DRAFT RED HERRING PROSPECTUS

Transcription

1 DRAFT RED HERRING PROSPECTUS Dated: December 30, 2006 Please read Section 60B of the Companies Act, 1956 Draft RHP will be updated upon RoC Filing 100% Book Built Issue HAL OFFSHORE LIMITED (Our Company was incorporated on December 17, 1996 as Himachal Alkalies Limited under the Companies Act, 1956, with the Registration No of Our name was changed to HAL Offshore Limited with effect from September 4, 2000.Our CIN is U24298DL1996PLC083879) Registered Office: Superior House, 48, Todarmal Road, Bengali Market, New Delhi ; Tel. No / 72, Fax No.: , Contact Person: Mr. Mayur Maheshwari, Company Secretary and Compliance Officer, ipo@haloffshore.com Website: (We changed our Registered Office from Superior House, 25 Baazaar Lane, Bengali Market, New Delhi at our present address with effect from November 7, 2006) Mumbai Office: 821, Solitaire Corporate Park, Andheri Kurla Road, Andheri (East), Mumbai PUBLIC ISSUE OF 33,00,000 EQUITY SHARES OF RS. 10 EACH AT A PRICE OF RS. [ ] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [ ] PER EQUITY SHARE) FOR CASH AGGREGATING TO RS. [ ] LAKHS (THE ISSUE ) BY HAL OFFSHORE LIMITED OUT OF WHICH 3,00,000 EQUITY SHARES HAVE BEEN RESERVED FOR ELIGIBLE EMPLOYEES OF OUR COMPANY AND ELIGIBLE SHAREHOLDERS OF OUR GROUP COMPANIES ( RESERVATION PORTION ). THE NET ISSUE TO THE PUBLIC SHALL BE 30,00,000 EQUITY SHARES OF RS.10 EACH AT A PRICE OF RS. [ ] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [ ] PER EQUITY SHARE) FOR CASH AGGREGATING TO RS. [ ] LAKHS (THE NET ISSUE ) THE ISSUE WILL CONSTITUTE % OF THE POST ISSUE PAID-UP CAPITAL OF OUR COMPANY AND THE NET ISSUE WILL CONSTITUTE % OF THE POST ISSUE PAID -UP CAPITAL OF OUR COMPANY. Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ( Pre-IPO Placement ) out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. PRICE BAND: Rs. [ ] TO Rs. [ ] PER EQUITY SHARE THE ISSUE PRICE IS [ ] TIMES OF THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND [ ] TIMES OF THE FACE VALUE AT THE HIGHER END OF THE PRICE BAND In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited, and National Stock Exchange of India Limited, by issuing a press release and by indicating the change on the websites of the Book Running Lead Manager ( BRLM ) and the terminals of the member(s) of the Syndicate. This Issue is being made through a 100% Book Building Process wherein at least 50% of the Net Issue shall be allotted on a proportionate basis to Qualified Institutional Buyers ( QIBs ). 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only. If at least 50% of the Net Issue cannot be allotted to QIBs, then the entire application money will be refunded. Further, up to 15% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and up to 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. Our Company has not opted for grading of this Issue. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of our Company, there has been no formal market for our Equity Shares. The face value of the shares is Rs. 10 and the Issue Price is [ ] times of the face value at the lower end of the Price Band and [ ] times of the face value at the higher end of the Price Band. The Issue Price (as determined and justified by our Company, and the BRLM on the basis of assessment of market demand for the Equity Shares by way of book building as stated in the section titled Basis of the Issue Price beginning on page [ ] of this Draft Red Herring Prospectus) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares of our Company or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Company and this Issue including the risks involved. The Equity Shares issued in this Issue have not been recommended or approved by the Securities and Exchange Board of India ( SEBI ), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the statements in the chapter titled Risk Factors beginning on page [ ] of this Draft Red Herring Prospectus. COMPANY S ABSOLUTE RESPONSIBILITY Our Company having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to our Company and this Issue, which is material in the context of this Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole, or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares issued through this Draft Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited ( BSE ) and The National Stock Exchange of India Limited ( NSE ). We have received in-principle approvals from these Stock Exchanges for the listing of our Equity Shares pursuant to letters dated [ ] and [ ], respectively. For purposes of this Issue, BSE is the Designated Stock Exchange. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE Fortune Financial Services (India) Limited K. K. Chambers, 2 nd Floor, Sir P. T. Marg, Fort,Mumbai Tel. No. : Fax No.: hal.ipo@ffsil.com Contact Person: Mr.D.H.Shinde Website: Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup (West), Mumbai Tel. No.: (9 lines) Fax No.: hal-ipo@intimespectrum.com Contact Person: Mr. Salim Shaikh Website: ISSUE SCHEDULE BID / ISSUE OPENS ON [ ], 2007 BID / ISSUE CLOSES ON [ ], 2007

2 TABLE OF CONTENTS Table of Contents Page No. Section I General i Definitions and Abbreviations i Certain Conventions - Presentation of Financial and Use of Market Data vii Forward Looking Statements viii Section II Risk Factors ix Risk Factors ix Section III Introduction 1 Summary 1 The Issue 4 General Information 5 Capital Structure 9 Objects of The Issue 15 Basis of Issue Price 19 Statement of Tax Benefits 21 Section IV About us 25 Industry Overview 25 Our Business 29 Key Industry Regulations and Policies 35 History and Other Corporate Matters 37 Our Management 40 Our Promoters and their Background 46 Related Party Transactions 47 Dividend Policy 47 Section V Financial Statements 48 Report of our Statutory Auditors, M/s Kamal & Co., Chartered Accountants 48 Our Promoter Group Entities 60 Management s Discussion and Analysis of Financial Conditions and Results of Operations 66 Section VI Legal and Regulatory Information 71 Outstanding Litigations, Material Developments and Other Disclosures 71 Government / Statutory Approvals 75 Section VII -Other Regulatory and Statutory Disclosures 78 Section VIII Issue Related Information 86 Issue Structure 86 Terms of the Issue 89 Issue Procedure 91 Section IX Main Provisions of the Articles of Association of our Company 116 Main Provisions of the Articles of Association of our Company 116 Section X Other Information 153 Material Contracts and Documents for Inspection 153 Declaration 154

3 SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS Unless the context otherwise requires, the terms and abbreviations stated hereunder shall have the meanings as assigned therewith. Term HAL, HAL Offshore our Company, the Company we and Issuer Our Group or our Promoter Group Entities or Group Entities Description HAL Offshore Limited, a company incorporated under the Companies Act, Unless the context otherwise requires, refers to our Company and our Promoter Group Companies, as defined in section titled Our Promoter Group Entities beginning at page [ ] of this Draft Red Herring Prospectus. CONVENTIONAL / GENERAL TERMS Term Description Articles/ Articles of The Articles of Association of our Company. Association Auditors The statutory auditors of our Company, being M/s. Kamal & Co., Chartered Accountants. Board of Directors / Board The Board of Directors of our Company or a Committee thereof. Companies Act The Companies Act, 1956, as amended from time to time. Depositories Act The Depositories Act, 1996, as amended from time to time. Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time. Depository Participant A depository participant as defined under the Depositories Act. Director(s) Director(s) of our Company unless otherwise specified. Financial Year/ Fiscal/ FY The period of twelve months ended March 31 of that particular year. Memorandum/ Memorandum The Memorandum of Association of our Company. of Association Mumbai Office 821, Solitaire Corporate Park, Andheri Kurla Road, Andheri (East), Mumbai Non Resident A person who is not resident in India except NRIs and FIIs. NRI/ Non-Resident Indian A person resident outside India, as defined under FEMA, and who is a citizen of India or a person of Indian origin, each such term as defined under the FEMA (Deposit) Regulations, 2000, as amended from time to time. Registered Office of our Company Superior House, 48, Todarmal Road, Bengali Market, Bengali Market, New Delhi SEBI Guidelines The SEBI (Disclosure and Investor Protection) Guidelines 2000, as amended from time to time, including instructions, guidelines and clarifications issued by SEBI from time to time. SEBI Insider Trading Regulations The SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, including instructions and clarifications issued by SEBI from time to time. ISSUE RELATED TERMS Term Allotment/ Allotment of Equity Shares Allocation/ Allocation of equity shares Allottee Banker(s) to this Issue Bid Bid Amount Bid / Issue Closing Date Description Unless the context otherwise requires, allotment of Equity Shares pursuant to this Issue. Unless the context otherwise require, allocation of Equity Shares pursuant to the Issue. The successful Bidders to whom Equity Shares are being /have been allotted. [ ] An indication to make an offer, made during the Bidding Period by a prospective investor to subscribe to the Equity Shares at a price within the Price Band, including all revisions and modifications thereto. The highest value of the optional Bids indicated in the Bid Cum Application Form and payable by the Bidder on submission of the Bid for this Issue. The date after which the member(s) of the Syndicate will not accept any Bids for this i

4 HAL OFFSHORE LIMITED Term Bid/ Issue Opening Date Bid Cum Application Form Bidder Bidding / Issue Period Book Building Process BRLM / Book Running Lead Manager CAN/ Confirmation of Allocation Note Cap Price Cut-off / Cut Off Price Designated Date Designated Stock Exchange Draft Red Herring Prospectus Eligible NRI Eligible Employees Eligible Shareholders/Eligible Shareholders of Group Companies Description Issue, which shall be notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. The date on which the member(s) of the Syndicate shall start accepting Bids for this Issue, which shall be the date notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of our Company and which will be considered as the application for Allotment in terms of the Red Herring Prospectus and Prospectus. Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid Cum Application Form. The period between the Bid / Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids. Book building mechanism as provided under Chapter XI of the SEBI Guidelines, in terms of which this Issue is made. Book Running Lead Manager to this Issue, in this case being Fortune Financial Services (India) Limited. The note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares after discovery of Issue Price in accordance with the Book Building Process. The upper end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted. The Issue Price finalised by our Company in consultation with the BRLM and it shall be any price within the Price Band. A Bid submitted at the Cut-off Price by a Retail Individual Bidder is a valid Bid at all price levels within the Price Band. The date on which funds are transferred from the Escrow Account to the Public Issue Account after the Prospectus is filed with the RoC following which the Board of Directors shall allot Equity Shares to successful Bidders. BSE is the designated stock exchange for the purpose of this Issue This Draft Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars on the price at which the Equity Shares are offered and size of this Issue. NRI from such jurisdiction outside India where it is not unlawful to make an offer or invitation under the Issue. For the purpose of the Reservation Portion, Eligible Employees means permanent employees/ Executive Directors of our Company as on the Bid/Issue Opening Date who are Indian Nationals, based in India and are physically present in India on the date of submission of the Bid Cum Application Form. For the purpose of the Reservation Portion, Eligible Shareholders/Eligible Shareholders of Group Companies means members of our following Group Companies as on the Bid/Issue Opening Date, who are Indian Nationals, based in India and are physically present in India on the date of subimission of the Bid Cum Application Form: Hindustan Aqua Limited, Moon Beverages Limited, Shantnu Farms Private Limited, Lumax Builders Private Limited, Softlign Solutions Private Limited, Superior Exim Private Limited, Versatile Polytech Private Limited, Eastern Steel and Power Limited. Our Company, the BRLM and the Registrar shall rely on a certificate from the concerned Group Companies as to their members on the Bid/Issue Opening Date, who shall constitute the Eligible Shareholders of the Group Companies for the purposes of the Reservation Portion. Equity Shares Escrow Account(s) Escrow Agreement Escrow Collection Bank(s) First Bidder Equity Shares of our Company of face value of Rs. 10 each unless otherwise specified in the context thereof. Account opened with Escrow Collection Bank(s) and in whose favor the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid. Agreement to be entered into among our Company, the Registrar to this Issue, the Escrow Collection Banks and the BRLM in relation to the collection of Bid Amounts and dispatch of refunds (if any) of the amounts collected, to the Bidders. The banks, which are registered with SEBI as Banker (s) to the Issue at which the Escrow Account for the Issue will be opened, in this case being [ ]. The Bidder whose name appears first in the Bid Cum Application Form or Revision ii

5 Term Description Form. Floor Price The lower end of the Price Band, below which the Issue Price will not be finalised and below which no Bids will be accepted. Indian GAAP Generally accepted accounting principles in India. Issue This issue of 33,00,000 Equity Shares of Rs. 10 each fully paid up at the Issue Price aggregating Rs. [ ] Lakhs. Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. Issue Price The final price at which Equity Shares will be issued and allotted in terms of the Red Herring Prospectus. The Issue Price will be decided by our Company in consultation with the BRLM on the Pricing Date. Margin Amount The amount paid by the Bidder at the time of submission of the Bid, being 10% to 100% of the Bid Amount. Mutual Funds Means mutual funds registered with SEBI pursuant to the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. Upto 5 % of the QIB portion shall be available for allocation on proportionate basis to Mutual Funds only and the remainder of the QIB portion shall be available for allocation on a proportionate basis to all QIB bidders, including Mutual Funds. Mutual Fund Portion 5% of the QIB portion or 75,000 Equity Shares available for allocation to Mutual Funds only, out of the QIB Portion Net Issue or Net Issue to the 30,00,000 Equity Shares of Rs. 10 each fully paid up at the Issue Price aggregating to Rs. Public [ ] Lakhs. Non Institutional Bidders All Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than Rs. 1,00,000. Non Institutional Portion/ Non Institutional Bidders Portion The portion of this Net Issue being up to 15% of the Net Issue consisting upto 4,50,000 Equity Shares of Rs. 10 each aggregating Rs. [ ] Lakhs, available for allocation to Non Institutional Bidders. OCB / Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly to the extent of atleast 60% by NRIs, including overseas trust in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under Foreign Exchange Management (Deposit) Regulations, OCBs are not allowed to invest in this issue. Pay-in Date Pay-in-Period Bid/Issue Closing Date or the last date specified in the CAN sent to Bidders receiving Allocation who pay less than 100% Margin Amount at the time of bidding, as applicable. Means: (i) With respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid/ Issue Opening Date and extending until the Bid/Issue Closing Date; and Price Band Pricing Date Prospectus Public Issue Account QIB Margin Amount QIB Portion (ii) With respect to other bidders, whose Margin Amount is less than 100% of the Bid Amount, the period commencing on the Bid/Issue Opening Date and extending until the closure of the Pay-in Date. The price band of a minimum price ( Floor Price ) of Rs. [ ] and the maximum price ( Cap Price ) of Rs. [ ] and includes revisions thereof, if any. The date on which our Company in consultation with the BRLM finalises the Issue Price. The Prospectus, to be filed with the RoC in accordance with the provisions of the Companies Act containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of this Issue and certain other information. Account opened with the Banker(s) to this Issue to receive monies from the Escrow Account for this Issue on the Designated Date. An amount representing at least 10% of the Bid Amount. Consists of at least 15,00,000 Equity Shares of Rs. 10 each aggregating Rs. [ ] Lakhs being at least 50% of the Net Issue, available for allocation to QIBs. 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only. iii

6 HAL OFFSHORE LIMITED Term Qualified Institutional Buyers or QIBs Red Herring Prospectus Refund Account Refund Bankers Registrar/ Registrar to this Issue Reservation Portion Retail Individual Bidders Retail Portion Revision Form Stock Exchanges Syndicate Syndicate Agreement Syndicate Members Transaction Registration Slip/ TRS Underwriters Underwriting Agreement Description Public financial institutions as specified in Section 4A of the Companies Act, FIIs registered with SEBI, scheduled commercial banks, mutual funds registered with SEBI, multilateral and bilateral development financial institutions, venture capital funds registered with SEBI, foreign venture capital investors registered with SEBI, state industrial development corporations, insurance companies registered with Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs Lakhs (subject to applicable law) and pension funds with minimum corpus of Rs Lakhs (subject to applicable law). The Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars on the price at which the Equity Shares are offered and size of the Issue. The Red Herring Prospectus will be filed with the RoC at least three days before the opening of the Issue and will become a Prospectus after filing with the RoC, the copy which includes the details of pricing and allocation and final size of issue. Account to which subscription monies to be refunded to the investors shall be transferred from the Public Issue Account [ ] Intime Spectrum Registry Limited Consists of 3,00,000 Equity Shares of Rs. 10 each aggregating to Rs. [ ] Lakhs reserved for Eligible Employees and Eligible Shareholders of Group Companies in this Issue on a competitive basis. The Reservation Portion comprises upto 9.09% of the Issue size. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. Individual Bidders (including HUFs) who have Bid for an amount less than or equal to Rs. 1,00,000 in any of the bidding options in this Issue. Consists of upto 10,50,000 Equity Shares of Rs. 10 each aggregating Rs. [ ] Lakhs, being up to 35% of the Net Issue, available for allocation to Retail Individual Bidder(s). The form used by the Bidders to modify the quantity of Equity Shares or the Bid price in any of their Bid Cum Application Forms or any previous Revision Form(s). Bombay Stock Exchange Limited and National Stock Exchange of India Limited The BRLM and the Syndicate Member(s). The agreement to be entered into between our Company and the member(s) of the Syndicate, in relation to the collection of Bids in this Issue. Intermediaries registered with SEBI and Stock Exchanges and eligible to act as underwriters. Syndicate Member is appointed by the BRLM The slip or document issued by the Member(s) of the Syndicate to the Bidders as proof of registration of the Bid. The BRLM and the Syndicate Members. The Agreement among the Underwriters and our Company to be entered into on or after the Pricing Date. INDUSTRY / COMPANY RELATED TERMS Term AHT BCMPA BPI DGH FMD HVAC IBEF IEA IUG IMCA Description / Full Form Anchor Handling Tug Billion Cubic Meter Per Annum Baseline Platform Inspection Director General of Hydrocarbons Flooded Member Detection Heat Ventilation and Air Conditioning India Brand Equity Foundation Internationl Energy Agency Instrument and Utility Gas International Marine Contractors Association iv

7 IMR Inspection Maintenance Repair IRM Inspection, Repair and Maintenance KG Basin Krishna Godavari Basin MBPD Million Barrel Per Day MCM Million Cubic Metre Merchant Shipping Act Indian Merchant Shipping Act, 1958 MMT Million Metric Tonne MGR Marine Growth Removal MPI Magnetic Particle Inspection MSL Mean Sea Level MSV Multi Support Vessel MV HAL Samridhi Refers to our vessel MV HAL SAMRIDHI MV HAL Supporter Refers to our vessel MV HAL SUPPORTER NDT Non Destructive Testing NELP New Exploration and Licensing Policy of the Government of India OECD Organization for Economic Cooperation and Development OPEC Organization of Petroleum Exporting Countries OSV Offshore Supply Vessel PSC Production Sharing Contract PSV Platform Service Vessel QHSE Policy Quality Heath Safety & Environment Policy ROV Remotely Operated Vehicle SBM Single Buoy Moorings Vessels Our vessels MV HAL Samridhi and MV HAL Supporter Abbreviation A/c AGM AS BSE CAGR CDSL CIN DP DRHP ECS EBIDTA EGM EPS FCNR Account FEMA FII / Foreign Institutional Investors FIPB ABBREVIATIONS Full Form Account Annual General Meeting. Accounting Standards issued by the Institute of Chartered Accountants of India. Bombay Stock Exchange Limited. Compounded Annual Growth Rate. Central Depository Services (India) Limited. Corporate Identity Number Depository Participant. Draft Red Herring Prospectus Electronic Clearing System Earnings before Depreciation, Interest, Tax and Amortisation. Extraordinary General Meeting. Earnings per Equity Share. Foreign Currency Non Resident Account. Foreign Exchange Management Act, 1999, as amended from time to time and the rules and regulations issued thereunder. Foreign Institutional Investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time) registered with SEBI under applicable laws in India. Foreign Investment Promotion Board. v

