. The store has five levels, having an aggregate floor area of 57,430 sq. ft. with an ample car parking facility. As of December 31, 2010, we had 190 employees working in the Chennai store. On the ground floor we sell generic 22 carat gold jewellery, while on the first floor we sell gold brands, gold watches, 24 carat gold statues, traditional gold jewellery and jewellery made from other precious stones. The second floor is exclusively dedicated to diamond and platinum jewellery. On the third floor we sell silver jewellery, gift articles, silver furniture and we have a VIP lounge and a unique diamond cave. Our purchase division, regional office and B2B Solutions division are situated on the fourth floor. The diamond cave gives information to our interested customers on the history of diamonds including mining, cutting, polishing and designing of diamond jewellery. This is our largest jewellery retail store, in terms of store size, gold and diamond jewellery stock, car parking facility, number of staff and by quantity of our sales. Apart from these, there are facilities such as a feeding room, prayer rooms, and restrooms etc. to cater to the comfort of our customers. Further, we have won the Best Single Retail Store of the Year award for our Chennai store at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation. Bangalore Store - Our Large Format Store situated on M. G. Road, Bangalore is spread over an aggregate floor area of 26,314 sq. ft. Our Bangalore store was inaugurated on July 4, As of December 31, 2010, we had 150 employees working in the Bangalore store. The building has five levels with ample car parking facility. On the ground floor we sell generic antique, traditional and contemporary gold jewellery. The first floor features exclusive branded collections and jewellery made from other precious stones. The second floor showcases diamond bridal sets and premium diamond sets. The third floor houses the joyalukkas branded collections in pearls, diamonds and platinum. It also features a dedicated section for silver artifacts, utensils and jewellery. The store also has feeding rooms, prayer rooms and refreshment corners to cater to the comfort of our customers. 73

111 Our Jewellery Business Our jewellery products consist of four product segments: (a) Gold jewellery; (b) Diamond jewellery; (c) platinum jewellery and jewellery made from other precious stones; and (d) silver jewellery. Sourcing of Jewellery Gold jewellery We source our inventory of gold jewellery through the following routes: (a) Purchase of bullion/standard gold from bullion suppliers and converting them into finished jewellery through job-work arrangements; (b) Purchase of finished gold jewellery from independent jewellers/ suppliers; and (c) Purchase of old gold jewellery from customers and converting them into finished jewellery through job-work arrangements. We place orders for the purchase of bullion/standard gold from gold suppliers or finished gold jewellery from a large number of local independent jewellery manufacturers, based on our requirements received from each of our retail stores, through our centralized purchase division having regional offices. The bullion/standard gold is converted into finished gold jewellery through job-work arrangements with our dedicated group of goldsmiths/ job-workers. We select the jewellery designs, based on market trends and our requirements in each of our retail stores, or we obtain designs through leading design houses. The raw materials required for the manufacture of gold jewellery products, such as, standard gold/bullion, copper and colored-stones are provided by us to the job-workers, based on our requirements. We have entered into agreements with major suppliers of bullion, such as, with the Bank of Nova Scotia for spot purchase of bullion and also entered into supply agreements with some of our major suppliers of finished jewellery and job-workers. Additionally, we procure old jewellery from our customers who intend to exchange their old jewellery for new designs or against payment of cash. We currently have five purchase divisions for the purchase of gold, situated at Thrissur, Coimbatore, Chennai, Bangalore and Hyderabad. 74

112 The following flowchart indicates the mode of procurement of raw materials for the manufacture of gold jewellery: Gold Jewellery - Raw Materials Standard Gold Old Gold Copper Loose Stones Outsourced for purification Standard Gold Finished Jewellery through Job-work arrangements Diamond Jewellery We source our inventory of diamond jewellery through the following routes: (a) Purchase of finished diamond jewellery from independent jewellers/suppliers; and (b) Job-work arrangements for manufacture of diamond jewellery. The procedure followed for the sourcing of diamond jewellery is similar to that of gold jewellery. We currently have four regional purchase divisions for the purchase of diamond jewellery, situated at Thrissur, Chennai, Hyderabad and Bangalore. We have entered into supply agreements with some of our major suppliers of finished diamond jewellery. Platinum Jewellery and Jewellery made from other precious stones We source our inventory of jewellery made of platinum and other precious stones completely through purchase of finished jewellery from independent jewellers/suppliers. The procedure followed for the sourcing of jewellery made of platinum and other precious stones is similar to that of gold and other jewellery products. We currently have three regional purchase divisions for the purchase of jewellery made of platinum and other precious stones, situated at Thrissur, Chennai and Bangalore. We have entered into supply agreements with some of our major suppliers of jewellery made of other precious stones. Silver Jewellery We source our inventory of silver jewellery through the following routes: (a) Purchase of finished silver jewellery from independent jewellers/suppliers; and 75

113 (b) Purchase of old silver jewellery from customers and converting them into finished jewellery through job-work arrangements. The procedure followed for the sourcing of silver jewellery is similar to that of gold jewellery. Our purchase division for the purchase of silver jewellery is currently situated in Chennai. Processes undertaken by the Company Upon receipt of finished jewellery from job-workers/independent jewellers, we undertake the following measures, prior to final sale of jewellery products to end-customers: A. Quality control Quality control involves physical verification and inspection of the finished jewellery products and mechanized purity check of the finished jewellery products on a random basis. The physical and mechanized verification is to ascertain the craftsmanship, finishing and purity of the jewellery products. Apart from the regular quality control measures, finished diamond jewellery products are tested on a fourpoint scale: carat, color, cut and clarity. Based on this test, the diamond jewellery is given a grade such as Flawless (FL), Internally Flawless (IF), Very Very Slightly Included (VVS), Very Slightly Included (VS), Slightly Included (SI) or Included (I). B. BIS Hallmarking/ IGI and PGI certifications Hallmarking is a gold purity assurance certification obtained from certain agencies certified by the Bureau of Indian Standards ( BIS ), a Central Government authority. BIS is a recognized certification authority in the gold jewellery industry. The hallmarking agencies test the purity of gold contained in the finished gold jewellery products and certifies such purity for each product. Our Company typically sells hallmarked gold jewellery through its retail stores. Diamond jewellery is certified by International Gemological Institute ( IGI ). The IGI certification is a purity assurance certification. All diamond jewellery sold at our retail stores is certified by IGI except very small ornaments like nosepins etc. Our platinum jewellery is certified by Platinum Guild International ( PGI ). The PGI certification is a purity assurance certification. All platinum jewellery sold at our retail stores is certified by PGI except very small ornaments like nosepins etc. Further, we obtain purity assurance certification for our silver jewellery products from certain outside agencies. The purity assurance certification will specify the purity of silver contained in the finished silver jewellery products. C. Bar-coding The hallmarked jewellery products are bar-coded by our Company. Bar-coding is a process of categorizing, branding and pricing of the jewellery products, prior to distributing the finished jewellery products for sale in our retail stores. Bar-coding provides the maximum price at which a finished jewellery product can be sold. Further, bar-coding also enables the tracking of the finished jewellery products from the time of barcoding until the sale of the jewellery product by invoicing the bar-coded details. Details such as gold content, item code, description of the item, weight, the name of the supplier, brand name, price, and stone value are typically included in the bar-coding of the finished jewellery products. Bar-coding is carried out prior to distribution to our retail stores. D. Packaging We package our jewellery products prior to their sale to our end-customer. Our packaging carries the joyalukkas brand name and is carried out at our retail stores. 76

114 The following flowchart indicates the manufacturing process for gold jewellery: Gold Jewellery Finished Jewellery Job-works Quality Control Hallmarking Bar-coding Packaging Sales Our Product Portfolio Our portfolio of finished jewellery products includes, among others, studs, chains, bangles, necklaces, bracelets, rings and anklets. Our Textiles and Apparels Business Our textiles, apparels and accessories business operations are carried out through our four Wedding Centres situated in Kerala. Our largest Wedding Centre is situated in Kollam having a floor area of approximately 39,896 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, clothing and accessories for weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of an entire family, with its wide collection of men s, women s and children s apparel. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. The purchase division for the Wedding Centres is spread across our four stores. The Manager (Textiles) heads the textile division. All purchases for the Wedding Centres are directly controlled by the Manager (Textiles) and orders for purchase are placed based on the requirements received from each of the Wedding Centres. As of December 31, 2010, our textile and apparel division comprised of 535 employees. 77

