DISINVESTMEMT POLICY IN INDIA

Vedant Bhutra

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Index
Definition Evolution Disinvestment Policy of India Facts and figures till 2004-05 Current Strategies
1) 2) 3) 4)

Valuation of PSUs Valuation Techniques Challenges in valuation Right valuation approach

5) Problems associated with disinvestment policy 6) Conclusion

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Definitions of Disinvestments:

Capital investment shrinkage caused by a firm's failure to maintain or replace capital assets being used up or by the firm's sale of capital goods such as equipment.

Disinvestment is a process of transferring property from public ownership. (By Wordnet Dictionary)

Disinvestment refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government towards policy or regime change.

The term also refers to the reduction of investment in firms, industries or countries for reasons of political or social policy.

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Evolution of Disinvestments Policy
Disinvestment was a term first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid, which was still in force at that time. In India since 1991 the term is applied to the privatization of State-held assets; the Minister for Disinvestment is a Cabinet-level post. The Department of Disinvestment was formed on the10th December 1999, with a view to establishing a systematic policy.

DISINVESTMENT POLICY OF THE GOVERNMENT OF INDIA
The whole policy of disinvestments has undergone a sea change. Initially, it was one of offering a part of the equity to various private sector players both domestic and foreign. Now it is one of outright sale of majority shares to be so called strategic partners, with a clear commitment to ultimately off-load the rest of the shares after a time lag. And with such a strategy, the anxiety of the present Govt to bridge the fiscal deficit is creating a situation of distress sale of PSUs to private hands. Therefore, it is no longer disinvestments policy, but clear-cut policy conclusive privatization. The whole privatization process has become an instrument of transferring public property to private hands for a song much to the detriment of the national interest and the industrial economy of the country in particular. And with the whole process, corruption is woven intrinsically. The very concept of privatization of public sector units and more so the blue chip ones, in itself is a bankrupt
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500 crore to the exchequer in1991-92. part of Government holdings in the equity share capital of these enterprises will be disinvested in order to provide further market discipline to the performance of public enterprises "."The policy. is also expected to yield Rs. would be announced separately. treachery with the nation and fraud on the people of the country. Industrial Policy Statement of 24th July. which would broad base the equity. as enunciated by the Government. INTERIM BUDGET 1991-92 (Chandrasekhar Government) " It has been decided that Government would disinvest up to 20 per cent of its equity in selected public sector undertakings. in favour of mutual funds and financial or investment institutions in the public sector. The objective of the policy was stated to be to broad-base equity.corrupt policy perception. which are being worked out. improve management. 5 . The modalities and details of implementing this decision. 1991 “In the case of selected enterprises. and enhance availability of resources for these PSEs and yield resources for the exchequer. The disinvestment. 2. improve management and enhance the availability of resources for these enterprises. under the Prime Minister Shri Chandrashekhar was to divest up to 20% of the Government equity in selected PSEs in favour of public sector institutional investors.

the target public ownership level could be kept at 26%. it recommended 100% divestment of Government stake. In all other cases.Budget speech: 1991-92 "In order to raise resources. ammunition and defence equipment Atomic energy Radioactive minerals. such as the enterprises. disinvestment could take place to the extent of 74%. & 6 . up to 20 per cent of Government equity in selected public sector undertakings would be offered to mutual funds and investment institutions in the public sector. as also to workers in these firms" Report of the Committee on the Disinvestment of Shares in PSEs (Rangarajan Committee): April 1993 The Rangarajan Committee recommendations emphasised the need for substantial disinvestment. It stated that the percentage of equity to be divested could be up to 49% for industries explicitly reserved for the public sector. which had a dominant market share or where separate identity had to be maintained for strategic reasons. Holding of 51% or more equity by the Government was recommended only for 6 Schedule industries. namely: I) ii) iii) iv) v) Coal and Lignite Mineral Oils Arms. encourage wider public participation and promote greater accountability. that is. It recommended that in exceptional cases.

Revenues generated from such disinvestment will be utilised for allocations for education and health and for creating a fund to strengthen Public Sector Enterprises. I propose to take credit for the same amount. The recommendations indicated a shift from public offerings to strategic / trade sales. By August 1999. 7 . The interim budget for 1996-97 took credit for Rs. it made recommendations on 58 PSEs. Any decision to disinvest will be taken and implemented in a transparent manner.Oct. a Disinvestment Commission was set up in 1996. Budget Speech by Finance Minister Shri P. the Government did not take any decision on the recommendations of the Rangarajan Committee.1997.” Disinvestment Commission Recommendations: (Feb.vi) Railway transport However. Chidambaram (1996-97) on 22nd July. 1999) Pursuant to the above policy of the United Front Government. 1996 “Government has approved the proposal to establish a Disinvestment Commission. 5000 crore through disinvestment. with transfer of management.

In cases of public sector enterprises involving strategic considerations. government will continue to retain majority holding. Chidambaram (1997-98) on 28th February. Budget Speech by Shri Yashwant Sinha (1999-2000) on 27th February.” Government agrees with this view and I would appeal to Hon’ble Members to take a positive view of disinvestment. 1998) "Government has also decided that in the generality of cases. The interest of workers shall be protected in all cases". the Government shareholding in public sector enterprises will be brought down to 26per cent. but also minimise budgetary support towards unprofitable units while ensuring their long-term viability and sustainable levels of employment in them. privatising non-strategic ones through gradual disinvestment or strategic sale and devising viable rehabilitation strategies for weak units". 1999 "Government's strategy towards public sector enterprises will continue to encompass a judicious mix of strengthening strategic units. 1997 “The Commission has observed “The essence of a long-term disinvestment strategy should be not only to enhance budgetary receipts.Budget Speech by Finance Minister Shri P. 8 .” Budget Speech by Shri Yashwant Sinha (1998 -99) on (1st June.

 Whether the industrial sector requires a proper regulatory mechanism to protect the consumer interests before Public Sector Enterprises are privatised. It was decided that the Strategic Public Sector Enterprises would be those in the areas of:  Arms and ammunitions and the allied items of defence equipment defence aircrafts and warships. medicine and nonstrategic industries). For the non-strategic Public Sector Enterprises.  Railway transport. All other Public Sector Enterprises were to be considered nonstrategic. 9 .e.  Atomic energy (except in the areas related to the generation of nuclear power and applications of radiation and radio-isotopes to agriculture. the Government classified the Public Sector Enterprises into strategic and non-strategic areas for the purpose of disinvestment. would be taken on the following considerations:  Whether the industrial sector requires the presence of the public sector as a countervailing force to prevent concentration of power in private hands. A decision in regard to the percentage of disinvestment i..Strategic & Non-strategic Classification On 16th March 1999. Government stake going down to less than 51% or to 26%. it was decided that the reduction of Government stake to 26% would not be automatic and the manner and pace of doing so would be worked out on a case-to-case basis.

strategic partners would be selected through a transparent process". With public finances under intense pressure. The private sector in India has come of age. While some public enterprises are making profits.a time when the technological landscape and the national and international economic environment were so very different. contributing substantially to our nationbuilding process. Narayanan to the Joint Session of Parliament (February. the nature of this role cannot remain frozen to what it was conceived fifty years ago . "The public sector has played a vital role in the development of our economy. and bringing down Government equity in non-strategic PSUs to 26 percent or lower. CMC. and Maruti Udyog.Excerpts from the Address by the President Shri K. IPCL. The Government’s approach to PSUs has a three-fold objective: revival of potentially viable enterprises. ITDC. closing down of those PSUs that cannot be revived. The Government has decided to disinvest a substantial part of its equity in enterprises such as Indian Airlines. Therefore.Where necessary. quite a few have accumulated huge losses. Accordingly. VSNL. This programme has already achieved some initial successes. The private sector must assume greater public responsibilities just as the public sector needs to focus more on achieving results in a highly competitive market. 10 . BALCO. Hindustan Zinc. both the public sector and private sector need to be viewed as mutually complementary parts of the national sector. R. Interests of workers will be fully protected through attractive VRS and other measures. 2001). Governments are just not able to sustain them much longer. the Centre as well as several State Government is compelled to embark on a programme of disinvestment. Air India. However.

if necessary. restructuring of PSUs and retiring public debt. Bring down Government equity in all non-strategic PSUs To 26% or lower. “Disinvestment/Privatization/Public Sector Restructuring – Government’s policy towards the public sector is clear and unambiguous. Government have recently established a new Department for Disinvestment to establish a systematic policy approach to disinvestment and privatization and to give a fresh impetus to this programme. Its main elements are: • • • • • Restructure and revive potentially viable PSUs. Last year I had defined government’s policy in this regard clearly. Fully protect the interests of workers. 2001. 2000. In many ways. These enterprises must now be strengthened to compete and prosper in the new environment. “Our public sector has expanded in almost every area of economic activity. Government equity in all non-strategic PSUs will be reduced to 26% or less and the interests of the workers will be fully protected. Close down PSUs which cannot be revived. capability has been developed all round and a strong industrial base built up. I am emboldened to take credit for a receipt of Rs 12000 crore from 11 . Given the advanced stage of the process of disinvestment in many of these companies.Budget Speech: 2000 – 2001 by Shri Yashwant Sinha on 29th February. which will emphasize increasingly on strategic sales of identified PSUs.” Budget Speech: 2001 – 2002 by Shri Yashwant Sinha on 28th February. it has served the nation well. The entire receipt from disinvestment and privatization will be used for meeting expenditure in social sectors.

The Government has taken two major initiatives to improve the safety net for the workers of PSUs. R. it is evident that disinvestment in public sector enterprises is no longer a matter of choice. the significantly changed economic environment that now prevails both in India and globally makes it imperative for both the public sector and the private sector to become competitive. but an imperative. However. Narayanan to the Joint Session of Parliament (February.” 12 . especially over the last decade. A sum of Mrs.disinvestment during the next year. 5000 crore will be used to provide additional budgetary support for the Plan primarily in the social and infrastructure sectors. safety net to workers and reduction of debt burden. This additional allocation for the plan will be contingent upon realisation of the anticipated receipts.14 Excerpts from the Address by the President Shri K. The prolonged fiscal haemorrhage from the majority of these enterprises cannot be sustained any longer. primarily in the social and infrastructure sectors (contingent upon realisation of the anticipated receipt.) 2. 2002) “The Public sector has played a laudable role in enabling our country to achieve the national objective of self-reliance. The second increased training opportunities for self-employment for workers retiring under VRS. The first enhanced VRS benefits in those PSUs where wage revision had not taken place in 1992 or 1997."Additional budgetary support for the Plan. The disinvestment policy and the transparent procedures adopted for disinvestment have now been widely accepted and the shift in emphasis from disinvestment of minority shares to strategic sale has yielded excellent results. Learning from our experience. An amount of Rs 7000 crore out of this will be used for providing restructuring assistance to PSUs. In consultation with Planning Commission I shall come up with sectoral allocation proposals during the course of the year.

• Generating of employment. “With the streamlined procedure for disinvestment and privatisation. 5. 2002. • Creation of new assets. made in both Houses of Parliament on 9th December. I am happy to report that the Government has now completed strategic sales in 7 public sector companies and some hotels properties of the Hotel Corporation of India (HCI) and the India Tourism Development Corporation (ITDC). Disinvestment receipts for the present year are estimated at Rs. The change in approach from the disinvestment of small lots of shares to strategic sales of blocks of shares to strategic investors has improved the price earning ratios obtained. and • Retiring of public debt. 2002. Encouraged by these results. 12.16 Suo– Moto Statement of Shri Arun Shourie. Minister of Disinvestment. The main objective of disinvestment is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in our public sector enterprises. We expect to complete the disinvestment in another 6 companies and the remaining hotels in HCI and ITDC this year.000 crore excluding the special dividend from VSNL of Rs. The policy of disinvestment specifically aims at: • Modernization and Up gradation of Public Sector Enterprises. 13 . I am once again taking credit for a receipt of Rs. 1.887 crore.” 2.Excerpts from the Budget Speech for 2002-03 of the Finance Minister Shri Yashwant Sinha on 28th February.000 crore from disinvestment next year.

and for retirement of public debt. It will also ensure that disinvestment does not result in private monopolies. I wish to also state that details about the already announced Disinvestment Fund and Asset Management Company. the Government would set up a Disinvestment Proceeds Fund. which. The Ministry of Finance will also prepare for consideration of the Cabinet Committee on Disinvestment a paper on the feasibility and modalities of setting up an Asset Management Company to hold manage and dispose the residual holding of the Government in the companies in which Government equity has been disinvested to a strategic partner. 2. remain where they are.17 Excerpts from the Budget Speech for 2003-04 of the Finance Minister Shri Jaswant Singh on 28thFebruary. This Fund will be used for financing fresh employment opportunities and investment. to hold residual shares post disinvestment. In order to provide complete visibility to the Government’s continued commitment of utilization of disinvestment proceeds for social and infrastructure sectors. the methodologies adopted for such disinvestments and the extent of disinvestment in different CPSUs: 14 . the Ministry of Finance and the Ministry of Disinvestment will work out guidelines. I am confident that the pace of disinvestment will accelerate in the coming year.Government would continue to ensure that disinvestment does not result in alienation of national assets.disinvestment is not merely for mobilizing revenues for the Government. away from business and towards the business of governance. shall be finalized early in 2003-04.” The following table indicates the actual disinvestments from 199192 till date. it is mainly for unlocking the productive potential of these undertakings. and for reorienting the Government. 2003. through the process of disinvestment. For the disinvestment of natural asset companies.

Takeover KRL (CRL).25 sale of hotel properties of ITDC & HCI. VSNL-domestic issue. receipt from surplus cash reserves from STC and MMTC 15 . Equity of 6 companies sold by open auction but proceeds received in 94-95. in which NRIs and other persons legally permitted 4843.74%.26 Strategic sale of BALCO.00 GDR (MTNL) in international market.42 0. the methodologies adopted No. hold or sell equity.00 Shares sold separately for each company by auction method. in Crore) Actual receipts (Rs. BALCO 1860. MFIL’s strategic sale and others 1871.74 "very good". and 5632.e. GAIL. IBP – 33. GDR (VSNL) / Domestic offerings with the participation of FIIs (CONCOR. BRPL 1999-00 2000-01 5 5 10000 10000 2001-02 # 8 12.48 Equities of 4 companies auctioned 379. HTL –74%.58%. "good" and "average" companies 1912.000 Strategic sale of CMC – 51%. GAIL). of transacti ons in which equity sold 47 Target receipt (Rs. ONGC & IOC GDR—GAIL.Disinvestment from 1991-92 to 2004-05.14 restructuring. 168.67 GDR (VSNL) in international market. 910. 1992-93 1993-94 29 - 2500 3500 1994-95 1995-96 1996-97 1997-98 1998-99 17 5 1 1 5 4000 7000 5000 4800 5000 Sale through auction method. PPL-.10 to buy.11 purchase by 3 Oil sector companies i. allowed to participate. Cross 5371. LJMC. CPCL (MRL). VSNL – 25%. in Crore) Year Methodology 1991-92 2500 Minority shares sold in Dec 1991 and Feb 1992 by auction method in bundles of 3037.

Ltd. GAIL (10. through Public Offer15547.%) and ONGC (9.000 Strategic sale: HZL (26%).5%). Put Option MFIL (26%).945%).01%) 2003-04 2 14.60 Institutions & Public Sector Banks on 'Differential Pricing Method' 96800 49214.25% Offer for Sale). CMC and VSNL.87 NTPC (5.(72% Strategic Sale). Shares to employees in HZL. IPCL (5% to Employees) and ONGC (0.98 renunciation of rights issue. (9. dividend/dividend tax. HZL (18. ICI Ltd.96%) 2764.92% Call Option). Maruti: control premium from 3347.000 By sale of shares to Public Sector Financial 1567. IPCL (25%).2%). Jessop & Co. CMC (26. DCI (20%). IBP (26%).500 2004-05 2005-06 Total 3 4. HCI.41 Maruti (27.2002-03 # 8 12. restructuring and transfer of surplus cash reserves prior to disinvestments) 16 . ITDC.25%). IPCL (28.03 # Figures (inclusive of control premium.

53 Profit Making Loss Making 6.81 2.07 826.46 Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making 17 .97 89. Modern Food Industries (India) Ltd. No Name Percentage of Government Equity sold 74 25.Realization through strategic sale during 1999-2000 to 2004-05 Sr.97 89.07 Profit Making Profit Making 74 74 55 2. in crore Profit/Loss Making during the year of disinvestment Loss Making 1 a. 11.97 89. Ltd.97 89.41 34. 3b 4 5.92 ^ 152 6.97 3. CMC Ltd.97 39. 2. New Delhi 89. Hotel Agra Ashok Hotel Bodhgaya Ashok Hotel Hassan Ashok TBABR Mamallapuram Hotel Madurai Ashok Hotel Ashok Bangalore * Qutab Hotel.995 51 51 Realisation Rs. 9. CMC Ltd. 3a.45 44. 7 8. 12. 10.27 6.13 4. 1 b.61 1.97 89.97 89. @ HTL Lagan Jute Machinery Corporation ITDC-19 HOTELS 105. (MFIL) (MFIL) Phase II Bharat Aluminium Co.

