KMC SPECIALITY HOSPITALS (INDIA) LIMITED - … existing Equity Shares of the Company are listed on...

KMC Speciality Hospital (I) Ltd.

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DRAFT LETTER OF OFFER Dated June 24, 2010

(Private and Confidential) For Equity Shareholders of the Company Only

KMC SPECIALITY HOSPITALS (INDIA) LIMITED

(CIN: L85110TN1982PLC009781) [Originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 under the Companies Act, 1956 vide Certificate of Incorporation issued by the Registrar of Companies, Chennai, Tamil Nadu. The Company was converted into a Public Limited Company on July 15, 1988. The name of the Company was changed to Seahorse Hospitals Limited on March 21, 1995 and to its current name with effect from October 24, 2008] Registered Office: No. 6, Royal Road, Cantonment, Tiruchirappalli ‐ 620 001, Tamil Nadu, India. The Registered Office of the Company was originally located at: ‘Sri Bhuvneshwari’, No. 6, Royal Road, Cantonment, Tiruchirappalli and was shifted to 18, Swami Sivananda Salai, Chennai 600005 w.e.f. August 18, 1999. The Registered Office was later on shifted to the current address w.e.f. September 9, 2004, Tel: +91‐431‐407 7777; Fax: +91‐431‐241 5402; Website: http://www.kmcspecialityhospital.in, E‐mail: [email protected] Contact Person: Ms. N. Jayanthi, Company Secretary and Compliance Officer, Email: [email protected] Our Promoter: Sri Kavery Medical Care (Trichy) Limited (KMC), (for further details on the promoters see “Our Promoters and Promoter Group” on page 72)

DRAFT LETTER OF OFFERISSUE OF 150540000 EQUITY SHARES OF Re. 1/‐ EACH FOR CASH AT PAR ON RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 12 EQUITY SHARES FOR EVERY 1 EQUITY SHARE HELD ON THE RECORD DATE I.E. [•] 2010 AGGREGATING RS. 1505.40 LACS. THE OFFER PRICE IS 1 TIME OF THE FACE VALUE OF THE EQUITY SHARE

GENERAL RISKSInvestment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Offerunless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors on page no. 10 to 18 carefully before taking an investment decision in this Offering. For taking an investment decision, investors must rely on their own examination of the Issuer and the Offer including the risks involved. The securities being offered in the Issue have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document.

ISSUER’S ABSOLUTE RESPONSIBILITYThe Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Draft Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in the Draft Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTINGThe existing Equity Shares of the Company are listed on Bombay Stock Exchange Limited, Mumbai (BSE–‘Designated Stock Exchange’), Madras Stock Exchange Ltd. (MSE) and Delhi Stock Association Ltd (DSE). Accordingly the Company proposes to list the equity shares issues under the present rights issue on the on BSE, MSE and DSE. Applications are being made to BSE , MSE and DSE for permission to deal in and for official quotation in respect of the equity shares arising out of the present rights issue. The company has received in principle approvals from BSE , MSE and DSE vide letters dated [•] respectively. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

V B Desai Financial Services Limited

Cameo Corporate Services Limited

SEBI Registration No.: INM000002731 Cama Building, 1st floor 24/26 Dalal Street Fort, Mumbai 400 001 Tel: +91 22 4077 0777; Fax: +91 22 4077 0700 Website: http://www.vbdesai.com E‐mail: [email protected] Contact Person: Mr. K.K. Antoo

SEBI Registration No.: INR 000003753 Subramanian Building No.1 Club House Road Chennai ‐ 600 002. Tel: +91‐44‐2846 0390; Fax: +91‐44‐2846 0129 Website: http://www. www.cameoindia.com Email: [email protected] Contact Person: Mr. R.D. Ramasamy

ISSUE SCHEDULEIssue Opens On Last Date For Request for Split Issue Closes On

[•], 2010 [•], 2010 [•], 2010


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Section TABLE OF CONTENTS Page No.

I DEFINITIONS AND ABBREVIATIONS 3 NO OFFER IN OTHER JURISDICTIONS 7 PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA 8 FORWARD‐LOOKING STATEMENTS 9II RISK FACTORS 10 PROMINENT NOTES 19III INTRODUCTION (A) SUMMARY 1. SUMMARY OF OUR INDUSTRY AND OUR BUSINESS 20 2. THE ISSUE DETAILS IN BRIEF 22 3. SUMMARY OF FINANCIAL, OPERATING AND OTHER DATA 23 (B) GENERAL INFORMATION 25 (C) CAPITAL STRUCTURE OF THE COMPANY 29IV PARITCULARS OF THE ISSUE 37V ABOUT US (A) INDUSTRY OVERVIEW 48 (B) BUSINESS OVERVIEW 53 (C) KEY INDUSTRY REGULATIONS 55 (D) HISTORY AND CORPORATE STRUCTURE 59 (E) OUR MANAGEMENT 62 (F) OUR PROMOTERS AND PROMOTER GROUP 72 (G) DIVIDEND POLICY 77VI FINANCIAL INFORMATION (A) SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 78 (B) FINANCIAL INFORMATION OF ISSUER 82 (C) FINANCIAL INFORMATION OF GROUP COMPANIES 104 (D) CHANGES IN ACCOUNTING POLICIES IN THE LAST THREE YEARS 106 (E) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF THE

OPERATIONS 107

VII LEGAL AND OTHER INFORMATION (A) OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 113 (B) GOVERNMENT APPROVALS AND LICENSING ARRANGEMENTS 117

VIII OTHER REGULATORY AND STATUTORY DISCLOSURES 119IX OFFERING INFORMATION (A) TERMS OF THE ISSUE 130 (B) ISSUE PROCEDURE 134X DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION 151XI OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 169 DECLARATION 170

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SECTION I: DEFINITIONS AND ABBREVIATIONS In this Draft Letter of Offer, all references to “Re.”, “Rupees”, “Rs.” or “INR” refer to Indian Rupees, the official currency of India, “USD” or “US$” refer to the United States Dollar, the official currency of the United States of America, and “Euro” refers to the official currency of European Union. References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words “Lakh” or “Lac” means “100 thousand” and the word “crore” means “100 lacs”. Any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. Definitions Unless the context otherwise requires, the following terms have the following meanings in this Draft Letter of Offer. Term Description

“The Group” Unless the context otherwise requires, refers to Sri Kavery Medical Care Ltd., its subsidiaries and associates.

“We”, “us”, “our”, “our Company” “the Issuer”, “KMC‐SHIL” or “the Company”

Unless the context requires, refers to KMC Speciality Hospitals (India) Limited, a public limited company incorporated under the provisions of the Companies Act, 1956 having its registered office at No. 6, Royal Road, Cantonment, Tiruchirappalli ‐ 620 001, Tamil Nadu, India on a standalone basis.

Conventional/ General Terms Act The Companies Act, 1956 and amendments theretoArticles/Articles of Association

Articles of Association of KMC Speciality Hospitals (India) Limited

Associates Associates other than Promoters and Promoter GroupsAuditors The Statutory Auditors of the Company: M/s. Patel Mohan Ramesh & Co., Chartered

Accountants Board of Directors/Board Board of Directors of KMC Speciality Hospitals (India) LimitedCenvat The Central Value Added Tax.CIN Company Identification NumberEquity Shares Equity Shares of the Company of Re. 1/‐ eachEquity Shareholders Equity Shareholders of the Company whose names appear as:

- On the Register of Members of the Company in respect of the Equity Shares held in physical form and

- Beneficial Owners as per the list furnished by the depositories in respect of Equity Shares held in electronic form

Face Value Face Value of Equity Shares of the Company being Re. 1/‐ each GoTN Government of the State of Tamil NaduMemorandum Memorandum of Association of KMC Speciality Hospitals (I) Limited Promoter(s) Promoters shall have the same meaning as ascribed to it under the SEBI Guidelines and

which has been particularly detailed in the disclosure in this Draft Letter of Offer Promoter Group The individuals, companies and firms mentioned in the section titled “Our Promoters and

Promoter Group” beginning on page 72 of this Draft Letter of Offer. Registered Office of the Company

Registered Office of the Company situated at No. 6, Royal Road, Cantonment, Tiruchirappalli‐ 620 001, Tamil Nadu, India

Trichy Tiruchirappalli city / district in the state of Tamil Nadu, India Issue Related Terms Abridged Letter of Offer The abridged letter of offer to be sent to the eligible Equity Shareholders in accordance with

the SEBI Regulations and the terms and conditions specified in the section titled “Issue Procedure” beginning on page 134 of this Letter of Offer.

Application Money The aggregate amount payable in respect of the Equity Shares applied for in the Issue at the Issue Price of Re.1/‐

Application Supported by Blocked Account/ ASBA

An application, whether physical or electronic, used by an ASBA Applicant to apply for the Equity Shares in the Issue, together with an authorization to an SCSB to block the Application Money in the specified bank account maintained by such ASBA Applicant with such SCSB.

ASBA Applicants Any eligible Equity Shareholders who intend to apply through ASBA and (a) are holding Equity Shares in dematerialized form as on the Record Date and have applied for (i) their Rights Entitlement or (ii) their Rights Entitlement and Equity Shares in addition to their Rights Entitlement, in dematerialized form; (b) have not renounced their Rights Entitlement in full or in part; (c) are not renounces and (d) are applying through blocking of funds in bank accounts maintained with SCSBs.


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Bankers to the Issue Axis Bank Ltd. / The Bank in whom the Bank Account for Rights Issue will be opened and which act as such, in terms of this Draft Letter of Offer

BSE / Designated Stock Exchange

Bombay Stock Exchange Limited, Mumbai

CAF Composite Application FormCDSL Central Depository Services (India) Limited.Companies Act The Companies Act, 1956, as amended.Compliance Officer Compliance Officer of the Company for the Rights Issue being Ms. Jayanthi, Company

Secretary, KMC Speciality Hospitals (India) Limited Controlling Branches The branches of the SCSBs which coordinate with the Registrar to the Issue and the Stock

Exchanges and a list of which is available at http://www.sebi.gov.in Depositories NSDL and CDSLDepositories Act The Depositories Act, 1996, as amended.Depository A depository registered with SEBI under the Securities and Exchange Board of India

(Depositories and Participants) Regulations, 1996, as amended. Depository Participant A depository participant as defined under the Depositories Act. Designated Branches Such branches of the SCSBs which shall collect the CAFs of ASBA Applicants and a list of

which is available at http://www.sebi.gov.in. Draft Letter of Offer /DLOF/ Draft Offer Document

This Draft Letter of Offer circulated to the Equity Shareholders and filed with the Stock Exchanges containing inter alia the Issue price and the number of equity shares to be issued, issue price and other incidental information

DSE The Delhi Stock Exchange Association Ltd.ECS Electronic Clearing ServicesFace Value Face Value of Equity Shares of the Company being Re. 1/‐ each FCNR Account Foreign Currency Non Residence Account FEMA The Foreign Exchange Management Act, 1999, as amended, and the regulations framed

there under. FII Foreign Institutional Investor (as defined under the Securities and Exchange Board of India

(Foreign Institutional Investors) Regulations, 1995, as amended), registered with SEBI. Fiscal/Financial Year/FY A period of twelve months ended March 31 of that particular year. FVCI Foreign Venture Capital Investors (as defined under the Securities and Exchange Board of

India (Foreign Venture Capital Investors) Regulations, 2000, as amended), registered with SEBI.

IFRS International Financial Reporting Standards.Indian GAAP Generally accepted accounting principles in India.Issue / Rights Issue The issue of 150540000 Equity Shares of Re. 1/‐ each for cash at par (Issue Price Re. 1/‐ per

Equity Share on rights basis to existing Equity Shareholders of the Company in the ratio of 12 Equity Share for every 1 Equity Shares held on Record Date i.e. [•], 2010 aggregating Rs. 1505.40 lacs as per this Draft Letter of Offer

Issue Committee A committee of the Board authorized to decide the terms of the Issue. Issue Closing Date The date on which the issue closes for subscriptionIssue Opening Date The date on which the issue opens for subscriptionIssue Period The period between the Issue Opening Date and Issue Closing Date and includes both these

dates Issue Price The price at which the equity shares will be issued by the Company under this Draft Letter of

Offer Issuer / Company / KMCSHIL KMC Speciality Hospitals (India) LimitedLead Manager/ LM/ V B Desai Lead Manager to the Issue i.e. V B Desai Financial Services Limited MSE Madras Stock Exchange Ltd.Mutual Fund A mutual fund registered with SEBI under the Securities and Exchange Board of India (Mutual

Funds) Regulations, 1996, as amended. Non Resident(s) Person(s) resident outside India, as defined under FEMA, including FIIs and FVCIs.NRE Account Non Resident External AccountNRO Account Non Resident Ordinary AccountNRI/ Non Resident Indian

A person resident outside India, as defined under FEMA and who is a citizen of India or a person of Indian origin, such terms as defined under the Foreign Exchange Management (Deposit) Regulations, 2000, as amended.

NSDL National Securities Depository Limited.


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OCB/ Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly and which was in existence on October 3, 2003 and immediately before such date had taken benefits under the general permission granted to OCBs under the FEMA. OCBs are not permitted to participate in the Issue.

Record Date [•] Refund Bank Axis Bank Ltd.Registered Office of the Company

Registered Office of the Company situated at No. 6, Royal Road, Cantonment, Tiruchirappalli 620 001, Tamil Nadu, India

Registrar/ Registrar to the Issue Cameo Corporate Services LimitedRights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to under this Draft Letter

of Offer in proportion to his/her/its existing shareholding in the Company as on the Record Date i.e. [•]

ROC Registrar of Companies, TamilNadu, Chennai at Block no.6, B wing, 2nd floor, Shastri bhawan, 26, Haddows Road, Chennai – 600034

RTGS Real Time Gross Settlement.SAF(s) Split Application Form(s)SCRR Securities Contracts (Regulation) Rules, 1957 as amended from time to time SCBSs/Self Certified Syndicate Banks

The banks which are registered with SEBI under the Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994, as amended, and are recognized as such by SEBI and offer services of ASBA, including blocking of funds in bank accounts. A list of such banks is available at http://www.sebi.gov.in.

SEBI The Securities and Exchange Board of India constituted under the SEBI Act. SEBI Act The Securities and Exchange Board of India Act, 1992, as amended. SEBI Guidelines The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines,

2000, as amended. SEBI (SAST) Regulations / Takeover Code

Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as amended

SEBI (ICDR) Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Share Certificate The certificate in respect of the Equity Shares allotted to a folio with a split performance. Company / Industry Related Terms ENT Ear‐Nose‐ThroatInpatient A patient who is residing in the hospital for treatment.IPD Inpatient department.Occupancy Rate Represents the total number of inpatient days divided by the total number of bed days. Total

number of inpatient days represents the sum of days spent in the hospital by each inpatient during the period. Total number of bed days represents the sum of the number of days each bed was installed at the hospital during the period.

OPD Outpatient department.Outpatient A patient who is not hospitalized overnight but who visits a hospital, clinic, or associated

facility for diagnosis or treatment. PCB Pollution Control Board

Abbreviations AGM Annual General MeetingAY Assessment YearAS Accounting Standards as issued by the Institute of Chartered Accountants of IndiaBPLR Benchmark Prime Lending Rate.BIFR Board for Industrial and Financial Reconstruction.CAGR Compound Annual Growth RateCESTAT The Customs, Excise, Service Tax Appellate Tribunal.CII Confederation of Indian Industries.CLB Company Law BoardCY Calendar YearDCA Department of Company Affairs


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D/E Ratio Debt Equity RatioDIN Director Identification Number.EBITDA Earnings before interest, taxes, depreciation and amortization. EGM Extra‐ordinary General MeetingEPS Earnings Per ShareFDI Foreign Direct InvestmentFI Financial InstitutionFICCI Federation of Indian Chambers of Commerce and Industry.FIPB Foreign Investment Promotion Board, Department of Economic Affairs, Ministry of Finance,

Government of India INR Indian Rupee GDP Gross Domestic ProductGIR Number General Index Registry NumberGoI Government of IndiaHUF Hindu Undivided FamilyIndian GAAP Generally Accepted Accounting Principles in IndiaIT Act Income Tax Act, 1961 and amendments theretoITAT Income Tax Appellate Tribunal.LC Letters of CreditMOU Memorandum of UnderstandingNA Not ApplicableNAV Net Assets Value being paid Equity Share Capital plus free reserves (excluding reserves

created out of revaluation) less deferred expenditure not written off) and debit balance of profit and loss account, divided by number of issued equity shares

p.a. per annum PAN Permanent Account NumberPAT Profit After TaxPBDT Profit Before Depreciation and TaxPBIDT Profit Before Interest, Depreciation and TaxPBT Profit Before TaxP/E Ratio Price/ Earnings RatioPLR Prime Lending RateRBI The Reserve Bank of IndiaROI Return on InvestmentRONW Return on Net WorthRe. / Rs. / INR Indian RupeesSecurity Certificate Equity Share CertificateSecurity(ies) Equity Share(s)USD/US$/$ United States DollarWTO World Trade Organisation


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NOTICE TO OVERSEAS SHAREHOLDERS The distribution of this Draft Letter of Offer and the Issue to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession this Draft Letter of Offer may come are required to keep themselves legally informed about and observe such restrictions. The Company will dispatch the Draft Letter of Offer/Abridged Draft Letter of Offer and CAFs to such shareholders who have an Indian address to such Indian address. This Draft Letter of Offer does not constitute and may not be used for in connection with an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has been or will be taken by our Company or the Lead Manager to permit an offering of Equity Shares or distribution of this Draft Letter of Offer in any jurisdiction, other than India, where action for that purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this Draft Letter of Offer nor any offering material in connection with the Equity Shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. Persons receiving a copy of this Draft Letter of Offer should not distribute or send the same in any jurisdiction where to do so would or may contravene local laws or regulations. If this Draft Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or the rights entitlements referred to in this Draft Letter of Offer. The Rights Entitlement and the Equity Shares have not been and will not be registered under the United States Securities Act of 1933, as amended, or any other securities laws of the United States of America (“United States” or “US”) and may not be offered, sold, resold, or otherwise transferred within the United States of America or the territories or possessions thereof, except in a transaction exempt from the registration requirement of the United States Securities Act of 1933, as amended. The Rights Entitlement referred to in this Draft Letter of Offer is being offered in India but not in the United States of America. The offering to which this Draft Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any shares or rights for sale in the United States, or as a solicitation therein of an offer to buy any of the said shares or rights. Accordingly, this Draft Letter of Offer should not be forwarded to or transmitted in or into the United States by any person other than our Company at any time. None of our Company, the Lead Manager or any person acting on their behalf will accept subscriptions from any person, or his agent, who appears to be, or who our Company has reason to believe is, a resident of the United States and to whom an offer, if made, would result in requiring registration of this Draft Letter of Offer with the United States Securities and Exchange Commission. We are informed that there is no objection to a shareholder, resident of the United States, selling its Rights Entitlement in India.


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PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA Financial Data Unless stated otherwise, the financial information and data in this Draft Letter of Offer is derived from our Company’s financial statements which are included in this Draft Letter of Offer and set out in the section Financial Information on page 78. Our Company’s fiscal year commences on April 1 and ends on March 31 of the following calendar year. In this Draft Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding‐off, and unless otherwise specified, all financial numbers in parenthesis represent negative figures. Our Company is an Indian listed company and prepares its financial statements in accordance with Indian GAAP and in accordance with the Companies Act, 1956. Neither the information set forth in our financial statements nor the format in which it is presented should be viewed as comparable to information prepared in accordance with US GAAP, IFRS or any accounting principles other than principles specified in the Indian Accounting Standards. We prepare our financial statements in accordance with Indian GAAP. Indian GAAP differs significantly in certain respects from IFRS and US GAAP. We urge you to consult your own advisors regarding such differences and their impact on the financial data. The degree to which the financial statements included in this Draft Letter of Offer will provide meaningful financial information is entirely dependent on the reader’s familiarity with these accounting practices. Any reliance by persons not familiar with these accounting practices on the financial disclosures presented in this Draft Letter of Offer should accordingly be limited.


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FORWARD LOOKING STATEMENTS: We have included statements in this Draft Letter of Offer which contain words or phrases such as “will”, “shall” “may”, “aim”, “is likely to result”, “believe”, “expect”, “continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “pursue” and similar expressions or variations of such expressions, that are “forward looking statements”. These forward looking statements include statements as to business strategy, revenue and profitability, planned projects and other matters discussed in this Draft Letter of Offer regarding matters that are not historical fact. These forward – looking statements contained in this Draft Letter of Offer (whether made by us or any third party) involve known and unknown risks, uncertainties and other factors that may cause actual result, performance or achievements expressed or implied by such forward looking statements or other projections All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward‐looking statement. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:

- General economic and business conditions; - Company’s ability to successfully implement its strategy and Business plans; - Increasing competition in the healthcare industry; - Loss of our management team and other key personnel who are critical to our continued success. - Dependency on our doctors, nurses and other healthcare professionals and the loss of, or inability to attract or retain

such persons. - Inability to keep pace with changing technology, evolving industry standards and new product introductions. - Changes in laws and regulations that apply to the Healthcare industry; - Changes in government regulations and impact of fiscal, economic or political conditions in India; - Social or civil unrest or hostilities with neighboring countries or acts of international terrorism;

For a further discussion of factors that could cause our actual results to differ, please refer to the sections titled “Risk Factors”, “Business Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 10, 53 and 107 respectively of this Draft Letter of Offer. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither us, our directors, officers nor the Lead Manager nor any of their respective affiliates or advisors have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI and Stock Exchanges’ requirements, we and Lead Manager shall ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges.


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SECTION II: RISK FACTORS RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PERCEPTIONS THEREOF An investment in equity shares involves a high degree of risk. You should consider all information in this Draft Letter of Offer, including the risks and uncertainties described below, before making an investment in the Equity Shares. If any of the following risks or any of the other risks and uncertainties discussed in this Draft Letter of Offer actually occur, our business, financial condition and results of operations could suffer, the trading price of the Equity Shares could decline, and you may lose all or part of your investment. These risks and uncertainties are not the only issues that we face, additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also have an adverse effect on our business, results of operations and financial condition. Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the financial or other implications of any of the risks described in this section. The numbering of risk factors is provided solely for convenience. The risk factors shall be determined on the basis of their materiality. The following factors have been considered for determining the materiality (1) Some events may not be material individually but may be found material collectively. (2) Some risks may have an impact which is qualitative though not quantitative. (3) Some risks may not be material at the time of making the disclosures in the letter of offer but may have a material impact in the future. Risk relating to Our Company and its Business 1. Our company has gone for capital reduction

Our Company had filed a petition under Section 101 of the Companies Act, 1956 into the Hon’ble High Court of Judicature at Madras seeking to effect a reduction of its Equity Share Capital and by reducing the face value of our shares from Rs. 10/‐ per share to Re. 1/‐ per share and the Hon’ble High Court has approved such reduction vide its order dated November 24, 2009, a copy of which has been filed with the ROC on December 15, 2009.

