EPC INDUSTRIÉ LIMITED

Transcription

1 Draft Letter of Offer January 13, 2012 For Equity Shareholders of our Company only EPC INDUSTRIÉ LIMITED We (Corporate Identification Number L25200MH1981PLC025731) were incorporated in India on November 28, 1981 as Exomet Plastics and Chemicals Private Limited. Our name was changed to EPC Industrié Private Limited on December 8, Further, on conversion into a public company our name was changed to EPC Industrié Limited on August 24, Our name was further changed to EPC Irrigation Limited on September 11, 1992 and on October 13, 1997 the name of the Company was again changed to EPC Industrié Limited. For details of our change of name, please refer to the chapter History and Other Corporate Matters on page 52. Registered Office and Corporate Office: H-109, MIDC Ambad, Nashik , Maharashtra, India. Tel: Fax: Contact Person: Mr. Ratnakar Nawghare, Company Secretary and Compliance Officer rvnawghare@epcind.com Website: OUR PROMOTER: MAHINDRA & MAHINDRA LIMITED FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY ISSUE OF [ ] EQUITY SHARES WITH A FACE VALUE OF ` 10 EACH AT A PREMIUM OF ` [ ] PER EQUITY SHARE ( RIGHTS ISSUE EQUITY SHARES ) FOR AN AMOUNT NOT EXCEEDING ` 4,500 LACS ON A RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF EPC INDUSTRIÉ LIMITED (THE COMPANY OR THE ISSUER ) IN THE RATIO OF [ ] EQUITY SHARE(S) FOR EVERY [ ] FULLY PAID-UP EQUITY SHARE(S) HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON [ ] (THE ISSUE ). FOR FURTHER DETAILS, PLEASE REFER TO THE CHAPTER TERMS OF THE ISSUE ON PAGE 216. GENERAL RISK Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of our Company and the Issue including the risks involved. The securities being offered in the Issue have not been recommended or approved by Securities and Exchange Board of India ( SEBI ) nor does SEBI guarantee the accuracy or adequacy. Investors are advised to refer to the Risk Factors on page IX before making an investment in the Issue. COMPANY S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Letter of Offer contains all information with regard to our Company and the Issue, which is material in the context of the Issue, that the information contained in the Draft Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this Draft Letter of Offer as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares are listed on the Bombay Stock Exchange Limited ( BSE ). We have received in-principle approval from the BSE for listing the Rights Issue Equity Shares arising from the Issue vide letter dated [ ]. For the purposes of the Issue, the Designated Stock Exchange is BSE. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Kotak Mahindra Capital Company Limited 1st Floor, Bakhtawar, 229, Nariman Point, Mumbai , Maharashtra, India. Tel: Fax: epc.rights@kotak.com Investor Grievance kmccredressal@kotak.com Website: Contact Person: Mr. Ganesh Rane SEBI Registration No.: INM ISSUE OPENS ON Sharepro Services (India) Private Limited 13 AB, Samhita Warehousing Complex, 2 nd Floor, Sakinaka Telephone Exchange Lane, Off Andheri-Kurla Road, Sakinaka, Andheri (East), Mumbai , Maharashtra, India. Tel: /403 Fax: Website: satheesh@shareproservices.com Contact Person: Mr. Satheesh H K SEBI Registration No: INR LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON [ ] [ ] [ ]

2

3 TABLE OF CONTENTS SECTION I GENERAL... I DEFINITIONS AND ABBREVIATIONS... I NOTICE TO OVERSEAS SHAREHOLDERS... VI PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA... VII FORWARD LOOKING STATEMENTS... VIII SECTION II - RISK FACTORS... IX SECTION III INTRODUCTION... 1 SUMMARY OF INDUSTRY... 1 SUMMARY OF BUSINESS... 3 SUMMARY FINANCIAL INFORMATION... 6 THE ISSUE... 9 GENERAL INFORMATION CAPITAL STRUCTURE SECTION IV PARTICULARS OF THE ISSUE OBJECTS OF THE ISSUE BASIS OF ISSUE PRICE STATEMENT OF TAX BENEFITS SECTION V ABOUT US INDUSTRY OVERVIEW OUR BUSINESS KEY INDUSTRY REGULATIONS HISTORY AND OTHER CORPORATE MATTERS MANAGEMENT PROMOTER AND GROUP COMPANIES DIVIDEND POLICY SECTION VI FINANCIAL INFORMATION FINANCIAL STATEMENTS MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION MARKET PRICE INFORMATION FINANCIAL INDEBTEDNESS SECTION VII LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATIONS AND DEFAULTS GOVERNMENT AND OTHER APPROVALS OTHER REGULATORY AND STATUTORY DISCLOSURES SECTION VIII OFFERING INFORMATION TERMS OF THE ISSUE TERMS OF THE ARTICLES OF ASSOCIATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION DECLARATION