97 89. 23.97 89. Mumbai IBP Co Ltd Videsh Sanchar Nigam Ltd.97 89.70 445 6.Centaur Hotel Airport. 29.68 3689^ 151.97 89.(Centaur Rajgir) HCI . 27. New Delhi HCI .38 92.37 43. 22. 16. Hindustan Zinc Ltd.13. New Delhi Hotel Indraprastha. 30. Hindustan Zinc Ltd.93 6. 24. Paradeep Phosphates Ltd.97 89. Kovalam Hotel Aurangabad Ashok Hotel Airport Ashok. 17. 15.27 29.50 19.Centaur Hotel Juhu Beach.97 89.51 83 1153.58 25 74 26 71. 19. @@ 89.97 100 100 100 33.97 89. 31 (a) 31 (b) 31 (c) Lodhi Hotel. 20.97 89. 18.39 2. 25. 28. Mumbai HCI-Indo Hokke Hotels Ltd.65 40.39 16.28 153 6.77 3.19 8. New Delhi LVPH. 14. 26. Udaipur Hotel Manali Ashok KABR.88 18 . New Delhi Chandigarh Hotel project Hotel Ranjit. @ Hindustan Zinc Ltd.97 89.97 89. Kolkata Hotel Khajuraho Ashok Hotel Variants Ashok Hotel Kanishka.92 323.97 89. 21.19 Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Loss Making Profit Making Loss Making Profit Making Profit Making Loss Making Profit Making 18.39 17.

18 10257. Each and every move is meticulously designed under the prescription of the World Bank and the IMF and at the behest of the imperialist powers and the MNCs.32 33. The `Research Report’ of the World Bank has prescribed that: “If potential buyers cannot otherwise raise the funds. drastically curtail workers’ rights. called ‘Research Report’ and titled “Bureaucrats in Business” has already detailed out each and every step. State Trading Corporation of India MMTC Ltd. 34.2 26 1000 1490. 35 36 Maruti Udyog Ltd. The publication also had written down with every detail the game plan to create downward pressure on wages of the public sector employees. Jessop & Co Ltd Grand Total 4. of course.84 40 ^^^ 60 ^^^ Profit Making Profit Making 72 18. stop industry-wise wage settlement and to make the PSUs an unholy destination by suitable policy engineering from Govt level. the enterprise can be sold in trenches (passing management 19 .19 Loss Making The Fund-Bank design in Operation The Indian ruling polity. The World Bank publication. Indian Petrochemicals Corporation Ltd. It is amusing to note that the current model of outright privatization through ‘strategic disinvestments’ aggressively pursued by the Government has been copied from the World Bank prescription. cannot claim any originality in their disastrous designs on the country’s economy and her people. the Indian rulers have been taking since 1991to dismantle the public sector network in the country including the various modalities of privatization.

airports and of course the financial sector. without bothering for the immense financial loss and harm to economic sovereignty caused to the country. telecom. The BJP-led government is more than obliging to meet their dictates. This fact was reflected in the budget speech (200001) of the Union Finance Minister pronouncing that. power. the Government has mainly targeted most of the blue chip profit making PSUs which were decorated with the classification of ‘Ratnas’.control immediately to private. allowing them time to raise the funds to buy out rest of the share gradually). The game plan is to completely erase the public sector network from the industrial map of the country. Notable among them are oil & petroleum. The creation of a separate Disinvestments Ministry under the exclusive charge of one Cabinet Minister clearly demonstrates the present Government’s point of priority to completely destroy the public sector. rail. Further. Private oligarchies want complete command over the entire world economy and they wouldn’t tolerate even a token presence of PSU on their way. the foreign and Indian Corporate. the most strategic sectors have been engulfed under the drive for privatization. Thus it is clear that the offensive against the public sector is not guided by financial or managerial prudence but because of the ideological position taken by IMF/WB/WTO with rich countries led by United States pushing from behind. road and air transport. that there should be no public sector any where in the world. “Government have recently established a new Department for Disinvestments to 20 . ports & docks.” The message of the World Bank’s guideline is loud and clear: tune your privatization strategy to the advantage of the potential buyers. With freedom to hire and fire. The Policy to Wipe out Public Sector Under the on going drive of privatization. which is an important factor in successful management contracts.

Share Purchase Agreement (SPA) and 21 . when the Government is desperately taking steps to wipe out public sector from the country. “strengthening strategic units.establish a systematic policy approach to disinvestments and privatization and to give fresh impetus to this programmed. Similarly it is nothing but a stupid argument that “price realized through the sale of minority stakes. was low as compared to price realized through strategic disinvestments …” It is but natural that conclusive privatization is bound to fetch higher yields than off-loading of minority shares. The price differential is bound to be there between simple share holding and acquiring the ownership including whole sole control of the enterprise and its management which in turn open up host of private commercial interest to the buyer. Realizing higher price by so-called ‘strategic sale of PSUs is short sighted and suicidal for the country. They have identified these CPSUs as nonstrategic and selling them off chaotically.” As noted above. privatizing non-strategic ones” is nothing but travesty of truth. the mention in the agenda note that the Government strategy is. telecommunication and defense production sectors including the airports in protecting the economic sovereignty and even security of the country’s independence. which will emphasize increasingly on strategic sales of identified PSUs. The claim of the Government that “The concerns of the various stakeholders are taken care of through the Shareholders’ Agreement (SHA). the dangerous fall out of conclusive privatization is also colossal. particularly the blue chips ones. Therefore. there is no rationale behind the suicidal steps of strategic sale of CPSUs. On the other hand. The Government has refused to recognize the strategic importance oft he PSEs in energy. And after that talking about strategic and non-strategic sectors is nothing but extreme hypocrisy and self-deception.

which ensure price-fixing for the PSUs under sale at a low level. solely to the advantage of the prospective buyers. Except extending due and undue benefits to the private buyers. the people and of course the workmen.1. the manual recommends a particular method—‘the discounted cash flow method’ (DCF). the strategic sale cause immense harm to all – the nation. Let us examine some concrete examples: Asset Stripping The Tata Teleservices Limited (TTSL) acquired 25 per cent stake of Videsh Sanchar Nigam Limited (VSNL) from the Government at a price of Rs.Parent Guarantee Agreement (PGA)” is not correct.00 crore. The TTSL has been handed over the total management control of the telecom giant. By the said manual. The SHA is supposed to protect the interest of the employees and act against asset stripping. 22 . the Union Ministry of Disinvestments has brought out a “Manual on Privatization”. Now with 45 per cent stake. The Company further acquired another 20 per cent stake of VSNL through open offer at a cost of Rs.00 crore. While dealing at length various methods of valuation of the PSUs under sale. VSNL is a classic example of pre and post privatization asset stripping.439. Manual on Disinvestments & Strategic Sale Agreement On the basis of the experience of disinvestments in the last decade in more faithful tune with the World Bank guidelines.151. the process of loot on national wealth through fast track privatization as prescribed by the World Bank has been sought to be systematized and legitimized with deceptive posture of transparency. without any consideration of its huge asset base and replacement cost.1.

An unique scope has been created by the Government by providing for the buyer to grab money from the seller (PSUs) – “During the data room visits and the due diligence exercise by the Strategic Partner. provision has been made to pay cash ‘reward’ in the name of ‘Post Closing Adjustment’. It is not without reason the Comptroller & Auditor General (CAG) has found “intrinsic fault” in the valuation method recommended by the Govt’s Disinvestments Manual and commented. depreciated replacement cost (i. capital-replacement. the Manual went a step ahead to advise that the prospective cash flow to the company under sale must also capture for discount the future (after sale) presumable cost for modernization. Thus. the Strategic Partner gets the picture of the assets and liabilities of the company as on a certain date … The deal may actually close at a much later date … In the intervening period the company has been functioning and the asset/liability position has undergone a change “ The perception of 23 .e.. While recommending the Discounted Cash Flow method (DCF). it is crystal clear that the Government of the day is more concerned to protect the interest the private capitalist at the cost of the national asset. which could capture the real value of the huge national assets created by the public sector industries over a long period. Asset Valuation method) would have been the most appropriate method.” The love and affection of the Government of the day at the centre for the private business is further exposed in yet another document published by the Ministry of Disinvestments –‘Understanding The Strategic Sale Agreement’ As if the under valuation and other undue concessions granted while transferring the national assets to the private buyer for a song are not enough. that may be incurred by the new owner. which would lead to assessment of the ‘cash flow’ at a lower level and facilitate low pricing to facilitate the prospective customer.The said Manual published by the Disinvestments Ministry has squarely discarded the Asset valuation method.” As per international valuation standards. market etc.

in this matter.5 crore is being returned to the buyers. are all consistently profit making cash-rich public sector companies. good or bad record of performance.02 : “This means that the government could actually end up paying private bidders to rid itself of loss-making PSUs. 13.8.27. Thus.00 crore. the onslaught of Fund-Bank dictated policy of closure. In the deal of Modern Foods. Current Targets: The Cash-rich PSUs The motivated.7 crore against the reserve price of Rs.190 crore from the Government.” Now a concrete example is the sale of Paradip Phosphates Ltd. So also was the case of ITDC hotels deal where an amount of Rs.02)The Government has been repeatedly projecting the performance records of the comparatively weak PSUs to justify the privatisation policy. the net outcome of the privatization deal is the private business combine got a PSU plus a cash gift of Rs. the Hindustan Lever also got some money under the same consideration. (PPL). Zuari-Haroe has claimed an amount of Rs. and privatisation of public sector shall spare none. However. (TOI.03. unfounded blame of inefficiency attributed to the so-called ‘sick’ and ‘uneconomic’ PSUs are also nothing but a ploy to justify the closure of such PSUs. Taking advantage of the ‘post closing adjustment’ clause.176 crore.the Government. the interesting fact is that the recent past cases of privatisation and the ones lined up for the forthcoming period. PPL has been conclusively privatized and purchased by the sole bidder Zuari-Maroc combine at a cost of Rs. therefore profit-making PSUs should be the first to be sold. It is evident that whether loss making or profit making. has got expression in the statement of the Disinvestments Minister Arun Shourie to the Financial Express on 07. It has been aptly said that. then why the most efficient and consistently profit making oil PSUs are being privatized by robbing them of their investible surplus.39. “What is Shourie’s argument? PSUs are loss making. Indian Petrochemicals Corporation Ltd 24 . Had that not been so.151.

. These two CPSUs together have earned a profit of Rs. The two cash rich profit making Oil PSUs which are in the advanced stage of privatisation are Bharat Petroleum Corporation Ltd.00 crore. Manmohan Singh. In fact the CPSUs which are under current prioritized initiative of the Government for privatisation are from among the top ten profit making public sector companies with huge investible surplus and belong to very important sectors of the economy namely: Oil. Valuation of Public Sector Units for the purpose of Disinvestment The process of disinvestment in India began in 1992. over the past decade.1. Dr.13 crore in the year 2000-01.2.000. at the time of privatisation the IPCL had an amount of Rs. Disinvestment was supposed to be the tool in the hands of government to improve the functioning and profitability of public sector enterprises and also raise funds to mitigate its fiscal deficits. The Sterile Group has acquired the equity and management control of Hindustan Zinc Limited (HZL) at a price of Rs.737.946. However. (RIL) own by the Ambanies.00 crore and estimated asset base of around Rs. Power and Telecommunication.445.491. While RIL has acquired the controlling share of IPCL at price of Rs.1.908.00 crore. (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).(IPCL) has been handed over to the Reliance Industries Ltd. this exercise has been plagued by criticisms and controversies and has not achieved desired results for the government because of political bickering.13 crore as reserve and surplus. under the aegis of new economic liberalization policy put forward by then Finance Minister.10.00 crore and the PSU has a reserve fund of Rs. 25 .

valuation has always been at the core of controversy. thirdly.The enunciated Government of India’s policy on disinvestment as per Economic Survey 2001 was:  Bring down Government equity in all non-strategic PSUs to 26% or lower. The criticality of the issue of valuation in disinvestment or privatization can be easily gauged from the fact 26 . One is that valuations processes were unsound and that the government gave away its stakes too cheaply. it is contended that the government’s reluctance to disinvest more than 51% and relinquish control over PSUs has meant that the government has been unable to attract suitably priced bids. Be it disinvestments of 1991-92 or that of BALCO in 2001. as bidders do not believe the firms’ performance would improve significantly with small government stakes being offloaded.  Restructure and revive potentially viable PSUs.  Close down PSUs which cannot be revived. if necessary. This is so because there are several methods of valuation and different methods yield widely varying results. with little thought being given to the requirements of the firms concerned. An important and perhaps most critical issue in the process of disinvestments or privatization of PSUs is valuation. disinvestment has been merely a revenue-raising affair for the government. two.  Fully protect interests of workers. There have been several criticisms of the disinvestment process.

published by the Ministry of Disinvestment in 2001. These are: The Discounted Cash Flow method The Balance Sheet method Transaction Multiple method The Net Asset Value method While the first three are business valuation methodologies generally used for valuation of a going concern.5000 crore. Valuation Techniques The guidelines on valuation in the PSUs. The disinvestment Commission has prescribed four approaches to valuation of PSUs. Let us discuss about each one of them: The Discounted Cash Flow method: The Discounted Cash Flow (DCF) methodology expresses the present value of a business as a function of its future cash earnings capacity.1100 crore to Rs. This methodology works on the premise that the value of a business is measured in 27 . the last methodology would be relevant only for valuation of assets in case of liquidation of a company. are prescribed in Chapter 18 of the manual titled "DISINVESTMENT: POLICY & PROCEDURES".that the value of BALCO as put by different people differed as widely as from Rs.

it does not properly reflect the cash flows generated by a business. or take into account the time value of money. The Net Asset Value method: The asset valuation methodology essentially estimates the cost of replicating the tangible assets of the business. Instead it will be more realistic if asset valuation is done on the basis of the new book value of the assets. Since the replacement methodology assumes the value of business as if we were setting a new business. like earnings or sales.terms of future cash flow streams. discounted to the present time at an appropriate discount rate. Although the Transaction Multiples method captures most value elements of a business. Depreciation & Amortizations (EBITDA) . & Sales. The NAV method is normally used to determine the minimum price a seller would be willing to accept and. The replacement cost takes into account the market value of various assets or the expenditure required to create the infrastructure exactly similar to that of a company being valued. The asset valuation is a good indicator of the entry barrier that 28 . in valuing businesses by various valuation experts. one may have to review a series of comparable transactions to determine a range of appropriate capitalization factors to value a company as per this methodology. Two such parameters are: Earnings Before Interest. Accordingly. thus serves to establish the floor for the value of the business. this methodology may not be relevant in a going concern. However. Transaction Multiple method: This method takes into account the value paid for similar transactions in the industry and benchmarks it against certain parameters. it is considered as a useful rule of thumb. The Balance Sheet method: The Balance sheet or the Net Asset Value (NAV) methodology values a business on the basis of the value of its underlying assets. This is relevant where the value of the business is fairly represented by its underlying assets. Taxes.

• Valuation is a subjective figure arrived at by the bidder by leveraging his strengths with the potential of the company. • Valuation of PSU is different from establishing the price for which it can be sold. In the US. Alternatively. Government can only realize what the buyer is willing to pay for the PSU. the valuation report of any acquisition has to be filed with Securities and Exchange Commission (SEC). • Public Sector undertakings own not only huge business assets but also highly valuable non-business assets like real estate. 29 . this methodology can also assume the amount which can be realized by liquidating the business by selling off all the tangible assets of a company and paying off the liabilities. as there is no databank of transactions carried out in the past. • Valuing companies in India becomes even more difficult. most of the PSUs are either not listed on stock exchange or command extremely limited trade float. Challenges in valuation of Indian PSUs • Companies listed on stock exchange can be assessed fairly on the basis of market price of shares. residential complex and utilities like power plant etc. • The profitability of the PSUs as reflected through the profit and loss account does not adequately reflect the earning potential of PSUs because the PSUs have generally been run in unprofessional manner.exists in a business. However.

opportunity. Hindustan Lever. in fact. No method will suffice in any particular case. Price a buyer would be willing to pay could be a function of Synergies expected from proposed integration of Target Company In case of Modern Foods depending on the valuation method. This value will accrue to the acquirer’s shareholders rather than to the target’s shareholders. the higher the maximum price an acquirer will be interested in paying. however. the 30 . the company’s value oscillated between Rs 28 crore and Rs 78 crore.45 crore. The valuation methods are benchmark figures and in no way can predict the exact price at which an entity can be sold.The Right Valuation Approach All of the above methods have their own merits and demerits. Therefore. The value is a function of the individual’s perception of the risk. the government in order to realize better proceeds from disinvestment should consider following issues in future: It is important to understand that price is not value. and other similar factors. offered Rs 125. The buyer will be willing to pay the price depending on the synergy value that will result from improvements made when the companies are combined. the nature of financial resources available to the purchaser. The more the synergy value a particular acquisition can generate. HLL quoted the price depending on the value they thought they would derive from the company.

