MUTHOOT CAPITAL SERVICES LIMITED

Transcription

1 C M Y K LETTER OF OFFER July 02, 2011 For the Equity Shareholders of the Company Only MUTHOOT CAPITAL SERVICES LIMITED (The Company was incorporated originally as a Public Limited Company on February 18, 1994 under the name and style of "Muthoot Capital Services Limited" under the provisions of the Companies Act, 1956, in the State of Kerala. The Company has obtained the Certificate of Commencement of Business on March 23, 1994 issued by Registrar of Companies, Kerala.) (For further details, please refer to the section titled "History and Corporate Structure of the Company" on Page 23 Registered Office: 5th Floor, Muthoot Towers, M.G.Road, Kochi , Kerala, India. Tel.: ; Fax: ; Website: Contact person: Ms. Malathy N, Company Secretary and Compliance Officer, investorgrievance@muthootcap.com FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY ONLY ISSUE OF 65,00,000 SHARES OF ` 10/- EACH FOR CASH AT A PRICE OF ` 80 (INCLUDING A SHARE PREMIUM OF ` 70) PER EQUITY SHARE AGGREGATING ` 5200 LAKHS ON RIGHTS BASIS TO THE EXISTING ELIGIBLE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF ONE (1) EQUITY SHARE FOR EVERY ONE (1) FULLY PAID-UP EQUITY SHARE HELD ON THE RECORD DATE, I.E. MAY 25, THE ISSUE PRICE OF EACH EQUITY SHARE IS 8.0 TIMES THE FACE VALUE OF THE EQUITY SHARE. GENERAL RISK Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this offer unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this offering. For taking an investment decision, investors must rely on their own examination of the issuer and the offer including the risks involved. The securities being offered in the issue have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors shall be invited to the statement of "Risk factors" given on page number vii of this Letter of Offer. ISSUER S ABSOLUTE RESPONSIBILITY The issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer 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 the Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of the Company are listed on Bombay Stock Exchange Limited ("BSE"). The proposed Rights Shares will also be listed on the BSE. The Company has received in-principle approval from BSE for listing of the Equity Shares arising from this Issue vide letter no DCS/PREF/NTP/IP-RT/1131/10-11 dated March 14, For the purpose of this Issue, the Designated Stock Exchange shall be the Bombay Stock Exchange Limited. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Integrated Enterprises (India) Limited Karvy Investor Services Limited 2nd Floor, Regent Chambers Nariman Point, Mumbai Tel: / Fax: cmg@karvy.com Website: Contact Person : Ms. Sarita Gupta/ Mr. Sumit Singh SEBI Registration No.: INM Kences Towers, 2nd Floor, No.1 Ramakrishna Street, Off North Usman Road, T Nagar, Chennai Tel: Fax : corpserv@iepindia.com Website: Contact Person: Mr. K Balasubramanian SEBI Registration No.: INR ISSUE OPENS ON ISSUE PROGRAMME LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON JULY 11, 2011 JULY 18, 2011 JULY 25, 2011 C M Y K

2 TABLE OF CONTENTS SECTION - I. DEFINITIONS AND ABBREVIATIONS i 1. CONVENTIONAL/ GENERAL TERMS. i 2. COMPANY/ISSUE RELATED TERMS i 3. ISSUER AND INDUSTRY RELATED TERMS iii 4. ABBREVIATIONS iv 5. PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA v SECTION II - RISK FACTORS vii SECTION III -INTRODUCTION 1 1. SUMMARY 1 2. GENERAL INFORMATION 6 3. CAPITAL STRUCTURE 9 4. OBJECTS OF THE ISSUE STATEMENT OF TAX BENEFITS 17 SECTION IV: ABOUT THE COMPANY HISTORY AND CORPORATE STRUCTURE OF THE COMPANY MANAGEMENT 26 SECTION V. FINANCIAL INFORMATION FINANCIAL STATEMENTS 35 SECTION VI - LEGAL AND OTHER INFORMATION GOVERNMENT APPROVALS AND LICENSING ARRANGEMENTS MATERIAL DEVELOPMENT OTHER REGULATORY AND STATUTORY DISCLOSURES 104 SECTION VII: OFFERING INFORMATION 112 SECTION VIII: STATUTORY AND OTHER INFORMATION OPTION TO SUBSCRIBE LIST OF MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 141 SECTION IX. DECLARATION 143

3 SECTION - I. DEFINITIONS AND ABBREVIATIONS 1. CONVENTIONAL/ GENERAL TERMS. The following list of defined terms is intended for the convenience of the reader only and is not exhaustive. Term Description Unless the context otherwise indicates or implies, refers to Muthoot Company Capital Services Limited, a public limited Company incorporated under the Companies Act, 1956 Companies Act The Companies Act, 1956, as amended Articles/ Articles of Association The Articles of Association of Muthoot Capital Services Limited Depositories Act The Depositories Act, 1996 and amendments thereto from time to time Depository A depository registered with SEBI under the SEBI (Depository and Participant) Regulations, 1996, as amended from time to time. Equity Shareholders Means a holder of Equity Shares of Muthoot Capital Services Limited as on the record date i.e. May 25, 2011 Equity Shares Equity Shares of the Company having a face value of `10/- Listing Agreement The equity listing agreements signed between the Company and the Stock Exchange Memorandum / Memorandum of Memorandum of Association of Muthoot Capital Services Limited Association Rupees, Rs. and ` The lawful currency of India SEBI Act The Securities and Exchange Board of India Act, 1992, as amended SEBI Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended Takeover Code The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended 2. ISSUE RELATED TERMS Term Abridged Letter of Offer Allotment Allotment Date Application Supported by Blocked Amount/ ASBA ASBA Investor Auditors/Statutory Auditors Banker to the Issue Board/Board of Directors or Director(s) CAF Chairman Controlling Branches Description The Abridged Letter of Offer to be sent to the shareholders of the Company with respect to this Issue in accordance with SEBI (ICDR) Regulations, Unless the context otherwise requires, the allotment of Equity Shares pursuant to the Issue The date on which Allotment is made. The application (whether physical or electronic) used by an Investor to make a bid authorizing the SCSB to block the bid amount in his/her specified bank account maintained by the SCSB, as further detailed in Page 112 An applicant who; a) holds the shares of the Company in dematerialized form as on the record date and has applied for entitlements and / or additional shares in dematerialized form; b) has not renounced his/her entitlements in full or in part; c) is not a renouncee; d) is applying through a bank account maintained with SCSBs. The Statutory Auditors, M/s. K. Venkatachalam Aiyer & Co., Chartered Accountants, Kochi Axis Bank Limited Board of Directors of Muthoot Capital Services Limited unless otherwise specified. Composite Application Form Mr. Thomas John Muthoot Such branches of the SCSBs which coordinate applications under the Issue by the ASBA Investors with the Registrar to the Issue and the i

4 Stock Exchanges and a list of which is available at Corporate Consultants M/s. SVJS & Associates, Company Secretaries, Kochi Designated Stock Exchange For purpose of this Rights Issue, the Designated Stock Exchange is the Bombay Stock Exchange Limited Depositories NSDL and CDSL Draft Letter of Offer/DLoF Draft Letter of Offer dated February 02, 2011 filed with SEBI Eligible Equity Shareholder(s) A holder(s) of Equity Shares as on the Record Date Issue of 65,00,000 Equity Shares of `10/- each for cash at a price of `80 per share (including a premium of `70 per share) on rights basis Issue to the existing Equity Shareholders of the Company in the ratio of 1 Equity Share for every 1 Equity Share held on the Record Date being May 25, 2011, aggregating to `5,200 Lakhs. Issue Closing Date July 25, 2011 Issue Opening Date July 11, 2011 Issue Price `80 Per Equity Share The holder(s) of Equity Shares of the Company as on the Record Date, Investor(s) i.e. May 25,, 2011 and renouncees, who are eligible to apply for and receive their Rights Entitlement, subject to applicable laws. Lead Manager / Lead Merchant Banker Karvy Investor Services Limited Legal Advisor M/s. Menon & Pai, Advocates, Kochi Letter of Offer/LoF This Letter of Offer filed with the Designated Stock Exchange after incorporating SEBI comments on the Draft Letter of Offer Managing Director Mr. Thomas George Muthoot Promoters Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot. Promoter Group Muthoot Capital Services Limited has following Group Companies: 1) Muthoot Fincorp Limited 2) Muthoot Hotels and Infrastructure Ventures Private Limited 3) Muthoot Hotels Private Limited 4) Muthoot Agri Projects and Hospitalities Private Limited 5) LM Realtors Private Limited 6) The Right Ambient Resorts Private Limited 7) Muthoot Infrastructure Limited 8) Muthoot Pappachan Medicare Private Limited 9) Palakkad Infrastructure Private Limited 10) Muthoot Buildtech (India) Private Limited 11) Muthoot Properties (India) Private Limited 12) Muthoot Agri Development and Hospitalities Private Limited 13) Muthoot Housing Financing Company Limited 14) Muthoot Kuries Private Limited 15) Muthoot Land And Estates Private Limited 16) MPG Sports Academy Private Limited 17) Muthoot APT Ceramics Limited 18) Muthoot Equities Limited 19) Muthoot Exim Private Limited 20) Muthoot Motors Private Limited 21) El Toro Agri Projects and Hospitalities Private Limited 22) Calypso Agri Development and Hospitalities Private Limited 23) Fox Bush Agri Development and Hospitalities Private Limited 24) Linden Agri Ventures and Hospitalities Private Limited 25) Pine Pink Agri Ventures and Hospitalities Private Limited 26) Fireworks Agri Development and Hospitalities Private Limited 27) Musk Agri Ventures and Hospitalities Private Limited 28) Cinnamon Agri Development and Hospitalities Private Limited 29) Buttercup Agri Projects and Hospitalities Private Limited ii

5 30) Double Tails Agri Development and Hospitalities Private Limited 31) Alaska Agri Projects and Hospitalities Private Limited 32) Goblin Agri Projects and Hospitalities Private limited 33) Jungle Cat Agri Development and Hospitalities Private Limited 34) Flame Agri Projects and Hospitalities Private Limited 35) Mariposa Agri Ventures and Hospitalities Private Limited 36) Mandarin Agri Ventures and Hospitalities Private Limited 37) Muthoot Holdings Private Limited 38) Muthoot Agri Ventures and Hospitalities Private Limited 39) Bamboo Agri Projects and Hospitalities Private Limited 40) Emmel Realtors and Developers Private Limited 41) Muthoot Automotive (India) Private Limited 42) Muthoot Risk Insurance and Broking Services Private Limited Record Date May 25, 2011 Registrars to the Issue or Registrars Integrated Enterprises (India) Limited The persons who have acquired Rights Entitlements from Equity Renouncee(s) Shareholders The number of Equity Shares that a shareholder is entitled to, on the Rights Entitlement basis of the ratio decided, in proportion to his/her shareholding in the Company as on the Record Date The Equity Shares of face value ` 10 each of the Company offered and Rights Equity Shares to be issued and allotted pursuant to the Issue The issue of Equity Shares on rights basis based on terms of this Letter Rights Issue of Offer Stock Exchange Shall refer to the Bombay Stock Exchange Limited 3. ISSUER AND INDUSTRY RELATED TERMS Term ANBC AUM Capital Adequacy ratio DRR GDP KYC Mutual Fund / MF NBFC NPA SHG YTM Description Adjusted Net Bank Credit Asset Under Management A measure of a bank's capital as a percentage of a bank's risk weighted credit exposures. Also known as "Capital to Risk Weighted Assets Ratio (CRAR)." Debenture Redemption Reserve Gross Domestic Product Know your customer A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996 Non Banking Financial Company Non Performing Asset Self Help Group Yield to maturity iii

6 4. ABBREVIATIONS Term Description ACIT Assistant Commissioner of Income Tax AGM Annual General Meeting Addl, CIT Additional Commissioner of Income Tax AO Assessing Officer AY Assessment Year BSE Bombay Stock Exchange Limited CAGR Compounded Annual Growth Rate CDSL Central Depository Services (India) Limited DP Depository Participant EBIDTA Earnings before interest, depreciation, amortization and tax EPS Earnings per share FDI Foreign Direct Investment FEMA Foreign Exchange Management Act, 1999 and amendments thereto from time to time FI Financial Institution FII Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board FY The twelve months ended March 31 of a particular year, unless otherwise stated HUF Hindu Undivided Family ICAI Institute of Chartered Accountants of India Indian GAAP The generally accepted accounting principles in India IRDA Insurance Regulatory and Development Authority IRR Internal Rate of Return I.T. Act Income Tax Act, 1961 and amendments thereto from time to time ITAT Income Tax Appellate Tribunal N.A. Not Applicable NAV Net Asset Value NR Non Resident as defined under FEMA, 1999 NRE Non Resident External as defined under FEMA, 1999 NRI Non Resident Indian as defined under FEMA, 1999 NRO Non Resident Ordinary as defined under FEMA, 1999 NSDL National Securities Depository Limited. OCB(s) Overseas Corporate Body (ies) PAN Permanent Account Number PAT Profit after tax P/E Ratio Price/ Earnings Ratio Pvt. Private QIBs Qualified Institutional Buyers (as defined in SEBI Regulations) RBI Reserve Bank of India ROC Registrar of Companies, Company Law Bhawan, BMC Road Thrikkakara, Kochi RoNW Return on Net Worth RTGS Real Time Gross Settlement SCRR Securities Contracts (Regulations) Rules, 1957 as amended from time to time. SCSBs Self Certified Syndicate Banks SEBI The Securities and Exchange Board of India constituted under the SEBI Act, 1992 USD United States Dollar w.e.f. With effect from w.r.t. With respect to WOS Wholly Owned Subsidiary iv

7 PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA Financial Data Unless stated otherwise, in this LoF and unless the context otherwise requires all the references to one gender also refers to another gender. The financial data in this LoF contains financial statements of the Company on a standalone basis. Unless indicated otherwise, the financial data in this LoF is derived from the financial statements as of and for the years ended March 31, 2006, 2007, 2008, 2009, 2010 and 2011 prepared in accordance with Indian GAAP and the Act, restated in accordance with applicable SEBI (ICDR) Regulations, 2009, as stated in the report of the Statutory Auditors, M/s K. Venkatachalam Aiyer & Co., Chartered Accountants, included in this LoF. Unless indicated otherwise, the operational data in this LoF is presented on a consolidated basis. In accordance ts, we have also presented in this LoF standalone financial statements of the Company as of and for the years ended March 31, 2006, 2007, 2008, 2009, 2010 and 2011, prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with applicable SEBI (ICDR) Regulations, The Company The references to the fiscal year are for the twelve-month period ended March 31, 2006, 2007, 2008, 2009, 2010 and Currency of Presentation LoF are to Indian Rupees, the official currency of the Republic of India. Unless stated otherwise, throughout this LoF, all figures have been expressed in Lakhs. In this LoF, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding-off, and unless otherwise specified, all financial numbers in parenthesis represent negative figures. The Company has included statements in this LoF similar expressions or variations - All forward looking statements are subject to risks, uncertainties and assumptions about the Company that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Important factors that could cause actual results to differ materially from the Company but are not limited to: General economic and business conditions in the markets in which the Company operates and in the local, regional, national and international economies; Changes in laws and regulations relating to the sectors/areas in which the Company operates; Increased competition in the sectors/areas in which the Company operates; The Company successfully launch and implement various projects and business plans for which funds are being raised through this Issue; The Company ity to meet its capital expenditure requirements; Fluctuations in operating costs; The Company personnel; Changes in political and social conditions in India or in countries that the Company may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; The performance of the financial markets in India and globally; and Any adverse outcome in the legal proceedings in which the Company is involved. For a further discussion of factors that could cause the Company vii, of this LoF. 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 v

8 gains or losses could materially differ from those that have been estimated. Neither the Company nor the Lead Manager nor any of the respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirement, the Company and the Lead Manager will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchange. vi

9 SECTION II - RISK FACTORS An investment in Equity Shares involves a high degree of risk. The investors should carefully consider all the information in this LoF, including the risk and uncertainties described below, before making an investment in the Company Equity Shares. If any of the following risks actually occur, the Company operations and financial condition could suffer, the trading price of its Equity Shares could decline, and the investors may lose all or part of their investment. The financial and other implications of material impact of risks concerned, wherever quantifiable, have been disclosed in the risk factors mentioned below. However, there are a few risk factors where the impact is not quantifiable and hence the same has not been disclosed in such risk factors. Unless otherwise stated in the relevant risk factors set forth below, the Company is not in a position to specify or quantify the financial or other implication of any risks mentioned herein. INTERNAL RISK FACTORS 1. The Company is involved in various legal proceedings both as plaintiffs and defendants in which they may not prevail and which could have an adverse impact on them. MCSL and its Directors are party to various legal proceedings incidental to their business and operations. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. These proceedings if decided against the Company, it could have a material adverse impact on the management of the Company. Legal and Other Information page 82 of this LoF. 2. If the Company is unable to obtain required approvals and licenses in a timely manner, the business and operations may be adversely affected. The Company may, from time to time, require certain approvals, licenses, registrations and permissions for operating the business for which it may be required to make applications in the future. If the Company fails to obtain any of these approvals or licenses, or renewals thereof, in a timely manner, or at all, the business could be adversely affected. 3. Non Compliance with RBI regulations could adversely affect the Company The Company is a Non Banking Financial Company governed by RBI regulations. The Company is required to meet disclosure norms, exposure limits, maintain ratios like capital adequacy ratio, liquidity ratio, etc on a continuous basis. The RBI has the authority to change these norms/criteria as and when required. Inability to meet the prescribed norms/criteria, can adversely affect the operations and profitability of the Company. The capital adequacy ratio requirement for the company is a minimum of 12%. The capital adequacy ratio of the Company as on March 31, 2011 is 16.50%. 4. The Company has indebtedness, which, in the event of inadequate accruals may pose constraints in servicing its debt. As on March 31, 2010 the total borrowings, both secured and unsecured, stood at `8, Lakhs against `2, Lakhs. This includes, secured loans of `5, Lakhs (72.00% of the total loans) and unsecured loans of `2, Lakhs (28.00% of the total loans).as on March 31, 2011 the total borrowings, both secured and unsecured, stood at ` networth of `2, Lakhs. This includes, secured loans of `8, Lakhs (59.62% of the total loans) and unsecured loans of `5, Lakhs (40.38% of the total loans). The Company service obligations and to repay its outstanding borrowings will depend primarily upon the cash flow generated by the business. There can be no assurance that the Company will generate sufficient cash enabling it to service its existing or proposed borrowings, comply with covenants or fund other liquidity needs. Adverse developments or a reduced perception of the Company vii

10 could increase the debt service costs and the overall cost of funds. If the Company fails to meet its debt service obligations or financial covenants required under the financing documents, its lenders could, if so stated in the financial documents, declare the Company in default under the terms of its borrowings, accelerate the maturity of its obligations, enforce the security interest, and take possession of its assets. There can be no assurance that, in the event of any such acceleration, the Company will have sufficient resources to repay these borrowings. For further detail page 35 this LoF. 5. Inability to foreclose on collateral in the event of a default may result in failure to recover the expected value of the collateral. Additionally, the value of the collateral on loans may decrease, or the Company may experience delays in enforcing collateral when borrowers default on their obligations. The value of the collateral on the loans disbursed by the Company may decline due to adverse market conditions. In case of security interest being a movable asset, it may be difficult to foreclose on collateral in the event of a default. Additionally, delays in bankruptcy and foreclosure proceedings, defects in title, documentation of collateral, the necessity of obtaining regulatory approvals for the enforcement of rights in such collateral, fraudulent transfers and destruction of underlying assets may affect the value of the collateral and the ability to foreclose. Failure to recover the expected value of collateral could expose the Company to losses and, in turn, adversely affect the business and financial performance. 6. The Company does not currently own the trade mark to the Muthoot Capital Services Limited logo. Inability to use the logo, arising out of any dispute may adversely affect the goodwill, reputation and results of operations of the Company. The Directors of MCSL are in the process of getting the logo registered with the Registrar of trademarks in India under Class 36. In the interim period any disputes related to the logo may adversely affect the business, reputation, goodwill, financial condition and results of operations of the Company. Group Companies d, this will in turn affect the business, results of operations and financial condition of the Company. 7. Conflicts of interest may arise out of common business objects shared by the Company and certain Group Companies The Promoters of the Company have interests in other companies and entities that compete with MCSL, including Group Companies that are involved in businesses that are similar to those of MCSL within the NBFC sector. There is no undertaking made by the Promoters or Group Companies to not compete. In addition, there is no undertaking by the Promoters, Group Companies or such similar entities to conduct or direct any opportunities in the NBFC services sector only to MCSL. One of the Group Companies, Muthoot Fincorp Limited is also engaged in the business of advancing gold loans. As a result, conflicts of interest may arise in allocating or addressing business opportunities and strategies amongst the Company and Group Companies in cir Promoters or Group Companies will not compete with the existing business or any future business, nor that their interests will not conflict with those of the Company. 8. Deployment of issue proceeds is entirely at the discretion of the Issuer and is not subject to any monitoring by any independent agency. 13. The use of the net proceeds is at the Company any independent agency. Accordingly, investors in this Issue have to rely upon the judgment of the management, who will have considerable discretion, with respect to the use of proceeds. 9. Trading of MCSL securities was suspended on BSE for nonpayment of Listing fee The trading of securities listed on BSE of MCSL was suspended due to non-payment of listing fee during the period February 05, 2001 to September 17, Any non compliance of Listing Agreement in the future could lead to suspension/ delisting of MCSL share which could in turn impact the liquidity of the viii

11 shares. 10. If the Company is unable to manage the level of NPAs in the loan portfolio, profitability will suffer As at March 31, 2011, net NPAs of the Company were `89.44 Lakhs or 0.52% of Net Advances, compared to `60.70 Lakhs amounting to 0.61% of Net Advances as at March 31, 2010 and `52.56 Lakhs amounting to 0.78% of Net Advances as at March 31, Provisions for loans and advances amounted to `19.57 Lakhs as at March 31, 2011 compared to `17.59 Lakhs as at March 31, 2010 and `15.18 Lakhs as at March 31, If the quality of the loan portfolio of the Company deteriorates or if they are unable to implement effective monitoring and collection methods, the financial condition and results of operations may be affected. The Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 prescribe the provisioning required in respect of the outstanding loan portfolio of the Company. Should the overall credit quality of the loan portfolio deteriorate, the current level of provisions may not be adequate to cover further increases in the amount of NPAs of the Company. If MCSL is required to increase provisioning in the future due to increased loan losses or the introduction of more stringent requirements in respect of loan loss provisioning, this may reduce the profit from operations. Further, should the level of NPAs increase, there is no assurance that the Company will be able to recover the outstanding amounts due under any defaulted loans. 11. MSCL has decided to terminate its corporate agent's contract with HDFC Standard Life Insurance Company Limited and it has requested HDFC to apply for cancellation of its renewal application for IRDA License. The income and profitability of the Company is expected to be adversely affected by termination of this business vertical The Company had applied for the renewal of its IRDA license on May 15, 2010 for a further period of three years. MCSL has decided to terminate its Corporate Agents Contract with HDFC Standard Life Insurance Company Limited and it has requested HDFC to apply for cancellation of the renewal application for IRDA license. Sr. No. Nature of Registration / License Registration /License No. Issuing Authority Date of Expiry 1. IRDA License IRDA July 29, 2010 Insurance income for the year ended March 31, 2011 was ` 9,094,838 and the year ended March 31, 2010 was ` 4,881, The Company, by way of applications to Cochin Stock Exchange Limited and Coimbatore Stock Exchange Limited applied for delisting of its Equity Shares The above referred two stock exchanges considered the Company approval for delisting of Equity Shares of the Company. MCSL was delisted from Cochin Stock Exchange Limited w.e.f. from August 27, 2005 and same was informed to the Company vide letter Ref No. SE/LIST/262/2005 dated September 14, 2005 Coimbatore Stock Exchange Limited has also confirmed that MCSL shares are delisted as per the records of the Exchange. Note: The documents related to delisting on Cochin Stock Exchange Limited and Coimbatore Stock Exchange Limited have been misplaced by the Company. MCSL was unable to arrange for details related to the delisting date from Coimbatore Stock Exchange Limited 13. Merchant Banking License of the Company has expired and its details are not found on the records of the Company. ix

12 The Company received Category I merchant banking license with effect from March 16, 1995 by SEBI vide its letter dated March 13, 1995 bearing reference number PMD/SEBI-MB/4147/95. The Company has asked for details of the expiry of its Merchant Banking License from SEBI vide letter no MCSL/RI/SEBI/ dated November 18, 2010, which is still pending. 14. The Company may be required to be registered under State legislations that regulate the business of money lending, and the ceiling on interest rate imposed and other provisions contained therein could be made applicable to the Company including imposition of monetary penalties The Kerala Money- Kerala Money-lenders Act of Kerala to regulate and control the business of money-lenders within the State. The definition of a moneylender under the Kerala Money-lenders Act includes any person/entity that makes advances and accepts deposits in its ordinary course of business. Each money-lender within the State of Kerala is required to obtain a license under the provisions of this legislation. NBFCs in Kerala had filed a writ petition before the Kerala High Court contending that the Kerala Money-lenders Act would be inapplicable to them since they are registered with the RBI and are controlled directly by it. However, the Kerala High Court held that the object of the Kerala Money-lenders Act is to protect the interests of the borrowers and hence NBFCs would be covered by its provisions. Subsequently, the NBFCs, by special leave petition numbered SLP(C) No of 2009 dated November 18, 2009 appealed against this decision of the Kerala High Court to the Supreme Court of India and the issue is now pending before that court. If the case is decided against the Company, it could lead to other High Courts applying the decision of the Supreme Court to direct the C Moneylenders Act to register them under such legislations. The registration fee for each branch under the Kerala Money-lenders Act is in the tune of `5,000 and each branch would also be required to maintain a deposit with a specified authority which would act as a security for complying with the provisions of the license. The penalty prescribed for carrying on business without a license is imprisonment for up to three years and a fine of `50,000. In the event of the Supreme Court decision on the issue being against the Company, it could adversely affect income, profitability and results of operations of the Company. 15. A major part of the Company the economy of South India or any change in consumer preferences therein would adversely affect operations. As of March 31, 2011, out of 29 branches of the Company, 28 are located in southern states like Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. Any disruption, disturbance or breakdown in the economy of these states could adversely affect the result of business and operations of the Company. As on March 31, 2011, 77.55% of gold loan advances are made through branches located in the Southern States like Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. Concentration in the southern states exposes the Company to any adverse geological, ecological, economic and/or political circumstances that may arise in that region as compared to other NBFCs/commercial banks that have diversified national presence. If there is a sustained downturn in the economy of south India or a sustained change in consumer preferences in that region, the financial position of the Company may be adversely affected. 16. Gold loan forms March 31, operations. Gold loans formed 24.02% of the total loan portfolio and income from gold loans amounted to 37.87% of the total income for year ended March 31, Dependence on this sector for a large portion of income exposes the Company to a number of risks that are closely associated with this sector. The business involves the advancement of loans against the security of gold jewellery. Any fluctuation in the price of gold bears a direct relationship to the value of the security against which funds are advanced. Also, since the pledged jewellery is the security for loans advanced by the Company, any fall in its prices after it has been pledged would render it less valuable than it was at the time of the pledge. Hence, in case of a default in repayment, the Company may be rendered unable to fully recover the advanced amount. Fall in the value of the pledged jewellery may also act as a disincentive for borrowers to recover the gold pledged. Any such x

13 decrease in the price of gold would adversely affect the income, profitability and results of operations of the Company. 17. The Company is exposed to the threat of theft/burglary on branch/head office premises which may adversely affect reputation and profitability Storage of pledged gold jewellery as part of the business entails the risk of burglary and consequential loss to reputation and profitability of the Company. The short tenure of the loans advanced coupled with emphasis on processing the repayment of loans within very short timelines requires storage of the pledged gold on the office premises at all points in time. Though, in the past no such incidences have occurred in MCSL, the Company is exposed to this risk. The Company is insured against the risk of burglary arising from nature of business, such insurance may not be sufficient. Further, the actual recovery of the insured amount from the insurer entails procedural hurdles and delays and could adversely affect the reputation and profitability of the Company. 18. The Company is subject to the risk of gold loan and cash related misappropriations by their customers/employees. The Company is exposed to many types of operational risks, including the risk of fraud or other misconduct by customers/employees, as well as unauthorized transactions by employees etc. Though employees are recruited carefully by the Company, there has been one case of cash related misappropriations committed by an employee in the past, amounting to `45,000. The Company has filed a case against the employee under section 138 of Negotiable Instruments Act and a non bailable warrant is pending against him. MCSL expects to recover the aforesaid amount. The Company is required to report cases of internal fraud to the RBI and the RBI may take appropriate action against the same. MCSL cannot guarantee that such events will not recur in the future. Any such event could adversely affect the reputation, operations, or otherwise have a material adverse effect on the business, financial condition or results of operation of the Company. 19. The proceeds of the Issue will be utilized by the Company to repay borrowings availed from one of the The Company plans to utilize the issue proceeds for repayment of ` lakhs unsecured loans availed from one of its Promoters, Mr. Thomas George Muthoot. This constitutes more than 80% of the issue proceeds and will not result in creation of tangible assets. The Company intends to deploy the balance issue proceeds aggregating to ` lakhs towards general corporate purposes, including brand building, meeting exigencies and contingencies in ordinary course of business which may not be foreseen or any other purpose as approved by our Board of Directors from time to time. The issue proceeds used for general corporate purposes may constitute more than 20% of the issue size. Page 13 of the LOF. 20. The Company has negative cash flows from operating and investing activities. Any negative cash flows in the future could have an adverse effect on the results of operations. Cash Flow from Operating Activities Cash flows from operating activities were negative in the year 2010 and 2011 Particulars (in `) xi CASH FLOW FOR OPERATING ACTIVITIES Year ended Year ended March 31, 2011 March 31, 2010 Net Profit before tax 145,061, ,741,991 Operating profit before working capital changes 152,892, ,679,082 Net increase/ (decrease) in operating assets (742,309,659) (308,596,230)

14 Net increase/ (decrease) in operating liabilities 6,927,584 (7,787,222) Cash Generated from operations (582,489,210) (206,704,370) Direct Taxes paid (49,840,209) (37,009,036) Net Cash from operating activities (632,329,419) (243,713,406) The negative cash flow from operating activity is mainly due to increased working capital requirement of the Company. MCSL has grown its loan portfolio from ` lakhs as on March 31, 2010 to `17, lakhs as on March 31, 2011 due to which the Company has increased receivables and trade advances resulting in a negative operating cash flow. Particulars (in `) xii CASH FLOW FOR INVESTING ACTIVITIES Year ended Year ended March 31, 2011 March 31, 2010 Purchase of Fixed Assets (3,545,160) (1,741,741) Investments in Shares and Mutual Funds 71,755 (29,409) Dividend Received 85,232 61,031 Net cash from investing activities (B) (3,388,173) (1,710,119) Cash flows from investing activities were negative in the year ended March 31, 2010 and March 31, 2011 mainly due to purchase of fixed assets 21. RBI has changed the priority sector norms as where applicable to bank finance. This may adversely affect income and profitability of the Company. RBI has changed the priority sector lending norms vide circular no. RBI/ /397 RPCD.CO.Plan.BC. 51 / / dated February 02, This may adversely affect income and profitability of the Company. 22. The client base of the Company is comprised of individual borrowers who are generally more likely to be affected by declining economic conditions than larger corporate entities. Individual borrowers generally are less financially resilient than larger corporate borrowers, and, as a result, they can be more adversely affected by declining economic conditions. Moreover, unlike several developed economies, a nationwide credit bureau has only recently become operational in India, so there is less financial information available about individuals, and, in turn, it is difficult to carry out precise credit risk analyses on them. Although the Company certain that they will continue to be sufficient or that additional risk management policies for individual borrowers will not be required. Failure to maintain sufficient credit assessment policies could adversely affect the credit portfolio which could have a material and adverse effect on the results of operations and financial condition of the Company. The loan portfolio of MCSL stands as of below: (` in Lakhs) Particulars March 31, 2011 September 30, 2010 March 31, 2010 Gold Loan 4, , , % of Total Loan Portfolio 24.02% 37.93% 57.33% Auto Loan 12, , , % of Total Loan Portfolio 75.41% 60.44% 40.44% Other Loan % of Total Loan Portfolio 0.57% 1.63% 2.23% Total Loan Portfolio 17, , , Appraisal of gold is subjective and inaccurate appraisal of the same by the personnel employed by the Company may adversely affect income and profitability The accurate appraisal of the gold that is pledged as security for loans advanced is vital to the business of the Company. However, appraisal of gold requires skilled manpower and hence the dependence upon the

15 workforce for the same. Evaluating the worth/genuineness of gold is subjective and requires high degrees of expertise and experience. Inaccurate appraisal of gold by the workforce entails the risk of it being overvalued and being accepted as security for a loan that is higher than its actual value, adversely affecting the profitability and reputation of the Company. Non availability of skilled workforce to keep up with the plans of expansion of the Company could also adversely affect its income and profitability. Any fraud/miscalculation in relation to the existing gold inventory that is pledged with the Company, if discovered any time in the future, may adversely affect the results of operations. 24. The Company has appointed individuals as Debenture trustees for the Debentures issued by it As on March 31, 2011, an amount of `1, Lakhs is outstanding as Principle and ` Lakhs as interest accrued but not due on debentures, on twelve separate series of privately placed secured redeemable bonds issued by the Company. These series of 1 of Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993 as amended. However, as these bonds are privately placed and unlisted, they are outside the domain of SEBI. 25. The Company faces difficulties and incurs additional expenses in operating from rural and semi urban areas, where infrastructural facilities are limited. A significant portion of the operations of the Company are carried out from rural and semi urban areas. However, several difficulties are faced in carrying out such operations in terms of accessing infrastructural facilities like power and transport. In addition, since such branches tend to be located in relatively secluded areas, additional costs are incurred on security related requirements. It cannot be assured that such costs will not increase in the future as the network of the Company is strengthened in the rural and semi urban areas. 26. There are operational risks associated with the business of the Company which may have an adverse impact on performance The Company is exposed to many types of operational risks associated with the business. There are also chances of collusion between an employee and a borrower to defraud the Company. Maintaining cash in the liquid form is essential to the business. However, this also entails the risk of pilferage though the cash cabin at every branch is constantly manned. The Company is also responsible for inventory control of the gold that is pledged for obtaining loans. Given the large volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. There is also the risk that the controls and procedures employed by the Company may prove inadequate or may be circumvented thereby causing delays in detection or errors in information. Although the Company currently maintains and is in the constant process of upgrading the systems of controls to keep operational risk to a minimum, there could be no assurance that it will not suffer loss from operational risk in the future that may be material in amount. 27. The Company may not be able to successfully manage and maintain growth The Company has experienced significant growth in terms of the income from services, the loans portfolio and the number of offices and employees since inception in The income from operations increased at CAGR 55.07% from the year ended March 31, 2006 to the year ended March 31, In this same period, income gold loans increased at a CAGR of 35.69%. Future growth depends on a number of factors, including increased penetration into the market for gold loans, the competition from competitors and future regulatory changes. The Company cannot assure that it will be able to continue to sustain growth at historical rates in the future. The Company is bound by certain financial covenants under the assignment agreements which require it to maintain leverage at a specified level. Inability to do so may adversely affect the ability to depend on this source of funding. The Company expanded significantly in the recent past and it cannot be assured that there will not be significant additional NPAs in the loan portfolio in the future on account of new loans made or that the asset quality of the current loan portfolio can be maintained. As the Company continues to grow, they are required to continue to improve their managerial, technical and operational knowledge, the allocation of resources and management information systems. In addition, it may be required to manage relationships with a greater number of customers, third party agents, lenders and other parties. It cannot be assured that the Company will not experience issues such as capital constraints, operational difficulties, and xiii