2. Our Company has incurred losses continuously in the past years. As a result, considerable portion of our net worth has been wiped out. Further, as per the restated financial statements included in this Draft Letter of Offer, we had negative cash flows. We have incurred losses continuously in the past years till March 31, 2010. Our Company had incurred losses in the past due to, interest burden, carrying cost of manpower and other fixed overheads.

3. The land on which KMCSHIL is situated is subject to litigation. In the event of an adverse ruling, we may be unable to operate and manage the hospital and recover investments made in it. A major portion of the land on which our hospital situated is the subject of ongoing litigation. If the litigation in respect of such land is not decided in our favor, we may lose right on the land or have to make substantial payments, or may be unable to continue operate our hospital. We may also have to relocate our existing hospital and incur additional costs. For further details, see the section titled “Outstanding Litigation and Material Developments” on page 113 of this Draft Letter of Offer.

4. The audit reports on the audited financial statements of the Company are qualified and subject to significant limitations and may not provide a complete presentation of our financial condition. The audit reports of PMR & Associates, Chartered Accountants, dated May 30, 2008 for Fiscal 2008, May 13, 2009 for Fiscal 2009 and May 21st, 2010 for Fiscal 2010 in respect of the audited financial statements of the Company are qualified and provide no opinion on the impact of our outstanding litigation relating to the land on which our Hospital is located. Also, in the audit reports, the auditors have not expressed any opinion regarding certain customs duty demands aggregating Rs. 85.25 Lacs raised on KMCSHIL by the Department of Customs. These matters are currently pending and consequently the eventual outcome of these matters cannot be estimated. These cases may expose KMCSHIL to potentially high liability. As a result of these qualifications, our financial statements may not provide a complete presentation of our financial condition. For further details, see the


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auditor’s report included in the section titled “Financial Information” beginning on page 79 of this Draft Letter of Offer.

5. We are a single location hospital and any local event might have an adverse impact on our revenues and profitability. Our hospital is located at a single location, which is at Tiruchirappally in Tamil Nadu. We are vulnerable to the effects of a natural disaster, such as a flood, earthquake or fire, or other calamity or event or any local social unrest or breakdown of services and utilities in that area that disrupts our ability to conduct our business or that causes material damage to our property. In the event of a significant disaster in our facilities, it could be difficult for us to maintain or quickly resume our operations. We do not have business interruption insurance, and our property insurance may not cover all loss or damage to our assets.

6. We have experienced negative cash flows. There has been negative cash flows in the past years due to mismatch of expenses exceeding income, but in the previous year ended on March 31, 2010 there are no cash loss though there is a operating loss due to depreciation.

7. If we are unable to identify expansion opportunities or we experience delays or other problems in implementing new facilities at our hospital, our growth, financial condition and results of operations may be adversely affected. In addition, from the Net Proceeds of the Issue we intend to fund for renovation and may not be successful in our plans. Our growth depends on our ability to upgrade and manage the hospital. We may face challenges while renovating, rebuilding or repositioning of our hospital and may be unable to effectively integrate new facilities with our current operations. Undertaking new projects and facilities requires significant managerial and financial resources and we may face difficulties in recruiting and retaining an adequate pool of doctors and other personnel for our hospitals.

8. Our management has a limited history of operating as a Listed Company and we have incurred net losses to date and may incur additional net losses in the future. The Company was incorporated in 1982, came out with an IPO in 1992 and has been a loss making entity since then. We have operational losses in all the previous years. The Management of the Hospital changed post the Open Offer in April 2008 and the existing management only has a limited history of operation of Listed Company upon which you can evaluate us or our prospects. We have incurred net losses in previous years. While we recorded a net loss of Rs.41.60 lacs in Fiscal 2010, we cannot assure you that we will report and sustain profitability in the future.

9. The Promoter of the Company KMC Medicare (Trichy) Ltd. is in the same business as KMCSHIL and operates in the same locale.

There may be conflicts of interest in addressing business opportunities and strategies in circumstances where our interests differ from our Promoters or one or more members of our Promoter Group has an interest. None of our Promoters or the members of our Promoter Group has undertaken to refrain from competing with our business. In addition, none of the Promoters or members of the Promoter Group is obligated to direct any opportunities to us. We share members of senior management and key employees and other resources and office space which may divert management attention and resources away from our business and create conflicts of interest. In addition, new business opportunities may be directed to our Promoter Company instead of our Company. Our Promoters and our Promoter Group may also keep us from entering into certain businesses related to our own, which may be important for our growth the in the future, as they may already have interests in other similar businesses.

10. We have taken certain unsecured loans, which may be recalled by our lenders at any time. As on March 31, 2010, the Company has outstanding unsecured loans aggregating Rs.1554 Lacs repayable on demand basis. The repayment schedule in respect of unsecured loan has not been specified. Unscheduled demand of these loans and payments thereof, may impact the liquidity positions.


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11. Our hospital is located on land not owned by us.

A major portion of the land on which the hospital building is located is not owned by our company. The said land is owned by our Promoter company namely Sri Kavery Medical Care (Trichy) Ltd. We have entered into a lease agreement with our Promoter Company for use of the land which we do not own and we make regular lease payment. For any reason, the lease agreement is not renewed on expiry period, there may be disruptions to our operations and we may face substantial financial loss in respect of our investment.

12. We have dues to municipality for regularization of construction on 4th, 5th and 6th floor of our hospital. The Municipal Corporation of Tiruchirapalli contended that the construction of 4th, 5th and 6th floors of the hospital building have no approval and issued a show cause notice to the company. Our company has paid a sum of Rs. 6.05 as regularization fees and has filed an application before the appropriate authorities for the regularization of the construction. If our application for regularization of 4th, 5th and 6th floors of the hospital building is not decided in our favor, we may lose sizeable part of hospital building or have to make substantial payments.

13. Property tax to the tune of Rs. 108.32 lacs is payable by the company The hospital of the Company was built on the land leased out from the erstwhile promoter of the Company in the year 1992. The hospital building was wrongly assessed for property tax by the Tiruchirappalli Municipal Corporation separately for each floor on the assumption that the building is owned by erstwhile promoter and leased out to the Company and charged property tax accordingly. The Company had filed a suit against Tiruchirappalli Municipal Corporation before the District Munsif Court, Tiruchirappalli in the year 1993 and a judgement was delivered in November 2003 directing the Tiruchirappalli Municipal Corporation to issue demand notice in the name of the hospital and to reconsider revision of property tax in line with the existing rules and procedures. The Company has provided Rs. 50 lacs in the books of accounts upto March 31, 2010 against property tax payables. If the Tiruchirappalli Municipal Corporation does not revise the property tax, the Company needs to be provided additional amount which will affect the Company’s business and profitability.

14. We do not own the trademarks, including their respective names and logos, and the value of such intellectual

property may be impaired by the actions of others. The name and logo “KMC Speciality Hospital”, is an important asset of our hospital and our business. However, we do not own the “KMC Speciality Hospital” trademark, including name and logo. Maintaining and enhancing the reputation associated with the trademark name and logo is integral to our success. Infringement of the “KMC Speciality Hospitals” trademark, for which we may not have recourse, may adversely and materially affect our reputation, and, thereby, our business.

15. Compliance with applicable safety, health, environmental and other governmental regulations may be costly and adversely affect our competitive position and results of operations. We are subject to central and local laws, rules and regulations governing, among other things, the: • conduct of our operations; • additions to facilities and services; • adequacy of medical care; • quality of medical equipment and services; • discharge of pollutants into air and water and handling and disposal of bio‐medical, radioactive and other

hazardous waste; • qualifications of medical and support personnel; • confidentiality, maintenance and security issues associated with health‐related information and medical

records; and • screening, stabilization and transfer of patients who have emergency medical conditions.

Safety, health and environmental laws and regulations in India are stringent and it is possible that they will become significantly more stringent in the future. If we are held to be in violation of such regulatory requirements, including conditions in the permits required for our operations, by courts or governmental agencies, we may have to pay fines, modify or discontinue our operations, incur additional operating costs or


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make capital expenditures. Any public interest or class action legal proceedings related to such safety, health or environmental matters could also result in the imposition of financial or other obligations on us. Any such costs could adversely affect our competitive position and results of operations. For further details of the regulations applicable to us, see the section titled “Key Industry Regulation” beginning on page 55 of this Draft Letter of Offer.

16. Rapid technological advances, technological failures and other challenges related to our medical equipment could adversely affect our business. We use sophisticated and expensive medical equipment in our hospitals to provide services, including devices required for super‐specialty procedures. Medical equipment often needs to be replaced frequently as innovation can rapidly make existing equipment obsolete. Replacement of equipment may involve significant costs, as well as foreign currency risks, since some equipment is imported from other countries. In addition, because of the high costs of medical equipment, we may not maintain back‐up equipment, and, therefore, if such equipment is damaged or breaks down, our ability to provide services to our patients may be impaired.

17. We are vulnerable to failures of our information technology systems, which could adversely affect our business. Our information technology systems are a critical part of our business and help us manage clinical systems, medical records and inventory. We also rely on our information technology systems to practice telemedicine, where our doctors consult with each other and patients via advanced video conferencing arrangements. Any technical failures associated with our information technology systems, including those caused by power failures and computer viruses and other unauthorized tampering, may cause interruptions in our ability to provide services to our patients. Corruption of certain information could also lead to delayed or inaccurate judgments or diagnoses in our treatment of patients and could result in damage to the welfare of our patients. In addition, we may be subject to liability as the result of any theft or misuse of personal information stored on our systems.

18. The Company currently does not intend to pay dividends, and it may not pay dividends in the future. The Company has not declared dividends in the past. The Company currently intends to retain all of its earnings to finance the development and expansion of its business and, therefore, does not intend to declare dividends on the Equity Shares in the foreseeable future. The Company’s ability to pay dividends will depend upon a number of factors, including its results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions, applicable Indian legal restrictions and other factors considered relevant by the Board.

19. Your holdings may be diluted by additional issuances of Equity Shares. Furthermore, sales of Equity Shares by the Promoters may adversely affect the market price of the Equity Shares. Any future issuance of the Equity Shares, including any issuing of Warrants, employee stock option scheme or any other similar scheme in the future, may dilute the positions of investors in the Equity Shares, which could adversely affect the market price of the Equity. Any such future issuance of Equity Shares could negatively impact the market price of the Equity Shares. Such Equity Shares also may be issued at prices below the then‐current market price. Sales of a large number of the Equity Shares by the Promoters, or the possibility of such sales, may adversely affect the market price of the Equity Shares.

20. The objects of the Issue include the utilization of a portion of the Net Proceeds of the Issue for payments to certain Promoter Group companies. The objects of the Issue include the utilization of the Net Proceeds of the Issue towards repayment of the loans granted by promoter group to the Company.

21. The exit options available to the equity shareholders may be limited The equity shares of the company are listed on BSE, MSE and DSE. There has not been any trading in the shares since 1996 on MSE and DSE. On BSE Company’s shares were not actively traded. There can be no assurance that


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an active trading market for the Company’s equity shares will revive or be sustained and as such the exit options available to the equity shareholders may be limited.

22. Our funding requirements and the deployment of the Net Proceeds of the Issue are based on management estimates and have not been independently appraised. The objects of the issue requirements have not been appraised by any of the external agency. Our management has prepared an internal business plan and investment proposal based on estimates derived from past experience of the Promoter. There is no guarantee that our estimates will prove to be accurate in the coming years and any significant deviation in our estimates could adversely impact our operations and sustainability. However, we confirm that issue proceeds shall be utilized within the objects specified under the section titled "Objects of the Issue" on page no. 37 of this Draft Letter of Offer.

23. The company has not properly maintained records as regards shareholding buildup since inception 24. We are highly dependent on healthcare professionals such as our doctors, nurses and other healthcare

professionals and the loss of, or inability to attract or retain, such persons could adversely affect our business and results of operations. If we are unable to attract and retain leading doctors and other healthcare professionals, we may not be able to provide quality services and could affect our business and results of operation.

25. We are also highly dependent on members of our senior management team, to manage our current operations

and meet future business challenges. In particular, the services of our Managing Director and our senior doctors. We are highly dependent on members of our senior management team, to manage our current operations and meet future business challenges. In particular, the services of Dr. S.Chandrakumar, the Managing Director of the Company, and our senior doctors, who typically practice at individual hospitals, have been integral to our development and business. The loss of the services of our senior management or key personnel, including our senior doctors, could seriously impair our ability to continue to manage and expand our business.

26. Our arrangements with some of our doctors may give rise to conflicts of interest and time‐allocation constraints and adversely affect our operations.

Our contracts and other arrangements with some of our doctors, who provide non‐core specialty services such as dentistry, also permit them to maintain their own private practices, as well as positions at a limited number of other hospitals. Certain of our doctors may also maintain positions at local clinics or affiliations with teaching hospitals. These arrangements may give rise to conflicts of interest, including with regard to how these doctors allocate their time and other resources between our hospitals and other clinics or hospitals at which they work and where doctors refer patients. Such conflicts may prevent us from providing a high quality of service at our hospitals and adversely affect the level of our patient intake.

27. We operate in competitive industry and face increasing competition from other hospitals and healthcare providers, which may have effects on our position and results of operations.

We compete with government‐owned hospitals, other private hospitals, smaller clinics, hospitals owned or operated by non‐profit and charitable organizations and hospitals affiliated with medical colleges. We will also have to compete with any future healthcare facilities located in the regions in which we operate. Some of these competitors may be more established and have greater financial, personnel and other resources than our hospitals. New or existing competitors may price their services at a significant discount to ours or offer greater convenience or better services or amenities than we provide. Smaller hospitals, stand‐alone clinics and other hospitals may exert pricing pressures on some or all of our services and also compete with us for doctors and other medical professionals. Some of our competitors also have plans to expand their hospital networks, which may exert further pricing and recruiting pressure on us. If we are forced to reduce the price of our services or are unable to attract patients and doctors and other healthcare professionals to our hospitals, our business and financial results may be adversely affected.


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28. Our significant size of income comes from limited number of customers. Any adverse change in customer relationship could harm our business

Our Company has arrangement with Government Enterprises and large corporate clients numbering to 49 for providing health care to their employees at negotiated price. These arrangements contributes major source of our income which constitute around 40% of our total revenue during the Fiscal 2010. Our revenues from these corporate customers may differ from quarter to quarter and may adverse our operations. If such arrangements are not renewed on its expiry or any adverse change in customer relationship could harm our business and financial results.

29. Our Company did not comply with Section 383(A) of the Companies Act, 1956 regarding the appointment of whole time company secretary. Our Company did not comply with Section 383(A) of the Companies Act, 1956 regarding the appointment of wholetime Company Secretary for the period December 1, 1982 to March 14, 1991, June 1, 1994 to May 18,2000, December 13, 2001 to July 14, 2003, October 23, 2004 to March 27, 2005 and August 2, 2005 to February 28, 2009. Our Company has appointed whole time Company Secretary from March 1, 2010.

30. Our gross income is dependent on inpatient income and occupancy rates, which could decline due to a variety of factors. Our primary source of gross income is from inpatient treatments. Growth in inpatient income and increasing or maintaining occupancy rates at our hospitals are highly dependent on our ability to attract and retain well‐known doctors, our ability to develop speciality practices and our ability to compete effectively with other hospitals and clinics. Growth in inpatient income may also be impaired by the absence of a developed health insurance sector, lack of appropriate government programs and the small proportion of people in India with health insurance. Our inability to increase growth in inpatient treatments or occupancy rates may adversely affect our business and results of operations.

31. There is outstanding litigation against us relating to customs and tax obligations, and such litigation may adversely affect our financial results. In 1991, we benefited from a customs exemption (Customs Exemption Certificate; Notification No. 64/88‐Cus dated March 1, 1998) in importing various types of medical equipments. The exemption required us to provide free treatment to a minimum of 40% of our outpatients and 10% of our inpatients, subject to the patients having monthly income lower than Rs. 500. We complied with this condition until 1997 when the medical equipment became non‐functional. We discontinued using and dismantled the medical equipment in 1997 and stopped providing the free treatment. The Commissioner of Customs issued a show cause notice pursuant to which an order was passed on January 31, 2000, directing that the Cardiac Catherization Laboratory be confiscated. We were also ordered to pay a duty of Rs.76 .11 Lacs in order to redeem the confiscated equipment, along with a penalty of Rs. 2 Lacs. The Company had filed a writ petition before the Madras High Court in 2001 against the Order of Commissioner of Customs. On December 5, 2006 the Madras High Court allowed Company’s petition and remanded the matter for fresh consideration. The Commissioner of Customs, Airport, filed an appeal against the order of Madras High Court on March 30, 2007, where this matter is currently pending.

32. There has been no appraisal for requirement of funds as well as monitoring and the company has not entered

into any definitive agreements to utilise the proceeds of the Issue. Also, a part of the Issue proceeds shall be used for general corporate purposes The requirement of funds has not been appraised. Also, deployment of funds raised through the issue is completely at the discretion of our board and will not be monitored by any independent agency. The proposed Rights Issue funds would be utilized for repayment of loans taken from promoters and other requirements mentioned under section Objects of the Issue on page 37 of this Draft Letter of Offer. A part of the Issue proceeds shall be used for general corporate purposes for which the company is yet to firm up its plans. The deployment of funds would be judiciously exercised and monitored by the Board of Directors, pending utilization in the project as per the manner as referred to above, the proceeds of the Rights Issue will be deposited in a bank account as stated under the undertaking given for utilization of Issue proceeds on page 39 of this Draft Letter of Offer. The management will have significant flexibility in applying the proceeds received from the Issue towards general corporate purposes.


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33. Increases in wages could reduce profit margins, cordial relationship with the workers / employees and is

crucial for smooth functioning of operations Any significant increase in wages and salary costs could have an adverse effect on the business, financial condition and results of operations. In the long term, wages and salary increase may make KMC SHIL less competitive unless it is able to continue increasing efficiency and productivity, and the prices that it can charge to customers

34. Non meeting of projections made in Prospectus.

We came out with an IPO in the year 1992 and raised equity share capital by way of a public issue to finance hospital project. The projected capacity and cash profit and net profit were made in the Prospectus however the Company could not able to meet projections stated in the Prospectus.

35. Litigations

Outstanding Litigations: The following are the material pending litigations and defaults involving the Company. For details of these litigations please refer to section ‘Outstanding Litigation and Material Developments’ on page no. 113 of this Draft Letter of Offer. Sr. No.

Particulars of litigations No. of cases Amount (Rs. In lacs)

1. Company a. Litigation filed against our Company 5 103.86 b. Litigation filed by our Company

‐ where financial implication can be ascertained ‐ where financial implication cannot be ascertained

Nil Nil

Nil Nil

2 Promoter / Group Companies Nil Nil a. Litigation filed against Promoter /Group Companies Nil Nil b. Litigation filed by Promoter /Group Companies Nil Nil3 Promoter/Directors of our Company Nil Nil a. Litigation filed against Promoters / Directors Nil Nil b. Litigation filed by Promoters/ Directors Nil Nil

For further details, please refer “Legal and Other Information” beginning on page 113 of this Draft Letter of Offer. 36. Contingent Liabilities not provided for:

As on March 31, 2010, contingent liabilities not provided for and appearing in our restated financial statements are as under:

Sr. No.

Particulars

Amount (Rs. In Lacs)

1 Customs duty / penalty for the medical equipment imported during the years 1989‐93

85.25

2 Regularization of construction of 4th, 5th & 6th floors of the hospital building, which have no approval according to Tiruchirappalli Municipal Corporation

Amount not ascertainable

3 Arrears on rent on peramboke land 9.17 4 Arrears of property tax 108.32 5 Claims against the Company not acknowledged 4.35

In the event that any of these contingent liabilities materialize, our financial condition may be adversely affected. For further details, see the auditor’s report forming part of “Financial Information on page 79 of this Draft Letter of Offer.


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Risk Factors External to the Company and beyond the control of the Company

1. Competitive business environment The Company operates in a competitive business environment. Growing competition may force it to reduce the price of its services which may reduce its revenues and margins and / or decrease its market share, either of which could have a materially adverse effect on its business, financial condition and results of operations.

2. The business of the Company is significantly affected by external factors

The results of the Company have been and may be significantly affected by factors outside our control such as political unrest, cross‐border hostilities, civil commotion and acts of terrorism either in India or outside India. Other factors include potential negative changes in environmental regulations, government regulations. The Company is also subject to the risk of loss of revenues and assets due to fire or natural disasters. The occurrence of all such event including natural disasters could interrupt the Company’s business for significant periods.

3. Changes in the Government of India policies

A significant change in India’s economic liberalization and deregulation policies, including the healthcare industry, could affect business and economic conditions in India generally and the business of our Company in particular. A significant change in the Indian governments or the state governments economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally and the business and financial condition and prospects in particular of our Company.

4. Risk relating changes laws and regulations

Any change in the laws and regulations governing the industry may adversely affect the business and financial condition of our Company.

5. Future offering resulting in dilution of the shareholding

Any future equity offering made by the Company may lead to dilution of the shareholding or may affect the market price of the Equity Shares of the Company.

6. Perils of Environmental Litigations

Failure to comply with environmental laws and regulations could result in litigation and company’s business may be adversely affected. It may incur substantial expense in complying with environmental laws and regulations. Also, currently unknown environmental problems or conditions may be discovered. The company is subject to significant national and state environmental laws and regulations, which govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from its operations. Environmental laws and regulations in India have been increasing in stringency and it is possible that they will become significantly more stringent in the future.

7. Economic Slowdown

Any economic slowdown may result in reduced spending generally. It can also put pressures on the realizations, resulting in reduced volumes/margins and may impair the financial results.