The government should have clear future policy when going in for big-ticket disinvestments like Air India.difference between price and value is the raison d’etre of investment valuation. The final value to be paid by acquirer will depend on the controlling premium he is willing to pay. independent of market pricing. not merely should the value derived be unquestionable on the basis of well-established equity valuation principles. Will these bilateral rights vest with Air India – if yes. no country in the world has committed all its bilateral to one airline. In such case asset valuation approach needs to be given lesser weightage. but also the processes and methodologies (and the underlying assumptions) adopted for deriving such value be reasonable. These uncertainties with regard to future of the sector will prevent bidders to quote higher prices for Air India. However. There is no reason why the government should continue to hold a part of the equity in PSEs that are operating in non-core sectors. B. what is important is that. main assets of Air India are the bilateral rights. In the cases of disinvestment involving transfer of control of management affairs to the private investor. more weightage will have to be given to market price. Transparency in valuations is a must so as to avoid controversies. While disinvesting minority shares. Most foreign companies are not comfortable with less than 51 percent holding. But the government isn’t offering 51 percent in most strategic sales. Nonetheless. Air India’s valuation will be higher. 31 . For instance. higher weightage has to be given to the value of assets both tangible and intangible and relatively lower value can be assigned to fair market price. This strategy leads to sub-optimal realization of revenue and significant loss to the government.

Further. as the government has retained a majority stake in them. Contrary to the publicity of the Government. Besides. There has been some apprehension that disinvestment of PSUs might result in the? Crowding out? Of private corporate (through lowered subscription to their shares) from the primary capital market. UTI and other mutual funds to purchase the equity. but also in that of betterperforming PSUs. Such reduction takes place both immediately before and after privatisation. privatisation of CPSUs almost invariably involves reduction of workmen. To cite an example of pre-privatisation reduction of workmen. in many cases. disinvestment has not really changed the ownership of PSUs. The number of bidders for equity has been small not only in the case of financially weak PSUs. All this has led to low valuation or under pricing of equity.Problems associated with Disinvestments A number of problems and issues have bedeviled the disinvestment process. let take the case of Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). These organizations have not been very enthusiastic in listing and trading of shares purchased by them. These 32 . the government has often compelled financial institutions. as we have seen in the case of ‘asset stripping’ in the VSNL. which was being unloaded through disinvestment. as it would reduce their control over PSUs. Instances of insider trading of shares by them have also come to light.

In BALCO. ITDC Hotels. since the Government has launched the privatisation onslaught. he will get the same compensation as his Hindustan Lever counterparts. in many CPSUs the workers got guaranteed benefit of more than 80% of basic pay.” So far as the question of wage revision is concerned. An Executive of the company has been quoted. the experience of the CPSU workers in privatized companies is very bad. Maruti.” 33 . the management of CPSUs. however. VSNL are more or less same.000.000 per worker and hence not gratis from the management.5.7 million”. the workforce in the Public Sector Undertakings has reduced from 2. In fact. The experience with Modern Foods.15. The wage revision was deliberately kept pending by the Government keeping in mind the impending privatisation. BALCO workers never got such a paltry wage rise.two PSEs have drawn plan to reduce the number of workmen by around 4. the”guaranteed benefit of 20% of basic pay” is one of the lowest in a profit making company like BALCO. “During last ten years.000 referred in the note of the Ministry is in lieu of the unpaid wages of the workers on an average amounting to Rs. It is a case of mourning and not rejoicing. The Labour Ministry note itself has mentioned.000 excess staff at the Vadoda plant alone. The ex-gratia payment of Rs.3 million to 1. The Hindustan Lever Ltd (HLL) management has declared that the acquired Modern Food employee shall continue to get less pay than the HLL employees. If. During its entire period in the public sector. most widely noticed case of privatisation. ”we will not pay a Modern Foods employee the same salary. under orders from the Government has been reducing the workmen. several hundred workmen has been retrenched after privatisation. Further. In IPCL 400 hundred workmen are being dislodged and further “Reliance has identified 2. The drum beating by the Ministry of Disinvestments citing the example of wage revision of the BALCO workers is rather a case of deprivation. we recruit a new employee and post him at Modern Foods. In fact ever.

market structure and 34 . Conclusion Disinvestment plays an important role in revenue generation.As is generally the case in the private sector. rampant violation of labour laws and blatant refusal to trade rights is seriously confronted by the workers in the post privatisation era.e. workers. But has the government been successful in this context. intervention of stakeholders and interest groups as well as poor state of PSUs have all contributed to this performance. The government would seek to establish a competitive market which would result in driving down consumer prices (telecom sector privatisation in India) or it would try to maximize revenue by divesting in a pseudo monopoly environment and using regulation to control rent seeking behaviour (Reliance acquisition of IPCL) but it cannot try to maximize both revenue and market structure. Further this essay looks only at a single variable i. The following case will explain the contradiction in the two objectives. employees. Solutions are not simple. equity holders and consumers. especially where stakeholders are many and come from all sections of the society.000 Actual Receipts 1829 1870 5632 Political hurdles in disinvestment. Good disinvestment receipts can help the government reduce fiscal deficit not only by way of equity sale in PSUs but also for the subsequent cap in government transfers to bleeding PSUs.000 12. Trends in the past few years have displayed wide and abysmal differences in disinvestment targets and actual receipts. Year 1999-2000 2000-2001 2001-2002 Targeted Receipts 10.000 10. management. Efficient Market Structure is also one of the important goals in the disinvestment/privatisation process.

The government should study international best practices. Dated this _______ AGREEMENT AMONGST SELLING SHAREHOLDER AND COMPANY AND REGISTRAR 1 35 . Several other variables play more important roles in the scheme of disinvestment.its relationship with disinvestment receipts. customize them to the Indian landscape and arrive at the right direction of the liberalization process.

be deemed to mean and include its successors and permitted assigns. of the THIRD PART. a company registered under the Companies Act. of the FIRST PART. 1956 (the “Companies Act”) and having its registered office. the Company and the Registrar are hereinafter individually referred to as a “Party” and collectively as “Parties”. AND REGISTRAR. which expression shall. The Selling Shareholder. which expression shall. a company within the meaning of the Companies Act and having its registered office (the “Registrar”). WHEREAS: 2 36 . of the SECOND PART. be deemed to mean and include its successors and permitted assigns). (the “Company”). unless it be repugnant to the context or meaning thereof. unless it be repugnant to the context or meaning thereof. AND COMPANY.THIS AGREEMENT (the “Agreement”) is made at New Delhi on this ______ by and amongst: SELLING SHAREHOLDER(hereinafter referred to as the “Selling Shareholder”).

S.S. or not subject to. 5. Securities Act of 1933. as defined in. including a reservation for Eligible Employees (as defined in the Draft Red Herring Prospectus to be filed with the SEBI. and related rules and regulations and in reliance upon transactions exempt from. have the meanings assigned to them in the Draft Red Herring Prospectus or Red Herring Prospectus or the Prospectus to be filed with the SEBI and the 3 37 . to “qualified institutional buyers” (“QIBs”) as defined in Rule 144A (“Rule 144A”) under the U. Securities Act”). as defined in. (ii) within the United States. circular or guideline issued by the Securities and Exchange Board of India (the “SEBI”) and as agreed to by the Selling Shareholder and the Company.S. as amended from time to time (the “SEBI Regulations”) and other Applicable Laws (i) within India. at such prices as may be determined or discovered in accordance with the processes provided under the SEBI Regulations or any regulation. valid from _______ to _______.S. Regulation S (“Regulation S”) under the U. 2009. The Offer less the Employee Reservation Portion shall constitute the net Offer to the public (the “Net Offer”). All capitalized terms used in this Agreement shall. non-institutional and retail investors that are not “U.1.S. to Indian institutional. _______. 1956 (the “Act”) the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations. In terms of Regulation 5 (7) of the SEBI Regulations. Equity Shares by the Selling Shareholder (the “Offer for Sale”). The Offer comprises an offer for sale of …………. persons”. REGISTRAR is registered with the SEBI as Registrar to Issue and has a subsisting Registration No. and in reliance on Regulation S under the U. and in reliance on. as per the terms and conditions detailed in this Agreement (the activities pertaining to it acting as the registrar to the Offer are hereinafter referred to as the “Assignment") and the Registrar has accepted the Assignment. persons”.__ of the Company (the “Equity Shares”) in accordance with the requirements of the Companies Act. and such portion will herein after referred to as. as amended (the “U. the registration requirements of the U. The Selling Shareholder has appointed REGISTRAR as the Registrar to the Offer wide its mandate letter dated ______. 4. unless specifically defined herein or required by the context in which they are referred to. in consultation with the BRLMs. 6. The Selling Shareholder and the Company are taking steps for an initial public offering (hereinafter referred to as the “Offer”) of up to ………… equity shares of face value of Rs. 2.S.S. 3. Securities Act and (iii) outside the United States and India.S. Securities Act that are also “qualified purchasers” as defined in the U. pursuant to which the Parties are entering into this Agreement. Investment Company Act of 1940. the “Employee Reservation Portion”). as amended. Securities Act. to institutional investors that are not “U. the Registrar is required to enter into a valid agreement with the Selling Shareholder and the Company inter alia to define the allocation of duties and responsibilities among the Parties.

and the Bidders. facilities. capability and the net worth to honour its obligations and liabilities under this Agreement. In case any prohibiting orders are passed restricting it from carrying out the Assignment. b) It has not violated any of the conditions subject to which registration has been granted and that no disciplinary or other proceedings have been commenced by SEBI and that it is not debarred or suspended from carrying on its activities as a registrar by SEBI. 2.Registrar of Companies. the SEBI Regulations and rules. including without limitation. capacity. NOW THEREFORE. 3. the Company. duties and obligations and to provide such other functions. c) It shall perform the Assignment with highest standards of integrity and fairness and shall abide by the code of conduct as specified in Schedule III of the RTA Regulations and shall act in an ethical manner in all its dealings pursuant to the Agreement with the Selling Shareholder. regulations and bye-laws of the Stock Exchanges. The Registrar will not take up any activities which are likely to be in conflict with the interests of the Selling Shareholder. the Company and investors or contrary to/ in violation of the directions issued by SEBI. National Capital Territory of Delhi and Haryana. d) It shall carry out the Assignment and complete all the formalities within the specified time limits as per the applicable law. duties. it agrees to promptly inform the Company and the Selling Shareholder of the same and cooperate to establish alternate arrangements. e) It has the required infrastructure. The Registrar hereby undertakes to perform and fulfill such functions. 4 38 . The Registrar declares and undertakes that: a) It has obtained certificate of registration from SEBI and that the certificate is valid from _____ to _____. personnel. the Parties do hereby agree as follows: 1. subject to other entities/intermediaries involved in the Offer adhering to their time deadlines and standards agreed upon. It shall also ensure that the certificate of registration shall remain in force by taking suitable steps including prompt steps for renewal. The Selling Shareholder and the Company hereby appoints the Registrar as Registrar to the Offer and the Registrar accepts such appointment. at New Delhi. obligations and services as are mentioned herein and undertakes that it shall be the Registrar‟s sole and absolute responsibility to ensure that such duties are performed.

h) It shall co-operate and comply with any instructions the BRLMs may provide in respect of the Offer. k) In the event the Registrar is unable to continue to act as a Registrar. court or tribunal order or any agreement. or constitute a breach of. the Registrar 5 39 . duties and obligations pertaining to the Assignment in respect of each activity mentioned in Schedule II hereunder. the SEBI Regulations. The Parties agree to their respective functions. regulations and guidelines. for a smooth transition of the Equity Shares data held by the Registrar at no cost to the Company and the Selling Shareholder for such transition to another Registrar as may be appointed by the Company. The Selling Shareholder and the Company hereby declares that they have complied with and agree to comply with all statutory formalities under the Act. 5. deed or undertaking entered into by the Registrar. Further. to enable them to make the Offer. The Selling Shareholder and the Company also agrees that it will co-ordinate with the Registrar and that they will not give any instructions which are in violation of any applicable legislation. regulation. at any point of time. which is indicative and not exhaustive and conforms to the model agreement contemplated under the SEBI Regulations. 2008. due to any direction of any statutory or regulatory authority it shall immediately inform the Company and the Selling Shareholder and take steps. l) It shall keep the Company and the Selling Shareholder fully informed about the progress with regard to any legal action initiated against it and/or any of its group entity by any regulator from time to time. or injunction or order of any court or regulatory authority that seeks to prevent it from entering into this Agreement or performing the Assignment in any manner or acting as the registrar in relation to any public offering by a company. any law. rules. regulations and guidelines. j) The entry into this Agreement does not violate. and any rules. in consultation with and as per the direction of the Company and the Selling Shareholder. as amended. g) It is a „fit and proper person‟ as per the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations. i) It is not subject to any litigation in. 4. and all other applicable laws. The Parties may include further activities agreed upon but all the activities pertaining to the Assignment shall be listed and agreed upon between the parties.f) It shall ensure that adequate resources including qualified manpower are dedicated in the performance of the services indicated herein and that due care and caution shall be taken and endeavor to ensure that there are no errors in the services to be performed by the Registrar.

Client ID and PAN specified in the reconciled data with the depository‟s database. 6. in accordance with the instructions of the Selling Shareholder and the Company and reporting any disruptions/delay in the flow of applications from bankers to the Selling Shareholder. if any. Without prejudice to the above. the “Offer Documents”) provided that the Registrar is either a party to such agreements or is in receipt of any communication detailing such obligations and responsibilities. the following: (A) Collecting: 1) the Bid cum Application Forms from various centers of the Escrow Collection Banks. the Draft Red Herring Prospectus and the Prospectus (collectively. 2) the electronic Bid data (including the Application Supported by Blocked Amount (“ASBA”) Bid data) from the Stock Exchanges. syndicate agreement. (ii) Matching the DP ID. along with advice to send the rectified data within a specified date. in the Bid details. self certified syndicate bank agreement. without limitation. as well as in the underwriting agreement. Client ID and PAN specified in the reconciled data does not match with these details in the depository‟s database and which has not been rectified by the SCSB within the specified date. The Registrar hereby consents to the inclusion of its name as the Registrar to the Offer in all such documents as are required for the Offer.agrees to undertake all the obligations and responsibilities specified for the Registrar herein. in each case. the Company and the BRLMs. and 3) the aggregate data in relation to the total number of ASBAs uploaded by the Self Certified Syndicate Banks (the “SCSBs”) and the total number of Equity Shares and the total amount blocked against the uploaded ASBAs. (iii) Informing the SCSBs about errors. from each SCSB. if any. the Registrar‟s functions and responsibilities in connection with the Offer will include. escrow agreement. (B) Processing all applications in relation to the Offer (i) Reconciling the compiled data collected from the Stock Exchanges in terms of Clause 6(A) (2) with the data collected from the SCSBs in terms of 6(A)(3). iv) Rejecting the Bids (including ASBAs) in respect of which the DP ID. 6 40 .

including: (a) ASBAs taken from the online public Offer system of the Stock Exchanges and ASBAs furnished by SCSBs.(v) Entering accurate data based on application/depository details and weeding out multiple applications. in accordance with the terms of this Agreement. regulations and guidelines issued by SEBI. the Prospectus. and (d) Particulars relating to rejected/withdrawn/unsuccessful ASBAs. as specified in the Offer Documents and applicable rules. (C) Keeping a proper record of applications and monies received from Bidders and paid to the Selling Shareholder/ Escrow collection Account/ Bankers to the Offer. (vi) Keeping accurately. the electronic records relating to ASBAs received from all SCSBs. (c) Particulars relating to the requisite money to be transferred to the Public Offer Account. (G) Ensuring that allotment made is correct and timely uploading of the correct file in the depository system is made. at all times. preparation of list of allottees entitled to allocation of Equity Shares. the Draft Red Herring Prospectus. (E) Post communication of the basis of allotment by the Selling Shareholder and the Company. Red Herring Prospectus. (F) Ensuring that correct credit to respective demat accounts (for all applicants including ASBA applicants) is made in time . (vii) Delete details of the Bids submitted by the ASBA Bidders which have been withdrawn after the Bid/Offer Closing Date. the SEBI Regulations and the Companies Act. (b) Particulars relating to the allocation and Allotment of Equity Shares against valid ASBAs. including in relation to ASBA applicants. including ASBAs. (D) Providing correct data in time to enable the Selling Shareholder and the Company to determine and finalize the basis of allocation and allotment and the Selling Shareholder and the Company in coordination with the designated stock exchange for timely approval of the basis of allotment. 7 41 .

and (ii) Total number of shares and total amount blocked against the uploaded ASBAs (“Reconciled Data”). as per applicable regulations. (M) Complying with the effective procedure for monitoring the activities of intermediaries. (Q) Rejecting multiple ASBAs determined as such. along with instructions to unblock the relevant bank accounts and transfer the requisite money to the Selling Shareholder‟s account. any reference to dispatch of refund orders shall include refunds made by way of modes permitted by the Reserve Bank of India and as provided in the SEBI Regulation. (R) Once the basis of allotment is approved by the Designated Stock Exchange. as the case may be. based on common PAN. (I) Dispatch of letters of allotment/ Confirmation of Allocation Note (“CAN”)/ refund orders. (L) Carrying out due procedures in relation to processing of multiple applications as provided in the Offer Documents. which will be established in consultation with the Selling Shareholder/Company. (K) Revalidating refund orders. and the BRLMs. providing the following details to the Controlling Branch of each SCSB. credit of shares to the allottees‟ demat accounts within the time frame indicated in the Offer Documents subject to certain cases kept in abeyance in consultation with the Selling Shareholder/Company / BRLMs. (N) Collecting and keeping a record of multiple Bids submitted by ASBA Bidders (determined on the basis of common PAN) and rejected . (i) Total number of ASBAs uploaded by the SCSB. (P) Ensuring that proper grievance handling mechanism is in place at its office during the Offer period and after closing of the Offer. within the timelines specified in the ASBA process: 8 42 . It is clarified that for the purposes of this Agreement.(H) Coordinating with the concerned depository and ensure that the number of Equity Shares allocated to each category of bidders is correct in all respects. (J) Issuing duplicate refund orders (after obtaining suitable indemnity bond)/CAN. (O) Obtaining the electronic bid data (including ASBA bid data) from the Stock Exchange(s) and reconciling the same with the following data received from the SCSBs that is.