16 difficulties in expanding existing business and operations and training an increasing number of personnel to manage and operate the expanded business. Any of these issues may result in a failure to implement the expansion plans in a timely manner and there can be no assurance that any expansion plans, if implemented, will be successful. The Company may, in the future, enter into alliances, investments, partnerships or acquisitions in the future and unsuccessful implementation of the same may harm the business. 28. Members of the Promoter Group have significant influence over the operations of the Company, which will enable them to influence the outcome of matters submitted to shareholders for approval. As of March 31, 2011, the Promoters and members of the Promoter Group hold approximately 75% of the share capital. 9 of the LoF. In addition, the Promoters have provided personal guarantees in connection with certain financing arrangements. The Promoter Group may be in a position to influence decisions relating to the business and the outcome of matters submitted to shareholders for approval. This control could delay, defer or prevent a change in control of the Company, impede a merger, consolidation, takeover or other business combination involving the Company, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company even if it is in the Company continues to exercise significant control over the Company, it may influence the material policies of the Company in a manner that could conflict with the interests of the other shareholders. The Promoter Group may have interests that are adverse to the interests of the other shareholders and may take positions with which the management and the other shareholders of the Company do not agree. 29. Insurance policies provide limited coverage and the Company may not be insured against some business risks. The Company maintains insurance on property and stock in trade in amounts believed to be consistent with industry practices and the insurance policies cover physical loss or damage to the property and stock in trade arising from a number of specified risks including burglary, fire, fraud by employees and other perils. Further, the Company maintains insurance for employee fidelity, cash and gold in the office premises and in transit which provides insurance cover against loss or damage by employee theft, burglary, house breaking and hold up. The Company is having insurance policies with Reliance General Insurance Company Limited, viz., (i) Reliance Bankers Indemnity Policy amounting to ` 24,75,00,000/-, (ii) Reliance Standard Fire and Special Peril Policy amounting to ` 31,00,000/- and (iii) Reliance General Insurance amounting to ` 40,00,00,000/-. However, the amount of insurance coverage may be less than the replacement cost of all covered property and may not be sufficient to cover all financial losses that the Company may suffer should a risk materialize. Notwithstanding this insurance coverage, the Company 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 insurance policies, could materially and adversely affect the financial condition and results of operations of the Company. 30. Certain group companies have incurred losses in the last three years (for which audited financials are available) The following group companies of MCSL have incurred losses in the last three years (for which audited financials are available). The Profit/ Loss after tax for FY 2010, FY 2009 and FY 2008 are as under: (` Sr. Company Name FY 2010 FY 2009 FY 2008 No. 1. Muthoot Hotels Private Limited (14,209) (18,845) 11, Muthoot Infrastructure Limited (90) (36) (4) 3. Muthoot APT Ceramics Limited (13,421) (12,393) (13,744) xiv

17 4. Palakkad Infrastructure Private (2,179) (2,705) Nil Limited 5. Right Ambient Resorts private Limited* (716) (6,887) NA 6. Muthoot Pappachan Medicare (4,089) NA NA Private Limited** 7. Muthoot Exim Private Limited 1, (162) *The Company was acquired in FY08 ** The Company was acquired in FY09 Note: Audit for group companies is in-process for FY The Object of the Issue is to repay the unsecured loan from one of the Promoters. This unsecured loan is repayable on demand of the promoter as and when the Company has a cash surplus. This could impact The Company intends to utilize the net proceeds of this issue towards repayment / prepayment of a portion no. 13 of the LoF. As on May 31, 2011 an amount of ` 5, lakhs is outstanding as unsecured loans from Mr. Thomas George Muthoot. The unsecured loan is repayable on demand of the promoter as and when the Company has a cash surplus. This may affect the liquidity position of the Company. MCSL intends to repay the unsecured loan from the Promoter as one of the objects of the issue. In order to reduce the leverage and allow flexibility in financial management of the business and operations the Company intends to utilize up to `4, lakhs towards repayment of outstanding loans. Details of Unsecured Loans Name of Lender Thomas George Muthoot Relationship with the Company Promoter Interest Rate 12% p.a. Tenure Repayable on Demand Unsecured Loan position, as on May 31, 2011 (`) 588,064, The Company is subject to certain restrictive covenants in the loan agreements, which may restrict the operations and expansion ability and may adversely affect the business. The Company has entered into certain loan agreements in respect of the borrowings, which contain certain restrictive covenants or require MCSL to obtain approval from the lender in certain circumstances for disposing of (including creating any charge on) the specified assets, undertaking any merger or reorganization, taking up new line of business, declaring dividends in certain circumstances, amending the memorandum and articles of association, making substantial change to the general nature or scope of business, incur or assume any debt, reduce share capital and in case of any substantial change in management. Although no difficulties are generally encountered in obtaining consent from lenders for desired actions in the past, no assurance can be given that such consent will be granted in the future. 33. The Company The cost and availability of capital is, amongst other factors, also dependent on short-term and long-term credit ratings. MCSL is currently rated by CRISIL as A+ stable financial strength, operating performance, strategic position, and ability to meet obligations. While tings would increase borrowing costs and constrain access to capital and lending markets and, as a result, would negatively affect business. In addition, downgrades of credit ratings could increase the possibility of additional terms and conditions being added to any new or replacement financing arrangements. 34. The Promoters of the Company have given personal guarantees in relation to certain debt facilities, which if revoked may require alternative guarantees, repayment of amounts due or termination of the xv

18 facilities. The Promoters of the Company have given personal guarantees in relation to certain debt facilities pertaining to the Company. In the event that any of the guarantees are revoked, the lenders for such facilities may require alternate guarantees, repayment of amounts outstanding under such facilities, or even terminate such facilities. The Company 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 the financial condition and cash flows of the Company. 35. MCSL is required to comply with the requirements contained in certain labour law legislations which may impose additional costs. The employees of the Company are required to be registered under the provisions of certain labour law legislations such as the Employees State Insurance Act, 1948, the Payment of Gratuity Act, 1972 the Kerala Shops and Commercial Establishments Act, 1960, Kerala Labour Welfare Fund Act, 1975, and the Employees Provident Fund and Miscellaneous Provisions Act, The Company is also required to maintain certain records under the provisions of these legislations, which adds to costs. 36. The Company has entered into, and will continue to enter into, related party transactions. The Company has entered into transactions with several related parties, including Promoters and Group Companies. These transactions and any future transactions with related parties have involved or could potentially involve conflicts of interest. For more information regarding related party transactions, see 35 of this LoF. 37. There are financial risks inherent in the business of the Company which may have an adverse effect on growth and performance The Company is exposed to certain financial risks that are inherent to its business. It is required to maintain, at all times, adequate amounts of cash to meet the demand for loans. The sustainability and growth of AUM (sum of loans and advances and gold loans assigned) is dependent upon the rate at which the Company is able to maintain and enhance market penetration as well as on customer demand for gold loans. Although the Company has evolved several methods of verifying the purity and authenticity of the gold that is pledged with it, there is always a risk of pledges of spurious gold that may not be detected at the time of the pledge itself. It cannot be assured that the Company will not suffer loss from financial risk in the future that may be material in amount. 38. The retention of key management personnel and finance and operating professionals and the ability to continue to recruit such professionals is critical to the success and growth of the Company. The success of the business depends on the efforts and judgment of the personnel of the Company. The reputation and relationships with members of the business community and deep understanding of the key management personnel of the market for gold financing in India are critical to the success of the business. Attracting and retaining talented professionals is a key element of strategy and believed to be a significant source of competitive advantage. As the Company is particularly focused on tapping the rural and semi urban sectors for providing finance, the success and growth of business will depend on the ability to identify, attract, hire, train, retain and motivate skilled regional personnel as the Company continues to grow. Competition for qualified professionals at the corporate and branch offices is intense as these personnel are in limited supply. There can be no assurance that the Company will be able to successfully attract, assimilate or retain sufficiently qualified personnel. Inability to attract and retain talented professionals or the resignation or loss of key management personnel may have an adverse impact on the business, future financial performance and the price of Equity Shares. 39. The Company has misplaced certain filings made with the Registrar of Companies The Company has misplaced certain filings made with the Registrar of Companies relating to increase in share capital and return of allotments of Equity Shares of the Company. The misplaced records do not have xvi

19 any material impact on the operation of the Company. 40. The Company does not own the premises at which the registered office is located. The Company does not currently own the premises at which its registered office is located. The Company has a lease arrangement with Thomas George Muthoot, one of the promoters of the Company (lessor) and pays rent for the occupation of the premises. The lease may be renewed subject to mutual consent of the lessor and the Company. In the event that the lessor requires the Company to vacate the premises, it will have to seek a new premises at short notice and for a price that may be higher than what it is currently paying, which may affect its ability to conduct the business or increase its operating costs. 41. The Company is dependent on third party service providers in relation to the maintenance of its windmills. There are no provisions for indemnification under the maintenance contracts entered into by the Company with third party service providers. The Promoters started diversifying into the field on Non-Conventional Electric Energy Generation in the year 1995, when the first batch of windmills were installed. Now, the Promoters of the Company have over 15 years of experience in running windmill operations and the group owns a total of 24 windmills. MCSL have been operating its windmills on its own and the company does not intend to avail third party services for windmill operation, it is only dependent on third party for the maintenance of its windmills. MCSL commenced its windmill operations in year 1995 located at Muppandhal in Kanyakumari District in the state of Tamil Nadu. The power generated from the windmill is sold to Tamil Nadu Electricity Board. In the event of failure, for any reason, of any of these service providers to perform their obligations as specified, the power generation activity from the windmills and income arising therefrom would be adversely affected. The commitment of the purchasers to purchase electricity under the relevant power purchase agreements is always subject to technical feasibility and availability of distribution and transmission capacity of such company, irrespective of the capacity of the Company to generate power as specified in the agreements. In the event that the purchasing companies fail to purchase the entire amounts of power specified, income therefrom would be adversely affected. 42. The Company has been facing competition, particularly from the banking sector and growth will depend on the ability of the Company to compete effectively. The Company plays an important role in providing credit to the unorganized sector and small consumers at the local level. However, several foreign banks in India and Indian banks have over the last few years entered the business of gold loan financing in a focused manner, increasing the competition in this segment. As the banks have access to lower cost funds, wider network and greater resources, the Company performance would be dependent on the ability to maintain low cost of funds and the ability to provide effective and quick service to customers. The Company is also faced with increased competition from other NBFCs that are involved in gold loan financing and from Regional Rural Banks that are also involved in similar lines of business. If the Company is unable to access funds at an effective cost that is comparable to or lower than competitors, it may not be able to offer competitive interest rates for loans. This may have an adverse impact on the business, future financial performance and the price of Equity Shares of the Company. 43. A rise in the general income level of the customers may adversely affect the demand for Gold loans. The demand for gold loans is inversely related to the general income level of customers. A rise in the general income level would make gold loans unattractive to customers and this would result in lower interest income, adversely affecting income and profitability. 44. The Company depends on the customers themselves in respect of information submitted about them while assessing their credit worthiness. xvii

20 In deciding whether to extend credit or enter into other transactions with the customers and counter parties, the Company relies on information furnished by or on behalf of consumers, including the financial information based on which the credit assessment is performed. The Company may also rely on certain representations as to the accuracy and completeness of that information and the verification of the same. Further, any changes in this information may not be made available nor may the information be sufficient for completely assessing the risk profile of the customer. The financial conditions and result of operations of the Company could be negatively affected by relying on financial information or other information that may be materially incorrect or incomplete or misleading. 45. Significant security breaches or breakdowns in the computer systems and network infrastructure are operational risks that could adversely impact business of the Company. The Company seeks to protect the computer systems and network infrastructure from physical break-ins as well as security breaches and other disruptive problems. Computer break-ins and power disruptions could affect the security and integrity of information stored in and transmitted through the computer systems and networks. These concerns will intensify with increased use of technology and internet based resources. 46. All branches are located on leased premises and non renewal of these agreements or their renewal on terms not favourable to the Company could adversely affect operations. All branches of the Company are located on leased premises. Any failure to renew these lease agreements for these premises on terms and conditions favourable to the Company may require the Company to shift the concerned branches to new premises. The Company may incur considerable expenses in relation to such relocation and the same may also affect business operations. 47. The Company may not be able to pay out dividends at past levels, or at all in the future. While the Company has paid dividends in the past, there can be no assurance as to whether dividends will be paid in the future and, if so, the level of such future dividends. The declaration, payment and amount of any future dividends is subject to the discretion of the Board, and will depend upon, among other factors, the earnings, financial position, cash requirements and availability of profits, as well as the provisions of relevant laws in India from time to time. EXTERNAL RISK FACTORS 48. The Company is subject to risks arising from interest rate fluctuations, which could adversely affect its business, financial condition and results of operations. Changes in interest rates could significantly affect the financial condition and results of operations of the Company. If the interest rates for its existing or future borrowings increase significantly, its cost of funds will increase. This may adversely impact the Company and cash flows. Although the Company may in the future enter into hedging arrangements against interest rate risks, there can be no assurance that these arrangements will successfully protects from losses due to fluctuations in interest rates. 49. Uncertainties and instability in global market conditions could adversely affect the business, financial condition and results of operations of the Company. The global credit and financial markets have experienced, and may continue to experience, significant dislocations and turbulence resulting in slowdown in the economies of the U.S., Europe, some Asian economies and elsewhere. This led to significant declines in employment, household wealth, consumer demand, lending and investor confidence in the financial markets, which as a result, affected and may continue to affect economic growth in the Indian economy. There can be no assurance that the business, financial condition and results of operations, as well as future prospects of the Company, will not be materially and adversely affected by an economic downturn in India. xviii

21 50. affect business. A international rating agencies may adversely affect the ability to raise additional financing, and the interest rates and other commercial terms at which such additional financing is available. This could harm the business and financial performance of the Company, and consequently affect the ability to obtain financing for capital expenditures and the price of Equity Shares. 51. A slowdown in economic growth in India may adversely affect the business and results of operations of the Company. The performance and the quality of growth of the business of the Company are necessarily dependent on the health of the overall economies in which the Company operates or is expected to operate. Substantially all operations are currently located in India. As such, any slowdown in the Indian economy, could adversely affect business including the ability to implement strategy and increase participation in the NBFC sector. Indi the NBFC sector. The Indian economy is currently in a state of transition and it is difficult to gauge the impact of certain fundamental economic changes on business. Any downturn in the macroeconomic environment in India, or in specific sectors, could adversely affect the price of the Equity Shares of the Company, the business and results of operations. 52. Natural calamities could have a negative impact on the Indian economy and cause the Company business to suffer. India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past few years. The extent and severity of these natural disasters determine their impact on the Indian economy. Monsoons in 2009 were below normal, which led to several districts in the country being declared rainfalldeficient and drought-prone. Further, prolonged spells of below normal rainfall or other natural calamities could have a negative impact on the Indian economy, adversely affecting the business, financial condition and results of operations and the price of the Equity Shares of the Company. 53. Political instability or changes in the Government could adversely affect economic conditions in India generally and the business of the Company in particular. The Indian government has traditionally exercised and continues to exercise a significant influence over many aspects of the economy. The Company Equity Shares, may be affected by interest rates, changes in government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. Since 1991, successive governments have pursued policies of economic liberalization and financial sector reforms. The current Government, which came to power in May 2009, is expected to take initiatives supporting economic reform policies that have been pursued by previous governments. However, there can be no assurance that such policies will be continued and a significant change in the also adversely affect the business, financial condition and results of operations of the Company. 54. If terrorist attacks occur, or communal disturbances or riots erupt in India, or if regional hostilities increase, it would adversely affect the Indian economy, which would, in turn, affect the business of the Company. India has experienced communal disturbances, terrorist attacks and riots during recent years. If such events recur, operational and marketing activities may be adversely affected, resulting in a decline in the income of the Company. The Asian region has from time to time experienced instances of civil unrest and hostilities among neighbouring countries, including those between India and Pakistan. Although the governments of India xix

22 and neighbouring countries have recently been engaged in conciliatory efforts, any deterioration in relations between India and its neighbouring countries might affect stability in the region. In 2008, coordinated financial losses. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including the Equity Shares of the Company. 55. An outbreak of an infectious disease or any other serious public health concerns in India could have a material adverse effect on the business and results of operations of the Company. The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concerns could have a negative impact on the global economy, financial markets and business activities worldwide, which could have a material adverse effect on business. The outbreak in 2003 of Severe Acute Respiratory Syndrome in Asia had a significant adverse impact on the economies of many of the countries affected. particular poultry, as well as some isolated cases of transmission of the virus to humans. There have also been recent outbreaks of the influenza A/H1N1 virus globally. Although the Company has not been adversely impacted by these recent outbreaks, no assurance can be given that a future outbreak of an infectious disease among humans or animals or any other serious public health concerns will not have a material adverse effect on the business, financial condition and results of operation of the Company. 56. There may be less Company information available in the Indian securities markets than 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 the markets in more developed countries. The SEBI is responsible for approving and improving disclosure and other regulatory 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 Indian companies than is regularly made available by public companies in more developed countries. 57. Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions. The Articles of Association, regulations of Board of Directors and the corporate affairs of the Company are governed by Indian law. Legal principles relating to these matters and the validity of corporate procedures, Directors a Company s or jurisdictions. Investors may have more difficulty in asserting their rights as a shareholder than as a shareholder of a corporation in another jurisdiction. 58. Foreign investors are subject to foreign investment restrictions under Indian law that limits the ability of the Company to attract foreign investors, which may adversely impact the market price of the Equity Shares. Under the foreign exchange regulations currently in force in India, transfers of shares between nonresidents and residents are freely permitted (subject to certain restrictions) if they comply with the pricing guidelines and reporting requirements specified by the RBI. If the transfer of shares is not in compliance with such pricing guidelines or reporting requirements or fall under any of the exceptions referred to above, the prior approval of the RBI will be required. Additionally, shareholders who seek to convert the Rupee proceeds from a sale of shares in India into foreign currency and repatriate that foreign currency from India will require a no-objection/tax clearance certificate from the Indian income tax authorities. The Company cannot assure that any required approval from the RBI or any other government agency can be obtained on any particular terms or at all. Also, FDI is permitted up to 100% in the NBFC sector provided that the activities carried on by such NBFC falls within the 19 activities that has been identified in the relevant notification. FIIs can invest in the primary and secondary capital markets in India through the portfolio investment scheme. Under this scheme, FIIs can acquire shares/debentures of Indian companies through the stock exchanges in India. The ceiling for overall investment by FIIs is 24.00% of the paid up capital of the Indian xx

23 Company. The aforementioned ceiling of 24.00% can be raised up to sectoral cap, provided that a special resolution to that effect is passed by the shareholders of the concerned Company. Investment by FII above the limit, such limit would violate the law in this regard. Any diversification in the activities carried on may require the Company to phase out foreign investment 59. The ability of the Company to raise foreign debt may be constrained by Indian law. For Indian companies, exchange controls regulate borrowing from foreign currencies. Such regulatory restrictions limit financing sources available to the Company and hence could constrain the ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, the grant of the required approvals without onerous conditions cannot be assured, if at all. Limitations on raising foreign debt may have an adverse effect on the business of the Company. 60. Trade deficits could have a negative effect on business and the trading price of the Equity Shares of the Company. India's trade relationships with other countries can influence Indian economic conditions. If India's trade deficits increase or become unmanageable, the Indian economy, and consequently the business, future financial performance and the trading price of the Equity Shares of the Company could be adversely affected. 61. A third party could be prevented from acquiring control of the Company because of anti- takeover provisions under Indian law There are provisions in Indian law that may discourage a third party from attempting to take control of the Company even if a change in control would result in the purchase of the Equity Shares at a premium to the market price or would otherwise be beneficial to investors. The Takeover Code contains certain provisions that may delay, deter or prevent a future takeover or change in control of the Company. Any person or an interest (either on its own or together with parties acting in concert with it) in 15.00% or more of the Equity Shares must make an open offer to acquire at least another 20.00% of the outstanding Equity Shares of the Company. A takeover offer to acquire at least another 20.00% of the outstanding Equity Shares (or a lower percentage in certain circumstances) also must be made in the compliance with the applicable regulations. These provisions may discourage or prevent certain types of transactions involving an actual or threatened change in control of the Company. 62. Companies operating in India are subject to a variety of central and state government taxes and surcharges. Tax and other levies imposed by the central and state governments in India that affect the tax liability of the Company include: (i) central and state taxes and other levies; (ii) income tax; (iii) value added tax; (iv) service tax; (v) stamp duty; and (vi) other special taxes and surcharges which are introduced on a temporary or permanent basis from time to time. Moreover, the central and state tax scheme in India is extensive and subject to change from time to time. The statutory corporate income tax in India, which includes a surcharge on the tax and an education cess on the tax and the surcharge, is currently 33.22%. The central or state government may in the future increase the corporate income tax it imposes. Any such future increases or amendments may affect the overall tax efficiency of companies operating in India and may result in significant additional taxes becoming payable. Additional tax exposure could adversely affect the business and results of operations of the Company. 63. Significant differences exist between Indian GAAP, on which the financial statements are based; and other bodies of accounting principles with which investors may be more familiar. The financial statements of the Company are prepared in conformity with the Indian GAAP, and no attempt has been made to reconcile any of the information given in this LoF to any other principles or to base it on any other standards. Indian GAAP differs from accounting principles and auditing standards with which prospective investors may be familiar in other countries. Risks relating to Equity Shares xxi

24 62. Shareholders of Equity Shares will bear the risk of fluctuation in the price of the Equity Shares. It is impossible to predict whether the price of the Equity Shares will rise or fall. The trading price of the Equity Shares on the Stock Exchange may fluctuate after this Issue as a result of several factors, including: relative to the U.S. dollar, the Euro and other foreign currencies; the results of operation and performance of the Company; perceptions about future performance of the Company or the performance of Indian companies in general; performance of competitors and the perception in the market about investments in NBFCs/gold loan finance companies; adverse media reports on the Company or the Indian gold loan financing industry; changes in the estimates of the performance of the Company or recommendations by financial analysts; and in environmental regulations. There can be no assurance that an active trading market for the Equity Shares will be sustained after this Issue, or that the price at which the Equity Shares have historically traded will correspond to the price at which the Equity Shares are offered in this Issue or the price at which the Equity Shares will trade in the market subsequent to this Issue. The trading price of the Equity Shares may be volatile and may decline post listing. 63. Future issuances of Equity Shares by the Company or disposals of Equity Shares by any major shareholders may adversely affect the market price of the Equity Shares of the Company. A future issue of Equity Shares by the Company the market price of Equity Shares, and similarly, the disposal of Equity Shares by any of the major shareholders, or the perception that such issues or sales may occur, may adversely affect the market price of the Equity Shares. There is no restriction on the Company Equity Shares or the ability of any of the shareholders to dispose of, encumber or pledge Equity Shares held by them, and there can be no assurance that the Company will not issue Equity Shares. 64. There is no assurance that the Equity Shares will be listed on the BSE in a timely manner or at all In accordance with Indian law and practice, permission for listing of the Equity Shares will not be granted until after the Equity Shares have been issued and allotted. Approval will require all other relevant documents authorising the issuing of the Equity Shares to be submitted. There could be a failure or a delay in listing the Equity Shares on the BSE. Any failure or delay in obtaining the approval would restrict the Equity Shares. 65. The Equity Shareholders will not be able to sell immediately on an Indian stock exchange any of the Rights Equity Shares purchased in the Issue. The Rights Equity Shares will be listed on the BSE. Pursuant to Indian regulations, certain actions must be completed before the Rights Equity Shares Depository participants in India are expected to be credited within two working days of the date of Allotment. Thereafter, upon receipt of final approval from the BSE, trading in the Rights 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. The Company cannot assure that the Rights Equity Shares Equity Shares will commence, within the time periods specified above. 66. Because the Equity Shares of the Company are quoted in Indian Rupees in India, investors may be subject to potential losses arising out of exchange rate risk on the Indian Rupee and risks associated with the conversion of Indian Rupee proceeds into foreign currency. Investors are subject to currency fluctuation risk and convertibility risk since the Equity Shares are quoted in Indian Rupees on the Indian stock exchanges on which they are listed. Dividends on the Equity Shares will also be paid in Indian Rupees. The volatility of the Indian Rupee against the U.S. dollar and other xxii

25 currencies subjects investors who convert funds into Indian Rupees to purchase Equity Shares to currency fluctuation risks. 67. to acquire Indian securities, including the Equity Shares of the Company, or repatriate dividends or sale proceeds from those securities. The Indian government may impose foreign exchange restrictions in certain situations, including situations where there are sudden fluctuations in interest rates or exchange rates, where the Indian government experiences difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in India. These restrictions may require foreign investors to obtain the dends from those securities or the proceeds from the sale of those securities. No assurance can be given that these restrictions will not adversely affect, among other things, the secondary market price of the Equity Shares. Prominent Notes: 1. This is an Issue of 65, 00,000 Equity Shares of face value of `10/- each at a premium of `70 per Equity Share for an amount aggregating to `5200 Lakhs on Rights basis to the existing shareholders of the Company in the ratio of 1 Equity Share for every 1 Equity Share held by the existing shareholders on the Record Date, i.e. May 25, The net worth of the Company as per the audited standalone financial a statement as on March 31, 2011 is `2, Lakhs. 3. Net asset value per share as per the audited standalone financial a statement as on March 31, 2011 is `44.26 per Equity Share. 4. The Company has increased its focus on auto loans and as a result the disbursement of gold loans has decreased in terms of percentage of total disbursements and total income, in the last five years. Gold Loan as a percentage of total loans (` in lakhs) Particulars March-07 March- 08 March-09 March-10 March-11 Gold Loan 3,280 4,298 6,240 5,670 4,134 Total Loan portfolio 3,477 4,447 7,287 9,891 17,212 Gold Loan as % of total loan 94% 97% 86% 57% 24% Income from gold loan as a percentage of total loans (` in lakhs) March- 08 Particulars March -07 March-09 March-10 March-11 Total Income 803 1,225 1,739 2,248 3,773 Income from Gold Loan 743 1,040 1,421 1,404 1,429 Gold Loan as % of total loan 92% 85% 82% 62% 38% 5. All information shall be made available by the Lead Manager and the Company to the existing shareholders of the Company and no selective or additional information would be available only to a section of the investors in any manner whatsoever. 6. Please refer to the section on "Basis of Allotment Offering Page 112 of this LoF for details of the basis of Allotment. 7. The Promoters of the Company, their relatives and associates, and entities belonging to the Promoter Group have not purchased or sold directly or indirectly, any Equity Shares during a period of one year proceeding the date on which this LoF is filed with SEBI except as disclosed in this document. xxiii

26 8. The Company had entered into certain related party transactions. For details please refer to the section titled Auditors 35 of this LoF. 9. Other than as stated in this LoF, the other ventures of the promoter have no business interests /other interests in the Company. 10. The Lead Manager and the Company shall update this LoF and keep the shareholders/public informed of any material changes till the listing and trading commencement and the Company shall continue to make all material disclosures as per the terms of the Listing Agreement. 11. Investors may contact Karvy Investor Services Limited or the Compliance Officer for any complaints, information or clarifications pertaining to the Issue and they will be obliged to attend to the same. For contact details of the Lead Manager and the compliance officer please refer to page 7 of this LoF. xxiv

27 SECTION III -INTRODUCTION 1. SUMMARY Issue Details: Equity Shares offered Rights Equity Shares 65,00,000 Equity Shares of `10/- each for cash at a premium of `70 per share `5200 Lakhs on a basis to the existing Equity Shareholders/beneficial owners of the Company in the ratio of 1 equity share for every 1 equity share held as on May 25, 2011i.e., record date. Entitlement for Rights Equity Shares 1 Right Equity Share for every 1 Equity Shares held on the Record date Equity Shares outstanding prior to the 65,00,000 Equity Shares of `10/- each Issue Equity Shares outstanding after the 1,30,00,000 Equity Shares of `10/- each Issue Record Date May 25, 2011 Utilization of Issue proceeds 1. For General Corporate Purpose of the Company 2. To repay unsecured loans taken from one of the Promoters 3. To meet the expenses of the present issue. The payment terms available to the Investors are as follows: page 13 Due Date On the Issue application (i.e. along with the CAF) Amount payable per Equity Share (`) `80 per share, which constitutes 100% of the issue price payable 1

28 SUMMARY FINANCIAL AND OPERATING DATA The following table sets forth the selected historical financial information of Muthoot Capital Services Limited derived from its latest audited standalone financial statements for the year ending March 31, 2011 prepared in accordance with Indian GAAP and the Companies Act, 1956, as. 35 of this LoF and should be read in conjunction with those financial statements and notes thereon. Statement of Unconsolidated Assets and Liabilities Particulars As at March 31, 2011 As at March 31, 2010 ` ` SOURCES OF FUNDS Shareholders' Funds: Share Capital 65,000,000 65,000,000 Reserves and Surplus 222,682, ,691, ,682, ,691,855 Loan Funds Secured Loans 874,669, ,191,810 Unsecured Loans 592,463, ,043,066 1,467,133, ,234,876 TOTAL 1,754,815,371 1,013,926,731 APPLICATION OF FUNDS Fixed Assets Gross Block 23,550,073 20,004,913 Less: Depreciation till date 17,125,625 15,692,326 Net Block 6,424,448 4,312,587 Investments 1,890,450 1,833,462 Deferred Tax Asset 3,389,300 1,072,100 Current Assets, Loans and Advances: A. Current Assets 1,331,766, ,696,166 B. Loans and Advances 462,142, ,734,194 1,793,908,872 1,039,430,360 Less: Current Liabilities and Provisions Liabilities 15,991,869 9,055,156 Provisions 34,805,830 23,666,622 50,797,699 32,721,778 Net Current Assets 1,743,111,173 1,006,708,582 TOTAL 1,754,815,371 1,013,926,731 2

29 Statement of Unconsolidated Profits and Losses Particulars Year Ended Year Ended March March 31, , 2010 ` ` INCOME Income from operations 375,891, ,737,839 Other Income 1,400,578 2,017,888 TOTAL 377,292, ,755,727 EXPENDITURE Financial Expenses 115,705,205 69,160,678 Establishment Expenses 51,165,868 24,829,562 Administrative and other expenses 58,077,947 20,864,373 TOTAL 224,949, ,854,613 PROFIT BEFORE DEPRECIATION AND OTHER PROVISIONS 152,343, ,901,114 Depreciation 1,433, ,821 Provision and Write offs 5,848, ,302 PROFIT BEFORE TAX 145,061, ,741,991 Provision for taxation Current tax 50,700,000 37,220,000 Deferred Tax (2,317,200) (174,000) Fringe Benefit Tax 0 Income Tax Adjustment For Earlier Years 24,593 (32,628) PROFIT AFTER TAX 96,653,895 71,728,619 Add: Balance brought forward from previous year 100,432,855 62,115,936 AMOUNT AVAILABLE FOR APPROPRIATIONS 197,086, ,844,555 Less: Appropriations Transfer to Statutory Reserve 19,400,000 14,400,000 Proposed Dividend 19,500,000 16,250,000 Dividend Tax 3,163,400 2,761,700 Surplus carried to Balance Sheet 155,023, ,432,855 Basic and Diluted Earnings Per Share

30 Cash Flow Statement Sl. No. PARTICULARS Year ended March 31, 2011 ` Year ended March 31, 2010 ` A CASH FLOW FROM OPERATING ACTIVITIES 1 Net Profit before tax 145,061, ,741,991 2 Adjustments for:- I Depreciation 1,433, ,821 Ii Provisions and write offs net 6,612,253 84,302 Iii Bad debts written off - 36,333 Iv Income Tax and FBT written off - - V Impairment of Fixed Assets - - Vi Unclaimed balance written back - 7,990 Vii Loss on Sale of Asset - - Viii Profit on Sale of Asset - - Ix Profit from Capital Market Operations (128,743) (49,324) X Dividend Income (85,232) (61,031) Xi Assets written off - - 7,831, ,091 3 Operating profit before working capital changes 152,892, ,679,082 4 Net (Increase) / decrease in operating assets:- i Trade and other receivables (921,930) (638,103) ii Hire purchase receivables 78,065 50,856 iii Trade advances (740,508,798) (307,957,045) iv Other loans and advances (956,996) (51,938) (742,309,659) (308,596,230) 5 Net increase/ (decrease) in operating liabilitiesi Current Liabilities 6,936,713 (7,796,032) Ii Provisions (9,129) 8,810 6,927,584 (7,787,222) 6 Net changes in working capital (735,382,075) (316,383,452) 7 Cash Generated From Operating Activities (6+3) (582,489,210) (206,704,370) 8 Taxes paid (49,840,209) (37,009,036) Net cash from Operating Activities (A) (7+8) (632,329,419) (243,713,406) B CASH FLOW FROM INVESTING ACTIVITIES i Purchase of Fixed Assets (3,545,160) (1,741,741) ii Investments in Shares and Mutual Funds 71,755 (29,409) iii Dividend Received 85,232 61,031 Net cash from investing activities (B) (3,388,173) (1,710,119) 4

31 Sl. No. PARTICULARS Year ended March 31, 2011 ` Year ended March 31, 2010 ` C CASH FLOW FROM FINANCING ACTIVITIES i Increase in Secured Bonds 13,383,402 (1,548,184) ii Increase in Loan from Financial Institutions 285,093, ,739,943 iii Increase in Loan from Directors 68,420,746 92,117,733 iv Increase in Inter corporate deposit 300,000,000 - v Dividend paid (including Corporate Dividend Tax) (19,011,700) (15,209,350) Net cash used for financing activities(c) 647,886, ,100,142 D E F Net increase/(decrease) in cash and cash equivalents (A+B+C) OPENING CASH BALANCE AND CASH EQUIVALENTS CLOSING CASH BALANCE AND CASH EQUIVALENTS 12,168,853 1,676,617 19,545,029 17,868,412 31,713,882 19,545,029 5

32 2. GENERAL INFORMATION Muthoot Capital Services Limited was incorporated as a Public Limited Company on February 18, 1994 under of Kerala. The Company has obtained the Certificate of Commencement of Business on March 23, 1994 issued by Registrar of Companies, Kerala. The registered office of the Company is situated at 5th Floor, Muthoot Towers, M.G.Road, Kochi , Kerala, India. Pursuant to the resolution passed by the Board of Directors of the Company at its meetings held on May 21, 2009 and the special resolution passed by the Members of the Company at the Annual General Meeting held on September 24, 2009 it has been decided to make the following offer to the Equity Shareholders of the Company. ISSUE OF 65,00,000 SHARES OF `10/- EACH FOR CASH AT A PREMIUM OF `70- PER SHARE `5200 LAKHS EQUITY SHAREHOLDERS/BENEFICIAL OWNERS OF THE COMPANY IN THE RATIO OF 1 EQUITY SHARE FOR EVERY 1 EQUITY SHARE HELD AS ON MAY 25, 2011 i.e., RECORD DATE. Registered Office of the Company 5th Floor, Muthoot Towers, M.G.Road, Kochi , Kerala. Tel.: Fax: Website: Registration No Corporate Identification Number: L67120KL1994PLC Address of the Registrar of Companies The Registrar of Companies, Kochi, Kerala Company Law Bhawan, BMC Road, Thrikkakara, Kochi The Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (BSE). Board of Directors Sl. No Name Category/Designation 1. Thomas John Muthoot Chairman 2. Thomas George Muthoot Managing Director 3. Thomas Muthoot Director 4. A. P. Kurian Director 5. Philip Thomas Director 6. R. K. Nair Director 6

33 Issue Management Team Company Secretary and Compliance Officer Ms. Malathy N Company Secretary and Compliance Officer 5th Floor, Muthoot Towers, M.G.Road, Kochi , Kerala Tel.: Fax: investorgrievance@muthootcap.com Banker to the Issue Axis Bank Limited 41/419, Ground Floor Chicago Plaza Rajaji Road Ernakulam Tel: /5 Fax: kochi.operationshead@axisbank.com Contact person : Mr. Suraj M Lead Manager to the Issue Karvy Investor Services Limited 2 nd Floor, Regent Chambers Nariman Point, Mumbai Tel: / Fax: Website: cmg@karvy.com Contact Person : Ms. Sarita Gupta/ Mr. Sumit Singh SEBI Registration No.: INM Legal Advisor M/s. Menon & Pai, Advocates Post Box 1911 I.S Press Road Kochi Tel: Fax: advgopinath@gmail.com Contact person: Mr. P. Gopinath Menon Auditors to the Company M/s. K. Venkatachalam Aiyer & Co. Chartered Accountants. Building No. 41/3647 B, Blue Bird Towers, Providence Road, North End, Ernakulam, Kochi Tel: Fax: agopalk@sify.com Contact person: Mr. A. Gopalakrishnan Registrar to the Issue Integrated Enterprises (India) Limited, Kences Towers, 2nd Floor, No.1, Ramakrishna Street, Off North Usman Road, T Nagar, Chennai Tel: Fax : corpserv@iepindia.com Contact person: Mr. K Balasubramanian Website: SEBI Registration. No. :INR 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 Inter-se Allocation of responsibilities Not Applicable. Credit Rating This being a rights issue of Equity Shares, no credit rating is required. Debenture Trustee As the issue consists of the Equity Shares, the appointment of debenture trustee is not required. Monitoring Agency In terms of Regulation 16 (1) of the SEBI (ICDR) Regulations, 2009, the size of the issue being less than `50000 Lakhs, the Company is not required to appoint a monitoring agency. 7

