KLG SYSTEL LIMITED

(incorporated as a public limited Company under the Indian Companies Act with Registration No. 05-34348)
US$ 22,000,000
1% Unsecured Foreign Currency Convertible Bonds Due 2012
Convertible into Ordinary Shares of KLG Systel Limited.
ISSUE PRICE: 100 per cent.
The US$ 22,000,000 1% Unsecured Foreign Currency Convertible Bonds due 2012 (the "Bonds") will be issued
by KLG Systel Limited ("KLG" or the "Company").
The Bonds will bear interest at the rate of 1% per annum, payable semi annually in arrears on September 26 and
March 26. The first Interest Payment Date will be September 26, 2007. The Bonds are convertible at any time on
and after March 26, 2007 up to the close of business on March 16, 2012 by holders into fully paid Shares with full
voting rights with a par value of Rs.10 each of the Company (the "Shares") at an initial Conversion Price (as
defined in the "Terms and Conditions of the Bonds") of Rs. .400.00 per Share with a fixed rate of exchange on
conversion of Rs.43.70 to US $1.00. The Conversion Price is subject to adjustment in certain circumstances. The
closing price of the Shares on the Bombay Stock Exchange Limited (the "BSE") on 23 March 2007 was Rs.
297.40 per Share and on the National Stock Exchange of India Limited (the "NSE", together with the BSE the
"Indian Stock Exchanges") on 23 March 2007 was Rs. 297.20 per Share. For the terms of conversion rights, see
"Terms and Conditions of the Bonds".
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE BONDS, SEE "RISK FACTORS".
The Bonds will be represented initially by a single Global Certificate (as defined herein) in registered form,
deposited with and registered in the name of a nominee of the common depositary for Euroclear Bank S.A./N.V.
("Euroclear") and Clearstream Banking, socit anonyme ("Clearstream, Luxembourg") (together, the "Clearing
Systems") on or about March 26, 2007 (the "Issue Date") for the accounts of their respective accountholders.
The Bonds and the Shares issuable upon conversion of the Bonds have not been and will not be registered under
the US Securities Act of 1933, as amended (the "Securities Act") and, unless the Bonds and such Shares are
registered under the Securities Act or an exemption from the requirements of the Securities Act is available, may
not be offered or sold within the United States. The Bonds may not be offered or sold directly or indirectly in India
or to, or for the account or benefit of, any resident of India.
A copy of this Offering Circular will be delivered for record purposes only to the Indian Stock Exchanges, SEBI
and the Registrar of Companies.
The Bonds are of a specialist nature and should only be bought and traded by investors who are
particularly knowledgeable in investment matters. In making an investment decision, prospective investors
must rely on their own examination of the Company and the terms of the Offer, including the risks
involved. For a discussion of certain factors that should be considered in connection with an investment in
the Bonds, see the section of this Offering Circular headed "Risk Factors" on page 44.
Global Coordinator, Lead Manager & Book runner

Elara Capital plc

29 Marylebone Road, London NW1 5JX, United Kingdom
Tel: +44 20 7486 9733 Fax: +44 20 7486 4776
Email newissues@elaracapital.com Web www.elaracapital.com

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Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed in US dollars on
March 27, 2012 at 143.775 per cent. of their principal amount. The Bonds may be redeemed, in whole but not in
part, at any time at the option of the Company at their Accreted Principal Amount if less than 10 per cent. of the
aggregate principal amount of the Bonds originally issued is outstanding. The Bonds may also be redeemed in
whole but not in part at any time at the option of the Company at their Accreted Principal Amount in the event of
certain changes relating to taxation in India. The Company will, at the option of any holder of any Bonds, redeem
such holder's Bonds at their Accreted Principal Amount upon a Delisting (as defined in the "Terms and Conditions
of the Bonds") of the Shares or upon the occurrence of a Relevant Event (as defined in the "Terms and Conditions
of the Bonds") in respect of the Company. See "Terms and Conditions of the Bonds - Redemption, Purchase and
Cancellation".
In-principle approval has been received for the listing of the Bonds on the Singapore Exchange Securities Trading
Limited (the "SGX-ST"). Acceptance of subscription applications will be conditional upon the issue of the Bonds
and upon permission being granted to list all of the Bonds by the SGX-ST. Monies paid in respect of subscriptions
will be returned if such permission is not granted. The SGX-ST assumes no responsibility for the correctness of any
statements made, opinions expressed or reports contained herein. Admission of the Bonds to the Official List of the
SGX-ST is not to be taken as an indication of the merits of the Company or the Bonds. The Bonds will be traded on
the SGX-ST in minimum bond lot sizes of U.S.$200,000 as long as any of the Bonds remain listed on the SGX-ST.
No application has been made to list the Bonds on any stock exchange other than the SGX-ST. The Company has
undertaken to apply to have the Shares issuable upon conversion of the Bonds approved for listing on the NSE and
the BSE.
The Company accepts full responsibility for the information contained in this Offering Circular and, having made
all reasonable enquiries, confirms that this Offering Circular contains all information with respect to the Company,
the Bonds and the Shares which is material in the context of the issue and offering of the Bonds and that the
information contained in this Offering Circular, to the best of its knowledge, is in accordance with the facts in all
material respects and contains no omission of a fact or matter (i) which was or is necessary to enable investors and
their investment advisers to make an informed assessment of the assets and liabilities, financial position, profits and
losses and prospects of the Company and of an investment in the Bonds, (ii) the omission of which made or makes
any statement herein misleading in any material respect or (iii) in the context of the issue and offering of the Bonds
was or is material for disclosure herein. The statements contained in this Offering Circular relating to the Company,
the Bonds and the Shares are in every material particular true and accurate and not misleading and the opinions and
intentions expressed in this Offering Circular with regard to the Company, the Bonds and the Shares are honestly
held, have been reached after considering all relevant circumstances and information which is presently available to
the Company, and are based on reasonable assumptions. There are no other facts in relation to the Company, the
Bonds and the Shares the omission of which would, in the context of the issue and offering of the Bonds, make any
statement in this Offering Circular misleading in any material respect and all reasonable enquiries have been made
by the Company to ascertain such facts and to verify the accuracy of all such information and statements.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Company, Elara Capital
plc (the "Lead Manager"), The Bank Of New York, London Branch (the "Trustee") or the Agents (as defined in the
Terms and Conditions of the Bonds) to subscribe for or purchase, any of the Bonds, and may not be used for the
purpose of an offer to, or a solicitation by, any person in any jurisdiction in which such offer or invitation would be
unlawful. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be
restricted by law. Persons into whose possession this Offering Circular comes are required by the Company and the
Lead Manager to inform themselves about and to observe any such restrictions. For a description of certain further
restrictions on offers and sales of the Bonds and distribution of this Offering Circular, see "Subscription and Sale".
None of the Lead Manager, the Trustee, the Agents or any of their respective affiliates has separately verified the
information contained in this Offering Circular. Accordingly, no representation, warranty or undertaking, express or
implied, is made and no responsibility or liability is accepted by the Lead Manager, the Trustee or the Agents or
legal advisors as to the accuracy or completeness of the information contained in this Offering Circular or any other
information supplied in connection with the Bonds or the Shares. Each person receiving this Offering Circular
acknowledges that such person has not relied on the Lead Manager, the Trustee or the Agents or their respective
legal advisors or on any person affiliated with the Lead Manager, the Trustee or the Agents in connection with its
investigation of the accuracy of such information or its investment decision and each such person must rely on its
own examination of the Company and the merits and risks involved in investing in the Bonds. Neither the delivery
of this Offering Circular nor any sale made in connection with the offer of the Bonds shall, under any
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circumstances, create any implication that the information contained herein is correct as at any time subsequent to
the date hereof. Prospective investors should not construe anything in this Offering Circular as legal, business or tax
advice. Each prospective investor should consult its own advisors, as needed, to make its investment decision and to
determine whether it is legally able to purchase the Bonds under applicable laws or regulations.
No person is authorised to give any information or to make any representation not contained in this Offering
Circular and any information or representation not so contained must not be relied upon as having been authorised
by or on behalf of the Company, the Lead Manager, the Trustee or the Agents. The delivery of this Offering Circular
at any time does not imply that the information contained in it is correct as at any time subsequent to its date.
Information about the Company contained in publications other than this Offering Circular (such as the Companys
website) is not part of this Offering Circular and should not be relied upon in connection with the proposed placing
of the Bonds. Neither the Company nor the Lead Manager are making an offer of these securities in any country
where the offer is not permitted.
Certain monetary amounts in this Offering Circular have been subject to rounding adjustments. Accordingly, figures
shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
Market data and certain industry forecasts used throughout this Offering Circular have been obtained from market
research, publicly available information and industry publications. Industry publications generally state that the
information that they contain has been obtained from sources believed to be reliable but that the accuracy and
completeness of that information is not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified, and none of the Company, the Lead
Manager or the Trustee makes any representation as to the accuracy of that information.
Certain statements in this Offering Circular constitute "forward-looking statements". Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Company's present and future business strategies and
the environment in which the Company will operate in the future. Important factors that could cause the Company's
actual results, performance or achievements to differ materially from those in the forward-looking statements
include, inter alia, the condition of, and changes in, India's political and economic status. Additional factors that
could cause actual results, performance or achievements to differ materially include, but are not limited to, those
discussed under "Risk Factors" and "Business". These forward-looking statements speak only as at the date of this
Offering Circular. The Company expressly disclaims any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statement contained herein to reflect any changes in the Company's
expectations with regard thereto or any change in events, conditions or circumstances on which any such statements
are based.
CONVENTIONS
In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to
"Bondholders" and "holders" are to holders of the Bonds from time to time; all references to "India" are to the
Republic of India and its territories and possessions; all references to the "US" and "United States" are references to
the United States of America and its territories and possessions; all references to the "UK" and "United Kingdom"
are to the United Kingdom of Great Britain and Northern Ireland and its territories and possessions; all references to
the "Indian Government" are to the Government of India and to the "Companies Act" are to the Companies Act,
1956, as amended.; and all references to S$ are to Singapore dollars.
References in this Offering Circular to a particular "fiscal year" are to the fiscal year starting from 1 April and
ending on 31 March of each year. The Company prepares its financial statements in accordance with generally
accepted accounting principles in India ("Indian GAAP"). The Company's financial statements included in this
Offering Circular include its audited financial statements as at and for the years ended March 31, 2004, 2005 and
2006 and unaudited financial statements for the nine months ended December 31, 2006, which have all been
prepared in accordance with Indian GAAP.
The Company publishes its financial statements in Indian Rupees. All references herein to "Indian Rupees" and
"Rs." are to Indian Rupees and all references herein to "US dollars" and "US$" are to United States dollars. All
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translations from Indian Rupees to United States dollars were made (unless otherwise indicated) on the basis, of Rs.
44.11 to US$1.00. All amounts translated into United States dollars as described above are provided solely for the
convenience of the reader, and no representation is made that the Indian Rupees or United States dollar amounts
referred to herein could have been or could be converted into United States dollars or Indian Rupees, as the case
may be, at any particular rate, the above rate or at all.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is a limited liability public company incorporated under the laws of India. Majority of the Company's
directors and executive officers are residents of India and all or a substantial portion of the assets of the Company
and such persons are located in India. As a result, it may not be possible for investors to effect service of process
upon the Company or such persons in jurisdictions outside India, or to enforce against them judgments obtained in
courts outside India. India is not a party to any international treaty in relation to the recognition or enforcement of
foreign judgments
Recognition and enforcement of foreign judgments is provided for under Section 13 of the Code of Civil Procedure,
1908 as amended (the "Civil Code"). Section 13 of the Civil Code provides that a foreign judgment shall be
conclusive as to any matter directly adjudicated upon between the same parties or between parties under whom they
or any of them claim under the same title except (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where the
judgment appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal
to recognise the law of India in cases where such law is applicable; (iv) where the proceedings in which the
judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi)
where the judgment sustains a claim founded on a breach of any law in force in India. Section 44A of the Civil
Code provides that where a foreign judgment has been rendered by a superior court, as defined under Section 44A,
in any country or territory outside India which the Indian Government has by notification declared to be a
reciprocating territory for the purposes of Section 44A, it may be enforced in India by proceedings in execution as if
the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is
applicable only to a decree or judgment of a superior court under which a sum of money is payable, not being a sum
in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, and shall in no case
include an arbitration award, even if such award is enforceable as a decree or judgment.
The United Kingdom has been declared by the Indian Government to be a reciprocating territory for the purpose of
Section 44A of the Civil Code. However, the United States has not been so declared. Accordingly, a judgment of a
court in the United States may be enforced only by a suit upon judgment and not by proceedings in execution. Such
a suit must be filed in India within three years from the date of the judgment in the same manner as any other suit
filed to enforce a civil liability in India. A party seeking to enforce a foreign judgment in India is required to obtain
approval from the RBI to repatriate outside India any amount recovered.

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TABLE OF CONTENTS
Pages
DEFINITIONS & GLOSSARY...................................................................................................................... 6
GLOSSARY OF TREMS.............................................................................................................................. 11
SUMMARY OF THE TERMS OF THE OFFERING .................................................................................. 13
SUMMARY .................................................................................................................................................. 19
INDUSTRY................................................................................................................................................... 25
BUSINESS.................................................................................................................................................... 27
RISK FACTORS........................................................................................................................................... 41
SELECTED FINANCIAL INFORMATION ................................................................................................ 51
MANAGEMENTS DISCUSSION AND ANALYSIS ................................................................................ 53
MARKET PRICE INFORMATION CONCERNING THE SHARES ......................................................... 56
DIVIDENDS................................................................................................................................................. 57
EXCHANGE RATES ................................................................................................................................. 599
USE OF PROCEEDS.................................................................................................................................... 60
CAPITALISATION....................................................................................................................................... 61
DIRECTORS AND MANAGEMENT ......................................................................................................... 62
DESCRIPTION OF THE SHARES.............................................................................................................. 69
THE INDIAN SECURITIES MARKET ...................................................................................................... 82
TERMS AND CONDITIONS OF THE BONDS ......................................................................................... 90
SUMMARY OF THE TERMS OF THE GLOBAL CERTIFICATE .......................................................... 128
CLEARANCE AND SETTLEMENT OF THE BONDS............................................................................ 131
FOREIGN INVESTMENT AND EXCHANGE CONTROLS................................................................... 133
INDIAN GOVERNMENT AND OTHER APPROVALS........................................................................... 138
TAXATION................................................................................................................................................. 140
SUBSCRIPTION AND SALE.................................................................................................................... 143
GENERAL INFORMATION...................................................................................................................... 147
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND IAS/IFRS ............ 149
INDEX TO FINANCIAL STATEMENTS.................................................................................................. 153

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DEFINITIONS & GLOSSARY

In this document the following expressions have the following meanings, unless the context otherwise requires or
unless it is otherwise specifically provided.
"Articles of Association" or
Articles
Accountholder

Accreted Principal
Amount
Agents
"AGM"
Alternative Clearing
System
Audit Committee
"Board" or "Directors" or
Board of Directors
"Bondholder"
"Bonds"
"BSE"
"Business Day"

Certificate
Change of Control

means the articles of association of the Company;

means for so long as any of the Bonds are represented by the Global Certificate and
such Global Certificate is held on behalf of Euroclear and/or Clearstream,
Luxembourg, each person who is for the time being shown in the records of
Euroclear and Clearstream, Luxembourg as the holder of a particular principal
amount of such Bonds;
means principal amount of the Bonds and gross yield calculated on semi annual
basis up to the date of redemption as per the terms of offering;
means paying Agent Principal Paying Agent and Conversion Agent and
Transfer Agent;
means Annual General Meeting
means a clearing system other than Euroclear and Clearstream, Luxembourg;
means committee of the Board of Directors of the company set up under clause 49
of the Listing Agreement;
means the board of directors of the Company;
means registered holders of the Bonds or any of them;
means the US$ 22,000,000 1% unsecured foreign currency convertible bonds due
2012;
means the Bombay Stock Exchange Limited;
shall mean a day other than a Saturday or Sunday on which banks are open for
general banking business in New York City, London, Singapore and Mumbai and in
the city in which the specified office of the relevant Agent is located and in the case
of surrender of Certificates, the place where such Certificates are surrendered.;
means Bond Certificate;
means when:
(i) any person or persons acting together acquires Control of the Company if such
person or persons does not or do not have, and would not be deemed to have
Control of the Company on the Issue Date;
(ii) the Company consolidates with or mergers into or sells or transfers all or
substantially all of the Companys assets to any other person, unless the
consolidation, merger, sale or transfer will not result in the other person or persons
acquiring Control over the Company or the successors entity; or
(iii) one or more other persons acquires the legal or beneficial ownership of more
than 50 per cent. of the issued share capital of the Company.
The term Control means the right to appoint and / or remove all or the majority of
the members of the Companys Board of Directors or other governing body,
whether obtained directly or indirectly, and whether obtained by ownership of share
capital, the possession of voting rights, contract or otherwise;

"Civil Code"

means The Code of Civil Procedure, 1908 of India (as amended from time to time);
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"Clearing Systems"
"Clearstream, Luxembourg"
Closed Period

Closing Date
"Common Depositary"
"Companies Act"
"Company" or "KLG" or
"Issuer"
"Conditions"
"Conversion Notice"
Conversion Date
Conversion Price
conversion Right
"Crore"
Definitive Certificate
Delisting
Delisting Guidelines
Delisting Put Date
"Depositories Act"
Distribution
Compliance
Period
"ECB Guidelines"

"EGM"
"Euroclear"
Extraordinary Resolution
"FCCB(s)"
"FCCB Scheme"
FDI or Foreign Direct
Investment
"FEMA"
FEM
Securities

means Euroclear and Clearstream, Luxembourg;

means Clearstream Banking, socit anonyme;
means the period during which no Bondholder may require the transfer of a Bond to
be registered, i.e. (i) during the period of 15 calendar days ending on (and
including) the due date for any payment of principal, premium (if any) and interest
on Bonds; (ii) during the period of 10 Business Days ending on (and including) the
dates for redemption or conversion pursuant to Condition 8.2 and Condition 8.3 of
the terms and conditions of Bonds; (iii) after a Conversion Notice (as defined in
Condition 6.2) has been delivered with respect to a Bond; (iv) after a Relevant
Event Put Exercise Notice (as defined in Condition 8.4) has been deposited in
respect of such a Bond; or(v) after a Purchase Notice (as defined in Condition 8.5)
has been deposited in respect of such a Bond.
means the issue closing date;
means The Bank of New York acting in such capacity through its London branch;
means the (Indian) Companies Act, 1956, as amended;
means KLG Systel Limited;
means the terms and conditions of the Bonds;
has the meaning set out in condition 6.2.1(i) of the terms and conditions of the
bond;
Has the meaning set out in condition 6.2.1 (ii) of the terms and conditions of the
bond;
means the initial Conversion Price of bonds subject to further adjustments as per the
terms and conditions of Bonds.
means the Bondholders right during the Conversion Period to convert their Bonds
into Shares at the Conversion Price;
means ten million (10,000,000);
means the certificates issued by the Company in registered form in exchange for the
Global Certificate;
means the event the shares cease to be listed or admitted to trading on The Indian
Stock Exchanges;
means SEBI (Delisting of Securities) Guidelines, 2003;
means twentieth day after the delisting of shares form NSE and BSE;
means the Indian Depositories Act, 1996, as amended;
means 40 days after the later of the commencement of the offering of the bonds and
the last related issue date;
means the External Commercial Borrowings Guidelines of the RBI dated 31
January 2004, April 1, 2004, July 7, 2004, August 1, 2005, as amended from time to
time;
means Extraordinary General Meeting
means Euroclear Bank S.A./N.V., as operator of the Euroclear System;
means resolution signed by or on behalf of the holders of not less than 90 per cent.
of the aggregate principal amount of Bonds outstanding;
means Foreign Currency Convertible Bond(s);
means the Indian Issue of Foreign Currency Convertible Bonds and Ordinary Shares
(through Depositary Receipt Mechanism) Scheme, 1993, as amended;
means investment by way of subscription and/or purchase of securities of an Indian
company by a non-resident investor;
means the Indian Foreign Exchange Management Act, 1999, as amended;
means FEM Securities Regulations, notified by the RBI on 3 May 2000 as amended
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Regulations
FEM Regulation
"FII"
"FIIA"
"FIPB"
Foreign
Institutional
Investor Regulation
"FSMA"
"Global Certificate"
"Government" or Indian
Government
"IAS"
"IFRS"
"Income Tax Act"
"India"
Indian Stock Exchange
"Indian GAAP"
Insider Trading Regulation
International
Investment
Securities

"IPO"
"Issue Date"
"ISIN"
Interest payment Date
"Lead Manager"
"Listing Agent"
Listing Agreement
"Maturity Date"
memorandum
of
Association or MOA or
Memorandum
"MOF"
"Mumbai"
"NRIs"
"NSE"
"Offering Circular" or "OC"
"Offering"

"Paying
Agency

and Conversion
Agreement" or

from time to time;

means Foreign Exchange Management Regulation;
means a Foreign Institutional Investor as defined in FEMA;
means the Foreign Investment Implementation Authority;
means the Foreign Investment Promotion Board;
means the Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations 1995;
means the UK Financial Services and Markets Act 2000;
means the Global Certificate that will represent the Bonds;
means the Government of India;
means International Accounting Standards;
means International Financial Reporting Standards;
means the Indian Income Tax Act, 1961, as amended;
means the Republic of India;
means NSE, BSE and other regional stock exchanges in India
means generally accepted accounting principles in India;
means The SEBI (Prohibition of Insider Trading) Regulations 1992;
means any present or future indebtedness in the form of, or represented by, bonds,
debentures, notes or other investment securities which (i) are denominated in a
currency other than Rupees or are by their terms payable, or confer a right to receive
payment, in any currency other than Rupees, or are denominated or payable in
Rupees and more than 50 per cent. of the aggregate principal amount thereof is
initially distributed outside India, and (ii) are for the time being, or are intended to
be or capable of being, quoted, listed, ordinarily dealt in or traded on any stock
exchange or over-the-counter or other securities market;
means Initial Public Offering
means the date of closing of the Offering, being March 26, 2007;
means International Security Identification Number;
means semi-annual interest payment date i.e. September 26 and March 26. The first
Interest Payment Date will be September 26, 2007
means Elara Capital plc;
means Goodwins Law Corporation;
means agreement of listing between company and stock exchange;
means March 27, 2012;
means Memorandum of Association of the Company;

means the Ministry of Finance of India;

means the city of Mumbai, India (previously named Bombay);
means Non Resident Indians, as defined under FEMA;
means the National Stock Exchange of India Limited;
means this document;
means the Bonds being offered by the Company to investors outside the United
States in reliance on Regulation S and other applicable laws. The Bonds are not
being offered in India; except as permitted by applicable Indian Laws and
Regulations;
means the paying and conversion agency agreement dated March 26, 2007 made
between the Company, the Trustee, Principal Paying and Conversion Agent,
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Agency Agreement

Transfer Agent and Registrar;

Portfolio Investment

means Investments by registered FIIs or Non-Resident Indians made through a

stock exchange;
means The Bank of New York, acting in such capacities, through its London branch;

"Principal
Paying
Conversion
Agent
Transfer Agent"
"Promoters"
Promoters Group

and
and

Prospectus Directive
"RBI"
Record Date
"Registrar"
"Regulation S"
Relevant Event Put Date

Remuneration Committee

ROC
"R&D"
"SCRA"
SCRR
"SEBI Act"
"SEBI"
SEBI Guidelines
SEBI (DIP) Guidelines
Security

"Securities Act"
SFA
Sensex
"SGX-ST" or "Singapore
Stock Exchange"
"Shareholders"
Shareholders and Investors
Grievance Committee

"Shares"

means the promoters of the Company;

means associates of the promoters and/ or entities owned or controlled by or acting
in concert with the Promoters' Group;
means Directive 2003/71/EC and includes any relevant implementing measure in
each Relevant Member State;
means the Reserve Bank of India;
means 15 calendar days prior to the Interest Payment Date;
means The Bank of New York;
means Regulation S under the Securities Act;
means fourteenth calendar day after the expiry of such period of 30 days of notice
of redemption by bondholders to paying agent on occurrence of a Relevant Event. If
such date is not a Business Day then the next following Business Day shall be
treated as the Relevant Event Put Date.
means a committee of the Board of Directors of the company to determine the
Companys policy and approve, remuneration packages for executive directors, their
relatives and other managerial personnel working in the Company, including
pension rights and compensation payment;
means Registrar of Companies;
means Research & Development
means Securities Contracts (Regulation) Act, 1956 of India;
means the Securities Contracts (Regulation) Rules 1957
means the Securities and Exchange Board of India Act, 1992, as amended;
means the Securities and Exchange Board of India;
means the Securities and Exchange Board of India Guidelines
Means the Securities and Exchange Board of India (Disclosure and Investor
Protection) Guidelines, 2000;
means any mortgage, charge, pledge, lien or other form of encumbrance or security
interest upon the whole or any part of its undertaking, assets or revenues, present or
future, to secure any international investment securities, or to secure any guarantee
of or indemnity in respect of any International Investment Securities
means the United States Securities Act of 1933, as amended;
the Securities and Futures Act, Chapter 289 of Singapore;
means the BSE Sensitive Index;
means the Singapore Exchange Securities Trading Limited;
means the registered holders of Shares;
means a committee of the Board of Directors of the company to look into the
Shareholders' and investors' complaints on matters relating to transfer of shares,
non-receipt of annual report and non-receipt of dividend. In addition, the committee
also looks into matters which can facilitate better investor services and relations.
means ordinary shares in the capital of the Company of Rs.10 each in nominal
value;
Page 9

SICA
"Subscription"
Subscription Agreement
Subsidiary
"Takeover Code"
"Trust Deed"
"Trustee"
"UK" or "United Kingdom"
"United States" or "US"

means the Sick Industrial Companies (Special Provisions) Act, 1985

means the obligation to pay for and convert the Bonds;
means agreement of subscription between Company and Elara Capital plc (Lead
Manager to the issue) dated March 01, 2007
means companies in which the parent company has an interest of more than 50% of
the voting power;
means SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 of
India (as amended from time to time);
means the Trust Deed dated on or about the Issue Date and made between the
Company and the Trustee, constituting the Bonds;
means Bank of New York, acting through its London branch in its capacity as
trustee for the holders of the Bonds;
means the United Kingdom of Great Britain and Northern Ireland;
means the United States of America.

All references to "we", "our", "us", "the Company", "the Issuer", "our Company" or " KLG" or words of similar
import in this OC are to KLG Systel Limited, unless otherwise specified in this Offering Circular or the relevant
context.

Page 10

GLOSSARY OF TREMS
Term
ABT
ANN
AT&C
AVVNL
BOLT
BPO
CAD
CAE
CAM
CLA
CLB
Co
CT
DPS
DT
ECM
ERP
FY
GAAP
GDP
GDRs
GIS
HVDS
IPR
IT
ITeS
JVVNL
KV
LED
LIBOR
LT
LTD
LuxSE
MV S/S
OCB
PAT
PBDITA
PBDT
PBT
PLM
POS
PSS
PTC
RFID

Description
Availability based tariff system
Automatic Neural Network
Aggregate Technical & Commercial
Ajmer Vidyut Vitaran Nigam Limited, Ajmer
BSE On-line Trading
Business Process Outsourcing
Computer Aided Design
Computer Aided Engineering
Computer Aided Manufacturing
Central Listing Authority
Company Law Board
Company
Current Transformer
Dynamic Publishing System
Distribution Transformer
Enterprise Content Management
Enterprise Resource Management
Financial Year
General Accepted Accounting Principles
Gross Domestic Product
Global Depository Receipts
Geographical Information System
High Voltage Distribution System
Intellectual Property Rights
Information Technology
Information Technology enabled services
Jodhpur Vidyut Vitaran Nigam Limited, Jodhpur
Kilo Volt
Laser Electronic Disply
London Interbank Offered Rate
Low Transmission
Limited
Luxembourg Stock Exchange
Mega Volt Sub station
Overseas Corporate Body
Profit After Tax
Profit Before Depreciation Interest Tax Amortisation
Profit Before Depreciation & Tax
Profit Before Tax
Product Lifecycle Management
Point of Sale software
Power System Solutions
Parametric Technology Corporation
Radio Frequency Identification Device
Page 11

SBU
SEB
SME
TIFM
T&D

Strategic Business Unit

State Electricity Board
Small and Medium Enterprise
Total Infrastructure and Facilities Management
Transmission & Distribution

Page 12

SUMMARY OF THE TERMS OF THE OFFERING

The following is a general summary of the terms of the Offering. This summary is derived from, and should be read
in conjunction with, the full text of the "Terms and Conditions of the Bonds" and the Trust Deed constituting the
Bonds. Capitalised terms used herein and not otherwise defined have the respective meanings given to such terms in
the "Terms and Conditions of the Bonds".
Company

KLG Systel Limited

Issue

US$22,000,000 1% Unsecured Foreign Currency Convertible Bonds due

2012 (the "Bonds").

Issue Price

The Bonds will be issued at 100 per cent. of their principal amount.

Issue Date

March 26, 2007

Maturity Date

March 27, 2012

Interest Payment Date

Interest will be payable semi-annually in arrears on September 26 and

March 26. The first Interest Payment Date will be September 26, 2007.

Interest Rate

means 1% per annum on the Bonds which will be payable semi annually in
arrears on each Interest Payment Date. Interest shall be paid to the
Bondholder who appears as the registered owner of the Bonds on the
records of the Registrar at the close of business on the Record Date;

Status of the Bonds

The Bonds will constitute direct, unsubordinated, unconditional and

unsecured obligations of the Company and shall at all times rank pari
passu and without any preference or priority among themselves. The
payment obligations of the Company under the Bonds shall, save for such
exceptions as may be provided by mandatory provisions of applicable law,
at all times rank at least equally with all of its other present and future
senior, unsubordinated, unconditional and unsecured obligations.

Rating of the Bonds

The Bonds are not, and are not expected to be, rated by any rating agency.

Conversion Right

The Bondholders will have the right during the Conversion Period to
convert their Bonds into Shares at the Conversion Price. Bondholders may
convert the Bonds in whole from time to time at their sole discretion
during the period commencing on March 26, 2007 and up to the close of
business on March 16, 2012 or if such Bond shall have been called for
redemption prior to the Maturity Date, then up to the close of business on a
date no later than seven business days prior to the date fixed for
redemption thereof.

Conversion Price

The initial Conversion Price will be Rs.400.00. The Conversion Price will
be subject to adjustment for, among other things:
Standard adjustment for any dilution will be applied,
Consolidation, subdivision or reclassification
Capitalisation of profits or reserves
Cash and other distributions
Rights issues of Shares or options over Shares
Rights issues of other securities
Page 13

Conversion Procedure

Issues at less than current market price

Other issues at less than current market price
Modification of rights of conversion
Dividends or distributions in cash or script deemed as Excess
Dividend.
Other offers to Shareholders
The Company will use its best endeavours to ensure that the Bonds are
converted to Shares within 30 days after the relevant Conversion Date.

Exchange Rate on Conversion

The exchange rate of U.S. Dollars to Rupees will be fixed at Rs.43.70 to

US$1.00, being the Reserve Bank of Indias U.S. Dollar to Rupee
exchange rate on 23 March 2007.

Conversion Price Reset

The Conversion Price, if applicable, will be reset on September 26, 2007

and thereafter, the first, second and third anniversaries of the Bonds being
March 26, 2008, March 26, 2009 and March 26, 2010 respectively. The
applicable Conversion Price may be reset (downwards only) to the current
market price of the Shares on the relevant Reset Date if the volume
weighted average share price of the 21 trading days prior to the relevant
Reset Date is lower than the Conversion Price then in effect. The Reset
Conversion Price cannot be lower than Rs 350.00 or the applicable reset
floor price as prescribed by SEBI from time to time.
Bondholders will have no voting rights with respect to the Bonds at a
general meeting of the Company. Bondholders will have voting rights at a
meeting of Bondholders. Voting rights will attach to the Shares.
So long as any Bond remains outstanding (as defined in the Trust Deed):

Voting Rights

Negative Pledge

(i)

the Company will not and will procure that none of its
subsidiaries will create or permit to subsist any mortgage, charge,
pledge, lien or other form of encumbrance or security interest
("Security") upon the whole or any part of its undertaking, assets
or revenues, including any uncalled capital present or future, to
secure any Relevant Indebtedness (as defined below), or to secure
any guarantee or indemnity in respect of any Relevant
Indebtedness;

(ii)

the Company will procure that no Subsidiary or other person

creates or permits to subsist any Security upon the whole or any
part of the undertaking, assets or revenues present or future of that
Subsidiary's Relevant Indebtedness or other person to secure any
of the Companys or any Subsidiarys International Investment
Securities, or to secure any guarantee of or indemnity in respect
of any of Companys or any Subsidiary's Relevant Indebtedness.

(iii)

the Company will procure that no other person gives any

guarantee of, or indemnity in respect of, any of the Company's or
any Subsidiary's Relevant Indebtedness,

unless, at the same time or prior thereto, the Company's obligations under
the Bonds and the Trust Deed (a) are secured equally and rateably
therewith to the satisfaction of the Trustee, or (b) have the benefit of such
other security, guarantee, indemnity or other arrangement as the Trustee in
its absolute discretion shall deem to be not materially less beneficial to the
Bondholders or as shall be approved by an Extraordinary Resolution (as
defined in the Trust Deed) of the Bondholders.
See Terms and Conditions of the Bonds Negative Pledge.
Page 14

Cancellation

All Bonds which are redeemed, repurchased or converted will be cancelled

and may not be reissued or resold. Bonds redeemed or repurchased by the
Company will be surrendered for cancellation.

Redemption at Maturity

Unless previously redeemed, converted or purchased and cancelled, the

Company will redeem each Bond at 143.775 per cent. of its principal
amount on the Maturity Date.

Redemption for Taxation Reasons

The Bonds may be redeemed subject to regulatory approval at the option

of the Company in whole, but not in part, at any time at their Accreted
Principal Amount, in the event of certain changes affecting taxes in India

Redemption for Relevant Event

To the extent permitted by applicable law, unless the Bonds have been
previously redeemed or repurchased and cancelled or converted, each
Bondholder shall have the right, at such Bondholders option, upon the
occurrence of a Relevant Event (as defined in the Conditions), (i) to
require the Company to repurchase all such Bondholders Bonds at a price
equal to their then Accreted Principal Amount. The Company shall serve
written notice on Bondholders within seven (7) Business Days of
becoming aware of the occurrence of a Relevant Event.

Redemption of the Bonds in the

event of Delisting

To the extent permitted by applicable law, unless the Bonds have been
previously redeemed or repurchased and cancelled or converted, in the
event that the Shares cease to be listed or admitted to trading on the BSE (a
Delisting), each Bondholder shall have the right, at such Bondholders
option, to require the Company to repurchase all (but not less than all) of
such Bondholders Bonds at a price equal to their then Accreted Principal
Amount. The date for such repurchase shall be the twentieth Business Day
following the date the Company delivers written notice to the Principal
Paying and Conversion Agent of the Delisting. The Company agrees to
promptly give written notice to Bondholders of any Delisting.

RBI Approval Required for Early Under current regulations of the RBI applicable to convertible bonds, the
Redemption
Company will require the prior approval of the RBI before providing
notice for or effecting any redemption prior to the Maturity Date.
Form and Denomination of Bonds

The Bonds will be issued in registered form in denominations of US$

10,000 each or in integral multiples thereof. A bond certificate (each a
"Certificate") will be issued to each Bondholder in respect of its registered
holding of Bonds. Each Bond and each Certificate will be numbered
serially with an identifying number which will be recorded on the relevant
Certificate and in the Register.
The Bonds will be represented by the Global Certificate in the aggregate
principal amount of the Bonds and the Company shall procure the
Registrar to make such entries in the Register (as defined below). The
Global Certificate will be issued in the name of, and deposited with, a
nominee of a common depositary for Euroclear and Clearstream,
Luxembourg. The Global Certificate need not be security printed. The
Bonds evidenced by the Global Certificate shall be subject to their terms in
all respects and entitled to the same benefits under this Trust Deed as
Bonds evidenced by individual definitive Certificates.

Covenant

The Company will not take any action which would result in the
Conversion Price being reduced, pursuant to the adjustment events, below
a price which would render conversion of the Bonds into ordinary shares
of the Company, at such adjusted Conversion Price, to be in contravention
Page 15

of applicable law or subject to approval from the Reserve Bank of India,

the Ministry of Finance, Government of India and/or any other
governmental and/or regulatory authority in India.
Events of Default

Shares already Issued

Certain events of default, subject to regulatory approval will permit the

Bonds immediately to become due and payable at their then Accreted
Principal Amount together with accrued but unpaid interest.
As at the date of this Offering Circular there were 10,782,900 Existing
Shares.

Warrants

As at the date of this Offering Circular, the Company has offered for
subscription 1.07 million warrants of Rs. 10 each to its promoters,
associates and key employees entitling the subscriber to one Share per
warrant at a premium of Rs. 251.00 each within a period of 18 months
from the date of allotment.
The Company further proposes to allot 500,000 warrants to strategic
investors entitling the subscriber to one Share per warrant, subject to
approval of shareholders in forthcoming extraordinary general meeting.

Status of Shares issued on

Conversion

The Shares issued upon conversion of the Bonds will in all respects rank
pari passu with the Shares in issue on the relevant Conversion Date (except
for any right excluded by mandatory provisions of applicable law) and
such Shares shall be entitled to all rights the record date or other due date
for the establishment of entitlement for which falls on or after such
Conversion Date to the same extent as all other fully-paid Shares of the
Issuer in issue as if such Shares had been in issue throughout the period to
which such rights relate. A holder of Shares issued on conversion of Bonds
shall not be entitled to any rights the record date for which precedes the
relevant Conversion Date.

Dividends

Dividends, if any, are only payable on the Shares issued in respect of

record dates falling after the date of conversion of the Bonds.

Market for the Shares, Listing and The existing Shares of the Company are listed on the BSE and the NSE.
Share Ownership Restrictions
In-principle approval from the BSE and the NSE has been obtained for the
listing of the Shares to be issued upon conversion of the Bonds (the
"Conversion Shares"). Upon conversion of the Bonds and issue of the
Conversion Shares, final approval from the BSE and NSE and any other
stock exchanges in India on which the Shares are listed from time to time
will be sought for the listing and the trading of such Shares received upon
Conversion.
There are certain restrictions applicable to investments in shares and other
securities of Indian companies, including the Shares, by persons who are
not residents of India. See "Foreign Investment and Exchange Controls".
Clearance

The Bonds will be cleared through the Clearing Systems. The Clearing
Systems each hold securities for their customers and facilitate the
clearance and settlement of securities transactions by electronic book-entry
transfer between their respective account holders.

Global Certificate

For as long as the Bonds are represented by the Global Certificate, the
Global Certificate will be held by a common depositary for the Clearing
Systems, payments of principal and premium in respect of the Bonds
represented by the Global Certificate will be made against presentation for
endorsement and, if no further payment falls to be made in respect of the
Bonds, surrender of the Global Certificate to or to the order of the Paying
Page 16

Agent for such purpose. The Bonds which are represented by the Global
Certificate will be transferable only in accordance with the rules and
procedures for the time being of the relevant Clearing System.
Indian Taxation

Payment of Principal, interest and premium on the Bonds made by the

Company will be made after deduction or withholding in respect of Indian
taxation to the extent required by law. The Company will gross up the net
taxable amount to the extent set out in Condition 9 and will be required to
account separately to the Indian tax authorities for any withholding taxes
applicable to payments attributable to such tax. The Bonds will have the
benefit of the tax concessions available under the provisions of Section
115AC of the Income Tax Act, 1961, as amended (the "Income Tax Act").
Under current Indian laws, tax is not payable by the recipients of dividends
on Shares. See "Taxation".

Selling Restrictions

There are restrictions on the offer, sale and/or transfer of the Bonds in,
among others, the European Economic Area, United Kingdom, United
States, India, Hong Kong, Japan and Singapore. For a description of the
selling restrictions on offers, sales and deliveries of the Bonds, see
"Subscription and Sale".

Listing

Approval in-principle has been received for the listing of the Bonds on the
SGX-ST.
The Bonds will be traded on the SGX-ST in a minimum board lot size of
US$200,000 for so long as the Bonds are listed on the SGX-ST.
The Company has undertaken to apply to have the Shares issuable upon
conversion of the Bonds approved for listing on the NSE and the BSE.

Trustee

The Bank of New York, acting in such capacity through its London
Branch.

Principal Paying, Conversion and The Bank of New York, acting in such capacity through its London
Transfer Agent
Branch.
Registrar

The Bank of New York

Governing Law

The Bonds will be governed by, and construed in accordance with, the
laws of England.

Use of Proceeds

The net proceeds of the issue of the Bonds (after the deduction of fees,
commissions and expenses) are expected to be approximately US$21.12m
and will be used by the Company as set out in "Use of Proceeds". The use
of the net proceeds shall be in accordance with the end-use restrictions
specified by the RBI and the Indian Government.

Indian Government Approvals

The Issue of Foreign Currency Convertible Bonds and Ordinary Shares

(Through Depository Receipt Mechanism) Scheme, 1993, as amended (the
"FCCB Scheme"), Foreign Exchange Management (Transfer or Issue of
any Foreign Security Regulations), 2000, as amended (the "FEM
Regulations") and the Master Circular No.07/2006-7 dated July 1, 2006
issued by the RBI ("Circular No. 7") permit Indian companies to issue
foreign currency convertible bonds ("FCCBs") up to US$500 million under
the "automatic route" (i.e. without the prior approval of the RBI), subject
to compliance with certain conditions specified therein. The Company is
undertaking the present issue of the Bonds in accordance with these
Page 17

guidelines and regulations.

Common Code for the Bonds
ISIN for the Bonds

029029172
XS0290291722

Page 18

SUMMARY
The following summary does not purport to be complete and should be read in conjunction with the more detailed
information contained elsewhere in this Offering Circular and may not contain all the information that may be
important to investors. Before making an investment decision, investors should read the entire Offering Circular,
including the financial statements and the notes to those statements appearing elsewhere in this Offering Circular.
In particular, investors should carefully consider the risks discussed under the heading "Risk Factors".
HISTORY AND OVERVIEW OF THE COMPANY
KLG Systel Limited was initially known as KLG Consultants Private Limited and was incorporated on December
02, 1985. KLG Consultants Private Limited was converted into a public Company vide special resolution passed by
its shareholders. The fresh certificate of incorporation consequent to change of name was issued under hand of the
Assistant Registrar of Companies, NCT of Delhi & Haryana on September 29, 2004. KLG Consultants Limited
changed its name to KLG Systel Limited on September 29, 1994.
KLG Systel Limited is a listed public company. KLG has got ISO 9001-2000 certificate for its Power System
division covering Revenue Management Activities by BSI Management Systems of United Kingdom.
KLG is a Knowledge Capital Management company and is one of the prominent Life Cycle Solution providers in
the areas of concept and creation, plant design, project execution and management, operations and optimization, and
expansion/ revamp. KLG provides life cycle solutions through its five strategic business units which are as follows:
1
2
3
4
5

Computational Engineering and Sciences.

Enterprise Project Management.
Automation and Manufacturing Solutions.
Enterprise Business Solutions.
Power Systems Solutions.

STRENGTH AND COMPETITIVE ADVANTAGES

The strengths of a Company always help it to grow in its respective industry. KLG specializes in creating
customized solutions for its clients. Its work methodology emphasizes a close interaction with its clients and a
comprehensive study of its operations and objectives. In delivering cutting edge solutions, KLG ensures that it
constantly adapts to the latest technologies.
The following strengths of KLG make it competitive to survive as one of the best in the industry and existing and
future markets:

It is an existing profit making company.

It is promoted by experienced persons.
It has successfully implemented large projects of big corporate clients.
The new software solution in the power sector has already been developed and pilot projects have evoked
favourable response.
Software development
Leveraging on its knowledge in the power sector and its strengths in software development, KLG has developed a
modern, innovative and state-of-the-art user friendly software tool, VIDUSHI. It is a cost effective, user friendly
and comprehensive software solution that handles with ease the database management of consumers and seamlessly
integrates the entire spectrum of work under Revenue Management through dedicated modules in order to provide
various solutions to the distribution utilities.
KLG has extended these services to select states in Northern India who have significantly benefited, both in terms
of revenue increase and decrease in transmission losses. Given the benefits provided by above services to utilities,
the Utility Process Management division of KLG has tremendous potential in the near future.
KLGs technical group offers consulting services to Utilities, Industrial Consumers and Regulatory Bodies.
Besides, the group also offers Equipment Diagnosis services.
Page 19

Utility consulting
The Power Services Sector (PSS) group has experience in the following areas of distribution network analysis and
planning studies for the utilities:

Loss Diagnostic studies: Using synergy of scientific methods for extrapolation, design calculations and field
activity, KLG is helping the power regulators in the states of Rajasthan and Himachal Pradesh in the following
areas:

Accurately estimate the total losses, and

Segregating the total losses into technical and commercial losses

These study reports are used by the regulators to independently verify the losses and ensure corrective actions,
wherever necessary.
High Voltage Distribution System (HVDS): The Indian Government is emphasising on implementing HVDS
schemes in rural areas which has become absolutely essential for utilities. KLG has taken a lead role in designing
HVDS systems, with following projects executed/under execution:

Jaipur Vidyut Vitaran Nigam Limited (JVVNL), Jaipur

Ajmer Vidyut Vitaran Nigam Limited (AVVNL), Ajmer
Reliance Energy Limited for unauthorized colonies in urban areas

A properly designed system has the potential to save substantial costs for the utility by bringing down losses,
increasing voltage profiles and quality of supply and decreasing outages.
Load Forecasting Studies: KLG has the experience of conducting load forecasting studies for Uttar Pradesh Power
Corporation Limited and Reliance Energy Limited for future growth plans. Its study reports included load
forecasting by trending as well as neural network methods.
Industrial consulting
KLG has undertaken system studies for industrial plants inclusive of:
1. Load flow studies
2. Load shedding scheme
3. Short circuit analysis
4. Transient stability including grid synchronisation schemes
5. Motor acceleration
6. Relay coordination
7. Harmonics analysis
Projects include KRIBHCO, IOCL Mathura, Coromondel Fertilizers, Shrew Cement and Kuwait Oil Refinery, to
name but a few.
Consulting for regulatory bodies
With the increasing role of the Regulators post the Electricity Act 2003, KLG Systel has tie-up with British Power
International (BPI) and Martineau Johnson (MJ), UK to offer services in the areas of:
1.
2.
3.
4.
5.
6.

Development of State Grid Code, Supply Code

Documents and Procedures with State & National Regulators
Trading Contracts including PPAs & Short Term Trading Instruments, Options
Procurement methods for Ancillary Services
Clean Development Mechanism Projects & Metering Contracts
Loss Diagnostic studies

KLG has extended these services to select states in Northern India who have significantly befitted, both in terms of
revenue increase and decrease in AT&C loss. Given the benefits provided by above services to utilities, Utility
Process Management division of KLG has tremendous potential in the near future.
STRATEGY AND OBJECTIVES
KLG aims to provide complete integrated software solutions to the power sector. The Company's business strategy
is to expand its service offerings and its global capabilities. It also aims to maintain strategic focus in the Indian
Page 20

Market. KLG is working towards further developing its strategic alliances. It targets to attract, train and retain
employees.
Another important focus of KLG to strengthen and better its R&D capabilities and its brand name.
The Company's main objective is to focus on client objectives and provide customer satisfaction.
The Company also aims to:

to be a global software solutions Company for the power sector;

to identify, source and deploy infrastructure, talent and resource in order to render superior customer
specific solutions;
to provide quality driven, innovation fuelled software solutions and emerge as a leading solutions
Company.

Major events in the history of our Company:

Year

Major Events in the history of the Company

1990

KLG entered into an agreement with M/s COADE Inc. in the field of Plant CAD and Engineering and
became an exclusive representative of COADE in India for all the engineering products of the
COADE.
COADE, Inc. is one of the world's leading engineering software companies. In the early 1980's,
COADE revolutionized pipe stress analysis with CAESAR II. COADE sets world standards for
engineering and design software solutions. KLG has since helped companies like BHEL, EIL, Jacob
H&G, IOCL and others design their plant systems.

1990

In the field of project management, KLG signed a contract with M/s PRIMAVERA Inc. And since
then it is acting as exclusive representative of the latter for all the project management solutions.
Primavera Systems, Inc. is the worlds leading project and portfolio management software Company.
It is estimated that projects totaling more than US$5 trillion in value have been managed with
Primavera products. Primavera provides industry-specific solutions to more than 75,000 customers
around the world.
In India, KLG has assisted various organizations to build world class infrastructure projects. Key
customers have been, Indian Railways, BHEL, EIL, Reliance, NTPC, NHPC and others.

1996

In the sequence of joining hands with global leaders, an agreement was signed with M/s. Operation
Technology Inc., in the field of electrical analysis solutions
Operation Technology, Inc. (OTI) specializes in the planning, design, analysis, operation, training,
and computer simulation of power systems. KLG provides software related to designing of electrical
networks in Generation, Transmission and Distribution sector. KLG has provided these solutions to
companies such as ABB, Alstom, Bechtel, BHEL, Bhaba Atomic Research Centre (BARC), Central
Power Research Institute (CPRI), Delhi Transco Limited, Damodar Valley Corporation, GE Power,
IOCL, IITs, KRIBHCO, MECON and PGCIL.

1996

The Company signed a contract with M/s Invensys (Wonderware) in the stream of manufacturing
automation and has become authorized exclusive representative for all the automation solutions
developed by the invensys in the name of Wonderware.
Wonderware is a leading supplier of industrial automation and information software, legendary for its
ease of use and for providing exceptional integration benefits. Wonderware powers intelligent plant
decisions in real time. Wonderware has approximately 325,000 software licenses in approximately
Page 21

100,000 plants worldwide, which is about 30 percent of the world's 335,000 plants with 20 or more
employees.
In India, KLG has provided manufacturing automation solution based on wonderware to companies
like Nestle, Tata Steel, Essar Steel, BPCL, Indian Oil, Maruti Suzuki, Reliance and others.
1996

The Company signed a pact with M/s Manitoba HVDS Research Centre, Canada in the stream Power
System Simulator for distribution of the latters solutions in India. The said solutions are used for
contingency studies of AC networks, Transformer Saturation effects.

1998

The Company opened its new internet division in April 1998 and successfully deployed leading edge
enabling technologies.

1998

The Company co-promoted Jaldi.com, a comprehensive e-tailing site with B2C and B2B integration,
which was used as online superstore, offering a wide repertoire of products and services to the
consumers right at their desktop. Jaldi.com was consistently rated as one of the best e-tailing software
in Asia.

1999

KLG created two B2B portals namely EPCASIA.COM and EPCPLANET.COM for providing a
powerful combination of on-line integrated project management system and information, to deal with
the complexity of the project and complete projects on time, within the budget and meeting
performance expectations.

1999

KLG was awarded the ISO 9001 Quality Management System certification by DNV certification
B.V. of the Netherlands under the accreditation of the Dutch Council of Accreditation (RvA) in
respect of design, development, supply, support and service of application software, providing
engineering and internet services using software solutions and providing training programs on
engineering based subjects using software applications. The said certification of the Company was
renewed by BSI management Systems, UK and valid to date.

2000

For providing effective enterprise solutions, KLG entered into partnership with MICROSOFT for
providing solutions in India in manufacturing, infrastructure and Oil & Gas segment.

2002

KLG is the largest reseller of the Autodesk products in India, the said reseller agreement was signed
with M/s. Autodesk Inc. to provide complete 2D and 3D design solution to the Indian market. KLG
also handles key major accounts such as BHEL and Ordinance Factory Board for Autodesk.

2004

The Company was awarded ISO 9001 Quality Management System certification by BSI Management
Systems of UK with respect to Revenue Management Services for Power utilities.

2005

In CAD/CAE segment, KLG signed agreements for distribution in India with M/s Applied flow
technology, USA in flow analysis stream, with M/s. CHAM, UK in computational fluid dynamics,
with M/s Z Corporation, USA in the field of rapid prototyping solutions.

2005

In Cable Management software, the Company entered into an agreement with M/s. Cloudis, UK for
distribution in India of the latters software applications.

2005

The Company is an Independent Software vender (ISV) Advantage partner with IBM in India for
power system solutions.

2005

During the financial year ended March 2005, the Company earned 36.07% of its revenue i.e. Rs.
131.73 Millions from major customers namely BSES, BHEL, Jaipur Vidyut Vitran Nigam Limited,
Uttar Pradesh Power Corporation Limited, IRCON, North Delhi Power Limited, Larson & Toubro
Ltd, Uttranchal Power Corporation Limited, Nestle and Jacob.

2005

In Supply chain Optimization, KLG has partnered with Oracle for providing enterprise solutions.
Further in barcode and RFID segment, the Company has executed the agreement with SATO, Japan
for acting as its authorized representative in India. To also handle the retail market in India, the
Page 22

Company has signed with Sage India Ltd. to provide a complete retail ERP in the Indian market.
These solutions are targeted to address end to end solution from POS to backend ERP.
2005-06

KLG has partnered with Microsoft, IBM, Sage Accpac, Sato and Intermec for providing solutions in
retail segment The Company offers complete Retail Solution in terms of the ePOS (Point of Sale
software) and the standard POS hardware like Barcode Scanners, Printers, Touch screens, card
reader, cash drawers and other devices.
The retail Point-of-Sale solution helps the retail segment in their Business Process Automation and
also gives Business Intelligence inputs. Easy-to-use and intuitive, it features all the needs for
managing a retail shop. It comes with integrated bar-code enabled POS billing, inventory
management, financial accounting, promotions & schemes management and customizable reporting.

2006

KLG has recently signed an agreement with SAP India in the stream of enterprise solutions for acting
as Selling ISV partner in India. As part of this relationship the Company will integrate its
infrastructure project management solution with SAP Business-one ERP and offer the integrated
solution through the SAP SME channel.

2006

KLG has entered into an agreement with Archibus, Bostan, USA for providing software solutions for
real estate, facilities and infrastructure management in the field of enterprise solution as value added
reseller in India.
ARCHIBUS/FM is widely recognized as the industry leader in facilities and infrastructure
management technology, supporting more that 3,000,000 users around the world managing over 16
billion square feet of space.
Physical assets such as real estate, buildings, equipment, materials and furniture make up a significant
percentage of an organizations total asset value. These assets are used by different business units,
departments, and individuals, and must be accurately managed in order to extend asset life cycles and
keep operating costs at a minimum. ARCHIBUS / FM Total Infrastructure and Facilities Management
(TIFM) solutions address these issues with the right combination of leading edge technologies, years
of industry experience and unparalleled, worldwide support.

2006

KLG successfully secured 33.92% of its revenue i.e. Rs. 174.05 Millions from major customers
namely Jaipur Vidyut Vitran Nigam Limited, Uttar Pradesh Power Corporation Limited, BHEL,
Uttranchal Power Corporation Limited, Tata Consultancy Services, Jodhpur Vidyut Vitran Nigam
Limited, CDOT, UHDE, Larsen & Toubro and Reliance during the financial year ending March 31,
2006.

2006

KLG has successfully raised US$7.5 Million by issue of 23,07,600 Global Depository Receipts each
representing one Share each. The GDRs of the company are listed on the Luxembourg Stock
Exchange.

2007

KLG is a strategic partner of PTC and works in close association with the customers to provide an
end to end 3D-modeling and design solution in automotive, aerospace, defense, Ship Building,
industrial equipment and Heavy engineering.
PTC provides Product Lifecycle Management (PLM) and Enterprise Content Management (ECM)
solutions to Aerospace & Defense, Airlines, Automotive, Process Manufacturing, Life sciences,
Industrial Equipment, Retail industries. PTC has delivered industry-leading software solutions to
enterprise and small business customers spanning multiple industries. Other solutions provided by
PTC are Product Development System (PDS), Dynamic Publishing System (DPS).

2007

KLG has decided to extend its supply chain application to the last mile of the Supply Chain the
retail outlet. Early last year, KLG started working on the building blocks of a complete solution from
Supply side to Demand side of a retail enterprise.
Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Page 23

Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from Esolutions which is already used by some of the leading retail chains in India such as Flemingo Duty
Free and Giordano.
CORPORATE INFORMATION
KLG's registered office is situated at Plot No. 70A, Sector- 34, EHTP, Gurgaon-122004, Haryana, (India).
The Companys website address is www.klgsystel.com. Information contained on the site is not a part of this
Offering Circular. KLG Systels shares are currently listed on the BSE and NSE and its GDRs are listed on LuxSE.

Page 24

INDUSTRY

The information presented in this section has been extracted from publicly available
documents which have not been prepared or independently verified by the Issuer, or
any of their respective affiliates or advisors.
THE INFORMATION TECHNOLOGY INDUSTRY IN INDIA
The Indian IT sector has proved to be the country's fastest growing segment in the globally challenging
economic environment. The software and services industry, a major component of India's IT sector, showed
significant momentum, higher than that of other industries in the country. India continues to be a compelling
investment destination, as leading companies either set up business here or beef up their existing
infrastructure. Outsourcing of IT requirements by leading global companies to Indian majors also picked up
pace, in line with worldwide trends.
The performance of the Indian IT sector was determined by its growth in the following areas:

IT software and services exports.

IT-enabled services.
The domestic IT market.
Telecom infrastructure.

IT Software and Services Exports

Software and services exports continue to remain on top of the IT industry's revenue table. The export-driven
software sector saw major long term projects come to Indian IT leaders and Indian companies receiving a
substantial share of the global outsourced business. In terms of geographies, Indian IT companies began
tapping regions outside the US market, even though the country remained the largest user of software solutions
from India. The revenue contributions by the US market continued to rise on account of the large number of
ITES/BPO projects getting outsourced from India.
Some of the key service lines for Indian players continue to be:

Custom Application development and maintenance.

Applications outsourcing.
IT enabled services.
R&D services.

Indian companies also made modest headway in segments such as packaged software support and installation,
product development and design services and embedded software solutions.
IT Enabled services (ITES)/BPO
Compared to other competing ITES nations such as Ireland, Philippines and China, India drew the bulk of the
global ITES/BPO business on account of its unmatched price, performance and quality proposition. The
ITES/BPO industry took root in most of India's leading cities. Some of the leading hubs of these services are
the National Capital Region of Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Kochi, Ahmedabad
and Pune.
Domestic IT Market
The Indian software and services sector lags behind the export segment on account of issues such as higher
piracy levels, pressure on software prices and lower level of IT spending for domestic companies. Reductions
in IT spend by key spending segments such as banking and manufacturing is said to be responsible for this
trend.
Page 25

Telecom Infrastructure
Indias telecom infrastructure has become a priority area for the country. The telecom market has recently
witnessed the following changes:
International Long Distance, National Long Distance and Basic Telephone services have been opened up
for free competition
ISPs have been granted licenses freely and are allowed to set up their own international gateways and
submarine cable landing stations.
Internet telephony has been permitted
Revenue sharing has been introduced
Telecom services have been corporatised. BSNL has been set up

Page 26

BUSINESS
Brief History and Corporate Profile
KLG was incorporated as KLG Consultants Private Limited in December 1985. KLG was converted into a public
limited Company in July, 1994 and changed its name to KLG Systel Limited in September, 1994.
KLG made a public issue in September 1995 to (a) part-finance its expansion-cum-diversification program for
setting up a centre for software development and systems integration facility at Electronic City in Gurgaon, Haryana
catering to the domestic and export markets (b) to expand the facilities in Bombay and other places, and (c) to set up
R&D department.
KLG raised GDRs of US$ 7.5 Million listed on LuxSE for strengthening organizational structure of the
Organisational Life Cycle solutions SBU, power sector SBU, implementation of pilot projects of the software
solution developed for the power sector, purchase of equipments, marketing and implementing of the software in
various parts of India meeting working capital requirements, setting up office infrastructure and expansion of its
increasing presence in power sector software solutions market and implementation of a continuous improvement
and development program for updating and customization of its software.
KLG has a strong focus on quality in sales and support processes. KLG has been awarded ISO 9001-2000
certification in respect of design, development, supply, support and service of application software and providing
engineering services using software solutions. In addition to that KLG has been awarded the ISO 9001-2000
certificate for its Power System division covering Revenue Management Activities by BSI Management Systems of
United Kingdom.
KLG has a national presence in India with 20 offices all over India and qualified resource pool to sell and support
its life cycle solutions. KLG employs over 215 engineers, domain experts, software programmers, mapping/
survey experts and has pioneered several concepts in Power Systems management, GIS and updating of Consumer
databases, Energy Audit, Revenue Management etc. It has made a paradigm shift from a normal software solutions
provider to a total solutions provider, which includes software and hardware and obtained a good response from
various industry segments.
KLG's support legacy, contemporary and futuristic technologies, applications and packages are based on its clients'
requirements. Its clients draw on KLG's expertise for ideas and plans that are dynamic and future oriented. KLG's
solutions are based on a blend of experience and winning business paradigms that are integrated into a unique and
holistic answer to its clients' demands.
The Company comprises of a core team of qualified and experienced professionals possessing expertise in a wide
spectrum of technical and commercial domains. Its aim is to give complete integrated IT solutions to its clients.
KLG has recently developed a unique solution - SG61 to manage the endemic problems of transmission and
distribution relating to technical and commercial losses and demand side management like power theft, absence of
consumption data for load management, lack of energy audit etc. The technology is a combination of hardware,
software and business processes. The development of SG61 is part of KLGs endeavour to assist distribution
utilities by introducing innovative solutions to the problem of transmission and distribution problems.
At the date of this Offering Circular the Company has the following subsidiaries:
Sl.
No.

Name of the Subsidiary

Company

Address
Company

1.

KLG Environment and

Safety Sciences Limited
KLG Software Technology
Private Limited

24/11A, Moti Nagar,

New Delhi
Unit 3-6, Tower A,
Unitech
Business
Park, South City-I,
Sector 41, Gurgaon
Unit 3-6, Tower A,
Unitech
Business

2.

3.