Number of Equity Shares to be allotted against each valid ASBA. 43 .i.

44 .ii. Amount to be transferred from the relevant bank account to the Selling Shareholder‟s account. for each valid ASBA.

45 . shall be transferred to the Selling Shareholder‟s account.iii. The date by which the funds referred herein above.

along with reasons for rejection and details of withdrawn/ unsuccessful ASBAs. regulations and guidelines issued by SEBI. (b) records relating to ASBAs received from all SCSBs including ASBAs taken from the online public issue system of the Stock Exchanges and ASBAs furnished by SCSBs.iv. the Registrar shall maintain. to enable SCSBs to unblock the respective bank accounts. if any. and (U) Assisting the Selling Shareholder/Company in providing necessary report/information and complying with the formalities of the designated stock exchange. 9 46 . (V) Delivery of communication to the Company and the Selling Shareholder at the earliest in the event of discrepancy between Bids registered in the online IPO system of the Stock Exchanges and physical Bid cum Application Forms. and provide requisite reports to the Selling Shareholder and the Company. (c) all the applications of investors rejected and reasons thereof and details of the rejected/withdrawn or unsuccessful ASBA Forms. (T) Settling investor complaints and grievance in a timely manner in accordance with any applicable legislation and any rules. without limitation. (W) Providing all the relevant statements/reports in a timely manner for listing and trading as required under applicable regulations issued by the SEBI. along with relevant annexures and details. the following records: (a) all the applications received from investors in respect of the Offer. in consultation with the Company. the Selling Shareholder and the BRLMs. 7. Details of rejected ASBAs. (S) Deleting the Bids withdrawn by ASBA investors from the bid file. In connection with the Offer. where withdrawal request is submitted to the Registrar after the Bid/Offer Closing Date. if any. (d) basis of allocation of Equity Shares to the investors as finalized by the Selling Shareholder and the Company in consultation with the Designated Stock Exchange.

the Company and/or the BRLMs for carrying on the activities as Registrar to an Offer. (k) list of names of successful bidders and unsuccessful bidders of the Equity Shares. (f) ASBAs taken from the electronic bidding system of the Stock Exchange(s) and ASBAs furnished by SCSBs in respect of the Offer. 8. The Registrar shall provide the Selling Shareholder.. divulge to any third party any confidential information about the Selling Shareholder and 10 47 . or after the termination of. and (q) such other records as may be specified by SEBI. (g) particulars relating to allocation and Allotment of Equity Shares against valid ASBAs. the Company or any of their assigns any report that is required by them using the information specified above in a timely manner. Subject to the provisions of any other law. (n) refund orders dispatched to investors in respect of application monies received from them in response to the Offer revalidation and Offer of duplicate refund order. including successful ASBA Bidders and unsuccessful ASBA Bidders. the Selling Shareholder . (m) particulars relating to the monies to be transferred to the public offer account and the refunds to be returned to the bidders. their appointment hereunder. (i) Details of rejected/ withdrawn/ unsuccessful ASBAs. if any. the Registrar shall preserve all aforesaid records and documents for a minimum period of three years. (p) details of files in case of refunds to be sent by electronic mode such as Electronic Clearing Service/ RTGS etc. either during the term of. (l) particulars relating to the allocation/allotment of the Equity Shares for the Offer. employees and agents shall not.(e) terms and conditions of offer of the Equity Shares. (h) particulars relating to the requisite money to be transferred to the Offerer‟s account against valid ASBAs. (o) reconciliation between funds deposited in the Escrow Bank and total of amounts stated in bid cum application forms received in the Offer. (j) details of allotment of Equity Shares. The Registrar and its officers.

The Registrar shall undertake that it shall not generally and particularly in respect of any dealings in the Equity Shares be party to: (a) creation of false market. and e. b. the information furnished to the SCSBs in discharging its responsibility under the ASBA process is correct and valid. the enquiries/ complaints from applicants/ investors. d. including any of their correspondent banks. are dealt with adequately and in a timely manner in accordance with applicable rules.the Company. regulations and guidelines. 11. address and redress investor complaints. the Registrar has a proper system to track. members of the stock exchanges and other intermediaries in the securities market or take any other action which is not in the interest of the investors. c. 9. 10. dispatch of instructions to SCSBs to unblock the bank accounts of the respective ASBA Bidders pursuant to approval of basis of allotment by the Designated Stock Exchange and dispatch of refund orders without delay. including providing the escrow collection banks with the details of the monies and any surplus amount to be refunded to the bidders. uniform procedure is followed for the processing ASBA Forms and non ASBA Forms. including ASBA Bidders. adequate steps are taken for proper allocation and allotment of Equity Shares and refund of application monies without delay and as per law. (b) price rigging or manipulation. to ensure proper allotment and transfer of the Equity Shares. The Registrar shall ensure that: a. The Registrar shall be responsible for the correctness and validity of the information furnished by it to the SCSBs and shall be liable for omissions and commissions in discharging its responsibilities under this Agreement. The Registrar shall be responsible for the correctness and validity of the information relating to any refunds required to be made that has been provided by the Registrar to the Refund Bankers. The Registrar shall provide in a timely manner all accurate information to be provided by it under this Agreement. (c) passing of unpublished price sensitive information to any third party including without limitation brokers. or the Offer which comes to its knowledge in its capacity as the Registrar to the Offer. and 11 48 .

the Registrar shall dispatch all the refund orders within the period specified in the Offer Documents. credit of shares etc. partners or managers having the management of the whole or substantially the whole of the affairs of their business shall either on their respective accounts or through their associates or family members. The Registrar will not hand over any Bid cum Application Forms or other documents/ records relating to the Offer to any other person (except to the BRLMs and the relevant stock exchanges. 13. 15. The Registrar undertakes not to disclose or cause to be disclosed any such information to any other person without the written consent of the Selling Shareholder and the Company. is liable to pay interest due to delay in refunding the amount. Immediately on receiving the instructions from the Selling Shareholder and/or the Company . refund orders. the Registrar shall be solely responsible to pick up the relevant details from the bid cum application form or depository(ies) and provide the Refund Bank(s) with the requisite details and files. to the SCSBs and the Stock Exchanges with prior notice of such disclosure to the Selling Shareholder and the Company. Direct Credit or RTGS. In case of Employee Reservation. 12. relatives or friends indulge in any insider trading. letters of allocation and allocation advice shall be arranged by the Selling Shareholder at least three days in advance to the Registrar. Equity Shares within the Employee Reservation Portion shall be allotted to persons identified in the list provided by the Authorised Representative of the Company certifying that such persons are bona fide employees of the Company who are Eligible Employees as defined in the Offer Documents. as the case may be. the Registrar shall be liable to indemnify the Selling Shareholder for the cost incurred by the Selling Shareholder in paying the interest as per the applicable law. subject to the Registrar having provided prior notice of such disclosure to the Selling Shareholder and the Company) until the completion of the dispatch of allotment letters. as the case may be. In case of refunds through electronic means like NECS. as per the procedure specified in the Offer Documents. as the case may be. 14. Provided that the Registrar may hand over any Bid cum Application Form or ASBA Form or other documents/ records relating to the Offer to the BRLMs. where such a delay is attributable solely to the Registrar‟s failure to refund the amount or to provide instructions to the SCSBs to unblock the bank accounts of the respective ASBA Bidders within the period stated in the Offer Documents on receiving the instruction to do so from the Selling Shareholder. 12 49 . The Selling Shareholder and the Company agrees that it will have access to the applications/ documents relating to the Offer at the office of the Registrar only (as indicated at Clause 16 below).(d) neither it nor any of its directors. NEFT etc. If the Selling Shareholder . The required pre-printed stationery of CAN / refund orders.

Pannalal Silk Millls Compound. envelopes etc. allocation advice. The address of its above said office shall be printed in all relevant stationery pertaining to the said Offer. allotment will be done in the presence of a Stock Exchange representative and the Registrar will extend all facilities to complete the allotment process smoothly and speedily. forgery. Bhandup (West). Company and the BRLMs. 22. by entering into tripartite agreement between the Company. shall be kept ready and handed over to the Registrar by the Selling Shareholder within seven days from the date of closure of Offer and the Selling Shareholder shall be responsible for any delay on this account. in consultation with the Selling Shareholders. Marg. Depository and the Registrar. L. if so required 19. along with relevant documents/ certificates.400078 which has been declared to SEBI and approved by it for carrying on its activities. The Registrar acknowledges that the ASBA process has been newly introduced and effective functioning of the same has not been established. 13 50 . in consultation with the post issue lead manger and the Selling Shareholder and the Company. errors of commission/ omission etc. The Selling Shareholder and/or the Company may take a special contingency insurance policy to cover risk arising out of fraud. The Registrar will extend all help to the public representative deputed by the designated Stock Exchange. 23. to be submitted to SEBI within the stipulated time. 18. The post Offer stationery including letters of allocation. 24. 20. In the case of over-subscription.B. The Registrar will also carry-out the following activities: 1. Ensure to establish electronic connectivity for the Company‟s equity shares with NSDL & CDSL. The Selling Shareholder and the Company shall also extend all necessary assistance to the Registrar in such matters. The Registrar shall act as a nodal agency for redressing complaints of ASBA and nonASBA investors. The Registrar shall extend all necessary support to the Selling Shareholder and the Company. The Registrar will handle the Offer related work from its office/s at C-13.S. refund orders. 17.16. including providing guidance to ASBA investors regarding approaching the SCSB concerned. the BRLMs and the SCSBs as may be required for the smooth and speedy functioning of the ASBA process. Mumbai . 21. The Registrar will finalize various post Offer monitoring reports such as 3 day report and final issue monitoring report. The Registrar will provide all the relevant statements/reports for trading within timelines mentioned in the Offer Documents.

27. 3. The Registrar shall continue to be responsible for the services detailed herein till termination of the Agreement. The Registrar should maintain a proper account of the amount spent by it on behalf of the Selling Shareholder. in consultation with the BRLMs. Initiate Corporate Action to allot shares to the applicants by transfer from the escrow account. Ensure that the equity shares offered for sale are transferred to ESCROW account a day prior to the Offer opening date. prior to exercising the option to terminate. In the event of complete collapse or dislocation of business in the financial markets of the country due to war. mailing charges for dispatching of allotment letters etc..2. the Company and the Selling Shareholder may terminate this Agreement with or 14 51 . any of the Parties may terminate this Agreement with mutual consent before the opening of the Offer. 29. SEBI as applicable. 30. Move the funds from the escrow collection amount to Company‟s Public Offer Account. expenses and charges payable to the Registrar for handling the Assignment shall be paid by the Selling Shareholder as per the terms and conditions specified in Schedule I. after the approval of allotment of shares. The Selling Shareholder agrees that the fees. then any of the Parties shall be entitled to terminate this Agreement by giving 15 working days notice to the other Parties of its intention to so terminate this Agreement. The Selling Shareholder shall ensure that requisite funds are made available to the Registrar for postage. insurrection or any other serious sustained. The Selling Shareholder and the Company agrees that formats of all reports. 28. share certificates and other documents shall be in conformity with the standard designs approved by the Stock Exchanges. statements. However. for eventual credit to the Sellers. 25. the Registrar will submit an estimate of the work done and the funds required for postage. political or industrial disturbance or in any event caused by force majeure as may be agreed to between the Parties. 26. On allotment. the Agreement shall immediately stand terminated without the Registrar having recourse to compensation from the Selling Shareholder and/or the Company Further. decide not to proceed with the Offer. The Selling Shareholder and the Company shall be entitled to terminate this Agreement in the event the Registrar‟s „Certificate of Registration‟ with the SEBI is suspended/ cancelled or the SEBI debars the Registrar from carrying on its activities. the Parties shall need to mutually decide on the future course of action and if they fail to arrive at a mutually agreeable course of action within 15 working days from the date on which the event of force majeure occurs. 4. In the event the Selling Shareholder and the Company.

actions and demands which may be made or commenced by the bidders for the Equity Shares (including ASBA Bidders). The Registrar shall act with due diligence. The Registrar‟s responsibility under this Agreement will be restricted to the duties of the Registrar as agreed to herein and the Registrar will not be in any way construed to be an agent of the Selling Shareholder and the Company in any other business of the Selling Shareholder and the Company in any manner whatsoever. duties. officers. 34. then they shall within 3 working days upon being instructed by the Selling Shareholder and the Company transfer all the documents in their possession including shares. 32. deficiency or error on the part of the Registrar or any of its officers. If ever this Agreement is terminated. 33.without cause. claims. or any failure. The Registrar shall indemnify and hold harmless the Selling Shareholder and the Company its affiliates. obligations and services under this Agreement. against the Registrar. advisors. care and skill. The Registrar shall redress complaints of the investors (including ASBA Bidders) within 15 days of receipt of the complaint during the currency of this Agreement and continue to do so during the period it is required to maintain records under the RTA Regulations and the Selling Shareholder and the Company shall extend necessary co-operation to the Registrar for its complying with such regulation. employees or agents in performing or fulfilling any of its functions. the Registrar shall ensure that the Registrar will take all measures at its own cost to rectify such defaults and the Registrar shall be directly responsible for any liability arising out of such error or failure to deliver the services contemplated in this Agreement. then it shall be the duty of the Registrar to extend all such support as may be required by the Selling Shareholder and the Company or their newly appointed Registrar to the Offer towards taking over duties and responsibilities as the Registrar to the Offer. The Registrar undertakes that in the event that there is any order or any injunction issued by any court or authority. employees and agents (collectively “Indemnified Party”) from and against all suits. its successors and each of their respective directors. 31. 35. In an event of default of any of the duties and responsibilities of the Registrar herein or any error in the services rendered by the Registrar. to any other registrar/depositary as instructed by the Selling Shareholder and the Company. The Registrar shall provide a status report of investor complaints on a fortnightly basis to the Selling Shareholder/the Company. upon giving seven days notice to the Registrar of its intention to so terminate the Agreement. Similar status reports should also be provided to the Selling Shareholder and the Company as and when required. The Registrar shall further indemnify and refund all costs incurred by the Selling Shareholder and the 15 52 . any holder of the Equity Shares or third party against the Selling Shareholder and the Indemnified Party as a consequence of any act or omission of.

income tax authorities. telex or by fax. without limitation. 37. shall be confirmed in writing. Any notice. The Registrar may have to provide certain information regarding the applicants (including ASBA Bidders) as may be required under any legislation or regulation to certain statutory and regulatory authorities including. and if given by fax or telex upon transmission thereof. and the Parties acknowledge that providing such information strictly for such purpose shall not be in violation of the terms of this Agreement. if given by post on expiration of three working days after the notice etc. However. in addressing investor complaints which otherwise would have been addressed by the Registrar in the performance of the services contemplated under this Agreement and in responding to queries relating to such services from SEBI and/ or the stock exchanges and/or any other statutory or regulatory authority or a court of law. shall have been delivered to the post office for onward dispatch. employees and agents. its affiliates and each of their respective directors. communication or document shall be deemed to have been served upon the Party to whom it is given if given by personal delivery when so delivered. the Registrar shall not be liable for any indirect or consequential loss caused to the Selling Shareholder and the Company due to error or omission committed by them in good faith. The notice. registered/ speed post. 36. All notices to the Parties shall be addressed as under: If to the Company: COMPANY Address Telphone: Fax: Kind Attn: Name. communication or documents to be given to the Parties may be given by personal delivery. Designation If to the Registrar: REGISTRAR Address 16 53 .Company. Designation If to the Selling Shareholder: SELLING SHAREHOLDER Telephone: Fax: Kind Attn: Name. Provided that any notice etc. officers. given by telex or fax.

courts at New Delhi shall have exclusive jurisdiction. the defaulting Party shall have the right to cure such breach within a period of ten days of receipt of written notice of such breach by the nondefaulting Party. In the event that (i) such breach is not cured by the defaulting Party within the aforesaid period. this Agreement will expire and stand terminated upon the expiry of one year from the date of closing of the Offer. The Arbitration shall take place in New Delhi. without reference to its conflict of laws rules. India. or (ii) any dispute or difference arises between the Parties hereto as regards the validity and the interpretation of this Agreement and which is not settled within fifteen (15) days through negotiations. 43. In the event of a breach by any Party. 38. 38. Designation Any change in the above shall be intimated by the Party concerned to the other Party and such change shall be effective 5 business days thereafter or such later date as may be specified by the Party whose address/ contact details are changed. Subject to Clause 39. This Agreement shall be governed by and construed in accordance with the laws of India. 44. 39. 42. duties or obligations hereunder without the prior written consent of the other. 40. All proceedings in any such arbitration shall be conducted under the Arbitration and Conciliation Act. The Parties shall share the costs of such arbitration equally unless otherwise awarded or fixed by the arbitration tribunal. 39 and 40 and this Clause 41 shall survive the termination of this Agreement. Neither Party shall be entitled to assign any of its rights. all documents and other information and data which are in the possession or custody of the Registrar shall be handed over to the Selling Shareholder/ the Company. Unless terminated earlier in accordance with its terms. The arbitral award shall state the reasons on which it is based. provided that Clauses 33.Telephone: Fax : Kind Attn : Name. 1996 and shall be conducted in English. If any provision/s of this Agreement is held to be prohibited by or invalid under applicable law or becomes inoperative as a result of change in 17 54 . one by the Registrar and the two arbitrators so appointed will appoint the third arbitrator). 41. On expiry or termination of this Agreement. then any Party may refer the dispute for resolution to an arbitration tribunal consisting of three arbitrators (one to be appointed by the Selling Shareholder/ the Company. The Parties agree that non-compliance of any of the covenants contained herein by any Party shall be reported to the SEBI within seven days by the other Party(ies).

such provision/s shall be ineffective only to the extent of such prohibition or invalidity or inoperativeness.circumstances. Offer agreement OFFER AGREEMENT DATED _____ AMONGST SELLING SHAREHOLDER AND COMPANY AND BRLM 55 . without invalidating the remaining provisions of this Agreement.