34 Appraising Entity Not applicable. Details of underwriting, if any The present Issue is not underwritten and the Company has not made any standby arrangements for the present Rights Issue. Principal terms of Loans outstanding as on March 31, 2011 and Assets Charged as Security Particulars Amount ( `) Security SECURED LOANS Redeemable non-convertible bonds 152,191,000 Secured by a charge on all movable assets, book debts, receivables and advances Interest accrued but not due on 14,929,956 including loan against security of gold created bonds by the Company Secured by creating First charge on current assets of the company ranking pari passu with other participating banks and debenture 100,000,000 ICICI working capital loan trustees and Personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. Secured by creating First charge on the entire current assets including gold loan receivables, SBT-ERNAKULAM - Demand 151,149,886 business loans receivables, vehicle loan Loan 6152 bonds, DPN, ICD etc ranking pari passu with other working capital lenders and personal State Bank of Travancore -Cash 202,770,492 guarantee of the Chairman Mr.Thomas John Credit Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. Secured by first Pari passu charge on the current assets of the Company including Gold HDFC Bank Ltd. 151,159,315 Loan receivables and hire purchase receivable and personal guarantee of Thomas George Muthoot, Thomas John Muthoot and Thomas Muthoot Note 2: Secured by pari passu first charge on entire current assets including loan AXIS Bank Ltd. 101,756,740 receivables and personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. HDFC Bank Ltd Car Loan-Verna 345,438 Secured by Hypothecation of Hyundai Verna Car bearing Registration No KL 7 BH 5228 HDFC Bank Ltd Car Loan-Asta I20 366,382 Secured by Hypothecation of Asta i20 bearing Registration No KL 7 -BL-6708 TOTAL 874,669,209 UNSECURED LOANS Loan from Directors 292,463,812 Not Applicable Page no 35 of the LoF. 8

35 3. CAPITAL STRUCTURE The share capital of the Company as on the date of filing of this LoF with SEBI is set forth below: Particulars Nominal Value (` Lakhs) Aggregate Value (` Lakhs) Authorized Share Capital: 15,000,000 Equity Shares of `10/- each 1, , Issued, Subscribed and Paid-up Capital: 6,500,000 Equity Shares of `10/- each Present Issue being Offered to the Equity Shareholders through this LoF 6,500,000 Equity Shares of `10/- each at a premium of , `70 each at a total price of `80 each Post Issue Paid-up Equity Share Capital: 13,000,000 Equity Shares of `10/- each (Assuming full 1, , subscription) SHARE PREMIUM ACCOUNT Before the Issue NIL After the Issue NOTES TO CAPITAL STRUCTURE 1. Shareholding Pattern of the Company as on March 31, 2011: Category of Shareholder (A) Shareholding of Promoter and Promoter Group (1) Indian Individuals / Hindu Undivided Family Bodies Corporate Financial Institutions / Banks No. of Shareholders Total No. of Shares Number of Shares held in Dematerialized Form Total Shareholding as a % of total No. of Shares Shares pledged or otherwise encumbered As a % As a % of Number As a% of of (A+B) (A+B+C) of shares Total No. of Shares 4,873,922 4,873, NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL Any (Specify) Trusts Others NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL Sub Total 8 4,873,922 4,873, NIL NIL (2) Foreign Total shareholding of Promoter and Promoter Group 8 * 4,873,922 4,873, (A) (B) Public Shareholding NA NA 9 NA NA

36 Category of Shareholder (1) Institutions No. of Shareholders Total No. of Shares Number of Shares held in Dematerialized Form Total Shareholding as a % of total No. of Shares Shares pledged or otherwise encumbered As a % As a % of Number As a% of of (A+B) (A+B+C) of shares Total No. of Shares Mutual Funds / UTI Financial Institutions / Banks Insurance Companies Foreign Institutional Investors Sub Total NIL NIL NIL NIL NIL NIL (2) Non-Institutions Bodies Corporate 82 57,902 50, Individuals NA NA Individual shareholders holding nominal share capital up to ` 1 lakh Individual shareholders holding nominal share capital in excess of ` 1 lakh 6,959 1,242, , NIL NIL 9 286,985 38, NIL NIL Any Others (Specify) Non Resident Indians Clearing Members 41 38,033 38, NIL NIL Hindu Families Undivided NIL NIL Sub Total 7,091 1,625, , NIL NIL Total Public shareholding (B) 7,092 1,626, , Total (A)+(B) 7,100 6,500,000 5,820, NIL NIL (C) Shares held by Custodians and against which Depository Receipts have been issued NIL NIL NIL NIL NIL NIL NIL Total (A)+(B)+(C) 7,100 6,500,000 5,820, NIL NIL *Note: The number of shareholders in the promoter group as mentioned above include three folios held by Mr. Thomas John Muthoot. 2. The Promoters and Promoter Group have confirmed that they intend to subscribe to the full extent of their Rights Entitlement in the Issue. The Promoters and Promoter Group also intend to subscribe to any 10

37 unsubscribed portion of the Issue such that 100% of the issue is subscribed. This subscription and acquisition of additional Equity Shares by the Promoters and Promoter Group, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the SEBI Takeover Code. The Promoters and Promoter Group shall subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the Promoters and Promoter Group of any unsubscribed portion over and above their Rights Entitlement shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements. Any subscription by the Promoters and Promoter Group to their rights entitlement or additional subscription to the unsubscribed portion shall be only to the extent possible to not result in breach of minimum public shareholding requirement stipulated in the equity Listing Agreement entered into between the issuer and the BSE. 3. Shareholding of the Promoters and Promoter Group as on March 31, 2011 Sr.No. Name of the Shareholder Number % of Holding 1. Mr. Thomas Muthoot 1,449, Mr. Thomas George Muthoot 1,449, Mr. Thomas John Muthoot 1,450, Mrs. Neena George 178, Mrs. Remmy Thomas 178, Mrs. Preethi John 167, Total 4,873, The Promoters of the Company, their relatives and associates, and entities belonging to the Promoter Group have not purchased or sold directly or indirectly, any Equity Shares other than that stated below during a period of one year proceeding the date on which this LoF is filed with SEBI. As on June 24, 2011, the shareholding of the Promoters and the Promoter Group is 74.32% The following transactions were entered into by Mrs. Neena George (Category: Promoter Group) Transaction Date Buy/ Sell No. of Shares Price at which the Equity Shares has been sold (`) May 2, 2011 Sell May 5, 2011 Sell 11, The following transactions were entered into by Mrs. Neena George (Category: Promoter Group) Transaction Date Buy/ Sell No. of Shares Price at which the Equity Shares has been sold (`) April 26,2011 Sell 10, May 05,2011 Sell 20, Shareholding of the Promoters and Promoter Group as on June 24, 2011 Sl.No. Name of the Shareholder Number % of Holding 1. Mr. Thomas Muthoot 1,449, Mr. Thomas George Muthoot 1,449, Mr. Thomas John Muthoot 1,450, Mrs. Neena George 166, Mrs. Remmy Thomas 178, Mrs. Preethi John 136, Total 4,830,

38 5. There are no outstanding instruments in the form of options or convertible securities issued by the Company. 6. As on date, none of the Equity Shares held by the Promoters and Promoter Group have been pledged. 7. None of the shares held by the promoters or promoter group are under lock-in. 8. The Company is in compliance with Clause 40A of the Listing Agreement and is required to maintain public shareholding of at least 25% of the total number of its listed Equity Shares. Further, the Company has duly complied with the following during last financial year i. Provisions of the Listing Agreement with respect to reporting and compliance under Clause 35, 40A, 41 and 49. ii. iii. Provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, with respect to reporting in terms of Regulation 8(3) pertaining to disclosure of changes in shareholding and Regulation 8A pertaining to disclosure of pledged shares. Provisions of the SEBI (Prohibition of Insider Trading) Regulations, 1992, with respect to reporting in terms of Regulation Details of Shareholders holding more than one percent of the share capital of the issuer as on March 31, Sl.No. Name of the Shareholder Number % of Holding 1. Mr. Thomas Muthoot 14,49, % 2. Mr. Thomas George Muthoot 14,49, % 3. Mr. Thomas John Muthoot 14,50, % 4. Mrs. Neena George 178, % 5. Mrs. Remmy Thomas 178, % 6. Mrs. Preethi John 167, % Total 48,73, % 12

39 4. OBJECTS OF THE ISSUE The objects of the present Issue of Equity Shares on Rights basis are: 1. To repay unsecured loans taken from one of the promoters 2. For general corporate purpose of the Company 3. To meet the expenses of this issue. The main objects and objects incidental or ancillary to the main objects set out in the Memorandum of Association enable the Company to undertake the existing activities and the activities for which funds are being raised by this Issue. Requirement of Funds The fund requirement of the Company is `5,200 Lakhs as per the details given below: Particulars Amount (` in Lakhs) Repayment of unsecured loans taken from one of the Promoters 4, General corporate purpose Issue expenses Total 5, Means of Finance The fund requirements hereinabove shall be met in the following manner: Particulars Amount (` in Lakhs) Gross proceeds 5, Less: Issue expenses Net Proceeds 5, Since the objects of the Issue are proposed to be financed out of Issue proceeds, the requirement of an undertaking confirming that firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount proposed to be raised through this Issue, is not applicable Notes: a. The fund requirement and intended use of net proceeds of the issue as described herein, is as per the estimate of the management of the Company and have not been appraised by any Bank or Financial Institution. b. In case of any increase in the project cost or any shortfall in raising the requisite capital from the proceeds of the Issue, the extent of the shortfall will be met by internal accruals. The stated Objects of the Issue are proposed to be financed entirely from the Proceeds of the Issue. Therefore, excluding the amount to be raised through proposed Rights issue, there is no requirement of firm arrangements of finance. No part of the Rights Issue proceeds will be paid by the Company as consideration to Promoters, Directors, Company Utilization of Funds Subject to compliance with applicable laws and regulations, the Company proposes to use the proceeds of the Issue for: 1. Repayment of unsecured loans The Company has entered into financing arrangements with one of its Promoters. MCSL is a Non Banking Finance Company and is in the business of lending, for which it uses its own funds, funds raised through debentures and borrowing from banks. When the demand for loan is high, inorder to sustain its business 13

40 operations and to increase its loan portfolio, MCSL also borrows from the promoters. As on May 31, 2011 an amount of `5, Lakhs was outstanding as unsecured loans from Mr. Thomas George Muthoot. This unsecured loan is repayable on demand to the promoter when the Company has a cash surplus. This may affect the liquidity of the Company. MCSL intends to repay the unsecured loan from the Promoter as one of the objects of the issue. In order to reduce the leverage and allow flexibility in financial management of the business and operations the Company intends to utilize up to `4, Lakhs towards repayment of outstanding loans. Details of Unsecured Loans Name of Lender Thomas George Muthoot Relationship with the Company Promoter Interest Rate 12% p.a. Tenure Repayable on Demand Unsecured Loan position, as on May 31, 2011 (`) 588,064, The following table provides the details of the various secured loans availed by the Company. Key terms of the Company n March 31, 2011 are as follows: (` in Lakhs) Sl. No. Type of facility Sanctioned Amount Amount outstanding as at March 31, 2011 Interest rate p.a. Repayment Schedule Tenor 1 2 ICICI Working Capital Loan Axis Working Loan Bank Capital 2, , % 1, , SBT Loan 4, , HDFC Short term Working Capital Loan HDFC Bank Ltd Car Loan-Verna HDFC Bank Ltd Car Loan-Asta I20 1, , days or up to validity period of facility whichever is earlier. Principal and interest of each tranche is to be repaid as bullet payment on the maturity date or in installments as agreed upon, but within the validity period of the facility. CC- BR+3.25%, On demand WCDL- BR+2.75% 3.50% ABOVE NA SBT BASE RATE 9.5% payable monthly Minimum: 7 days, Maximum: 180 days or up validity period facility whichever is earlier. to of One year from the date of sanction One year from the date of sanction 180 days 180 days 60 monthly EMI of `15,967/- 36 monthly EMI of `21,750/- 5 Years 3 Years In addition to the above, MCSL may, from time to time, enter into further financing arrangements and draw down funds there under. The Company requires funds on a regular basis for its business operations, capital expenditure, investments and towards its other general corporate and working capital requirements. The Company meets such fund requirements from internal accruals and/or by availing various loans and facilities as may be deemed suitable by the Company.

41 The details of the outstanding loans as on March 31, 2011 is certified by M/s. K. Venkatachalam Aiyer & Co., Chartered Accountants, Statutory Auditor of the Company vide their certificate dated May 10, General corporate purpose The Company intends to deploy the balance issue proceeds aggregating to ` Lakhs towards general corporate purposes, including brand building, meeting exigencies and contingencies in ordinary course of business which may not be foreseen or any other purpose as approved by our Board of Directors from time to time. 3. Details of the Issue Expenses fees, printing and distribution expenses, advertisement expenses and miscellaneous expenses like stamp duty, depository charges and listing fees to the stock exchange. The total expenses for this issue are estimated to be ` Lakhs, which is approximately 0.80 % of the Issue Size. Particulars Amount (`) % of the Issue Size 1,500, % 200, % Registrar Fees 400, % Auditors Fee 220, % Printing and distribution expenses 1,711, % Advertisement and Misc. Expenses 143, % Total 4,175, % 4. Funds deployed till date and the sources of its deployment The details of the sources and deployment of funds as on May 31, 2011 as certified by M/s. K. Venkatachalam Aiyer & Co., Chartered Accountants, Statutory Auditor of the Company vide their certificate dated June 20, 2011 is as follows: Deployment of funds (` in Lakhs) Description Amount Invested Rights Issue Expenses Total Sources of funds (` In Lakhs) Description Amount Internal Accruals Total Bridge Financing Facilities The Company has not raised any bridge loans from any bank or financial institution as on the date of this LoF which are proposed to be repaid from the proceeds of this Issue. Appraisal Not Applicable. Schedule of Implementation The entire proceeds of the issue will be utilized on listing of the Equity Shares of the Company issued pursuant to this rights issue. 15

42 Year-wise breakup of Fund Utilisation The entire proceeds of the issue will be utilized on listing of the Equity Shares of the Company issued pursuant to this rights issue. Interim use of funds The management, in accordance with the policies established by the Board of Directors from time to time, will have flexibility in deploying the Net Proceeds of the Issue. Pending utilization of the proceeds out of the Issue for the purposes described above, the Company intends to temporarily invest the funds in high quality interest bearing liquid instruments including money market mutual funds, deposits with banks or temporarily deploy the funds in investment grade interest bearing securities as may be approved by the Board. Such investments would be in accordance with the investment policies approved by the Board or the Investment Committee from time to time. Interest of promoters and Directors The promoters and Directors of the Company do not have any interest applicable to the Objects of the Issue other than those disclosed in this chapter. 16

43 STATEMENT OF TAX BENEFITS To The BOARD OF DIRECTORS Muthoot Capital Services Limited Muthoot Towers M G Road, Ernakulam We report that the enclosed annexure states the possible tax benefits available to Muthoot Capital Services Limited, M.G. Road, Ernakulam and its Shareholders under the current tax laws presently in force in India as amended by the Finance Act, Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill. The benefits discussed below 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: The Company or its shareholders will continue to obtain these benefits in future; or The conditions prescribed for availing the benefits have been / would be met with. The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. For K VENKATACHALAM AIYER & CO. Chartered Accountants FRN S A GOPALAKRISHNAN Partner Membership No Date: May 10, 2011 Place: Kochi 17

44 STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO MUTHOOT CAPITAL SERVICES LIMITED AND ITS SHAREHOLDERS SPECIAL TAX BENEFITS Nil The following benefits shall be available to the Company. GENERAL TAX BENEFITS (A) BENEFITS AVAILABLE UNDER THE INCOME TAX ACT I. TO THE COMPANY 1. Depreciation under section 32 In accordance with and subject to the provisions of section 32 of the Income Tax Act, the Company will be allowed to claim depreciation on specified tangible and intangible assets as per the rates specified. 2. Income from units of Mutual Funds exempt under section 10(35) The Company will be eligible for exemption of income received from units of mutual funds specified under section 10(23D) of the Act, income received in respect of units from the Administrator of specified undertaking and income received in respect of units from the specified Company in accordance with and subject to the provisions of section 10(35) of the Act. 3. Dividend income exempt under section 10(34) Dividends (Whether interim or final) declared, distributed or paid by any Indian Company are exempt in the hands of the Company as per the provisions of section 10(34) of the Act. 4. Lower Tax Rate under section 112 on Long term Capital gains As per the provisions of section 112 of the Act, long term gains that are not exempt under Section 10(38) of the Act would be subject to tax at a rate of 20% (Plus applicable surcharge and education cess). However, as per the proviso to Section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units, calculated at the rate of 20% with indexation benefit exceeds the tax on long term gains computed at the rate of 10% without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10% (Plus applicable surcharge and education cess). 5. Lower Tax rate under section 111A on short term Capital gains As per the provisions of section 111A of the Act, short term capital gains on sale of Equity Shares or units of an equity oriented fund where the transaction of sale is chargeable to Securities Transa subject to tax at a rate of 15% (Plus applicable surcharge and education cess). 6. Exemption of Long Term Capital Gain under section 10 (38) According to Section 10(38) of the Act, long term capital gains on sale of Equity Shares or units of an equity oriented fund where the transaction of sale is chargeable to STT shall be exempt from tax. 7. Exemption of Long Term Capital Gain under section 54EC. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (other than those exempt under section 10(38) of the Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: 18

45 National Highway Authority of India constituted under section 3 of The National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the Company formed and registered under the Companies Act, If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this section for calculating capital gain, shall not be allowed as a deduction from the income tax under section 80C of the Act for any assessment year beginning on or after April 01, Further, the investment made on or after April 01, 2007 in the above specified assets by an assessee during any financial year cannot exceed `50 Lakhs. 8. Benefit under section 115JAA (1A) Under section 115JAA (1A) of the Act, tax credit shall be allowed of any tax paid (MAT) under Section 115JB of the Act. Credit eligible for carry forward is the difference between MAT paid and the tax computed as per the normal provisions of the Act. Such MAT credit shall not be available for setoff beyond 10 years succeeding the year in which the MAT becomes allowable. II. TO RESIDENT SHAREHOLDERS 1. Dividends exempt under section 10 (34) Dividends (whether interim or final) declared, distributed or paid by the Company are exempt in the hands of shareholders as per the provisions of section 10(34) of the Act. 2. Exemption of Long Term Capital Gain under section 10(38) According to section 10(38) of the Act, long-term capital gains on sale of Equity Shares or units of an equity oriented fund where the transaction of sale is chargeable to STT shall be exempt from tax. 3. Lower Tax rate under section 112 on Long Term Capital Gains As per the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to Section112 (1), if the tax on long term capital gains resulting on transfer of listed securities or units, calculated at the rate of 20% with indexation benefit exceeds the tax on long term gains computed at the rate of 10% without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10% (plus applicable surcharge and education cess.) 4. Lower Tax rate under section 111A on Short Term Capital Gains As per the provisions of section 111A of the Act, short term capital gains on sale of Equity Shares where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 15% (plus applicable surcharge and education cess). 5. Exemption of Long Term Capital Gain under section 54EC Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (other than those exempt under section 10(38) of the Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: National Highway Authority of India constituted under section 3 of The National Highway Authority of India Act, 1988; 19

46 Rural Electrification Corporation Limited, the Company formed and registered under the Companies Act, If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this section for calculating capital gain, shall not be allowed as a deduction from the income tax under section 80C of the Act for any assessment year beginning on or after April 1, Further, the investment made on or after April 01, 2007 in the above specified assets by an assessee during any financial year cannot exceed `50 Lakhs. 6. Exemption of Long Term Capital Gain under section 54F According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case of an individual or a Hindu Undivided Family(HUF), gains arising on transfer of a long term capital asset (not being a residential house), other than gains exempt under section 10(38), are not chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in residential house, then such gains would not be chargeable to tax on a proportionate basis. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. III. TO NON RESIDENT INDIAN SHAREHOLDERS 1. Dividends exempt under section 10(34) Dividends (Whether interim or final) declared; distributed or paid by the Company are exempt in the hands of shareholders as per the provisions of section 10(34) of the Act. 2. Lower Tax rate under section 112 on Long Term Capital Gains In case investment is made in Indian rupees, the long term capital gain is to be computed after indexing the cost. According to the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units, calculated at the a rate of 20% with indexation benefit exceeds the tax on long term gains computed at the rate of 10% without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10% (plus applicable surcharge and education cess). 3. Lower Tax rate under section 111A on short term capital gains As per the provisions of section 111A of the Act, short term capital gains on sale of Equity Shares where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 15% (plus applicable surcharge and education cess). 4. Options available under the Act Where shares have been subscribed to in convertible foreign exchange Option of taxation under Chapter XII A of the Act: Non Resident Indians (as defined in section 115C (e) of the Act), being shareholders of an Indian Company, have the option of being governed by the provisions of Chapter XII A, which inter alia entitles them to the following benefits in respect of income from shares of an Indian Company acquired, purchased or subscribed to in convertible foreign exchange; According to the provisions of section 115D read with section 115E of the Act and subject to the conditions specified therein, long term capital gains arising on transfer of an Indian Company will be subject to tax at the rate of 10% (Plus applicable surcharge and education cess), without indexation benefit 20

47 According to the provisions of section 115F of the Act and subject to the conditions specified therein, gains arising on transfer of a long term capital asset being shares in an Indian Company shall not be chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period of six months in any specified asset or savings certificates referred to in section 10(4B) of the Act. If part of such net consideration is invested within the prescribed period of six months in any specified asset or savings certificates referred to in section 10 (4B) of the Act then such gains would not be chargeable to tax on a proportionate basis. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. Further, if the specified asset or savings certificate in which the investment has been made is transferred within a period of three years from the date of investment, the amount of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such specified asset or savings certificates are transferred. As per the provisions of section 115G of the Act, Non Resident Indians are not obliged to file a return of income under section 139 (1) of the Act, if their only source of income is income from investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVIIB of the Act. Under section 115H of the Act, Where Non Resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under section 139 of the Act to the effect that the provisions of the Chapter XIIA shall continue to apply to him in relation to such investment income derived from the specified assets for the year and subsequent assessment years until such assets are converted into money. As per the provisions of section 115I of the Act, Non Resident Indian may elect not to be governed by the provisions of Chapter XIIA for any assessment year by furnishing his return of income for that assessment year under section 139 of the Act, declaring therein that the provisions of Chapter XIIA shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act. 5. Exemption of Long term capital gain under section 10(38) According to section10 (38) of the Act, long term capital gains on sale of Equity Shares, where the transaction of sale is chargeable to STT, shall be exempt from tax. 6. Exemption of Long term capital gain under section 54EC Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (other than those exempt under section 10(38) of the Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: National Highway Authority of India constituted under section 3 of The National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the Company formed and registered under the Companies Act, If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this section for calculating capital gain, shall not be allowed as a deduction from the income tax under section 80C of the Act for any assessment year beginning on or after April 01, Further, the investment made on or after April 01, 2007 in the above specified assets by an assessee during any financial year cannot exceed `50 Lakhs. 21

48 7. Exemption of Long Term Capital Gain under section 54F According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case of an individual or a HUF, gains arising on transfer of a long term capital asset (not being a residential house), other than gains exempt under section 10(38), are not chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in a residential house. If part of such net consideration is invested within the prescribed period in a residential house, then such gains would not be chargeable to tax on a proportionate basis. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. 8. Tax Treaty benefits A non resident investor has an option to be governed by the provisions of the Act or the provisions of Tax Treaty that India has entered into with another country of which the investor is a tax resident, whichever is more beneficial. (B) BENEFITS AVAILABLE UNDER THE WEALTHTAX ACT, 1957 Exemption from Wealth Tax Asset as defined under section 2 (ea) of the Wealth Tax Act, 1957 does not include shares in companies and hence, shares are not liable to Wealth Tax. (C) BENEFITS AVAILABLE UNDER THE GIFT TAX ACT, 1958 Exemption from Gift Tax Gift Tax is not liable in respect of any gifts made on or after October 01, Therefore, any gift of shares will not attract Gift Tax. The above Statement of Possible 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. The statements made above are based on the tax laws in force and as interpreted by the relevant taxation authorities as of date. Investors are advised to consult their tax advisors with respect to the tax consequences of the purchase, ownership and disposal of Equity Shares. 22

49 SECTION IV: ABOUT THE COMPANY 1. HISTORY AND CORPORATE STRUCTURE OF THE COMPANY Muthoot Capital Services Limited is a public limited Non Banking Financial Company registered with the Reserve Bank of India and listed on the Bombay Stock Exchange. To augment its fund base, MCSL came out with a public issue in February MCSL has a strong presence in the banking and finance sector in rural and semi-urban areas in South India. The Company offers non-convertible debentures, auto loans, small and medium enterprise loans, gold loans, lease financing and bonds. MCSL also offers capital market services like financial advisory services, wealth management, insurance products of leading insurance and mutual fund companies. The expertise and experience of an expert team of management and business professionals provides customers with informed and competent service and advice. MCSL leverages the extensive branch network of the Muthoot Pappachan Group to deliver financial services and products to several locations in Kerala, Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh. The Issuer Company has schemes like Smart Plus Auto Loan (gold can be pledged as down payment), low down payment schemes, schemes with low interest rates, etc in order to deal with Competition. MCSL also gives its customers the facility to make the installment payments daily, weekly and monthly basis. Key Events and Milestones Year Event 1994 Incorporation 1995 Initial Public Offering 1995 Started Auto loan Business 1995 Commenced windmill operations 1998 Category A Deposit accepting NBFC License was obtained 2001 Started Gold Loan Business 2002 Started disbursing loans based on Demand Promissory Notes 2007 License from IRDA to act as a Corporate Agent was obtained 2007 Entered into agreement with HDFC Standard Life Insurance Company Limited to act as Corporate Agent 2007 Entered Auto Loans Business 2009 Entered into agreement with Birla SunLife Insurance Company Limited for Data Sharing Main Objects of the Company The main objects of the Company as set out in the Memorandum of Association are as under: 1. To carry on the business of Merchant Banking, Issue Management, Portfolio Management Discretionary Portfolio Management, Dealers and agents of motor cars, to act as Registrars to an Issue, Share Transfer Agents, Underwriters, Stock Broker of any stock exchange/(s), Sub-broker to any stockbroker, custodian, Bankers to the issue, Collecting Agents, Debenture Trustee, Investment Advisors, Financial Advisors, Equity and Debt Market Researchers, Full fledged Money changers, Authorised Dealers in Foreign Exchange, Venture Capitalist, Dealer for Wholesale Debt Instruments, and Dealer for Equity Instrument to execute Bought out Deals, and such other services which are directly or indirectly related to the Capital Market, Money Market and Financial Service Operations. 2. To do Hire Purchase Finance of all types on motor vehicles, machinery, etc. and to lend money on security on movable or immovable property or properties and to undertake and carry out and in particular the financing of Hire Purchase contracts or agreements relating to property or assets of any description whether fixed or movable. 3. To carry on the business of leasing and to finance lease operations of all kinds, purchasing, selling, hiring or 23

50 letting on hire all kinds of plant, machinery and equipment that the Company may think fit to assist in financing of all and every kind and description of Hire Purchase or Deferred Payment or similar transactions and to subsidies finance or assist in subsidising or financing the same and maintenance of any goods or articles or commodities of all and every kind and description upon any terms whatsoever and to purchase or otherwise deal in all forms of movable and immovable property including plant and machinery, equipment, automobiles, computer, all consumer, commercial and industrial items, lands and buildings and to lease or otherwise deal with them in any manner whatsoever including resale thereof regardless of whether the property purchased and leased be new and or used and from India or from any part of the world and to provide leasing advisory counseling services. 24

51 Corporate Structure MD CEO Accounts Manager FM Senior Manager Product Head Company Secretary Legal Officer Legal Assistant Accounts Officers Accounts Executive Management Trainee Software Engineer Auto loan Department HR Executive Collection Department Executive Assistant to CEO Credit Department Front Office Other Support Staff Branch Staff Branch Manager CSE Other Support Staff Operations Department Sales Department 25

52 2. MANAGEMENT Under the Articles of Association of the Company, other than Alternate Director, the Company cannot have less than three Directors and not more than 12 Directors. The Company, currently, has 6 Directors. The following table sets forth details regarding our Board of Directors as of the date of filing of the LoF with SEBI: Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Mr.Thomas John Muthoot : Chairman Age: 49 years (June 7, 1962) S/o Mr. Mathew M. Thomas Address: TC 4/1008, Muthoot House, Kuravankonam, Thiruvananthapuram Kerala DIN: Occupation: Business Date of Expiration of Current Term: Retire by Rotation Nationality: Indian Date of Appointment February 18, 1994 Qualifications 26 Experience (no. of years) Other Directorships/ Partnerships B. Com 26 years Muthoot APT Ceramics Ltd Muthoot Hotels and Infrastructure Ventures Pvt Ltd Muthoot Fincorp Ltd Muthoot Hotels Pvt Ltd Muthoot Motors Pvt Ltd Muthoot Exim Pvt Ltd Muthoot Infrastructure Ltd MPG Sports Academy Pvt Ltd L.M. Realtors Pvt Ltd Muthoot Agri Projects and Hospitalities Pvt Ltd Palakkad Infrastructure Pvt Ltd The Right Ambient Resorts Pvt Ltd Muthoot Pappachan Medicare Pvt Ltd Muthoot Housing Finance Company Ltd Muthoot Kuries Pvt Ltd Muthoot Equities Ltd Muthoot Land and Estates Pvt Ltd Muthoot Properties (India) Pvt Ltd Muthoot Buildtech (India) Pvt Ltd Muthoot Agri Development and Hospitalities Pvt Ltd Muthoot Bankers Muthoot Estate Investments Muthoot Financiers Muthoot Motors Muthoot Insurance Services Muthoot Cine Theatres Bamboo Agri Projects and Hospitalities Private Limited Fox Bush Agri Development and Hospitalities Private

53 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Date of Appointment Qualifications Experience (no. of years) Other Directorships/ Partnerships 27 Limited Calypso Agri Development and Hospitalities Private Limited El Toro Agri Projects and Hospitalities Private Limited Cinnamon Agri Development and Hospitalities Private Limited Musk Agri Ventures and Hospitalities Private Limited Fireworks Agri Development and Hospitalities Private Limited Pine Pink Agri Ventures and Hospitalities Private Limited Linden Agri Ventures and Hospitalities Private Limited Double Tails Agri Development and Hospitalities Private Limited Buttercup Agri Projects and Hospitalities Private Limited Goblin Agri Projects and Hospitalities Private Limited Alaska Agri Projects and Hospitalities Private Limited Muthoot Agri Ventures and Hospitalities Private Limited Muthoot Holdings Private Limited Mandarin Agri Ventures and Hospitalities Private Limited Flame Agri Projects and Hospitalities Private Limited Mariposa Agri Ventures and Hospitalities Private Limited Jungle Cat Agri Development and Hospitalities Private Limited

54 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Mr.Thomas Muthoot: Director George Managing Age: 49 years (June 7, 1962) S/o Mr. Mathew M. Thomas Address: Muthoot Towers, X L 7384, M.G.Road, Ernakulam, Kerala DIN: Occupation: Business Date of Expiration of Current Term: July 11, 2011 Nationality: Indian Date of Appointment February 18, 1994 Qualifications Experience (no. of years) Other Directorships/ Partnerships Emmel Realtors and Developers Private Ltd. Muthoot Automotive (India) Private Limited Muthoot Risk Insurance and Broking Services Limited B. Com 26 years Muthoot APT Ceramics Ltd Muthoot Hotels and Infrastructure Ventures Pvt Ltd Muthoot Fincorp Ltd Muthoot Hotels Pvt Ltd Muthoot Motors Pvt Ltd Muthoot Exim Pvt Ltd Muthoot Infrastructure Ltd MPG Sports Academy Pvt Ltd L.M. Realtors Pvt Ltd Muthoot Agri Projects and Hospitalities Pvt Ltd Palakkad Infrastructure Pvt Ltd The Right Ambient Resorts Pvt Ltd Muthoot Pappachan Medicare Pvt Ltd Muthoot Housing Finance Company Ltd Muthoot Kuries Pvt. Ltd Muthoot Equities Ltd Muthoot Land and Estates Pvt Ltd Muthoot Properties (India) Pvt Ltd Muthoot Buildtech (India) Pvt Ltd Muthoot Agri Development and Hospitalities Pvt Ltd Muthoot Bankers Muthoot Estate Investments Muthoot Financiers Muthoot Motors Muthoot Insurance Services Muthoot Cine Theatres Bamboo Agri Projects and Hospitalities Private Limited Fox Bush Agri Development and 28

55 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Date of Appointment Qualifications Experience (no. of years) Other Directorships/ Partnerships 29 Hospitalities Private Limited Calypso Agri Development and Hospitalities Private Limited El Toro Agri Projects and Hospitalities Private Limited Cinnamon Agri Development and Hospitalities Private Limited Musk Agri Ventures and Hospitalities Private Limited Fireworks Agri Development and Hospitalities Private Limited Pine Pink Agri Ventures and Hospitalities Private Limited Linden Agri Ventures and Hospitalities Private Limited Double Tails Agri Development and Hospitalities Private Limited Buttercup Agri Projects and Hospitalities Private Limited Goblin Agri Projects and Hospitalities Private Limited Alaska Agri Projects and Hospitalities Private Limited Muthoot Agri Ventures and Hospitalities Private Limited Muthoot Holdings Private Limited Mandarin Agri Ventures and Hospitalities Private Limited Flame Agri Projects and Hospitalities Private Limited Mariposa Agri Ventures and Hospitalities Private Limited Jungle Cat Agri Development and Hospitalities Private

56 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Mr. Thomas Muthoot : Director Age: 44 (July 15, 1966) S/o Mr. Mathew M. Thomas Address: Muthoot House, Cherukad P.O, Eroor, Ernakulam DIN: Occupation: Business Date of Expiration of Current Term: Retire by rotation Nationality: Indian Date of Appointment February 18, 1994 Qualifications 30 Experience (no. of years) Other Directorships/ Partnerships Limited Muthoot Automotive (India) Private Limited Muthoot Risk Insurance and Broking Services Limited BA, LLB 22 years Muthoot APT Ceramics Ltd Muthoot Hotels and Infrastructure Ventures Pvt Ltd Muthoot Fincorp Ltd Muthoot Hotels Pvt Ltd Muthoot Motors Pvt Ltd Muthoot Exim Pvt Ltd Muthoot Infrastructure Ltd MPG Sports Academy Pvt Ltd Muthoot Agri Projects and Hospitalities Pvt Ltd Palakkad Infrastructure Pvt Ltd The Right Ambient Resorts Pvt Ltd Muthoot Pappachan Medicare Pvt Ltd Muthoot Housing Finance Company Ltd Muthoot Kuries Pvt Ltd Muthoot Equities Ltd Muthoot Land and Estates Pvt Ltd Muthoot Properties (India) Pvt Ltd Muthoot Buildtech (India) Pvt Ltd Muthoot Agri Development and Hospitalities Pvt Ltd Muthoot Bankers Muthoot Estate Investments Muthoot Financiers Muthoot Motors Muthoot Insurance Services Muthoot Cine Theatres Bamboo Agri Projects and Hospitalities Private Limited Fox Bush Agri Development and Hospitalities Private Limited

57 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Date of Appointment Qualifications Experience (no. of years) Other Directorships/ Partnerships Calypso Agri Development and Hospitalities Private Limited El Toro Agri Projects and Hospitalities Private Limited Cinnamon Agri Development and Hospitalities Private Limited Musk Agri Ventures and Hospitalities Private Limited Fireworks Agri Development and Hospitalities Private Limited Pine Pink Agri Ventures and Hospitalities Private Limited Linden Agri Ventures and Hospitalities Private Limited Double Tails Agri Development and Hospitalities Private Limited Buttercup Agri Projects and Hospitalities Private Limited Goblin Agri Projects and Hospitalities Private Limited Alaska Agri Projects and Hospitalities Private Limited Muthoot Agri Ventures and Hospitalities Private Limited Muthoot Holdings Private Limited Mandarin Agri Ventures and Hospitalities Private Limited Flame Agri Projects and Hospitalities Private Limited Mariposa Agri Ventures and Hospitalities Private Limited Jungle Cat Agri Development and Hospitalities Private Limited 31