KLG Software Technology

and Infrastructure Private

of

the

Page 27

Percentage of
Shareholding
held by KLG
Systel Limited
Wholly owned
subsidiary
Wholly owned
subsidiary

Shareholding
of KLG

Wholly owned
subsidiary

100%

100%
100%

Limited

Park, South City-I,

Sector 41, Gurgaon

The Work Force

The Company has qualified and experienced professionals possessing expertise in a wide spectrum of technical and
commercial domains. These professionals have a distinguished record in their respective fields. Based on their
accumulated knowledge base, the core team of senior associates, who have a distinguished history of success in
academia as well as the industry, bring a cross functional approach to tackling strategic and long range concerns, to
ensure a smooth and stable success curve for the Company's projects.
The senior associates help to translate long-term mission statements and goals into tactical planning which guides
the empowered professionals in the Company to have a concrete action plan. The leadership quality of the senior
management is the driving force for motivation and retention of good employees in the dynamic and fluid
environment of software and computerization. The analysts, designers, programmers, technicians, and a host of
other operations staff bring projects based to life in the non-hierarchy bound organization based on a democratic
ethos. Staff at any level can avail the assistance of any skill or functionality available with any person in the
Company. With its truly open-door policy, it is not at all unique to find even the senior most management directly
involved in the operational workings to lend them the edge of knowledge that is earned only by years of distilled
experience. This edge, blended with the technical edge that the whiz kids of today possess, enables its projects to
turn out a unique output.
Key Strengths
The Company has a comprehensive range of service offerings. It has a track record of executing large, end to end,
mission critical projects. KLG maintains and enjoys long term client relationship which is one of the basic
potentials of any business. Its strategic focus is on the Indian market. The Company has extremely strong R&D
capabilities. KLG is recognised as a preferred employer and has a strong and an able management team.
Technological Strengths
The Company has concentrated its strengths in the strategic business units of Computational Engineering and
Services, Enterprise Project Management, Automation and Manufacturing Solutions, Enterprise Business Solutions
and Power Sector Solutions. Each specific Strategic Business Unit provides the client the opportunity to avail the
best professional expertise and support. The Company, based on its direct tie-ups with internationally reputed
companies, can access the latest software systems. Oracle, Microsoft, Primavera, Invensys (Wonderware),
Autodesk, COADE and others are just some of the associations that the Company can tap to deliver the best, most
feasible and economical results in the shortest time possible.
Intellectual Property
The intellectual property law protects a Company from infringement of its new and unique products. The
intellectual property rights are important to the Companys business. The Company engages employees,
independent contractors and, whenever possible, upon the commencement of their relationships with the Company.
These agreements generally provide that any confidential or proprietary information developed by the Company or
on its behalf be kept confidential. These agreements also provide that any confidential or proprietary information
disclosed to third parties in the course of its business be kept confidential by such third parties.
Overview of the present activities
An overview of the business activities of KLG, strategic business unit wise, is given hereunder:
Computational Engineering and Sciences
Increasing globalisation and technological advancements have offered new opportunities for collaborative
functioning. Off shoring jobs, sharing of data, mass customisation, growing popularity of 3D modelling by
graduating from 2D modelling, increasing functionality of CAM software have created more acceptability of Plant
Page 28

Centric Solutions, Manufacturing Centric Solutions, Infrastructure Centric Solutions and Life Sciences Centric
Solutions.
KLG within its domain of Life Cycle Solutions aims to become a key knowledge provider in the industry specific
mainstream. Under this SBU KLG has strategic alliance with Coade, Paulin, Autodesk, Trimble, Z Corp, Parametric
Technology Corp. (PTC) etc. to provide solution in CAD/CAE/CAM/GIS areas. Uni-Graphics (UG), Stratasys, 3D
Systems, Intergraph, Bentley and other Autodesk resellers in India,from whom KLG faces competition.
Enterprise Project Management
Effective enterprise project management solutions is the fulcrum to functioning of project focussed management
organisations. Constant monitoring of projects is critical to ensure ontime within budget implementation. Effective
project management solutions provide sound business practices for effective revenue management, customer service
and maximising available resources. KLG with support of its partners provides solutions for managing resources
and tactical plans for timely completion of projects.
KLG has formed a strategic alliance with Primavera, USA and provides various Enterprise Project Management
services including consulting, software and solutions customisation, solutions deployment and user acceptance,
training and development, and support and maintenance. KLG's portfolio of Primavera solutions bring together the
disciplines of strategic planning and project management, and provide a framework for effectively managing both
the resources and the tactical plans for completing projects.
KLG has received an award for Prime Club from Primavera Inc. for achieving 100%+ of target plan in the year
2005-06. Moreover the Company has successfully conducted Seminars at New Delhi and Mumbai, where the
industry leader Larson & Toubro shared the platform and applauded at the successful performance of Enterprise
project management Solutions provided by KLG. To add to the list, KLG has recently launched Academies at New
Delhi, Bangalore and Mumbai to impart Project Management courses to professionals. In Project Management
SBU, the Company faces competition from Microsoft, Artemis and Team Centre.
Automation and Manufacturing Solution
Producing the desired quality at an appropriate and competitive price to meet market needs and preferences is the
essential decision for an enterprise, and therefore, the need is to achieve an optimal combination of the above
factors.
KLG has provided IT enabled business optimisation solutions to manufacturing enterprises, which have evolved
from man machine interface and shop floor scheduling solutions to a complete framework of plant intelligence and
supply chain optimisation applications. KLGs solutions have enabled enterprises to make informed decisions about
their businesses. KLG has partnered with Invensys for exclusively representing the latters Wonderware products.
KLG has been focusing on SCADA, MES, PlMS (Plant Information Management Systems) and Plant-to-Business
Integration solutions. The main competition in this SBU is from Siemens, Rockwell, Honey well and GE.
Enterprise Business Solutions
The present age of changing consumer demand has given rise to need to factor demand side spikes in their supply
chain plans. Artificial intelligence inputs are used to analyse historical data to predict future demand. This provides
need based models for a cost effective enterprise wide supply chain optimisation solution.
KLGs solutions for supply chain optimisation provide integration with other enterprise applications. KLG also has
expertise in automating item identification and data collection for inventory and supply chain applications. In the
Enterprise Business Solutions SBU, KLG has strategic alliance with world leaders, such as Oracle, Intermac and
SATO. Under this SBU, the Company competes with IBM, Barcode India and Intellicon
KLG in Retail
KLG has been traditionally a strong player in the FMCG (also called CPG) supply chain. KLG has built number of
Supply Chain applications for leading names in India like, Nestle, Hindustan Lever Ltd., GlaxoSmithKlineBeecham
and SHV.
With the current boom in the Indian retails sector and the expected FDI approvals in the retail, KLG has decided to
extend its supply chain application to the last mile of the Supply Chain the retail outlet. Early last year, KLG
started working on the building blocks of a complete solution from Supply side to Demand side of a retail
Page 29

enterprise. Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from E-solutions which
is already used by some of the leading retail chains in India such as Flemingo Duty Free and Giordano.
Having created a world-class solution for an end-to-end retail supply chain, KLG is now all geared up to
aggressively go into the market.
Power Systems Solutions business
In the Power System Solution Business, KLG represents Operation Technology Inc., USA. HVDC Manitoba,
Canada, Cloudis, UK for solutions on Power Generation, Transmission and Distribution sectors. The Company has
world renowned products like ETAP, PSCAD, SPARD, and Electrical Designer which covers specialized area in
Power Systems. Competitive products in the segment are CYME, EDS, NEplan. We have 85% market share of the
total market in India for our products. We believe that we are far ahead with our competitors in terms of support,
training, core knowledge in software. The Company has received an award from 2005- ETAP Agent of the Year
for its outstanding sales, support and marketing of ETAP by Operation Technology, Inc.
KLGs PSS have been associated with the Indian power sector for over 10 years and provides integrated IT-based
solutions and services for the complete Life Cycle of electricity including power generation, transmission and
distribution (T&D). It is involved with the power sector from conceptualisation to design and analysis and
execution of proposed systems. KLG also provides revenue management services to several power utilities and is
presently serving more than 2 million customers in over 10 cities in India.
KLG increased its focus in this sector since 2001 and undertook providing services alongwith existing applications
of technology and software.
Propelled by its native knowledge of existing ground level position and an approach relevant to the Indian context,
KLG has consciously developed its business model in providing solutions that offer innovation and value addition
to this sector. With favourable government policies, such as APDRP, has facilitated acceptance of its services in
areas of identification and reduction of aggregate technical and commercial losses in the Transmission and
Distribution Sector. KLG has now developed a unique (patent under grant) solution titled SG61TM (SG61TM) to
manage the problems in transmission and distribution in countries like India for monitoring and control of aggregate
technical and commercial losses and demand side management.
KLG recognizes that its key strategic priorities are vested in the development of solutions for the power sector and
believes that it is well positioned to grow its presence in this business segment. The invention of SG61 offers
improvements in revenue management operations of utilities in India and in other markets.
Prime Product:
SG61
The SG61 technology is the brainchild of KLG which is an endeavour to provide a low cost Distribution
Automation System with minimum changes in the existing system and immediately enhances revenue
management for utilities.

GIS based consumer indexing

Once a geographical map of the service area and consumer database is updated, all information is linked
together to form a GIS. Consumer indexing is done to give a unique identification to each consumer in the
electrical network and gives its connectivity to LT pole, DT, 11 kV feeders to MV s/s. The advantages of GIS
based consumer indexing are:
Fault repair management.
Connection and disconnection management.
MIS specific to consumer level.
Better consumer oriented online services.
Online Energy accounting Distribution Transformer and Pole level.
Apart from the evident advantages of online energy accounting at DT level, SG61 provides a unique concept of
pole level energy accounting. While a DT level energy accounting identifies theft in a sample of 100-150
consumers, pole level energy accounting does the same on a sample size of 5-10 consumers. This provides the
Page 30

utility a microscopic view of specific problem areas. Energy consumption on account of such factors can be
monitored closely to try to reach at the root cause of the problems.

Online tracking of consumption (or Automatic Meter Reading), billing and collection
SG61 technology integrates the three most crucial links for the utility as well as for the consumer consumption, billing and collection. Online tracking of consumption or automatic meter reading introduces
transparency into the system, with the connected load of each consumer being tracked on a minute basis. This
translates into more efficient and accurate billing processes, as units consumed for billing purpose is tracked
continuously. Further, it is possible to create infrastructure to make payment through the Internet and credit
card from anywhere and cheques and cash at selected locations. Payment related information can be fed to the
local and central server units, which make updating the account of the respective consumer.

Pre-paid metering
The meter box will be equipped with a magnetic swipe card and a smart card reader, enabling the consumer to
pay in advance, if he chooses to. A micro controller will keep tracking the energy consumption of the
consumer against the available balance. The box will be equipped with an alarm and LEDs for each meter to
indicate a low balance/zero balance.

Tamper proof metering

The meter box will be equipped with two proximity switches to monitor the unauthorized opening of meter box
by sending signals to the micro controller to activate the relays/ tripping of contactor. All the consumers
connected to a meter box can be connected and disconnected by the micro controller.
In case the proximity switch does not operate and the meter is tampered by changing the CT ratio or meter
setting, it will be detected immediately by the micro controller through optical switch mounted on the meter.
The optical switch counts pulse rate of the meter and in case of meter tampering the changed pulse rate will be
identified immediately by the micro controller.

By-passing the meter or meter box

In case a by-pass of the meter or meter box (direct connection from LT line) is attempted, disconnection will be
initiated by the micro controller from the pole.
Damaging any microprocessor on pole / direct theft from pole
In case the box on the pole or the meter boxes are damaged the disconnection of the entire consumers connected
to the pole/ meter boxes will be initiated by the relay / contactor inside the box.
Damaging the wire/cable connecting the microprocessors

Upon disconnection of the SG61 boxes, the action will be identified by the local server and it will stop serial
communication with the micro-controllers on the pole and start individual communication with each micro
controller.
Time of day metering
The local server unit will collect energy consumption data from each micro controller at an interval of 15
minutes. With this, it is possible to implement Time-of-Day based tariff system in which differential pricing
can be implemented for peak and slump periods of the day.
Asset management
GIS based asset coding and indexing can be carried out for all the major assets like sub-station, DTs, feeders,
cables, pole etc. Complete history about all the assets like specification, installation date, present location etc
can be collected and documented for efficient use.
Availability based tariff system (ABT)

With the facility of monitoring frequency and voltage parameters at the central server / local server unit at an
interval of 15 minutes it is possible to implement the availability based tariff system. The advantage of the ABT
is to provide better quality of power to the consumer.
Demand side management

Page 31

Connected load of the consumer can be set / changed by the micro controller. In case the consumer starts
drawing more power from the sanctioned load for more than a pre set duration an alarm is raised.
Load forecasting / trending
With available database of energy consumption in the local and central server unit, load forecasting, using time
series method and advance models like ANN, can be carried out for area wise group of MV s/s, individual MV
s/s wise and 11 kV feeders wise. Based on reports, correct demand for the coming days can be made at grid
level where ABT is already applicable and penalties for UI (un-schedule interchange) of power can be
minimized.
EDRS Energy Demand Response System
EDRS or Energy Demand Response System is a service to help View, Visualize, Measure, Optimize and
Manage the Energy Consumption in Domestic, Commercial, Industrial, Government and Semi-Government
establishments. It would not only educate the users on the fundamentals of electricity & consumer rights but
also empower them to monitor and control their power on a real time basis.

The following are the details of financial assistance granted upto December 2006:
No
1.
2.
3.

Name of the Institution

State Bank of India, Overseas Branch,
New Delhi
-do-do-

4.

-do-

Nature
Cash Credit (Stocks)

Amount Rs. Millions

100.00

Term Loan Corporate

Bank Guarantee and Letter of Credit

30.00
150.00
120.70

5.

ICICI Bank Limited

Term Loan (Rent Plus and for

Building
Equipment Finance Loan

6.

ICICI Bank Limited

Vehicle Loan

5.00
5.00

Total

410.7

Contingent Liabilities:
As per the audited financial results of the Company for the year ended March 31, 2006:
1) Guarantees given by bankers amount to Rs. 76,805,876/- (Rs. 44,205,260/-) during the financial year
ending March 2006, against which the Company has shown Deposits of Rs. 8,362,186 (Nil) held by banks
as margin under the head bank balance.
2) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of
advances) amounts to Rs. 37,188,853/- ( 10,656, 560/-).
3) Other Claims against the Company, which are not acknowledged as debts, amounting to Rs. 986,392/-(Rs.
858,112/-).
Net Turnover according to SBUs
(Rs. in Millions)
SBU
Enterprise Project Management
Computational
Engineering
and
Sciences
Power Systems Solutions
Automation
and
Manufacturing
Solutions
Enterprise Business Solutions
Total

Year ended March

31, 2006
91.86
168.41

Year ended March

31, 2005
63.51
116.01

Year ended March

31, 2004
58.26
92.40

160.66
60.81

126.11
37.39

72.54
48.25

31.32
513.06

22.27
365.29

108.50
379.96

Page 32

Note: The activities carried on by the Company are of Software Services, Technical Services, Internet
Services, Consulting Services and Power System Solutions. The services provided by the Company cannot be
expressed in any generic unit and hence it is not practicable to give quantitative details of above items.
Competition
In respect of the key products sold by the Company there are no major competitors taking into consideration the
reference base and unique features in each of these products.
Recent Developments
Emerging Opportunities:
Power Sector:
Indian power industry, traditionally has been in big trouble. The aggregate transmission and distribution losses have
crossed Rs. 2,300 million (2004-05) and the rate of return for SEBs is still negative and India loses an estimated 2%
of its GDP to blackouts and SEB underperformance every year. The reforms are however happening now and one
of the key drivers for growth in this sector is the new Electricity Act 2003. The act has pushed several reforms such
as, accelerated power capacity addition, mega power projects, alternate energy solution, accelerated power
development and reform programme and rural electrification.
KLG has been involved in almost all the above areas since last 5-6 years. KLG provides solution for both
generation as well as T&D. The key customers on generation front have been companies like NTPC, NHPC, BHEL,
Siemens and Alstom, while on T&D, KLG is a key player in the Indian market.
The Company has indigenously developed Software namely VIDUSHI, which can be termed as the IT backbone
of the Revenue Management System in Power Sector. It is a cost effective, user friendly and comprehensive
software solution developed by KLG that seamlessly integrates the entire spectrum of work under Revenue
Management through dedicated modules. The VIDUSHI software integrates the prime activities i.e. GIS and
Electrical Network Mapping, Linking of consumer to Poles, Distribution Transformer & upstream network for
Energy Audits, Door-to-Door Survey etc in such a way that any data updated in one of the activities gets reflected
to the other. By doing this the user can double click any Consumer/Asset on the map and get the details specific to
that particular Consumer/Asset. This would result in regular and accurate Energy Accounting, Billing, and Revenue
Collection activities. The Company had applied for the copyright of the said software and successfully obtained the
Copyright of the said software in year 2005. Further IBM has awarded the Company Websphere Brand Badshah
Award 2005 for its stellar performance as ISV partner of IBM for Vidushi.
KLG has used worlds leading technologies to build a software solution for Power Distribution Management which
specifically meets the need of Indian utilities. KLG, though, its in house R&D, innovated and developed a unique
real time technological solution to manage the problems in transmission and distribution in developing countries for
monitoring and control of AT & C losses and demand side management and named it as SG61 Technology. SG61,
being a combination of hardware, software, and business processes, is a cost competitive and state of the art
solution which addresses not just the current problems in developing economies but will also help the distribution
companies to introduce next generation reforms including online energy audit, load management and optimization,
demand management, time-of-day billing and customer relationship management. The modules of this product are
used to manage close to 4.4 million Indian consumers and is proven in the Indian market. With the success in the
Indian market, lot of foreign companies in the region are now showing interest in the potential of the product in the
markets like Thailand, Philippines and China. To protect, the intellectual property rights in the said innovation, the
Company had applied for patent registration in 2005, registration is awaited.
KLG has formed a strategic alliance with IBM and has ported the SG-61 product on the IBM software framework to
leverage the global reach of IBM. The two companies are now jointly bidding opportunities in the power sector.
Infrastructure Centric Solution
As per the India Infrastructure Report there is a need for an increase in investment in infrastructure from 5% to 8%
of GDP by 2005-06 and doubling private spending in the infra sector to over 2% of GDP.As per the recent PWC
Page 33

report, the key sectors where the growth opportunities are immense are Airports, Ports, Power and Roads. The
investments as per the report are expected to be about USD 150 billion over the next 6 years.
KLGs business model to cater to needs of various sectors:
Airports: This is one of the fastest growing segment where new airports are expected in 6 metros and 45 non metro
airports have to be modernized. These projects will involve terminals, runways, taxiways, aerobridges and retail
spaces. This is likely to be Rs. 3,500 million expenditure.
KLG has many products to offer in airport modernization opportunity. These areas are Project Management, Design
and Engineering, Control Systems, Retail Automation and Asset Tagging.
The Company already has solution and desired experience in the Indian market to tap this opportunity. KLG has
provided solution to the key players already engaged in airport projects. These are L&T, GMR and Siemens. KLGs
technology partners such as Primavera have been involved with major international airports.
Ports: Indian ports have a long way to go. There are major capacity constraints and the ports lack in equipment and
automation to handle huge ships and cargo.
The growth in this segment is largely towards increase of capacity, construction of berths and jetties and storage
facility. Also the development of port infrastructure will drive related industries like shipping, maritime equipment,
ship building, ship repair and aquaculture.
KLG has been engaged with key players in this segment and has worked with major government and private ports,
largely in the area of Design & Engineering and Project Management. KLG has also been involved with many ship
building facilities in the country by providing them CAD and Project Management Solution.
Roads: India in the backdrop of the ambitious National Highway Development Programme would complete Rs
19,210 Millions - seven phase Golden Quadrilateral programme by 2012. Investments in the tune of Rs 6,000
Millions are required on Pradhan Mantri Gram Sadak Yojana (PMGSY) to provide road connectivity to all
unconnected inhabitants by 2007. Investments of about Rs 3,000- 4,000 Millions is likely to flow in to the road
sector from private players.
KLG has provides Design & Engineering solution, GIS frameworks and Project & Construction Management
solution to most of the key players in the Indian market. These include L&T, Punj Lloyd, DS Construction, HCC,
Gammon India Simplex Infrastructure.
Retail Automation:
The retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats
such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun
appearing in metros and second-rung cities alike introducing the Indian consumer to a shopping experience like
never before. Indias vast middle class and its almost untapped retail industry are key attractions for global retail
giants wanting to enter newer markets.
The organised retail sector is expected to grow stronger than GDP growth in the next five years driven by changing
lifestyles, strong income growth and favourable demographic patterns.
The structure of retailing is developing rapidly with shopping malls becoming increasingly common in large cities,
and development plans being projected at 150 new shopping malls by 2008. According to retail analysis reports, the
annual growth of department stores has been estimated at 24 per cent, which is faster than overall retail; and
supermarkets have taken an increased share of general food and grocery trade over the last two decades.
KLG has been traditionally a strong player in the FMCG (also called CPG) supply chain. KLG has built number of
Supply Chain applications for leading names in India like, Nestle, Hindustan Lever Ltd., GlaxoSmithKline
Beecham and SHV.

Page 34

With the current boom in the Indian retails sector and the expected FDI approvals in the retail, KLG has decided to
extend its supply chain application to the last mile of the Supply Chain the retail outlet. Early last year, KLG
started working on the building blocks of a complete solution from Supply side to Demand side of a retail
enterprise. Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from E-solutions which
is already used by some of the leading retail chains in India such as Flemingo Duty Free and Giordano.
Having created a world-class solution for an end-to-end retail supply chain, KLG is now all geared up to
aggressively go into the market.
KLGs Business Model:
From the technology perspective as the new retail chains are set-up across the country there will be an increasing
need for automation across the retail supply chain. Traditionally the automation has been in pockets and limited to
only large chains. As the network of stores become geographically spread there will be huge complexities in terms
of managing merchandise, understanding the consumer trends, fulfilling orders, increasing customer service levels
and optimizing the inventory and finances. This will require IT enablement of complete retail supply chain. KLG
has entered this area to tap the large potential in this sector. This will also help KLG in leveraging immense
experience it gained while running asias biggest e-tailing portal jaldi.com. KLG plans to focus on areas namely
Point of Sale solution, Retail ERP, Demand Forecast and Management, Barcode/RFID based product tagging and
Theft/Pilferage Control.
Accordingly KLG has tied up with global leaders in these areas as follows:
1.
2.
3.
4.
5.

SATO, Japan World leader in Bar coding solution.

Intermec, USA World leader in RFID and handheld based tagging solution.
SAGE world leader in retail ERP and Point of Sale solution.
SAP Business One along with the SAP Netweaver certified Point of Sale solution from E-solutions
IBM Point of Sale hardware (Cash Register).

The Company has executed projects worth Rs. 825.28 million during nine months period ended December 31,2006
under various segments detailed as follows:
S no. Segments
INR Millons
1.
Computational Engineering & Sciences
251.57
2.
Enterprise Project Management
75.79
3.
Automation & Manufacturing Solutions
39.05
4.
Enterprise Business Solutions
8.69
5.
Power System Solutions
450.18
825.28
Cost of sales and services has gone up by 2.08% during the nine month period ended December 31, 2006 compared
to cost of sales and services in the year ended March 31, 2006. No major changes has taken in inventory since the
end of the financial year to which the last published annual accounts relate.
The Company had a turnover of Rs. 365.28 millions and Rs. 513.06 millions for the year ending March 31, 2005
and 2006 respectively recording an increase of 40.46% and reported a turnover of Rs.825.28 million upto the nine
months ended December 31, 2006 as against Rs.357.06 millions during the nine months ended December 2005
recording an increase of 131.13%. The Company is expected to maintain the upward trend in the financial year
ending 31 March 2007.

Insurance
The insurance taken by the Company is adequate to cover all its facilities. There has not been material change since
the certificate was issued in the amount of the policies taken by the Company. The details of the major insurance
are as follows:
Details regarding Major Insurances effected by the Company:
Page 35

Sl. No.

1
2

Amount
insured
(in Rs.)

Valid
upto

Category of Insurance

Major Policy details

Insurance Company

Group Personal
Accident

All Employees

The Oriental Insurance Company

Limited

40,700,000

11-01-08

Analogical Computers

The Oriental Insurance Company

Limited

2,968,000

12-01-08

The Oriental Insurance Company

Limited

43,800,000

25/04/07

The Oriental Insurance Company

Limited

8,800,000

25/04/07

All Risk Policy

Standard Fire Policy

Burglary

Assets located at Plot No. 24,

Sector 18, Gurgaon
Furniture/Fixture/Fittings/Utensils
and appliances in Trade at Plot
No. 24, Sector 18, Gurgaon

All risk policy

Computers Hardware, peripherals,

various electronic equipments etc

The Oriental Insurance Company

Limited

15,073,896

19/04/07

Office Umbrella Policy

Assets situated at Unit 3-6, tower

A, Unitech Business Park, South
City-I, Gurgaon.

The Oriental Insurance Company

Limited

51,813,750

20/04/07

The Oriental Insurance Company

Limited

4,017,750

24/01/08

The Oriental Insurance Company

Limited

7,310,088

24/01/08

The Oriental Insurance Company

Limited

855,000

24/01/08

The Oriental Insurance Company

Limited

2,823,202

24/01/08

Office Umbralla Policy

Assets located at B-Block, 1

Floor, 131-142, Ananth Plaza,
University Road, Udaipur

The Oriental Insurance Company

Limited

1,855,200

24/01/08

Office Umbralla Policy

Assets located at SCO 37,

Basement, Sector-31 Market,
Gurgaon

The Oriental Insurance Company

Limited

2,335,866

24/01/08

The Oriental Insurance Company

Limited

1,452,526

24/01/08

Office Umbralla
Package Policy

Office Umbralla
Package Policy

Office Umbralla
Package Policy

10

Office Umbralla Policy

Assets situated at 1/1, First Floor,

RAMS,27, West Cott Road,
Roayapettah Chennai
Assets situated at 301 Pujit Plaza,
Plot.No.67, Sector 11,
Central Business District-Belapur,
Navi Mumbai
Assets situated at 3/3A Vikash
Nagar, Near R L B School
Lucknow
Assets located at 46/31/1
Gariahat Road, 4th Floor
Ballygunge New AC Market,
Kolkata
st

11

12

th

13

Office Umbralla Policy

Assets located at Flat No. 6-7, 8

Floor, Narayan Manzil,
Connaught Place, New Delhi

14

Contractors All Risk

Policy

Materials located at site of

erection at Plot No. 68, 69, 70A,
Sector-34, EHTP, Gurgaon

The Oriental Insurance Company

Limited

7,199,330

07/03/07

15

Electronic Equipments
Insurance Poilcy

Computer Hardware, peripherals,

various electronic equipments etc.
located at Jodhpur & Bikaner

The Oriental Insurance Company

Limited

2,818,400

28/11/07

16

Contractors All Risk

Policy

The Oriental Insurance Company

Limited

30000000

04/04/07

17

Erection All Risk

The Oriental Insurance Company

Limited

179504897

31/07/07

18

Erection All Risk

The Oriental Insurance Company

Limited

268187310

31/07/07

Materials located at site of

erection at Plot No. 68, 69, 70A,
Sector-34, EHTP, Gurgaon
Supply of work & material and
erecting, testing and
commissioning of electricity
transmission line in Banswara
Supply of work & material and
erecting, testing and
commissioning of electricity
transmission line in Chittorgarh

Page 36

Employees and Employee Relations

The Company considers human resource as its most important asset. To strengthen this asset the Company
emphasizes on attracting and recruiting best possible talent and having regard to the constantly changing business
environment, the Company has instituted training and development program for its employees. As at March 31,
2004, 2005, 2006, the Company had 154, 171 and 182 employees respectively, including managers and staff, whose
details are as follows:
Category of Employees
Top Management
Managers and above
Executives (upto Deputy Managers, Engineers and other
staff)
Total

As at March
31, 2004
8
30
116

As at March
31, 2005
8
35
128

As at March 31,
2006
8
40
134

154

171

182

Offices of the Company

The Company's registered office and branch offices used in its operating activities are situated as follows:
Registered office:
KLG SYSTEL LIMITED
Plot No. 70A, Sector- 34, EHTP,
Gurgaon-122004, Haryana
Tel: +91-124-4129900
Fax: +91-124-4129999
Email: klg.ho@klgsystel.com
Branch Offices:
Allahabad
Flat No : F 1
Swastik Appartments
Main Road, Near Asha Hospital, Allahabad
Tel: +91-532-3091165
Banglore
104 B, 105, 106, 107, FIRST FLOOR,
H.M. Geneva House 14
Cunigham Road,
Tel: +91-80- 41479151 / 52
Bareilly
001485-A First Power,
Raghuvanshi Complex,
Civil Lines, Bareilly-243001.
Tel: +91-581-3292107, Fax: +91-581-2455524
Chennai
1/1, First Floor, RAMS,
27, West Cott Road, Roayapettah
Chennai 600 014
Tel: +91-44-28413236/28419327, Fax: +91-44-28511662
Email: klg.chennai@klgsystel.com
Dehradun
H.No.1060, Indira Nagar Colony
Dehradun-248001
Tel: +91-135-2762467, Fax: +91-135-2762467
Gorakhpur
305-306, Sunanda Tower, Bank Road,
Gorakhpur-273001.
Tel: +91-551-3091403, Fax: +91-551-2349672
Haldwani
Ashirwad bhawan,
Indirajit Garden, Haldwani

Jaipur
412 ,4th Floor,
Ganpati Plaza,
MI Road, Jaipur
Tel: +91-141-4005614
Email: klg.jaipur@klgsystel.com
Jamshedpur
Flat C 1/2, Nirode Apartment
L- Road, Bistupur, Jamshedpur, Jharkhand
Tel: +91-657-2429879
Email: klg.jam@klgsystel.com
Kolkata
46/31/1 Gariahat Road
4th Floor Ballygunge New AC Market
Kolkata-700019
Tel: +91-33-24647465 /24645257/24645259
Fax:+91-33-24645258
Lucknow
3/3A Vikash Nagar, Near R L B School
Lucknow 226022
Tel: +91-522-2769784/3020910, Fax: +91-522-2328212
Email: klg.lucknow@klgsystel.com
Moradabad
C/o Jigar Colony, Electric Sub-Station,
Moradabad
Tel: +91-591-3098991, 2440791, Fax: +91-591- 2440735
Mumbai
301 Pujit Plaza, Plot.No.67, Sector 11,
Central Business District-Belapur,
Navi Mumbai 400 614
Tel: +91-22-27576789/90/91/27577327/28/29
Fax: +91-22-27576461
Email: klg.mumbai@klgsystel.com
C-19, Mezzanine Floor,
Satyam Shopping Centre,
MG Road, Ghatkopur (East)
Mumbai 400 077
New Delhi
Flat No. 6-7, 8th Floor
Narayan Manjil,
Page 37

23 Bahrakhamba Road,
Connaught Place, New Delhi
Tel: +91-11-41524492

Tel: +91-5946- 284172

Email: klgrpr@klgsystel.com
Hyderabad
Flat No. 92/505,
Minar Apartment, Deccan Towers,
Bhasheer Bhag
Hyderabad 500001
Tel : +91-40- 5546995

Shimla
Khosala Appartment
3rd Floor, Under Khalini Bus Stand
Khalini, Shimla 2
Tel: +91-177-3092127
Vadodara
814, Siddharth Complex, R.C.Dutt Road,
Vadaodara 390 005
Tel: +91-265-2351867/8, Fax: +91-265-2331341
Email: klg.vadodara@klgsystel.com

Udaipur
B- Block, 1st Floor,
131 to 142, Anand Plaza,
University Road, Udaipur

Varanasi
House No 57, Chandrika Colony
Sigra, Varanasi
Tel: +91-542-3951184

Legal Proceedings
No.
Name of the Party

Amount
Due
(In Rs.)

Brief Facts

Cases by the Company

1.

Agnice Fire
Protection Ltd.

561600 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear on the next day of appearance.

2.

Pradeep Pandey

500000 The Company has filed a suit against the ex-employee of the
Company for compensation/damages for misusing the
Companys proprietary information obtained during his
employment with the Company. The defence of the defendant
has been struck off and an application for recalling the said order
is to be argued before court.
Page 38

3.

Smartech India

320000 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear by the next day of appearance i.e. March 23,
2007.

4.

Hewlett Packard
India Pvt. Ltd.

The Company has filed a suit for recovery of an amount

5720296 obtained by the defendant in an unlawful manner and also with
respect to the damages due to delay occasioned by default of HP.
The summons are to be issued on the defendant.

5.

Rajlakshmi Engg.
College

280800 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear by the next day of appearance i.e. March 21,
2007.

6.

Narula College of
Engg.

213200 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The suit is
pending for clearance of objections.

7.

Jessop & Co. Ltd.

378000 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The suit is
pending for clearance of objections.
Cases against the Company

1.

Sanjay Sharma

121163 The party has filed the suit against the Company for supply,
installation, repair and maintenance of DG Sets, which due to
defective goods/services is disputed by the Company, hence suit.
The evidence has been filed in the court by the company and the
witness is to be cross examined by the other party on the next
date of hearing.

2.

Prakash Mal Jain

8100 The party has filed the case against forfeiture of shares by the
shares Company on December 5, 1997, whereas the Company has
contended that the forfeiture is in due accordance with the
provisions of Companies Act. The party has already lost four
cases filed by it against the Company by way of dismissal by the
judge, on the similar grounds, as in this particular case. The
reply of the petition and reply of re-joinder filed by petitioner
have already been made and the final argument date was fixed
on 29.05.2006, the case was argued and honble Board has given
the two weeks time for submission of brief written arguments.
The Company had already filed the written arguments and the
matter has been reserved by honble Board for order with the
date awaited from the honble Board.

3.

Employee State

180216 ESI Corporation has issued a demand letter against the Company
Page 39

Insurance
Corporation

for ESI Contribution for the calendar year 2000, which is

contested by the Company in the Court on ground of wrong
calculation of the contribution amount. The Company had
deposited Rs. 90,108/- with ESI Corporation under protest. The
matter is listed for further arguments.

Registration Number:
The Company is incorporated in the Republic of India and registered under the Companies Act with Registration
No.05-34348.
Employee Stock Option Scheme
In accordance with the SEBI Guidelines on Employee Stock Options and the Scheme framed under these guidelines
i.e. KLG Systel Employees Stock Option Scheme 2005, The Company, on April 12, 2006 had also issued
299,500 Employee Stock Options to the employees/directors of the Company at Rs. 119.58 per option, which after
exercise will give rise to equivalent number of equity share of Rs. 10/- each at a premium of Rs.109.58 per share.
The options will vest after one year from the date of grant and the options are scheduled to vest in a period of 3
years.
In year 1999, the Company granted 70,000 options to the eligible employees of the Company, convertible into
equity shares of the Company, which were proposed to vest in three consecutive years at 20%, 30% and 50%
respectively. Out of these, 57,850 options were converted into shares by the Company upto the year 2001.
Preferential Allotment of warrants
The Company, on November 09, 2006 had allotted 400,000 equity shares of Rs.10/- each at a premium of Rs.96/per share to promoters of the company on conversion of warrants allotted to them on May 23, 2006.
Further, the company on December 05, 2006 had resolved to issue 10,70,000 further Warrants to Promoters of the
Company at Rs 261 per warrant, which after conversion, within a period of 18 months from the date of allotment,
will give rise to equity shares of Rs. 10/- each at a premium of Rs. 251 per shares. After approval of the
Shareholders by special resolution, under section 81 (1A) of the Companies Act in an EGM of the Company held
on January 05, 2007, the Board of Directors of the Company allotted the warrants to the promoters in its meeting
held on January 17, 2007. The key terms of the warrants are that upon conversion the shares underlying the
warrants will have the same rights as the equity shares issued at the time of the conversion of the equity shares. The
warrants have been issued in accordance with the SEBI (DIP) Guidelines, 2000, Chapter XIII, Guidelines for
Preferential Issues.
Further, the Company proposes to allot 1.25 million warrants to strategic investors entitling the subscriber to one
Share per warrant, subject to approval of shareholders in forthcoming extraordinary general meeting.

GLOBAL DEPOSITORY RECEIPTS

The company had on September 01, 2007 raised US$7.5 million by the issue of 2,307,600 Global Depository
Receipts (GDRs) representing 2,307,600 Shares. As of date of this Offering Circular 284750 GDRs are outstanding
representing 284750 Shares.

Page 40

RISK FACTORS
The risks described below together with the other information contained in this Offering Circular should be
carefully considered before making an investment decision. The risks described below are not the only ones
relevant to the country, the industry in which the Company operates, the Company, the GDRs or the Shares.
Additional risks, not presently known to the Company or that it currently deems immaterial may also impair
Companys business operations. The Companys business, financial condition or results of operations could be
materially adversely affected by any of these risks.
Any potential investor in, and purchaser of, the GDRs should pay particular attention to the fact that Company is
governed in India by a legal and regulatory environment which in some material respects may be different from
that which prevails in the United States and the United Kingdom and other countries. Prior to making an
investment decision, prospective investors and purchasers should carefully consider all of the information
contained in this Offering Circular (including the consolidated financial statements included in this Offering
Circular).
This Offering Circular may be construed as forward-looking statements that involve risks and uncertainties. The
Companys actual results could differ materially from those anticipated in these construed forward-looking
statements as a result of certain factors, including the considerations described below and elsewhere in this
Offering Circular.
RISKS RELATED TO THE COMPANY AND THE INDUSTRY
The revenues and expenses of the Company are difficult to predict and can vary significantly from quarter to
quarter, which could cause the share price of the Company to decline.
The revenues and profitability have grown rapidly in recent years and are likely to vary significantly in the future
from quarter to quarter. Therefore, the Company believes that period-to-period comparisons of the results of
operations are not necessarily meaningful and should not be relied upon as an indication of their future
performance. Factors, which affect the fluctuation of the revenues, include:

changes in the pricing policies or those of its competitors;

the effect of hiring patterns and the time required to train and productively utilize new employees,
particularly information technology sector , or IT professionals;
the size and timing of facilities expansion; and
Unanticipated variations in the duration, size and scope of its orders /projects.

A significant part of its total operating expenses, particularly expenses related to personnel and facilities, are fixed
in advance of any particular quarter. As a result, unanticipated variations in the number and timing of demand for its
products projects or employee utilization rates, or the accuracy of its estimates of the resources required to complete
ongoing demand, may cause significant variations in its operating results in any particular quarter.
There are also a number of factors other than its performance that is not within the control of the Company that
could cause fluctuations in the operating results from quarter to quarter. These include general economic factors.
Any inability to manage the growth of the Company could disrupt the business and reduce its profitability
In the last couple of years the Company has undertaken major expansions by way of setting up offices in 18 cities
across the country.
The Company believes that its increasing growth shall place significant demands on its management and other
resources. It will require the Company to continue to develop and improve its operational, financial and other
internal controls, both in India and elsewhere.
In particular, continued growth increases the challenges involved in:
Page 41

recruiting, training and retaining sufficient skilled technical, marketing and management personnel;
adhering to its high quality and process execution standards;
preserving its culture, values and entrepreneurial environment;
developing and improving its internal administrative infrastructure, particularly its financial, operational,
communications and other internal systems; and
maintaining high levels of client satisfaction.

Its growth strategy also relies on the expansion of its operations to other parts of the world, particularly South East
Asia. The costs involved in entering these markets may be higher than expected and the Company may face
significant competition in these regions. The inability of the Company to manage growth in these regions may have
an adverse effect on its business, results of operations and financial condition.
The business of the Company may suffer if it fails to anticipate and develop new products and enhance existing
products in order to keep pace with rapid changes in technology and the industries on which the Company
focuses
The IT solutions / products market is characterized by rapid technological change, evolving industry standards,
changing client preferences and new product and service introductions. The future success of the Company will
depend on its ability to anticipate these advances and develop new product and service offerings to meet client
needs. The Company may not be successful in anticipating or responding to these advances in a timely basis, or, if
the Company responds, the products or technologies the Company develops may not be successful in the market
place. Further, products, services or technologies that are developed by its competitors may render its products noncompetitive or obsolete.
The Company is investing substantial cash assets in new facilities, and its profitability could be reduced if its
business does not grow proportionately
The Company may encounter cost overruns or delays in connection with new facilities that it would be setting up.
Additionally, future financing for additional facilities, whether within India or elsewhere, may not be available on
attractive terms or at all. Such expansions will significantly increase the Companys fixed costs. If the Company is
unable to grow its business and revenues proportionately, its profitability will be reduced.
The Company may be unable to recoup its investment costs to develop its software products
The development of its software products requires significant investments. Its current software products or any new
software product that it develops may not be commercially successful and the costs of developing such new
products may not be recouped. Since software product revenues typically occur in periods subsequent to the periods
in which the costs are incurred for the development of such software products, delayed revenues may cause periodic
fluctuations of its operating results.
The Company may engage in acquisitions, strategic investments, strategic partnerships or alliances or other
ventures that may or may not be successful
The Company may acquire or make strategic investments in complementary businesses, technologies, services or
products, or enter into strategic partnerships or alliances with third parties in order to enhance its business. It is
possible that it may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if it
does identify suitable candidates, it may not complete those transactions on terms commercially acceptable to it.
The inability to identify suitable acquisition targets or investments or the inability to complete such transactions
may affect its competitiveness and its growth prospects. If the Company acquires another Company, it may have
difficulty in assimilating the acquired Companys personnel, operations, technology and software. In addition, the
key personnel of the acquired Company may decide not to work for the Company. In some cases, the Company may
have difficulty in integrating the acquired products, services or technologies into its operations. These difficulties
could disrupt its ongoing business, distract its management and employees and increase its expenses. As of the date
of this Offering Circular, the Company has no proposal to enter into any material acquisition, investment,
partnership, alliance or other joint venture transaction.
The Company should be well conversant with the latest trends and changes in the IT Industry
Page 42

The business and profitability of the Company may be affected if it is unable to anticipate rapid changes in the
technology industry, innovate or diversify its product offerings in response to the market challenges.

Highly Competitive Field

The IT Industry is extremely competitive. Software companies need to be efficient enough to face the competition
in the industry. The Company has to be technologically advanced to be in the race. If the Company fails to compete
with the other leading companies in the IT Industry, it shall cause an adverse effect in its revenues and profitability.
Intellectual Property Rights (IPR)
Intellectual Property Law has been designed to protect the property of the owner created by him by his own
intellect. It includes Patents, Designs, Trade Marks, Copyright, Confidential Information, Trade Secrets and knowhow. It plays a crucial role in the development of industry, commerce and trade and in the growth of creative effort
in almost every field of human endeavour. Hence, any infringement or misappropriation of the Company's
Intellectual Property Rights could harm the Company's competitive position. The Company may be subject to
intellectual property infringement claims as the number of its competitors grows and its product or service offerings
overlap with competitive offerings. In addition, the Company may become subject to such claims since it may not
always be able to verify the intellectual property rights of third parties from which it licenses a variety of
technologies. Defending against these claims, even if not meritorious, could be expensive and divert the Companys
attention from operating the Company. If the Company becomes liable to third parties for infringing their
intellectual property rights, the Company could be required to pay substantial damage awards and be forced to
develop non-infringing technology, obtain a license or cease selling the applications that contain the infringing
technology. The loss of some of the Companys existing licenses could delay the introduction of software
enhancements, interactive tools and other new products and services until equivalent technology could be licensed
or developed. The Company may be unable to develop non infringing technology or obtain a license on
commercially reasonable terms, or at all.
Change in Technology and new introduction of new products may affect the Companys Business or its
financials.
Change in industry requirements or competitive technologies may render certain current products obsolete. The
Companys ability to adhere to technological changes and standards and to develop and introduce new and
enhanced products successfully on a timely basis will play a significant factor in the Companys ability to grow and
to remain competitive. The Company, however, cannot assure that it will be able to adhere to such technological
changes on timely basis and that certain of the Companys products will not become obsolete.
The Company is also subject to risks generally associated with the introduction of new products and their
applications, including lack of market acceptance, delays in product development and failure of products to operate
properly. The Company cannot assure that these will not affect its business or its financials.
The future growth of the Company may depend on its ability to raise new capital and obtain financing.
The Company needs to remain competitive in its market, which requires substantial investment in technological
advances. This is dependent on the Companys ability to finance these projects and other investments out of internal
accruals or new capital. If the financial performance of the Company in the future fails to meet the expectations of
its lenders and investors, the Company may not be able to raise new capital required to fund its growth or financing
may not be obtained on satisfactory terms.
Disputes with labour may affect the Companys operations.
The Companys operations depend upon the productivity of the Companys staff force. Relations with employees
could deteriorate due to disputes related to, inter alia, salary or benefit levels. In the event of any such disruptions,
the Companys business or its financials could be adversely affected.
Some of the Companys transactions are in foreign currency and hence vulnerable to foreign exchange rates.
Page 43

The Company receives a portion of its revenues in US dollars or other foreign currencies and incurs a part of its
expenses in US dollars or other foreign currencies. The fluctuation of the Rupee, particularly with respect to the US
dollar could adversely impact the Companys financial statements.
Companys ability to retain its highly skilled IT professional, management team and Key personnel
The ability of the Company to execute projects and to obtain new clients depends largely on its ability to attract,
train, motivate and retain highly skilled IT professionals, particularly project managers and other mid-level
professionals. If it cannot hire and retain additional qualified personnel, its ability to expand its business will be
impaired and its revenues could decline. The Company believes that there is significant worldwide competition for
IT professionals with the skills necessary to deliver the products it offers. The Company may not be able to hire and
retain enough skilled and experienced IT professionals to replace those who leave. Additionally, the Company may
not be able to redeploy and retrain its IT professionals to keep pace with continuing changes in technology,
evolving standards and changing client preferences. The Companys inability to attract and retain IT professionals
may have a material adverse effect on its business, results of operations and financial condition. The Company is
dependent on the senior members of its management team, including the continued efforts of its Chairman &
Managing Director, its Directors and its Executives and officers. The Companys future performance will be
affected by the continued service of these persons. Competition for senior management in the Company is intense,
and it may not be able to retain such senior management personnel or attract and retain new senior management
personnel in the future. The loss of any members of it senior management or other key personnel may have a
material adverse effect on the Companys business, results of operations and financial condition.
The Company is controlled by certain Shareholders and, if they take actions that are not in the best interests of
the Holders, it may harm the value of an investment in the Bonds
As on 31 December 2006, about 26.81% of the Shares of the Company are owned directly or indirectly by the
members of the Goel family and their associates (the "Promoters' Group") or entities owned or controlled by or
acting in concert with the Promoters' Group. The Promoters' Group has the ability to exercise significant control
over most matters requiring approval by Shareholders, including the election and removal of directors and
significant corporate transactions. This control could delay, defer or prevent a change in control of the Company,
impede a merger, consolidation, takeover or other business combination involving the Company, or discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company even if that
were in the best interests of Shareholders as a whole.
The Company has plans of international expansion which is subject to risks inherent in doing business on an
international level.
Currently, the Company has operations in India. The Company intends to tap the South East Asian market for
marketing its power sector solutions. Due to reason of its limited experience with facilities outside of India, the
Company is subject to additional risks related to its international expansion strategy, including risks related to
complying with a wide variety of national and local laws, restrictions on the import and export of certain
technologies and multiple and possibly overlapping tax structures. In addition, the Company may face competition
in other countries from companies that may have more experience with operations in such countries or with
international operations generally. The Company may also face difficulties integrating new facilities in different
countries into its existing operations, as well as integrating employees that it hires in different countries into its
existing corporate culture. The Company's international expansion plans may not be successful and it may not be
able to compete effectively in other countries.

RISKS RELATING TO INDIA

Political instability or changes in the government in India could delay further liberalisation of the Indian
economy and adversely affect economic conditions in India generally and the Company's business in particular.
Since 1991, successive Indian governments have pursued policies of economic liberalisation, including significantly
relaxing restrictions on the private sector. Nevertheless, the roles of the Indian central and state governments in the
Indian economy as producers, consumers and regulators have remained significant. In a general election that took
place in India in April and May 2004, the incumbent coalition government of the National Democratic Alliance,
Page 44

formed in October 1999, was defeated and the United Progressive Alliance, a multi-party coalition headed by the
Congress Party, formed a new government. Though the Congress Party has publicly indicated an intention to
continue India's programme of economic reform through a programme agreed to in consultation with all coalition
parties, the United Progressive Alliance consists of parties with differing agendas, which could result in political
instability, and as such the rate of economic liberalisation could change, and specific laws and policies affecting
Information Technology companies, foreign investment, currency exchange and other matters affecting investment
in the Company's securities could change as well. A significant change in India's economic liberalisation and
deregulation policies could adversely affect business and economic conditions in India generally, and the
Company's business in particular, if new restrictions on the private sector are introduced or if existing restrictions
are increased.
If regional hostilities, terrorist attacks or social unrest in India increase, the Company's business could be
adversely affected and the trading price of the Bonds could decrease.
The Asian region has from time to time experienced instances of civil unrest, terrorist attacks and hostilities among
neighbouring countries, including between India and Pakistan. Since May 1999, military confrontations between
India and Pakistan have occurred in Kashmir. Also, since early 2003, there have been military hostilities and civil
unrest in Afghanistan and Iraq. Military activity or terrorist attacks in India in the future could influence the Indian
economy by creating a greater perception that investments in Indian companies involve higher degrees of risk.
These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on
the Indian economy, the Company's business, its future financial performance and the trading price of the Bonds.
Furthermore, India has also experienced social unrest in some parts of the country. If such tensions occur in other
parts of the country, leading to overall political and economic instability, it could have an adverse effect on the
Group's business, future financial performance and the trading price of the Bonds.
Financial instability in other countries, particularly countries with emerging markets, could disrupt Indian
markets and the Company's business and cause the trading price of the bonds to decrease.
The Indian financial markets and the Indian economy are influenced by economic and market conditions in other
countries, particularly emerging market countries in Asia. Financial turmoil in Asia, Latin America, Russia and
elsewhere in the world in past years has had limited impact on the Indian economy and India was relatively
unaffected by financial and liquidity crises experienced elsewhere. Although economic conditions are different in
each country, investors' reactions to developments in one country can have adverse effects on the securities of
companies in other countries, including India. A loss of investor confidence in the financial systems of other
emerging markets may cause volatility in Indian financial markets and, indirectly, in the Indian economy in general.
Any worldwide financial instability could also have a negative impact on the Indian economy. This in turn could
negatively impact on the movement of exchange rates and interest rates in India. In short, any significant financial
disruption could have an adverse effect on the Company's business, future financial performance and the trading
price of the Bonds.
A slowdown in economic growth in India could cause the Company's business to suffer.
The Company's performance and the quality and growth of its business are necessarily dependent on the health of
the overall Indian economy. The Indian economy has grown significantly over the past few years with gross
domestic product increasing by 7.50 per cent. in the year ended 2005 compared to the previous fiscal year. Any
future slowdown in the Indian economy could harm the Company, its customers and other contractual
counterparties. The Indian economy is also largely driven by the performance of the agricultural sector, which
depends on the quality of the monsoon and is difficult to predict.
Furthermore, the Indian economy is in a state of transition. The share of the services sector of the economy is rising
while that of the industrial, manufacturing and agricultural sector is declining. It is difficult to gauge the impact of
these fundamental economic changes on the Company's business.
Trade deficits could have a negative effect on the Company's business and the trading price of the Bonds.
India's trade relationships with other countries can influence Indian economic conditions. In the year ended March
31, 2006, India experienced a trade deficit of US$39.6 billion, an increase of US$13.6 billion from the year ended
Page 45

2005. If India's trade deficits increase or become unmanageable, the Indian economy, and, therefore, the Company's
business, future financial performance and the trading price of the Bonds, could be adversely affected.
A decline in India's foreign exchange reserves may affect liquidity and interest rates in the Indian economy,
which could have an adverse impact on the Company.
India's foreign exchange reserves have increased significantly since 1991 from US$ 5.8 billion to US$ 151.6 billion
in 2006. A sharp decline in these reserves could result in reduced liquidity and higher interest rates in the Indian
economy. Reduced liquidity or an increase in interest rates in the economy following a decline in foreign exchange
reserves could adversely affect the Company's business, its future financial performance and the trading price of the
Bonds.
Any downgrading of India's debt rating by an international rating agency could have a negative impact on the
Company's business and the trading price of the Bonds.
Any adverse revisions to India's credit ratings for domestic and international debt by international rating agencies
may adversely affect the Company's ability to raise additional financing and the interest rates and other commercial
terms at which such additional financing is available. This could have an adverse effect on the Company's business
and future financial performance and the Company's ability to obtain financing to fund its growth, as well as the
debt rating and trading price of the Bonds.
Increasing employee compensation in India may erode some of the Company's competitive advantage and may
reduce the Company's profit margins.
Employee compensation in India has historically been significantly lower than employee compensation in the
United States and Western Europe for comparably skilled professionals, which has been one of the Company's
competitive strengths. However, compensation increases in India may erode some of this competitive advantage and
may negatively affect the Company's profit margins. Employee compensation in India is increasing at a faster rate
than in the United States and Western Europe, which could result in increased costs relating to scientists and
engineers, managers and other mid-level professionals. The Company may need to continue to increase the levels of
its employee compensation to attract and retain staff and manage attrition. Compensation increases may have a
material adverse effect on the Company's business, results of operation and financial condition.
The Indian securities markets are more volatile than certain other securities markets.
The Indian securities markets are more volatile than the securities markets in certain countries which are members
of the Organisation for Economic Cooperation and Development. The Indian stock exchanges have, in the past,
experienced substantial fluctuations in the prices of listed securities.
The Indian stock exchanges have experienced problems which, if such or similar problems were to continue or
recur, could affect the market price and liquidity of the securities of Indian companies, including the Shares. These
problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In
addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading
in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time
disputes have occurred between listed companies, stock exchanges and other regulatory bodies, which in some
cases may have had a negative effect on market sentiment.
Significant differences exist between Indian GAAP and International Accounting Standards
("IAS")/International Financial Reporting Standards ("IFRS"), which may be material to the financial
information prepared and presented in accordance with Indian GAAP contained in this Offering Circular.
As stated in the reports of B. Bhushan & Co., independent auditors included in this Offering Circular, the financial
statements included in this Offering Circular are prepared and presented in conformity with Indian GAAP and no
attempt has been made to reconcile any of the information given in this Offering Circular to any other principles or
to base it on any other standards. Indian GAAP differs from accounting principles and auditing standards with
which prospective investors may be familiar in other countries, such as IAS/IFRS. Significant differences exist
between Indian GAAP and IAS/IFRS, which may be material to the financial information prepared and presented in
accordance with Indian GAAP contained in this Offering Circular. B. Bhushan & Co., Auditors has made no
Page 46

attempt to quantify the effect of any of those differences. In making an investment decision, investors must rely
upon their own examination of the Company, the Terms and Conditions of the Bonds and the financial information
contained in this Offering Circular. See "Summary of Significant Differences between Indian GAAP and
IAS/IFRS".
There may be less Company information available in the Indian securities markets than securities markets in
developed countries.
There is a difference between the level of regulation and monitoring of the Indian securities markets and the
activities of investors, brokers and other participants than that of markets in other more developed economies. The
Securities and Exchange Board of India (the "SEBI") is responsible for monitoring disclosure and other regulatory
standards for the Indian securities market. The SEBI has issued regulations and guidelines on disclosure
requirements, insider trading and other matters. There may, however, be less publicly available information about
Indian companies than is regularly made available by public companies in developed countries, which could
adversely affect the market for the Shares.
Investors in the Bonds may not be able to enforce a judgment of a foreign court against KLG.
KLG is a limited liability company incorporated under the laws of India. All of KLG's directors and executive
officers named herein are residents of India and all of the assets of KLG and such persons are located in India. As a
result, it may not be possible for investors to effect service of process upon KLG or such persons outside India or to
enforce judgments obtained against such parties outside India. Moreover, it is unlikely that a court in India would
award damages on the same basis as a foreign court if an action were brought in India or that an Indian court would
enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with Indian practice.
Recognition and enforcement of foreign judgments is provided for under Section 13 of the Civil Code on a statutory
basis. Section 13 of the Civil Code provides that foreign judgments shall be conclusive regarding any matter
directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent
jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it appears on the face
of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognise
the law of India in cases to which such law is applicable; (iv) where the proceedings in which the judgment was
obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the
judgment sustains a claim founded on a breach of any law then in force in India. Under the Civil Code, a court in
India shall, upon the production of any document purporting to be a certified copy of a foreign judgment, presume
that the judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court, within
the meaning of that Section, in any country or territory outside India which the Indian Government has by
notification declared to be in a reciprocating territory, it may be enforced in India by proceedings in execution as if
the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is
applicable only to monetary decrees not being in the same nature of amounts payable in respect of taxes, other
charges of a like nature or in respect of a fine or other penalties.
The United Kingdom has been declared by the Indian Government to be a reciprocating territory for the purposes of
Section 44A but the United States has not been so declared. A judgment of a court of a country which is not a
reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution.
Such a suit has to be filed in India within three years from the date of the judgment in the same manner as any other
suit filed to enforce a civil liability in India. Repatriation outside India of any amounts received following the
enforcement of a foreign judgment is subject to the approval of the RBI. It is unlikely that a court in India would
award damages on the same basis as a foreign court if an action were to be brought in India. Furthermore, it is
unlikely that an Indian court could enforce foreign judgments if, in the opinion of that court, the damages awarded
were excessive or inconsistent with public policy. There can be no assurance that an Indian court would enforce a
foreign judgment that contravenes or violates the laws of India.

Page 47

RISKS RELATING TO THE BONDS AND SHARES

RBI approval is required for repayment of the Bonds prior to maturity, including upon an event of default.
Under the guidelines on policies and procedures for external commercial borrowings issued by the RBI, any
prepayment of an external commercial borrowing prior to its stated maturity requires the prior approval of the RBI.
Therefore, any repayment of the Bonds prior to maturity as a result of early redemption pursuant to Condition 8 or
acceleration of the Bonds pursuant to Condition 10 would require the prior approval of the RBI. There can be no
assurance that such approval would be obtained in a timely manner or at all.
Certain corporate actions to adjust the Conversion Price of the Bonds may require the approval of the Indian
Ministry of Finance.
The Indian Ministry of Finance, through a notification dated August 31, 2005, amended the FCCB Scheme and
prescribed certain pricing guidelines in relation to the conversion of foreign currency convertible bonds ("FCCBs").
The FCCB Scheme provides, among other things, that the conversion price of FCCBs should not be lower than a
"floor price" which is calculated with reference to the higher of (i) the six month average share price for the relevant
company and (ii) the two week average share price for the relevant company (each such average to be determined
on the day which falls 30 days prior to the date of the general meeting approving the issue of the FCCBs). The
FCCB Scheme applies to the issue of the Bonds.
There can be no assurance that the potential adjustments to the Conversion Price which are provided for under the
Terms and Conditions of the Bonds would be permitted by the Ministry of Finance if an adjustment resulted in the
Conversion Price falling below the "floor price" referred to above. There can also be no assurance (i) as to how the
Ministry of Finance will apply or interpret the FCCB Scheme or whether the restrictions set forth in the FCCB
Scheme would prevent the Company from undertaking certain corporate actions; or (ii) that the Ministry of Finance
will not prescribe any further pricing guidelines which would deem any adjustments by way of certain corporate
actions (including declaration of dividends, issue of Shares by way of capitalisation of profits or reserves and
division of outstanding Shares) to be in contravention of the FCCB Scheme.
There is no existing market for the Bonds and an active market for the Bonds may not develop, which may cause
the price of the Bonds to fall.
The Bonds are a new issue of securities for which there is currently no trading market. In-principle approval has
been received for the listing of the Bonds on the SGX-ST. No assurance can be given that an active trading market
for the Bonds will develop or as to the liquidity or sustainability of any such market, the ability of holders to sell
their Bonds or the price at which holders of the Bonds will be able to sell their Bonds. If an active market for the
Bonds fails to develop or be sustained, the trading price of the Bonds could fall. If an active trading market were to
develop, the Bonds could trade at prices that may be lower than the initial offering price of the Bonds.
Whether or not the Bonds will trade at lower prices depends on many factors, including: (i) the market for similar
securities; (ii) general economic conditions; and (iii) the Company's financial condition, results of operations and
future prospects.
Upon a change of control or delisting of the Shares from the Indian Stock Exchanges, or upon acceleration
following an event of default, KLG may not be in a position to redeem or repay the Bonds.
Upon a change of control of KLG, or a delisting of the Shares from both the NSE and BSE, Bondholders may
require KLG to redeem in whole or in part such Bondholder's Bonds. Following acceleration of the Bonds upon an
event of default, KLG would be required to pay all amounts then due under the Bonds. See"Terms and Conditions
of the Bonds". KLG may not be able to redeem all or any of such Bonds or pay all amounts due under the Bonds if
(i) the requisite RBI regulatory approval is not received or (ii) KLG does not have sufficient cash flow to redeem or
repay the Bonds.