SUPPLYING OF INFORMATION AND DOCUMENTS ........................................................ 22 18........................................................................... 9 6....................................................................... BOOK BUILDING ...................................................................................................... 5 3.......................................................................... POST OFFER WORK ............................................................................................................... 26 STATEMENT OF RESPONSIBILITY AMONG THE MANAGERS ........................................................................................................... DEFINITIONS ............ INDEMNITY ........ SCOPE OF SERVICE....... 21 16................ 5 4....................................................................................... 25 ANNEXURE B ................................................... 14 10........................................................................... 17 13....... CONSEQUENCES OF BREACH ............................................................ WAIVER OF SOVEREIGN IMMUNITY .............................................................................................................................................. APPOINTMENT OF INTERMEDIARIES ......................................................................... 11 7...................................................................................................................................................................................................................... 21 17........................................................................................................................................................... SEVERABILITY ................................................................................... OFFER TERMS ............. 4 1................ PUBLICITY FOR THE OFFER .................................................................... INDEPENDENT VERIFICATION BY BRLMS ... TERMS AND TERMINATION .. 14 8........ INTERPRETATION ....................................................................................... 15 12................................ GOVERNING LAW .................................................... 14 9................ MISCELLANEOUS ................................................................. 6 5..................................................... DUTIES OF THE BRLMS ............... 4 2...... 18 14............................................................................................................................................ 26 1 56 ........................................................ NOTICES............. 22 19................................. 15 11.................... 22 ANNEXURE A .............. ARBITRATION ..................... 22 20....................................................................................................... 19 15........... 2 B................................. CONFIDENTIALITY .........................................................................TABLE OF CONTENTS A..................................................................................................................................................................................................................................................................................... PAYMENT .......

unless it be repugnant to the context or meaning thereof. The Selling Shareholder. unless it be repugnant to the context or meaning thereof. to Indian institutional. as amended ("Companies Act") and having its registered office at ______(hereinafter referred to as "____" or the "Company") which expression shall. noninstitutional and retail 2 57 . in accordance with the requirements of the Companies Act as amended. AND BRLM. _____. AND COMPANY. of the SECOND PART.__ each of the Company (the "Equity Shares") by an offer for sale by the Selling Shareholder. amongst: SELLING SHAREHOLDER _________ (hereinafter referred to as the "Selling Shareholder"). the Company and the BRLMs are hereinafter collectively referred to as the "Parties" and individually as "Party". be deemed to mean and include its successors and permitted assigns. The Selling Shareholder and the Company are taking steps for a initial public offering (hereinafter referred to as the "Offer") of up to _______ equity shares of Rs. of the THIRD PART. a company registered under the Companies Act. WHEREAS 1. 1956. which expression shall. the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations. _____. be deemed to mean and include its successors and permitted assigns. a company incorporated under the Companies Act and having its registered office at whose registered office is situated at ______ (hereinafter referred to as "__").OFFER AGREEMENT This OFFER AGREEMENT ("Agreement") is entered into on _____ at ____. 2009. of the FIRST PART. _____ are hereinafter collectively referred to as the "Book Running Lead Managers" or "BRLMs". as amended (the "SEBI Regulations") and other Applicable Laws (i) within India.

conveyed the approval granted to the Offer.S.3. or (c) any other person that is a holding company. for purposes of this Agreement. in consultation with the BRLMs. 3 58 .S. to "qualified institutional buyers" as defined in Rule 144A under the U. to institutional investors that are not "U. as the BRLMs to the Offer and the BRLMs have accepted this engagement in terms of the engagement letter dated ____ issued to them by the Selling Shareholder (the "Engagement Letter") as set out in Annexure A and subject to the Selling Shareholder and the Company entering into this Agreement with the BRLMs. Regulation S ("Regulation S") under the U.S. The Selling Shareholder has appointed the BRLMs to manage the Offer subject to the execution of customary underwriting agreements between the Parties on the terms and conditions. the Company and the BRLMs do hereby agree as follows: A. Securities Act. THEREFORE. the Parties are entering into this Agreement for the purpose of these presents. "Agreement" shall have the meaning ascribed to such term in the preamble hereto. 4.investors that are not "U. persons". unless the context otherwise requires. and in reliance on. including a reservation for Eligible Employees (as defined in the Draft Red Herring Prospectus and such portion. as amended (the "U. the Selling Shareholder. the term "control" (including the terms "controlling". where (i) "significant influence" over a person is the power to participate in the management. as prescribed under the SEBI Regulations. Securities Act and (iii) outside the United States and India.S. and (ii) shareholders beneficially holding. Further. are presumed to have a significant influence over that person or Party. (ii) within the United States.S. directly or indirectly through one or more intermediaries. as defined in. "Allot" or "Allotment" or "Allotted" shall mean the transfer of Equity Shares to successful Bidders pursuant to the Offer. which will be stated therein. the "Employee Reservation Portion"). the registration requirements of the U. joint venture or subsidiary of such Party. The Offer comprises an offer for sale of ______ Equity Shares by the Selling Shareholder. shall have the following meanings: "Affiliates" with respect to any Party means any person that (a) directly or indirectly through one or more intermediaries. DEFINITIONS In this Agreement the following terms. NOW. at such prices as may be determined or discovered in accordance with the processes provided under the SEBI Regulations or any regulation. persons". Control or is Controlled by or is under common control with such Party. provided that.S. 4. as defined in. "controlled by" or "under common control with") shall have the same meaning as assigned to it under Regulation 2(1)(i) of the SEBI Regulations. circular or guideline issued by the Securities and Exchange Board of India (the "SEBI") and as agreed to by the Selling Shareholder and the Company. the terms "holding company" and "subsidiary" shall have the meanings set forth in Section 4 of the Companies Act. and in reliance on Regulation S under the U. 2. For the purposes of this definition. or not subject to. Securities Act ("Rule 144A") and related rules and regulations and in reliance upon transactions exempt from. a 10% interest in the voting power of any person or Party. "Applicable Laws" has the meaning attributed to such term in Clause 1. 3. The SELLING SHAREHOLDER through its letter dated _______ bearing reference no. The Offer less the Employee Reservation Portion shall constitute the Net Offer to the public. Securities Act of 1933. financial or operating policy decisions of that person but is less than control over those policies. or (b) has a "significant influence" over or is under "significant influence" of such Party. either directly or indirectly through one or more intermediaries. Securities Act").S.

"Party" or "Parties" has the meaning attributed to such term in the Preamble. containing. together with the preliminary or final international supplement/wrap to such offering documents. "Designated Stock Exchange" means [•] "Directors" shall mean the directors of the Company. supplements. "____" has the meaning attributed to such term in the Preamble. "Offer Price" refers to the final price at which Allotment will be made. "Prospectus" shall mean the prospectus of the Company to be filed with the RoC relating to the Offer post the Pricing Date pursuant to Section 60 B of the Companies Act. "Draft Red Herring Prospectus". "Equity Shares" has the meaning attributed to such term in the Recitals. the stock exchanges and the Registrar of Companies. "Bidder" shall mean a prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus. "Red Herring Prospectus" and "Prospectus" refer to the offering documents used or to be used in connection with the Offer. as determined by the Company and the Selling Shareholder in consultation with the Book Running Lead Managers. 4 59 . as applicable. "Intermediary(ies)" has the meaning attributed to such term in Clause 4. "Book Running Lead Managers" or "BRLMs" has the meaning attributed to such term in the Preamble. as may be applicable and.1. "Companies Act" has the same meaning as attributed to it in the Preamble. "Offer" has the meaning attributed to such term in the Recitals. the Offer Price that is determined at the end of the Book Building Process on the Pricing Date. "____" has the meaning attributed to such term in the Preamble. "Company" or "____" has the meaning attributed to such term in the Preamble.8."Bid" shall mean an indication by a Bidder to make an offer to purchase the Equity Shares in terms of the Red Herring Prospectus. inter alia. including any corrigendum thereof. "Book Building" has the meaning attributed to such term in Clause 1. corrections or corrigenda to such offering documents and any international supplement/wrap. . "Cure Period" has the meaning attributed to such term in Clause 14.1 (e).1. "Indemnified Party(ies)" has the meaning attributed to such term in Clause 14. "Group Companies" shall mean the companies or other entities identified as such in the Draft Red Herring Prospectus. as filed or to be filed with the Securities and Exchange Board of India issued in accordance with the provisions of Section 60B of the Companies Act and the SEBI Regulations. "Bid cum Application Form" means the form in terms of which the Bidder shall make a Bid and which will be considered as the Application for Equity Shares pursuant to the terms of the Red Herring Prospectus and the Prospectus including the ASBA Bid cum Application as may be applicable. "Engagement Letter" has the meaning attributed to such term in the Recitals. any amendments. notices.

[•] per Equity Share. 1. (f) any reference to any Party to this Agreement or any other agreement or deed or instrument shall include its successors or permitted assigns. "Rule 144A" has the meaning attributed to such term in the Recitals. [•] per Equity Share and the Cap Price of Rs.1. consolidated. extended. Securities Act" has the meaning attributed to such term in the Recitals. (h) any reference to a Clause or paragraph or Annexure is. or instrument as the same may from time to time be amended. (d) references to the word "include" or "including" shall be construed without limitation. (c) heading and bold typeface are only for convenience and shall be ignored for the purposes of interpretation.S. Red Herring Prospectus and the Prospectus. unless the context otherwise requires: (a) capitalized terms used in this Agreement that are not specifically defined herein shall have the meaning assigned to them in the Draft Red Herring Prospectus.2. such extended time shall also be of the essence. (e) references to this Agreement or to any other agreement. supplemented or novated. "Selling Shareholder" has the meaning attributed to such term in the Preamble. BOOK BUILDING 5 60 . Red Herring Prospectus and the Prospectus shall prevail. "U. "SEBI Regulations" has the meaning attributed to such term in the Recitals. (b) words denoting the singular number shall include the plural and vice versa. If any time period specified herein is extended. re-enacted or replaced. unless indicated to the contrary. and (i) time is the essence in the performance of the Parties' respective obligations. the definitions as prescribed in the Draft Red Herring Prospectus. In the event of any inconsistencies or discrepancies. a reference to a clause or paragraph of this Agreement. deed or instrument shall be construed as a reference to this Agreement or to such agreement. deed. varied. B. and (ii) the date of closing of the Offer and (b) that ends on the date that is one year after the date determined in accordance with clause (a) of this definition."Price Band" shall mean the price band between the Floor Price of Rs. "US Exchange Act" has the meaning attributed to such term in Clause 5. modified. as the context requires. (g) any reference to a statute or statutory provision shall be construed as a reference to such provisions as from time to time amended. "Regulations S Distribution Compliance Period" means a period (a) that begins on the later of (i) the date on which the Equity Shares are first offered to persons other than distributors in reliance upon Regulation S. INTERPRETATION In this Agreement. "RoC" or "Registrar of Companies" shall mean the Registrar of Companies. including all revisions thereof "Regulation S" has the meaning attributed to such term in the Recitals. "SEBI" has the meaning attributed to such term in the Recitals.

1 The Offer would be managed by the BRLMs through processes prescribed under the SEBI Regulations ("Book Building"). 1. Kolkata. All payments are subject to deductions on account of any taxes. civil commotion or any other serious or sustained financial.1. by giving a written notice thereof to the other Parties: (i) a complete break down or dislocation of business in the major financial markets affecting any or all of the cities of New Delhi. 3. in accordance with the inter se allocation of responsibilities. the Company and the BRLMs may terminate this Agreement with written mutual consent. as annexed to this Agreement as Annexure B. or to purchase. 1. on the BRLMs.4 Subject to Clause 5. 3. PAYMENT 2. Notwithstanding the above. regulations applicable to the Offer (hereinafter referred to as the "Applicable Laws") and shall be undertaken by the Selling Shareholder and the Company in consultation with the BRLMs and the Designated Stock Exchange. Kolkata or Chennai as a result of which the success of the Offer is likely to be prejudicially affected.2 The Selling Shareholder and the Company shall be responsible for deciding the Price Band and the Offer Price. whether express or implied. Chennai as a result of which the success of the Offer is likely to be prejudicially affected. shall be entitled to terminate this Agreement after the expiry of the said period of fifteen (15) days.2 All payments to be made by the Selling Shareholder to the BRLMs in relation to the Offer. Mumbai. (ii) declaration of war or occurrence of insurrection.2 above. shall be made in Indian Rupees to each of the BRLMs at such address in India as may be intimated by each of the BRLMs individually in writing. including any changes to them necessitated by the market conditions from time to time. Selling Shareholder and the Company to enter into any underwriting agreement with the Company in connection with the Offer. the Parties shall meet to mutually decide on the future course of action and in the event they fail to arrive at a mutually agreeable course of action within a period of fifteen (15) days from the date on which the force majeure event occurred. the "Engagement") shall have commenced as of the date specified in the Engagement Letter and shall continue until the completion of all formalities in respect of the Offer and the completion of applicable compliances prescribed by the SEBI and the Stock Exchanges regarding the Offer. statutes.1 The respective BRLMs' engagement (collectively.2 The Selling Shareholder. TERMS AND TERMINATION 3. charges. political or industrial emergency or disturbance affecting the financial markets in any or all of the cities of New Delhi. 2. in consultation with the BRLMs. 3. the Selling Shareholder agrees that the Price Band and the Offer Price. on the occurrence of the following force majeure conditions. 2. shall be approved by it in writing to the BRLMs.3 Notwithstanding anything stated in Clause 3. unless terminated earlier pursuant to this Agreement. duties or levies applicable in connection to performance of services hereunder. the Parties agree that entering into this Agreement or the Engagement Letter by the Company/ Selling Shareholder with BRLMs shall not create any obligation. the BRLMs shall be paid fees as per the Engagement Letter. 1.6 of this Agreement. underwrite or place any securities or to provide any financing to the Company or its Affiliates. Mumbai. then any of the Parties.3 All allocations made pursuant to the Offer shall be in accordance with the SEBI Regulations and other laws. 6 61 .1 For the services to be rendered by the BRLMs.

as may be required under the prevailing framework of guidelines issued by SEBI and the Stock Exchanges.(iii) any material adverse change in the international financial or political conditions as a result of which trading generally on the Stock Exchanges or either of the Stock Exchanges is suspended for a continuous period of more than 5 business days or future trading on the Stock Exchanges is likely to be materially limited or restricted as a result of which the success of the Offer is likely to be prejudicially affected. in accordance with the Engagement Letter. the BRLMs shall. (iv) Along with the Syndicate Members (as defined in the Red Herring Prospectus to be filed with the RoC). Bid-cum-Application Form. 3. any of the representations. or (iv) any other event as may be agreed to. inaccurate. 14. the Parties to this Agreement shall (except for any liability arising before or in relation to such termination and except as otherwise provided herein) be released and discharged from their respective obligations under or pursuant to this Agreement. to ensure completion of the Offer process) at the Stock Exchanges. the Stock Exchanges and RBI and any other government agencies together with other advisors and legal counsels.1 Without limiting the scope of services as described herein and as set forth in the Engagement Letter. Red Herring Prospectus. 3. advertisements. in their individual capacities. this Agreement shall be terminated. 17 and 19 shall survive such termination. (ii) Assisting the Company in applying for and securing all necessary regulatory approvals from various regulatory agencies such as SEBI. 3. Red Herring Prospectus and Prospectus for filing with SEBI.5 and Clauses 11.6 The termination of this Agreement shall not affect any fees which may have been accrued to any of the BRLMs till the date of such termination. 3. among other things. articulate the key marketing themes and positioning of the Company. the terms of the respective Engagement Letter shall prevail. undertaking liaison for the listing process (i. RoC or the Stock Exchanges. untrue or misleading either affirmatively or by omission. in writing.3. (v) Assisting the Selling Shareholder and the Company in the appointment of Registrars to the Offer.3 above. (iii) Undertaking due diligence activities to enable preparation of appropriate due diligence certificates and to assist the Selling Shareholders and the Company in preparing the Draft Red Herring Prospectus. SCOPE OF SERVICE 4.7 In case the Offer is withdrawn or abandoned for any reason other than a default in the duties of the BRLMs. 16.5 Upon termination of this Agreement in accordance with this Clause 3. the BRLMs. Bankers to the Offer. and the refund bankers (the "Intermediaries"). at any time prior to the Offer Opening Date as notified in the Red Herring Prospectus. provided that this Clause 3. provide the following services in relation to the Offer: (i) Assisting the Company and the Selling Shareholder in structuring of the Offer. and subject to the 'inter-se allocation of responsibility' (as per Annexure B). 12. public announcements or in this Agreement are found to be incorrect. 7 62 . . develop the equity story for the Offer.4 Notwithstanding anything stated in Clause 3. between the Parties. Prospectus. statements or undertakings made by the Selling Shareholder and/or the Company in the Draft Red Herring Prospectus. 15. 3.8 In case of any inconsistency or dispute between the terms relating to fees in this Agreement and the Engagement Letter. may terminate this Agreement if.e. 4.