4

5 SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS In this Draft Letter of Offer, unless the context otherwise requires, the terms defined and abbreviations expanded herein below shall have the same meaning as stated in this section. In this Draft Letter of Offer, unless otherwise indicated or the context otherwise requires, all references to EPC Industrié Limited, EPC, the/our Company, we, our or us are to EPC Industrié Limited or, as the context requires, and references to you are to the prospective investors in the Issue. Conventional/ General Terms Term Description Act/ Companies Act Depositories Act IT Act Indian GAAP SEBI Act, 1992 SEBI Regulations/ SEBI ICDR Regulations Securities Act Takeover Code The Companies Act, 1956 and amendments thereto The Depositories Act, 1996 and amendments thereto The Income Tax Act, 1961 and amendments thereto Generally Accepted Accounting Principles In India Securities and Exchange Board of India Act, 1992 and amendments thereto The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and amendments thereto The United States Securities Act of 1933, as amended The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and amendments thereto Takeover Regulations The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 Wealth Tax Act The Wealth Tax Act, 1957 and amendments thereto Issue related terms Term Abridged Letter of Offer Allot/ Allotted/ Allotment Allottees Application Supported by Blocked Amount/ ASBA ASBA Account ASBA Investor Bankers to the Issue Composite Application Form / CAF Consolidated Certificate Description The abridged letter of offer to be sent to the Eligible Equity Shareholders with respect to this Issue in accordance with SEBI ICDR Regulations Unless the context requires, the allotment of Rights Issue Equity Shares pursuant to the Issue Persons to whom Rights Issue Equity Shares are issued pursuant to the Issue The application (whether physical or electronic) used compulsorily by QIB and Non Institutional Investor and optionally by Retail Individual Investors to make an application authorizing the SCSB to block the amount payable on application in their specified bank account Account maintained by an ASBA Investor with a SCSB which will be blocked by such SCSB to the extent of the appropriate amount in relation to an application by an ASBA Investor Equity Shareholders proposing to subscribe to the Issue through ASBA process and: a) Are holding the Equity Shares in dematerialized form as on the Record Date and have applied for their Rights Entitlements and/or additional Equity Shares in dematerialized form; b) Have not renounced their Rights Entitlements in full or in part; c) Are not Renouncees; and d) Are applying through blocking of funds in a bank account maintained with SCSBs All QIBs and Non-Insitutional Investors, complying with the above conditions, must mandatorily invest through the ASBA process. [ ] The form used by an Investor to make an application for the Allotment of Rights Issue Equity Shares in the Issue In case of holding of Equity Shares on physical form, the certificate that we would issue for the Rights Issue Equity Shares Allotted to one folio i

6 Term Controlling Branches/ Controlling Branches of the SCSBs Designated Stock Exchange Designated Branches Draft Letter of Offer Equity Share(s) Eligible Equity Shareholder / Shareholder Group Companies Investor(s) Issue/ Rights Issue Issue Closing Date Issue Opening Date Issue Price Issue Proceeds Issue Size Lead Manager Letter of Offer Listing Agreement Net Proceeds Non Institutional Investors Net Proceeds Promoter/ M&M Promoter Group QIBs or Qualified Institutional Buyers Record Date Description Such branches of the SCSBs which coordinate with the Lead Manager, the Registrar to the Issue and the Stock Exchange, a list of which is available on Bombay Stock Exchange Limited Such branches of the SCSBs which shall collect application forms used by ASBA Investors and a list of which is available on This Draft Letter of Offer dated January 13, 2012 filed with SEBI and which does not contain complete particulars of the Issue Price and the Issue Size in terms of the number of Rights Issue Equity Shares proposed to be offered in this Issue Equity shares of our Company having a face value of ` 10 each unless otherwise specified in the context thereof Means a holder of Equity Shares as on the Record Date Includes those companies, firms and ventures that are promoted by our Promoter, irrespective whether these entities are covered under Section 370(1)(B) of the Companies Act. Equity Shareholders as on Record Date and/or Renouncees applying in the Issue. Issue of [ ] Equity Shares with a face value of ` 10 each at a premium of ` [ ] per Equity Share for an amount not exceeding ` 4,500 Lacs on a rights basis to the existing Equity Shareholders in the ratio of [ ] Equity Share(s) for every [ ] fully paid-up Equity Share(s) held by the existing Equity Shareholders on the Record Date. The issue price is [ ] times the face value of the Equity Shares. [ ] [ ] ` [ ] per Rights Issue Equity Share The proceeds of the Issue that are available to us The issue of [ ] Equity Shares not exceeding ` 4,500 Lacs Kotak Mahindra Capital Company Limited The final letter of offer to be filed with the Stock Exchange after incorporating the observations received from the SEBI on the Draft Letter of Offer The listing agreement entered into between us and the Bombay Stock Exchange The Issue Proceeds less the Issue related expenses. For further details, please refer to the chapter Objects of the Issue on page 24. All Investors including sub-accounts of FIIs registered with SEBI, which are foreign corporate or foreign individuals, that are not QIBs or Retail Individual Investors and who have applied for Rights Issue Equity Shares for an cumulative amount more than ` 2 Lacs. The Issue Proceeds less the Issue related expenses. For further details, please refer to the chapter Objects of the Issue on page 24. Our Promoter being Mahindra & Mahindra Limited Unless the context requires otherwise, the entities forming part of the promoter group in accordance with the SEBI ICDR Regulations or which are disclosed by us to the Stock Exchange from time to time Public financial institutions as specified in Section 4A of the Companies Act, scheduled commercial banks, mutual fund registered with SEBI, FIIs and subaccount registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual, multilateral and bilateral development financial institution, venture capital fund registered with SEBI, foreign venture capital investor registered with SEBI, state industrial development corporation, insurance company registered with IRDA, provident fund with minimum corpus of ` 2,500 Lacs, pension fund with minimum corpus of ` 2,500 Lacs, National Investment Fund set up by the Government of India and insurance funds set up and managed by the army, navy or air force of the Union of India and insurance funds set up and managed by the Department of Posts, India [ ] ii