Page 48

Fluctuations in the exchange rate between the Indian Rupee and US dollar may have a material adverse effect
on the value of the Bonds or the Shares independent of the operating results of the Company.
Investors that purchase the Bonds are required to pay for them in US dollars. Investors are subject to currency
fluctuation risk and convertibility risk since the Shares are quoted in Indian Rupees on the Indian stock exchanges
on which they are listed.
The exchange rate between the Indian Rupee and the US dollar has changed substantially in the last two decades
and may fluctuate substantially in the future. On an annual average basis, the Indian Rupee has declined against the
US dollar from 1980 to 2002. As per the noon buying rate in the City of New York for cable transfers as reported
by the Federal Reserve Bank of New York, the Indian Rupee lost approximately 8.89 per cent. of its value relative
to the US dollar in the three years ended 31 March 2003, depreciating from a rate of Rs.43.65 = US$1.00 on 31
March 2000, to a rate of Rs.47.53 = US$1.00 on 31 March 2003. The Indian Rupee has appreciated approximately
6.42 per cent. in value against the US dollar since 31 March 2003 to an exchange rate as at March 31, 2006 of
Rs.44.48 = US$1.00.
Bondholders will bear the risk of fluctuation in the price of the Shares.
The market price of the Bonds is expected to be affected by fluctuations in the market price of the Shares and it is
impossible to predict whether the price of the Shares will rise or fall. Trading prices of the Shares will be influenced
by, among other things, the financial position of and the results of operations of the Company, and political,
economic, financial and other factors. Any decline in the price of the Shares may have an adverse effect on the
market price of the Bonds.
Future issues or sales of the Shares may significantly affect the trading price of the Bonds or the Shares and
such issues or sales may not result in an adjustment to the conversion price provisions in the conditions and the
Trust Deed.
A future issue of Shares by KLG or the disposal of Shares by any of the major shareholders of KLG, or the
perception that such issues or sales may occur, may significantly affect the trading price of the Bonds or the Shares.
Other than the obtaining of consent from some of its lenders prior to altering its capital structure, there is no
restriction on KLG 's ability to issue Shares or the ability of any of its shareholders to dispose of, encumber or
pledge its Shares, and there can be no assurance that KLG will not issue Shares or that such issue will result in an
adjustment to the conversion price provisions in the Conditions and the Trust Deed.
Investors in the Bonds may be subject to Indian taxes arising out of capital gains on the sale of the Shares
following exercise of their conversion rights.
Sale of the Shares issued on conversion of the Bonds, whether to an Indian resident or to a person resident outside
India and whether in India or outside India, would be subject to tax in India. Under applicable Indian laws, a sale of
shares may be chargeable to a transaction tax and/or tax on income by way of capital gains in India. See "Taxation".
Investors are advised to consult their own tax advisers and to consider carefully the potential tax consequences of an
investment in the Bonds or Shares under the laws of India or any other applicable jurisdiction.
The ability to sell Shares to a resident of India may be subject to certain pricing restrictions.
A person resident outside India (including a Non-Resident Indian) is generally permitted to transfer by way of sale
the shares held by him to any other person resident in India without the prior approval of the RBI or the Foreign
Investment Promotion Board (the "FIPB"). However, the price at which the transfer takes place must comply with
the pricing guidelines prescribed by the RBI in its Circular dated October 4, 2004. The guidelines stipulate that
where the shares of an Indian company are traded on a stock exchange:
(i)

the sale may be at the prevailing market price on the stock exchange if the sale is effected through a
merchant banker registered with the SEBI or through a stock broker registered with the stock exchange; or

(ii)

if the transfer is other than that referred to above, the price shall be arrived at by taking the average
quotations (average of daily high and low) for one week preceding the date of application with a 5 per cent.
variation.
Page 49

Bondholders will have no rights as shareholders until they acquire the Shares upon conversion of the Bonds.
Unless and until the Bondholders acquire the Shares upon conversion of the Bonds, the Bondholders will have no
rights with respect to the Shares, including any voting rights or rights to receive any regular dividends or other
distributions with respect to the Shares. Bondholders who acquire the Shares upon the exercise of a Conversion
Right will be entitled to exercise the rights of holders of the Shares only as to actions for which the applicable
record date occurs after the Conversion Date.
There are limitations on the ability of Bondholders to exercise conversion rights.
The Bonds are convertible into Shares at the option of the Bondholders pursuant to the terms of the Bonds.
Bondholders will be able to exercise their conversion right only within the Conversion Period specified in the
Bonds and will not be able to exercise their conversion right during the Closed Periods (as defined in the "Terms
and Conditions of the Bonds"). In addition, conversion rights may not be exercised during certain other limited
periods. See"Terms and Conditions of the Bonds". As such, a Bondholder's ability to exercise conversion rights will
be restricted during these periods.
There may be a delay from when a holder decides to convert Bonds into Shares until the time the resulting
Shares are approved to be listed and traded on the Indian Stock Exchanges and, therefore, the risk that the
Share price may fluctuate during that period.
There will be a time gap of at least 40 days from the date on which a Bondholder advises the paying and conversion
agent of the intention to convert the Bonds into Shares and the date of allotment of the Shares to the Bondholder,
being a date after the Indian Stock Exchanges have granted their final approval for the Shares to be listed and
traded. Within this gap, the price of the Shares may fluctuate and this may have an adverse effect on the price that
the Bondholder anticipates to receive for the transfer of Shares. Furthermore, any trade in the Shares by the
Bondholder will have to be done on a spot delivery basis and the trade will have to be settled within the next
settlement cycle.

Page 50

SELECTED FINANCIAL INFORMATION

The selected financial and operational data have been derived from the Company's audited financial statements and
related schedules included elsewhere in this Offering Circular for the years ended March 31, 2004, 2005 and 2006.
The selected audited income statement data and balance sheet data for the years ended March 31, 2004, 2005 and
2006 set forth below have been derived from the Company's audited financial statements and related schedules for
the years ended March 31, 2004, 2005 and 2006 which have been prepared in accordance with Indian GAAP as
applicable at the time of their initial preparation and have been audited by B. Bhushan & Co., Chartered
Accountants, the Company's independent statutory auditor.
The selected unaudited income statement data and balance sheet data for the nine months ended December 31,
2006 has been prepared from the information underlying the unaudited financial information of the Company
prepared in accordance with Indian GAAP as applicable at the time, approved by the Board of Directors on
January 08, 2007 and subject to a limited review by B. Bhushan & Co., Chartered Accountants, as reported by
them in their report dated January 08, 2007. Accordingly, any event subsequent to such date has not been
considered.
Indian GAAP differs in certain material respects from IAS/IFRS. For a discussion of significant differences between
Indian GAAP and IAS/IFRS, see "Summary of Significant Differences between Indian GAAP and IAS/IFRS".
Summary of Financial Performance
Summary of Balance Sheet
(Figures in Millions)

SOURCES OF FUNDS
Equity share capital
Reserves and surplus
Secured loans
Deferred tax liabilities
Total Liabilities
APPLICATION
OF
FUNDS
Gross Block
Less: depreciation
Net Block
Capital work in progress
Investments
Gross current assets
Less: Current liabilities and
provisions
Net current assets
Miscellaneous expenditure
Total assets
Net worth
US $ Rate (Rs.)

As at March 31, 2006

Rs.
US $
81.31
1.82
403.62
9.05
74.23
1.66
37.43
0.84
596.59
13.37

As at March 31, 2005

Rs.
US $
38.94
0.89
388.55
8.87
4.71
0.11
31.90
0.73
464.10
10.60

As at March 31, 2004

Rs.
US$
38.94
0.88
369.71
8.38
7.10
0.16
24.92
0.56
440.67
9.98

493.24
166.47
326.77
43.90
3.92
346.69
130.24

11.05
3.73
7.32
0.98
0.09
7.77
2.92

397.13
128.95
268.18
9.37
4.11
282.67
107.26

9.07
2.94
6.12
0.21
0.09
6.46
2.45

285.84
96.69
189.15
0.00
5.40
314.39
82.99

6.48
2.19
4.29
0
0.12
7.12
1.88

216.45
5.55
596.59
479.38

4.85
0.12
13.37
10.75
44.62

175.41
7.03
464.10
420.45

4.01
0.16
10.60
9.60
43.79

231.40
14.72
440.67
393.93

5.24
0.33
9.98
8.93
44.12

Page 51

Summary of Income Statement for the last 3 financial years

(Figures in Million)
Year ended March 31, 2006
Rs.

US $

Year
ended
March 31, 2005
Rs.
US $

Sales and services

Other income
Total income
Cost of sales and
services
Sales, general and
administrative
expenses
PBDITA
Interest
Miscellaneous
expenditure written off
PBDT
Depreciation
PBT
Provision for tax
Adjustment
for
deferred taxation
Prior
period
adjustments
Profit after tax

513.06
10.66
523.72
295.99

11.51
0.24
11.74
6.63

365.28
15.11
380.39
220.26

8.34
0.35
8.69
5.03

107.41

2.41

86.57

1.98

76.56

1.73

120.32
2.54
1.48

2.70
0.06
0.03

73.56
0.06
1.88

1.68
0
0.04

66.55
0.08
2.01

1.51
0
0.05

116.30
39.12
77.18
(19.19)
(5.53)

2.61
0.88
1.73
(0.43)
(0.12)

71.62
32.85
38.77
(6.65)
(6.97)

1.64
0.75
0.89
(0.15)
(0.16)

(0.40)

(0.01)

0.24

0.01

(0.07)

52.06

1.17

25.39

0.59

24.94

0.57

Equity capital
Reserves (excluding
revaluation reserves)
No. of shares
Profit per share
US $ Rate (Rs.)

81.31
403.62

1.82
9.05

38.94
388.55

0.89
8.87

38.94
369.71

0.88
8.38

8.07
0.15
44.62

3.84
6.62

3.84
0.15
43.79

3.84
6.50

3.84
0.15
44.12

8.07
6.66

Year
ended
March 31, 2004
Rs.
US$
379.93
8.61
8.76
0.20
388.69
8.81
245.58
5.57

64.46
1.46
27.33
0.62
37.13
0.84
(3.55) (0.08)
(8.57) (0.19)

Other than the investments made and reflected in the Financial Statements in this OC, the Company is not planning
any further investments in the near future.
Earning per Share (EPS) Statement for the last 4 financial years
Year
2005 06
2004 05
2003 04
2002 03

EPS (In Rs.)

6.66*
6.62
6.50
2.47

* Adjusted consequent to bonus issue in the ratio of 1:1.

Page 52

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following discussion and analysis of our financial condition is based on our financial statements as of and for
the year ended 31 March 2006. This discussion contains forward-looking statements and reflects our current views
of our Company with respect to future events and financial performance. Actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain factors such as those set forth under
"Risk Factors" and elsewhere in this Offering Circular. This discussion should be read together with our Indian
GAAP financial statements and related notes included elsewhere in this Offering Circular. We have prepared our
financial statements in accordance with Indian GAAP and in Rupees. Indian GAAP differs in some respects from
US GAAP. See "Summary of Certain Significant Differences between Indian GAAP and US GAAP".
The overall trend in the Indian Information Technology Industry remains the same, directionally, in the fiscal 2005,
as compared to fiscal 2004. The industry has been charting sustaining growth and has achieved critical mass. Indian
IT companies and service providers are achieving leadership positions in the Global IT Industry. The Government
and the skilled and dedicated manpower have made this enviable achievement possible due to sustained support
available in India. The IT industry has been a witness to changing customer demands and customer profile. Service
providers who are able to anticipate these changes have managed to survive the recent IT Industry meltdown. KLG
is one of the few who have adapted and survived.
According to a statement issued by NASSCOM, "the Indian IT Companies do not want to merely match worldwide
standards in security. They want to set the very highest standards." The Company is striving to achieve that.
INDUSTRY STRUCTURE AND DEVELOPMENT
In recent years, technology has become increasingly important to the success of organisations worldwide and has
transformed businesses, driven productivity gains, enhanced operational efficiencies and created new business
models. In this context, organizations have increased their spending on IT services, which enable them to realize
greater value from their technology infrastructure and achieve productivity gains. The Company has organized its
operations in a structure focused on developing products using cutting edge technologies developed by its R&D
team.
PERFORMANCE OVERVIEW
The Directors are pleased to inform you that in spite of the overall recessionary trend and the meltdown in the
Information Technology Sector, the Company has achieved good growth in its turnover and net profit. Due to
continued efforts and stress on reduction of operating costs and improving efficiencies, the Company has achieved a
total revenue of Rs. 523.72 Million during the year 2005 - 2006 as against Rs. 380.39 Million in the previous year,
with net profit increasing from Rs. 25.39 to Rs. 52.04 Million.
(Rupees in Million)
Particulars
2005-06
2004 05
2003 04
Turnover Sales and other incomes
523.72
380.39
388.69
Operating profits (PBDIT)
120.32
73.56
66.55
Less: Depreciation & interest
41.66
32.90
27.41
Profit before tax (PBT)
77.18
38.78
37.12
Provision for tax Current Year
(19.19)
(6.65)
(3.55)
Provision for tax Deferred tax
(5.53)
(6.97)
(8.57)
Prior period adjustments
(0.40)
0.24
(0.07)
Profit after tax (PAT)
52.06
25.39
24.94
Balance of profit from previous year
3.02
4.19
19.68
Amount available for appropriation
55.08
29.58
44.62
Proposed Dividend
12.11
5.76
5.76
Dividend tax
1.70
0.81
0.74
Transfer to general reserve
35.00
20.00
33.94
Balance carried over to Balance Sheet
6.27
3.01
4.18

Page 53

SWOT ANALYSIS
Strength

A pioneer of the Indian IT Solutions Industry. The Company has developed a software solution for the
power sector which is a unique solution that integrates the various components of the problem of
transmission and distribution losses and tackles them simultaneously to have an immediate and long term
effect. The solution is a cost competitive and state of the art solution, has potential for global
commercialization and is backed by a professional and dedicated management team.
Promoters with deep sector knowledge, entrepreneurial drive and vision.
The Company has developed hard to imitate technologies, giving it a head start.
Comprehensive range of product and service offerings.
Proven ability to execute mission critical projects.
Enduring client relationships with repeat assignments.
Strategic focus on the global automobile security markets.
Proven R&D capabilities churning out unique customized solutions.
Strong management team and recognition as a preferred employer.

Weakness

Growing competition from quality local and global players

Increasing remuneration packages for IT Professionals. Acceptable attrition rate, though a cause for worry.
Political, Economic and Social developments in India including the state of infrastructure facilities in
certain critical cities.
IT market is volatile and technology driven, worldwide. High level of obsolescence.

Opportunities

Company is on the verge of achieving critical mass.

Strengthening, expansion and recognition of the Companys global capabilities.
Adopting strategic focus on emerging markets and technologies
Tie-ups with well-known and strategically critical partners for marketing support.
Attracting and retaining high quality IT personnel due to the Companys visibility in the IT Industry.
Expanding and strengthening the Companys research and development capabilities.
Focus on brand building.

Threats

The Growth Rate of the Company could be impacted in case of a slowdown in the IT Industry.
New entrants with their cutthroat pricing in the highly competitive market may affect the Companys
profitability in the short term.
The Companys strength is its senior management team and the skilled IT professionals. Threat of
poaching is a reality.

Risk Management

The Company has always been technology driven with cutting edge technologies developed by the
Company, which are hard to duplicate.
The Company is in an expansion mode and is on the verge of achieving critical mass.
The Company is planning to raise funds in the international capital markets by issue of Foreign Currency
Convertible Bonds..
Develop capabilities to continuously develop new products to broaden customer base and drive growth by
creation of new markets.
Concerted efforts to cut the cost of raising funds, energy, materials and utilities and to achieve international
norms of efficiency.
Page 54

Develop capabilities to absorb higher input costs by increasing share of high value added products in its
product portfolio.
Enhance customer satisfaction by providing products and services that meet and exceeds their expectation
through continual improvements.

Outlook

The outlook is distinctly positive especially with Indias booming economy and development of new
markets for Companys products.
Tie up with state electricity boards to provide Companys developed software solutions developed by the
Company.
The current fund raising programme will help the Company in leveraging its technological strength by
effectively launching its unique products in developing and developed markets.
Companys focus on brand building will enhance Companys presence in critical markets and add value to
the Companys fundamentals.
Overall growth achieved by the Company due to various factors will enhance value for all the stakeholders
and associates of the Company.

HUMAN RESOURCE DEVELOPMENT

The Companys HR policy revolves around motivating its personnel by encouraging friendly work culture and
environment aimed at continuous improvement in productivity. The HR policies ensure that the Company attracts
the best available talent. The HR strategy and practice helps the personnel to integrate with and support the
corporate business strategies of the Company. The Companys HR policy revolves around motivating its personnel
by encouraging friendly work culture and environment aimed at continuous improvement in productivity. Education
and training cover both attitudinal and behavioural training and critical skills enhancement training.
CAUTIONARY STATEMENT
The statements made in this report on the Companys objectives are based on certain assumptions and expectations
of future events. Actual results could however differ from those expressed or implied. Important factors that could
make a difference to the Companys operations include domestic economic environment, changes in Government
regulations, economic and political developments in India and abroad. The Company assumes no responsibility in
respect of forward looking statements which may be amended or modified in future on the basis of subsequent
developments, information or events.

Page 55

MARKET PRICE INFORMATION CONCERNING THE SHARES

The Companys Shares were listed on the BSE in 1995. The Companys Shares were listed on the NSE in 1999.
The tables below sets forth for the periods indicate the high and low prices for the Companys shares on the NSE
and the average volume of trading activity on the NSE for its Shares. On 23 March 2007, the closing price of the
Shares on the BSE was Rs.297.40 per Share and on the NSE it was Rs. 297.20 per share.
Monthly High and Low quotations of shares traded at NSE from December 2003 to December 2006 are as tabulated
below.
Month and year

High (In Rs.)

Low (in Rs.)

No. of Shares Traded

December-03
January-04
February-04
March-04
April-04
May-04
June-04
July-04
August-04
September-04
October-04
November-04
December-04
January-05
February-05
March-05
April-05
May-05
June- 05
July- 05
August-05
September-05
October-05
November-05
December-05
January-06
February-06
March-06
April-06
May-06
June-06
July-06
August-06
September-06
October-06
November-06
December-06
January-07
[Source: www.nseindia.com]

60.5
57.25
38.9
33.8
38
47
37.4
41.25
43.5
46.9
73.4
117.85
114.65
102
104.9
109
97.5
98.75
108.80
176.50
206.80
241.90
192.90
187.95
217.80
267.90
154.80
127.00
127.95
139.35
138.45
140
198
223.15
314.35
319
357.65
395

36
37.1
30.25
26.35
28.25
24.25
31.25
30.5
35.1
39.9
41.35
54.2
85
67.05
82.5
73.1
76.75
74.6
85.00
92.00
158.55
171.10
127.00
136.40
168.50
127.00
119.20
91.10
97.00
102.15
91
105
122.05
169.10
209.90
240.40
255
301.20

1,503,017
406,412
176,979
154,681
148,491
311,442
155,413
224,587
269,235
626,440
3,321,811
5,032,381
2,753,018
774,574
1,772,717
2,336,444
602,524
1,367,858
2,647,011
6,770,266
6,808,844
5,106,381
1,067,235
806,823
1,236,304
2,199,333
1,611,558
808,606
971,163
1,610,202
781,398
878,251
2,171,122
1,436,918
2,513,623
1,820,215
3,008,300
3,056,519

Page 56

DIVIDENDS
Under the Companies Act, unless the Board recommends the payment of a dividend, the Shareholders at a general
meeting have no power to declare any dividend. The Shareholders at a general meeting may declare a lower, but not
higher, dividend than that recommended by the Board. Dividends are generally declared as a percentage of the par
value of the Companys Shares. The dividend recommended by the Board and approved by the Shareholders at a
general meeting is distributed and paid to Shareholders in proportion to the paid-up value of their Shares as on the
record date for which such dividend is payable. In addition, as is permitted by the articles of association, the Board
may declare and pay interim dividends. Under the Companies Act, dividends can only be paid in cash to
Shareholders listed on the register of Shareholders on the date, which is specified as the "record date" or "book
closure date". No Shareholder is entitled to a dividend while any lien in respect of unpaid calls on any of his Shares
is outstanding. Dividend declared and paid by the Company for the last 5 years is tabulated as follows:
Year ended March
31
2006
2005
2004
2003
2002
December 31, 2000

Dividend, exclusive of tax (Rs.

in Millions)
12.11
5.76
5.76
4.80
6.72
3.84

Dividend Rate (%)

15.00
15.00
15.00
12.50
17.50
15.00

Dividend
per
share (in Rs.)
1.50
1.50
1.50
1.25
1.75
1.50

A company must pay "dividend distribution tax" of 17% (inclusive of a surcharge on dividend distribution tax and
education cess on dividend distribution tax and surcharge) on the total amount distributed as dividends. A company
is not permitted to declare any dividend, which is not recommended by the directors. The directors may pay an
interim dividend. No dividend may be paid except out of the profits of the company pursuant to Section 205 of the
Companies Act.
The Company may not declare any dividend that is not recommended by the Board of Directors. The Board of
Directors may declare and pay an interim dividend. No dividend may be paid except out of the profits of the
Company or pursuant to Section 205 of the Companies Act. See "Description of the Shares- Dividends".
The form, frequency and amount of future dividends on the Shares will depend upon the Companys earnings, cash
flow, financial conditions and other factors and shall be at the discretion of the Board.
For the Financial Year ended 31 March 2006, the Company declared a dividend of Rs. 1.50 per share (15%) on
8,075,300 equity shares of Rs.10 each, aggregating to Rs. 12.11 Million excluding dividend tax of Rs. 1.69 Million.
Future Dividends
There is no assurance that any future dividends will be declared or paid or that the amount thereof will not be
decreased. Holders of the Bonds will not be entitled to receive dividends paid on Shares until the Bonds are
converted into shares.

Page 57

Movement in Authorised and Issued Share Capital

The Company has increased its authorized capital from time to time in accordance with the provisions of the
Companies Act. A schedule and summary of the increase in capital of the Company during last 10 years is as
follows:
S. No
1

Particulars of Increase in Authorised Capital

From Rs 10 Millions to Rs. 40 Millions

Date of Meeting
January 27, 1995

No. of Shares
4,000,000

From Rs 40 Millions to Rs. 60 Millions

April 23, 1999

6,000,000

From Rs. 60 Millions to rs. 100 Millions

August 5, 2002

10,000,000

From Rs. 100 Millions to Rs. 200 Millions

January 12, 2006

20,000,000

Changes in Issued Share Capital

The table below sets forth changes in the issued share capital of the Company during the last 10 years, where the
nominal value of Shares is Rs.10 each:
No.

Description

Date

1.

Equity Share
Capital

as on December 31,
1995

Equity shares
forfeited

December 5, 1997

Equity

July 21, 1999

Equity

No of shares

Value per Share

3363100

10

(183,300)

10

14,000

10

December 22, 1999

600,000

10

Equity

September 2, 2000

17,100

10

Equity

July 23, 2001

26,750

10

Equity

November 25, 2005

200,000

10

Equity

February 3, 2006

4,037,650

10

Equity

September 01, 2006

23,07,600

10

10

Equity

November 09, 2006

400,000

10

Information on the Companys Share Capital as on December 31, 2006

Share Capital Structure of the Company as at December 31, 2006
Authorized Share Capital As at 30 September 2005
20,000,000 Shares

Rs. 200,000,000

Issued, Subscribed and Paid-up capital

Issued:
10,966,200 Shares
Subscribed:
10,966,200 Shares
Paid-up:
10,782,900 Shares
Add: value of forfeited shares
(183,300 equity shares, forfeited due to
non-payment of amount due on Shares)
Total :

Rs. 109,662,000
Rs. 109,662,000
Rs. 107,829,000
Rs.
559,200

Rs. 108,388,200
Page 58

EXCHANGE RATES
The following table sets out, for the periods indicated, certain information reported by the Federal Reserve Bank of
New York concerning exchange rates between Indian Rupees and US dollars since 2004 based on the noon buying
rate in New York City on the last business day of each month during the period for cable transfers in Indian Rupees.
The column entitled "Average" in the table below is the average of the daily noon buying rate on the last business
day of each month during the year and the average of the daily noon buying rate on each business day during the
quarter or the month.
Indian Rupees per US$1.00
Average
High
Low Period End
Mid Rate
2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2006
January
February
March
April
May
June
July
August
September
October
November
December
January 2007
Source: Federal Reserve Bank of New York

Page 59

45.22
44.85
46.15
44.82

45.68
46.21
46.45
45.87

43.40
43.40
45.66
43.27

43.40
45.99
45.91
43.27

43.59
43.53
43.61
45.32

43.82
43.72
44.00
46.26

43.28
43.21
43.05
44.00

43.62
43.51
43.94
44.95

44.20
44.23
43.34
44.82
45.20
45.89
46.37
46.45
46.01
44.38
44.86
44.11
44.21

44.92
44.54
44.58
45.09
46.20
46.25
46.83
46.61
46.38
45.97
45.26
44.48
44.49

43.89
44.10
44.09
44.39
44.77
45.50
45.84
46.32
45.74
44.90
44.46
44.70
44.07

43.96
44.21
44.48
44.86
45.05
45.83
46.49
46.44
46.06
45.35
44.59
44.11
44.07

USE OF PROCEEDS
The Company expects to raise US22Million from this Offering. The net proceeds from this Offering, after
deduction of fees and expenses of issue of FCCBs is expected to be approximately US$21.12 Million which the
Company intends to use for new projects in Power System Solutions and expansion of existing activities.

Page 60

CAPITALISATION
The following table sets forth the Companys non-consolidated capitalisation and total debt, as adjusted to give
effect to the issuance of the Bonds. This table should be read in conjunction with the Companys audited nonconsolidated financial statements, the related notes and the other financial information contained elsewhere in this
Offering Circular.

Particulars

Secured Loans
Unsecured Loans
Total Debt (A)

As on December 31, 2006

Unaudited
Rs. Millions
US $ Millions
177.77
4.03
177.77
4.03

As adjusted following issue of Bonds

Un-audited
Rs. Millions
US $ Millions
177.77
4.03
970.42
22.00
1148.19
26.03

Authorised Share Capital

200.00

4.53

200.00

4.53

Paid up share capital

Reserve and Surplus
Total Shareholders fund (B)

108.39
886.11
994.50

2.46
20.09
22.55

108.39
886.11
994.50

2.46
20.09
22.55

Total Capitalisation (A+B)

1172.27

26.58

2142.69

48.58

There has been no material change in the capitalisation of the Company since 31 December 2006.

Page 61

DIRECTORS AND MANAGEMENT

BOARD OF DIRECTORS
Election of Directors
Under the Companies Act, the Board has the ultimate responsibility for the management and administration of
the Companys business. The Companys Articles provide that its Board shall have not less than 3 and not more
than 12 Directors. The minimum and maximum number of Directors may be increased or decreased, as the case
may be, by a special resolution of the Companys Shareholders and approval of the Central Government (as may
be applicable), subject to the provisions of the Companys Articles and the Companies Act. As of the date of
this Offering Circular, the Companys Board comprises 6 Directors. The Companies Act provides that directors
of a Company be appointed by Shareholders in the general meeting by a resolution passed by simple majority,
where at least two-thirds of the directors so appointed are liable to retire by rotation and at every AGM one third
of such directors must retire from office. The remaining directors in the absence of any provision in the Articles
may be appointed at such general meeting for such duration of time as the general meeting may determine. The
Companies Act also states that a public Company may, through its Articles, provide for the appointment of not
less than two thirds of its directors according to the principal of proportional representation either by a single
transferable vote, or by a system of cumulative voting or otherwise as provided in the Articles. A retiring
Director is eligible for re-election. The Directors who retire by rotation shall be those who have been longest in
office since their last appointment. The Companys Articles state that persons to be appointed as Directors need
not hold any Shares to qualify for the office of Director.
Composition of the Board
The Listing Agreement with the BSE and NSE provides that the Board shall have an optimum combination of
executive and non-executive directors with not less than half the Board consisting of non-executive directors. A
non executive director is a Director, who does not undertake to devote his whole working time to the Company,
and as such does not draw additional remuneration from the Company. The number of independent directors
depends on whether the Chairman is an executive or a non-executive director. In the case of a non-executive
Chairman, at least one-third of the Board should be independent and in case of an executive Chairman, at least
half the Board should be independent. An independent director is one who, apart from receiving directors
remuneration, does not have any other material pecuniary relationship or transactions with the Company, its
promoters, its management or its subsidiaries, which in judgement of the Board may affect the independence of
judgement of the director. The Companies Act also provides that a Company may have both a Managing
Director and a Whole-Time Director. A Managing Director is a director who is entrusted with substantial
powers of management and a Whole-Time Director is a director in the whole time employment of the Company
and devotes all of his time and attention in the carrying on of the affairs of the Company.
Terms of Appointment of the Whole Time Directors
The Shareholders reappointed Mr. K.L. Goel as Whole-Time Director of the Company for a period of 5 years
with effect from November 5, 2003.
The Shareholders reappointed Mr. Kumud Goel as Managing Director of the Company for a period of 5 years
with effect from October 1, 2004.
The Shareholders appointed Mrs. Upasana Goel as Director (Commercial) of the Company for a period of 5
years with effect from November 25, 2005.
The Shareholders appointed Mrs. Ritu Goel as Director (Business Development) of the Company for a period of
5 years with effect from October 19, 2006.
Directors of the Company
Name of the Directors Designation
Mr. S.B. Budhiraja, Independent Non-executive Director
Mr. R.C. Mody, Independent Non-executive Director
Mr. G.K. Pandey, Independent Non-executive Director

Page 122

Mr. B. D. Gupta, Independent Non-executive Director

Mr. K.L. Goel, Whole Time Director
Mr. Kumud Goel, Managing Director
Mrs. Upasana Goel, Director (Commercial)
Mrs. Ritu Goel, Director (Business Development)
Mr. Prabir Sengupta, Independent Non-executive Director
Directors Remuneration
Remuneration of non-executive Directors
All directors are paid a sitting fee of Rs. 5000.00 for every meeting of the Board or committee attended by them
based on their attendance at the Board meetings.
Remuneration of executive Directors
The remuneration paid to the Executive Directors are as per the resolution passed by the Board of directors and
further approved by the Shareholders of the Company. Salary and perquisites include all elements of
remuneration, i.e. salary, allowances and benefits. No bonus, pension or incentive is paid to any of the Directors.
Loans and guarantees to Directors and Management
As on the date of this Offering Circular, there are no loans or guarantees provided and outstanding to either the
Directors or the Management of the Company. No transactions undertaken by the Company with its directors or
management are of an unusual nature.
No remuneration or benefits in kind were granted from the group companies to the members of the
administrative, management and supervisory bodies
The addresses of the Board of Directors and key management are listed below in the table:
Remuneration
paid
(Year
ended March
31, 2006) (in
INR)
314,478*

Number
of
shares held

Options
to
subscribe for New
Shares

1,100

12500 (ESOP)

365,025*
365,025*

12500 (ESOP)
12500 (ESOP)

1,952,603

515,980

2,594,895

787,000

940,172

655,538

B- XI/ 8124, Vasant Kunj,

New Delhi
G- 3/ 18, DLF Phase I,
Gurgaon, Haryana

400000 (Warrants
convertible
into
equity shares
300000 (Warrants
convertible
into
equity shares
-

112100

C- 1/5, Humayun Road,

New Delhi

No.

Name

Residential Address

(1)

Mr.
S.B.
Budhiraja
Mr. R.C. Mody
Mr.
G.K.
Pandey
Mr. K.L. Goel

3, Sukh Chain Marg, DLF

Phase I, Gurgaon, Haryana
H-5-D, Saket, New Delhi
B-3, Press Enclave, Saket,
New Delhi
46, SOA, DLF Phase I,
Gurgaon, Haryana
G-3/ 18, DLF Phase I,
Gurgaon, Haryana

(2)
(3)
(4)
(5)

Mr.
Goel

Kumud

(6)

Mrs.
Goel

Upasana

(7)

Mr. B. D. Gupta

(8)

Mrs. Ritu Goel

(9)

Mr.
Prabir
Sengupta

46, SOA, DLF

Gurgaon, Haryana

Phase

I,

Page 63

100000 (Warrants
convertible
into
equity shares
-

(10)

Mr.
Arora

Mukesh

C-2618,
Gurgaon

Sushant

Lok-I,

2,695,004

30000 (ESOP)

*Further in accordance with the approval of the Shareholders in the AGM of the Company held on August 12,
2005, the Non-Executive Directors were paid the commission for the financial year ending 31.03.2005 i.e. Sh.
S.B. Budhiraja, Rs. 125,776/- Sh. R.C. Mody, Rs. 136,259/- and Sh. G.K. Pandey 125,776/- aggregating to Rs.
387,811/- during the period under reporting.
No other remuneration or benefits in kind were granted, during the last completed financial year for any reason
whatsoever, and charged to overheads or the profit appropriation account, to members of the administrative,
management and supervisory bodies.
Biography of the Directors
Mr. S.B. Budhiraja, Director
Mr. S. B. Budhiraja, aged 75 years is an Independent Management consultant. Mr. S.B. Budhiraja is an
Independent Management Consultant and a Past President of the Institute of Management Consultants of India,
the national apex body of management consultants. He was the Executive Director of Management
Development Institute (MDI), Gurgaon from 1990-93, one of the top ranking management schools.
A gold medallist in Mechanical Engineering from the University of Roorkee, Mr. Budhiraja joined BurmahShell, where he worked for 14 years. He also trained with Shell, UK Mr. Budhiraja has held several significant
posts, and was the youngest ever Managing Director of Indian Oil Corporation from 1974-78. He has also been
the Managing Director of IBP, Balmer Lawrie, and Indian Oxygen, during his career. He was Overseas Director,
Al Futtaim Group U.A.E. from 1978-82.
Mr. Budhiraja was invited in 1982-83 as a Fellow, Centre for International Affairs, Harvard University. He is a
Fellow of the All India Management Association, and the Institute of Management Consultants of India. He was
President, Indian Chamber of Commerce, Calcutta in 1989-90 and Chairman CII Eastern Region in 1980-89.
Mr. R.C. Mody, Director
Mr. R. C. Mody aged 80 years is a post graduate in Economics and an Associate of Indian Institute of Bankers.
He retired as Chief General Manager in-charge of Industrial Export Credit Department of Reserve Bank of India
at the National level. He had been officially deputed to RBIs counterpart bodies in some of the European
countries like United Kingdom, Germany and Sweden.

Mr. G.K. Pandey, Director

Mr. G. K. Pandey aged 76 years, is a post graduate in Economics. He was employed with the Government of
India and has the unique distinction of reporting to Pt. Jawaharlal Nehru on some important economic issues. He
left the Government to pursue a career in journalism where he worked with the Times Group and also as a
Senior Editor of Observer. Since September 1996, he has been working as a freelance journalist.
Mr. KL Goel, Founder & Whole Time Director
Mr. K. L. Goel aged 74 years is wholetime Director of the Company. He is a fellow member of the Institute of
Chartered Accountants of India and also an alumnus of the International Management Institute (IMI, Geneva),
Indian Institute of Management, Ahmedabad and Henley on Thames - Staff Administration college, United
Kingdom. He was Director, Finance of Indian Oil Corporation Limited and Director-In-charge of Assam Oil
Division till 1983, when he joined an oil trading Company in Paris and returned to India to set up his own
business. Mr. Goel has been a consultant to various government/ private companies and World Bank projects.
He has more than 39 years of experience in business development and management.

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Mr. Kumud Goel, Promoter & Managing Director

Mr. Kumud Goel aged 47 years is the Managing Director of our Company, a fellow member of the Institute of
Chartered Accountants and has been in the information technology industry for more than 17 years. A
visionary, he has made significant contributions in the Indian industry for identifying the need and potential for
Plant Life Cycle Management Solutions. He has attended various advanced software seminars in India and
overseas. Mr. Kumud Goel has been one of the pioneers in introducing CAD/ CAE applications, Project
Management, Power System and Automation in India in the late 1980s.
Mrs.Upasana Goel, Director (Commercial)
Mrs. Upasana Goel aged 39 years is Whole-time Director and is designated as Director (Commercial). Mrs.
Upasana Goel is Post Graduate and is working with the Company since last 7 years. Considering her experience
and capabilities and the contribution, she has made towards the Companys growth, she was appointed as
Whole-time Director, designated as Director (Commercial) by the Board of Directors on November 25, 2005.
The Shareholders in the EGM held on January 12, 2006 had approved by special resolution her appointment.
Mr. B.D. Gupta, Director (appointed on July 10, 2006)
Mr. B.D. Gupta, aged 70 years is a Post Graduate in Commerce and an Associate Member of the Institute of
Cost & Works Accountants of India. He has about 45 years of experience in Finance, Management and Business
Strategies. From 1990 to 1994 he worked as Director (Finance) of Indian Oil Corporation Ltd (IOCL)- A
FORTUNE-500 Company. He was on the Board of Directors of Indian Oil Corporation Ltd. as a Wholetime
Director during this period. During 1995-2001, he had worked as Executive Director of J.M.Morgan Stanley Ltd
and was responsible for North India Territory with particular emphasis on Government and PSUs business in the
field of Corporate Advisory, Disinvestment, Debt mobilisation, IPOs, Mergers & Acquisitions and other
Investment Banking activities.
Currently he is Senior Advisor to the Chairman, ONGC-a Top Oil & Gas PSU of India. Besides, he is also
Chairman of the Board of Governors of an Oil Business School and a Governor of University of Petroleum &
Energy Studies, Delhi.
Mrs.Ritu Goel, Director (Business Development) (appointed on October 19, 2006)
Mrs. Ritu Goel aged 45 years is whole-time director and is designated as Director (Business Development). Mrs.
Ritu Goel is a Post Graduate and has been associated with the Company/ Group Company since last 7 years.
Considering her experience and capabilities and the contribution she has made towards the Companys growth,
she was appointed as whole-time director, designated as Director (Business Development) by the Board of
Directors on October 19, 2006. The Shareholders approved her appointment by special resolution in the EGM
held on January 05, 2007.
Mr. Prabir Sengupta, Director (appointed on February 24, 2007)
Mr. Prabir Sengupta, aged 65 years is a M. A. in Economics from Presidency College, Calcutta University. He
is a retired officer of Indian Administrative Service and has held various positions in the State of Assam
including the position of Sub-Divisional Officer, Additional District Collector, District Collector, Joint
Secretary, Home & Political Departments, etc. Further, he had held various positions with the Government of
India including, Secretary, Department of Commerce, Secretary, Department of Supply, Ministry of Commerce
& Industry, Secretary, Department of Defence Production & Supplies, Secretary, Ministry of Petroleum and
Natural Gas (PNG), Secretary, Department of Heavy Industry, Ministry of Industry, Additional Secretary and
Adviser (Energy), Planning Commission and various other important positions during his long career of more
than 40 years.
He retired as Director of Indian Institute of Foreign Trade, a Deemed University.
Biography of Key Managerial Personnel
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Mr.Mukesh Arora, Chief Executive Officer

Age 42 years
Has a rich blend of management experience. A Mechanical Engineer and MBA by qualification, he currently is
the CEO of KLG. He has held management positions at reputed organizations like HCL, TATA Unisys, IMTAC
(Oman) etc. He has the distinction of being a pioneer in the area of Internet solutions in India and has played a
key role in defining the internet strategies for a number of reputed blue-chip companies in India and abroad.
Audit Committee
Constitution and Composition
KLG set up an Audit Committee. The Company has been reviewing and making appropriate changes in the
composition and working of the committee from time to time not only to comply with various requirements
under the Companies Act and Clause 49 of the Listing Agreement, but also to bring about greater effectiveness
of the committee.
The Audit Committee consists of three Directors:
(1) Mr. R.C. Mody, Chairman
(2) Mr. B. D. Gupta
(3) Mr. G.K. Pandey
All the three members of the Audit Committee are independent, non-executive directors. The Audit Committee
reviews, acts and reports to the Board of Directors, inter alia, with respect to:
auditing and accounting matters, including the recommendation for appointment of KLGs independent
auditors;
Companys compliance with legal and statutory requirements;
Integrity of the Companys financial statements, the scope of the annual audits, and fees to be paid to
the independent auditors;
Performance of the Companys Internal Audit function, independent auditors and accounting practices.
The Audit Committee reviews the audited/unaudited quarterly, half-yearly and yearly financial results and
thereafter the same are placed to the Board for its consideration and approval.
Mr. Vinay Kumar acts as Secretary of the Audit Committee.
Remuneration Committee of Directors
Composition
KLGs Remuneration Committee comprises:
(1) Mr. G.K. Pandey, Chairman
(2) Mr. R.C. Mody
(3) Mr. S.B. Budhiraja
The following terms of reference have been specified for the committee:
To determine the Companys policy and approve, remuneration packages for executive directors and
their relatives working in the Company, including pension rights and compensation payment.
To approve the remuneration payable to the managerial personnel under the Companies Act, taking
into account the financial position of the Company, trend in the industry, the appointees qualification,
experience, past remuneration and performance.
Shareholders' and Investors' Grievance Committee

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Composition
KLGs Shareholders' and Investors' Grievance Committee of the Board comprises:
(1) Mr. G.K. Pandey, Chairman
(2) Mr. K.L. Goel
The following terms of reference have been specified for the committee:

To look into the Shareholders' and investors' complaints on matters relating to transfer of shares, nonreceipt of annual report and non-receipt of dividend. In addition, the committee also looks into matters
which can facilitate better investor services and relations.

Transactions with Related Parties

From time to time the Company enters into transactions with affiliates or related parties, and with its associate
companies. The Companys policy is that such transactions are made on an arms length basis on no less
favourable terms than if such transactions were carried out with unaffiliated third parties. Full details of related
party transactions with its subsidiary and associates as at 31 March 2006 are set out in Schedule xxviii to the
Companys financial statements included elsewhere in the Offering Circular. As at December 31, 2006, the
Company had three subsidiary companies, namely, KLG Environment and Safety Sciences Limited, KLG
Software Technology and Infrastructure Private Limited and KLG Software Technology Private Limited.
The term "promoter" is defined in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997
as:
(a)

any person who is in control of the target Company;

(b)

any person named as promoter in any offer document of the target Company or any shareholding
pattern filed by the target Company with the stock exchanges pursuant to the Listing Agreement,
whichever is later;
and includes any person belonging to the promoter group as mentioned in Explanation I:
Provided that a director or officer of the target Company or any other person shall not be a promoter, if
he is acting as such merely in his professional capacity.
Explanation I: For the purpose of this clause, 'promoter group' shall include:
(a)

(b)

in case promoter is a body corporate (i)

a subsidiary or holding Company of that body corporate;

(ii)

any Company in which the promoter holds 10% or more of the equity capital or
which holds 10% or more of the equity capital of the promoter;

(iii)

any Company in which a group of individuals or companies or combinations thereof

who holds 20% or more of the equity capital in that Company also holds 20% or
more of the equity capital of the target Company; and

in case the promoter is an individual (i)

the spouse of that person, or any parent, brother, sister or child of that person or of
his spouse;

(ii)

any Company in which 10% or more of the share capital is held by the promoter or
an immediate relative of the promoter or a firm or HUF in which the promoter or any
one or more of his immediate relative is a member;
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(iii)

any Company in which a Company specified in (i) above, holds 10% or more, of the
share capital; and

(iv)

any HUF or firm in which the aggregate share of the promoter and his immediate
relatives is equal to or more than 10% of the total.

Explanation II: Financial Institutions, Scheduled Banks, Foreign Institutional Investors (FIIs) and
Mutual Funds shall not be deemed to be a promoter or promoter group merely by virtue of their
shareholding.
Provided that the Financial Institutions, Scheduled Banks and Foreign
Institutional Investors (FIIs) shall be treated as promoters or promoter group for the subsidiaries or
companies promoted by them or mutual funds sponsored by them.

Page 68

DESCRIPTION OF THE SHARES

Set forth below is certain information relating to the share capital of the Company, including brief summaries of
certain provisions of its Articles, the Companies Act, the Indian Securities Contracts (Regulation) Act, 1956 (as
amended) (the "SCRA") and certain related legislations of India, all as currently in effect. References in this
section "Description of the Shares" to "shares" shall include the Shares and any other equity shares issued by the
Company.
General
The Company's authorised share capital is Rs.200,000,000 consisting of 20,000,000 Shares. All of the issued
and outstanding Shares of the Company are in registered form. As of December 31, 2006, the Company had
issued and subscribed capital of Rs.109,662,000 comprising 1,09,66,200 Shares (out of issued capital, 183,300
Shares, which were issued in year 1995 during public issue, were forfeited in December 1997 on account of
non-payment of money due on the Shares) and paid up capital of Rs.107,829,000 comprising 1,07,829,00
Shares. The Shares are currently traded in dematerialised form.
Dividends
Under the Companies Act, unless the board of directors of a company recommends a dividend, the shareholders
at a general meeting have no power to declare any dividend. Subject to certain conditions laid down by Section
205 of the Companies Act, no dividend can be declared or paid by a company for any financial year except out
of the profits of the Company for that year determined in accordance with the provisions of the Companies Act
or out of the profits of the Company for any previous financial year(s) arrived at after providing for unabsorbed
depreciation or losses, whichever is lower, in accordance with the provisions of the Companies Act, and
remaining undistributed, or out of moneys provided by the Indian central or state government for payment of
dividend pursuant to a guarantee given by that government. Under the Company's Articles of Association, the
shareholders at a general meeting may declare a dividend not higher than that recommended by the Board of
Directors. Dividends are generally declared as a percentage of the par value. The dividend recommended by the
Board of Directors and approved by the shareholders at a general meeting is distributed and paid to shareholders
in proportion to the paid-up value of their Shares as at the book closure date or record date for which such
dividend is payable. In addition, the Board of Directors may declare and pay interim dividends. Under the
Companies Act, dividends can only be paid to shareholders listed on the register of shareholders on the date
which is specified as the "book closure date" or "record date". No shareholder is entitled to a dividend while any
lien in respect of unpaid calls on any of his/her shares is outstanding. The Shares issuable upon the conversion
of the Bonds will be fully paid-up when delivered.
The Shares issued upon conversion of the Bonds will rank pari passu, subject to listing, with the existing Shares
of the Company in all respects including entitlement to dividends declared thereafter.
Any dividend declared shall be deposited in a separate bank account within five days from the date of the
declaration of such dividend. Dividends must be paid within 30 days from the date of the declaration and any
dividend which remains unpaid or unclaimed after that period must be transferred within seven days of the
expiry of such 30-day period to a special unpaid dividend account held at a scheduled bank. Any money which
remains unpaid or unclaimed for seven years from the date of such transfer must be transferred by the Company
to the Investor Education and Protection Fund established by the Indian Government pursuant to which no claim
shall lie against the Company or its directors or the Investor Education and Protection Fund. Directors may be
held criminally liable for any default of the aforementioned provisions.
Under the Companies Act, the Company may only pay a dividend in excess of 10 per cent. of paid-up capital in
respect of any financial year out of the profits of that year after the Company has transferred to its reserves an
amount ranging between 2.5 per cent. and 10 per cent. of that year's profit (depending on the rate of dividend
proposed to be declared/paid in that year). The Companies Act further provides that if the profit for a year is
inadequate or absent, the dividend for that year may be declared out of the accumulated profits earned in
previous years and transferred to reserves, subject to the following conditions: (i) the rate of dividend to be
declared may not exceed the lesser of the average of the rates at which dividends were declared in the five years
immediately preceding that year, or 10 per cent. of paid-up capital; (ii) the total amount to be drawn from
accumulated profits from previous years and transferred to reserves may not exceed an amount equivalent to 10
Page 69

per cent. of paid-up capital and free reserves and the amount so drawn is first to be used to set off the losses
incurred in the financial year before any dividends in respect of preference or shares is declared; and (iii) the
balance of reserves after withdrawals must not be below 15 per cent. of paid-up share capital.
Capitalisation of Reserves and Issue of Bonus Shares
The Company's Articles of Association permit a resolution of the shareholders in a general meeting to resolve in
certain circumstances, upon the recommendation of the Board of Directors, that certain amounts standing to the
credit of any reserves or the profit and loss account or otherwise available for distribution can be capitalised and
distributed by way of bonus shares. Bonus issues must be issued pro rata to the amount of capital paid-up on
existing shareholdings. Such amounts may also be utilised on behalf of the Company's shareholders to pay in
full, either at par or premium, any unissued shares and/or to pay any amounts for the time being unpaid on any
shares held by the members.
Any issue of bonus shares will be subject to the guidelines issued by the SEBI. The relevant SEBI Guidelines
prescribe that no company shall, pending conversion of convertible securities, issue any shares by way of bonus
unless a similar benefit is extended to the holders of such convertible securities, through reservation of shares in
proportion to such convertible part of the convertible securities falling due for conversion within a period of 12
months from the date of the bonus issue. Furthermore, bonus shares cannot be issued if a company has defaulted
in the payment of interest or principal in respect of fixed deposits, interest on existing debentures/bonds or
principal on redemption of such debentures/bonds, or if partly paid-up shares are not fully paid up. The
declaration of bonus shares in lieu of a dividend cannot be made. The bonus issue shall be made out of free
reserves accumulated from genuine profits or share premium collected in cash only. The reserves created by the
revaluation of fixed assets cannot be capitalised. Furthermore, the company should have sufficient reason to
believe that it has not defaulted in respect of the payment of statutory dues of its employees, such as
contributions to the provident fund, gratuities and/or bonuses.
The issuance of bonus shares must be implemented within six months from the date of approval by the Board of
Directors.
Recent amendments also permit the Company to issue bonus shares to its non-resident shareholders, subject to
the satisfaction of certain conditions.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act and with the approval of shareholders in a general meeting, the
Company may increase its share capital by issuing new Shares. The new Shares shall be offered to existing
shareholders listed on the members' register on the record date in proportion to the amount paid-up on those
Shares at that date. The offer shall be made by notice specifying the number of Shares offered and the date
(being not less than 15 days from the date of the offer) after which the offer, if not accepted, will be deemed to
have been declined. After such date, the Board of Directors may dispose of the Shares offered in respect of
which no acceptance has been received in such manner as the Board of Directors may consider to be most
beneficial to the Company. The offer is deemed to include a right exercisable by the person concerned to
renounce the Shares offered to him/her in favour of any other person provided that the person in whose favour
such shares have been renounced is approved by the Board of Directors in their absolute discretion.
Furthermore, under the provisions of the Companies Act, new Shares may be offered to any persons, whether or
not those persons include existing shareholders, if a special resolution to that effect is passed by the shareholders
of the Company in a general meeting. The issuance of the Shares upon conversion of the Bonds has been duly
approved by a special resolution of the shareholders and such shareholders are deemed to have waived their preemptive rights with respect to such Shares.
From time to time, the Company may, by ordinary resolution, alter its Memorandum of Association, such that it
may subdivide the Shares into a larger number of shares than is fixed by its Memorandum of Association
provided that the same proportionate liability shall continue on the Shares so reduced or increased as existed on
the original Shares before such subdivision or consolidation, and the Company may also cancel Shares which, at
the date of passing of the resolution, have not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of Shares cancelled.
Page 70

The Company's issued share capital may be, inter alia, increased by the exercise of warrants attached to any
securities of the Company, or individually issued, entitling the holder to subscribe for the Shares, or upon the
conversion of convertible debentures issued. The issue of any convertible debentures or the taking of any
convertible loans, other than from the Indian Government and financial institutions, will require the approval of
a special resolution of shareholders.
The Company's Articles of Association also provide that it may, by special resolution from time to time,
increase its capital by the creation of new Shares, consolidate or sub divide its share capital, convert all or any of
its fully paid-up Shares into stock and reconvert that stock into fully paid-up Shares and cancel Shares. The
Company may also from time to time by special resolution reduce its capital.
The Company's Articles of Association also provide that if at any time its share capital is divided into different
classes of shares, the rights attached to any one class (unless otherwise provided by the terms of issue of the
shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued shares
of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares
of that class.
Preference Shares
Preference share capital is that part of the paid-up capital of the company which fulfils the following
requirements:
(i)

it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at a fixed
rate; and

(ii)

it carries or will carry on a winding-up of the company a preferential right to be repaid the amount of
the capital paid up or deemed to have been paid up.

Preference shares do not confer any further rights to participate in a company's profits or assets. Holders of
preference shares are not entitled to vote at a general meeting except:
(i)

in relation to resolutions placed before the company that directly affect the rights attached to the
holder's preference shares; and/or

(ii)

where the dividend due on such capital has remained unpaid:

(iii)

in the case of cumulative preference shares, in respect of an aggregate period of not less than two years
preceding the date of commencement of the meeting; and

(iv)

in the case of non-cumulative preference shares, either in respect of a period of not less than two years
ending with the expiry of the financial year immediately preceding the commencement of the meeting
or in respect of an aggregate period of not less than three years comprised in the six years ending with
the expiry of the financial year immediately preceding the commencement of the meeting.

Under the Companies Act, the Company may issue redeemable preference shares, but (i) no such shares shall be
redeemed except out of the profits which would otherwise be available for dividends or out of the proceeds of a
fresh issue of shares made for the purposes of the redemption; (ii) no such shares shall be redeemed unless they
are fully paid; (iii) the premium, if any, payable on redemption shall have been provided for out of profits or out
of the securities premium account before the shares are redeemed; (iv) where any such shares are redeemed
otherwise than out of the proceeds of a fresh issue, there shall be transferred to the Company's capital
redemption reserve account a sum equal to the nominal amount of the shares redeemed out of profits which
would otherwise have been available for dividends; and (v) the provisions of the Companies Act relating to the
reduction of the share capital of a company shall apply as if the capital redemption reserve account were paid-up
share capital of the Company. Preference shares must be redeemable before the expiry of a period of 20 years
from the date of their issue.

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General Meetings of Shareholders

The Company must hold its annual general meeting each year within 15 months of the previous annual general
meeting and in any event not later than six months after the end of each accounting year unless extended by the
Registrar of Companies (the "RoC"), at the Company's request for any special reason for a period not exceeding
three months. The Board of Directors may convene an extraordinary general meeting of shareholders when
necessary or at the request of a shareholder or shareholders holding in the aggregate not less than 10 per cent. of
the Company's paid-up capital (carrying a right to vote in respect of the relevant matter on the date of the
deposit of the requisition).
Written notices convening a meeting setting out the date, place and agenda of the meeting must be given to
members at least 21 days prior to the date of the proposed meeting. A general meeting may be called after
giving shorter notice if consent is received from all shareholders in the case of an annual general meeting and
from shareholders holding not less than 95 per cent. of the Company's paid-up capital in the case of any other
general meeting. Each notice must be accompanied by an explanatory statement containing details relating to
any special business proposed to be dealt with at the relevant general meeting. General meetings are generally
held at the Company's registered office. The quorum for a general meeting of the Company is five shareholders
attending in person.
A company intending to pass a resolution relating to matters such as, but not limited to, the amendment of the
objects clause of the Memorandum of Association, the issuing of shares with different voting or dividend rights,
a variation of the rights attached to a class of shares or debentures or other securities, a buyback of shares under
the Companies Act or the giving of loans or the extending of guarantees in excess of limits prescribed under the
Companies Act and guidelines issued thereunder, is required to have the resolution passed by means of a postal
ballot instead of transacting the business at the Company. A notice to all shareholders shall be sent along with a
draft resolution explaining the reasons therefor and requesting each shareholder to send his/her assent or dissent
in writing on a postal ballot within a period of 30 days from the date of posting the letter. Postal ballot includes
voting by electronic means.
Voting Rights
At a general meeting upon a show of hands, every member holding Shares and entitled to vote and present in
person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or
by proxy, are in the same proportion as the capital paid-up on each Share held by such shareholder to the total
paid-up capital of the Company. Voting is by show of hands, unless a poll is ordered by the chairman of the
meeting of his own motion or demanded by a shareholder or shareholders present in person or by proxy and
holding at least 10 per cent. of the voting rights in respect of the resolution or by those holding Shares on which
an aggregate sum of not less than Rs.50,000 has been paid up. The chairman of the meeting has a casting vote.
Bondholders will have no voting rights or other direct rights of a shareholder with respect to the Shares
underlying the Bonds.
Ordinary resolutions may be passed by simple majority of those present and voting at any general meeting for
which the requisite period of notice has been given. Special resolutions require that the votes cast in favour of
the resolution by those present and voting must be at least three times the votes cast against the resolution.
Under the Companies Act, matters that require special resolution include amendments to the articles of
association, a member's voluntary winding-up, dissolution, merger or consolidation, and the issue of shares to
persons other than existing shareholders. Furthermore, under the Companies Act, the approval of a scheme of
compromise or arrangement requires the approval of a majority of at least 75 per cent. in value of the
shareholders or creditors present and voting.
A shareholder may exercise his voting rights by proxy to be given in the form required by the articles of
association. The instrument appointing a proxy is required to be lodged with the Company at least 48 hours
before the time of the meeting. A shareholder may, by a single power of attorney, grant a general power of
representation regarding several general meetings of shareholders. Any shareholder of the Company may
appoint a proxy. A corporate shareholder is also entitled to nominate a representative to attend and vote on its
behalf at general meetings, subject to the necessary resolution having been passed by the corporate shareholder.
A proxy may not vote except on a poll and does not have a right to speak at meetings. A shareholder which is a
Page 72

legal entity may appoint an authorised representative who can vote in all respects as if a member both by a show
of hands and by a poll.
The Companies Act allows for a company to issue shares with differential rights as to dividends, voting or
otherwise, subject to certain conditions. In this regard, the laws require that, for a company to issue shares with
differential voting rights: (i) the company must have had distributable profits (in accordance with the
requirements of the Companies Act) for the three financial years preceding the year in which it was decided to
issue such shares; (ii) the company must not have defaulted in filing annual accounts and annual returns for the
three financial years immediately preceding the financial year in which the company proposes to issue such
shares; (iii) the articles of association of the company must allow for the issuance of shares with differential
voting rights; and (iv) the conditions as set forth in the Companies (Issue of Share Capital with Differential
Voting Rights) Rules, 2001 must be complied with.
Convertible Securities and Warrants
The Company, in accordance with the provisions of applicable law, may from time to time issue debt
instruments that are partly and fully convertible into Shares and warrants to purchase Shares.
Register of Shareholders and Record Dates
The Company maintains a register of shareholders at its registered office at Plot No. 70 A, Sector- 34, EHTP,
Gurgaon-122004, Haryana, (India). The register and index of beneficial owners maintained by a depositary
under the Depositories Act, 1996 (the "Depositories Act") is deemed to be an index of members and register and
index of debenture holders. The Company recognises as shareholders only those persons who appear on its
register of shareholders and it cannot recognise any person holding any Share or part of it upon any trust,
express, implied or constructive, except as permitted by law.
In the case of Shares held in physical form, the Company registers transfers of Shares on the register of
shareholders upon lodgement of the duly stamped share transfer form executed by or on behalf of the transferor
and by or on behalf of the transferee and duly completed in all respects, accompanied by a share certificate or, if
there is no certificate, the letter of allotment in respect of Shares transferred. In respect of the transfer of Shares
held in the depositary form, the transfer of Shares is effected by the depository entering the name of the
purchaser in its books as the beneficial owner of the Shares. In turn, the Company enters the name of the
depositary in its records as the registered owner of the Shares. The beneficial owner is entitled to all the rights
and benefits, as well as the liabilities, attached to the Shares that are held by the depositary. Transfer of
beneficial ownership through a depositary is exempt from any stamp duty but each depositary participant may
be subject to certain charges.
Under the Companies Act, the Company is also required to maintain a register of debenture holders if it issues
debentures.
Annual Reports and Financial Results
The annual report must be laid before the annual general meeting. This report contains the audited financial
statements, the auditors' report and the directors' report, a corporate governance section, management's
discussion and analysis and certain financial information. Generally such reports are also available for
inspection at the registered office/corporate office of a company during normal working hours for 21 days prior
to the annual general meeting.
Under the Companies Act, the Company must file its annual report with the RoC within 30 days from the date
of the relevant annual general meeting. Under its listing agreements, copies of the annual report, and all
periodical and special reports which are issued by the Company are required to be sent to the stock exchanges
on which the Shares are listed. The Company must also publish its financial results in at least one English
language daily newspaper circulating in the whole or substantially the whole of India and also in a newspaper
published in the language of the region where the Company's registered office is situated.
The Company files certain information online, including its annual report, interim financial statements, report on
corporate governance, shareholding pattern statement, statement of any action taken against the company by any
Page 73

regulatory agency and such other statements, information or reports as may be specified by the SEBI from time
to time or in accordance with the requirements of its listing agreements.
Transfer of Shares
Following the introduction of the Depositories Act and the repeal of Section 22A of the Securities Contracts
(Regulation) Act, 1956 of India (SCRA) the shares of a public company became freely transferable, subject
only to the provisions of Section 111A of the Companies Act. Since the Company is a public company, the
provisions of Section 111A of the Companies Act will apply to it. In accordance with the provisions of Section
111A(2) of the Companies Act, the Board of Directors may refuse to register a transfer of Shares within two
months from the date on which the instrument of transfer or intimation of transfer, as the case may be, is
delivered to the Company, if it has sufficient cause to do so. If the Board of Directors refuses to register a
transfer of Shares, the shareholder wishing to transfer his, her or its Shares may file an appeal with the Indian
Company Law Board (the "CLB") and the CLB can direct the Company to register such transfer.
Pursuant to Section 111A(3) of the Companies Act, if a transfer of shares contravenes any of the provisions of
the Securities and Exchange Board of India Act, 1992 (the "SEBI Act") or the regulations issued thereunder, the
Sick Industrial Companies (Special Provisions) Act, 1985, as amended (the "SICA") or any other laws in India,
the CLB may, on an application made by the Company, a depositary, a participant, an investor or the SEBI,
within two months from the date of transfer of any shares or debentures held by a depositary or from the date on
which the instrument of transfer or the intimation of the transmission was delivered to the Company, as the case
may be, direct the rectification of the register of records after such inquiry as it thinks fit. The CLB may, at its
discretion, issue an interim order suspending the voting rights attached to the relevant shares before making or
completing its investigation into the alleged contravention. Furthermore, the provisions of Section 111A of the
Companies Act do not restrict the right of a holder of shares or debentures to transfer such shares or debentures
and any person acquiring such shares or debentures shall be entitled to voting rights, unless the voting rights
have been suspended by the CLB. By the Companies (Second Amendment) Act, 2002, the CLB will be replaced
by the National Company Law Tribunal. Furthermore, the SICA is sought to be repealed by the Sick Industrial
Companies (Special Provisions) Repeal Act, 2003, although this is not yet in force.
Shares held through depositaries are transferred in the form of book-entries or in electronic form in accordance
with the regulations laid down by the SEBI. These regulations provide for the functioning of the depositories
and the participants, and set out the manner in which the records are to be kept and maintained, and the
safeguards to be followed. Transfers of beneficial ownership of shares held through a depositary are exempt
from stamp duty. The Company has entered into an agreement for such depositary services with the National
Securities Depository Limited and the Central Depository Services (India) Limited.
The SEBI requires that, for trading and settlement purposes, the Shares are to be in book-entry form for all
investors, except for transactions that are not made on a stock exchange and transactions that are not required to
be reported to the stock exchange. The requirement to hold Shares in book-entry form will apply to Bondholders
when they acquire Shares upon conversion.
Pursuant to its listing agreements, in the event that the Company has not effected the transfer of Shares within
one month or where the Company has failed to communicate to the transferee any valid objection to the transfer
within the stipulated time period of one month, it is required to compensate the aggrieved party for the loss of
opportunity caused by the delay.
Acquisition by the Company of its Own Shares
The Company is prohibited from acquiring its own Shares unless the consequent reduction of capital is effected
by an approval of at least 75 per cent. of its shareholders voting on the matter in accordance with the Companies
Act and is also sanctioned by the High Court of competent jurisdiction (namely, the High Court of the state in
which the Company's registered office is situated). Subject to certain conditions, the Company is prohibited
from giving whether directly or indirectly and whether by means of a loan, guarantee, the provision of security
or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made
or to be made by any person of or for any Shares in the Company.