(vi) Undertake pre-marketing and marketing activities. including co-ordination with Intermediaries. etc. (xiv) Preparation of various draft agreements in consultation with legal counsels to the Offer. (xvii) Prepare and maintain the book of demand. acts. brochure and memoranda containing salient feature of the Offer documents. as applicable. based on the correct figures. as amended and the SEBI Regulations and all Applicable Laws. which must include finalization of the basis of allotment.. (viii) Assisting the Company in obtaining the required connectivity. 1992. and 63 . from the Stock Exchanges in various cities for registration of electronics bids. abridged prospectus and brochure and deciding on the quantum of issue material. approvals and exemptions as may be necessary. Prospectus. (c) Collection Centers. (vii) Conducting the Book Building as per SEBI Regulations. Brokers. file the Prospectus along with the Offer Price and Offer size with the RoC. analyze such feedback and suggest an appropriate valuation range/Floor Price. (xx) The post offering activities such as essential follow-up. (xi) Advising the Selling Shareholder and the Company on the compliance of various regulatory norms. The number of Bid cum Application Forms should not be less than one crore for all categories taken together. (x) Performing and/or undertaking all. (xii) Drafting and designing of advertisements or other publicity material including newspaper advertisements. (xv) Formulating an action plan for complying with various formalities relating to the Offer. SEBI Regulations and/ guidelines. from the bidders. (xviii) Follow-up with the bankers to the Offer and Self Certified Syndicate Banks to get quick estimates of collection and advising the Selling Shareholder about the closure of the Offer. Investors. (ix) Assisting the Selling Shareholder and the Company in the dealing with the SEBI and Stock Exchanges in relation to the Offer. weeding out of multiple applications as per SEBI Regulations. (d) Distribution of publicity and issue material including Bid cum Application Forms. etc. (xiii) Advising the Company on timing of the Offer with due regard to the strengths. etc and assisting in securing consents. (b) Centers for holding conferences with press. collate feedback from investors. rules. (xvi) Make arrangements for the selection of : (a) Ad-Media. deeds and things necessary or incidental for the Offer as per the Securities and Exchange Board of India (Merchant Bankers) Regulations. (xix) After the Book Building. weakness of the Offer and prevalent market forces.

guidelines. with the various agencies such as Registrars to the Offer. 8 64 . dispatch of certificates and refunds. Bankers to the Offer and the bank(s) handling refund business and any such related activities.

(vi) the absence of any material adverse change in the condition. (v) the receipt of necessary and any applicable consents and approvals by the Company. (vii) any change in the type of securities proposed to be offered in the Offer being made only with the prior written consent of the BRLMs. (ii) the completion of due diligence to the satisfaction of the BRLMs as is customary in issues of the kind contemplated herein to enable the BRLMs in their sole discretion to file the due diligence certificate with SEBI. provisions such as representations and warranties.2 The obligations of the BRLMs in relation to the Offer shall be conditional. supplements. where necessary. undertakings. conditions as to closing of the Offer. 65 . notices. without limitation. current or proposed business (including any proposed restructuring). results. certifications for incorporation in the Draft Red Herring Prospectus. RHP and the Prospectus. force majeure. the underwriting agreement between the Company. declarations. satisfactory in form and substance to the BRLMs. statements. corrections or corrigenda to such offering documents and any international supplement/ wrap. including. it is expressly understood and agreed that the Selling Shareholder and/or the Company shall be entitled to proceed against the BRLMs for breach or non-performance of all activities relating to the Offer including those enumerated above. regulations and guidelines applicable to the Offer and disclosure in the DRHP. all to the satisfaction of the BRLMs. lock-in. (iii) execution of certifications (including from the statutory auditor of the Company) and auditor's comfort letter. undertakings. upon the following: (i) the Company providing authentic.(xxi) To carry out the above assignment the BRLMs will depute their deal teams committed in their respective presentations and ensure that the strength of the deal teams will be maintained for the timely completion of the above assignment. 4. of the Company which may have any material adverse impact on the Company. and such agreements will include. term and termination provisions. inter alia. without limitation. operations or prospects. indemnification and contribution.3 hereof. Subject to the Clause 11. Red Herring Prospectus and the Prospectus. valid information. consents. including any amendments. Selling Shareholders and the BRLMs and/or the syndicate members to the Offer. (xxii) Any other services to be rendered as per terms of request for proposal and clarification thereto by the SELLING SHAREHOLDER and the Engagement Letter and further deliberation in connection with the Offer. reports. correct. and (xxiv) Rendering such other assistance as may be required in connection with the Offer. customary agreements. documents. (xxiii) The above-mentioned scope of services is illustrative and not exhaustive and BRLMs are required to perform all such other incidental obligations or acts as may be required to successfully launch and conclude the Offer. (iv) completion of all regulatory requirements (including receipt of all necessary approvals and authorisations) and compliance with all laws. clarifications.

9 66 . satisfactory for launch of the Offer. (ix) terms and conditions of the Offer having being finalised. Offer Price and size of the Offer. the Price Band. in consultation with and to the satisfaction of the BRLMs.(viii) existence of market conditions being. by the Company and the Selling Shareholder. including without limitation.

force majeure provisions. 10 67 . In the event of failure to do so.4 of this Agreement. 5. with SEBI/ Stock Exchanges. OFFER TERMS 5. which would include customary provisions including representations and warranties. the Selling Shareholder shall pay interest to the non-ASBA bidders as provided under the Companies Act or any other applicable regulations. not later than the applicable time limit under Applicable Laws and regulation. refund orders to the nonASBA bidders. 5.3 The Selling Shareholder and the Company shall jointly determine the Offer Opening Date and Offer Closing Dates. charges or any other encumbrances.4 The Selling Shareholder and the Company hereby declare that they have complied with at all times and agree to comply with all the statutory formalities under all corporate. the Selling Shareholder and the Company. Any agreement or commitment between the parties with respect to underwriting or purchasing the Equity Shares shall be set forth in such an underwriting agreement. undertaken. present or future. file the Draft Red Herring Prospectus.1 The Offer is being made by the Selling Shareholder and the Company pursuant to the approval granted by the SELLING SHAREHOLDER through its letter dated ______. without the approval of the BRLMs. shall decide the terms of the Offer. 5. to enable the Selling Shareholder and the Company to make the Offer (and similar agreements. preliminary or final international wrap and/or any documentation with relation to the Offer. and in connection therewith. or being undertaken. and in any case. as the case may be. 5. in a form and substance as may be mutually agreed upon by the Selling Shareholder. liens. including the Companies Act and the SEBI Regulations and other relevant statutes.7 The Selling Shareholder and the Company shall take such steps as are necessary to ensure the completion of allotment and dispatch of the CAN. including a revised CAN. the Red Herring Prospectus or the Prospectus. and (xii) the Company and the Selling Shareholder not having breached any term of this Agreement and the Engagement Letter.5 The Company shall obtain the requisite approval from the Reserve Bank of India for the Offer. conditions as to closing of the Offer. 5. which may affect the benefit of such clear market to the BRLMs.6 Notwithstanding the provisions of Clause 1.(x) the BRLMs having approved of any changes to the terms and conditions of the Offer from those set forth in the Draft Red Herring Prospectus. economic legislation and any other statutes as are applicable to the Selling Shareholder. Accordingly. Red Herring Prospectus. Prospectus including any amendments or supplement thereto. circulars or communications issued by SEBI. other than the Offer. and provisions as to the indemnification of the BRLMs. the absence of any debt or equity offering of any type. 5. RoC or any other authorities whatsoever. the Company and the Offer. the Company and the BRLMs. if any. to the extent applicable and that the Company has complied with and agrees to comply with the terms and conditions of such approvals. rules and regulations in force in other countries where the Offer is to be launched or marketed) and that consent of lenders and any third party having any pre-emptive rights in respect of the Equity Shares has been obtained. fiscal. 5. the Selling Shareholder and the Company shall enter into an underwriting agreement with the BRLMs.8 The Equity Shares proposed to be transferred and sold in the Offer will be free and clear of any pre-emptive rights. in consultation with the BRLMs.2 The Selling Shareholder and the Company shall not. by the Company. in consultation with the BRLMs. 5. (xi) the benefit of a clear market to the BRLMs prior to the Offer. as applicable.

the Company is not in default under or in violation of any of any indenture. as applicable. or any other agreement or instrument to which the Company is a party or by which the Company is bound or to which the Company's properties or assets are subject. the Company represents that it has made the necessary applications for obtaining such Governmental Licenses and no such application has been rejected by any concerned authority. Further. the Company possesses all the necessary permits. its Directors and companies in which the Company's Directors are directors have not been prohibited from accessing or operating in the capital markets or restrained from buying. local or foreign regulatory agencies or bodies for the business carried out by the Company and in relation to its projects as of the date hereof as described in the Draft Red Herring Prospectus and as will be described in the Red Herring Prospectus and the Prospectus and that all such Governmental Licenses are valid and in full force and effect and no notice of proceedings has been received relating to the revocation or modification of any such Governmental Licenses. the Selling Shareholder and the Offer. the Stock Exchanges and the Registrar of Companies. (iv) except as disclosed in the Draft Red Herring Prospectus and except as will be disclosed in the Red Herring Prospectus and the Prospectus. approvals. state. (vi) to inform the BRLMs about material developments in respect of the Offer. consents and other authorisations (collectively. rights issue or in any other manner during the period between the date of filing the Red Herring Prospectus with the RoC till the listing of the Equity Shares in the Offer or refund of application moneys on non-listing or failure of the Offer. there has been no notice or communication. (ii) that the Company. issued by any third party to the Company with respect to any default or violation of or sought acceleration of repayment with respect to any indenture.5. warrant and undertake: (i) that there shall be no further issue of capital whether by way of issue of bonus shares. its business and assets and contains all information with regard to the Company. except as disclosed in the Draft Red Herring Prospectus.10 The Company and the Selling Shareholder undertake to sign and cause each of the Company's Directors to sign the Draft Red Herring Prospectus to be filed with SEBI and Red Herring Prospectus and Prospectus to be filed with the SEBI. Further. licenses. Furthermore. preferential allotment. Red Herring Prospectus and Prospectus gives a fair. "Governmental Licenses") issued by and has made all necessary declarations and filings with. written or otherwise. which information is true and correct in all material 11 68 .9 The Company and the Selling Shareholder represent. Such signatures will be construed to mean that the Company and the Selling Shareholder agrees that: (i) each of the Draft Red Herring Prospectus. selling or dealing in securities under any order or direction passed by the SEBI. loan or credit agreement or any other agreement or instrument to which the Company is a party or by which the Company is bound or to which the Company's properties or assets are subject. the material terms and conditions of all such Governmental Licenses have been duly complied with. which is material in the context of the Offer. (iii) the Company its Directors and companies in which our Directors are directors have not been declared as willful defaulter by RBI or any other government authority and there have been no violation of securities laws committed by them in the past or no such proceeding are pending against the Company or them. including in respect of the operations or business of the Company and its Board of Directors that may have any effect on the Offer for the period up to and including the closing of the Offer 5. the appropriate central. (v) Except as disclosed in the Draft Red Herring Prospectus and except as will be disclosed in the Red Herring Prospectus and the Prospectus. loan or credit agreement. in the case of Governmental Licenses which are required in relation to the business and in relation to the projects and have not yet been obtained. true and accurate description of the Company.

(ii) the Draft Red Herring Prospectus. not misleading. in whole or in part. sell any option or contract to purchase. or (ii) convertible or exchangeable at an effective conversion premium (calculated as specified in paragraph (a)(6) of Rule 144A) of less than ten percent for securities so listed or quoted. the Equity Shares will not be (i) of the same class as securities listed on a national securities exchange in the United States that is registered under Section 6 of the Securities Exchange Act of 1943. during the period in which it is prohibited under such laws.1 The Selling Shareholder and/or the Company. Exchange Act) in the United States.aspects and is not misleading in any material respect and all opinions and intentions expressed in each of the Draft Red Herring Prospectus. undertake to furnish and cause the Directors of the Company to furnish such relevant information. 5.2 The Selling Shareholder and/or the Company. documents and particulars for the purpose of the Offer as may be required by the BRLMs to enable them to cause filing of such reports. as the case may be. 6. in cash or otherwise or (iv) engage in any publicity activities prohibited under the SEBI Regulations or any general solicitation of directed selling efforts as such terms are defined in Regulation S or any other jurisdiction in which the Equity Shares are being offered. to the BRLMs. right or warrant to purchase. 6. or (iii) publicly announce any intention to enter into any transaction described in (i) or (ii) above. its director or in relation to the Equity Shares until the closing of the Offer. as amended (the "U. as may be required by SEBI and/or other regulatory bodies and to enable the BRLMs to file the due diligence certificates with SEBI. any Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares. in time. and furnish all relevant documents. sell. information relating to the said litigation etc.12 The Selling Shareholder undertakes to appoint and bear the expenses for an IPO grading agency in compliance with SEBI Regulation. Red Herring Prospectus and Prospectus. (ii) quoted in any "automated inter dealer quotation system" (as such term is used in the U. Exchange Act").. Red Herring Prospectus and Prospectus are honestly held. offer. Red Herring Prospectus and Prospectus. undertake and declare that they shall disclose. grant any option. and (iii) the affixing of signature shall also mean that no relevant material information has been omitted from the Draft Red Herring Prospectus. whether any such transaction described in (i) or (ii) above is to be settled by delivery of Equity Shares or such other securities. pledge. as of each of their respective dates. As of the closing date of the Offer and the date of transfer of the Equity Shares.S.13 The Equity Shares satisfy the eligibility requirements of Rule 144A (d)(3) under the US Securities Act. complaints or investigation in relation to the Company. encumber. do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein. papers. SUPPLYING OF INFORMATION AND DOCUMENTS 6. as the case may be. directly or indirectly. The Selling Shareholder 69 . (ii) enter into any swap or other agreement that transfers. purchase any option or contract to sell or issue. during the period starting from the date hereof and ending 180 days after the date of the Prospectus. to verify and incorporate the information and statements in the Draft Red Herring Prospectus. all information and documents including pending or threatened litigation. the Red Herring Prospectus or the Prospectus. lend or otherwise transfer or dispose of. any of the economic consequences of ownership of shares of the Company or any securities convertible into or exercisable as or exchangeable for the Equity Shares. 5. lend. and the Prospectus will not as if the Closing Date of the Offering. (i) issue. in light of the circumstances under which they were made. without the prior written consent of the BRLMs.S.11 The Company agrees that it will not. contract to sell or issue. 5.

12 70 . on an immediate basis.and/or the Company further undertake to also inform the investors in the manner advised by the BRLMs.