115 Our textile and apparel purchases can be broadly categorized into: (a) seasonal purchases, (b) non-seasonal purchases and (c) purchase for export sales. A. Seasonal purchases - These are bulk purchases made to fulfill our seasonal requirements, such as during Onam, Christmas and New Year seasons. Based on the previous years sales figures, our purchase division prepares a purchase budget for the upcoming season. The purchase requisitions and purchase orders are prepared and approved based on this budget. B. Non-seasonal purchases - These purchases are made based on our stock position and the anticipated marketability of certain unique and new products. C. Export sales - These purchases are made for the purpose of our export sales of textiles and apparels to Joy Alukkas Center LLC, Sharjah. Product Portfolio Our textile product portfolio comprises of saris, men s wear, ladies wear, kids wear and life style clothing. Human Resources As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. Marketing Our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, CCTV visual advertisements at prominent locations, advertisements in cinema hall, bus terminals, railway stations and similar displays. Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller-tones. We believe that effective marketing is an important investment in future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive costeffective manner. Further we have won the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 from the Retail Jeweller Magazine, Mumbai. In Fiscal 2010 and in the six month period ended September 30, 2010, we had expended ` million and ` million respectively for advertising and sales promotions across various media as part of our marketing initiative. Competition We operate in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. The jewellery industry is still an unorganized sector in India and therefore we face competition not only from other jewellery companies, but also from local jewellers and craftsmen, which affects our business prospects and margins. The Indian retail jewellery industry is highly fragmented and dominated by the unorganized sector, from which the organized retail jewellery sector faces intense competition. The players in the unorganized sector offer their products at highly competitive prices and many of them are well established in their local sectors. We also compete against certain organised national, regional and local players. Intellectual Property Rights 78

116 We have received a certificate of registration of trademark bearing number dated January 20, 2006 for the trademark Alukkas held by Joyalukkas Traders India Private Limited, P.O. Box 3014, Kurian Towers, Banerji Road, Kochi, Kerala. We have also applied for the following trademarks: 1. Application for trademark registration dated September 3, 2010 made by the Company in relation to the registration of trademark for Joyalukkas under 14, 24, 25 and Application for trademark registration dated July 3, 2006 made by the Company in relation to the registration of trademark for joy alukkas under classes 35, 36 and Application for trademark registration dated December 28, 2004 made by the Company in relation to the registration of trademark for Dazzle under class Application for trademark registration dated September 14, 2007 made by the Company in relation to the registration of trademark for World s Favourite Jeweller under classes 14 and Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for Alukkas Wedding Centre under class Application for trademark registration dated September 8, 2003 made by the Company n relation to the registration of the trademark for Alukkas under classes 14 and Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for Ponnum Pudavayum Orumichu under class 14 and 25. Loyalty and Promotion Programs Golden Rewards Program: This is a loyalty program of our Company where the customer is offered a smart card which offers the customer a wide range of benefits and privileges. To earn reward points, the customer presents the card at the time of purchase at any of our stores and receives points, which can later be redeemed by the customer, against future purchases at any of our stores. For every 10,000 points the customer will be eligible for a discount of ` 1,000. B2B Program: B2B Solutions is a division of our Company dedicated towards customized corporate sales. It began operations in July We maintain corporate tie-ups with certain key corporate customers as part of our B2B Solutions program, for providing loyalty and retention related services. We offer the customers or clients of our B2B corporate-partners, discount vouchers or options to earn loyalty points based on various loyalty programs including credit and debit card usage or purchasing merchandise at various identified outlets in India. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners outlets or stores and to redeem such points on purchase of jewellery or textile products at our retail outlets. We also offer certain customized gifting options for our corporate-partners, based on their requirements. B2B is aimed at corporate clientele and with a view of creating strong brand equity and increasing customer foot falls and revenues. Annual Clearance Sales: We periodically evaluate the stock position of the textile division of our Company. Non-moving items or old stocks are identified and ear marked for discount sales. We typically hold discount sales once a year. Easy Gold Plan: Our easy gold plan enables the purchase of jewellery by a customer based on fixed monthly installment payments, starting from ` 500, for a specified period of time (12 or 18 or 24 months), for the purchase of gold or other jewellery products worth the total amount including a certain bonus from the Company, upon maturity of the plan at the then prevailing market price. Under the plan, purchase of 22 or 24 carat gold coins or bars is not permitted. Further, pre-payment of installments at one time and redemption (with bonus) thereafter on or before the indicated day of maturity is not allowed. Purchases can be made only after 30 days from the last installment paid under the plan. In case of default in payment of installments, the eligibility for purchase is proportionately reduced. Late payments are treated as defaults 79

117 for that month and are taken into account in reducing the calculation of bonus under the plan. As per the plan, cash will not be refunded to the customer. Corporate Social Responsibility Joyalukkas Foundation is a public charitable trust created under the deed of declaration of trust dated August 12, It is a registered charitable trust under the provisions of the Income Tax Act. The objects of the trust include, among others, to give financial aid and assistance to establish, promote, set up, maintain and support the running of educational institutions, orphanages, schools and old age homes. Our Promoter, Alukkas Varghese Joy and our Promoter s spouse, Jolly Joy are the trustees of Joyalukkas Foundation. The employees of our Company voluntarily contribute a fixed sum out of their monthly salary to the Joyalukkas Foundation and the Company also contributes towards the same. The fund is mainly utilized for the medical aid and treatment of needy patients. Our Company has also formed a blood donation forum amongst its employees which has organized blood donation camps. Our Company has also organized green campaigns with the objective of improving the environment. Property Our Company holds several properties on lease hold and free hold basis, including our registered and corporate offices, retail stores, staff quarters and guest houses. Registered and Corporate Office: Our registered and corporate office, situated at door nos. 40/2096A, 40/2096B, first and second floors, Peevees Triton, Survey No. 843, Ernakulam Village, Kanayannur Taluk, Ernakulam District, India, has been leased from Pee Vee Holdings and Property Developers Limited pursuant to a continuing lease agreement dated December 9, The lease agreement is valid till January 31, Retail Stores: Our Company holds 18 leased and four owned premises for our retail operations. Our lease agreements are typically for terms ranging from five to 25 years and all such lease agreements are valid as of the date of this Draft Red Herring Prospectus. Others: We have also entered into 13 lease agreements for our staff quarters, 23 lease agreements for our guest houses, two license/lease agreements for parking facilities. These lease agreements are typically for terms ranging from 11 months to 15 years and all such agreements are valid as of the date of this Draft Red Herring Prospectus. For details in relation to risks associated with our properties, see Risk Factor on page x and for interests of our Promoter in our properties see Our Promoter Common pursuits and interest of our Promoter on page 101. Insurance We maintain the following insurance policies subject to specified limits, including an aggregate limit of ` 10, million on our insurance policies and vehicle insurance of ` million: (a) standard fire and special perils policy to insure our stock of all kinds, including textiles and readymade, garments, personnel effects and such other goods; (b) jewellers block insurance policy, which provides insurance cover against loss or damage by fire, explosion, lightning, riot and strikes, malicious damage, burglary, theft, robbery and hold up risks, including our stocks on display in our stores. It also covers property outside the premises while in the custody of its directors, employees, goldsmith etc. The policy also covers the stock whilst in transit with in India by air freight and also for furniture and fittings and trade equipments in the premises; (c) burglary insurance policies to insure our stock of ornaments made of gold, pearl, diamond and other precious stones, kept or displayed on window and displayed at night in our stores. Our policies also insure us against loss or damage suffered during transit of our stock, (d) We also have money insurance policies to 80