8. Wars, natural disasters and terrorist attacks may adversely affect the markets, investor confidence, exchange

rates and world economy in general and may result in loss of business and assets 9. Political instability in India and other countries, can adversely affect the Company’s business. 10. Competition

Competition from existing established health care companies and future entrants into the health care industry may affect our performance.


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11. Regulatory Environment Changes in regulatory environment may have an impact on the business of the Company.

12. Volatility in Share Prices After the Rights Issue, the price of the Equity Shares may be highly volatile and may fluctuate significantly due to many factors, including variations in the operations of the Company and changes in the regulatory environment. The prices of the Equity Shares may fluctuate as a result of several factors, including:

volatility in the Indian and Global Securities market; our results of operations and performance; performance of our competitors in the Indian healthcare industry and the perception in the market about

investments in healthcare industry; adverse media reports on the Company or the Indian healthcare Industry; changes in the estimates of our performance or recommendations by financial analysts; significant developments in India’s economic liberalization and deregulation policies; changes in the applicable tax incentives; significant development in India’s fiscal and environmental regulations; and general political and security environment in the country and across the globe.

13. Force Majeure

In future there might be a force majeure events such as but not limiting to earthquake, Tsunami, volcano, etc. or some unforeseen event that is beyond the control of the company like war, terrorist attack etc. that might prevent us from performing our business obligations.

14. Changes In Domestic Tax Laws

Any changes in the tax laws prevailing in India particularly the income tax might lead to increased tax liability of the Company thereby putting pressures on our profitability. Change in tax laws, particularly income tax, can have an impact on the post‐tax profits of our Company


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NOTES

1. The Investors may contact the merchant bankers, V.B.Desai Financial Services Limited, who have submitted the due diligence certificate to the SEBI, for any complaint relating to the issue.

2. The Net worth of the Company before the Issue (as per latest Audited Financial statements disclosed in the Draft

Letter of Offer is Rs. 110.51 lacs. The Issue Size is Rs 1505.40 lacs. 3. For details of the group companies having business interests or other interests in the issuer please refer

“Business interest of Promoter / Group Companies” on page 76 in the section relating to Financial Information of group companies.”

4. The average cost of acquisition of Equity Shares of our Company by our Promoters is Rs. 9.22 per Equity Share. 5. The Company has entered into certain related party transactions. The related party transactions cover the

financial transactions carried out in the ordinary course of business and/or discharge of contractual obligations. There are no common pursuits among the group companies and all the transactions are at Arm's length and are subject to Transfer Pricing regulations. The Statutory Auditors certify these transactions, which fall within the norms of Transfer Pricing u/s. 92A of the Income Tax Act, 1961, for the purposes of the Income Tax Return. The details of the transactions as certified by the auditors of the Company are as follows. For the details of the related party transactions please refer page 102 of this Draft Letter of Offer.

6. Our Company was originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 under the Companies Act, 1956 vide Certificate of Incorporation issued by the Registrar of Companies, Chennai, Tamil Nadu. The Company was converted into a Public Limited Company on July 15, 1988. The name of the Company was changed to Seahorse Hospitals Limited on March 21, 1995 and to its current name with effect from October 24, 2008]

7. There have been no financing arrangements whereby the promoter group, the directors of our Company and their relatives to finance the purchase by any other person of securities of our Company during the period of six months immediately preceding the date of filing offer document with the

8. Further there have been no transactions in Equity Shares of our Company by our Promoters and Promoter Group

and Directors of our Company in the last six months preceding the date of this Draft Letter of Offer.


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SECTIN III: INTRODUCTION A. SUMMARY

1. Summary of Industry and Our Business Summary of Industry a) Overview

Both the public sector and private sector deliver the healthcare sector in India. The public healthcare system consists of healthcare facilities run by central and state government which provide services free of cost or at a subsidized rates to low income group in rural and urban areas. With the Indian economy enjoying a steady growth, the industry is heading towards growth phase. The Indian healthcare industry is one of India’s largest sectors, in terms of revenue and employment and growing at a frantic pace and has the potential to show the exponential growth.

b) Public vs. Private Provision of Healthcare Services

The state, central and local governments share the responsibility of providing healthcare in India. After the economic reforms in 1986, public health expenditure has remained more or less stagnant between 0.9 per cent to 1.2 per cent of GDP. Private healthcare to form a large share of the healthcare spend around 80% and would increase to US$ 33.6 billion in 2010 from US$ 14.8 billion in 2002. (Source: India Brand Equity Foundation, www.ibef.org). Healthcare delivery infrastructure is still under developed in India, and there is strain on existing resources. Patients may be required to wait in long queues for treatment at these hospitals, and many doctors are overworked. India’s growing middle class is, therefore, increasingly choosing private hospitals.

c) Lack of Infrastructure

i. Hospital Beds India’s healthcare infrastructure has not kept pace with the economy’s growth. The available capacity has increased but not in line with rising demand. India has 0.7 beds per thousand patients as against a world average of 2.6. Bed to thousand‐population ratio of 1.85 is likely to be reached by 2012. (Source: India Brand Equity Foundation, www.ibef.org). This is a clear indication of the insufficiency of healthcare infrastructure in India. The physical infrastructure is woefully inadequate to meet today’s healthcare demands, much less tomorrows. While India has several centers of excellence in healthcare delivery, these facilities are limited in their ability to drive healthcare standards because of the poor condition of the infrastructure in the vast majority of the country. The number of public health facilities also is inadequate.

ii. Trained Personnel

The biggest challenge for the healthcare industry today is a shortage of trained personnel, ranging from doctors, nurses, technicians and even healthcare administrators Density of registered doctors and nurses in India is 1.9 per 1000 population, which is less than half of the world average of 4.1 and lower even when compared to global norms (5) as well as the norm of 2.25 set by NCMH. The number of non‐allopathic doctors in India is slightly more than the number of allopathic doctors. (Source: India Brand Equity Foundation, www.ibef.org).


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Summary of Our Business

1. Details of Our Business

Our Company is a super speciality Hospital based in Tiruchirappalli, belong to the KMC group. We are in the business of running a super speciality hospital having 175 beds with team of dedicated specialists. We provide quality healthcare to patients in key specialty areas such as Neurosurgery, Cardiovascular & thoracic surgery, Orthopedics, Plastic and Reconstructive Surgery, Gynecology, Neonatology and Nephrology (including renal transplants). A special feature of the hospital is the availability of the state‐of‐the‐art equipments and trained personnel required for managing critically ill patients. Our hospital is fully equipped to deal with all kinds of accident victims 24 hours a day.

We were originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 with the Registrar of Companies, Chennai at Tamil Nadu. Company came out with its initial public offer (IPO) in July, 1992. The management of the company was taken over by the present promoter Sri Kavery Medical Care (Trichy) Limited, during May 2008.

As mentioned above we belong to the KMC Group, our group is engaged in a business of operating and managing hospitals. Our group hospital consists of multi‐specialty hospitals, which provide comprehensive general healthcare to patients in their local communities and in the surrounding areas. We are committed to delivering quality healthcare services to our patients through modern facilities using advanced technology and our teams of doctors, nurses and other healthcare professionals.


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2. The Issue Details in Brief ISSUE OF 15, 05, 40,000 EQUITY SHARES OF RS.1/‐ EACH AT PAR AGGREGATING TO RS. 1505.40 LACS: Ratio of Rights Entitlement 12 Share for One Equity Share held Record Date [•] , 2010 Total Equity Shares under Draft Letter of Offer 15,05,40,000 Equity Shares of Re.1/‐ each Equity Shares outstanding prior to the Issue 12545000 Equity Shares of Re. 1/‐ each Equity Shares outstanding after the Issue* 16,30,85,000 Equity Shares of Re. 1/‐ each Use of Issue proceeds Please see section entitled “Objects of the Issue” on

page no. 37 of this Draft Letter of Offer for additional information

* Assuming full subscription a.) The Issue has been authorised by the Board of Directors in their meeting held on January 21, 2010 under

section 81 of the Companies Act. b.) The Face Value of Equity Shares is Re. 1/‐ each and the issue price Re. 1/‐ each is one time of the Face Value

of the Equity Shares. For more details, please refer the Chapter titled “Terms of the Issue” beginning on page 130 of this Draft Letter of Offer.

Issue Schedule Issue Opens on Last date for request for split

application forms Issue closes on

[•] , 2010 [•] , 2010 [•] , 2010


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3. Summary of Financial, Operating and Other Data Summary Statement of Assets and Liabilities, As Restated

(Rs. in lakhs)

2010 2009 2008 2007 2006

1. Fixed AssetsGross Block 2,614.95 2,435.70 2,427.19 2,430.81 2,429.35 Less‐Depreciation 1,405.76 1,420.88 1,448.18 1,354.67 1,251.07 Net Block 1,209.19 1,014.82 979.01 1,076.14 1,178.28

Net Deferred Tax Assets 369.61 375.68 344.73 308.10 273.23

2. Current Assets, Loans and AdvancesInventories 29.91 15.64 7.54 13.34 15.53 Debtors 140.77 50.48 10.01 7.93 8.32 Cash and Bank Balances 8.86 8.60 18.64 1.64 1.03 Loans and Advances 24.90 20.65 25.40 26.50 25.93 Total 204.44 95.38 61.60 49.40 50.80

Total Assets (A) 1,783.24 1,485.87 1,385.34 1,433.64 1,502.32

3. Liabilities and ProvisionsUnsecured Loans 1,554.01 1,225.32 885.19 564.47 658.47 Current Liabilities 64.64 72.86 59.80 172.78 64.16 Provisions 54.05 52.77 47.11 44.03 40.19

Total Liabilities (B) 1,672.70 1,350.95 992.10 781.27 762.82

Net Worth (A)‐(B) 110.54 134.92 393.24 652.37 739.50

Represented by1. Share Capital 125.45 1,254.50 1,254.50 1,254.50 1,254.50 2. Reserves and Surplus 301.82 301.82 301.82 301.82 301.82 Less:3. Debit Balance of Profit & Loss A/c (316.74) (1,421.40) (1,163.08) (903.95) (816.82)

Net Worth 110.54 134.92 393.24 652.37 739.50

Particulars As at 31st March


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Summary Statement of Profits and Losses, As Restated(Rs. in lakhs)

2010 2009 2008 2007 2006

1. IncomeIncome from Operations 853.70 327.38 84.00 196.95 280.53 Other Income 6.17 21.73 19.19 16.00 9.73

Total 859.87 349.11 103.18 212.95 290.27

2. ExpenditureConsumption of Medicines etc 161.76 61.03 30.59 57.20 87.29 Operating Expenses 213.49 90.51 14.96 15.81 33.11 Personnel Expenses 196.87 103.40 51.20 76.17 102.88 Administration Expenses 219.54 151.68 101.29 81.61 118.77 Finance Charges 114.08 139.81 101.63 ‐ 10.88 Depreciation 86.53 91.03 98.40 103.60 112.85

Total 992.27 637.46 398.06 334.39 465.78

3. Profit before Tax & Extraordinary Items (132.40) (288.36) (294.87) (121.45) (175.51) Extra ordinary Items 114.08 ‐ ‐ ‐ ‐

4. Profit/(Loss) before Tax (18.32) (288.36) (294.87) (121.45) (175.51) Less: Provision for TaxesIncome Tax ‐ ‐ ‐ ‐ ‐ Deferred Tax 6.07 (30.94) (36.63) (34.87) (25.89) Fringe Benefit Tax ‐ 0.90 0.88 0.56 1.04

5. Profit/(Loss) for the year (24.39) (258.31) (259.13) (87.14) (150.66) Profit/(loss) brought forward (1,421.40) (1,163.08) (903.95) (816.82) (666.16) Less: Adjusted against Share Capital 1,129.05 ‐ ‐ ‐ ‐

Profit/(Loss) carried to Balance Sheet (316.74) (1,421.40) (1,163.08) (903.95) (816.82)

Notes:

1. Extraordinary item of Rs.114.08 lakhs for the period ended 31st March 2010 comprise of waiver of interest on loans taken from a company under the same management.

2. The company has implemented a scheme of Capital Reduction approved by the Honourable High Court of Madras vide order

dated 24th November 2009. As a result, the Face Value has been reduced to Re.1. Consequently, share capital amounting to Rs. 1,129.05 lakhs has been utilized to write off accumulated losses.

Particulars Year ended 31st March


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B. GENERAL INFORMATION

1. Issuer Details Our company was incorporated on December 31, 1982 under the Companies Act, 1956 as ‘Advanced Medical Care Private Limited’ vide Certificate of Incorporation issued by the Registrar of Companies, Chennai, Tamil Nadu. The Company was converted into a Public Limited Company on July 15, 1988. The name of the Company was changed to Seahorse Hospitals Limited on March 21, 1995 and to its current name with effect from October 24, 2008

Name KMC Speciality Hospital (I) Limited Registered Office: No. 6, Royal Road

Cantonment Tiruchirappalli ‐ 620 001 Tamil Nadu, India Tel: +91‐431‐407 7777 Fax: +91‐431‐ +91‐431‐2415402 Website: www.kmcspecialityhospital.in

Company Identification Number L85110TN1982PLC009781 Address of Registrar of Companies Registrar of Companies, Tamil Nadu

Block No.6, B wing 2nd floor, Shastri bhawan 26, Haddows Road Chennai – 600034 Tamil Nadu, India Tel: +91 44 2827 7182 / 2676 Fax: +91 44 2823 4298 Website: www.mca.gov.in Email: [email protected]

2. Board of Directors: Our board comprises the following: Name of the Director Position CategoryMr. R. Mohan Chairman IndependentDr. S. Chandrakumar Managing Director ExecutiveDr. S. Manivannan Director Non‐Executive, Non‐Independent Dr. T. Senthilkumar Director Non‐Executive, Non‐Independent Mr. D. Selvaraj Director Non‐Executive, Non‐Independent Mr. A. Krishnamoorthy Director Non‐Executive, Non‐Independent CA S. Chenthilkumar Director IndependentMr. B. Pattabhiraman Director Independent

3. Composition of the Board The Chairman of the Board Mr. R. Mohan is an Independent Director. Dr. S. Chandrakumar is the Managing Director. Other than Managing Director, all the other directors are non‐executive. For further details regarding the Board of Directors please refer to the chapter titled “Our Management” beginning on page 62 of this Draft Letter of Offer.


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4. Company Secretary and Compliance Officer Our Company Secretary and Compliance Officer is Ms. N. Jayanthi. Her contact details are as follows:

Ms. N. Jayanthi KMC Speciality Hospitals (India) Limited No. 6, Royal Road, Cantonment Tiruchirappalli ‐ 620 001, Tamil Nadu Tel. No.: +91‐431‐407 7777 Fax No.: +91‐431‐241 5402 Email: [email protected] 5. Bankers to the Company

Punjab National Bank No, 7, Royal Road Cantonment Tiruchirappalli – 620 001 Tamil Nadu Tel No.: 0431 ‐2466563, 572 Fax No.: 0431‐2416581 Email id:[email protected] Website: www.pnbindia.com

Axis Bank Ltd. Thillai Nagar Branch 75/ E – 1, Salai Road Thillai Nagar Arch Tiruchirapalli – 620 018. Tel. No. : 0431 – 2769790, 791 Fax No.: 0431 ‐2769792 Email id: [email protected] Website: http://www.axisbank.com 6. Issue Management Team

a. Lead Manager

V. B. Desai Financial Services Ltd. Cama Building, 1st floor 24/26, Dalal Street Fort, Mumbai 400 001. Tel: +91‐22‐ 4077 0777 Fax: +91‐22‐4077 0700 Email: [email protected] Website: www.vbdesai.com Contact Person: Mr. K. K. Antoo SEBI Registration No.: INM000002731

b. Registrar to the Issue:

Cameo Corporate Services Ltd. Subramanian Building No.1 Club House Road Chennai ‐ 600 002. Tel: +91‐44‐2846 0390 Fax: +91‐44‐2846 0129 Email: [email protected] Website: http://www. www.cameoindia.com Contact Person: Mr. R.D. Ramasamy SEBI Registration No.: INR000003753


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c. Bankers to the Issue Name: Axis Bank Limited Building “M” Palm Court Complex, New Link Road, Malad (W), Mumbai‐400064 Tel. No.: +91‐22 61415400 Fax No.: +91‐22 61415444 Contact Person: Babu Gani Email: [email protected]

d. Self Certified Syndicate Banks The list of banks that have been notified by SEBI to act as SCSB for the ASBA Process is provided on http://www.sebi.gov.in/pmd/scsb.pdf. For details on designated branches of SCSBs collecting the ASBA Bid cum Application Form, please refer the above mentioned SEBI link.

e. Refund Bankers to the Issue

Name: Axis Bank Limited Building “M” Palm Court Complex, New Link Road, Malad (W), Mumbai‐400064 Tel. No.: +91‐22 61415400 Fax No.: +91‐22 61415444 Contact Person: Babu Gani Email: [email protected]

7. Auditors of the Company M/s Patel, Mohan, Ramesh & Co., Chartered Accountants Block II‐D, Kences Enclaves, Chari Street, T Nagar, Chennai – 600 017 Tel: +91‐ 44 28140525 Fax: +91‐ 44 65170748 E‐mail: [email protected]

8. Legal Advisors A.K.Mylsamy & Associates, L.L.P Attorney‐At‐Law No.61, T.T.K Road, Alwarpet, Chennai – 600 018 Tel: +91 ‐44 24991947; 24662036/37 Fax: +9 ‐ 44 24660134 E‐mail: [email protected]

9. Inter‐se Allocation of Responsibilities among lead Merchant Bankers

V B Desai Financial Services Limited is the sole Lead Manager for the Issue; it shall be responsible for and shall coordinate the activities in relation to the Issue In respect of certain post‐Issue activities to be handled by other intermediaries, the Lead Manager shall be responsible for ensuring that these agencies fulfill their functions and enable such agencies to discharge their responsibilities through suitable agreements with the Company.


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10. Credit Rating As this is an Issue of Equity Shares on rights basis to the existing shareholders, there is no requirement of credit rating for this Issue.

11. Experts

The Company has not obtained any expert opinions.

12. Debenture Trustees: As this is an Issue of Equity Shares, appointment of Trustees is not required.

13. Monitoring Agency:

As the size of the Issue does not exceed Rs. 50,000 lacs, appointment of a monitoring agency is not required.

14. Appraising Entity:

The Project has not been appraised by any entity.

15. Book building process

Not applicable

16. Underwriting/ Standby arrangements:

The present Issue is not underwritten. Neither our Company, Promoters, Directors of our Company, nor the Lead Manager to the Issue have entered into any buy‐back, standby or similar arrangements for any of the securities being issued through this Draft Letter of Offer.

Others Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre or post‐Issue related problems, such as non‐receipt of letters of allotment, share certificates, credit of allotted Equity Shares in the respective beneficiary account and refund orders. All grievances relating to the ASBA process may be addressed to the Registrar to the Issue, with a copy to the SCSBs, giving full details such as name, address of the applicant, number of Equity Shares applied for, Bid Amount blocked, ASBA Account number and the Designated Branch of the SCSBs where the ASBA Form was submitted by the ASBA Bidders. For all Issue related queries and for redressal of complaints, investors may also write to the LM. All complaints, queries or comments received by SEBI shall be forwarded to the LM, who shall respond to the same.

Minimum Subscription:

If the Company does not receive the minimum subscription of 90% of the Issue, or the subscription level falls below 90%, after the Issue Closing Date on account of cheques being returned unpaid or withdrawal of applications, the Company shall refund the entire subscription amount received within 15 days from the Issue Closing Date. If there is delay in the refund of the subscription amount by more than eight days after the Company becomes liable to pay the subscription amount (i.e.,15 days after the Issue Closing Date), the Company will pay interest for the delayed period, as prescribed under sub‐sections (2) and (2A) of Section 73 of the Companies Act.


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C. CAPITAL STRUCTURE The share capital of the Company as at the date of filing this Draft Letter of Offer with SEBI (before and after the Issue) is set forth below.

Number of Shares

Nominal Value (Rs.)

Aggregate Value (Rs.)

Authorised Capital 25,00,00,000 Equity Shares of Rs. 1/‐ each 25,00,00,000 25,00,00,000 Issued, Subscribed and Paid‐up Capital 1,25,45,000 Equity Shares of Rs. 1/‐ each fully paid up. 1,25,45,000 1,25,45,000 Equity Capital after the Issue 16,30,85,000 Equity Shares of Rs. 1/‐ each 16,30,85,000 16,30,85,000 Securities Premium Account Before the Issue Nil Nil After the Issue Nil Nil

i. The Issue has been authorised by the Board of Directors in their meeting held on January 21, 2010 under

section 81 of the Companies Act.

ii. All the existing shares are fully paid up.

iii. The equity shareholders do not hold any warrant, option or convertible loan or any debenture, which would entitle them to acquire further equity shares

iv. We have not issued any Equity Shares for consideration other than cash or out of revaluation reserves except as under: a. 15927 Equity Shares of Rs. 100 each issued on 21.06.1989 for consideration other than cash. On split of

Face Value of Rs.100/‐ per Equity Share to Face Value of Rs. 10/‐ per Equity Share, the Company allotted 159270 Equity Shares of Rs 10 each on 05.02.1990.

b. 100000 Equity Shares issued on 07.04.1990 for consideration other than cash.

For more details, please refer the section titled “Build up of existing Equity Share Capital” as given below

v. The Face Value of Equity Share of the company was reduced from Rs. 10/‐ per share to Re. 1/‐ per share by way of a Petition for Capital Reduction approved by the Honb’le High Court, Chennai vide it Order dated November 24, 2009 and the said Order has been registered by the Registrar of Companies on December 15, 2009.

Notes to the Capital Structure 1. Build up of existing Equity Share Capital

Date of Allotment

Number of Equity Shares

Face Value (Rs.)

Issue price per share (Rs.)

Consideration (cash, bonus, consideration other than cash)

Reasons for allotment / forfeiture

Cumulative paid‐up capital (Rs.)

