Cyan Magenta Yellow Black Red Herring Prospectus Please read Section 60B of the Companies Act, 1956 Dated 27th November, 2007 100% Book Built Issue ARIES AGRO LIMITED (The Company was originally incorporated as "Aries Agro-Vet Industries Private Limited" on 27th November, 1969 under the Companies Act, 1956 with the Registrar of Companies, Maharashtra and was converted into Public Limited Company under section 21 of the Companies Act, 1956 and the name was changed to "Aries Agro-Vet Industries Limited" on 30th December, 1994. The name of the Company was further changed to "Aries Agro Limited" and a fresh Certificate of Incorporation was obtained on 27th October 2006 from the Registrar of Companies, Maharashtra, Mumbai. For details of changes in the Registered Office of the Company, please refer to page no. 11 of this Red Herring Prospectus) Registered & Corporate Office: Aries House, Plot No.24, Deonar, Govandi (East), Mumbai 400 043 Tel No: +91 22 25564052/53 Fax No: +91 22 25564054/25502753 Contact Person/Compliance Officer: Mr. S. Ramamurthy, Chief Financial Officer E-mail: [email protected], Website: www.ariesagro.com INITIAL PUBLIC ISSUE OF 45,00,000 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PRICE OF RS. [(cid:122)(cid:122)(cid:122)(cid:122)(cid:122)] PER EQUITY SHARE (INCLUDING SHARE PREMIUM OF RS. [(cid:122)(cid:122)(cid:122)(cid:122)(cid:122)] PER EQUITY SHARE) AGGREGATING RS. [(cid:122)(cid:122)(cid:122)(cid:122)(cid:122)] LAKHS, (HEREINAFTER REFERRED TO AS “THE ISSUE”). THE ISSUE WOULD CONSTITUTE 34.61% OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF THE COMPANY. PRICE BAND: RS. 120/- TO RS.130/- PER EQUITY SHARE OF FACE VALUE OF RS 10/- THE ISSUE PRICE IS 12.0 TIMES OF THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND 13.0 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 ten working days. Any revision in the price band, and the revised Bidding/Issue period, if applicable, will be widely disseminated by notification to 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 website of the Book Running Lead Manager (BRLM) and at the terminals of the Syndicate Member(s). The Issue is being made through the 100% Book Building Process wherein up to 50% of the issue shall be allocated on proportionate basis to Qualified Institutional Buyers out of which 5% will be available for allocation on a proportionate basis to Mutual Funds. The remaining QIB portion shall be available for allotment on a proportionate basis to QIB bidders including Mutual Funds, subject to valid bids being received at or above the Issue Price. Further, not less than 15% of the issue would be allocated to Non-Institutional Bidders on proportionate basis and not less than 35% of the issue would be allocated to Retail Individual Bidders on a proportionate basis, subject to valid bids being received from them at or above the Issue Price. RISKS IN RELATION TO THE FIRST ISSUE This being the first issue 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 and the Issue Price is 12.0 times of the face value at the lower end of the price band and 13.0 times of the face value at the higher end of the price band. The Price Band (as determined by the Company in consultation with the Book Running Lead Manager (BRLM) on the basis of assessment of market demand for the Equity Shares by way of Book Building) 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. We have not opted for the grading of the Issue. GENERAL RISKS 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 the Company 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 Red Herring Prospectus. Specific attention of investors is invited to the section titled ‘Risk Factors’ beginning on page no. viii of this Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for, and confirms that this Red Herring Prospectus contains all information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this 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 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 offered through this Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). The in-principle approvals from BSE and NSE for the listing of Equity Shares have been received vide their letter nos. DCS/ IPO/SC/IPO-IP/0289/2007-08 dated May 22, 2007 and NSE/LIST/53368-A dated August 13, 2007 respectively. For the purposes of this Issue, BSE is the Designated Stock Exchange. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE SREI CAPITAL MARKETS LTD. AARTHI CONSULTANTS PRIVATE LIMITED 'Vishwakarma', 86 C Topsia Road (South) 1-2-285, Domalguda, Kolkata - 700 046, West Bengal, India Hyderabad - 500 029, Andhra Pradesh, India Tel : +91-33-39873845 Tel : +91-40-27634445 / 27642217 Fax: +91-33-39873861/3863 Fax: +91-40-27632184 E-Mail: [email protected] E-mail: [email protected] Investors Grievance E-mail: [email protected] Website: www.aarthiconsultants.com Website: www.srei.com SEBI Regn. No.: INR 000000379 SEBI Regn. No.: INM 000003762 ISSUE PROGRAMME BID/ISSUE OPENS ON : Friday, December 14, 2007 BID/ISSUE CLOSES ON : Wednesday, December 19, 2007 TABLE OF CONTENTS SECTION TITLE PAGE NO. SECTION I DEFINITIONS AND ABBREVIATIONS COMPANY RELATED TERMS i ISSUE RELATED TERMS i TECHNICAL AND INDUSTRY TERMS iv CONVENTIONAL AND GENERAL TERMS / ABBREVIATIONS v SECTION II RISK FACTORS CERTAIN CONVENTIONS; USE OF MARKET DATA vii FORWARD LOOKING STATEMENTS vii RISK FACTORS viii SECTION III INTRODUCTION SUMMARY OF OUR INDUSTRY, BUSINESS, STRENGTHS & STRATEGY 1 THE ISSUE 5 SUMMARY OF FINANCIAL AND OPERATING INFORMATION 6 GENERAL INFORMATION 11 CAPITAL STRUCTURE 19 OBJECTS OF THE ISSUE 30 BASIC TERMS OF ISSUE 67 BASIS FOR ISSUE PRICE 69 STATEMENT OF TAX BENEFITS 73 SECTION IV ABOUT THE COMPANY INDUSTRY OVERVIEW 81 BUSINESS OVERVIEW 93 HISTORY OF THE COMPANY AND OTHER CORPORATE MATTERS 140 MANAGEMENT AND ORGANIZATION 147 PROMOTERS 161 RELATED PARTY TRANSACTIONS 162 CURRENCY OF PRESENTATION 163 DIVIDEND POLICY 163 SECTION V FINANCIAL INFORMATION AUDITORS REPORT AND FINANCIAL STATEMENTS (AS RESTATED) 164 FINANCIAL AND OTHER INFORMATION OF COMPANIES/FIRMS/ TRUSTS PROMOTED/CONTROLLED BY THE PROMOTERS 244 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 252 SECTION VI LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATIONS AND DEFAULTS 261 MATERIAL DEVELOPMENTS 270 GOVERNMENT APPROVALS/LICENSING ARRANGEMENTS 271 SECTION VII OTHER REGULATORY AND STATUTORY DISCLOSURES 283 SECTION VIII ISSUE RELATED INFORMATION TERMS OF THE ISSUE 291 ISSUE STRUCTURE 294 ISSUE PROCEDURE 295 SECTION IX MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY 321 SECTION X OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 351 DECLARATION 353 SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS COMPANY RELATED TERMS Terms Description “Aries Agro Limited” or “Aries” or Unless the context otherwise require, refers to, Aries Agro Limited, a “Aries Agro” or “the Company” or Public limited company incorporated under the Companies Act, 1956 “Issuer” or “We” or “us” or “our” and having its registered office at Aries House, Plot No.24, Deonar, Govandi (East), Mumbai 400 043 Promoter(s) Shall mean jointly Dr. T.B. Mirchandani Dr. Jimmy Mirchandani Dr. Rahul Mirchandani Promoter’s Group As defined in Explanation II of Clause 6.8.3.2 of SEBI (Disclosure and Investor Protection) Guidelines, 2000 and amendments thereof Promoters’ Group includes: Mr. Akshay Mirchandani Mr. Amol Mirchandani Mrs. Sarasa Mirchandani Mrs. Nitya Mirchandani Mr. Ashok Mirchandani Mrs. Meenaxi Subramanian Mrs. Jayanti Gopalakrishnan Group Companies/ Firms Aries Marketing Limited Aries East West Nutrients Pvt Ltd Mirabelle International Blossoms International Ltd Sreeni Agro Chemicals Pvt Ltd Golden Harvest Middle East (FZC) Articles / Articles of Association/AoA Articles of Association of Aries Agro Ltd. Auditors The statutory auditors of the Company, M/s Kirti D Shah & Associates, Chartered Accountants Board/Board of Directors Board of Directors of Aries Agro Limited or a committee thereof Director(s) Director(s) of Aries, unless otherwise specified Subsidiary Companies Aries Agro Care Private Limited Aries Agro Equipments Private Limited You Unless the context otherwise requires, refers to, investors. ISSUE RELATED TERMS Term Description Allotment/Allotted Unless the context otherwise requires, the issue/ allotment of Equity Shares of the Company pursuant to this Issue to the successful Bidders. Allottee The successful Bidder to whom the Equity Shares are being/have been Issued / allotted. Banker(s) to the Issue ICICI Bank Limited, HDFC Bank Limited and Axis Bank Limited Bid An offer made by a prospective investor to subscribe to or purchase the Equity Shares of the Company at a price within the Price Band, during the Bidding Period and includes 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 Syndicate Members to the Issue will not accept any Bids for the issue; any such date shall be notified through a notice in a widely circulated English national newspaper, a Hindi national newspaper and a Marathi news paper i Bid / Issue Opening Date The date on which the Syndicate Members to the Issue shall start accepting Bids for the Issue; any such date shall be notified through a notice in a widely circulated English national newspaper, a Hindi national newspaper and a Marathi news paper Bid-cum-Application Form The form in terms of which the Bidder shall make an offer to subscribe to or purchase the Equity Shares of the Company and which will be considered as the application for issue of the Equity Shares pursuant to the terms of this Red Herring Prospectus Bidder(s) Any prospective investor who makes a Bid for Equity Shares in terms of this Red Herring Prospectus and the Bid-cum-Application