118 insure the money in the personal custody of the insured or the authorized employee of the insured whilst in transit between premises and bank or post office or vice versa and (e) machine insurance for insuring our transformers, airconditioners and chiller plants. We have procured our insurance policies from New India Assurance Company Limited and Oriental Insurance Company Limited. There can be no assurance that our insurance coverage will be sufficient to cover the losses we may incur. For further details in relation to risks associated with insurance policies of the Company, see Risk Factor on page x. 81

119 REGULATIONS AND POLICIES The Government of India, the Government of Kerala and other State Governments and the respective local authorities have framed various regulations and policies all of which apply to us. A summary of these regulations and policies is detailed below. The following information has been obtained from the various statutes, regulations and/or local legislations and the bye laws of the relevant authorities that are available in the public domain. The regulations and policies set forth below may not be exhaustive and are only intended to provide general information to the investors and are neither designed nor intended to substitute for professional legal advice. Our Company is involved in the business and manufacture and retailing of jewellery and the retailing of textiles. Foreign Direct Investment Under the extant foreign direct investment policy, foreign direct investment up to 100% is permitted in the gems and jewellery business under the automatic route subject to applicable laws/sectoral rules/regulations/security conditions. Multibrand retailing is a prohibited sector for foreign direct investment under the applicable foreign exchange regulations and the FDI Policy in India. Investment by Foreign Institutional Investors Foreign institutional investors ( FIIs ) including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated, institutional portfolio managers can invest in securities traded on the primary and secondary markets in India subject to various requirements of SEBI and RBI. FIIs are required to obtain an initial registration from SEBI and a general permission from RBI to engage in transactions regulated under Foreign Exchange Management Act, FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time. The initial registration and RBI s general permission together enable a registered FII to buy (subject to the ownership restrictions discussed below) and sell freely securities issued by Indian companies, to realise capital gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares, to appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income received by way of interest and any compensation received towards sale or renunciation of rights issues of shares. Non residents such as FVCIs, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per the existing regulations, OCBs cannot participate in this Issue. Ownership restrictions of FIIs Under the portfolio investment scheme, the overall issue of equity shares to FIIs on a repatriation basis should not exceed 24% of post-issue paid-up capital of the company. However, the limit of 24% can be raised up to the permitted sectoral cap for that company after approval of the board of directors and approval of the shareholders of the company by way of a special resolution. The holding of equity shares of a single FII should not exceed 10% of the post issue paid-up capital of the company. In respect of an FII investing in equity shares of a company on behalf of its sub-accounts, the investment on behalf of each subaccount shall not exceed 10% of the total issued capital of that company. The Company will file an application with the RBI seeking its permission for participation by FIIs in the Issue under the portfolio investment scheme and for participation by NRIs in the Issue under the portfolio investment scheme as well as on a non repatriable basis under Schedule IV of 4 of the FEMA (Transfer or Issue of a Security by a Person Resident outside India) Regulations, Investment by NRIs 82

120 As per Section 5(3) of the Foreign Exchange Management Act (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 ( FEMA 20 ), a NRI may purchase shares or convertible debentures of an Indian company either (a) on a stock exchange under the Portfolio Investment Scheme ( PIS ), subject to the terms and conditions set out in Schedule 3 of FEMA 20; or (b) on a non repatriation basis other than under PIS, subject to terms and conditions set out in Schedule 4 of FEMA 20. Paragraph 2 of Schedule 4 of FEMA 20 provides that a NRI may, without limit, purchase on nonrepatriation basis, shares or convertible debentures of an Indian company, issued whether by public issue or private placement or rights issue. The permission granted to NRIs is however subject to prior permission from the Central Government if the NRI has, as on January 12, 005, an existing joint venture or technology transfer / trademark agreement in the same field as the company, whose shares or convertible debentures are being acquired by the NRI. The amount of consideration for the acquisition of shares by the NRI on non repatriation basis is paid by way of an inward remittance through normal banking channels from abroad or out of funds held in NRE / FCNR / NRO / NRSR / NRNR account maintained with an authorized dealer or as the case may be with an authorized dealer in India. Please note that if the NRI is resident in Nepal or Bhutan, the payment can be made only by way of inward remittance in foreign exchange through normal banking channels. The amount invested in the shares or convertible debentures and the capital appreciation thereon shall not be allowed to be repatriated abroad. NRIs are not permitted to invest in shares or convertible debentures of an Indian company on a non repatriation basis under Schedule 4 of FEMA 20, if the company concerned is a chit fund or a nidhi company or is engaged in agricultural / plantation activities or real estate business or construction of farm houses or dealing in transfer of development rights. Foreign Trade Policy The revised foreign trade policy for the period issued by the Ministry of Commerce and Industry includes gems and jewellery within the initiatives identified for special focus. The other sectors that are so identified include agriculture, handicrafts, handlooms, leather and footwear. The objective behind declaring a sector as a sector with special focus is to increasing the percentage share of global trade in relation to that sector and expanding employment opportunities within the sector. As per this policy: (i) (ii) Import of gold of 8 carat and above is allowed under replenishment scheme subject to import being accompanied by a specified certificate specifying purity, weight and alloy content; Duty free import entitlement of consumables and tools, for jewellery made out of: a) Precious metals (other than gold & platinum) 2% b) Gold and platinum 1% c) Rhodium finished Silver 3% d) Cut and Polished Diamonds 1% (iii) Duty free import entitlement of commercial samples is ` 300,000; (iv) (v) (vi) Duty free re-import entitlement for rejected jewellery is 2% of FOB value of exports; Import of diamonds on consignment basis for certification/ grading and re-export by the authorized offices/agencies of Gemological Institute of America in India or other approved agencies is permitted; Personal carriage of gems and jewellery products in case of holding/participating in overseas exhibitions increased to USD 5,000,000 and to USD 1,000,000 in case of export promotion tours; 83

121 (vii) (viii) Extension in number of days for re-import of unsold items in case of participation in an exhibition in USA increased to 90 days; and Endeavour to make India a diamond international trading hub, it is planned to establish Diamond Bourse(s). Gem and Jewellery Export Promotion Council The Government of India has designated the Gem and Jewellery Export Promotion Council ( GJEPC ) as the importing and exporting authority in India in keeping with its international obligations under Section IV(b) of the Kimberley Process Certification Scheme ( KPCS ). The GJEPC has been notified as the nodal agency for trade in rough diamonds under para 2.2, chapter 2 of the foreign trade policy ( ). The KPCS is a joint government, international diamond and civil society initiative to stem the flow of conflict diamonds, which are rough diamonds used by rebel movements to finance wars against legitimate governments. The KPCS comprises participating governments that represent 99.8% of the world trade in rough diamonds. The KPCS has been implemented in India from January 1, 2003 by the Government of India through communication No. 12/13/2000-EP (GJ) dated November 13, However, under the SEZ Rules, the Development Commissioners have been delegated powers to issue Kimberley Process Certificates for units situated in respective SEZs. Labour Laws A list of labour / industrial laws are applicable to Indian industries which includes the Industries (Development and Regulation) Act, 1951, Industrial Disputes Act 1947, the Employees Provident Funds and Miscellaneous Provisions Act 1952, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, Workmen Compensation Act, 1923, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936 and the Factories Act, 1948, amongst others. The Employees State Insurance Act, 1948 The Employees State Insurance Act 1948, ( ESI Act ) provides for certain benefits to employees in case of sickness, maternity and employment injury. The ESI Act extends to the whole of India. It applies to all factories (including government factories but excluding seasonal factories) employing ten or more persons and carrying on a manufacturing process with the aid of power or employing 20 or more persons and carrying on a manufacturing process without the aid of power and such other establishments as the Government may specify. A factory or other establishment, to which the ESI Act applies, shall continue to be governed by its provisions even if the number of workers employed therein falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power, subsequently. The ESI Act does not apply to the following: (i) (ii) (iii) Factories working with the aid of power wherein less than 10 persons are employed; Factories working without the aid of power wherein less than 20 persons are employed; Seasonal factories engaged exclusively in any of the following activities, cotton ginning, cotton or jute pressing, decortication of groundnuts, the manufacture of coffee, indigo, lacs, rubber, sugar (including gur.) or tea or any manufacturing process incidental to or connected with any of the aforesaid activities, and including factories engaged for a period not exceeding seven months in a year in blending, packing or repackaging of tea or coffee, or in such other process as may be specified by the Central Government; 84