31.12.1982 180 100 100 Cash Subscribers to MOA 1800030.09.1983 1442 100 100 Cash Allotment to ex‐promoters

friends & relatives 162200

07.01.1984 320 100 100 Cash Allotment to ex‐promoters friends & relatives

194200


218000

14.01.1988 20 100 100 Cash Allotment to ex‐promoters 22000004.07.1988 20 100 100 Cash Allotment to ex‐promoters 22200015.12.1988 14465 100 100 Cash Allotment to ex‐promoters


31.03.1989 2640 100 100 Cash Allotment to ex‐promoters 1932500


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friends & relatives12.01.1989 3880 100 100 Cash Allotment to ex‐promoters


21.06.1989 15927 100 100 Consider other than cash

Allotment to ex‐promoter ‐10000 Equity Shares issued against Equipments, Furniture ‐ 5000 shares issued towards pre operative expenses ‐ 927 shares issued against lease rentals for the period from 01/09/88 To June 1989

3913200


6161000


7620800

05.02.1990 762080 10 10 Consideration other than cash

Split of shares from FV of Rs. 100/ to FV of Rs. 10/‐ each

7620800


17000000


18000000


Allotment to ex‐promoter for purchase of building in which diagonistic centre situated

19000000

30.06.1990 800000 10 10 Cash Allotment of FIs 2700000018.12.1990 500000 10 10 Cash Allotment of FIs 3200000001.07.1991 100000 10 10 Cash Allotment of FIs 3300000027.05.1992 1090000 10 10 Cash Allotment FIs 4390000009.09.1992 8155000 10 10 Cash Allotment in IPO 12545000015.12.2009 12545000 10 10 Considerati

on other than cash

Capital reduction pursuant to Order of Madras High Court dated 24.11.2009

12545000

2. Details of Shares issued for consideration other than cash

Date of Allotment

Number of Equity Shares

Face Value (Rs.)

Issue price per share (Rs.)

Consideration (cash, bonus, consideration other than cash)

Reasons for allotment / forfeiture

Cumulative Shares

21.06.1989 15927 100 100 Consider other than cash

Allotment to Dr. P. S. Mahadevan, the ex‐promoter ‐10000 Equity Shares issued against Equipments, Furniture ‐ 5000 shares issued towards pre operative expenses ‐ 927 shares issued against lease rentals for the period from 01/09/88 to June 1989

15927


Split of shares from FV of Rs. 100/ to FV of Rs. 10/‐ each

1592700


Allotment to Dr.P. S. Mahadevan, ex‐promoter for purchase of building in which diagonistic centre situated

2592700


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3. We have not allotted Equity Shares in terms of any scheme approved under section 391‐394 of the Companies Act, 1956.

4. Our Company does not have any revaluation reserves and has not issued any bonus shares out of revaluation

reserves. 5. Our Company does not have any Employees Stock Option Scheme and has not issued any shares under any such

scheme. 6. We have not issued any shares at a price lower than the issue price during the preceding year.

7. There will be no further issue of Equity Shares, whether by way of issue of bonus shares, preferential allotment,

and rights issue or in any other manner during the period commencing from submission of the Draft Letter of Offer with SEBI until the Equity Shares have been listed.

8. The Company presently does not intend or propose to alter the capital structure for a period of six months from

the Issue Opening Date, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise. However, during such period or at a later date, we may issue Equity Shares or securities linked to Equity Shares to finance an acquisition, merger or joint venture by us or as consideration for such acquisition, merger or joint venture, or for regulatory compliance or such other scheme of arrangement if an opportunity of such nature is determined by our Board to be in our interest.

9. Buildup of Promoters Shareholding:

Sr. No.

Name of Promoter Date of intimation of Transfer

Nature of Consideration

No. of Shares Face Value (Rs.)

Cost of acquisition (Rs. per share)

1. Sri Kavery Medical Care (Trichy) Ltd.

12.07.2008 Cash 4261935 10 9.08


12.07.2008 Cash 740210 10 10


30.04.2009 Cash 100 10 10

Total 5002245 10. Shareholding of the Promoter Group in the Company:

The shareholding of the Promoter Group and directors of the Promoters in the Company as on the date of Draft Letter of Offer is as provided below:

Name of Shareholder Number of equity share Percentage of

Shareholding Sri Kavery Medical Care (Trichy) Ltd. 5002245 39.87% Total 5002245 39.87%

11. The Promoter Group and/or by the directors of the Company which is a Promoter of the Issuer and/or by the

directors of the Issuer and their immediate relatives have not purchased or sold any Equity Shares during a period of six months preceding the date on which this Draft Letter of Offer is filed with SEBI.

12. The present Issue being a rights issue, as per Regulation34(c) of the SEBI (ICDR) Regulations, 2009 the

requirement of promoters’ contribution and lock‐in are not applicable. 13. Our Company, the Directors, the Promoters, the Promoter Group, their respective directors and the LM have not

entered into any buy‐back and/or standby safety net arrangements for purchase of Equity Shares from any person.


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14. The Equity Shares being offered in this Issue will be fully paid up at the time of Allotment. 15. None of our Directors or Key Management Personnel hold Equity Shares in the Company, except as stated in the

section titled “Our Management” beginning on page 62 of this Draft Letter of Offer 16. Shareholding pattern of the Company

The list of top ten shareholders of the Company and the number of Equity Shares held by them is as under: a.) The top ten shareholders of the Company as of the date of filing of this Draft Letter of Offer are as follows

Name of Shareholders Number of Equity Shares

Percentage Shareholding

Sri Kavery Medical Care (Trichy) Ltd. 5002245 39.87%Hitesh Ramji Javeri 108000 0.86%Shriram Indl. Hold. Pvt. Ltd. 50000 0.40%Interlink Securities Pvt. Ltd. 33300 0.27%Narayan Jayaram Somaiya 25500 0.20%Unimate Financial Services Ltd. 24900 0.20%Santosh Kumar Jain 22300 0.18%Chandra SRK 22000 0.18%Wizkids Finance Ltd. 18400 0.15%Ravindran TC 16000 0.13%

b.) The top ten shareholders of the Company as on June 14, 2010 (i.e. 10 days prior to filing this Draft Letter of Offer) are as follows:



Sri Kavery Medical Care (Trichy) Ltd. 5002245 39.87%Hitesh Ramji Javeri 106700 0.85%Shriram Indl. Hold. Pvt. Ltd. 50000 0.40%Interlink Securities Pvt. Ltd. 33300 0.27%Bharati Anil Pawani 25500 0.20%Unimate Financial Services Ltd. 24900 0.20%Santosh Kumar Jain 22300 0.18%Chandra SRK 22000 0.18%Wizkids Finance Ltd. 18400 0.15%Ravindran TC 16000 0.13%

deepak

Highlight

deepak

Highlight

deepak

Highlight


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c.) The top ten shareholders of the Company as on June 24, 2008 (i.e., two years prior to filing this Draft Letter of Offer) were as follows:



Seahorse India Pvt. Ltd. 3851685 30.70Seahorse Ship Agencies Pvt. Ltd. 154400 1.23Ashok Kirtanlal Gandhi 125450 1.00Hitesh Ramji Javeri 106700 0.85Ashoni Financial Services Pvt. Ltd. 101500 0.80Kothari Sugar & Chemicals Ltd. 70000 0.56Mahadevan P. S. 50000 0.40Shriram Indl Hold. Pvt. Ltd. 50000 0.40Interlink Securities Pvt. Ltd. 33300 0.27Seshadri Raju 31800 0.25

17. As of the date of this Draft Letter of Offer, the LMs and its associates do not hold any Equity Shares in the

Company.

18. The details of changes in the authorised share capital of our company after the date of incorporation till the filing of this letter of offer have been set out below

Date of passing the resolution

Amendment

15.07.1988 The authorised share capital of the Company of Rs. 5,00,000 divided into 5000 Equity Shares of Rs. 100 was increased to Rs. 4,00,00,000 divided into 300000 Equity Shares of Rs. 100 each and 100000 12.5% cumulative preference shares of Rs. 100 each

03.03.1990 The authorised share capital of the Company of Rs. 4,00,00,000 divided into 300000 Equity Shares of Rs. 100 each and 100000 12.5% cumulative preference shares of Rs. 100 each was reclassified to Rs. 4,00,00,000 divided into 4000000 equity shares of Rs. 10 each

28.09.1991 The authorised share capital of the Company of Rs. 7,50,00,000 divided into 7500000 Equity Shares of Rs. 10 was increased to Rs. 15,00,00,000 divided into 15000000 Equity Shares of Rs. 10 each

24.12.1994 The authorised share capital of the Company of Rs. 15,00,00,000 divided into 15000000 Equity Shares of Rs. 10 each was increased to Rs. 25,00,00,000 divided into 2,50,00,000 Equity Shares of Rs. 10 each

25.09.2009 The authorized share capital of the company of Rs. 25,00,00,000 divided into 2,50,00,000 equity shares of Rs. 10 each was restated to Rs. 25,00,00,000 divided into 25,00,00,000 equity shares of Rs. 1 each and confirmed by way of High Court Order for Capital Reduction dated November 24, 2009 registered at the ROC and confirmed vide its letter dated December 15, 2009.

19. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law. We shall comply

with such disclosure and accounting norms as may be specified by SEBI from time to time.

20. The issue will remain open for a minimum of 15 days. However, the Board of Directors will have the right to extend the Issue period as it may determine from time to time but not exceeding 30 days from the Issue Opening Date.


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21. The Company has not raised any bridge loans against the proceeds of the Issue. For details on use of proceeds, see the section titled “Objects of the Issue” on page 37 of this Draft Letter of Offer.

22. The Company, Directors, Promoters or Promoter Group shall not make any payments, direct or indirect, discounts, commissions, allowances or otherwise under this Issue, except as disclosed in this Draft Letter of Offer.

23. The Company has not made a public offering of its Equity Shares in the immediately preceding two years from

the date of filing of this Draft Letter of Offer.

24. In the event of Oversubscription, an extent of 10% of the net offer to the public can be retained for the purpose of rounding off to the nearer multiple of minimum allotment lot.


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25. Pre and Post Issue

The table below presents the shareholding pattern of Equity Shares before the proposed Issue and as adjusted for the Issue as per the format prescribed in Clause 35 of the Listing Agreement: Category Code

Category of Shareholder

(A) Shareholding of Promoter and Promoter Group

(1) Indian

Bodies Corporate 5,002,245 39.87 60,026,940 39.87 65,029,185.00 39.87

Sub Total 5,002,245 39.87 60,026,940 39.87 65,029,185.00 39.87

(2) Foreign

Total shareholding of Promoter and Promoter Group (A) 5,002,245 39.87 60,026,940 39.87 65,029,185.00 39.87

(B) Public Shareholding

(1) Institutions

Mutual Funds / UTI 900 0.01 10,800 0.01 11,700.00 0.01

Sub Total 900 0.01 10,800 0.01 11,700.00 0.01

(2) Non‐Institutions

Bodies Corporate 167,500 1.34 2,010,000 1.34 2,177,500.00 1.34

Individuals

Individual shareholders holding nominal share capital up to Rs. 1 lakh 6,496,655 51.79 77,959,860 51.79 84,456,515.00 51.79

Any Others (Specify) 877,700 7 10,532,400 7 11,410,100.00 7

Non Resident Indians 877,600 7 10,531,200 7 11,408,800.00 7

Hindu Undivided Families 100 ‐ 1,200 ‐ 1,300.00 ‐

Sub Total 7,541,855 60.12 90,502,260 60.12 98,044,115.00 60.12

Total Public shareholding (B) 7,542,755 60.13 90,513,060 60.13 98,055,815.00 60.13

Total (A)+(B) 12,545,000 100 150,540,000 100 163,085,000.00 100

(C) Shares held by Custodians and against which Depository Receipts have been issued

‐ ‐ ‐ ‐ ‐

Total (A)+(B)+(C) 12,545,000 ‐ 150,540,000 100 163,085,000.00 100

Post Right IssueProposed Right Issue

Total No. of Shares

As a % of (A+B+C)

Total No. of Shares As a % of

(A+B+C)

Total No. of Shares

Pre Issue holding *

As a % of (A+B+C)

*As per share holding pattern as on March 31, 2010

26. The effective price of the promoter’s shareholding as on the date of this Draft Letter of Offer is Rs 9.22. 27. None of the Directors or key management personnel holds Equity Shares in the Company except as stated in the

section titled “Our Management” on page 62 of this Draft Letter of Offer.

28. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor.

29. As on March 31, 2010 the total number of holders of the Equity Shares was 50390.

30. Since Inception our Company has not made any bonus issue of Equity Shares.

31. As per the RBI regulations, OCBs are not allowed to participate in the Issue.

32. The Equity Shares held by the Promoters are not subject to any pledge.

33. There have been no purchases or sale of Company’s shares by promoters and promoter group in the last one year

immediately preceding the date of filing the Draft letter of offer with the designated stock exchange, the date of filing draft Draft letter of offer with the Board.

34. The intention and extent of participation by promoters and promoter group in the issue with respect to:


36

A. their rights entitlement

The Promoters have confirmed that they intend to subscribe to the full extent of their entitlement in the Issue subject to the compliance with the takeover code.

B. the unsubscribed portion over and above their rights entitlement

The Promoter has confirmed that they intend to subscribe to the full extent of their Rights entitlement in the Issue. Subject to compliance with the Take Over Code, the Promoter reserve their right to subscribe for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholders. The Promoter has provided an undertaking dated June 23, 2010 to our Company to apply for additional Equity Shares in the Issue, to the extent of the unsubscribed portion of the Issue As a result of this subscription and consequent allotment, the Promoter may acquire Equity Shares over and above their entitlement in the Issue, which may result in their shareholding in the Company being above their current shareholding with the Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by the Promoter through this issue, if any, will not result in change of control of the management of the Company and shall be exempt in terms of provision to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The Promoter have confirmed that in case the Rights Issue of the Company is completed with their subscribing to equity shares over and above their entitlement and as a result, if the public shareholding in the Company after the Issue falls below the permissible minimum level as specified in the listing condition or listing agreement, they will undertake to maintain the minimum public shareholding in such manner and within such period as specified in Clause 40A of the Listing Agreement.

35. Details of the shareholders holding more than one per cent. of the share capital of the issuer:

As on date of filing the Draft Letter of Offer, there are no public shareholders who hold more than 1% of the paid up capital of the issuer.


37

SECTION IV: PARTICULARS OF THE ISSUE OBJECTS OF THE ISSUE A. The objects of the Issue are:

• To fund the Renovation and Civil construction of the hospital building • Equipments • Repayment of loans • General corporate purposes • Issue Expenses

The main object clause of our Memorandum of Association and objects incidental to the main objects enable us to undertake our existing activities and the activities for which funds are being raised by us through this Issue. Details of the Objects 1.) Renovation and construction cost As per management estimates, the Renovation and construction cost for the Hospital is Rs. 153.30 lacs. Floor wise renovation cost is set forth in the following table:

(Rs. in Lacs)

Sr.No. Particulars Amount

1 Ground Floor 26.39

2 First Floor 19.32

3 Second Floor 16.57

4 Third Floor 32.03

5 Fourth Floor ‐‐

6 Fifth Floor 17.06

7 Sixth Floor 41.93

Total 153.30 2.) Equipments We need to invest in capital equipment on a recurring basis to further fund our expansion and provide value‐added services to our customers. We believe that such investments in suitable equipment will give us the ability to further integrate our business and enable us to broaden the scope and quality of our services and increase our market presence. We intend to utilize Rs. 100 lacs from the Net Proceeds of this Issue to invest in the development of our existing hospital facilities in the following manner:

(Rs. in Lacs) Sr. No. Particulars of Medical Equipment Name of the Supplier Amount

1 ECCP Siliconlabs Pvt. Ltd. 7.00

2 C‐Arm Machine Siemens Ltd. 35.00

3 Airconditioning, Air Handling AHU Voltas Ltd. 54.35

4 Hospital Furnitures Steri ‐ Clean 7.50

Total 103.85

The outlay in relation to our investments to develop facilities at our hospital has been estimated based on pro forma invoices/ quotations received from various parties and management estimates. We have not entered into any contracts in relation to the estimated amount to be deployed. Our Company has obtained quotations from suppliers in relation to the purchase of the above equipment and related infrastructure. 3.) Utilize the funds for Repayment of loans Our Company has entered into financing arrangements with our Promoter. In order to reduce the leverage and allow flexibility in financial management of our business and operations we intend to utilize up to Rs. 1175.00 Lacs, or 78 % of the Net Proceeds, towards repayment of our outstanding loans.


38

Company had utilised the loan amounts for renovation, procurement of equipments and working capital requirements. Our Company will give preference to repaying high cost debt/advance in order to reduce the interest burden and enhance the equity capital necessary for sustenance of operations. In addition to the above, we may, from time to time, enter into further financing arrangements and draw down funds there under. The Company requires funds on a regular basis for its business operations, capital expenditure, investments and towards its other general corporate and working capital requirements. The Company meets such fund requirements from internal accruals and/or by availing various loans and facilities as may be deemed suitable by the Company. 4.) To meet the Expenses of the Issue The Issue expenses includes the expenses for the current rights Issue inter‐alia including management fees, printing and distribution expenses, legal fees, statutory advertisement expenses and listing fees payable to the stock exchanges, among others. The total issue expenses are estimated to be approximately 3.32% of the total proceeds of this rights issue. The total expenses for this Issue are estimated not to exceed Rs. 50 Lacs. A broad breakup of the same is as under: B. Requirements of Funds The following table summarises the requirement of funds:

(Rs. In Lacs) Sr. No. Particulars Amount

1. Renovation and civil construction 153.002. Equipments 103.853. Repayment of loans/general corporate purposes 1175.004. General corporate purposes 23.555. To meet the expenses of the Issue 50.00 Total 1505.40

C. Funding Plans (Means of Finance)

The details of the proceeds of the Issue are summarized in the table below:

(Rs. In Lacs) Sr. No. Particulars Amount

1. Rights Issue 1505.40 Total 1505.40

D. Appraisal The above fund requirements are based on internal management estimates and have not been appraised by any bank or financial institution. These are based on current conditions and are subject to change in light of changes in external circumstances or costs, or other financial condition, business or strategy, as discussed further below. The fund requirements are based on the current internal management estimates of our Company. We operate in a highly competitive, dynamic industry, and may have to revise our estimates from time to time on account of particular purpose in relation to current plans. Any change in our plans may require rescheduling of our expenditure programs, starting projects which are not currently planned and an increase or decrease in the expenditure for a renovation and construction or particular purpose in relation to current plans, at the discretion of the management of the Company. In case of any shortfall or cost overruns, we intend to meet our estimated expenditure from our cash flow from operations or debt or further issue of shares. The entire requirement of funds as set out above will be met through the Net Proceeds.

E. Schedule of Implementation Barring unforeseen circumstances, our Company will utilize the funds over a period of time but before the end of March 31, 2011.


39

F. Deployment of Funds

Since our company is not raising capital for a project particulars under this para are not applicable. Funds deployed towards objects of the issue as on March 31, 2010

Particulars

Details of Use Amount (Rs. in Lacs) Source

Funds deployed towards objects of the issue as on March 31, 2010

Issue expense 3.75 Own fund

G. Sources of Financing of Funds Already Deployed

The Company has not availed of any bridge loan to be repaid from the Net Proceeds. H. Deployment of Balance Fund

Please refer para relating to schedule of Implementation on Page 38 of this Dart Letter Offer

I. Interim Use of Proceeds

The management of the Company, in accordance with the policies set up by the Board, will have flexibility in deploying the Net Proceeds. Pending utilization for the purposes described above, the Company intends to temporarily invest the funds in interest bearing liquid investments and instruments, including money market mutual funds and deposits with banks. Such investments will be in accordance with investment policies approved by the Board from time to time. The Company confirms that pending utilization of the Net Proceeds; it shall not invest the Net Proceeds in the equity market.

J. Basic Terms of the Issue Please refer the ‘Terms of Issue’ titled under section “Offering Information” on Page 130 of this Draft Letter of Offer

K. Basis for Issue Price

The Issue Price of Re. 1/‐ per share has been determined by the Company in consultation with the LM and on the basis of assessment of market demand from the shareholders for the offered Equity Shares by way of Rights Issue. The face value of the Equity Shares is Re. 1 and the Issue price is 1 time of the face value. Investors should also refer to the sections titled “Risk Factors” and “Financial Information” on page 10 and 78 of this Draft Letter of Offer. Qualitative Factors • Established Brand Name; • Business Development Model; • Execution Methodology; • Emphasis on Innovation; • Qualified and Skilled Employee Base For more details on qualitative factors, refer to section titled “Business Overview” beginning on page 53 of this Draft Letter of Offer.

Quantitative Factors Information presented in this section is derived from our restated financial statements prepared in accordance with Indian GAAP.

Some of the quantitative factors which may form the basis for computing the Issue Price are as follows:


40

a.) Earning Per Share (EPS): Fiscal year ended March 31 Weights EPS (Rs.)

2008 1 (2.46)2009 2 0.892010* 3 (0.36)

Weighted Average EPS (0.29) *EPS on FV of Re.1/‐ each b.) Price Earning Ratio (P/E) at issue price of Re.1/‐

Sr. No.

Particulars P/E Ratio

1 P/E (based on EPS on March 31, 2010) N. A.2 P/E (based on weighted average EPS) N. A.

c.) Industry P/E

Particulars P/E RatioIndustry P/E 26.10Highest 156.67Lowest 12.90Average 44.22Source: Capital Market Vol.XXV/08 June 14‐27, 2010

d.) Average return on net worth

Year Weights RONW (%) Year ended March 31, 2008 1 (65.90) Year ended March 31, 2009 2 (191.46) Year ended March 31, 2010 3 (125.27) Weighted Average return on net worth (137.44)

e.) Minimum Return on increased net worth required to maintain pre‐issue EPS of Rs. (0.36) is N. A. % at Issue

Price of Re. 1/

f.) Net Asset Value (NAV) per share (Rs.)