58 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Date of Appointment Qualifications Experience (no. of years) Other Directorships/ Partnerships Mr. Arrattukulam Peter Kurian : Director Age: 78 years (June 06, 1933) S/o A. Peter Kurian Address: 9, Friendship, 23 rd Road, TPS III, Bandra West, Mumbai, Maharashtra April 4, 1994 M.A. (Economics and Statistics) Muthoot Automotive (India) Private Limited Muthoot Risk Insurance and Broking Services Limited 49 years Geojit BNP Paribas Financial Services Ltd. National Stock Exchange Ltd Granules India Ltd. JPMorgan Asset Managements India Pvt Ltd. Muthoot Fincorp Ltd. DIN: Occupation: Retired Date of Expiration of Current Term: Retire by rotation Nationality: Indian Mr. Philip Kolethu Thomas : Director Age: 81 (October 22, 1929) December 11, 1994 MA, M.Sc (Economics) 25 years Devan Plastics Ltd. Indus Venture Management Services Ltd. S/o K.C.Thomas Address: 21, Abhilasha Sadan, Nargis Dutt Road, Pali Hill, Bandra West, Mumbai DIN: Occupation: Retired Date of Expiration of Current Term: Retire by rotation Nationality: Indian Mr. Kamalasanan Nair Ramakrishna : Director April 8, 2008 M.Com, ACA, LL.M. 38 years Muthoot Fincorp Ltd. 32

59 Name of Director, Age, DIN, Occupation, Date of Expiration of Term, Nationality Date of Appointment Qualifications Experience (no. of years) Other Directorships/ Partnerships Age: 72 (January 18, 1939) S/o Ramakrishna Pillai Address: Rubicon Apartments, Flat No: 8A, Medical College P O, Ullor, Trivandrum 7 DIN: Occupation: Accountant Chartered Date of Expiration of Current Term: Retire by rotation Nationality: Indian Details of current and past Directorship(s) of Directors of the Company, for a period of five years (prior to the date of this LoF) in listed companies whose shares have been / were suspended from being traded on the Bombay Stock Exchange Ltd./National Stock Exchange of India Ltd Directors are/ were associated with any listed Company whose shares have been/ were suspended from being traded on the Bombay Stock Exchange Ltd. /National Stock Exchange of India Ltd Details of current and past Directorship(s) of Directors of the Company, in listed companies who have been/ were delisted from the stock exchange(s) Directors are/were associated with any listed Company which has been delisted from stock exchange(s) Nature of family relationship between Directors Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot are brothers. There is no other family relationship between the Directors. Arrangement for selection of Director/Senior Management There is no arrangement or understanding with major shareholders, customers, suppliers etc for appointment of Directors or members of senior management. Details of appointment of the Managing Director and the compensation payable:- Name Mr. Thomas George Muthoot Designation Managing Director Date of Re-appointment August 29, 2008 Effective Date of Re-appointment July 12, 2008 Period 3 years Salary `36,00,000/- per annum Note: The salary of the Mr. Thomas George Muthoot has been revised as on May 12, 2010 and the sanction for 33

60 the same was obtained on November 22, 2010 Except as stated above in this section, no amount or benefit has been paid or given within the two preceding years or is intended to be paid or given to any of the Directors except the normal remuneration for services rendered as Directors. Interest of Directors 35 of this LoF, and to the extent of shareholding in the Company, the Directors do not have any other interest in the Company All the Directors of the Company, including Independent Directors, may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them under the Company All the Company Directors, are entitled to sitting fees of ` 1,000 each per meeting of the Board or a committee thereof. The Company him for services rendered as an officer or employee of the Company. All the Company Directors, including the independent Directors, may also be deemed to be interested to the extent of Shares, if any, held by them and also to the extent of any dividend payable to them and other distributions in respect of the said Shares. The Company Directors, including the independent Directors, may also be regarded as interested in the Shares, if any, held by or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as Directors, members, partners or trustees. All the Company Directors may be deemed to be interested in the contracts, agreements or arrangements entered into or to be entered into by the Company with any Company in which they hold Directorships or any partnership firm in which they are partners as declared in their respective declarations. Except as otherwise stated in this LoF and statutory registers maintained by the Company in this regard, the Company has not entered into any contract, agreements or arrangements during the preceding two years from the date of this LoF in which the Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements which are proposed to be made with them. 34

61 SECTION V. FINANCIAL INFORMATION 1. FINANCIAL STATEMENTS A. AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE To The Members of MUTHOOT CAPITAL SERVICES LTD We have examined the Compliance of conditions of Corporate Governance by Muthoot Capital Services Limited for the year ended on 31 st March 2011 as stipulated in Clause 49 of the Listing Agreement entered into by the Company with the Stock Exchanges. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to a review of procedures and implementation thereof, adopted by the company for ensuring the compliance with the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company. In our opinion and to the best of our information and according to the explanations given to us, we certify that company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the abovementioned Listing Agreement. We state that no investor grievances are pending for a period exceeding one month against the company as per the records maintained by the Share Transfer cum Investors Grievances Committee. We further state that such compliance is neither an assurance as to future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company. For K.VENKATACHALAM AIYER & Co Chartered Accountants FRN: S CA A. GOPALAKRISHNAN (Partner) Membership No Place: KOCHI Date: April 28,

62 B. AUDITORS 1 To the Members of MUTHOOT CAPITAL SERVICES LIMITED 1. We have audited the attached Balance Sheet of MUTHOOT CAPITAL SERVICES LTD., M.G. ROAD, ERNAKULAM as at March 31, 2011 and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed there to, which we have signed under reference to this report. These financial statements are the responsibility of the Company an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. Report)(Amendment) Order,2004 (together th sub- checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above we report that; We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit. In our opinion, the Company has kept proper books of account as required by law so far as appears from our examination of those books. The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account In our opinion the Balance sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report have been prepared in all material respects in compliance with the Accounting Standards referred to in sub-section (3C) of Section 211of the Companies Act 1956,to the extent applicable On the basis of the written representations received from the Directors of the Company as on March 31, 2011, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2011 from being appointed as a director of the Company in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956, In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Company here to, appearing in Schedule-O and other notes appearing elsewhere in the accounts give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: o in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011; o in the case of the Profit and Loss Account,of the profit of the Company for the year ended on that date and; o in the case of Cash Flow statement, of the cash flows for the year ended on that date. For K.VENKATACHALAM AIYER & Co Chartered Accountants FRN: S 36

63 CA A. GOPALAKRISHNAN (Partner) Membership No Place: KOCHI Date: April 28,

64 Annexure Referred to in Paragraph 3 of the Auditors date to the members of Muthoot Capital Services Limited, M.G. Road, Ernakulam on the Financial Statements for the year ended March 31, (i) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (ii) The fixed assets have been physically verified by the management during the period, the programme of verification of which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been noticed on such physical verification. (iii) In our opinion and according to the information and explanation given to us, a substantial part of the Fixed Assets has not been disposed off by the Company during the year. 2. (i) Except the repossessed assets from the borrowers the company does not have any stock of inventory. (ii) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory of the above items. 3. (i) On the basis of the explanations given by the management, we report that the Company has not taken any loans, secured or unsecured from Companies or other parties covered in the register maintained u/s 301 of the Companies Act. However we report that the Company has frequently entered into recurring and repetitive transactions with the Directors of the Company and the maximum amount to the credit of such account of the Directors during the year ended March 31, 2011 was `8, Lakhs ( : `3, Lakhs) and the outstanding balance as on was `2, Lakhs ( : `2, Lakhs) (ii) The company has granted secured loans of `6.15 Lakhs during the year ( : `1.10 Lakhs) to one relative of directors covered in the register maintained in pursuance of Section 301 of the Act. Apart from the above, the company has not granted any loans to other companies or firms covered in the register maintained u/s 301 of the Companies Act, (iii) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from/granted to companies, firms or other parties listed in the register maintained under section 301 of the Act are not prima facie prejudicial to the interests of the Company. (iv) In respect of the aforesaid loans, the company is regular in repaying the principal amounts as stipulated and is also regular in payment of interest, wherever applicable. The parties are repaying the principal amounts as stipulated and are also regular in payment of interest, wherever applicable. (v) There are no overdue amounts of loans taken from or granted to companies, firms or other parties listed in the register maintained in pursuance of Section 301 of the Act. 4. In our opinion and according to the information and explanations given to us there are adequate internal control procedures, commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures. 5. i) In our opinion and according to the information and explanations given to us, the transactions that need to be entered in the register in pursuant of section 301 of the Act, have been so entered. ii) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Act and exceeding the value of Rupees five Lakhs in respect of any party during the year prima facie, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6. The Company has not accepted deposits within the meaning of Sec 58A of the Companies Act 1956 from the public during the year ended March 31, The Company has an internal audit system, which in our opinion, is commensurate with the size and the 38

65 nature of its business. 8. i) According to the information and explanations given to us and the records of the Company examined by us, and in our opinion, the Company is regular in depositing the undisputed statutory dues including provident fund, value added tax and other material statutory dues as applicable with the appropriate authorities. ii) According to the information and explanations given to us there are no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax/ value added tax, excise duty and cess which are outstanding as at March 31,2011 for a period of more than six months from the date they became payable. iii) Details of dues of Income-Tax, which have not been deposited as on 31 March, 2011 on account of disputes are given below: Nature of Dues Forum where dispute is pending Period to which the amount relates-financial Year Amount involved (` in lakhs) Income Tax and Commissioner of Income Tax Interest (Appeals) Income Tax and Commissioner of Income Tax Interest (Appeals) Income Tax Income Tax Appellate Tribunal Income Tax Income Tax Appellate Tribunal Income Tax Income Tax Appellate Tribunal The Company has no accumulated losses as at March 31, 2011 and it has not incurred any cash losses during the year ended on that date or in the immediately preceding financial year. 10. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to any financial institution or Bank or Bondholders as at the balance sheet date. 11. In our opinion and according to the information and explanations given to us, Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities except loans given against the security of its own secured debentures/ bonds. 12. In our opinion Company has maintained proper records for the trading in shares; securities and other investments and timely entries have been made. 13. According to the explanations and information given to us, the Company has not given any guarantee during the year for loans taken by others from banks or other financial institutions, the terms and conditions of which are prejudicial to the interest of the Company. 14. To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company, prima facie, were applied by the Company during the year for the purposes for which the loans were obtained. 15. According to the cash flow statement and other records examined by us and the explanations and information given to us, on an overall examination of the balance sheet of the Company, funds raised on short-term basis have not been used for long-term investment. 16. According to the explanations and information given to us, during the year under audit the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. 17. According to the explanations and information given to us, the Company has created securities in respect of the secured redeemable non-convertible bonds issued and outstanding as on March 31, The Company has not raised money by public issues during the year ended March 31,

66 19. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the explanations and information given to us, we have neither come across with any instance of fraud on or by the Company being noticed or reported during the year, nor have we been informed of such case by the management. 20. In our opinion and according to the information and explanations given to us, the nature of the Company business/ activities during the year have been such that clauses(viii)and (xiii) of paragraph 4 of the Companies (Auditors Company for the year. For K.VENKATACHALAM AIYER & Co Chartered Accountants. FRN: S CA A. GOPALAKRISHNAN (Partner) Membership No Place: KOCHI Date: April 28,

67 AUDITORS -BANKING FINANCIAL COMPANIES AUDITORS ENDED MARCH 31, 2011 OF MUTHOOT CAPITAL SERVICES LTD., M.G. ROAD, ERNAKULAM. The Board of Directors, Muthoot Capital Services Ltd., M.G. Road, Ernakulam 1. The Company is engaged in the business of Non Banking Financial institution and it has obtained the certificate of registration as provided in section 45 IA of the RBI Act, The Company is entitled to hold Certificate of registration in terms of Asset/Income Pattern as on March 31, The Company is classified as a Deposit accepting Company as Per RBI Order No However the Company has not accepted any public deposits during the year under review 4. The Company has complied with the prudential norms on Income Recognition, Accounting standards, Asset Classification, Provisioning for bad and doubtful debts and concentration of credits / investments as specified in the directions issued by the Reserve Bank of India in terms of the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions The capital adequacy ratio as disclosed in the return submitted to the RBI in terms of Non Banking Financial (Deposit accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 has been correctly determined and such ratio is in compliance with the minimum Capital to Risk Asset Ratio prescribed by RBI. 6. As the Company has no public deposits during the year under review, the requirements of compliance with the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions 1998 are not applicable. 7. As the Company has no public deposits during the year under review, the requirement of having the minimum credit rating is not applicable to the Company in terms of the proviso to Paragraph 4 (1) (i) of NBFC Public Deposit Directions (RBI) Directions, There are certain secured bonds held by the Company as on the March 31, 2011, which have already been matured but for which the bondholders did not make any claim. We are informed that the Company has taken adequate steps for its repayment. The total number of accounts and total amount in respect thereof as on the date of Balance Sheet are as follows: - Particulars Nature of the instrument Secured bonds Public deposits (unsecured) Total Total no. of accounts 64 NIL 64 Principal amount due(`) `4,251,000 NIL `4,251,000 Interest accrued(`) `495,331 NIL `495,331 Total amount outstanding (`) `4,746,331 NIL ` 4,746, As the Company has no public deposits during the year, liquidity requirement by making investments in approved securities is not applicable. 10. The Company has furnished to the RBI the return on deposits as specified in the first schedule to the Non Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions The Company has furnished to the RBI the half-yearly return on prudential norms for & on and respectively as specified in the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions The management informed us that the said return of deposits for the half year commencing from October 2010 to March 2011 would be furnished to the 41

68 Reserve Bank of India before the due date viz. 30 th June As explained to us, the company has not opened or closed any branch or appointed any agent to collect deposit during the Year ended. Consequently, the requirement contained in the Non Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 is not applicable. For K.VENKATACHALAM AIYER & Co Chartered Accountants FR No S CA. A.GOPALAKRISHNAN Partner M No Place: KOCHI Date: April 28,

69 Statement of Unconsolidated Assets and Liabilities Particulars Sch As at March 31, 2011 As at March 31, 2010 No. ` ` SOURCES OF FUNDS Shareholders' Funds: Share Capital A 65,000,000 65,000,000 Reserves and Surplus B 222,682, ,691, ,682, ,691,855 Loan Funds Secured Loans C 874,669, ,191,810 Unsecured Loans D 592,463, ,043,066 1,467,133, ,234,876 TOTAL 1,754,815,371 1,013,926,731 APPLICATION OF FUNDS Fixed Assets E Gross Block 23,550,073 20,004,913 Less: Depreciation till date 17,125,625 15,692,326 Net Block 6,424,448 4,312,587 Investments F 1,890,450 1,833,462 Deferred Tax Asset 3,389,300 1,072,100 Current Assets, Loans and Advances: G A. Current Assets 1,331,766, ,696,166 B. Loans and Advances 462,142, ,734,194 1,793,908,872 1,039,430,360 Less: Current Liabilities and Provisions H Liabilities 15,991,869 9,055,156 Provisions 34,805,830 23,666,622 50,797,699 32,721,778 Net Current Assets 1,743,111,173 1,006,708,582 TOTAL 1,754,815,371 1,013,926,731 Notes on Accounts O The attached schedules and notes form an integral part of these accounts. This is the balance sheet referred to in our report of even date. 43

70 Statement of Unconsolidated Profits and Losses INCOME Particulars Year Ended Year Ended March Sch March 31, , 2010 No. ` ` Income from operations I 375,891, ,737,839 Other Income J 1,400,578 2,017,888 TOTAL 377,292, ,755,727 EXPENDITURE Financial Expenses K 115,705,205 69,160,678 Establishment Expenses L 51,165,868 24,829,562 Administrative and other expenses M 58,077,947 20,864,373 TOTAL 224,949, ,854,613 PROFIT BEFORE DEPRECIATION AND OTHER PROVISIONS 152,343, ,901,114 Depreciation E 1,433, ,821 Provision and Write offs N 5,848, ,302 PROFIT BEFORE TAX 145,061, ,741,991 Provision for taxation Current tax 50,700,000 37,220,000 Deferred Tax (2,317,200) (174,000) Fringe Benefit Tax Income Tax Adjustment For Earlier Years 24,593 (32,628) PROFIT AFTER TAX 96,653,895 71,728,619 Add: Balance brought forward from previous year 100,432,855 62,115,936 AMOUNT AVAILABLE FOR APPROPRIATIONS 197,086, ,844,555 Less: Appropriations Transfer to Statutory Reserve 19,400,000 14,400,000 Dividend 19,500,000 16,250,000 Dividend Tax 3,163,400 2,761,700 Surplus carried to Balance Sheet 155,023, ,432,855 Basic and Diluted Earnings Per Share Notes on Accounts O The attached schedules and notes form an integral part of these accounts. This is the profit and loss account referred to in our report of even date. 44

71 Cash Flow Statement Year ended Year ended March Sl. Particulars March 31, , 2010 No. ` ` A CASH FLOW FROM OPERATING ACTIVITIES 1 Net Profit before tax 145,061, ,741,991 2 Adjustments for:- i Depreciation 1,433, ,821 ii Excess Provision W/back 6,612,253 84,302 iii Bad debts written off - 36,333 iv Income Tax and FBT written off - - v Impairment of Fixed Assets - - vi Unclaimed balance written back - 7,990 vii Loss on Sale of Asset - - viii Profit on Sale of Asset - - ix Profit from Capital Market Operations (128,743) (49,324) x Dividend Income (85,232) (61,031) xi Assets written off - - 7,831, ,091 3 Operating profit before working capital changes 152,892, ,679,082 4 Net (Increase) / decrease in operating assets:- i Trade and other receivables (921,930) (638,103) ii Hire purchase receivables 78,065 50,856 iii Trade advances (740,508,798) (307,957,045) iv Other loans and advances (956,996) (51,938) (742,309,659) (308,596,230) 5 Net increase/ (decrease) in operating liabilitiesi Current Liabilities 6,936,713 (7,796,032) Ii Provisions (9,129) 8,810 6,927,584 (7,787,222) 6 Net changes in working capital (735,382,075) (316,383,452) 7 Cash Generated From Operating Activities (6+3) (582,489,210) (206,704,370) 8 Taxes paid (49,840,209) (37,009,036) Net cash from Operating Activities (A) (7+8) (632,329,419) (243,713,406) B CASH FLOW FROM INVESTING ACTIVITIES i Purchase of Fixed Assets (3,545,160) (1,741,741) ii Investments in Shares and Mutual Funds 71,755 (29,409) iii Dividend Received 85,232 61,031 Net cash from investing activities (B) (3,388,173) (1,710,119) C CASH FLOW FROM FINANCING ACTIVITIES i Increase in Secured Bonds 13,383,402 (1,548,184) ii Increase in Loan from Financial Institutions 285,093, ,739,943 iii Increase in Loan from Directors 68,420,746 92,117,733 iv Increase in Inter corporate deposit 300,000,000-45

72 Year ended Year ended March Sl. Particulars March 31, , 2010 No. ` ` v Dividend paid (including Corporate Dividend Tax) (19,011,700) (15,209,350) Net cash used for financing activities(c) 647,886, ,100,142 D E Net increase/(decrease) in cash and cash equivalents (A+B+C) OPENING CASH BALANCE AND CASH EQUIVALENTS 12,168,853 1,676,617 19,545,029 17,868,412 CLOSING CASH BALANCE AND CASH F 31,713,882 19,545,029 EQUIVALENTS Note:- 1. Cash and Cash Equivalents includes balances in unclaimed dividends account of Rs.17,64,912( Rs.11,09,353) 2. Previous year figures have been regrouped/reclassified wherever necessary to confirm to current The attached schedules and notes form an integral part of these accounts. This is the cash flow referred to in our report of even date. 46

73 MUTHOOT CAPITAL SERVICES LIMITED M.G.ROAD, ERNAKULAM SCHEDULE E FIXED ASSETS Sl.No. Description of the assets GROSS BLOCK DEPRECIATION NET BLOCK As at April 01,2010 Additions / (Deductions) during the year As at March 31, 2011 Rate Upto March 31, 2010 For the Year Upto March 31, 2011 W.D.V. as on March 31, 2011 W.D.V. as on March 31, 2010 ` ` ` % ` ` ` ` ` 1 Vehicles 3,075,502 59,760 3,135, % 1,927, ,578 2,233, ,643 1,148,461 2 Furniture and Fittings 3,130,229 1,253,406 4,383, % 2,594, ,075 2,754,715 1,628, ,589 3 Office Equipments 622, ,300 1,158, % 529,488 21, , ,218 92,757 4 Computers and Accessories 4,198,607 1,695,694 5,894, % 3,406, ,543 4,083,774 1,810, ,376 5 Windmill Generator 8,978, ,978, % 7,234, ,264 7,502,190 1,476,140 1,743,404 GRAND TOTAL 20,004,913 3,545,160 23,550,073 15,692,326 1,433,299 17,125,625 6,424,448 4,312,587 Previous Year 18,263,172 1,741,741 20,004,913 14,773, ,821 15,692,326 4,312,587 3,489,667 47

74 As at March 31, 2011 As at March 31, 2010 ` ` SCHEDULE - A SHARE CAPITAL Authorised 150,000, ,000,000 (1,50,00,000 Equity Shares of `10/- each) Issued and subscribed 65,00,000 Equity Shares of `10/- each fully called and paid up 65,000,000 65,000,000 SCHEDULE - B RESERVES AND SURPLUS Statutory Reserve As on April 01, ,159,000 33,759,000 Add: Transfer from Profit and Loss account 19,400,000 14,400,000 As on September 09, 2010 (A) 67,559,000 48,159,000 Surplus Carried from Profit and Loss Account (B) 155,023, ,432,855 Debenture Redemption Reserve (C) 100, ,000 TOTAL (A+B+C) 222,682, ,691,855 SCHEDULE - C SECURED LOANS Redeemable non-convertible bonds 152,191, ,676,000 Interest accrued but not due on bonds 14,929,956 14,061,554 (Secured by a charge on all movable assets, book debts, receivables and advances including loan against security of gold created by the Company) ICICI WORKING CAPITAL LOAN 100,000, ,000,000 ( Secured by hypothecation of Gold loan receivables and book debts) SBT-ERNAKULAM - Demand Loan ,149,886 - SBT-ERNAKULAM CC A/c 202,770,492 21,716,532 (Secured by a charge on all movable assets, book debts, receivables and advances including loan against security of gold created by the Company) H D F C Bank Ltd. 151,159, ,000,000 (First pari passu charge on the current assets including Gold Loan receivable of the Company) AXIS Bank Ltd. 101,756,740 99,635,742 (Secured by First charge on entire current assets including loan receivables, all the stock in trade both present and future, outstanding monies, receivables, claims and bills, along with SBT and ICICI Bank) HDFC Bank Ltd Car Loan-Getz - 25,112 (Secured by Hypothecation of Getz Car bearing Registration No KL 7 AX 284) 48

75 As at March 31, 2011 As at March 31, 2010 ` ` HDFC Bank Ltd Car Loan-Verna 345, ,630 (Secured by Hypothecation of Hyundai Verna Car bearing Registration No KL 7 BH 5228) HDFC Bank Ltd Car Loan-Asta I20 366, ,240 (Secured by Hypothecation of Asta i20 bearing Registration No KL 7 -BL-6708) TOTAL 874,669, ,191,810 SCHEDULE - D UNSECURED LOANS Loan from Directors 249,654, ,849,886 Add: Interest Payable on above 42,809,697 5,193, ,463, ,043,066 INTERCORPORATE DEPOSIT ECL Finance ltd 300,000, ,463, ,043,066 SCHEDULE - F INVESTMENTS Equity Shares -quoted (Valued at Cost or Market price whichever is lower and certified by the Management) At Cost 1,871,079 1,814,091 Preference share unquoted - - Less: Provision for diminution in value of investments - - 1,871,079 1,814,091 UTI GOLD - Exchange Traded Fund 19,371 19,371 (20 Units Of UTI Gold Exchange Traded Fund with NAV of ` as at , valued at Cost) TOTAL 1,890,450 1,833,462 SCHEDULE - G CURRENT ASSETS, LOANS AND ADVANCES CURRENT ASSETS Gross Stock on Hire - 80,492 Less: Unmatured finance charges - 2,427-78,065 Hypothecation Loan -Gross 1,632,188, ,890,126 Less: Unmatured finance charges 334,919,808 93,089,913 1,297,268, ,800,213 Add:-Value of repossessed automobile assets 688,074 99,068 Net Book Value 1,297,957, ,899,281 Cash and Bank Balances Cash -in hand 5,644,370 7,246,317 Bank Balances - in Current Accounts 24,126,940 11,169,359 - in Deposit Accounts(given as security to Commercial Tax Department, Govt. of Kerala) 20,000 20,000

76 As at March 31, 2011 As at March 31, 2010 ` ` - Unclaimed Dividend Accounts 1,764,912 1,109,353 DD on Hand 157,660 Receivables Outstanding for a period of: - More than six months - - Others 2,095,721 1,131,216 Prepaid Expense - 42,575 TOTAL 1,331,766, ,696,166 LOANS AND ADVANCES Loan against Gold Security, Loan against Company's own Bonds, Demand Promissory Notes, Inter corporate Deposits etc. i) Secured Considered good 447,688, ,192,776 Considered doubtful - ii) Unsecured Considered good 7,047,808 19,092,188 Considered doubtful - Deposits Considered good 3,344,707 3,344,807 Loans and advances - others 4,061,519 3,104,423 TOTAL 462,142, ,734,194 SCHEDULE -H CURRENT LIABILITIES AND PROVISIONS Current Liabilities 15,991,869 9,055,156 Provisions 34,805,830 23,666,622 TOTAL 50,797,699 32,721,778 SCHEDULE - I INCOME FROM OPERATIONS Finance charges earned 218,932,904 71,995,996 Income from Other Loans 147,863, ,860,327 Insurance Commission 9,094,838 4,881,515 TOTAL 375,891, ,737,838 SCHEDULE - J OTHER INCOME Interest on Bank deposits 441,366 Wind Mill Income 1,075,217 1,113,795 Profit from Capital Market Operations 128,743 49,324 Excess provision written back 55, ,000 Dividend 85,232 61,031 Miscellaneous Income 55, ,372 TOTAL 1,400,578 2,017,888 SCHEDULE- K FINANCIAL EXPENSES 50

77 As at March 31, 2011 As at March 31, 2010 ` ` Interest on Bank Loans 42,186,418 34,208,871 Interest on Bonds 15,628,939 15,506,307 Interest on Others 55,170,042 15,941,300 Other Financial Expenses 2,719,806 3,504,200 TOTAL 115,705,205 69,160,678 SCHEDULE- L ESTABLISHMENT EXPENSES Remuneration to Employees 47,802,964 23,329,562 Remuneration to Directors 3,362,904 1,500,000 TOTAL 51,165,868 24,829,562 SCHEDULE- M ADMINISTRATIVE and OTHER EXPENSES Rent, Rates and Taxes (Sub. Sch. 20) 7,098,072 4,719,371 Reimbursement of operating expense 4,505,888 4,470,437 Business Promotion Expenses 3,183, ,360 Dealer Incentive 20,505,904 - Professional Charges 8,785,632 4,033,272 General Expenses (Sub. Sch. 21) 13,999,106 7,152,933 TOTAL 58,077,947 20,864,373 SCHEDULE- N PROVISIONS and WRITE OFFS Provision for Non Performing Assets 198, ,302 Provision for diminution in the value of Repossessed Assets 294,593 Provision for Contingencies 1,000,000 Contingent Provisions against Standard Assets 4,355,556 TOTAL 5,848, ,302 51

78 SCHEDULE O NOTES FORMING PART OF ACCOUNTS FOR THE YEAR ENDED MARCH 31, SIGNIFICANT ACCOUNTING POLICIES Basis for preparation of financial statements. The financial statements for the year ended March 31, 2011, have been prepared under historical cost mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and in compliance with the provisions of Companies Act, 1956 and the directions issued by Reserve Bank of India for Non Banking Financial Companies from time to time wherever applicable. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year Use of Estimates The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the balance sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the manage relevant facts and circumstances as of the date of financial statements. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognised prospectively in the current and future years Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured a. Finance charges in respect of hire Purchase/hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Overdue charges on belated hire purchase /hypothecation loan installments are accounted as and when received by the Company. b. Interest on loans and advances is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for delayed payments are accounted as and when received. c. Dividend on investments is recognized as income when right to receive payment is established by the date of balance sheet. The profit/loss on Capital Market Operations is recognised at the time of actual sale/redemption of investments. d. Income in respect of Non-performing assets is recognized as and when received as per the guidelines given in the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, e. Income from Services is recognized on accrual basis as per the terms of the contract f. Income from power generation is recognized on supply of power to the grid as per the terms of the power purchase agreement with Tamil Nadu Electricity Board 1.4. Treatment of expenses: a. b. As per the guidelines given in the Prudential Norms for Non Banking Financial Companies prescribed by the Reserve Bank of India, the Company makes adequate provisions against Non Performing Assets in the following manner. i. Sub-standard Assets: Provision as required by paragraph 9 of the Non Banking Financial Companies Prudential Norms 52

79 (Reserve Bank) Directions ii. Doubtful/ Loss Assets: Provision as required by paragraph 9 of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions iii. Standard Assets: Provisions against Standard Assets are made at the rate of 0.25% as required by Paragraph 9A of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007 read with Notification No. DNBS.222/ CGM(US)-2011 issued by Reserve Bank India on January 17, The Company has followed the Directions prescribed by the Reserve Bank of India for Non Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, provisioning / writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments and Non Banking Finance Companies acceptance of Public Deposits (Reserve Bank) Directions Fixed Assets, Depreciation and Impairment Of Assets: a. Fixed Assets Fixed assets are carried at historical cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. b. Depreciation Depreciation on assets held for own use of the Company is provided on written down value method at the rates prescribed under schedule XIV of the Companies Act, All fixed assets individually costing ` 5,000/- or less are fully depreciated in the year of installation. Depreciation on Assets sold during the year is recognised on a prorata basis to the profit and loss account till the date of sale. c. Impairment of Assets 1.7. Investments: The carrying amounts of assets are reviewed at each balance sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets' net selling price and their value in use. After impairment, depreciation is provided on the revised carrying amount of the asset as per the depreciation rate prescribed in Schedule XIV of the Companies Act A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. The investments made by the Company, are valued as per the Accounting Standard-13 issued by The Institute of Chartered Accountants of India. Current investments are valued at lower of cost or market value/realisable value determined on an individual investment basis. Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline, other than temporary, in the value of the investments Hire Purchase/Hypothecation Loans a. Hire purchase / hypothecation loans are stated at the amounts advanced including finance charges accrued and expenses recoverable, as reduced by amounts received up to balance sheet date. 53

80 b. Repossessed automobile assets are valued at lower of book value and estimated realisable value Income Tax: - Provision for taxation is made in accordance with the Accounting Standard- income for the year. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences in the financial statements between carrying amounts of existing assets and liabilities and their respective tax bases. Deferred Tax Liability arising from timing differences have been fully provided for. Deferred Tax assets are recognised on the consideration of prudence. Deferred tax assets and deferred tax liabilities are Employee Benefits a. Short Term Employee Benefits Short term employee benefits such as leave encashment and incentives for services rendered by employees are estimated by the management and recognized during the period when the services are rendered. b. Post Employment Benefits i. Defined Contribution plan- Provident Fund. Contributions to provident fund made in accordance with the EPF rules are accounted on actual cost to the company. ii. Defined Benefit plan - Gratuity Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/payable to be determined on actuarial valuation by LIC is charged to the Profit & Loss Account Segment Reporting: ent which constitutes Financing Activities (Advancing of Gold Loan, Hire Purchase and Hypothecation Loans and DPN's etc.), The Company operates primarily in India, hence there is no other significant geographical segment that require the disclosure Related Party Disclosure: Disclosures are made as per the requirements of the Accounting Standard 18 read with the clarifications issued by Institute of Chartered Accountants of India Earnings per Share: The Company reports basic earning per share in accordance with AS-20 "Earnings per Share", issued by the ICAI. Basic earning per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. For the purpose of calculating Diluted earnings per share the net profit or loss for the period attributable to equity share holders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares Provisions other than that for Non Performing Assets: Provisions are recognized when the company has present legal or constructive obligations, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made for the amount of the obligation. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation 54

81 at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates Cash and Cash Equivalents Cash and cash equivalents in the cash flow statements comprise cash at hand and at bank, remittances in transits and short term investments with an original maturity of 3 months or less Rights Issue Expense Issue expenses incurred in respect of proposed right issue of the Company has been fully charged to the Profit and Loss Account Contingent Liabilities Contingent liability is disclosed for (i) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised. 55

82 2. BALANCE SHEET 2.1. Debenture Redemption Reserve (DRR) As per the clarification regarding Debenture Redemption Reserve given in general Circular no. 9/2002 dated issued by Department of Company affairs, for NBFCs registered with RBI u/s. 45-IA of the RBI (Amendment) Act, 1997, Debenture Redemption Reserve is not required in the case of privately placed debentures. The directors confirm that the company issued only privately placed secured bonds and hence it is not required to create Debenture Redemption Reserve u/s 117C of the Companies Act 1956 and accordingly the company did not create Debenture Redemption Reserve during the year ended March 31, Secured Loans: Particulars of privately placed Secured Redeemable Bonds: Secured by a charge on all movable assets, book debts, receivables and advances including loans against security of gold created by the company Fully Secured During Current Year Ended March 31, 2011 Amount In ` During Previous Year Ended March 31, 2010 Amount In ` Issue 133,600,000 99,705,000 Redemption 121,085, ,479,000 56

83 Series Number of Bonds/Year of Maturity Grand Total , , , ,000 4 Total , , ,000 A 30 30,000 30, ,000 3, ,000 38,000 2,205 2,205,000 2,205,000 A Total 2,276 30,000 3,000 38,000 2,205,000 2,276,000 B 6 6,000 6, ,000 5, , ,000 7,081 7,081,000 7,081,000 1,260 1,260,000 1,260, , ,000 4,295 4,295,000 4,295,000 B Total 13,795 6,000 5, ,000 7,081,000 1,260, ,000 4,295,000 13,795,000 C 81 81,000 81, ,000 62,000 4,162 4,162,000 4,162,000 6,950 6,950,000 6,950,000 C Total 11,255 81,000 62,000 4,162,000 6,950,000 11,255,000 E , ,000 1,687 1,687,000 1,687, , , ,000 6,000 E Total 2, ,000 1,687, ,000 6,000 2,443,000 57

84 Series Number of Bonds/Year of Maturity Grand Total F , ,000 3,108 3,108,000 3,108, ,000 67,000 1,849 1,849,000 1,849,000 F Total 5, ,000 3,108,000 67,000 1,849,000 5,166,000 G 2,362 2,362,000 2,362,000 2,184 2,184,000 2,184, ,000 42,000 1,254 1,254,000 1,254,000 G Total 5,842 2,362,000 2,184,000 42,000 1,254,000 5,842,000 H 1,049 1,049,000 1,049,000 29,921 29,921, ,921,000 2,652 2,652,000 2,652,000 8,521 8,521,000 8,521, , , , ,000 3,138 3,138,000 3,138,000 46,244 1,049,000 29,921,00 2,652,000 8,521, , ,000 3,138,000 46,244,000 H Total 0 I 1,968 1,968,000 1,968,000 4,061 4,061,000 4,061,000 1,555 1,555,000 1,555, , ,000 1,390 1,390,000 1,390,000 1,165 1,165,000 1,165,000 I Total 10,583 1,968,000 4,061,000 1,555, ,000 1,390,000 1,165,000 10,583,000 J 15,490 15,490,00 15,490,000 58

85 Series Number of Bonds/Year of Maturity Grand Total , ,000 6,147 6,147,000 6,147,000 2,758 2,758,000 2,758,000 25,064 15,490,00 669,000 6,147,000 2,758,000 25,064,000 J Total 0 14,714 14,714,00 14,714,000 K 0 3,670 3,670,000 3,670,000 4,404 4,404,000 4,404, ,000 50, , ,000 23,300 14,714,00 3,670,000 4,404,000 50, ,000 23,300,000 K Total 0 M 1,502 1,502,000 1,502,000 3,339 3,339,000 3,339, , , ,000 15,000 M Total 5,550 1,502,000 3,339, ,000 15,000 5,550,000 Grand Total 152, ,000 9,000 5,000 81,000 3,646,000 83,327, ,387,000 21,122,000 5,154,000 5,412,000 7,538, ,191,000 Note:- The balance outstanding in respect of the secured redeemable debentures for which maturity attained on or before March 31, 2011 represents the amount not claimed by the Bond holders. The year of redemption shown above is based on the maturity date of the bonds outstanding as on March 31,