7 Term Description Refund through electronic Refunds through NECS, Direct Credit, NEFT or ASBA process, as applicable. transfer of funds Registrar of Companies/ RoC The Registrar of Companies, Maharashtra, Mumbai, 100, Everest, Marine Drive, Mumbai , Maharashtra, India. Registrar to the Issue Sharepro Services (India) Private Limited Renouncees Any persons who has / have acquired Rights Entitlements from the Equity Shareholders Retail Individual Investors Individual Investors who have applied for Equity Shares for an amount not more than ` 2 Lacs (including HUFs applying through their Karta) Rights Entitlement The number of Equity Shares that an Investor is entitled to in proportion to the number of Equity Shares held by the Investor on the Record Date Rights Issue Equity The Equity Share(s) offered in this Issue Share(s) SAF(s) Split Application Form(s) SCSB(s) Share Certificate Stock Exchange A Self Certified Syndicate Bank, registered with SEBI, which acts as a banker to the Issue and which offers the facility of ASBA. A list of all SCSBs is available at The certificate in respect of the Rights Issue Equity Shares allotted to a folio BSE where the Equity Shares are presently listed and traded Company Related and Industry Related Terms Term Articles/ Articles of Association Auditor Board/ Board of Directors Erstwhile Promoters ESOS 2010 / ESOS Financial Year/ Fiscal/ Fiscal Year/ FY Memorandum/ Memorandum of Association Preference Shares Registered Office/ Corporate Office Share Subscription Agreement Shareholders Agreement Description The articles of association of our Company, as amended M/s. Deloitte Haskins & Sells, Chartered Accountants, our statutory auditor Board of Directors of our Company including any committees thereof Trenton Investments Company Private Limited, Shishilin Investments Private Limited, Garuda Plant Products Limited, Ms. Indrani Khanna, Mr. Anirudh Khanna, Ms. Neelanjana Khanna and Ms. Deepanjali Chhapwale Employee Stock Option Scheme 2010 for our employees as approved by the shareholders by way of resolution dated July 21, 2010 and subsequent amendments thereto Any period of twelve months ended March 31 of that particular year, unless otherwise stated. The memorandum of association of our Company, as amended 12% redeemable preference shares having a face value of ` 100 unless otherwise specified in the context thereof Our registered and corporate office, located at H-109, MIDC Ambad, Nashik , Maharashtra, India Share subscription agreement dated June 27, 2011 between us, our Promoter, Trenton Investments Company Private Limited, Garuda Plant Products Limited, Mr. K L Khanna, Ms. Indrani Khanna, Mr. Anirudh Khanna, Ms. Neelanjana Khanna and Ms. Deepanjali Chhapwale. For further details, please refer to the Chapter History and Other Corporate Matters on page 52. Shareholders agreement dated June 27, 2011 between us, our Promoter, Trenton Investments Company Private Limited, Garuda Plant Products Limited, Kimplas Piping Systems Limited, Mr. K L Khanna, Ms. Indrani Khanna, Mr. Anirudh Khanna, Ms. Neelanjana Khanna and Ms. Deepanjali Chhapwale. For further details, please refer to the Chapter History and Other Corporate Matters on page 52. iii