Pre issue as on March 31, 2010 Re. 0.88Post Rights Issue (Assuming 100% Subscription) Re. 0.99Issue Price Re. 1

g.) Comparison of key ratios with the companies in the same industry group

Company EPS P/E RONW (%) NAV (RS.) FACE VALUE Apollo Hospitals Enterprise Ltd. 24.60 31.50 9.10% 249.60 10 Fortis Healthcare Ltd. 0.90 156.67 ‐‐% 53.30 10 Indraprastha Medical Corp. Ltd. 3.40 12.90 20.30% 14.80 10 Kovai Medical Center & Hospital Ltd. 10.60 12.90 26.00% 27.70 10 Regency Hospital Ltd. 0.60 34.90 30.20% 25.10 10 Fortis Malar Hospitals Ltd. 1.90 16.50 ‐‐% 15.00 10


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Monitoring Utilization of Funds As this is an Issue for less than Rs. 5,000 million, there is no need for an appointment of a monitoring agency. Our Board will monitor the utilization of the Net Proceeds, through its Audit Committee. We will disclose the details of the utilization of the Issue proceeds under a separate head in our financial statements until fiscal 2011, specifying the purpose for which the Net Proceeds have been utilized as per the disclosure requirements of our listing agreements with the Stock Exchanges and in particular clause 49 of the Listing Agreement. As per the requirements of clause 49 of the Listing Agreement, we will disclose to the Audit Committee the uses/applications of funds on a quarterly basis as part of our quarterly declaration of results. Further, on an annual basis, we shall prepare a statement of funds utilized for purposes other than those stated in this Draft Letter of offer and place it before the Audit Committee. The said disclosure shall be made until such time that the money raised through the Issue has been fully spent. The statement shall be certified by Auditors. Further, we will furnish to the Stock Exchanges on a quarterly basis, a statement indicating material deviations, if any, in the use of proceeds from the objects stated in this Draft Letter of Offer. No part of the proceeds from the Net Issue will be paid by us as consideration to our Promoters, our Directors, Group Entities, associates or key managerial employees, except in the normal course of our business. Where share application money brought in advance by the promoters is deployed in the project and the same is being adjusted towards their rights entitlement in the rights issue, the extent of deployment and utilisation of the funds brought in by the promoters shall be disclosed in the Annual Report for the year 2011.


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L. Statement of Tax Benefits

Statement of Possible Tax Benefits available to the Company and its shareholders

Auditor’s Report The Board of Directors KMC Speciality Hospitals (India) Limited (formerly Sea Horse Hospital Limited) 6, Royal Road, Cantonment, Trichy‐620 001 India Dear Sirs, We hereby report that the enclosed statement states the possible tax benefits available to the Company and to the shareholders of the Company under the Income Tax Act, 1961 and Wealth Tax Act, 1957, presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon their fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill. The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the proposed rights issue of equity shares of Re. 1 each on rights basis (referred to as “the Issue”). We do not express any opinion or provide any assurance as to whether: i) the Company or its share holders will continue to obtain these benefits in future; or ii) the conditions prescribed for availing the benefits have been / would be met with. The contents of the enclosed statement are based on information, explanations and representations obtained from the management of the Company which are based on their understanding of the business activities and operations and our interpretation of the current tax laws in force in India. For Patel Mohan Ramesh & Co. Chartered Accountants S.Mohan Partner Membership No. 019695 Place: Trichy Date: 21.06.2010


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STATEMENT OF TAX BENEFITS

The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of these benefits are dependent on the Company or its Shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its Shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives it faces in the future, it may not choose to fulfill. The following tax benefits shall be available to the Company and the prospective shareholders under Direct Tax. 1. To the Company ‐ Under the Income‐tax Act, 1961 (‘the Act’) 1.1 Special Tax Benefits

1.1.1 Under section 80 IB (11C) of the Act (effective from Assessment Year AY 2009‐2010), profits of an

undertakings deriving profits from the business of operating and maintaining a newly constructed hospital with a minimum capacity of 100 beds, located anywhere in India (other than the specified excluded area), is eligible for 100% deduction for initial five consecutive assessment years, if such hospital is constructed and has started or starts functioning at anytime during the period beginning on April 1, 2008 and ending on March 31, 2013 and subject to satisfaction of other conditions specified in that section. However, section 80AC of the Act provides that no deduction under section 80‐IB of the Act shall be allowed if the return is not filed on or before the due date specified under section 139(1) of the Act. From AY 2003‐2004 onwards, no deduction under section 80‐IB of the Act shall be allowed where the assessee fails to make a claim in its return of income.

1.1.2 Under section 80 IE of the Act (effective from AY 2008‐2009), profits of an undertakings deriving profits from

the eligible business specified in sub‐section (7) of section 80‐IE of the Act which includes providing medical and health services in the nature of nursing home with a minimum capacity of 25 beds in any of the North‐Eastern States, is eligible for 100% deduction for initial ten consecutive assessment years, if such undertaking has begun or begins to carry on such eligible business during the period beginning April 1, 2007 and ending before April 1, 2017 and subject to satisfaction of conditions specified in that section. However, as per section 80AC of the Act, no deduction under section 80‐IE of the Act shall be allowed if the return is not filed on or before the due date specified under section 139(1) of the Act. From AY 2003‐2004 onwards, no deduction under section 80‐IB of the Act shall be allowed where the assessee fails to make a claim in its return of income.

1.1.3 Under section 35 AD of the Act (effective from AY 2010‐2011), undertakings, building and operating

anywhere in India, a new hospital with at least 100 beds for patients is eligible for 100% deduction of capital expenditure incurred wholly and exclusively for such purpose subject to satisfaction of conditions specified in that section. However, where an undertaking claims deduction under this section, no deduction in respect of such expenditure shall be allowed to the assessee under any other provisions of the Act (including 80 IB and 80 IE as aforesaid).

1.2 General Tax Benefits

1.2.1 Under section 10(34) of the Act, any income by way of dividends referred to in Section 115O (i.e. dividends

declared, distributed or paid on or after April 1, 2003 by domestic companies) received on the shares of any domestic company is exempt from tax.

1.2.2 Under section 10(35) of the Act, any income by way of income received in respect of the units of a Mutual

Fund specified in section 10(23D) of the Act; or in respect of units from the Administrator of the specified undertaking; or in respect of units from the specified company as defined in Explanation to section 10(35) of the Act is exempt from tax.

1.2.3 Under Section 10(38) of the Act, long term capital gains arising from transfer of a long term capital asset

being an equity share in the company or a unit of an equity oriented fund entered into in a recognized stock exchange in India and being such a transaction, which is chargeable to Securities Transaction Tax, shall be


44

exempt from tax. However, from AY 2007‐2008 onwards, long term capital gains of a company shall be taken into account in computing the book profit and the tax payable thereon under section 115JB of the Act.

1.2.4 Under Section 32(1) of the Act, the Company can claim depreciation allowance at the prescribed rates on

tangible assets such as building, plant and machinery, furniture and fixtures, etc and intangible assets such as patent, trademark, copyright, know‐how, licenses, etc, if such intangible assets are acquired after March 31, 1998.

1.2.5 Under section 32(2) of the Act, where full effect cannot be given to any depreciation allowance under section

32(1) of the Act in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than depreciation allowance, then, subject to the provisions of section 72(2), depreciation allowance or the part of depreciation allowance to which effect has not been given, as the case may be, shall be added to the amount of the depreciation allowance for the following previous year and deemed to be part of that depreciation allowance, or if there is no such depreciation allowance for that previous year, be deemed to be the depreciation allowance for that previous year, and so on for the succeeding previous years.

1.2.6 Under section 72(1) of the Act, where for any assessment year, the net result of the computation under the

head “ Profits & Gains of Business or Profession” is a loss to the company, not being loss sustained in a speculation business, and such loss cannot be and is not wholly set off against income from any other head of income (other than salary) for the same year, the same shall be eligible to be carried forward; and such loss carried forward shall be available for set off against income from business under head “Profits & Gains of Business or Profession” in subsequent years. As per section 72(3) of the Act, the loss carried forward can be set off subject to a limit of 8 assessment years immediately succeeding the assessment year for which the loss was first computed. However, as per section 80 of the Act, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139(3) of the Act, shall be carried forward and set off under section 72(1) of the Act.

1.2.7 In terms of Section 115JAA (1A) of the Act tax credit shall be allowed for any Assessment Year commencing

on or after April 1, 2006. Credit eligible for carry forward is the difference between Minimum Alternate Tax (‘MAT’) paid and the tax computed as per the normal provisions of the Act. The credit is available for set off only when tax becomes payable under the normal provisions and that tax credit can be utilized to set‐off any tax payable under the normal provisions in excess of MAT payable for that relevant year. MAT credit in respect of MAT paid prior to AY 2007‐08 shall be available for setoff upto 5 years succeeding the year in which the MAT credit initially arose. However, from AY 2007‐ 2008 onwards, MAT credit for MAT paid for AY 2006‐07 or thereafter shall be available for set‐off upto 7 years succeeding the year in which the MAT credit initially arose. From AY 2010‐2011, MAT rate has been increased from 10% to 15%. However, from AY 2010‐2011, MAT credit for MAT paid for AY 2006‐07 or thereafter shall be available for set‐off upto 10 years succeeding the year in which the MAT credit initially arose.

1.2.8 Presently, every employer being a person other than an individual is required to pay Fringe Benefits Tax

(‘FBT’) at the rate 30% (plus applicable surcharge and education cess) on the value of fringe benefits. However, from AY 2010‐2011, the levy of FBT shall stand withdrawn.

2. To the Members of the Company – Under the Income Tax Act, 1961 2.1 General Tax Benefits 2.1.1 Resident Members

a. Under Section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section 115‐O of the Act is exempt from income‐tax in the hands of the shareholders.

b. Under Section 10(38) of the Act, long term capital gain arising to the shareholder from transfer of a long term

capital asset being an equity share in the company (i.e. capital asset held for the period of more than twelve months) entered into in a recognized stock exchange in India and being such a transaction, which is chargeable to Securities Transaction Tax, shall be exempt from tax. However, from AY 2007‐2008 onwards, long term capital gains of a company shall be taken into account in computing the book profit (in case of companies) and the tax payable thereon under section 115JB.


45

c. In terms of Section 88E of the Act, the Securities Transaction Tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of the business would be eligible for rebate from the amount of income‐tax (as computed in prescribed manner) on the income chargeable under the head ‘Profits and Gains under Business or Profession’ arising from taxable securities transactions. From AY 2010‐11 onward the said securities transaction tax would be allowed as deduction in computing the profits & gains from business or profession.

d. As per the provisions of Section 10(23D) of the Act, all mutual funds set up by public sector banks, public

financial institutions or mutual funds registered under the Securities and Exchange Board of India (‘SEBI’) or authorized by the Reserve Bank of India (‘RBI’) are eligible for exemption from income‐tax, subject to the conditions specified therein, on their entire income including income from investment in the shares of the company. From AY 2010‐2011, the expression “public sector banks” shall include “a bank included in the category ‘other public sector banks’ by the Reserve Bank of India”.

e. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets (other than those exempt under section 10(38)) shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds redeemable after three years and issued by –

i. National Highways Authority of India (‘NHAI’) constituted under Section 3 of National Highways Authority of India Act, 1988 and notified by the Central Government in the Official Gazette for the purpose of this section; or

ii. Rural Electrification Corporation Limited (‘RECL’), a company formed and registered under the Companies Act, 1956 and notified by the Central Government in the Official Gazette for the purpose of this section;

It is also provided that the investments made on or after April 1, 2007 in the above mentioned bonds is restricted to Rupees fifty lakhs during any financial year. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax as long term capital gain subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition.

f. Under Section 54F of the Act, where the assessee is an individual or Hindu Undivided Family (‘HUF’), capital

gain arising from transfer of long term assets (other than a residential house and those exempt under section 10(38) of the Act) shall be exempt, if the net sale consideration from such transfer is utilized for purchase of a residential house property within a period of one year before or two year after the date on which the transfer took place or for construction of a residential house property within a period of three years after the date of transfer subject to the conditions and to the extent specified therein. If only a part of the net consideration is so reinvested, the exemption shall be proportionately reduced.

g. Under Section 111A of the Act, capital gains arising from transfer of short term capital assets (i.e held for a period of less than 12 months), being an equity share in a company, which is subject to Securities Transaction Tax will be taxable at 15% from AY 2010‐11 onwards(plus applicable surcharge and educational cess). Levy of such surcharge shall be withdrawn on all the cases other than the companies effective April 1, 2009.

h. Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains (other than

those covered under Section 10(38) of the Act) arising on transfer of shares of the Company shall be taxed at a rate of 20% (plus applicable surcharge and educational cess on income‐tax) after indexation as provided in the second proviso to Section 48 or at 10% (plus applicable surcharge and educational cess on income tax) without indexation, at the option of the shareholders. Levy of such surcharge shall be withdrawn on all the cases other than the companies effective April 1, 2009.

2.1.2 Non Resident Indians/Members other than Foreign Institutional Investors and Foreign Venture Capital Investors

a. By virtue of Section 10(34) of the Act, income earned by way of dividend referred to in Section 115‐O of the Act (i.e. dividend income from a domestic company), is exempt from tax in the hands of the recipients.


46

b. Under Section 10(38) of the Act, long term capital gain arising to the shareholder from transfer of a long term capital asset being an equity share in the company or unit of an equity oriented mutual fund (i.e. capital asset held for the period of more than twelve months) entered into in a recognized stock exchange in India and being such a transaction, which is chargeable to Securities Transaction Tax, shall be exempt from tax.

c. In terms of Section 88E of the Act, the Securities Transaction Tax paid by the shareholder in respect of the

taxable securities transactions entered into in the course of the business would be eligible for rebate from the amount of income‐tax (as computed in prescribed manner) on the income chargeable under the head ‘Profits and Gains under Business or Profession’ arising from taxable securities transactions. From AY 2010‐11 onwards the said securities transaction tax would be allowed as deduction in computing the profits & gains from business or profession.

d. Under the first proviso to section 48 of the Act, in case of a non resident, in computing the capital gains

arising from transfer of shares of the Indian company acquired in convertible foreign exchange (as per exchange control regulations), protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case.

e. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets (other than those

exempt under section 10(38)) shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds redeemable after three years and issued by –

i. National Highways Authority of India (‘NHAI’) constituted under Section 3 of National Highways Authority of India Act, 1988 and notified by the Central Government in the Official Gazette for the purpose of this section; or

ii. Rural Electrification Corporation Limited (‘RECL’), a company formed and registered under the Companies Act, 1956 and notified by the Central Government in the Official Gazette for the purpose of this section;

It is also provided that the investments made on or after April 1, 2007 in the above mentioned bonds is restricted to Rupees fifty lakhs during any financial year. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax as long term capital gain subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition.

f. Under Section 54F of the Act, where the assessee is an individual or Hindu Undivided Family (‘HUF’), capital

gain arising from transfer of long term assets (other than a residential house and those exempt under section 10(38) of the Act) shall be exempt, if the net sale consideration from such transfer is utilized for purchase of a residential house property within a period of one year before or two year after the date on which the transfer took place or for construction of a residential house property within a period of three years after the date of transfer subject to the conditions and to the extent specified therein. If only a part of the net consideration is so reinvested, the exemption shall be proportionately reduced.

g. Under Section 111A of the Act, capital gains arising from transfer of short term capital assets (i.e held for a

period of less than 12 months), being an equity share in a company, which is subject to Securities Transaction Tax will be taxable at 15% from AY 2010‐11 onwards(plus applicable surcharge and educational cess). Levy of such surcharge shall be withdrawn on all the cases other than the companies effective April 1, 2009.

h. Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains (other than

those covered under Section 10(38) of the Act) arising on transfer of shares of the Company shall be taxed at a rate of 20% (plus applicable surcharge and educational cess on income‐tax) after indexation as provided in the second proviso to Section 48 or at 10% (plus applicable surcharge and educational cess on income tax) without indexation, at the option of the shareholders. Levy of such surcharge shall be withdrawn on all the cases other than the companies effective April 1, 2009.

i. Taxation of Income from investment and Long Term Capital Gains (other than those exempt under section

10(38)) i. A non‐resident Indian, i.e. an individual being a citizen of India or person of Indian origin who is not

a “resident”, has an option to be governed by the special provisions contained in Chapter XIIA of the


47

Act, i.e. “Special Provisions Relating to certain incomes of Non‐Residents” which are mentioned below in paragraphs (ii) to (v).

ii. Under Section 115E of the Act, where shares in the company are subscribed for in convertible Foreign Exchange by a non‐resident Indian, capital gains arising to the non resident on transfer of shares held for a period exceeding 12 months shall (in cases not covered under Section 10(38) of the Act) be taxed at a concessional rate of 10% (plus applicable surcharge and education cess) without indexation benefit but with protection against foreign exchange fluctuation under the first proviso to Section 48 of the Act. Levy of such surcharge and education cess shall be withdrawn on all the cases other than the companies effective April 1, 2009.

iii. Under provisions of section 115F of the Act, long term capital gains (not covered under section 10(38) of the Act) arising to a non‐resident Indian from the transfer of shares of the company subscribed to in convertible Foreign Exchange shall be exempt from income tax if the net consideration is reinvested in specified assets or specified savings certificates, within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted into money within three years from the date of their acquisition.

iv. Under provisions of Section 115G of the Act, it shall not be necessary for a non‐resident Indian to

furnish his return of income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from.

v. Under Section 115I of the Act, a non resident Indian may elect not to be governed by the provisions of Chapter XII‐A of the Act for any assessment year by furnishing his return of income under section 139 of the Act declaring therein that the provisions of the Chapter shall not apply to him for that assessment year and if he does so the provisions of this Chapter shall not apply to him. In such a case the tax on investment income and long term capital gains would be computed as per normal provisions of the Act.

3. To the Members of the Company‐ Under the Wealth Tax Act, 1957 Wealth Tax is applicable if the net wealth (as defined) of a company or an individual or HUF exceeds Rs. 15 Lakhs as on the valuation date (i.e. March 31 of the relevant financial year). Wealth Tax shall be charged in respect of the net wealth of every company or an individual or HUF at the rate of one percent of the amount by which net wealth exceeds Rs. 15 lakhs. From AY 2010‐2011, wealth Tax shall be charged in respect of the net wealth of every company or an individual or HUF at the rate of one percent of the amount by which net wealth exceeds Rs. 30 lakhs. Shares in a company held by a shareholder will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act; hence, wealth tax is not leviable on shares held in a company. Notes a) In respect of non‐residents, taxability of capital gains mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any between India and the country of which the non‐resident is a resident. b) In view of the individual nature of tax consequence, each investor is advised to consult his/ her own tax adviser with respect to specific tax consequences of his/ her participation in the scheme.


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SECTION V: ABOUT US (A) Industry Overview

The information in this section has not been independently verified by us, the Lead Manager or any of our or their respective affiliates or advisors. The information may not be consistent with other information compiled by third parties within or outside India. The information presented in this section has been obtained from publicly available documents from various sources, including industry websites/publications, Annual Reports and company estimates. Industry sources and publications generally state that the information contained therein has been obtained from sources it believes to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Industry publications are also prepared based on information as of specific dates and may no longer be current or reflect current trends. Industry sources and publications may also base their information on estimates, forecasts and assumptions which may prove to be incorrect. Accordingly, investment decisions should not be based on such information. Certain information contained herein pertaining to prior years is presented in the form of estimates as they appear in the respective reports/ source documents. The actual data for those years may vary significantly and materially from the estimates so contained.

Overview

Both the public sector and private sector deliver the healthcare sector in India. The public healthcare system consists of healthcare facilities run by central and state government which provide services free of cost or at a subsidized rates to low income group in rural and urban areas. With the Indian economy enjoying a steady growth, the industry is heading towards growth phase. The Indian healthcare industry is one of India’s largest sectors, in terms of revenue and employment and growing at a frantic pace and has the potential to show the exponential growth.

Public vs. Private Provision of Healthcare Services

The state, central and local governments share the responsibility of providing healthcare in India. After the economic reforms in 1986, public health expenditure has remained more or less stagnant between 0.9 per cent to 1.2 per cent of GDP. Private healthcare to form a large share of the healthcare spend around 80% and would increase to US$ 33.6 billion in 2010 from US$ 14.8 billion in 2002. (Source: India Brand Equity Foundation, www.ibef.org). Healthcare delivery infrastructure is still under developed in India, and there is strain on existing resources. Patients may be required to wait in long queues for treatment at these hospitals, and many doctors are overworked. India’s growing middle class is, therefore, increasingly choosing private hospitals.

Lack of Infrastructure

i. Hospital Beds

India’s healthcare infrastructure has not kept pace with the economy’s growth. The available capacity has increased but not in line with rising demand. India has 0.7 beds per thousand patients as against a world average of 2.6. Bed to thousand‐population ratio of 1.85 is likely to be reached by 2012. (Source: India Brand Equity Foundation, www.ibef.org). This is a clear indication of the insufficiency of healthcare infrastructure in India. The physical infrastructure is woefully inadequate to meet today’s healthcare demands, much less tomorrows. While India has several centers of excellence in healthcare delivery, these facilities are limited in their ability to drive healthcare standards because of the poor condition of the infrastructure in the vast majority of the country. The number of public health facilities also is inadequate.


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(Source: India Brand Equity Foundation, www.ibef.org).

ii. Trained Personnel The biggest challenge for the healthcare industry today is a shortage of trained personnel, ranging from doctors, nurses, technicians and even healthcare administrators Density of registered doctors and nurses in India is 1.9 per 1000 population, which is less than half of the world average of 4.1 and lower even when compared to global norms (5) as well as the norm of 2.25 set by NCMH. The number of non‐allopathic doctors in India is slightly more than the number of allopathic doctors. (Source: India Brand Equity Foundation, www.ibef.org).

Emerging Trends and Industry Outlook

i. Shifting Demographics and Socio‐economic Trends

One driver of growth in the healthcare sector is India’s booming population. Socio‐economic and demographic changes within the Indian population have increased the incidence of lifestyle diseases such as cancer, diabetes and cardiovascular diseases. The Indian healthcare market is estimated to touch US$ 77 billion by 2013 expected to grow at a compound annual growth rate (CAGR) of 15 per cent for the next 15 years. (Source: India Brand Equity Foundation, www.ibef.org). The main factors propelling this growth are rising income levels, changing demographics and illness profiles, with a shift from chronic to lifestyle diseases. The rapid growth of the Indian economy has led to a change in urban and rural lifestyles that has brought about a major shift in the prevalence of disease pattern from communicable to non‐communicable. The shift in disease profiles from infectious to lifestyle‐related diseases is expected to raise expenditures per treatment. Lifestyle related diseases are typically more expensive to treat than infectious ones.


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ii. Market Growth Healthcare which is estimated at about US$ 38 billion industry is expected to rise to US$ 77 billion in 2013 at a CAGR of 15 per cent. The Sector expected to grow at a compound annual growth rate (CAGR) of 15 per cent for the next 15 years. Healthcare industry accounted for 5.1 per cent of the country‘s GDP in 2006 and this industry is expected to generate employment opportunities for nine million people by 2012.