122 (iv) A factory which was exempted from the provisions of the Act as being a seasonal factory will not lose the benefit of the exemption on account of the amendment of the definition of seasonal factory; (v) Mines subject to the Mines Act, 1952; (vi) (vii) Railway running sheds; and Government factories or establishments, whose employees are in receipt of benefits similar or superior to the benefits provided under the Act and Indian naval, military or air forces. The appropriate Government may exempt any factory or establishments or class of factories or establishments or and employee or class of employees from the provisions of the ESI Act. Every employee (including casual and temporary employees), whether employed directly or through a contractor, who is in receipt of wages upto ` 10,000 per month is entitled to be insured under the ESI Act. However, apprentices engaged under the Apprentices Act are not entitled to the ESI benefits. Coverage of part time employees under the ESI Act will depend on whether they have contract of service or contract for service with the employer. The former is covered whereas the latter are not covered under the ESI Act. 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. Payment of Gratuity Act, 1972 Under the Payment of Gratuity Act, 1972 (the Gratuity Act ), an employee in a factory is deemed to be in, continuous service for a period of at least 240 days in a period of 12 months or 120 days in a period of six months immediately preceding the date of reckoning, whether or not such service has been interrupted during such period by sickness, accident, leave, absence without leave, lay-off, strike, lock-out or cessation of work not due to the fault of the employee. An employee who has been in continuous service for a period of five years will eligible for gratuity upon his retirement, superannuation, death or disablement. The maximum amount of gratuity payable shall not exceed ` 1 million. Payment of Bonus Act, 1965 Under the Payment of Bonus Act, 1965 (the Payment of Bonus Act ) an employee in a factory who has worked for at least 30 working days in a year is eligible to be paid bonus. Allocable surplus is defined as 67% of the available surplus in the financial year, before making arrangements for the payment of dividend out of profit of our Company. The minimum bonus to be paid to each employee is 8.33% of the salary or wage or ` 100, whichever is higher, and must be paid irrespective of the existence of any allocable surplus. If the allocable surplus exceeds minimum bonus payable, then the employer must pay bonus proportionate to the salary or wage earned during that period, subject to a maximum of 20% of such salary or wage. Contravention of the Act by a company will be punishable by proceedings for imprisonment up to six months or a fine up to `1,000 or both against those individuals in charge at the time of contravention of the Payment of Bonus Act. Minimum Wages Act, 1948 The State Governments may stipulate the minimum wages applicable to a particular industry. The minimum wages generally consist of a basic rate of wages, cash value of supplies of essential commodities at concession rates and a special allowance, the aggregate of which reflects the cost of living index as notified in the Official Gazette. Workers are to be paid for overtime at overtime rates stipulated by the 85

123 appropriate State Government. Any contravention may result in imprisonment of up to six months or a fine of up to ` 500. Workmen s Compensation Act, 1923 If personal injury is caused to a workman by accident during employment, his employer would be liable to pay him compensation. However, no compensation is required to be paid if the injury did not disable the workman for three days or the workman was at the time of injury under the influence of drugs or alcohol, or the workman willfully disobeyed safety rules. Where death results from the injury the workman is liable to be paid the higher of 60% of the monthly wages multiplied by the prescribed relevant factor (which bears an inverse ratio to the age of the affected workman, the maximum of which is for a worker aged 16 years) or ` 80,000. Where permanent total disablement results from injury the workman is to be paid the higher of 60% of the monthly wages multiplied by the prescribed relevant factor or ` 90,000. The maximum wage which is considered for the purposes of reckoning the compensation is ` 4,000. Employees Provident Fund and Miscellaneous Provisions Act, 1952 The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (the PF Act ) is applicable to every establishment which is a factory engaged in any industry specified in Schedule I of that legislation and in which twenty or more persons are employed, as well as to any other establishment employing twenty or more persons or class of such establishments which the Central Government may by notification in the Official Gazette specify in that behalf. The Central Government may notify schemes under the PF Act whereby the employer as well as the employee is required to make a contribution to a common pool of fund. The employee would be entitled to this fund on the occurrence of a specified event or at a stipulated time period. The contribution which is to be made by the employer to the fund is twelve percent of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees and the employee s contribution is equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding twelve percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the provisions of the PF Act. Environmental Laws Manufacturing concerns and other concerns that emit any form of an affluent as defined by the Water (Prevention and Control of Pollution) Act 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the Environment Protection Act, 1986 must also ensure compliance with the same. Taxation Taxation statutes such as the Income Tax Act, 1961, Central Sales Tax Act, 1956, the Finance Act, 1994, and applicable local sales tax statutes, and other miscellaneous regulations and statutes such as the Trade Marks Act, 1999 apply to us as they do to any other Indian company. 86

124 HISTORY AND CORPORATE STRUCTURE Our History Our Company was incorporated as a private limited company under the Companies Act on April 22, 2002 under the name and style of Joy Alukkas Traders (India) Private Limited with its registered and corporate office at 42/1385 A, Kurians Cottage, St. Benedict Road, Ernakulam District, Kochi , Kerala, India. The shareholders of our Company at the time of its incorporation were Alukkas Varghese Joy and Jolly Joy. Our Company was allocated the corporate identity number U51398KL2002PTC Subsequently, the name of our Company was changed to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, Our Company was converted into a public limited company on November 15, 2010 with the name Joyalukkas India Limited and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC and was allotted a corporate identity number of U51398KL2002PLC Changes in Registered Office Following are the details regarding shifting of our Registered Office: From To With effect from Reasons for Change 42/1385 A, Kurians Cottage, St. Benedict Road, Ernakulam District, Kochi , Kerala, India 41/4108 E6, Kurian Towers Banerjee Road, Ernakulam District, Kochi Kerala, India December 17, 2003 To facilitate the business of our Company 41/4108 E6, Kurian Towers, Banerjee Road, Ernakulam District, Kochi , Kerala, India Key Events, Milestones and Achievements Door No. 40/2096, A&B Peevees Triton, Shanmugham Road Marine Drive Ernakulam District, Kochi Kerala, India June 6, 2005 To facilitate the business of our Company Year Key Events, Milestones and Achievements 2002 Incorporated as a private limited company under the name and style of Joy Alukkas Traders (India) Private Limited 2003 Implemented a new concept of wedding centres by opening our first wedding centre (at Angamaly, Kerala) 2004 Opened the first showroom in Tamil Nadu, at Coimbatore 2006 Opened a showroom in Hyderabad, Andhra Pradesh, which increased the total number of showrooms to Opened the fourth showroom in Tamil Nadu at Thirunelveli, which increased the total number of showrooms to Opened the Company s largest showroom in Chennai, with an area of 57,430 sq. ft Achieved a turnover of ` 10,000 million for the year ended March 31, This was the first time our turnover crossed ` 10,000 million 2009 Opened a showroom in Puducherry and which increased the total number of showrooms to Underwent name change to Joyalukkas India Private Limited 2010 Opened the Company s first showroom in Karnataka, at Bangalore 2010 Converted into a public limited company and changed name to Joyalukkas India Limited Awards and Accreditations Fiscal Award Year 2011 Best Single Retail Store of the Year award to our Chennai showroom at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation 2011 Best Retail Jewellery Chain of the Year award at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation 2010 Retail Chain of the Year Award at the Retail Jeweller India Awards 2010 instituted by the Retail Management Group 87

