Prospectu s Please read Section 60B of the Companies Act, 1956 100% Book Building Issue THANGAMAYIL JEWELLERY LIMITED [Incorporated as a Private Limited Company on March 24, 2000 under the Companies Act, 1956 as Thangamayil Jewellery Private Limited vide Certificate of Incorporation issued by the Registrar of Companies, Tamil Nadu, Chennai. The name of the Company was changed to Thangamayil Jewellery Limited upon conversion into Public Limited Company with effect from November 20, 2007 and a fresh certificate of incorporation has been obtained from Registrar of Companies, Tamil Nadu, Chennai.] Registered Office: 124, Nethaji Road, Madurai – 625 001 Tel.: +91-0452-2345553; Fax: +91-0452-2344340; E-mail: [email protected]; Website: www.thangamayil.com Contact Person: Mr. V. Vijayaraghavan, Company Secretary & Compliance Officer PROMOTERS OF THANGAMAYIL JEWELLERY LIMITEDARE MR. BALARAMA GOVIND DAS, MR. BA RAMESH AND MR. N.B. KUMAR PUBLIC ISSUE OF 38,33,667 EQUITY SHARES OF Rs. 10/- EACH OF THANGAMAYIL JEWELLERY LIMITED (“TMJL” OR THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF Rs. 75.00 PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF Rs. 65.00 PER EQUITY SHARE) AGGREGATING TO Rs. 2875.25 LACS (THE “ISSUE”). UPTO 1,20,000 EQUITY SHARES AGGREGATING TO RS. 90.00 LACS WILL BE RESERVED IN THE ISSUE FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (“THE EMPLOYEES RESERVATION PORTION”). THE ISSUE LESS THE EMPLOYEE RESERVATION PORTION IS REFERED TO AS THE “NET ISSUE”. THE ISSUE WILL CONSTITUTE 27.94 % OF THE POST ISSUE PAID UP CAPITAL OF THE COMPANY. THE NET ISSUE TO PUBLIC WILL CONSTITUTE 27.07 % OF THE FULLY DILUTED POST ISSUE PAID-UP EQUITY SHARE CAPITAL OF THE COMPANY. ISSUE PRICE: RS. 75.00 PER EQUITY SHARE OF FACE VALUE RS. 10 EACH. THE ISSUE PRICE IS 7.5 TIMES THE FACE VALUE In case of revision in the Price Band, the Bidding/Issue Period will be extended by three additional days after revision of the Price Band subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band and the Bidding/Issue Period, if applicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”), by issuing a press release, and also by indicating the change on the websites of the Book Running Lead Manager and at the terminals of the Syndicate. The Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue will be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue will be available for allocation on a proportionate basis to Non- Institutional Bidders and not less than 35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first public issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the Equity Shares is Rs. 10/- per Equity Share and the Issue Price is 7.5 times of the face value. The Issue Price (as determined by the Company in consultation with the Book Running Lead Manager on the basis of assessment of market demand for the Equity Shares offered by way of the Book Building Process and as stated in the section “Basis for Issue Price” on page 31 of this 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 the 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 Issuer and the Issue, including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Prospectus. Specific attention of the investors is drawn to the section titled “Risk Factors” beginning on page viii of this Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Prospectus contains all information with regard to the Issuer and the Issue that is material in the context of the Issue, that the information contained in this 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 Prospectus as a whole, or any information or the expression of any opinions or intentions, misleading in any material respect. IPO GRADING The Issue has been graded by Brickwork Ratings India Pvt. Ltd. (Brickwork). Brickwork has vide their letter dated November 05, 2009 assigned the “IPO Grade III” to the company indicating Average fundamentals. For further details and rationale of grading please refer page no. 10. LISTING The Equity Shares of the Company 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 approval from these Stock Exchanges for the listing of the Equity Shares pursuant to their letters dated September 18, 2009 and November 13, 2009 respectively. For purposes of the Issue, the Designated Stock Exchange is BSE. BOOK RUNNING LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE KEYNOTE CORPORATE SERVICES LIMITED S.K.D.C CONSULTANTS LIMITED 4th Floor, Balmer Lawrie Building, No. 11, Seth Narayandas Layout, Street No.1, 5, J.N. Heredia Marg, Ballard Estate, Mumbai 400001 West Power House Road, Coimbatore 641 012 Tel: (91 22) 3026 6000-3 Tel: (91 0422) 6549 995 Fax: (91 22) 2269 4323 Fax: (91 0422) 2499 574 Email: [email protected] Email: [email protected] Website: www.keynoteindia.net Website: www.skdc-consultants.com Contact Person: Ms. Girija Choudhari Contact Person: Mrs. Vijayalakshmi Narendra SEBI Registration No.: INM 000003606 SEBI Registration No.: INR 000000775 BID/ISSUE PROGRAMME BID/ISSUE OPENED ON WEDNESDAY , 27TH JANUARY 2010 BID/ISSUE CLOSED ON FRIDAY ,29TH JANUARY 2010 TABLE OF CONTENTS SECTION I: GENERAL......................................................................................................................... I DEFINITIONS AND ABBREVIATIONS ........................................................................................... I PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ..................................... VI FORWARD-LOOKING STATEMENTS ......................................................................................... VII SECTION II: RISK FACTORS ....................................................................................................... VIII SECTION III: INTRODUCTION ....................................................................................................... 