Page 74

However, pursuant to certain amendments to the Companies Act, a company is empowered to purchase its own
shares or other specified securities out of its free reserves, the securities premium account or the proceeds of any
shares or other specified securities (other than the kind of shares or other specified securities proposed to be
bought back), subject to certain conditions, including:
(i)

the buyback should be authorised by its articles of association;

(ii)

a special resolution should have been passed in a general meeting authorising the buyback;

(iii)

the buyback is for less than 25 per cent. of the total paid-up capital and free reserves, provided that the
buyback of shares in any financial year shall not exceed 25 per cent. of the total paid-up share capital
in that year;

(iv)

the debt (including all amounts of unsecured and secured debt) owed by the company is not more than
twice the capital and free reserves after such buyback; and

(v)

the buyback is in accordance with the Securities and Exchange Board of India (Buyback of Securities)
Regulation, 1998.

The condition mentioned in (ii) above would not be applicable if the buyback is for less than 10 per cent. of the
total paid-up equity capital and free reserves of the company and provided that such buyback has been
authorised by the board of directors of the company. Furthermore, a company after buying back its securities, is
not permitted to buy back any securities for a period of one year from the buyback or to issue new securities for
six months from the buyback date except by way of bonus issue, conversion of warrants, preference shares or
debentures into shares. The aforesaid restriction relating to the one-year period does not apply to a buyback
authorised by a special resolution of the shareholders in general meeting. Each buyback has to be completed
within a period of one year from the date of passing of the special resolution or the resolution of the board of
directors, as the case may be.
Following a buyback of securities, the company is required to extinguish and physically destroy the securities
bought back within seven days of the last date of completion of the buyback.
A company is also prohibited from purchasing its own shares or specified securities through any subsidiary
company, including its own subsidiary companies or through any investment company (other than a purchase of
shares in accordance with a scheme for the purchase of shares by trustees of, or for shares to be held by or for
the benefit of employees of, the company) or if the company is defaulting on the repayment of deposit or
interest, redemption of debentures or preference shares or payment of dividend to a shareholder or repayment of
any term loan or interest payable thereon to any financial institution or bank, or in the event of non-compliance
with certain other provisions of the Companies Act.
The buyback of securities can be from existing security holders on a proportionate basis or from the open
market or from odd lots or by purchasing securities issued to the employees of the company pursuant to a
scheme of stock option or sweat equity.
Disclosure of Ownership Interest
Section 187C of the Companies Act requires (i) beneficial owners of shares of Indian companies who are not
holders on record to declare to the company details on the holder of record; and (ii) the holder on record to
declare to the company details of the beneficial owner. Any person who fails to make the required declaration
within 30 days from the date beneficial interest in the shares is acquired may be liable for a fine of up to
Rs.1,000 for each day the declaration is not made. Any charge, promissory note or other collateral agreement
created, executed or entered into with respect to any share by the registered owner thereof, or any hypothecation
by the registered owner of any share pursuant to which a declaration is required to be made under Section 187C
of the Companies Act, shall not be enforceable by the beneficial owner or any person claiming through the
beneficial owner if such declaration has not been made. Failure to comply with Section 187C of the Companies
Act will, inter alia, not affect the obligation of the Company to register a transfer of Shares or to pay any
dividends to the registered holder of any Shares pursuant to which such declaration has not been made.

Page 75

Liquidation Rights
Subject to the provisions of the Companies Act (including the rights of employees, the requirement to pay
statutory dues and the rights of creditors as contained in Sections 529A and 530 thereof) and the rights of the
holders of any other shares entitled by their terms of issue to preferential repayment over the Shares, in the event
of the Company's winding-up, the holders of the Shares are entitled to be repaid the amounts of capital paid-up
or credited as paid-up on such Shares or in case of a shortfall, proportionately.
Recent Developments
A draft concept paper has been prepared by a committee appointed by the Department of Company Affairs,
which has recommended substantial changes to the provisions of the Companies Act. In the event the proposed
changes are accepted, it could substantially alter the provisions of the Companies Act described in this section.

Page 76

Distribution of Shareholding
Shareholding Pattern
The table below sets forth the Shareholding pattern of KLG as on December 31, 2006.
Category
PROMOTERS HOLDINGS
PROMOTERS
Indian Promoters
Foreign Promoters
Persons acting in Concerts
Sub Total (A)
NON PROMOTERS HOLDING
Institutional Investors
Mutual Funds and UTI
Banks, Financial Institution, Insurance
Companies (Central/State Govt.
Institutions/Non Govt. Institutions)
Foreign Institutional Investors (FIIs)
Sub Total (B)
OTHERS
Private Corporate Bodies :
Indian Public
NRIs/OCBs
Shares held by custodians and against
which Depository Receipts have been
issued
Any other
Sub Total (c )
Grand Total (A+B+C)

No. of Shares

% of Shareholding

2,890,856
2,890,856

26.81
26.81

84000
963955
1047955

0.78
8.94
9.72

2434241
3610812
222351

22.56
33.49
2.06

284750
291935

2.64
2.72

6844089

63.47

10,782,900

100.00

As on December 31, 2006 the promoters of the Company holds 26.81% shares out of the total share capital of
the Company. There are no persons or any other entity that exercises or could exercise control over the
Company.
Promoters Shareholding
Name of the Promoter

Number of shares held

Promoters shareholding
Ritu Goel
Upasana Goel
K. L. Goel
Pushap Lata Goel
Kumud Goel
KLG Computers Pvt.Ltd.
Total

112100
655538
515980
207522
787000
612716
2890856

The pre-issue and post-issue shareholding pattern of KLG is as under:

Page 77

Shareholding
(%)
1.04
6.08
4.79
1.92
7.30
5.68
26.81

Category
Indian Promoters
Banks, Financial
Institution, Insurance
Companies (Central/State
Govt. Institutions/Non
Govt. Institutions)
Foreign Institutional
Investors (FIIs)
Private Corporate Bodies :
Indian Public
NRIs/OCBs
Shares held by custodians
and against which
Depository Receipts have
been issued
Any other
TOTAL

Pre-Issue*
No. of Shares
per cent holding
2890856
26.81
84000
0.78

Post issue on conversion of Bonds

No. of Shares
per cent holding
2890856
20.76
84000
0.60

963955
2434241
3610812
222351

8.94
22.56
33.49
2.06

4106812
2434241
3610812
222351

29.49
17.48
25.93
1.60

284750
291935
10782900

2.64
2.72
100

284750
291935
13925757

2.04
2.10
100

It has been assumed that Bonds will be subscribed by FIIs and all bonds will be converted into shares. Further, it
has been assumed that there will be no further issue or change in shareholding pattern till conversion. The
conversion price is taken as Rs.350/- per shares i.e SEBI floor price and US$1=Rs.44/-.
As at December 31, 2006, the following persons or entities fall under the category of "public" and hold more
than 1% of the share capital of the Company.
Name

Number of shares held

Sonata Investments Limited

21st Century Management Service Limited
S I Investments & Broking Private Limited
Vanaja Sundar
The Bank of New York
Mangalambal Eswar
BSMA Limited
Deutsche Bank AG London
Goldman Sachs Investments Mauritius Limited
Total

Page 78

Shareholding
(%)

400462
569942
322158

3.710
5.290
2.990

251000
284750
125000
287469
160886
415700
2817367

2.330
2.640
1.160
2.670
1.490
3.860
26.140

Main Objects of the Company

The Main Objects of the Company as set out in Clause III of the Memorandum of Association are as follows:
1.

To supply and to provide, maintain and operate services, facilities conveniences, bureaus and the like of
the benefits of any person, Company, corporate body, firm trusts, association, society or organization
whatsoever and generally to act as consultants and as a service organization whatsoever and generally to
act as consultants and as a service organization or for providing general, administrative, secretarial,
advisory, commercial, financial, engineering, technical, computer, accountancy, quality control, legal and
other services to persons, companies, corporate bodies, firms, trusts, association or organization
whatsoever.

2.

To carry on the business of Information Technology, developing of engineering, plant design and other
softwares and providing e-commerce services as software developers, consultant, advisors and
counselors, particularly relating but not limited to, web site designing, web site launching, internet,
intranet, enterprise resource planning and other related services.

3.

To carry on the business of Energy Service Companies, Utility (Power, Water, Gas) franchisee, license to
trade, purchase, distribute, manage revenues, customers of Utilities, to carry on operation, maintenance
management, inspection, repair and maintenance of all hardware, software systems in Utilities, to finance,
fund, provide on Build Own and Operate, Build Own and Transfer system for Utilities, to design,
construct, erect equipment for Utilities as contractor, system integrator and service provider and to carry
on all such activities that may be directly or indirectly be incidental or ancillary to the above said
business.

4.

To carry on the business of research and development, prototyping, testing, production of hardware,
software, embedded system for usage in transmission and distribution network of Utilities comprising
Power, Gas and Water. The areas shall include Supervisory Control and Data Acquisition System,
Metering systems, Automation and Control System, Protection System, Distribution Management
Systems, Load Forecasting and Power Trading System and to carry on all such activities that may be
directly or indirectly be incidental or ancillary to the above said business.

5.

To advice, handle, look after and deal with legal matter, taxation matters, industrial dispute matters,
matter arising out of customers, excise and other taxes, duties or cess imposed by Central or State
Government of Municipal Bodies or other authorities and to render services as is usually rendered by
lawyers and Chartered Accountants and other professional people.

6.

To provide or produce the provisions by others of every and all kinds of office and other services, wants
or requirements of such nature that may be required by any persons, firm, trust, organization or Company
in or in connection with any business occupation, professional people profession or vocation or activity
carried on by them.

7.

To provide, supply, maintain and operate for the benefit of any person, institution, Company or
companies services, facilities, conveniences, bureaus and the like including internal telephone, teleprinter,
telex, and communication services and facilities, medical health services, guest houses and entertainment
facilities, canteens, clubs, housing, recreation and welfare centres, organization of Purchases, sales,
marketing and other services, time and motion studies, assessment of work loads, internal audits in
offices, factories and other establishments, general services, in relation to the affairs and business for the
benefit of any person, firms, trust, organization, institution or Company or companies.

8.

To act as consultants and to give advice on all aspect of business organization and to make valuations and
surveys or to give expert advice and suggest ways and means for improving efficiency and improvement
of business management, office organisation, maintenance of accounts and records etc.

9.

To assist any person, institution, Company, organization, trust, firm, undertaking industry of any
description by statistical information, reports, bureaus and the like.

Page 79

These objects along with other objects set out in the Memorandum of Association enable the Company to
undertake its existing and proposed activities.

Main Provisions of the Articles of Association

Quorum for General Meetings
Article 68 (1): No business shall be transacted at any general meeting, unless a quorum is present at the time
when the meeting proceeds to business.
Article 68 (2): Save as otherwise provided in Section 174 of the Companies Act, 1954 a minimum of five
members present in person shall be the quorum. A body corporate, being member, shall be deemed to be
personally present if it is represented in accordance with Section 187 of the Act.
Chairman of General Meeting
Article 69: The Chairman, if any, of the Board shall preside as Chairman at every general meeting of the
company.
Article 70: If there is no such Chairman or if he is not present within fifteen minutes of the time appointed for
holding the meeting or is unwilling to act as Chairman of the meeting, the Directors present shall elect one of
their members to be the Chairman of the meeting.
Alternate Directors
Article 92: Subject to the provisions of Section 313 of the Companies Act, 1956, the Board of Directors shall
have power to appoint an Alternate Director to act for a Director during his absence for a period of not less than
three months from the state in which meeting of the Board are ordinarily held.
Borrowing powers
Article 101: Subject to the provisions of section 58A, 292 and 293 of the Companies Act, 1956, and regulations
made thereunder and directions issued by the R.B.I., the Directors may exercise all the powers of the company
to borrow money and to mortgage or charge its undertaking, property (both present and future) and uncalled
capital, or any part thereof and to issue debentures, debenture-stock and other securities whether outright or as
security for any debt, liability or obligation of the company or of any third party.
Article 102: The payment or repayment of moneys borrowed as aforesaid may be secured in such manner and
upon such terms and conditions in all respects as the Board may think fit and in particular by a resolution passed
at a meeting of the Board (and not by circulation) by the issue of debenture or debenture-stock of the company,
charged upon all or any of the property of the company (both present and future), including its uncalled capital
for the time being.
Article 103: Any debenturs, debenture-stock or other securities may be issued at a discount, premium or
otherwise, may be made assignable free from any equities between the company and person to whom the the
same may be issued and may be issued on the condition that they shall be convertible into shares of any
authorised denomination, and with privileges and conditions as to redemption, surrender, drawings, allotment of
shares, attending (but not voting) at general meetings, appointment of directors and otherwise, provided that
debentures with the right to allotment of or conversion into shares will not be issued except with the sanction of
the company in General Meeting.
Article 104: All cheques, promissory nots, drafts, hundies, bills of exchange and other negotiable instruments
and all receipts for moneys paid to the company, shall be signed, drawn accepted, endorsed or otherwise
executed, as the case may be, by such person and in such manner as the Board may, from time to time, by
resolution determine.

Page 80

Quorum for Board Meeting and adjournment of Board Meeting

Article 105: Subject to section 287 of Companies Act, 1956, the quorum for a meeting of the Board of Directors
shall be one third of its total strength (any fraction contained in that one third being rounded off as one) or two
directors, whichever is higher orivided that where at anytime the number of interested directors exceeds or is
equal to two third of the total strength, the number of the remaining directors, that is to say, the number of
directors, who are not interested, present at the meeting, being not less than two, shall be the quorum during
such time.
Article 106: If a meeting of the Board could not be held for want of quorum, whatever number of directors, not
being less than two, shall be present at the adjourned meeting, notice whereof shall be given to all the directors,
shall form a quorum.
Article 107 (1): Save as otherwise expressly provided in the Act, questions arising at any meeting of the Board
shall be decided by a majority of vote.
Article 107 (2): In case of equality of votes, the chairman of the meeting shall have a second or casting vote.
Article 108: The continuing directors may act notwithstanding any vacancy in the Board, but if and so long as
their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors
or director may act for the purpose of increasing the number of directors to that fixed for the quorum or for
summoning a general meeting of the company, but for no other purpose.

Page 81

THE INDIAN SECURITIES MARKET

The information in this section has been extracted from publicly available documents from various sources,
including officially prepared materials from the Securities and Exchange Board of India, the NSE and the BSE
and has not been prepared or independently verified by KLG or the Lead Manager or any of its respective
affiliates or advisers.
India has a long history of organised securities trading. In 1875, the first stock exchange was established in
Mumbai.
Stock Exchange Regulations
India's stock exchanges are regulated primarily by the SEBI, as well as by the Indian Government under the
Securities Contracts (Regulation) Act 1956 (the "SCRA") and the Securities Contracts (Regulation) Rules 1957
(the "SCRR"). The SCRR along with the rules, by-laws and regulations of the respective stock exchanges,
regulate the recognition of stock exchanges, the qualifications for membership thereof and the manner in which
contracts are entered into and enforced between members.
The SEBI Act provided for the establishment of the SEBI to protect the interests of investors in securities and to
promote the development of, and to regulate, the securities market and for related matters. The SEBI Act
granted powers to the SEBI, inter alia, to regulate the Indian securities market, including stock exchanges and
other intermediaries in the capital markets, to promote and monitor self regulatory organisations, to prohibit
fraudulent and unfair trade practices and insider trading, to regulate substantial acquisitions of shares and
takeovers of companies, to call for information, to undertake inspections and conduct inquiries and audits of
stock exchanges, self regulatory organisations, intermediaries and other persons associated with the securities
market.
The SEBI also issues guidelines and regulations concerning minimum disclosure requirements by public
companies, rules and regulations concerning investor protection, insider trading, substantial acquisition of shares
and takeovers of companies, buy back of securities, delisting of securities, employees stock option schemes,
stock brokers, merchant bankers, underwriters, mutual fund, foreign institutional investors ("FIIs"), credit rating
agencies and other capital market participants.
The Central Listing Authority (the "CLA") has been set up to address the issue of multiple listing of the same
security and to bring about uniformity in the due diligence exercise by scrutinising all listing applications on any
stock exchange. The functions of the CLA as enumerated in SEBI (Central Listing Authority) Regulations 2003
are to receive and process applications made by any body corporate, mutual fund or collective investment
scheme for the letter of recommendation to be listed at any stock exchange, for letter precedent to listing from
applicants and issue, if it deems fit, a letter precedent to listing to any such applicant, to make recommendations
to the SEBI on issues pertaining to the protection of the interest of the investors in securities and development
and regulation of the securities market, including the listing agreements, listing conditions and disclosures to be
made in the offer documents and to undertake any other functions as may be delegated to it by the SEBI from
time to time.
Listing
The listing of securities on a recognised Indian stock exchange is regulated by the Companies Act, the SCRA,
the SCRR and the listing agreements of the respective stock exchanges (the "Listing Agreement"). Under the
standard terms of the Listing Agreement, the governing body of each stock exchange is empowered to suspend
trading of or dealing in a listed security for breach of the Company's obligations under such agreement, subject
to the Company receiving prior notice of the intent of the exchange.
A listed company can be delisted under the provisions of the SEBI (Delisting of Securities) Guidelines, 2003,
(the "Delisting Guidelines") which govern voluntary and compulsory delisting of shares of Indian companies
from the stock exchanges. A company may be delisted through a voluntary delisting sought by the promoters of
such company or a compulsory delisting due to any acquisition of shares of such company or scheme of
arrangement, or consolidation of holdings by the person in control pursuant to which the public shareholding in
Page 82

the company falls below the minimum limit specified. A company may voluntarily delist from the stock
exchange where its securities are listed provided that an exit opportunity has been given to the investors at an
exit price determined in accordance with a specified formula. The procedure for compulsory delisting also
requires the company to make an exit offer to the shareholders in accordance with the above mentioned
guidelines.
The Delisting Guidelines provide that if for any reason the securities of a company become liable to be delisted
from the relevant stock exchange, the company may, if it desires to maintain listing, follow the procedure laid
down in the Delisting Guidelines. Pursuant to the Delisting Guidelines, the company may, within six months,
issue new shares to the public or the promoters of the company may sell a portion of their shares to the public,
such that the minimum level of public shareholding is re-established.
The Delisting Guidelines also provide that if a company fails to issue new shares or the promoters fail to sell
portion of their shares to the public, so as to bring the public shareholding back to the minimum required level,
the SEBI may delist that Company (after giving notice and as per the procedure laid down in the Delisting
guidelines). The procedure essentially requires the promoter to make an offer to buy the securities from the
public at a fair value (the "fair value" being determined in accordance with the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations 1997 (the " Takeover Code")).
In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to
apply daily circuit breakers which do not allow transactions beyond certain price volatility. The index-based
market-wide circuit breaker system applies at three stages of the movement of the relevant index, at 10 per cent.,
15 per cent. and 20 per cent. These circuit breakers, when triggered, bring about a coordinated trading halt in all
equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement
of either the BSE's Sensitive Index or the NSE, whichever is breached earlier.
In addition to the index-based market-wide circuit breakers, there are currently in place varying individual scrip
wise price bands. However, no price bands are applicable on scrips on which derivative products are available or
scrips included in indices on which derivative products are available. The stock exchanges in India can also
exercise the power to suspend trading during periods of market volatility. The Company is also subject to a daily
circuit breaker imposed by the NSE and the BSE which does not allow transactions beyond a certain volatility
threshold in relation to the price of the Company's Shares. This circuit breaker operates independently of the
index-based market-wide circuit breakers generally imposed by the SEBI on Indian stock exchanges. The
percentage limit on the Company's circuit breaker is set by the NSE and the BSE based on the historical
volatility in the price and trading volume of the Company's Shares. The NSE and the BSE do not inform the
Company of the percentage limit of the circuit breaker from time to time, and may change it without the
Company's knowledge. The Company believes it is currently set at 20 per cent., such that bid and ask prices for
the Company's Shares are only permitted to be within a band of 20 per cent. above or below the Share price at
the opening of any trading day. This circuit breaker effectively limits the upward and downward movements in
the price of the Company's Shares.
Listing Agreement
KLG has entered into Listing Agreements with each of the Indian stock exchanges on which its shares are
listed. Each of the listing agreements provide that if a purchase of a listed company's shares result in the
purchaser and its affiliates holding more than 5 per cent. of the company's outstanding shares or voting rights,
the purchaser and the company must, in accordance with the provisions of the Takeover Code (see below), as
amended to date, report its holding to the company and the relevant stock exchange(s). The agreements also
provide that if an acquisition results in the purchaser and its affiliates holding shares representing more than 15
per cent. of the voting rights in the company, then the purchaser must, in accordance with the provisions of the
Takeover Code, as amended to date, before acquiring such shares, make an offer on a uniform basis to all
remaining shareholders of the company to acquire shares that have at least an additional 20 per cent. of the
voting rights of the total shares of the company at a prescribed price.
Disclosures under the Companies Act and Securities Regulations
Under the Companies Act, a public offering of securities in India must be made by means of a prospectus, which
must contain information specified in the Companies Act and be filed with the RoC having jurisdiction over the
Page 83

place where a company's registered office is situated which, in the case of KLG is currently the RoC at its office
in Hyderabad. Additionally, the SEBI has prescribed certain guidelines, which provide for the contents of the
prospectus. A company's directors and promoters may be subject to civil and criminal liability for
misrepresentation in a prospectus. The Companies Act along with certain guidelines issued by the SEBI also
sets out procedures for the acceptance of subscriptions and the allotment of securities among subscribers and
establishes maximum commission rates for the sale of securities.
Public limited companies are required under the Companies Act to prepare, file with the RoC and circulate to
their shareholders audited annual accounts, which comply with the Companies Act's disclosure requirements
and regulations governing their manner of presentation and which include for listed companies, sections
pertaining to corporate governance and the management's discussion and analysis as required under the listing
agreement. In addition, a listed company is subject to continuing disclosure requirements pursuant to the terms
of its listing agreement with the relevant stock exchange. The companies are also required to publish unaudited
financial statements (albeit subject to a limited review by the company's auditors), on a quarterly basis and are
required to inform stock exchanges immediately regarding any stock price sensitive information. The SEBI
Guidelines permit companies to price issues of securities freely except in the case of an issue of securities to
which the preferential issue guidelines apply.
Indian Stock Exchanges
There are now 23 stock exchanges in India. Most of the stock exchanges use their own governing board for selfregulation. The NSE and the BSE together hold a dominant position among the stock exchanges in terms of
number of listed companies, market capitalisation and trading activity.
BSE
The BSE is the Company's primary stock exchange in India. Established in 1875, it is the oldest stock exchange
in India. It is the first stock exchange in India to have obtained permanent recognition in 1956 from the Indian
Government under the SCRA. It has evolved over the years into its present status as the premier stock exchange
of India. Recently, pursuant to the SEBI's BSE (Corporatisation and Demutualisation) Scheme, 2005, with effect
from August 20, 2005 the BSE has been corporatised and demutualised and is now a company under the
Companies Act.
The BSE has switched over from an open outcry trading system to an online trading network in May 1995 and
has today expanded this network to over 400 cities in India. As at November 30, 2006, the BSE had 912
members, comprising 180 individual members, 710 Indian companies and 22 FIIs. Only a member of the BSE
has the right to trade in the stocks listed on the BSE. As at November 30, 2006, there were 4,786 listed
companies trading on the BSE and the estimated market capitalisation of stocks trading on the BSE was Rs. 35,
773 billion. On November 30, 2006, the average daily turnover on the BSE was Rs. 46.29 billion.
NSE
The NSE was established by financial institutions and banks to provide nationwide, online, satellite-linked,
screen-based trading facilities with market makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange
under the Securities Contracts (Regulation) Act, 1956 in April 1993 and commenced operations in the wholesale
debt market segment in June 1994. The capital market (equities) segment commenced operations in November
1994 and operations in the derivatives segment commenced in June 2000. In October 2006, the average daily
traded value of the capital market segment was Rs.69.1 billion. As at October 31, 2006, the NSE had 981
trading members and about 11,207 registered sub-brokers on the capital market segment and the wholesale debt
market segment. The NSE launched the NSE 50 Index, now known as S&P CNX NIFTY, on 22 April 1996 and
the Mid-cap Index on 1 January 1996. As at December 5, 2006, the market capitalisation of the NSE was
approximately Rs.34,836.3 billion. With a wide network in major metropolitan cities, screen-based trading, a
central monitoring system and greater transparency, the NSE has lately recorded high volumes of trading.

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Trading Hours
Trading on the NSE is conducted from Monday to Friday between 9:30 a.m. and 3:30 p.m. Trading on the BSE
is conducted from Monday to Friday between 9:55 a.m. and 3:30 p.m. The NSE and the BSE are closed on
public holidays.
Trading Procedure
Until 1995, brokers and members of the BSE received individual orders from which any cross-orders were
matched and taken off. The balance of the orders was transmitted to the trading floor for execution in an open
outcry system. The BSE has now introduced its BSE Online Trading ("BOLT") system on the exchange. The
enhanced transparency in dealings due to the implementation of BOLT has assisted considerably in
smoothening settlement cycles and improving efficiency in back office work. The BOLT was commissioned on
14 March 1995.
Classification of shares
Securities listed on the BSE are classified into "A", "B1", "B2","T", "S", "TS", "F", "G" and "Z" groups for the
guidance and benefit of investors. Securities in the equity segment of the BSE may be classified in the "A",
"B1", "B2","T", "S", "TS" or "Z" group depending on certain qualitative and quantitative parameters, such as
number of trades or value traded. The "F" group consists of fixed income securities. The "T" group consists of
shares that are settled on a trade-to-trade basis as a surveillance measure. The "S" Group consists of shares that
form part of the "BSE-Indonext" segment. The "TS" Group consists of shares in the " BSE-Indonext" segment
that are settled on a trade-to-trade basis as a surveillance measure. The "G" group consists of government
securities for retail investors. In 1999, the BSE introduced the "Z" group which contains shares issued by
companies that have failed to comply with the BSE's listing requirements, have failed to resolve investor
complaints or have not made the required arrangements with both the Central Depository Services (I) Limited
and National Securities Depository Limited in respect of dematerialisation of their securities.
The BSE also provides a facility to market participants for online trading of odd-lot securities in physical form
that are classified within the "A", "B1", "B2", "T", "S", "TS" and "Z" groups and for rights renunciations in
respect of any securities in the equity segment of the BSE.
Settlement
With effect from 31 December 2001, trading in all securities listed in the equity segment of the BSE takes place
in one market segment, known as the Compulsory Rolling Settlement Segment.
With effect from 1 April 2003, in accordance with SEBI directives, all transactions in all groups of securities in
the equity segment of the BSE and all fixed income securities listed on the BSE are required to be settled on a
T+2 basis. The settlement calendar, which indicates the dates for various settlement related activities, is drafted
by the BSE in advance and is circulated among market participants. T+2 settlement requires that a transaction is
settled on the second business day following the relevant trade date. The Shares are listed in the rolling segment
on the BSE and trades in the Shares are settled on a T+2 basis.
Commissions
The maximum commission charged by brokers for trading equities is 2.5 per cent. of the transaction value but,
in practice, commissions generally range between 0.5 per cent. and 2 per cent. The Indian Government's 2004
budget imposed a 10 per cent. service tax (plus an education cess of 3 per cent. on the service tax) on brokerage
commissions. Pursuant to the Finance Act, 2001, payments of commission to brokers exceeding Rs.2,500 are
taxable and attract withholding tax of 10 per cent. (with an additional applicable surcharge and an education
cess of 3 per cent.).
Stock market indices
The following two indices are generally used in tracking the aggregate price movements on the BSE:

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the BSE Sensitive Index (the "Sensex") consists of listed shares of 30 large market capitalisation companies.
The companies are selected on the basis of market capitalisation, liquidity and industry representation. The
Sensex was first compiled in 1986 with the fiscal year ended 31 March 1979 as its base year. This is the most
commonly used index in India; and

the BSE 100 Index (formerly the BSE National Index) consists of listed shares of 100 companies
including the 30 comprising the Sensex. The BSE 100 Index was introduced in January 1989 with the
fiscal year ended 31 March 1984 as its base year.

Internet-based Securities Trading and Services

The SEBI approved Internet trading in January 2000. Internet trading takes place through order routing systems,
which route client orders to exchange trading systems for execution. Stock brokers interested in providing this
service are required to apply for permission to the relevant stock exchange and also have to comply with certain
minimum conditions stipulated by the SEBI. The NSE became the first exchange to grant approval to its
members for providing Internet based trading services. Internet trading is possible on both the "equities" as well
as the "derivatives" segments of the NSE.
Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Takeover Code which prescribes certain thresholds or trigger points that give rise to these obligations, as
applicable. The Takeover Code is under constant review by the SEBI and has been recently amended on 26 May
2006. Since the Company is an Indian listed company, the provisions of the Takeover Code will apply to
acquisition of its shares.
The salient features of the Takeover Code are as follows:
Any acquirer (defined as a person who, directly or indirectly, acquires or agrees to acquire shares or voting
rights in a company or acquires or agrees to acquire control over a company, either by himself or with any
person acting in concert) who acquires shares or voting rights that would entitle the acquirer to more than 5%,
10%, 14%, 54% and 74% of the shares or voting rights, (as the case may be), in a company is required to
disclose the aggregate of his shareholding or voting rights in that company to the company and to each of the
stock exchanges on which the company's shares are listed within two days of (i) the receipt of allotment
information or (ii) the acquisition of shares or voting rights, as the case may be. The term "shares" is defined
under the Takeover Code to mean " shares or any other security which entitles a person to acquire shares with
voting rights, but excludes preference shares."
A person who holds more than 15% of the shares or voting rights in any company must make annual disclosure
of his holdings to that company within 21 days of the financial year ending on March 31 of that year. The
company must, within 30 days of the financial year ending on March 31 of that year, make annual disclosure to
all the stock exchanges on which the company's shares are listed, of the changes, if any, in the holdings of that
person.
Further, a person who holds 15% or more but less than 55% of the shares or voting rights in any company must
disclose any purchase or sale of shares exceeding (in aggregate) 2% of the share capital of the company, along
with the aggregate shareholding after such purchase or sale, to the company and to each of the stock exchanges
where the shares of the company are listed within two days of (i) the receipt of allotment information or (ii) the
sale or acquisition or disposal of shares or voting rights.
Promoters or persons in control of a company are also required to make periodic disclosure of shares or voting
rights held by them along with persons acting in concert, in the same manner as above, annually within 21 days
of the end of the financial year as well as from the record date for entitlement to dividend.
An acquirer who, along with persons acting in concert, acquires 15% or more of the shares or voting rights of a
company must make a public announcement to acquire a further minimum 20% of the voting capital of the
company. Such offer has to be made to all public shareholders of the company (defined as holders of
shareholdings held by persons other than the promoter).
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An acquirer who, together with persons acting in concert, holds 15% or more but less than 55% of the shares or
voting rights in a company acquires additional shares or voting rights in a company that would entitle him to
exercise more than 5% of the voting rights in any financial year, must make a public announcement to acquire a
further minimum 20% of the voting capital of the company. Such offer has to be made to all public shareholders
of the company.
An acquirer who, together with persons acting in concert, holds 55% or more but less than 75% of the shares or
voting rights in a company acquires any additional shares or voting rights, must make a public announcement to
acquire a further minimum 20% of the voting capital of the company. Such offer has to be made to all public
shareholders of the company.
However, if the acquisition of shares in pursuance to the public offer results in the public shareholding in the
company being reduced below the minimum level required under the listing agreement (which is generally 25%,
but in certain cases, it can be 10%), the acquirer must take necessary steps to ensure that the company complies
with the relevant provisions of the listing agreement to restore minimum public shareholding (which means
restoring public shareholding to not less than 25% or 10%, as the case may be).
Where an acquirer who, together with persons acting in concert, holds 55% or more but less than 75% (under
certain cases to be read as 90%, if the listing of the company's shares was obtained by making an offer of 10%
of issue size to the public, i.e. IPO of just 10%) of the shares or voting rights in a company, is desirous of
consolidating his holding, while ensuring that the public shareholding in the company does not fall below the
minimum level permitted by the listing agreement with the stock exchanges, he may do so only by making an
open offer in accordance with the Takeover Code. Such open offer would be required to be made for the lesser
of (i) 20% of the voting capital of the company; or (ii) such other lesser percentage of the voting capital of the
company as would, assuming full subscription to the public offer, enable the acquirer, together with the persons
acting in concert, to increase his holding to the maximum level possible, which is consistent with the company
meeting the requirements of minimum public shareholding laid down in the listing agreement.
In addition, regardless of whether there has been any acquisition of shares or voting rights in a company, an
acquirer cannot directly or indirectly acquire control over a company (for example, by way of acquiring the right
to appoint a majority of the directors or to control the management or the policy decisions of the company)
unless such acquirer makes a public announcement offering to acquire a further minimum of 20% of the shares
in addition to the shares or voting rights which it already owns in the company.
The public offer for the acquisition of further shares of the target company must be made by way of public
announcement which must be made within four working days of entering into an agreement for the acquisition
of, or decision to acquire directly, shares or voting rights exceeding the relevant percentages of control over the
company.
The Takeover Code sets out the contents of the required public offer as well as the minimum offer price. The
minimum offer price depends on whether the shares of the company are "frequently" or "infrequently" traded (as
defined by the Takeover Code). If the shares are frequently traded, then the minimum offer price would be the
highest of:

the negotiated price under the agreement for the acquisition of shares in the company;

the highest price paid by the acquirer or persons acting in concert with him for any acquisitions,
including through an allotment in a public, preferential or rights issue, during the 26-week period prior
to the date of public announcement; and

the average of the weekly high and low of the closing prices of the shares of the company quoted on the
stock exchange where the shares of the company are most frequently traded during the 26-week period
prior to the date of public announcement, or the average of the daily high and low of the closing prices
of the shares as quoted on the stock exchange where the shares of the company are most frequently
traded during the two weeks preceding the date of public announcement, whichever is higher.

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The Takeover Code permits conditional offers and provides specific guidelines for the gradual acquisition of
shares or voting rights. Specific obligations of the acquirer and the board of directors of the company in the
offer process have also been set out. Acquirers making a public offer are also required to deposit into an escrow
account a percentage of the total consideration which amount will be forfeited in the event the acquirer does not
fulfil its obligations. In addition, the Takeover Code introduces the "chain principle" by which indirect
acquisition by virtue of an acquisition of companies, whether listed or unlisted, whether in India or abroad, of a
company listed in India will oblige the acquirer to make a public offer to the shareholders of each such company
which is indirectly acquired. On account of any such public offer if the public shareholding of the company falls
below the minimum level prescribed under the listing agreement with the stock exchanges, the acquirer must
take necessary steps to facilitate compliance of the company with the relevant provisions of the listing
agreement, within the time period mentioned therein.
The public offer provisions of the Takeover Code do not apply, among other things, to certain specified
acquisitions, including the acquisition of shares: (i) by allotment in a public and rights issue subject to the
fulfilment of certain conditions; (ii) pursuant to an underwriting agreement; (iii) by registered stockbrokers in
the ordinary course of business on behalf of clients; (iv) in unlisted companies (unless such acquisition results in
an indirect acquisition of shares in excess of 15% in a listed company); (v) pursuant to a scheme of
reconstruction or amalgamation approved by a court in India or abroad; (vi) pursuant to an inter se transfer
between promoters or group companies, subject to certain conditions; (vii) pursuant to a scheme under Section
18 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA"). The public offer provisions of the
Takeover Code do not apply to acquisitions in the ordinary course of business by public financial institutions
either on their own account or as pledgee. However, if the pledgee is a person, other than a bank or a financial
institution, he must make disclosures to the company and the stock exchange within two days of creation of
pledge, if the pledge is of more than 5%, 10%, 14%, 54% or 74% shares or voting rights in the company. An
application may also be filed with SEBI seeking exemption from the requirements of the Takeover Code.

SEBI Insider Trading Regulations

The SEBI (Prohibition of Insider Trading) Regulations 1992 (the "Insider Trading Regulations"), have been
notified by the SEBI to prohibit and penalise insider trading in India. The SEBI Insider Trading Regulations
prohibit "insider" dealings in the securities of a company on the basis of a communication of "unpublished price
sensitive information" or the counsel or procurement of any other person to deal in securities on the basis of
such "unpublished price sensitive information". The SEBI Insider Trading Regulations require any person who
holds more than 5 per cent. shares or voting rights in any listed company or any person who is a director or an
officer of a listed company to disclose to the company, the number of shares or voting rights held by such
person, on becoming such holder, within four working days of either:

the receipt of intimation of allotment of shares; or

the acquisition of shares or voting rights, as the case may be.

On a continuing basis, any person who holds more than 5 per cent. shares or voting rights in any listed company
is required to disclose to the company, the number of shares or voting rights held by him and change in
shareholding or voting rights, even if such change results in shareholding falling below 5 per cent., if there has
been change in such holdings from the last disclosure made, provided such change exceeds 2 per cent. of total
shareholding or voting rights in the company. Furthermore, if such person is a director or an officer of the
company, and such person's shareholding changes from the last disclosed shareholding by a value in excess of
Rs.0.1 million or 25,000 shares or 1.0 per cent. of the total shareholding or voting rights, whichever is lower,
disclosure of such change is required. Such disclosure is required to be made within four working days of either:

the receipt of intimation of allotment of shares; or

the acquisition or sale of shares or voting rights, as the case may be.

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Depositories
In August 1996, the Indian Parliament enacted the Depositories Act which provides a legal framework for the
establishment of depositaries to record ownership details and effectuate transfers in book-entry form. The SEBI
framed the Securities and Exchange Board of India (Depositories and Participants) Regulations 1996 which
provide for, inter alia, the registration of depositaries and participants, the rights and obligations of the
depositaries, participants, the issuer companies and the beneficial owners, creation of pledge of securities held in
dematerialised form, and procedure for dematerialisation of shares held in physical form.
The depositary system has significantly improved the operations of the Indian securities markets. Trading of
securities in book-entry form commenced towards the end of 1996. In January 1998, the SEBI notified scrips of
various companies for compulsory dematerialised trading by certain categories of investors such as FIIs and
other institutional investors. The SEBI has subsequently significantly increased the number of scrips in which
dematerialised trading is compulsory for all investors. The SEBI (Disclosure and Investor Protection)
Guidelines 2000 provide that no company shall make a public or rights issue or an offer for sale of securities
unless the company enters into an agreement with a depositary for dematerialisation of securities already issued
or proposed to be issued to the public or existing shareholders and the company gives an option to subscribers,
shareholders or investors to receive the security certificates or hold securities in dematerialised form with a
depositary.
The Companies Act provides that Indian companies making any initial public offerings of securities for or in
excess of Rs.100 million (US$2.3 million) should issue the securities in dematerialised form.
However, even in case of scrips notified for compulsory dematerialised trading, investors, other than
institutional investors, are permitted to trade in physical shares on transactions outside the stock exchange where
there are no requirements of reporting such transactions to the stock exchange, and on transactions on the stock
exchange involving lots of less than 500 securities.
Transfers of shares in book-entry form require both the seller and the purchaser of the shares to establish
accounts with depositary participants registered with the depositaries established under the Depositories Act.
Charges for opening an account with a depositary participant, transaction charges for each trade and custodian
charges for securities held in each account vary depending upon the practice of each depositary participant and
have to be borne by the account holder. Upon delivery, the shares shall be registered in the name of the relevant
depositary in the books of the company and this depositary shall enter the name of the investor in its records as
the beneficial owner. The transfer of beneficial ownership shall be effected through the records of the
depositary. The beneficial owner shall be entitled to all rights and benefits and subject to all liabilities in respect
of his securities held by a depositary.

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TERMS AND CONDITIONS OF THE BONDS

The following other than the words in italics is the text of the Terms and Conditions of the Bonds which will
appear on the reverse of each of the definitive certificates evidencing the Bonds:
The issue of U.S.$ 22 million in aggregate principal amount of 1% Unsecured Foreign Currency Convertible
Bonds Due 2012 (the "Bonds", which term shall include, unless the context requires otherwise, such further
Bonds issued in accordance with Condition 16 and consolidated and forming a single series therewith) of KLG
Systel Limited (the Company), was authorised by a resolution of the Board of Directors of the Company
passed on January 8, 2007 and by the shareholders of the Company at an extraordinary general meeting of
shareholders held on February 10, 2007. The Bonds are constituted by a trust deed (as amended or supplemented
from time to time) (the "Trust Deed") dated March 26, 2007 and made between the Company and The Bank of
New York, London branch as trustee for the holders of the Bonds (the "Trustee", which term shall, where the
context so permits, include all other persons for the time being acting as trustee or trustees under the Trust
Deed). The Company has entered into a paying, conversion and transfer agency agreement (as amended or
supplemented from time to time, the "Agency Agreement") dated March 26, 2007 with the Trustee, The Bank
of New York, London branch as principal paying and conversion agent and transfer agent (the "Principal
Paying and Conversion Agent" and "Transfer Agent")The Bank of New York as registrar (the "Registrar")
and together with the Principal Paying and Conversion Agent and the Transfer Agent, the "Agents" and each an
Agent relating to the Bonds.
The statements in these terms and conditions (these "Conditions") include summaries of, and are subject to, the
detailed provisions of the Trust Deed. Unless otherwise defined, terms used in these Conditions have the
meaning specified in the Trust Deed.
Copies of the Trust Deed and of the Agency Agreement are available for inspection at the specified office of the
Trustee and at the specified offices of each of the Agents. The Bondholders are entitled to the benefit of the
Trust Deed and are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the
Agency Agreement applicable to them.
1.

Status
The Bonds constitute direct, senior, unsubordinated, unconditional and (subject to the provisions of
Condition 4) unsecured obligations of the Company and shall at all times rank pari passu and without
any preference or priority among themselves. The payment obligations of the Company under the
Bonds shall, save for such exceptions as may be provided by mandatory provisions of applicable law
and subject to Condition 4, at all times rank at least equally with all of its other present and future
senior, unsubordinated, unconditional and unsecured obligations.
The Bonds are not and are not expected to be rated by any rating agency.

2.

Form, Denomination and Title

2.1

Form and Denomination

The Bonds are issued in registered form in the denomination of U.S.$10,000 each or in integral
multiples thereof. A bond certificate (each a "Certificate") will be issued to each Bondholder in respect
of its registered holding of Bonds. Each Bond and each Certificate will be numbered serially with an
identifying number which will be recorded on the relevant Certificate and in the Register (as defined
below).
Upon issue, the Bonds will be represented by a global certificate (Global Certificate) deposited with
a common depositary for, and representing Bonds registered in the name of a nominee of, such common
depositary of Euroclear Bank S.A./N.V. as operator of the Euroclear System (Euroclear) or
Clearstream Banking, socit anonyme (Clearstream, Luxembourg). These Conditions are modified
by certain provisions contained in the Global Certificate. Except in the limited circumstances described
in the Global Certificate, owners of interests in Bonds represented by the Global Certificate will not be

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entitled to receive definitive Certificates in respect of their individual holdings of Bonds. The Bonds are
not issuable in bearer form.
The Bonds will be represented by the Global Certificate in the aggregate principal amount of the Bonds
and the Company shall procure the Registrar to make such entries in the Register (as defined below).
The Global Certificate will be issued in the name of, and deposited with, a nominee of a common
depositary for Euroclear and Clearstream, Luxembourg. The Global Certificate need not be security
printed. The Bonds evidenced by the Global Certificate shall be subject to their terms in all respects
and entitled to the same benefits under this Trust Deed as Bonds evidenced by individual definitive
Certificates.
2.2

Title
Title to the Bonds passes only by transfer and registration in the register of Bondholders as described in
Condition 3. The holder of any Bond will (except as otherwise required by law) be treated as its
absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership,
trust or any interest in it or any writing on, or the theft or loss of, the Certificate issued in respect of it)
and no person will be liable for so treating the holder. In these Terms and Conditions "Bondholder" and
(in relation to a Bond) "holder" means the person in whose name a Bond is registered.

3.

Transfers of Bonds; Issue of Certificates

3.1

Register
The Company will cause to be kept at the specified office of the Registrar and in accordance with the
terms of the Agency Agreement a register (the Register)on which shall be entered the names and
addresses of the holders of the Bonds and the particulars of the Bonds held by them and of all transfers
of the Bonds, subject to the Registrar having received all such information. In the event that a
Bondholder becomes entitled to a definitive Certificate each Bondholder shall be entitled to receive
only one Certificate in respect of its entire holding. No notice of any trust, charge, encumbrance or
dispute, express, implied or constructive , shall be entered on the Register in respect of any Bond,
except as may be required by law or by any court or other authority of competent jurisdiction. Each
Bondholder shall be entitled to receive only one Certificate in respect of its entire holding.

3.2

Transfers
Subject to Condition 3.5 and the terms of the Agency Agreement, a Bond may be transferred or
exchanged by delivery of the Certificate issued in respect of that Bond, with the form of transfer on the
back duly completed and signed by the holder or his attorney duly authorised in writing, to the
specified office of the Registrar or any of the Transfer Agents. No transfer of title to a Bond will be
valid unless and until entered on the Register.
Transfers of interests in the Bonds evidenced by the Global Certificate will be effected in accordance
with the rules of the relevant clearing systems.
The Bonds are not transferable to US persons (as defined in the United States Securities Act 1933 (as
amended) nor to persons resident in India and the Registrar may, without incurring any liability,
whatsoever refuse to register any such person as the holder of a Bond. The Registrar is under no
obligation to enquire as to the residency or tax status of a holder or potential holder and shall not be
liable to any person in any manner whatsoever for any failure to do so.
Every instrument of transfer must be signed by the transferor and, where jointly held, by all joint
holders (or where the transferor is a corporate entity given under its common seal) and the transferor
shall be deemed to remain the owner of the Bond to be transferred until the name of the transferee is
entered in the Register in respect of that Bond.

Page 91

Every instrument of transfer must be deposited at the specified office of the Registrar, accompanied by
the Certificate for the Bond to be transferred and, if the instrument is executed by some other person on
his behalf, the authority of that person to do so.

3.3

Delivery of New Certificates

3.3.1

Each new Certificate to be issued upon a transfer or exchange of Bonds will, within seven business
days of receipt by the Registrar or, as the case may be, any other relevant Transfer Agent of the
original Certificate and the form of transfer duly completed and signed, be made available for
collection at the specified office of the Registrar or such other relevant Transfer Agent or, if so
requested in the form of transfer, be mailed by uninsured mail (at the expense of the Company) at the
risk of the holder entitled to the Bonds but free of charge to the holder to the address specified in the
form of transfer. The form of transfer is available at the specified office of the Principal Paying and
Conversion Agent.
Except in the limited circumstances described in the Global Certificate, owners of interests in the
Bonds represented by the Global Certificate will not be entitled to receive definitive Certificates.

3.3.2

Where some but not all of the Bonds in respect of which a Certificate is issued is to be transferred,
exchanged, converted or redeemed, a new Certificate in respect of the Bonds not so transferred,
exchanged, converted or redeemed will, within seven business days of delivery of the original
Certificate to the Registrar or other relevant Agent, be made available for collection at the specified
office of the Registrar or such other relevant Agent or, if so requested in the form of transfer, be mailed
by uninsured mail at the expense of the Company and at the risk of the holder of the Bonds not so
transferred, exchanged, converted or redeemed to the address of such holder appearing on the Register.

3.3.3

For the purposes of these Conditions, "business day" shall mean a day other than a Saturday or Sunday
on which banks are open for general banking business in New York City, London, Singapore and
Mumbai and in the city in which the specified office of the relevant Agent is located and in the case of
surrender of Certificates, the place where such Certificates are surrendered.

3.4

Formalities Free of Charge

Registration of a transfer of Bonds and issuance of new Certificates will be effected without charge to
the Bondholders by or on behalf of the Company or any of the Agents, but upon (i) payment (or the
giving of such indemnity as the Company or any of the Agents may require) in respect of any tax or
other governmental charges which may be imposed in relation to such transfer; and (ii) the Company or
the relevant Transfer Agent being satisfied that the regulations concerning transfer of Bonds have been
complied with.

3.5

Closed Periods
No Bondholder may require the transfer of a Bond to be registered (i) during the period of 15 calendar
days ending on (and including) the due date for any payment of principal, premium (if any) and interest
on such Bonds; (ii) during the period of 10 business days ending on (and including) the dates for
redemption or conversion pursuant to Condition 8.2 and Condition 8.3; (iii) after a Conversion Notice
(as defined in Condition 6.2) has been delivered with respect to a Bond; (iv) after a Relevant Event Put
Exercise Notice (as defined in Condition 8.4) has been deposited in respect of such a Bond; or(v) after
a Purchase Notice (as defined in Condition 8.5) has been deposited in respect of such a Bond.

3.6

Regulations
All transfers of Bonds and entries on the Register will be made subject to the detailed regulations
concerning transfer of Bonds scheduled to the Agency Agreement. The regulations may be changed by
the Company, with the prior written approval of the Trustee and the Registrar. A copy of the current
regulations will be mailed (free of charge to the Bondholder and at the expense of the Company) by the
Registrar to any Bondholder upon request.
Page 92

4.

Negative Pledge
So long as any Bond remains outstanding (as defined in the Trust Deed):

4.1

the Company will not, and will procure that none of its Subsidiaries (as defined below) will create or
permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest
("Security") upon the whole or any part of its undertaking, assets or revenues, including any uncalled
capital present or future, to secure any Relevant Indebtedness (as defined below), or to secure any
guarantee or indemnity in respect of any Relevant Indebtedness;

4.2

the Company will procure that no Subsidiary or other person creates or permits to subsist any Security
upon the whole or any part of the undertaking, assets or revenues present or future of that Subsidiary or
other person to secure any of the Companys or any Subsidiarys Relevant Indebtedness, or to secure
any guarantee of or indemnity in respect of any of Companys or any Subsidiary's Relevant
Indebtedness.

4.3

the Company will procure that no other person gives any guarantee of, or indemnity in respect of, any
of the Company's or any Subsidiary's Relevant Indebtedness,
unless, at the same time or prior thereto, the Company's obligations under the Bonds and the Trust
Deed (a) are secured equally and rateably therewith to the satisfaction of the Trustee, or (b) have the
benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute
discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by
an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.
For the purposes of these Conditions:
"Relevant Indebtedness" means any present or future indebtedness (whether being principal, premium,
interest or other amount) in the form of, or represented by, bonds, debentures, notes or other investment
securities or any borrowed money or any liability under or in respect of any acceptance or acceptance
credit which (i) are denominated in a currency other than Rupees or are by their terms payable, or
confer a right to receive payment, in any currency other than Rupees, or (ii) are denominated or
payable in Rupees and more than 25per cent. of the aggregate principal amount thereof is initially
distributed outside India.

5.

Interest

5.1

Interest Rate: The Bonds will bear interest from 26 March 2007 (the Interest Commencement Date)
at the rate of 1% per annum of the principal amount of the Bonds. Interest is payable semi-annually in
arrears on 26 September and 26 March (each an "Interest Payment Date") with the first such payment
being made on 26 September 2007, in respect of the period from and including the Interest
Commencement Date to but excluding the first Interest Payment Date. However, if any Interest
Payment Date, would otherwise fall on a date which is not a business day, it will be postponed to the
next business day unless it would then fall in to the next calendar month, in which case it would be
brought forward to the preceding business day. Such payment shall be in respect of the period
beginning on (and including) the Issue Date or any Interest Payment Date, and ending on (but
excluding) the next Interest Payment Date. Interest shall be paid to the Bondholder who is shown as the
registered holder of a particular Bond at the close of business on the record date, which is 15 calendar
days prior to the Interest Payment Date (the "Record Date").
In the event a Bondholder exercises his Conversion Right (as described in Condition 6.1), accrued
interest will be paid by the Company directly to such Bondholder at account details specified in the
Conversion Notice for the period from and including the immediately preceding Interest Payment Date
or Interest Commencement Date, as the case may be, up to but excluding the Conversion Date. The
Trustee and Agents shall not be liable or responsible in any manner whatsoever for such calculation or
payment by the Company.

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When interest is required to be calculated in respect of a period of less than a full year period, it shall
be calculated on the basis of a 360 day year consisting of 12 months of 30 days each and, in the case of
an incomplete month, the number of days elapsed on the basis of a month of 30 days.
If the Company fails to pay any sum in respect of the Bonds when the same becomes due and payable
under these Conditions, interest shall accrue on the overdue sum at the rate of 8.25 per cent. per annum
on an as converted basis on the amount of Bonds to be converted until such conversion takes place.
Such default interest shall accrue on the basis of the actual number of days elapsed and a 360-day year.
5.2

Accrual of Interest: Each Bond will cease to bear interest on the earlier of:
(a)
up to but excluding the Conversion Date; and
(b)
the due date of redemption of such Bond unless payment is improperly withheld or refused or
default is otherwise made in which case interest will continue to accrue until whichever is the
earlier of:
(i)
the date on which all amounts due in respect of such Bond have been paid; and
(ii)
five business days prior to the date on which the full amount of the moneys payable
in respect of such Bond has been received by the Principal Paying and Conversion
Agent or the Registrar, as the case may be, and notice to that effect has been given to
the Bondholders in accordance with Condition 17.

6.

Conversion

6.1

Conversion Right

6.1.1

Conversion Period:
Subject as hereinafter provided, Bondholders have the right to convert their Bonds into Shares at any
time during the Conversion Period (as defined below). The right of a Bondholder to convert any Bond
into Shares is called the "Conversion Right". Subject to and upon compliance with the provisions of
this Condition, the Conversion Right attaching to any Bond may be exercised, at the option of the
holder thereof, at any time (subject to the next paragraph) on and after 26 March 2007 up to the close
of business (at the place where the Certificate evidencing such Bond is deposited for conversion) on 16
March 2012 (or if that is not a business day, on the immediately preceding business day) (but, except
as provided in Condition 6.1.4, in no event thereafter) or if such Bond shall have been called for
redemption prior to the Maturity Date (as defined below), then up to the close of business (at the place
aforesaid) on a date no later than seven business days (at the place aforesaid) prior to the date fixed for
redemption thereof (the "Conversion Period").
Conversion Rights may not be exercised in relation to any Bond during the period (each a "Closed
Period") commencing on: (i) the date falling 21 days prior to the date of the Company's annual general
shareholders' meeting and ending on the date of that meeting, (ii) the date falling 30 days prior to an
extraordinary shareholders' meeting and ending on the date of that meeting, (iii) the date that the
Company notifies Bombay Stock Exchange Limited (the "BSE") and The National Stock Exchange of
India Limited ("NSE") of the record date for determination of the shareholders entitled to receipt of
dividends, subscription of shares due to capital increase or other benefits, and ending on the record date
for the distribution or allocation of the relevant dividends, rights and benefits or (iv) on such date and
for such period as determined by Indian law applicable from time to time that the Company is required
to close its stock transfer books. The Company will give notice of any such period to the Bondholders
and the Principal Paying and Conversion Agent at the beginning of each such period, if practical and
depending on any applicable stock exchange requirements, at least five business days prior to the
beginning of each such period.
The Company shall provide to the Trustee, the Bondholders and the Principal Paying and Conversion
Agent notice of any meeting of the Company's board of directors which is convened to consider the
declaration of any dividends, subscription of shares due to capital increase or other benefits, at the same
time notice of such meeting is announced in India.

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In addition, Conversion Rights may not be exercised (i) in respect of a Bond where the Bondholder
shall have exercised its right to require the Company to redeem such Bond pursuant to Condition 8.4 or
8.5 or (ii) except as provided in Condition 6.1.4 and Condition 10, in each case following the giving of
notice by the Trustee pursuant to Condition 10.
The number of Shares to be issued on conversion of a Bond will be determined by the Company by
dividing the principal amount of the Bond to be converted (translated into Rupees at the fixed rate of
Rs.43.70 = U.S.$1.00 (the "Fixed Exchange Rate") by the Conversion Price in effect at the Conversion
Date (both as hereinafter defined). Neither the Trustee nor the Agents shall be responsible for
determining the number of Shares to be issued on conversion of a Bond or for verifying the Companys
determination of such number of Shares and neither shall be responsible or liable to the Bondholders or
any other person for any erroneous determination by the Company or any delay or failure of the
Company in making such determination.
A Conversion Right may only be exercised in respect of one or more Bonds. If more than one Bond
held by the same holder is converted at any one time by the same holder, the number of Shares to be
issued upon such conversion will be calculated on the basis of the aggregate principal amount of the
Bonds to be converted.
Upon exercise of Conversion Rights in relation to any Bond and the fulfilment by the Company of all
its obligations in respect thereof, the relevant Bondholder shall have no further rights in respect of such
Bond and the obligations of the Company in respect thereof shall be extinguished.
6.1.2

Fractions of Shares:
Fractions of Shares will not be issued on conversion and no cash adjustments will be made in respect
thereof. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by
operation of law or otherwise occurring after the Issue Date which reduces the number of Shares
outstanding, the Company will upon conversion of Bonds pay in cash (in U.S. dollars by means of a
U.S. dollar cheque drawn on a bank in New York) a sum equal to such portion of the principal amount
of the Bond or Bonds evidenced by the Certificate deposited in connection with the exercise of
Conversion Rights, aggregated as provided in Condition 6.1.1, as corresponds to any fraction of a
Share not issued if such sum exceeds U.S.$10.00 (which sum shall be translated into U.S. dollars at the
Fixed Exchange Rate). Any such sum shall be paid not later than seven business days in Mumbai after
the relevant Conversion Date by transfer to a U.S. dollar account with a bank in New York City
specified in the relevant Conversion Notice.

6.1.3

Conversion Price and Conversion Ratio:

The price at which Shares will be issued upon conversion, as adjusted from time to time (the
"Conversion Price"), will initially be Rs. 400.00 per Share but will be subject to adjustment in the
manner provided in Condition 6.3.

6.1.4

Revival and/or survival after default:

Notwithstanding the provisions of Condition 6.1.1, if (a) the Company shall default in making payment
in full in respect of any Bond which shall have been called for redemption, re-purchase or cancellation
on the date fixed for redemption, re-purchase or cancellation thereof, (b) any Bond has become due and
payable prior to the Maturity Date (as defined in Condition 8.1) by reason of the occurrence of any of
the events referred to in Condition 10 or (c) any Bond is not redeemed on the Maturity Date in
accordance with Condition 8.1, the Conversion Right attaching to such Bond will revive and/or will
continue to be exercisable up to, and including, the close of business (at the place where the Certificate
evidencing such Bond is deposited for conversion) on the date upon which the full amount of the
moneys payable in respect of such Bond has been duly received by the Principal Paying and
Conversion Agent or the Trustee and notice of such receipt has been duly given to the Bondholders
and, notwithstanding the provisions of Condition 6.1.1, any Bond in respect of which the Certificate
and Conversion Notice are deposited for conversion prior to such date shall be converted on the
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relevant Conversion Date (as defined in Condition 6.2.1(ii)) notwithstanding that the full amount of the
moneys payable in respect of such Bond shall have been received by the Principal Paying and
Conversion Agent or the Trustee before such Conversion Date or that the Conversion Period may have
expired before such Conversion Date.
6.1.5

Meaning of "Shares":
As used in these Conditions, the expression "Shares" means (1) shares of the class of share capital of
the Company which, at the date of the Trust Deed, are designated as shares of the Company with full
voting rights, together with shares of any class or classes resulting from any subdivision, consolidation
or reclassification of those shares, which as between themselves have no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary liquidation or dissolution
of the Company; and (2) fully-paid and non-assessable shares of any class or classes of the share
capital of the Company authorised after the date of the Trust Deed which have no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or windingup of the Company; provided that, subject to the provisions of Condition 11, shares to be issued on
conversion of the Bonds means only "Shares" as defined in sub-clause (1) above.

6.2

Conversion Procedure

6.2.1

Conversion Notice:
(i)

To exercise the Conversion Right attaching to any Bond, the holder thereof must complete,
execute and deposit at his own expense during 9 a.m. and 3 p.m. at the specified office of the
Principal Paying and Conversion Agent on any business day during the Conversion Period
(subject as provided in this Condition 6) a notice of conversion (a "Conversion Notice") in
duplicate in the form (for the time being current) obtainable from the specified office of each
Agent, together with (a) the relevant Certificate and (b) certification by the Bondholder, in the
form obtainable from the Principal Paying and Conversion Agent that is not a US person or
located in the United States (according to the meaning of Regulation S of the Securities Act,
1933 of the United States) and any certificates and other documents, as may be required under
the laws of the Republic of India or the jurisdiction in which the specified office of such
Principal Paying and Conversion Agent shall be located. A Conversion Notice deposited
outside the hours specified above or on a day which is not a business day at the place of the
specified office of the relevant Principal Paying and Conversion Agent shall for all purposes
be deemed to have been deposited with that Principal Paying and Conversion Agent during the
hours specified above on the next business day following such business day. Any Bondholder
who deposits a Conversion Notice during a Closed Period will not be permitted to convert the
Bonds into Shares (as specified in the Conversion Notice) until the next business day after the
end of that Closed Period, which (if all other conditions to conversion have been fulfilled) will
be the Conversion Date for such Bonds notwithstanding that such date may fall outside of the
Conversion Period. A Bondholder exercising its Conversion Right for Shares will be required
to open a depository account with a depositary participant under the Depositories Act (Act
22), 1996 of India (the "1996 Depositories Act"), for the purposes of receiving the Shares.