125 Fiscal Award Year 2010 Highest Commercial Tax Payer in Jewellery Retail at the Kerala Trade Awards 2010 organised by the Government of Kerala 2009 Retail Jeweller India Awards for the television campaign, 2009 instituted by the Retail Management Group Degree Marketing Campaign for the Year 2009 at the Retail Jeweller India Awards instituted by the Retail Management Group 2009 Kerala s Highest VAT Payer in Gem & Jewellery Industry at the Kerala Gem & Jewellery Show Gold Souk Awards 2008 Best Consumer Choice Award at the Retail Jeweller Awards, 2008 instituted by the Retail Management Group 2008 Best Overseas Retailer of the Year at the Kerala Gem & Jewellery Awards, 2008 at the Kerala Gem & Jewellery Awards, Best Retailer of the Year at the JJS Gold Souk Awards, Best Retail Promotion of the Year at the Retail Jeweller Awards, 2006 instituted by the Retail Management Group Main Objects Our main objects enable us to carry on our current business. The main objects of our Company as contained in our Memorandum of Association are as follows: To carry on the business of wholesale and retail dealers, manufacturers, importers and exporters of gold and silver ornaments, diamond and precious stones, platinum and white gold ornaments and accessories and of acquiring and trading in textiles, fashion articles, perfumes, cosmetics, watches, cutlery, utensils, curio articles, antiques and other consumer articles. Amendments to Memorandum of Association Since incorporation, the following changes have been made to our Memorandum of Association: Date of Shareholders Amendment Approval September 20, 2002 Increase in authorised capital from ` 1,000,000 divided into 2,000 Equity Shares of ` 500 each to ` 50,000,000 divided into 100,000 Equity Shares of ` 500 each March 30, 2005 Increase in authorised capital from ` 50,000,000 divided into 100,000 Equity Shares of ` 500 each to ` 100,000,000 divided into 200,000 Equity Shares of ` 500 each January 29, 2007 Increase in authorised capital from ` 100,000,000 divided into 200,000 Equity Shares of ` 500 each to ` 250,000,000 divided into 500,000 Equity Shares of ` 500 each September 28, 2007 Sub-division of each Equity Share of ` 500 into 50 Equity Shares of ` 10 each October 30, 2007 Increase in authorised capital from ` 250,000,000 divided into 25,000,000 Equity Shares of ` 10 each to ` 650,000,000 divided into 65,000,000 Equity Shares of ` 10 each December 16, 2009 Change of name of our Company from Joy Alukkas Traders (India) Private Limited to Joyalukkas India Private Limited November 15, 2010 Change of status of our Company from private to public and change in name of our Company from Joyalukkas India Private Limited to Joyalukkas India Limited November 15, 2010 Increase in authorised capital from ` 650,000,000 divided into 65,000,000 Equity Shares of ` 10 each to ` 1,000,000,000 divided into 100,000,000 Equity Shares of ` 10 each Total Number of Shareholders of our Company As of the date of filing of this DRHP, the total number of holders of Equity Shares are 111. For more details on the shareholding of the members, please see the section titled Capital Structure at page 23. For details on the corporate profile of the Company regarding its history, description of the activities, services, products, market, growth of the Company etc. see Our Business at page

126 The Company is not party to or aware of any shareholders agreement and/or any other agreement not executed in the ordinary course of business in the two years immediately preceding the date of this DRHP. Strategic Partners Our Company does not have any strategic partners or joint venture agreements with any entity. Financial Partners Our Company does not have any financial partners. Details of our Subsidiary Wholly Owned Subsidiary Joyal Ornaments and Trades Private Limited Joyal Ornaments and Trades Private Limited, a company registered under the laws of India, is presently not engaged in any business. This company has been incorporated with the object of improving exports by opening a 100% export oriented unit within a special economic zone. The authorised share capital of Joyal Ornaments and Trades Private Limited is ` 1,000,000 divided into 100,000 equity shares of ` 10 each. The issued, subscribed and paid up share capital is ` 100,000 divided into 10,000 equity shares of ` 10 each. Our Company holds 9,999 equity shares aggregating to 99.99% of the issued, subscribed and paid up share capital of Joyal Ornaments and Trades Private Limited. Joyal Ornaments and Trades Private Limited, our Subsidiary, was incorporated on April 28, It has not commenced operations since its incorporation. It has an equity share capital of Rs. 0.1 million and a loss of Rs million for the period from April 28, 2010 to September 30, As the Subsidiary is not material, the consolidated financial statements have not been prepared and presented in the DRHP. For further details please refer Annexure IV to Restated Financial Statements. Financial Performance (` in millions except per share data) For the period from April 28, 2010 to September 30, 2010 Equity capital 0.10 Loss for the period (0.05) Loss per share (not annualised) (4.75) Book value per share 5.27 Our Associates Our Company does not have any Associates. Partnership Firms Our Company is not a partner in any partnership firm. 89

127 OUR MANAGEMENT Board of Directors Under our Articles of Association, we are required to have not less than three and not more than twelve directors. We currently have five directors on our Board. The following table sets forth details regarding our Board of Directors: S. No. Name, Father s Name, Designation, DIN, Residential Address, Occupation, Term 1. Alukkas Varghese Joy (S/o. Late A. J. Varghese) Managing Director DIN: Alukkas House Kuriachira P.O. Thrissur Kerala, India Business Term: Non-retiring Director for a period of five years with effect from November 15, Other Directorships/ Nationality Age (years) Proprietorships/Partnerships/Trus ts Indian 54 Domestic Companies 1. KIMS Health Care Management Limited; 2. Joyal Properties Private Limited; 3. Mythri Entertainers & Enterprises Private Limited; 4. Cochin Smart City Properties Private Limited; 5. Fusion Technosoft Private Limited; 6. Jyothi Aviation & Developers Private Limited; 7. Mudita Trades Private Limited; 8. Joyal Ornaments & Trades Private Limited; 9. Dalia Hotels & Resorts Private Limited; and 10. Joyalukkas Foundation. Offshore Companies 1. Joy Alukkas Holdings Inc. British Virgin Islands; 2. Joy Alukkas Centre LLC, Sharjah; 3. Alukkas Exchange LLP, Dubai UAE; 4. Joy Alukkas Jewellery LLC, Dubai; 5. Joy Alukkas Diamonds LLC, Sharjah; 6. Joy Alukkas Jewellery LLC, Abu Dhabi; 7. Joy Alukkas Jewellers LLC, Ras Al Khaimah; 8. Joy Alukkas Jewellery LLC, Oman; 9. Joy Alukkas Jewellery WLL, Bahrain; 10. Joy Alukkas Jewellery WLL, Qatar; 11. Joy Alukkas Jewellery WLL, Kuwait; 12. Alukkas Limited, United Kingdom; and 90

128 S. No. Name, Father s Name, Designation, DIN, Residential Address, Occupation, Term 2. John Paul Joy Alukkas (S/o Alukkas Varghese Joy) Director (Non executive) DIN: Alukkas House Kuriachira P.O. Thrissur Kerala, India Business Term: Re-appointed as Director on September 26, 2009, liable to retire by rotation 3. D.K Manavalan (S/o. Kurian Sebastian Manavalan) Chairman (Independent Director) Nationality Age (years) Other Directorships/ Proprietorships/Partnerships/Trus ts 13. Joy Alukkas Jewellery LLC, Ajman. Indian 25 Domestic Companies 1. Mudita Trades Private Limited; and 2. Jyothi Aviation & Developers Private Limited Offshore Companies 1. Joy Alukkas Jewellery LLC, Ajman; 2. Joy Alukkas Diamonds LLC, Sharjah; 3. Joy Alukkas Jewellery LLC, Dubai; 4. Joy Alukkas Jewellery LLC, Abu Dhabi; 5. Joy Alukkas Jewellery WLL, Bahrain; 6. Joy Alukkas Jewellery WLL, Kuwait; 7. Joy Alukkas Jewellers LLC, Ras Al Khaimah; and 8. Joy Alukkas Jewellery LLC, Oman. 9. Alukkas Limited, London 10. Joy Alukkas Holdings INC., BVI Indian 69 Domestic Company 1. The South Indian Bank Limited DIN: Flat No A-231, Shriniketan Society, PlotI, Sector 7, Dwaraka, New Delhi Service Term: Appointed as Additional Director on October 15, 2010 to hold office upto the date of next Annual General Meeting. 4. C. J. George (S/o. Late Mathew John) (Independent Director) DIN: A, Skyline Elysium Gardens Stadium Link Road, Kaloor Ernakulam District Kochi Kerala, India Business Indian 51 Domestic Companies 1. Geojit BNP Paribas Financial Services Limited 2. Geojit Credits Private Limited 3. Geojit Investment Services Limited 4. Geojit Financial Distribution Private Limited 5. Geojit Financial Management Services Private Limited 6. V-Guard Industries Limited 7. CJG Holdings India Private Limited 8. Geojit Comtrade Limited 91