form through the Book Building Process Bidding / Issue Period The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which period prospective investors can submit their Bids. Book Building Process / Method Book building route as provided in Chapter XI of the SEBI Guidelines, in terms of which this Issue is made BRLM/Book Running Lead Manager Book Running Lead Manager, in this case being SREI Capital Markets Limited CAN / Confirmation of Means the note, advice or intimation of allocation of Equity Shares Allocation Note sent 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, Rs. 130/- per equity share in the issue above which the Issue Price will not be finalized and above which no bids will be accepted Companies Act/ The Act The Companies Act, 1956, as amended from time to time. Cut-off / Cut-off Price Any price within the Price Band finalised by the Company in consultation with the BRLMs. A Bid submitted at Cut-off Price is a valid Bid at all Price levels within the Price Band Depositories Act The Depositories Act, 1996, as amended from time to time Depository/Depositories A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time Designated Date The date on which Escrow Collection Banks transfer the funds from the Escrow Account to the Public Issue Account after the Prospectus is filed with the ROC, following which the Board of Directors shall transfer/allot the Equity Shares to successful Bidders Depository Participant / DP A depository participant as defined under the Depositories Act Designated Stock Exchange Bombay Stock Exchange Limited Draft Red Herring Prospectus/ DRHP The Draft Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, 1956 and SEBI Guidelines, which does not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue. Eligible NRI NRI from such jurisdiction outside India where it is lawful to make an offer or invitation under the issue. Equity Shares Equity Shares of the Company of face value of Rs. 10 each unless otherwise specified in the context thereof Escrow Account Account opened with the Escrow Collection Bank and in whose favour the Bidder will Issue cheques/drafts in respect of the Bid amount/margin money, when submitting a Bid Escrow Agreement Agreement entered into amongst the Company, the Registrar, the Escrow Collection Bank(s) and BRLMs for collection of the Bid Amounts and for remitting refunds, if any of the amounts collected to the Bidders Escrow Collection Bank(s) The banks, which are clearing members and registered with SEBI as Bankers to the Issue and with whom the Escrow Account will be opened in this Issue. FII(s)/Foreign Institutional Investors Foreign institutional investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India First Bidder The bidder whose name appears first in the bid cum application ii form or revision form Floor Price The lower end of the Price Band, Rs. 120/- per equity share in the Issue below which the Issue Price will not be finalised and below which no bids will be accepted Fresh Issue/ Issue/ Public Issue/ Offer Public Issue of 45,00,000 Equity Shares of Rs. 10 each for cash at the Issue Price of Rs. [•] aggregating to Rs. [•] lakhs by the Company in terms of this Red Herring Prospectus FVCI Foreign Venture Capital Investor registered under the SEBI (Foreign Venture Capital Investor) Regulations, 2000 Income Tax Act The Income Tax Act, 1961, as amended from time to time Issue Price The final price at which Equity Shares will be Allotted in terms of the Prospectus, as determined Issue Account Account opened with the Banker(s) to the Issue to receive monies from the Escrow Accounts for the Issue on the Designated Date Issuer Aries Agro Limited 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 Memorandum of The Memorandum of Association of Aries Agro Limited Association/Memorandum/MOA Mutual Funds Mutual funds registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996. Mutual Fund Portion 5% of the QIB Portion or 1,12,500 Equity Shares (assuming the QIB Portion is for 50% of the Issue size) available for allocation to Mutual Funds only on proportionate basis, out of the QIB Portion. 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. 