8 Abbreviations Term Description AGM Annual General Meeting AS Accounting Standards issued by the Institute of Chartered Accountants of India BSE Bombay Stock Exchange Limited CDSL Central Depository Services (India) Limited DP Depository Participant DR Depository Receipts EBITDA Earnings before Interest, Tax, Depreciation and Amortisation ECB External Commercial Borrowing ECB Guidelines The ECB guidelines issued by the RBI on 1 July 2009 (RBI/ /27 Master Circular No. /07 / ) EGM Extraordinary General Meeting EPS Earnings Per Share FDI Foreign Direct Investment FEMA Foreign Exchange Management Act, 1999 FII(s) Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board GDR Global Depository Receipt HUF Hindu Undivided Family ICAI The Institute of Chartered Accountants of India IFRS International Financial Reporting Standards Indian GAAP Generally accepted accounting principles followed in India ISIN International Securities Identification Number IT Information Technology IT Act The Income Tax Act, 1961, as amended JV Joint Venture MIS Micro Irrigation System MI Micro Irrigation MICR Magnetic Ink Character Recognition NAV Net Asset Value NECS National Electronic Clearing Services NEFT National Electronic Funds Transfer NR Non Resident NRI(s) Non Resident Indian(s) NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited OCB Overseas Corporate Body OCCD Optionally convertible cumulative debenture PAN Permanent Account Number PAT Profit After Tax PBT Profit Before Tax PLR Prime Lending Rate QPC Quick Pipe Coupling RBI Reserve Bank of India Regulation S Regulation S of the Securities Act Rs./`/Rupees/INR Indian Rupees. RTGS Real Time Gross Settlement. SEBI Securities and Exchange Board of India. Securities Act U.S. Securities Act of 1933, as amended Sensex Bombay Stock Exchange Sensitive Index STT Securities Transaction Tax TP Act The Transfer of Property Act, 1882 The words and expressions used but not defined herein shall have the same meaning as is assigned to such terms under iv

9 the Companies Act, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the rules and regulations made thereunder. Notwithstanding the foregoing, terms in Terms of the Articles of Association, Statement of Tax Benefits, Key Industry Regulations and Financial Statements on pages 241, 31, 49 and 132, respectively, shall have the meanings given to such terms in these respective sections. v

10 NOTICE TO OVERSEAS SHAREHOLDERS The rights and the securities of our Company have not been and will not be registered under the United States Securities Act of 1933, as amended ( Securities Act ), or any U.S. state securities laws and may not be offered, sold, resold or otherwise transferred within the United States of America or the territories or possessions thereof (the United States or U.S. ), except in a transaction exempt from the registration requirements of the Securities Act. The rights referred to in the Draft Letter of Offer are being offered in India, but not in the United States. The offering to which the Draft Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any Equity Shares or rights for sale in the United States or as a solicitation therein of an offer to buy any of the said Rights Issue Equity Shares or rights. Accordingly, the Draft Letter of Offer or Letter of Offer and the enclosed CAF should not be forwarded to or transmitted in or into the United States at any time. Neither we nor any person acting on behalf of us will accept subscriptions or renunciation from any person, or the agent of any person, who appears to be, or who we or any person acting on behalf of us has reason to believe is in the United States when the buy order is made. Envelopes containing a CAF should not be postmarked in the United States or otherwise dispatched from the United States or any other jurisdiction where it would be illegal to make an offer, and all persons subscribing for the Rights Issue Equity Shares and wishing to hold such Rights Issue Equity Shares in registered form must provide an address for registration of the Rights Issue Equity Shares in India. We are making the issue of Rights Issue Equity Shares on a rights basis to Equity Shareholders on the Record Date and the Letter of Offer and CAF will be dispatched only to Equity Shareholders who have an Indian address. Any person who acquires rights and the Rights Issue Equity Shares will be deemed to have declared, represented, warranted and agreed, (i) that it is not and that at the time of subscribing for the Rights Issue Equity Shares or the Rights Entitlements, it will not be, in the United States when the buy order is made, (ii) it does not have a registered address (and is not otherwise located) in the United States, and (iii) it is authorised to acquire the rights and the Rights Issue Equity Shares in compliance with all applicable laws and regulations. We reserve the right to treat as invalid any CAF which: (i) does not include the certification set out in the CAF to the effect that the subscriber does not have a registered address (and is not otherwise located) in the United States and is authorized to acquire the rights and the Rights Issue Equity Shares in compliance with all applicable laws and regulations; (ii) appears to us or our agents to have been executed in or dispatched from the United States; (iii) where a registered Indian address is not provided; or (iv) where we believe that CAF is incomplete or acceptance of such CAF may infringe applicable legal or regulatory requirements; and we shall not be bound to allot or issue any Rights Issue Equity Shares or Rights Entitlement in respect of any such CAF. vi

11 PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA EPC Industrié Limited Unless stated otherwise, the financial data in this Draft Letter of Offer is derived from the Standalone Restated Financial Information of our Company which has been prepared in accordance with Indian GAAP and are included in the Draft Letter of Offer. Our financial year commences on April 1 and ends on March 31. In this Draft Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding-off, and unless otherwise specified, all financial numbers in parenthesis represent negative figures. All references in the Draft Letter of Offer to Rupees, `, Rs., Indian Rupees and INR are to Indian Rupees, the official currency of the Republic of India. All references to U.S. $, U.S. Dollar, USD or $ are to United States Dollars, the official currency of the United States of America. All references to CHF are to Swiss Francs, the official currency of Switzerland. All references to SGD are to Singapore Dollars, the official currency of Republic of Singapore. Please Note: One million is equal to 10,00,000/10 Lacs / Lakhs One billion is equal to 1,000 million/100 crores One Lacs / lakhs is equal to 100 thousand One crore is equal to 10 million/100 Lacs / Lakhs Unless stated otherwise, industry data used throughout this Draft Letter of Offer has been obtained from industry publications. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe that industry data used in this Draft Letter of Offer is reliable, it has not been independently verified. Fluctuations in the exchange rate between the Rupee and the U.S. Dollar will affect the U.S. Dollar equivalent of the Rupee price of the Equity Shares on the Stock Exchange. These fluctuations may also affect the conversion into U.S. Dollars of any cash dividends paid in Rupees on the Equity Shares. vii