129 S. No. Name, Father s Name, Designation, DIN, Residential Address, Occupation, Term Appointed as Director on September 18, 2010, liable to retire by rotation Nationality Age (years) Other Directorships/ Proprietorships/Partnerships/Trus ts 9. Cochin Chamber of Commerce and Industry Offshore Companies 1. Barjeel Geojit Securities LLC 2. Al-Oula Geojit Brokerage Company, Saudi Arabia 3. Sigma Systems International FZ LLC 5. K.P. Padmakumar (S/o. Pallakkal Velayudha Menon) (Independent Director) DIN: Indian 66 Domestic Companies 1. Muthoot Vehicle & Asset Finance Limited 2. Muthoot Securities Limited 3. Muthoot Commodities Limited 4. Jyothy Laboratories Limited 3F Skyline Topaz, Kaloor Kadavanthara Road, Kaloor, Ernakulam Business Appointed as Director on September 18, 2010, liable to retire by rotation Directorships in companies suspended/delisted None of our Directors hold directorships in listed companies whose shares have been/were suspended from trading /delisted from the stock exchanges within a period of five years immediately preceding the date of this Draft Red Herring Prospectus. All the Directors of our Company are Indian nationals. Except John Paul Joy Alukkas who is the son of Alukkas Varghese Joy, none of our Directors are related to each other. There are no arrangements or understanding with major shareholders, customers, suppliers or others, pursuant to which any of our Directors were selected as a Director or member of the senior management except as per the Articles of Association of our Company. Brief biographies of our Directors Alukkas Varghese Joy, aged 54 years, is responsible for the establishment of our Company and was appointed as the first Managing Director of our Company on May 1, He has an experience of about 22 years in the jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. He was also awarded the Retail Jeweller Award 2007 NRI Retailer of the Year by the Retail Management Group. He was also awarded the K3A Top 10 Businessman Award in He was also selected as the Best Keralite Entrepreneur 2010 by the Indian Accounting Association. This award is presented through a screening of Kerala based entrepreneurs who operate enterprises globally. John Paul Joy Alukkas aged 25 years, was appointed as a Director on December 5, He holds a bachelors degree in business administration from the Manipal University. He has been involved in the business of the Company with a special focus on marketing and brand related initiatives. He currently manages the operational and administrative aspects of the Promoter s business in the middle east. He is also one of the members of the board of directors of the Dubai Gold and Jewellery Group. 92

130 D. K. Manavalan aged 69 years, was appointed as an additional director of our Company on October 15, He belongs to the 1965 batch of the Indian Administrative Service, and was assigned to the West Bengal cadre. He holds a bachelor s degree (Honours) in Science from the University of Kerala. He has also undergone training in public administration from the National Acedemy of Administration, Mussorrie. He was a fellow of the Economic Development Institute, World Bank, Washington D. C, U.S.A in He held the position of Special Secretary, Finance and Commissioner Commercial Taxes, Secretary, Rural Development and Panchayats and Principal Secretary, Commerce and Industries, under the Government of West Bengal. He also held the position of Joint Secretary to the Government of India, Ministry of Human Resource Development, in charge of youth affairs and sports, Additional Secretary, Ministry of Welfare, Secretary to Social Justice and Empowerment and Secretary to the Department of Youth Affairs and Sports. He presently heads a national level NGO by the name of AFPRO-Action for Food Production, that works for natural resource management, watershed and livelihood programmes for tribals, scheduled castes and the marginalized population of the country. C. J. George aged 51 years, was appointed as an additional Director on May 22, He is also the Managing Director of Geojit BNP Paribas Financial Services Limited, a company founded by him in 1987 and joined by BNP Paribas in He holds a membership on many professional bodies. He was an executive committee member of the NSE. He is an executive committee member of the NSDL, a managing committee member of the Associated Chambers of Commerce & Industry of India, New Delhi, a member of the executive committee of BNP Paribas Personal Investors, Paris, a member of the Confederation of Indian Industry, an executive member of the Cochin Chamber of Commerce, a managing committee member of the Kerala Management Association and a member of the capital markets committee of Federation of Indian Chambers of Commerce and Industry. K. P. Padmakumar aged 66 years, was appointed as an additional Director on May 22, He is a banker with over 42 years of experience in India and abroad in commercial banking, treasury management, capital markets and mutual funds. He holds a bachelors degree in Agricultural Science and is a certified associate of the Indian Institute of Bankers. During his 27 year tenure with the State Bank of India, he handled many operational assignments including the treasury managership of the bank s Bahrain offshore banking unit and that of the fund manager of the SBI mutual fund. He was Chairman of the Federal Bank Limited for six years from 1999 to He joined the Muthoot group in 2005 and continues as an executive director therein. He has held various positions including that of a member of the Indian Banking Association management committee, President of the Kerala Chapter of the Indian Banking Association, member of the management committee of the Cochin Chamber of Commerce and Industry, President of the Association of Private Sector Banks in India, Chairman of the governing board of the Southern India Bankers Training College and that of a member on the advisory board of the Guruvayoorappan Institute of Management. He has been awarded the Management Leadership Award by the Kerala Management Association, Kochi and the Life Time Achievement Award instituted by the Kerala Darshana Vedi, Kochi. Remuneration of our Executive Directors Alukkas Varghese Joy was re-appointed as the Managing Director from November 15, 2010 for a term of five years, pursuant to an agreement entered into by the Company with him dated November 15, The terms of his employment and remuneration, include the following: Particulars Salary Commission Perquisites Remuneration ` 2,000,000 per month, with an annual increase not exceeding 20% of the last drawn salary as may be decided by the Board or any committee thereof At the rate of 1% of the net profits of the Company calculated in accordance with the provisions of the Companies Act Includes accommodation, gas, electricity, water and other amenities, medical reimbursement, club fees, leave travel allowance, insurance coverage and car with chauffeur 93

131 Alukkas Varghese Joy received an annual remuneration aggregating to ` million for Fiscal Except as stated above, there are no service contracts entered into by the Directors with our Company providing for benefits upon termination of employment. Details of Borrowing Powers of our Board Our Articles, subject to the provisions of Section 293(1)(d) of the Companies Act authorize our Board, to borrow or raise money or secure the payment of any sum or sums of money for the purposes of our Company. The shareholders of our Company, through a resolution passed at the EGM dated November 15, 2010, authorized our Board to borrow monies, together with monies already borrowed by us, in excess of the aggregate of the paid up capital of our Company and our free reserves, not exceeding ` 5,000 million at any time. Interest of Directors All of our Directors may be deemed to be interested to the extent of fees 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 under our Articles, and to the extent of remuneration paid to them for services rendered as an officer or employee of our Company. Our Directors may also be regarded as interested in the Equity Shares, if any, held 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 our 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. For details of interests of our Promoter who is also our executive Director, see Our Promoter on page 101. Except as stated in Related Party Transactions on page 150, and to the extent of shareholding in our Company, if any, our Directors do not have any other interest in our business. Further, see Our Promoter - Interests of our Promoter and Common Pursuits on page 101. Except as stated in this Draft Red Herring Prospectus, our Directors have no interest in any property acquired by us two years prior to the date of this Draft Red Herring Prospectus. For details of interests of our Promoter who is also our Managing Director, see Our Promoters on page 101. Details of compensation paid to directors None of our non executive Directors were paid any remuneration in Fiscal Corporate Governance We have complied with the Listing Agreement with respect to corporate governance especially with respect to broad basing of our Board, constituting committees such as the Audit Committee, Remuneration Committee and Investor Grievance Committee. Further, the provisions of the Listing Agreement to be entered into with the Stock Exchanges with respect to corporate governance will be applicable to us immediately upon the listing of our Equity Shares on the Stock Exchanges. We have complied with such provisions, including with respect to the appointment of independent Directors to our Board and the constitution of committees of our Board. Our Company undertakes to take all necessary steps to comply with all the requirements of Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges. 94