1 SUMMARY OF THE BUSINESS, STRENGTHS AND STRATEGY ................................................. 1 THE ISSUE ......................................................................................................................................... 3 SUMMARY OF FINANCIAL INFORMATION....................................................................................................4 GENERAL INFORMATION ............................................................................................................. 7 CAPITAL STRUCTURE................................................................................................................... 15 OBJECTS OF THE ISSUE ................................................................................................................. 24 BASIS FOR ISSUE PRICE ................................................................................................................. 31 STATEMENT OF TAX BENEFITS .................................................................................................. 33 SECTION IV: ABOUT THE COMPANY ......................................................................................... 42 INDUSTRY OVERVIEW.................................................................................................................. 42 BUSINESS OVERVIEW ................................................................................................................... 46 REGULATIONS AND POLICIES ................................................................................................... 55 HISTORY AND CORPORATE STRUCTURE ................................................................................ 56 MANAGEMENT ............................................................................................................................. 61 PROMOTERS ................................................................................................................................... 71 DIVIDEND POLICY ........................................................................................................................ 72 SECTION V: FINANCIAL STATEMENTS ..................................................................................... 73 RESTATED FINANCIAL INFORMATION FOR THANGAMAYIL JEWELLERY LIMITED ..... 73 AUDITORS’ REPORT ...................................................................................................................... 73 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........................................................................................................... 92 SECTION VI: LEGAL AND OTHER INFORMATION ................................................................. 97 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ....................................... 97 GOVERNMENT APPROVALS ....................................................................................................... 99 OTHER REGULATORY AND STATUTORY DISCLOSURES .................................................... 101 SECTION VII: ISSUE INFORMATION ........................................................................................ 111 TERMS OF THE ISSUE .................................................................................................................. 111 ISSUE STRUCTURE ....................................................................................................................... 114 ISSUE PROCEDURE...................................................................................................................................118 SECTION VIII: MAIN PROVISIONS OF ARTICLES OF ASSOCIATION ............................. 157 SECTION IX: OTHER INFORMATION ....................................................................................... 170 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ........................................ 170 DECLARATION ............................................................................................................................ 172 THANGAMAYIL JEWELLERY LIMITED SECTION I: GENERAL DEFINITIONS AND ABBREVIATIONS Term Description “the Issuer”, “the Unless the context otherwise indicates or implies, refers to Thangamayil Company”, “the Jewellery Limited a Public Limited Company under the Companies Act, company” or “TMJL” 1956. Company Related Terms Term Description Articles Articles of Association of the Company Auditors The statutory auditors of the Company, B. Thiagarajan & Co., Chartered Accountants Board/Board of Board of Directors of the company including a duly constituted committee Directors thereof Directors Directors of Thangamayil Jewellery Limited, unless otherwise specified Key Management Those individuals described in “Our Management – Key Management Personnel Personnel” on page 68 of this Prospectus Memorandum Memorandum of Association of the