12 FORWARD LOOKING STATEMENTS Certain statements in this Draft Letter of Offer which contain words or phrases such as will, may, aim, is likely to result, believe, expect, continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, project, should, 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: Disruptions in our manufacturing facilities Disruption in raw material supply and prices Increase in cost of power or other fuel Competition from existing and new players Working capital arrangements Growth of unorganized sector and threat from national/regional players Our ability to successfully implement our growth strategy Changes in laws and regulations relating to the industry in which we operate Changes in political and social conditions in India Loss or shutdown of our operations at any time due to strike or labour unrest or any other reason Our ability to successfully implement our strategy, growth and expansion plans Non renewal or receipt of government approvals Changes in government policies and regulatory actions that apply to or affect our business General economic conditions The outcome of legal or regulatory proceedings that we are or might become involved in Contingent liabilities, environmental problems and uninsured losses Developments affecting the Indian economy Uncertainty in global financial markets For a further discussion of factors that could cause the actual results to differ, please refer to the chapter Risk Factors on page IX. 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 we nor the Lead Manager nor any of their respective affiliates or advisors 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 and Stock Exchange s requirements, we and Lead Manager shall ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchange. viii

13 SECTION II - RISK FACTORS An investment in equity and equity related securities involves a high degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing all or a part of their investment. You should carefully consider all of the information in this Draft Letter of Offer, including the risks and uncertainties described below, before making an investment. In making an investment decision, prospective investor must rely on their own examination of us and terms of the Issue, including the merits and risk involved. If any of the following risks actually occur, our business, financial condition, results of operations and prospects could suffer, the trading price of our Equity Shares could decline and you may lose all or part of your investment. The risk and uncertainties described below are not the only risks that we currently face. Additional risk and uncertainties not presently known to us or that we currently believe to be immaterial may also have an adverse effect on results of operations and financial condition. This Draft Letter of Offer also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Draft Letter of Offer. The financial and other implications of material impact of risks concerned, wherever quantifiable, have been disclosed in the risk factors mentioned below. However there are few risk factors where the impact is not quantifiable and hence the same has not been disclosed in such risk factors. Internal Risk Factors 1. We, our Promoter, one of our Directors and certain constituents of our Group Companies are involved in litigation proceedings and we cannot assure you that we or they will be successful in any or all of these actions. In the event we are unsuccessful in litigating any or all of the disputes described below, our business, reputation and results of operations may be adversely affected We, our Promoter, one of our Directors and certain constituents of our Group Companies are party to litigations and are subject to legal notices. No assurances can be given that these proceedings will be determined in our or their favour. If a claim is determined against us and we are required to pay all or a portion of the disputed amount, it could have an adverse effect on our results of operations and cash flows. A classification of the legal proceedings instituted against and by us, our Promoter, our Director and certain constituents of our Group Companies and the monetary amount involved, wherever quantifiable, in these cases is mentioned in brief below: Litigation against us Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in Lacs 1. Civil Tax Tax notices Total Litigation by us Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs 1. Criminal Civil SEBI related litigation 2 Not ascertainable 4. Tax Total Litigation against our Directors Names of the Director Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs S. Durgashankar Criminal 1 Not ascertainable Total 1 Not ascertainable ix

14 Litigation against our Promoter Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs 1. Criminal 57 Not ascertainable 2. Civil 3,144 15, Arbitration 2 Not ascertainable 4. Civil notices 2,064 2, Tax 311 1,08, Tax notices 93 45, Total 5, , Litigation by our Promoter Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs 1. Criminal , Civil 34 2, Arbitration 1 Not ascertainable 4. Intellectual property notices 3 Not ascertainable 5. Tax 86 30,292 Total , Litigation against our top 5 listed Group Companies Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs 1. Criminal Civil 1,732 19, Arbitration 1 1, Tax cases 43 13, Tax notices Total 1,995 2,016 Litigation by our top 5 listed Group Companies Sr. No. Nature of the litigation Number of outstanding litigations Aggregate amount ascertainable (`) in lacs 1. Criminal 24,341 33, Civil 63 10, Arbitration 69,606 1,69, Civil notices 11,290 2, Tax cases 2 65, Total 1,05,302 2,80, Note: The amounts indicated in the columns above are approximate amounts. For further details, please see Outstanding Litigations and Material Developments beginning on page Our operations are significantly dependent on the timely procurement of raw materials and any delay in such procurement or procurement on commercially unviable terms may adversely affect our business and results of operations. We are engaged in the business of manufacturing drip and sprinkler irrigation systems, its components, specialized pipes for water and gas distribution and industrial pipes. These products are manufactured from raw materials of high, medium and linear low density polyethylene which we procure from third parties. We place orders for the raw materials on a monthly basis with the quantity of our orders dependent on internal estimates. In the event our estimates prove to be incorrect on grounds of higher purchase orders than expected in a particular month or quarter, we may be unable to procure additional raw material from our suppliers. While occasions of incorrect monthly estimates of raw materials have occurred in the past, the same has not affected our production or has hampered our ability to supply our products to our customers as we have been able to procure additional raw materials from the x