Indian Healthcare Market Healthcare infrastructure in 2008

(Source: India Brand Equity Foundation, www.ibef.org). (Source: India Brand Equity Foundation, www.ibef.org).

During 2006‐2011, the average annual growth in health expenditure by the BRIC countries is estimated at 11 per cent. It is expected to touch US$ 413 billion by 2011. Share of tertiary care in the total healthcare market is around 11 per cent and which is expected to grow at a faster rate, due to rise in complex ailments such as heart diseases and cancer. The per capita healthcare expenditure in India grew by 9.3 per cent between the years 1993‐94 and 2001‐02. The Government launched the National Rural Health Mission (NRHM) in 2005. It aims to provide quality healthcare for all and increase the expenditure on healthcare from 0.9 per cent of GDP to 2‐3 per cent of GDP by 2012. During the 2009 interim budget, the government hiked the allocation for NRHM by US$ 423.7 million over and above US$ 2.5 billion. The government has announced a US$ 64 million initiative to promote domestic manufacture of medical devices such as stents, catheters, heart valves and orthopedic implants that will lead to lower prices of these critical equipment. (Source: India Brand Equity Foundation, www.ibef.org).

iii. Shifting Spending Patterns

There would be significant changes in the spending patterns. This growth is expected to be driven by the rise in lifestyle diseases. The occurrence of communicable diseases is likely to decrease, that of non‐communicable diseases is rising. Cardiac, oncology and diabetes collectively accounted for 13.8 per cent of the hospitalisation cases in 2008. In terms of value, these three ailments accounted for 39 per cent of the in‐patient revenues. These ailments are estimated to account for 17.4 per cent and 20.0 per cent of the hospitalisation cases in the year 2013 and 2018, respectively. (Source: India Brand Equity Foundation, www.ibef.org).

Hospitalisation cases, 2008



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iv. Increasing Penetration of Health Insurance In recent years, with a liberalization of the Indian healthcare a number of private insurance companies have entered the Indian market. The Indian health insurance market has emerged as a new and lucrative growth avenue for both the existing players as well as the new entrants. The health insurance market represents one the fastest growing and second largest non‐life insurance segment in the country. The Indian health insurance market has posted record growth in the last two fiscals (2008‐09 and 2009‐10). Revenue attributable to insurance or Third Party Administrators (TPAs) has grown from two per cent in 2001‐02 to 16 per cent in 2005‐06. Total credit billing has increased to 32 per cent in 2005‐06 and it is likely to increase further to 50 per cent by 2011‐12. Domestic health policy premiums have shown a 47 per cent increase in the first quarter of 2006. Health insurance is projected to grow to US$ 5.75 billion by 2010. (Source: India Brand Equity Foundation, www.ibef.org).

v. Medical Value Travel

Use of technologically advanced diagnostic equipments and excellent infrastructure are making India a medical value travel hub. Medical value travel is one of the most lucrative segments of the healthcare sector and is expected to grow into a US$ 1.5 billion industry by 2010. It has the potential to contribute US$ 1.2 ‐2.4 billion additional revenue for upmarket tertiary hospitals by 2012, and will account for 3‐5 per cent of the total healthcare delivery market. From 10,000 patients about five years ago, India was able to attract approximately 150,000 patients to the country in 2006‐07. With an annual growth rate of 30 per cent, India is already inching closer to Singapore and Thailand, which are established medical care hubs that attract millions of medical tourists a year. The Ministry of Tourism (MOT), Government of India has further enhanced the Mvisa and MXvisa (Medical Visa) by extending it from six months to three years. India offers easy access to visa facilities for overseas patients along with best emerging medical infrastructure in large and tertiary towns. This shall generate earnings of about US$ 19.5 billion in foreign exchange by 2012. (Source: India Brand Equity Foundation, www.ibef.org).

vi. Public Private Partnerships (PPP)

Various state governments are collaborating with the private sector through PPP to improve the inefficiency and decrease the inequity in the health system. Partnership initiatives range from super‐specialty tertiary‐care hospitals (Apollo Hospital, Raichur; SMS hospital, Jaipur) to primary care (Karuna Trust in Karnataka) and slum communities (Arpana Swasthya Kendra, Delhi; urban slum care in the district town of Adilabad, Andhra Pradesh). Community health insurance initiatives have also been undertaken in terms of Arogya Raksha scheme in Andhra Pradesh and Yeshasvini scheme in Karnataka. Chiranjeevi Yojna is a public private partnership which has dramatically reduced maternal and infant mortality in the state of Gujarat. The NHS (National Health Service) of Britain, with an annual budget of US$ 100 billion, is also eager to invest in PPP ventures in India, starting with West Bengal in the initial phase. (Source: India Brand Equity Foundation, www.ibef.org).


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vii. Increased Spending on Infrastructure An enormous amount of private capital will be required in the coming years to enhance and expand India’s healthcare infrastructure to meet the needs of a growing population and an influx of medical tourists. Medical infrastructure market in India is expected to grow at 14.5 per cent over the next five years (starting 2007). To achieve a bed to population ratio of 1.98, a total investment of US$ 88 billion would be required. Revenues from private beds in 2012 estimated at US$ 38.8 billion. (Source: India Brand Equity Foundation, www.ibef.org). Physical Infrastructure Investments



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(B) BUSINESS OVERVIEW 1. Details of Our Business

Our Company is a super speciality Hospital based in Tiruchirapalli, belong to the KMC group. We are in the business of running a super speciality hospital having 175 beds with team of dedicated specialists. We provide quality healthcare to patients in key specialty areas such as Neurosurgery, Cardiovascular & thoracic surgery, Orthopedics, Plastic and Reconstructive Surgery, Gynecology, Neonatology and Nephrology (including renal transplants). A special feature of the hospital is the availability of the state‐of‐the‐art equipments and trained personnel required for managing critically ill patients. Our hospital is fully equipped to deal with all kinds of accident victims 24 hours a day.

We were originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 with the Registrar of Companies, Chennai at Tamil Nadu. Company came out with its initial public offer (IPO) in July, 1992. The management of the company was taken over by the present promoter Sri Kavery Medical Care (Trichy) Limited, during May 2008.

As mentioned we belong to KMC Group, our group is engaged in a business of operating and managing hospitals. Our group hospital consists of multi‐specialty hospitals, which provide comprehensive general healthcare to patients in their local communities and in the surrounding areas. We are committed to delivering quality healthcare services to our patients in modern facilities using advanced technology and our teams of doctors, nurses and other healthcare professionals.

a. Our Competitive Strengths

We believe that following strengths will benefit us:

i. Quality patient care:

We have ensured that at our hospital we are able to offer quality care to our patients. We have adopted systematic and comprehensive clinical standards in patient handling, operating theaters, intensive care unit management and emergency care. The layouts at our facilities minimize inpatient movement, with outpatient facilities located near diagnostic facilities within the hospital. Our hospital staff is continually trained to care for patients with techniques utilized in the hospitality industry, which helps more comfortable experience for patients. We also emphasize high quality maintenance of our facilities.

ii. Skilled doctors :

We believe that we have been successful in attracting and retaining doctors who have over a period of time achieved clinical excellence in their fields at our hospitals. The total manpower directly employed by the Company as on April 30, 2010 is 384 personnel. Distribution of the manpower is as follows: Managerial Personnel 4Nurses & Assistants 171O.T. and Cardiac Technician 4Pharmacist 20Other supporting staff 185Total 384

iii. Specialty focus:

We have specific focus on clinical areas such as Neurosurgery, Cardiovascular & thoracic surgery, Orthopedics, Plastic and Reconstructive Surgery, Gynecology, Neonatology and Nephrology (including renal transplants). We are investing significantly in the technology, equipment and infrastructure required to perform the most advanced procedures. To extend, support and strengthen our specialty focus, we have established and intend to expand our network of regional specialty ICU hospitals, which can refer patients to our super‐specialty hospital.

iv. Experienced management:

Our operations are led by an experienced management group that functions well as a team, and that has the expertise and vision to continue to expand our business. The management of the company was taken over by the present promoter Sri Kavery Medical Care (Trichy) Limited, during May 2008. Our Managing Director


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Dr. S. Chandrakumar is well experienced in clinical as well as administrative experience. We have dedicated and experienced management teams from the healthcare and other service sectors, as well as doctors with both clinical and administrative experience. Our senior managers are well experienced in managing the healthcare services industry. We believe our combination of a professionally managed administration with a commitment to patient care and high ethical standards enables us to operate our facilities more efficiently.

v. Brand equity:

We believe the “KMC” brand is widely recognized in the region where our hospital facility is located by both healthcare professionals and patients in specialty areas, such as cardiac care, orthopedics, neuro‐sciences, oncology, renal care, metabolic diseases and mother and child care. We believe that our reputation helps us to attract not only patients, but also well‐known doctors and other healthcare professionals, who in turn draw additional patients to our facilities.

b. Our Business Strategies

The following are the key elements of our business strategy:

i. Focus on high‐growth segment in the healthcare services market: The increase in standard of living and purchasing power of people, an increase in awareness about health and healthcare, a growing medical value travel market and an increase in lifestyle‐related diseases such as heart disease, has created a new and expanding group of patients. This group is increasingly demanding higher levels of quality medical services. We believe we are well‐positioned to serve the increasing demand for sophisticated clinical care.

ii. Improve profitability and occupancy rates at our hospitals:

We intend to improve profitability at our hospitals by increasing average income per bed and decreasing average length of stay. We plan to focus on our case mix and increase the ratio of surgical to medical procedures, and also improve our utilization rates in order to increase average income per bed.

iii. Attract and retain prominent, skilled doctors:

We believe that we have been successful in attracting and retaining doctors who have over a period of time achieved clinical excellence in their fields at our hospitals. We believe that hiring surgeons and other physicians who have established reputations for clinical excellence in their communities is key to the successful implementation of our strategy.

iv. Training to the Administration with leadership skills:

We believe that well trained and skilled staff is required to carry out the smooth operation of the organization. We at our hospital provide training to the administrative staff to attract sustained management talent to support emerging business needs and develop and train employees appropriately for each level of the management hierarchy to drive results efficiently.


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2. KEY INDUSTRY REGULATIONS

The Company is engaged in the business of operating and managing hospitals and we are governed by a number of central and state legislations that regulate our business. Additionally, our functioning requires, at various stages, the sanction of the concerned authorities under the relevant legislations and local bye‐laws:

Besides being governed by the general laws relating to conduct of our business and services include sales tax, service tax, customs duty, income tax etc. Apart from all the corporate laws, local laws and other related regulations the following are the key regulations in respect of the healthcare industry in India:

1. Drugs and Cosmetics Act, 1940 (“DCA”), Drugs and Cosmetics Rules, 1945 (“DCR”) and Drugs (Prices

Control) Order, 1995 (“DPCO”)

In order to maintain high standards of medical treatment, the DCA regulates the import, manufacture, distribution and sale of drugs for the proper protection of drugs and medicines and prohibits the manufacture and sale of certain drugs and cosmetics which are misbranded, adulterated, spurious or harmful. The DCR specifies the requirement of a license for the manufacture, sale, import or distribution of any drug or cosmetic. It further mandates that every person holding a license must keep and maintain such records, registers and other documents as may be prescribed which may be subject to inspection by the relevant authorities. Under the present drug policy of the government of India, certain drugs have been specified under the DPCO, which are subject to price control. The government of India established the National Pharmaceutical Pricing Authority (“NPPA”) to control pharmaceutical prices. Under the DPCO, the NPPA has the authority to fix the maximum selling price for specified drugs.

2. Medical Termination of Pregnancy Act, 1971 (“MTP”)

The MTP regulates the termination of pregnancies by registered medical practitioners and permits termination of pregnancy only on specific grounds and for matters connected therewith. It stipulates that abortion can be carried out only in certain stipulated circumstances by a registered medical practitioner who has the necessary qualification, training and experience in performing medical termination of pregnancy and only at a place which has facilities that meet the standards specified in the rules and regulations issued under the MTP. Under the MTP, private hospitals and clinics need government approval and authorization (certification) to provide medical termination of pregnancy services. Under the rules framed pursuant to the MTP, private clinics can receive their certification only if the government is satisfied that termination of pregnancies will be done under safe and hygienic conditions, and the clinic has the requisite infrastructure and instruments in place.

3. Pre‐Natal Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994 (“PDT”)

The PDT regulates the use of pre‐natal diagnostic techniques for the purposes of detecting genetic or metabolic disorders or chromosomal abnormalities or certain congenital malformations or sex‐linked disorders and for the prevention of the misuse of such techniques for the purposes of pre‐natal sex determination leading to female feticide, and, for matters connected therewith or incidental thereto. No person authorized to use pre‐natal diagnostic techniques is permitted to determine the sex of a fetus or to communicate the sex of the fetus to the pregnant woman or her relative. The PDT makes it mandatory for all genetic counseling centers, genetic clinics, laboratories and all bodies utilizing ultrasound machines to register with their respective appropriate authorities failing which penal actions could be taken against them.

4. Transplantation of Human Organs Act, 1994 (“THOA”)

The THOA provides for the regulation of removal, storage and transplantation of human organs for therapeutic purposes and for the prevention of commercial dealings in human organs and for matters incidental thereto. The THOA prohibits the removal of any human organ except in situations provided therein. No hospital can provide services relating to the removal, storage or transplantation of any human organ for therapeutic purposes unless such hospital is duly registered under the THOA.


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5. The Atomic Energy Act, 1962 (“AEA”)

In order to ensure safe disposal of radioactive wastes and secure public safety and safety of persons handling radioactive substances, the AEA mandates that no minerals, concentrates and other materials which contain prescribed substances can be disposed of without the previous permission in writing of the Central Government. AEA provides that the Central Government may require a person to make periodical and other returns or such statements accompanied by plans, drawings and other documents as regards any prescribed substance in the AEA that can be a source of atomic energy and further states that the Central Government may prohibit among other things the acquisition, production, possession, use, disposal, export or import of any prescribed equipment, or substance, excepting under a license granted by it to that effect.

6. Atomic Energy (Radiation Protection) Rules, 2004 (“AERPR”)

The AERPR, issued under the AEA, provides that all persons handling radioactive material need to obtain a license from a competent authority, which shall be valid for a period of five years from the date of issue of such license. Various medical uses may require additional authorizations and registrations. The AERPR stipulates that no person is to use any radioactive material for any purpose, in any location and in any quantity, other than in a manner otherwise specified in the license and that every employer must designate a “Radiological Safety Officer” and monitor radiation on a regular basis and maintain records with respect to every such radiation worker in the manner prescribed under the AERPR.

7. Radiation Protection Rules, 1971 (“RPR”)

The RPR provides that every employer required to handle radiation equipment or radioactive material must obtain the prior permission of the competent authority. The RPR mandates an employer to appoint a “Radiological Safety Officer” with the approval of the competent authority for the implementation of the radiation protection program including all in‐house radiation surveillance measures and procedures and to discharge the functions as specified under it. Further, the employer is also required to obtain prior permission from the competent authority for undertaking any decommissioning operation.

8. Radiation Surveillance Procedures for Medical Applications of Radiation, 1989 (“RSP”)

The RSP provides for procedures applicable to the medical uses of radiation, including the commissioning and decommissioning of radiation equipment as well as working conditions in any radiation installation. Any employer intending to use radiation equipment must acquire a license or authorization. A “Radiological Safety Officer” is to be appointed to survey the radiation equipment and to maintain records of radioactive materials and persons handling them.

9. Safety Code for Medical Diagnostic X‐Ray Equipment and Installations No. AERB/SC/MED‐2 (Rev‐1) dated

October 5, 2001 (“Code”)

The Code stipulates that all medical X‐ray machines are required to be operated in accordance with the requirements outlined therein and that it is the responsibility of the owner/user of medical X‐ray installation equipment to ensure compliance with the statutory provisions. The Code mandates that only those medical X‐ray machines which are of the type approved by Atomic Energy Regulatory Board (“AERB”) are to be installed for use. It further provides, among other things, that the owners of medical X‐ray installations in India be registered with AERB, and further to carry out quality assurance performance test of the X‐ray unit and to employ qualified staff. Violation of any license issued under the RPR or condition of the Code may be punished by fine or imprisonment.

10. Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987 (“Radioactive Waste Rules”)

Under the Radioactive Waste Rules, an authorization is necessary for any person to dispose of radioactive waste, and the waste may only be disposed of in the terms of such authorization. A “Radiological Safety Officer” is required to be appointed to avoid contamination from radioactive waste. Records are required to be maintained of all disposal and handling of radioactive waste and the persons carrying it out.


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11. Pharmacy Act, 1948 (“PA”)

The PA provides that all pharmacists require a registration under the PA, which registration process includes providing: (a) the full name and residential address of the pharmacist; (b) the date of his first admission to the register; (c) his qualifications for registration; (d) his professional address, and if he is employed by any person, the name of such person; and (e) such further particulars as may be prescribed.

12. The Indian Medical Council Act, 1956 (“Medical Council Act”)

The Medical Council of India, originally constituted under the Indian Medical Council Act, 1933, has been reconstituted under the Medical Council Act. The Medical Council of India so constituted is required to maintain a register of medical practitioners to be known as the Indian Medical Register, containing the names of all persons who are for the time being enrolled on any State Medical Register and who possess medical qualifications recognized under the Medical Council Act. The relevant State enactments provide for the constitution of State Medical Councils and the maintenance of State Medical Registers. Any person possessing recognized medical qualifications under the Medical Council Act is deemed sufficiently qualified for enrolment on any State Medical Register. No person other than a medical practitioner enrolled on a State Medical Register is entitled to do any of the following: (a) hold office as physician or surgeon or any other office (by whatever designation called) in Government or in any institution maintained by a local or other authority; (b) practice medicine in any State; (c) sign or authenticate a medical or fitness certificate or any other certificate required by any law to be signed or authenticated by a duly qualified medical practitioner: (d) give evidence at any inquest or in any court of law as an expert under section 45 of the Indian Evidence Act, 1872 on any matter relating to medicine. The Registrar of the Indian Medical Council, may, on receipt of the report of registration of a person in the relevant State Medical Register, or on application made in the prescribed manner by any such person, enter his name in the Indian Medical Register. Subject to the conditions contained in the Medical Council Act, every person whose name is for the time being borne on the Indian Medical Register is entitled according to his qualifications to practice as a medical practitioner in any part of India.

13. Bio‐Medical Waste (Management and Handling) Rules, 1998 (“BMW Rules”)

The BMW Rules are issued under the Environment (Protection) Act, 1986, as amended. They apply to all persons who generate, transport, treat, dispose or handle bio‐medical waste in any form and regulate the mode of treatment and disposal of bio‐medical waste. The BMW Rules mandate every occupier of an institution generating, collecting, transporting, treating, disposing and/or handling bio‐medical waste to take steps to ensure that such waste is handled without any adverse effect to human health and environment and to apply to the prescribed authority for grant of authorization. The BMW Rules further require such person to submit an annual report to the prescribed authority, report any accidents that may take place and maintain records related to the generation, collection, storage, transportation, treatment, disposal, and/or any form of handling of bio‐medical waste in accordance with rules and guidelines issued.

14. Indian Council of Medical Research (“ICMR”) Regulations

The ICMR has issued guidelines relating to the accreditation, supervision and regulation of assisted reproductive technology, good clinical laboratory practices, stem cell research and therapy and biomedical research. Under the Ethical Guidelines for Biomedical Research on Human Participants, 2006 (the “Ethical Guidelines”), an Institutional Ethics Committee (“IEC”) must be appointed to review the ethical aspects of proposed research and monitor approved research. An IEC shall consist of certain individuals specified under the Ethical Guidelines, including an outside chairman, experts from the medical science area, a legal expert or retired judge and a member secretary from the institution conducting the research. The Ethical Guidelines specify the principles to be followed for biomedical research generally and specific guidelines for the various fields of research. In addition, our doctors are subject to various regulations issued by the Medical Council of India and certain state level bodies.


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15. Other Legislation

Certain other legislation, including the Narcotic Drugs and Psychotropic Substances Act, 1985, the Dangerous Drugs Act, 1930, the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, the Medical and Toilet Preparations Act, 1955 and environmental legislation, including the Air (Prevention and Control of Pollution) Act, 1981, the Water (Prevention and Control of Pollution) Act, 1974, the Environment (Protection) Act, 1986 and the rules made there under, are also applicable to us. A wide variety of labor laws are also applicable to the nursing and hospital sector, including the Contract Labour (Regulation and Abolition) Act, 1970, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, as amended (“Provident Funds Act”), the Employees State Insurance Act, 1948, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936, the Trade Unions Act, 1926, Workmen’s Compensation Act, 1923 and the Shops and Commercial Establishments Acts.


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3. HISTORY, AND CORPORATE STRUCTURE

1. History and Major events Our company was originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 by P. S. Mahadevan and Sheshadri Ramanujam with the Registrar of Companies, Chennai at Tamil Nadu. The Company was converted into a Public Limited Company on July 15, 1988. We came out with an IPO in July 1992.

The name of our company was changed to Seahorse Hospitals Limited on March 21, 1995 pursuant to the change in management to the Seahorse group in March 1994. Sri Kavery Medical Care (Trichy) Ltd. signed a Share Purchase Agreement to acquire 42,59,635 equity shares of Rs. 10 each (representing 33.95% of the then paid up capital) with Seahorse group to acquire control over our company in February 2008; In response to the Public Announcement and subsequent open offer our promoters acquired 7,42,510 equity shares (5.92%). Our company was renamed to KMC Speciality Hospitals (India) Ltd. with effect from October 24, 2008 pursuant to the above take over to reflect the change in management.