company Promoters Mr. Balarama Govinda Das, Mr. Ba. Ramesh and Mr. N.B. Kumar Registered and 124, Nethaji Road, Madurai 625 001 Corporate Office of the company Issue Related Terms Term Description Allotment/Allotment of Unless the context otherwise requires, the allotment of Equity Shares Equity Shares pursuant to the Issue Allottee A successful Bidder to whom the Equity Shares are Allotted ASBA/ Application An application for subscribing to an issue, containing an authorisation to Supported by Blocked block the application money in a bank account. Amount ASBA Investor/ ASBA An Investor who intends to apply through ASBA process and Bidder (a) is a “non QIB Investor”; (b) is applying through blocking of funds in a bank account with the SCSB; ASBA Form Bid cum Application form for ASBA Investor intending to subscribe through ASBA Banker(s) to the Issue Axis bank, HDFC Bank, HSBC Bank, ICICI Bank and Oriental Bank of Commerce Basis of Allotment The basis on which Equity Shares will be Allotted to Bidders under the Issue and which is described in “Issue Procedure – Basis of Allotment” on page 140 of this Prospectus Bid An indication to make an offer during the Bidding Period by a prospective investor to subscribe to the Equity Shares of the company at a price within the Price Band, including all revisions and modifications thereto Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid in the Issue Bid/Issue Closing Date The date after which the members of the Syndicate will not accept any Bids for this Issue, which shall be notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper Bid /Issue Opening Date The date on which the members 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 Bid cum Application The form used by a Bidder to make a Bid and which will be considered as Form the application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid cum Application Form i THANGAMAYIL JEWELLERY LIMITED Term Description Bidding/Issue Period 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, including any revisions thereof Book Building Process/ Book building route as provided in Schedule XI of the SEBI (ICDR) Method Regulations,2009 in terms of which this Issue is being made BRLM/Book Running Book Running Lead Manager to this Issue, in this case being Keynote Lead Manager Corporate Service Limited CAN/Confirmation of Means the note or advice or intimation of allocation of Equity Shares sent Allocation Note to the Bidders who have been allocated Equity Shares after discovery of the Issue Price in accordance with the Book Building Process Cap Price The higher end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted Cut-off Price Any price within the Price band finalised by the Company in consultation with the Book Running Lead Manager. A Bid submitted at Cut-off Price is a valid price at all levels within the Price Band Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time Depositories Act The Depositories Act, 1996, as amended from time to time Depository Participant A depository participant as defined under the Depositories Act Designated Date 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 Designated Stock Exchange Bombay Stock Exchange Limited DP ID Depository Participant’s Identity Red Herring Prospectus The Red Herring Prospectus filed with SEBI, which does not have complete or DRHP particulars on the price at which the Equity Shares are offered and size of the Issue. Employee, Employees or A permanent and full-time employee or a Director of the Company, as on Eligible Employees (in the date of the Red Herring Prospectus, who is a person resident in India the Employee (as defined under the FEMA) and who continues to be in the employment Reservation Portion) of the Company until submission of the Bid- cum-Application Form. They do not include employees of the Promoters and the Promoter Group. Employee Reservation The portion of the Issue, being a maximum of Rs. 90.00 lacs available for Portion allocation to the Employees. Equity Shares Equity shares of the company of Rs. 10 each unless otherwise specified Escrow Account Account opened with the Escrow Collection Bank(s) for the Issue and in whose favour the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid Escrow Agreement Agreement to be entered into by the company, the Registrar to the Issue, the Book Running Lead Manager, the Syndicate Members and the Escrow Collection Bank(s) for collection of the Bid Amounts and where applicable, refunds of the amounts collected to the Bidders on the terms and conditions thereof Escrow Collection The banks which are clearing members and registered with SEBI as Banker Bank(s) to the Issue with whom the Escrow Account will be opened First Bidder The Bidder whose name appears first in the Bid cum Application Form or Revision Form Floor Price The lower end of the Price Band, at or above which the Issue Price will be finalised and below which no Bids will be accepted Indian National As used in the context of a citizen of India’s defined under the Indian Citizenship Act, 1955, as amended, who is not a NRI Issue The public issue of 38,33,667 Equity Shares of Rs. 10 each for cash at a price of Rs. 75.00 each aggregating to Rs. 2875.25 lacs 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 the company in consultation with the BRLM on the Pricing Date Issue Proceeds The proceeds of the