15 open market. However, in the event of such miss-estimation of the requirements of raw material in future, we are unable to assure you that we shall be able to procure raw materials from other sources on commercially viable terms, if at all and occurrence of the same shall not affect our ability to deliver our products to our customers in time. Moreover, the manufacture of the raw materials is dependent on crude oil and the price of crude oil globally determinates the prices of the raw materials. In recent times, the price of crude oil globally has been volatile. In the event of any material upswing of crude oil prices globally or locally the price of the raw materials may increase which would consequently increment the cost of manufacture of our products. In the event we are unable to pass on this cost to our customers, our margins and results of operations may be adversely affected. 3. The micro irrigation industry is substantially dependent on government subsidies under various mega MIS projects and any delay in receipt or non-receipt of such subsidies requires greater infusion of funds into the business by us which we may not be able to generate in time or at all The micro irrigation industry is significantly dependent on government subsidies. Our customers are primarily farmers and horticulturists who are entitled to government subsidies. We market our products either through our channel partners in open markets or arrangements with nodal agencies. For products sold through the arrangements with the nodal agencies, we receive payment from such nodal agencies consequent to fulfillment of procedural compliances. In the event there is a delay in receipt of the subsidy component, our margins for a particular period or year may be adversely affected. Moreover, in the event the government withdraws or reduces the subsidy currently being offered to the industry, which ranges from 50 % to 100 % of the approved product cost depending on the subsidy policies of the respective state governments, the farmers and the horticulturists may not be in a position to afford micro irrigation systems which would adversely affect our business and results of operations. Further, eligibility to receive subsidies is subject to fulfillment of certain condition by the company applying for the subsidy. Such conditions include the quality of the products manufactured by such a company, the nature of the after sales service, etc. While we are in compliance with all such eligibility parameters as on date, we are unable to assure you that we shall continue to comply with such conditions in the future. In case we are unable to meet any or all of such eligibility parameters, we shall be unable to market our products under the subsidy scheme which shall materially increase the cost of our products from the farmers perspective and consequently may adversely affect our sales and results of operations. 4. The loss of or shutdown of operations at our production facility may have a material adverse effect on our business, financial condition and results of operations. We have one facility for undertaking the manufacture of our products which is located at Nashik. The breakdown or failure of the equipments and/ or civil structure can disrupt our production schedules, resulting in performance being below expected levels. In addition, the development or operation of our facilities may be disrupted for reasons that are beyond our control, including explosions, fires, earthquakes and other natural disasters, breakdown, failure or sub-standard performance of equipment, improper installation or operation of equipment, accidents, operational problems, transportation interruptions, other environmental risks, and labour disputes. Our manufacturing facility was shut down for approximately three months in 2001 due to a labour strike. Such inadvertent incidences in the future may adversely affect our business. Our manufacturing facility is also subject to mechanical failure and equipment shutdowns. Our machineries may be susceptible to malfunction. Moreover, since the manufacture of our products is concentrated on only one manufacturing unit, occurrence of any or all of the above events may significantly disrupt our operations and affect our business, financial condition and results of operations. We employ significant number of employees at our manufacturing facility. We are unable to assure you that we will not experience disruptions to our operations due to disputes or other problems with our work force, which may lead to strikes, lock - outs or increased wage demands. Such issues could have an adverse effect on our business, and results of operations. 5. We face stiff competition in our business from organized and unorganized players, which may adversely affect our business operation and financial condition. Moreover, we have a limited product portfolio when compared to industry peers in the organized sector which may affect our ability to compete effectively The market for our products is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes such as the quality of products, the quality of the after sales services, the strength of the distribution network and pricing. Some of our competitors may have greater financial, technical and other resources and greater market share and goodwill which may enable them xi