132 Currently, our Board has five Directors, consisting of, our Managing Director, one non executive director and three independent Directors. Further, in compliance with Clause 49 of the Listing Agreement, the following Committees have been formed. Audit Committee The Audit Committee of our Board was reconstituted by our Directors by way of a resolution passed by the Board dated November 15, 2010 pursuant to Section 292A of the Companies Act. The Audit Committee comprises: Name of the Director Designation on the Committee Nature of Directorship K.P.Padmakumar Chairman Independent Director C.J.George Member Independent Director D.K. Manavalan Member Independent Director Terms of reference of the Audit Committee include: Overseeing the Company s financial reporting process and disclosure of its financial information. Regular review of accounts, accounting policies, disclosures, etc. Regular review of the major accounting entries based on exercise of judgment by management. Review of qualifications in the draft audit report. Establishing and reviewing the scope of the statutory audit including the observations of the auditors and review of the quarterly, half-yearly and annual financial statements before submission to the Board, with particular reference to matters required to be included in the Directors Responsibility Statement to be included in the Board s report in terms of clause 2(AA) of S.217 of the Companies Act, 1956, changes in the accounting policies and practices and reasons for the same, significant adjustments made in the financial statements arising out of audit findings, and qualifications in the draft audit report. The Committee shall have post audit discussions with the statutory auditors to ascertain any area of concern. Regular review of the performance of statutory and internal auditors together with the management. Discussion and follow up on any important findings with the internal auditors. In case there is a suspected case of fraud or irregularity, review of the findings of the internal auditors and reporting the matter to the board. Establishing the scope and frequency of internal audit, reviewing the findings of the internal auditors and ensuring the adequacy of internal control systems including structure of the internal audit department, frequency of internal audit, staffing and seniority of the official heading the department. Review the functioning of the whistle blower mechanism, in case the same is existing. To look into reasons for substantial defaults in the payment to depositors, debenture holders, shareholders and creditors. To look into the matters pertaining to the Director s Responsibility Statement with respect to compliance with applicable accounting standards and accounting policies. Compliance with Stock Exchange legal requirements concerning financial statements, to the extent applicable. The Committee shall look into any related party transactions i.e., transactions of the company of material nature and disclose such transactions, with promoters or management, their subsidiaries or relatives etc., that may have potential conflict with the interests of company at large. Recommending to the Board the appointment, re-appointment, and replacement of the statutory auditor and the fixation of audit fee. Approval of payments to the statutory auditors for any other services rendered by them. Review of management discussion and analysis of financial condition and results of operations, statements of related party transactions submitted by management, management letters/letters of internal control weaknesses issued by the statutory auditors, internal audit reports relating to 95

133 internal control weaknesses, and the appointment, removal and terms of remuneration of the chief internal auditor. Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by the Audit Committee. Investor Grievance Committee The Investor Grievance Committee was constituted by our Directors by a board resolution dated November 15, 2010 and comprises: Name of the Director Designation on the Committee Nature of Directorship C.J.George Chairman Independent Director K.P.Padmakumar Member Independent Director D.K.Manavalan Member Independent Director Alukkas Varghese Joy Member Managing Director Terms of reference of the Investor Grievance Committee include the following: 1. Investor relations and Redressal of shareholders grievances in general and relating to non receipt of dividends, interest, non- receipt of balance sheet etc.; 2. Approve requests for share transfers and transmission and those pertaining to rematerialisation of shares/ sub-division/ consolidation/ issue of renewed and duplicate share certificates etc.; and 3. Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by such committee. Remuneration Committee The Remuneration Committee was constituted by our Directors by a board resolution dated November 15, 2010 and comprises: Name of the Director Designation on the Committee Nature of Directorship D.K.Manavalan Chairman Independent Director K.P.Padmakumar Member Independent Director Alukkas Varghese Joy Member Managing Director C.J. George Member Independent Director Terms of reference of the Remuneration Committee include the following: Framing suitable policies and systems to ensure that there is no violation, by an Employee of the Company of any applicable laws in India or overseas, including: a) The Securities and Exchange Board of India (Insider Trading) Regulations, 1992; or b) The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities market) Regulations, Determine on behalf of the Board and the shareholders the company s policy on specific remuneration packages for executive directors including pension rights and any compensation payments. Perform such functions as are required to be performed under Clause 5 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by such committee. IPO Committee 96

134 The IPO Committee was constituted by our Board in terms of their resolution dated August 7, The IPO Committee consists of Alukkas Varghese Joy, C. J. George and K. P. Padmakumar. The terms of reference of the IPO Committee include: To decide on the actual size of the Issue, including any reservation on a firm or competitive basis, timing, pricing and all the terms and conditions of the issue of the Equity Shares, including the price, and to accept any amendments, modifications, variations or alteration thereto; To appoint and enter into arrangements with the book running lead managers, co-managers to the Issue, underwriters to the Issue, syndicate members to the Issue, stabilizing agent, brokers to the Issue, escrow collection bankers to the Issue, registrars, legal advisers and any other agencies, intermediaries or persons; To finalise and settle and to execute and deliver or arrange the delivery of the DRHP, the RHP, the Prospectus, agreement with the book running lead managers, memorandum of understanding with registrar, syndicate agreement, underwriting agreement, escrow agreement, stabilization agreement and all other documents, deeds, agreements and instruments as may be required or desirable in connection with the Issue; To issue advertisement in such newspapers as it may deem fit and proper about the future prospects of the Company and the proposed issue conforming to the guidelines issue by SEBI; To open a separate current account(s) with a scheduled bank(s) to receive applications along with application monies in respect of the Issue or any other account with any name and style as required during or after process of forthcoming initial public offering of the shares of the Company; and To do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary or desirable for such purpose, including without limitation, allocation, finalizing the basis of allocation and allotment of the shares as permissible in law, issue of share certificates in accordance with the relevant rules. Shareholding of our Directors in our Company Except as provided hereunder, no other Directors hold any shares in the share capital of our Company. In terms of our Articles of Association, the Directors are not required to hold any qualification shares. The table below sets forth the details of Equity Shares that are held by our Directors. S. No. Name Number of Equity Shares Pre-Issue Percentage Equity Share Capital Post-Issue Percentage Equity Share Capital a) Alukkas Varghese Joy 44,980, % [ ] b) John Paul Joy Alukkas 10, % [ ] There are no outstanding vested options granted to our Directors. Changes in our Board of Directors during the last three years Name Date of Appointment Date of Change/ Cessation Reason Jacob. V. Palayoor March 5, 2004 November 30, 2007 Resignation Francis C. I September 28, 2007 September 14, 2009 Resignation Jolly Joy April 22, 2002 May 22, 2010 Resignation Reena Joby September 18, 2009 May 22, 2010 Resignation Joseph Christo November 19, 2009 October 15, 2010 Resignation K. P. Padmakumar May 22, Appointment C. J. George May 22, Appointment D. K. Manavalan October 15, Appointed as an Additional 97

135 Name Date of Appointment Date of Change/ Cessation Reason Director Managerial Organisation Structure Our Company s management organisation structure is given below: Board of Directors Managing Director Alukkas Varghese Joy Chief Financial Officer T. Nandakumar Chief Operating Officer P.P. Jose Manager Accounts & Taxation H. Sanjay Manager Finance Deepak Xavier Company Secretary Varun T. V Manager HR Joseph Christo Manager Retail P.D. Francis General Manager Jewellery P.D. Jose Key Management Personnel of our Company The biographies of our other key management personnel are set forth below: Nandakumar. T, Chief Financial Officer, aged 41 years, joined our Company on February 1, He is currently responsible for the planning and development of organisational strategies as well as for financial control and taxes. He acts as a point of contact for banking institutions and auditors and ensures transparent monthly financial reports. He holds a bachelors degree in commerce from the University of Calicut and is a qualified chartered accountant. He has an experience of more than 15 years in the field of accounts and finance. Prior to joining our Company, he was the chief financial officer of Wendt India Limited. Prior to that, he held the post of chief financial officer with V-Guard Industries Limited. He has also worked in various capacities with the Dhanalakshmi Bank Limited. The remuneration paid to him in Fiscal 2010 in the capacity of the Chief Financial Officer of our Company was ` 0.40 million. P. P. Jose, Chief Operating Officer, aged 66 years, joined our Company as General Manager (Operations) on April 2, He is responsible for the strategic planning function of the organisation and oversees process execution. His other responsibilities include the laying down guidelines for organisational development. He holds a bachelors degree in Physics and a masters degree in English from the University of Kerala. Prior to that, he was associated with Vijaya Kumar Mills as an Assistant Manager for two and a half years. He also worked for 26 years in various capacities with Madura Coats. The remuneration paid to him in Fiscal 2010 in the capacity of the General Manager (Operations) of our Company was ` 1.13 million. 98