8 HAL OFFSHORE LIMITED Abbreviation Full Form Fis Financial Institutions. FVCI Foreign Venture Capital Investors registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, GIR Number General Index Registry Number. GoI/ Government Government of India. HUF Hindu Undivided Family. IPO Initial Public Offer I. T. Act The Income Tax Act, 1961, as amended from time to time. I. T. Rules The Income Tax Rules, 1962, as amended from time to time, except as stated otherwise. MoA Memorandum of Association M.Sc. Master of Science. NAV Net Asset Value. NBFC Non-Banking Finance Companies. NRE Account Non-Resident External Account. NRO Account Non-Resident Ordinary Account. NSDL National Securities Depository Limited. NSE National Stock Exchange of India Limited. NTA Net Tangible Assets. P/E Ratio Price/Earnings Ratio. PAN Permanent Account Number. RBI The Reserve Bank of India. RBI Act The Reserve Bank of India Act, 1934, as amended from time to time. RHP Red Herring Prospectus RoC/Registrar of The Registrar of Companies, B Block, Paryavaran Bhavan, CGO Complex, Lodhi Road, New Companies, Delhi Delhi RoNW Return on Net Worth. Rs./ Rupees / INR Indian Rupees, the legal currency of the Republic of India. SCRA The Securities Contracts (Regulation) Act, 1956, as amended from time to time. SCRR The Securities Contracts (Regulation) Rules, 1957, as amended from time to time. SEBI The Securities and Exchange Board of India. SEBI Act The Securities and Exchange Board of India Act, 1992, as amended from time to time. UIN Unique Identification Number issued in terms of SEBI (Central Database of Market Participants) Regulations, 2003, as amended from time to time. UoI Union of India. USD/ $/ US$ The United States Dollar, the legal currency of the United States of America. Notwithstanding the foregoing, (i) In the section titled Main Provisions of the Articles of Association of our Company beginning on page [ ] of this Draft Red Herring Prospectus, defined terms have the meaning given to such terms in the Articles of Associaion of our Company; (ii) In the section titled Statement of Tax Benefits beginning on page [ ] of this Draft Red Herring Prospectus, defined terms have the meaning given to such terms in Statement of Tax Benefits of our Company; (iii) In the section titled Financial Statements beginning on page [ ] of this Draft Red Herring Prospectus, defined terms have the meaning given to such terms in the Financial Statements of our Company; (iv) In the paragraphs titled Disclaimer Clause of Bombay Stock Exchange Limited and Disclaimer Clause of National Stock Exchange of India Limited beginning on page [ ] and [ ] respectively of this Draft Red Herring Prospectus, defined terms have the meaning given to such terms in those paragraphs. vi

9 CERTAIN CONVENTIONS - PRESENTATION OF FINANCIAL AND USE OF MARKET DATA Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated financial statements as of and for the half-year ended September 30, 2006 and years ended March 2006, 2005, 2004, 2003 and 2002; prepared in accordance with Indian GAAP and the Companies Act restated in accordance with SEBI Guidelines, in the report of our statutory Auditors, M/s Kamal & Co., Chartered Accountants, beginning on page [ ] of this Draft Red Herring Prospectus. Our fiscal year commences on April 1 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a fiscal year (e.g., fiscal 2005), are to the fiscal year ended March 31 of a particular year. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding-off. All references to India contained in this Draft Red Herring Prospectus are to the Republic of India. All references to Rupees or Rs. or INR are to Indian Rupees, the official currency of the Republic of India. Market and industry data used throughout this Draft Red Herring Prospectus has been obtained from publications (including websites) available in public domain and internal Company reports. These publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe market data used in this Draft Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed to be reliable, have not been verified by any independent source. vii

10 HAL OFFSHORE LIMITED FORWARD-LOOKING STATEMENTS We have included statements in this Draft Red Herring Prospectus which contain words or phrases such as will, aim, is likely to result in, believe, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, project, should, will pursue and similar expressions or variations of such expressions, that are forward-looking statements. All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include but are not limited to: General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies; Changes in laws and regulations relating to the sectors/areas in which we operate; Increased competition in these sectors/areas in which we operate; Our ability to successfully implement our growth strategy and expansion plans, and to successfully acquire the Vessel for which funds are being raised through this Issue; Our ability to meet our capital expenditure requirements; Fluctuations in operating costs; Our ability to attract and retain qualified personnel; Changes in technology; Changes in political and social conditions in India, 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 we are involved. For a further discussion of factors that could cause our actual results to differ, see the chapters titled Risk Factors Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages [ ], [ ] and [ ] of this Draft Red Herring Prospectus respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company nor the member(s) of the Syndicate, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company and the BRLM will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges. viii

11 SECTION II RISK FACTORS RISK FACTORS An investment in Equity Shares involves a high degree of risk. You should carefully consider all of the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Company s Equity Shares. To obtain a complete understanding of our Company, you should read this section in conjunction with the sections titled Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations on pages [ ] and [ ] of this Draft Red Herring Prospectus as well as the other financial and statistical information contained in this Draft Red Herring Prospectus. If any of the following risks occur, our business, financial condition and results of operations could suffer, the trading price of our Equity Shares could decline, and you may lose all or part of your investment. These risks are not the only ones that we face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider being not material to our operations. Unless otherwise stated in the relevant risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of any of the risks mentioned herein. Materiality: The risk factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality: 1. Some events may not be material individually but may be found material collectively. 2. Some events may have material impact qualitatively instead of quantitatively. 3. Some events may not be material at present but may be having material impacts in the future. Internal risk factors: Company Related Risks 1. Our Director, our Company and some of our Promoter Group Entities are involved in legal proceedings A classification of the legal proceedings (including show cause and summons notices) instituted by and against our Company, our Directors/Promoter and Promoter Group Entities and the monetary amount involved in these cases is given in the following table: I. Outstanding Litigation of Our Directors/Promoters. Type of legal proceeding Total number of pending cases/ show cause notices/ summons ix Liability amount to the extent quantifiable (Rs. Lakhs) Criminal Case filed against 1 Not quantifiable Civil Case filed against 1 Not quantifiable II. Outstanding Litigation of our Company. Type of legal proceeding Total number of pending cases/ Amount involved (Rs. Lakhs) show cause notices/ summons Arbitration filed by us III. Outstanding Litigation of our Promoter Group Entities. a. M/s Supreme Exim Private Limited Type of legal proceeding Total number of pending cases/ show cause notices/ summons Liability amount to the extent quantifiable (Rs. Lakhs) Civil Cases filed against 2 Not quantifiable Civil Cases filed by 1 Not qantifiable Writ Petition filed by 1 Not quantifiable b. Moon Beverages Limited. Type of legal proceeding Total number of pending cases/ show cause notices/ summons Liability amount to the extent quantifiable (Rs. Lakhs) Criminal Cases filed against 3 Not quantifiable Consumer Cases filed against Case under Monopolies and 1 Not quantifiable

12 HAL OFFSHORE LIMITED Restrictive Trade Practicies Act filed against. IV. M/s. Superior Fabrics, Kanpur (Proprietorship of Promoter) Type of legal proceeding Total number of pending cases/ show cause notices/ summons Liability amount to the extent quantifiable (Rs. Lakhs) Central Excise Case filed by 1 38 V. M/s Superior Fabrics, Delhi (Proprietorship of Promoter s wife) Type of legal proceeding Total number of pending cases/ show cause notices/ summons Liability amount to the extent quantifiable (Rs. Lakhs) Central Excise Case filed by For further details regarding these litigations, please refer to the section titled Outstanding Litigations, Material Developments and other Disclosures beginning on page [ ] of this Draft Red Herring Prospectus. 2. We have not commissioned an independent appraisal of the vessel acquisition plan or the cost of Issue Objects to this Issue have not been appraised by any independent agency. The net proceeds of this Issue (after Issue expenses) are proposed to be used for acquisition of MSV and allied equipments to be installed thereon. The vessel acquisition plan has been determined based on our management s internal estimates and our experience and understanding of the offshore services industry, and has not been appraised by an independent agency. However, it may be noted that our Company has approached PNB for the term loan equivalent Rs Lakhs for acquisition of proposed MSV and allied equipment. PNB, while conveying its in- principle approval vide its letter dated 28th Decmber,2006 for sanctioning of the aforesaid term loan has stated that the term loan would be sanctioned subject to its Technical Commmitte finding the acquisition of MSV and allied equipment techno-economically viable. 3. We have not entered into definitive agreements or placed orders for the construction or for purchase of additional MSV and allied equipments required to operate our proposed MSV. In addition to our existing Vessels, we are looking to expand our fleet through acquisition of MSV, either new build or second hand, or by any other means as stated in the section titled Objects of the Issue beginning on page [ ] of this Draft Red Herring Prospectus. We have not yet entered into definitive agreements or placed orders for the construction or purchase of MSV and allied equipments we propose to purchase/acquire. We face risks in relating to to acquisition of additional MSV and allied equipments, including the following: The budgeted resources for implementation of the objects of our Issue may be inadequate and we may incur additional costs. We cannot assure you that we will be able to locate and acquire suitable MSV and allied equipments, identify and consummate MSV and allied equipments purchased, obtain requisite financial assistance on acceptable terms or conclude such definitive agreements on terms acceptable to us, or if at all. Based on our past experience concerning market and the nature of industry, it may take upto 6-12 months after this issue for acquisition of the relevant vessel. Pending the utilization of the Issue proceeds in terms of the objects of the Issue, they shall be invested as mentioned in the section titled Objects of the Issue beginning on page [ ] of this Draft Red Herring Prospectus. These Issue proceeds, pending utilization as per the objects of the Issue, may not earn sufficient or sustainable returns while they are invested. Delays in the implementation of the objects of our Issue for any reason, including as aforesaid and delays in registration formalities or delays in delivery of MSV and allied equipments by suppliers or deliveries of defective MSV and allied equipments by our suppliers or litigations, if any, in relation to our acquisitions could adversely affect our financial position. We cannot assure you that our acquisition of vessel would be at an optimum price, or that the same will not turn out to be overpriced or overvalued, which may adversely affect our projected returns in relation to such acquisition. In addition, if we are unable to manage the growth we achieve from the MSV that we may acquire, our results of operations, financial conditions and the implementation of our business strategy may be adversely affected. If one or more of these risks materialize, they may adversely affect our business, financial condition and results of operations. 4. Purchasing and operating secondhand vessel may result in increased operating costs and losses. Our current business strategy includes the acquisition of secondhand MSV. While our acquisition process typically involves prior inspection of the vessel physically and/or its records with various authorities, but such an inspection does not provide us with the complete knowledge about hidden conditions and defects. Repairs of such defects may require us to bear additional costs and losses. This may adversely affect our business, financial condition and results of operations. 5. For the FY over 99% of our revenue came from one customer. We are in the business of providing various offshore services. Currently we are providing these services only in the Arabian Sea area. We provide these services to an Indian Oil and Gas Major through various contracts entered into with it, who owns oil and x

13 gas fields in the Arabian Sea. In FY , over 99% of our revenues from Offshore Services were attributable to our contracts with the Indian Oil and Gas Major. We cannot assure you that we shall continue to generate business from this customer as we have in the past, or that we shall be able to find other customers for our services. Any reduction in revenues from the aforesaid single customer or any other adverse developments in this regard may adversely affect our business, financial condition and results of operations. 6. Our existing client contracts are for a maximum tenure of 3 years. The maximum term for which most of the existing contracts have been awarded by the Indian Oil and Gas Major is three years from the date of award of the contract with a provision for extension for further period of one year at the option of our client. We cannot assure you of renewals / extentions / number of contracts we get every year. 7. There are several risks that we face on account of our client contracts Currently an Indian Oil and Gas Major is our predominant customer and a most of our business has come from that Indian Oil and Gas Major. There are a number of risks that we face on account of these client contracts with the Indian Oil and Gas Major, including the following: All the contracts entered by us with the said client contain a clause which gives our client the power to suspend / terminate the contracts unilaterally. If any of the contracts are suspended / terminated unilaterally, our business and financial condition will be adversely affected to that extent. As per the terms and conditions of some of the contracts entered into by our Company with the Indian Oil and Gas Major, the said client has the right to terminate the contracts on account of force majeure. If work is suspended by force majeure conditions lasting for a predefined period, then our said client has the option of canceling the contract in whole or part at its discretion without any liability on their part. As per terms and conditions of some of the contracts entered into by our Company with the Indian Oil and Gas Major, our Company fails to complete the work within the scheduled completion date, unless such failure is due to force majeure, our Company may have to pay to the said client liquidated damages. Therefore, if our Company fails to complete the work within the schedule, it may have to bear liquidated damages, which will materially affect the business and financial status of our Company. As per the terms and conditions of the various contracts entered into by our Company with the said Indian Oil and Gas Major, our Company will be responsible for third party liability arising out of negligence or default on our part. We do not have any control over the extent of such liability, any such liability if it arises, we may have material adverse effect on the business and financial conditions of our Company. Most of our contracts are fixed price contracts, that is, there is no room for us to pass on escalation in estimated costs, (whether anticipated or unanticipated) to our client, and the same has to be borne by us. We do attempt to factor in escalation into our tender quotations, but we cannot assure you that the same would be sufficient to meet the actual cost escalation(s), if any. Our business is dependent on the decisions and actions of our said client, and there are a number of factors relating to our said client and the contracts entered into by us with the said client that are outside our control that might result in the termination of a project or the loss of the said client. Any of these factors could have a material adverse affect our revenues and profitability. 8. Our business model is tender based. In our current business, the entire work is through various contracts which are awarded through various tenders that have been floated. Hence, as there is no guarantee that we will be successful in procuring various tenders that we bid for, the amount of work awarded to us is uncertain. None of our current contracts are long term contracts, and if we are not successful in obtaining future work through tenders or otherwise, it may have material adverse effect on revenue and profitability. 9. Two of the licenses for our Vessel MV HAL Samridhi have expired and are pending renewal. Many of the licenses for both our Vessels, MV HAL Supporter and MV HAL Samridhi have short term/interim licenses. Two of our licenses for the vessel, MV HAL Samridhi have expired. We are in the process of complying with certain observations made pursuant to an inspection by Mercantile Marine Department, and this Vessel is currently undergoing surveys at the Mumbai port pursuant to change of flag, and the question of renewal of the aforesaid two licenses would be considered only on completion of the survey process and compliance with aforesaid directions. For further details regarding the same, please refer section titled Government/Statutory Approvals beginning on page [ ] of this Draft Red Herring Prospectus. Further, many of the licenses for both our Vessels are interim/short term in nature pending receipt of final approvals. 10. Our Company operates from rented office premises. All the premises from which our company currently operates from are rented office premises. The registered office of our Company and our Mumbai Office are premises taken on rent from Mr. Sanjeev Agrawal, Promoter and Managing Director of our Company and his wife Mrs. Deepti Agrawal respectively. xi

14 HAL OFFSHORE LIMITED 11. We do not own any intellectual property. We do not own any intellectual property. Our logo is not registered, nor have we applied for registration in relation to the same. We do not have any registered intellectual property rights. 12. Availaibility of skilled personnel are critical to our business. Our Company s performance is dependent on our skilled personnel. We also benefit from the recognition and reputation accorded to our key personnel. Many of these persons, particularly, the technical personnel, are not on the pay roll of our Company, which we believe is as per industry norms. Competition for skilled personnel in our industry is intense, and we may not be able to retain all or any of our key manpower. The loss of any of our key personnel may adversely affect our operations and financial conditions. Further, if we are unable to recruit and retain skilled employees our operations and expansion plans may be adversely affected, and accordingly impact our revenue. In addition, our expansion plans will require us to hire, train, and retain a significant number of new employees in the future, and particularly, on or around the time we get new assignments. If we are unable to attract and retain skilled employees, our operations may be impacted, which could harm our revenues and profitability. 13. Risks associated with operating oceangoing vessels could negatively affect our business, revenues and financial condition. The operation of oceangoing vessels carries certain inherent risks. These risks include, among others, possibilities of marine disasters, environmental accidents, cargo and property losses, business interruptions caused by mechanical failure, natural factors or sabotage and piracy. Any of these circumstances or events could increase our costs of operation or repair or lower our revenues. In addition to any economic cost, the involvement of our vessels in an environmental disaster may have a material adverse effect on our business. The loss of earnings, while our vessels are out of service would decrease our earnings and adversely affect our financial condition and results of operations. 14. The shipping industry has inherent operational risks that may not be adequately covered by our contracts and insurances. Although we attempt to limit and mitigate our liability for damages arising from negligent acts, errors or omissions as well as natural phenomena through contractual provisions and/or insurance policies, the indemnities set forth in our contracts and/ or our insurance policies may not cover all possible risks. Sometimes the whole of the risk may not be covered. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs. A successful assertion of one or more large claims against us could adversely affect the results of our operations. 15. The monsoon season affects our activity levels in the high seas. During the monsoon season, offshore activity is substantially reduced due to rough seas. Our services are also substantially lowered, resulting in lower revenues from the period June to September. Our results of operation are lower in this period. Therefore, our quarterly and half yearly results may not be comparable with those of succeeding quarters/half years and may not be an accurate indicator of our future quarterly/half yearly performance. 16. Maritime claimants could arrest one or more of our vessels, which could adversely affect us. Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages, including, in many jurisdictions, a claim to arrest a vessel (and in some jurisdictions the right to arrest even a sister ship ) through foreclosure proceedings. The arrest or attachment of one or more of our vessels could adversely affect our business and cash flow. This could have a material adverse effect on our business, financial condition, and results of operations. 17. We rely on our technological systems, marine divers and other professionals and any failures in these systems could adversely impact our operations Our operations are dependent on efficient technological systems to provide an umbilical link to our divers and other operatives. While we believe that we have provided necessary back-up systems where appropriate, any failure in our technological systems or loss of connectivity or any loss of data arising from such failure can impact us adversely. 18. A failure to comply with environmental laws and regulations may subject us to increased liabilities and significant expenditures. The shipping industry as a whole (including us) is subject to extensive environmental and safety regulations, local, national and international, in relation to vessel operations. Pursuant to regulatory requirements, we are required to, inter alia, develop and maintain safety management systems, and failure to comply with the same may subject us to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of our vessels. Despite our best efforts at compliance, statutory or other authorities may allege non-compliance on our part, and any non-compliance or perceived non- xii

15 compliance on our part could subject us to regulatory action, the cost and effect of which we cannot currently predict, and which may have a material adverse effect on our business, financial condition and results of operations. For further details regarding the regulations affecting our business, please refer section titled Regulations and Policies beginning on page [ ] of this Draft Red Herring Prospectus. 19. Our operations are dependent on the oil and gas industry. Our business is to provide offshore services to oil and gas exploration, development and production (E&P) companies. As a result, our operations are largely dependent upon the levels of offshore E&P activity. To varying degrees, these activity levels are affected by trends in oil and gas demand or increased activities in non-offshore E&P activities as opposed to offshore E&P activities. Any prolonged reduction in oil and gas demand could depress the level of our services in support of offshore exploration and production activity and, therefore, have a material adverse effect on our business, financial conditions, and results of operations. Our operations are focused solely on the provision of maintainance, management and support services to our clients in the E & P sector. There is a direct link between the performance of this sector and our performance. Any adverse change or a sudden or protracted downturn, in the economic conditions of the oil and gas industry may affect our results of operations, profitability and margin. 20. Our overall operations are dependent upon the level of activity in the Bombay High region. We have historically derived a predominant portion of our revenues from operations in the Bombay High region. Bombay High has been the largest offshore oil and gas reserve in India. Any negative development on the activities in and around this region like non-availability of oil and gas or hostile conditions that are not in our control may have an adverse impact on our business, financial conditions and results of operations. 21. We operate in competitive markets. Our business, operations and financial performance will depend on how effectively we compete. Our inability to compete, including in terms of operations, safety, security, service quality, and financially could have a material effect on our business, financial condition and operations. Our market position will depend upon our ability to anticipate and respond to various factors affecting the industry, including service innovations and particular issues important to competition. 22. Our maintenance costs will increase as ourvessels age. We have two Vessels, one whose age is 24 years and the other which is 26 years old. Maintenance costs of vessels typically increase on absolute basis with increased age. As our vessels age, our maintenance costs may increase, on an absolute basis, which we cannot presently quantify. 23. We are subject to restrictive covenants in certain fund based and non fund based debt facilities provided to us There are restrictive covenants in agreements we have entered into with our bankers for fund based and non-fund based facilities. As per the restrictive covenants in our loan agreements, our Company shall not, inter alia, except either in the normal course of business and or with the previous written consent of our lender(s), sell or dispose off in any manner the hypothecated goods or any part thereof. Our Company shall not during the continuance of the loan agreements create any mortgage, charge, lien or encumbrance affecting the hypothecated goods or any part thereof nor do anything, which would prejudice the security, nor shall they part with them except by way of sale in the ordinary course of their business. 24. There are loss making entities in our Promoter Group Companies Some of our promoter group companies are loss making from the last three years: Particulars FY 2006 FY2005 FY2004 Softlign Solutions Pvt Ltd (0.42) (0.09) (0.07) Shantnu Farms Pvt Ltd (0.02) (0.05) (0.05) (Rs.in Lakhs) 25. Any inability to manage our growth could disrupt our business and reduce our profitability. We have experienced significant growth in our total income in recent years. We expect this growth to place significant demands on both our management and our resources. This will require us to continuously evolve and improve our operational, financial and internal controls across the organization. Any inability to manage growth may have an adverse effect on our business, results of operations and financial conditions. 26. We have contingent liabilities in our balance sheet, as restated, as at September 30, 2006 As per our (audited) restated financials for the six months ended September 30, 2006, the following are the contingent liabilities not provided for: a) Any demand that may be raised by Income Tax Authorities on completion of pending assessments. b) Bank guarantees existing as on 30 th September 2006 for Rs. 28,58, 55,780. c) Delay in deposit of P.F, E.S.I, Professional Tax and TDS in a few cases. xiii