16 to compete effectively. We also anticipate entry by international players into the domestic market which should further increase the competition. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by us and consequently affect our sales volume and growth prospects. Growing competition may result in a decline in our market share and may affect our margins which may adversely affect our business operations and our financial condition. As part of our MIS business, we manufacture drip and sprinkler irrigation systems and their components. However, our industry peers are engaged in manufacturing a more diverse product portfolio which includes pressure compensating drippers, sub-surface irrigation, foggers and misters. While we believe we are able to compete effectively with our product portfolio, our competitors wider product range offers them the opportunity to cater to wider customer base and develop a greater brand recall. We propose to diversify our product portfolio but are unable to assure you whether the same shall be as successful as our existing products. In the event we are unable to compete effectively with our existing product range and are unable to successfully develop and market the new product range within a definite timeline or at all, our business and results of operations shall be adversely affected. 6. We outsource the manufacture of certain components used in the manufacture of our products to third parties which increase our operating costs. Moreover, we do not have long term agreements with such parties and any breakdown of our relationship with our suppliers may adversely affect our business and results of operations. We outsource the production of certain components forming part of our final products to independent third parties. Such components include sprinkler nozzles, risers, insert for PCN, serrated nipples, rubber seals, gaskets, Mild Steel clamps, rivets, metallic saddles and other similar components. These components formed 15.93% of our operating expenditure for the year ended March 31, 2011 and 16.27% of our operating expenditure for the period of September 30, Due to such procurement from third parties, our operating expenses increase which we believe would have been substantially lesser, on an internal estimate, if we would have manufactured these components in house. Moreover, we do not have any long terms agreements for procurement of such components with any of our suppliers. While we believe we have stable business relationship with all our suppliers, any break down of our relationship with any or all of our suppliers may adversely affect our business and results of operations. 7. Costs associated with warranty and liability due to defects in our products may adversely affect our business and results of operations and could also lead to adverse publicity. Warranty claims can reduce our profitability. Any defect in our products could affect the demand for our products and could result in customer claims for damages against us. We offer a five year warranty on drip and sprinkler irrigation systems and any defects in these products may expose us to claims for damages. For products marketed pursuant to arrangements with nodal agencies, we provide a warranty on the final finished product and for products sold though our channel partners in open markets, we provide a warranty for defects only in the parts manufactured by us. While we have resolved consumer complaints in the past by replacement of some of the products sold, there has not been any case of claim settlement in cash. Any warranty claims and liability suits in future may adversely affect our business and results of operations. 8. Our inability to develop and promote our brands may impede our growth rate and our profitability. We believe that brand building is an essential component of business growth particularly in the industry in which we operate and more particularly in the organized sector of which we are a part of. Our brands enable our customer to distinguish our products from competitors and other players in the unorganized sector. While we believe we have established our brands EPC in certain regions, we intend to expand our operations which would require additional investment towards brand promotion. Our inability to successfully promote and market our brand may adversely affect our business and results of operations. 9. Various trademarks pertaining to our name, logo and products are not registered and it may lead to the dilution of our trademarks and limits our ability to defend our trade marks in infringement or passing off proceedings. We have filed applications for registering the various trademarks and a design pertaining to our products under various classes under the Trade Marks Act, 1999 and the Designs Act, 2000 and these applications are currently pending. There can be no assurance that our trade mark and design applications will be accepted and the trademarks and design will be registered. Details of our intellectual properties which are yet to be registered are as follows: xii

17 Sr. Description Class Date of application No. 1. Shaktiman (Trademark) 7 September 16, Shaktiman (Trademark) 16 September 16, EPC (Trademark) 17 November 22, EPC Logo (Trademark) 17 November 22, EPC Logo (Trademark) 21 November 22, Piper Coupler for use of flowing fluid in the irrigation system (Design) Design November 10, 2011 Our Promoter has licensed the right to state A Mahindra Group Company as part of our logo, as appearing on the cover page, pursuant to an agreement dated December 2, Further, our applications for the registration of certain trademarks and designs may be opposed by third parties, and we may have to incur significant cost and spend time in litigations in relation to these oppositions. In the event we are not able to obtain registrations or if any injunctive or other adverse order is issued against us in respect of any of our trademarks or designs for which we have applied for registration, we may not be able to avail the legal protection and legal remedies (in case of infringement) or prohibit unauthorised use of such mark by third parties by means of statutory protection, available as a proprietor of registered trademarks or designs. 10. Our inability to maintain distribution network can adversely affect our revenues. We sell our products in open markets with the help of our distribution network. We have entered into formal arrangements with 113 channel partners and informal arrangements with a number of other channel partners to market and sell our products in 17 states. Our inability to maintain our existing distribution network or to expand it further consistent with our business growth and in order to compete effectively, can adversely affect our growth and revenues. 11. We have been subject to BIFR proceedings in the past which may result in negative sentiments about us. We had filed a reference with the BIFR based on our audited balance sheet as on July 31, The BIFR in its hearing held on 2 July, 2001, declared the Company 'sick' in terms of the provisions of the SICA. The reason for the erosion of our networth during this period was disruption in the subsidy schemes provided to the farmers by the government for procurement of micro irrigation systems. The payment of subsidy by the Government was delayed due to a number of factors which correspondingly affected our sales adversely. Our loan accounts were deemed Non-Performing Assets and the accumulated losses converted our status to a sick company. The BIFR vide its order dated June 29, 2007 discharged the Company from the purview of SICA/BIFR. This corporate history may result in negative sentiments about us which may consequently affect the trading price of our Equity Shares. For further details please refer to chapter titled History and Other Corporate Matters beginning on page As a manufacturing business, our success depends on the smooth supply and transportation of our products from our plants to our channel partners and customers. Supply and transportation are subject to various uncertainties and risks, and delays in delivery or delivery of non conforming shipments may result in rejected or discounted deliveries. We depend on trucking to deliver our products from our manufacturing facilities to our customers. We rely on third parties to provide such services. Disruptions of transportation services because of weather-related problems, strikes, lock-outs, inadequacies in road infrastructure or other events could impair our procurement of raw materials and our ability to supply our products to our customers. There is no assurance that such disruptions will not occur in the future. While we can claim compensation from the transportation service providers, under the terms of their engagement, for any delay in the timely delivery of our products, any such delays may adversely affect our relationship with our customers and consequently our goodwill. Any such disruptions could materially adversely affect our business, financial condition and results of operations. 13. The sale of products forming part of our micro irrigation system business is susceptible to the seasonal nature of the industry they cater to which affects our results of operations during the off season As part of our micro irrigation system business, we manufacture drip and sprinkler irrigation systems. Drip irrigation systems is generally used for row crops such as vegetables, flowers, fruits, plantation crops, etc., while the sprinkler irrigation systems is largely used for broadcast crops such as cereals, oilseeds, etc. Most of these crops are seasonal in nature and consequently utilisation of our products is also restricted to these periods. Due to such xiii