(ii)

The conversion date in respect of a Bond (the "Conversion Date") must (subject to the
provisions of Condition 6.1.4 and as provided below) fall within the Conversion Period and
will be deemed to be the date of the surrender of the Certificate in respect of such Bond and
delivery of such Conversion Notice and, if applicable, any payment to be made or indemnity
given under these Conditions in connection with the exercise of such Conversion Right and all
conditions precedent to conversion of the Bond are fulfilled, save that if a Bondholder
deposits a Conversion Notice during a Closed Period the Conversion Date in respect of the
relevant Bond shall be the next business day at the place of the specified office of the relevant
Principal Paying and Conversion Agent after the end of that Closed Period, notwithstanding
that such date may fall outside of the Conversion Period. A Conversion Notice once delivered
shall be irrevocable and may not be withdrawn unless the Company consents to such
withdrawal. A Conversion Right may only be exercised in respect of US$10,000 of Bonds or
integral multiples thereof and only in respect of the whole of the principal amount of a Bond.
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(iii)

6.2.2

The Principal Paying and Conversion Agent and/or the Company may reject any incomplete
or incorrect Conversion Notice or any Conversion Notice that is not accompanied by any
relevant Certificates in respect thereof.

Stamp duty etc.:

A Bondholder delivering a Certificate in respect of a Bond for conversion must pay directly to the
relevant authorities any taxes and capital, stamp, issue and registration duties arising on conversion
(other than any taxes or capital or stamp duties payable in India and, if relevant, in the place of the
Alternative Stock Exchange (as defined in Condition 6.4.1), by the Company in respect of the allotment
and issue of Shares and listing of the Shares on the Indian Stock Exchanges (as defined below) on
conversion) (the "Taxes") and such Bondholder must pay all, if any, taxes arising by reference to any
disposal or deemed disposal of a Bond in connection with such conversion. The Company will pay all
other expenses arising on the issue of Shares on conversion of the Bonds and all charges of the Agents
and the share transfer agent for the time being handling the transfers of the Shares of the Company
("Share Transfer Agent") in connection with conversion.
The Bondholder must provide the Principal Paying and Conversion Agent with confirmation of (as
provided in the Conversion Notice) payment to the relevant tax authorities in settlement of Taxes
payable pursuant to this Condition 6.2.2 at or before the time of deposit of the Conversion Notice.
None of the Agents or the Trustee shall be responsible or liable for: (a) determining whether a
Bondholder or the Company is liable to pay any Taxes or the amounts payable (if any) in connection
with this Condition 6.2.2; (b) any failure by any Bondholder or the Company to make any such
payment to the relevant authorities; or (c) determining the sufficiency or insufficiency of any amounts
so paid.

6.2.3

Delivery of Shares:
(i)

Upon exercise by a Bondholder of its Conversion Right for Shares, the Company will, on or
with effect from the relevant Conversion Date, enter the relevant Bondholder or his/their
nominee in the register of members of the Company in respect of such number of Shares to be
issued upon conversion (notwithstanding any Retroactive Adjustment (as defined below) of
the Conversion Price referred to below prior to the time it takes effect) and will, as soon as
practicable, and in any event not later than 30 days after the relevant Conversion Date, cause
the relevant securities account of the Bondholder exercising his Conversion Right for Shares
or of his/their nominee, to be credited with such number of relevant Shares to be issued upon
conversion (notwithstanding any Retroactive Adjustment of the Conversion Price referred to
below prior to the time it takes effect) and shall further cause the name of the concerned
Bondholder or its nominee to be registered accordingly, in the record of the depositors,
maintained by the depository registered under the 1996 Depositories Act with whom the
Company has entered into a depository agreement and, subject to any applicable limitations
then imposed by Indian laws and regulations, shall procure the Share Transfer Agent to, as
soon as practicable, and in any event within 14 business days in Mumbai of the Conversion
Date, despatch or cause to be despatched to the order of the person named for that purpose in
the relevant Conversion Notice at the place and in the manner specified in the relevant
Conversion Notice (uninsured and the risk of delivery at any such place being that of the
converting Bondholder), a U.S. dollar cheque drawn on a branch of a bank in New York City
in respect of any cash payable pursuant to Condition 6.1.2 required to be delivered on
conversion and such assignments and other documents (if any) as required by law to effect the
transfer thereof.
The crediting of the Shares to the relevant securities account of the converting Bondholder
will be deemed to satisfy the Company's obligation to pay the principal and premium on the
Bonds.

(ii)

If the Conversion Date in relation to any Bond shall be after the record date for any issue,
distribution, grant, offer or other event as gives rise to the adjustment of the Conversion Price
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pursuant to Condition 6.3, but before the relevant adjustment becomes effective under the
relevant Condition (a "Retroactive Adjustment"), upon the relevant adjustment becoming
effective the Company shall procure the issue to the converting Bondholder (or in accordance
with the instructions contained in the Conversion Notice (subject to applicable exchange
control or other laws or other regulations)), such additional number of Shares ("Additional
Shares") as, together with the Shares issued or to be issued on conversion of the relevant
Bond, is equal to the number of Shares which would have been required to be issued on
conversion of such Bond if the relevant adjustment to the Conversion Price had been made
and become effective as at such Conversion Date immediately after the relevant record date
and in such event and in respect of such Additional Shares references in Conditions 6.2.3(i)
and (iii) to the Conversion Date shall be deemed to refer to the date upon which the
Retroactive Adjustment becomes effective (notwithstanding that the date upon which it
becomes effective falls after the end of the Conversion Period).
(iii)

6.3

The Shares issued upon conversion of the Bonds will in all respects rank pari passu with the
Shares in issue on the relevant Conversion Date (except for any right excluded by mandatory
provisions of applicable law) and such Shares shall be entitled to all rights the record date for
which falls on or after such Conversion Date to the same extent as all other fully-paid and
non-assessable Shares of the Company in issue as if such Shares had been in issue throughout
the period to which such rights relate. A holder of Shares issued on conversion of Bonds shall
not be entitled to any rights the record date for which precedes the relevant Conversion Date.

Adjustments to Conversion Price

The Conversion Price will be subject to adjustment in the following events:

6.3.1

Free distribution, bonus issue, division, consolidation and re-classification of Shares:

Adjustment: If the Company shall (a) make a free distribution of Shares (other than by way of a
dividend in Shares), (b) make a bonus issue of its Shares, (c) divide its outstanding Shares, (d)
consolidate its outstanding Shares into a smaller number of Shares, or (e) re-classify any of its Shares
into other securities of the Company, then the Conversion Price shall be appropriately adjusted so that
the holder of any Bond, the Conversion Date in respect of which occurs after the coming into effect of
the adjustment described in this Condition 6.3.1, shall be entitled to receive the number of Shares
and/or other securities of the Company which such holder would have held or have been entitled to
receive after the happening of any of the events described above had such Bond been converted
immediately prior to the happening of such event (or, if the Company has fixed a prior record date for
the determination of shareholders entitled to receive any such free distribution or bonus issue of Shares
or other securities issued upon any such division, consolidation or re-classification, immediately prior
to such record date), but without prejudice to the effect of any other adjustment to the Conversion Price
made with effect from the date of the happening of such event (or such record date) or any time
thereafter.
Effective date of adjustment: An adjustment made pursuant to this Condition 6.3.1 shall become
effective immediately on the relevant event referred to above becoming effective or, if a record date is
fixed therefor, immediately after such record date; provided that in the case of a free distribution or
bonus issue of Shares which must, under applicable laws of India, be submitted for approval to a
general meeting of shareholders or be approved by a meeting of the Board of Directors of the Company
before being legally paid or made, and which is so approved after the record date fixed for the
determination of shareholders entitled to receive such distribution or issue, such adjustment shall,
immediately upon such approval being given by such meeting, become effective retroactively to
immediately after such record date.

6.3.2

Declaration of dividend in Shares:

Adjustment: If the Company shall issue Shares as a dividend in Shares or make a distribution of Shares
which is treated as a capitalisation issue for accounting purposes under Indian GAAP (including, but
not limited to, capitalisation of capital reserves and employee stock bonus), then the Conversion Price
Page 98

in effect when such dividend and/or distribution is declared (or, if the Company has fixed a prior record
date for the determination of shareholders entitled to receive such dividend and/or distribution, on such
record date) shall be adjusted in accordance with the following formula:
NCP = OCP x [N] / [N + n]
where:
NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price before such adjustment.
N = the number of Shares outstanding, at the time of issuance of such dividend and/or distribution (or
at the close of business in Mumbai on such record date as the case may be).
n = the number of Shares to be distributed to the shareholders as a dividend and/or distribution.
Effective date of adjustment: An adjustment made pursuant to this Condition 6.3.2 shall become
effective immediately on the relevant event referred to in this Condition 6.3.2 becoming effective or, if
a record date is fixed therefor, immediately after such record date; provided that in the case of a
dividend in Shares which must, under applicable laws of India, be submitted for approval to a general
meeting of shareholders of the Company or be approved at a meeting of the Board of Directors of the
Company before being legally paid or made, and which is so approved after the record date fixed for
the determination of shareholders entitled to receive such dividend, such adjustment shall, immediately
upon such approval being given by such meeting, become effective retroactively to immediately after
such record date.
6.3.3

Concurrent adjustment events:

If the Company shall declare a dividend in, or make a free distribution or bonus issue of, Shares which
dividend, issue or distribution is to be paid or made to shareholders as of a record date which is also:
(a)

the record date for the issue of any rights or warrants which requires an adjustment of the
Conversion Price pursuant to Condition 6.3.5, 6.3.6 or 6.3.7;

(b)

the day immediately before the date of issue of any securities convertible into or exchangeable
for Shares which requires an adjustment of the Conversion Price pursuant to Condition 6.3.9;

(c)

the day immediately before the date of grant, offer or issue of any Shares which requires an
adjustment of the Conversion Price pursuant to Condition 6.3.10 or, if applicable, the record
date for determination of stock dividend entitlement as referred to in Condition 6.3.10; or

(d)

the day immediately before the date of issue of any rights, options or warrants which requires
an adjustment of the Conversion Price pursuant to Condition 6.3.11;
then (except where such dividend, bonus issue or free distribution gives rise to a retroactive
adjustment of the Conversion Price under Conditions 6.3.1 and 6.3.2) no adjustment of the
Conversion Price in respect of such dividend, bonus issue or free distribution shall be made
under Conditions 6.3.1 and 6.3.2, but in lieu thereof an adjustment shall be made under
Condition 6.3.5, 6.3.6, 6.3.7, 6.3.9, 6.3.10, 6.3.11 or 6.3.13 (as the case may require) by
including in the denominator of the fraction described therein the aggregate number of Shares
to be issued pursuant to such dividend, bonus issue or free distribution.

6.3.4

Capital Distribution:
Adjustment:
(i)

If the Company shall pay or make to its Shareholders any Capital Distribution (as defined
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below), then the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [CMP - fmv] / CMP
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
CMP = the Current Market Price (as defined in Condition 6.3.15 below) per Share on the date
on which the relevant Dividend is first publicly announced.
fmv = the portion of the Fair Market Value (as defined below), with such portion being
determined by dividing the Fair Market Value of the aggregate Capital Distribution by the
number of Shares entitled to receive the relevant Capital Distribution (or, in the case of a
purchase of Shares or any receipts or certificates representing shares by or on behalf of the
Company, by the number of Shares in issue immediately prior to such purchase), of the Capital
Distribution attributable to one Share.
(ii)

If the Company shall pay or make to its Shareholders any Extraordinary Cash Dividend then,
in such case, the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [CMP - C] /CMP
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
CMP = the Current Market Price (as defined in Condition 6.3.15 below) per Share on the date
on which the relevant Dividend is first publicly announced.
C = the Extraordinary Cash Dividend attributable to one Share.

Effective date of adjustment:

Any adjustment pursuant to this Condition 6.3.4 shall become effective immediately after the record
date for the determination of Shareholders entitled to receive the relevant Dividend; provided that (a) in
the case of such a Dividend which must, under applicable law of India, be submitted for approval to a
general meeting of Shareholders or be approved by a meeting of the Board of Directors of the
Company before such Dividend may legally be made and is so approved after the record date fixed for
the determination of Shareholders entitled to receive such Dividend, such adjustment shall,
immediately upon such approval being given by such meeting, become effective retroactively to
immediately after such record date and (b) in the case of Condition 6.3.4(i), if the Fair Market Value of
the relevant Capital Distribution cannot be determined until the record date fixed for the determination
of Shareholders entitled to receive the relevant Dividend, such adjustment shall, immediately upon
such Fair Market Value being determined, become effective retroactively to immediately after such
record date.
If such Dividend is not so paid, the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such Dividend had not been approved.
For the purposes of this Condition:
"Capital Distribution" means any Dividend other than a cash Dividend.
In making any calculation for the purposes of this Condition 6.3.4, such adjustments (if any) shall be
made as an independent investment or commercial bank of international repute selected by the
Company (at the expense of the Company) and approved in writing by the Trustee (an "Independent
Financial Institution") considers appropriate to reflect any consolidation or subdivision of any Share
Page 100

or the issue of Shares by way of capitalisation of profits or reserves, or any like or similar event or any
adjustment to the Conversion Price.
For the purposes of this Condition 6.3.4, an Extraordinary Cash Dividend shall be any cash Dividend
where the total amount of:
(a)

such cash Dividend, which shall exclude all taxes, including but not limited to,(i) withholding
tax and (ii) any corporate tax and dividend distribution tax attributable to that Dividend (the
Relevant Dividend); and

(b)

all other cash Dividends paid or declared on the Shares, in the period beginning on the day
immediately after the prior anniversary of the relevant date of determination (other than any
dividend or portion thereof previously deemed to be an excess cash dividend or a Distribution
in respect of which an adjustment was made to the Conversion Price) (the "previous
dividends"), except that where the date of announcement or payment for dividends for two
different fiscal years has occurred in such period, such dividends relating to the earlier fiscal
year will be disregarded for the purpose of determining the previous dividends,
exceeds an amount equal to 25.00 per cent., 27.50 per cent., 30.25 per cent., 33.30 per cent.,
36.60 per cent. and 40.25 per cent. of the par value of the Shares, on a per Share basis, that the
Company may pay or declare on the Shares in each of the financial years ended 31 March
2007, 31 March 2008, 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012,
respectively.
Such adjustment shall become effective on the record date for the determination of
Shareholders entitled to receive such Dividend in cash.
"Relevant Period" means the period beginning on the first Trading Day after the record date
for the first cash Dividend aggregated in the total current Dividend, and ending on the Trading
Day immediately preceding the date of first public announcement for the Relevant Dividend.
However, if there were no cash Dividends publicly announced during the 365 consecutive day
period prior to the date of first public announcement for the Relevant Dividend or if there is no
other Dividend aggregated in the total current dividend, the Relevant Period will be the entire
such period of 365 consecutive calendar days.
"Dividend" means any dividend or distribution of cash or other property or assets or evidences
of the Company's indebtedness, whenever paid or made and however described provided that:

(a)

where a Cash Dividend is announced which is to be, or may at the election of a shareholder or
shareholders be, satisfied by the issue or delivery of Shares or other property or assets, or
where a capitalisation of profits or reserves is announced which is to be, or may at the election
of a shareholder or shareholders be, satisfied by the payment of a Dividend, then for the
purposes of this definition the Dividend in question shall be treated as a Dividend of (i) such
cash Dividend or (ii) the Fair Market Value (on the date of announcement of such Dividend or
date of capitalisation (as the case may be) or, if later, the date on which the number of Shares
(or amount of property or assets, as the case may be) which may be issued or delivered is
determined) of such Shares or other property or assets if such Fair Market Value is greater
than the Fair Market Value of such cash Dividend;

(b)

any tender or exchange offer falling within Condition 6.3.12 and any issue or distribution of
Shares falling within Condition 6.3.2 shall be disregarded; and

(c)

a purchase or redemption of ordinary share capital by or on behalf of the Company shall not
constitute a Dividend unless, in the case of purchases of Shares by or on behalf of the
Company, the Volume Weighted Average Price per Share (before expenses) on any one day in
respect of such purchases exceeds the Current Market Price per Share by more than 5 per cent.
either (1) on that day (or if such day is not a Trading Day, the immediately preceding Trading
Day), or (2) where an announcement (excluding for the avoidance of doubt for these purposes,
Page 101

any general authority for such purchases or redemptions approved by a general meeting of
shareholders of the Company or any notice convening such a meeting of shareholders) has
been made of the intention to purchase Shares at some future date at a specified price, on the
Trading Day immediately preceding the date of such announcement, in which case such
purchase shall be deemed to constitute a Dividend (but not a cash Dividend) to the extent that
the aggregate price paid (before expenses) in respect of such Shares purchased by or on behalf
of the Company exceeds the product of (i) the Current Market Price per Share determined as
aforesaid and (ii) the number of Shares so purchased.
"Fair Market Value" means, with respect to any property on any date, the fair market value of
that property as determined in good faith by an Independent Financial Institution provided,
that (i) the Fair Market Value of a cash Dividend paid or to be paid shall be the amount of such
cash Dividend; (ii) the Fair Market Value of any other cash amount shall be equal to such cash
amount; and in the case of (i) translated into Rupees (if declared or paid in a currency other
than Rupees) at the rate of exchange used to determine the amount payable to shareholders
who were paid or are to be paid or are entitled to be paid the cash Dividend in Rupees; and in
any other case, converted into Rupees (if expressed in a currency other than Rupees) at such
rate of exchange as may be determined in good faith by an Independent Financial Institution to
be the spot rate ruling at the close of business on that date (or if no such rate is available on
that date the equivalent rate on the immediately preceding date on which such a rate is
available).
"Volume Weighted Average Price" means, in respect of a Share on any Trading Day, the order
book volume-weighted average price of a Share appearing on or derived from Bloomberg (or
any successor service) page WWTC IN or such other source as shall be determined to be
appropriate by an Independent Financial Institution on such Trading Day, provided that on any
such Trading Day where such price is not available or cannot otherwise be determined as
provided above, the Volume Weighted Average Price of a Share in respect of such Trading Day
shall be the Volume Weighted Average Price, determined as provided above, on the
immediately preceding Trading Day on which the same can be so determined.
"Cash Dividend" means (i) any Dividend which is to be paid in cash and (ii) any Dividend
determined to be a cash Dividend pursuant to paragraph (a) of the definition "Dividend", and
for the avoidance of doubt, a Dividend falling within paragraph (c) of the definition
"Dividend" shall be treated as not being a cash Dividend.
6.3.5

Rights issues to Shareholders:

Adjustment: If the Company shall grant, issue or offer to the holders of Shares rights entitling them to
subscribe for or purchase Shares, which expression shall include those Shares that are required to be
offered to employees and persons other than shareholders in connection with such grant, issue or offer:
(a)

at a consideration per Share receivable by the Company (determined as provided in Condition

6.3.16) which is fixed on or prior to the record date mentioned below and is less than the
Current Market Price per Share at such record date; or

(b)

at a consideration per Share receivable by the Company which is fixed after the record date
mentioned below and is less than the Current Market Price per Share on the date the Company
fixes the said consideration, then the Conversion Price in effect (in a case within (a) above) on
the record date for the determination of shareholders entitled to receive such rights or (in a
case within (b) above) on the date the Company fixes the said consideration shall be adjusted
in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
Page 102

OCP = the Conversion Price before such adjustment.

N = the number of Shares outstanding (having regard to Condition 6.3.16) at the close of
business in India (in a case within (a) above) on such record date or (in a case within (b)
above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights at the said
consideration being (aa) the number of Shares which underwriters have agreed to underwrite
as referred to below or, as the case may be, (bb) the number of Shares for which applications
are received from shareholders as referred to below save to the extent already adjusted for
under (aa).
v = the number of Shares which the aggregate consideration receivable by the Company
(determined as provided in Condition 6.3.16) would purchase at such Current Market Price
per Share specified in (a) or, as the case may be, (b) above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective
immediately after the latest date for the submission of applications for such Shares by shareholders
entitled to the same pursuant to such rights or (if later) immediately after the Company fixes the said
consideration but retroactively to immediately after the record date mentioned above.
Rights not taken up by Shareholders: If, in connection with a grant, issue or offer to the holders of
Shares of rights entitling them to subscribe for or purchase Shares, any Shares which are not subscribed
for or purchased by the persons entitled thereto are underwritten by other persons prior to the latest date
for the submission of applications for such Shares, an adjustment shall be made to the Conversion Price
in accordance with the above provisions which shall become effective immediately after the date the
underwriters agree to underwrite the same or (if later) immediately after the Company fixes the said
consideration but retroactively to immediately after the record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Shares of rights entitling them to
subscribe for or purchase Shares, any such Shares which are not subscribed for or purchased by the
underwriters who have agreed to underwrite as referred to above or by the shareholders entitled thereto
(or persons to whom shareholders have transferred such rights) who have submitted applications for
such Shares as referred to above are offered to and/or subscribed by others, no further adjustment shall
be made to the Conversion Price by reason of such offer and/or subscription.
6.3.6

Warrants issued to Shareholders:

Adjustment: If the Company shall grant, issue or offer to the holders of Shares warrants entitling them
to subscribe for or purchase Shares:
(a)

at a consideration per Share receivable by the Company (determined as provided in Condition

6.3.16) which is fixed on or prior to the record date for the determination of shareholders
entitled to receive such warrants and is less than the Current Market Price per Share at such
record date; or

(b)

at a consideration per Share receivable by the Company which is fixed after the record date
mentioned above and is less than the higher of the Conversion Price in effect and the Current
Market Price per Share on the date the Company fixes the said consideration, then the
Conversion Price in effect (in a case within (a) above) on the record date for the determination
of shareholders entitled to receive such warrants or (in a case within (b) above) on the date the
Company fixes the said consideration shall be adjusted in accordance with the following
formula:
NCP = OCP x [N + v] / [N + n]
where:
Page 103

NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of
business in India (in a case within (a) above) on such record date or (in a case within (b)
above) on the date the Company fixes the said consideration.
n = the number of Shares to be issued upon exercise of such warrants at the said consideration
which, where no applications by shareholders entitled to such warrants are required, shall be
based on the number of warrants issued. Where applications by shareholders entitled to such
warrants are required, the number of such Shares shall be calculated based upon (aa) the
number of warrants which underwriters have agreed to underwrite as referred to below or, as
the case may be, (bb) the number of warrants for which applications are received from
shareholders as referred to below save to the extent already adjusted for under (aa).
v = the number of Shares which the aggregate consideration receivable by the Company
(determined as provided in Condition 6.3.16) would purchase at such Conversion Price in
effect or, as the case may be, Current Market Price per Share specified in (a) or, as the case
may be, (b) above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective (i)
where no applications for such warrants are required from shareholders entitled to the same, upon their
issue and (ii) where applications by shareholders entitled to the same are required as aforesaid,
immediately after the latest date for the submission of such applications or (if later) immediately after
the Company fixes the said consideration but in all cases retroactively to immediately after the record
date mentioned above.
Warrants not subscribed for by Shareholders: If, in connection with a grant, issue or offer to the holders
of Shares of warrants entitling them to subscribe for or purchase Shares in the circumstances described
in (a) and (b) of this Condition 6.3.6, any warrants which are not subscribed for or purchased by the
shareholders entitled thereto are underwritten by others prior to the latest date for the submission of
applications for such warrants, an adjustment shall be made to the Conversion Price in accordance with
the above provisions which shall become effective immediately after the date the underwriters agree to
underwrite the same or (if later) immediately after the Company fixes the said consideration but
retroactively to immediately after the record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Shares of warrants entitling them to
subscribe for or purchase Shares, any warrants which are not subscribed for or purchased by the
underwriters who have agreed to underwrite as referred to above or by the shareholders entitled thereto
(or persons to whom shareholders have transferred the right to purchase such warrants) who have
submitted applications for such warrants as referred to above are offered to and/or subscribed by others,
no further adjustment shall be made to the Conversion Price by reason of such offer and/or
subscription.
6.3.7

Issues of rights or warrants for equity-related securities to Shareholders:

Adjustment: If the Company shall grant, issue or offer to the holders of Shares rights or warrants
entitling them to subscribe for or purchase any securities convertible into or exchangeable for Shares:
(a)

at a consideration per Share receivable by the Company (determined as provided in Condition

6.3.16) which is fixed on or prior to the record date mentioned below and is less than the
Current Market Price per Share at such record date; or

(b)

at a consideration per Share receivable by the Company (determined as aforesaid) which is

fixed after the record date mentioned below and is less than the higher of the Conversion Price
in effect and the Current Market Price per Share on the date the Company fixes the said
consideration, then the Conversion Price in effect (in a case within (a) above) on the record
date for the determination of shareholders entitled to receive such rights or warrants or (in a
Page 104

case within (b) above) on the date the Company fixes the said consideration shall be adjusted
in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of
business in India (in a case within (a) above) on such record date or (in a case within (b)
above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights or warrants and
conversion or exchange of such convertible or exchangeable securities at the said
consideration being, in the case of rights, (aa) the number of Shares initially to be issued upon
conversion or exchange of the number of such convertible or exchangeable securities which
the underwriters have agreed to underwrite as referred to below or, as the case may be, (bb)
the number of Shares initially to be issued upon conversion or exchange of the number of such
convertible or exchangeable securities for which applications are received from shareholders
as referred to below save to the extent already adjusted for under (aa) and which, in the case of
warrants, where no applications by shareholders entitled to such warrants are required, shall
be based on the number of warrants issued. Where applications by shareholders entitled to
such warrants are required, the number of such Shares shall be calculated based upon (x) the
number of warrants which underwriters have agreed to underwrite as referred to below or, as
the case may be, (y) the number of warrants for which applications are received from
shareholders as referred to below save to the extent already adjusted for under (x).
v = the number of Shares which the aggregate consideration receivable by the Company
(determined as provided in Condition 6.3.16) would purchase at such Conversion Price in
effect or, as the case may be Current Market Price per Share specified in (a) or, as the case
may be, (b) above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective (a)
where no applications for such warrants are required from shareholders entitled to the same, upon their
issue and (b) where applications by shareholders entitled to the warrants are required as aforesaid and
in the case of convertible or exchangeable securities by shareholders entitled to the same pursuant to
such rights, immediately after the latest date for the submission of such applications or (if later)
immediately after the Company fixes the said consideration; but in all cases retroactively to
immediately after the record date mentioned above.
Rights or warrants not taken up by Shareholders: If, in connection with a grant, issue or offer to the
holders of Shares of rights or warrants entitling them to subscribe for or purchase securities convertible
into or exchangeable for Shares in the circumstances described in this Condition 6.3.7, any convertible
or exchangeable securities or warrants which are not subscribed for or purchased by the shareholders
entitled thereto are underwritten by others prior to the latest date for the submission of applications for
such convertible or exchangeable securities or warrants, an adjustment shall be made to the Conversion
Price in accordance with the above provisions which shall become effective immediately after the date
the underwriters agree to underwrite the same or (if later) immediately after the Company fixes the said
consideration but retroactively to immediately after the record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Shares or rights or warrants entitling them
to subscribe for or purchase securities convertible into or exchangeable for Shares, any convertible or
exchangeable securities or warrants which are not subscribed for or purchased by the underwriters who
have agreed to underwrite as referred to above or by the shareholders entitled thereto (or persons to
whom shareholders have transferred such rights or the right to purchase such warrants) who have
submitted applications for such convertible or exchangeable securities or warrants as referred to above
are offered to and/or subscribed by others, no further adjustment shall be made to the Conversion Price
Page 105

by reason of such offer and/or subscription.

6.3.8

Other distributions to Shareholders:

Adjustment: If the Company shall distribute to the holders of Shares of capital stock of the Company
(other than Shares), assets (excluding any Dividends), evidences of its indebtedness or rights or
warrants to subscribe for or purchase Shares or securities (excluding those rights and warrants referred
to in Conditions 6.3.5, 6.3.6 and 6.3.7), then the Conversion Price in effect on the record date for the
determination of shareholders entitled to receive such distribution shall be adjusted in accordance with
the following formula:
NCP = OCP x [CMP fmv] / CMP
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
CMP = the Current Market Price per Share on the record date for the determination of shareholders
entitled to receive such distribution.
fmv = the fair market value (as determined by an Independent Financial Institution or, if pursuant to
applicable law of India such determination is to be made by application to a court of competent
jurisdiction, as determined by such court or by an appraiser appointed by such court) of the portion of
the share capital shares of capital stock, assets, rights or warrants so distributed applicable to one Share
less any consideration payable for the same by the relevant Shareholder.
Effective date of adjustment: Such adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive such distribution. Provided that (a) in the case
of such a distribution which must, under applicable law of India, be submitted for approval to a general
meeting of shareholders or be approved by a meeting of the Board of Directors of the Company before
such distribution may legally be made and is so approved after the record date fixed for the
determination of shareholders entitled to receive such distribution, such adjustment shall, immediately
upon such approval being given by such meeting, become effective retroactively to immediately after
such record date and (b) if the fair market value of the shares of capital stock, assets, rights or warrants
so distributed cannot be determined until after the record date fixed for the determination of
shareholders entitled to receive such distribution, such adjustment shall, immediately upon such fair
market value being determined, become effective retroactively to immediately after such record date.

6.3.9

Issue of convertible or exchangeable securities other than to Shareholders or on exercise of warrants:

Adjustment: If the Company shall issue any securities convertible into or exchangeable for Shares
(other than the Bonds, or in any of the circumstances described in Condition 6.3.7 and Condition
6.3.11) or grant such rights in respect of any existing securities and the consideration per Share
receivable by the Company (determined as provided in Condition 6.3.16) shall be less than the Current
Market Price per Share on the date in India on which the Company fixes the said consideration (or, if
the issue of such securities is subject to approval by a general meeting of shareholders, on the date on
which the Board of Directors of the Company fixes the consideration to be recommended at such
meeting), then the Conversion Price in effect immediately prior to the date of issue of such convertible
or exchangeable securities shall be adjusted in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of business in
India on the day immediately prior to the date of such issue.
Page 106

n = the number of Shares to be issued upon conversion or exchange of such convertible or

exchangeable securities at the initial conversion or exchange price or rate.
v = the number of Shares which the aggregate consideration receivable by the Company would
purchase at such Current Market Price per Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in India
corresponding to the calendar day at the place of issue on which such convertible or exchangeable
securities are issued.
6.3.10

Other issues of Shares:

Adjustment: If the Company shall issue any Shares (other than Shares issued upon conversion or
exchange of any convertible or exchangeable securities (including the Bonds) issued by the Company
or upon exercise of any rights or warrants granted, offered or issued by the Company or in any of the
circumstances described in any preceding provision of this Condition 6.3), for a consideration per
Share receivable by the Company (determined as provided in Condition 6.3.16) less the Current Market
Price per Share on the date in India on which the Company fixes the said consideration (or, if the issue
of such Shares is subject to approval by a general meeting of shareholders, on the date on which the
Board of Directors of the Company fixes the consideration to be recommended at such meeting), then
the Conversion Price in effect immediately prior to the issue of such additional Shares shall be adjusted
in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of business in
India on the day immediately prior to the date of issue of such additional Shares.
n = the number of additional Shares issued as aforesaid.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as
provided in Condition 6.3.16) would purchase at such Current Market Price per Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in India of
the issue of such additional Shares.

6.3.11

Issue of equity-related securities:

Adjustment: If the Company shall grant, issue or offer options, warrants or rights (excluding those
rights and warrants referred to in Conditions 6.3.5, 6.3.6, 6.3.7 and 6.3.8) to subscribe for or purchase
Shares or securities convertible into or exchangeable for Shares and the consideration per Share
receivable by the Company (determined as provided in Condition 6.3.15) shall be less than the Current
Market Price per Share on the date in India on which the Company fixes the said consideration (or, if
the offer, grant or issue of such rights, options or warrants is subject to approval by a general meeting
of shareholders, on the date on which the Board of Directors of the Company fixes the consideration to
be recommended at such meeting), then the Conversion Price in effect immediately prior to the date of
the offer, grant or issue of such rights, options or warrants shall be adjusted in accordance with the
following formula:
NCP = OCP x [N + v] / [N + n]
where:

Page 107

NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of business in
India on the day immediately prior to the date of such issue.
n = the number of Shares to be issued on exercise of such rights or warrants and (if applicable)
conversion or exchange of such convertible or exchangeable securities at the said consideration.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as
provided in Condition 6.3.16) would purchase at such Current Market Price per Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in India
corresponding to the calendar day at the place of issue on which such rights or warrants are issued.

6.3.12

Tender or exchange offer:

Adjustment: In case a tender or exchange offer made by the Company or any Subsidiary (as defined
below) for all or any portion of the Shares shall expire and such tender or exchange offer shall involve
the payment by the Company or such Subsidiary of consideration per Share having a Fair Market Value
at the last time (the "Expiration Date") tenders or exchanges could have been made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds the Current Market Price per
Share, as of the Expiration Date, the Conversion Price shall be adjusted in accordance with the
following formula:
NCP = OCP x [N x CMP] / [fmv + [(N - n) x CMP]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (including any tendered or exchanged Shares) on the Expiration
Date.
CMP = Current Market Price per Share as of the Expiration Date.
fmv = the Fair Market Value of the aggregate consideration payable to the holders of Shares based on
the acceptance (up to a maximum specified in the terms of the tender or exchange offer) of all Shares
validly tendered or exchanged and not withdrawn as of the Expiration Date (the Shares deemed so
accepted up to any such maximum, being referred to as the "Purchased Shares").
n = the number of Purchased Shares.
Effective date of adjustment: Such adjustment shall become retroactively effective immediately prior to
the opening of business on the day following the Expiration Date. Tender or exchange offer not
completed: If the Company is obligated to purchase Shares pursuant to any such tender or exchange
offer, but the Company is permanently prevented by applicable law from effecting any such purchase
or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which
would then be in effect if such tender or exchange offer had not been made.

6.3.13

Analogous events and modifications:

If (a) the rights of conversion or exchange, purchase or subscription attaching to any options, rights or
warrants to subscribe for or purchase Shares or any securities convertible into or exchangeable for, or
which carry rights to subscribe for or purchase Shares are modified (other than pursuant to and as
provided in the terms and conditions of such options, rights, warrants or securities as originally issued)
or (b) the Company determines that any other event or circumstance has occurred which has or would
Page 108

have an effect on the position of the Bondholders as a class compared with the position of the holders
of all the securities (and options and rights relating thereto) of the Company, taken as a class which is
analogous to any of the events referred to in Conditions 6.3.1 to 6.3.12, then, in any such case, the
Company shall promptly notify the Trustee in writing thereof and the Company shall consult with an
Independent Financial Institution as to what adjustment, if any, should be made to the Conversion Price
to preserve the value of the Conversion Right of Bondholders and will make any such adjustment. All
costs, charges, liabilities and expenses incurred in connection with the appointment, retention,
consultation and remuneration of any Independent Financial Institution appointed under the Conditions
shall be borne by the Company.
6.3.14

Simultaneous issues of different classes of Shares:

In the event of simultaneous issues of two or more classes of share capital comprising Shares or rights
or warrants in respect of, or securities convertible into or exchangeable for, two or more classes of
share capital comprising Shares (for the avoidance of doubt excluding any conversion of the Bonds),
then, for the purposes of this Condition, the formula
NCP = OCP x [N + v] / [N + n]
shall be restated as
NCP = OCP x [N + v1 + v2 + v3] / [N + n1 + n2 + n3]
where v1 and n1 shall have the same meanings as "v" and "n" but by reference to one class of Shares,
v2 and n2 shall have the same meanings as "v" and "n" but by reference to a second class of Shares, v3
and n3 shall have the same meanings as "v" and "n" but by reference to a third class of Shares and so
on.

6.3.15

Certain definitions:
For the purposes of these Conditions:
the "Closing Price" of the Shares for each Trading Day shall be the last reported transaction price of the
Shares on the BSE for such day or, if no transaction takes place on such day, the average of the closing
bid and offered prices of Shares for such day as furnished by a leading independent securities firm
licensed to trade on the BSE selected and appointed from time to time by the Company at its own cost.
"Current Market Price" per Share on any date means the average of the daily Closing Prices (as defined
below) of the relevant Shares for the five consecutive Trading Days (as defined below) ending on and
including the Trading Day immediately preceding such date. If the Company has more than one class
of share capital comprising Shares, then the relevant Current Market Price for Shares shall be the price
for that class of Shares the issue of which (or of rights or warrants in respect of, or securities
convertible into or exchangeable for, that class of Shares) gives rise to the adjustment in question.
If during the said five Trading Days or any period thereafter up to but excluding the date as of which
the adjustment of the Conversion Price in question shall be effected, any event (other than the event
which requires the adjustment in question) shall occur which gives rise to a separate adjustment to the
Conversion Price under the provisions of these Conditions, then the Current Market Price as
determined above shall be adjusted in such manner and to such extent as an Independent Financial
Institution shall in its absolute discretion deem appropriate and fair to compensate for the effect thereof.
"Trading Day" means a day when the BSE is open for business, but does not include a day when (a) no
such last transaction price or closing bid and offered prices is/are reported and (b) (if the Shares are not
listed or admitted to trading on such exchange) no such closing bid and offered prices are furnished as
aforesaid.
If the Shares are no longer listed but are still listed on the NSE, references in the above definitions to
the BSE shall be deemed to be the NSE, and if the Shares are no longer listed on the BSE or the NSE
Page 109

and have been listed on an Alternative Stock Exchange as required by Condition 6.4.1, references in the
above definitions to the BSE will be taken as references to the Alternative Stock Exchange.
6.3.16

Consideration receivable by the Company:

For the purposes of any calculation of the consideration receivable by the Company pursuant to
Conditions 6.3.5, 6.3.6, 6.3.7, 6.3.9, 6.3.10 and 6.3.11 above, the following provisions shall be
applicable:
(a)

in the case of the issue of Shares for cash, the consideration shall be the amount of such cash;

(b)

in the case of the issue of Shares for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as determined by an
Independent Financial Institution or, if pursuant to applicable law of India, such determination
is to be made by application to a court of competent jurisdiction, as determined by such court
or an appraiser appointed by such court, irrespective of the accounting treatment thereof;

(c)

in the case of the issue (whether initially or upon the exercise of rights or warrants) of
securities convertible into or exchangeable for Shares, the aggregate consideration receivable
by the Company shall be deemed to be the consideration received by the Company for such
securities and (if applicable) rights or warrants plus the additional consideration (if any) to be
received by the Company upon (and assuming) the conversion or exchange of such securities
at the initial conversion or exchange price or rate and (if applicable) the exercise of such rights
or warrants at the initial subscription or purchase price (the consideration in each case to be
determined in the same manner as provided in this Condition 6.3.16) and the consideration per
Share receivable by the Company shall be such aggregate consideration divided by the
number of Shares to be issued upon (and assuming) such conversion or exchange at the initial
conversion or exchange price or rate and (if applicable) the exercise of such rights or warrants
at the initial subscription or purchase price;

(d)

in the case of the issue of rights or warrants to subscribe for or purchase Shares, the aggregate
consideration receivable by the Company shall be deemed to be the consideration received by
the Company for any such rights or warrants plus the additional consideration to be received
by the Company upon (and assuming) the exercise of such rights or warrants at the initial
subscription or purchase price (the consideration in each case to be determined in the same
manner as provided in this Condition 6.3.16) and the consideration per Share receivable by the
Company shall be such aggregate consideration divided by the number of Shares to be issued
upon (and assuming) the exercise of such rights or warrants at the initial subscription or
purchase price;

(e)

if any of the consideration referred to in any of the preceding paragraphs of this Condition
6.3.16 is receivable in a currency other than Rupees, such consideration shall (in any case
where there is a fixed rate of exchange between the Rupees and the relevant currency for the
purposes of the issue of the Shares, the conversion or exchange of such securities or the
exercise of such rights or warrants) be translated into Rupees for the purposes of this
Condition 6.3.16 at such fixed rate of exchange and shall (in all other cases) be translated into
Rupees at the mean of the exchange rate quotations (being quotations for the cross rate
through U.S. dollars if no direct rate is quoted) by a leading bank in India for buying and
selling spot units of the relevant currency by telegraphic transfer against Rupees on the date as
of which the said consideration is required to be calculated as aforesaid;

(f)

in the case of the issue of Shares (including, without limitation, to employees under any
employee bonus or profit sharing arrangements) credited as fully paid out of retained earnings
or capitalisation of reserves at their par value, the aggregate consideration receivable by the
Company shall be deemed to be zero (and accordingly the number of Shares which such
aggregate consideration receivable by the Company could purchase at the relevant Current
Market Price per Share shall also be deemed to be zero); and

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(g)

6.3.17

in making any such determination, no deduction shall be made for any commissions or any
expenses paid or incurred by the Company.

Cumulative adjustments:
If, at the time of computing an adjustment (the "later adjustment") of the Conversion Price pursuant to
any of Conditions 6.3.2, 6.3.5, 6.3.6, 6.3.9, 6.3.10 and 6.3.11 above, the Conversion Price already
incorporates an adjustment made (or taken or to be taken into account pursuant to the proviso to
Condition 6.3.18) to reflect an issue of Shares or of securities convertible into or exchangeable for
Shares or of rights or warrants to subscribe for or purchase Shares or securities, to the extent that the
number of such Shares or securities taken into account for the purposes of calculating such adjustment
exceeds the number of such Shares in issue at the time relevant for ascertaining the number of
outstanding Shares for the purposes of computing the later adjustment, such excess Shares shall be
deemed to be outstanding for the purposes of making such computation.

6.3.18

Minor adjustments:
No adjustment of the Conversion Price shall be required if the adjustment would be less than 1 per
cent. of the then current Conversion Price; provided that any adjustment which by reason of this
Condition 6.3.18 is not required to be made shall be carried forward and taken into account (as if such
adjustment had been made at the time when it would have been made but for the provisions of this
Condition 6.3.18) in any subsequent adjustment. All calculations under this Condition 6.3 shall be
made to the nearest Re.1.00 with Re.0.5 being rounded up to the next Re.1.00. Except as otherwise set
out in Condition 6.3.19, the Conversion Price may be reduced at any time by the Company.

6.3.19

Minimum Conversion Price:

Notwithstanding the provisions of this Condition, the Company covenants that:

6.3.20

(a)

the Conversion Price shall not be reduced below the par value of the Shares (Rs.10 at the date
hereof) as a result of any adjustment made hereunder unless under applicable law then in
effect Bonds may be converted at such reduced Conversion Price into legally issued, fullypaid and non-assessable Shares; and

(b)

it will not take any corporate or other action which might result in the Conversion Price being
reduced pursuant to Conditions 6.3.1 to 6.3.14 below the level permitted by (i) applicable
Indian laws and regulations from time to time (if any) or (ii) applicable Indian regulatory
authorities.

Reference to "fixed":
Any references herein to the date on which a consideration is "fixed" shall, where the consideration is
originally expressed by reference to a formula which cannot be expressed as an actual cash amount
until a later date, be construed as a reference to the first day on which such actual cash amount can be
ascertained.

6.3.21

Downward adjustment:
No adjustment involving an increase in the Conversion Price will be made, except in the case of a
consolidation of the Shares, as referred to in Condition 6.3.1.

6.3.22

Warrants
(a)

(b)

No adjustment shall be made to the Conversion Price in respect of the issue of Shares
pursuant to the exercise of 1070000 warrants outstanding on the Issue Date entitling the
holders thereof to subscribe for 1070000 Shares.
No adjustment shall be made to the Conversion Price in respect of the allotment of
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warrants to strategic investors to be made after the issue date subject to approval of
shareholders of the Company in general meeting up to 500,000 warrants and issue of
Shares pursuant to conversion of aforesaid warrants.
6.3.23

Employee share scheme:

No adjustment shall be made to the Conversion Price where Shares or other securities (including rights,
warrants or options) are issued, offered, exercised, allotted, appropriated, modified or granted to or for
the benefit of employees or former employees (including directors holding or formerly holding
executive office) of the Company or any associated company of the Company or other eligible persons
(as set out in the relevant employee share scheme or plan) pursuant to any employee share scheme or
plan (including any dividend reinvestment plan) adopted by the Company provided that, at any time,
such issues do not amount to, relate to, or entitle such persons to receive, Shares in excess of 5 per cent.
of the number of issued Shares at the time of issue, provided that at no time shall the issue of shares to
the employees exceed 5 per cent of the total issued share capital of the Company.

6.3.24

Trustee and Agents not obliged to monitor:

The Trustee and the Agents shall not be under any duty to monitor whether any event or circumstance
has happened or exists under this Condition 6.3 and may assume until they have received notice in
writing from the Company to the contrary that no such event has occurred and neither the Trustee nor
the Agents will be responsible to Bondholders for any loss arising from any failure by it to do so.

6.3.25

Approval of Trustee:
The Company shall send the Trustee a certificate setting out particulars relating to adjustment of the
Conversion Price. The Company shall also cause a notice containing the same information to be sent to
Bondholders, in accordance with Condition 17 (with a copy to the Trustee).

6.3.26

Calculation and Independent Financial Institution:

All calculations under these Conditions, the Trust Deed and the Agency Agreement shall be performed
by the Company, Auditors or any other person so nominated or authorised by the Company. Neither
the Trustee nor the Agents shall be responsible for performing any calculation under the conditions or
liable in any respect for the accuracy or inaccuracy in any mathematical calculation or formula under
these Conditions, the Agency Agreement or the Trust Deed, whether by the Company, the Auditors, an
Independent Financial Institution or any other person so nominated or authorised by the Company for
the purposes of these Conditions, the Agency Agreement or the Trust Deed.
If the Company fails to select an Independent Financial Institution when required in this Condition 6.3,
the Trustee may (at its absolute discretion) select such an Independent Financial Institution at the
expense of the Company.
For the purposes of these Conditions, Auditors means the auditors for the time being of the
Company or, if they are unable or unwilling to carry out any action requested of them under these
Conditions or the Trust Deed, such other firm of chartered accountants as may be selected by the
Company and appointed by the Company at its own cost and approved by the Trustee.

6.3.27

Expert Certificate

If any Bondholder shall have any doubts as to the appropriate adjustment to the Conversion Price, the
Company shall at its expense and at the request of the Trustee, acting on the instructions of the
Bondholders holding at least 25 percent of the aggregate outstanding principal amount of the bonds,
and as soon as practicable, provide the Trustee with a certificate signed by a Director or Authorised
Officer of the Company setting out the method by which the adjustment is calculated and a certificate

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of an Independent Financial Institution certifying the appropriate adjustment to the Conversion Price
and such a certificate shall be conclusive and binding on all concerned.
6.3.28

Trustee and Agents Not Liable

The Trustee and the Agents shall not be responsible or liable to the Bondholders or any person for any
failure of the Company:
(a) to make any cash payment or to issue, transfer or deliver any shares or other securities or
property upon the surrender of any Bond for the purpose of conversion;
(b) to comply with any of the Companys covenants set out in this Condition 6.

6.3.29

Conversion Price Reset

The Conversion Price, if applicable, will be reset on September 26, 2007 and thereafter, the first,
second and third anniversaries of the Bonds being 26 March 2008, 26 March 2009 and 26 March 2010
respectively (each a Reset Date). The applicable Conversion Price may be reset (downwards only)
(the Reset Conversion Price) to the current market price of the Shares on the relevant Reset Date if
the volume weighted average share price of the 21 trading days prior to the relevant Reset Date is lower
than the Conversion Price then in effect. The Reset Conversion Price cannot be lower than Rs 350.00
or the applicable reset floor price as prescribed by SEBI (Securities and Exchange Board of India)
from time to time.
Effective date of adjustment: Any such adjustments shall become effective as of the relevant Reset
Date and shall be notified to the Bondholders (with a copy to the Trustee) as soon as
practicable thereafter. The Trustee and the Agents shall not be responsible for monitoring whether any
reset of the Conversion Price may occur, and shall not be liable for (i) any failure to so monitor, or (ii)
any reset or lack of reset of the Conversion Price.
For the purpose of this Condition 6.3.29, volume weighted average price means, in respect of any
relevant period, the volume weighted average price of the Shares on the BSE as obtained or
derived from the relevant Bloomberg page or if no transaction in respect of the Shares takes
place during such relevant period, the average of the closing bid and offer prices on the days during
such period in respect of the Shares on the BSE as obtained or derived from the relevant Bloomberg
page.

6.4

Undertakings

6.4.1

The Company has undertaken in the Trust Deed, inter alia, that so long as any Bond remains
outstanding, save with the approval of an Extraordinary Resolution of the Bondholders or with the
approval of the Trustee where, in the opinion of the Trustee, it is not materially prejudicial to the
interests of Bondholders to give such approval:
(i)

it will use its best endeavours (a) to obtain and maintain a listing of the Bonds on Singapore
Exchange Securities Trading Limited (the SGX-ST), (b) to maintain a listing for all the
issued Shares on the BSE and the NSE together with the BSE, the "Indian Stock Exchanges"),
(c) to obtain and maintain a listing for all the Shares issued on the exercise of the Conversion
Rights attaching to the Bonds on the Indian Stock Exchanges, and (d) if the Company is
unable to obtain or maintain such listings, to obtain and maintain a listing for all the Bonds or
the Shares issued on the exercise of the Conversion Rights, as the case may be on such other
stock exchange (in the case of the Shares, an "Alternative Stock Exchange") as the Company
may from time to time (with the prior written consent of the Trustee) determine and will
forthwith give notice to the Bondholders and the Trustee in accordance with Condition 17
below of the listing or delisting of the Shares or the Bonds (as a class) by any of such stock
exchanges;

(ii)

it will pay the expenses of the issue of, and all expenses of obtaining listing for, Shares arising

Page 113

on conversion of the Bonds;

6.5

(iii)

it will not make any reduction of its ordinary share capital or any uncalled liability in respect
thereof or of any share premium account or capital redemption reserve fund (except, in each
case, as permitted by law); and

(iv)

it will not take any corporate or other action pursuant to Conditions 6.3.1 to 6.3.14 that would
cause the Conversion Price to be adjusted to a price which would render conversion of the
Bonds into Shares at such adjusted Conversion Price to be in contravention of applicable law
or subject to approval from the Reserve Bank of India ("RBI"), the Ministry of Finance,
Government of India and/or any other governmental/regulatory authority in India. The
Company also covenants that prior to taking any action which would cause an adjustment to
the Conversion Price, the Company shall provide the Trustee with an opinion of a legal
counsel in India of international repute, approved by the Trustee, stating that the Conversion
Price as proposed to be adjusted pursuant to such action, is in conformity with applicable law
and that the conversion of the Bonds to the Shares at such adjusted Conversion Price would
not require approval of the RBI, the Ministry of Finance, India and/or any other
governmental/regulatory authority in India (the "Price Adjustment Opinion").

In the Trust Deed, the Company has undertaken with the Trustee that so long as any Bonds remain
outstanding:
(i)

(ii)

6.6

it will reserve, free from any other pre-emptive or other similar rights, out of its authorised but
unissued ordinary share capital the full number of Shares liable to be issued on conversion of
the Bonds without breaching any foreign ownership restrictions in India applicable to the
Shares and will ensure that all such Shares will be duly and validly issued as fully-paid; and
it will not make any offer, issue or distribute or take any action the effect of which would be to
reduce the Conversion Price below the par value of the Shares of the Company, provided
always that the Company shall not be prohibited from purchasing its Shares to the extent
permitted by law.

The Company has also given certain other undertakings in the Trust Deed for the protection of the
Conversion Rights.
The Shares issued upon conversion of the Bonds are expected to be listed on the NSE and the BSE and
will be tradable on such stock exchange once listed thereon, which is expected to occur within 40 days
after the relevant Conversion Date. The Company will make due application in respect of such listing
within five days following the relevant Conversion Date. If there is any delay in obtaining the approval
of the NSE and the BSE to list such Shares, they shall not be tradeable on the BSE and the NSE until
the listing occurs.

6.7

Notice of Change in Conversion Price

The Company shall give notice to the Bondholders in accordance with Condition 17 and, for so long as
the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the Company shall also
give notice to the SGX-ST of any change in the Conversion Price. Any such notice relating to a change
in the Conversion Price shall set forth the event giving rise to the adjustment, the Conversion Price
prior to such adjustment, the adjusted Conversion Price and the effective date of such adjustment.

7.

Payments

7.1

Principal and Premium

Payment of principal, premium and interest (if any) payable on the Bonds will be made by transfer to
the registered account of the Bondholder or by U.S. dollar cheque drawn on a bank in New York mailed
to the registered address of the Bondholder if it does not have a registered account, in each case, in
accordance with provisions of the Agency Agreement. Such payment will only be made after surrender
Page 114

of the relevant Certificate at the specified office of an the relevant Agent. If an amount which is due on
the Bonds is not paid in full, the Registrar will annotate the Register with a record of the amount (if
any) in fact paid.
7.2

Registered Accounts
For the purposes of this Condition, a Bondholder's registered account means the U.S. dollar account
maintained by or on behalf of it with a bank in New York, details of which appear on the Register at the
close of business on the second business day before the due date for payment, and a Bondholder's
registered address means its address appearing on the Register at that time.

7.3

Applicable Laws
All payments to be made to Bondholders by or on behalf of the Company shall be made in all cases
subject to any applicable laws and regulations in New York City and, where appropriate, the place of
the specified office of the relevant Agent to whom a Certificate is surrendered, but without prejudice to
the provisions of Condition 9. No commissions or expenses shall be charged by the Company or any
Agent to the Bondholders in respect of such payments.

7.4

Payment Initiation
Where payment is to be made by transfer to a registered account, payment instructions (for value on the
due date or, if that is not a business day, for value on the first following day which is a business day)
will be initiated and, where payment is to be made by cheque, the cheque will be mailed (at the risk
and, if mailed at the request of the holder otherwise than by ordinary mail, expense of the holder) on
the due date for payment (or, if it is not a business day, the immediately following business day) or, in
the case of a payment of principal, if later, on the business day on which the relevant Certificate is
surrendered at the specified office of an Agent.

7.5

Delay in Payment
Bondholders will not be entitled to any interest or other payment for any delay after the due date in
receiving the amount due if the due date is not a business day, if the Bondholder is late in surrendering
its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after
the due date for payment.

8.

Redemption, Purchase and Cancellation

8.1

Maturity
Unless previously redeemed, converted or purchased and cancelled as provided herein, the Company
will redeem each Bond at 143.775 per cent. of its principal amount on 27 March 2012 (the Maturity
Date). The Company may not redeem the Bonds at its option prior to that date except as provided in
Condition 8.2 and Condition 8.3 below (but without prejudice to Condition 10).

8.2

Redemption for Taxation Reasons

8.2.1

At any time the Company may, having given not less than 30 nor more than 60 days' notice to the
Bondholders (which notice shall be irrevocable) redeem all, and not some only, of the Bonds at their
Accreted Principal Amount plus any accrued and unpaid interest on the date fixed for redemption ("Tax
Redemption Date"), if
(i)

the Company satisfies the Trustee immediately prior to the giving of such notice that the
Company has or will become obliged to pay additional amounts as referred to in Condition 9
as a result of any change in, or amendment to, the laws or regulations of India or any political
subdivision or any authority thereof or therein having power to tax, or any change in the
general application or official interpretation of such laws or regulations, which change or
Page 115

amendment becomes effective on or after 26 March 2007 (the Issue Date); and
(ii) such obligation cannot be avoided by the Company taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obliged to pay such additional amounts were a
payment in respect of the Bonds then due. Prior to the publication of any notice of redemption
pursuant to this paragraph, the Company shall deliver to the Trustee (a) a certificate signed by
two directors of the Company stating that the obligation referred to in (i) above cannot be
avoided by the Company (taking reasonable measures available to it) and (b) an opinion of
independent legal or tax advisors of recognised international standing to the effect that such
change or amendment has occurred (irrespective of whether such amendment or change is then
effective) and the Trustee shall be entitled to accept such certificate and opinion as sufficient
evidence thereof in which event it shall be conclusive and binding on the Bondholders.
8.2.2

8.2.3

Upon the expiry of any such notice, the Company will be bound to redeem the Bonds at their
Accreted Principal Amount plus any accrued and unpaid interest on the Tax Redemption Date.

If the Company gives a notice of redemption pursuant to this Condition 8.3, each Bondholder will have
the right to elect that his Bond(s) shall not be redeemed and that the provisions of Condition 9 shall not
apply in respect of any payment to be made in respect of such Bond(s) which falls due after the
relevant Tax Redemption Date whereupon no additional amounts shall be payable in respect thereof
pursuant to Condition 9 and payment of all amounts shall be made subject to the deduction or
withholding of the taxation required to be withheld or deducted by the government of India or any
authority thereof or therein having power to tax. For the avoidance of doubt, any additional amounts
which had been payable in respect of the Bonds as a result of the laws or regulations of the government
of India or any authority thereof or therein having power to tax prior to the Issue Date will continue to
be payable to such Bondholders. To exercise such right, the holder of the relevant Bond must complete,
sign and deposit at the specified office of any Principal Paying and Conversion Agent a duly completed
and signed notice of election (the "Bondholder's Tax Election Notice"), in the form for the time being
current, obtainable from the specified office of any Principal Paying and Conversion Agent together
with the Certificate evidencing the Bonds on or before the day falling 10 days prior to the Tax
Redemption Date.
Under prevailing RBI regulations the Company is required (and at the time of redemption may
continue to be required) to obtain the prior approval of the RBI before providing notice for or effecting
such a redemption prior to the Maturity Date, such approval may or may not be forthcoming.

8.3

Redemption for Relevant Event

8.3.1

Following the occurrence of a Relevant Event (as defined below) and to the extent permitted by
applicable law, the holder of each Bond will have the right at such holder's option to require the
Company to redeem in whole but not in part such holder's Bonds on the Relevant Event Put Date at
their Accreted Principal Amount plus any accrued and unpaid interest. To exercise such right, the
holder of the relevant Bond must complete, sign and deposit at the specified office of any Principal
Paying and Conversion Agent a duly completed and signed notice of redemption, in the form for the
time being current, obtainable from the specified office of any Principal Paying and Conversion Agent
("Relevant Event Put Exercise Notice") together with the Certificate evidencing the Bonds to be
redeemed by not later than 30 days following a Relevant Event, or, if later, 30 days following the date
upon which notice thereof is given to Bondholders by the Company in accordance with Condition 17.
The "Relevant Event Put Date" shall be the fourteenth calendar day after the expiry of such period of
30 days as referred to above. If such date is not a business day then the next following business day
shall be treated as the Relevant Event Put Date.

8.3.2

A Relevant Event Put Exercise Notice, once delivered, shall be irrevocable and the Company shall
redeem the Bonds which form the subject of the Relevant Event Put Exercise Notices delivered as
aforesaid on the Relevant Event Put Date.

8.3.3

Neither the Trustee nor the Agents shall be responsible or liable for monitoring whether a Relevant
Page 116

Event has occurred or is continuing and shall be entitled to assume that no such event has occurred
until the Trustee has received notice in writing to the contrary from the Company and shall not be liable
or responsible to the Bondholders or any person for any failure to monitor so.
8.3.4

No later than seven days after becoming aware of a Relevant Event, the Company shall procure that
notice regarding the Relevant Event shall be delivered to the Trustee and the Bondholders (in
accordance with Condition 17) stating: (i) the Relevant Event Put Date; (ii) the date of such Relevant
Event and, briefly, the events causing such Relevant Event; (iii) the date by which the Relevant Event
Put Exercise Notice (as defined above) must be given; (iv) the redemption amount and the method by
which such amount will be paid; (v) the names and addresses of all Principal Paying and Conversion
Agents; (vi) briefly, the Conversion Right and the then current Conversion Price; (vii) the procedures
that Bondholders must follow and the requirements that Bondholders must satisfy in order to exercise
the Relevant Event Put Right or Conversion Right; and (viii) that a Relevant Event Put Exercise
Notice, once validly given, may not be withdrawn.

8.3.5

For the purposes of this Condition 8:

(i)

a "person" includes any individual, company, corporation, firm, partnership, joint venture,
undertaking, association, organisation, trust, state or agency of a state (in each case whether or
not being a separate legal entity) but does not include the Company's Board of Directors or
any other governing board and does not include the Company's wholly-owned direct or
indirect subsidiaries;

(ii)

"Relevant Event" occurs when there has been a Change of Control in the Company;

(iii)

"Change of Control" means:

(a)

when any Person or Persons acting together acquires Control of the Company if such
Person or Persons does not or do not have, and would not be deemed to have, Control
of the Company on the Issue Date;

(b)

the Company consolidates with or mergers into or sells or transfers all or

substantially all of the Companys assets to any other Person, unless the
consolidation, merger, sale or transfer will not result in the other Person or Persons
acquiring Control over the Company or the successors entity; or

(c)

one or more other Persons acquires the legal or beneficial ownership of more than
50 per cent. of the issued share capital of the Company.

The term "Control" means the acquisition or control of more than 50 per cent of the voting
rights of the issued share capital of the Company or the right to appoint and / or remove all or
the majority of the members of the Companys Board of Directors or other governing body,
whether obtained directly or indirectly, and whether obtained by ownership of share capital,
the possession of voting rights, contract or otherwise;
(iv)

Accreted Principal Amount of each Bond will on the Issue Date equal US$10,000 and will
thereafter accrete at the rate of 8.25 per cent per annum from the Issue Date, compounded
semi-annually, calculated on the basis of the number of days elapsed and a 360-day year
(Accreted Principal Amount) and shall at any time, be calculated in accordance with the
formula set forth below. In the event that the Bonds are redeemed prior to the expiry of one
year from the Issue Date, the Company shall calculate the Accreted Principal Amount, as the
case may be, (on the basis of the number of days elapsed and a 360-day year) and notify the
Trustee and the Bondholders in accordance with Condition 17 (with a copy to the Trustee and
the Principal Paying and Conversion Agent).
Accreted Principal Amount = Previous Redemption Amount x [(1+R/2)d/p]- AI

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Previous Redemption Amount = Accreted Principal Amount for each U.S.$10,000 principal
amount on the Semi-Annual Date immediately preceding the date fixed for redemption as set
out below.
r = 8.25 per cent. expressed as a fraction.
d = number of days from and including the immediately preceding Semi-Annual Date (or if
the Bonds are to be redeemed on March 27, 2012, from and including the Closing Date) to,
but excluding, the date fixed for redemption, calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month, the number
of days elapsed.
p = 180.
AI = accrued and unpaid interest on the principal amount of Bonds from and including the
immediately preceding Semi-Annual Date to but excluding the date fixed for redemption.
The Trustee and the Agents shall not be responsible or liable with respect to any calculations
in relation to the Accreted Principal Amount of the accuracy or inaccuracy thereof. Upon
determination of the Accreted Principal Amount, the Company shall promptly notify the
Bondholders (with a copy to the Trustee and the Principal Paying and Conversion Agent).