16 HAL OFFSHORE LIMITED d) Any demand that may be raised by Custom Authorities on final assessment of Custom Duty of Reimbursable store value. External Risk Factors 1. A slowdown in economic growth in India could cause our business to suffer. The Indian economy has shown sustained growth over the last few years. However, any slowdown in the Indian economy could lead to a slowdown in the Offshore services industry and adversely affect our financial performance. 2. A significant change in the Government of India s economic liberalization and deregulation policies could disrupt our business and cause the price of our Equity Shares to decline. Our assets and customers are predominantly located in India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on private sector entities, including us, and on market conditions and prices of Indian securities, including Equity Shares. Any significant change in the government s policies or any political instability in India could adversely affect business and economic conditions in India and could also adversely affect our business, our future financial performance and consequently the market price of our Equity Shares. 3. Natural calamities could have a negative impact on the Indian economy and cause our business to suffer. India has experienced natural calamities such as earthquakes, tsunami, floods and drought in the past few years. The extent and severity of these natural disasters has an impact on the Indian economy. Such natural calamities may also affect our vessels and operations. Any negative impact of natural disasters on the Indian economy could adversely affect our business, results of operations and the market price of our Equity Shares. 4. Terrorist attack, civil unrest and other acts of violence or war involving India and other countries could adversely affect the financial markets and our business. Terrorist attacks and other acts of violence or war may negatively affect the Indian economy and financial markets and may also adversely affect the worldwide financial markets. These acts may result in a loss of business confidence and ultimately adversely affect our business. Diplomatic relations between India and some of its neighboring countries have been strained in the past. Any deterioration in relations between India and its neighbouring countries might result in investor concern about stability in the region, which could adversely affect the market price of our Equity Shares. India has also witnessed civil disturbances in recent years and it is possible that future civil unrest as well as other adverse social, economic and political events in India could have an adverse impact on us. Regional or international hostilities, terrorist attacks or other acts of violence or war could have a significant adverse impact on international and or Indian financial markets and or economic conditions and or on government policy. Such incidents could also create a perception that investment in Indian companies involves a higher degree of risk and could have an adverse impact on our business and the price of our Equity Shares. 5. After this Issue, the price of our Equity Shares may be volatile, or an active trading market for our Equity Shares may not develop. Prior to this Issue, there has been no public market for our Equity Shares. The trading price of our Equity Shares may fluctuate after this Issue due to a variety of factors, including results of our operations and the performance of our business, competitive conditions, general economic, political and social factors, volatility in the Indian and global securities markets, trends in general business and the off-shore service industry, the performance of the Indian and global economy and significant developments in India s fiscal regime. There can be no assurance that an active trading market for our Equity Shares will develop or be sustained after this Issue, or that the price at which our Equity Shares are initially issued will correspond to the prices at which they will trade in the market subsequent to this Issue. 6. The trading price of our Equity Shares may be affected by variations in our operations, and financial conditions Our quarterly/half yearly or other operating results may fluctuate in the future based on a variety of factors, including: _ the timing and success of our growth plans, as we increase operations from existing contracts or start new assignments _ changes in contract revenues, input and maintenance costs; _ increases in personnel and other operating expenses to support our anticipated growth; and _ changing competitive environment In addition, it is possible that in any future quarter/half yearly/other defined period our operating results could be below the expectations of investors and any published reports or analysis regarding our Company. In that event, the price of our Equity Shares could decline, perhaps substantially. 7. Exchange rate fluctuations may adversely affect our results of operations We report our financial results in Rupees, but a portion of our incomes and expenses are denominated in, or linked to, U.S. Dollars or Euros. The exchange rate between the Rupee and the US Dollar and or the Euro has changed substantially in recent years and may fluctuate substantially in future. We cannot assure you that we will be able to effectively mitigate any xiv

17 adverse impact of currency fluctuations on our business and financial condition. Notes to risk factors 1. Public Issue of 33,00,000 Equity Shares of Rs. 10 each at a price of Rs. [ ] per Equity Share including a share premium of Rs. [ ] per Equity Share for cash aggregating Rs. [ ] Lakhs from which 3,00,000 Equity Shares of Rs. 10 each at a price of Rs. [ ] are reserved for Eligible Employees and Eligible Shareholders of Group Companies in this Issue as the Reservation Portion on a competitive basis.the Issue would constitute 27.72% of the post Issue paid-up capital of our Company. The Net Issue to the Public shall be 30,00,000 Equity Shares of Rs. 10 each at a price of Rs. [ ] per Equity Share. The Net Issue will constitute % of the post-issue paid up capital of our Company. Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. 2. The net worth of our Company, before the Issue (as per our restated financial statements as at September 30, 2006) was Rs. 2, Lakhs and the book value per Equity Share (as per our restated financial statements as at September 30, 2006) was Rs per share. 3. The average cost of acquisition of Equity Shares by our Promoters, Mr. Sanjeev Agrawal and Sanjeev Agrawal HUF is Rs and Rs per Equity Share respectively. For details see the section titled Capital Structure beginning on page [ ] of this Draft Red Herring Prospectus. 4. Any clarification or information relating to the Issue shall be made available by the BRLM and our Company to the public and investors at large and no selective or additional information would be made available only to a section of the investors in any manner. Investors may contact the BRLM for any complaints pertaining to the Issue. 5. For details regarding our related party transactions, please refer section titled Financial Statements beginning on page [ ] of this Draft Red Herring Prospectus. 6. For interest of our Directors, please refer sections titled Risk Factors, Our Business and Our Management beginning on pages [ ], [ ] and [ ] of this Draft Red Herring Prospectus. 7. Investors are advised to refer to the paragraph on Basis of Issue Price on page [ ] of this Draft Red Herring Prospectus before making an investment in this Issue. 8. The Issue is being made through a 100% Book Building Process wherein at least 50% of the Net Issue will be allotted on a proportionate basis to QIBs, of which 5% shall be reserved for Mutual Funds. If at least 50% of the Net Issue cannot be allotted to QIBs, then the entire application money in this Issue shall be refunded herewith. Further, upto 15% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 35% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. 9. In the event of the Issue being oversubscribed, the allocation shall be on a proportionate basis to Bidders in the Reservation Portion, QIBs, Retail Individual Bidders and Non-Institutional Bidders. For details, refer to the chapter titled Issue Procedure on page [ ] of this Draft Red Herring Prospectus. 10. Trading in Equity Shares of our Company for all the investors shall be in dematerialized form only. 11. Under subscription, if any, in the Non-Institutional Portion Retail Individual Portion would be met with spill over from other categories at the sole discretion of our Company in consultation with the BRLM. If at least 50% of the Net Issue cannot be allotted to QIB Bidders, then the entire application money will be refunded. However, if the aggregate demand by Mutual Funds is less than 75,000 Equity Shares, balance Equity Shares available for allocation in the Mutual Funds Portion will be added to the QIB Portion and be allocated proportionately to the QIB Bidders. 12. Except as disclosed in the section titled Capital Structure beginning on page [ ] of this Draft Red Herring Prospectus, we have not issued any shares for consideration other than cash. We and the BRLM are obliged to keep this Draft Red Herring Prospectus updated and inform the public of any material change / development until the listing and trading of the Equity Shares offered under the Issue commences. xv

18 SECTION III - INTRODUCTION SUMMARY This is only a summary and does not contain all information that you should consider before investing in our Equity Shares.You should read the entire Draft Red Herring Prospectus, including the information on Risk Factors and our Financial Statements and related notes beginning on page [ ] and page [ ] of this Draft Red Herring Prospectus, before deciding to invest in our Equity shares. INDUSTRY OVERVIEW The Oil & Gas Industry is broadly segregated in upstream and downstream sectors. Exploration, Exploitation and Production [E&P] comprise the upstream sector while refining and marketing involve downstream activities. The Industry size in India is estimated at USD 110 bn (about 15% of India s GDP). Our Company is in the Offshore Services business, which essentially provides various services associated with offshore [as opposed to inland] E&P activities. Thus, this business derives its demand directly from the Oil & Gas Industry, more specifically E&P activities. Since offshore installations are in the middle of the Sea, away from land, these require various kinds of support services, such as delivering supplies, personnel, providing accommodation, repairs & maintenance, towing rigs from one location to the other and supporting offshore construction projects. Apart from the government owned ONGCL, private players such as Reliance, Cairn Energy, British Gas, etc. are now engaged in E&P activities. With oil exploration companies increasing their activities because of higher crude oil prices, offshore services are a fast growing area. Other focused offshore service companies like Dolphin Offshore, Garware Offshore, Great Eastern Offshore and South East Asia Marine have seen significant order flows in the recent past. This is because a major share of Oil & Gas production is derived from offshore activities. For e.g, during FY 2005, 65.9% of crude oil production and 71.75% of natural gas production in India was offshore. For the same period, ONGCL s offshore crude oil and natural gas output was 68.6% and 75.89% respectively. With the increasing focus of the Government of India on offshore E & P activities both in public sector & private sector, we believe that the support services industry players like our company will have immense opportunity in near future to provide all kind of support services to offshore exploration Oil & Gas companies. BUSINESS OVERVIEW Our Company was incorporated in the year 1996 as Himachal Alkalies Limited. Our promoters, realizing the growing importance of offshore services business for E&P industry, diversified into offshore marine services and the name of the company was subsequently changed to HAL Offshore Limited to reflect its key business activities. Our company started the offshore services business in the year 1998 by securing the global tender for operation and maintenance management of MSVs owned by an Indian Oil & Gas Major. Our Company is engaged in the business of providing integrated offshore services to the oil and gas industry, more specifically to Exploration, Exploitation and Production (E&P) companies. Our Company provides these services to our clients under fixed period contracts ranging from 1-5 years. A predominant portion of our Company s services are currently being provided to an Indian Oil and Gas Major engaged in offshore exploration activities in Arabian Sea, off the Western coast of India. The major services provided by our company are as under: 1. Underwater services Drilling support Inspection, Maintenance & Repairs Single Buoy Moorings (SBMs) Ship / rig repairs Remotely operated vehicles (ROVs) used for underwater work below 300 meters of water depth, where it is unsafe for divers to operate. The ROVs are essentially motorised robotic equipment that are controlled from a vessel on the surface and can be made to perform numerous tasks. 2. Marine Services - Technical management and operation of various types of vessel which covers the manning, operating and maintenance of the vessels. These services are provided on the following types of vessel: 1

19 HAL OFFSHORE LIMITED 3. Offshore Fabrication and Maintenance Services Modification of platforms, clamp on structures, clamp and protector installation, deck extensions, boat landing and running conductors. Platform revamp, including painting. Replacement of equipment such as cranes,fuel gas skids, chlorinators, water makers deluge systems, etc. Structural work comprising steel modules and assemblies, and painting. Over the years, our Company has also developed a base workshop along with a substantial machinery and tool base to carry out repairs in-house rather than being dependent on sub contractors to perform the work. Our major client is an Indian Oil & Gas Major, who uses all kinds of offshore vessels, such as MSVs, OSVs, AHTs etc. To support their operations and safety requirements, they maintain a policy of having a certain number of MSVs in their offshore field, some of which they charters from private operators. For a recent tender that we have submitted and is pending evaluation and award, we have bid on the basis of a tie-up with the foreign owners for chartering their vessel on back-to-back basis. Our Company is planning to buy its own vessel. In the event that the purchase agreement does not come through or does not come through in time, the opportunity of deploying the vessel shall not be lost, due to back-to-back chartering arrangement in place. Considering that there is a definite shortage of Service Vessels in the Arabian Sea E&P fields, even if this tender is executed with a chartered vessel, our Company will continue its agenda of acquiring an appropriate vessel as soon as possible. The management is sure that if an appropriate vessel is acquired, it shall be deployed within a very short time. SUMMARY FINANCIAL DATA The following summary financial information is derived from the restated financial statements of our Company for the fiscal 2002, 2003, 2004, 2005, 2006 and the half-year period ended September 30, 2006 as described in the Auditors Report in the section titled Financial Statements on page [ ] of this Draft Red Herring Prospectus. The financial statements have been prepared in accordance with Indian GAAP, the Companies Act and have been restated in accordance with SEBI Guidelines. The financial summary and operating information presented below should be read in conjunction with the financial statements, including the notes thereto included in Financial Statements and the Management Discussion and Analysis on pages [ ] and [ ] respectively of this Draft Red Herring Prospectus. Summary Income Stetement (Rs. in 'Lakhs) Particulars Period /Year Ended INCOME Reimbursable Stores Supplied Income From Offshore Operations Service Fees Charges Other Income Total Income (Gross Sales + Other Income) EXPENDITURE Cost of Reimbursable Stores Supplied Offshore Operation Expenditure Expenses against Service Fees Shipping Business Reserve Administrative Expenses Bank Financial Charges Depriciation Preliminary Expenses w/off Total Expenditure Net Profit Before Tax Less:Current Tax

20 Less:Income Tax Arrears Add: Excess Provision Written Back Adjusted Profit / (Loss) After Tax Summary of Assets & Liabilities (Rs. in Lakhs) Particulars Period / Year Ended SOURCES OF FUNDS: Share Capital and Reserves Share Capital Reserves and Surplus Loan Fund Secured Loans Unsecured Loans Total APPLICATION OF FUNDS: Fixed Assets Less: Depreciation Net Fixed Assets Investments Current Assets, Loans and Advances Receivables Cash & Bank Balances Loans & Advances Other Current Assets Total Less:Current Liabilities and Provisions Current Liabilities Provisions Total Current Assets Net Current Assets Miscellaneous Expenditure (to the extent not written off) Total

21 HAL OFFSHORE LIMITED Equity Shares Offered: Issue by our Company (1) THE ISSUE 33,00,000 Equity Shares aggregating Rs. [ ] Lakhs. Reservation Portion for Eligible Emloyees and Eligible Shareholders of Group Companies (2) 3,00,000 Equity Shares aggregating Rs. [ ] Lakhs. Net Issue to the Public 30,00,000 Equity Shares aggregating Rs. [ ] Lakhs. Of which A) Qualified Institutional Buyers Portion Atleast 15,00,000 Equity Shares aggregating Rs. [ ] Lakhs, constituting at least 50% of the Net Issue that will be available for allocation to Qualified Institutional Buyers. 5% of the QIB Portion, constituting 75,000 Equity Shares shall be available for allocation on proportionate basis to Mutual Funds only, and the balance QIB Portion shall be available for allocation on a propotationate basis to all QIBs, including Mutual Funds. If atleast 50% of the Net Issue cannot be allocated to QIBs, then the entire application moneys will be refunded. B) Non-Institutional Portion (3) Upto 4,50,000 Equity Shares aggregating Rs. [ ] Lakhs, constituting up to 15% of the Net Issue that will be available for allocation to Non-Institutional Bidders. C) Retail Portion (3) Upto 10,50,000 Equity Shares aggregating Rs. [ ] Lakhs constituting up to 35% of the Net Issue that will be available for allocation to Retail Individual Bidders. Equity Shares outstanding prior to the Issue Equity Shares outstanding after the Issue Use of Issue Proceeds 86,05,440 Equity Shares 1,19,05,440 Equity Shares Please refer section titled Objects of the Issue beginning on page [ ] of this Draft Red Herring Prospectus for additional information. (1) Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. (2) If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. Reservation Portion after the Pre-IPO Placement, if any, comprises of [ ] Equity Shares which shall be offered to Eligible Employees and Eligible Shareholders of Group Companies on a competitive basis. For definitions of who is an Eligible Employee and who is an Eligible Shareholder of Group Companies please refer to section titled Definitions and Abbreviations beginning on page [ ] of this Draft Red Herring Prospectus. Allocation in the Reservation Portion in case of an over subscription shall be on a proportionate basis. Under subscription, if any, in the Reservation Portion would be allowed to be met with spillover interse from any other categories, at the sole discretion of our Company, in consultation with the BRLM. (3) Under-subscription, if any, in any of the above categories would be allowed to be met with spillover inter-se from any other categories, at the sole discretion of our Company in consultation with the BRLM. 4

22 GENERAL INFORMATION Registered Office of our Company Superior House, 48, Todarmal Road, Bengali Market, New Delhi Tel. No /72, Fax No , Mumbai Office HAL Offshore Limited 821, Solitaire Corporate Park, Andheri Kurla Road, Andheri (East), Mumbai Tel. No , Fax No , Our Company is registered with the Registrar of Companies, Delhi with Registration Number of and CIN U24298DL1996PLC The address of the RoC is as follows: Registrar of Companies, Delhi B-Block, Paryavaran Bhavan, CGO Complex, Lodhi Road, New Delhi BOARD OF DIRECTORS Our Board of Directors as on date of filing this Draft Red Herring Prospetus with SEBI are as follows: Sr. No. Names of the Directors Designation 1. Mr. Sanjeev Agrawal Chairman and Managing Director 2. Mr. Mukesh Agarwal Non-Executive Director 3. Mr. Avinash Mehrotra Non-Executive and Independent Director 4. Mr. Ramalingam Natesan Non-Executive and Independent Director For a detailed profile of our directors, please refer section titled Our Management beginning on page [ ] of this Draft Red Herring Prospectus. Company Secretary and Compliance Officer Mr. Mayur Maheshwari. Superior House, 48, Todarmal Road, Bengali Market, New Delhi Tel. No /72, Fax No , ipo@haloffshore.com Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre-issue or post-issue problems such as non-receipt of letters of allocation, credit of allotted Equity Shares in the respective beneficiary account or refund orders, etc. BANKERS TO THE COMPANY Punjab National Bank Civil Lines, Delhi Tel. No.: / , Fax No.: , bo115@pnb.co.in Punjab National Bank Linking Road Branch, Bandra (West), Mumbai Tel. No.: , Fax No.: , bo0082@mail.pnb.co.in 5

23 HAL OFFSHORE LIMITED Oriental Bank of Commerce Roshanara Road, Delhi Tel.No.: , Fax No.: , ISSUE MANAGEMENT TEAM Book Running Lead Manager (BRLM) Fortune Financial Services (India) Limited K. K. Chambers, 2 nd Floor, Sir P. T. Marg, Fort, Mumbai Tel. No Fax No hal.ipo@ffsil.com Contact Person: Mr.D.H.Shinde Website: Legal Advisors to The Issue M/s. Crawford Bayley & Co. State Bank Buildings, 4th floor N. G. N. Vaidya Marg Fort, Mumbai Tel No.: Fax No.: sanjay.asher@crawfordbayley.com Syndicate Members The Syndicate member(s) will be finalized prior to filing the RHP with RoC. Registrar to Issue Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound LBS Road, Bhandup (West) Mumbai Tel.No.: (9 lines), Fax No.: , hal-ipo@intimespectrum.com Contact Person: Mr. Salim Shaikh Website: Bankers to Issue and Escrow Collection Banks The Bankers to the Issue and Escrow Collection Bank shall be finalized prior to filing of the RHP with RoC. Brokers to the Issue All the members of the recognised stock exchanges would be eligible to act as brokers to the Issue. Statutory Auditors M/s Kamal & Co. Chartered Accountants, 1372, Kashmere Gate, New Delhi Tel. No.: , Fax No.: , kamalg59@rediffmail.com Statement Of Inter Se Allocation of Responsibilities Since Fortune Financial Services (India) Limited is the sole BRLM for this Issue, the entire Issue related activities and responsibilities are vested with it. Credit Rating As this is an Issue of Equity Shares, credit rating is not required for this Issue. IPO Grading Our Company has not opted for IPO grading in relation to this Issue. Trustees As this is an Issue of Equity Shares, the appointment of Trustees is not required. Monitoring Agency There is no requirement for a monitoring agency in terms of Clause 8.17 of the SEBI Guidelines. The Audit Committee of our Board of Directors of our Company will monitor the use of the proceeds of the Issue. Appraising Entity The objects of the Issue have not been appraised by any agency. The objects of the issue and means of finance therefore are based on internal estimates of our Company. 6