100,000 Non-Institutional Portion The portion of the Issue Size being 6,75,000 Equity Shares of Rs.10 each available for allocation to Non Institutional Bidders on proportionate basis OCB / Overseas Corporate Body Means and includes an entity defined in Clause (xi) of Regulation 2 of the Foreign Exchange Management (Transfer or Issue of Securities by a person Resident outside India) Regulations, 2000 and which was in existence on the date of commencement of the withdrawal of general permission to Overseas Body Corporate Regulations, 2003 and immediate prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Foreign Exchange Management (Transfer or Issue of Securities by a person Resident outside India) Regulations, 2000. Pay-in-Date Bid/Issue closing date or the last date specified in the CAN sent to Bidders as applicable Price Band The price band with a minimum price (Floor Price) of Rs. 120/- and the maximum price (Cap Price) of Rs. 130/- per Equity Share, including any revisions thereof. Pay-in-Period i. With respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid Opening Date and extending until the Bid Closing Date, and ii. With respect to Bidders whose Margin Amount is less than 100% of the Bid Amount, the period commencing on the Bid Opening Date and extending until the closure of the Pay-in Date Pricing Date The date on which the Company in consultation with the BRLMs finalises the Issue Price Prospectus The Prospectus filed with the RoC 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 for the Issue on the Designated Date. Qualified Institutional Buyers/QIB Public Financial Institutions as specified in Section 4A of the Companies Act, Scheduled Commercial Banks, Mutual Funds registered with SEBI, Foreign Institutional Investors registered iii with SEBI, Multilateral & 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 the Insurance Regulatory And Development Authority (IRDA), Provident Funds with minimum corpus of Rs. 2500 Lakhs and Pension Funds with minimum corpus of Rs. 2500 Lakhs QIB Portion The portion of the issue size being 22,50,000 Equity Shares of Rs.10 each available for allocation to QIB Bidder(s) QIB Margin amount An Amount representing at least 10% of the Bid Amount Refund Banker HDFC Bank Limited Refunds through electronic transfer of Refunds through electronic transfer of funds means Refunds funds through ECS, Direct Credit or RTGS as applicable. Registrar/Registrar to the Issue Registrar to the issue, in this case Aarthi Consultants Private Limited having its registered office at 1-2-285, Domalguda, Hyderabad – 500 029. Retail Individual Bidders Individual Bidders (including HUFs) who have bid for Equity Shares for an amount less than or equal to Rs. 1,00,000. Retail Portion The portion of the Issue size being 15,75,000 Equity Shares of Rs. 10 each 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) RHP/Red Herring Prospectus Means this offer document 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 the size of the Issue. The Red Herring Prospectus which will be filed with the RoC at least 3 days before the Bid Opening Date and will become a Prospectus after filing with the RoC after pricing and allocation. ROC/Registrar of Companies Registrar of Companies, Maharashtra, Mumbai SCML/SREI SREI Capital Markets Limited a public limited company incorporated under the provisions of the Companies Act, 1956 and with its registered office at “Vishwakarma”, 86 C, Topsia Road, (South), Kolkata-700 046 Stock Exchanges The BSE and the NSE Syndicate The BRLMs and Syndicate Member(s). Syndicate Agreement The agreement to be entered into among the Syndicate Members and the Company in relation to the collection of bids in this Issue Syndicate Member Aum Capital Market Private Limited TRS or Transaction Registration Slip The slip or document issued by the Syndicate Members to the Bidder as proof of registration of the Bid. Underwriters [•] Underwriting Agreement The agreement between the Underwriters and the Company to be entered into on or after the Pricing Date VCFs Venture Capital Funds as defined and registered with SEBI under the SEBI (Venture Capital Fund) Regulations, 1996, as amended from time to time. TECHNICAL AND INDUSTRY TERMS Term Description (NH ) Mo O .4H O Ammonium Molybdate 4 6 7 24 2 AIBP Accelerated Irrigation Benefit Programme B Boron Ca Calcium Cl Chorine Co Cobalt Cu Copper CuSO .5H O Copper Sulphate Pentahydrate 4 2 DAP Di Ammonium Phosphate DCP Di-Calcium Phosphate iv DTPA Di-ethylene-tri-amine-penta-acetic acid EDDHA Ethylene-diamine(o-dihydroxyphenyl) acetic acid EDTA Ethylene-diaminetetraacetic acid FAI Fertilizer Association of India FCO Fertilizer Control Order, 1985 Fe Iron Fe – EDTA Chelated Iron FeSO .7H O Ferrous Sulphate 4 2 FSI Floor Space Index HEDTA Hydroxy-ethyl-ethylene-diamine-tri-acetic acid IMMA Indian Micro Fertilizers Manufacturers Association K Potassium KCl Potassium Chloride Mg Magnesium Mn Manganese MnSO .4H O Manganese Sulphate 4 2 Mo Molybdenum MOP Muriate of Potash MT/Mt Metric Tonnes N Nitrogen Na B O .10 H O Borax or Sodium Borate 2 4 7 2 NTA Nitrilotriacetic acid OGL Open General License P Phosphorous pH pondus hydrogenii (latin term for Measure of acidity) ppm Parts per million S Sulphur TDR Transferable Development Rights Zn Zinc Zn – EDTA Chelated Zinc ZnSO .7H O Zinc Sulphate Monohydrate 4 2 CONVENTIONAL AND GENERAL TERMS / ABBREVIATION Term Description Act or Companies Act Companies Act, 1956 and amendments thereto AED Monetary Unit used in UAE AGM Annual General