The corporate Identification Number of our Company is L85110TN1982PLC009781. Our Company was incorporated with its registered office at ‘Sri Bhuvneshwari’ No. 6, Royal Road, Cantonment, Tiruchirappalli ‐ 620 001, Tamil Nadu, India. The Registered Office of our company was shifted to 18, Swamy Sivananda Salai, Chennai 600 005, Tamil Nadu, India w.e.f. August 18, 1999. The Registered Office of our company was again shifted to No. 6, Royal Road, Tiruchirappalli, 620 001, Tamil Nadu, India w.e.f. September 29, 2004. The changes in the registered office were effected in order to facilitate better control, administration and management of the business operations of the Company. Our company incurred losses from FY 1992‐93 before extraordinary items. We reported a profit for the year in 2002‐03 and 2004‐05 due to waiver of accumulated interest by SBI and ICICI, IDBI & IFCI respectively. We agreed with our lenders for a One Time Settlement of dues in FY 2002‐03 and 2004‐05. Capital Reduction: Our company incurred losses during FY 1992‐93 through 2001‐02, FY 2003‐04 and FY 2005‐06 through 2009‐10 (previous completed financial year), In order to write‐off the above losses and to reflect the true financial position of the company, we did a capital reduction of the face value of equity shares from Rs. 10/‐ per share to Re. 1/‐ per share. The salient features of the Capital Reduction as extracted from the petition filed before the Hon’ble High Court of Judicature at Madras are as under: 1.) The Petitioner has been incurring losses over the last few years and had a total accumulated loss of Rs.

14,00,68,083 as on March 31, 2009, as against a paid up capital of Rs.12,54,50,000 and Reserves & Surplus of Rs. 3,01,82,334 (comprising of capital reserve account). Since there are no reserves except Capital Reserve Account of Rs. 3,01,82,334 the entire paid up share capital of the Company has been lost or is unrepresented by available assets. Thus the capital structure of the Company does not reflect the realistic financial position of the Company. The true financial position would be reflected only upon writing off the accumulated losses.

2.) The Petitioner felt that the huge accumulated losses is a deterrent to the progress of the company especially with regard to obtaining bank loans, obtaining better terms of credit with suppliers, capital servicing etc., more so because it would take a very long period for the losses to be wiped off completely. The Board of Directors of the Petitioner have, therefore, after contemplating various options, felt that it would be in the interest of the Petitioner if it writes off its paid up capital against the accumulated losses to the extent of Rs.9 per share amounting to Rs.11,29,05,000 without reducing the number of shares.

3.) The petitioner submits that the above proposal will reduce the paid up capital of the company and will not have any adverse influence on the creditors of the company. The proposal does not involve either the diminution of any liability in respect of the unpaid share capital or payment to any shareholder. The proposal does not involve any cash outflow and therefore would not affect the ability or liquidity of the petitioner to meet its obligations/commitments in the normal course of business.


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In compliance with the above petition and the order of the Honb’le High Court, Chennai dated November 24, 2009, the following was accomplished: 1.) Paid up share capital comprising of 1,25,45,000 shares of Rs. 10/‐ each be reduced to 1,25,45,000 shares

of Re. 1/‐ each 2.) The requirement to add the words, “and reduced” along with the name be dispensed

Major Events: The Equity Shares of our Company are listed on MSE, BSE and DSE.

Year Event Dec 1982 Incorporation as a private limited companyJuly 1988 Converted into public limited companyJuly 1992 Initial Public Offering (IPO)1994/95 Change of management2003/04 One time settlement with BanksMay 2008 Change in management consequent to take over by Sri Kavery Medical Care (Trichy) Ltd. Dec 2009 Capital Reduction of face value of equity shares from Rs. 10/‐ per share to Re. 1/‐ per share

2. Main Objects of our Company

i. T o import, buy, hire all kinds of diagnostic and therapeutic equipments in the field of medicine.

ii. To run medical centers owning conventional and non‐conventional medical equipments and to impart training and conduct training programmes for such centers.

iii. To serve the ailing poor citizens by rendering medical attention utilizing equipments owned or operated

by the company.

iv. To form medical trusts and foundations for rendering medical aid and for owning and operating medical equipments to cater to the needy and ailing citizens.

v. To carry out services as consultants in the field of medicine subject to such regulations as the

Government or Indian Medical Council may prescribe in this regard. Change in the Registered Office

The Registered Office of the Company was originally located at ‘Sri Bhuvneshwari’, No. 6, Royal Road, Cantonment, Tiruchirappalli and was shifted to 18, Swami Sivananda Salai, Chennai 600005 w.e.f. August 18, 1999. The Registered Office was shifted to the current address w.e.f. September 9, 2004

Amendments to our Memorandum of Association:

Date of passing the resolution

Clause

Amendment

15.07.1988 Amendment to Capital clause

The authorised share capital of the Company of Rs. 5,00,000 divided into 5000 Equity Shares of Rs. 100 was increased to Rs. 4,00,00,000 divided into 300000 Equity Shares of Rs. 100 each and 100000 12.5% cumulative preference shares of Rs. 100 each


The authorised share capital of the Company of Rs. 4,00,00,000 divided into 300000 Equity Shares of Rs. 100 each and 100000 12.5% cumulative preference shares of Rs. 100 each was reclassified to Rs. 4,00,00,000 divided into 4000000 equity shares of Rs. 10 each

28.09.1991 Amendment The authorised share capital of the Company of Rs. 7,50,00,000 divided into


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to Capital clause

7500000 Equity Shares of Rs. 10 was increased to Rs. 15,00,00,000 divided into 15000000 Equity Shares of Rs. 10 each


The authorised share capital of the Company of Rs. 15,00,00,000 divided into 15000000 Equity Shares of Rs. 10 each was increased to Rs. 25,00,00,000 divided into 2,50,00,000 Equity Shares of Rs. 10 each

21.03.1995 Amendment to name clause

Change of name from Advanced Medical Care Ltd. to Seahorse Hospitals Ltd.

24.10.2008 Amendment to name clause

Change of name from Seahorse Hospitals Ltd. to KMC Speciality Hospitals (India) Ltd.

25.09.2009 Reduction in Face Value

The authorized share capital of the company of Rs. 25,00,00,000 divided into 2,50,00,000 equity shares of Rs. 10 each was restated to Rs. 25,00,00,000 divided into 25,00,00,000 equity shares of Rs. 1 each and confirmed by way of High Court Order for Capital Reduction dated November 24, 2009 registered at the ROC and confirmed vide its letter dated December 15, 2009.

3. Our Subsidiary and Holding Companies:

Our Company has no subsidiary and also no company holds 51% or more of paid‐up capital of our Company.

4. Material Agreements:

There are no agreements with shareholders

5. Other Agreements:

Except the Contracts / Agreements entered into in the ordinary course of the business carried on or intended to be carried on by the Company, the Company has not entered into any other Agreement / Contract.

6. Financial / Strategic Partners

The Company does not have any Financial / Strategical Partner as on date of filing of this Draft Letter of Offer.

7. Our Group:

KMC Speciality Hospitals (India) Ltd. is part of the KMC group of hospitals based at Tiruchirappalli. The Company was taken over by the Sri Kavery Medical Care (Trichy) Ltd, by way of acquisition of shareholding of the outgoing promoter and subsequent open offer under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1996 in April 2008. The KMC group companies are engaged in the business of health care services, medical laboratory services, treatment of cardiac diseases, Investigations, healthcare institutions, imparting related training and education.


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4. OUR MANAGEMENT

Our Company functions under the control of Board consisting of professional directors as well as promoter representatives. The day‐to‐day matters are looked after by qualified key personnel, under the supervision of the MD and CEO.

Under our Articles of Association we cannot have less than 6 Directors or more than 12 Directors, unless otherwise determined by a general meeting. We currently have 8 Directors on our Board. The following table sets forth details regarding our Board as on the date of filing of this Draft Letter of Offer.

1. Board of Directors

Name, Age, Address, Nationality, Designation and Occupation

Date of Appointment and Expiry of current term

Qualification Other Directorships

Mr. R. Mohan DIN: 01765140 Age: 70 years Address: Old No. 1 B, New No.3, Gorikulam Street, Tiruchirappalli ‐ 620008 Designation: Chairman Non Executive /Independent Director Occupation: Engineer

DoA: May 30, 2008Term: Liable to retire by rotation

B.E(Hons), M.Sc(Eng), ME(USA)

Director Nil

Dr. S. Chandrakumar Age: 44 years DIN: 01867847 Address: 13, Grace Gardens TVK Nagar, Puthur, Tiruchirappalli ‐ 620017 Nationality: Indian Designation: Managing Director & CEO Occupation: Practicing Doctor and Entrepreneur

DoA: May 30, 2008Term: Upto May 29, 2011

MBBS and MD (Anaesthesiology)

Chairman Kavery Medi CT Scan (Thuraiyur) Pvt. Ltd.

Managing Director Sri Kavery Medical Care (Trichy) Ltd.

Director Udayam Medical Centre Pvt. Ltd Managing Trustee Kavery Medical Trust

Dr. S Manivannan DIN: 00910804 Age: 39 years Address: No S – 1, Arjuna Apartments, Reynolds Road, Cantonment, Tiruchirappalli 620 001 Designation: Non‐Executive, Non‐Independent Director Occupation: Doctor


MBBS, MD and DNB (Anesthesia).

Executive Director Sri Kavery Medical Care (Trichy) Ltd.

Managing Director Medexpert Business Consultants Pvt. Ltd.

Director Kavery Medi CT Scan (Thuraiyur) Pvt. Ltd

Trustee Kavery Medical Trust

Dr. T Senthilkumar DIN: 01742558 Age: 48 years Address: No 14 & 15, Vivekananda Nagar, Woraiyur, Tiruchirappalli 620 003.


MS. and M.Ch in Cardiac Surgery.

Director Sri Kavery Medical Care (Trichy) Ltd.

Partner Ramakrishna Nursing Home

Trustee Kavery Medical Trust


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Designation: Non‐Executive, Non‐Independent Director Occupation: Doctor Mr. D. Selvaraj, Age: 66 years DIN: 02061814 Address: No. 69‐B3, Durga Sresta Apartments, Ranganathpuram Puthur, Tiruchirappalli – 620 018 Nationality: Indian Designation: Non‐Executive, Non‐Independent Director Occupation:Business

DoA:May 30, 2008Term: Liable to retire by rotation

B.E

Director Sri Kavery Medical Care (Trichy) Ltd.

Udayam Medical Centre Pvt Ltd

Mr. A. Krishnamoorthy Age: 65 years DIN: 00386122 Address: 20/1, Sarvamangala Nagar, Easwaran Koil Street, Nanganallur, Chennai – 600 061 Nationality: Indian Designation: Non‐Executive, Non‐Independent Director Occupation: Financial Advisor


MA, MBA, CAIIB Chairman Sri Kavery Medical Care (Trichy) Ltd.

Director Cethar Vessels Ltd. GVPR Engineers Ltd.

CA S. ChenthilkumarDIN: 02621693 Age: 55 years Address: C‐59, N.E.E. 5th Cross, Thillai Nagar Tiruchirappalli, 620 018 Designation: Independent Director Occupation: Charted Accountant

DoA: March 26, 2009Term: Liable to retire by rotation

B. Com, FCA Nil

Mr. B Pattabhiraman DIN: 00099115 Age: 68 years Address: 27, Shankar Nagar Srirangam, Tiruchirappalli, 620006 Designation: Independent Director Occupation Industrialist:

DoA: March 26, 2009Term: Liable to retire by rotation

B.E. Chairman Resurgent Investments Pvt. Ltd.

Managing Director G B Engineering Enterprises Pvt. Ltd.

Director Enmas Engineering Pvt. Ltd. Enmas GB Power Systems Projects Ltd.

Enmas GB Power Systems Pvt. Ltd.

Enmas GB Power Systems Projects Limited

G B BPR Soft Pvt. Ltd. Resurgent Ortech Bio‐Energy Pvt. Ltd.


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Enmas GB Engineering LimitedManaging Partner

G B Enterprises Partner

EAL Associates

Brief Profile of our directors:

Dr. S. Chandrakumar 44 years is a Master of Doctorate in Anesthesiologist with over 18 years of reputed clinical experience and managing multi speciality hospitals. He is a life member in Indian Council and Indian Society of Anesthesiologists and also Executive member of Health Care Sub Committee in Confederation of Indian Industry and selected by the same as one of the 101 best Entrepreneurs in Tamil Nadu. He is one of the Five members of the Health Care panel of Tamil Nadu. He is the promoter and the Managing Director of Sri Kavery Medical Care (Trichy) Private Limited.

Mr. D. Selvaraj, 66years is an Engineer by profession and has more than 40 years of experience in the Executive and Administrative fields. He has over a decade of experience as the Administrative Officer of multi‐specialty hospital. Dr. T. Senthilkumar, 48 years is a Master in Cardiothoracic Surgeon having qualification of MS, M.Ch. He is a senior consultant having more than 17 years of professional experience. He is the life member of Association of Cardiovascular and Thoracic Surgeons of India and Indian Medical Association. He is also having over 5 years of experience is teaching and examiner in Bachelor in Physiotherapy course.

Dr. S. Manivannan, 39 years is a Master of Doctorate in Anesthesiologist and Intensivist (MD, DNB) having more than a decade of clinical experience. He is one of the promoters and Executive Director of Sri Kavery Medical Care (Trichy) Private Limited. Mr. R. Mohan, 70 years is a Engineer by qualification holds B.E (Hons), M.Sc Eng), ME(USA) with experience and interest in wide range of subjects such as Literature, Histrionics, Music and Consultancy Services. He is active member of various Philanthropic Association. Mr. A. Krishnamoorthy, 65 years holds qualification of MA, MBA,CAIIB and is the former Chairman and CEO of Lakshmi Vilas Bank Ltd. He is having 40 years of experience in Banking Industries and hold directorship in many Companies.

CA S. Chenthilkumar, 55 years is a Fellow Member of Institute of Chartered Accountants of India has more than 25 years of experience auditing and consultancy. He is an Honorary Fellow Member of the Institute of Financial Accountants, UK and member of International Affairs Committee of ICAI. Mr. B. Pattabhiraman, 68 years is a Mechanical Engineer by qualification. He is an industrialist and the Managing Director of G.B.Engineering Enterprises Pvt. Ltd. He is the former chairman of Confederation of Indian Industry. He is the National President of Indian Welding Society and President of Thuvakudi Industrial Estate Manufacturer’s Association. Relationship between our directors: None of the directors are related to each other within the definition of ‘relative’ under section 6 companies Act, 1956 except as under:

i.) Mr. D. Selvaraj and Dr. S. Manivannan being related as father and son


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Borrowing Powers of the Board:

In terms of Articles of Association, the Board may from time to time, at its discretion raise or borrow any sum or sums of money for the purposes of the Company and subject to the provisions of the Companies Act may secure payment or repayment of the same in such manner and terms as prescribed by the Board of Directors, in particular by issue of debentures or bonds of the Company or by mortgage or charge of all or any part of the property of the Company and of its uncalled capitals for the time being.

Pursuant to resolution passed at the Annual General Meeting of the Company held on September 25, 2009, consent of the members of the Company was accorded to the Board of Directors of the Company pursuant to Section 293 (1)(d) of the Companies Act, 1956 for borrowing from time to time any sums of money which together with the money already borrowed by the Company (apart from temporary loans obtained from the Company’s bankers in the ordinary course of business), shall not exceed in the aggregate at any one time Rs. 25 crores (Rupees Twenty Five crores only) over and above the paid up capital and free reserves of the Company.

Details of Appointment of Managing Director and Executive Director

The Board of Directors of the Company at their meeting held on July 31, 2009, approved the remuneration as recommended by Remuneration Committee at their meeting held on July 25, 2009 with effect from October 1, 2009. Dr. S. Chandrakumar is entitled to receive the following remuneration. The same has approved by the Shareholders in the AGM held on September 25, 2009.

2. Details of Remuneration to the Directors

a.) Managing Director I. Salary

a. Basic Salary: Rs. 1,75,000 per month b. House Rent Allowance: Rs. 17,500 per month c. Provident Fund: Rs. 21,000 per month

II. Perquisites:

a. Bonus payable 8.33% of gross salary. b. Gratuity payable at a rate not exceeding half a month’s salary for each completed year of service c. Leave Travel Allowance not exceeding 50% of one month basic salary, subject to Income Tax

provisions d. Reimbursement of medical insurance premium to self and family, to the extent of Rs. 25,000 per

annum. e. Reimbursement of actual expenditure of fuel bills of car utilized for official purposes. f. Company’s Car with driver g. Payment to the bills of mobile phone/s used and internet connections used for official purposes.

Explanation ‘Family’ means dependent children and dependent parents of the managerial person.

b.) Executive Director

The Company does not have an Executive Director other than Managing Director.

c.) Other Directors The Company pays its non executive independent Directors sitting fees of Rs. 20,000 for every meeting of its Board, and Rs. 10,000 for attending meeting of the committees of the Board, as authorised by Board resolution dated June 24, 2008.

Except the Managing Director who is entitled to statutory benefits upon termination of employment in the Company, no other Director is entitled to any benefit upon termination of their employment with the Company.

3. Share holding of our Directors

As per the AOA of our company, Directors of our company are not required to hold qualification shares. The Directors of our company do not hold any shares in their personal capacity as on date of filling this Draft Letter of Offer


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4. Interest of Directors

All our Directors may be deemed to be interested to the extent of the fees payable to them for attending meetings of the Board or a committee thereof, and to the extent of reimbursement of expenses payable to them if any and to the extent of remuneration paid to them, if any, for services rendered as an officer or employee of our Company.

All our Directors may be interested in the Equity Shares already held by them or that may be allotted to them pursuant to the Issue and / or that may be allotted to companies, firms and trusts in which they are directors, members, partners or trustees, as the case may be.

Except as disclosed above, none of our Directors have any interest in any property acquired or proposed to be acquired by our Company in the last two years.

Our Director(s) may have further interest to the extent of any dividend payable to them and other distributions in respect of the Equity Shares. The Directors may also be interested to the extent of the options of the Company held by them, if any. Our directors are also deemed to be interested in the loans or advances given by the Company, if any, in the ordinary course of business to the companies in which they are interested as a Director or any payment made to ventures with which they are associated with in any capacity for any services rendered to the company. Except as stated in the section titled “Statement of Related Party Disclosures” beginning on page 102 of this Draft Letter of Offer, the Directors do not have other interest in the business of the Company. Our Directors do not have any interest in any Objects of the Issue for which the Issue Proceeds are proposed to be utilised. However, Dr. S. Chandrakumar, Mr. A. Krishnamoorthy, Mr. D. Selvaraj, Dr. T. Senthilkumar and Dr. S. Manivannan are Directors in Sri Kavery Medical Care (Trichy) Ltd. A part of the Issue proceeds is to be utilized towards repayment of unsecured loans taken by the company from Sri Kavery Medical Care (Trichy) Ltd., In view of the directorship held by them in Sri Kavery Medical Care (Trichy) Ltd., they shall be deemed to be interested.

5. Changes in our Board of Directors in the last three years The following are the changes in the Board of Directors in the last 3 years and no changes thereafter have taken place: Name Date ReasonDr. A.K. Gandhi May 30, 2008 Cessation; Change of Management Capt. S. C. Batra May 30, 2008 Cessation; Change of Management Mr. A. S. Varadarajan May 30, 2008 Cessation; Change of Management Capt. A. C. Batra May 30, 2008 Cessation; Change of Management Capt. V. W. Katre July 14, 2008 Cessation; Change of Management Mr. R. Mohan May 30, 2008 AppointmentDr. S. Chandrakumar May 30, 2008 AppointmentDr. S. Manivannan May 30, 2008 AppointmentDr. T. Senthilkumar May 30, 2008 AppointmentMr. D. Selvaraj May 30, 2008 AppointmentMr. A. Krishnamoorthy May 30, 2008 AppointmentMr. CA. S.Chenthilkumar March 26, 2009 AppointmentMr. B. Pattabhiraman March 26, 2009 Appointment

Besides the above, Mr. S. Ramji was appointed as Manager in terms of Section 269 of the Companies Act, 1956 w.e.f. May 29, 2007 and designated as General Manager and Chief Executive Officer. He resigned as Manager w.e.f. May 30, 2008, pursuant to change of Management


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6. Management Organisation Structure

7. Corporate Governance

We have complied with the requirements of the applicable regulations, including the listing agreement entered in to with the Stock Exchanges and the SEBI Regulations, in respect of corporate governance including constitution of the Board and Committees thereof. The corporate governance framework is based on an effective independent Board, separation of the Board’s supervisory role from the executive management team and constitution of the Board Committees, as required under law. We have a Board constituted in compliance with the Companies Act and listing agreement to be entered in to with the Stock Exchanges and in accordance with best practices in corporate governance. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. Our executive management provides the Board detailed reports on its performance periodically.

I. Composition of the Board of Directors Currently, the Board of Directors has 8 Directors and the Chairman of the Board of Directors is a Non‐Executive Independent Director. In compliance with Clause 49 of the equity listing agreement, our Board has One Executive Director and 7 non‐executive Directors, including 3 independent Directors.


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Sr.No.

Name Status Date of expiry

1 Mr. R. Mohan Independent Subject to retirement by rotation 2 Dr. S. Chandrakumar Executive May 29, 20113 Dr. Manivannan Non‐executive /

Non‐Independent Subject to retirement by rotation

4 Dr. T. Senthilkumar Non‐executive /Non‐Independent

Subject to retirement by rotation

5 Mr. D. Selvaraj Non‐executive / Non‐Independent


6 Mr. A. Krishnamoorthy Non‐executive / Non‐Independent


7 CA S. Chenthilkumar Independent Subject to retirement by rotation 8 Mr. B. Pattabhiraman Independent Subject to retirement by rotation

II. Audit Committee Audit Committee is constituted by Board of Directors consisting of 3 directors. The Audit Committee provides directions to and reviews functions of the Audit / Accounts / Finance Department. The Committee evaluates internal audit policies, plans, procedures and performance and reviews the other functions through various internal audit reports and other year‐end Reports issued by the statutory auditors. Quarterly and Annual Accounts will be reviewed by the Audit Committee, prior to their presentation to the Board along with the recommendations of the Audit Committee. Besides, Audit Committee is authorized to exercise all such powers as are required under the amended Clause 49 of the Listing Agreement. Composition of Audit Committee: Sr. No

Name of the Director Designation Nature of Directorship

1. CA S.Chenthilkumar Chairman Independent Director 2. Mr. R. Mohan Member Independent Director 3. Mr. D. Selvaraj Member Non‐Executive/ Non‐ Independent Director

The Audit Committee was re‐constituted at the Board Meeting held on March 26, 2009. The scope of the Audit Committee in companies is defined under Clause 49 of the Listing Agreement dealing with Corporate Governance and the provisions of the Companies Act, 1956. The Audit Committee of the Company oversees, assesses and reviews the audit functions. The Audit Committee reviews the Company’s financial statements, monitors adequacy and effectiveness of internal controls, oversees the Audit Function and monitors the external auditors’ independence, objectivity and effectiveness. Apart from providing direction to the general audit function, the Committee also oversees the operation of the total audit function in the Company, which includes the organization, operationalisation and quality control of internal audit & inspection within the Company, follow‐up on the statutory / external audit of the Company.