24 Withdrawal of the Issue Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue any time after the Bid/Issue Opening Date but before allotment without assigning any reason therefor. Book Building Process Book Building refers to the process of collection of bids from investors on the basis of this Draft Red Herring Prospectus which is based on the price band. The Issue Price is fixed after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are: (1) Our Company, (2) Book Running Lead Manager in this case Fortune Financial Services (India) Limited, (3) Syndicate Member(s) who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible to act as underwriters. The BRLM appoints the Syndicate Members, (4) Registrar to the Issue, and (5) Escrow Collection Bank(s). The SEBI Guidelines, have permitted an issue of securities to the public through the 100% Book Building Process, wherein a minimum of 50% of the Net Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (QIBs) including upto 5 % of the QIB portion that shall be available for allocation on proportionate basis to Mutual Funds only and the remainder of the QIB portion shall be available for allocation on a proportionate basis to all QIB bidders, including Mutual Funds. If at least 50% of the Net Issue cannot be allotted to QIBs, then the entire application money will be refunded herewith. Further, upto 15% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and upto 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Our Company will comply with the SEBI Guidelines for this Issue. In this regard, our Company has appointed the BRLM to procure subscriptions to the Issue. The process of book building, under SEBI Guidelines, is relatively new and the investors are advised to make their own judgment about investment through this process prior to making a Bid in the Issue. QIBs are not allowed to withdraw their Bid after the Bid/ Issue Closing Date and are required to pay 10% Margin Amount upon submission of their Bid. For details, please refer to chapters titled Terms of the Issue and Issue Procedure beginning on page [ ] and [ ] of this Draft Red Herring Prospectus. Steps to be taken by the Bidders for bidding: Check whether he/ she is eligible for bidding (for further details, please refer to the paragraph on Who can Bid beginning on page [ ] of this Draft Red Herring Prospectus); Bidder necessarily needs to have a demat account and the demat account details are correctly mentioned in the Bid Cum Application form; Ensure that the Bid Cum Application Form is duly completed as per instructions given in this Draft Red Herring Prospectus and in the Bid Cum Application Form; and If your Bid is for Rs. 50,000 or more, ensure that the Bid Cum Application Form is accompanied by the Permanent Account Number or by Form 60 or Form 61 as may be applicable, together with necessary documents providing proof of address. For details please refer to the chapter titled Issue Procedure on page [ ] of this Draft Red Herring Prospectus. Bidders are specifically requested not to submit their General Index Register number instead of the Permanent Account Number as the Bid is liable to be rejected. Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purpose of illustration and is not specific to this Issue) Bidders can bid at any price within the price band. For instance, assuming a price band of Rs. 200 to Rs. 240 per share, issue size of 3,000 equity shares and receipt of five bids from bidders details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the website of the BSE ( and NSE ( during the bidding period. The illustrative book as shown below shows the demand for the shares at various prices and is collated from bids from various investors. Number of equity shares Bid Bid Price Cumulative equity shares Bid Subscription for (Rs.) for % % 7

25 HAL OFFSHORE LIMITED % % % The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off i.e., Rs. 220 in the above example. The issuer, in consultation with the BRLM will finalise the issue price at or below such cut off price i.e. at or below Rs All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in respective category. Bid/Issue Bidding Period/Issue Period BID/ISSUE OPENS ON BID/ISSUE CLOSES ON [ ],2007 [ ],2007 Bids and any revision in Bids shall be accepted only between 1000 hrs and 1500 hrs (Indian Standard Time) during the Bidding Period as mentioned above at the bidding centers mentioned on the Bid cum Application Form except that on the Bid/Issue Closing Date, the Bids shall be accepted only between 1000 hrs and 1300 hrs (Indian Standard Time) and uploaded till such time as permitted by the BSE and the NSE on the Bid/Issue Closing Date. Our Company reserves the right to revise the Price Band during the Bidding Period in accordance with SEBI Guidelines. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of the Price Band. In case of revision in the Price Band, the Issue Period will be extended for three additional days after revision of Price Band subject to the Bidding Period/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding Period/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release, and also by indicating the change on the web sites of the BRLM and at the terminals of the Syndicate. Underwriting After the determination of the Issue Price but prior to filing of the Prospectus with RoC, we will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be issued through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Member(s) do not fulfill their underwriting obligations. The Underwriters have indicated their intention to underwrite the following number of Equity Shares: (This portion has been intentionally left blank and will be filled in before filing of the Prospectus with RoC) Name and Address of the Underwriters Indicated Number of Equity Amount Underwritten (Rs. Shares to be Underwritten Lakhs) [ ] [ ] [ ] [ ] [ ] [ ] Total [ ] [ ] The above-mentioned amount is an indicative underwriting and would be finalised after pricing and actual allocation. The above underwriting agreement is dated [ ]. In the opinion of the Board of Directors of our Company (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act or registered as brokers with the Stock Exchange(s). Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the BRLM and the Syndicate Member(s) shall be severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them. In the event of any default in payment, the respective underwriter in addition to other obligations to be defined in the Underwriting Agreement, will also be required to procure/subscribe to the extent of the defaulted amount, as specifiesd in the underwriting agreement 8

26 CAPITAL STRUCTURE The share capital of our Company as on the date of filing of this Draft Red Herring Prospectus with SEBI is as set forth below: Share Capital as on the date of filing of this Draft Red Herring Prospectus A. Authorised Capital Amount in Rs. Lakhs Nominal Aggregate Value Value 150,00,000 Equity Shares of the face value of Rs. 10/- each B. Issued, Subscribed and Paid-Up Capital before this Issue 86,05,440 Equity Shares of the face value of Rs. 10/- each C. Present Issue to the public in terms of this Draft Red Herring Prospectus * 33,00,000 Equity Shares of the face value of Rs. 10/- each as Issue to the Public [ ] Of Which * 3,00,000 Equity Shares of Rs. 10/- each at a premium of Rs. [ ]/- per share are reserved for allotment to Eligible Employees of our Company and Eligible Shareholders of our Group Companies on a competitive basis D. Net Issue to the Public QIB portion of at least 15,00,000 Equity shares [ ] Non Institutional portion of up to 4,50,000 Equity shares [ ] Retail portion of up to 10,50,000 Equity shares [ ] E. Issued, Subscribed and Paid-Up Capital after this Issue 1,19,05,440 Equity Shares of the face value of Rs. 10/- each [ ] F. Securities Premium Account Before this Issue** Nil [ ] After this Issue [ ] [ ] * Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. ** The amount standing in the Securities Premium Account, on a pre-issue basis, is NIL. If the Pre- IPO Placement is completed, the amount will be accordingly modified. The increase in the Securities Premium Account as a result of the Issue will be completed only after the Issue Price is determined. The Equity Shares allotted pursuant to the Pre-IPO Placement, if completed, shall be subject to the following: a. Shall not be issued to Promoters or Promoters Group; b. Shall not be issued at a price substantially lower than the Issue Price; c. Shall be subject to a lock-in period of one year. Notes to the Capital Structure 1. Details of increase in Authorised Share Capital since incorporation Sr.No. Particulars of increase Date of meeting AGM/EGM 1. Rs.100,00,000 Incorporation - 2. From Rs. 100,00,000 to Rs.250,00,000 March 10, 1998 EGM 3. From 250,00,000 to Rs. 1250,00,000 December 26,2005 EGM 4. From 1250,00,00o to Rs. 1500,00,000 September 29,2006 AGM 9

27 HAL OFFSHORE LIMITED 2. Share Capital History of Our Company Date of Allotment of the Equity Shares No. of Equity Shares Face Value Issue Price Nature of payment of consideration 10 Reasons for Allotment Cumulative Securities Premium Account Cumulative Paid -up Capital December17, Cash Subscribers to the Nil 700 Memorandum March 20, , Cash Further allotment Nil 1,38,200 March 20, , Cash Further allotment Nil 3,38,200 April 29, , Cash Further allotment 12,80,000 6,58,200 February 28, ,04, Cash Further allotment 1,33,32,000 17,06,200 June 1, ,50, Cash Further allotment 2,68,32,000 32,06,200 November 26, , Cash Further allotment 3,13,32,000 37,06,200 March 30, ,66, Cash Further allotment 4,63,17,000 53,71,200 March 31, ,35, Cash Further allotment 5,84,67,000 67,21,200 November 15, , Cash Further allotment 6,25,17,000 71,71,200 March 31, ,75, Nil Bonus* - 5,17,60, ,28,000 March 30, ,92, Nil Bonus** - 3,38,32, ,56,000 September 30, ,19, Nil Bonus*** - Nil 860,54,400 * Our Company, on March 31, 2005 issued bonus shares to its members in the ratio of 3 equity shares for every 2 Equity Shares held by the members and such new shares were fully paid and ranked pari passu with the existing equity shares. A total of 10,75,680 equity shares were issued. Face value of each equity shares issued including the present allotment of bonus shares amounted to Rs. 10. This bonus issue was authorized through an ordinary resolution passed on March 31, ** Our Company, on March 30, 2006 issued bonus shares to its members in the ratio of 1equity share for every Equity Share held by the members and such new shares were fully paid and ranked pari passu with the existing equity shares. A total of 17,92,800 equity shares were issued. Face value of each equity shares issued including the present allotment of bonus shares amounted to Rs. 10. This bonus issue was authorized through an ordinary resolution passed on March 30, *** Our Company, on September 30, 2006 issued bonus shares to its members in the ratio of 7 Equity Shares for every 5 Equity Shares held by the members and such new shares were fully paid and ranked pari passu with the existing equity shares. A total of 50,19,840 equity shares were issued. Face value of each equity shares issued including the present allotment of bonus shares amounted to Rs. 10. This bonus issue was authorized through an ordinary resolution passed on September 29, Promoters Contribution and Lock-In Details of Promoters contribution locked-in for 3 years: Name of the Promote r Mr. Sanjeev Agrawal Date on which Equity Shares were made fully paid up Mode of acquisit ion (Allotm ent/tra nsfer) Number of Equity Shares Face Value per Equit y Share (in Rs) Issue/ Transfe r price per Equity Share in Rs. Consider ation (cash, bonus, considera tion other than cash) Percentag e of pre- Issue paid-up capital Percent age of post- Issue paid-up capital Lock-in Period March 20, 1998 Allotme nt 10, Cash 0.12% 0.08% 1 year October 10, 2003 Transfer 10, Cash 0.12% 0.08% 1 year October 10, 2003 Transfer Cash 0.01% 0.01% 1 year February 15, 2005 March 31, 2005 October 28, 2005 Transfer 90, Cash 1.05% 0.76% 1 year Allotme nt Transfer 1,66, ** Bonus 1.93% 1.40% 1 year 1,09, Cash 1.27% 0.92% 1 year March 30, 2006 Allotme nt 3,86, ** Bonus 4.49% 3.25% 1 year March 31, 2006 Transfer 2,39, Cash 2.79% 2.02% 1 year

28 Name of the Promote r Date on which Equity Shares were made fully paid up September 30, 2006 Mode of acquisit ion (Allotm ent/tra nsfer) Allotme nt Number of Equity Shares Face Value per Equit y Share (in Rs) Issue/ Transfe r price per Equity Share in Rs. Consider ation (cash, bonus, considera tion other than cash) Percentag e of pre- Issue paid-up capital Percent age of post- Issue paid-up capital Lock-in Period 14,17, ** Bonus 16.48% 11.91% 3 years 24,30, % 20.42% October 28, 2005 Transfer 2,79, Cash 3.25% 2.35% 1 year Sanjeev Allotme 98, % 0.82% 3 years March 30, ** Bonus Agrawal nt 181, % 1.52% 3 years HUF September 30, Allotme 7,81, ** Bonus 9.09% 6.57% 3 years 2006 nt 13,40, % 11.26% ** Bonus shares were allotted on capitalization of free reserves, including securities premium account As per clause of the SEBI Guidelines, equity shares locked in for a period of three years have been locked in on LIFO basis (that is shares have been issued last shall be locked in first) from the date of allotment in this Issue. Other than equity shares for three years, the entire pre-issue capital of our Company shall be locked in for a period of one year. 14,17,990 Equity Shares, held by Sanjeev Agrawal and 10,61,150 Equity Shares held by Sanjeeev Agrawal (HUF) as the Promoters shall be locked in for 3 years from the date of allotment of Equity Shares in this Issue. Other than that, the entire pre- Issue share capital of our Company shall be locked in for a period of 1 year from the date of the allotment of Equity Shares in this Issue. Shares held by the person other than our Promoters, prior to this Issue, which are subject to lock in as per the relevant provisions of Chapter IV of SEBI Guidelines, may be transferred to any other person holding shares which are locked in, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable. Shares held by our Promoters which are locked in as per the relevant provisions of Chapter IV of the SEBI Guidelines, may be transferred to and amongst Promoters/Promoter group entities or to a new promoter or persons in control of our Company, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable. The locked-in Equity Shares held by our Promoters can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan. 4. Our Promoters and our Promoter Group Entities, the Directors of our Company, the Directors of our Promoter Group Entities have not purchased, neither have they sold any Equity Shares, during a period of six months preceding the date of filing this Draft Red Herring Prospectus with SEBI. 5. Our Company, our Directors, our Promoters and the BRLM to this Issue have not entered into any buy-back, standby or similar arrangements for purchase of Equity Shares of our Company from any person. 6. An over-subscription to the extent of 10% of this Issue size can be retained for the purpose of rounding off to the nerasest multiple of minimum allotment lot. 7. The Equity Shares forming part of promoter s contribution do not consist of any private placement made by solicitation of subscription from unrelated persons, either directly or through any intermediary. 8. As per RBI regulations, OCBs are not allowed to participate in this Issue. 9. Since the entire money of Rs. [ ]/- per share (Rs. 10/- face value + Rs. [ ]/- premium) is being called on application, all the successful applicants will be issued fully paid-up Equity Shares. 10. The Equity Shares of our Company are fully paid up and there are no partly paid up shares as on date. 11

29 HAL OFFSHORE LIMITED 11. In case of over-subscription in all categories, at least 50% of the Net Issue to the Public shall be allocated on a proportionate basis to Qualified Institutional Buyers, of which 5% shall be reserved for Mutual Funds. Further, up to 15% of the Net Issue to the Public shall be available for allocation on a proportionate basis to Non Institutional Bidders and up to 35% of the Net Issue to the Public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. Under-subscription, if any, in the Non Institutional and Retail categories would be allowed to be met with spill over from any other category at the sole discretion of our Company in consultation with the BRLM. 12. (a) Particulars of top ten shareholders on the date of filing this Draft Red Herring Prospectus with SEBI Sr. No. Name of the shareholder Number of Equity Shares 1 Sanjeev Agrawal 24,30,840 2 Sanjeev Agrawal (H.U.F.) 13,40, Mahesh FINSEC (P) Ltd. 3,84, Metbrass Plassim India (P) Ltd 9,12, Trimurti Petrochemicals & Allied Services (P) Ltd. 8,40, Saptrishi Finance Ltd 7,68, Sumati Agrawal 4,20, Deepti Agrawal 3,96, Indus Netlinks Limited 3,78, RPG Securities & Financial Services Ltd 2,79,600 12(b) Particulars of top ten shareholders ten days prior to filing this Draft Red Herring Prospectus with SEBI Sr. No. Name of the shareholder Number of Equity Shares 1 Sanjeev Agrawal 24,30,840 2 Sanjeev Agrawal (H.U.F.) 13,40, Mahesh FINSEC (P) Ltd. 3,84, Metbrass Plassim India (P) Ltd 9,12, Trimurti Petrochemicals & Allied Services (P) Ltd. 8,40, Saptrishi Finance Ltd 7,68, Sumiti Agrawal 4,20, Deepti Agrawal 3,96, Indus Netlinks Limited 3,78, RPG Securities & Financial Services Ltd 2,79, c) Particulars of the top shareholders 2 years prior to the date of filing of this Draft Red Herring Prospectus with SEBI Sr. No. Name of the shareholder Number of Equity Shares 1 Sanjeev Agrawal 20,810 2 Saptrishi Finance Limited 64,000 3 Divya Metals Private Limited 79,700 4 RPG Securities & Finance Ltd 33,300 5 Trimurti Petrochemicals & Allied Services Ltd 1,30,000 6 Mukesh Agarwal 25,000 7 VHQ Impex Pvt Ltd 33,500 8 Metbrass Plassim India Ltd 61,040 9 Fortune Industrial Resources Ltd. 16, Indus Netlinks Ltd. 31,500 12

30 13. Shareholding pattern of our Company prior and post this Issue Name of the Shareholders Pre-Issue Equity Capital Post-Issue Equity Capital Number of Equity Shares % Number of Equity Shares % Promoters Mr. Sanjeev Agrawal 24,30, ,30, % Sanjeev Agrawal (HUF) 13,40, ,40, % Sub Total (A) 37,71, ,71, % Promoter Group Entities Deepti Agrawal 3,96, ,96, % Sumati Agrawal 4,20, ,20, % Sub Total (B) 8,16, ,16, % Promoters & Promoter 45,87, ,87, % GroupTotal (A+B)=C Non-Promoter Corporate Bodies 40,18, ,18, Others Sub Total (D) 40,18, ,18, Total Pre Issue Capital (C+D)= (E) 86,05,440* ,05,440* Fresh Issue Reservation Portion* - - 3,00,000* 2.52 Public ,00, Total of Fresh Issue (F) ,00, Total Post Issue capital (E+F) - - 1,19,05, * Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. Further, the total pre-issue capital shall stand increased to the extent of the Pre-IPO Placement, if any. 14. The total number of members of our Company as on the date of filing this Draft Red Herring Prospectus is Our Company has not raised any bridge loan against the proceeds of this Issue. 16. Except for the Pre-IPO placement of upto 3,00,000 Equity Shares, there would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of this Draft Red Herring Prospectus with SEBI until the Equity Shares offered through this Draft Red Herring Prospectus have been listed. 17. We presently do not have any intention or proposal to alter our capital structure for a period of six months from the date of opening of this Issue, by way of split/ consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into exchangeable, directly or indirectly, for our Equity Shares) whether preferential or otherwise, except that if we enter into acquisition(s) or joint venture(s), we may consider additional capital to fund such activities or to use Equity Shares as a currency for acquisition or participation in such joint ventures. 18. Our Company has not revalued its assets since its incorporation. 19. Our Company has not issued any Equity Shares out of revaluation reserves or for consideration other than cash except for bonus issue made out of free reserves including Securities Premium Account. 20. Our Company has not made any public issue since its incorporation. 13