8.4

Delisting Put Right

8.4.1

In the event the Shares cease to be listed or admitted to trading on any of the Indian Exchanges (a
"Delisting"), each Bondholder shall have the right (the "Delisting Put Right"), at such Bondholder's
option, to require the Company to redeem all (but not less than all) of such Bondholder's Bonds on the
twentieth business day after notice has been given to Bondholders regarding the Delisting referred to
under Condition 8.4.2 below or, if such notice is not given, the twentieth business day after the
Delisting (the "Delisting Put Date") at their Accreted Principal Amount plus any accrued and unpaid
interest (the "Delisting Put Price").

8.4.2

Promptly after becoming aware of a Delisting, the Company shall procure that notice regarding the
Delisting Put Right shall be given to the Trustee and the Bondholders (in accordance with Condition
17) stating:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

the Delisting Put Date;

the date of such Delisting and, briefly, the events causing such Delisting;
the date by which the Purchase Notice (as defined below) must be given;
the Delisting Put Price and the method by which such amount will be paid;
the names and addresses of all Principal Paying and Conversion Agents;
the Conversion Right and the then current Conversion Price;
the procedures that Bondholders must follow and the requirements that Bondholders must
satisfy in order to exercise the Delisting Put Right or Conversion Right; and
that a Purchase Notice, once validly given, may not be withdrawn.

8.4.3

To exercise its rights to require the Company to purchase its Bonds, the Bondholder must deliver a
written irrevocable notice of the exercise of such right (a "Purchase Notice") together with the
Certificate evidencing the Bonds to be redeemed, in the then current form obtainable from the specified
office of any Agent during business hours, to any Principal Paying and Conversion Agent on any
business day prior to the close of business at the location of such Principal Paying and Conversion
Agent on such day and which day is not less than 10 business days prior to the Delisting Put Date.

8.4.4

A Purchase Notice, once delivered, shall be irrevocable and the Company shall redeem the Bonds
which form the subject of the Delisting Notices delivered as aforesaid on the Delisting Put Date.

8.4.5

Neither Trustee nor the Agents shall be responsible or liable for monitoring whether a Delisting has
Page 118

occurred or is continuing and shall be entitled to assume that no such event has occurred until the
Trustee has received notice in writing to the contrary from the Company and shall not be liable or
responsible to the Bondholders or any person for any failure to monitor so.
RBI regulations at the time of redemption may require the Company to obtain the prior approval of the
RBI before providing notice for or effecting such a redemption prior to the Maturity Date, such
approval may or may not be forthcoming.
8.5

Redemption Following Exercise of a Put Option

Upon the exercise of any put option specified in Condition 8.4 or 8.5, payment of the applicable
redemption amount shall be conditional upon (i) the Company obtaining all approvals required by law
and (ii) delivery of the Bondholder's Certificate (together with any necessary endorsements) to any
Principal Paying and Conversion Agent on any business day together with the delivery of any other
document(s) required by these Conditions, and will be made promptly following the later of the date set
for redemption and the time of delivery of such Certificate.

8.6

Redemption of balance portion of the Bonds

If at any time the aggregate principal amount of the Bonds outstanding is less than 10 per cent. of the
aggregate principal amount originally issued (including any Bonds issued pursuant to Condition 16),
the Company shall have the option to redeem such outstanding Bonds in whole but not in part at their
Accreted Principal Amount plus any accrued and unpaid interest at the date fixed for such redemption.
The Company will give at least 30 days but not more than 60 days prior notice to the holders and the
Trustee of such redemption.

8.7

Purchases
The Company or any of its Subsidiaries may, if permitted under the laws of India, at any time and from
time to time purchase Bonds at any price in the open market or otherwise (including without limitation
by private treaty).
The Company is required to submit to the Registrar for cancellation any Bonds so purchased. If
purchases are made by tender, the tender must be available to all Bondholders alike.

8.8

Cancellation
All Bonds which are redeemed or converted or purchased by the Company or any of its Subsidiaries
will forthwith be cancelled. Certificates in respect of all Bonds cancelled will be forwarded to or to the
order of the Registrar and such Bonds may not be reissued or resold.

8.9

Redemption Notices
All notices to Bondholders given by or on behalf of the Company pursuant to this Condition will be
given in accordance with Condition 17, and specify the Conversion Price as at the date of the relevant
notice, the closing price of the Shares (as quoted on the BSE) as at the latest practicable date prior to
the publication of the notice, the date for redemption, the manner in which redemption will be effected
and the aggregate principal amount of the Bonds outstanding as at the latest practicable date prior to the
publication of the notice.
No notice of redemption or conversion given under Condition 8.2 or Condition 8.3 shall be effective if
it specifies a date for redemption or conversion which falls during a Closed Period or within 15 days
following the last day of a Closed Period.

8.10

Multiple Notices
If more than one notice of redemption (which shall include any notice given by the Company pursuant
to Condition 8.2 or 8.3 and any Relevant Event Put Exercise Notice or Delisting Put Notice given by a
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Bondholder pursuant to this Condition 8, the first of such notices to be given shall prevail.
9.

Taxation

9.1

All payments of principal, interest and premium (if any) in respect of the Bonds by the Company will
be made free from any restriction or condition and without deduction or withholding for or on account
of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed
or levied by or on behalf of India or any authority thereof or therein having power to tax, unless
deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by
law.

9.2

In the event that any such withholding or deduction in respect of principal or premium or interest is
required, the Company will pay such additional amounts by way of principal, premium or interest as
will result in the receipt by the Bondholders of the amounts which would otherwise have been
receivable in the absence of such withholding or deduction, except that no such additional amount shall
be payable in respect of any Bond:

9.2.1

to a holder (or to a third party on behalf of a holder) who is subject to such taxes, duties, assessments or
governmental charges in respect of such Bond by reason of his having some connection with India
otherwise than merely by holding the Bond or by the receipt of amounts in respect of the Bond; or

9.2.2

(in the case of a payment of principal or premium) if the Certificate in respect of such Bond is
surrendered more than 30 days after the Relevant Date except to the extent that the holder would have
been entitled to such additional amount on surrendering the relevant Certificate for payment on the last
day of such period of 30 days; or

9.2.3

where such withholding or deduction is imposed on a payment to an individual and is required to be

made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the
conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings
income or any law implementing or complying with, or introduced in order to conform to, such
Directive; or

9.2.4

presented for payment by or on behalf of a holder who would have been able to avoid such withholding
or deduction by presenting the relevant Bond to another Principal Paying and Conversion in a Member
State of the European Union.

9.3

For the purposes hereof, "Relevant Date" means the date on which such payment first becomes due
except that if the full amount payable has not been received by the Trustee or the Principal Paying and
Conversion Agent on or prior to such due date, the date on which, the full amount having been so
received, notice to that effect shall have been given to the Bondholders and cheques despatched or
payment made.

9.4

References in these Conditions to payments (including of principal, premium and interest in respect of
the Bonds) shall be deemed also to refer to any additional amounts which may be payable under this
Condition or any undertaking or covenant given in addition thereto or in substitution therefore pursuant
to the Trust Deed.

10.

Events of Default

10.1

The Trustee at its discretion may (but shall not be obliged to), and if so requested in writing by the
holders of not less than 25 per cent. in principal amount of the Bonds then outstanding or if so directed
by an Extraordinary Resolution shall (subject to being indemnified and/or secured by the Bondholders
to its satisfaction), give notice to the Company that the Bonds are, and they shall accordingly thereby
become, immediately due and repayable at their Accreted Principal Amount plus any accrued and
unpaid interest (subject as provided below and without prejudice to the right of Bondholders to exercise
the Conversion Right in respect of their Bonds in accordance with Condition 6) if any of the following
events (each an "Event of Default") has occurred and is continuing:

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10.1.1

a default is made in the payment of any sum due in respect of the Bonds and such default continues for
a period of 15 business days;

10.1.2

failure by the Company to deliver the Shares as and when such Shares are required to be delivered
following conversion of a Bond;

10.1.3

the Company does not perform or comply with one or more of its other obligations in the Bonds or the
Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy,
is not in the opinion of the Trustee remedied within 30 days after written notice of such default shall
have been given to the Company by the Trustee (acting at the written direction of Bondholders holding
not less than 25 per cent. of the principal amount of the Bonds then outstanding).

10.1.4

the Company or any Subsidiary is (or is, or could be, deemed by law or a court to be) insolvent or
bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend, payment of all or a
material part of (or of a particular type of) its debts, proposes or makes any agreement for the deferral,
rescheduling or other readjustment of all of (or all of a particular type of) its debts (or of any part which
it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an
arrangement or composition with or for the benefit of the relevant creditors in respect of any of such
debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a
particular type of) the debts of the Company or any of its Subsidiaries;

10.1.5

(i) any other present or future indebtedness of the Company or any of its Subsidiaries for or in respect
of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior
to its stated maturity by reason of any actual or potential default, event of default or the like
(howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be,
within any applicable grace period, or (iii) the Company or any of its Subsidiaries fails to pay when due
any amount payable by it under any present or future guarantee for, or indemnity in respect of, any
moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness,
guarantees and indemnities in respect of which one or more of the events mentioned above in this
Condition 10.1.5 have occurred equals or exceeds U.S.$1 million or its equivalent (as reasonably
determined on the basis of the middle spot rate for the relevant currency against the U.S. dollar as
quoted by an independent bank of international repute on the day on which such indebtedness becomes
due and payable or is not paid or any such amount becomes due and payable or is not paid under any
such guarantee or indemnity);

10.1.6

a distress, attachment, execution or other legal process is levied, enforced or sued out on or against a
material part of the property, assets or revenues of the Company or any of its Subsidiaries and is not
discharged or stayed within 45 days;

10.1.7

an order is made or an effective resolution passed for the winding-up or dissolution, judicial
management or administration of the Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations
or the company or any of its subsidiaries disposes of the whole or a substantial part of its assets
(including but not limited to the issuance of equity interests by any of the companys subsidiaries or the
sale of equity interests in any of the companys subsidiaries), except for the purpose of and followed by
a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an
Extraordinary Resolution of the Bondholders or (ii) in the case of the voluntary winding up or
dissolution of a Subsidiary, whereby the undertaking and surplus assets of the Subsidiary are
transferred to or otherwise vested in the Company or another of its Subsidiaries;

10.1.8

an encumbrancer takes possession or an administrative or other receiver or an administrator is

appointed of the whole or a material part of the property, assets or revenues of the Company or any of
its Subsidiaries (as the case may be) and is not discharged within 30 days;

10.1.9

it is or will become unlawful for the Company to perform or comply with any one or more of its
obligations under any of the Bonds or the Trust Deed;

10.1.10 any step is taken by any person with a view to the seizure, compulsory acquisition, expropriation or
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nationalisation of all or a material part of the assets of the Company or any of its Subsidiaries; or
10.1.11 any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the
events referred to in any of the foregoing paragraphs.
"Subsidiary" or "subsidiary" means (i) any company or other business entity of which that person
owns or controls (either directly or through one or more other Subsidiaries) more than 50 per cent. of
the issued share capital or other ownership interest having ordinary voting power to elect directors,
managers or trustees of such company or other business entity or (ii) any Consolidated Subsidiary
whose gross revenues (consolidated in the case of a Subsidiary which itself has Subsidiaries) or whose
total assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) represent in each
case (or, in the case of a Subsidiary acquired after the end of the financial period to which the then
latest audited consolidated accounts of the Company and its Subsidiaries relate, are equal to) not less
than 5 per cent. of the consolidated gross revenues of the Company, or, as the case may be,
consolidated total assets, of the Company and its Subsidiaries taken as a whole, all as calculated
respectively by reference to the then latest audited accounts (consolidated or, as the case may be,
unconsolidated) of such Subsidiary and the then latest audited consolidated accounts of the Company
and its Subsidiaries, provided that in the case of a Subsidiary of the Company acquired after the end of
the financial period to which the then latest audited consolidated accounts of the Company and its
Subsidiaries relate, the reference to the then latest audited consolidated accounts of the Company and
its Subsidiaries for the purposes of the calculation above shall, until consolidated accounts for the
financial period in which the acquisition is made have been prepared and audited as aforesaid, be
deemed to be a reference to such first-mentioned accounts as if such Subsidiary had been shown in
such accounts by reference to its then latest relevant audited accounts, adjusted as deemed appropriate
by the Company; "Consolidated Subsidiary" means any company or other business entity which at
any time has its accounts consolidated with those of that person or which, under Indian law, regulations
or generally accepted accounting principles from time to time, which should have its accounts
consolidated with those of that person.
10.1.12 if the Company breaches any of the covenants as defined in Condition 6.4, Neither the Trustee nor the
Agents shall be responsible or liable for monitoring whether an Event of Default has occurred or is
continuing and shall be entitled to assume that no such event has occurred until the Trustee has
received notice in writing to the contrary from the Company and shall not be liable or responsible to the
Bondholders or any person for any failure to monitor so.
10.2

Notwithstanding receipt of any payment after the acceleration of the Bonds, a Bondholder may exercise
its Conversion Right by depositing a Conversion Notice with a Principal Paying and Conversion Agent
during the period from and including the date of a default notice with respect to an event specified in
Condition 10.1.2 (at which time the Company will notify the Bondholders of the number of Shares per
Bond to be delivered upon conversion, assuming all the then outstanding Bonds are converted) to and
including the 30th business day after such payment.
If any converting Bondholder deposits a Conversion Notice pursuant to this Condition 10 in the
business day prior to, or during, a Closed Period, the Bondholder's Conversion Right shall continue
until the business day following the last day of the Closed Period, which shall be deemed the
Conversion Date, for the purposes of such Bondholder's exercise of its Conversion Right pursuant to
this Condition 10.
If the Conversion Right attached to any Bond is exercised pursuant to this Condition 10, the Company
will deliver Shares (which number will be disclosed to such Bondholder as soon as practicable after the
Conversion Notice is given) in accordance with these Conditions, except that the Company shall have
10 business days before it is required to register the converting Bondholder (or its designee) in its
register of members as the owner of the number of Shares to be delivered pursuant to this Condition
and an additional five business days from such registration date to make payment in accordance with
the following paragraph.
If the Conversion Right attached to any Bond is exercised pursuant to this Condition 10, the Company
shall, at the request of the converting Bondholder, pay to such Bondholder an amount in United States
dollars (converted from Rupees at the Fixed Exchange Rate) (the "Default Cure Amount"), equal to the
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product of (x) (i) the number of Shares that are required to be delivered by the Company to satisfy the
Conversion Right in relation to such converting Bondholder minus (ii) the number of Shares that are
actually delivered by the Company pursuant to such Bondholders' Conversion Notice and (y) the
Closing Price of the Shares on the Conversion Date; provided that if such Bondholder has received any
payment under the Bonds pursuant to this Condition 10, the amount of such payment shall be deducted
from the Default Cure Amount.
The "Share Price" means the Closing Price of the Shares on the Conversion Date.
11.

Consolidation, Amalgamation or Merger

The Company will not consolidate with, merge or amalgamate into or transfer its assets substantially as
an entirety to any corporation or convey or transfer its properties and assets substantially as an entirety
to any person (the consummation of any such event, a "Merger"), unless:
(i)

Prior thereto the Company shall have notified the Trustee and the Bondholders of such event
in accordance with condition 17

(ii)

the corporation formed by such Merger or the person that acquired such properties and assets
shall expressly assume, by a supplemental trust deed, all obligations of the Company under the
Trust Deed, the Agency Agreement and the Bonds and the performance of every covenant and
agreement applicable to it contained therein and to ensure that the holder of each Bond then
outstanding will have the right (during the period when such Bond shall be convertible) to
convert such Bond into the class and amount of shares, cash and other securities and property
receivable upon such consolidation, amalgamation, merger, sale or transfer by a holder of the
number of Shares which would have become liable to be issued upon conversion of such Bond
immediately prior to such consolidation, amalgamation, merger, sale or transfer;

(iii)

immediately after giving effect to any such Merger, no Event of Default shall have occurred or
be continuing or would result therefrom;

(iv)

the corporation formed by such Merger, or the person that acquired such properties and assets,
shall expressly agree, among other things, to indemnify each holder of a Bond against any tax,
assessment or governmental charge payable by withholding or deduction thereafter imposed
on such holder solely as a consequence of such Merger with respect to the payment of
principal and premium on the Bonds; and

(v)

immediately after giving effect to such transaction on a pro forma basis, the Company or any
Person becoming the successor obligor of the Notes shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately prior to such
transaction.
"Consolidated Net Worth" means total shareholders' equity for the Company on a consolidated
basis (as determined from the relevant financial statements of the Company) but deducting:
(a)

any debit balance on the consolidated profit and loss account of the Company;

(b)

(to the extent included) any amount shown in respect of goodwill (including goodwill
arising only on consolidation) or other intangible assets of the Company on a
consolidated basis; and

(c)

any amount in respect of interests of any affiliate of the Issuer

and so that no amount shall be included or excluded more than once.

For the avoidance of doubt, Condition 11 shall only apply if the Company is not the surviving corporation after
any such Merger.

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"No Subsidiary of the Company will consolidate with or merge into any other Person or permit any other Person
to consolidate with or merge into it, except that a Subsidiary may consolidate with or merge into (i) the
Company (and for the avoidance of doubt the Company remains the obligor of the Bonds) or (ii) another
Subsidiary of the Company which is a Wholly Owned Subsidiary of the Company.

A "Wholly Owned Subsidiary" is any company or other business entity of which that person owns or controls
(either directly or through one or more other Subsidiaries) 100 per cent. of the issued share capital or other
ownership interest having ordinary voting power to elect directors, managers or trustees of such company or
other business entity."
The Trustee shall be entitled to require from the Company such opinions, consents, documents and other
matters at the expense of the Company in connection with the foregoing as it may consider appropriate and may
rely on such opinions, consents and documents without liability to any person. The above provisions of this
Condition 11 will apply in the same way to any subsequent consolidations, amalgamations, mergers, sales or
transfers.

12.

Prescription
Claims in respect of amounts due in respect of the Bonds will become prescribed unless made within
10 years (in the case of principal and premium) and five years (in the case of interest) from the relevant
date for payment. Neither the Trustee nor the Agents shall be responsible or liable for any amounts so
prescribed.

13.

Enforcement
At any time after the Bonds have become due and repayable, the Trustee may, at its discretion and
without further notice, take such proceedings against the Company as it may think fit to enforce
repayment of the Bonds and to enforce the provisions of the Trust Deed, but it will not be bound to take
any such proceedings unless (i) it shall have been so requested in writing by the holders of not less than
25 per cent. in principal amount of the Bonds then outstanding or shall have been so directed by an
Extraordinary Resolution of the Bondholders and (ii) it shall have been indemnified and/or secured to
its satisfaction. No Bondholder will be entitled to proceed directly against the Company unless the
Trustee, having become bound to do so, fails to do so within a period of 60 days from the date of the
relevant written request on Extraordinary Resolution and such failure shall be continuing and no
direction inconsistent with such written request or Extraordinary Resolution has been given to the
Trustee during such 60 day period by the holders of a majority in principal amount of the outstanding
Bonds.

14.

Meetings of Bondholders, Modification, Waiver and Substitution

14.1

Meetings
The Trust Deed contains provisions for convening meetings of Bondholders to consider any matter
affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the
Bonds or the provisions of the Trust Deed. The quorum at any such meeting for passing an
Extraordinary Resolution will be two or more persons holding or representing in the aggregate over 50
per cent. in principal amount of the Bonds for the time being outstanding or, at any adjourned such
meeting, two or more persons being or representing Bondholders whatever the principal amount of the
Bonds so held or represented unless the business of such meeting includes consideration of proposals,
inter alia, (i) to modify the due date for any payment in respect of the Bonds, (ii) to reduce or cancel the
amount of principal or premium or default interest payable in respect of the Bonds (including the
Accreted Principal Amount or method of calculation thereof), (iii) to change the currency of payment
of the Bonds, (iv) to modify or cancel the Conversion Rights or the put options specified in Condition 8
or (v) to modify the provisions concerning the quorum required at any meeting of the Bondholders or
Page 124

the majority required to pass an Extraordinary Resolution, in which case the necessary quorum for
passing an Extraordinary Resolution will be two or more persons holding or representing not less than
75 per cent., or at any adjourned such meeting not less than 25 per cent., in principal amount of the
Bonds for the time being outstanding. An Extraordinary Resolution passed at any meeting of
Bondholders will be binding on all Bondholders, whether or not they are present at the meeting. The
Trust Deed provides that a written resolution signed by or on behalf of the holders of not less than 90
per cent. of the aggregate principal amount of Bonds outstanding shall be as valid and effective as a
duly passed Extraordinary Resolution.
14.2

Modification and Waiver

The Trustee may agree, without the consent of the Bondholders, to (i) any modification (except as
mentioned in Condition 14.1 above) to, or the waiver or authorisation of any breach or proposed breach
of, the Bonds, the Agency Agreement or the Trust Deed which is not, in the opinion of the Trustee,
materially prejudicial to the interests of the Bondholders or (ii) any modification to the Bonds or the
Trust Deed which, in the Trustee's opinion, is of a formal, minor or technical nature or to correct a
manifest error or to comply with mandatory provisions of law. Any such modification, waiver or
authorisation will be binding on the Bondholders and, unless the Trustee agrees otherwise, any such
modifications will be notified by the Company to the Bondholders as soon as practicable thereafter.

14.3

Substitution
The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the
Trust Deed and such other conditions as the Trustee may (in its absolute discretion) require, but without
the consent of the Bondholders, to the substitution of any other company in place of the Company, or of
any previous substituted company, as principal debtor under the Trust Deed and the Bonds. In such
event, the Company shall give notice to Bondholders in accordance with Condition 17.

14.4

Interests of Bondholders
In connection with the exercise of its functions (including but not limited to those in relation to any
proposed modification, authorisation, waiver or substitution) the Trustee shall have regard to the
interests of the Bondholders as a class and shall not have regard to the consequences of such exercise
for individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholder be
entitled to claim, from the Company or the Trustee, any indemnification or payment in respect of any
tax consequences of any such exercise upon individual Bondholders except to the extent provided for
in Condition 9 and/or any undertakings given in addition thereto or in substitution therefore pursuant to
the Trust Deed.

14.5

Certificates/Reports
Any certificate or report of any expert or other person called for by or provided to the Trustee (whether
or not addressed to the Trustee) in accordance with or for the purposes of these Conditions or the Trust
Deed may be relied upon by the Trustee as sufficient evidence of the facts therein (and shall, in absence
of manifest error, in the Trustee's opinion, be conclusive and binding on all parties) notwithstanding
that such certificate or report and/or engagement letter or other document entered into by the Trustee
and/or the Company in connection therewith contains a monetary or other limit on the liability of the
relevant expert or person in respect thereof.

15.

Replacement of Certificates
If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified
office of the Registrar or any Agent upon payment by the claimant of such costs as may be incurred in
connection therewith and on such terms as to evidence and indemnity as the Company and such Agent
may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements
will be issued.

16.

Further Issues
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The Company may from time to time without the consent of the Bondholders create and issue further
securities either having the same terms and conditions as the Bonds in all respects and so that such
further issue shall be consolidated and form a single series with the Bonds outstanding securities of any
series (including the Bonds) or upon such terms as the Company may determine at the time of their
issue. Such further Bonds may, with the consent of the Trustee, be constituted by a deed supplemental
to the Trust Deed. References in these Conditions to the Bonds include (unless the context requires
otherwise) any other securities issued pursuant to this Condition and forming a single series with the
Bonds. Any further securities forming a single series with the outstanding securities of any series
(including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other
securities may (with the written consent of the Trustee), be constituted by a deed supplemental to the
Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and
the holders of securities of other series where the Trustee so decides.
17.

Notices
All notices to Bondholders shall be validly given if mailed to them at their respective addresses in the
register of Bondholders maintained by the Registrar or published in a leading newspaper having
general circulation in Asia and, so long as the Bonds are listed on the SGX-ST and the rules of that
Exchange so require notices will also be published via SGXNET of the SGX-ST. Such notices shall be
deemed to have been given on the later of the date of such publications. Any such notice shall be
deemed to have been given on the later of the date of such publication and the seventh day after being
so mailed, as the case may be.
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on
behalf of Euroclear or Clearstream or the Alternative Clearing System (as defined in the form of the
Global Certificate), notices to Bondholders shall be given by delivery of the relevant notice to
Euroclear or Clearstream or the Alternative Clearing System, for communication by it to entitled
accountholders in substitution for notification as required by these Conditions.

18.

Agents
The names of the initial Agents and the Registrar and their specified offices are set out below. The
Company reserves the right, subject to the prior written approval of the Trustee, at any time to vary or
terminate the appointment of any Agent or the Registrar and to appoint additional or other Agents or a
replacement Registrar. The Company will at all times maintain (i) a Principal Paying and Conversion
Agent, (ii) a Registrar outside the United Kingdom, (iii) an Agent having a specified office in
Singapore (or any city required by the rules and regulations of an Alternative Stock Exchange) where
the Bonds may be presented or surrendered for payment or redemption, so long as the Bonds are listed
on theSGX-ST (or, as the case may be, Alternative Stock Exchange) and the rules of that exchange so
require and (iv) a Principal Paying and Conversion Agent with a specified office in a European Union
member state that will not be obliged to withhold or deduct tax pursuant to any law implementing the
Savings Directive (2003/48/EC) or any other Directive implementing the conclusions of the ECOFIN
Council meeting of 26-27 November 2000. Notice of any such termination or appointment, of any
changes in the specified offices of any Agent or the Registrar and of any change in the identity of the
Registrar or the Principal Paying and Conversion Agent will be given promptly by the Company to the
Bondholders in accordance with Condition 17 and in any event not less than 45 days' notice will be
given.
Subject to the terms of the Agency Agreement, in acting hereunder and in connection with the Bonds,
the Agents shall act solely as agents of the Company and will not thereby assume any obligations
towards, or relationships of agency or trust for, any of the Bondholders.
So long as the Bonds are listed on the SGX-ST and the rules of that exchange so require, in the event
that the Global Certificate is exchanged for definitive Certificates, the Company shall appoint and
maintain a paying agent in Singapore, where the Bonds may be presented or surrendered for payment
or redemption. In addition, in the event that the Global Certificate is exchanged for definitive

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Certificates, announcement of such exchange shall be made through the SGX-ST and such
announcement will include all material information with respect to the delivery of the definitive
Certificates, including details of the Singapore agent.
19.

Indemnification
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from
responsibility, including provisions relieving it from taking proceedings to enforce repayment unless
indemnified and/or secured to its satisfaction. The Trustee is entitled to enter into business transactions
with the Company without accounting for any profit.
The Trustee may rely without liability to Bondholders on any certificate prepared by the directors or
Authorised Officers of the Company and accompanied by a certificate or report prepared by the
Auditors of the Company or an internationally recognised firm of accountants pursuant to these
Conditions and/or the Trust Deed, whether or not addressed to the Trustee and whether or not the
Auditors of the Company or the internationally recognised firm of accountants liability in respect
thereof is limited by a monetary cap or otherwise limited or excluded and shall be obliged to do so
where the certificate or report is delivered pursuant to the obligation of the Company to procure such
delivery under these Conditions; any certificate or report shall be conclusive and binding on the
Company, the Trustee and the Bondholders.

20.

Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of this Bond under the Contracts
(Rights of Third Parties) Act 1999.

21.

Governing Law
These Conditions are governed by, and shall be construed in accordance with, the laws of England.

22.

Jurisdiction
The courts of England and Wales are to have jurisdiction to settle any disputes which may arise out of
or in connection these Conditions or the Bonds and accordingly any legal action or proceedings arising
out of or in connection with these Conditions or the Bonds ("Proceedings") may be brought in such
courts. The Company irrevocably submits to the jurisdiction of such courts and waives any objections
to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been
brought in an inconvenient forum. This submission is for the benefit of the Trustee and each of the
Bondholders and shall not limit the right of any of them to take Proceedings in any other court of
competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the
taking of Proceedings in any other jurisdiction (whether concurrently or not).

23.

Service of Process
The Company irrevocably appoints Ashley King Ltd., of 148 Field End Road, Pinner, HA5 1RJ as its
authorised agent for service of process in England. Subject to applicable law, such service shall be
deemed to be completed on delivery to such process agent (whether or not it is forwarded to and
received by the Company). The Company will procure that, so long as any of the Bonds is outstanding,
there shall be in force an appointment of such a person with an office in England with authority to
accept service as aforesaid on behalf of the Company and, failing such appointing within 15 days after
demand by or on behalf of the Trustee, the Trustee shall be entitled by notice to the Company to
appoint such person at the cost of the Company. Nothing herein shall affect the right to serve process
in any other manner permitted by law.

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SUMMARY OF THE TERMS OF THE GLOBAL CERTIFICATE

The Bonds will initially be represented by a Global Certificate in registered form. The Global Certificate was
delivered to, and registered in the name of a common nominee for, and held by the Common Depositary for,
Euroclear and Clearstream, Luxembourg on the Issue Date. Except in the limited circumstances described in the
Global Certificate, owners of interests in the Bonds represented by the Global Certificate will not be entitled to
receive definitive Certificates in respect of their individual holdings of the Bonds. The Global Certificate
contains provisions, which apply to the Bonds while they are in global form, some of which modify the effect of
the terms and conditions (the "Conditions") of the Bonds set out in this Offering Circular. The following is a
summary of certain of those provisions. Unless otherwise defined herein, terms defined in the Conditions shall
have the same meaning herein.
Meetings
The holder of the Global Certificate will be treated as being two persons for the purposes of any quorum
requirements of a meeting of Bondholders and, at any such meeting, as having one vote in respect of each
US$10,000 in principal amount of Bonds in respect of which the Global Certificate is issued. The Trustee may
allow any accountholder (or the representative of any such person) of a clearing system entitled to Bonds in
respect of which the Global Certificate is issued to attend and speak (but not to vote) at a meeting of
Bondholders, on confirmation of entitlement and proof of his identity.
Conversion
Subject to the requirements of Euroclear and Clearstream, Luxembourg (or any alternative clearing system
approved in writing by the Trustee), the Conversion Right attaching to Bonds in respect of which the Global
Certificate is issued may be exercised by the presentation of one or more Conversion Notices (which may be by
facsimile while the Bonds are represented by the Global Certificate) duly completed by or on behalf of a holder
of a book-entry interest in such Bond. Deposit of the Global Certificate with the Conversion Agent together with
the relevant Conversion Notice shall not be required. The provisions of Condition 6 of the Bonds will otherwise
apply.
Trustee's Powers
In considering the interests of Bondholders, the Trustee may, to the extent it considers it appropriate to do so in
the circumstances, (a) have regard to such information as may have been made available to it by or on behalf of
the relevant clearing system or its operator as to the identity of its accountholders (either individually or by
category) with entitlements in respect of Bonds and (b) consider such interests on the basis that such
accountholders were the Bondholders in respect of which the Global Certificate is issued.
Enforcement
For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a
certificate of the holder of the Bonds in respect of which the Global Certificate is issued shall be as the
beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interests in the
Bonds set out in the certificate of the holder as if they were themselves the holders of Bonds in such principal
amounts.
Cancellation
Cancellation of any Bonds required by the Conditions to be cancelled following its redemption, conversion or
re-purchase will be effected by reduction in the principal amount of the Bonds in the Register.
Payments
Payments of principal, interest and premium (if any) in respect of Bonds represented by the Global Certificate
will be made without presentation or, if no further payment is to be made in respect of the Bonds, against
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presentation and surrender of the Global Certificate to or to the order of the Principal Paying Agent or such
other Paying and Conversion Agent as shall have been notified to the Bondholders for such purpose.
Transfers
Transfers of interests in the Bonds with respect to which this Global Certificate is issued shall be made in
accordance with the Agency Agreement.
Transfers of interests in the Bonds with respect to which this Global Certificate is issued shall be effected
through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance
with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect
participants.
Accountholders
For so long as any of the Bonds are represented by the Global Certificate and such Global Certificate is held on
behalf of Euroclear and/or Clearstream, Luxembourg, each person who is for the time being shown in the
records of Euroclear and Clearstream, Luxembourg as the holder of a particular principal amount of such Bonds
(each an "Accountholder") (in which regard any certificate or other document issued by Euroclear and
Clearstream, Luxembourg as to the principal amount of such Bonds standing to the account of any person shall
be conclusive and binding for all purposes) shall be treated as the holder of such principal amount of such Bonds
for all purposes (including for the purposes of any quorum requirements of, or in the right to demand a poll at,
meetings of the Bondholders) other than with respect to the payment of principal and premium on such Bonds,
the right to which shall be vested, as against the Company and the Trustee, solely in the holder of the Global
Certificate in accordance with and subject to its terms and the terms of the Trust Deed. Each Accountholder
must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment
made to the holder of the Global Certificate.
Notices
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of
Euroclear or Clearstream, Luxembourg, or any alternative clearing system notices required to be given to
Bondholders may be given to the relevant clearing system for communication by it to entitled accountholders in
substitution for notification, as required by the Conditions.
Definitive Certificates
Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title
to the Bonds registered in their names and to receive individual certificates in definitive form ("Definitive
Certificates") if either:
(i)

(ii)

the Common Depositary or any successor to the Common Depositary notifies the Company in writing
that it is at any time unwilling or unable to continue to act as a depositary and a successor depositary is
not appointed by the Company within 90 days of the date of such notice, or
Euroclear or Clearstream, Luxembourg or a successor clearing system is closed for business for a
continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an
intention permanently to cease business or does in fact do so.

In such circumstances, the Company will make arrangements for the exchange of interests in the Global
Certificate in whole but not in part for Definitive Certificates and cause such Definitive Certificates to be
executed and delivered to the Registrar in sufficient quantities and authenticated by the Registrar for delivery to
the holders of the Bonds. Each person exchanging interests in the Global Certificate for one or more of these
Definitive Certificates will be required to provide to the Trustee, through the relevant clearing system, written
instructions and other information required by the Company and the Registrar to complete, execute and deliver
the relevant certificates. Any Definitive Certificates delivered in exchange for the Global Certificate or
beneficial interests therein will be registered in the names requested, and issued in any denominations approved,
by the relevant clearing system.
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In the case of Definitive Certificates issued in exchange for any Global Certificate, such Definitive Certificates
will bear, and be subject to, such legends, as the Company requires in order to ensure compliance with any
applicable law. The holder of such restricted Definitive Certificates may transfer the Bonds represented by such
Definitive Certificates, subject to compliance with the provisions of such legend. Upon the transfer, exchange or
replacement of Definitive Certificates bearing the legend, or upon specific request for removal of the legend on
a Definitive Certificate, the Company will deliver only Definitive Certificates that bear such legend, or will
refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither
the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions
of the Securities Act.

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CLEARANCE AND SETTLEMENT OF THE BONDS

The information set out below is subject to any change in or reinterpretation of the rules, regulations and
procedures of the Clearing Systems currently in effect. The information in this section concerning the Clearing
Systems has been obtained from sources that the Company believes to be reliable, but none of the Company, the
Lead Manager, the Trustee or any of the Agents takes any responsibility for the accuracy of this section.
Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued
applicability of the rules, regulations and procedures of the relevant Clearing System. Neither the Company nor
any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in the Bonds held through the
facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Custodial and depositary links have been established with Euroclear and Clearstream, Luxembourg to facilitate
the initial issue of the Bonds and transfers of the Bonds associated with secondary market trading.
The Clearing Systems
Euroclear and Clearstream, Luxembourg
Euroclear and Clearstream, Luxembourg each hold securities for participating organisations and facilitate the
clearance and settlement of securities transactions between their respective participants through electronic bookentry of changes in the accounts of their participants. Euroclear and Clearstream, Luxembourg provide their
respective participants with, inter alia, services for safekeeping, administration, clearance and settlement of
internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg
participants are financial institutions throughout the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to
Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg
participant, either directly or indirectly.
Distributions of principal with respect to book-entry interests in the Bonds held through Euroclear or
Clearstream, Luxembourg will be credited, to the extent received by the Paying Agent, to the cash accounts of
Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system's rules and
procedures.
Registration and form
Book-entry interests in the Bonds held through Euroclear and Clearstream, Luxembourg will be evidenced by
the Global Certificate, registered in the name of a nominee of the common depositary of Euroclear and
Clearstream, Luxembourg. The Global Certificate will be held by a common depositary for Euroclear and
Clearstream, Luxembourg. Beneficial ownership in the Bonds will be held through financial institutions as
direct and indirect participants in Euroclear and Clearstream, Luxembourg.
The aggregate holdings of book-entry interests in the Bonds in Euroclear and Clearstream, Luxembourg will be
reflected in the book-entry accounts of each such institution. Euroclear and Clearstream, Luxembourg, as the
case may be, and every other intermediate holder in the chain to the beneficial owner of book-entry interests in
the Bonds, will be responsible for establishing and maintaining accounts for their participants and customers
having interests in the book-entry interest in the Bonds. The Paying Agent will be responsible for ensuring that
payments received by it from the Company for holders of interests in the Bonds holding through Euroclear and
Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be.
The Company will not impose any fees in respect of the Bonds. However, holders of book-entry interest in the
Bonds may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear
and Clearstream, Luxembourg.

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Global Clearance and Settlement Procedures

Initial settlement
Interests in the Bonds will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests
in the Bonds through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures
applicable to conventional eurobonds. Book-entry interests in the Bonds will be credited to Euroclear and
Clearstream, Luxembourg participants' securities clearance accounts on the business day following the Issue
Date against payment (for value on the Issue Date).
Secondary market trading
Secondary market sales of book-entry interests in the Bonds held through Euroclear or Clearstream,
Luxembourg to purchasers of book-entry interests in the Bonds through Euroclear or Clearstream, Luxembourg
will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream,
Luxembourg and will be settled using the procedures applicable to conventional participants.
General
Although the foregoing sets out the procedures of Euroclear and Clearstream, Luxembourg in order to facilitate
the transfers of interests in the Bonds among participants of Euroclear and Clearstream, Luxembourg, neither
Euroclear nor Clearstream, Luxembourg is under any obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
None of the Company, the Trustee, the Agents or any of their agents will have any responsibility for the
performance by Euroclear or Clearstream, Luxembourg or their respective participants of their respective
obligations under the rules and procedures governing their operations.

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FOREIGN INVESTMENT AND EXCHANGE CONTROLS

General
With effect from 1 June 2000, foreign investment in Indian securities is regulated by the Indian Foreign
Exchange Management Act, 1999 (as amended) (the "FEMA") and the rules, regulations and notifications made
under the FEMA.
The transfer and issue of securities by a person resident, including but not limited to corporates established and
incorporated, outside India is also governed by the FEM Securities Regulations, notified by the RBI on 3 May
2000 as amended from time to time. Pursuant to the Liberalisation Policy relating to the FDI, the RBI has issued
a recent Circular No. 38 dated 3 December 2003 containing the current regulatory provisions as amended from
time to time.
The FEM Securities Regulations provide that an Indian entity may issue securities to a person resident outside
India or record in its books any transfer of security from or to such person only in the manner set forth in the
FEMA and the rules and regulations made thereunder or as permitted by the RBI.
FOREIGN DIRECT INVESTMENT
The Government of India, pursuant to its liberalisation policy, set up the Foreign Investment Promotions Board
("FIPB") to regulate all investment by way of subscription and/or purchase of securities of an Indian company
by a non-resident investor, or FDI, into India. Foreign direct investment means investment by way of
subscription and/or purchase of securities of an Indian company by a non-resident investor ("Foreign Direct
Investment" or "FDI"). FIPB approval is required for investment in sectors such as housing, broadcasting,
petroleum (other than private sector oil refining), defence and strategic industries, print media and for
investment in certain other circumstances. Also, the following investments require the prior permission of the
FIPB:
(i)
(ii)

(iii)
(iv)
(v)
(vi)

investments in excess of specified sectoral caps;

investments by any person who has or had an existing or previous venture through investment in shares
or debentures or a technical collaboration or a trade mark agreement or investment by whatever name
called in the same field or allied field to that in which the Indian company whose shares are being
acquired is engaged;
investments of more than 24 per cent in the equity capital of units manufacturing items reserved for
small scale industries;
investments by an unincorporated entity;
investments in industries for which industrial licensing is compulsory; and
all proposals relating to the acquisition of shares of an Indian Company by a foreign investor (including
a non-resident Indian), the activities of which company are not under the "automatic" route under
existing Indian Foreign Investment Policy.

A person residing outside India (other than a citizen of Pakistan and Bangladesh) or any entity incorporated
outside India (other than an entity incorporated in Pakistan or Bangladesh) has general permission to purchase
shares or convertible debentures or preference shares of an Indian company, subject to certain terms and
conditions.
Currently, subject to certain exceptions, FDI and investment by Non-Resident Indians in Indian companies do
not require the prior approval of the FIPB or the RBI. The Government of India has indicated that in all cases
where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary
agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is
obtained, no approval of the RBI is required, although a declaration in the prescribed form, detailing the foreign
investment, must be filed with the RBI once the foreign investment is made in the Indian company. The
foregoing description applies only to an issuance of shares by, and not to a transfer of shares of, Indian
companies.
The Government of India has set up the Foreign Investment Implementation Authority (the "FIIA") in the
Department of Industrial Policy and Promotion. The FIIA has been mandated to (i) translate foreign direct
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investment approvals into implementation, (ii) provide a pro-active one stop after care service to foreign
investors by helping them obtain necessary approvals, (iii) deal with operational problems, and (iv) meet with
various Government of India agencies to find solutions to foreign investment problems, and maximise
opportunities through a partnership approach.
Under the current regulations, 100% FDI is permitted for investments in IT industries.
Pricing
The SEBI is the regulatory body that regulates the business of Indian securities markets and has framed SEBI
(Disclosure and Investor Protection) Guidelines, 2000, as amended (the "SEBI Guidelines") to be complied
with by Indian companies who intend to issue and list their securities in the Indian stock markets. The SEBI
Guidelines are applicable to all public issues by listed and unlisted companies, all offers for sale, bonus issues
and rights issues by listed companies whose share capital is listed, except in the case of rights issues where the
aggregate value of securities offered does not exceed Rs.5 million.
The Ministry of Finance through an amendment to the Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depository Receipt Mechanism) Scheme, 1993 announced on 31 August 2005 that it had
prescribed the eligibility criteria for Indian issuers desirous of raising funds under the said Scheme. Consequent
thereto, an Indian Company which is not eligible to raise funds from the Indian capital market including a
company which has been restrained from accessing the securities market by the SEBI will not be eligible to
issue FCCBs or Global Depositary Receipts ("GDRs") under the aforesaid Scheme. OCBs that are not eligible
to invest in India through the portfolio route and entities that are prohibited to buy, sell or deal in securities by
SEBI will not be eligible to subscribe to the FCCBs or the GDRs under the aforesaid Scheme. The pricing at
which the FCCBs or the GDRs may be made has also been set out by the Ministry of Finance through the
amendment.
The pricing of the FCCBs or the GDRs shall not be less than the higher of the following two averages: (a)
average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange
during the six months prior to the relevant date, and (b) the average of the weekly high and low of the closing
prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date.
Relevant date for the above purpose is defined as the date thirty days prior to the date on which the meeting of
the general body of the shareholders is held, in terms of Section 81(1A) of the Companies Act to consider the
proposed issue.
Every Indian company issuing shares or convertible debentures in accordance with the Regulations must submit
a report to the RBI within 30 days of receipt of the consideration and another report within 30 days from the
date of issue of the shares to the non-resident purchaser.
The above description applies only to a new issue of securities by an Indian company.
Investment by Foreign Institutional Investors
In September 1992, the Government of India issued guidelines which enable foreign institutional investors
("FIIs"), including institutions such as pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional portfolio managers, to make portfolio investments in all securities of
listed and unlisted companies in India. Investments by registered FIIs or Non-Resident Indians made through a
stock exchange are known as portfolio investments ("Portfolio Investments"). Foreign investors wishing to
invest and trade in Indian securities in India under these guidelines are required to register with the SEBI and
obtain a general permission from the RBI under the FEMA. However, since the SEBI provides a single window
clearance, a single application must be made to the SEBI. Foreign investors are not necessarily required to
register with the SEBI as FIIs and may invest in securities of Indian companies pursuant to the FDI route
discussed above.
FIIs that are registered with the SEBI must comply with the provisions of the Securities and Exchange Board of
India (Foreign Institutional Investors) Regulations 1995 (the "Foreign Institutional Investor Regulations"). A
registered FII may, subject to the ownership restrictions discussed below, freely buy and sell securities issued by
any Indian company, realise capital gains on investments made through the initial amount invested in India,
Page 134

subscribe to or renounce rights offerings for shares, appoint a domestic custodian for custody of investments
made and repatriate the capital, capital gains, dividends, income received by way of interest and any
compensation received towards sale or renunciation of rights offerings for shares. An Fll may not hold more
than 10% of the total issued capital of a company in its own name; a corporate/individual sub-account of the FII
may not hold more than 5% of the total issued capital of a company, and a broad-based sub-account may not
hold more than 10% of the total issued capital of a company. The total holding of all Flls in a company is
subject to a cap of 24% of the total issued capital of a company, which can be increased to the relevant statutory
cap/ceiling in respect of the company with the passing of a special resolution of the shareholders of the company
in a general meeting.
Registered FIIs are generally subject to tax under Section 115AD of the Indian Income Tax Act. The Bonds and
the Shares are subject to tax under Section 115AC. There is uncertainty under Indian law as to the tax regime
applicable to the FIIs that hold and trade in foreign currency denominated bonds or global depositary receipts. A
Bondholder need not be an FII in order to exercise its Conversion Rights.
Portfolio Investment by Non-Resident Indians
A variety of methods for investing in shares of Indian companies are available to Non-Resident Indians. These
methods allow Non-Resident Indians to make Portfolio Investments in shares and other securities of Indian
companies on a basis not generally available to other foreign investors. In addition to Portfolio Investments in
Indian companies, Non-Resident Indians may also make foreign direct investments in Indian companies
pursuant to the FDI route discussed above.
Until recently, the sale of shares of an Indian company from a non-resident to a resident required RBI approval,
unless the sale was made on a stock exchange at the market price. The Government has granted general
permission to persons residing outside India to transfer shares and convertible debentures held by them to an
Indian resident, subject to compliance with certain terms and conditions and reporting requirements. A resident
who wishes to purchase shares from a non-resident must, pursuant to the relevant notice requirements, file a
declaration with an authorised dealer in the prescribed Form FC-TRS, together with the relevant documents and
file an acknowledgment thereof with the Indian company to effect transfer of the shares to his name. However,
in such cases, the person to whom the shares are being transferred is required to obtain the prior permission of
the Central Government of India to acquire the shares if he has an existing or previous venture or tie-up in India
through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment
by whatever name called in the same field or allied field other than in the information technology field to that in
which the Indian company whose shares are being transferred is engaged. Further, a non-resident may transfer
any security held by him to a person resident in India by way of gift.
Transfer of shares and convertible debentures of an Indian company by a person resident outside India
Subject to what is stated below, a person resident outside India may transfer the shares or convertible debentures
held by him in Indian companies in accordance with the Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India) Regulations 2000. A non-resident or a NRI may transfer, by way
of sale, the shares or convertible debentures held by him to any other non-resident or a NRI, respectively,
without the prior approval of the RBI. Approval of the FIPB will however be required in cases where the person
to whom the shares are being transferred has an existing or previous venture or tie-up in India through
investment in shares or debentures or a technical collaboration or a trade mark agreement or other investment,
howsoever called in the same or an allied field (other than in the information technology field and certain
relaxations in the mining sector) to that in which the Indian company whose shares are being transferred is
engaged. Further, a non-resident may transfer shares or convertible debentures held by him to a person resident
in India by way of gift or may sell the same on a recognised stock exchange in India through a registered broker.
Pursuant to recent liberalisation, non-residents (other than erstwhile overseas corporate bodies, foreign
nationals, NRIs and FIIs) are permitted to purchase shares or convertible debentures of an Indian company
(subject to applicable sectoral caps), other than an Indian company engaged in the financial services sector, from
a resident of India without the prior approval of the RBI, subject to compliance with prescribed conditions,
pricing guidelines, submission of required documents and reporting and obtaining a certificate from the
applicable authorised dealer. Similarly, a non-resident (i.e. incorporated non-resident entity, erstwhile overseas
corporate bodies, foreign nationals, NRIs and FIIs) may sell shares or convertible debentures of an Indian
Page 135

company (subject to applicable sectoral caps), other than an Indian company engaged in the financial services
sector, to a resident of India without the prior approval of the RBI, subject to compliance with prescribed pricing
guidelines, submission of required documents and reporting and obtaining a certificate from the applicable
authorised dealer. Further to this, in its recent Circular No. 16 dated 14 October 2004, the RBI has granted
general permission for the transfer of shares by way of sale by a person resident outside India to a person
resident in India, subject to compliance with certain terms, conditions and reporting requirements.
Issue of Foreign Currency Convertible Bonds ("FCCBs")
The MOF, through the Depositary Receipt Scheme and the ECB Guidelines, has allowed Indian corporates to
issue FCCBs. The notification relating to FCCBs has been amended from time to time by the MOF, and certain
relaxations in the guidelines have also been notified by the RBI. The FEM Regulations provide that an Indian
company may issue FCCBs to a person resident outside India subject to the approval of the RBI in certain cases.
Any Indian company issuing such bonds must comply with certain reporting requirements prescribed by the
RBI. The FEM Securities Regulations provide the following:
An Indian corporate can raise funds up to US$500 million under the "automatic route" without the approval of
the RBI, and above any amount of US$500 million with the approval of the RBI. These limits are also available
to FCCBs under the ECB Guidelines, and Indian Companies may issue FCCBs subject to the following
conditions:
(i)
FCCBs up to US$20 million or equivalent must have a minimum average maturity of three years;
(ii)
FCCBs above US$20 million and up to US$500 million or equivalent must have minimum average
maturity of five years;
(iii)
FCCBs up to US$20 million may have a call/put option provided the minimum average maturity of
three years is complied before exercising the call/put option;
(iv)
the issue of FCCBs shall be subject to the foreign direct investment sectoral caps prescribed by the
MOF;
(v)
public issues of FCCBs must be made through reputable lead managers;
(vi)
FCCBs must be availed of from Recognised Lenders (as defined in the ECB Guidelines dated 1 August
2005);
(vii)
prepayment of FCCBs up to US$200 million is permitted without prior approval subject to compliance
with the minimum average maturity period, as applicable;
(viii)
the "all-in cost" ceiling for FCCBs having a minimum average maturity period of three to five years
should not exceed six month LIBOR plus 2 per cent, and in the case of FCCBs having a minimum
average maturity period of more than five years, should not exceed six month LIBOR plus 3.5 per cent;
(ix)
FCCB proceeds must be used for investments in areas such as import of capital goods, new projects,
modernisation/expansion of existing production units and real estate investments (such as industrial
sector, including small and medium enterprises ("SME") and infrastructure sector, but other than
permitted development of integrated townships) in India. Infrastructure sector is defined as (i) power,
(ii) telecommunications, (iii) railways, (iv) road including bridges, (v) ports, (vi) industrial parks and
(vii) urban infrastructure (water supply, sanitation and sewage projects). Utilisation of the FCCB
proceeds is also permitted in the first stage acquisition of shares in the divestment process and also in
the mandatory second stage offer to the public under the Government of India's divestment programme
of PSU shares, or for overseas direct investment in joint ventures/wholly-owned subsidiaries,
expansion of existing joint ventures or wholly-owned subsidiary operations and overseas mergers and
acquisitions. For any use of proceeds, other than as set out above, the prior permission of the RBI
would be required;
(x)
FCCB proceeds are not permitted to be used for working capital purposes, general corporate purposes
or for the repayment of existing Rupee loans;
(xi)
FCCB proceeds may not be used for on-lending and investment in capital markets or acquiring a
company (or a part thereof) in India and real estate (other than permitted development of integrated
townships);
(xii)
proceeds from the issue of the FCCBs after deduction of the amounts equal to commissions, fees and
expenses of the arranger (provided that such amounts do not exceed the prescribed ceiling) must be
parked overseas until actual requirement in India;
(xiii)
issue-related expenses shall not exceed 4 per cent of issue size for public issues and 2 per cent for
private placements.

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On 31 January 2004, the RBI issued a revised policy with effect from 1 February 2004 for External Commercial
Borrowings, which is also applicable to FCCBs (the "Borrowing Policy"), permitting Indian corporations to
raise funds up to US$500 million under the automatic approval route. Borrowings in excess of US$500 million
require the approval of the RBI. In terms of the Borrowing Policy, FCCBs up to US$20 million must have a
minimum average maturity period of three years and FCCBs above US$20 million and up to US$500 million
must have a minimum average maturity of five years. Further, the "all-in cost" ceiling for FCCBs having a
minimum average maturity period of three to five years should not exceed 200 basis points over six month
LIBOR and in the case of FCCBs having a minimum average maturity period of more than five years should not
exceed 350 basis points over six month LIBOR. The RBI has yet to amend the Overseas Direct Investment
Regulations to give effect to the Borrowing Policy. Further, on 1 April 2004, the RBI issued a circular stating,
inter alia, the following:
(i)
end use of FCCBs for working capital, general corporate purpose and repayment of existing rupee
loans is not permitted;
(ii)
the maximum amount of FCCBs that may be raised by an eligible borrower under the automatic route
is US$500 million or its equivalent during a financial year; and
(iii)
the primary responsibility to ensure that FCCBs raised/utilised are in conformity with the RBI
instructions is that of the concerned borrower and any contravention of the FCCB guidelines will be
viewed seriously and may invite penal action.

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INDIAN GOVERNMENT AND OTHER APPROVALS

This offering is being made entirely outside India. This Offering Circular may not be distributed directly or
indirectly in India or to residents of India and the Bonds are not being offered or sold and may not be offered or
sold directly or indirectly in India or to, or for the account or benefit of, any resident of India. Each purchaser of
Bonds will be deemed to represent that it is neither located in India nor a resident of India and that it is not
purchasing for, or for the account or benefit of, any such person, and understands that the Bonds will bear a
legend to the effect that the securities evidenced thereby may not be offered, sold, pledged or otherwise
transferred to any person located in India, to any resident of India or to, or for the Bonds account of, such
persons, unless the Company may determine otherwise in compliance with applicable law.
Automatic Route
In terms of the FCCB Scheme and the FEM Regulations, read in conjunction with Circular No. 7 on external
commercial borrowings issued by the RBI, Indian companies are permitted to issue FCCBs in principal amount
greater than US$20 million and up to US$500 million or equivalent, with a minimum average maturity of five
years, under the automatic route in the manner set forth therein, subject to compliance with certain conditions
specified therein. The Company is required to make periodic filings with the RBI with respect to the Bonds.
In terms of the existing policy on foreign investment in India (See "Foreign Investment and Exchange Controls Foreign Direct Investment"), foreign direct investment in the Company is permitted under the automatic route
and non-resident investors are permitted to hold up to 100 per cent. of the equity capital of the Company. The
Shares issued on conversion of the Bonds are to be listed on the principal Indian stock exchanges on which the
Shares of the Company are now listed. The Company has undertaken to apply for an "in principle" approval
from the NSE and the BSE for the listing of the Shares issuable on conversion of the Bonds on such stock
exchanges. This Offering Circular will be filed with each Indian stock exchange on which the Company's Shares
are listed for information purposes only.
Pricing of a FCCB Issue
Pursuant to a recent amendment of the FCCB Scheme by a circular dated August 31, 2005, the RBI has, inter
alia, prescribed pricing norms for FCCB issues by Indian companies. Under this circular, the pricing of FCCB
issues is required to be at a price not less than the higher of the following two averages:
(i)

the average of the weekly high and low of the closing prices of the related shares quoted on the stock
exchange during the six months preceding the relevant date; and

(ii)

the average of the weekly high and low of the closing prices of the related shares quoted on a stock
exchange during the two weeks preceding the relevant date.
The "relevant date" in this regard has been defined to mean the date 30 days prior to the date on which
the meeting of the general body of shareholders is held, in terms of section 81(IA) of the Companies
Act to consider the proposed issue of FCCBs.

Regulatory Filings
The Company is required to make the following filings in connection with issuance of the Bonds and at the time
of conversion of Bonds into Shares:
(i)

filing with the RBI (through an authorised dealer in foreign exchange) Form No. 83;

(ii)

filing of information with the RBI subsequent to the issuance of the Bonds, which would include: total
amount of the Bonds issued, names of the investors resident outside India and number of the Bonds
issued to each of them, and the amount repatriated to India through normal banking channels duly
supported by Foreign Inward Remittance Certificates;

(iii)

filing of return of allotment with the ROC of NCT of Delhi & Haryana at its office in New Delhi at the
time of conversion of Bonds into Shares;
Page 138

(iv)

filing of information with the RBI on conversion of Bonds into the Shares in the prescribed Form FCGPR;

(v)

monthly filing with the RBI (through an authorised dealer in foreign exchange) in the prescribed Form
No. ECB-2; and

(vi)

filing of this Offering Circular with the Indian Stock Exchanges.

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TAXATION

The following is a summary of the principal Indian tax consequences for non-resident investors of the Bonds
who acquire the Bonds pursuant to this Offering Circular. The summary details the tax consequences for nonresident investors only in relation to the Bonds and the Shares issuable upon conversion of the Bonds. The
summary only addresses the tax consequences for non-resident investors who hold the Bonds or the Shares
issued on conversion of Bonds as capital assets and does not address the tax consequences which may be
relevant to other classes of non-resident investors, including dealers. The summary proceeds on the basis that
the investor continues to remain a non-resident when the income by way of dividends and capital gains is
earned. The summary is based on Indian tax laws as in force as at the date of this Offering Circular and is
subject to change. This summary is not intended to constitute a complete analysis of all the tax consequences for
a non-resident investor under Indian law in relation to the acquisition, ownership and disposal of the Bonds or
Shares issuable upon conversion of the Bonds. Potential investors should therefore consult their own tax
advisers on the tax consequences of such acquisition, ownership and disposal of the Bonds or the Shares under
Indian law including specifically, the tax treaty between India and their country of residence and the law of the
jurisdiction of their residence.
The following discussion describes the material Indian income tax, stamp duty and estate duty consequences of
the purchase, ownership and disposal of the Bonds and the Shares issuable upon conversion of the Bonds. The
Income Tax Act is the law relating to taxation of income in India. The Income Tax Act provides for the taxation
of persons resident in India on their global income and persons not resident in India on income received,
accruing or arising in India or deemed to have been received, accrued or arisen in India. This summary is based
on the provisions of Section 115AC of the Income Tax Act and other applicable provisions of the Income Tax
Act and the FCCB Scheme promulgated by the Indian Government (together referred to as the "Tax Regime").
Taxation of Income from Bonds
The Tax Regime provides that payment of interest on the Bonds paid to the non-resident Bondholders will be
subject to withholding tax at the rate of 10 per cent. plus surcharge at the applicable rate. The Income Tax Act
requires that such tax be withheld at source. Under the FCCB Scheme, the transfer of Bonds outside India by a
non-resident holder to another non-resident shall not give rise to any capital gains tax in India. However, Section
115AC of the Income Tax Act provides that income by way of long-term capital gains arising from the transfer
of Bonds outside India by the non-resident holder to another non-resident is subject to tax at the rate of 10 per
cent. In the circumstances, if at all, that capital gains arising from a transfer of Bonds are taxable under the
Income Tax Act, the same shall be subject to tax as long-term capital gains at the rate of 10 per cent. plus
surcharge at the applicable rate if such Bonds have been held by the non-resident holder for more than 12
months. In the event that such Bonds have been held by the non-resident holder for less than 12 months, the
capital gains shall be subject to tax as short-term capital gains at the normal income tax rates applicable to nonresidents under the provisions of the Income Tax Act.
It is unclear whether capital gains derived from the sale by a non-resident investor of rights in respect of Bonds
will be subject to tax liability in India. This will depend on the view taken by Indian tax authorities on the
position with respect to the situs of the rights being offered in respect of the Bonds. The premium payable by the
Company to a non-resident Bondholder upon redemption of the Bonds will be taxed as long-term capital gains
at the concessional rate of 10 per cent. plus surcharge at the applicable rate if the Bonds have been held by the
non-resident holder for more than three years. In the event that the Bonds have been held by the non-resident
holder for less than three years, the capital gains due to payment of premium on redemption of the Bonds shall
be subject to tax as short-term capital gains at the normal income tax rates applicable to non-residents under the
provisions of the Income Tax Act. Withholding tax on capital gains due to payment of premium on redemption
of the Bonds is required to be deducted under Section 195 of the Income Tax Act at the prescribed rates.
Taxation of Shares Issued upon Conversion of Bonds
The conversion of Bonds into Shares, will not give rise to any capital gains liable to income tax in India.
However, the issue of Shares by the Company upon conversion of Bonds will be chargeable to stamp duty as
described below under "Stamp Duty".