Issue that are available to the Company Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid, being 10% to 100% of the Bid Amount i i THANGAMAYIL JEWELLERY LIMITED Term Description Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996 Mutual Fund Portion 5% of the QIB Portion or 92,842 Equity Shares (assuming the QIB Portion is for 50% of the Issue Size) available for allocation to Mutual Funds only, out of the QIB Portion Net issue The Issue other than the Equity Shares included in the Employee Reservation Portion, subject to any addition of Equity Shares pursuant to any under-subscription under the Employee Reservation Portion aggregating to Rs. 2785.25 lacs. Net Proceeds The Issue Proceeds less the Issue expenses. For further information about use of the Issue Proceeds and the Issue expenses see “Objects of the Issue” on page 24 of this Prospectus Non-Institutional All Bidders that are not QIBs or Retail Individual Bidders and who have Bidders Bid for Equity Shares for an amount more than Rs. 100,000/- (but not including NRI’s other than eligible NRI’s) Non-Institutional Portion The portion of the Issue being not less than 15% of the Issue consisting of 5,5,7050 Equity Shares of Rs. 10/- each aggregating to Rs. 417.79 lacs available for allocation to Non-Institutional Bidders Pay-in Date Bid Closing Date or the last date specified in the CAN sent to Bidders, as applicable Pay-in-Period 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 With respect to 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 Price Band Price band of a minimum price (floor of the price band) of Rs. 70.00 and the maximum price (cap of the price band) of Rs. 75.00 and includes revisions thereof Pricing Date The date on which the company in consultation with the Book Running Lead Manager finalizes the Issue Price Prospectus The Prospectus to be filed with the RoC in accordance with Section 60 of the Companies Act, containing, inter alia, the Issue Price that is determined at the end of the Book Building process, the size of the Issue and certain other information Public Issue Account Account opened with the Bankers to the Issue to receive monies from the Escrow Account on the Designated Date QIB Margin Amount An amount representing at least 10% of the Bid Amount QIB Portion The portion of the Issue being upto 18,5,6834 Equity Shares of Rs. 10/- each aggregating to Rs. 1392.62 lacs being upto 50% of the Issue to be allotted to QIBs Qualified Institutional Public financial institutions as specified in Section 4A of the Companies Buyers or QIBs Act, FIIs, scheduled commercial banks, mutual funds registered with SEBI, venture capital funds registered with SEBI, state industrial development corporations, insurance companies registered with Insurance Regulatory and Development Authority, provident funds (subject to applicable law) with minimum corpus of Rs. 25 crores and pension funds with minimum corpus of Rs. 25 crores Red Herring Prospectus The Red Herring Prospectus issued in accordance with Section 60B of the or RHP Companies Act, which does not contain complete particulars of the price at which the Equity Shares are issued and the size (in terms of value) of the Issue Refund Account The account opened with Escrow Collection Bank(s), from which refunds, if any, of the whole or part of the Bid Amount shall be made Refund Banker Axis Bank Ltd. Refunds through Refunds through electronic transfer of funds means refunds through ECS, electronic transfer of Direct Credit or RTGS as applicable funds Registrar to the Issue Registrar to the Issue, in this case being S.K.D.C Consultants Limited, a company incorporated under the Companies Act and having its registered i i i THANGAMAYIL JEWELLERY LIMITED Term Description office at No. 11, Seth Narayandas Layout, Street No.1, West Power House Road, Coimbatore – 641 012. Retail Individual Individual Bidders (including HUFs applying through their Karta and Bidder(s) eligible NRI’s) who have not Bid for Equity Shares for an amount more than Rs. 100,000/- in any of the bidding options in the Issue. Retail Portion The portion of the Issue being up to 12,99,783 Equity Shares of Rs. 10/- each aggregating to Rs. 974.84 lacs, being not less than 35% of the Issue, available for allocation to Retail Individual Bidder(s) Revision Form 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) Stock Exchanges Bombay Stock Exchange Limited and National Stock Exchange of India Limited Syndicate The Book Running Lead Manager and the Syndicate Member Syndicate Agreement The agreement to be entered into between the Syndicate and the company in relation to the collection of Bids in this Issue Syndicate Members Keynote Capitals Limited TRS/ Transaction The slip or document issued by a member of the Syndicate to the Bidder as Registration Slip proof of registration of the Bid Underwriters The BRLM and the Syndicate Member Underwriting Agreement The agreement among the Underwriters and the company to be entered into on or after the Pricing Date Conventional and General Terms/ Abbreviations Term Description A/c Account Act or Companies Act Companies Act, 1956 and amendments thereto AGM Annual General Meeting AS Accounting Standards issued by the Institute of Chartered Accountants of India ASBA Application Supported by Blocked Amount AY Assessment Year BSE Bombay Stock Exchange Limited CAGR