31 HAL OFFSHORE LIMITED 21. Our Company undertakes that at any given time, there shall be only one denomination for the Equity shares of our Company and our Company shall comply with such disclosure and accounting norms as specified by SEBI from time to time. 22. As on the date of filing of this Draft Red Herring Prospectus, there are no outstanding warrants, options or other financial instruments, which would entitle our Promoters or shareholders of our Company or any other person an option to receive Equity Shares of our Company. 23. The shares locked in by our Promoters are not pledged to any party. The locked-in Equity Shares held by ourpromoters can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan. 24. Only Eligible Employees and Eligible Shareholders of the Group Companies would be eligible to apply in this Issue under the Reservation Portion on a competitive basis. Bids by Eligible Employees and Eligible Shareholders of the Group Companies can also be made in the Net Issue to the Public and the same shall not be treated as multiple Bids. In case of undersubscription in the Reservation Portion, it would be allowed to be met with spillover inter-se from any other categories, at the sole discretion of our Company, in consultation with the BRLM. In case of under-subscription in the Net Issue, spillover to the extent of under subscription shall be permited from the Reservation Portion at the discretion of our Company in consultation with the BRLM. Such inter-se spillover if any, would be effected in accordance with applicable laws, rules, regulations and guidelines. 25. Our Company does not have any employee stock option plan or scheme. 26. No payment, direct or indirect in the nature of discount, commission, and allowance or otherwise shall be made either by us or our promoters to the persons who receive allotments, if any, in this Issue. 27. The Equity Shares which are subject to lock-in shall carry the inscription non-transferable and the non-transferability details shall be informed to the depositories. The details of lock-in shall also be provided to the stock exchanges, where the shares are to be listed, before the listing of the securities. 14

32 OBJECTS OF THE ISSUE The objects of the Issue are: To finance equity portion required for acquisition of one MSV either newly built or second hand on outright ownership or by any other means, including Bare Boat Charter cum Demise (which includes a purchase option at the end of the Charter Period) and allied equipment to be installed on such MSV; To achieve the benefit of listing on the Stock Exchange(s); To meet the Issue related expenses. The main objects of our Memorandum of Association permits us to undertake our existing activities and the activities for which the funds are being raised by us through the present Issue. The net proceeds of the Issue after deducting all Issue related expenses are estimated to be Rs. [ ] Lakhs. The fund requirements and deployment are based on the estimates of our management and have not been appraised by any bank or financial institution or independent third party. Requirements of Funds The following table summarizes the requirement of funds for the use of net proceeds from the Issue: S. No. Particulars Amount Rs. Lakhs 1. Acquisition of MSV and allied equipment 20, Public Issue Expenses [ ] Total [ ] 1. Acquisition of MSV and allied equipment We intend to utilize the proceeds from this Issue for financing equity portion required for acquisition of one MSV and allied equipment. Our Company intends to acquire the MSV and allied equipments which is designed to provide various services to offshore installations like repair & maintenance through underwater diving services, crane assistance, fire fighting and rescue services, construction support services while fabricating new facilities on Offshore Platforms etc. Both new-built and second hand MSVs are available in the market and our company is constantly looking for and assessing new opportunities in relation to vessel acquisition and whenever any of them reach our viability threshold, we will purchase the same. As per our estimates based on our understanding and experience of the industry, the cost of the MSV and allied equipment would be approximately Rs. 20,000 Lakhs including all taxes, duties etc. Our Company s strategy is to conclude acquisition at a time when we perceive that the commercial terms would be suitable, keeping in mind the tender cycles in the industry. Our major client is an Indian Oil & Gas Major, which is the biggest owner as well as user in India of all kinds of offshore vessels, such as MSVs, OSVs, AHTs etc. To support their operations and safety requirements, it maintains a policy of having a certain number of MSVs in their field. The said oil & gas major owns two such vessels and have been inviting tenders for chartering the vessel to meet its balance requirements. Our strategy is to acquire vessels to strengthen our bidding and contract execution capabilities. We bid for tender on the basis of tying- up arrangement with the foreign owner for chartering the vessel on back-to-back basis. Simultaneously, negotiations for purchasing the vessel are also carried out. Therefore, in the event of any delay in finalizing the purchase agreement, the opportunity of deploying the vessel shall not be lost, due to chartering arrangement in place. This de-risks the business model from the factor of Idleness of Asset. The term MSV (Multi Support Vessel) is not a technical term, but a business term that has been coined to denote a special kind of OSV (Offshore Supply Vessel) that can perform a multitude of offshore services. It is very different from regular cargo/bulk carrier vessels, since the primary function of those vessels is to transport cargo and people, while the primary purpose of the MSV is to provide offshore services. The offshore services that can be provided by a typical MSV include diving, crane assistance, fire fighting and rescue work, accommodation support, ROV intervention, etc. MSVs also have certain technical differences over regular cargo vessels. For example, where a cargo vessel needs to drop anchor to halt at a particular position, while for an MSV, it is equipped with a technology called Dynamic Positioning System which helps it to maintain the same position at sea without having to drop anchor. Since these are specialized kinds of vessels, they cannot be categorized on the same lines as cargo vessels are usually categorized, that is panamax, handymax, etc. as there is no industry characterization with respect to their size and weight. The MSV that we acquire would require certain specialized equipment, in accordance with the terms of the contract that the MSV has to fulfill or in accordance with the instructions/directions of the person/entity chartering the said MSV from us. 15

33 HAL OFFSHORE LIMITED Further, it is possible that the MSV, we may acquire, may require installation/replacement of certain basic equipment in order to be seaworthy/meet regulatory requirements/meet client requirements. Such allied equipment can be determined only once the MSV that we propose to acquire are definitively identified and inspected, and on finalisation of the contract(s) for the fulfillment of which we propose to deploy the MSV. As per prevailing industry trends, we may have to pay the seller an advance of up to 10% to 20% of the cost of the MSV and the balance payment will have to be made in a period of days based on the stage of completion of documentation for the transfer of ownership of the MSV and receipt of various Government approvals. After the handing over the possession, the refurbishment and customization work on the MSV would begin for which the necessary costs have to be incurred. If the vessal is acquired outside India, customs duty would be paid thereafter, and the vessel shall enter into the Indian territorial waters for mobilization and being put to use. The refurbishment and upgradation as referred to earlier of the MSV would need another 3 months and will be done either at an Indian shipyard or at a foreign shipyard. The balance cost of acquisition of vessel including the custom duty, would be paid during that period. Once completed, the vessel will be put to use within 2 months thereafter for commercial operations. We believe that the appropriate MSV that we propose to acquire would be acquired from overseas owners, as, to our knowledge there are very few such specialized vessels that operate under the Indian flag. 2. Issue Expenses Issue expenses includes underwriting and issue management fees, selling commission, distribution expenses, legal fees, fees to advisors, stationery costs, advertising expenses, book building expenses, SEBI fees and listing fees payable to the Stock Exchanges, among others. The total expenses for this Issue are estimated at Rs. [ ] million, which will be paid by our Company. (Rs. in Lakhs) Activity Expenses Lead management fee and underwriting commissions* [ ] Advertising & Marketing Costs** [ ] Printing & stationery [ ] Others (Registrar s fees, legal fees, fees for auditors and bankers to the issue, stamp duty, initial [ ] listing fees and annual listing fees, SEBI filing fees, other statutory fees, depository fees, charges for using the book building software of the exchanges and other related expenses)** Total Estimated Issue Expenses [ ] * Will be incorporated after finalisation of Issue Price ** Will be incorporated prior to filing Red Herring Prospectus with the RoC Means of Finance As per the industry practice and as a matter of financial prudence, typically majority of the fund requirements for acquisition of vessels are funded with judicious mixture of equity and debt. Our Company has been following the above practice of funding the fleet acquisition with a judicious mix of debt and equity component in the past. It is our intention to pursue such financial policy for acquisition of the MSV and allied equipments also. The exact debt portion and the best source to fund the same are typically structured once the vessel is identified, as the same vessel is given as primary security for the debt portion. The proceeds from this Issue will be primarily utilized towards financing equity component of acquisition of vessel(s). The means of finance for our requirements above shall be as follows: S. No. Particulars Amount Rs. Lakhs 1. Term loan from Punjab National Bank Issue Proceeds [ ] 3. Internal Accruals [ ] Total [ ] Punjab National Bank, vide its letter dated December 28, 2006, has conveyed its in-principle approval for sanctioning of FCNR term loan of US$ Lakhs [approximately to Rs Lakhs assuming 1US$ = Rs.44/-] for purchase of the MSV subject to the following conditions, viz. the bank s technical committee should find the proposal to be techno-economically viable, assessment of our financial requirements and availability of US$ funds. With reference to para 2.8 of the SEBI Guidelines, we confirm that firm arrangements for 75% of the stated means of finance, excluding net proceeds of the Issue, have been made. Net proceeds of the Issue will be utilized wholly to meet the the funding required towards acquisition of MSV and allied equipment. It is our intention to avail term loan only to the extent necessary to part finance the cost of MSV & allied equipment. Shortfall in the means of finance, if any, shall be met out of internal generations of our Company. 16

34 Appraisal The fund requirements and funding plans are the Company s own estimates and have not been appraised by any bank / financial institution. Schedule of Implementation The exact timeline involved in the acquisition of second-hand vessels will depend on the following factors: Identification of the vessel Negotiating the contractual terms Due Diligence Arrangement of financing for the acquisition Possibility of immediate deployment The total time involved in an acquisition of a newly built vessel or in getting a new vessel built will depend on the following factors: Identification of the yard / yard space Design and specification Negotiation of contractual terms and lining up of finance Delivery schedule Based on our past experience and on our management estimates, we believe that it may take us from 6-12 months, to utilize the Issue proceeds towards financing acquisition of MSV and allied equipments and subsequently deploying the vessel. As per the normal industry practice, a buyer is required to pay initial margin amount between 10% to 20% to the seller after price negotiation, on signing the in-principle understanding for purchase. Subsequent to or concurrently with signing of the initial agreement with seller of the vessel, debt portion is negotiated and tied-up with banks / financial institutions. We are also constantly analyzing new opportunities in relation to vessel acquisition and whenever any of them reach our viability threshold, the purchase will be made. Funds deployed on Objects of the Issue as on date We have not deployed any funds towards the Objects of this Issue as on the date of this Draft Red Herring Prospectus and we have not entered into any definitive agreements for the use of the net proceeds of this Issue. No part of the proceeds of this Issue will be paid by us as consideration to our Promoters, our Directors, key management employees or our Promoter Group companies, except in pursuance of the Objects of this Issue as stated hereinabove. Monitoring and Interim Use of Funds Pending utilization for the purposes described above, we intend to temporarily invest the funds in high quality interest/dividend bearing liquid instruments including money market mutual funds, deposit with banks for necessary duration. The monitoring of the funds will be done by the Audit Committee of our Board. All interim usage of the Issue proceeds will have to be authorized by our Audit Committee/any other committee authorized by our Board in this behalf. 17

35 HAL OFFSHORE LIMITED BASIC TERMS OF THE ISSUE The present Issue is of 33,00,000 Equity Shares of Rs. 10 each at a price of Rs. [ ] per Equity Share (including a share premium of Rs. [ ] per Equity Share) for cash aggregating to Rs. [ ] Lakhs (the Issue ), out of which 3,00,000 Equity Shares have been reserved for Eligible Employees of our Company and Eligible Shareholders of our Group Companies on a competitive basis ( Reservation Portion ). The Net Issue to the Public shall be 30,00,000 Equity Shares of Rs. 10 each at a price of Rs. [ ] per Equity Share (including a share premium of Rs. [ ] per Equity Share) for cash aggregating to Rs. [ ] Lakhs (the Net Issue ). The Issue will constitute % of the post Issue paid-up capital of our Company and the Net Issue will constitute % of the post Issue paid -up capital of our Company. Our Company is considering a Pre-IPO placement of upto 3,00,000 Equity Shares aggregating to Rs [ ] Lakhs with certain investors ("Pre-IPO Placement") out of the Reservation Portion. The Pre-IPO Placement, if any, will be completed before the Issue Opening Date. If, and to the extent that the Pre-IPO Placement is completed, the Reservation Portion would stand reduced to the extent of such Pre-IPO Placement. Principal Terms and Conditions of the Issue The Equity Shares being issued are subject to the provisions of the Companies Act, the Memorandum and Articles of Association of our Company, the terms of this Draft Red Herring Prospectus, Red Herring Prospectus, Prospectus and Bid Cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the allotment advice, and other documents/certificates that may be executed in respect of this Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to this Issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, Reserve Bank of India, Stock Exchanges, Registrar of Companies and/or other authorities, as in force on the date of this Issue and to the extent applicable. Ranking of Equity Shares The Equity Shares being issued shall be subject to the provisions of our Memorandum and Articles and shall rank pari passu in all respects with the existing Equity Shares of our Company including rights in respect of dividend. The allottees will be entitled to dividend or any other corporate benefits, if any, declared by our Company after the date of Allotment. See the section titled Main Provisions of the Articles of Association of our Company beginning on page [ ] of this Draft Red Herring Prospectus for a description of the Articles of Association. Face Value and Issue Price The Equity Shares with a face value of Rs. 10 each are being issued in terms of this Draft Red Herring Prospectus at a price of Rs. [ ] per share. At any given point of time, there shall be only one denomination for the Equity Shares of our Company, subject to applicable laws. Rights of the Equity Shareholders Subject to applicable laws, the equity shareholders shall have the following rights: Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll either in person or by proxy; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation; Right of free transferability; and Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and Articles of Association of our Company. For further details on the main provisions of our Company s Articles of Association dealing with voting rights, dividend, forfeiture and lien, transfer and transmission and/or consolidation/splitting, please refer section titled Main Provisions of the Articles of Association of our Company beginning on page [ ] of this Draft Red Herring Prospectus. Market Lot and Trading Lot In terms of Section 68B of the Companies Act, the Equity Shares of our Company shall be allotted only in dematerialized form. In terms of existing SEBI Guidelines, the trading in the Equity Shares of our Company shall only be in dematerialized form for all investors. Since trading of our Equity Shares will be in dematerialized mode, the tradable lot is one Equity Share. Allocation and allotment of Equity Shares through this Issue will be done only in electronic form in multiples of one Equity Share to the successful Bidders subject to a minimum Allotment of [ ] Equity Shares. For details of allocation and allotment, see Statutory and Other Information beginning on page [ ] of this Draft Red Herring Prospectus. 18

36 BASIS OF ISSUE PRICE The Equity shares being offered are subject to the provision of the Companies Act, 1956, the Memorandum and Articles of Association of our Company, the terms of this Draft Red Herring Prospectus, Red Herring Prospectus and other terms and conditions as may be incorporated in the allotment advice and other documents / certificates that may be executed in respect of the Issue. The Equity Shares shall also be subjected to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, RBI, ROC and/or other authorities as in force on the date of the Issue and to the extent applicable. Investors should read the following along with the Risk Factors beginning on page no. [ ] and the details about our Company and its financial statements included in this Prospectus. The trading price of the Equity shares of our Company could decline due to these risks and the investors may lose all or part of their investments. QUALITATIVE FACTORS Operating in highly technical service industry for companies engaged in offshore oil exploration. Profit making company since inception. Long Term Nature of Operations and Strong Relationships. Our company has successfully executed contracts with a track record of no security/safety lapses in its execution. One of the early entrants in offshore service industry. QUANTITATIVE FACTORS 1. Adjusted earnings per share (EPS) weighted Year ended EPS Weight March 31, March 31, March 31, Weighted Average Price Earnings ratio (P/E ratio) in relation to the Issue Price of Rs. [ ] per share Particulars Based on March 31, 2006 EPS Based on September 30, 2006 EPS Based on weighted average EPS [ ] [ ] [ ] Based on the adjusted EPS of Rs for the FY March 31, 2006, the Issue Price at the lower price band of Rs. [ ], answers to a P/E multiple of [ ] and at higher price band of Rs. [ ], it answers to a P/E multiple of [ ] Industry P/E Particulars P/E Highest - Garware Offshore Ltd Lowest - South East Asia Marine Ltd Average Source: Capital Market Volume XXI/22, dated Jan , 2007; Category: Oil Drilling & Allied Services 3. Average Return on Net worth (RoNW) Year ended RoNW (%) Weight March 31, % 1 March 31, % 2 March 31, % 3 Weighted Average 16.77% 4. Minimum Return on total Net worth after issue needed to maintain pre-issue EPS of Rs is [ ] % (at an issue price of Rs. [ ] per share) 19

37 HAL OFFSHORE LIMITED 5. Net Asset Value (NAV) per share (Rs.) NAV as at March 31, 2006 NAV as at September 30, 2006 NAV after the Issue Issue Price Rs per Equity Share Rs per Equity Share Rs. [ ] per Equity Share Rs. [ ] per Equity Share 6. Comparison with peer group of companies Company FV EPS (Rs.)* P/E* RoNW (%) NAV (Rs.) Sales (Rs.) (Rs. In Lakhs) South East Asia Marine Limited Garware Offshore Limited Dolphin Offshore Limited HAL Offshore Limited N.A Source: Capital Market Volume XXI/22, dated Jan 01-14, 2007; Category: Oil Drilling & Allied Services The financial year end of South East Asia Marine Ltd and Garware Offshore Ltd is December 31, 2005 and the year ending of Dolphin Offshore Ltd and HAL Offshore Ltd is March 31, Thus the RONW, NAV, and Sales are for the respective year end. Note: Although the above companies are not exactly comparable, the key ratios of the companies who are in similar line of activities are shown above. 7. The face value of Equity shares of HAL Offshore Limited is Rs. 10/- and the Issue Price is [ ] time of face value The BRLM believes that the issue price of Rs. [ ] is justified in view of the above Qualitative and Quantitative parameters. The investors may want to pursue the risk factors and financials of our company including important profitability and revenue ratios, as set out in the Auditors reports in this Draft Red Herring Prospectus to have more informed view of the investment proposition. 20

38 STATEMENT OF TAX BENEFITS Statement of Tax Benefits available to the Company and its shareholders The Board of Directors, HAL Offshore Limited "Superior House, 48, Todarmal Lane, Bengali Market, New Delhi Dear Sirs, We hereby certify that the enclosed Annexure 1 states the tax benefits available to HAL Offshore Limited (the Company ) and its Shareholders under the provisions of the Income-tax Act, 1961 and other direct tax laws presently in force. 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 dependant 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 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 of equity shares. 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 Kamal & Co. Chartered Accountants Kamal Kishore Partner Membership NO.: Place: New Delhi Date:2 nd December,

39 HAL OFFSHORE LIMITED ANNEXURE 1 STATEMENT OF TAX BENEFITS AVAILABLE TO HAL OFFSHORE LIMITED ( THE COMPANY ) AND ITS PROSPECTIVE SHAREHOLDERS 1. Benefits to the Company under the Income Tax Act, 1961( The Act ): There is no additional benefit arising to the Company under The Income Tax Act, 1961, by proposed Initial Public Offer of Equity Shares except as provided under the said act for the time being in force at that time. 2. Similar Benefits available to the Prospective Shareholders (except Foreign Institutional and Foreign Venture Capital Investors): 2.1 Dividends exempt under Section 10(34) Under Section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section 115-O of the Act is exempt from income tax in the hands of the shareholders. 2.2 Computation of capital gains Capital assets may be categorised into short term capital assets and long term capital assets based on the period of holding. Shares in this company, will be considered as long term capital assets if they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are considered as long term capital gains. Capital gains arising on sale of shares, if held for 12 months or less are considered as 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 10 per cent (plus applicable surcharge and education cess) Exemption of capital gain from income tax Under Section 10(38) of the Act, Long term Capital Gains arising out of sale of equity shares of this Company will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT. According to the provisions of Section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under Section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately. In such a case, the cost of such long term specified asset will not qualify for deduction under Section 80C of the Act. However, if the said bonds are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money. 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) 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 only a part of such net consideration is invested within the prescribed period in a residential house, the exemption shall be allowed proportionately. 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. 2.3 Rebate under section 88E Section 88E provides that where the total income of a person includes income chargeable under the head Profits and gains of business or profession arising from taxable securities transactions, he shall get rebate of STT paid by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax. 3. Other Benefits available for the Prospective Shareholders 3.1 Benefits available to Resident Indian shareholders Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition / improvement and expenses incurred in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital gains, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index as prescribed from time to time. 22