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Taxation of Dividends
Dividends paid to a non-resident holder of Shares issued upon conversion of Bonds are not presently liable to
tax. However, the Company is liable to pay a "dividend distribution tax" currently at the rate of approximately
12.5 per cent. Additionally, there is a surcharge at 10 per cent. levied on the dividend distribution tax and a 3 per
cent. education cess levied on the sum of the dividend distribution tax and the surcharge. Hence, the effective
rate of dividend distribution tax is 14.03 per cent. The Company assumes the responsibility for the payment of
such tax.
Taxation on Sale of the Shares
Sale of the Shares by any holder thereof may occasion certain incidence of tax in India, as is discussed below.
Under applicable law, a transaction of sale of Shares may be chargeable to a transaction tax and/or tax on
income by way of capital gains. Capital gains accruing to a non-resident investor on the sale of the Shares,
whether to an Indian resident or to a person resident outside India and whether in India or outside India, may be
subject to Indian capital gains tax in certain instances as described below.
Sale of the Shares on a Recognised Stock Exchange
In accordance with applicable Indian tax laws, any income arising from a sale of the shares of an Indian
company through a recognised stock exchange in India is subject to securities transaction tax. Such tax is
payable by a person irrespective of its residential status and is to be collected by the recognised stock exchange
in India on which the sale of the shares is effected.
Capital gains (calculated in the manner set forth in the following paragraph) realised in respect of Shares held by
the non-resident investor for more than 12 months will be treated as long-term capital gains and will not be
subject to tax in the event such transaction is chargeable to securities transaction tax. Capital gains (calculated in
the manner set forth in the following paragraph) realised in respect of Shares held by the non-resident investor
for 12 months or less will be treated as short-term capital gains and will be subject to tax at the rate of 10 per
cent. plus surcharge at the rate of 2.5 per cent., in the event such transaction is chargeable to securities
transaction tax. Withholding tax on capital gains on sale of the Shares is required to be deducted under Section
195 of the Income Tax Act at the prescribed rates.
For the purpose of computing capital gains tax on the sale of the Shares, the cost of acquisition of the Shares
issued upon conversion of the Bonds would be the market price of the Shares on the BSE or the NSE on the date
of conversion. For the purpose of computing capital gains on sale of Shares, the sale consideration received or
accruing on such sale shall be reduced by the cost of acquisition of such Shares and any expenditure incurred
wholly and exclusively in connection with such sale. However, there is no corresponding provision in the
Income Tax Act as to the cost of acquisition of the Shares being the price prevailing on the date of conversion as
explained above.
Sale of the Shares otherwise than on a Recognised Stock Exchange
Capital gains (calculated in the manner set forth above) realised in respect of Shares held by the non-resident
investor for more than 12 months will be treated as long-term capital gains and will be subject to tax at the rate
of 10 per cent. plus surcharge at the rate of 2.5 per cent. Capital gains (calculated in the manner set forth above)
realised in respect of Shares held by the non-resident investor for 12 months or less will be treated as short-term
capital gains and will be subject to tax at the normal income tax rates applicable to non-residents under the
provisions of the Income Tax Act. Withholding tax on capital gains on sale of the Shares is required to be
deducted under Section 195 of the Income Tax Act at the prescribed rates.
Capital Losses
The losses arising from a transfer of a capital asset in India can only be set off against capital gains and not
against any other income in accordance with the Income Tax Act. A long-term capital loss may be set off only
against a long-term capital gain. To the extent that the losses are not absorbed in the year of transfer, they may
be carried forward for a period of eight assessment years immediately succeeding the assessment year for which
the loss was first computed and may be set off against the capital gains assessable for such subsequent
Page 141

assessment years. In order to get the benefit of set-off of the capital losses in this manner, the non-resident
investor would be required to file appropriate and timely tax returns in India and undergo the usual assessment
procedures. If the investors are covered by the securities transaction tax regime, the loss arising from the transfer
of a long-term capital asset may not be available for set-off against capital gains.
Tax Treaties
The above mentioned tax rates and the consequent taxation shall be subject to any benefits available to a nonresident investor under the provisions of any agreement for the avoidance of double taxation entered into by the
Indian Government with the country of residence of such non-resident investor.
Stamp Duty
Upon issuance of the Shares upon conversion of the Bonds, stamp duty as applicable would need to be paid
regardless of whether such Shares are issued in physical or dematerialised form. If the Shares are issued in
physical form, the transfer of the Shares would be subject to stamp duty at the rate of 0.25 per cent. (as presently
in force) of the value of the ordinary shares on the transfer date and such stamp duty customarily is borne by the
transferee. However, if the Shares are issued in dematerialised form, no stamp duty is payable on the transfer of
the Shares in dematerialised form.
Wealth Tax, Gift Tax and Inheritance Tax
At present there are no taxes on wealth, gifts and inheritances which apply to the Bonds, or the Shares issuable
upon conversion of the Bonds.
Service Tax
Brokerage or commission fees paid to stockbrokers in connection with the sale or purchase of Shares are now
subject to an Indian service tax at a rate of 12.24 per cent. A stockbroker is responsible for collection of such
service tax at the prescribed rate and for paying the same to the relevant authority.
Tax Credit
A non-resident investor would be entitled to tax credit with respect to any withholding tax paid by the Company
or any other person for its account in accordance with the laws of the applicable jurisdiction.
Education Cess
In all the above cases, the amount of income tax and surcharge and service tax as stated above would be
increased by an education cess of 3 per cent.
Taxation on buyback of Shares
If Shares held by a non-resident investor are purchased by the Company, the non-resident investor will be liable
to pay income tax in respect of the capital gains arising on such buyback under the provisions of Indian tax laws.
The provisions of any double taxation treaty entered into by the Indian Government with the country of
residence of the non-resident investor will be applicable to the extent they are more beneficial to the nonresident investor.

Page 142

SUBSCRIPTION AND SALE

The Lead Manager has, pursuant to the Subscription Agreement agreed with the Company, subject to the
satisfaction of certain conditions, to subscribe, or procure subscribers for, the principal amount of Bonds at 100
per cent. of their principal amount, less a management fee and an underwriting commission.
The Subscription Agreement entitles the Lead Manager to terminate it in certain circumstances prior to payment
being made to the Company.
The Lead Manager and certain of its subsidiaries or affiliates have performed certain investment banking and
advisory services for the Company from time to time for which they have received customary fees and
expenses. The Lead Manager may, from time to time, engage in transactions with and perform services for the
Company in the ordinary course of its business.
General
The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Bonds
is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering
Circular or any offering material are advised to consult with their own legal advisers as to what restrictions may
be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of
an offer or invitation in any circumstances in which such offer or invitation is not authorised.
The Lead Manager has represented and agreed that it understands that no action has been or will be taken in any
jurisdiction by the Company or the Lead Manager that would permit a public offering, or any other offering
under circumstances not permitted by applicable law, of the Bonds or the Shares issuable on conversion of the
Bonds, or possession or distribution of this Offering Circular, any amendment or supplement thereto issued in
connection with the proposed re-sale of the Bonds or any other offering or publicity material relating to the
Bonds or the Shares issuable on conversion of the Bonds, in any country or jurisdiction where action for that
purpose is required. Accordingly, the Lead Manager has represented and agreed that neither the Bonds nor any
of the Shares issuable on conversion of the Bonds may be offered or sold, directly or indirectly, and neither this
Offering Circular nor any other offering material or advertisements in connection with the Bonds or the Shares
issuable on conversion of the Bonds may be distributed or published, by the Company or the Lead Manager in
or form any country or jurisdiction, except in compliance with all applicable rules and regulations of any such
country or jurisdiction.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a "Relevant Member State"), the Lead Manager has represented and agreed that with effect
from and including the date on which the Prospectus Directive is implemented in that Relevant Member State
(the "Relevant Implementation Date") it has not made and will not make an offer of Bonds to the public in that
Relevant Member State prior to the publication of a prospectus in relation to the Bonds which has been
approved by the competent authority in that Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance
with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation
Date, make an offer of Bonds to the public in that Relevant Member State at any time:
(a)

to legal entities which are authorised or regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose is solely to invest in securities;

(b)

to any legal entity which has two or more of (1) an average of at least 250 employees during the last
financial year; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of
more than 50,000,000, as shown in its last annual or consolidated accounts; or

(c)

in any other circumstances which do not require the publication by the Company of a prospectus
pursuant to Article 3 of the Prospectus Directive.

Page 143

For the purposes of this provision, the expression an "offer of Bonds to the public" in relation to any Bonds in
any Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the offer and the Bonds to be offered so as to enable an investor to decide to purchase or
subscribe the Bonds, as the same may be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive
2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
United Kingdom
The Lead Manager has represented and agreed that:
(1)

it has only communicated or caused to be communicated and will only communicate or cause to be
communicated any invitation or inducement to engage in investment activity (within the meaning of
section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection
with the issue or sale of any Bonds in circumstances in which section 21(1) of the FSMA does not
apply to the Company; and

(2)

it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

United States
The Bonds and the Shares to be issued upon conversion of the Bonds have not been and will not be registered
under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States.
The Bonds are being offered and sold outside the United States in reliance on Regulation S under the Securities
Act.
India
The Lead Manager has represented and agreed that this Offering Circular will not be registered as a prospectus
with the RoC and that the Bonds will not be offered or sold in India, nor has it circulated or distributed nor will
it circulate or distribute this Offering Circular or any other offering document or material relating to the Bonds,
directly or indirectly, to the public or any members of the public in India.
Hong Kong
The Lead Manager has represented and agreed that (i) it has not offered or sold and will not offer or sell in Hong
Kong, by means of any document, any Bonds other than (a) to "professional investors" as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in
other circumstances which do not result in the document being a "prospectus" as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that
Ordinance; and (ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have
in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or
document relating to the Bonds, which is directed at, or the contents of which are likely to be accessed or read
by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than
with respect to Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to
"professional investors" as defined in the Securities and Futures Ordinance and any rules made under that
Ordinance.
Japan
The Lead Manager has represented and agreed that the Bonds have not been and will not be registered under the
Securities and Exchange Law of Japan (the "Securities and Exchange Law"). Accordingly, the Lead Manager
has represented, warranted and agreed that it has not, directly or indirectly, offered or sold and will not, directly
or indirectly, offer or sell any Bonds in Japan or to, or for the benefit of, any resident of Japan (which term as
used herein means any person resident in Japan, including any corporation or other entity organised under the
laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of,

Page 144

any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in
compliance with, the Securities and Exchange Law and other relevant laws and regulations of Japan.
Singapore
The Lead Manager has acknowledged that this Offering Circular has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, the Lead Manager has represented, warranted and agreed that it
has not offered or sold any Bonds or caused such Bonds to be made the subject of an invitation for subscription
or purchase and will not offer or sell such Bonds or cause such Bonds to be made the subject of an invitation for
subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering
Circular or any other document or material in connection with the offer or sale, or invitation for subscription or
purchase, of such Bonds, whether directly or indirectly, to persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a
relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with
the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
The Bonds may not be sold within the period of 6 months from the date of the initial acquisition by the owner to
any person other than to (a) an institutional investor; (b) a relevant person as defined in section 275 (2); or (c)
any person pursuant to an offer referred to in section 275 (1A) of the SFA.
Note:
Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole
business of which is to hold investments and the entire share capital of which is owned by one or more
individuals, each of whom is an accredited investor; or

(b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary (which shall include a unitholder of a business trust and a participant of a collective
investment scheme) of the trust is an individual who is an accredited investor,
the shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights
and interest (howsoever described) in that trust shall not be transferred within six months after that
corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the
SFA except:

(1)

to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person
defined in Section 275(2) of the SFA, or to any person pursuant to Section 275(1A), and in accordance
with the conditions specified in Section 275 of the SFA;

(2)

where no consideration is or will be given for the transfer; or

(3)

where the transfer is by operation of law.

Notice to Investors
Except in certain limited circumstances, interests in the Bonds may only be held through interests in the Global
Certificate. Such interests in the Global Certificate will be shown on, and transfers thereof will be effected only
through, records maintained by Euroclear and Clearstream, Luxembourg and their respective direct and indirect
participants.
Each purchaser of the Bonds, by accepting delivery of such Bonds, will be deemed to have acknowledged and
represented to and agreed as follows (terms used herein that are defined in Regulation S are used as defined
therein):

Page 145

(1)

(2)

(3)

(4)
(5)

(6)

The Bonds and the Shares issuable upon conversion of the Bonds have not been and are not expected to
be registered under the Securities Act or with any securities regulatory authority of any state of the
United States and are subject to significant restrictions on transfer.
Each owner purchasing prior to the expiration of 40 days after the later of the commencement of the
offering of the Bonds and the last related Issue Date (the "Distribution Compliance Period") is
purchasing the Bonds in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of
Regulation S.
The Bonds and the Shares issuable upon conversion of the Bonds may not be sold, pledged or
transferred to, or for the account or benefit of, any U.S. person during the Distribution Compliance
Period.
The purchaser is not located in India, is not a resident of India and is not purchasing for, or for the
account or benefit of any US person during the Distribution Compliance Period.
Such owner will not offer, sell, pledge or otherwise transfer any interest in the Bonds or the Shares
issuable upon conversion of the Bonds except as permitted by the applicable legend set forth in
paragraph (5) below.
The Bonds will bear legends to the following effect, unless the Company determines otherwise in
compliance with applicable law, and that it will observe the restrictions contained therein:

THE BONDS ("BONDS") EVIDENCED HEREBY AND THE SHARES OF KLG SYSTEL LIMITED
ISSUABLE UPON CONVERSION OF THE BONDS HAVE NOT BEEN AND ARE NOT EXPECTED TO
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND PRIOR TO THE EXPIRATION OF 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING OF THE BONDS AND THE LAST RELATED ISSUE DATE
(THE "DISTRIBUTION COMPLIANCE PERIOD"), SUCH BONDS AND SHARES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY U.S. PERSON.
EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE BONDS EVIDENCED
HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING AND
FOLLOWING RESTRICTIONS.
UPON THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD, THIS LEGEND (BUT NOT
THE LEGEND SET OUT IN THE IMMEDIATELY FOLLOWING PARAGRAPH) SHOULD BE
REMOVED AND THE BONDS EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON
CONVERSION OF THE BONDS SHALL NO LONGER BE SUBJECT TO THE RESTRICTIONS
PROVIDED IN THIS LEGEND, PROVIDED THAT AT SUCH TIME AND THEREAFTER THE OFFER OR
SALE OF THE BONDS EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION OF
THE BONDS WOULD NOT BE RESTRICTED UNDER ANY APPLICABLE SECURITIES LAWS OF THE
UNITED STATES OR OF THE STATES OR TERRITORIES OF THE UNITED STATES.
EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE BONDS EVIDENCED
HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES THAT (I) IT IS NOT LOCATED IN
INDIA, (II) IT IS NOT A RESIDENT OF INDIA AND (III) IT IS NOT PURCHASING FOR, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY SUCH PERSON THE BONDS EVIDENCED HEREBY OR THE
SHARES OF KLG SYSTEL LIMITED ISSUABLE UPON CONVERSION OF THE BONDS AND UNLESS,
IN ANY SUCH CASE, THE COMPANY DETERMINES OTHERWISE, IN COMPLIANCE WITH
APPLICABLE LAW, THE BONDS EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, TO ANY RESIDENT OF
INDIA OR TO, OR FOR THE ACCOUNT OF, ANY SUCH PERSON.
(7)
(8)

The Company has the absolute right at its discretion to reject all or part of any application for the
Bonds and return the subscription monies accordingly without interest.
Such owner is entitled to subscribe for the Bonds under the laws of all jurisdictions, which apply to it
and it has fully observed such laws and has obtained all necessary consents and completed all necessary
formalities.

Page 146

GENERAL INFORMATION
(1)

The Company is incorporated in India under registration number 05-34348. The Company's registered
office is Plot No. 70A, Sector- 34, EHTP, Gurgaon-122004, Haryana, (India).

(2)

The issue of the Bonds and the Shares issuable on conversion of the Bonds was authorised by an
extraordinary general meeting of the shareholders of the Company held on February 10, 2007. The terms
of the offering and the issue of the Bonds were approved by resolution of the Board of Directors passed
on January 8, 2007.

(3)

The Company has undertaken to apply to have the Shares issue on conversion of the Bonds approved for
listing on the NSE and the BSE, and approval in-principle has been received for the listing of the Bonds
on the SGX-ST. So long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require,
the Company shall appoint and maintain a paying agent in Singapore, where the Bonds may be presented
or surrendered for payment or redemption, in the event that the Global Certificate is exchanged for
Certificates in definitive form. In addition, in the event that the Global Certificate is exchanged for
Certificates in definitive form, announcement of such exchange shall be made by or on behalf of the
Company through the SGX-ST and such announcement will include all material information with respect
to the delivery of the Certificates in definitive form, including details of the paying agent in Singapore.

(4)

Copies of the Memorandum and Articles of Association of the Company and copies of the Trust Deed
and the Agency Agreement will be available for inspection during usual business hours on any weekday
(except Saturdays and public holidays) at the Company's registered office and at the specified office of
the Principal Agent.

(5)

Copies in English of the Company's audited annual financial statements for the years ended March 31,
2004, 2005 and 2006 and the unaudited nine months ended December 31, 2005 and 2006 statements,
prepared in accordance with Indian GAAP, may be obtained during usual business hours at the office of
the Principal Agent subject to provision of such financial statements by the Company to the Principal
Agent.

(6)

The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg with a
Common Code of 029029172. The International Securities Identification Number for the Bonds is
XS0290291722.

(7)

The Company has obtained all consents, approvals and authorisations in India required in connection
with the issue of the Bonds.

(8)

There has been no significant change in the financial or trading position of the Company since December
31, 2006 and no material adverse change in the financial position or prospects of the Company since
December 31, 2006.

(9)

The Company is not involved in any litigation or arbitration proceedings or any regulatory investigations
relating to claims or amounts which are material in the context of the issue of the Bonds or to the
Company's results of operations.

(10)

The financial statements of the Company as at and for the years ended March 31, 2004, 2005 and 2006
have been audited by B. Bhushan & Co., Chartered Accountants as stated in its reports appearing herein
and therein.

(11)

Subject to the relevant provisions of the Civil Code, submission by the Company to the jurisdiction of the
English courts, and the appointment of an agent for service of process, are valid and binding under Indian
law. The choice of English law as the governing law, under the laws of India, is a valid choice of law and
should be honoured by the courts of India, subject to proof thereof and considerations of public policy.

(12)

The Trustee is entitled under the Trust Deed to rely without liability to the Bondholders on any certificate
Page 147

prepared by the directors or Authorised Officers (as defined in the Trust Deed) of the Company and
accompanied by a certificate or report prepared by the auditors of the Company or an internationally
recognised firm of accountants, whether or not addressed to the Trustee, and whether or not the same are
subject to any limitation on the liability of that internationally recognised firm of accountants and
whether by reference to a monetary cap or otherwise limited or excluded.
(13)

The Conditions do not provide Bondholders with any participating rights in the event of a takeover offer
for the Shares.

(14)

There has been no material adverse change in the financial position or prospects of the Company since
December 31, 2006.

(15)

Application Approval in-principle has been received for the listing of Bonds on the SGX-ST. Application
will be made to list the Shares issued on conversion of the Bonds on the BSE and the NSE. There is no
assurance that such listings will be granted or maintained.

(16)

Copies of the following documents will be available for inspection and collection during usual business
hours on any weekday (Saturdays, Sundays and public holidays excepted) at the specified office of the
Principal Paying and Conversion Agent in London and the specified office of the Principal Paying and
Conversion Agent free of charge for so long as any of the Bonds shall remain outstanding and for so long
as the Bonds remain listed on the Singapore Stock Exchange:
(i)
this Offering Circular and any Supplementary Offering Circular required to be so produced;
(ii)
the Trust Deed;
(iii)
the Paying and Conversion Agency Agreement;
(iv)
the most recent published annual audited accounts of the Company for the year ended 31 March
2006 and the annual audited accounts published thereafter; and
(v)
the quarterly audited results of the Company for the nine months ended December 2006 and
thereafter.

(17)

The annual audited accounts of the Company for the year ended 31 March 2006 will be available for
inspection and collection during usual business hours on any weekday (Saturdays, Sundays and public
holidays excepted) at the specified office of the Principal Paying and Conversion Agent in London and
the specified office of the Principal Paying and Conversion Agent free of charge for so long as any of the
Bonds shall remain outstanding and for so long as the Bonds remain listed on the Singapore Stock
Exchange.

(18)

Information contained on the Company's website www.klgsystel.com is not, and should not be, construed
as part of this Offering Circular.

Page 148

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND IAS/IFRS

The following is a general summary of significant differences between Indian GAAP and IAS/IFRS as applicable
to the Company.
The Company's financial position and results of operations have been prepared in accordance with Indian GAAP,
which differs in certain respects from IAS/IFRS. Certain significant differences between Indian GAAP and
IAS/IFRS relevant to the Company's financial position and results of operations are summarised below. There can
be no assurance that the Company's financial position and results of operations reported in accordance with
Indian GAAP would not be adversely impacted if determined in accordance with IAS/IFRS. Such summary should
not be construed to be exhaustive.
No numerical reconciliation of the financial position and results of operations under Indian GAAP and IAS/IFRS
is included in this Offering Circular. In addition, no attempt has been made to identify disclosure, presentation or
classification differences that would affect the manner in which transactions and events are presented in either the
Company's financial position or results of operations or notes thereto. Furthermore, no attempt has been made to
identify future differences between Indian GAAP and IAS/IFRS as a result of prescribed changes in accounting
standards. Regulatory bodies that promulgate Indian GAAP and IAS/IFRS have significant ongoing projects that
could affect future comparisons such as this one. Finally, no attempt has been made to identify all future
differences between Indian GAAP and IAS/IFRS that may affect either the Company's financial position or results
of operations as a result of transactions or events that may occur in the future.
SUBJECT
Investments

Foreign currency transactions

INDIAN GAAP
IAS/IFRS
Investments are classified as Investments are classified as
long-term or current, based on trading, held-to-maturity or
management's intention at the available for sale.
time of purchase.
Long-term
investments
are Investments acquired principally
carried at cost less provision for for the purpose of generating
diminution in value, which is profits from short-term price
other than temporary.
fluctuations or dealers margin are
classified as trading.
Current investments are carried Held-to-maturity investments are
at the lower of cost or fair value. investments with fixed or
determinable payments and fixed
maturity, together with the
entity's intent and ability to hold
until maturity.
Available for sale investments
are those that do not qualify as
either trading or held-to-maturity
investments.
Changes in fair value of trading
investments are recognised as
profits or losses in the income
statement.
Held to maturity investments are
carried at amortised cost.
Changes in fair value of
available for sale securities are
recognised in the statement of
equity.
Transactions in foreign currency All gains or losses arising out of
are converted at the exchange foreign exchange differences are
rate prevailing on the date of the recognised in the profit and loss
transaction. Foreign currency account.
Page 149

Discounting

Onerous contracts

Retirement benefits

monetary assets and liabilities

are restated at exchange rates
prevailing on the balance sheet
date.
Exchange differences arising on Forward exchange contracts are
conversion and translation of measured at fair value on the
monetary assets and liabilities balance sheet date. If the forward
are recognised in the profit and exchange contract is an effective
loss account, except in respect of hedge in accordance with IAS 39
liabilities for purchase of fixed (Revised), Financial Instruments:
assets where such exchange Recognition and Measurement,
differences are adjusted in the the gain or loss arising on fair
carrying cost of the fixed assets. valuation is recognised in the
statement of changes in equity. If
the hedge is ineffective, the gain
or loss is recognised in the profit
and loss account.
Premiums or discounts on
forward exchange contracts are
amortised and recognised in the
profit and loss account in the
year in which they arise, except
in respect of liabilities for the
acquisition of fixed assets where
such amortisation difference is
adjusted in the carrying cost of
fixed assets.
Discounting of liabilities is not Discounting of liabilities is
permitted and provisions are permitted. Where the effect of
carried at their full value.
the time value of money is
material, the amount of a
provision should be the present
value of the expenditures
expected to be the requisite
amount to settle a provision.
The company is not required to An onerous contract is a contract
recognise any provisions on in which the unavoidable cost of
account of onerous contracts meeting the obligation exceeds
under Indian GAAP.
the economic benefits expected
to be received under it. Current
obligations
under
onerous
contracts should be recognised
and measured as a provision.
Retirement benefit liabilities are Liability for defined benefit
actuarially determined. Several obligations are determined by
alternative methodologies are calculating the present value of
considered acceptable for the future benefits using the
purpose of valuation, and the projected unit cost method and
actuary has considerable latitude stipulated method to determine
in selecting assumptions applied. assumptions. Actuarial gains and
losses arising on a periodic basis
valuation
of
liability
are
recognised based on certain
criteria.
As
a
minimum,
amortisations of an unrecognised
net gain or loss are included as a
Page 150

Compensation absences

Termination benefits

Business combinations

Dividends

component of employee costs for

the year if, as at the beginning of
the year, the unrecognised net
gain or loss exceeds 10 per cent.,
of
the
projected
benefit
obligation. Actuarial gains or
losses are amortised based on the
expected average remaining
working lives of the employees.
Vacation accrual or leave Compensation
absences
encashment is regarded as a outstanding at the balance sheet
retirement benefit and is reported date are reported as a liability
at the actuarially determined and are priced at prevailing
present value of future benefits. salary rates.
Compensation paid to employees Compensation paid to employees
under
voluntary
retirement under
voluntary
retirement
schemes are amortised over a schemes are recognised in the
period of 48 months.
income statement in the period of
incurrence of the expenditure.
Net present value of pensions Termination benefits that fall due
payable to employees who opt more than 12 months following
for retirement under an "Early the balance sheet date are
separation scheme" are amortised discounted using the rate
over 36 months on the basis of determined by reference to
actuarial valuation.
market yields on high quality
corporate bonds at the balance
sheet date. In countries where
there is no deep market in
corporate bonds, the market yield
on Government bonds is used.
Transfer of assets and liabilities All business combinations, other
of an entity, as a consequence of than those between entities under
an amalgamation pursuant to the common control, are accounted
provisions of the Companies Act, for using the purchase method.
is accounted for in a manner As at the effective date of
consistent with "pooling of business combination, the cost of
interests". Accordingly, assets acquisition is allocated to the
and liabilities of the transferor identifiable assets, liabilities and
entity are taken over at their contingent liabilities of the
book values on the effective date acquired entity at their fair value.
Fair values are determined in
of the amalgamation.
accordance with IFRS 3,
Business Combinations.
Accounting under the pooling of
interest method is not permitted
except for business combinations
of entities under common
control.
Dividends are recognised as an Dividends are recognised as an
appropriation from profits and appropriation from profits and
recorded as a liability at the recorded as a liability in the
balance sheet date if proposed or period they are declared.
declared subsequent to the
reporting period, but before
approval of the financial
statements.
Page 151

Depreciation on fixed assets

Borrowing costs

Issuance and
borrowings

redemption

Deferred income taxes

costs

Depreciation
is
generally The depreciation of property,
provided on a straight-line basis plant and equipment is allocated
at rates prescribed in Schedule on a systematic basis over its
XIV of the Companies Act. useful life.
These are minimum rates and
companies are permitted to
charge depreciation at a higher
rate.
Borrowing
costs
directly Borrowing costs are recognised
attributable to the acquisition, as an expense in the period in
construction or production of a which they are incurred and
qualifying asset are capitalised as calculated using an effective
a part of the cost of that asset. interest rate method. Borrowing
Other borrowing costs are costs include amortisation of
recognised as an expense in the transaction costs incurred in the
period in which they are initial
arrangement
of
incurred. Costs incurred include borrowings.
Alternatively
interest and other fees paid in borrowing costs attributable to
connection with the arrangement the purchase, construction or
of borrowings.
production of an asset may be
capitalised.
of Debt
issuance
costs
and Debt
issuance
costs
are
prepayment premiums may be amortised using the effective
(a) amortised and charged as an interest rate method over the
expense or (b) charged as an period of the debt. Prepayment
expense or (c) charged to a premiums are recognised in the
Securities Premium Account.
profit and loss account in the
period of prepayment.
Deferred tax assets and liabilities Deferred income taxes are
arising as a consequence of recognised for the future tax
timing
differences
between effects of temporary differences
accounting and taxable income between the accounting and tax
are measured using the tax rates base of assets and liabilities at
and laws that have been enacted tax rates and laws enacted or
or substantively enacted at the substantively enacted at the
balance sheet date.
balance sheet date.
Deferred tax assets relating to Deferred
tax
assets
are
unabsorbed tax depreciation or recognised for carry forward tax
carry forward tax losses are losses and unused tax credits to
recognised only to the extent that the extent that it is probable that
there
is
virtual
certainty future taxable profits will be
supported
by
convincing available against which the carry
evidence that sufficient future forward losses and unused tax
taxable income will be available credits can be utilised.
against which such deferred tax
assets can be realised.
All other deferred tax assets are
recognised and carried forward
only to the extent that there is a
"reasonable
certainty"
that
sufficient future taxable income
will be available against which
such deferred tax assets can be
realised.

Page 152

INDEX TO FINANCIAL STATEMENTS

rticulars Page Nos.
Particulars
Auditors report on the Financial Statements for the year ended 31 March
2005
Auditors report on the Financial Statements for the year ended 31 March
2006
Auditors report on the Consolidated Financial Statements for the year ended
31 March 2004
Auditors report on the Consolidated Financial Statements for the year ended
31 March 2005
Auditors report on the Consolidated Financial Statements for the year ended
31 March 2006
Consolidated comparative financial Statements of the Company for three
years
Audited Balance Sheets, Profit & Loss Accounts and Cash flow statements
for the year ended March 2006
Unaudited Quarterly results for the nine months period ended December
31,2006

153

Page Nos.
154
157
160
161
162
163
180
200

AUDITORS REPORT 2005

To the members of KLG Systel Limited
We have audited the attached Balance Sheet of KLG Systel Limited as on March 31, 2005 and also the
Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in India. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
As required by the Companies (Auditors Report) (Amendment) Order, 2004 [Order] issued by the
Central Government in terms of sub-section (4A) of section 227 of the Companies Act, we enclose in
the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.
Further to our comments in Annexure referred to above, we report that:
(a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been maintained by the
Company so far as appears from our examination of those books and proper returns
adequate for the purposes of our audit have been received from branches not visited by
us.
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this
report are in agreement with the books of account maintained by the Company.
(d) In our opinion Balance Sheet, Profit and Loss Account and Cash Flow Statement referred
to in this report comply with the accounting standards referred to in sub-section (3C) of
section 211 of the Companies Act.
(e) On the basis of written representations received from the directors, as on March 31, 2005
and taken on record by the Board of Directors, we report that none of the directors is
disqualified as on March 31, 2005 from being appointed as a director in the terms of
clause (g) of sub-section (1) of section 274 of the Companies Act.
(f) In our opinion and to the best of our information and according to the explanations given
to us, the said accounts read together with notes and accounting policies thereon, give the
information required by the Companies Act, in the manner so required and give a true and
fair view in conformity with the accounting principles generally accepted in India:
i).
ii).
iii).

in the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2005;
in the case of the Profit and Loss Account, of the profit earned by the Company
for the year ended on that date; and
in the case of the Cash Flow Statement, of the cash flows for the year ended on
that date.

EC-13, Inderpuri,
New Delhi 110012

B.Bhushan & Co.

Chartered Accountant
By the hand of

May 31, 2005

Kamal Ahluwalia
Partner
Membership no. 93812

154

ANNEXURE TO AUDITORS REPORT(referred to in our report of even date)

i)

a)

The Company is maintaining proper records showing full particulars including

quantitative details and situation of fixed assets.

b) The fixed assets were physically verified by the management at reasonable intervals
during the year and no material discrepancies were noticed on such verification as
compared to book records.

ii)

c)

The Company has not disposed off any substantial part of its fixed assets during the year.

a)

The inventory has been physically verified by the management at reasonable intervals
during the year.

b) In our opinion, the procedures for physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the Company and the
nature of its business.
c)

The Company is maintaining proper records of inventory. No discrepancies were noticed

on physical verification of inventory as compared to the book records.

iii)

The Company has neither granted nor taken any loans, secured or unsecured, to/from
companies, firms or other parties covered in the register maintained under section 301 of the
Companies Act.

iv)

In our opinion and according to the information and explanations given to us, there are
adequate internal control systems commensurate with the size of the Company and the nature
of its business with regard to purchase of inventory, fixed assets and with regard to the sale of
goods and services. Further, on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us, we have neither
come across nor have been informed of any continuing failure to correct major weaknesses in
the aforesaid internal control systems.

v)

a)

In our opinion and according to the information and explanations given to us, there are no
transactions that are required to be entered into the register in pursuance of section 301 of
the Companies Act.

b) In our opinion and according to the information and explanations given to us, there are no
transactions made in pursuance of contracts or arrangements entered into the register in
pursuance of section 301 of the Companies Act.
vi)

In our opinion and according to the information and explanations given to us, the Company
has not accepted any deposits from the public within the meaning of sections 58A, 58AA or
any other relevant provisions of the Companies Act and the rules framed thereunder.

vii)

In our opinion, the Company has an internal audit system commensurate with its size and
nature of its business.

viii)

According to the information and explanations given to us, the Central Government has not
prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209
of the Companies Act in respect of activities carried out by the Company. Accordingly, clause
4(viii) of the Order is not applicable

ix)

a)

According to the information and explanations given to us and the records of the
Company examined by us, in our opinion, the Company is regular in depositing the
undisputed statutory dues including provident fund, investor education protection fund,
employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty,
excise duty, cess and other statutory dues as applicable with the appropriate authorities.

155

b) According to the information and explanations given to us, there are no dues of income
tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not
been deposited with the appropriate authorities on account of any dispute.
x)

The Company has no accumulated losses as at the end of the financial year and it has not
incurred any cash losses in the financial year ended covered by our audit and in the
immediately preceding financial year.

xi)

In our opinion and according to information and explanation given to us, the Company has not
defaulted in repayment of dues to a financial institution or bank or debenture holders.

xii)

The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.

xiii)

The provisions of any special statute applicable to chit fund/ nidhi/mutual benefit fund/
societies are not applicable to the Company.

xiv)

The Company is not dealing or trading in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv)

According to information and explanation given to us, the Company has not given any
guarantees for loans taken by others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the Company.

xvi)

The Company has not obtained any term loans.

xvii)

According to the information and explanations given to us and on the basis of an overall
examination of the Balance Sheet of the Company, there no funds raised on a short term basis
which have been used for long term investment.

xviii)

The Company has not made any preferential allotment of shares to parties and companies
covered in the register maintained under section 301 of the Companies Act. Accordingly,
provisions of clause 4(xviii) of the Order are not applicable to the Company.

xix)

The Company has not issued any debenture during the year. Accordingly, the provisions of
clause 4(xix) of the Order are not applicable to the Company.

xx)

The Company has not raised any money by way of public issue during the year. Accordingly,
the provisions of clause 4(xx) of the Order are not applicable to the Company.

xxi)

Based upon the audit procedures performed and according to the information and explanations
to us, no fraud on or by the Company has been noticed or reported during the course of our
audit, that causes the financial statements to be materially misstated.

EC-13, Inderpuri
New Delhi.

B. Bhushan & Co.

Chartered Accountants
By the hand of

New Delhi
May 31, 2005

Kamal Ahluwalia
Partner
Membership no. 93812

156

AUDITORS REPORT 2006

To the members of KLG Systel Limited
We have audited the attached Balance Sheet of KLG Systel Limited as on March 31, 2006 and also the
Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in India. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
As required by the Companies (Auditors Report) (Amendment) Order, 2004 [Order] issued by the
Central Government in terms of sub-section (4A) of section 227 of the Companies Act, we enclose in
the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.
Further to our comments in Annexure referred to above, we report that:
(a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been maintained by the
Company so far as appears from our examination of those books and proper returns
adequate for the purposes of our audit have been received from branches not visited by
us.
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this
report are in agreement with the books of account maintained by the Company.
(d) In our opinion Balance Sheet, Profit and Loss Account and Cash Flow Statement referred
to in this report comply with the accounting standards referred to in sub-section (3C) of
section 211 of the Companies Act.
(e) On the basis of written representations received from the directors and taken on record by
the Board of Directors, we report that none of the directors is disqualified as on March 31,
2006 from being appointed as a director in the terms of clause (g) of sub-section (1) of
section 274 of the Companies Act.
(f) In our opinion and to the best of our information and according to the explanations given
to us, the said accounts read together with accounting policies and notes thereon, give the
information required by the Companies Act, in the manner so required and give a true and
fair view in conformity with the accounting principles generally accepted in India:
i).
ii).
iii).

in the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2006;
in the case of the Profit and Loss Account, of the profit earned by the Company
for the year ended on that date; and
in the case of the Cash Flow Statement, of the cash flows for the year ended on
that date.

EC-13, Inderpuri,
New Delhi 110012

B.Bhushan & Co.

Chartered Accountant
By the hand of

April 22, 2006

Kamal Ahluwalia
Partner
Membership no. 093812

157

ANNEXURE TO AUDITORS REPORT

(referred to in our report of even date)

i)

a)

The Company is maintaining proper records showing full particulars including

quantitative details and situation of fixed assets.

b) The fixed assets were physically verified by the management at reasonable intervals
during the year and no material discrepancies were noticed on such verification as
compared to book records.
ii)

iii)

iv).

v)

c)
a)

The Company has not disposed off any substantial part of its fixed assets during the year.
The inventory has been physically verified by the management at reasonable intervals
during the year.

b)

In our opinion, the procedures for physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the Company and the
nature of its business.

c)

The Company is maintaining proper records of inventory. No discrepancies were noticed

on physical verification of inventory as compared to the book records.

The Company has neither granted nor taken any loans, secured or unsecured, to/from
companies, firms or other parties covered in the register maintained under section 301 of the
Companies Act. Accordingly, the provisions of clause of 4(iii) of the Order are not applicable
to the Company.
In our opinion and according to the information and explanations given to us, there are
adequate internal control systems commensurate with the size of the Company and the nature
of its business with regard to purchase of inventory, fixed assets and with regard to the sale of
goods and services. Further, on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us, we have neither
come across nor have been informed of any continuing failure to correct major weaknesses in
the aforesaid internal control systems.
a)

In our opinion and according to the information and explanations given to us, there are no
transactions that are required to be entered into the register in pursuance of section 301 of
the Companies Act.

b) In our opinion and according to the information and explanations given to us, there are no
transactions made in pursuance of contracts or arrangements entered into the register in
pursuance of section 301 of the Companies Act.
vi)

In our opinion and according to the information and explanations given to us, the Company
has not accepted any deposits from the public within the meaning of sections 58A, 58AA or
any other relevant provisions of the Companies Act and the rules framed thereunder.

vii)

In our opinion, the Company has an internal audit system commensurate with its size and
nature of its business.

viii)

According to the information and explanations given to us, the Central Government has not
prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209
of the Companies Act in respect of activities carried out by the Company. Accordingly, clause
4(viii) of the Order is not applicable

ix) a)

According to the information and explanations given to us and the records of the Company
examined by us, in our opinion, the Company is regular in depositing the undisputed statutory
dues including provident fund, investor education protection fund, employees state insurance,
income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other
statutory dues as applicable with the appropriate authorities.

158

b) According to the information and explanations given to us, there are no dues of income tax,
sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been
deposited with the appropriate authorities on account of any dispute.
x).

The Company has no accumulated losses as at the end of the financial year and it has not
incurred any cash losses in the financial year ended covered by our audit and in the
immediately preceding financial year.

xi).

In our opinion and according to information and explanation given to us, the Company has not
defaulted in repayment of dues to a financial institution or bank or debenture holders.

xii).

The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.

xiii).

The provisions of any special statute applicable to chit fund/ nidhi/mutual benefit
fund/societies are not applicable to the Company.

xiv).

The Company is not dealing or trading in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv).

According to information and explanation given to us, the Company has not given any
guarantees for loans taken by others from bank or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the Company.

xvi).

In our opinion and according to the information and explanations given to us, the term loans
have been applied for the purpose for which they were raised.

xvii).

According to the information and explanations given to us and on the basis of an overall
examination of the Balance Sheet of the Company, there no funds raised on a short term basis
which have been used for long term investment.

xviii).

The Company has not made any preferential allotment of shares to parties and companies
covered in the register maintained under section 301 of the Companies Act. Accordingly,
provisions of clause 4(xviii) of the Order are not applicable to the Company.

xix).

The Company has not issued any debenture during the year. Accordingly, the provisions of
clause 4(xix) of the Order are not applicable to the Company.

xx).

The Company has not raised any money by way of public issue during the year. Accordingly,
the provisions of clause 4(xx) of the Order are not applicable to the Company.

xxi).

Based upon the audit procedures performed and according to the information and explanations
to us, no fraud on or by the Company has been noticed or reported during the course of our
audit, that causes the financial statements to be materially misstated.

EC-13, Inderpuri,
New Delhi 110012.

B.Bhushan & Co.

Chartered Accountant
By the hand of

April 22, 2006

Kamal Ahluwalia
Partner
Membership no. 093812

159

CONSOLIDATED AUDITORS REPORT 2004

We have examined the attached Consolidated Balance Sheet of KLG Systel Limited and its subsidiaries
as at March 31, 2004, and also the Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with generally accepted auditing standards in India. These standards require that we plan
and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in
all material aspects, in accordance with an identified financial reporting framework and are free of
material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the overall financial
statements. We believe that our audit provides a reasonable basis for our opinion.
The financial statements of wholly owned subsidiaries i.e. KLG Environment and Safety Sciences
Limited and First Power Utilities Distribution Limited, with total assets of Rs. 6,638,245 as at March
31, 2004 (Nil) and total revenues of Rs. 5,502,062 (Nil) for the year ended on that date have not been
audited by us. These financial statements have been audited by other auditors, and in case of First
Power Utilities Distribution Limited such financial statements have been audited upto the period ended
December 31, 2003. The reports of the auditors of the wholly owned subsidiary companies have been
furnished to us and our opinion, in so far it relates to the amounts included in respect of those wholly
owned subsidiaries, is based solely on the report of such auditors.
We report the consolidated financial statements have been prepared by the Company in accordance
with the requirements of Accounting Standard-21 Consolidated Financial Statements issued by the
Institute of Chartered Accountants of India and on the basis of the individual financial statements of
KLG Systel Limited and its wholly owned subsidiaries included in the aforesaid consolidation.
On the basis of the information and explanations given to us and on consideration of the separate audit
reports on individual audited financial statements of KLG Systel Limited, audited financial statements
of the wholly owned subsidiary KLG Environment and Safety Sciences Limited, audited financial
statements of the wholly owned subsidiary First Power Utilities Distribution Limited for the period
from April 1, 2003 to December 31, 2003, and unaudited financial statements for the period from
January 1, 2004 to March 31, 2004 and on consolidation of the same, we are of the opinion that the said
consolidated financial statements give a true and fair view in conformity with the accounting principles
generally accepted in India:
(i)

in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Limited and its subsidiary as at March 31, 2004; and

(ii)

in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date.

(iii)

In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.

EC-13, Inderpuri,
New Delhi.

B.Bhushan & Co.

Chartered Accountants
By the hand of

May 20, 2004

Kamal Ahluwalia
Partner
Membership no. 093812

160

CONSOLIDATED AUDITORS REPORT 2005

We have examined the attached Consolidated Balance Sheet of KLG Systel Limited and its subsidiaries
as at March 31, 2005, and also the Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with generally accepted auditing standards in India. These standards require that we plan
and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in
all material aspects, in accordance with an identified financial reporting framework and are free of
material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the overall financial
statements. We believe that our audit provides a reasonable basis for our opinion.
The financial statements of wholly owned subsidiaries i.e. KLG Environment and Safety Sciences Ltd.,
KLG Software Technology Pvt. Ltd. and KLG Software Technology and Infrastructure Pvt. Ltd., with
total assets of Rs. 8,996,050 (Rs. 6,638,245) as at March 31, 2005 and total revenues of Rs. 14,177,179
(Rs. 5,502,062) for the year ended on that date. The audit of KLG Software Technology Pvt. Ltd. and
KLG Software Technology and Infrastructure Pvt. Ltd., have not been conducted by us. In case of First
Power Utilities Distribution Ltd. which has ceased to be subsidiary of the Company with effect from
December 23, 2004, the results of operations have been included in the consolidated statement of Profit
and Loss upto the date of cessation. The reports of the other auditors of the wholly owned subsidiary
companies have been furnished to us and our opinion, in so far it relates to the amounts included in
respect of those wholly owned subsidiaries, is based solely on the report of such auditors.
We report the consolidated financial statements have been prepared by the Company in accordance
with the requirements of Accounting Standard-21 Consolidated Financial Statements issued by the
Institute of Chartered Accountants of India and on the basis of the individual financial statements of
KLG Systel Limited and its wholly owned subsidiaries included in the aforesaid consolidation.
On the basis of the information and explanations given to us and on consideration of the separate audit
reports on individual audited financial statements of KLG Systel Ltd., audited financial statements of
the wholly owned subsidiaries i.e., KLG Environment and Safety Sciences Ltd., KLG Software
Technology Pvt. Ltd. and KLG Software Technology and Infrastructure Pvt. Ltd., and the results of
operations of First Power Utilities Distribution Ltd. for the period from April 1, 2004 to December 23,
2004 and on consolidation of the same, we are of the opinion that the said consolidated financial
statements give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i)
in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Ltd. and its subsidiaries as at March 31, 2005;
(ii)
in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date; and
(iii)
In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.
EC-13, Inderpuri,
New Delhi.

B.Bhushan & Co.

Chartered Accountants
By the hand of

May 31, 2005

Kamal Ahluwalia
Partner
Membership no. 93812

161

CONSOLIDATED AUDITORS REPORT 2006

We have examined the attached Consolidated Balance Sheet of KLG Systel Limited and its subsidiaries
as at March 31, 2006, and also the Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement for the year ended on that date annexed thereto. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in India. These
standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are prepared, in all material aspects, in accordance with an identified financial
reporting framework and are free of material misstatements. An audit includes, examining on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by the management,
as well as evaluating the overall financial statements. We believe that our audit provides a reasonable
basis for our opinion.
The financial statements of wholly owned subsidiaries i.e. KLG Environment And Safety Sciences
Limited, KLG Software Technology Private Limited and KLG Software Technology and Infrastructure
Private Limited, has total assets of Rs. 8,802,269 (Rs. 8,996,050) as at March 31, 2006 and total
revenues of Rs. 5,175,472 (Rs. 14,177,179) for the year ended on that date. The audit of KLG Software
Technology Private Limited and KLG Software Technology and Infrastructure Private Limited have
not been conducted by us. The reports of other auditors of the wholly owned subsidiary companies
have been furnished to us and our opinion, in so far it relates to the amounts included in respect of
those wholly owned subsidiaries, is based solely on the report of such auditors.
We report the consolidated financial statements have been prepared by the Company in accordance
with the requirements of Accounting Standard-21 Consolidated Financial Statements issued by the
Institute of Chartered Accountants of India and on the basis of the individual financial statements of
KLG Systel Limited and its wholly owned subsidiaries included in the aforesaid consolidation.
On the basis of the information and explanations given to us and on consideration of the separate audit
reports on individual audited financial statements of KLG Systel Limited, audited financial statements
of the wholly owned subsidiaries i.e., KLG Environment and Safety Sciences Limited, KLG Software
Technology Private Limited and KLG Software Technology and Infrastructure Private Limited, and on
consolidation of the same, we are of the opinion that the said consolidated financial statements give a
true and fair view in conformity with the accounting principles generally accepted in India:
(i)
(ii)

(iii)

in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Limited and its subsidiaries as at March 31, 2005;
in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date; and
In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.

EC-13, Inderpuri,
New Delhi.

B.Bhushan & Co.

Chartered Accountants
By the hand of

April 22, 2006

Kamal Ahluwalia
Partner
Membership no. 93812

162

COMPARATIVE FINANCIAL STATEMENT OF THREE YEARS

KLG SYSTEL LIMITED
CONSOLIDATED BALANCE SHEET
Schedules

As at March
31, 2006
Rs.

As at March
31, 2005
Rs.

As at March
31, 2004
Rs.

Share capital

81,312,200

38,935,700

38,935,700

Reserves and surplus

Loans funds

404,438,016

391,467,246

372,840,595

Secured

74,237,267

4,710,089

7,101,889

Unsecured

1,400

Deferred tax liabilities

37,744,706

31,995,448

597,733,588

467,108,483

418,878,184

496,652,948

398,618,498

288,764,890

Less: Depreciation

166,961,519

129,133,245

96,842,043

Net block

329,691,429

269,485,253

191,922,847

Capital work in progress

43,902,877

11,801,566

SOURCES OF FUNDS
Shareholders funds

APPLICATION OF FUNDS
Fixed assets
Gross block

Investments
Current assets, loans and advances

1,000

1,391,000

4,239,602

Inventories

29,870,120

14,543,362

8,223,820

Debtors

254,680,117

187,632,200

206,995,421

Cash and bank balances

10

27,613,706

25,250,414

47,877,110

Loans and advances

11

38,200,696

59,265,681

57,274,994

350,364,639

286,691,657

320,371,345

131,820,305

109,327,927

86,949,085

218,544,334

177,363,730

233,422,260

Less: Current liabilities and provisions

12

Net current assets

Deffered Tax

13

(25,173,322)

Miscellaneous expenditure
(to the extent not written off or adjusted)

14

5,593,948

7,066,934

14,466,798

597,733,588

467,108,483

418,878,184

163

KLG SYSTEL LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Schedules

For the year

ended
March 31,
2006
Rs.

For the year

ended
March 31,
2005
Rs.

For the year

ended
March 31,
2004
Rs.

516,054,775

372,928,694

383,232,621

10,670,016

15,242,126

8,857,874

526,724,791

388,170,819

392,090,495

INCOME
Sales and services

15

Others

EXPENDITURE
Cost of sales and services

16

295,987,102

213,885,154

243,585,086

Employees remuneration and benefits

17

40,262,496

40,727,608

26,541,880

Consultancy fees

6,095,191

7,895,388

7,389,532

Travelling and conveyance

14,940,955

10,120,958

8,853,081

Communication

18

4,421,140

4,845,779

3,654,586

Administrative

19

28,425,666

22,283,474

17,388,921

Research and development

10,375,426

6,099,994

5,077,167

Training and seminars

3,115,109

1,880,247

2,240,381

Business and human resource development

4,253,893

4,575,454

7,983,528

Loss on investment in subsidiary

79,594

640,950

407,876,977

312,393,651

323,355,112

PROFIT BEFORE INTEREST, DEPRECIATION, TAX AND

AMORTISATIONS

118,847,815

75,777,168

68,735,383

Interest

2,553,261

56,076

Depreciation

39,444,575

33,301,714

27,481,593

Miscellaneous expenditure written off

1,480,148

1,877,042

2,009,333

PROFIT BEFORE TAX

Provision for taxation

75,369,831

40,542,336

39,244,458

- Current income tax

(18,043,748)

(7,075,818)

(3,625,311)

- Deferred tax

(5,749,256)

(6,998,805)

(8,495,989)

- Wealth tax

(80,962)

(28,138)

(28,755)

- Fringe benefit tax

Prior period adjustments

(1,129,955)

164

(406,848)

126,390

(68,436)

PROFIT AFTER TAX

49,959,062

26,565,966

27,025,967

Balance brought forward from last year

3,213,209

4,715,888

20,022,843

Surplus of foreign subsidiary dissolved

(341,024)

53,172,271

31,281,854

46,707,786

Interim dividend on equity shares

1,200,000

Proposed dividend on equity shares

12,112,950

5,756,475

6,956,476

Corporate dividend tax

1,698,842

964,170

891,298

Transfer to General Reserve

35,000,000

20,148,000

34,144,124

Balance carried over to Reserve & Surplus Account

4,360,479

3,213,209

4,715,888

53,172,271

31,281,854

46,707,786

APPROPRIATIONS

165

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS

As at March
31, 2006
Rs.
1.
SHARE CAPITAL
Authorised
20,000,000 (10,000,000) equity shares of Rs. 10 (Rs. 10)

As at March
31, 2005
Rs.

As at March
31, 2004
Rs.

200,000,000

100,000,000

100,000,000

82,586,000

40,209,500

40,209,500

each fully paid up

80,753,000

38,376,500

38,376,500

Add : Forfeited shares

559,200

559,200

559,200

81,312,200

38,935,700

38,935,700

Capital reserve

1,100,800

1,100,800

1,100,800

Share premium account

266,596,075

289,772,575

289,772,575

Capital profit on consolidation

451,332

451,332

451,332

Adjustment due to cessation of subsidiary

General reserve

(18,670)

(18,670)

Opening balance - Parent Company

95,000,000

75,000,000

41,055,876

1,948,000

1,800,000

1,600,000

Additions during the year

35,000,000

20,148,000

34,144,124

Profit and Loss Account

4,360,479

3,213,209

4,715,888

404,438,016

391,467,246

372,840,595

- Cash credit facilities

41,233,312

- Term loan
ICICI Bank Ltd.

25,401,963

- Vehicle loan

5,105,410

- Equipment loan

1,029,719

Sales tax deferment loan

1,466,863

4,710,089

each
Issued and subscribed
8,258,600 (4,020,950) equity shares of Rs. 10 (Rs. 10)
each
Paid up
8,075,300 (3,837,650) equity shares of Rs. 10 (Rs. 10)

2.

RESERVES AND SURPLUS

- Subsidiaries

3.

SECURED LOANS
From State Bank of India

166

7,101,889

4.

74,237,267

4,710,089

1,400

Deferred tax assets

4,799,812

5,442,918

Deferred tax liabilities

42,544,518

37,438,366

37,744,706

31,995,448

UNSECURED LOAN
From director

5.

7,101,889

DEFERRED TAX LIABILITIES (NET)

167

6. FIXED ASSETS
GROSS BLOCK
Cost as at
Additions
April 1, 2005

Deletions

Cost as at
March
31,2006

Upto March

NET BLO
CK
As at March

As at March

As at March

written back

31, 2006

31, 2006

31, 2005

31, 2004

Rs.

Rs.

Rs.

Rs.

Rs.

59,217,775

53,560,885

1,207,944

D E P R E C I AT I O N
Upto March
For the

Depreciation

31, 2005

Year

Rs.

Rs.

Rs.

during the
year
Rs.

during the
year
Rs.

Land

53,560,885

5,656,890

59,217,775

Buildings

49,192,168

45,765

49,237,933

8,927,883

1,558,844

10,486,727

38,751,206

40,264,285

41,822,982

Computers

134,154,979

42,898,375

177,053,354

76,394,533

21,979,239

98,373,772

78,679,582

57,760,446

62,732,061

Plant and machinery

26,322,650

10,833,587

37,156,237

3,513,733

3,740,429

7,254,162

29,902,075

22,808,917

3,453,945

Furniture

24,175,028

8,009,162

32,184,190

5,347,702

1,660,239

7,007,941

25,176,249

18,827,326

14,549,234

Office equipments

12,925,247

1,822,284

14,722,031

2,293,459

654,277

339

2,947,397

11,774,634

10,631,788

10,264,940

Air conditioners

8,314,745

1,634,887

9,949,632

2,099,029

414,200

2,513,229

7,436,403

6,215,716

5,763,064

Vehicles

8,369,858

6,927,757

12,031,387

3,338,356

956,492

2,693,376

9,338,011

5,031,502

5,332,938

Patent - Technology

45,864,144

21,117,977

66,982,121

11,769,620

4,873,958

16,643,578

50,338,543

34,094,524

22,931,996

Brands

35,738,794

2,379,494

38,118,288

15,448,930

3,592,407

19,041,337

19,076,951

20,289,864

23,863,743

Total

398,618,498

101,326,178

3,291,729

496,652,948

129,133,245

39,430,085

1,601,811

166,961,519

329,691,429

269,485,253

191,922,847

Previous year 2005

288,764,890

113,613,576

3,759,968

398,618,498

96,842,043

33,064,805

773,603

129,133,245

269,485,253

191,922,847

193,558,528

Previous year 2004

262,918,978

25,845,912

288,764,890

69,360,450

27,481,593

96,842,043

191,922,847

193,558,528

195,104,713

25,500
3,266,228

Rs.

168

1,601,472

7.
a)

b)

INVESTMENTS - (AT COST)

Investment in other companies
(Non trade and unquoted)
- (9,500) (-) equity shares of - (Rs. 10) each of First
Power Utilities Distribution Ltd.
- (9,500) (-) equity shares of - (Rs. 10) each of Universal

95,000

Powerone Distribution Ltd.

5 (5) (5) shares of Rs. 100 (Rs. 100) each of Apex Hotel

95,000

95,000

& Enterprises P. Ltd.

5 (5)(5) shares of Rs. 100 (Rs. 100) each of Siddhartha

500

500

500

(Vadodra) Association

500

500

500

(a)

1,000

191,000

96,000

546,983

530,685

3,065,934

Investment in others - Units

(Current, non trade and unquoted)
- (- ) (19,979) units of - (- ) Rs. 10 each of Birla Income
Plus Plan B Growth
- (-) 35,115 units of- (-) Rs. 10 each of Birla Monthly
Income Plan C Growth
- (-) '272,302 units of - (-) Rs. 10 each of Birla Bond
Plus Dividend

8.

9.

10.

- (113,394) units of - (Rs. 10) each of Tata Floating

Rate Fund Short Term Growth
(b)

1,200,000

(a+b)

1,000

1,391,000

Software licenses held for development

810,307

640,194

Value of work in process

29,059,813

13,903,168

Finished Inventories

8,223,820

29,870,120

14,543,362

8,223,820

six months

Others debts
(Unsecured and considered good)

12,239,149

Debts outstanding for a period exceeding six months

37,646,538

21,348,490

20,729,174

Others debts

217,033,579

166,283,710

174,027,098

254,680,117

187,632,200

206,995,421

4,239,602

INVENTORIES

DEBTORS
Secured and considered good
Debts outstanding for a period exceeding

CASH AND BANK BALANCES

Cash in hand

169

13,276,985

22,055,499

29,378,072

- in current account

5,733,779

2,836,362

12,567,400

- in deposit account
Balance with non scheduled banks

8,602,942

358,554

5,636,111

(including cheques in hand)

Balance with scheduled banks

11.

12.

- H.S.B.C., U.A.E - US$ Account

195,780

- H.S.B.C., U.A.E - Dhr. Account

99,748
27,613,706

25,250,415

47,877,110

- Secured and considered good

5,379,000

6,634,000

6,679,000

- Unsecured and considered good

Advance tax (net of income tax provision)

16,147,118

5,937,622

Advance to staff

3,318,576

4,095,191

6,675,462

LOANS AND ADVANCES

Advances recoverable in cash or in kind or for
value to be received

Capital advances

4,883,944

Interest accrued but not due

95,128

Security deposits

11,573,058

10,077,015

9,690,505

Earnest money deposits

5,985,190

3,497,677

11,838,777

Advances to vendors

4,718,000

12,893,730

Others

7,226,872

5,920,950

11,474,556

38,200,696

59,265,681

57,274,994

Creditors for purchases

71,904,548

27,403,630

51,598,953

Creditors for capital assets

2,049,597

40,613,866

Other liabilities

37,022,035

17,133,615

18,339,307

Unpaid dividend

999,469

949,782

708,772

Provisions

Proposed dividend on equity shares

12,112,950

5,756,475

6,956,476

Income tax (net of advance tax)

3,890,312

13,635,834

6,707,243

Gratuity

2,181,507

1,564,659

1,325,102

Leave encashment

1,578,925

2,179,924

1,194,334

Others

80,962

90,143

118,898

131,820,305

109,327,928

86,949,085

CURRENT LIABILITIES AND PROVISIONS

Current liabilities

170

13

14

DEFERRED TAX

5,185,777

Deferred tax assets

(30,359,099)

Deferred tax liabilities

(25,173,322)

Public issue expenses

396,894

926,079

Less: Written off during the year

396,894

529,185

396,894

Structuring cost

7,030,624

13,321,327

14,801,475

Less: Written off during the year

1,480,148

6,290,703

1,480,148

5,550,476

7,030,624

13,321,328

Preliminary expenses

30,800

30,800

32,681

Less: Written off during the year

469

30,800

30,800

32,212

12,672

5,510

716,364

5,593,948

7,066,934

14,466,798

For the year ended

March 31, 2006
Rs.

For the year

ended
March 31, 2005
Rs.

For the year

ended
March 31, 2004
Rs.

Sales

341,645,999

255,277,597

345,218,071

Professional fee and service charges

147,687,306

103,747,929

38,014,550

Value of work in process

28,896,470

13,903,168

518,229,775

372,928,694

383,232,621

Opening stock

640,194

8,223,820

8,928,969

Add: Purchases during the year

234,796,335

169,484,568

221,436,237

235,436,529

177,708,388

230,365,206

Less: Closing stock

810,307

640,194

8,223,820

(A)

234,626,222

177,068,194

222,141,386

MISCELLANEOUS EXPENDITURE
(to the extent not written off or adjusted)

Preoperative expenses

15.

16.

SALES AND SERVICES

COST OF SALES AND SERVICES

Cost of material utilised

171

17.

18.

19

Cost of services
(B)

61,360,880

36,816,960

21,443,700

(A+B)

295,987,102

213,885,154

243,585,086

Salary

33,524,392

33,658,255

21,860,105

Welfare contributions and benefits

3,216,073

2,831,628

2,443,554

Gratuity

994,840

513,426

952,176

Leave encashment

793,503

1,444,463

485,866

Others

1,733,688

2,279,836

800,179

40,262,496

40,727,608

26,541,880

Telephone and fax

3,234,669

4,015,394

2,823,788

Courier

985,674

682,023

624,787

Postage

200,797

148,362

206,011

4,421,140

4,845,779

3,654,586

Consumables and stationery

4,845,205

3,776,684

2,516,893

Rent, rates and taxes

5,020,374

4,703,420

4,106,735

Vehicle running and maintenance

1,704,124

1,962,323

1,903,990

Power and fuel

1,664,200

1,624,004

1,818,773

Bank charges

3,481,715

2,406,263

1,388,918

Temporary partition
Repair and maintenance

558,304

- Machinery

179,577

239,151

314,127

- Computers

172,853

227,405

92,227

- Building

445,535

301,189

232,549

- Office

699,120

735,307

- Others

107,504

110,050

223,221

Insurance

654,432

371,653

580,981

Auditors' remuneration

386,730

254,408

177,299

Membership fees

290,828

167,180

159,951

Management expenses

8,215,165

5,404,437

3,873,257

28,425,666

22,283,474

17,388,921

EMPLOYEES REMUNERATION AND BENEFITS

COMMUNICATION

ADMINISTRATIVE

172

20.