86 2.3. Loans from Financial institutions (`in lakhs) PARTICULARS Amount Amount March 31, 2011 March 31, 2010 ICICI Bank Ltd 1, , State Bank of Travancore 3, H D F C Bank Ltd. 1, , AXIS Bank Ltd. 1, Vehicle Loans From: HDFC Bank TOTAL 7, , ) ICICI Working Capital Demand Loan The Company, has availed working capital loan of `1,000 Lakhs from ICICI Bank Ltd as on the balance sheet date (March 31, 2010: ` 2,000 Lakhs) by creating First charge on current assets of the company ranking pari passu with other participating banks and debenture trustees and Personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. 2) Loan from State Bank of Travancore As on the Balance Sheet date, the Company has availed a working capital demand loan of `1, Lakhs (March 31, 2010: ` Nil) and cash credit of `2, Lakhs (March 31, 2010: ` Lakhs) from State Bank of Travancore by creating First charge on the entire current assets including gold loan receivables, business loans receivables, vehicle loan receivables, loan against DPN, ICD etc ranking pari passu with other working capital lenders and personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. 4) Loan from HDFC Bank Ltd. The company has availed a working capital demand loan of ` 1, Lakhs as on the balance sheet date (March 31, 2010: `1,000 Lakhs) from HDFC Bank Ltd secured by first Pari passu charge on the current assets of the company including Gold Loan receivables and hire purchase receivable and personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. 5) Loan from Axis Bank Ltd. The company has availed a cash credit/working capital demand loan of `1, Lakhs as on the balance sheet date (March 31, 2010: ` Lakhs) from Axis Bank Ltd., secured by pari passu first charge on entire current assets including loan receivables and personal guarantee of the Chairman Mr.Thomas John Muthoot and the directors Mr.Thomas George Muthoot and Mr.Thomas Muthoot. 6) Vehicle Loans from HDFC Bank Ltd. The Company has availed Hypothecation Loans from HDFC Bank Ltd. for the purchase of 3 Cars. The amount outstanding as on March 31, 2011 is ` 7.12 Lakhs (March 31, 2010: `11.02 Lakhs) Unsecured Loans: 1) Loan from Directors 60

87 The company has entered into frequent recurring and repetitive transactions involving receipts and payments of different amounts with the directors of the company. The balance outstanding as on March 31, 2011 was ` 2, Lakhs, inclusive of interest accrued thereon. (March 31, 2010: `2, Lakhs). 2) Inter Corporate Deposit During the year the company accepted a short term inter corporate deposit of ` 3,000 Lakhs from M/s ECL Finance Limited to meet the working capital requirement Current Assets a. Hire Purchase/Hypothecation Receivables Hypothecation/ Hire purchase agreements comprise of automobile and other equipments and the amounts receivable under these agreements as at March 31, 2011 are as follows. (` in Lakhs) Receivables Gross Un-matured Finance Charges Net Due but not received Within one year 8, , , Between one and five years 7, , , Total 1 6, , , Loans and Advances Loans and Advances includes Gold Loans, Loan against Bonds, DPNs, Deposits and other advances (Grouped under Schedule G) 2.7. Current Liabilities and Provisions: a. To the extent identified with available information the Company does not owe any amount to Micro, Small and Medium Enterprises. b. The company provided an amount of `12.75 Lakhs (March 31, 2010: ` NIL) to meet the unforeseen losses / contingent liabilities, if any as on the balance sheet date Deferred Tax Assets/Liabilities: In accordance with AS-22 'Accounting for taxes on income' issued by Institute of Chartered Accountants of India (ICAI), Company has recognised deferred tax for the year. The breakup of deferred tax assets and liabilities into major components at is as follows:- (` in Lakhs) Sl.No Deferred tax liability / (Asset) as at March 31, 2011 Deferred tax For the Year liability / (Asset) as Ended March 31, Particulars at April 01, Difference between book and tax depreciation Provision for NPA and other Contingent Liabilities (6.17) (21.94) (28.11) Expenses Disallowed under Income Tax Act, 1961 (5.53).31 (5.22) 61

88 Sl.No 4 Deferred tax liability / (Asset) as at April 01, 2010 For the Year Ended March 31, 2011 Deferred tax liability / (Asset) as at March 31, 2011 Particulars Preliminary expenses u/s 35D of the Income Tax Act 1961 (1.06) (1.89) (2.95) Total (10.72) (23.17) (33.89) 3. PROFIT AND LOSS ACCOUNT a. Retirement benefits: The company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India. The Gratuity Trust Scheme is a defined benefit scheme and the company has to make contributions under such scheme. For the year ended , actuarial valuation of gratuity has been carried out and the disclosure required as per the revised Accounting Standard 15 for defined benefits plans is shown below: Reconciliation of Defined Benefit Obligation and Plan Asset for the year Year Ended Year Ended Particulars 31-Mar Mar-10 Amount (`) Amount (`) Change in Defined Benefit Obligation Opening Defined Benefit Obligation 517, ,412 Current Service cost 120,649 63,736 Interest cost 41,430 23,793 Actuarial Losses/ (Gain) 429, ,928 Benefits paid - - Closing Defined Benefit Obligation 1109, ,869 Change in Fair Value of Assets Opening Fair Value of Plan Assets 523, ,222 Expected Return on plan assets 47,089 18,999 Contribution - 297,993 Benefits paid - - Actuarial Gain/ (Losses) on plan asset - - Closing Fair Value of Plan Assets 570, ,214 Amount to be recognized in Balance Sheet Year Ended Year Ended Particulars 31-Mar Mar-10 Amount(`) Amount(`) Present value of obligation as at the end of the year 1,109, ,869 Fair Value of plan assets as at the end of the year (570,303) (523,214) Net Liability/ (Assets) 539,306 (5,345) 62

89 Amounts in Balance Sheet Liability (539,306) - Assets - 5,345 Net Asset (Liability) (539,306) 5,345 Expense recognized in Profit and Loss Account Year Ended Year Ended Particulars 31-Mar Mar-10 Amount (`) Amount (`) Current Service Cost 120,649 63,736 Interest cost 41,430 23,793 Expected Return on Plan Asset (47,089) (18,999) Net actuarial (gain)/loss recognized in the year 429, , , ,458 below Particulars Year Ended Period Ended March 31, 2011 March 31, 2010 Discount Rate (p.a) 8.00% 8.00% Salary Escalation Rate (p.a) 7.00% 5.00% b. Remuneration to Directors: Particulars of remuneration paid to whole time Directors for the year ended on March 31, (` in lakhs) PARTICULARS 63 Year Ended March 31, 2011 Year Ended March 31, 2010 Salaries Other allowances and Perquisites Contribution to PF TOTAL Number of whole time Directors as on March 31, One Computation of Net Profit for calculation of remuneration to Directors under sections 198 and 349 of the Companies Act, 1956 PARTICULARS Year Ended March 31, Year Ended March 31, 2010 Profit before tax as per Profit & Loss Account 1, , Add; Directors remuneration Provision & Write offs Depreciation as per books

90 PARTICULARS 64 Year Ended March 31, Year Ended March 31, 2010 Sub Total Total 1, , Less; Depreciation as per section 350 of Companies Act Profit on Sale of Investments Sub Total Profit under section 349 of the Companies Act, , , Maximum Commission payable- 1% Net Profit computed, as per section 349 of the Companies Act, Commission paid to Directors Nil Nil Maximum remuneration payable: - 5% Net profit computed as per section 349 of the Companies Act, Remuneration paid to Managing and whole time directors : c. Payment to Auditors included under administrative and other expenses (` in Lakhs) Particulars Year Ended March 31, Year Ended March 31, 2010 a. Statutory Audit b. Taxation matters c. Other services d. Certifications TOTAL d. The names of employees drawing salary more than ` 2 lakhs per month if employed for part or whole of the year are given below. Sl No Name Designation Amount 1 Thomas George Muthoot Managing Director ` Lakhs 2 R Manomohanan Chief Executive Officer ` Lakhs e. Financial Expenses "Interest on Other Borrowings" includes ` Lakhs ( : ` Lakhs) being interest paid/ credited to Directors in respect of unsecured loans received from them. f. During the year the Company made a Provision of ` Lakhs being 0.25% of its Standard Assets as Per Notification No. DNBS.222/ CGM (US)-2011 issued by Reserve Bank India on January 17, GENERAL 4.1 i. Expenditure in Foreign currency - Nil ii. Earning in Foreign currency - Nil iii. Remittances in Foreign currency on account of dividend - Nil

91 iv. C I F value of imports - Nil a. Some of the balances under Sundry debtors, Sundry creditors, Loans and advances, Stock on hire, Deposits, Secured Bonds and Unsecured loans are subject to confirmation/reconciliation due to nonreceipt of the statements of accounts and confirmation letters. Necessary adjustments if any, in the accounts will be made on completion of the reconciliation/receipt of confirmation letter/statement of accounts. b. Earnings Per Share Basic and Diluted earning per equity share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding as on March 31, Calculation of Basic and Diluted Earnings per Share Sl.No Particulars Year Ended March 31, Profit available for appropriation as per Profit & Loss Account Weighted average no. of shares during the year Year Ended March 31, ,66,53,895 71,728,619 6,500,000 6,500,000 3 Nominal value of shares `10/- `10/- 4 Basic and Diluted Earning per share c. Related Party Disclosure Related Party Disclosures as required by AS- below. The related Parties are being recognized / identified by the management and relied up on by the auditors. 1) List of related parties as on March 31, 2011 is given below. A. List of companies/ Firms where control / significant influence exists; 1. Alaska Agri Projects and Hospitalities Private Limited 2. Bamboo Agri Projects and Hospitalities Private Limited 3. Buttercup Agri Projects and Hospitalities Private Limited 4. Calypso Agri Development and Hospitalities Private Limited 5. Cinnamon Agri Development and Hospitalities Private Limited 6. Double Tails Agri Development and Hospitalities Private Limited 7. El Toro Agri Projects and Hospitalities Private Limited 8. EMMEL Realtors & Developers P Ltd 9. Fireworks Agri Development and Hospitalities Private Limited 10. Flame Agri Projects and Hospitalities Private Limited 11. Fox Bush Agri Development and Hospitalities Private Limited 12. Goblin Agri Projects and Hospitalities Private Limited 13. Jungle Cat Agri Development and Hospitalities Private Limited 14. L.M Realtors Pvt Ltd 15. Linden Agri Ventures and Hospitalities Private Limited 16. Mandarin Agri Ventures and Hospitalities Private Limited 17. Mariposa Agri Ventures and Hospitalities Private Limited 18. MPG Sports Academy Pvt Ltd 19. Musk Agri Ventures and Hospitalities Private Limited 65

92 20. Muthoot Agri Development and Hospitalities Private Limited 21. Muthoot Agri Projects and Hospitalities Pvt Ltd 22. Muthoot Agri Ventures and Hospitalities Private Limited 23. Muthoot APT Ceramics Ltd 24. Muthoot Automotive India P Ltd 25. Muthoot Bankers 26. Muthoot Buildtech (India) Private Limited 27. Muthoot Cine Enterprises (Kripa Theatres) 28. Muthoot Equities Limited 29. Muthoot Estate Investments 30. Muthoot Exim Pvt Ltd. 31. Muthoot Financiers 32. Muthoot Fincorp Ltd. 33. Muthoot Holdings Private Limited 34. Muthoot Hotels (P) Ltd. 35. Muthoot Hotels & Infrastructure Ventures (P) Ltd. 36. Muthoot Housing Finance Company Ltd. 37. Muthoot Infrastructure Ltd 38. Muthoot Insurance Services 39. Muthoot Kuries Private Limited 40. Muthoot Land and Estates Private Limited 41. Muthoot Motors (Cochin) 42. Muthoot Motors Private Ltd. 43. Muthoot Pappachan Medicare Pvt Ltd 44. Muthoot Properties ( India) Private Limited 45. Muthoot Risk Insurance & Broking Services Ltd. 46. Muthoot Travel Online 47. Palakkad Infrastructure Pvt Ltd 48. Pine Pink Agri Ventures and Hospitalities Private Limited 49. The Right Ambient Resorts Pvt Ltd B. Name of Key Managerial Persons: Sl No Name of the Person Designation 1. Thomas John Muthoot Chairman 2. Thomas George Muthoot Managing Director 3. Thomas Muthoot Director C. Relative of Key Managerial Key Managerial person Name of Relative Nature of Relationship Thomas John Muthoot Mrs. Janamma Thomas Mother Mrs. Preethi John Spouse Ms. Susan John Muthoot Daughter Mr. Thomas M John Son Thomas George Muthoot Mrs.Nina George Spouse Ms. Tina Suzanne George Daughter Ms. Ritu Elizabeth George Daughter Ms. Sweta Ann George Daughter Thomas Muthoot Mrs. Remy Thomas Spouse Ms. Suzannah Muthoot Daughter 66

93 Ms. Hannah Muthoot Daughter 2) The list of related party transactions for the year ended 31st March 2011 Details relating to parties referred to in Item (A) Sl No Particulars Transaction Transaction for the Year for the Year ` ` 1 Expenses recovered - 4,29,373 2 Advance Given (Net) 1,294-3 Reimbursement of Operating Expenses 45,05,888 44,70,437 4 Business Promotion Expenses 15,03,010-5 Liability taken over by the related party 3,55,824-6 Dealer Incentive Expense 13,73,889 - Sl No Particulars 67 Outstanding Balance As on March 31, 2011 ` Outstanding Balance As on March 31, Other Advances outstanding - 13,355 2 Amount Receivable 1, ,106 3 Expenses Payable 4,786,976-4 Amount Payable for Liability taken over by the related party Details relating to parties referred to in Item (B) Sl No Particulars Transaction for the Year 355,824 - ` Transaction for the Year ` ` 1 Rent paid 5,44,320 5,44,320 2 Salaries & other allowances 33,62,904 15,00,000 3 Interest on loans 5,50,87,850 1,59,41,300 4 Dividend Paid 1,08,82,115 87,02,892 Sl No Particulars Outstanding Balance Outstanding Balance As on March 31, 2011 As on March 31, Loan From Directors payable 292,463, ,043,066 2 Maximum amount of credit in Transaction with related parties ` 823,483, ,811,057 3 Rent Deposit 2,500,000 2,500,000 `

94 Details relating to parties referred to in Item (C): Sl. No Particulars Hire Purchase/Hypothecation Loan Given Hire Purchase/Hypothecation Loan Installments Received Hire Purchase/Hypothecation Loan Outstanding Interest Income from Hypothecation Loan For the year ended March 31, 2011 For the Year ended March 31, , , ,026 64, ,500 47,276 5 Dividend Paid 1,434,440 1,273,752 d. Disclosure as required in terms of Paragraph 13 of Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions, Liabilities side: Particulars 1 Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid: a) b) c) d) e) f) Amount Outstanding (` in Lakhs) Amount Overdue Debentures : Secured : Unsecured Nil Nil (Other than falling within the meaning of public deposits*) Deferred Credits Nil Nil Term Loans Nil Nil Inter- corporate loans and borrowings Commercial Paper Nil Nil Public Deposits Nil Nil g) Other loans State Bank of Travancore (Working Capital Demand Loan) State Bank of Travancore (Cash Credit) ICICI Bank Ltd (Working Capital Demand Loan) HDFC Bank Ltd (Working Capital Demand Loan) Axis Bank Ltd (Cash Credit) HDFC Car Loan Nil 68

95 Note : Amount overdue ` lakhs in secured debentures is in respect of bonds for which payments could not be made as claims were not made by bond holders. 2 Break-up of (1)(f) above (Outstanding public deposits inclusive of interest accrued thereon but not paid): Amount Outstanding a) In the form of Unsecured debentures Nil b) In the form of partly secured debentures Nil i.e. debentures where there is a shortfall in the value of security c) Other public deposits Assets side (` in lakhs) Nil Amount Overdue Particulars 3 Break-up of Loans and Advances including bills receivables [other than those included in (4) below]: (a) Secured (b) Unsecured 4 Break up of Leased Assets and stock on hire and hypothecation loans counting towards EL/HP activities Amount Outstanding - - (i) Lease assets including lease rentals under sundry debtors (a) Financial lease (b) Operating lease (ii) Stock on hire including hire charges under sundry debtors: (a) Assets on hire (b) Repossessed Assets Nil Nil Nil Nil (iii) Hypothecation loans counting towards EL/HP activities (a) Loans where assets have been 6.88 repossessed (b) Loans other than (a) above Particulars 5 Break-up of Investments Current Investments: - 69 Amount Outstanding Market value 1. Quoted: - (i) Shares: (a) Equity (b) Preference Nil Nil

96 (ii) Debentures and Bonds Nil Nil (iii) Units of mutual funds Nil Nil (iv) Government Securities Nil Nil (v) Others (please specify) Gold Exchange traded fund of UTI Unquoted: - (i) Shares: (a) Equity Nil Nil (b) Preference Nil Nil ii) Debentures and Bonds Nil Nil (iii) Units of mutual funds Nil Nil (iv) Government Securities Nil Nil (v) Others (Please specify) Nil Nil Long Term investments: - 1. Quoted: - (i) Share: (a) Equity Nil Nil (b) Preference Nil Nil (ii) Debentures and Bonds Nil Nil (iii) Units of mutual funds Nil Nil (iv) Government Securities Nil Nil (v) Others (Please specify) Nil Nil 2. Unquoted: - (i) Shares: (a) Equity Nil Nil (b) Preference Nil Nil (ii) Debentures and Bonds Nil Nil (iii) Units of mutual funds Nil Nil (iv) Government Securities Nil Nil (v) Others (Please specify) Nil Nil 6 Borrower group-wise classification of all leased assets, stock on hire and loans and advances Amount net of provisions Category Secured Unsecur Total ed 1.Related Parties (a) Subsidiaries Nil Nil Nil (b) Companies in the same group Nil Nil Nil (c ) Other related parties 0.64 Nil Other than related parties

97 Total Investors group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted): Category Market Value/ Breakup or fair value or NAV Book Value (Net of provisions) 1.Related Parties (a) Subsidiaries Nil Nil (b) Companies in the same group Nil Nil (c) Other related parties Nil Nil 2.Other than related parties Total Other Information Particulars Amount (` in lakhs) (i) (ii) (iii) Gross Non Performing Assets (a) Related Parties (b) Other than related parties Net Non Performing Assets (a) Related Parties (b) Other than related parties Assets acquired in satisfaction of debt (After provision of `3.31 Lakhs for diminution in the value of repossed assets) Nil Nil e. Disclosure pursuant to Clause 32 and 41 of the Listing Agreement Sl. No. Loans & Advances Amount outstanding as at March 31, 2011 Maximum amount outstanding during the year ended March 31, 2011 (A) To Subsidiaries NIL NIL (B) To Associate/Joint Venture NIL NIL (C) To Firms/Companies in which directors are interested (other than (A) & (B) above) NIL NIL (D) Where there is (I) No repayment schedule (ii) Repayment beyond seven years NIL NIL (iii) Interest below the rate specified in Section 372 A of the Companies Act

98 f. Contingent Liabilities Contested claims not provided for: As at March 31, 2011 ` in Lakhs As at March 31, 2010 Particulars Income Tax issues where the Company is in appeal Authorities and for which the Department is in further appeal with respect to Income Tax with Income Tax Appellate Tribunal Note: The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence. Previous current year's classifications. 72

99 Details of Bonds Issued by the Company and outstanding as on with Scheme, Interest Rate and Period of Maturity Series - 4 ( D ) Monthly Interest Scheme Period General 1 year 8.00% 2 years 8.00% 3 years 8.50% 5 years 8.50% Annual Interest Scheme Period General 1 year 8.50% 2 years 8.50% 3 years 9.00% 5 years 9.00% Maturity Scheme (Yield) Period General 3 years 9.27% 5 years 10.08% Series - A Monthly Interest Scheme Period General 1 year 8.50% 3 years 9.00% 3 years 9.50% 5 years 9.00% 5 years 9.50% Annual Interest Scheme Period General 2 years 8.50% 5 years 9.50% Maturity Scheme (Yield) Period General 5 years 10.08% 5 years 11.49% Series - B Monthly Interest Scheme Period General Sr.Citizen 31 days 6.50% 7.00% 3 years 11.00% 11.50% 3 years 12.00% 12.50% 5 years 9.50% 10.00% 5 years 11.00% 11.50% Annual Interest Scheme Period General Sr.Citizen 73

100 1 year 11.00% 11.50% 1 year 11.50% 12.00% 3 years 11.50% 12.00% 3 years 12.00% 12.50% 5 years 11.50% 12.00% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 12.83% 13.50% 3 years 14.19% 14.90% 5 years 11.49% 11.99% 5 years 14.40% 15.26% 6 years (Doubling Scheme) 16.67% 16.67% Series - C Monthly Interest Scheme Period General Sr.Citizen 1 year 10.50% 11.00% 2 years 10.50% 11.00% 3 years 11.00% 11.50% 5 years 11.00% 11.50% Annual Interest Scheme Period General Sr.Citizen 1 year 11.00% 11.50% 2 years 11.00% 11.50% 3 years 11.50% 12.00% 5 years 11.50% 12.00% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 12.83% 13.50% 5 years 14.40% 15.26% Series - E Monthly Interest Scheme Period General Sr.Citizen 31 days 8.00% 8.50% 46 days 9.00% 9.50% 3 months 10.00% 10.50% 6 months 10.50% 11.00% 1 year 11.50% 12.00% 2 years 11.50% 12.00% 3 years 12.00% 12.50% 5 years 11.00% 11.50% Annual Interest Scheme Period General Sr.Citizen 1 year 12.00% 12.50% 2 years 12.00% 12.50% 3 years 12.50% 13.00% 5 years 11.50% 12.00% Maturity Scheme (Yield) Period General Sr.Citizen 74

101 3 years 14.19% 14.90% 5 years 14.40% 15.26% 6 years (Doubling Scheme) 16.67% 16.67% Series - F Monthly Interest Scheme Period General Sr.Citizen 31 days 7.50% 8.00% 46 days 8.50% 9.00% 3 months 9.50% 10.00% 6 months 10.00% 10.50% 1 year 11.00% 11.50% 2 years 11.00% 11.50% 3 years 11.50% 12.00% 5 years 10.50% 11.00% Annual Interest Scheme Period General Sr.Citizen 1 year 11.50% 12.00% 2 years 11.50% 12.00% 3 years 12.00% 12.50% 5 years 11.00% 11.50% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 13.50% 14.19% 5 years 13.58% 15.26% 6 years (Doubling Scheme) 16.67% 16.67% Series - G Monthly Interest Scheme Period General Sr.Citizen 31 days 6.50% 7.00% 46 days 7.50% 8.00% 3 months 8.50% 9.00% 6 months 9.50% 10.00% 1 year 10.50% 11.00% 2 years 10.50% 11.00% 3 years 10.50% 11.00% 5 years 10.50% 11.00% 6 years 11.50% 12.00% Annual Interest Scheme Period General Sr.Citizen 1 year 11.00% 11.50% 2 years 11.00% 11.50% 3 years 11.00% 11.50% 5 years 11.00% 11.50% 6 years 12.00% 12.50% Maturity Scheme (Yield) Period General Sr.Citizen 75

102 3 years 12.17% 12.83% 5 years 13.58% 14.40% 6 years (Doubling Scheme) 16.67% 16.67% Series - H Monthly Interest Scheme Period General Sr.Citizen 31 days 5.50% 6.00% 46 days 6.50% 7.00% 3 months 7.50% 8.00% 6 months 8.50% 9.00% 1 year 9.50% 10.00% 2 years 10.00% 10.50% 3 years 10.50% 11.00% 5 years 10.50% 11.00% Annual Interest Scheme Period General Sr.Citizen 1 year 10.00% 10.50% 2 years 10.50% 11.00% 3 years 11.00% 11.50% 5 years 11.00% 11.50% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 12.17% 12.83% 5 years 13.58% 14.40% 6 years (Doubling Scheme) 16.67% 16.67% Series - I Monthly Interest Scheme Period General Sr.Citizen 31 days 5.00% 5.50% 46 days 6.00% 6.50% 3 months 7.00% 7.50% 6 months 8.00% 8.50% 1 year 9.00% 9.50% 2 years 9.50% 10.00% 3 years 10.00% 10.50% 5 years 10.00% 10.50% Annual Interest Scheme Period General Sr.Citizen 1 year 9.50% 10.00% 2 years 10.00% 10.50% 3 years 10.50% 11.00% 5 years 10.50% 11.00% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 11.50% 12.16% 5 years 12.77% 13.58% 76

103 6 years (Doubling Scheme) 16.67% 16.67% Series - J Monthly Interest Scheme Period General Sr.Citizen 1 year 9.50% 10.00% 1.5 years 9.50% 10.00% 2 years 10.50% 11.00% 3 years 11.00% 11.50% 5 years 10.50% 11.00% Annual Interest Scheme Period General Sr.Citizen 1 year 10.00% 10.50% 2 years 11.00% 11.50% 3 years 11.50% 12.00% 5 years 11.00% 11.50% Maturity Scheme (Yield) Period General Sr.Citizen 3 years 12.83% 13.50% 5 years 14.40% 15.26% 6 years (Doubling Scheme) 16.67% 16.67% Series - K Monthly Interest Scheme Period General Sr. Citizens 1 year 10.00% 10.50% 400 days 11.00% 11.50% 1½ years 11.00% 11.50% 2 years 11.00% 11.50% 2½ years 11.00% 11.50% 3 years 11.50% 12.00% 5 years 11.50% 12.00% Annual Interest Scheme Period General Sr. Citizens 1 year 10.50% 11.00% 1½ years 11.50% 12.00% 2 years 11.50% 12.00% 2½ years 11.50% 12.00% 3 years 12.00% 12.50% 5 years 12.00% 12.50% Maturity Scheme (Yield) Period General Sr. Citizens 400 days 11.50% 12.00% 3 years 13.50% 14.20% 5 years 15.26% 16.12% 6 years (Doubling Scheme) 16.67% 16.67% 77

104 Series - M Monthly Interest Scheme Period General Sr. Citizens 1 Year 11.00% 11.50% 400 Days 11.00% 11.50% 1½ Years 12.00% 12.50% 2 Years 12.00% 12.50% 2½ Years 12.00% 12.50% 3 Years 12.00% 12.50% 5 Years 11.00% 11.50% Annual Interest Scheme Period General Sr. Citizens 1 Year 11.50% 12.00% 1½ Years 12.50% 13.00% 2 Years 12.50% 13.00% 2½ Years 12.50% 13.00% 3 Years 12.50% 13.00% 5 Years 11.50% 12.00% Maturity Scheme (Yield) Period General Sr. Citizens 400 Days 11.50% 12.00% 3 Years 14.20% 14.90% 5 Years 14.40% 15.24% 5½ Years Doubling Scheme 18.19% 18.19% 78

105 2. STOCK MARKET PRICE INFORMATION The Equity Shares of BSE. a) Week end prices of Equity Shares of the Company for the last four weeks on the BSE are as below: Week Ended on Weekend Price High Price Date of High Low price Date of Low (`) (`) (`) June 03, June 03, May 30, 2011 June 10, June 06, June 10, 2011 June 17, June 14, June 16, 2011 June 24, June 20, June 23, 2011 b) The closing market price was ` on BSE on May 25, 2011, the record date. c) The high and low prices recorded on the Stock Exchange for the 6 preceding months and the number of Equity Shares traded on the days the high and low prices were recorded are stated below: Month High (`) December Date of High December 03, 2010 Volume on date of High Low (`) 8, January January 05, , February February 02, , March March 29, , April April 26, , May May 05, , (Source: Date of Low December 10, 2010 January 31, 2011 February 10,2011 March 11, 2011 April 01, 2011 May 27, 2011 Volume on date of low Total Volume traded in the month 5, ,725 2,229 78,939 5, ,561 6, ,418 2,948 2,123,319 85,815 2,536,848 d) The high and low prices recorded on the BSE for the last 3 years are stated below: Period Date of High High (`) Volume on date of High Date of Low Low (`) Volume on date of low 2010 October 18, ,889 February 05, December ,609 March 09, 23, January 08, ,728 October 27, 2008 Average of Closing Price for the year (`) , , e) The Issue price of `80 per rights share has been arrived at in consultation between the Company and the Lead Manager. 79

106 3. OTHER FINANCIAL INFORMATION information derived from the Company 35of this LoF. Accounting and other ratios Sl No Particulars Year ended March31 st March Earnings per share a) Basic(`) b) Diluted(`) Cash Earnings per c) share(`) Net Asset Value per 2 share(`) Return on Networth 3 (%) 33.61% 33.54% 34.35% 33.10% 22.17% 13.32% Total Debt / Equity 4 Ratio Notes The ratios have been computed as below: a) Earnings per Share = Adjusted profit after tax before extra ordinary items/restated weighted average no of Equity Shares outstanding during the year b) Cash Earnings per share = Adjusted profit after tax but before depreciation/ Restated weighted average no of Equity Shares outstanding during the year c) Net Asset value per share = Net worth excluding revaluation reserve/ Restated weighted average no of Equity Shares outstanding during the year d) Return on Net worth% = Adjusted profit after tax but before extraordinary items/ Net worth e) Total Debt/Equity Ratio = (Long Term Debt + Short Term Debt)/ (Equity Share Capital + Reserves and Surplus) 2. The earnings per share is calculated in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India. 3. Profit after tax as restated has been considered for the purpose of computing the above ratios. 4. Net worth means Equity Share Capital + Reserves and Surplus (Excluding revaluation reserve). Capitalisation Statement (` In Lakhs) Particulars Pre-issue as at March Pre-issue as at March As adjusted for 31, , 2010 the Issue Short Term Debt 12, , , Long Term Debt 1, , , Total Debt 14, , , Shareholders Funds Share Capital , Reserves 2, , , Total Shareholders Funds 2, , , Long Term Debt/Equity

107 Pre-issue as at March Pre-issue as at March As adjusted for Particulars 31, , 2010 the Issue Total Debt/Equity Information as required by the Government of India, Ministry of Finance circular No. F2/5/SE/76 dated February 5, 1977 as amended vide their circular of even number dated March 8, 1977 and in accordance with sub-item (B) of item X of Part E of the SEBI Regulations. 1. Working Results of the Company on a standalone basis for the period from April 01, 2011 to May 31, 2011: Sr.No. Particulars Amount (` in Lakhs) (a) (i) Sales/turnover 846 (ii) Other income 2 (b) Estimated gross profit/ loss (excluding depreciation 324 and taxes) (C) (i) Provision for Depreciation 4 (ii) Provision for Taxes 106 (d) Estimated net profit/ loss Material changes and commitments, if any, affecting the financial position of the Company: There are no material changes and commitments, other than as disclosed in this LoF, which are likely to affect the financial position of the Company since March 31, 2011 (i.e. last date up to which audited information is incorporated in the LoF) 3. Two of the Promoter group members have sold the shares of the Company. The details of the same are provided below. a. Mrs. Neena George: Transaction Date Buy/ Sell No. of Shares Price at which the Equity Shares has been sold (`) May 2, 2011 Sell May 5, 2011 Sell 11, b. Mrs. Preeti John Transaction Date Buy/ Sell No. of Shares Price at which the Equity Shares has been sold (`) April 26,2011 Sell 10, May 05,2011 Sell 20,

108 SECTION VI - LEGAL AND OTHER INFORMATION Except as stated below (i) there are no outstanding litigation, suits, criminal or civil prosecutions, statutory or legal proceedings including those for economic offences, tax liabilities, show cause notices or legal notices pending against the Company and its Directors whose outcome could have a materially adverse effect on the business, operations or financial position of the Company, and (ii) there are no defaults including nonpayment of statutory dues, over-dues to banks/financial institutions, defaults against banks/financial institutions, defaults in dues payable to holders of any debenture, bonds and fixed deposits issued by the Company, or arrears on cumulative preference shares issued by the Company, defaults in creation of full security as per the terms of issue/other liabilities, proceedings initiated for economic / civil / any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (I) of Part 1 of Schedule XIII of the Companies Act) other than unclaimed liabilities of the Company except as stated below, and (iii) no disciplinary action has been taken by SEBI or any stock exchange against the Company or its Directors. Unless stated to the contrary, the information provided below is as on the date of filing this Offer Document. Neither the Company nor the Directors have been declared as willful defaulters by the RBI or any other Governmental authority and there are no violations of securities laws committed by them in the past or penalties imposed on them thereunder or pending against them, and adverse findings regarding compliance with securities laws. Summary of Litigations involving the Company as of May 31, 2011 Sl. No. Brief Description No. of Cases Amount Involved (`) 1. Suits filed by the Company against 260 1,08,95,961 individuals under Section 138 of the Negotiable Instruments Act 2. Civil cases filed against individuals for 30 31,66,924 recovery of money 3. Customer of the Company approached the Lok Adalath 1 NA MCSL offers capital market solutions that include Leasing and Hire Purchase, Vehicle Loans and Bonds and Deposits among others, with cost-effective value-added services for the benefit of its customers. The litigations filed by the Company are broadly classifiable under 2 heads: a) Cases filed by the Company under Section 138 of the Negotiable Instruments Act in respect of cheques issued by its customers for repayment of amounts due to the Company. List of criminal cases pending before various courts Sl No. Case no. Name of the parties Amount (`) Brief facts and Status 1 CC 397/04 Vinu V. 31,808 In all these cases, the accused persons have 2 CC 417/04 Sudhi L. 42,000 availed a loan from the Company and 3 CC 430/04 Jaymon E.S. 37,500 defaulted the repayment of loan. So the 82

109 Sl No. Case no. Name of the parties Amount (`) Brief facts and Status 4 CC 432/04 Rajesh B. 42,000 Company presented a cheque, which had 5 CC 437/04 Saidukunju A. 22,000 been dishonoured. Then the Company filed 6 CC 529/04 Vijayakumar R. 42,000 a case under Section 138 of the Negotiable 7 CC 647/04 Sunil Kumar 40,000 Instruments Act and the cases are pending 8 CC 649/04 Ibrahimkutty C.M. 62,300 9 CC 753/04 Anoop B.J. 40,000 Court, Ernakulam 10 CC 759/04 Joshi Mukund 22, CC 831/04 Sunil Kumar R. 1, CC 851/04 Sasidharan J. 45, CC 852/04 Biju M. Thomas 41, CC 958/04 Saji K.V. 1, ST 1781/04 Bijukumar P. 10, ST 1839/04 Shamsudeen S. 31, ST 2024/04 Ramesh C. 34, CC 398/96 King Fisheries 25,00,000 Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 1 CC 778/02 Hussain E. 47,950 In all these cases, the accused persons have 2 CC 789/02 Joy V.S. 1,14,470 3 CC 953/02 Rajeevan P.P. 17,659 4 CC 979/02 Joseph Fernandez 42,600 5 CC 1014/02 Viswanathan R. 56,000 6 CC 1222/02 Vijayan K. 97,000 7 CC 1273/02 Sudev Kumar M.S. 20,000 8 CC 1405/02 Raveendran K.i 73,800 9 CC 835/03 Baiju B. 34, CC 743/04 Salim M. 26, CC 745/04 Ramkumar 8, CC 746/04 Murukesh 33, ST: 998/10 Radhakrishnan U. 11, MP: 7004/09 Santosh V. 25, MP: 9430/09 Prabhakaran K. 31, MP: 9433/09 Anilkumar S. 31, MP: 9431/09 Alex J. 41, MP:12118/09 Subashkumar T.K. 38, MP: 1637/10 Ashokan T.L. 15, CC 101/99 Sathyan B.D. 24, CC 477/99 Sivankutty Pillai 15, CC 537/99 Ligi M.D. 15, CC 540/99 Muraleedharan N. 4, CC 541/99 Gireesh Kumar K.G. 8, CC 555/99 Joy Abraham 5, CC 1182/99 Madhavan K CC 1212/99 Thankamani J. 8, CC 1329/99 Abdul Nazarudeen 5, CC 1337/99 Shaji C.G. 3, availed a loan from the Company and defaulted the repayment of loan. So the Company presented a cheque, which had been dishonoured. Then the Company filed a case under Section 138 of the Negotiable Instruments Act and the cases are pending Ernakulam