40 3.2. Benefits available to Non-Resident Indian shareholders (Other than FIIs and Foreign venture capital investors) Computation of capital gains Section 48 of the Act contains special provisions in relation to computation of capital gains on transfer of shares of an Indian company by non-residents. Computation of capital gains arising on transfer of shares in case of non-residents has to be done in the original foreign currency, which was used to acquire the shares. The capital gain (i.e., sale proceeds less cost of acquisition/improvement) computed in the original foreign currency is then converted into Indian Rupees at the prevailing rate of exchange. 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 percent (plus applicable surcharge and education cess) 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 of the Act, 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 shares in an Indian company not exempt under Section 10(38), will be subject to tax at the rate of 10 percent (plus applicable surcharge and education cess), without indexation benefit. 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. If part of such net consideration is invested within the prescribed period of six months in any specified asset the exemption will be allowed 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 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 source of income is only investment income and / or long term capital gains defined in Section 115C of the Act, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Act. Under Section 115H of the Act, where the Non-Resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under Section 139 of the Act to the effect that the provisions of the Chapter XII-A shall continue to apply to him in relation to such investment income derived from any foreign exchange asset being asset of the nature referred to in sub clause (ii), (iii), (iv) and (v) of Section 115C(f) for that year and subsequent assessment years until such assets are converted into money. As per the provisions of Section 115-I of the Act, a Non-Resident Indian may elect not to be governed by the provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment year under Section 139 of the Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act Benefits available to Foreign Institutional Investors ( FIIs ) Dividends exempt under section 10(34) Under Section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section 115-O of the Act is exempt from income tax in the hands of the shareholders Taxability of capital gains Under Section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT. 23

41 HAL OFFSHORE LIMITED The income by way of short term capital gains or long term capital gains [in cases not covered under Section 10(38) of the Act] realized by FIIs on sale of shares of the company would be taxed at the following rates as per Section 115 AD of the Act. Short term capital gains, other than those referred to under Section 111A of the Act shall be 30% (plus applicable surcharge & education cess). Short term capital gains, referred to under Section 111A of the Act shall be 10% (plus applicable surcharge and education cess) Long Term capital 10% (plus applicable surcharge and education cess) (without cost indexation) According to the provisions of Section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under Section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately. However, if the assessee transfers or converts the notified bonds into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money Rebate under Section 88E Section 88E provides that where the total income of a person includes income chargeable under the head Profits and gains of business or profession arising from taxable securities transactions, he shall get rebate of STT paid by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax. 4. Benefits available to Mutual Funds As per the provisions of Section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under, Mutual Funds set up by public sector banks or public financial institutions or authorized by the Reserve Bank of India would be exempt from income tax. However, the Mutual Funds shall be liable to pay tax on distributed income to unit holders under Section 115R of the Act. 5. Venture Capital Companies / Funds In terms of Section 10(23FB) of the Act, all Venture capital companies/funds registered with Securities and Exchange of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including profit on sale of shares of the Company. 6. Benefits available under the Wealth-tax Act, 1957 Shares of the Company held by the shareholder will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act, 1957, hence no Wealth Tax will be payable on the market value of shares of the Company held by the shareholder of the Company. Notes: 1. All the above benefits are as per the current tax law as amended by the Finance Act, The stated benefits will be available only to the sole / first named holder in case the shares are held by joint holders. 3. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of his/her participation in the issue. 4. In respect of non- residents, taxability of capital gains mentioned above shall be further subject to any benefits available unde the Double Taxation Avoidance Agreement, if any between India and the country in which the non-resident has fiscal domicile. 24

42 SECTION IV- ABOUT US INDUSTRY OVERVIEW The information in this section is derived from various government and other public sources. The industry sources cited herein include the websites of Ministry of Petroleum, Director General of Hydrocarbons, etc. Neither we nor any other person connected with the Issue has verified this information. Industry sources and publications generally state that the information contained therein has been obtained from sources and publications generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assumed and accordingly investment decisions should not be based on such information. Overview The Oil & Gas Industry is broadly segregated in upstream and downstream sectors. Exploration, Exploitation and Production [E&P] comprise the upstream sector while refining and marketing involve downstream activities. The Industry size in India is estimated at USD 110 bn (about 15% of India s GDP). Offshore Services business essentially provides various services associated with offshore [as opposed to inland] E&P activities. Thus, this business derives its demand directly from the Oil & Gas Industry, more specifically E&P activities. Since offshore installations are in the middle of the sea away from land, these require various kinds of support services such as delivering supplies, personnel, providing accommodation, repairs & maintenance, towing rigs from one location to the other and supporting offshore construction projects. Global Oil & Gas Industry Scenario The global demand for oil has been increasing at a CAGR of 6% during the last decade, driven mainly by high energy requirements for a more technologically dependent and industrialized world and rapid growth in developing countries such as India, China, Brazil, Russia etc. and also creation of buffer stock by nations apprehending volatile political situation in the Middle-East. Oil supply has been constrained due to lack of new discoveries, aging and depletion of existing resources, aging E&P infrastructure etc. The increasing demand / supply gap has led to increase in oil prices to all time highs. Since the year 2005, crude oil prices have increased by around 45% (from approximately US$ 42 / barrel to approximately US$ 60 / barrel). Oil Demand [ MBPD] E CAGR [ ] World % Asia % Source: IEA Oil Market Report 11 October 2006 The oil demand from developing countries such as India and China has been growing at a higher rate than the rest of the world. Most of the OPEC countries are already producing at maximum levels. Hence, concerns over oil supply gap are expected to continue, creating an upward pressure on oil prices. High oil prices and depleting reserves, especially in OECD countries [ which are the key consumers of oil] has increased pressure on oil companies to explore and add new resources, leading to an increase in spending on E&P activities by about 10% in The following table represents the total demand and total supply of oil to OECD and Non OECD Countries: Demand [ MBPD] OECD Non OECD Total Supply [MBPD] OECD Non OECD Total MBPD - Million barrels per day Source: IEA Oil Market Report 11 October

43 HAL OFFSHORE LIMITED Millions barrels per day Source: India Brand Equity Foundation Demand Supply It will be imperative to intensify exploration efforts to convert the remaining prognosticated hydrocarbon reserves to established reserves and also to increase recovery factor of producing fields. This is expected to necessitate an increased spending on offshore exploration, resulting in an increase in demand for offshore services. With oil prices soaring to record levels on the back of a tight demand-supply situation, global E&P majors have lined up aggressive exploration plans to secure oil reserves. Through , more than US$ 260 billion will be spent on offshore drilling alone. This compares well with an estimated US$ 193 billion spent on drilling over the past five years. In the longer term, the International Energy Agency (IEA) expects cumulative global investment of US$ 3.0 trillion in the oil sector alone over Of this, nearly 70% is likely to go towards the upstream sector for replacing the exhausted capacity. The gas sector, as per the IEA, would see investments of another US$ 2.7 trillion in the same period. Of this 56% would be spent on E&P activities alone. In other word, the Oil & Gas sector is expected to see a total investment of US$ 3.6 trillion in E&P activities over the years Indian Oil & Gas Sector The Indian Oil & Gas Industry is estimated to be at US$ 110 billion (about 15% of GDP). A strong growth in automobiles sector and strong revival in industrial activity has led to a sustained increase in oil demand. India currently ranks 6 th in the world in terms of petroleum demand and over 70% of the demand is met through import of crude oil. India is the fifth largest energy consumer in the World. India is projected to become the 4 th largest consumer of energy in the world by the year 2010, behind United States, China and Japan. India - Oil Demand & Supply [MPBD] E CAGR [ ] Demand % Supply % Net Imports % Source: IEA Crude Oil (MMT) Year Demand Supply Source: IBEF

44 The domestic oil supply has largely been constant despite the strong demand growth due to decreasing production from the oilfields (which are ageing) and no additions to oil resources due to lack of a major oil discovery. India has had a historic dependence on imports for meeting its energy requirements. Such dependence, in view of increasing oil prices has led to a significant impact on the trade deficit and raised concerns over energy security of the country. India has 0.5% of the world s proven oil & gas reserves and contributes to 1.0% and 1.1% of world oil & gas production respectively. As estimated by the Ministry of Petroleum & Natural Gas, 85% of India s oil reserves are offshore. Mumbai High Offshore Basin is the major oil resource in India and accounts for approximately 78% of the domestic oil production. Indian E&P Scenario India currently produces around MMT of crude oil. The demand is expected to reach 370 MMT approximately in Also, the demand for natural gas is expected to grow about 200 BCMPA by Oil & Gas Production FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006* Crude Oil ['000 MT] Onshore 11,791 11,889 11,471 11,456 11, Offshore 20,635 20,143 21,573 21,917 22, Total 32,426 32,032 33,044 33,373 33, Natural Gas [MCM] Onshore 7,725 7,967 8,726 8, Offshore 21,752 21,747 22,663 22, Total 29,477 29,714 31,389 31,962 31, Source: Ministry of Petroleum * Provisional The global oil scenario and domestic energy security concerns have led to a renewed focus on E&P activities. The Government of India formulated the New Exploration Licensing Policy (NELP) in to encourage private participation in E&P and provide an impetus to this sector as also to increase competition among players in this sector. Over the past 6 years, 5 bidding rounds under NELP have been completed and 108 exploration blocks have been awarded through the international competitive bidding process. NELP has acted as a catalyst for increasing the E&P activity in the country and resulted in investment commitment of about US$ 5 billion in various exploration phases. The 6 th round of bidding under NELP has recently concluded and 165 bids for 52 blocks have been received, made by a total of 68 companies including 36 foreign companies and 32 Indian companies either on their own or as consortia. After bid evaluation by the DGH, the blocks are expected to be awarded and the contracts are expected to be signed by January, Increased level of activity since NELP Pre NELP [ ] Since NELP I- V [ ] Exploratory wells Discoveries PSCs signed Investment [USD Mn] Source: The hydrocarbon reserves as estimated by DGH based on seismic surveys are around 28 billion tons of oil and oil equivalent of gas, translating into significant scope for E&P activity. It can be concluded that an increased investment in E&P activity, development of new infrastructure and modification of existing ageing infrastructure will be essential for increasing the domestic oil supply. The demand for offshore services, being entirely derived from such activities, is expected to move in line with the same. The biggest player in E&P sector in India is ONGC, which accounts for around 75% of the Oil & Gas production in the country. ONGC has developed 120 well platforms, 15 processes and water injection platforms and 3700 km of pipeline since its inception. It has major investment plans for development and maintenance of its oil & gas infrastructure. The focus of ONGC s capital expenditure plan is: Increase / stabilize output from producing fields Bringing new and marginal fields in production. 27

45 HAL OFFSHORE LIMITED The proposed capex on development and maintenance will directly impact the demand for offshore services. ONGC has a track record of investing substantially in E&P activities: ONGC Capex FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Investment [ INR Mn] Source: ONGC website Apart from ONGC, private players such as Reliance, Cairn Energy, British Gas, etc. are now engaged in E&P activities. With oil exploration companies increasing their activities because of higher crude oil prices, offshore services are a fast growing area. Other focused offshore service companies like Dolphin Offshore, Garware Offshore, Great Eastern Offshore and South East Asia Marine have seen significant order flows in the recent past. This is because a major share of Oil & Gas production is derived from offshore activities. For e.g, during FY 2005, 65.9% of crude oil production and 71.75% of natural gas production in India was offshore. For the same period, ONGC s offshore crude oil and natural gas output was 68.6% and 75.89% respectively. Offshore Oil & Gas Production in India * Crude Oil output [ 000MT] Offshore production [ 000MT] % of offshore production 65.3% 65.7% 65.9% 64.5% Natural Gas output [MCM] Offshore production [ 000MT] % of offshore production 72.20% 71.9% 71.8% 70.3% Source: Ministry of Petroleum * - Provisional Offshore Shipping- International Perspective The increased E&P activity has already resulted in charter rates touching new heights in North Sea and other parts of world. All through 2006, charter rates for offshore vessels such as AHTS, OSVs etc are showing firm trend. With renewed thrust on increasing the output from ageing oilfields by revamping the production facilities, and going into deep-waters for striking the new discoveries, demand for offshore vessels is expected to remain strong in next 2-3 years. Offshore Shipping-Indian Perspective The demand for offshore vessels is mainly from E&P contractors such as ONGC, Reliance, Cairn Energy, Hardy Oil, British Gas, etc. The requirement is direct when vessels are chartered by these operators themselves to meet their operational requirement. However, there is a requirement from the contractors of these E&P companies, who are setting up new facilities / revamping or refurbishing the existing facilities. Due to the enhanced E&P activities worldwide as well as in India, requirement of Offshore Vessel in India is very high. There are reportedly 65 Offshore Support Vessels of all kind (excluding ONGC owned Offshore Support Vessels) working in India, and demand exists for around 110 such vessels. Conclusion Thus, the total offshore production of Crude Oil & Natural Gas in India is substantial and indicates emphasis of Government of India on offshore Oil & Gas exploration. With the increasing focus on offshore E & P activities both in public sector & private sector; we believe that the support services industry players like our company will have immense opportunity in near future to provide all kind of support services to offshore exploration Oil & Gas companies. 28

46 OUR BUSINESS Company s business, strengths, and strategy Our Company is engaged in the business of providing integrated offshore services to the oil and gas industry, more specifically to Exploration, Exploitation, and Production (E&P) companies and our services include diving and underwater services, marine operations and management services, topside/fabrication services, etc. Our Company provides these services to our clients under fixed period contracts ranging from 1-5 years. A predominant portion of our Company s services are currently being provided to an Indian Oil & Gas Major engaged in offshore exploration activities in Arabian Sea, off the Western coast of India. Our Company was incorporated in the year 1996 as Himachal Alkalies Limited. Our promoters, realizing the growing importance of offshore services business for E&P industry, diversified into offshore marine services and the name of the company was subsequently changed to HAL Offshore Limited to reflect its key business activities. Our Company started the offshore services business in the year 1998 by securing the global tender for operation and maintenance management of MSVs owned by an Indian Oil & Gas Major. The major services provided by our company are as under: 1. Underwater services Underwater services are provided either by way of diving services or by using remotely operated vehicles. Diving services involve the provision of trained divers who are capable of working underwater. These services are provided in water depths up to 300 meters where human intervention is required for carrying out work. The services provided by divers can broadly be classified into the following types: Drilling support Seabed inspection Connecting and retrieving sub-sea equipment Inspection, Maintenance & Repairs Carrying out marine growth removal on platforms Carrying out inspections of platforms using non destructive techniques Fixing of anodes Underwater welding and cutting Underwater video recording of structures ROV s operation for area where human intervention is not possible or is hazardous Construction activities Assistance in installation of platforms and laying of pipelines Installation of riser / conductor clamps Underwater hook-up Single Buoy Moorings (SBMs) Installation of SBMs Inspection, maintenance and repairs on SBMs Remotely operated vehicles (ROVs) are used for underwater work below 300 meters of water depth, where it is unsafe for divers to operate. The ROVs are essentially motorised robotic equipment that are controlled from a vessel on the surface and can be made to perform numerous tasks. 2. Marine Services Technical management and operation of various types of vessels covers the manning, operating and maintenance of the vessels. These services are provided on the following types of vessel: Dynamically positioned multipurpose support vessels (DP MSV) 29

47 HAL OFFSHORE LIMITED Offshore supply vessels (OSV) / anchor handling, towing and supply vessels (AHTS) 3. Offshore Fabrication and Maintenance Services This work generally covers work performed above the waterline, or in a dry environment. The services offered include the following: Modification of platforms, clamp on structures, clamp and protector installation, deck extensions, boat landing and running conductors. Platform revamp, including painting. Replacement of equipment such as cranes, fuel gas skids, chlorinators, water makers, deluge systems, etc. Piping and steel work using carbon steel, stainless steel, etc. Structural work comprising steel modules, assemblies and painting. Installation and revamping of accommodation modules Fabrication and installation of walkway bridges, deck landing, deck extensions, etc. Electrical and instrumentation work on platforms Some of the key contracts executed by our Company over the past few years of its operations are as follows: Nature of Contract Scope of Work Contract Value [ US$ Million] 1 Operation and Management of Multi Support Vessels Fire fighting duties, Rescue and Recovery operations and normal IRM work like BPI,MGR, SBM mooring and demooring, crane assistance, Splash ZoneRiser Inspectionwork (SZRI), Saturation and Air Diving Support, etc 2 Replacement of Cable and Cable Trays etc. Barge based replacement of burnt Cable and Cable trays with new cables, cable trays, junction boxes on the fire ravaged process platform. 3 Charter hire of Multi Support Diving Vessel 4 Operation of Work Class ROV and Flooded Member Detection (FMD) 5 Charter hire of Workboat, Painting of Splash Zone and Atmospheric Zone The contracts currently being executed by our Company are as follows: Fire fighting duties, rescue and recovery operations and normal IMR work like Base Pipeline Inspection Marine Growth Removal, SBM, mooring and demooring, crane assistance, SZRI work, Saturation and Air Diving Support, ROV intervention, etc. Work Class ROV mobilized for Flare Jacket Inspection for 120 days, and FMD inspection carried out with ROV for 10 days. Painting of Splash Zone, Atmospheric Zone, and underwater from -3 mtr to MSL. Job also involved maintenance repairs of platform till Celler Deck area, removal and fixing of handrails, gratings, etc Included in pt 3 above 3.00 Nature of Contract Scope of Work Contract Value [ US$ Million] 1 Maintenance Painting of Unmanned Platforms Maintenance painting of complete well platforms, maintenance and repair of platforms upto cellar deck area by the provision of work boat 2 Replacement of Fuel Gas skid on Platform Replacement of Fuel Gas Skids ( 3 nos) on platform including detail engineering., procurement, installation, hookup, and commissioning 3 Operation and Maintenance of Equipment Operation and maintenance of water makers, sewage 4.00 treatment plant, chlorinator on process platforms. 4 Replacement of Air Dryer Replacement of Air Dryer Units on various platform

48 Unit at various platforms 5 Replacement of IUG Skids on 13 unmanned platforms including detail engineering., procurement, installation, testing, hookup and commissioning Replacement of IUG Skids on various platforms including detail engineering., procurement, installation, testing, hookup and commissioning 7.00 For the purpose of providing offshore services, we primarily used to rely on chartered-in vessels. However, we have, in the last fifteen months, acquired two Vessels, namely MV HAL Supporter and MV HAL Samridhi. MV HAL Supporter has already been pressed into service, while HAL Samridhi is currently undergoing surveys/repairs. The brief details of these Vessels are stated hereinbelow: Name of Vessel Month of acquisition by our Company Year in which built Age during acquisition (Yrs) GRT (Gross Registered Tonnage) Purchase Price (USD) Book value as on (in Rs. Lakhs) MV HAL September, Tons 2.8 Million Supporter* 2005 MV HAL April, Tons 375, Samridhi* * Both these Vessels have been acquired from overseas owners. MV HAL Supporter is primarily utilized for the purposes of transportation of men and materials from land till the offshore site, and aid in rendering the offshore services required to be provided as per contractual terms. Once MV HAL Samridhi completes its surveys/inspections and receives statutory clearances for operation, we expect it to perform similar operations. Our Company s present and potential clients are mainly oil & gas companies involved in exploration and production activities in offshore exploration areas. We also enjoy business relationship with majors in the oil & gas industry having done business with them pursuant to various sub-contracting agreements.. Over the years, our Company has also developed a base workshop along with a substantial machinery and tool base to carry out repairs in-house rather than being dependent on sub contractors to perform the work. For the financial year , our Company registered revenues of Rs Lakhs, as compared to Rs Lakhs during , an increase of 53%. The net profit for the year increased by 230 %, from Rs Lakhs as against Rs Lakhs in The revenue was derived from offshore operations, service fee charges and reimbursable stores supplied. Income from offshore operations contributed to growth in revenues in fiscal 2006 which constituted 99% of the total income. During the year , our Company successfully completed the execution of the ongoing contract for charter hire of a multi support vessel in February In October 2005, our Company was awarded a global contract for painting and maintenance of 46 offshore platforms divided into two separate contracts for 23 platforms each. The total value of the contract to be executed over a period of 3 years is US$ 40 million approximately. To ensure smooth execution of the new contract, our Company acquired its first vessel, HAL Supporter during the year Currently our only and predominant client is an Indian Oil & Gas Major, which is the biggest user in India of all kinds of offshore vessels, such as MSVs, OSVs, AHTs etc. To support their operations and safety requirements, it maintains a policy of having a certain number of MSV in their field. The said oil & gas major has been inviting tenders for chartering vessel to meet its requirement. It invites global tender for charter hire of MSVs to enable foreign vessel owners to participate in the tendering procedure to have wider participation. This ensures that even the Indian companies can quote in foreign currency and retain the proceeds in foreign currency. The tenders are invited under the Two Bid System, which involves submission of bids separately for Technical Commercial Evaluation and the Price Bid. If the Techno Commercial Offer is found compliant as per the tendering procedure, only then the Price Bids are opened and the Letter of Award issued to the lowest bidder. However, Indian Shipowners enjoys protection under what is known as Cabotage under the provision of Merchant Shipping Act. Under the provisions, Indian vessel owners have First Right of Refusal on all inquiries floated for chartering of vessels. If the Indian Flag Vessel is found technically acceptable, then Indian Flag Vessel owners have the right the match the price offered by the lowest quoted foreign Flag Vessel owner. Another advantage offered to Indian Bidder is in the form of Price Preference. Indian bidders, submitting bids to Public Sector Undertakings, and providing an undertaking that not more than 50% of the bid component shall be subcontracted to foreign companies, are given 10% price preference over lowest quoted foreign bids. 31