The Company further declares that no information. financial or otherwise. in or affecting the condition. at the date hereof) will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein. that may have any effect on the Offer for the period up to and including the closing of the Offer. printers. earnings. the Red Herring Prospectus and the Prospectus. including the Registrar to the Offer who may be associated with the Offer in any capacity whatsoever. the concerned regulatory authorities and/or investors. the Stock Exchanges.6. shall extend all necessary facilities to the BRLMs to interact on any matter relevant to the Offer with the Board of Directors.6 The Selling Shareholder and the Company declare that any information made available to the BRLMs or any statement made in the Draft Red Herring Prospectus.7 The Company undertakes to furnish complete audited annual report(s). including in respect of the operations or business of the Company. to follow the instructions of the BRLMs. material or otherwise. will inform the BRLMs about material developments in respect of the Offer. 6. auditors. The Prospectus at the closing date of the Offer (and any amendment or supplement thereto. the Red Herring Prospectus and the Prospectus at the respective dates thereof. brokers and syndicate members.8 The Selling Shareholder and the Company shall furnish such relevant information and particulars regarding the Offer as may be required by the BRLMs to enable them to cause filing of post-Offer reports as may be required by SEBI. etc. there has not been any material adverse change. do not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein. 6. 6. its Board of Directors. Red Herring Prospectus and Prospectus. except as set forth in the Draft Red Herring Prospectus. 6. the Registrar of Companies and any other regulatory or supervisory authority. the escrow collection banks. accurate and updated in all material respects as of their respective dates and as required under SEBI Regulations and all Applicable Laws will be true. financial institutions. Red Herring Prospectus and the Prospectus is or will be complete. in light of the circumstances under which they were made. bankers. instructions or other rules and regulations issued by SEBI.3 The Selling Shareholder and/or the Company. adequate and correct and that under no circumstances would they give any information or statement which is likely to mislead the BRLMs.4 The Selling Shareholder and the Company undertake to provide the BRLMs with all information and documents to enable the BRLMs to assist the Selling Shareholder and the Company in preparing the Draft Red Herring Prospectus. as the case may be. to enable the BRLMs to corroborate the information and statements given in the Draft Red Herring Prospectus. shall be left undisclosed by it which will have an impact on the judgment of the concerned regulatory authorities and/or investment decision of investors. consultants. papers. including the registrar to the Offer. as the case may be. solicitors/legal advisors.5 The Selling Shareholder and or the Company. not misleading. business or operations of the Company. advisors to the Offer. The Draft Red Herring Prospectus. The Company shall instruct all intermediaries. Since the respective dates as of which information is given in the preliminary offering circular and the final offering circular. or any development involving a prospective material adverse change. other relevant documents. and (iii) customary disclosure norms to enable the investors to make a well informed decision as to investment in the Offer. not misleading. key managerial personnel. the credit rating agencies. and also with the any other intermediaries. 6. banks or any other organizations. 71 . in light of the circumstances under which they were made. (ii) the guidelines. the Government of India. Red Herring Prospectus and the Prospectus in compliance with (i) legal requirements in relation to the Offer.

9 The BRLMs shall have the right to call for any reports. documents. papers. information etc. necessary from the Selling Shareholder or the Company to enable them to certify that the statements 13 72 .6.

including matters pertaining to allotment and dispatch of refund orders/share certificates/ demat credits for the Equity Shares. . address. To the extent that any documents or information relating to the Offer are transmitted electronically.13. Red Herring Prospectus and the Prospectus. if they encounter any difficulties due to dislocation of communication system or any other material adverse circumstances which are likely to prevent or which have prevented either the Selling Shareholder or the Company from complying with its obligations. providing misleading information or withholding or concealing material facts which have a bearing on the Offer except in relation to information provided by the BRLMs as stated in Clause 6. up to the closing of the Offer. correctness. the Party requesting for such documents or information. provided that such issuance and circulation is in accordance with Applicable Laws of each relevant jurisdiction. in case any of the information requested for is not made available by the Company. 73 . if any. The BRLMs and their Affiliates shall not be liable in any manner for the foregoing except to the extent of the information provided by such BRLM in writing expressly for inclusion in the Draft Red Herring Prospectus. 6. declarations. the Party(ies) that may so request electronic transmission shall be deemed to have hereby released the other Party(ies) from any loss or liability that may be incurred in connection with the electronic transmission of any such documents or information. statements. undertakings. including any unauthorized interception.11 The Selling Shareholder and the Company authorize the BRLMs to issue and circulate the Red Herring Prospectus and Prospectus to the prospective investors after filing the same with SEBI. of making a false statement. correct. alteration or fraudulent generation or transmission of electronic transmission by any third parties. its Board of Directors. confirms that such information has been and shall be procured from reliable third parties. whether statutory or contractual. In relation to certain information in the Draft Red Herring Prospectus. provided that such other Party(ies) have exercised due caution in accessing such information from the Internet and have accessed the said information through a secure medium. 6. validity and reasonableness of the information. officers and employees) and other information provided by them. documents. as the case may be. which consists of only the BRLM's the name.12 The Selling Shareholder and/or the Company acknowledge and agree that all information. which have been obtained from the public domain. in respect of the Company. the Red Herring Prospectus and the Prospectus. 6. 6. required for the purpose related to the Offer would be signed/ authenticated by their authorized signatories or by an attorney authorized by a valid power of attorney without independent verification by the BRLMs. Red Herring Prospectus and the Prospectus. Red Herring Prospectus and/or the Prospectus to the SEBI. clarifications. the Selling Shareholder and or the Company. documents. reports.made in the Draft Red Herring Prospectus. Red Herring Prospectus/ and Prospectus are true. shall be responsible for the authenticity. certifications provided or authenticated by (including. The BRLMs shall have the right to withhold submission of the Draft Red Herring Prospectus.14 The Company accepts full responsibility for consequences. respectively. the Stock Exchanges and the Registrar of Companies.10 The Selling Shareholder and the Company shall keep the BRLMs informed. for incorporation in the Draft Red Herring Prospectus. contact details and SEBI registration numbers. statements. The Selling Shareholder and the Company shall update the information provided to the BRLMs and duly communicate to the BRLMs in case of any material change subsequent to the filing of the Red Herring Prospectus with the RoC. accurate and not misleading. in respect of any matter pertaining to the Offer. 6. acknowledges and agrees that the privacy and/or integrity of electronic transmissions cannot be guaranteed. as the case may be. In the event any Party requests any of the other Parties to deliver documents or information relating to the Offer via electronic transmissions or delivery of such documents or any information is required by law or regulation to be made via electronic transmissions.13 The Selling Shareholder/Company. as applicable.

6.S Securities Act. the Company will. unless they become subject to and comply with the 14 74 .15 So long as any of the Equity Shares are "restricted securities" within the meaning of Rule 144 (a)(3) under the U.

3 The Company and the Selling Shareholder agree that the BRLMs shall not be directly or indirectly be held responsible for any action/ inaction for any Intermediary including any processes adopted by the Intermediary for discharging its professional duties for the Offer. legal or other experts. from time to time of such restricted securities. The Selling Shareholder and the Company shall not make any statement. Exchange Act. status and other facts relevant to the Offer. 8. 8.S. The Parties acknowledge that any such intermediary.S. enter into a memorandum of understanding or agreement. However. shall be furnished to the BRLMs. shall be fully and solely responsible for the performance of its duties and obligations. responsibilities and obligation.1 The Selling Shareholder and the Company shall in consultation with the BRLMs appoint the Intermediaries or other persons in connection with the Offer. if so required. in consultation with the BRLMs. as the case may be. publicity material or any other media communications in connection with the Offer or for the term of this Agreement and shall make available to them copies of all Offer related material. and the prospective purchasers designated by such holders. to ascertain for themselves. the BRLM's would be required to substitute the intermediary to the satisfaction of the Government. in the opinion of the BRLMs. the offices of the Company or such other place(s) to conduct due diligence. etc. Securities Act. The Parties agree that any Intermediary who is so appointed shall have to be necessarily registered with SEBI under the applicable SEBI guidelines/regulations. This covenant is intended to be for the benefit of the holders. conferences. the BRLMs shall co-ordinate the activities of all the Intermediaries in order that they perform their respective functions in accordance with their respective terms of engagement.2 Whenever required. 8. issued by SEBI and instruction given by it from time to time and with all Applicable Laws in India and abroad. In case the work of the intermediaries appointed by the BRLM's is not found satisfactory. road show meetings or brokers or investors conferences without the prior approval of the BRLMs. extend such facilities as may be called for by the BRLMs to enable their representatives to visit the plant site. in any advertisements or at any press. as the case may be. any information required to be provided by Rule 144A(d)(4) under the U. the verification of any of the aforesaid matters require hiring of service of technical. the true state of affairs of the Company. 7. including the progress made in respect of the project implementation. 9.Section 13 or 15 (d) of the U. upon request of such holder or prospective purchaser. If. being an independent entity shall be fully and solely responsible for the performance of its duties and obligations. being an independent entity. publicity material or other media communications including any corporate and product advertisement as prescribed under the SEBI Regulations and as may be prescribed by the legal counsels for the Offer. provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities. such intermediary. PUBLICITY FOR THE OFFER 9. in consultation with the BRLMs shall ensure that all advertisements prepared and released by the advertising agency or otherwise in connection with the Offer conform to the regulations/ guidelines. 15 75 . APPOINTMENT OF INTERMEDIARIES 8. with the concerned Intermediary associated with the Offer. including review of relevant documents. The Selling Shareholder and the Company shall follow restrictions in respect of all advertisements. or release any material or other information which is not contained in the Draft Red Herring Prospectus/Red Herring Prospectus and/or Prospectus. in the specialized field. clearly setting forth their mutual rights.1 The Selling Shareholder and the Company shall obtain prior approval of the BRLMs in respect of all Offer advertisements. the Company will permit access to such independent agency hired by BRLMs to all relevant and material facts on record of the Company. INDEPENDENT VERIFICATION BY BRLMs The Company will. The Selling Shareholder and the Company. A certified true copy of such memorandum of understanding or agreement. the Company and the Selling Shareholder shall.

and in the event of failure to do so. and dispatch of letters of intimation/ demat credits and refund orders to the applicants. 10. soon after the basis of allotment has been approved by the Designated Stock Exchange and in any case not later than the statutory time limit. The Selling Shareholder agrees that it shall pay requisite interest if so required under the Applicable Laws or direction or order of the SEBI. with the prior consent of the Company. DUTIES OF THE BRLMS 11. Red Herring Prospectus and/or the Prospectus. The Selling Shareholder has duly authorized the Compliance Officer and Company Secretary of the Company and the Registrar to the Offer to satisfy all investor grievances in relation to the Offer.3 From the date of this Agreement until the commencement of trading of the Equity Shares. Securities Act or otherwise distribute any "written communication" as defined in Rule 405 under the U.2 The Company has set up a Shareholders'/Investors' Grievance Committee to satisfy all Offer related grievances to the satisfaction of the BRLMs. 1992.S. except in consultation with and after receipt of the advice of the BRLMs. including any subsequent amendments and the SEBI Regulations 16 76 . if any. during the period in which it is prohibited under each such law. 10. 11. and may use the Company's name and logo in this regard.3 The Selling Shareholder and the Company agree that they will not.4 The Selling Shareholder and the Company agree that they will not. Securities Act relating to the Company or the Offer in the United States. The Selling Shareholder and the Company further agree that they shall refund the money raised in the Offer together with any interest to the non-ASBA bidders if required to do so for any reason such as. the Regulation S Distribution Compliance Period as notified by the BRLMs engage in any "directed selling efforts" as defined in Regulation S or "general solicitation" or "general advertising" as defined Regulation D under the U. Stock Exchanges or the RoC. the BRLMs may.9. during Regulation S Distribution Compliance Period indulge in any publicity activities prohibited under the SEBI Regulations or Regulation S.S. 9. failing to get requisite permissions or under any direction or order of the SEBI or any other governmental or statutory authority. 9. including non-resident Indians. the Selling Shareholder shall pay interest to the applicants as provided in the Prospectus. save and except on account of reasons beyond its control. The Company shall keep the BRLMs immediately informed in writing of all the developments pertaining to such legal proceedings in relation to the Offer. which shall not be unreasonably withheld.4 The Selling Shareholder shall not access the money raised in the Offer till completion of transfer formalities and receipt of listing and trading approval from the Stock Exchanges.1 The Selling Shareholder and/or the Company shall take such steps as are necessary to ensure the completion of transfer. The BRLMs agree that such advertisements shall be issued only after the closure of the Offer. without the prior written consent of the BRLMs. at their own expense place advertisements in newspapers and other external publications describing their involvement in the Offer and the services rendered by them.5 The Selling Shareholder and the Company agree that they will not indulge in any publicity activities prohibited by any other jurisdiction in which the Equity Shares under the Offer are being offered.1 The BRLMs hereby undertake to observe the code of conduct as stipulated in the SEBI (Merchant Bankers) Regulations. POST OFFER WORK 10. without the prior written consent of the BRLMs. 10.2 Subject to applicable regulations and laws regarding publicity restrictions issued by SEBI or the restrictions in any other jurisdiction in which the Company proposes to circulate the Draft Red Herring Prospectus. the Selling Shareholder or the Company shall not resort to any legal proceedings in respect of any matter having a bearing on the Offer. 10. 9.

and the process leading to such transaction. Each of the BRLMs shall be responsible for the activities carried out by their respective Affiliates in relation to this Offer. 11. the BRLMs and their group companies or Affiliates can represent other entities whose interests conflict with or are adverse to those of the Selling Shareholder and the Company. Accordingly.4.5 The Selling Shareholder and Company acknowledge and agree that (i) any purchase and sale of the Equity Shares pursuant to an underwriting agreement and the determination of the Offer Price. Any of the BRLMS. while the BRLMs shall. The BRLMs further undertake to exercise due diligence and care in the preparation of the Draft Red Herring Prospectus/ Red Herring Prospectus and/or the Prospectus and manage the process diligently. No tax. on a best efforts basis and in an advisory capacity. act on behalf of and in the best interest of the Selling Shareholder and the Company as their clients. the BRLMs or their group companies or Affiliates may at any time hold long or short positions and may trade or otherwise effect transaction for its own account or account of customers in debt or equity securities or senior loans of any company that may be involved in the Offer. securities brokerage. 11. In addition. and the BRLMs. For the avoidance of doubt. including as a fiduciary. including the SEBI Regulations. on the one hand. employees or authorized persons of the Selling Shareholder or the Company. (ii) in connection with the Offer. regulatory or accounting advice is being given by the BRLMs. The Selling Shareholder/Company hereby acknowledge and agree that. financing. the Selling Shareholder and the Company acknowledge and agree that each BRLM will be responsible to the Selling Shareholder and the Company only for its own acts and omissions but not for acts and omissions of the other BRLMs. shall be an arms' length commercial transaction between the Selling Shareholder and the Company. 11. and shall be limited to those expressly set out in this Agreement.issued by SEBI from time to time. agents.3. by reason of law or duties of confidentiality owed to other persons. unless expressly otherwise provided. including the SEBI Regulations. their directors. legal. in debt or equity securities of any company that may be involved in the Offer. officers and employees may also at any time invest on a principal basis or manage funds that invest on a principal basis. the group companies or Affiliates of the BRLMs may be prohibited from disclosing information to the Company. as each deems appropriate. In the ordinary course of its trading. underwriters or Syndicate Members or any other intermediaries. 11. all rights and obligations of the BRLMs are on a several basis. shall not include providing services as receiving bankers or registrars.2 The services rendered by the BRLMs shall be performed in a professional manner with due diligence. and in particular. or the rules of any regulatory authority. banking and investment activities. The Selling Shareholder and the Company understand and agree that the BRLMs and/or their group companies and/or their Affiliates may be engaged in securities trading. Each of the BRLMs shall act under this Agreement as an independent contractor with duties of each of the BRLMs arising out of its engagement pursuant to this Agreement owed solely to the Company and not in any other capacity. The BRLMs shall not be held responsible for any acts of commission or omission of the Selling Shareholder. The BRLMs shall not be obligated to disclose to the Selling Shareholder/Company any information in connection with any such representation by their respective group companies or Affiliates. the BRLMs shall act solely as a principal and not as 77 . subject to compliance with provisions under Applicable Law. subject to compliance with provisions under Applicable Law. Each of the BRLMs is providing services pursuant to this Agreement on a several basis and independent of other BRLMs or other underwriter/syndicate members or any other intermediary in connection with the Offer.4 The duties and responsibilities of the BRLMs under this Agreement shall not include general financial or strategic advice. pursuant to this Agreement. The Selling Shareholder and the Company agree that the BRLMs may provide services hereunder through one or more of their Affiliates. on the other hand. as well as providing investment banking and financial advisory services. in particular information as to the BRLMs' or their Affiliates' possible interests as described in this Section 11. the Company or directors. brokerage and financing activities.

the agents or fiduciaries of the Company or its stockholders. (iii) the BRLMs do not have any obligation to the Selling shareholder and Company with respect to the Offer except the obligations expressly set forth herein. 17 78 . creditors. or the Selling Shareholder. and irrespective of whether the BRLMs have advised or are currently advising the Company on other matters. employees or any other party.