136 H. Sanjay, Manager Accounts and Taxation, aged 36 years joined our Company on April 1, He is responsible for the accounting of revenue and expenses, finalization of accounts and statutory and tax audits. He represents the Company before indirect and direct tax regulatory authorities in relation to various issues and disputes. He holds a bachelors degree in Science from the Mahatma Gandhi University and is a qualified chartered accountant. He has over nine years of experience in the field of accounts and finance. Prior to joining our Company, he was associated with the Malabar Group, Calicut as finance manager and prior to that he was working with the corporate office of Muthoot Finance Private Limited, New Delhi. Since he joined our Company in April 2010, he has not received any remuneration in Fiscal Deepak Xavier, Finance Manager, aged 28 years, joined our Company on December 1, He is responsible for the daily fund management of our Company. His responsibilities include management of the receivables and payables, cash flow management, preparation of budgets and financial statements. He reports to the Chief Financial Officer. He holds a bachelors degree in Commerce from the Mahatma Gandhi University, Kerala and a Post Graduate Diploma in Management from Indira Gandhi National Open University. He is a qualified chartered accountant. He has over five years of experience in the field of accounts and finance. The remuneration paid to him in Fiscal 2010 in the capacity of the Finance Manager of our Company was ` 0.95 million. Varun T. V., Company Secretary, aged 24 years, holds a masters degree in Finance from Annamalai University and is a qualified company secretary. He has two years of experience in the field of secretarial practice and corporate compliance. He is designated as the Company Secretary and the Compliance Officer and his responsibilities include administration of secretarial and compliance teams. Since he joined our Company in April 2010, he has not received any remuneration in Fiscal Joseph Christo, Human Resource Manager, aged 28 years, joined our Company on May 2, His responsibility entails the training and development of our personnel to meet the standards of the market. His profile also includes the conducting of interviews, appraisals and performance review. He holds a bachelors degree in Commerce from the Calicut University and a masters degree in Sociology from the Pondicherry University. He holds a masters degree in business administration from the National Institute of Business Management. He has over seven years of experience in the field of human resource management. Prior to joining our Company, he assisted STC Technologies Private Limited as their HR Team Leader. The remuneration paid to him in Fiscal 2010 in the capacity of the Human Resource Manager of our Company was ` 0.49 million. P. D. Francis, Retail Manager, aged 44 years, joined our Company on August 1, His profile includes management of his team to increase sales and ensure efficiency. He analyzes sales figures and forecasts future sales volumes in order to maximize profits. He analyzes and interprets trends to facilitate planning. He works towards ensuring that standards for quality, customer service, health and safety are met. He responds to customer complaints and comments. He is entrusted with the responsibility of organising special promotions, displays and events. The remuneration paid to him in Fiscal 2010 in the capacity of the Retail Manager of our Company was ` 0.87 million. P. D. Jose, General Manager Jewellery Division, aged 53 years, joined our Company as Purchase Manager-Jewellery Division on October 1, He is responsible for supplier selection, product selection, purchase, pricing of products and inventory management. He is also responsible for ensuring the product quality, maintaining an even supply chain and timely replacement of inventory. He has been associated with our overseas Group Entities for 20 years before being appointed as Purchase Manager-Jewellery Division of our Company. The remuneration paid to him in Fiscal 2010 in the capacity of the General Manager-Jewellery Division of our Company was ` 1.13 million. All our Key Managerial Personnel are permanent employees of our Company and except P. D. Jose and P. D. Francis who are brothers, none of our Key Management Personnel are related to each other. Shareholding of the Key Management Personnel 99

137 The table below sets forth the details of Equity Shares that are held by our Key Management Personnel: S. No. Name Number of Equity Shares Pre-Issue Equity Share Capital Post-Issue Equity Share Capital % 1. P. P. Jose 700 Negligible [ ] 2. P. D. Jose 700 Negligible [ ] 3. P.D. Francis 700 Negligible [ ] 4. T. Nandakumar 1,000 Negligible [ ] 5. Deepak Xavier 600 Negligible [ ] 6. H. Sanjay 600 Negligible [ ] 7. Varun T.V. 600 Negligible [ ] 8. Joseph Christo 800 Negligible [ ] Bonus or profit sharing plan of the Key Management Personnel There is no bonus or profit sharing plan of the key management personnel. Changes in the Key Management Personnel The changes in the Key Management Personnel in the last three years are as follows: Name of the Key Date of Change Reason for change Management Person Rolf W Schneebeli August 9, 2010 Resignation Tom Jose December 1, 2008 Resignation Antony Louis May 31, 2008 Resignation Rajesh Kurup G May 31, 2008 Resignation N R Achan April 30, 2008 Resignation Other than the above changes, there have been no changes to the Key Management Personnel of our Company that are not in the normal course of employment. Payment or benefit to officers of our Company Except as stated in this Draft Red Herring Prospectus, no amount or benefit has been paid or given or is intended to be paid or given to any of our Company s employees including the Key Management Personnel and our Directors. None of the beneficiaries of loans and advances and sundry debtors are related to the Directors of our Company. 100

138 OUR PROMOTER Alukkas Varghese Joy Driving License: 5/1695/1977 Passport No.: Z PAN: ACNPJ7972K Voter s Identity: Our Promoter does not have a voters identity. Our Company confirms that the Permanent Account Number, Bank Account Number and Passport Number of our Promoter will be submitted to the BSE and the NSE at the time of filing this Draft Red Herring Prospectus with them. For further details in relation to our Promoter see Our Management on page 90. Common Pursuits and Interest of Our Promoter Our Promoter is interested in us to the extent that he has promoted our Company and his shareholding in us. Further, our Promoter, Alukkas Varghese Joy, who is also the Managing Director of our Company, may be deemed to be interested to the extent of remuneration and compensation paid to him and fees, if any, payable to him for attending meetings of the Board or a committee thereof as well as to the extent of expenses payable to him. Our Promoter may be deemed to be interested in our Company to the extent of his shareholding in our Subsidiary and our Group Entities with which our Company transacts during the course of our operations. For details, see Details of our Subsidiary on page 89 and Group Entities on page 104. Our Promoter is further interested in the operations of our Company to the extent of the bank guarantees issued by him as security for certain of our borrowings. For details, see Financial Indebtedness on page 181. One of our Group Entities, Cochin Smart City Properties Private Limited, has executed a corporate guarantee in favour of a lender from whom the Company has availed of a loan. We have also entered into two lease agreements with Cochin Smart City Properties Private Limited for obtaining on lease the land on which our proposed showrooms at Thiruvananthapuram and Kozhikode are to be situated. For details, see Objects of the Issue on page 31. Except the three lease agreements that have been entered into by our Company with Alukkas Varghese Joy in relation to obtaining on lease property to run its business, the aforementioned lease agreements entered into with Cochin Smart City Properties Private Limited, and except as stated otherwise in this Draft Red Herring Prospectus, we have not entered into any contract, agreements or arrangements during the preceding two years from the date of this Draft Red Herring Prospectus in which our Promoter is directly or indirectly interested and no payments have been made to him in respect of the contracts, agreements or arrangements which are proposed to be made with him including the properties purchased by us other than in the normal course of business. 101