49 HAL OFFSHORE LIMITED Our strategy is to acquire vessels to strengthen our bidding and contract execution capabilities. We bid for tenders on the basis of tying-up arrangement with foreign owners for chartering their vessel on back-to-back basis. Simultaneously, negotiations for purchasing the vessel are also carried out which are at advanced stage. In the event thatthere is delay in finalizing the purchase agreement, the opportunity of deploying the vessel is not lost due to chartering agreement in place. This de-risks the business model from the factor of Idleness of Asset. Key Strengths 1. Established track record of successful execution of contracts. We have a track record of successful execution of contracts involving provision of various offshore services, aggregating in value approximately USD 83.5 million over the years. 2. Established player in offshore services industry Our Company has been involved in providing various services for offshore oil exploration activities since With the demand-supply gap for oil and gas widening over the years and the oil prices increasing, the offshore oil exploration activity has been increasing, resulting in an increased demand for offshore services. Our Company has registered significant growth in its revenues as well as profitability over the years. 3. Long Term Nature of Operations and Strong Relationships: Our Company provides services to clients operating in oil and gas exploration under contracts, which are for a period of one to three years with renewal options. We have been in this industry for over 8 years and our predominant client is an Indian Oil and Gas Major. We are one of the few companies operating in a highly regulated industry which requires considerable expertise and experience for qualifying to do business and in which there is considerable time period involved for gaining an entry into the industry. We have thus achieved an early-mover advantage being one of the first and few companies operating in this niche area. 4. Focus on safety Our company has successfully executed contracts with a track record of no security/safety lapses in execution. We have a welldefined safety and environment protection policy and there is strict adherence to the same at all times. In addition to the aforesaid, we believe that, we enjoy a high level of credibility in contract execution due to our continuous recognition. We are also one of the most competitive companies in the industry Business Strategy The key drivers of our Company s business strategy are: 1. Strengthen competitive position in the existing market by leveraging the growing E&P activity 2. Focus on developing own facilities / infrastructure to pursue growth, including acquiring own vessels 3. Focus on providing value added / new services offerings to cater to a broad spectrum of demand 4. To provide services in overseas markets to insulate from dependence on single market / tender business 5. Developing partnership / association with international players for technical know how. An integral part of our Company s growth strategy is to develop / acquire own assets. We have already acquired two Vessels in this regard, namely MV HAL Supporter and MV HAL Samridhi, and propose to acquire further vessel(s) in the course of time. Growth in the offshore industry can be achieved only by strengthening the asset base to enable our Company to bid for and successfully execute contracts involving diverse capabilities. The MSV and allied equipments that we propose to acquire, as per objects of this Issue, is to ensure that we can bid for and execute contracts involving diverse capabilities in the offshore services sector. This safeguards our Company against possible fluctuations in contract rates. Our Company plans to acquire vessels which will help cater to the growing demand for the offshore services. Human Resources We are a professionally managed company and believe that our employees are key contributors to our business success. Our work force consists of our permanent employees, consultants engaged by us on a contractual basis to assist in functional aspects of business, and specialized technical personnel engaged on a contractual basis for executing various requirements of contracts undertaken by us. Details of personnel As on December 31, 2006 Number of permanent employees 53 Professionals on contractual basis 5 Specialised Technical Personnel (on contractual basis)

50 Insurance The activities undertaken by our Company in course of execution of contracts have an inherent element of risk. Also, our Company is currently providing its services in a high risk area. Our vessels are statutorily required to be insured for Hull & Machinery. Also, our Company has taken Protection & Indemnity (P&I) cover from insurers to safeguard third party liability arising on account of any mishap / accident. All the personnel operating on vessels / offshore installations are covered under personal accident policies. All other contractors or any of its subcontractors of any tier are insured to provide for any third party liability to our clients. Our personnel working onshore are also insured under personal accident policies. Property Immovable properties acquired by our Company on ownership/leasehold basis currently being held by is are as follows: Property acquired Date of purchase/agreement Plot No. W-301, in T.T.C. Industrial Area, situated at Village Rabale within the limits of Navi Mumbai Municipal Corporation admeasuring square meters. Premises No. 406, 4 th Floor of the Building Balarama, situated at Bandra-Kurla Complex, Bandra (East), Mumbai admeasuring 590 square feet. Premises No. 407, on the 4 th floor of the building Balarama, situated at Bandra-Kurla Complex, Bandra (East), Mumbai, admeasuring 740 square feet. Consideration January 18, 2005 Rs 3,90,000 + Rs 99,000 totaling to Rs 4,89,000 Agreement between October 1, 2001 Rs. 35,55,000 Freehold Property September 25, 2001 Rs 43,55,000 Freehold Property Immovble Properties taken on rent by our Company are as follows: Leasehold property agreement made at Mahape dated January 18, 2005 between Maharashtra Industrial Development Corporation (the lessor) and HAL Offshore Limited (the lessee) for a time period of 95 years computed from January 1, 1992 Licensor Sanjeev Agrawal, HUF Mr. Jaivant J Chodankar Property in question Unit No. 201, admeasuring 3775 square feet, built on 2 nd floor of Building No. 8, situate at Solitaire Complex, Andheri (E), Mumbai. 2 Kashibhai Chawal, Chakala Road, Date July 3, st Sept Duration of the period For a period of 11 months For a period of 22 months from 22 nd Sept Letters of renewal, if any. From April 2006 to March 31, 2007 by letter dated April 6, 2006 Rent payable+ Overheads, if any Monthly rent payable: Rs.2,50,000 + Overheads such as the electricity, water charges, adequate insurance policy for the premises occupied, pay directly to the builder/condominium, proportionate share of outgoing and maintenance charges. On the expiration of the Agreement, our Company shall be responsible for the removal of the goods and agreed to pay to the HUF compensation of Rs. 0.15Lakhs per day for the use of the said premises. - Monthly rental: Rs. 6,000 a month on every 22 nd of the month + electricity charges. Our Company as the Licensee shall be liable to Deposit paid Our Company deposited a sum of Rs 50,00,000. Out of which Rs. 30,00,000 was not refundable. Incase HUF did not refund the said amount then in that case our Company shall not be obliged or bound to remove its goods and shall be entitled to use the said portion without being liable to pay any compensation. Our Company paid a sum of Rs. 36,000 as interest free security deposit to be returned after termination of 33

51 HAL OFFSHORE LIMITED Chakala Andheri (E), Mumbai. Mrs. Deepti Superior Agrawal House, 48, Todarmal Lane, New Delhi March 1, 2005 (Both the days inclusive) For a period of 3 years indemnify the Licensor from and against any damage/loss. - Rs. 50,000 per month agreement or its expiry. 34

52 A. Legislation pertaining to our Vessels 1. Indian Merchant Shipping Act, 1958 KEY INDUSTRY REGULATIONS AND POLICIES Legislation Indian Merchant Shipping Act, 1958 ( Act ) is the principal legislation in India in relation to shipping operations. In the year 1959, India became a member of the International Maritime Organisation ( IMO ), which is the United Nations specialized agency responsible for the improving maritime safety and preventing pollution from ships. The Act among other things, lays down the procedure for registration of ships. The Act makes it mandatory for Indian ships to be registered under the Act. The Act sets out the requirements which vessels registered in India are to comply with, including, in relation to the following: Installation of safety equipment on board vessels; Number and standard of competence of officers and seamen operating and manning the vessel; Crew management; Engagement and discharge of seamen; Surveys and inspections to be undertaken on the vessels. Legislative Authority The Act is administered by the Director-General of Shipping ( DG Shipping ) under the powers granted to him therein, encompassing all activities in relation to shipping, namely shipping administration, maritime safety, maritime training, examination and certification, shipping development, etc. The DG Shipping is the designated authority in India on all matters of shipping. The DG Shipping ensures implementation of the provisions of the Act and also of the various international conventions relating to safety requirement for prevention of pollution and other mandatory requirements of IMO. For operating all vessels registered under the Act, necessary license has to be obtained from the DG Shipping as per the provisions of the Act. Similarly, for the operations of foreign flag vessel in the Indian Coast, license under section 407 of the Act has to be obtained. Port clearance will not be given to those vessels, which do not have a proper license from the DG Shipping for transportation from one Indian port to another Indian port. Part XIV of the Act extends protection to the Indian flag vessels/ national fleet by preventing foreign flag vessels from engaging in coastal trade of India except under a license issued by the DG Shipping, which is subject to certain conditions and guidelines issued in this behalf by the DG Shipping. 2. International Convention for the Safety of Life at Sea 1974 (SOLAS 1974) The International Maritime Organisation ( IMO ) also adopted the SOLAS 1974, which specifies the minimum standards for the construction, equipping, and operation of vessels. India ratified this convention in 1976 and it entered into force in Some standards include the requirement for installation of fire-fighting systems, machinery and electrical equipment on board a vessel that are essential for its safe operation under various emergency conditions. Furthermore, the Central Government has the power to make rules [Merchant Shipping (Construction and Survey of Passenger Ships) Rules, 1977] prescribing the requirements that the hull, equipment and machinery of Indian passenger vessels shall comply with, and these rules incorporate the provisions of SOLAS A vessel that has complied with these rules as well as with the provisions of the Merchant Shipping Act, 1958 is issued a safety certificate in prescribed form by the Central Government. 3. Global Maritime Distress and Safety System (GMDSS) Regulations The GMDSS Regulations constitute part of SOLAS It applies to all vessels of 300 GT and above from 1 February Vessels of such tonnage must be able to transmit ship-to-shore distress alerts in at least 2 separate and independent manners under the GMDSS regulations. Each manner of transmission must be made using a different radio communication service. The vessels must also be able to transmit and receive ship-to-ship distress alerts. 4. International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code) The International Maritime Organization (IMO) governs safety and environmental protection, development of plans for shipboard operations, emergency preparedness and reports and analysis of non-conformities, accidents and hazardous occurrences, maintenance of the ship and equipment, certification, verification and control of vessels, among other things. The ISM Code requires the establishment of procedures for maintenance and safety of vessels and pollution prevention. The Central Government verifies compliance with the requirements of these rules and upon successful verification; a Document of Compliance is issued to our Company. A Safety Management Certificate shall be issued by the Central Government to a ship upon initial verification of compliance with the requirements of the ISM Code. 35

53 HAL OFFSHORE LIMITED 5. International Convention for the Prevention of Pollution from Ships, 1973/1978 (MARPOL 73/78) The International Convention for the Prevention of Pollution from Ships, 1973 as amended by its 1978 Protocol, came into force in 1983 and was subsequently ratified by India in The Convention provides that ships should be constructed and equipped in a manner to enable polluting substances to be retained on board at sea and when entering a port, to discharge those substances thus retained into shore reception facilities. 6. International Ship and Port Facility Security Code (ISPS- 2002) The International Ship and Port Facility Security Code (ISPS) was developed in response to the 9/11 attacks in the United States and aims to increase the standards of security at both ship and port facilities. The code provides for a risk assessment process in order to ascertain what measures are best suited for a particular ship or port facility. All countries that are parties to SOLAS have to comply with the requirements laid down in the ISPS. 7. International Convention on Load Line, 1966 The International Convention on Load Line, 1966 ( ICLL ) was ratified by India in Vessels having Indian flag have to obtain the load line certificates under the ICLLcertifying the maximum weight of cargo and / or equipment that may be loaded by vessels. The Convention was recently amended in 2003 and all ships have to comply with the provisions included there under. The provisions of this Convention have been given effect in Part IX of the Indian Merchant Shipping Act, International Convention on Tonnage Measurement of Ships, 1969 The International Convention on Tonnage Measurement of Ships, 1969 ( ICTMS ) lays down a standard formula for the computation of gross and net tonnage of ships in order to ensure the safety of the vessels. India ratified this convention in 1977 and subsequently framed the Merchant Shipping (Tonnage Measurement of Ships) Rules, 1991 incorporating the provisions of the same. A ship that is in accordance with these rules is issued an International Tonnage Certificate or an Indian Tonnage Certificate. B. Legislation pertaining to our Personnel 1. International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978 (STCW) The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978 (STCW) lays down certain minimum pre-requisites in terms of training, certification and watchkeeping for seafarers on a global level. The articles contained herein extend to ships of non-party States when visiting ports of the signatories to the STCW. India ratified this Convention in 1984 along with the various amendments, the most recent being in 1998, which dealt with cargo handling and stowage at both operational as well as management levels. This Convention has been enforced through the framing of The Merchant Shipping (Standards of Training, Certification and Watch-keeping for Seafarers) Rules, 1998 and the same incorporates all the provisions of this Convention as amended in International Marine Contractors Association All marine crew are required to have certain qualifications / experience as required under the Merchant Shipping Act for working in their particular category. The qualification / experience is recognized all over the world under the IMO convention / STCW convention. Since there is no corresponding legislation to govern the diving personnel, Company abides by the guidelines of International Marine Contractors Association (IMCA) while employing diving personnel. Personnel meeting the IMCA requirement or equivalent as accepted by IMCA, for their respective categories only are sent offshore. All other personnel going offshore have the relevant qualification / experience that is required for their respective categories. Client requirements relating to personnel having certain minimum safety courses for going offshore are also followed. 36

54 HISTORY AND OTHER CORPORATE MATTERS HISTORY AND BACKGROUND OF OUR COMPANY: Our Company was incorporated on December 17, 1996 as HIMACHAL ALKALIES LIMITED having company registration number of Our Company s name was changed from HIMACHAL ALKALIES LIMITED to HAL OFFSHORE LIMITED pursuant to change in nature of business activity, and we were issued fresh certificate of incorporation consequent on change of name by the RoC on September 4, HISTORY AND MAJOR EVENTS: Year Event 1998 Our Company obtained the operation and management contract from an Indian Oil and Gas Major for its MSVs 2002 Our Company obtained a contract for Revamping of cables and cable-trays at fire ravaged platform. Our Company obtained a three year contract for charter of MSV providing fire fighting coverage as well as diving support services 2003 Our Company obtained a one year contract for maintenance and painting of unmanned well platforms 2004 Our Company obtained the contract for operation and management of water makers. Our Company obtained the contract for replacement of fuel gas skids on platforms 2005 Our Company obtained a three year contract for maintenance and painting of unmanned well platforms Our Company acquired a work boat, MV HAL Supporter 2006 Our Company obtained the contract for replacement of IUG skids on 13 unmanned platforms Our Company acquired an offshore supply vessel, MV HAL Samridhi. Changes in Registered Office of our Company Date Address Upto November 6, , Baazaar Lane, Bengali Market, New Delhi From November 7, 2006 Superior House 48, Todarmal Road, Bengali Market, New Delhi MAIN OBJECTS OF OUR COMPANY The main objects of our Company as contained in our Memorandum of Association are as set forth below: 1. To manufacture, produce, process, buy, sell trade, import, export and otherwise deal in Caustic Soda, Salt, Barimeem Salts, Purification Chemicals, Graphite, Anode, Soda Ash, sodium Sulphate. 2. To carry on business as traders, dealers, wholesalers, retailers, importers, exporters, processors, formulators, finishers, packers, despatchers, receivers and manufacturers of various types of Chemical, Acids, Alkalies and other substances from heavy and light grades of chemicals including Monochlorophenol, Diachlorophenol, Calcium chloride and such other chemical and raw-material for chemicals of all description. 3. To manufacture, process and otherwise deal in petroleum and petroleum products and petrochemicals and any of their by-products. 4. To produce, manufacture, use, buy, or otherwise acquire, sell, distribute, deal in and dispose of alkalies and acids, gasses, compounds, fertilizers, chemicals and chemical products of every nature and description and compounds, intermediates, derivatives and by-products thereof. 5. To act as consultants in the field of chemical technology. 6. To carry on the business of Electronic Communication Engineering and render and supply and form of marine service including:- a) import, export, supply, hire, let out or otherwise deal in, install, service, repair and maintain all plant, machinery, instruments and equipment relating to navigation, communication, radar, electronic, electrical, safety and other aspect of marine servicing and engineering. 37

55 HAL OFFSHORE LIMITED b) managing, chartering, owning, repairing, servicing, dealing and acting as agents for marine vessels and ships of all nationalities, flags, types, sizes and description, whether for carrying passengers or cargo or otherwise, and acting as agents or representatives of foreign manufacturers/principals in respect or Sales and Servicing including obtaining and issuing warranties of all plant, machinery, instruments, equipments and things connected with or ancillary to the Shipping Industry. c) moving men and material over land and sea by trucks, sea going vessel, and other means of communication. 7. To act as consultants, advisers, coordinators, technicians, surveyors, promoters, recruiting agency, turnkey operators representatives, trainers, researchers, contractors in all matters relating to marine services, under water services, shipping travel, transportation, pipe laying, industrial and public utility projects in any part of the world and to select, procure and supply staff and labour, plant, machinery, equipment, tools, spares, fittings, instruments and all items connected therewith as may be required or necessary for rending marine services. The Main Objects clause of our MoA enables us to undertake activities for which funds are being raised through this Issue. The existing activities of our Company are in accordance with the Objects clause of our Memorandum of Association. CHANGES IN MEMORANDUM OF ASSOCIATION Date of Shareholders Approval August 19, 1997 Changes in the Memorandum of Association Addition of Clause Nos. 6 and 7 after Clause No. 5 of the Main Objects 1. To carry on the business of Electronic Communication Engineering and render and supply and form of marine service including:- a) Import, export, supply, hire, let out or otherwise deal in, install, service, repair and maintain all plant, machinery, instrument and equipment relating to navigation, communication, radar, electronic, electrical, safety and other aspect of marine servicing and engineering. b) Managing, chartering, owning, repairing, servicing, dealing and acting as agents for marine vessels and ships of all nationalities, flags, types, sizes and description, whether for carrying passengers or cargo or otherwise, and acting as agents or representatives of foreign manufacturers/principals in respect or Sales and Servicing including obtaining and issuing warranties of all plant, machinery, instruments, equipments and things connected with or ancillary to the Shipping Industry. c) Moving men and material over land and sea by trucks, sea going vessel, and other means of communication. March 10, 1998 September 14, 2000 December 26, 2005 September 29, To act as consultants, advisers, coordinators, technicians, surveyors, promoters, recruiting agency, turnkey, operators representatives, trainers, researchers, contractors in all matters relating to marine service, under water services, shipping travel, transportation, pipe laying, industrial and public utility projects in any part of the world and to select, procure and supply staff and labour, plant, machinery, equipment, tools, spares, fittings, instruments and all items connected therewith as may be required or necessary for rending marine services. Alteration In Capital Clause: The authorized capital of our Company was increased from Rs. 100 Lakhs/- divided into 10,00,000 equity Shares of Rs. 10/- each to Rs. 250, Lakhs divided into 25,00,000 Equity Shares of Rs. 10/- each. Change in Name Clause The name of our Company was changed from Himachal Alkalies Limited to H A L Offshore Limited. Alteration In Capital Clause: The authorized capital of our Company was increased from Rs. 250 Lakhs divided into 25,00,000 equity Shares of Rs. 10/- each to Rs Lakhs divided into 125,00,000 Equity Shares of Rs. 10/- each. Alteration In Capital Clause: The authorized capital of our Company was increased from Rs Lakhs divided into 125,00,000 equity Shares of Rs. 10/- each to Rs Lakhs divided into 150,00,000 Equity Shares of Rs. 10/- each. 38