Compound Annual Growth Rate CDSL Central Depository Services (India) Limited Depositories NSDL and CDSL Depositories Act The Depositories Act, 1996 as amended from time to time DP/ Depository A depository participant as defined under the Depositories Act, 1996 Participant EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation ECS Electronic Clearing Service EGM Extraordinary General Meeting EPS Earnings Per Share i.e., profit after tax for a fiscal year divided by the weighted average outstanding number of equity shares at the end of that fiscal year FEMA Foreign Exchange Management Act, 1999 read with rules and regulations there under and amendments thereto FEMA Regulations FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 and amendments thereto FII(s) Foreign Institutional Investors as defined under SEBI (Foreign Institutional Investor) Regulations, 1995 registered with SEBI under applicable laws in India Financial Year/ Fiscal/ Period of twelve months ended March 31 of that particular year FY FVCI Foreign Venture Capital Investor registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 i v THANGAMAYIL JEWELLERY LIMITED Term Description GDP Gross Domestic Product GoI/Government Government of India HNI High Net worth Individual HUF Hindu Undivided Family INR/ Rs./ Rupees Indian Rupees, the legal currency of the Republic of India I.T. Act The Income Tax Act, 1961, as amended from time to time IPO Initial Public Offering MOU Memorandum of Understanding NA Not Applicable NAV Net Asset Value being paid up equity share capital plus free reserves (excluding reserves created out of revaluation) less deferred expenditure not written off (including miscellaneous not written off) and debit balance of Profit and Loss Account, divided by weighted average number of equity shares outstanding during the year NEFT National Electronic Fund Transfer NOC No Objection Certificate NR Non Resident NRE Account Non Resident External Account NRI Non Resident Indian, is a person resident outside India, as defined under FEMA and the FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 NRO Account Non Resident Ordinary Account NSDL National Securities Depository Limited NSE The National Stock Exchange of India Limited p.a. per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number allotted under the Income Tax Act, 1961 PAT Profit After Tax PBT Profit Before Tax RBI The Reserve Bank of India RoC The Registrar of Companies, Tamil Nadu (Chennai) is located at Shastri Bhavan, 1st Floor, 26, Haddows Road, Chennai 600 006 RONW Return on Net Worth RTGS Real Time Gross Settlement SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SEBI The Securities and Exchange Board of India constituted under the SEBI Act, 1992 SEBI Act Securities and Exchange Board of India Act 1992, as amended from time to time SEBI (ICDR) 2009 SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 SEBI Takeover Securities and Exchange Board of India (Substantial Acquisition of Shares Regulations and Takeovers) Regulations, 1997, as amended from time to time SIA Secretariat for Industrial Assistance SICA Sick Industrial Companies (Special Provisions) Act Stock Exchange(s) BSE and/ or NSE as the context may refer to UIN Unique Identification Number VCFs Venture Capital Funds as defined and registered with SEBI under the SEBI (Venture Capital Fund) Regulations, 1996, as amended from time to time v THANGAMAYIL JEWELLERY LIMITED Technical/ Industry Related Terms Term Description Carat The unit for determining weight of gemstones, 1 carat being equal to 0.2 grams GJEPC Gem & Jewellery Export Promotion Council Karatage Unit to determine the purity of gold Kg Kilogram Studded Jewellery Jewellery made of gold/platinum/silver which are studded by diamonds and/or precious stones or semi-precious stones 916 916 is the grade by which purity of gold is measured for 22 carat jewels. PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA Financial Data Unless stated otherwise, the financial data contained in this Prospectus is derived from the restated financial statements which have been prepared in accordance with SEBI (ICDR) Regulations, 2009 as of the years ended March 31, 2009, 2008, 2007, 2006 and 2005 and for the six months period ended September 30, 2009 prepared in accordance with Indian GAAP and are included in this Prospectus in Section I of the Financial Statement. The fiscal year commences on April 1 and ends on March 31 of the next year. In this Prospectus, any discrepancies in any table between the totals and the sum of the amounts listed are due to rounding off. Industry and Market Data Unless stated otherwise, industry and market data used throughout this Prospectus 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 the Company believes that industry data used in this Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed by us to be reliable, have not been verified by any independent sources. The extent to which the market and industry data used in this Prospectus is meaningful depends on the reader’s familiarity with and understanding of the methodologies used in compiling such data. Currency of Presentation All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of India. v i THANGAMAYIL JEWELLERY LIMITED FORWARD-LOOKING STATEMENTS This Prospectus contains certain “forward-looking statements”. These forward-looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe strategies, objectives, plans or goals of TMJL are also forward-looking statements. All forward- looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results and property valuations to differ materially from those contemplated by the relevant statement. Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with expectations of TMJL with respect to, but not limited to, regulatory changes pertaining to the industries in India in which TMJL has its businesses and its ability to respond to them, its ability to successfully implement its strategy, its growth and expansion, technological changes, its exposure to market risks, general economic and political conditions in India and which have an impact on its business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in the industry. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the following: 1. General economic and business conditions in the markets in which the Company operates and in the local, regional and national and international economies; 2. Changes in laws and regulations relating to the industries in which the Company operates; 3. Increased competition in these industries; 4. The nature of contracts with customers which contain inherent risks and contain certain provisions which, if exercised, could result in lower future income and negatively affect the profitability of TMJL; 5. Unanticipated variations in the duration, size and scope of the projects; 6. Changes in political and social conditions in India or in other countries that the Company may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; and 7. Any adverse outcome in the legal proceedings in which the Company is involved. For further discussion of factors that could cause actual results of the Company to differ from its expectations, see the sections titled “Risk Factors”, “Business Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages viii, 46 and 92 respectively, of this Prospectus. Neither the company nor any of the Underwriters nor any of their respective affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof. In accordance with SEBI requirements, the company and the BRLM will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges. v i i THANGAMAYIL JEWELLERY LIMITED SECTION II: RISK FACTORS Investing in the Equity Shares of the company involves substantial risks. In addition to the other information in this Prospectus, you should carefully consider the following factors before investing in the Equity Shares of the Company. Any of the risk factors described below could adversely affect business, financial condition and/or results of operations of TMJL. The market price of Equity Shares of TMJL could decline if one or more of these risks and uncertainties develop into actual events, causing you to lose all or part of the money you paid to buy Equity Shares. Certain statements in “Risk Factors” are forward-looking statements. See also “Forward-Looking Statements” on page vii of this Prospectus. INTERNAL RISK FACTORS Risks Related To the Issue and Business 1. The company is involved in certain of legal proceedings, which if decided against the Company, could impact income and financial condition of the Company. The Company is involved in certain legal proceedings, which are detailed as below. Any rulings by appellate courts against the company would have a material impact on the cash flows which may affect the operations of the company. Cases filed against the Company Sr. Nature of Case Total Number of pending Financial Implication No. cases/ show cause notices/ (to the extent quantifiable) summons (Rs. in Lacs) 1. Civil 2 56.99 The amount involved is the amount expressly claimed, being the liability and financial impact which may be incurred by the company if they are unsuccessful in the legal proceedings. For further details on the above litigation, please refer to the section titled “Outstanding Litigation and Material Developments” beginning on page 97 of this Prospectus. 2. Pending approval for the showroom at Nethaji Road Madurai showroom. TMJL is yet to receive permit from Madurai Corporation for the construction of its main showroom at 124, Nethaji Road, Madurai due to deviation in the construction from the approved plan. For further details of the same please refer to the section titled “Outstanding Litigation and Material Developments” beginning on page 97 of this Prospectus. 3. There are certain contingent liabilities not provided for in the balance sheet of the Company. If these contingent liabilities materialises, financial condition and results of operations of the Company could be adversely affected. Contingent liabilities not provided for as of March 31, 2009 and September 30, 2009 were Rs. 22.00 lacs and Rs. 30.00 lacs respectively. If these, or any other contingent liability materialises, the financial condition and results of operations of the Company could be adversely affected. For further details on the nature of contingent liabilities, please see ‘Financial Statements – Annexure IV on page 73. 4. The company has experienced negative cash flow from operations and from financing activities. Any negative cash flows in future could affect the results of operations and financial conditions. For the financial years March 31, 2005, 2007, 2008, 2009 and for the six months period ended v i ii