110 Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 30 CC 156/00 Shahul Hameed 17, CC 253/00 Rajan R. 7, CC 405/00 Madhusudhanan J. 24, CC 510/00 Sivankutty Pillai 66, CC 511/00 Nirmala I. 10, CC 573/00 Girish Kumar K.G. 95, CRL MP Reni Reji 9, /11 37 CRL MP Ramees 25, /11 38 CRL MP Seethy Azzez 26, /11 39 ST 161/11 Vijay Babu 47, ST 160/11 Ramachandra Ponna 21, MP 416/11 Satheesh 18, ST 162/11 Ankuri Padmaja 36, CC 62/11 Vooda Srinivasa Rao 21, CC 61/11 Shahul Hameed 41,900 Sl Case no. Name of the parties Amount (`) Brief Facts and Status No. 1 CC 626/01 Muhammed Hashim 49,607 In all these cases, the accused persons have 2 CC 737/01 Madhavan K. 70,000 availed a loan from the Company and 3 CC 738/01 Santhosh N. 31,780 defaulted the repayment of loan. So the Company presented a cheque, which had 4 CC 63/02 Raju K.V. 17,200 been dishonoured. Then the Company filed 5 CC 64/02 Karthikeyan M.R. 54,110 a case under Section 138 of the Negotiable 6 CC 125/02 Abdul Saleem H. 14,000 Instruments Act and the cases are pending 7 CC 127/02 Gopalakrishnan Pillai 15,300 before Judicial First Class 8 CC 337/02 Shahul Hameed 13,920 9 CC 340/02 Muhammed Thaha 25, CC 342/02 Abubakkar 5, CC 524/02 Sailajan C. 63, CC 525/02 Sunil Kumar 58, CC 583/02 Sajikumar K. 55, CC 586/02 Mohan Kumar K. 72, CC 1126/02 Shaji S. 45, CC 2110/02 Sanil Kumar 35, CC 1236/02 Sara Beevi 27, CC 1284/02 Navas P.A. 35, CC 1640/03 Nazarudeen 38, CC 644/04 Saji K. Babu 20, CC 1000/04 Shaji Kumar S. 42, ST 159/11 Renjith 18,000 84

111 Sl Case No. Name of the Parties Amount (`) Brief Facts and Status No. 1 CC 1351/03 Nizarudeen K. 32,375 In all these cases, the accused persons have 2 CC 1464/04 Majeed 28,740 availed a loan from the Company and 3 CC 1507/03 Rejimon 36,320 defaulted the repayment of loan. So the 4 CC 1511/03 Basheerkutty E. 27,290 Company presented a cheque, which had been dishonoured. Then the Company filed a case under Section 138 of the Negotiable Instruments Act and the cases are pending Court, Kolencherry Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 1 CC 508/01 Mohanan Pillai 55,000 In all these cases, the accused persons have 2 CC 627/01 Abdul Nazarudheen 40,000 availed a loan from the Company and 3 CC 773/01 Thankamony J. 15,000 defaulted the repayment of loan. So the 4 CC 1306/01 Anil Kumar K. 64,064 Company presented a cheque, which had 5 CC 1884/01 Thomas Joseph 33,650 been dishonoured. Then the Company filed 6 CC 1885/01 Joseph P.A. 47,350 a case under Section 138 of the Negotiable 7 CC 1886/01 Suresh Kumar 27,550 Instruments Act and the cases are pending 8 CC 1887/01 Shanavaz E.M. 28,050 9 CC 2278/1 Rajendra Babu V. 37,350 Court, Kochi 10 CC 2282/1 Unnikrishnan Achari 27, CC 11/02 Reghunathan K. 14, CC 13/02 Sankaran N. 30, CC 154/02 Peeru Mohammed 62, CC 155/02 Asokan K. 28, CC 338/02 Dinesh S. 31, CC 370/02 Ravikumar 35, CC 718/02 Thankappan K. 35, CC 935/02 Rajeeb A. 51, CC 945/02 Sasankan Pillai 50, CC 946/02 Khalifa A.S. (Souda Beevi) 65, CC 1125/02 Saseendran C.R. 45, CC 1207/02 Santhosh K. 38, CC 1454/02 Alex K.P. 37, CC 1698/02 Martin M.V. 29, CC 88/03 Anandan A. 41, CC 185/03 Shanavas J. 21, CC 193/03 Valsala Kumari P.K. 41, CC 198/03 Biju K.P. 42, CC 260/03 Anil Kumar A. 34, CC 465/03 Vinod R. 44, CC 565/03 Pushpakaran N. 50, CC 607/03 Lalan C. 35, CC 649/03 Arshad B. 34, CC 660/03 Sreekantan Nair 63,900 85

112 Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 35 CC 674/03 Shajahan M. 39, CC 829/03 Sulthan T. 25, CC 875/03 Shaji M.S. 37, CC 878/03 Benny Varghese 37, CC 992/03 Sashidharan M.K. 51, CC 993/03 Vasudevan N. 16, CC 1001/03 Shajahan M. 27, CC 1066/03 Navas 34, CC 1116/03 Priyakumar G. 33, CC 1117/03 Kunjumon K.P. 15, CC 1152/03 Ramani S. 21, CC 1153/03 Prinsen Thomas 41, CC 1154/03 Abdul Khader Kunju 27, CC 1271/03 Noordeen K. 35, CC 1375/03 Leju N. 39, CC 1406/03 Viswanathan R. 26, CC 1520/03 Navad J. 31, CC 2197/03 Shibu V. 5, CC 2549/03 Suresh Kumar S. 16, CC 2737/03 1,74, CC 2967/03 Sajan K.R. 18, CC 3/04 Suseelan S. 37, CC 6/04 Biju S. 48, CC 12/04 Shafeek M. 41, ST 13/04 Kavirajan K. 48, CC 15/04 Jayesh T. 12, ST 23/04 Aseem Mahim T.K. 45, ST 31/04 Sulaiman S. 41, ST 32/04 Anilkumar P. 2, ST 33/04 Selvaraj K.R. 7, ST 34/04 Alexin A.D. 36, CC 64/04 Chandran P. 29, CC 65/04 Retnamma 44, CC 68/04 Antony Suresh 20, CC 69/04 Sanil B. 1, CC 161/04 Sasidharan Assari 41, CC 170/04 Nazeer P. 31, CC 182/04 Surendran K.S. 3, CC 264/04 Pradeep Kumar D. 36, ST 344/04 Anilkumar P. 20, ST 345/04 Suresh Kumar A. 47, ST 346/04 Alibava P.H. 45, CC 348/04 Shaji S. 45, ST 349/04 Madhavan Nair 2, CC 350/04 Rajeev S. 44, CC 351/04 Manoharan V. 37, CC 352/04 Steephenson J. 48, CC 353/04 Murali V.V. 41, CC 403/04 Subhash R. 40, CC 483/04 Trosi Jayan 51,600 86

113 Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 85 CC 484/04 Jyothi V. 48, ST 1045/04 Chandra Rose C. 41, ST 1071/04 Nisarudeen 11, ST 1074/04 Shaji 41, CC 1512/04 Shamsu A.S. 48, CC 1517/04 Aisha Kabeer 35, ST 67/05 Sanju K. Babu 10, ST 227/05 Kumar S. 37, ST 1340/05 Bijukumar 31, ST 1436/05 Sunil Kumar M.C. 15, ST 384/05 Vikraman M.R. 36, ST 444/05 Christopher John 37, ST 870/05 Jayakumar R. 25, ST 1453/05 Rajamma Amma 25, ST 1455/05 Shanavas 29, ST 1587/05 Shibunath V. 38, ST 1590/05 Radhakrishnan L. 49, ST 1618/05 Biju Sam 36, ST 1646/05 Sivaprasad P.C. 35, ST 1856/05 Jobin Varghese 37, ST 2121/05 Sabukuttan R. 32, ST 1876/05 Anoop K. Raj 56, ST 2442/05 Riswan Mehar 1, ST 191/06 Yesudas 26, ST 193/06 Varghese P.M. 35, ST 194/06 Manoj V. 25, ST 179/06 Anishkumar T.D. 35, ST 860/06 Suresh Kumar S. 20, ST 61/07 Murugan P (B) 35, ST 972/06 Mahesh Kumar P.K. 35, ST 971/06 Vinod Kumar S. (B) 30, CC 1014/06 Benny Joseph 23, CC 1013/06 Jobin Jose (John Jos) 20, ST 291/07 Muhammed Rafi 22, ST 258/07 Joys Augustine 38, ST 256/07 John A 25, ST 1081/06 Vijayamma Gopi 31, CC 1836/07 Sajeev 40, ST 1513/07 Ebrahim Kutty 45, CC 1834/07 Ramesh V. 30, ST 1500/07 Fahad M. 30, CC 1665/07 Mahesh K. 25, ST 384/07 Raja V. 16, ST 387/07 Sanil Kumar G. 60, CC 1660/07 Mani A.K. 18, CC 517/07 Suresh K.S. 15, CC 516/07 Salahudeen E (B) 1, CC 1661/07 Shibi S. 27, ST 762/07 Saji P. 22, ST 761/07 John R. 9,000 87

114 Sl No. Case no. Name of the parties Amount (`) Brief Facts and Status 135 CC 1468/07 Soma C. 15, CC 1271/07 Biju S. 17, CC 1272/07 Shan V.S. 25, CC 1270/07 Varghese C C (B) 14, CC 2938/07 Mahesh S. 32, CC 140/08 Ajithkumar P.S. 11, CC 2838/07 Prasanthkrishnan R.S. 17, CC 1188/07 Rahamathulla T H (R A) 17, ST 745/08 Soman M. 15, CC 904/08 Thajudeen D (B) 28, CC 3612/07 Jose Kunju P.S. (B) 15, CC 59/07 Pushpa Vasudevan 27, CC 409/08 Rajappan P.A. 47, ST 2658/07 Ganesh Devadas 1, ST 1487/07 Sheela Ganesh 35, CC 747/08 Biju 20, ST 809/08 Jayachandran R. 8, ST 3649/09 Parthipan Sekhar 42, ST 3693/09 Abhilash Babu J.S. 12, ST 3720/09 Tressa C.D. 30, ST 403/10 Vidhyadharan K.M. (B) 50, ST 537/10 Nair Sree Kumar K. 30, ST 534/10 Ajaya Kumar 45, ST 2053/10 Abhilash V. 41, CC 629/01 Reghunath B. 45, CC 92/03 Chakrapani G. 45, CC 253/03 Vijayakumar N. 27, CC 255/03 Kumar M. 33, CC 711/03 Hydros Kunju M. 33, ST 945/10 Prince G 35, ST 1055/10 Radhakrishna Pillai 32, MP 1438/10 Ajeesh Kumar K M 24, MP 1437/10 Sharafudeen 12, ST 944/10 Abeeshmon 35, ST 1258/10 Muraleedharan 31, ST 946/10 Sheiksteen 38, ST 948/10 Noushad 30, ST 947/10 Shidin 18,730 Grand Total 1,06,31,336 NOTE:- Each of these cases relate to offences under Section 138 of the Negotiable Instruments Act and have been filed when cheques issued in respect of amounts payable to the Company have not been honoured. b) Cases filed for recovery of money from individuals who owe money to the Company The details of the civil suits filed by the Company are given below: 88

115 Details of the Civil suits filed by the Company: 1. Outstanding Litigation and Other Defaults Sl No. Case No. Name of the parties 1 OS 1347/99 Muraleedharan M. and Sreekala 2 OS 1450/99 Krishna Pillai M. and M. jmadanan Pillai 3 OS 1485/99 Rajan and K. Ramana 4 OS 367/01 Mohanan Pillai and Gopalakrishnan Pillai 5 OS 667/01 Vijayan K. and Majeed Khan 6 OS 1326/03 Sankaran N. Thulaseedharan 7 OS 1472/03 Sreekantan Nair V. and Jayakumar M.S. Amount (`) Brief Facts Court Status 26,432 For the purpose of Suit decreed. recovery of Court, Execution money due under Ernakulam pending a Hire Purchase Transaction 23,191 For the purpose of recovery of money due under a Hire Purchase Transaction 7,042 For the purpose of recovery of money due under a Hire Purchase Transaction 44,981 For the purpose of recovery of money due under a Hire Purchase Transaction 42,392 For the purpose of recovery of money due under a Hire Purchase Transaction 37,276 For the purpose of recovery of money due under a Hire Purchase Transaction 36,282 For the purpose of recovery of money due under a Hire Purchase Transaction 89 Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Suit decreed. Customer will make payment. Suit decreed. Execution Petition Pending Suit pending. Execution Petition is pending for return of notice. Suit decreed. Execution Petition filed Hirer absconding hence pending Suit decreed Exparte. Execution petition pending Suit decreed exparte. Posted for giving fresh address of Judgement Debtor 2 furnished Suit decreed. Customer almost settled the matter 8 OS 1474/03 Biju S. and 36,542 For the purpose of Padmini T. recovery of Court, money due under Ernakulam a Hire Purchase Transaction 9 OS 40/04 Jameela and Sabu 15,537 For the purpose of Suit decreed

116 Sl No. Case No. 10 OS109/04 Rajeeb A. and Selvraj P.T. 11 OS 166/04 Sailajan C. and Mini S. 12 OS 215/04 Sajikumar K. and Eliamma E.P. 13 OS 361/04 Baburaj M.R. and Suma Baburaj 14 OS 1668/04 Steephenson J. and Ajtha Kumari 15 OS 915/04 Kavirajan K. and Subadra 16 OS 914/04 Sulthan T. and Mohammed Haneefa 17 OS 1056/04 Latheef A. and Joy George 18 OS 1069/04 Prinsen Thomas and Sherly Prinsen Name of the parties Amount (`) Brief Facts Court Status U. recovery of Court, exparte. money due under a Hire Purchase Transaction Ernakulam Matter almost settled. 43,546 For the purpose of Court asked recovery of Court, to take Paper money due under Ernakulam Publication. a Hire Purchase Taken the Transaction same also. 52,209 For the purpose of Suit decreed. recovery of Court, Matter money due under Ernakulam almost a Hire Purchase settled. Transaction 40,238 For the purpose of recovery of money due under a Hire Purchase Transaction 62,172 For the purpose of recovery of money due under a Hire Purchase Transaction 49,900 For the purpose of recovery of money due under a Hire Purchase Transaction 63,702 For the purpose of recovery of money due under a Hire Purchase Transaction 25,061 For the purpose of recovery of money due under a Hire Purchase Transaction 26,200 For the purpose of recovery of money due under a Hire Purchase Transaction 46,700 For the purpose of recovery of money due under a Hire Purchase 90 Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Court, Ernakulam Suit decreed exparte. Execution Petition Pending Suit decreed. Execution Petition to be filed Suit decreed. Execution Petition to be filed. Suit decreed exparte. Execution Petition pending Suit decreed. Execution Petition Pending Suit decreed. Execution Petition filed. Judgment Debtor 2 was arrested and released on bail. Suit decreed. Execution Petition Pending

117 Sl No. Case No. Name of the parties 19 OS 1102/04 Noorjahan P. and Abdul Latheef 20 OS 1199/04 Sreekantan Nair G. and Ashokan S. 21 OS 1519/04 Shafi SS Hussain and Sreeju P. 22 OS 1523/04 Ayyappan Pillai C. and Sasidharan Nair J. 23 OS 1444/04 Rajendra Babu V. and Sreekumaran Nair P. 24 OS 519/04 Joy V.S. and Jayakumar V.S. 25 OS 1814/04 Ravikumar K.S. and Abhilash M. Ravikumar 26 OS 425/06 Ibrahim T.H. and P.A. Moidu 27 OS 695/06 Madhusoodanan J. and Vimala 28 OS 1285/06 Alex K.P. and Lillykutty Amount Brief Facts Court Status (`) Transaction 31,500 For the purpose of Suit decreed recovery of Court, exparte. money due under Ernakulam Execution a Hire Purchase Petition Transaction pending 50,700 For the purpose of recovery of money due under a Hire Purchase Transaction 48,550 For the purpose of recovery of money due under a Hire Purchase Transaction 58,447 For the purpose of recovery of money due under a Hire Purchase Transaction 92,949 For the purpose of recovery of money due under a Hire Purchase Transaction 1,14,500 For the purpose of recovery of money due under a Hire Purchase Transaction 41,000 For the purpose of recovery of money due under a Hire Purchase Transaction 37,303 For the purpose of recovery of money due under a Hire Purchase Transaction 40,763 For the purpose of recovery of money due under a Hire Purchase Transaction 35,165 For the purpose of recovery of money due under a Hire Purchase 91 Court, Ernakulam Court, Ernakulam Court, Ernakulam Sub Court, Ernakulam Sub Court, Ernakulam Court, Ernakulam Court Court Court Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending Suit decreed Exparte. Execution Petition Pending. Suit almost settled. Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending Suit decreed. Execution Petition Pending

118 Sl No. Case No. Name of the parties 29 OS 1293/06 Mohan Kumar K. andprasanna Kumari Amount Brief Facts Court Status (`) Transaction 1,03,734 For the purpose of Posted for recovery of Court Balance money due under Court Fee a Hire Purchase Transaction Sub Court, Suit is now 30 OS 839/09 18,32,910 For the purpose of recovery of money due under a Hire Purchase Transaction Ernakulam posted return Notice. There is a case where a customer of the Company has approached the Lok Adalath seeking return of Documents from the Company. The case is still pending. Case no Name Court AP:237/09 Ajikumar Lokadalath,Kottarakkara for of The Directors of the Company have been involved in the following litigations: Criminal cases against the Directors: Against Mr. Thomas John Muthoot Nil Against Mr. Thomas George Muthoot Nil Against Mr. Thomas Muthoot Nil Against Mr. A. P. Kurian Sl No. Case no. 1. Crl M.P.201/ 2011 Name of the parties High Court of Patna, State of Bihar Vs. A.P. Kurian & Others. Amount (`) Brief facts and Status One depositor of Nagarjuna Finance Limited filed a criminal compliant u/s 406 and 420 IPC on the file of Judicial Magistrate, 1 st class, Patna against Mr. A.P.Kurian & others for non payment of deposits of NFL. The court issued Non-bailable warrants. stay in its Order, dated January 20,

119 2 Crl RC 1305/ 2005 against CC 14/ 2005 Registrar of Companies Vs. Mr. A.P. Kurian and others. Not Known Registrar of Companies, Andhra Pradesh, Hyderabad, filed a complaint before the Special Judge for Economic Offences at Hyderabad against the erstwhile Directors of NFL including Mr. A.P.Kurian seeking conviction against the accused persons on the ground of violations of the order of CLB passed on The Registrar of Companies, Andhra Pradesh, Hyderabad, also sought direction to the accused to pay the amount due to the depositors of NFL. Mr. A.P.Kurian and others filed discharge discharged them from the case, vide Order, dated May 2, Aggrieved by the above order, Registrar of Companies, Andhra Pradesh, Hyderabad, filed High Court of Andhra Pradesh and the matter is pending. Against Mr. Philip Thomas Nil Against Mr. R.K. Nair Nil 93

120 Civil cases against the Directors: Against Mr. Thomas John Muthoot Sl No Assessment Year Amount Involved (`) ,37,05, ,06,94, ,28, ,00, ,49, ,09, ,75, ,37, ,56, ,09,919 Nature of Demand Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Tax u/s 194A and interest u/s 201(1A) Penalty u/s 271 B Penalty u/s 271 C Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Tax u/s 143 (3) Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Date of Order March 26,2010 July 03, 2009 June 08,2009 January 18, 2008 July 22,2009 March 26, 2010 July 03,2009 December 27, 2010 March 26, 2010 July 03,2009 Status Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - IV / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) / TVM Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Against Mr. Thomas George Muthoot: Sl No Assessment Year Amount Involved (`) Nature of Demand ,893,540 Wealth Tax ,088,299 Wealth Tax ,197,107 Wealth Tax ,371, ,804, ,000 Tax u/s 143 (3) Tax u/s 194A and interest u/s 201(1A) Penalty u/s 271 B ,215,920 Wealth Tax ,354,083 Penalty u/s 271 C 94 Date of Order December 30, 2010 December 30, 2010 December 30, 2010 December 31, 2009; September 17, 2010 June 30, 2009 January 29, 2008 December 30, 2010 March 26, 2010 Status Appeal pending before CWT (Appeals) / Kochi Appeal pending before CWT (Appeals) / Kochi Appeal pending before CWT (Appeals) / Kochi Appeal pending before the ITAT / Kochi Bench Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - IV / Kochi Appeal pending before CWT (Appeals) / Kochi Appeal pending before CIT (Appeals) - III / Kochi

121 Sl No Assessment Year Amount Involved (`) ,808,635 Nature of Demand Tax u/s 194A and interest u/s 201(1A) ,186,170 Wealth Tax ,463,871 Against Mr. Thomas Muthoot: Tax u/s 194A and interest u/s 201(1A) Date of Order July 25, 2009 December 30, 2010 June 30, 2009 Status Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CWT (Appeals) / Kochi Appeal pending before CIT (Appeals) - III / Kochi Sl No Assessment Year Amount Involved (`) ,818, ,727, , ,569, ,166, ,060, ,856,104 Nature of Demand Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Penalty u/s 271 B Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Penalty u/s 271 C Tax u/s 194A and interest u/s 201(1A) Date of Order March 26, 2010 July 20, 2009 September 29, 2009 July 23,2009 June 08, 2009 March 26, 2010 July 20, 2009 Status Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) / TVM Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Appeal pending before CIT (Appeals) - III / Kochi Against Mr. A. P. Kurian: Sl No. Case no. Name of the parties Amount (`) Brief facts and Status 1. SLP (Crl) /2009 in C.A. No.3 to 11/2007 in C.C. No.915/2 002 Mr.E.Bapanaiah Vs. Mr.K.S.Raju & Others Not Known Mr. E Bapanaiah, depositor of NFL has filed an High Court of Andhra Pradesh for contempt of the court by Mr.K.S. Raju & other erstwhile Directors of NFL including Shri A P Kurian. order, the Directors filed appeal before the Division Bench and the same was allowed. Order dated August 22, 2008 Mr. E Bapanaiah filed an SLP (Crl) /2009 before the Supreme Court of India against the order of Division Bench of High Court of Andhra Pradesh and the same is pending before the Supreme Court. 95

122 Sl No. Case no. Name of the parties Amount (`) Brief facts and Status 2. CA 23/ 2003, 15/ 2003, CP 80/ 2004 and various Compan y petitions, WP 17814/04 E.Bapanaiah Mr.K.S.Raju Others Vs. & Not Known Nagarjuna Finance Limited filed an application for impleading the erstwhile Directors of NFL. There were related petitions such as Writ Petition, Winding-up of Petition of RBI, Winding-up Petition of depositors filed before the High Court of Andhra Pradesh. The Division Bench for all these matters had passed a common order dismissing the various petitions and passed Order for winding-up of NFL in the petition of RBI for winding-up. Th the management which has filed the present appeal, is the same management, which has accepted the change of management and liabilities of NFL Company. Hence we are of the view that the promoters and erstwhile Directors have ceased their interests from the date of which they have transferred their shares and resigned from the post of Directors and hence they are not liable for the affairs of the Company that all the petitions filed by the RBI and the depositors seeking winding up of the Company are allowed and the NFL Company is ordered to be wound up and the Official Liquidator is appointed to take charge of the Company Order dated March 30, 2010 Aggrieved by this order, various petitioners filed review petitions before the Division Bench. The Division Bench which passed the earlier orders is hearing the review. Litigations against Mr. Philip Thomas: Sl No. Case no /2001/ DRT2/Ch ennai (Earlier 1169/1999 /DRT1/Ch ennai) Name of the parties State Bank of Mysore, Bangalore vs Devon Plastics Ltd Amount (`) 3,00,00,000 (approx.) 96 Brief facts and Status During his tenure as Director in Devon Plastics Ltd, State Bank of Mysore had filed a suit in Debt Recover Tribunal-2, Chennai. Insurant to the suit, Debt Recover Tribunal ordered the assets of the Company to be sold off in a public auction. Accordingly, the assets were sold and the sale proceeds were realized by State Bank of Mysore as settlement of their dues. *Mr. Philip Thomas has requested the Registrar of Debt Recovery Tribunal-2 for a copy of the proceedings and the final order of the aforesaid mentioned case.

123 Tax Related Matters Sr. No. Assessment Number and Year 1. CST No. 7305/ PGST No / PGST No / PGST No / PGST No / Contents M/s. Zenith Tins Private Limited, Puducherry manufacturers of Plastic Containers, have reported in Form 1 a Total turnover of `23,23,270 and taxable turnover of `23,23,270 respectively claiming exemption on a turnover of Nil under the CST Act, 1956 for the year M/s. Zenith Tins Private Limited, Puducherry manufacturers of Plastic Containers, have reported in Form A-1 a total turnover of `NIL and taxable turnover of respectively under the PGST Act, 1967 for the year M/s. Zenith Tins Private Limited, Puducherry manufacturers of Plastic Containers, have reported in Form A-1 a total turnover of NIL and taxable turnover of NIL respectively under the PGST Act, 1967 for the year M/s. Zenith Tins Private Limited, Puducherry manufacturers of Plastic Containers, have reported in Form A-1 a total turnover of NIL and taxable turnover of NIL respectively under the PGST Act, 1967 for the year M/s. Zenith Tins Private Limited, Puducherry manufacturers of Plastic Containers, have reported in Form A-1 a total turnover of NIL and taxable turnover of NIL respectively under the PGST Act, 1967 for the year Amount Payable as of Date (`) Status of the Proceedings NIL Final order passed on September 16, 2010 NIL Final order passed on September 16,2010 NIL Final order passed on September 16,2010 NIL Final order passed on September 16,2010 NIL Final order passed on September 16,2010 Litigations against Mr. R. K. Nair: Nil 97

124 GOVERNMENT APPROVALS AND LICENSING ARRANGEMENTS The Company has received the necessary consents, licenses, permissions and approvals from the various governmental agencies required for their present business and to undertake the Issue and no further material approvals are required for carrying on their present activities. In addition, except as mentioned in this chapter LoF, there are no pending regulatory and government approvals and no pending material renewals of licenses or approvals in relation to the activities undertaken by the Company or in relation to the Issue. Approvals for the Issue: A. Board resolution dated May 21, 2009 approving the Issue. B. Special resolution passed by the Members of the Company at the Annual General Meeting held on September 24, 2009 C. In-principle approval from the BSE through letter no. DCS/PREF/NTP/IP-RT/1131/10-11dated March 14, Approvals/Licenses/ Permission received for the Company The Company requires various approvals/licenses/permission for it to carry on its business in India. The approvals that the Company requires include the following: (i) Constitutional Registration Sr. No. Nature of Registration/License Registration /License No. Issuing Authority Date of Issue 1. Certificate of Registrar of Companies, February 18,1994 Incorporation Kerala 2 NBFC License Reserve Bank of India May 13, 1998 (ii) Taxation Registration Sr. No. Nature of Registration/License 1 Permanent Account Number(PAN) 2. Certificate of Registration under section 69 of the Finance Act 2. Tax deduction Account Number (TAN) 3. Taxpayer Identification Number (TIN) Registration /License Issuing Authority No. AADCM1805H Income Tax Department of India AADCM1805HST001 Office of the Superintendent of Central Excise CHNM00455A Income Tax Department of India Office of the commercial Tax Officer, Ernakulam Date of Issue February 18,1994 May 05, 2009 Not Available April 20,

125 (iii) Sr. No. Labour Registration Nature of Registration/License Registration /License No. Issuing Authority 1 Labour Registration Kerala Shops and Commercial Establishments Workers Welfare 2. Employees Provident Fund Registration Fund Board KL/13967 Regional Provident Fund Commissioner, Kerala Date of commencement /Issue April 01, 2009 Not Available Date of expiry NA NA (iv) Sr. No Approvals for Offices Nature of Registration /License 1. Shops and Establishments Act Registration /License No. CC EE Issuing Authority Assistant Labour Officer, Ernakulam II Circle Factory Unit /Offices Head Office Date of commence ment/ Issue December 13, 1994 Date of expiry To be renewed every year (v) Approval for wind mill Sr. Nature of No Registration/License 1. NOC from Tamil Nadu Electricity Board Registration /License No. No: CE/NCES/EE/C/A1/Muthoot Bankers WF/D 1486/95 dated March 22, 1995 Issuing Date of Expiry Authority TNEB March 31,2015 Merchant Banking License Details The Company was registered as Category I Merchant Banker with effect from March 16, 1995 vide letter reference No.PMD/SEBI-MB/4147/95. The License for the same subsequently lapsed due to non-renewal. The Company has obtained the above approvals and the same are valid as of the date of this LoF. The Company, further, undertakes to obtain and renew all approvals, licenses, registrations and permissions required, from time to time, to operate the Company 99

126 DETAILS OF AUDIT COMMITTEE MEETINGS AND SHAREHOLDER GRIEVANCE COMMITTEE MEETINGS A. Details of Audit Committee Meetings from April 01, 2009 to the date of filing this Letter of Offer Members of the committee 1. Philip Thomas 2. A.P.Kurian 3. Thomas Muthoot 4. R.K.Nair Date April 28, 2011 February 02, 2011 October 19,2010 July 31, 2010 May 12, 2010 January 20,2010 Members attended Philip Thomas, Thomas Muthoot Philip Thomas, A.P.Kurian, Thomas Muthoot Philip Thomas, A.P.Kurian Philip Thomas, Thomas Muthoot, R.K.Nair Philip Thomas, Thomas Muthoot, R.K.Nair Philip Thomas, Thomas Muthoot, R.K.Nair Other attendees R.Manomohanan, A.Gopalakrishnan, Malathy.N, Dantu Sebastian R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Elizabeth Wilson, Dantu Sebastian R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Elizabeth Wilson, Dantu Sebastian R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Elizabeth Wilson, Anu George R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Elizabeth Wilson, Anu George R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Varun T.V, Reba John, 100 Agenda Approval of accounts for the year ended March 31,2011 Review of Internal Audit Report Review of information on management discussion and analysis of financial condition and results of operation. Review of significant related party transactions Appointment of Internal Auditors Appointment of Statutory Auditors Approval of accounts for the quarter ended December 31,2010 Review of Internal Audit Report Approval of accounts for the quarter ended September 30, 2010 Review of Internal Audit Report Approval of accounts for the quarter ended June 30, 2010 Review of Internal Audit Report Approval of accounts for the quarter ended March 31, 2010 Review of Internal Audit Report. Review of information on management discussion and analysis of financial condition and results of operation. Review of significant related party transactions Appointment of Internal Auditors Appointment of Statutory Auditors Approval of accounts for the quarter ended December 31, 2009 Review of Internal Audit Report

127 Date October 31, 2009 July 28,2009 May 21,2009 Members attended Philip Thomas, Thomas Muthoot, R.K.Nair Philip Thomas, A.P.Kurian, R.K.Nair Philip Thomas, R.K. Nair, Thomas Muthoot Other attendees R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Varun T.V, Reba John R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Varun T.V, Reba John R.Manomohanan, A.Gopalakrishnan, P.Sivakumar, Varun T.V, Reba John Agenda Approval of accounts for the quarter ended September 30, 2009 Review of Internal Audit Report Approval of accounts for the quarter ended June 30, 2009 Review of Internal Audit Report Approval of accounts for the quarter ended March 31, 2009 Review of Internal Audit Report. Review of information on management discussion and analysis of financial condition and results of operation. Review of significant related party transactions Appointment of Internal Auditors Appointment of Statutory Auditors B. Details of Shareholder Grievance Meeting from April 01, 2009 to the date of filing this Letter of Offer Members of the committee 1. Mr. Thomas George Muthoot 2. Mr. Thomas John Muthoot 3. Mr. Thomas Muthoot Date Members attended Agenda May 09, Thomas Muthoot, Considering the report received from Share Transfer Agents 2011 Thomas George Muthoot, Thomas John Muthoot February 2, Thomas Muthoot, Considering the report received from Share Transfer Agents 2011 Thomas George Muthoot, Thomas John Muthoot October 19, Thomas John Considering the report received from Share Transfer Agents 2010 Muthoot, Thomas George Muthoot July 14, Thomas John Considering the report received from Share Transfer Agents 2010 Muthoot, Thomas George Muthoot, Thomas Muthoot April 14, Thomas John Muthoot, Considering the report received from Share Transfer Agents 2010 Thomas George Muthoot, Thomas Muthoot 101

128 January 16, 2010 October 08, 2009 July 07, 2009 April 06, 2009 Thomas John Muthoot, Thomas George Muthoot, Thomas Muthoot Thomas John Muthoot, Thomas George Muthoot, Thomas Muthoot Thomas John Muthoot, Thomas George Muthoot, Thomas Muthoot Thomas John Muthoot, Thomas George Muthoot, Thomas Muthoot Considering the report received from Share Transfer Agents Considering the report received from Share Transfer Agents Considering the report received from Share Transfer Agents Considering the report received from Share Transfer Agents 102

129 2. MATERIAL DEVELOPMENT There is no material development after the date of last financial statements disclosed in the LoF which is likely to materially and adversely affect or is likely to affect the profitability of the Company or the value of the assets, or its ability to pay its liabilities. 103

130 3. OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the Issue The present Rights Issue has been authorized by the Board of Directors at its meeting held on May 21, 2009 and subsequently approved by the Shareholders at the Extra-ordinary General Meeting of the Company held on September 24, The Board of Directors determined the Rights Issue price at `80per equity share and a rights entitlement of One Equity Share for every one fully paid-up Equity Shares held on the Record Date, i.e. on May 25, 2011 Prohibition by SEBI, RBI or Governmental authorities The Company, its subsidiaries, its Directors or the Promoters, or members of the promoter group and the companies with which the Directors are associated with as Directors or promoters, have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI. Neither the Company nor its promoters/promoter group, or Directors or subsidiaries, promoter group companies, the relatives of Promoters and Directors, or ventures with which promoters were associated with in the past have been declared as willful defaulters by the RBI or any other governmental authority and there have been no violations of securities laws committed by any of them in the past and no such proceedings are currently pending against them. Securities Related Business None of the Directors/ Group/ Associate / entity of the Company, and/ or any company/ entity with which any of the above is associated as promoter/ director/ partner/ proprietor that is/ was associated with securities related business and registered with SEBI other than as stated below. Muthoot Finance Company (partnership firm, wherein partners include Mr. Thomas John Muthoot, Mr. Thomas George Muthoot, Mr. Thomas Muthoot, Mrs. Janamma Thomas, Mrs. Saramma Thomas and Mr. C. Prabhakaran Nair) is a Sub Broker for Motilal Oswal Securities on National Stock Exchange Limited (SEBI registration no: INS / ) and The Bombay Stock Exchange Limited (SEBI registration no: INS / ) Neither the Company, any of its promoters, promoter group or Directors or persons in control of the Company is debarred from accessing the capital market by the Board. Neither the promoters, Directors or persons in control of the issuer was or also is a promoter, director or person in control of any other company which is debarred from accessing the capital market under any order or directions made by the Board. Further neither the Promoter, the Company nor Group Companies has been declared as willful defaulters by RBI / Government authorities. Eligibility for the Issue The Company is an existing Company registered under the Companies Act and its Equity Shares are listed on the BSE. It is eligible to offer this Issue in terms of Chapter IV of the SEBI Regulations. MCSL has complied with the following during the financial year immediately preceding the date of the LoF: Agreements / Regulations Details Compliance a. Listing Agreement Clause 35, 40A, 41 and 49 Complied with b. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 Regulation 8(3) pertaining to disclosure Complied with of changes in shareholding and Regulation 8A pertaining to disclosure 104

131 c. SEBI (Prohibition of Insider Trading) Regulations, 1992 of pledged shares Regulation 13 Complied with Compliance with Part E of Schedule VIII of the SEBI Regulations The Company is in compliance with the provisions specified in Clause 1 of Part E of Schedule VIII of the SEBI Regulations. (a) The Company has been filing periodic reports, statements and information in compliance with the Listing Agreement for the last three years. (b) The reports, statements and information referred to in sub-clause (a) above are available on the website of BSE; (c) The Company has an investor grievance-handling mechanism which includes meeting of the Shareholders Grievance Committee at frequent intervals, appropriate delegation of power by the Board of Directors of the issuer as regards share transfer and clearly laid down systems and procedures for timely and satisfactory redressal of investor grievances. Disclaimer Clause AS REQUIRED, A COPY OF THE DLOF HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF LOF TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. LEAD MERCHANT BANKER, KARVY INVESTOR SERVICES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER, KARVY INVESTOR SERVICES LIMITED HAS FURNISHED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) A DUE DILIGENCE CERTIFICATE DATED FEBRUARY 02, 2011 WHICH READS AS FOLLOWS: WE, THE LEAD MERCHANT BANKER(S) TO THE ABOVE MENTIONED FORTHCOMING ISSUE, STATE AND CONFIRM AS FOLLOWS: 1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE FINALISATION OF THE DLOF PERTAINING TO THE SAID ISSUE; 2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS 105