56 SHAREHOLDERS AGREEMENT There are no subsisting shareholders agreements among our shareholders in relation to our Company. OTHER AGREEMENTS We are not a party to, or have entered into, any other material contracts not being a contract: (i) (ii) entered into in the ordinary course of our business carried on, or intended to be carried on, by us; or entered into more than two years before the date of filing of the Red Herring Prospectus with RoC. STRATEGIC PARTNERS Our Company does not have any strategic partners. FINANCIAL PARTNERS Our Company does not have any financial partners. 39

57 HAL OFFSHORE LIMITED OUR MANAGEMENT BOARD OF DIRECTORS As on date of filing of his Draft Red Herring Prospectus, we have 4 Directors. Our Board of Directors as on date of filing this Draft Red Herring Prospectus is as follows: Sr. No. Name, Designation, Father s/ Husband s Name, Address, Nationality, Occupation 1. Mr. Sanjeev Agrawal Managing Director S/o Late Mr. M. M. Agrawal 1A, Maharaja Lal lane, Civil Lines, Delhi Nationality: Indian Occupation: Business DIN No.: Age Dateof Appointment as Director & Term 42 Since Incorporation March 01, 2005 Details of other Directorships, - Moon Beverages Limited - Hindustan Aqua Limited - Eastern Steels & Power Limited - Versatile Polytech Limited - Superior Exim Private Limited - Shantnu Farms Private Limited - Lumax Builders Pvt Limited - Superior Fabrics Private Limited - Metbrass Plassim Indian Limited 2. Mr. Mukesh Agarwal Director S/o Mr. Bal Kishan Dass A 48, Chander Nagar, Ghaziabad, U.P. Nationality: Indian Occupation: Business DIN: Mr. Avinash Mehrotra* Director S/o Late Mr. Prabhaker Mehrotra Devdhan, E 22, Sector -41, Noida Uttar Pradesh DIN No.: Nationality : Indian Occupation: Chartered Accountant 4. Mr. Ramalingam Natesan Director S/o Mr. Natesan Narayan Iyer 201, Laxmi Vilas Bangur Nagar, Goregaon (W), Mumbai Nationality : Indian Occupation: Consultant DIN No.: July 1, Softlign Solutions Private Limited -Superior Industrial Enterprises Limited. - RPL Capital Finance Limited - Metbrass Plassim Pvt limited. - Hindustan Aqua Limited - Swastik Calltech Private Limited. 42 August 31, Mehrotra Consultants Private Limited -Supriya Mercandise Private Limited. 62 October 9, 2006 Nil * Mr. Avinash Mehrotra is associated with Mehrotra Consulants Private Limited(MCPL) as a Director. MCPL is a member of OTCEI Exchange of India Limited and the Interconnected Stock Exchange of India Limited. All the directors of our Company except Mr. Sanjeev Agrawal, Managing Director are liable to retire by rotation. BRIEF BIOGRAPHY OF OUR DIRECTORS Sanjeev Agrawal, age 42, is the Managing Director of our company. He holds a Masters degree in Commerce from Kanpur University and MBA Degree from Coca-Cola University, Atlanta, USA. He is also the Managing Director of our Promoter Group Company Moon Beverages Limited. He has also been the brain behind establishing the state-of the-art plant of carbonated soft drink under franchise with Coca-Cola Company at Kanpur and Rourkela. Mukesh Agarwal, age 46, is a Director of our Company. He has a Bachelors degree in Commerce. He is specialised in the field of marketing and has been instrumental in framing policies and procedures relating to the marketing activities. He is also actively involved with charitable institutions. Currently he is also on the Board of Directors of our other Promoter Group Companies. 40

58 Avinash Mehrotra, age 42, is Director of our Company. He is a Chartered Accountant, and holds Bachelors degrees in Commerce and Law, and Masters Degree in Economics. He has over 18 years of experience in various capacities, specially in the areas of business management, strategic thinking, and finance. He has been an active member of the Institute of Chartered Accountants of India and is a former Chairman of its Central India Regional Council (CIRC). He was also a public nominee to the Disciplinary Committee of the U.P. Stock Exchange for Natesan Ramalingam, age 62, is a Director of our Company. He holds a bachelors degree in Engineering. He is an experienced professional in diversified fields such as oil and gas upstream sectors including Sub-Sea E&P activities, andeinitiative in oil and gas. Mr. Ramalingam started off with Engineers India Limited with their Ocean Engineering Division. He joined Halliburton Group with their Sub-Sea division in 1989, moving up the corporate ladder as Engineering Manager India, Wharton Williams Taylor (2WT)/Rockwater; General Manager-India and Middle East, Rockwater; Country Manager-India and Bangladesh, Brown and Root Energy Services; Director-Brown and Root Energy Services.. After quitting Brown and Root Energy Services in 1997, he held senior positions as Area Manager of Kvaerner E&C Singapore Pte Ltd, Mumbai; Sales Director- Asia Pacific, PetroCosm Asia Pacific Pte Ltd, Singapore; Resident Manager, Stolt Offshore. He is currently working as a Consultant, in the oil and gas upstream industry. BORROWING POWERS OF BOARD OF DIRECTORS Pursuant to a special resolution passed at our Extraordinary General Meeting held on March 30, 2006 our Directors were authorised to borrow money(s) on behalf of our Company in excess of aggregate amount of paid up share capital and free reserves of our Company from time to time subject to an amount not exceeding Rs. 1,00,000 Lakhs. For details of provisions of our Articles of Association regarding borrowing powers, please refer section titled Main Provisions of the Articles of Association of our Company beginning on page [ ] of this Draft Red Herring Prospectus. REMUNERATION/COMPENSATION OF DIRECTORS (i) Managing Director 1. Mr. Sanjeev Agrawal Mr. Sanjeev Agrawal was re-appointed as our Managing Director at our Extraordinary General Meeting held on April 29, 2005 without remuneration. The remuneration was recommended by the Remuneration Committee which was approved by the Board of Directors at the meeting held on 1 st April, 2006 and confirmed in shareholder s meeting held on April 27, 2006 as under : Basic Salary: Rs. 2,00,000 - per month Perquisites: In addition to the salary received by him, he shall be eligible for the following perquisites: Category A (a) Medical Reimbursement: Expenses incurred for Managing Director and his family, subject to a ceiling of one month salary in a year or three months salary in a period of three years. (b) Children education allowance subject to a celling of Rs upto maximum of two children. (c) Managing Director will be paid a commission not exceeding 1% of net profits of the Company in any financial year. Category B (a) Our Company shall provide a car for office use. Our Company shall bill use of car for private purposes. (b) Our Company shall provide telephone at the residence of the Managing Director at the entire cost of our Company. Personal long distance calls be billed by our Company. Managing Director shall be entitled to reimbursement of all the bonafide expenses duly incurred by him, for and on behalf of our Company, in conduct of his duties. (ii) Non-executive Directors: Our Non-executive Directors are entitled to sitting fees for attending meetings of the Board, or of any committee of the Board. Currently, the sitting fees payable by our Company to our Directors is Rs. 5,000/- for every meeting of the Board attended by them, and for every meeting of the committee of the Board attended by them. SHAREHOLDING OF OUR DIRECTORS As per our Articles, our Directors are not required to hold any Equity Shares in our Company. Save and except as below, our Directors do not hold any Equity Shares in our Company as on the date of filing of this Draft Red Herring Prospectus. 41

59 HAL OFFSHORE LIMITED S. No. Names of our Directors No. of Equity Shares 1. Mr. Sanjeev Agrawal 24,30,840 INTEREST OF DIRECTORS All of our Directors may be deemed to be interested to the extent of fees payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them under our Articles of Association. All our directors may also be deemed to be interested to the extent of equity shares, if any, already held by them or their relatives in our Company, or that may be subscribed for and allotted to them, out of the present Issue in terms of the Draft Red Herring Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the said equity shares. Mr. Sanjeev Agrawal, as Managing Director, is entitled to receive remuneration from our Company. No remuneration or commission has been paid by our Company in FY 2006 to our Managing Director. For further details regarding the same, please refer sub-section titled Remuneration/Compensation of Directors beginning on page [ ] of this Draft Red Herring Prospectus. Our Company has taken two properties from our Promoter and our Promoter s wife on rent. For further details with respect to these properties, please refer to section titled Our Business beginning on page [ ] of this Draft Red Herring Propectus. Except as stated above and transactions disclosed in Related Party Transactions under section titled Financial Statements beginning on page [ ] of this Draft Red Herring Prospectus, our Directors do not have any other interest in our Company. CHANGES IN OUR BOARD OF DIRECTORS DURING THE LAST THREE YEARS Sr. Name of the Director Date of Joining Date of Resignation. No. 1. Mr. Sanjeev Agrawal December 17, June 1, 2004 Reappointment on March 1, Mrs. Deepti Agrawal June 1, 2003 July 1, Mr. Avinash Mehrotra August 31, Mr. Vinod Singh Rawat August 31, 2006 November 7, Mr. Ashok Saxena December 17, 1996 October 05, Mr. Ramalingam Nateshan October 09, CORPORATE GOVERNANCE The provisions of the Listing Agreement / SEBI guidelines with respect to corporate governance will be applicable to our Company immediately upon the listing of our Company s Equity Shares on the Stock Exchanges. We are in compliance with these provisions relating to setting up necessary committees. We have constituted the following committees of our Board of Directors in pursuance hereof. Audit Committee The Audit Committee was constituted vide a resolution passed by the Board at its meeting held on October 09, The terms of reference of the Audit Committee covers the matters specified under Section 292A of the Companies Act and clause 49 of the listing agreement. The Committee is responsible for effective supervision of the financial operations and ensuring that financial, accounting activities and operating controls are exercised as per the laid down policies and procedures. The Audit Committee consists of the following Directors: Name of the Director Designation in the Committee Nature of Directorship Mr. Avinash Mehrotra Chairman Independent Non- Executive Director Mr. Mukesh Agarwal Member Non- Executive Director Mr. Ramalingam Natesan Member Independent Non- Executive Director 42

60 Shareholders' / Investors' Grievance Committee The Shareholders' / Investors' Grievance Committee was constituted vide a resolution passed by the Board at its meeting held on October 9, Our Company has formed a Shareholders' / Investors' Grievance Committee pursuant to Clause 49 of the Listing Agreement for looking into the redressal of shareholders' and investors' complaints like transfer of Equity Shares, nonreceipt of Balance Sheet, etc. The composition of the Shareholders' / Investors' Grievance Committee is as follows: Name of the Director Designation in the Committee Nature of Directorship Status Mr. Avinash Mehrotra Chairman Independent Non- Executive Director Mr. Mukesh Agarwal Member Non- Executive Director Mr. Ramalingam Natesan Member Independent Non- Executive Director Remuneration Committee Our Company has constituted a Remuneration Committee pursuant to the requirement of Schedule XIII of the Companies Act, 1956 for approving remuneration to our executive Directors. This Remuneration Committee, while approving remuneration under Schedule XIII, takes into account the financial position of our Company, trends in industries, Director's qualifications, experience, past performance, past remuneration etc. The Remuneration Committee was constituted vide a resolution passed by the Board at its meeting held on October 9, The composition of the Remuneration Committee is as follows: Name of the Director Designation in the Committee Nature of Directorship Mr. Avinash Mehrotra Chairman Independent Non- Executive Director Mr. Mukesh Agarwal Member Non- Executive Director Mr. Ramalingam Natesan Member Independent Non- Executive Director Policy on Disclosures and Internal Procedure for Prevention of Insider Trading We will comply with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 1992 after listing of our Company s shares on the Stock Exchanges. Mr. Mayur Maheshwari Company Secretary and Compliance Officer, is responsible for setting forth policies, procedures, monitoring and adherence to the rules for the prevention of dissemination of price sensitive information and the implementation of the code of conduct under the overall supervision of the Board. 43

61 HAL OFFSHORE LIMITED MANAGEMENT ORGANISATION STRUCTURE MANAGING DIRECTOR Chief Financial Officer GM Marine GM Tech. GM -Ops GM. Div. GM. Project Manager Marine Manager Tech. Manager Ops Diving Manager Manager Account Project Manager Manager Purchase Company Secretary Radio Officer AMR - ADP Logistic Manager In charge Reporting Service Engineer Project - Mech. Manager HR Manager - IT Service Engineer Project Elect. OUR KEY MANAGERIAL PERSONNEL 1. Naveen Mohta, age 33, is the Chief Financial Officer of our Company. He joined our Company in June He holds a Bachalors degree in Commerce from Kurukshetra University. He is a qualified Chartered Accountant and Cost And Works Accountants He has over 8 years of experience and has worked in the capacity of Assistant Manager Accounts with India Gypsum Ltd., prior to being appointed as the General Manager of our Company. His current responsibilities include, exploring new business opportunities related to offshore industries, bidding for tenders, interacting with clients and foreign parties and has independent charge of complete commercial operations. Remuneration paid by our Company to Mr. Mohta for FY year was Rs. 3,51, Hari Pagare, age 50, is the Maintenance Engineer of our Company. He joined our company in February He holds a Diploma in Mechanical Engineering and has over 28 years of experience. Prior to joining our Company he has worked with Gulf Inject LLC, Dubai; Biogenic India Limited, Pune; Gulf Pharmaceuticals Co. UAE, Saerle India Ltd., Mumbai, in the capacities of Maintenance Supervisor, Packaging Line Supervisor, Mechanic, and has complete knowledge of arc welding, argon welding, brazing, plumbing and minor repairing of electrical equipment. Remuneration paid to Mr. Pagare by our Company for FY was Rs. 297, Shailesh Shinde, age 34, is the Maintenance Engineer of our Company. He joined our Company in March 07, He holds a diploma in Electronic Assembling and Trouble Shooting, Instrumentation Trade from the Industrial Training Institute and a Certificate for Vocational training. He has undergone one year apprenticeship training with Hindustan Petroleum Corporation Ltd, Mumbai Refinery in Instrumentation Discipline. He has over 14 years of experience in various capacities, especially in the areas of maintenance for process, oil and gas onshore/offshore stations and refinery. He is also involved in the day-to-day maintenance and preventive maintenance for boiler, gas turbine, off-sites and utilities besides calibration, faultfinding, troubleshooting, overhauling and testing of various field/control room electronic and pneumatic instruments. Before joining our Company he has worked with M/s International Engg. and Marine Works, Mumbai, Geo Services India Ltd, M/s Jacorossi Impresse S.R.L., Kuwait, M/s National Kharafi, Kuwait, M/S Middle East Constructor, Qatar, in the capacity of Sr. Instrument Technician, Aarvi Encon Pvt. Ltd. in the capacity of an Instrument Supervisor, M/S Specialised Oil Services-Qatar as an Instrument Technician. Remuneration paid by our Company to Mr. Shinde for FY was Rs 2,70, Sunil Pinto, age 34, is the Manager (Materials) of our Company. He joined our Company in January He holds a Bachelors degree in Commerce from Mangalore University and is currently pursuing Masters degree in Commerce from Mumbai University. He also holds a Diploma in Export and Import Management from Indian Merchant 44

62 Chambers, Mumbai and a Post Graduate Diploma in Computer Science and Management. He has over 10 years of experience and has worked in the capacities of Accounts Assistant with M/s. R.K.Shetty & Co.; Junior Programmer & Computer Operator for Smooth Software Solutions; and Accounts Assistant for Gabriel Electric Corporation. His current responsibilities include, looking after imports and exports for our Company, liasoning with suppliers, customs, octroi, custom house agent, dock authorities and related organizations, preparation of various MIS Reports pertaining to materials department and supervising office administration. Remuneration paid to Mr. Pinto by our Company for FY was Rs. 1,60, Mayur Maheshwari, 27 years, is the Company Secretary of our Company. He joined our Company in May 2006 and is in charge of corporate and secreterial matters. He has a Bachelors degree in Commerce and Law from University of Meerut and is a Fellow Member of the Institute of Company Secretaries since He is currently pursuing Post Graduation in Business Administration in Finance from Symbiosis Centre for Distance Learning. He was incharge of Secretarial and Legal matters in SPA Group of Companies, Delhi from September 2004 to April All key managerial personnel are permanent employees of our Company. SHAREHOLDING OF OUR KEY MANAGERIAL PERSONNEL Our key managerial personnel do not hold any Equity Shares in our Company. BONUS OR PROFIT SHARING PLAN There is no bonus or profit sharring plan for our key managerial personnel save and except the bonus paid including under payment of Bonus Act to our kay managerial personnel. CHANGES IN OUR KEY MANAGERIAL PERSONNEL DURING THE PAST ONE YEAR S. Name Date Reason No. 1 Harish Kumar March 06, 2006 Resignation 2. Mayur Maheswari May 22, 2006 Appointment INTEREST OF KEY MANAGERIAL PERSONNEL Except as stated otherwise in this Draft Red Herring Prospectus, no amount or benefit has been paid or given during the preceding year to any of our key managerial personnel except to the extent of the remuneration and other benefits in accordance with their terms of employment for services rendered as officers or employees. If any Equity Shares are allotted to our key managerial personnel in terms of this Issue, they will be deemed to be interested to the extent of their shareholding and / or dividends paid or payable on the same. None of our Directors or key managerial personnel are relatives within the meaning of section 6 of the Companies Act. EMPLOYEES STOCK OPTION SCHEME Our Company does not have any Employee Stock Option Scheme or other similar scheme giving options in our Equity Shares to our employees. PAYMENT OF BENEFITS TO OFFICERS OF OUR COMPANY Except the payment of salaries and perquisites/sitting fees and reimbursement of expenses incurred in the ordinary course of business, we have not paid /given any benefit within the two preceding years nor do we intend to make such payment/given such benefit as to any officer as on date of filing this Draft Red Herring Prospectus with SEBI. 45

63 HAL OFFSHORE LIMITED OUR PROMOTERS AND THEIR BACKGROUND Our Company has been promoted by Mr. Sanjeev Agrawal and Sanjeev Agrawal HUF. Detail of our Promoters are given hereinbelow: 1. Mr. Sanjeev Agrawal Mr. Sanjeev Agrawal, 42 years, Managing Director, is the founder promoters of our Company. He holds a Masters degree in Commerce from the Kanpur University and MBA Degree from Coca-Cola University, Atlanta, USA. He was instrumental in establishing the state-of the-art plant of carbonated soft drink under franchise with Coca-Cola Company at Kanpur and Rourkela. His voter identification number is DL/05/060/ and his driving license number is P Sanjeev Agrawal (HUF) Sanjeev Agrawal (HUF), is also the promoter of our Company. Our Promoter Mr. Sanjeev Agrawal is the Karta of the HUF and other members of this HUF are as follows: a. Mrs. Deepti Agrawal - Wife b. Ms. Sumati Agrawal - Daughter c. Ms. Avantika Agrawal - Daughter d. Mr. Anant Agrawal - Son We confirm that the Permanent Account Number, bank account number and passport number of our Promoters will be submitted to the BSE and NSE at the time of filing this Draft Red Herring Prospectus with these Stock Exchanges. Relatives of our Promoter that are part of the Promoter Group The following relatives of our Promoter forming part of our Promoter Group, hold Equity Shares in our Company: S.No. Name of the shareholders Relationship Number Of Equity Shares 1. Deepti Agrawal Spouse 3,96, Sumati Agrawal Daughter 4,20,000 The following relatives of our Promoter hold no shares in our Company: S.No. Name of the Relationship Number Of Equity Percentage of Equity shareholders Shares Shares (%) 1. Prabha Agrawal Mother Nil - 2. Avantika Agrawal Daughter Nil - 3. Anant Agrawal Son Nil - 4. Pradeep Agrawal Brother Nil - 5. Kalpana Dalmiya Sister Nil - COMMON PURSUITS There are no common pursuits between our Company and our Promoter/Promoter Group Entities.. Interest of Promoters Save asstated otherwise in the senction titled Our Managent and Financial Statements beginning on page [ ] and [ ]of this Draft Red Herring Prospectus, and to the extent of Equity Shares held by them, our Promoters do not have any other interests in 46