Meeting of the shareholders AS Accounting Standards issued by the Institute of Chartered Accountants of India AY Assessment Year BSE Bombay Stock Exchange Ltd. CAGR Compounded Annual Growth rate CDSL Central Depository Services (India) Limited cm Centimeter DIP Guidelines SEBI (Disclosure & Investor Protection) Guidelines, 2000, as amended DP ID Depository Participant’s Identity ECS Electronic Clearing Service EGM Extraordinary General Meeting of the shareholders EPS Earnings Per Share FCNR Account Foreign Currency Non Resident Account FDI Foreign Direct Investment FEMA Foreign Exchange Management Act, 1999, as amended from time to time, and the Regulations framed there under. FIPB Foreign Investment Promotion Board FY / Fiscal/Financial Year Period of twelve months ended March 31 of that particular year, unless otherwise stated FZC Free Zone Company (in UAE) GIR Number General Index Registry Number Golden Harvest Golden Harvest Middle East (FZC), A Company incorporated in UAE GOI Government of India v Term Description GDP Gross Domestic Product HUF Hindu Undivided Family Ha Hectare ICAI Institute of Chartered Accountants of India IPO Initial Public Offering IMMA Indian Micro-Fertilisers Manufacturers Association I.T. Act The Income Tax Act, 1961, as amended from time to time LLC Limited Liability Company MOF Ministry of Finance, Government Of India MOU Memorandum of Understanding Mt Metric tonne NA Not Applicable NAV Net Asset Value NEFT National Electronic Funds Transfer NR Non Resident NRE Account Non-Resident External Account NRI Non-Resident Indian, as defined under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended. NRO Account Non Resident Ordinary Account NSDL National Securities Depository Limited OGL Open General Licence PAN Permanent Account Number PAT Profits After Taxation PBT Profits Before Taxation P/E Ratio Price/Earnings Ratio RBI The Reserve Bank of India RONW Return on Net Worth Rs. / Rupees / INR Indian Rupees RTGS Real Time Gross Settlement SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SCRA Securities Contract (Regulation) Act, 1956, as amended from time to time SEBI Securities and Exchange Board of India constituted under the SEBI Act. SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to time SEBI DIP Guidelines SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by SEBI effective from January 27, 2000, as amended, including instructions and clarifications issued by SEBI from time to time SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as amended. TAN Tax Account Number tpa/TPA Tonnes Per Annum UAE United Arab Emirates WOS Wholly Owned Subsidiary vi SECTION II RISK FACTORS i. CERTAIN CONVENTIONS; USE OF FINANCIAL & MARKET DATA Unless stated otherwise, the financial data in this Red Herring Prospectus is derived from the restated financial statements as of and for the years ended March 31, 2003, 2004, 2005, 2006, 2007 and for the four months ended 31st July, 2007, prepared in accordance with Indian GAAP, the Companies Act, 1956 and restated in accordance with SEBI Guidelines, as stated in the report of our Statutory Auditors, M/s. Kirti D Shah & Associates, Chartered Accountants, included on page 164 of this Red Herring Prospectus. The fiscal year commences on April 1 and ends on March 31. In this Red Herring Prospectus, unless the context otherwise requires, all references to one gender also refers to another gender and the word "Lakh" or "Lac" means "one hundred thousand" and the word "million" means "ten lac" and the word "Crore" means "ten million". In this Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. All references to “India” contained in this Red Herring Prospectus are to the Republic of India. All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. All references to “AED”, are to the monetary unit used in United Arab Emirates. Market and Industry Data used throughout this Red Herring Prospectus has been obtained from publications available in the public domain and internal Company reports. These publications generally state that the information contained therein has been obtained from sources believed to be reliable but their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe the industry data used in this Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed by the Company to be reliable, have not been verified by any independent source. FORWARD-LOOKING STATEMENTS This Red Herring Prospectus contains certain “forward-looking statements”. These forward looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals are also 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 the expectations include, but are not limited to: • Dependence of Indian Agriculture on monsoon and weather conditions • Changes in law and regulations that apply to Agri-business in India • Increasing competition and the conditions of the customers