ACCOUNTING POLICIES

a)
CONVENTIONS
The consolidated financial statements have been prepared under the historical cost convention in accordance with
the Indian generally accepted Accounting principles and mandatory According Standards issued by the Institute of
Chartered Accountants of India and the provisions of the Companies Act.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in accordance with Accounting Standard 21 (AS-21)Consolidated Financial Statements issued by the institute of Chartered Accountants of India, to the extent
possible in the same format as that adopted by the parent Company for its financial statements by regrouping
recasting, recasting or rearranging figures wherever considered necessary.
The consolidation of the financial statements of the parent Company and its subsidiaries is done to the extent
possible on line by line basis by adding together like items of assets, liabilities, income and expenses. All inter
Company balances and transactions are eliminated in the process of consolidation.
RECOGNITION OF REVENUE / EXPENDITURE
Income and expenditure are accounted for on accrual basis.
Income of KLG Environment and safety Sciences Ltd. Subsidiary of parent Company is considered to accrue at the
time attaining the defined stage of an assignment i.e. defined in clients contract and terms of payment.
Expenditure incurred on research and development, technology seminar, training and business development is
inclusive of direct expenses and allocable overheads.
Dividend income is accounted in the year of receipt.
FIXED ASSETS
Goodwill arising from consolidation represents the excess of cost to parent Company of its investment in
subsidiary Company over the parent Companys portion of equity at the date on which investment in subsidiary
Company is made.
Fixed assets, including assets acquired for research and development, are capitalized at cost inclusive of direct
expenditure incurred to put the asset into use.
Fixed assets under construction, advances paid towards acquisition of fixed assets and cost of assets not put to use
before the period/year end, are disclosed as capital work in progress.
Expenditure incurred on acquiring Technology and Brands, considered to have benefit of enduring nature, is
capitalised.
DEPRECIATION
Depreciation is charged according to the straight line method at rates as specified in Scheduled in Schedule XIV of
the Companies Act Depreciation on the acquisition / purchase of assets during the year has been provided on Prorata basis according to the period each asset was put to use during the year.
Technology developed is amortised equally in 10 years from the date of capitalization.
INVESTMENTS
Investments in subsidiaries are stated at cost and provision is made to recognize any decline, other than temporary,
in the value of such investments.
Investments in units are valued at cost or marked to Market value, whichever is lower.
INVENTORY
Work in process is valued at cost
Finished goods are valued at lower of cost or net realizable value cost being determined on the First in and first
out method
EMPLOYEES BENEFITS
Leave encashment, incentive, performance base allowance; medical and other reimbursements are accounted on
accrual basis.
Periodical contribution to provident fund is charged to revenue and provision for gratuity is based on actual
valuation.
TAXES ON INCOME
Current tax provision is measured by the amount of tax expected to be paid on the taxable profits after considering
tax allowances and exemptions and using applicable tax rates and laws.

173

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences
between the financial statements, carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss carry forwards. Deferred tax assets and liabilities are measured on the timing differences
applying the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.
Changes in deferred tax assets and liabilities between one Balance Sheet date and the next are recognised in the
Profit and Loss Account in the year of change. The effect on deferred tax assets and liabilities of a change in tax
rates is recognised in the Profit and Loss Account in the year of change. Deferred tax assets are recognized only if
there is reasonable certainty that they will be realized by way of future taxable income. Deferred tax assets related
to unabsorbed depreciation and carry forward losses are recognised only to the extent that there is virtual certainty
of realisation. Deferred tax assets are reviewed for appropriateness of their carrying amounts at each Balance Sheet
date.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit after tax for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per
share is computed using the weighted average number of equity shares outstanding during the year end, except
where the results would be anti-dilutive.
FOREIGN CURRENCY TRANSLATIONS
Revenue and expenditure items, current assets, current liabilities, if any, appearing/outstanding at the year end, are
converted into equivalent Indian Rupees at the exchange rate prevailing at the year end except in cases where
actual amount has been ascertained by the time of finalisation of accounts. Investments are stated at equivalent
Indian Rupees at the exchange rate prevailing at the time of remittance.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are accounted at the exchanged rate prevailing on the date of the transaction.
Monetary items denominated in foreign currencies at the exchange rate on the date of Balance Sheet. The
exchange differences arising on such except those relating to acquisition of fixed assets are recognized as income
or expense in the profit and Loss Account.
MISCELLANEOUS EXPENDITURE
Public issue expenses are amortised over a period of ten years.
Structuring cost is amortised over a period of ten years.

21

a)

b)

c)

ii.

Iii

iv.

NOTES TO ACCOUNTS

As at March 31,
2006
Rs.

i) Contingent liabilities
Guarantees given by bankers
Deposits of Rs. 8,428,186 (Nil) held by Banks as
margin shown under the head bank balance
Estimated amount of contracts to be executed on
capital account and not provided for (net of
advances)
Claims against the Company not acknowledged as
debts
Paid up share capital includes:
34,800, (34, 800) shares allotted as fully paid up for
consideration other than cash
4,609,730 (572,080) shares allotted as fully paid up
by way of bonus shares
57,850, (57,850) shares allotted as fully paid up
under Employees Stock Plan
Unexpired installments of assets purchased on hire
purchase basis

Payment of director:
Parent Company
-Remuneration to Mr. Kumud Goel, Managing
Director

174

76,971,876

As at
March 31,
2005
Rs.

As at
March 31,
2004
Rs.

44,205,260

26,347,557

10,656,560

1,182,976

856,112

348,000

348,000

5,720,800

5,720,800

578,500

578,500

37,188,853

986,392

348,000
46,097,300

578,500
6,907,319

For the year

ended
March 31, 2006
Rs.

For the year

ended
March 31,
2005
Rs.

2,594,895

1,750,184

For the year

ended
March 31,
2004
Rs.

1,498,668

-Remuneration to Mr. K. L. Goel whole time

Director
-Remuneration to Ms. Upasana Goel, Director
-Sitting fees
-Commission paid to non executive and independent
directors
An amount of Rs. 387,811/- pertains to financial
year 2004-05 on account of commission to non
executive and independent directors
Subsidiaries
-Professional charges paid to director
V

vi) a)

Payment to auditors:
Audit fees including services tax
Other services including service tax

1,952,603

1,600,291

940,172
262,500

18,500

1,169,839

383,555
92,339
475,894

1,790,633

16,500
377,655

220,000

214,839

254,408
29,724
284,132

226,929
24,780
251,709

The consolidated financial statements includes the accounts of the Company and the subsidiaries (as listed
below). Subsidiary undertaking are those companies in which the parent Company has an interest of more
than 50% of the voting power. Subsidiary are consolidated from the date on which effective control is
acquired and are excluded from the date of cessation.

S.No.

Details of Subsidiary are as follows:

Name of Subsidiary

1.
2.
3.

KLG Environment and Safety Sciences Ltd.

KLG Software Technology Pvt. Ltd.
KLG Software Technology and Infrastructure Pvt. Ltd.

Country of
incorporation
India
India
India

% of holding
100
100
100

b)
The consolidated financial statements for the current year are not comparable with that of previous year
on account of inclusion of acquired subsidiaries and exclusion of subsidiary in the previous year.
c)
The consolidated financial statements are prepared using uniform accounting policies for the transactions
and other events in similar circumstances.
vii)

Secured Loans
From State Bank of India
Working capital facilities of Rs. 41.23 Millions in the form of cash credit secured against hypothecation of
Company's entire current assets including receivables both present and future, and also collaterally secured by, (a)
extension of first charge over the entire fixed assets, present and proposed, of the Company including equitable
mortgage over land and building at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot nos. 68,
69, 70A and passage in Plot no. 70 situated at Sector-34, Gurgaon, Haryana, and proposed building to be
constructed, (b) personal guarantees of Shri K.L.Goel, Whole Time Director of the Company and Shri Kumud
Goel, Managing Director of the Company, and (c) keyman insurance policy of Shri Kumud Goel, Managing
Director of the Company.
Term loan of Rs. 25.40 Millions under 'Rent Plus Scheme' secured against clean assignment of receivables/rentals
with power of attorney duly recorded with the lessee and also collaterally secured by, (a) extension of charge on
land and building rented at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, (b) extension of charge over
the entire fixed assets of the Company, both present and future, including equitable mortgage over land and
building at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot no. 68, 69, 70A and passage in Plot
no. 70 situated at Sector-34, Gurgaon, Haryana, and (c) extension of charge on current assets of the Company.
From ICICI Bank Ltd.
Equipment loan of Rs. 1.03 Millions secured against hypothecation of equipments namely desktops, printers,
servers, projectors, UPS, and other allied products, and also collaterally secured by way of personal guarantee of
Mr. K.L.Goel, Whole Time Director of the Company.
Equipment loan repayable within 1 (one) year is Rs. 584,640/- (Nil).
Vehicle loans of Rs. 5.105 Millions are secured against hypothecation of vehicles. Vehicle loan repayable within 1
(one) year is Rs. 2,200,092/- (Nil).
The Company availed Sales tax deferment for a period of 7 years effective from August 29, 1997, subject to a
ceiling of Rs. 84,380,625 and yearly renewal of its entitlement certificate, under Rule 28A of the Haryana General
Sales tax Act, 1973. The Company availed benefit of sales tax deferment of Rs. 9,134,418 (Rs. 9,134,418), which
has since been converted into interest free loan by District Industries Centre, (Gurgaon, Haryana) and is secured
against bank guarantees issued by bankers of the Company. The Company is required to make payment of the
deferred amount, during the period September, 2003 to August, 2006.
The Company discontinued availing the above deferment with effect from August 1, 2001 and commenced
availing the benefit of retaining 50% of sales tax collections in full settlement of future obligations as provided

175

under the provisions of Rule 28C of Haryana General Sales Tax Act, 1973. The period of benefit of retaining 50%
sales tax collections expired on August 28, 2004.
Structuring cost relate to costs incurred in connection with structuring of business transactions and strategic
investments and are stated net of recovery.
Inventory represents cost of acquisition of software licenses lying unutilised for customised development/ internal
usage.
In the opinion of the management, the current assets, loans and advances, if realised in the ordinary course of
business, would realise a sum equal to that stated in the Balance Sheet.
Unpaid dividend does not include any amount, due and outstanding, to be credited to Investor Education and
Protection Fund.
Other liabilities includes Rs. 3,825,900 (Rs. 3,825,900) received as deposits from tenants.
As per the information provided by the Company, there are no small scale industrial undertakings as defined under
section 3(J) of the Industries (Development & Regulation) Act, 1951 to whom the Company owes any sum.
The segment report prepared in accordance with accounting standard 17 'Segment Reporting' issued by the
Institute of Chartered Accountants of India.
Xvi

a.
b.
c.
d.
xvii)

S.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

12.

13

Earnings per Share (EPS)

EPS is calculated by dividing the profit attributable to the equity shareholders by the average number of
equity shares outstanding during the year. Numbers used for calculating basic and diluted earnings per
equity share are as stated below:
As at March
As at March
31,2005
31, 2006
Net profit available for equity shareholders (in Rs.)
53,172,271
26, 565,966
Number of equity shares outstanding
7,815,300
7,675,300
Nominal value of per equity share (in Rs.)
10
10
Earnings per share (a) / (b) (Basic and Diluted)
6.80
3.46*
*Adjusted EPS consequent to 1:1 bonus issue
Related Party Disclosures
Pursuant to Accounting Standard (AS18) Related Party Disclosure issued by institute of chartered
Accountants of India following parties are to be treated as related alongwith their relationship.
Related Party
Relationship between parties
K.L. Goel
Key management personnel
Kumud Goel
Key management personnel
Upasana Goel
Key management personnel
Mukesh Arora
Key management personnel
P.L. Goel
Spouse of Mr. K.L. Goel
Ritu Goel
Spouse of Mr. Kumud Goel
Mini Arora
Spouse of Mr. Mukesh Arora
KLG Environment and Safety Sciences Ltd.
Subsidiary Company
K.L.G Software Technology and Infrastructure Pvt. Ltd
Subsidiary Company
K.L.G Software Technology Pvt. Ltd.
Subsidiary Company
KLG Computers Pvt. Ltd.
Enterprises over with key
management Personnel is able to
exercise significant influence
Pushap Telecommunication Pvt. Ltd.
Enterprises over with key
management Personnel is able to
exercise significant influence
Aditi Telecom Pvt. Ltd.
Enterprises over with key
management Personnel is able to
exercise significant influence

Transactions with related parties:

Sr. No.

Nature of transactions

Related party

Amount

Payment for service as whole time director

Payment for service as managing Director
Payment for service as whole time director
Payment for service as Chief executive Officer
Salary paid
Salary paid
Rent paid for premises
Rent paid for premises
Rent paid for premises
Rent paid for premises

K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
Mini Arora
Ritu Goel
Upasana Arora
Mukesh Arora
Mini Arora
Pushap Telecommunication
Pvt. Ltd.
Aditi Telecom Pvt. Ltd.
Mukesh Arora
Mini Arora
K.L. Goel
Kumud Goel

1,952,603
2,594,895
940,172
2,695,004
346,872
114,000
480,000
178,500
178,500
300,000

Rent paid for premises

Loan refund including interest
Loan refund including interest
Amount received for preferential allotment
Amount received for preferential allotment

176

300,000
1,557,500
308,000
6,720,000
6,720,000

Amount received for preferential allotment

Amount outstanding as at March 31, 2006

KLG Computers Pvt. Ltd.

5,760,000

B.
S.No.
1.

Accounted head
Loan & advances

Related Party
Mukesh Arora
Mini Arora

Amount
2,202,500
3,176,500

xviii
Segment reporting
Segment wise revenue, results and capital employed for the period ended March 31, 2006
Rs.
In 000
For the year
ended
March 31, 2006
Rs.
1

Segment revenue
a)
b)

2.

3.

xix
xx)

For the year

ended
March 31, 2005
Rs.

Plant centric applications

420,927
305,628
Enterprises integrated applications
95,128
67,300
Total
516,055
372,928
Less: Inter segment revenue
Net sales / income from operations
516,055
372,928
Segment results
Profit) / (loss) before tax and interest from each
segment)
a) Plant centric applications
147,855
91,342
b) Enterprises integrated applications
27,075
14,040
Total
174,930
105,382
Less:
c) Interest
2,553
56
d) Other un allocable expenditure net off
97,007
64,784
Unallocable income
Profit before tax
75,370
40,542
Capital Employed
Assets and liabilities have not been segregated to any of the reportable segments, as fixed assets are
used interchangeably between segments and it is not practicable to provide meaningful segment
disclosure relating to total assets and liabilities.
Figures have been rounded off to the nearest Rupees
Figures in brackets pertain to previous year, unless, otherwise indicated.

177

CONSOLIDATED CASHFLOW STATEMENT FOR THREE YEARS

Year ended
March 31,
2006

Year ended
March 31,
2005

Year ended
March 31,
2004

Rs.

Rs.

Rs.

Profit before tax and extraordinary items

75,369,831

40,542,336

39,244,459

Depreciation

39,444,575

33,301,714

27,481,593

Miscellaneous Expenditure written off

Public issue expenses written off

396,894

Structuring cost written off

1,480,148

6,290,703

Interest paid

2,553,261

56,076

Fringe benefit tax

(1,129,955)

Interest receipts

(1,072,485)

(854,230)

Dividend receipts

(2,416,718)

Profit on sale of investments

(53,521)

(21,603)

(3,434,015)

Adjustment for deferred taxation

(5,749,256)

(6,998,805)

(8,495,989)

Adjustment of General Reserve

Adjustment of capital profit on consolidation

(18,670)

Adjustment of profit of subsidiary

Adjustment of fixed assets of subsidiary

1,766,405

Adjustment of depreciation on fixed assets of subsidiary

(236,907)

Adjustment of preoperative expenses of subsidiary

(7,162)

710,854

Share premium

Adjustment of preliminary expenses

1,412

Unrealised loss

(14,489)

Prior period adjustment

(406,848)

126,390

Loss on sale of fixed assets

1,087,917

714,210

111,502,016

73,360,061

Adjustment for trade and other receivables

(45,982,932)

14,940,777

Inventories

(15,326,758)

(6,319,542)

705,149

Trade payables and other liabilities

16,269,711

31,546,982

40,147,240

(ii)

(45,039,979)

40,168,217

(61,272,132)

(iii=i+ii)

66,462,037

113,528,278

(4,258,720)

(13,243,933)

(8,166,013)

(1,722,397)

CASH FLOW FROM OPERATION

Operating profit before working capital changes

(i)

Cash used in operations

Direct taxes paid (net)
Interim dividend paid

2,009,333

78,984
(1,109,586)
-

1,600,000
451,329
(341,024)

(748,576)
345,340

(68,436)
-

57,013,412
(102,124,521)

178

(1,356,825)

(6,720,645)

(7,847,774)

(5,411,687)

46,497,460

96,157,666

(11,392,804)

Purchase of fixed assets

(101,326,178)

(113,613,576)

(25,845,912)

Capital work in progress

(32,101,311)

(9,369,809)

Investments

1,390,000

2,848,602

Sale of fixed assets

602,000

505,747

Profit on sale on investment

53,521

21,603

3,434,015

Interest receipts

1,072,485

854,230

1,109,586

Dividend receipts

2,416,718

(130,309,483)

(116,336,485)

Issuance of equity share capital

2,000,000

Share premium received on issuance of equity share capital

17,200,000

Proceeds from long term borrowings (net)

69,527,178

(2,391,800)

Security Deposits

Proceeds from unsecued loans

1,400

Interest paid

(2,553,261)

(56,076)

Dividend paid
Net cash flow operating activities

(A)

CASH FLOW FROM INVESTING ACTIVITIES

Net cash used in investing activities

(B)

47,300,181
-

25,997,870

CASH FLOW FROM FINANCING ACTIVITIES

(2,032,529)
3,825,900
(78,984)

Net cash used in financing activities

(C)

86,175,316

(2,447,876)

1,714,387

NET INCREASE IN CASH AND CASH

EQUIVALENTS

(A+B+C)

2,363,293

(22,626,695)

16,319,453

Cash and cash equivalents - Opening balance

25,250,414

47,877,110

31,557,657

Cash and cash equivalents - Closing balance

27,613,706

25,250,414

47,877,110

Note: Figures in brackets indicate cash outflow

179

KLG SYSTEL LIMITED

BALANCE SHEET AS AT MARCH, 31, 2006
Schedule

As at March
31, 2006
Rs.

As at March 31,
2005
Rs.

1
2

81,312,200
403,600,359

38,935,700
388,547,005

3
4

74,237,267
37,424,925
596,574,750

4,710,089
31,896,358
464,089,152

493,243,767
166,476,377
326,767,390
43,902,877

397,131,965
128,953,473
268,178,492
11,048,105

Investments

3,918,524

4,108,524

Current assets, loans and advances

Inventories
Debtors
Cash and bank balances
Loans and advances

7
8
9
10

29,659,840
253,212,523
26,934,819
36,877,598
346,684,780

14,496,425
184,922,132
23,901,692
44,603,788
267,924,036

Less: Current liabilities and provisions

Net current assets

11

130,249,297
216,435,483

94,200,630
173,723,406

Miscellaneous expenditure
(to the extent not written off or adjusted)

12

5,550,476

7,030,625

596,574,750

464,089,152

SOURCES OF FUNDS
Shareholders funds
Share capital
Reserves and surplus
Loans funds
Secured
Deferred tax liabilities

APPLICATION OF FUNDS
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress

ACCOUNTING POLICIES

18

NOTES TO ACCOUNTS

19

This is the Balance Sheet referred in our

report of even date addressed to the
members of KLG Systel Limited.

The schedules referred above form an

integral part of the Balance Sheet.

B. Bhushan & Co.

Chartered Accountants
By the hand of

Kumud Goel
Managing Director

K. L. Goel
Director

Kamal Ahluwalia
Partner
Membership no. 093812
New Delhi
April 22, 2006

S.P. Bathla
Company Secretary

Sanjay Kumar Garg

Chief Finance Officer

180

R.C. Mody
Director

KLG SYSTEL LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

INCOME
Sales and services
Others

EXPENDITURE
Cost of sales and services
Employees remuneration and benefits
Consultancy fees
Travelling and conveyance
Communication
Administrative
Research and development
Training and seminars
Business and human resource development

Schedule

As at March
31, 2006
Rs.

As at March 31,
2005
Rs.

13

513,061,119
10,663,200
523,724,319

365,283,867
15,109,774
380,393,640

14
15

295,987,102
36,927,387
5,707,991
14,644,420
4,360,193
28,076,837
10,375,426
3,115,109
4,218,802
403,413,266
120,311,054

220,263,716
31,764,831
7,453,424
8,823,067
4,707,665
21,260,260
6,099,994
1,880,247
4,575,454
306,828,659
73,564,981

2,543,838
39,124,712
1,480,148

56,076
32,850,780
1,877,042

77,162,356

38,781,083

(18,013,270)
(5,528,566)
(80,962)
(1,098,792)
(399,120)

(6,619,477)
(6,971,451)
(28,138)

52,041,646
3,018,970
55,060,616

25,396,840
4,185,950
29,582,790

12,112,950
1,698,842
35,000,000
6,248,824
55,060,616

5,756,475
807,345
20,000,000
3,018,970
29,582,790

6.66

3.31

16
17

PROFIT BEFORE INTEREST, DEPRECIATION, TAX AND

AMORTISATIONS
Interest
Depreciation
Miscellaneous expenditure written off
PROFIT BEFORE TAX
Provision for taxation
- Current income tax
- Deferred tax
- Wealth tax
- Fringe benefit tax
Prior period adjustments
PROFIT AFTER TAX
Balance brought forward from last year
APPROPRIATIONS
Proposed dividend on equity shares
Tax on proposed dividend
Transfer to General Reserve
Balance carried over to Reserve & Surplus Account

Earnings per share (equity shares, par value

of Rs.10 each)
Basic and diluted (Refer note no. xxv of
Schedule 19)
*Adjusted EPS consequent to 1:1 bonus
issue
ACCOUNTING POLICIES
NOTES TO ACCOUNTS

234,823

18
19

This is the Profit and Loss Account referred

in our report of even date addressed to the
members of KLG Systel Limited.

The schedules referred above form an

integral part of the Profit and Loss
Account

B. Bhushan & Co.

Chartered Accountants
By the hand of

Kumud Goel
Managing Director

K. L. Goel
Director

Kamal Ahluwalia
Partner
Membership no. 093812

S.P. Bathla
Company Secretary

Sanjay Kumar Garg

Chief Finance Officer

New Delhi
April 22, 2006

181

R.C. Mody
Director

SCHEDULES FORMING PART OF THE ACCOUNT

1.

As at March
31, 2006
Rs.

As at March 31,
2005
Rs.

200,000,000

100,000,000

82,586,000

40,209,500

80,753,000

38,376,500

SHARE CAPITAL
Authorised
20,000,000 (10,000,000) equity shares of
Rs.10 (Rs.10) each
Issued and subscribed
8,258,600 (4,020,950) equity shares of
Rs.10 (Rs.10) each
Paid up
8,075,300 (3,837,650) equity shares of
Rs.10 (Rs.10) each fully paid up
Add : Forfeited shares

2.

559,200

559,200

81,312,200

38,935,700

Capital reserve

1,100,800

1,100,800

Share premium account

266,250,735

289,427,235

RESERVES AND SURPLUS

General reserve
Opening balance

95,000,000

75,000,000

Add: Additions during the

35,000,000

20,000,000

6,248,824

3,018,970

403,600,359

388,547,005

- Cash credit facilities

41,233,312

--

- Term loan

25,401,963

--

- Vehicle loan

5,105,410

--

- Equipment loan

1,029,719

--

Sales tax deferment loan

1,466,863

4,710,089

74,237,267

4,710,089

year
Profit and Loss Account

3.

SECURED LOANS
From State Bank of India

ICICI Bank Ltd.

4.

DEFERRED TAX LIABILITIES (NET)

Deferred tax assets

4,799,812

5,394,414

Deferred tax liabilities

42,224,737

37,290,772

37,424,925

31,896,358

182

5.

FIXED ASSETS

PARTICULA
RS

GROSS BLOCK

DEPRECIATION
Upto March
31, 2006

NETBLOCK
As at March
31, 2006

As at March
31, 2005

Rs.

Rs.

Rs.

--

Depreciatio
n
written
back
Rs.
--

--

59,217,775

53,560,885

1,558,844

--

10,486,727

38,751,205

40,264,285

76,345,335

21,846,446

--

98,191,781

78,617,724

57,629,619

3,504,269

3,733,354

--

7,237,623

29,771,044

22,720,813

Cost as at
April 1,
2005
Rs.

Additions
during the
year
Rs.

Deletions
during the
year
Rs.

Cost as at
March
31,2006
Rs.

Upto March
31,2005

For the
year

Rs.

Rs.

Land

53,560,885

5,656,890

--

59,217,775

--

Buildings

49,192,167

45,765

--

49,237,932

8,927,883

Computers

133,974,953

42,834,552

--

176,809,505

Plant and
machinery
Furniture

26,225,080

10,783,587

--

37,008,667

23,436,698

6,277,950

--

29,714,648

5,319,315

1,557,598

--

6,876,913

22,837,735

18,117,384

Office
equipments
Air
conditioners
Vehicles

12,789,168

1,785,919

25,500

14,549,587

2,281,142

645,176

339

2,925,979

11,623,608

10,508,027

8,159,433

1,593,637

--

9,753,070

2,085,945

405,358

--

2,491,303

7,261,767

6,073,488

8,190,645

6,927,757

3,266,228

11,852,174

3,271,036

911,571

1,601,472

2,581,135

9,271,039

4,919,609

Patent
Technology
Brands

45,864,144

21,117,977

--

66,982,121

11,769,620

4,873,958

--

16,643,578

50,338,543

34,094,527

35,738,794

2,379,494

--

38,118,288

15,448,930

3,592,407

--

19,041,337

19,076,951

20,289,864

Total

397,131,967

99,403,528

3,291,728

493,243,767

128,953,475

39,124,712

1,601,811

166,476,377

326,767,390

268,178,492

Previous Year

285,860,185

113,081,748

1,809,968

397,131,965

96,692,701

32,850,780

590,008

128,953,473

268,178,492

189,167,484

183

6.

As at March
31, 2006
Rs.

As at March 31,
2005
Rs.

3,717,524

3,717,524

100,000

100,000

100,000

100,000

3,917,524

3,917,524

--

95,000

--

95,000

500

500

500

500

(b)

1,000

191,000

(a+b)

3,918,524

4,108,524

763,370
28,896,470
29,659,840

593,257
13,903,168
14,496,425

37,106,373

21,152,112

216,106,150
253,212,523

163,770,020
184,922,132

13,276,136

20,875,977

5,221,741
8,436,942
26,934,819

2,667,162
358,554
23,901,692

INVESTMENTS
a)
Investments in subsidiary
companies at cost (long term, non-trade
and unquoted)
12,000 (12,000) equity shares
of Rs.100 (Rs.100) each of KLG
Environment and Safety Sciences Ltd.
10,000 (10,000) equity shares
of Rs.10 (Rs.10) each of KLG Software
Technology and Infrastructure Pvt. Ltd.
10,000 (10,000) equity shares
of Rs.10(Rs.10) each of KLG Software
Technology Pvt. Ltd.
(a)
b)

Investment in others
(Non-trade and unquoted)
(9,500) equity shares of
(Rs.10) each of First Power
Utilities Distribution Ltd.
(9,500) equity shares of
(Rs.10) each of Universal Power
Distribution Ltd.
5 (5) shares of Rs.100 (Rs.100) each
of Apex Hotel & Enterprises P. Ltd.
5 (5) shares of Rs.100 (Rs.100) each
of Siddhartha (Vadodra) Association

*
Investments are pursuant to
purchase of office flats.

7.

8.

9.

INVENTORIES
Software licenses held of development
Value of work in process

DEBTORS
(Unsecured and considered good)
Debts outstanding for a period
exceeding six months
other debts

CASH AND BANK BALANCES

Cash in hand
(including cheques in hand)
Balance with scheduled banks
in current account
in deposit account

184

10.

LOANS AND ADVANCES

Advances recoverable in cash or in kind
or for value to be received
Secured and considered good
good

Unsecured and considered

5,379,000

Advance tax (net of income tax provision)

--

1,849,775

Advance to staff

3,318,576

4,095,191

Security deposits

11,270,721

9,749,005

Earnest money deposits

5,985,190

3,497,677

Advances to vendors

4,718,000

12,893,730

Others

11.

6,634,000

6,206,111

5,884,410

36,877,598

44,603,788

71,904,548

27,403,630

CURRENT LIABILITIES AND

PROVISIONS
Current Liabilities
Creditors for purchase
Creditors for capital assets

2,049,597

40,613,866

Other liabilities

35,508,372

15,774,702

Unpaid dividend

999,469

949,782

Proposed dividend on equity

12,112,950

5,756,475

Income tax (net of advance

3,859,834

--

Provisions
shares
tax)
Gratuity

2,154,640

1,553,008

Leave encashment

1,578,925

2,059,024

Others

12.

80,962

90,143

130,249,297

94,200,630

MISCELLANEOUS EXPENDITURE
(to the extent not written off or adjusted)
Public issue expenses

--

396,894

Less: Written off during the year

--

396,894

--

--

Structuring Cost

7,030,624

13,321,327

Less: Written off during the year

1,480,148

6,290,703

(A)

(B)

5,550,476

7,030,624

(A+B)

5,550,476

7,030,624

185

13.

14.

For the year

ended march
31, 2006
Rs.

For the year

ended march
31, 2005
Rs.

341,645,999
142,518,650
28,896,470
513,061,119

255,277,597
96,103,102
13,903,168
365,283,867

593,257
234,796,335
235,389,592

8,176,883
169,463,130
177,640,013

(A)

763,370
234,626,222

593,257
177,046,756

(B)

61,360,880

43,216,960

(A+B)

295,987,102

220,263,716

30,229,912
3,197,583
989,266
776,938
1,733,688
36,927,387

25,347,753
2,433,923
513,426
1,444,463
2,025,266
31,764,831

3,173,722
985,674
200,797
4,360,193

3,877,280
682,023
148,362
4,707,665

4,845,205
4,960,974
1,704,124
1,664,200
3,481,715
558,304

3,462,718
4,689,169
1,841,003
1,624,004
2,395,543
--

179,577
159,645
445,535
591,120
107,504
654,432
386,730
275,278
8,062,494
28,076,837

239,151
183,637
301,189
735,307
110,040
365,675
214,890
144,730
4,953,204
21,260,260

SALES AND SERVICES

Sales
Professional fee and service charges
Value of work in process

COST OF SALES AND SERVICES

Cost of material utilised
Opening stock
Add: Purchases during the year

Less: Closing stock

Cost of services

15.

16.

17.

EMPLOYEES REMUNERATION AND BENEFITS

Salary
Welfare contributions and benefits
Gratuity
Leave encashment
Others

COMMUNICATION
Telephone and fax
Courier
Postage

ADMINISTRATIVE
Consumables of stationery
Rent, rates and taxes
Vehicle running and maintenance
Power and fuel
Bank charges
Temporary partition
Repair and maintenance
Machinery
Computers
Building
Office
Others
Insurance
Auditor's remuneration
Membership fees
Management expenses

18.

ACCOUNTING POLICIES

a)

CONVENTIONS
The financial statements are prepared under the historical cost convention, in accordance with the Indian
Generally Accepted Accounting Principles and mandatory accounting standards issued by the Institute of
Chartered Accountants of India and the provisions of Companies Act.

186

b)

RECOGNITION OF REVENUE/EXPENDITURE
Income and expenditure are accounted for on accrual basis.
Expenditure incurred on research and development, technology seminar, training and business development is
inclusive of direct expenses and allocable overheads.
Dividend income is accounted in the year of receipt.

c)

FIXED ASSETS
Fixed assets, including assets acquired for research and development, are capitalised at cost inclusive of direct
expenditure incurred to put the asset into use.
Fixed assets under construction, advances paid towards acquisition of fixed assets and cost of asses not put to
use before the period/year end, are disclosed as 'capital work-in-progress'.
Expenditure incurred on acquiring Technology and Brands, considered to have benefit of enduring nature, is
capitalized.

d)

DEPRECIATION
Depreciation is charged according to the straight line method at rates as specified in Schedule XIV of the
Companies Act. Depreciation on the acquisition/purchase of assets during the year has been provided on prorata basis according to the period each asset was put to use during year.
Technology and Brand costs are amortised equally in 10 years from the date of capitalisation.

e)

INVESTMENTS
Investments in subsidiaries are stated at cost and provision in made to recognize any decline, other than
temporary, in the value of such investments.

f)

INVENTORY
Work-in-process is valued at cost.
Finished goods are valued at lower of cost or net realisbale value; cost being determined on the 'First in and
first out' method.

g)

EMPLOYEE BENEFITS
Leave encashment, incentive, performance base allowance, leave travel allowance, medical and other
reimbursements are accounted on accrual basis.
Periodical contribution to provident fund is charged to revenue for gratuity is based on actuarial valuation.

h)

TAXES ON INCOME
Current tax provision is measured by the amount of tax expected to be paid on the taxable profits after
considering tax allowance and exemptions and using applicable tax rates and laws.
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing
differences between the financial statements, carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured on the
timing differences applying the tax rates and tax laws that have been enacted or substantively enacted by the
Balance sheet date. Changes in deferred tax assets and liabilities between one balance sheet date and the next
are recognized in the profit and Loss Account in the year of change. The effect on deferred tax assets and
liabilities of a change in tax rates in recognised in the Profit and Loss Account in the year of change. Deferred
tax assets are recognised only if there is reasonable certainty that they will be realized by way of future taxable
income. Deferred tax assets related to unabsorbed depreciation and carry forward losses are recognised only to
the extent that there is virtual certainty of realisation. Deferred tax assets are reviewed for appropriateness of
their carrying amounts at each Balance Sheet date.

i)

EARNINGS PER SHARE

187

Basic earnings per share is computed by dividing the net profit after tax for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings
per share is computed using the weighted average number of equity shares outstanding during the year end,
except where the results would be anti-dilutive.
j)

FOREIGN CURRENCY TRANSLATIONS

Revenue and expenditure items, current assets, current liabilities, if any, appearing/outstanding at the year end,
are converted into equivalent Indian Rupees at the exchange rate prevailing at the year end except in cases
where actual amount has been ascertained by the time of finalisation of accounts. Investments are stated at
equivalent Indian Rupees at the exchange rate prevailing at the time of remittance.

k)

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currency are accounted at the exchange rates prevailing on the date of transaction,
Monetary assets and liabilities denominated in foreign currency are converted at the exchange rate prevailing
on the date of Balance Sheet. The exchange differences arising on such conversion except those relating to
acquisition of fixed assets are accounted for in the Profit and Loss Account.

l)

MISCELLANEOUS EXPENDITURE
Public issue expenses are amortised over a period of ten years.
Structuring cost, net of recovery is amortised over a period of ten years.

19.

NOTES TO ACCOUNTS

(i)

Contingent liabilities
Guarantees given by bankers
Deposits of Rs.8,362,186 (Nil) held by
Banks as margin shown under the head
bank balance.

(ii)

As at March
31,2006
Rs.

As at March
31,2005
Rs.

76,805,876

44,205,260

Estimated amount of contracts

remaining to be executed on capital
account and not provided for (net of
advances)

37,188,853

10,656,560

Claims against the Company not

acknowledged as debts

986,392

858,112

Paid up share capital includes:

34,800 (34,800) shares alloted as fully
paid up for consideration other than
cash.

348,000

348,000

46,097,300

5,720,800

578,500

578,500

6,907,319

--

For the year

ended March
31, 2006
Rs.

For the year

ended March
31, 2005
Rs.

2,594,895

1,750,184

1,952,603

1,600,291

940,172

--

1,169,839

--

4,609,730 (572,080) shares allotted as

fully paid up by way of bonus shares
57,850 (57,850) shares allotted as fully
paid up under Employees Stock Option
Scheme
(iii)

(iv)

Unexpired installments of assets

purchased on hire purchase basis

Payment to directors :
Remuneration to Mr. Kumud Goel,
Managing Director
Remuneration to Mr. K.L. Goel, whole
time director
Remuneration to Ms. Upasana Goel,
whole time director
Commission paid to non executive and
independent directors
*
An amount of Rs.387,811/-

188

pertains to financial year 2004-05 on

account of commission to non executive
and independent directors.
Sitting fees
Remuneration to non working directors
Restricted to 1% of net profit
calculated in accordance with section
198 of the Companies Act
Net profit of the Company
after directors remuneration
Less: Profit on sale of
investment
Add: Loss on sale of fixed
assets

(v)

Payment to auditors:
Audit fees including service tax
Other services including service tax

189

262,500

18,500

782,028

--

77,162,356

--

(47,500)

--

1,087,917

--

78,202,773

--

361,515
80,379
441,894

214,890
29,724
244,614

(vi)

Secured Loan
From State Bank of India
(A)
Working capital facilities of Rs.41.23 Millions in the form of cash credit secured against
hypothecation of Company's entire current assets including receivables both present and future, and also
collaterally secured by, (a) extension of first charge over the entire fixed assets, present and proposed, of the
Company including equitable mortgage over land and building at Plot No.24, Sector-18, Electronic City,
Gurgaon, Haryana, and Plot Nos. 68, 69, 70A and passage in Plot No.70 situated at Sector-34, EHTP, Gurgaon,
Haryana, and proposed building to be constructed, (b) personal guarantees of Shri K.L. Goel, Whole Time
Director of the Company and Shri Kumud Goel, Managing Director of the Company, and (c) keyman insurance
policy of Shri Kumud Goel, Managing Director of the Company.
(B)
Term loan of Rs.25.40 Millions under 'Rent Plus Scheme' secured against clean assignment of
receivable/rentals with power of attorney duly recorded with the lessee and also collaterally secured by, (a)
extension of charge on land and building rented at Plot No.24, Sector-18, Electronic City, Gurgaon, Haryana,
(b) extension of charge over the entire fixed assets of the Company, both present and future, including equitable
mortgage over land and building at Plot no.24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot No.68,
69, 70A and passage in Plot No. 70 situated at Sector-34, EHTP, Gurgaon, Haryana, and (c) extension of
charge on current assets of the Company.
Term loan repayable within 1 (one) year is Rs.8,551,344/- (Nil).
From ICICI Bank Ltd.
(C)
Equipment loan of Rs.1.03 Millions secured against hypothecation of equipments namely desktops,
printers, servers, projectors, UPS, and other allied products, and also collaterally secured by way of personal
guarantee of Mr. K.L. Goel, Whole Time Director of the Company.
Equipment loan repayable within 1 (one) year is Rs.584,640/- (Nil).
(D)

(vii)

Vehicle loans of Rs.5.105 Millions are secured against hypothecation of vehicles.

Vehicle loan repayable within 1 (one) year is Rs.2,200,092/- (Nil).

The Company availed Sales tax of deferment for a period of 7 years effective from August 29, 1997, subject to
a ceiling of Rs. 84,380,625/- and yearly renewal of its entitlement certificate, under Rule 28A of the Haryana
General Sales Tax Act, 1973. The Company availed benefit of sales tax deferment of Rs.9,134,418
(Rs.9,134,418), which has since been converted into interest free loan by District Industries Centre, Gurgaon,
Haryana, and is secured against bank guarantees issued by bankers of the Company. The Company is required
to make payment of the deferred amount, during the period September, 2003 to August, 2006.
The Company discontinued availing the above deferment with effect from August 1, 2001 and commenced
availing the benefit of retaining 50% of Sales Tax collections in full settlement of future obligations as provided
under the provisions of Rule 28C of Haryana General Sales Tax Act, 1973. The period of benefit of retaining
50% Sale Tax collections expired on August 28, 2004.

(viii)

Structuring cost relate to costs incurred in connection with structuring of business transactions and strategic
investments and are stated net of recovery.

(ix)

The Company alloted 200,000 (Nil) equity shares to its promoters on November 25, 2005 arising out of
conversion of 200,000 (Nil) warrants at a price of Rs.96.00 per warrant, which was converted into equity share
of face value of Rs.10 including premium of Rs.86.00 per share, which were issued on August 25, 2005, in
compliance with all the requirements under Securities Exchange Board of India (Disclosure and Investor
Protection) Guidelines, 2000. The proceeds of issue had been utilised to part finance the projects in power
sector in acquiring capital assets and for meeting part of working capital requirements of projects in power
sector.

(x)

During the year, the Company issued 4,037,650 equity shares of Rs.10 each as fully paid up bonus shares on
February 3, 2006, in the proportion of 1:1, i.e., one fully paid up equity share for each equity share held on the
record date i.e., January 30, 2006. The aforesaid bonus shares were issued out of capitalisation of Share
Premium Account.

(xi)

The Company had got the approval of shareholders in its EGM held on March 16, 2006, for raising of funds to
the tune of US $ 10 millions by issue of American Depository Receipt/Global Depository Receipt/ Foreign
Currency Convertible Bonds or any financial instrument from Indian/Overseas market.

(xii)

The Company, at its meeting of Compensation Committee held on April 12, 2006, issued 299,500 employee
stock options @ Rs.119.58 per option to the employees/directors of the Company, which after exercise will
give rise to equivalent number of equity shares of Rs.10.00 each at a premium of Rs.109.58 per share.

190

The Company resolved to issue 400,000 warrants @ Rs.106.00 per warrant to the promoters of the Company,
which after conversion will give rise to equivalent number of equity shares of Rs.10.00 each at a premium of
Rs.96.00 per share, subject to the approval of the shareholders of the Company at the proposed EGM
Scheduled to be held on May 11, 2006.
(xiii)

In the opinion of the management, the current assets, loans and advances, if realised in the ordinary course of
business, would realise a sum equal to that stated in the Balance Sheet.

(xiv)

Inventory represents cost of acquisition of software licenses lying unutilised for customized
development/internal usage.

(xv)

Other liabilities includes Rs.3,825,900 (Rs.3,825,900) received as deposits from tenants.

(xvi)

As per Accounting Standard 21 on "Consolidated Financial Statements" issued by the Institute of Chartered
Accountants of India, the Company has presented consolidated financial statements separately in this annual
report.

(xvii)

Unpaid dividend does not include any amount, due and outstanding, to be credited to Investor Education and
Protection Fund.

(xviii
)

As per the information provided by the Company, there are no small scale industrial undertakings as defined
under section 3(J) of the Industries (Development & Regulation) Act, 1951, to whom the Company owes any
sum.

(xix)

Prior year adjustments comprise; (i) Rs.3,04,915 (Rs.58,947) charged/ (credited) to Profit and Loss Account
being short provision made on account of income tax for the assessment years 2001-02, (ii) 293,606
(Rs.175,876) being the amount of excess depreciation charged in previous year, now written back, and (iii)
Rs.387,811 (Nil) being amount of commission payable to non executive and independent directors for the
financial year 2004-05.

(xx)

The Company is primarily engaged in the customised development of computer software. The production and
sales of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative
details as required under paragraph 3, 4C and 4D of Part 2 of Schedule VI to the Companies Act.

(xxi)

Previous years figures have been regrouped/rearranged wherever necessary to confirm to those of the current
year.

(xxii)

Figures have been rounded off to the nearest Rupee.

(xxiv
)

In accordance with the provisions of the Accounting Standard-22 on "Accounting for Taxes on Income" issued
by the Institute of Chartered Accountants of India, the Company has recognised deferred tax assets of
Rs.4,799,812 (Rs. 5,394,414) and deferred tax liabilities of Rs.42,224,737 (Rs.37,290,772) as at March 31,
2006. Major components of deferred tax are as follows:

Deferred tax assets

Unabsorbed short
term capital loss
Others

As at April 1,
2005
Rs.
(A)

As at March
31, 2006
Rs.
(B)

For the year

Rs.
(B) (A)

3,838,141

3,543,094

(295,047)

1,556,272
5,394,413

1,256,718
4,799,812

(299,554)
(594,601)

7,640,157

10,943,620

3,303,463

29,650,615
37,290,772

31,281,116
42,224,737

1,630,501
4,933,965

31,896,359

37,424,925

5,528,566

(i)

Deferred tax liabilities

Research and
development
Fixed assets

Net deferred tax (liability); (ii) - (i)

The deferred tax liability amounting to Rs.5,528,566 (Rs.6,971,451) for the year has been adjusted from Profit
and Loss Account.

(xxv)

Earning Per Share (EPS)

191

EPS is calculated by dividing the profit attributable to the equity shareholders by the average number of equity
shares outstanding during the year. Numbers used for calculating basic and diluted earnings per equity share
are as stated below:

(a)
Net profit available for equity
shareholders (in Rs.)
(b)
Weighted average number of
shares outstanding
(c)
Nominal value of per equity
share (in Rs.)
(d)
Earning per share (a)/(b)
(Basic and Diluted)
*
Adjusted EPS consequent to
1:1 bonus issue

(xxvi
)

As at March
31, 2006
Rs.

As at March
31, 2005
Rs.

52,041,646

25,396,840

7,815,300

7,675,300

10

10

6.66

3.31

Additional information pursuant to provisions of Para 3 and 4 of Schedule VI of the Companies Act 1956:
For the year
ended March
31, 2006
Rs.

For the year

ended March
31, 2005
Rs.

7,446,231

CIF value of import of

materials
Traveling Directors

146,976,580

99,248,309

312,068

481,870

Travelling Others

543,025

910,845

Internet charges

566,359

527,099

Membership

--

58,000

Subscription

180,144

--

Seminar

--

45,950

b)

Foreign exchange inflow

Service charges

1,495,189

787,659

a)

Foreign exchange outflow

Capital assets purchased

192

xxvii) Schedule of Investments as at March, 31, 2006

S.No.

a.

Particulars

Opening Balance

Investment in subsidiary companies at

cost (Long term, non-trade and unquoted)
KLG Environment and Safety Sciences
Ltd.
KLG Software Technology and
Infrastructure Pvt. Ltd.
KLG Software Technology Pvt. Ltd.
Investment in others
(Non-trade and unquoted)
First Power Utilities Distribution Ltd.
Universal Powerone Distribution Ltd.
Apex Hotel & Enterprises Pvt. Ltd.
Siddartha (Vadodra) Association

Sale/Adjustment

Closing balance

Shares

Amount
Rs.

Shares

Amount
Rs.

Shares

Amount
Rs.

Shares

Amount
Rs.

12,000

3,717,524

10,000

100,000

----

----

----

----

12,000
10.000
10,000

3,717,524
100,000
100,000

10,000

100,000
3,917,524

--

--

--

--

-----

9,500
9,500
---

95,000
95,000
---

A
b.

Purchases

9,500
9,500
5
5
B

95,000
95,000
500
500
191,000

C=A+B

--

--

4,108,524

* Investments are pursuant to purchase of office flats

193

Valuatio
n

At cost
At cost
At cost

3,917,524

--5
5

--500
500

190,000

1,000

190,000

3,918,524

At cost
At cost
At cost
At cost

xxvii
i)

Related Party Disclosure

Pursuant to Accounting Standard (AS18) "Related Party Disclosure" issued by Institute of Chartered
Accountants of India following parties are to be treated as related parties alongwith their relationships:

S.No.

Related Party

Relationship between parties

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
P.L. Goel
Ritu Goel
Mini Arora
KLG Environment and Safety Sciences Ltd.
KLG Software Technology and Infrastructure Pvt. Ltd.
KLG Software Technology Pvt. Ltd.
KLG Computers Pvt. Ltd.

12.

Pushap Telecommunication Pvt. Ltd.

13.

Aditi Telecom Pvt. Limited

Key management personnel

Key management personnel
Key management personnel
Key management personnel
Spouse of Mr. K.L. Goel
Spouse of Mr. Kumud Goel
Spouse of Mr. Mukesh Arora
Subsidiary Company
Subsidiary Company
Subsidiary Company
Enterprise over which key management
personnel is able to exercise significant
influence
Enterprise over which key management
personnel is able to exercise significant
influence
Enterprise over which key management
personnel is able to exercise significant
influence

Note : Parties have been identified by the management

S.No.

Nature of transactions

Related party

Amount Rs.

1.
2.
3.
4.
5.
6.
7.

Payment for services as whole time director

Payment for services as managing director
Payment for services as whole time director
Payment for services as chief executive officer
Salary paid
Salary paid
Amount received for sale rendered

1,952,603
2,594,895
940,172
2,695,004
346,872
114,000
2,175,000

8.
9.
10.
11.

Rent paid for premises

Rent paid for premises
Rent paid for premises
Rent paid for premises

12.
13.
14.
15.
16.
17.

Rent paid for premises

Loan refund including interest
Loan refund including interest
Amount received for preferential allotment
Amount received for preferential allotment
Amount received for preferential allotment

K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
Mini Arora
Ritu Goel
KLG Environment and Safety
Sciences Ltd.
Upasana Goel
Mukesh Arora
Mini Arora
Pushap Telecommunication
Pvt. Ltd.
Aditi Telecom Pvt. Limited
Mukesh Arora
Mini Arora
K.L. Goel
Kumud Goel
KLG Computers Pvt. Ltd.

B.

Amount outstanding as at March 31, 2006

S.no.

Account head

Related party

Amount Rs.

1.

Investments

KLG Environment and Safety Sciences Ltd.

KLG Software Technology and Infrastructure Pvt. Ltd.

3,717,524
100,000

194

480,000
178,500
178,500
300,000
300,000
1,557,500
308,000
6,720,000
6,720,000
5,760,000

2.

Loan & Advances

KLG Software Technology Pvt. Ltd.

100,000

Mukesh Arora
Mini Arora

2,202,500
3,176,500

The segment report prepared in accordance with the accounting standard 17 on 'Segment Reporting' issued by the
Institute of Chartered Accountants of India.
Segment wise revenue, results and capital employed for the year ended March 31, 2006
(Rs. in '000)

S.no.

Particulars

1.

Segment revenue

a)
b)

2.

For the year

ended March
31, 2006

For the year

ended March
31, 2005

Plant centric applications

420,927

305,628

Enterprise integrated applications

92,134

59,656

Total

513,061

365,284

Less: Inter segment revenue

--

--

Net sales / income from operations

513,061

365,284

Segment results
Profit/(loss) before tax and interest from each segment)

a)

Plant centric applications

147,855

91,342

b)

Enterprise integrated applications

23,740

10,467

Total

171,595

101,809

Interest

2,544

56

Other un-allocable expenditure net off

91,889

62,972

77,162

38,781

Less:
c)
d)

Unallocable income
Profit before tax
3.

Capital employed
Assets and liabilities have not been segregated to any of the reportable segments, as fixed assets are used
interchangeably between segments and it is not practicable to provide meaningful segment disclosure relating
to total assets and liabilities.

195

(xxx)

Additional information under part IV of the Schedule VI of the Companies Act, as certified by the
Management.

I.

REGISTRATION DETAILS

2005-06

2004-05

34348

34348

05
March 31, 2006

05
March 31, 2005

As at March
31, 2006
Rs. in '000

As at March
31,2005
Rs. in '000

CAPITAL RAISED DURING THE YEAR

Public issue
Right issue
Bonus issue
Private placement

--40,337
2,000

-----

POSITION OF MOBILISATION AND

DEPLOYMENT OF FUNDS
Total liabilities
Total assets

596,575
596,575

464,089
464,089

SOURCES OF FUNDS
Paid up capital
Reserves and surplus
Secured loans
Deferred tax liabilities (net)

81,312
403,600
74,237
37,425

38,936
388,547
4,710
31,896

APPLICATION OF FUNDS
Net fixed assets
Capital work in progress
Investments
Net current assets
Miscellaneous expenditure

326,767
43,903
3,919
216,435
5,550

268,178
11,048
4,109
173,723
7,031

For the year ended

March 31, 2006
Rs. '000

For the year ended

March 31, 2005
Rs. '000

PERFORMANCE OF COMPANY
Total turnover
Total expenditure
Profit before tax
Profit after tax

523,724
446,562
77,162
52,042

380,394
341,613
38,781
25,397

Earning per share (in Rs.)

Dividend rate

6.66
15.00%

3.31
15.00%

GENERIC NAMES OF PRINCIPAL PRODUCT

(as per monetary terms)
Item code no.
Product description

85249002
85249002
Computer software and hardware

Registration no.
Status code
Balance Sheet date

II.

III.

IV.

V.

196

Signature to the above schedules which form

an integral part of the Balance Sheet and Profit
and Loss Account.

Kumud Goel
Managing Director

K.L. Goel
Director

R.C. Mody
Director

Sanjay Kumar Garg

Chief Finance
Officer

S.P. Bathla
Company Secretary
New Delhi,
April 22, 2006

197

KLG SYSTEL LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH, 31, 2006

Year ended
March 31,
2006
Rs.

Year ended
March 31,
2005
Rs.

77,162,356

38,781,083

39,124,712
1,480,148

32,850,780
1,877,042

--

4,810,555

2,543,838
(1,098,792)
1,073,280
-(47,500)
(5,528,566)
(399,120)
1,087,917

56,076
-(864,312)
(2,400,000)
(37,252)
(6,971,451)
234,823
714,213

115,398,273

69,051,557

(60,564,202)

17,025,153

(15,163,415)
29,146,763
(46,580,854)

(6,319,542)
32,357,764
43,063,375

(A)

68,817,419
(12,911,734)
(6,563,820)
49,341,866

112,114,932
(7,809,716)
(6,494,023)
97,811,193

(B)

(99,403,528)
(32,854,772)
190,000
602,000
47,500
(1,073,280)
-(132,492,080)

(113,081,748)
(9,369,809)
1,282,668
505,747
37,252
864,312
2,400,000
(117,361,578)

2,000,000
17,200,000

---

(C)

69,527,178
(2,543,838)
86,183,340

-(56,076)
(2,447,876)

(A+B+C)

3,033,127

(21,998,261)

23,901,692

45,899,953

CASH FLOW FROM OPERATION

Profit before tax and extraordinary
items
Depreciation
Miscellaneous expenditure written
off
Adjustment of miscellaneous
expenditure
Interest paid
Fringe benefit tax
Interest receipts
Dividend receipts
Profit on sale of investments
Adjustment of deferred taxation
Prior period adjustment
Loss on sale of fixed assets
Operating profit before working
capital changes
Adjustment for trade and other
receivables
Inventories
Trade payables and other liabilities

(i)

(ii)
Cash used in operations
Direct taxes paid (net)
Dividend paid
Net cash flow operating activities
CASH FLOW FROM INVESTING
ACTIVITIES
Purchase of fixed assets
Capital work in progress
Sale of investments
Sale of fixed assets
Profit on sale on investment
Interest receipts
Dividend receipts
Net cash used in investing activities
CASH FLOW FROM FINANCE
ACTIVITIES
Issuance of equity share capital
Share premium received on issuance
of equity share capital
Increase in secured loans
Interest paid
Net cash used in financing activities
NET INCREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents Opening
balance

(iii=i+ii)

198

Cash and cash equivalents Closing

26,934,819

23,901,692

balance
Note: Figures in brackets indicate cash outflow
Certified that the above statement is in accordance with the requirement prescribed by SEBI.
For and on behalf of the Board

B. Bhushan & Co.

Chartered Accountants
By the hand of

Kumud Goel
Managing Director

K.L. Goel
Director

Kamal Ahluwalia
Partner

S.P. Bathla
Company Secretary

Sanjay Kumar Garg

Chief Manager Finance

New Delhi
April 22, 2006

199

R.C. Mody
Director

KLG SYSTEL LTD.

A Knowledge Company
Regd.Office : Unit no. 3-6, Tower A ,Ground Floor, Unitech Business Park, F Block, South City-1, Sector
41, Gurgaon - 122001
Unaudited financial results for the quarter ended December 31,2006
Rs. In lacs, except per share data

S no.

Particular

Quarter

Quarter

ended
31.12.2006

ended
31.12.2005

Nine
months
period
ended
31.12.2006

Nine months

Year

period ended
31.12.2005

Ended
31.03.2006
Audited

Net Sales/Income
from operation

4,098.63

1,227.37

8,252.85

3,570.64

5,130.61

2
3

Other income
Total expenditure

70.61

24.61

136.72

80.46

106.63

a.

1.90

1.02

5.00

0.28

(1.70)

b.

(Increase)/decrease
in stock in trade
Cost of
sales/operations

2,532.45

633.73

4,928.29

2,031.72

2,961.57

c.

Staff cost

174.46

103.27

452.81

271.28

369.27

d.

Administrative

211.93

65.77

371.68

185.48

280.77

e.

Other expenditure

147.79

106.57

356.25

275.88

439.02

Interest

20.27

4.16

52.65

8.81

25.44

Cash profit

1,080.45

337.46

2,222.90

877.65

1,162.87

Depreciation

148.55

112.09

402.74

314.53

391.25

Profit before tax

931.90

225.37

1,820.16

563.12

771.62

Provison for taxation

Deferred tax
adjustment
Prior period
adjustments

186.47

70.45

355.14

163.05

191.93

34.85

14.63

73.25

11.78

55.29

3.99

Profit after tax

Paid-up equity share
capital
of Rs. 10 each fully
paid up
Reserve excluding
revaluation
reserve
Dividend

710.58

140.29

1,391.77

388.29

520.41

1078.29

403.76

1078.29

403.76

807.53

9
10
11
12

13
14

4036.00
15.00%

200

15

7.98
Basic EPS
*Adjusted consequent to 1:1 bonus
issue

16

Diluted EPS

17

18

1.74

15.64

4.81

6.66

7.98

15.64

10.08
Cash EPS
*Adjusted consequent to 1:1 bonus
issue
Aggregate of nonpromoters
shareholding

3.35

21.11

8.90

12.56

7,892,044

2,727,222

7,892,044

2,727,222

5,454,444

73.19

67.54

73.19

67.54

67.54

- Number of shares
- Percentage of
shareholding
Segment reporting

Segment wise revenue and results for the quarter ended December 31, 2006
S
no.

Particular

Quarter

Quarter

ended
31.12.2006

ended
31.12.2005

Nine
months
period
ended
31.12.2006

Nine months

Year

period ended
31.12.2005

Ended
31.03.2006
Audited

Segment Revenue
Life Cycle Solutions

a)

1,439.11

1,017.31

4,286.27

2,828.46

3,995.59

2,659.52

210.06

3,966.58

742.18

1,135.02

8,252.85

3,570.64

5,130.61

Power System Solutions

b)
Total
4,098.63
Less: Inter segment
revenue
Net sales/income from
operations

1,227.37
-

3,570.64

4,098.63

1,227.37

2. Segment Results
(Profit)+/Loss(-) before tax and interest
from each segment)*
Life Cycle Solutions
497.97
a)
Power System Solutions
867.66
b)
Total
1,365.63
Less:
Interest
1)
20.27
Other un-allocable
expenditure net off
413.46
2)
unallocable income
Total Profit Before Tax

8,252.85

5,130.61

380.38

1,300.48

892.46

1,160.10

97.50

1,527.12

321.26

555.85

477.88

2,827.60

1,213.72

4.16

52.65

8.81

248.35

201

225.37

25.44

954.79
641.79

931.90

1,715.95

1820.16

563.12

918.89
771.62

Notes :
1) The above results have been reviewed by audit committee and taken on record by the Board of Directors
of the Company at its meeting held on January 8,2007 at Gurgaon.
2) Statutory Auditor's of the Company have carried out the limited review of the financial results for the
quarter ended December 31,2006.
3) Net deferred tax liability as at the end of the quarter is Rs 447.50 lacs. Company has accounted for net
deferred tax liability of Rs. 374.24 lacs till March 31,2006.
4) The Company had allotted 4,00,000 equity shares on November 09,2006 to its promoters arising out of
conversion of 4,00,000 warrants. The aforesaid warrants were issued on May 23,2006.
5) The Company had received Rs. 42.40 lacs during quarter ended June 30,2006 and Rs. 381.60 lacs during
the quarter from promoters as payment against issue of warrants, which were converted into equity shares
(see note 4 above).The proceeds of issue have been utilised to finance the projects in power sector in
acquiring capital assets and for meeting working capital requirements of projects in power sector .
6) The Company resolved to issue 1,070,000 warrants @ Rs. 261.00 per warrant to the promoters of the
Company, which after conversion will give rise to equivalant number of equity shares of Rs. 10.00 each
at a premium of Rs. 251.00 per share. Abovesaid resolution has been approved by shareholders of the
Company at its Extra-Ordinary General Meeting held on January 5, 2007.
7) The Company received Rs. 3,363.64 lacs during quarter ended September 30,2006 from issue of GDR's.
The proceeds of issue to the extent of Rs. 863.64 lacs had been utilised for creation / development of
infrastructure facilities for Research and Development centre and meeting working capital requirements
and Rs. 2,500.00 lacs had been kept invested in units of mutual funds till final utilisation.
8) The Company have rearranged its segments during the quarter ended September 30, 2006 so as to give
better understanding of the business of the Company; accordingly segment report for the quarter and
previous period figure's have been regrouped.
9) Fixed assets and liabilities have not been segregated to any of the reportable segments, as fixed assets are
used interchangeably between segments and currently not practicable to provide meaningful segment
disclosures relating to total assets and liabilities.
10) There were no investor complaints pending as on 1.10.2006. 6 complaints were received during the
quarter, out of which two were for non receipt of 700 bonus shares, four were for non receipt of dividend
of Rs. 128,400/-. All the complaints have been resolved except one which was for non receipt of dividend
warrants amounting to Rs. 2,400/11) Figures have been regrouped /rearranged wherever considered necessary.

Date: 08.01.2007
Place: Gurgaon
http://www.klgsystel.com
E-mail address : investor@klgsystel.com

For KLG Systel Ltd.

Kumud Goel
Managing Director

202

The Company
KLG Systel Limited
Plot No. 70A, Sector- 34,
EHTP, Gurgaon-122004,
Haryana, (India)

GLOBAL CO-ORDINATOR AND LEAD MANAGER

Elara Capital plc
29 Marylebone Road, London NW1 5JX
United Kingdom
TRUSTEE, PRINCIPAL PAYING, CONVERSION AND TRANSFER AGENT

REGISTRAR

The Bank of New York

One Canada Square
40th Floor
London E14 5AL
United Kingdom
SINGAPORE LISTING AGENT

The Bank of New York

101 Barclay Street
21st Floor West
New York, N.Y. 10268
United States of America

Goodwins Law Corporation

3 Anson Road, #07-01
Springleaf Tower
Singapore 079909
LEGAL ADVISERS

To the Lead Manager as to English Law

To the Company as to Indian law

(limited to review of OC)

Campbell Hooper
35, Old Queen Street
Londan SWIH 9J D
United Kingdom

Rajani Associates,
F-4, Panchsheel, 53, C Road
Churchgate, Mumbai 400020
India

LEGAL ADVISERS TO THE TRUSTEE AND THE AGENTS

Lovells Lee & Lee
80 Raffles Place
#54-01 UOB Plaza 1
Singapore 048624
AUDITORS
M/s. B. Bhushan & Co.
Chartered Accountants,
EC-13, Inderpuri,
New Delhi-110 012

203