Upon closing of the Offer.6 The Company and the Selling Shareholder acknowledges that the provision of services by the BRLMs herein is subject to the requirements of any laws and regulations applicable to the BRLMs and their Affiliates. (ii) To any information which is required to be disclosed. (iii) Disclosed on behalf of the Company and the Selling Shareholder to purchasers or prospective purchasers of the Equity Shares in connection with the Offer. representatives or counsel for purpose of the Offer or to the extent such information is or becomes publicly available otherwise than by disclosure by the BRLMs in violation of this Agreement. whether furnished before or after the date hereof and regardless of the manner in which it is or was furnished will be treated by the BRLMs. rule or regulation. except to the extent required to be retained under any requirement of any applicable law.1 The BRLMs severally agree to keep all information furnished by the Selling Shareholder and/or the Company. 12. in accordance with the applicable laws. which is or comes into the public domain without any default on the part of the BRLMs or their advisors. rule or any regulation. or their advisors. was already in the possession of the BRLMs or its advisors. both oral and written. the BRLMs may request the Company to issue written instructions to confirm any oral instruction given by the Company. in connection with the Offer. (iv) Upon the request or demand of any regulatory authority or any stock exchange having jurisdiction over any of the BRLMs or any of their respective Affiliates. the BRLMs. (i) To any information which. if they so deem necessary and the Company shall issue such written instruction as expeditiously as possible. representatives or counsels. or is disclosed.2 The confidentiality obligation under this Clause will not apply. 12. request or requirement (whether or not having the force of law) of any central bank or any governmental. 11. However. in connection with the Offer. shall notify the Selling Shareholder and the Company in respect thereof. (vi) To any disclosure pursuant to any law or order of any court or pursuant to any direction. which they reasonably believe has been issued by or on behalf of the Company. representatives or counsel or comes into the possession of the BRLMs or their advisors. to the extent practicable and permitted by Applicable Laws. The BRLMs and their Affiliates are authorized by the Company to do all such acts necessary to comply with any applicable laws and regulations in the course of their services required to be provided under this Agreement or under the Engagement Letter. The BRLMs may comply with all instructions. representatives or counsel other than in breach of any confidentiality obligation owed to the Selling Shareholder and the Company of which they are aware. prior to its disclosure in connection with this Offer. representatives or counsel when they were not acting as BRLMs or their advisors. regulatory or supervisory authority. 79 . the BRLMs will promptly return or cause to be returned all such Confidential Information to the Selling Shareholder and/or the Company. CONFIDENTIALITY 12. including also the Draft Red Prospectus or Red Herring Prospectus or the Prospectus. The BRLMs undertake that any such Confidential Information retained shall be used only for the purpose of making disclosures. (v) To any information. rule of regulation. their advisors. and at the request by the Selling Shareholder and/or the Company. if any required by any law.and (iv) the BRLMs and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Selling Shareholder and the Company. representatives and counsel as Confidential Information.

(vii) To the extent that any of the BRLMs or their advisors. representatives or counsel need to disclose any information with respect to any proceeding for the protection or enforcement of 18 80 .

the BRLMs shall be the exclusive advisors to the Company and the Selling Shareholder in respect to the Offer.4 Any advice or opinions provided by the BRLMs under or pursuant to this Offer shall not be disclosed or referred to publicly or to any third party except in accordance with the prior written consent from the BRLMs and except where such information is required by law or in connection with disputes between the Parties or if required by a court of law or any other regulatory authority. Nothing contained herein shall be interpreted to prevent the Company from retaining legal counsels or other advisors or parties as may be required for taxation.any of its right arising out of this Agreement or the Offer the BRLMs shall notify the Selling Shareholder and the Company in respect thereof provided giving such notice does not prejudice or diminish the BRLMs or its advisors. The Selling Shareholder and the Company agrees that any BRLM may place advertisements in financial and other newspapers and journals at the BRLM's expense describing the BRLM's involvement in any transaction resulting from this Engagement and its services rendered after the closing of the Offer. accounts. 12A. any due diligence defences. or (viii) To any information made public with the prior consent of the Selling Shareholder and/or the Company. Provided that the term "Confidential Information" shall not include any information that is stated in the Draft Red Herring Prospectus or Red Herring Prospectus or the Prospectus. and except to the extent that such public announcement or communication may be required under applicable law. which may have been filed with relevant regulatory authorities (excluding any informal filings or filings where the documents are treated in a confidential manner). in the event of a breach by any Party. give notice in writing to all Parties. legal. provide the BRLMs with prior notice of such requirement.5 above.5 The BRLMs shall not use any of the Confidential Information. as they may deem fit including but not limited to withdrawing from the Offer. the non-defaulting Parties shall not be liable or responsible for the consequences if any. Subject to Applicable Laws. which shall not be unreasonably withheld. CONSEQUENCES OF BREACH In the event of breach of any of the material terms of the Agreement. 19 81 . any defences available to them under Applicable Laws in connection with such underwriting. or in the opinion of such BRLM is necessary to make the statements therein not misleading. provided that the Selling Shareholder and/or the Company shall. for any purpose other than for the purpose of the Offer and shall be fully responsible for any breach of the confidentiality undertaking hereunder. Each of the BRLMs acknowledges and agrees that this Clause 12 shall survive the termination of this Agreement for a period of one year from the date of termination of the Agreement or closing of the Offer. the non-defaulting Parties shall have the absolute right to take such action. the defaulting Party shall have the right to cure any such breach within a period of ten (10) days of the breach. The Company and the Selling Shareholder shall not. including without limitation. immediately upon occurrence of a breach or the knowledge of a breach. 12. during the term of the Agreement appoint any advisor in relation to the Offer without the prior written consent of the BRLMs. due diligence and other matters in connection with the Offer. 13. The Selling Shareholder and the Company agrees that no public announcement or communication relating to the subject matter of this Agreement shall be issued or dispatched without the prior consent of the BRLMs. to the extent possible. 12.3 The BRLMs shall be entitled to retain all information and to use the information. EXCLUSIVITY Subject to Clause 11. 12. The defaulting Party shall. representatives or counsel's rights in any such proceeding. In the event that the breach is not cured within the aforesaid period. employee matters. resulting from such termination and withdrawal.

The BRLMs will not be liable to refund any amounts paid as fees, commissions, reimbursements or expenses specified under the Engagement Letter if any breach of this Agreement occurs as a result of any act or omission of the Company and or the Selling Shareholder only as determined by way of a binding judgment/order, after exhausting any appellate / revisional / writ remedies available to the parties. If it is determined by way of a binding judgment/order, after exhausting any appellate / revisional / writ remedies available to the parties, that the breach is caused due to gross negligence, willful misconduct or fraud of any of the BRLMs, the Company shall not be liable to pay any fees, if applicable, to such defaulting BRLM. 14. INDEMNITY 14.1 The Selling Shareholder and the Company shall indemnify and keep indemnified and hold harmless each of the BRLMs for its own account and their respective Affiliates and all the respective directors, officers, employees, agents and controlling persons(each, an "Indemnified Party(ies)") at all times from and against any and all losses, liabilities, costs, claims, charges, actions, suits, proceedings, damages, expenses or demands of whatever nature made, suffered or incurred including without limitation, any legal or other fees and expenses actually incurred in connection with investigating, disputing, preparing or defending any action or claim, to which such Indemnified Party may become subject under any applicable laws including the law of any applicable foreign jurisdiction or otherwise consequent upon or arising directly or indirectly out of or in connection with or in relation to this Agreement, Engagement Letter, Offer, or the BLRM's role contemplated under this Agreement or the Engagement Letter, including without limitation (i) any breach or alleged breach by the Company and or the Selling Shareholder of its obligations, representations or warranties under this Agreement, the Engagement Letter,(ii) breach of any obligations of the Company and or the Selling Shareholder under the Draft Red Herring Prospectus and the Prospectus or the Bid cum Application Form and any amendment or supplement to any of the foregoing (iii) arising out of or based on the Draft Red Herring Prospectus or the Prospectus being, or being alleged to be, not true, fair or adequate to enable the investors to make a well informed decision as to the investment in the proposed Offer; (iv) including any misrepresentation or alleged misrepresentation of a material fact contained in the Draft Red Herring Prospectus/ Red Herring Prospectus and Prospectus, the Bid cum Application Form, ASBA, including the preliminary and final international wrap the Bid cum Application Form and any amendment or supplement thereto, or any other offering materials, including, without limitation, any road show materials or in information or documents, furnished or made available by the Company to an Indemnified Party and any amendment or supplement thereto, or omission or alleged omission therefrom of a material fact necessary in order to make the statements therein in light of the circumstances under which they were made not misleading, or (v) any acts or omissions which violates or allegedly violates applicable laws and regulations in relation to the Offer, by the Company or which are determined by a court or arbitral tribunal of competent jurisdiction to have resulted from any bad faith, dishonesty, illegal or fraudulent acts or the willful default or gross negligence on the part of the Selling Shareholder or the Company. Such indemnity will extend to include all reasonable costs, changes and expenses which such Indemnified Party may pay or incur in investigating, disputing or defending any such loss, liability, cost, claim, charge, demand or action or other proceedings. 14.2 Each Party giving an indemnity hereinabove is liable to indemnify solely for the information provided respectively by such Party. 14.3 Each of the BRLMs agrees that after receiving a notice of an action, suit, proceeding or claim against any Indemnified Party or receipt of a notice of the commencement of any investigation which is based, directly or indirectly, upon any matter in respect of which indemnification may be sought from the Selling Shareholder and the Company, the BRLMs will notify the Selling Shareholder and the Company in writing of the particulars thereof and will provide copies of all relevant documentation of the Selling Shareholder and the Company, unless the Selling Shareholder and/or the Company assume the defense thereof, will keep the Selling

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Shareholder and the Company informed of the progress thereof, and will discuss all significant actions proposed. The omission to notify the Selling Shareholder and/or the Company shall not relieve the Selling Shareholder and/or the Company of any liability which the Selling Shareholder and/or the Company may have to any Indemnified Party, except only to the extent that any such delay in or failure to give notice, as herein 20

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required, prejudices the defence of such action, suit or proceeding under this indemnity, had the BRLMs or any other the Indemnified Party(ies) not so delayed in or failed to give the notice required hereunder. 14.4 The Selling Shareholder and the Company shall be entitled, at their own expense, to participate in and, to the extent it may wish to do so, assume the defence of such action, suit, proceeding, claim or investigation, provided that such defence is conducted by experienced and competent counsel. Upon the Selling Shareholder and the Company notifying the BRLMs in writing of its election to assume the defence and retaining counsel, the Selling Shareholder and the Company shall not be liable to the BRLMs or any other Indemnified Party for any legal expenses subsequently incurred by them in connection with such defence. If such defence is assumed by the Selling Shareholder and/or the Company, the Selling Shareholder and/or the Company, throughout the course thereof, will provide copies of all relevant documentation to the BRLMs, will keep the BRLMs advised of the progress thereof, and will discuss with the BRLMs all significant actions proposed. 14.5 No Indemnified Party shall admit any liability or settle any action, writ proceeding, claim or investigation without the prior written consent of the Selling Shareholder and the Company, which shall not be unreasonably withheld. The Selling Shareholder and the Company will not be liable for any settlement of any action, suit, proceeding, claim or investigation that any Indemnified Party makes without the written consent of the Selling Shareholder and the Company. 14.6 The right of the Selling Shareholder and/or the Company to assume the defence on behalf of the Indemnified Party set out above shall be subject to the following conditions: (i) No admission of liability or compromise whatsoever in connection with the claim or action may take place without the BRLMs' prior written consent, which shall not be unreasonably withheld. (ii) Notwithstanding the foregoing, the Indemnified Party shall have the right to employ its or their own counsel in any such case and also to undertake any action in connection with the investigation of, preparation of or defence of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such a claim, action or proceeding is initiated or brought by or on behalf of the Selling Shareholder and/or the Company, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (a) the employment of such counsel shall have been authorized in writing by the Selling Shareholder and the Company in connection with the defence of such action, and (b) the Selling Shareholder and the Company have not employed counsel to take charge of the defence of such action within a reasonable time after notice of commencement of the action. 14.7 Notwithstanding anything contained hereinabove, in the event any of the BRLMs have acted in bad faith or have been grossly negligent or have committed any willful misconduct, illegal or fraudulent act, in performing the services under this Agreement, the Selling Shareholder and the Company shall give notice of 30 days (the "Cure Period") to the concerned BRLMs, as the case may be, to remedy or cure such default. 14.8 In the event of a failure by the concerned BRLMs to remedy or cure such default or offer suitable justification to the Selling Shareholder and the Company that they have not acted in bad faith or gross negligence or willful misconduct, illegal or fraudulent acts in performing the services under this Agreement within the Cure Period, as determined by a court or arbitral tribunal of competent jurisdiction, the concerned BRLMs shall be severally responsible to the Selling Shareholder and the Company for any loss, claim, damage or liability incurred by the Selling Shareholder and the Company, caused due to such acts of bad faith or gross negligence or willful misconduct, illegal or fraudulent acts on the part of the BRLMs, as the case may be, in performing the services under this Agreement. 14.9 This Clause 14 would survive the termination of expiry of this Agreement, subject to Applicable Laws. 21

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14.10 The remedies provided for in this Clause 14 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Party at law or in equity. 14.11 The indemnity provisions contained in this Clause 14 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the BRLMs, or any party controlling the BRLMs, or by or on behalf of the Company, its officers or Directors or any party controlling the Company, and (iii) acceptance of and payment for any of the Equity Shares. 15. ARBITRATION 15.1 If any dispute, difference or claim arises between the Parties hereto in connection with this Agreement or the validity, performance, interpretation, implementation or alleged breach of the terms of this Agreement or anything done or omitted to be done pursuant to this Agreement, the Parties shall attempt in the first instance to resolve the same through negotiation. If the dispute is not resolved through negotiation within 15 days after commencement of discussion then any Party may refer the dispute for resolution to an arbitration tribunal consisting of three arbitrators, one to be appointed jointly by the Selling Shareholder and the Company, the other to be jointly appointed by the BRLMs and the third to be jointly appointed by the two arbitrators appointed under this Agreement in accordance with the Rules of Arbitration of the Indian Council of Arbitration to be conducted in accordance with the fast track arbitration procedures as set forth in such rules. All proceedings in any such arbitration shall be conducted under the Arbitration and Conciliation Act, 1996, as amended, and shall be conducted in English. The arbitration shall take place in Delhi, India and shall be governed by the laws of India. The Parties shall share the costs of such arbitration equally unless otherwise awarded or fixed by the arbitral tribunal. The arbitral tribunal shall provide a speaking and reasoned award shall state the reasons on which it is based. 15.2 Notwithstanding the power of the arbitrators to grant interim relief, the disputing parties shall have the power to seek appropriate interim relief from the courts of New Delhi. The arbitration award shall be in English and shall state the reasons on which it is based and shall be final and binding on the disputing parties and the disputing parties agree to be bound thereby and to act accordingly. The arbitrators may award to a disputing party that substantially prevails on the merits, its costs and expenses (including fees of its counsel). Without prejudice to the indemnification provisions in the Engagement Letter and this Agreement, the Parties shall bear their respective costs incurred in the arbitration unless otherwise awarded or fixed by the arbitration tribunal. 15.3 Any reference made to the arbitration tribunal under this Agreement shall not affect the performance of terms, other than the terms related to the matter under arbitration, by the Parties under this Agreement and the Engagement Letter. The disputing parties shall co-operate in good faith to expedite, to the maximum extent practicable, the conduct of any arbitral proceedings commenced pursuant to this Agreement. 16. NOTICES All notices required or permitted to be given hereunder shall be in writing and shall be valid and sufficient if dispatched by registered airmail, postage prepared, or by telex, cable or facsimile as follows: If to the Selling Shareholder SELLING SHAREHOLDER Address : Attn : Tel.: Fax.: If to the Company 22

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alteration or amendment of this Agreement or any of its terms or provisions shall be valid or legally binding on the Parties unless made in writing duly executed by or on behalf of all the Parties hereto.2 The terms and conditions of this Agreement are not assignable by any Party hereto without the prior written consent of all the other Parties hereto. without invalidating the remaining provisions of this Agreement.1 No modification. settlement or arbitral award. obligations provided by. GOVERNING LAW This Agreement shall be governed by and performed in accordance with the laws of India. waives any and all rights of immunity that it or any of its assets may have or may acquire in future against the institutions of any legal or arbitral proceedings and the enforcement of any judgment.4 This Agreement may be executed in separate counterparts. 19. and permitted assigns of this Agreement.COMPANY Address : Attn : Tel. 17. any diplomatic or consular office.8. Subject to Section 3. warranties. 20. such provision shall be ineffective only to the extent of such prohibition or invalidity or inoperativeness. and rights of the given by each of the BRLMs in this Agreement have been provided severally.: If to BRLM Address : Attn : Tel. 18. each of which when so executed and delivered shall be deemed to be an original. WAIVER OF SOVEREIGN IMMUNITY The execution. 20.3 All representations. Any notice sent to any Party shall also be marked to all the remaining Parties to this Agreement as well. 20. MISCELLANEOUS 20.: Fax. delivery and performance by the Selling Shareholder of this Agreement and any other related agreements to which it is a party constitutes commercial acts done and performed for commercial purposes and do not constitute sovereign acts and the Selling Shareholder.5 These terms and conditions will be binding on and enforceable for the benefit of the Parties hereto.: Fax. the terms and conditions hereof shall supersede and replace any and all prior contracts. or national heritage. 20. but all such counterparts shall constitute one and the same instrument. save and except the present or future assets and properties concerning the military of the Government of India.: Any Party hereto may change its address by a notice given to the other Parties hereto in the manner set forth above. the constitutional authorities and their offices. 20. their successors. understandings or 23 86 . SEVERABILITY If any provision of this Agreement is held to be prohibited by or invalid under Applicable Law or becomes inoperative as a result of change in circumstances.

heretofore made between any of the Parties hereto and relating to the subject matter hereof. 24 87 . whether oral or written. and as of the date hereof constitute the entire understanding of the Parties with respect to the Offer.arrangements.

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