of the Company and the micronutrients/agro-chemical industry • Changes in Government policies towards our industry • The Company’s ability to successfully implement its strategy, growth and expansion plans; • General economic and business conditions in the markets in which we operate and in the local, regional and national economies. • Changes in the value of the Rupee vis-à-vis other currencies • Changes in political and socio-economic conditions in India. • The Company’s ability to meet its capital expenditure requirements; For further discussion of factors that could cause the actual results to differ, please refer to the section titled “Risk Factors”, “ Business Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page viii, 93 and 252 of this 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 the Company, the Directors, any member 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, the Company and the BRLM will ensure that investors in India are informed of material developments until such time of the grant of listing and trading permission by the Stock Exchanges. vii ii. RISK FACTORS An investment in equity shares involves a high degree of risk. You should carefully consider all of the information in this Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in the Equity Shares of the Company. If any of the following risks actually occur, the Company’s business, results of operations and financial condition could suffer, the trading price of its Equity Shares could decline, and you may lose all or part of your investment. Unless specified or quantified in the relevant risk factors below, the Company is not in a position to quantify the financial or other implication of any of the risks mentioned herein under: 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 future. Internal Risk Factors: 1. There are qualifications for non provisioning of certain expenses in the Auditors Report to Accounts To meet the provisioning requirements in respect of Gratuity, the Company has opted for Life Insurance Corporation of India’s Group Gratuity Scheme for its employees. The total contribution payable including arrears as per Life Insurance Corporation of India as on 31/03/2007 is Rs. 126.24 lakhs. The Company has provided Rs. 37.00 lakhs in audited accounts for FY 2005-06, FY 2006-07 and for the four month period ended 31st July, 2007 and has also provided additional Rs. 40 lakhs (pertaining to period FY 2001- 02 to FY 2004-05) in these restated Accounts. The balance liability of Rs. 49.24 lakhs pertaining to period prior to 1.4.2001 remains unprovided for. The Company has not taken the credit for deferred Tax asset of Rs. 16.58 lakhs on such unprovided liability. Due to this the Reserves and Surplus are higher by Rs. 32.66 lakhs, Current Liabilities and Provisions are lower by Rs. 49.24 lakhs and Deferred Tax Liability is higher by Rs. 16.58 lakhs. Management Perception We intend to pay unprovided liability in 5 equal installments as permitted by Life Insurance Corporation of India and will provide the liability in the year of payment. 2. Majority of the Trade Marks of our Company are not registered and in case we do not receive the new registrations or renewal of the existing registrations, it may affect our business goodwill on account of possible misuse by any third party. We have Certificates of Registration in our name for 18 Trade Marks, out of which 3 have been applied for renewal. The Trade Marks are renewed from time to time from the Registrar of Trademarks, Mumbai for our various products in routine course. We have also applied to the Trade Marks Registry for registration of 24 Trade Marks (including Logo). The Registration of Trade Mark is normally valid for 10 years from the date of the application and may be subsequently renewed. Non-receipt of the new registrations and non- renewal of Trademarks applied for by us may affect our business goodwill on account of possible misuse by any third party. For details of trade marks expired and applications for renewal and the new registration applications, please refer to the section titled ‘Intellectual Property’ on page 103 of the Red Herring Prospectus. Management Perception We do not foresee any difficulty in getting the registration/renewals of these trade marks. Although there is likelihood of Company losing busiess or goodwill on account of use or misuse of our trademarks by any third party or concern, we have been using the trademarks and logo consistently and therefore believe that we have a proprietory right and ownership over the logo and trademarks. 3. Some of secretarial and accounting records were damaged / lost / washed out from the Company’s premises in the unprecedented floods in Mumbai during the month of July, 2005. We have vide our letter dated 25th August, 2005 intimated the Senior Inspector, Deonar Police viii