18 periodic usage of our products, their life cycle tends to increase which affects our recurring sales. 14. We have not entered into any long-term contracts with any of our customers which may affect our business in case of change in buying patterns We do not have any long-term contracts with our customers and any change in the buying pattern of the customers could adversely affect our business. While we believe that the quality of our products and goodwill has ensured repeat business, there is no certainty that the same will continue in the years to come which may consequently affect our profitability. 15. We have an export obligation in terms of the licenses granted under the Export Promotion Capital Goods Scheme and in the event we are unable to meet the obligation, we may have to pay import duty which may affect our profits We have obtained licenses dated August 27, 1992 and May 9, 2011 under the Export Promotion Capital Goods Scheme ( EPCG Scheme ) under which we are eligible for concessional rate of custom duty on import of capital goods with a five years and six years export obligation respectively amounting to free on board value of four times the cost insurance freight value of capital goods imported by us. In the past, we have not been able to meet our export obligations with the requisite time frame. As on September 30, 2011, the total outstanding export obligations pursuant to the terms of the grant of the above licenses are ` 1, Lacs. We are obligated to meet the export obligation under the August 27, 1992 license by March 31, 2015 and the May 9, 2011 license by May 8, In the event we are unable to comply with the export obligations, we shall have to pay duty proportionate to unfulfilled obligation along with the interest, which may adversely affect our profits. 16. Our business entails high working capital requirements and cash flows and our inability to arrange for the same, in a timely manner or at all, may adversely impact on the results of our operations. Our business demands substantial fund and non-fund based working capital facilities. For products marketed in open markets, the working capital requirement is significantly lesser as the majority of the consideration is paid upfront. However, for project market sales, our requirement of working capital funds increments substantially as the consideration is not received upfront. For further details of our sales model, please see Our Business on page 36. In case there is insufficient cash flows to meet our working capital requirement or our inability to arrange for the same from other sources or due to other factors including delay in disbursement of arranged funds, resulting in our inability to finance our working capital needs when needed or there is any increase in interest rate on our borrowings, it may adversely affect our performance. 17. Our success is dependent on the quality control processes and any failure to maintain the quality of our products may affect our reputation and business. Our quality management system is ISO 9001:2008 certified. Our quality assurance department is equipped with equipments and resources necessary to carry out various tests in order to ensure the quality of our products prior to delivery to our customers. The British Gas Transco Technical Specifications for Polyethylene Pipes and Fittings for Natural Gas and Suitable Manufactured Gas has approved the quality of the pipes diameter 20 mm to 125 mm manufactured by us in BP Rigidex PC 2040 and Finathene 3802 YCF. Further, the following products manufactured by us are ISI marked: IS Standard IS : IS : (P-1) IS : (P-2) IS : IS : IS : IS : IS : IS : Description High Density Polyethylene Pipes for Water Supply. Irrigation Equipment - Sprinkler Pipes. Irrigation Equipment - Quick Coupled Sprinkler Pipe. Irrigation Equipment - Polyethylene Pipes for Irrigation Laterals. Irrigation Equipment - Emitting Pipe Systems. Irrigation Equipment Polyethylene Micro Tubes For Drip Irrigation. Polyethylene Pipes for Supply of Gaseous Fuel. High Density Polyethylene Pipe for Sewerage. Irrigation Equipment Emitters. xiv