132 DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT: (a) THE DLOF FILED WITH THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; (b) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE REGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND (c) THE DISCLOSURES MADE IN THE DLOF ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS. 3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DLOF ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID. 4. WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS. NOT APPLICABLE 5. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SPECIFIED SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN SHALL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DLOF WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER. NOT APPLICABLE 6. WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DLOF. NOT APPLICABLE 7. WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITORS CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. NOT APPLICABLE 106

133 8. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION. 9. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 73 OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE DRAFT LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION. IN ACCORDANCE WITH CLAUSE 56 THE ISSUER SHALL UTILISE FUNDS COLLECTED IN RIGHTS ISSUE AFTER FINALISATION OF BASIS OF ALLOTMENT IN ACCORDANCE WITH ICDR REGULATION AND APPLICABLE LAWS; 10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE LOF THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE; 11. WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN THE VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION. 12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DLOF: (a) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUER; AND (b) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME. 13. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE. 14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE, ETC. 15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE LOF WHERE THE REGULATION HAS BEEN COMPLIED WITH AND THE COMMENTS, IF ANY. THE FILING OF THIS LOF DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGER ANY 107

134 IRREGULARITIES OR LAPSES IN THIS LOF. Caution Disclaimer Statement from the Issuer and Lead Merchant Banker: The Company and the Lead Manager accept no responsibility for statements made otherwise than in the offer document or in the advertisement or any other material issued by or at the instance of the issuer and that anyone placing reliance on any other source of information would be doing so at his own risk. Investors who invest in the Issue will be deemed to have been represented by the Issuer and Lead Manager and their respective Directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company, and are relying on independent advice / evaluation as to their ability and quantum of investment in this Issue. Investors who invest in the Issue will be deemed to have represented to the Company and Lead Manager and their respective Directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares, and are relying on independent advice / evaluation as to their ability and quantum of investment in the Issue. Disclaimer with respect to jurisdiction This LoF has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Kochi, India only. Designated Stock Exchange The Designated Stock Exchange for the purpose of the Issue will be the Bombay Stock Exchange Limited (BSE). Disclaimer Clause of the BSE As required, a copy of the DLoF is submitted to BSE. The disclaimer clause as intimated by the BSE to us, post scrutiny of the DLoF, is included in the Letter of Offer, prior to filing the same with BSE. Disclaimer Clause of the RBI A License authorizing the Company to carry on the business of a non-banking financial institution has been obtained from the Reserve Bank of India in terms of Section 45 IA of the Reserve Bank of India Act, It must be distinctly understood, however, that in issuing the license the Reserve Bank of India does not undertake any responsibility for the financial soundness of the Company or for the correctness of any of the statements made or opinion expressed in this connection. Filing The DLoF was filed with SEBI, D`Monte Building, 3rd Floor, 32, D`Monte Colony, TTK Road, Alwarpet, Chennai , India to give its observations. After SEBI gives its observations, the LoF is being filed with the Designated Stock Exchange as per the requirements of the law. All the legal requirements applicable till the date of filing the LoF with the Stock Exchange have been complied with. Selling restrictions The distribution of this LoF and the Issue of Rights Equity Shares to persons in certain jurisdictions outside India may be restricted by the legal requirements prevailing in those jurisdictions. Persons into whose 108

135 possession the LoF may come are required to inform themselves about and observe such restrictions. The Company is making this Issue of Rights Equity Shares to the Eligible Equity Shareholders of the Company and will dispatch the LoF / Abridged Letter of Offer and CAFs to the Eligible Equity Shareholders who have provided an Indian address. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose, except that the DLoF was filed with SEBI for observations. Accordingly, the Rights Equity Shares represented thereby may not be offered or sold, directly or indirectly, and the LoF may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Receipt of the LoF will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, under those circumstances, the LoF must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of the LoF should not, in connection with the Issue of the Rights Equity Shares or the Rights Entitlements, distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. If the LoF is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the Rights Equity Shares or the Rights Entitlements referred to in the LoF. Neither the delivery of this LoF nor any sale hereunder, shall under any circumstances create any implication that there has been no change in the Company herein is correct as of any time subsequent to this date. Impersonation As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of sub-section (1) of section 68A of the Companies Act which is reproduced below: Any person who makes in a fictitious name an application to a Company for acquiring, or subscribing for, any shares therein, or otherwise induces a Company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years Expert Opinion, if any 35 and 17 of this LoF, respectively, no expert opinion has been obtained by the Company in relation to this LoF. Expenses of this Issue The expenses of this Issue payable by the Company including lead management fees, fees payable to Auditors, legal counsel, Registrar to the Issue, printing and distribution expenses, publicity, listing fees, stamp duty and other expenses are estimated at ` Lakhs (around 0.80% of the total Issue size) and will be met out of the proceeds of this Issue. Particulars Estimated % of the Issue % of the Issue size expenses (` ) expenses Lead Management Fee 1,500, % 0.29% 200, % 0.04% 400, % 0.08% Auditors Fee 220, % 0.04% Printing and distribution 1,711,200 expenses 40.98% 0.33% Advertisement and 143,706 Misc. Expenses 3.44% 0.03% 109

136 Total 4,175, % 0.80% Previous Issues by the Company during the last 5 years Nil Promise vis-à-vis Performance last three issues Public issue 1995 The Company issued 16, 25,000 Equity Shares of `10/- each for cash at par aggregating ` Lakhs Share by way of a public issue. Year of Issue Size of Issue (`in Lakhs) Closing Date February 6, 1995 Name of the Stock Exchange Date of listing of Equity Shares Bombay Stock Exchange Limited April 24, 1995 Cochin Stock Exchange Limited April 17, 1995 Coimbatore Stock exchange Limited Not Available* * Listing Agreement with Bombay Stock Exchange Limited, Cochin Stock Exchange Limited and Coimbatore Stock Exchange Limited has been misplaced. MCSL was unable to arrange for details regarding the listing date from Coimbatore Stock Exchange Limited Details of objects a. To build the stock broking network, corpus for carrying out leasing, stock market operation and investments in shares and securities and build a strong financial base for merchant banking operation and corporate finance; b. To augment the long term working capital requirement of the Company c. To list the Company shares in the Cochin Stock Exchange Limited, Bombay Stock Exchange Limited and Coimbatore Stock Exchange Limited and d. To meet the expenses of the Issue Fees Payable to the Lead Manager to the Issue The fee payable to the Lead Manager to the Issue is set out in the relevant documents entered into by the Company with Karvy Investor Services Limited, copies of which are available for inspection at the Registered Office of the Company. Fees Payable to the Registrars to the Issue The fee payable to the Registrars to the Issue is as set out in the relevant documents, copies of which are kept open for inspection at the Registered Office of the Company. Investor Grievances Redressal Mechanism The Company has constituted Shareholders/Investors Grievance Committee which oversees redressal of complaints of shareholders/investors and other important investor related matters. In order to expedite the process of investor service, the Managing Director has been delegated by the Board the power to approve share transfers and deal with matters, connected therewith. The Company has adequate arrangements for redressal of investor complaints as follows:- a) Computerised record of correspondence b) Share transfer/dematerilisation/rematerilisation are handled by a well equipped professionally managed Registrar and Transfer Agent, appointed by the Company in terms of SEBI`s direction for appointment of Common Agency for physical as well as demat shares. The Registrars are constantly monitored and supported 110

137 by qualified and experienced personnel of the Company. The contact details of the Company - Integrated Enterprises (India) Limited SEBI Registration. No. INR Kences Towers, 2nd Floor, No.1 Ramakrishna Street, Off North Usman Road, T Nagar, Chennai Tel: Fax : corpserv@iepindia.com Website: Contact Person: Mr. K Balasubramanian SEBI Registration No.: INR Status of Complaints: a. No. of shareholders complaints outstanding as of June 21, 2011: Nil b. Total number of complaints received during the period April 01, 2011 to June 21, 2011: 14 c. Status of complaints: Out of the 14 complaints received by the Company during the period April 01, 2011 to June 21, 2011, the Company resolved 14 complaints d. Time normally taken for disposal of various types of investor grievances: 21 days The investor grievances arising out of the Issue will be handled by Ms. Malathy N, Company Secretary and Compliance Officer and Integrated Enterprises (India) Limited, Registrars to the Issue. The Registrar will have a separate team of personnel handling only the post-issue correspondence. All grievances relating to the issue may be addressed to the Registrars to the Issue giving full details such as folio no., name and address, contact telephone/cell numbers, id of the first investors, number and type of shares applied for, application form serial number, amount paid on application and the name of the bank and the branch where the application was deposited, along with a photocopy to the acknowledgement slip. In case of renunciation, the details of the Renouncees should be furnished. The average time taken by the Registrar for attending to routine grievances will be 10 days from the date of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the endeavor of the Registrar to attend to them as expeditiously as possible. The Company undertakes to resolve the Investor grievances in a time bound manner. Investors may contact the Company Secretary and Compliance Officer in case of any pre-issue/post-issue related problems such as non-receipt of letters of allotment/share certificates/demat credit/refund orders etc. at: Ms. Malathy N, Muthoot Capital Services Limited Company Secretary and Compliance Officer Muthoot Towers, 5 th Floor, M G Road, Kochi ,Kerala Tel: , , Fax: ,

138 SECTION VII: OFFERING INFORMATION TERMS OF THE PRESENT ISSUE The Rights Equity Shares, now being issued, are subject to the terms and conditions contained in this LoF, the Company, the provisions of the Companies Act, approvals from the RBI, guidelines or regulations issued by SEBI, approvals from the Stock Exchanges where Equity Shares of the Company are listed, FEMA, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the Allotment advice or letter of Allotment or security certificate, the provisions of the Depositories Act, to the extent applicable and any other legislative enactments and rules as may be applicable and introduced from time to time. Authority for the Issue This Rights Issue is being made to the Eligible Equity Shareholders of the Company authorized by the Board of Directors at its meeting held on May 21, 2009 and subsequently approved by the Shareholders at the Annual General Meeting of the Company held on September 24, The Board of Directors determined the Rights Issue price at `80per equity share and a rights entitlement of One Equity Share for every one fully paid-up Equity Share held on the Record Date, i.e. on May 25, Ranking of the Equity Shares The Equity Shares issued and allotted on a Rights Basis as a part of this Issue shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects including dividends with the existing Equity Shares of the Company. Mode of Payment of Dividend The Company shall pay dividend to the Equity Shareholders as per the provisions of the Companies Act, Basis for the Issue The Rights Equity Shares are being offered for subscription for cash to the Eligible Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the Equity Shares held in electronic form and on the Register of Members of the Company in respect of the Equity Shares held in the physical form at the close of business hours on the Record Date i.e. May 25, 2011, fixed in consultation with the Designated Stock Exchange. The Equity Shares are being offered for subscription in the ratio of one Rights Share for every one Equity Share held by the Eligible Equity Shareholders. Rights Entitlement As your name appears as a beneficial owner in respect of the Equity Shares held in electronic form or appears in the Register of Members as an Equity Shareholder on the Record Date, you are entitled to the number of Rights Equity Shares shown in Block I of Part A of the enclosed CAF. In the event you are an ASBA Investor, you shall be required to indicate either in (i) Part A of the CAF, or (ii) a plain paper application, as to whether you desire to avail of the ASBA option. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. The Eligible Equity Shareholders are entitled to 1(one) Rights Equity Share(s) for every 1 (one) Equity Share(s) 112

139 held on the Record Date. Principal Terms of the Issue Face Value Each Rights Equity Share shall have the face value of `10/-. Issue Each Equity Share shall be offered at an Issue Price of `80 for cash (including a premium of `70/-per Rights Equity Share). Payment terms All Investors shall have to make the full payment of the Issue Price of `80 per Rights Equity Share at the time of making an Application. Entitlement Ratio The Equity Shares are being offered on a Rights basis to the existing Equity Shareholders in the ratio of one Equity Share for every one Equity Share held on the Record Date. Rights of the Equity Shareholders Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll in person or by proxy; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation; Right to free transferability of shares; and Such other rights as may be available to a shareholder of a listed public Company under the Companies Act and Memorandum and Articles of Association. Listing and trading of Equity Shares proposed to be issued The Company Equity Shares are currently traded on the BSE under the ISIN INE296G01013 The fully paid up Rights Equity Shares proposed to be issued shall be listed and admitted for trading on the BSE under the existing ISIN for fully paid up Equity Shares of the Company. The Rights Equity Shares allotted pursuant to this Issue will be listed as soon as practicable but in no case later than 7 (seven) working days from the date of finalization of basis of Allotment. The Company - for listing of the Rights Equity Shares in accordance with clause 24(a) of the Listing Agreement to the BSE through letters dated February 02, 2011 and has received such approval from the BSE through letter no. DCS/PREF/NTP/IP-RT/1131/10-11dated March 14, The distribution of the LoF and the Issue of Rights Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. The Company is making this Issue of Rights Equity Shares on a rights basis to the Eligible Equity Shareholders of the Company and will dispatch the Letter of Offer / Abridged Letter of Offer and the CAF to the Eligible Equity Shareholders who have provided an Indian address. 113

140 General terms of the Issue Market lot The Equity Shares of the Company are tradable only in dematerialized form. The market lot for the Equity Shares in dematerialised mode is one. In case of physical certificates, the Company would issue one certificate for the Equity Shares In respect of the Consolidated Certificate, the Company will be returning the share certificates issued for the entire holding, duly split as desired by the Equity Shareholders within six weeks time, as and when such requests are received from the Equity Shareholders without charging anything from the Equity Shareholder. Minimum Subscription If the Company does not receive the minimum subscription of 90% of the Issue, the Company shall forthwith refund the entire subscription amount received within 15 (fifteen) days from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to repay it, (i.e. 15 (fifteen) days after the Issue Closing Date or the date of the refusal by the Stock Exchange(s), whichever is earlier) the Company and every Director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money with interest as prescribed under sub-section (2) and (2A) of Section 73 of the Companies Act. Additional Subscription by the Promoters Promoters of the Company have confirmed that they either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group intend to subscribe to the full extent of their Rights Entitlement in the Issue. Promoters, either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group also intends to apply for additional Equity Shares in the Issue, such that the Issue is subscribed. As a result of this subscription and consequent Allotment, Promoters either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group may acquire Equity Shares over and above their Rights Entitlement, which may result in an increase of their shareholding above their current shareholding together with their Rights Entitlement. This subscription and acquisition of additional Equity Shares by them, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the 13 of this LoF), there is no other intention/purpose for this Issue including no intention to de-list the Company, even if, as a result of Allotments to Promoters or their relatives or entities controlled by them forming part of the Promoter Group in this Issue, their shareholding in the Company exceeds its current shareholding. Promoters either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group intends to subscribe to such unsubscribed portion as permitted under the relevant provisions of the law. Pursuant to any Allotment made to the Promoters or their relatives or entities controlled by them forming part of the Promoter Group of additional Equity Shares forming part of the unsubscribed portion in the Issue, the Company and the Promoters undertake to comply with applicable laws. However, the Promoters have confirmed that in case the Rights Issue of the Company is completed with their subscribing to Equity Shares over and above their entitlement and as a result, if the public shareholding in the Company after the Issue falls below the permissible minimum level as specified in the listing condition or Listing Agreement, they will undertake to maintain the minimum public shareholding in such manner and within such period as specified in Clause 40A of the Listing Agreement. Joint-Holders Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint-holders with the benefits of survivorship subject to provisions contained in the Articles of Association of the Company. 114

141 Notices All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one English national daily with wide circulation and one Hindi national daily and one regional language daily newspaper and/or, will be sent by ordinary post/ to the registered holders of the Equity Share from time to time. Nomination facility In accordance with Section 109A of the Companies Act, only individuals applying as sole applicants/ joint applicants can nominate, non-individuals including society, trust, body corporate, partnership firm, holder of power of attorney cannot nominate. In accordance with Section 109A of the Companies Act, the sole or first holder, along with other joint holders, may nominate any one person in whom, in the event of the death of sole holder or in case of joint holders, death of all the holders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale/ transfer/ alienation of equity share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the Company Company Transfer Agents. The Applicant can make the nomination by filling in the relevant portion of the CAF. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, 1956, shall upon the production of such evidence as may be required by the Board, elect either: to register himself or herself as the holder of the Equity Shares; or to make such transfer of the Equity Shares, as the deceased holder could have made Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity Shares, until the requirements of the notice have been complied with. Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder(s) has already registered the nomination with the Company, no further nomination needs to be made for Equity Shares to be allotted in this Issue under the same folio. In case the Allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires changing the nomination, they are requested to inform their respective DP. Issue of duplicate Equity Share Certificate If any equity share certificate is mutilated or defaced or the pages for recording transfers of equity share are fully utilized, the same may be replaced by the Company against the surrender of such certificate. Provided, where the equity share certificate are mutilated or defaced, the same will be replaced as aforesaid only if the certificate numbers and the distinctive numbers are legible. If any equity share certificate is destroyed, stolen or lost, then upon production of proof thereof to the satisfaction of the Company and upon furnishing such indemnity/surety and/or documents as the Company may deem adequate, duplicate equity share certificate shall be issued. 115

142 Printing of bank particulars on refund orders As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. The Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud. Offer to Non-Resident Equity Shareholders/Applicants Applications received from NRIs for Allotment of Rights Equity Shares shall be, inter alia, subject to the conditions imposed from time to time by the RBI under the Foreign Exchange Management Act, 1999 (FEMA) in the matter of refund of application moneys, Allotment of Rights Equity Shares, issue of letter of Allotment/share certificates, payment of interest, dividends, etc. The Rights Equity Shares purchased by NRIs shall be subject to the same conditions including restrictions in regard to the reparability as are applicable to the original shares against which Rights Equity Shares are issued. have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) Regulations, The circular stipulates that an OCB shall not be eligible to purchase equity or preference shares or convertible debentures offered on right basis by an Indian Company, and no Indian Company shall offer equity or preference shares or convertible debentures on right basis to an OCB. Accordingly, OCBs shall not be eligible to subscribe to the Equity Shares. The RBI has however clarified in its circular, A.P. (DIR Series) Circular No. 44, dated December 8, 2003 that OCBs which are incorporated and are not under the adverse notice of the RBI are permitted to undertake fresh investments as incorporated non-resident entities in terms of Regulation 5(1) of RBI Notification No.20/2000-RB dated May 3, 2000 under FDI Scheme with the prior approval of Government if the investment is through Government Route and with the prior approval of RBI if the investment is through Automatic Route on case by case basis. Thus, OCBs desiring to participate in this Issue must obtain prior approval from the RBI. On providing such approval to the Bank at its registered office, the OCB shall receive this Letter of Offer and the CAF. Applications received from the NRIs for the Allotment of Rights Equity Shares shall, among other things, be subject to conditions as may be imposed, from time to time, by the RBI, in the matter of refund of application moneys, Allotment of Rights Equity Shares, issue of letters of allotment/ certificates/ payment of dividends etc. Procedure for Application The Composite Application Form (CAF) would be printed in black ink for all Equity Shareholders. In case the original CAF is not received by the applicant or is misplaced by the applicant, the applicant may request the Registrar to the Issue, for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address. The CAF consists of four parts: Part A: Form for accepting the Rights Equity Shares and for applying for additional Rights Equity Shares; Part B: Form for renunciation; Part C: Form for application for renunciation; Part D: Form for request for split Application forms. Utilisation of Issue Proceeds The Board of Directors declares that: (i) The funds received against this Issue will be transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Act. 116

143 (ii) Details of all moneys utilised out of the Issue shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such moneys have been utilized; and (iii) Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against this Issue will be kept in a separate bank account. The Company will utilize the issue proceeds only after the basis of Allotment is finalized. Undertakings by the Company in connection with this Issue 1. The complaints received in respect of the Issue shall be attended to by the Company expeditiously and satisfactorily. 2. All steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the Equity Shares to be issued pursuant to this Issue are to be listed will be taken within seven (7) working days of finalization of basis of Allotment. 3. The funds required for dispatch of refund orders/ Allotment letters/share certificates by registered post / under certificate of posting shall be made available to the Registrar to the Issue by the Company. 4. Where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 15 days of closure of the Issue, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund. 5. Adequate arrangements shall be made to collect all ASBA applications and to consider them similar to Non-ASBA applications while finalizing the basis of Allotment. 6. The certificates of the securities/ refund orders to the non-resident Indians shall be dispatched within the specified time. 7. No further issue of securities affecting equity capital of the Company shall be made till the securities issued/offered through the Issue are listed or till the application moneys are refunded on account of non listing, under subscription etc. 8. The Company certifies that the investors shall be given an option to get the Rights Shares in demat or Physical form 9. The Company undertakes that it shall comply with such disclosure, monitoring of the utilization of proceeds of the Issue and accounting norms specified by SEBI from time to time. Note Company accepts full responsibility for the accuracy of information given in this LoF and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this LoF misleading and further confirms that it has made all reasonable enquiries to ascertain such facts. by the Lead Manager and the Issuer to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc. he Issuer and Lead Manager shall update this LoF and keep the investors informed of any material changes till the listing and trading commences. How to Apply For Equity Shareholders wishing to apply through the newly introduced ASBA process for rights issues, on page 124 of this LoF. (i) Application by Resident Equity Shareholders Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed in all respects, as explained in the instructions indicated in the CAF and submitted to the Bankers to 117

144 the Issue. CAFs will not be accepted by the Lead Manager or by the Registrar to the Issue or by the Company at any office except in the case of postal applications as per instructions given in the LoF. ASBA Investors shall be required to indicate either in (i) Part A of the CAF, or (ii) a plain paper application, as to whether they desire to avail of the ASBA option. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. Mode of payment for Resident Equity Shareholders/ Applicants All cheques / demand drafts accompanying the CAFs should be drawn in favour of the Collecting Bank (specified on the reverse of the CAF), Muthoot Capital Services Limited -. Applicants residing at places other than places where the bank collection centers have been opened by the Company for collecting applications, are requested to send their applications together with Demand Draft net of demand draft and postal charges for the full application amount favouring the Bankers to Muthoot Capital Services Limited - Rights Issue payable at Chennai directly to the Registrar to the Issue by Registered Post so as to reach them on or before the Issue closing date. The Company or the Registrar will not be responsible for postal delays or loss of applications in transit, if any. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. (ii) Application by Non-Resident Equity Shareholders Applications received from the Non-Resident Equity Shareholders for the Allotment of Equity Shares shall, inter-alia, be subject to the conditions as may be imposed from time to time by RBI, in the matter of refund of application moneys, Allotment of Equity Shares, issue of letters of allotment/certificates/payment of dividends etc. This LoF and CAF shall only be dispatched to Non-Resident (including NRI) Equity Shareholders with registered address in India. Please see the procedure for application above. The Non Resident applicants, who have not received the LoF and CAF, can obtain the same from the Registrars to the Issue, Integrated Enterprises (India) Limited, Kences Towers, 2nd Floor, No.1, Ramakrishna Street, Off North Usman Road, T Nagar, Chennai Non Resident applicants may please note that only such applications as are accompanied by payment in free foreign exchange shall be considered for Allotment under the reserved category. The Non Resident Indians who intend to make payment through Non Resident Ordinary (NRO) accounts shall use the form meant for Resident Indians and shall not use the forms meant for reserved category Mode of payment for Non-Resident Equity Shareholders/ Applicants Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. As regards the application by Non-Resident Equity Shareholders, the following further conditions shall apply: Payment by Non-Residents must be made by demand draft / cheque payable at Chennai (net of demand draft charges and postal charges) or funds remitted from abroad in any of the following ways: 1. Application with repatriation benefits (a) By Indian Rupee drafts purchased from abroad and payable at Chennai or funds remitted from abroad 118

145 (submitted along with Foreign Inward Remittance Certificate); or (b) By cheque / draft on a NRE or FCNR Account maintained in Mumbai; or (c) By Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in India and payable at Chennai; or (d) FIIs registered with SEBI must remit funds from special Non-Resident rupee deposit account. (e) Non Resident investors applying with repatriation benefits should draw cheques/drafts in favour of the Muthoot Capital Services Limited - Rights Issue - NR Chennai ue or bank draft must accompany each application form. (f) In the case of non-residents who remit their application money from funds held in FCNR / NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF. (g) In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, refunds and other disbursements, if any will be made in US Dollars at the rate of exchange prevailing at such time subject to the permission of RBI. The Company will not be liable for any loss on account of exchange rate Bankers. 2. Application without repatriation benefits As far as Non-Residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on NRO Account maintained in Mumbai or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Chennai. In such cases, the Allotment of Equity Shares will be on non-repatriation basis. All cheques/drafts submitted by Non-Residents should be drawn in favour of the Bankers to the Issue and marked Muthoot Capital Services Limited - Rights Issue - payable at Chennai and must be crossed application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on the Issue Closing Date. A separate cheque or bank draft must accompany each CAF. Applicants may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incomplete and is liable to be rejected. New demat account shall be opened for holders who have had a change in status from resident Indian to NRI. Notes: 1. In case where repatriation benefit is available, interest, dividend and sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India. 3. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on the aforesaid Issue Closing Date. A separate cheque or bank draft must accompany each CAF. 119

146 4. In case application received from Non-Residents, Allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such Allotment, remittance and subject to necessary approvals. 5. The Company is not responsible for any postal delay / loss in transit on this account and applications received through mail after closure of the Issue are liable to be rejected. 6. Applications through mail should not be sent in any other manner except as mentioned above. The CAF along with the application money must not be sent to the Company or the Lead Manager or the Registrar except stated otherwise. The Investors are requested to strictly adhere to these instructions. 7. Renouncees who are NRIs / FIIs / Non Residents should submit their respective applications either by hand delivery or by registered post with acknowledgement due to the Registrar to the Issue only at the below mentioned address along with the cheque / demand draft payable at Chennai so that the same are received on or before the closure of the Issue. (iii) Procedure for Application by Mutual Funds A separate application can be made in respect of each scheme of an Indian mutual fund registered with the SEBI and such applications shall not be treated as multiple applications. The applications made by asset management companies or custodians of a mutual fund should clearly indicate the name of the concerned scheme for which the application is being made. (iv) Investment by FIIs In accordance with the current regulations, the following restrictions are applicable for investment by FIIs: The issue of Rights Equity Shares under this Issue to a single FII should not exceed 10% of the post-issue paid up capital of the Company. In respect of an FII investing in the Rights Equity Shares on behalf of its subaccounts, the investment on behalf of each sub-account shall not exceed 10% of the total paid-up capital of the Company or 5% of the total issued capital in case such sub-account is a foreign corporate or an individual. In accordance with foreign investment limits applicable to the Company, the total FII investment cannot exceed 24% of the total paid-up capital of the Company. With the approval of the board and the shareholders by way of a special resolution, the aggregate FII holding can go up to 100%. As of date, the FII investment in the Company is limited to 24% of the total paid-up capital of the Company. OPTION AVAILABLE TO THE EQUITY SHAREHOLDERS The CAF clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to. If the Equity Shareholder applies for an investment in Equity Shares, then he can: A. Apply for his Rights entitlement in full; B. Apply for his Rights Entitlement in part (without renouncing the other part); C. Apply for his Rights Entitlement in full and apply for additional Equity Shares; D. Renounce his entire Rights Entitlement; E. Apply for his Rights Entitlement in part and renounce the other part. Options A and B: Acceptance of the Rights Entitlement The Equity Shareholders may accept their Rights Entitlement and apply for the Equity Shares offered, either (i) in full or (ii) in part, without renouncing the other part, by completing Part A of the CAF. Option C: Acceptance of the Rights Entitlement and Application for Additional Equity Shares 120

147 The Equity Shareholders are eligible to apply for additional Equity Shares, over and above their Rights Entitlements, provided that such Equity Shareholders have applied for all the Equity Shares without renouncing some or all of them in favor of any other person(s). The application for the additional Equity Shares shall be considered and allotment shall be made at the sole discretion of the Board of Directors, in consultation, if necessary, with the Designated Stock Exchange. Where the number of Equity Shares applied for exceeds the number of Equity Shares available for allotment, the allotment of additional Equity Shares shall be made on a fair and equitable basis with reference to the number of Equity Shares held by the applicant on the Record Date. For details of the manner in which applications for additional Equity Shares with shall be considered and allotment completed, please refer to the sub- Offering Information 112 of this LoF. If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for additional Equity Shares in Part A of the CAF. Options D and E: Renunciation of the Rights Entitlement As an Equity Shareholder, you have the right to renounce your entitlement to the Equity Shares, in full or in part, in favor of one or more persons. Your attention is drawn to the fact that our Bank shall not allot and/or the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or any other law applicable to trusts and societies and is authorised under its constitution or byelaws to hold equity shares of a company). The person(s) in whose favor any Equity Shares are renounced should complete and sign Part C of the CAF and submit the CAF to the Bankers to the Issue on or prior to the Issue Closing Date along with the Application Money. Renouncees need not be existing Equity Shareholders of the Company. Renouncees who have subscribed for all the Equity Shares renounced in their favor may also apply for additional Equity Shares. A Renouncee cannot further renounce. However, the right of renunciation is subject to the express condition that the Board of Directors shall be entitled, in its absolute discretion, to reject the request from the renouncees for the allotment of Equity Shares without assigning any reason therefore. RENUNCIATION The Issue includes a right exercisable by you to renounce the Rights Equity Shares offered to you either in full or in part in favour of any other person or persons. Such renouncees can only be Indian nationals/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (unless registered under the Indian Trust Act), minors (through their legal guardians), societies (unless registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold Equity Shares in a Company and cannot be a partnership firm, more than three persons including joint holders, HUF, foreign nationals (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of this LoF could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board. Any renunciation from Non-Resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/ renouncee(s) obtaining the approval of the FIPB and/ or necessary permission of RBI under the Foreign Exchange Management Act, 1999 (FEMA) and other applicable laws and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approval are liable to be rejected. Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from Non- Resident Indian Shareholder(s) to other Non-Resident Indian(s) is subject to the prevailing RBI guidelines. By virtue of the Circular No. 14 dated September 16, 2003 issued by RBI, Overseas Corporate Bodies bsequently issued the Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe 121

148 to the Equity Shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCBs. en made. If used, this will render the application invalid. Submission of the enclosed CAF to the Bankers to the the CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Rights Equity Shares of the CAF to receive Allotment of such Rights Equity Shares. The Renouncees applying for all the Rights Equity Shares renounced in their favour may also apply for additional Rights Equity Shares of the CAF must not be used by the Renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right to renounce any Rights Equity Shares in favour of any other person. The right of renunciation is subject to the express condition that the Board/Committee of Directors shall be entitled in its absolute discretion to reject the request for Allotment to renouncee(s) without assigning any reason therefor. PROCEDURE FOR RENUNCIATION To renounce all the Rights Equity Shares offered to an Eligible Equity Shareholder in favour of one Renouncee If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of the CAF. To renounce in part/or renounce the whole to more than one person(s) If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split into requisite number of forms. Please indicate your requirement of split application forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for split application forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraph above shall have to be followed. In case the signature of the Equity Shareholder(s), who has/have renounced the Equity Shares, does/do not match with the specimen registered with the Company, the application is liable to be rejected. Renouncee(s) The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the CAF and submit the entire CAF to the Bankers to the Issue on or before the Issue closing date along with the application money. The Renouncee cannot further renounce. Change and/or introduction of additional holders If you wish to apply for Equity Shares jointly with any other person or persons, not more than three, who is/are not already joint holder(s) with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed. However, this right of renunciation is subject to the express condition that the Board of Directors of the Company shall be entitled in its absolute discretion to reject the request for Allotment from the renouncee(s) 122

149 without assigning any reason therefor. Please note that: (a) Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. (b) A request by the Investor for the split Application form should reach the Company on or before July 18, 2011 (c) Only the person to whom the Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. ADDITIONAL RIGHTS EQUITY SHARES You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any other person(s). Applications for additional Equity Shares shall be considered and Allotment shall be made at the sole discretion of the Board, in consultation, if necessary, with the Designated Stock Exchange and in the manner prescribed in the Letter of Offer. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. In case of change of status of a holder, i.e., from a Resident Indian to Non-Resident Indian, a new Demat account shall be opened for the purpose. In case of application for additional Equity Shares by Non-Resident Equity Shareholders, the Allotment of additional shares will be subject to the condition that the overall issue of shares to the Non-Resident Equity Shareholders in the total paid-up capital does not exceed the sectoral cap and will be subject to RBI guidelines in this regard. Where the number of additional Equity Shares applied for exceeds the number available for Allotment, the Allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF: Option Available 1. Accept whole or part of your entitlement without renouncing the balance. 2. Accept your entitlement in full and apply for additional Equity Shares 3. Renounce your entitlement in full to one person (Joint renouncees are considered as one). Action Required Fill in and sign Part A (All joint holders must sign) Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares. (All joint holders must sign) Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand it over to the renouncee. The renouncees must fill in and sign Part C (All joint renouncees must sign) 123

150 Option Available 4. Accept a part of your entitlement and renounce the balance to one or more renouncee(s) OR Renounce your entitlement to all the Equity Shares offered to you to more than one renouncee 5. Introduce a joint holder or change the sequence of joint holders Action Required Fill in and sign Part D (all joint holders must sign) requesting for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. Splitting will be permitted only once. On receipt of the Split Form take action as indicated below. For the Equity Shares you wish to accept, if any, fill in and sign Part A. For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand it over to the renouncees. Each of the renouncees should fill in and sign Part C for the Equity Shares accepted by them. This will be treated as a renunciation. Fill in and sign Part B and the renouncees must fill in and sign Part C. For applicants residing at places other than designated Bank collecting branches Resident investors residing at places other than the cities where the bank collection centres have been opened and NR applicants applying on a non-repatriation basis should send their completed CAF by registered post/speed post to the Registrar to the Issue, Integrated Enterprises (India) Limited, along with demand drafts net of bank and postal charges, payable at Chennai in favour of the Bankers to the Issue, crossed account payee only and marked Muthoot Capital Services Limited - Rights Issue so that the same are received on or before closure of the Issue i.e. July 25, NR investors, who are not excluded U. S. Persons as defined in Regulation S under the U.S. Securities Act of 1933, as amended, (a U.S. Person ), applying on a repatriation basis should send their completed CAF by registered post/speed post to the Registrar to the Issue, Integrated Enterprises (India) Limited along with demand drafts for the full application amount, payable at Chennai in favour of the Bankers to the Issue, crossed account payee only and marked Muthoot Capital Services Limited- Rights Issue - NR so that the same are received on or before closure of the Issue i.e. July 25, 2011.The Company will not be liable for any postal delays and applications received through mail after the closure of the Issue are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned below. AVAILABILITY OF DUPLICATE CAF In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number/ DP and Client ID no. and his/her full name and address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should not utilise the original CAF for any purpose including renunciation, even if it is received/found subsequently. If the applicant violates this requirement, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications. PROCEDURE FOR APPLICATION THROUGH THE APPLICATIONS SUPPORTED BY BLOCKED AMOUNT ( ASBA ) PROCESS SEBI, by its circular dated August 20, 2009, introduced in rights issue -ASBA wherein the application money remains in the ASBA Account until Allotment. Mode of payment through ASBA in Rights Issue became effective on August 20, Since this is a new mode of payment in Rights Issues, set forth below is the procedure for applying under the ASBA procedure, for the benefit of the shareholders. 124

151 This section is only to facilitate better understanding of aspects of the procedure which is specific to ASBA Investors. ASBA Investors should nonetheless read this document in entirety. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. The Company and the Lead Manager are not liable for any amendments or modifications or changes in applicable laws or regulations, which may occur after the date of this Letter of Offer. Equity Shareholders who are eligible to apply under the ASBA Process are advised to make their independent investigations and ensure that the number of Equity Shares applied for by such Equity Shareholders do not exceed the applicable limits under laws or regulations. ASBA Process Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding `200,000, shall mandatorily make use of ASBA facility. An ASBA Investor can submit his application through CAF/plain paper, either in physical or electronic mode, to the SCSB with whom the bank account of the ASBA Investor or bank account utilised by the ASBA Investor is maintained. The SCSB shall block an amount equal to the application amount in the ASBA Account specified in the CAF, physical or electronic, on the basis of an authorisation to this effect given by the account holder at the time of submitting the CAF. The application data shall thereafter be uploaded by the SCSB in the web enabled interface of the Stock Exchanges as prescribed under circular issued by SEBI - SEBI/CFD/DIL/DIP/38/2009/08/20 dated August 20, 2009 or in such manner as may be decided in consultation with the Stock Exchanges. The amount payable on application shall remain blocked in the ASBA Account until finalisation of the Basis of Allotment and consequent transfer of the amount against the allocated Equity Shares to the separate account opened by the Company for Rights Issue or until failure of the Issue or until rejection of the ASBA application, as the case may be. Once the basis of Allotment is finalized, the Registrar to the Issue shall send an appropriate request to the Controlling Branch for unblocking the relevant ASBA Accounts and for transferring the amount allocable to the successful ASBA Investors to the separate account opened by the Company for Rights Issue. In case of withdrawal/failure of the Issue, the blocked amount shall be unblocked on receipt of such information from the Registrar to the Issue The Lead Manager, the Company, its Directors, affiliates, associates and their respective Directors and officers and the Registrar to the Issue shall not take any responsibility for acts, mistakes, errors, omissions and commissions etc. in relation to applications accepted by SCSBs, Applications uploaded by SCSBs, applications accepted but not uploaded by SCSBs or applications accepted and uploaded without blocking funds in the ASBA Accounts. It shall be presumed that for applications uploaded by SCSBs, the amount payable on application has been blocked in the relevant ASBA Account. Equity Shareholders who are eligible to apply under the ASBA Process: The option of applying for Equity Shares in the Issue through the ASBA Process is only available to Equity Shareholders of the Company on the Record Date and who: i. Are holding Equity Shares in dematerialised form and have applied towards their rights entitlements or additional shares in the Issue in dematerialised form; ii. Have not renounced their entitlements in full or in part; iii. Have not split the CAF; iv. Are not Renouncees; and v. Who apply through a bank account with one of the SCSBs. 125

152 CAFs The Registrar will despatch the CAFs to all Equity Shareholders as per their entitlement on the Record Date for the Issue. Those Equity Shareholders who wish to apply through the ASBA payment mechanism, will have to select for this mechanism in Part A of the CAFs and provide necessary details or in plain paper application and indicate that they wish to apply through ASBA payment mechanism. Application in electronic mode will only be available with such SCSB who provides such facility. The Equity Shareholder shall submit the CAF/plain paper application to the SCSB for authorising such SCSB to block an amount equivalent to the amount payable on the application in the said bank account maintained with the same SCSB. Equity Shareholders applying under the ASBA Process are also advised to ensure that the CAF is correctly filled up, stating therein the bank account number maintained with the SCSB in which an amount equivalent to the amount payable on application as stated in the CAFs will be blocked by the SCSB. Application on Plain Paper ASBA Investors may indicate in a plain paper application, as to whether they desire to avail of the ASBA option. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. An Equity Shareholder who has neither received the original CAF nor is in a position to obtain a duplicate CAF and wanting to apply under ASBA process may make an application to subscribe for the Issue on plain paper, The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with the Company, must be submitted at a designated branch of a SCSB on or before the Issue Closing Date and should contain the following particulars; Name of the issuer, being Muthoot Capital Services Limited; Name and address of the Equity Shareholder, including any joint holders; Registered folio number/dp ID number and client ID number; Number of Equity Shares held as on the Record Date; Rights Entitlement; Number of Equity Shares applied for; Number of additional Equity Shares applied for, if any; Total number of Equity Shares applied for; Savings/Current Account Number along with name and address of the SCSB and Branch from which the money will be blocked ; The permanent account number (PAN) of the Equity Shareholder and where relevant, for each joint holder, except in respect of Central and State Government officials and officials appointed by the court (e.g., official liquidators and court receivers) who, in terms of a SEBI circular dated June 30, 2008, may be exempt from specifying their PAN for transacting in the securities market, subject to submitting sufficient documentary evidence in support of their claim for exemption, provided that such transactions are undertaken on behalf of the Central and State Government and not in their personal capacity; ed in Regulation S under the Securities Act); Signature of the Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company; In case of Non Resident Shareholders, NRE/FCNR/NRO A/c no., Name and address of the SCSB and Branch In the application, the ASBA Investor shall, inter alia, give the following confirmations/declarations: A) That he/she is an ASBA Investor as per the SEBI (ICDR) Regulations and B) That he/she has authorized the SCSBs to do all acts as are necessary to make an application in the Issue, upload his/her application data, block or unblock the funds in the ASBA Account and transfer 126

153 the funds from the ASBA Account to the separate account maintained by the Company for Rights Issue after finalization of the basis of Allotment entitling the ASBA Investor to receive Equity Shares in the Issue etc The Equity Shareholder shall submit the plain paper application to the SCSB for authorising such SCSB to block an amount equivalent to the amount payable on the application in the said bank account maintained with the same SCSB If an applicant makes an application in more than one mode i.e. both in the CAF and on plain paper, then both the applications may be liable for rejection. The list of banks who have been notified by SEBI to act as SCSB for the ASBA Process are provided on For details on designated branches of SCSB collecting the CAF, please refer the above mentioned SEBI link. Acceptance of the Issue The Equity Shareholder may accept the Issue and apply for the Equity Shares offered, either in full or in part, by filling Part A of the CAF sent by the Registrar, selecting the ASBA process option in Part A of the CAF and submit the same to the SCSB before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board of Directors of the Company in this regard. Mode of payment The Equity Shareholder applying under the ASBA Process agrees to block the entire amount payable on application (including for additional Equity Shares, if any) with the submission of the CAF, by authorizing the SCSB to block an amount, equivalent to the amount payable on application, in a bank account maintained with the SCSB. After verifying that sufficient funds are available in the bank account provided in the CAF, the SCSB shall block an amount equivalent to the amount payable on application mentioned in the CAF until it receives instructions from the Registrars. Upon receipt of intimation from the Registrar, the SCSBs shall transfer such amount as pe from bank account with the SCSB mentioned by the Equity Shareholder in the CAF. This amount will be transferred in terms of the SEBI (ICDR) Regulations, into the separate bank account maintained by the Company as per the provisions of section 73(3) of the Companies Act. The balance amount remaining after the finalisation of the basis of Allotment shall be either unblocked by the SCSBs or refunded to the investors by the Registrar on the basis of the instructions issued in this regard by the Registrar to the Issue and the Lead Manager to the respective SCSB. The Equity Shareholders applying under the ASBA Process would be required to block the entire amount payable on their application at the time of the submission of the CAF. The SCSB may reject the application at the time of acceptance of CAF if the bank account with the SCSB, details of which have been provided by the Equity Shareholder in the CAF, does not have sufficient funds equivalent to the amount payable on application mentioned in the CAF. Subsequent to the acceptance of the application by the SCSB, the Company would have a right to reject the application only on technical grounds. Options available to the Equity Shareholders applying under the ASBA Process The summary of options available to the Equity Shareholders is presented below. The Equity Shareholder may exercise any of the following options with regard to the Equity Shares offered, using the respective CAFs received from Registrar: No. Options available Requirement 1 Accept whole or part of your entitlement Fill in and sign Part A of the CAF (All joint holders without renouncing the balance. must sign). 127

154 No. Options available Requirement 2 Accept your entitlement in full and apply for additional Equity Shares Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign) The Equity Shareholder(s) applying under the ASBA Process will need to select the ASBA option process in the CAF and provide required necessary details. However, in cases where this option is not selected, but the CAF is tendered to the SCSB with the relevant details required under the ASBA process option and SCSB blocks the requisite amount, then that CAF would be treated as if the Equity Shareholder has selected to apply through the ASBA process option. Additional Equity Shares The Equity Shareholder is eligible to apply for additional Equity Shares over and above the number of Equity Shares that he is entitled to, provided that he has applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any other person(s). Applications for additional Equity Shares shall be considered and Allotment shall be made at the sole discretion of the Board, in consultation with the Designated Allotment 12 of this LoF. The Allotment of additional Equity Shares will be made on an equitable basis with reference to number of shares held by you on the Record date. If a Shareholder desires to apply for additional Equity Shares, he should indicate his requirement in the place provided for additional securities in Part A of the CAF. Renunciation under the ASBA Process Renouncees cannot participate in the ASBA Process. Last date of Application The last date for submission of the duly filled in CAF/plain paper application is July 25, The Issue will be kept open for a minimum of 20 days and the Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 30 (thirty) days from the Issue Opening Date. If the CAF/plain paper application is not received by the SCSB on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/Committee of Directors, the offer contained in this LoF shall be deemed to have been declined and the Board/Committee of Directors shall be at liberty to dispose off the Equity Shares hereby offered, as provided under Allotment Option to receive securities in Dematerialized Form EQUITY SHAREHOLDERS UNDER THE ASBA PROCESS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY UNDER THE ASBA PROCESS CAN ONLY BE ALLOTTED IN DEMATERIALIZED FORM AND TO THE SAME DEPOSITORY ACCOUNT IN WHICH THE EQUITY SHARES ARE BEING HELD ON RECORD DATE. Issuance of Intimation Letters Upon approval of the basis of Allotment by the Designated Stock Exchange, the Registrar to the Issue shall send the Controlling Branches, a list of the ASBA Investors who have been allocated Equity Shares in the Issue, along with: The number of Equity Shares to be allotted against each successful ASBA; 128

155 The amount to be transferred from the ASBA Account to the separate account opened by the Company for Rights Issue, for each successful ASBA; The date by which the funds referred to in para above, shall be transferred to separate account opened by the Company for Rights Issue; and The details of rejected ASBAs, if any, along with reasons for rejection to enable SCSBs to unblock the respective ASBA Accounts. General instructions for Equity Shareholders applying under the ASBA Process Please read the instructions printed on the CAF carefully. a) Application should be made CAF only should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/or which are not completed in conformity with the terms of this Letter of Offer is liable to be rejected. The CAF/plain paper application must be filled in English. b) The CAF/plain paper application in the ASBA Process should be submitted at a designated branch of the SCSB and whose bank account details are provided in the CAF and not to the Bankers to the Issue/ Collecting Banks (assuming that such Collecting Bank is not a SCSB), to the Company or Registrar or Lead Manager to the Issue. c) All applicants, and in the case of application in joint names, each of the joint applicants, should mention his/her PAN number allotted under the Income-Tax Act, 1961, irrespective of the amount of the application. CAFs/plain paper applications without PAN will be considered incomplete and are liable to be rejected. d) All payments will be made by blocking the amount in the bank account maintained with the SCSB. Cash payment is not acceptable. In case payment is affected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. e) Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/her official seal. The Equity Shareholders must sign the CAF/plain paper application as per the specimen signature recorded with the Company/or Depositories. f) In case of joint holders, all joint holders must sign the relevant part of the CAF/plain paper application in the same order and as per the specimen signature(s) recorded with the Company. In case of joint applicants, applicant. g) All communication in connection with application for the securities, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of Allotment in this Issue quoting the name of the first/sole applicant Equity Shareholder, folio numbers and CAF number. h) Only the person or persons to whom securities have been offered and not Renouncee(s) shall be eligible to participate under the ASBA process. i) Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding ` 200,000, shall mandatorily make use of ASBA facility. 129

156 a) Ensure that the ASBA Process option is selected in part A of the CAF and necessary details are filled in. In case of non-receipt of the CAF, the Application can be made on a Plain Paper with all the necessary details as b) Ensure that you submit your application in physical mode only. Electronic mode is only available with certain SCSBs and not all SCSBs and you should ensure that your SCSB offers such facility to you. c) Ensure that the details about your Depository Participant and beneficiary account are correct and the beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only. d) Ensure that the CAFs/plain paper applications are submitted at the SCSBs whose details of bank account have been provided in the CAF. e) Ensure that you have mentioned the correct bank account number in the CAF plain paper application. f) Ensure that there are sufficient funds (equal to {number of Equity Shares applied for} x {Issue Price of Equity Shares}) available in the bank account maintained with the SCSB mentioned in the CAF/plain paper application before submitting the CAF/ plain paper application to the respective designated branch of the SCSB. g) Ensure that you have authorised the SCSB for blocking funds equivalent to the total amount payable on application mentioned in the CAF/ plain paper application, in the bank account maintained with the respective SCSB, of which details are provided in the CAF/ plain paper application and have signed the same. h) Ensure that you receive an acknowledgement from the SCSB for your submission of the CAF/ plain paper application in physical form. i) Each applicant should mention their Permanent Account N Act, j) Ensure that the name(s) given in the CAF/plain paper application is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the CAF/plain paper application is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the CAF/plain paper application. k) Ensure that the Demographic Details are updated, true and correct, in all respects. a) Do not apply on duplicate CAF after you have submitted a CAF to a designated branch of the SCSB. b) Do not pay the amount payable on application in cash, by money order or by postal order. c) Do not send your physical CAFs/ plain paper applications to the Lead Manager to Issue / Registrar / Collecting Banks (assuming that such Collecting Bank is not a SCSB) / to a branch of the SCSB which is not a designated branch of the SCSB / Company; instead submit the same to a designated branch of the SCSB only. d) Do not submit the GIR number instead of the PAN as the application is liable to be rejected on this ground. e) Do not instruct your respective banks to release the funds blocked under the ASBA Process. Grounds for Technical Rejection under the ASBA Process on page 139 of this LoF, applications 130

157 under the ABSA Process are liable to be rejected on the following grounds: a) Application for entitlements or additional shares in physical form b) DP ID and Client ID mentioned in CAF/plain paper application not matching with the DP ID and Client ID records available with the Registrar. c) Sending CAF/plain paper application to a Lead Manager / Registrar / Collecting Bank (assuming that such Collecting Bank is not a SCSB) / to a branch of a SCSB which is not a designated branch of the SCSB / Company. d) Renouncee applying under the ASBA Process. e) Insufficient funds are available with the SCSB for blocking the amount. f) Funds in the bank account with the SCSB whose details are mentioned in the CAF/ plain paper application having been frozen pursuant to regulatory orders. g) Account holder not signing the CAF/plain paper application or declaration mentioned therein. h) PAN not stated, GIR no. stated instead i) Signature of sole/joint shareholder missing in the CAF j) CAF not submitted within the prescribed time k) Application on split form. COMMUNICATIONS All future communication in connection with ASBA applications made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the sole or First ASBA Investor, CAF number, details of Depository Participant, number of Equity Shares applied for, date of CAF, name and address of the designated branch where the application was submitted and bank account number of the ASBA Account, with a copy to the relevant SCSB. The Registrar to the Issue shall obtain the required information from the SCSBs for addressing any clarifications or grievances. The SCSB shall be responsible for any damage or liability resulting from any errors, fraud or willful negligence on the part of any employee of the concerned SCSB, including its designated branches and the branches where the ASBA Accounts are held. ASBA Investors can contact the Compliance Officer, the designated branch where the application was submitted, or the Registrar to the Issue in case of any pre or post-issue related problems such as non-receipt of credit of Allotted Equity Shares in the respective beneficiary accounts, blocking of excess Amount, etc. Disposal of Investor Grievances All grievances relating to the ASBA 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, Amount blocked on application, bank account number of the ASBA Account number and the designated branch or the collection centre of the SCSB where the CAF was submitted by the ASBA Investors. Depository account and bank details for Equity Shareholders applying under the ASBA Process. IT IS MANDATORY FOR ALL THE EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL THE EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS SHOULD MENTION 131

158 NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE CAF/PLAIN PAPER APPLICATION. EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS MUST ENSURE THAT THE NAME GIVEN IN THE CAF/PLAIN PAPER APPLICATION IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE CAF IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE CAF/PLAIN PAPER APPLICATION. Equity Shareholders applying under the ASBA Process should note that on the basis of name of these Equity Shareholders, D number provided by them in the CAF/plain paper application, the Registrar to the Issue will obtain from the Depository demographic details of these Equity Shareholders such as address, bank account details for printing on refund orders and occupation. Hence, Equity Shareholders applying under the ASBA Process should carefully fill in their Depository Account details in the CAF/Plain paper application. These Demographic Details would be used for all correspondence with such Equity Shareholders including mailing of the letters intimating unblock of bank account of the respective Equity Shareholder. The Demographic Details given by Equity Shareholders in the CAF/plain paper application would not be used for any other purposes by the Registrar. Hence, Equity Shareholders are advised to update their Demographic Details as provided to their Depository Participants. By signing the CAFs/plain paper application, the Equity Shareholders applying under the ASBA Process would be deemed to have authorised the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. Letters intimating Allotment and unblocking or refund (if any) would be mailed at the address of the Equity Shareholder applying under the ASBA Process as per the Demographic Details received from the Depositories. Refunds, if any, will be made directly to the bank account in the SCSB and which details are provided in the CAF/plain paper application and not the bank account linked to the DP ID. Equity Shareholders applying under the ASBA Process may note that delivery of letters intimating unblocking of bank account may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Equity Shareholder in the CAF/plain paper application would be used only to ensure dispatch of letters intimating unblocking of bank account. Note that any such delay shall be at the sole risk of the Equity Shareholders applying under the ASBA Process and none of the Company, the SCSBs, the Lead Manager or the Registrar to the Issue shall be liable to compensate the Equity Shareholder applying under the ASBA Process for any losses caused to such Equity Shareholder due to any such delay or liable to pay any interest for such delay. In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Equity Shareholders (including the order of names of joint holders), the DP ID and the beneficiary account number, then such applications are liable to be rejected. PAYMENT BY STOCKINVEST In terms of RBI Circular DBOD No.FSC BC 42/ / dated November 5, 2003 the Stockinvest scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in the Issue. LAST DATE OF APPLICATION The last date for submission of CAF is July 25, The Board/Committee of Directors will have the right to extend the said date for such period as it may determine from time to time but not exceeding 30 (thirty) days from the date the Issue opens. 132

159 If the CAF together with the amount payable is not received by the Bankers to the Issue/ Registrar on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offer contained in the Letter of Offer shall be deemed to have been declined and the Board/ Committee of Directors shall be at liberty to dispose off the Equity Shares Allotment INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES ISSUED PURSUANT TO THIS ISSUE CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM. BASIS OF ALLOTMENT Subject to provisions contained in the Letter of Offer, the Articles of Association and the approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority: (a) Full Allotment to those Rights Equity Shareholders who have applied for their Rights Entitlement either in full or in part and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part. (b) Preferential Allotment of one additional share each to shareholders whose fractional rights have been ignored and have applied for additional shares. (c) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as rights have also applied for additional Equity Shares. The Allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an undersubscribed portion after making full Allotment as per (a) above. The Allotment of such Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the rights issue and not preferential Allotment. (d) Allotment to the renouncees who, having applied for all the Equity Shares renounced in their favour, have also applied for additional Equity Shares, provided there is a surplus remaining after (a), (b) and (c) above. The Allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion of the Board/Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the rights issue and not preferential Allotment. (e) Allotment to any other person as the Board may in its absolute discretion deem fit provided there is a surplus available after making full Allotment under (a), (b), (c) and (d) above. After taking into account Allotment to be made under (a) and (b) above, if there is any unsubscribed portion, the would be available for allocation under (c), (d) and (e) above. After considering the above Allotment, any additional Equity Shares shall be disposed off by the Board or Committee authorised in this behalf by the Board of Directors of the Company, in such manner as they think most beneficial to the Company and the decision of the Board or Committee in this regard shall be final and binding. In the event of oversubscription, Allotment will be made within the overall size of the issue. After taking into account Allotment under (a) and (b) above, if there is any unsubscribed portion, the same shall be deemed to be undersubscribed for the purpose of Regulation 3(1)(b) of the Takeover Code which would be available for allocation under (c), (d) and (e) above. Promoters of the Company have confirmed that they either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group intends to subscribe to the full extent of their Rights Entitlement in the Issue. Promoters of the Company, either by themselves or through his relatives or entities controlled by them forming part of the Promoter Group also intends to apply for additional Equity Shares in the Issue, such that the Issue is subscribed. As a result of this subscription and consequent Allotment, Promoters either by themselves or 133

160 through their relatives or entities controlled by them forming part of the Promoter Group may acquire Equity Shares over and above their Rights Entitlement, which may result in an increase of their shareholding above their current shareholding together with their Rights Entitlement. This subscription and acquisition of additional Equity Shares by them, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the 13 of this LoF), there is no other intention/purpose for this Issue including no intention to de-list the Company, even if, as a result of Allotment to Promoters or his relatives or entities controlled by him forming part of the Promoter Group in this Issue, their shareholding in the Company exceeds its current shareholding. Promoters of the Company either by themselves or through their relatives or entities controlled by them forming part of the Promoter Group intends to subscribe to such unsubscribed portion as permitted under the relevant provisions of the law. Pursuant to any Allotment made to the Promoters or their relatives or entities controlled by them forming part of the Promoter Group of additional Equity Shares forming part of the unsubscribed portion in the Issue, the Company and the Promoters undertake to comply with applicable laws. The Company expects to complete the Allotment of Equity Shares within a period of 15 days from the date of closure of the Issue in accordance with the Listing Agreement with the Stock Exchanges. The Company shall retain no oversubscription. UNDERWRITING The Issue is not underwritten. ALLOTMENT / REFUND The Company will issue and dispatch letters of allotment/ share certificates and/ or letters of regret along with refund order or credit the allotted shares to the respective beneficiary accounts, if any within a period of 15 days from the Date of Closure of the Issue. If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. Applicants residing at [68] centers where clearing houses are managed by the RBI, will get refunds through ECS only except where applicants are otherwise disclosed as applicable/eligible to get refunds through direct credit and RTGS. In case of those applicants who have opted to receive their Rights Entitlement in dematerialized form using electronic credit under the Depository system, and advice regarding their credit of the Equity Shares shall be given separately. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post intimating them about the mode of credit of refund within 15 working days of closure of Issue. In case of those applicants who have opted to receive their Rights Entitlement in physical form and the Company issues Letter of Allotment, the corresponding share certificates will be kept ready within three months from the Allotment Date thereof or such extended time as may be approved by the Companies Law Board under section 113 of the Companies Act or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment, which would be exchanged later for the share Allotment/ Equity page 136. Letters of allotment/ share certificates/ refund orders above the value of `1,500 will be dispatched by Registered exceeding `1,500 shall be sent to the applicants under Postal Certificate. Such cheques or pay orders will be payable at par drawn in the name of the sole/ first applicant. 134

161 Adequate funds would be made available to the Registrar to the Issue for the dispatch of letters of allotment/share certificates and refund orders. As regards Allotment/refund to Non-Residents, the following further conditions shall apply In case of Non-Residents, who remit their application monies from funds held in NRE/FCNR accounts, refunds and/ or payment of interest/dividend and other disbursement, if any, shall be credited to such accounts, details of which should be furnished in the CAF. Subject to the approval of RBI, in case of Non-Residents, who remit their application monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any other disbursement, shall be credited to such accounts (details of which should be furnished in the CAF) and will be made net of bank charges/commission in US Dollars, at the rate of exchange prevailing at such time. The Company will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupee amount into US Dollars. The equity share certificate(s) will be sent by registered post at the Indian address of the Non-Resident applicant. Payment of Refund Mode of making refunds: The payment of refund, if any, would be done through any of the following modes: 1. ECS (Electronic Clearing Service) Payment of refund would be done through ECS for Investors having an account at any centre where such facility has been made available. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf, from the Depositories. The payment of refunds is mandatory for Investors having a bank account at the centers where ECS facility has been made available by the RBI (subject to availability of all information for crediting the refund through ECS), except where the Investor, being eligible, opts to receive refund through NEFT, direct credit or RTGS. 2. NEFT (National Electronic Fund Transfer) Payment of refund shall be undertaken through NEFT wherever Magnetic Ink Character Recognition (MICR), if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the Investors have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the Investors through this method. The Company in consultation with the Lead Managers may decide to use NEFT as a mode of making refunds. The process flow in respect of refunds by way of NEFT is at an evolving stage and hence use of NEFT is subject to operational feasibility, cost and process efficiency. In the event that NEFT is not operationally feasible, the payment of refunds would be made through any one of the other modes as discussed herein. 3. Direct Credit applicants having bank accounts with the Refund Banker(s), in this case being, Axis Bank Limited shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by the Company. 4. RTGS applicants having a bank account at any of the centres where such facility has been made available and whose refund amount exceeds `2Lakh, have the option to receive refund through RTGS. Such eligible applicants who indicate their preference to receive refund through RTGS are required to provide the IFSC code in the Bid-cum-application Form. In the event the same is not provided, refund shall be made through ECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by the Company. Charges, if any, 5. For all other applicants, including those who have not updated their bank particulars with the MICR code, the refund orders will be dispatched under certificate of posting for value up to `1,500 and through Speed Post/ 135

162 Registered Post for refund orders of `1,500 and above. Such refunds will be made by cheques, pay orders or demand drafts payable at par. LETTERS OF ALLOTMENT / EQUITY SHARE CERTIFICATES Letter(s) of Allotment/ equity share certificates or letters of regret will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within 15 days, from the date of closure of the subscription list. In case the Company issues letters of allotment, the relative equity share certificates will be dispatched within three months from the date of allotment. Allottees are requested to preserve such letters of allotment (if any) to be exchanged later for equity share certificates. Export of letters of allotment (if any)/ equity share certificates to Non-Resident allottees will be subject to the approval of RBI. ARRANGEMENT FOR ODD LOT EQUITY SHARES The Company has not made any arrangements for the disposal of odd lot Equity Shares arising out of this Issue. The Company will issue certificates of denomination equal to the number of Equity Shares being allotted to the Equity Shareholder. EQUITY SHARES IN DEMATERIALISED FORM Applicants to the Equity Shares of the Company issued through the Issue shall be allotted the shares in dematerialised (electronic) form at the option of the applicant. The Company and the Registrars have signed a tripartite agreement with CDSL on December 22, 2003 and NSDL on February 29, 2004 respectively which enables the investors to hold and trade in shares in a dematerialised form, instead of holding the shares in the form of physical certificates. CAF contains space for indicating the number of shares subscribed for in demat form and physical form both. In the Issue, the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a Depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accurately contain this information, will be given the shares in physical form. Separate applications for shares in physical and dematerialised form should not be made. If such applications are made, the application for physical shares will be treated as multiple applications and is liable to be rejected. In case of partial Allotment, Allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares. The Equity Shares will be listed on the Stock Exchanges. Procedure for availing of this facility for Allotment of Equity Shares in this Issue in the electronic form is as under: 1. Open a Beneficiary Account with any Depository Participant (care should be taken that the Beneficiary Account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In case of joint holding, the Beneficiary Account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need not follow this step. 2. For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later or those who change their accounts and wish to receive their rights Equity Shares by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the Allotment of shares arising out of the Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the 136

163 same order as in the records of the Company. 3. -à-vis those with the Depository Participant would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be same as registered with the Depository Participant. Applicants must necessarily fill in the details (including the beneficiary 4. Equity Share/Warrants allotted to an applicant in the electronic account form will be credited directly to the 5. Applicants should ensure that the names of the applicants and the order in which they appear in the CAF 6. If incomplete / incorrect Beneficiary Account details are given in the CAF the applicant will get Equity Shares in physical form. 7. The rights Equity Shares allotted to investors opting for dematerialized form, would be directly credited to the Beneficiary Account as given in the CAF after verification. Allotment advice, Refund Order (if any) Depository Participant will provide to him the confirmation of the credit of the Rights Equity Shares Depository Account. 8. Renouncees will also have to provide the necessary details about their Beneficiary Account for Allotment of shares in the Issue. In case these details are incomplete or incorrect, the applicant will be allotted Equity Shares in physical form. 9. Non-transferable Allotment advice/refund orders will be directly sent to the applicant by the Registrar to the the CAF, the applicant will get Equity Shares in physical form. 10. Renouncees can also exercise the option to receive Equity Shares in the demat form by indicating in the relevant asset and providing the necessary details about their beneficiary account. 11. It may be noted that Equity Share arising out of this Issue can be received in demat form even if the existing Equity Shares are held in physical form. Nonetheless, it should be ensured that the DP account is in the name of the applicant(s) in the same order as per specimen signatures appearing in the records of the DP/Company. 12. It may be noted that Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic connectivity with NSDL or CDSL. 13. Dividend or other benefits with respect to the Equity Shares held in dematerialised form would be paid to those Equity Shareholders whose names appear in the list of beneficial owners given by the DP to the Company as on the date of the book closure. GENERAL INSTRUCTIONS FOR APPLICANTS (a) Please read the instructions printed on the enclosed CAF carefully. (b) Application should be made on the printed CAF provided by the Company and should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of the Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission 137

164 and other charges, if any. The CAF must be filled in English and the names of all the applicants, details of (c) The CAF together with cheque/demand draft should be sent to the Bankers to the Issue /Collecting Bank or to the Registrar and NOT to the Company or Lead Manager to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to make payment by Demand Draft payable at Chennai (net of demand draft charges and postal charges) and send their application forms to the Registrar to the Issue by Registered Post. If any portion of the CAF is / are detached or separated, such application is liable to be rejected. (d) Each of the applicants should mention his/ her PAN allotted under the IT Act. CAFs without the PAN details will be considered incomplete and are liable to be rejected. (e) Investors are advised that it is mandatory to provide information as to their savings / current account number and the name of the bank with whom such account is held in the CAF to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees. Applications not containing such details are liable to be rejected. For Eligible Equity Shareholders holding Equity Shares in dematerialised form, such bank details will be drawn from the demographic details of the Eligible Equity Shareholder in the records of the Depository. (f) All payments should be made by cheque / DD only. Cash payment is not acceptable. In case payment is affected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. (g) Signatures should be either in English or Hindi or in any other language specified in the 8 th Schedule of the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company or the Depositories. (h) In case of an application under Power of Attorney or by a body corporate or by a society, a certified true copy of the relevant Power of Attorney or relevant resolution or authority to make investment and sign the application along with a copy of the Memorandum and Articles of Association and / or bye laws must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF and folio numbers / DP ID and Client ID Number. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue closure date, then the application is liable to be rejected. In no case should these papers be attached to the application submitted to the Bankers to the Issue. (i) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in tion will be addressed to the first applicant. (j) Application(s) received from Non-Residents / NRIs, or persons of Indian origin residing abroad for Allotment of Equity Shares shall, inter-alia, be subject to conditions, as may be imposed from time to time by RBI under FEMA in the matter of refund of application money, Allotment of Equity Shares, subsequent issue and Allotment of Equity Shares, interest, export of equity share certificates, etc. In case a Non-Resident or NRI Equity Shareholder has specific approval from RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF. (k) All communication in connection with application for the Equity Shares, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of Allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation for change of address of Equity Shareholders, after the date of Allotment, should be sent to the Registrar and Transfer Agents of the Company (i.e. Alpha Systems Private Limited) in the case of Equity Shares held in physical form and to the respective DP, in case of Equity Shares held in dematerialised 138

165 form. (l) Split Application Forms cannot be re-split. (m) Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain Split Application Forms. (n) Applicants must write their CAF number at the back of the cheque/demand draft. (o) Only one mode of payment per application should be used. The payment must be either in cash or by cheque / demand draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted. (p) A separate cheque/draft must accompany each CAF. Outstation cheques/demand drafts or postdated cheques and postal/money orders will not be accepted and applications accompanied by such cheques/demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. For payment against application in cash please refer point (f) above. (q) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will acknowledge receipt of the same by stamping and returning the acknowledgement slip at the bottom of the CAF. (r) An applicant which is a mutual fund can make a separate application in respect of each scheme of the fund and such applications shall not be treated as multiple applications. The application made by the asset management Company or custodians of a mutual fund shall clearly indicate the name of the concerned scheme for which application is being made. Grounds for Technical Rejections Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following: Amount paid does not tally with the amount payable for; Bank account details (for refund) are not given and the same are not available with the DP (in the case of dematerialised holdings) or the Registrar (in the case of physical holdings); Age of first applicant not given; PAN details not given; PAN in CAF not matching the PAN in the DP ID; In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted; If the signature of the existing shareholder does not match with the one given on the Application Form and for renouncees if the signature does not match with the records available with their depositories; If the applicant desires to have Equity Shares in electronic form, but the Application Form does not have Depository account details; Application Forms are not submitted by the applicants within the time prescribed as per the Application Form and the LoF; Applications not duly signed by the sole/joint applicants; Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue; Applications accompanied by Stockinvest; In case no corresponding record is available with the Depositories that matches three parameters, namely, ty; Applications by persons in United States of America; 139

166 Applications which have evidence of being dispatched from United States of America; Applications where the Company believes that the CAF is incomplete or acceptance of such CAFs may infringe applicable legal or regulatory requirements; Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided; Applications by renouncees who are persons not competent to contract under the Indian Contract Act, 1872, including minors; and Multiple Applications; and Duplicate Applications. DISPOSAL OF APPLICATION AND APPLICATION MONEY No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. The Board of Directors reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part, and in either case without assigning any reason thereto. In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the applicant within 15 days from the close of the Issue. For further instruction, please read the CAF carefully. IMPORTANT 1. Please read the Letter of Offer carefully before taking any action. The instructions contained in the accompanying CAF are an integral part of the conditions of the Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected. 2. All inquiries in connection with the Letter of Offer or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID no., the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed - sue at the following address: Integrated Enterprises (India) Limited, Kences Towers, 2nd Floor, No.1, Ramakrishna Street, Off North Usman Road, T Nagar, Chennai It is to be specifically noted that this Issue of Equity Shares is subject to Risk Factors appearing on Page vii of the LoF. 4. The Issue will be kept open for a minimum period of 15 days and a maximum period of 30 days. 5. ASBA Investors shall be required to indicate either in (i) Part A of the CAF, or (ii) a plain paper application, as to whether they desire to avail of the ASBA option. Please note that pursuant to the SEBI circular dated April 29, 2011, all applicants who are QIBs or are applying in this Issue for Equity Shares for an amount exceeding `200,000, shall mandatorily make use of ASBA facility. 140

167 SECTION VIII: STATUTORY AND OTHER INFORMATION 1. OPTION TO SUBSCRIBE Other than the present Issue, and except as discl Offering Information 112 of this LoF, the Company has not given any person any option to subscribe to the Equity Shares of the Company. The Investors shall have an option either to receive the security certificates or to hold the securities in dematerialized form with a Depository. 2. LIST OF MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The contracts mentioned below (not being contracts entered into in the ordinary course of business carried on by the Company) are or may be deemed to be material contracts. These contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company situated at 5th Floor, Muthoot Towers, M.G.Road, Kochi from a.m. to 2.00 p.m. on any working day from the date of this LoF until the Issue Closing Date. I. Material Contracts 1. Engagement Letter dated August 25, 2009 between the Company and Karvy Investor Services Limited for appointment as the Lead Manager to the Issue. 2. Memorandum of Understanding dated December 31, 2010 between the Company and the Lead Manager. 3. Memorandum of Understanding dated April 1, 2007 between the Company and the Registrar to the Issue. 4. Tri-Partite Agreement dated December 22, 2003 among the Central Depository Services (India) Ltd. 5. Tri-Partite Agreement dated February 29, 2004 among the National Depository Services Ltd. II. Material Documents to the Issue 1. Memorandum and Articles of Association as amended till date. 2. Certificate of Incorporation of the Company issued by RoC, Kerala dated February 18, Certificate of commencement of business of the Company issued by RoC, Kerala dated March 23, Copy of the resolution passed at the Board Meeting held on May 21, 2009 wherein the issue had been approved. 5. Copy of the resolution passed at the AGM held on September 24, 2009 wherein the issue has been approved. 6. Letter dated November 22, 2010 from the Statutory Auditors, confirming the Tax Benefits as mentioned in this LoF. 7. on dated August 29, 2008 for the appointment of the Managing Director Copies of Annual Report for the Financial Year Consent of the Directors, Lead Manager, Company Secretary and Compliance Officer, Statutory Auditors, Legal Advisor to the Issue, Registrar to the Issue, Bankers to the Company, Bankers to the Issue, in their respective capacities. 11. In principle listing and trading approval vide letter no DCS/PREF/NTP/IP-RT/1131/10-11dated March 14, 2011 from BSE. 12. Due diligence certificate dated February 2, 2011 to SEBI issued by Karvy Investor Services Limited. 13. SEBI Observation letter dated April 27, 2011 issued by SEBI 14. Letters of intent for subscription to rights entitlement and unsubscribed portion received from Promoters. 141

168 15. Auditors certificate regarding sources and deployment of funds dated May 10, Auditors certificate regarding financial indebtedness as on March 31, Certificate regarding Material Developments for the period from April 01, 2011 to May 31, Copy of the Public Issue Offer Document. 19. Copy of the Due Diligence Certificate provided by practicing Company Secretary with reference to clause 1 of Part E of Schedule VIII of the SEBI (ICDR) Regulations, 2009, as amended. Any of the contracts or documents mentioned in this LoF may be amended or modified at any time if so required in the interest of the Company or if required by the other parties, without reference to the shareholders, subject to compliance of the provisions contained in the Companies Act and other relevant statutes. 142

169 J ul y02,