III. Remuneration Committee Composition of Remuneration Committee: Sr. No


1. Mr. A. Krishnamoorthy Chairman Non‐Executive/ Non‐ Independent Director2. Mr. R. Mohan Member Independent Director

3. Mr. D. Selvaraj Member Non‐Executive/ Non‐ Independent Director

This Committee looks into the matters pertaining to remuneration of the Managing Director. The Company does not have Employee Stock Option Plan.


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IV. Investors’ Grievance Committee Composition of Investors’ Grievance Committee: Sr. No


1. Dr. S. Chandrakumar Chairman Executive Director2. Dr. S. Manivannan Member Non‐Executive/ Non‐Independent Director3. Dr. T. Senthilkumar Member Non‐Executive/ Non‐ Independent Director

The Investors Grievance Committee was re‐constituted at the Board Meeting held on May 30, 2008. This Committee is responsible for redressal of shareholders’ and investors’ complaints relating to transfer of shares, issue of duplicate / consolidation of share certificates, allotment and listing of shares, review of cases for refusal of transfer / transmission of shares, non‐receipt of balance sheet etc. It is also responsible for reviewing the process and mechanism of redressal of investor complaints and suggesting measures of improving the existing system of redressal of investor grievances. Issue Committee: The Issue Committee comprises

• Dr. S.Chandrakumar, Managing Director & C.E.O. • Mr. D. Selvaraj, Director. • Dr. S Manivannan, Director.

The Issue Committee is responsible for taking all decisions relating to the Issue. Other Committees: In addition, the Board may constitute, from time to time, other committees, as may be required, for the efficient functioning and smooth operation of the Company

8. Key Management Personnel

Our company is run under the supervision of the Board of Directors by professional management. The details’ regarding our Key management personnel is as follows: Mr. P. Selvaraju, aged 41 years, is Vice President (Administration & Finance) and heads the Administration function in our company. He is Mechanical Engineer from Bangalore University. He has 18 years of experience; of which 10 years is in Health care industry. He has rich experience in administration, handling Finance and operation of multi‐speciality hospital. Before joining the Company in February 2009, he was part of the administration function with Sri Kavery Medical Care (Trichy) Ltd. He was paid a gross compensation of Rs. 2.10 lacs during FY 2009‐2010. Ms. Shaista Sivakumar, aged 38 years, is Vice President (Operations) and heads the overall operations of the hospital. She has completed B.A. (English Literature), Masters in Social Welfare (HR) and PhD in Industrial Sociology besides being a Certified Training Facilitator awarded by Carlton School of Management, London and Middle Earth Consultants. She has a total experience of 15 years and deals with designing and implementing a wide array of life skills and professional leadership training programs. Before joining our Company in December 2009 she was employed as Director with Carpe Diem Consulting. She was paid a gross compensation of Rs. 5.00 lacs per annum during FY 2009‐2010. Ms. N. Jayanthi, aged 51 years, is the Company Secretary and Compliance Officer of our Company and heads the secretarial function at our company. She is a post graduate in Commerce and is a MBA (Finance) and a Fellow Member of the Institute of Company Secretaries of India. She is having experience of more than 28 years out of which 11 years is post qualifying in CS examination. Prior to joining the Company in March 2009, she was employed with Sri Malini Spinning Mills Limited. She was paid a gross compensation of Rs. 3.25 lacs during FY 2009‐2010.


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Mr. R. Damodhara Kannan, aged 34 years, is Manager, Human Resources. He is Bachelor of Science, MBA in Human Resources and M. Phil in Management from Bharathidasan University, Tiruchirappalli. He takes care of the Human Resources function in our company. He has over 13 years of experience. He is associated with our company since September 6, 2008. Prior to joining our company, he was working with Sri Kavery Medical Care (Trichy) Ltd. He was paid a gross compensation of Rs. 1.74 lacs during FY 2009‐2010.

The persons whose names appear as key management personnel are on the rolls of the company as permanent employees.

There is no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any person was selected as director, However, the following persons are nominated to the board of directors of the company by Sri Kavery Medical Care (Trichy) Ltd, the Promoter in terms of its shareholding in our company:

1. Dr. S. Chandrakumar 2. Dr. S. Manivannan 3. Dr. T. Senthilkumar 4. Mr. D. Selvaraj 5. Mr. A. Krishnamoorthy

Also, none of the key managerial personnel have any relationship with the promoters or directors of the company except Mr. P. Selvaraju who is shareholder of Sri Kavery Medical Care (Trichy) Ltd. and relative of Dr. S. Chandrakumar, the Managing Director of our company.

Shareholding of Key Management Personnel

Except for Ms. N. Jayanthi, the Company Secretary of the Company, who holds 100 Equity Shares of the Company, none of the Key Managerial Personnel hold any shares of the Company as on March 31, 2010. Bonus or Profit Sharing Plan for the Key Managerial Personnel Except the payment of salaries and perquisites, the company provides other benefits to the employees that are uniform to all the employees of the company and performance based ex‐gratia payments. The Company does not have any profit sharing or stock option plans for any of its employees. Loans to key managerial personnel There are no loans outstanding against key managerial personnel as on March 31, 2010. Changes in the Key Managerial Personnel Except for the following, there have been no changes in the Key Managerial Personnel of the Company in the previous three years: Sr. No.

Name Designation Date of Joining

Date of Leaving

Remarks

1. Mr. R. Rangarajan Financial Controller & Compliance Officer

December 1, 1994

March 31, 2009 Retirement

2. S. Ramji Manager under section 269, GM and CEO

May 29, 2007 May 30, 2008 Resignation; Change in Management

3. Mr. S. Bhaskaran General Manager, Finance

April 11, 2008

October 31, 2009

Resigned

4. Mr. P. Selvaraju Vice President, Administration & Finance

February 2, 2009

N. A Appointed

5. Ms. Shaista Sivakumar Vice President, Operations

December 4, 2009

N.A. Appointed

6. Ms. N. Jayanthi Company Secretary March 1, 2009

N.A. Appointed

6 Mr. R. Damodhara Kannan

Manager(Human Resources)

September 6, 2008

N.A. Appointed


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9. Employees Stock Option Plan

The Company has no Employees Stock Option Scheme/ Employee Stock Purchase Scheme.

Payment or Benefit to officers of the Company Except as stated otherwise in this Draft Letter of Offer, no non‐salary amount or benefit has been paid or given or is intended to be paid or given to any of the Company’s employees including the Key Management Personnel and our Directors. Except as disclosed in this Draft Letter of Offer, none of the beneficiaries of loans, and advances and sundry debtors are related to the Directors of the Company.


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5. OUR PROMOTERS AND PROMOTER GROUP The promoter of our company is Sri Kavery Medical Care (Trichy) Limited (KMC). KMC is a 200 beds multispecialty hospital, located at the heart of Trichy City. The hospital is known for its cutting edge technology equipments. The hospital has been providing high quality care with the state of the art technology, with a team of dedicated medical specialists and well trained para medical personnel. KMC signed a Share Purchase Agreement to acquire 42,59,635 equity shares of Rs. 10 each (representing 33.95% of the then paid up capital) with Seahorse group to acquire control over our company in February 6, 2008; In response to the Public Announcement and subsequent open offer our promoters acquired 7,42,510 equity shares (5.92%). Our company was renamed to KMC Speciality Hospitals (India) Ltd. with effect from October 24, 2008 pursuant to the above take over to reflect the change in management Date of Incorporation November 26, 1997Nature of Activities KMC is involved in the business of providing health care

services Registered office No. 1, KC Road, Tennur, Tiruchirappalli 620 017Registration Number U85110TN1997PLC039491PAN No. AABCK8115EBank Account No. 137010200015668Address of ROC Registrar of Companies, Chennai, Tamil Nadu Listing Not Listed

The promoters of KMC are: a.) Dr. S. Chandrakumar b.) Dr. S. Mannivannan c.) Dr. D. Senguttuvan d.) Dr. T. Krishnamurthy The major shareholders of KMC as on March 31, 2010 is as follows: Name of Shareholder No. of Shares held % of shareholding Dr. S. Chandrakumar and Relatives 16,65,098 25.09 Dr. S. Mannivannan and Relatives 21,00,098 31.65 IL & FS Trust Company Ltd. 12,00,000 18.08 Other shareholders holding below 5% of share capital

16,70,411 25.18

TOTAL 66,35,607 100%

Board of Directors The board of directors of KMC is as follows: a.) Mr. A. Krishnamoorthy b.) Dr. S. Chandrakumar c.) Dr. S. Manivannan d.) Dr. T. Senthilkumar e.) Mr. D. Selvaraj f.) Mr. A. K. Purwar

There has been no change in the management of KMC. The company has not made any public or rights issue in the last three years and not been listed on any Stock Exchange. There has been no change in the capital structure of the company in the last six months. The company has not become a sick company under the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985, as amended nor is the company under winding up. Further, KMC has confirmed that it has not been detained as a willful defaulter by the RBI or any other governmental authorities and there are no violations of securities laws committed by it in the past or are pending against it, except as disclosed in the section titled “Outstanding Litigation and Material Development” on page 113 of this Draft Letter of Offer.


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Declaration Our Promoters has submitted its PAN details, and its bank account number(s), to the stock Exchanges, along with this Draft Letter of Offer.

The details of the promoters of Sri Kavery Medical Care (Trichy) Limited

Dr. S. Chandrakumar 44 years is a Master of Doctorate in Anesthesiologist with over 18 years of reputed clinical experience and managing multi speciality hospitals. He is also one of the promoter and the Managing Director of Sri Kavery Medical Care (Trichy) Limited.

Name Dr. S Chandrakumar Permanent Account Number ACCPC8792KPassport Number H3690261

Voter ID HTC1056936Driving License F/TN/48/005763/2005Bank Account Details Axis Bank Ltd ‐‐ A/c No 137010100275781

Dr. S. Manivannan, 39 years is a Master of Doctorate in Anesthesiologist and Intensivist (MD, DNB) having more than a decade of clinical experience. He is one of the promoters and Executive Director of Sri Kavery Medical Care (Trichy) Limited.

Name Dr. S. ManivannanPermanent Account Number AHOPM3601QPassport Number G6850548

Voter ID HTC9406760Driving License TN45 19920001383Bank Account Details Axis Bank Ltd – A/c No 137010100252256

Dr. Senguttuvan , having more than 15 years experience in paediatrics speciality. He is the past District Secretary in Indian Academy of Paediatrics Association. He is incharge of the Paediatrics & Neonatology Department in our Hospital.

Name Dr. D. SenguttuvanPermanent Account Number AAWPS2840NPassport Number B5186711

Voter ID TN/27165/0135219Driving License R/TN/045/009417/2007Bank Account Details Central Bank of India ‐ 377


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Dr. T. Krishnamurthy, having more than 30 years of experience in plastic surgery. He is one of the senior most versatile plastic surgeon of the region where our hospital situates. Dr. Krishnamurthy has done research in filarial treatment plan and made presentations in over 20 conferences.

Name Dr. T. KrishnamurthyPermanent Account Number AACPK6010GPassport Number B3113228

Voter ID ‐‐Driving License R/TN/48/006560/2004Bank Account Details Axis Bank Ltd. ‐137010100186438

Promoter Group Companies and entities

The Companies that form part our Promoter Group are as under 1. Udayam Medical Centre (Trichy) Pvt. Ltd. 2. Kaveri‐Medi C.T.Scan (Thuraiyur) Pvt. Ltd. 3. Kaveri Medical Trust

Details of Group Companies 1. Udayam Medical Centre (Trichy) Pvt. Ltd.

Date of Incorporation August 29, 1997Nature of Activities The Company is engaged in running Diagnostic Centers,

Scan Centers and related services Registered office No. 1, KC Road, Tennur, Tiruchirappalli 620 017Registration Number U85110TN1997PTC038910PAN No. AAACU5678BBank Account No. 0733351000001030Address of ROC Registrar of Companies, Chennai, Tamil Nadu Listing Not Listed

The promoters and Directors of the Company are as follows: a. Mr. D. Selvaraj b. Dr. D. Senguttuvan c. Dr. S. Chandrakumar

The total share holding is held by Directors and their relatives

There has been no change in the management of the Company. The company has not made any public or rights issue in the last three years and not been listed on any Stock Exchange. There has been no change in the capital structure of the company in the last six months. The company has not become a sick company under the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985, as amended nor is the company under winding up. Further, KMC has confirmed that it has not been detained as a willful defaulter by the RBI or any other governmental authority and there are no violations of securities laws committed by it in the past or are pending against it, except as disclosed in the section titled “Outstanding Litigation and Material Development” on page 113 of this Draft Letter of Offer.


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2. Kaveri‐Medi C.T.Scan (Thuraiyur) Pvt. Ltd.

Date of Incorporation January 9, 2009Nature of Activities The Company is in the business of running Diagnostic

centers, Scan centers Registered office No. 6, Old No. 38, Oongarakudil Road, Thuraiyur – 621

010 Registration Number U85190TN2009PTC070418PAN No. AADCK7291HBank Account No. 0742352000000163Address of ROC Registrar of Companies, Chennai, Tamil Nadu Listing Not Listed

3. The major shareholders of Kaveri‐Medi C.T.Scan (Thuraiyur) Pvt. Ltd. as on March 31, 2010 is as follows:

Name of Shareholder No. of Shares held % of shareholding Sri Kavery Medical Care (Trichy) Ltd. 103200 51.00 Dr. R. Vijayakumar 4900 2.42 Other 25 Share holders holding 3770 shares each 94250 46.58 Total 202350 100

Board of Directors The board of directors is as follows: 1.) Dr. S. Chandrakumar 2.) Dr. R. Vijayakumar 3.) Dr. S. Manivannan 4.) Dr. R. Raveendran 5.) Dr. M. Chandramohan 6.) Mr. K.P.Natarajan 7.) Dr. N. Kannan 8.) Dr. A. Indrani

There has been no change in the management of the Company. The company has not made any public or rights issue in the last three years and not been listed on any Stock Exchange. There has been no change in the capital structure of the company in the last six months. The company has not become a sick company under the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985, as amended nor is the company under winding up. Further, KMC has confirmed that it has not been detained as a willful defaulter by the RBI or any other governmental authority and there are no violations of securities laws committed by it in the past or are pending against it, except as disclosed in the section titled “Outstanding Litigation and Material Development” on page 113 of this Draft Letter of Offer.

4. Kavery Medical Trust A Trust created by Sri Kavery Medical Care (Trichy) Ltd on December 7, 2000. , is a Public Charitable Trust for the welfare of the poor in the field of medicine and education. The Board of Trustees comprises promoter directors of KMC.

Companies with which KMC has disassociated in the last three years: New Heart City Hospitals Pvt. Ltd. and Kavery Lab Services Pvt. Ltd. The Honb’le Madras High Court has approved vide Order dated April 2, 2009 the amalgamation of New Heart City Hospitals Pvt. Ltd. and Kavery Lab Services Pvt. Ltd., both wholly‐owned subsidiary of KMC with KMC with effect from the appointed date of April 01, 2008 . Hence New Heart City Hospitals Pvt. Ltd. and Kavery Lab Services Pvt. Ltd. are no more the a subsidiaries of KMC as they have merged into KMC.


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Business interest of Promoter / Group Companies: KMC acquired 4,259,635 Equity Shares of the Company from Seahorse group as per SPA dated February 6, 2008 at Rs. 9.08 per share. Pursuant to the Public Announcement in terms of SEBI (SAST) Regulations, KMC acquired additional 742510 equity shares of the company at a price of Rs. 10/‐ each. Except as stated in “Statement of Related Party Disclosures” on page 102 of this Draft Letter of Offer, KMC does not have any other interest in the Company’s business. Our Company has entered into a memorandum of understanding by executing the deed of lease dated June 30, 2008 with KMC in relation to leasing of 24864 sq. ft. of land owned by KMC, on which the building of our hospital is located. For further details please see section titled “Business Overview” on page 53 of the Draft Letter of Offer. KMC does not have any other interest in the property acquired by our Company within two years preceding the date of this Draft Letter of Offer or proposed to be acquired by our Company except as otherwise disclosed in the Draft Letter of Offer other than the loans raised by it from Axis Bank Ltd., by creating a charge in favour of the Bank against the Land and Building and Immovable property of the company. The charge created in favour of Axis Bank Ltd., was satisfied subsequently on repayment of loans raised by KMC. Common Pursuits KMC is a 200 bed multi‐speciality hospital operating out of Tiruchirappalli. Except as disclosed in this Draft Letter of Offer, KMC do not have any interest in any venture that is involved in any activities similar to those conducted by the Company. The Company will adopt necessary procedures and practices as permitted by law to address any conflict situations as and when they arise. a.) Dr. S. Chandrakumar Dr. S. Chandrakumar is the Managing Director of our Company. He is a resident Indian national. For further details, see the section titled “Our Management” on page 62 of this Draft Letter of Offer. His driving license number is F/TN/48/005763/2005 and his voter identification number is HTC1056936.


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6. DIVIDEND POLICY

The Company has not paid any cash dividends on the Equity Shares. The Company currently intends to retain all of its earnings to finance the development and expansion of its business and, therefore, does not anticipate paying any cash dividends on the Equity Shares in the foreseeable future. Any future dividends declared will be recommended by the Board of Directors and approved by the Equity Shareholders at their discretion and will depend on the financial condition, results of operations, capital requirements and surplus, contractual obligations and restrictions, the terms of the credit facilities and other financing arrangements of the Company at the time a dividend is considered, and other relevant factors.


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SECTION VI: FINANCIAL INFORMATION (A) Selected Consolidated Financial and Operating data – Not Applicable (B) Financial Information of the Issuer

The Restated financial statements of our Company, prepared in accordance with Indian GAAP, as at and for the years ended March 31,2010, 2009, 2008, 2007 and 2006 are being presented in this Draft Letter of Offer:


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Auditor’s Report as required by Part II of Schedule II of the Companies Act, 1956. The Board of Directors KMC Speciality Hospitals (India) Limited (Formerly Sea Horse Hospital Limited) 6, Royal Road, Cantonment, Trichy‐620 001 Dear Sirs,

1. We have examined the financial information of KMC Speciality Hospitals (India) Limited (the “Company”) prepared by the Company and annexed to this report, in connection with the proposed rights issue of equity shares of Re. 1 each, on rights basis (referred to as the “Issue”),. Such financial information, which has been approved by the Board of Directors of the Company, has been prepared in accordance with the requirements of: a. Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 (the “Act”); and b. The Securities and Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations

2009 (the “Guidelines”) issued by the Securities and Exchange Board of India (“SEBI”) on August 26, 2009.

2. We have examined such financial information taking into consideration:

a. The terms of reference received from the Company vide their letter dated 21st January 2010 , requesting us to carry out work on such financial information, proposed to be included in the offer document of the Company in connection with its proposed Issue;

b. The (Revised) Guidance Note on Reports in Company Prospectuses issued by the Institute of Chartered Accountants of India.

3. This information has been extracted by the Management from financial statements for the year ended 31st

March 2010, 2009, 2008, 2007and 2006. Audit for the financial year ended 31st March 2008, 2007 and 2006 was conducted by previous auditors, Guru and Ram, Chartered Accountants, and accordingly reliance has been placed on the financial information examined by them for the said years.

4. In accordance with the requirements of Paragraph B of Part II of Schedule II of The Companies Act, the ICDR

Regulations and terms of our engagement agreed with you, we further report that:

a. The Summary Statement of Assets and Liabilities, as restated, of the Company as at 31st March 2010, 2009, 2008, 2007, and 2006 examined by us, as set out in Annexure 1 to this report are after making adjustments and regroupings as in our opinion were appropriate and more fully described in Significant Accounting Policies, Notes and Changes in Significant Accounting Policies (Refer Annexure 21 and 22).

b. The Summary Statement of Profits and Losses, as restated, of the Company for the year ended 31st March 2010, 2009, 2008, 2007 and 2006 examined by us, as set out in Annexure 2 to this report are after making adjustments and regroupings as in our opinion were appropriate and more fully described in Significant Accounting Policies, Notes and Changes in Significant Accounting Policies (Refer Annexure 21 and 22).

c. The Summary Statement of Cash Flows, as restated, of the Company for the year ended March 31, 2010, 2008, 2007 and 2006 examined by us, as set out in Annexure 3 to this report are after making adjustments and regroupings as in our opinion were appropriate and more fully described in Significant Accounting Policies, Notes and Changes in Significant Accounting Policies (Refer Annexure 21 and 22).

d. The Summary Statement of Assets and Liabilities, Profits and Losses and Cash Flows, as restated, and

more specifically described in point 3(a), 3(b) and 3(c) above are together hereinafter referred to as ‘Restated Financial Information’.

e. The Restated Financial Information have been arrived at after making such adjustments and regroupings

as, in our opinion, are appropriate and more fully described in the notes appearing in Annexure 22 to this report. Based on our examination of these Restated Financial Information, we confirm that:


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i. the impact arising on account of changes in accounting policies from those adopted by the company for the year ended March 31, 2010 has been adjusted with retrospective effect in the attached Restated Financial Information

ii. material amounts relating to previous years have been adjusted in the attached Restated Financial Information in the years to which they relate.

iii. there are no extraordinary items, which need to be disclosed separately in the Restated Financial Information, except those stated in paragraph 5

iv. there are no qualifications in auditors’ reports except those stated in paragraph 6 below which require an adjustment, in the Restated Financial Information.

5. Extraordinary items as stated above in 4.e (iii) comprise of waiver of interest on loans taken from a company

under the same management amounting to Rs.114.08 lakhs for the period from 1st April 2009 to 31st March 2010. The same has been disclosed separately in the Summary Statement of Profit and Losses, As Restated for the period ended 31st March 2010.

6. The following are the qualifications in auditors’ reports as stated in 4.e (iv) above:

a. The auditors’ reports dated 29th May 2006 on the audited financial statements of the company issued by

M/s. Guru and Ram, Chartered Accountants for the year ended 31st March 2006 included the following qualification: “The company has not provided for pro‐rata interest on inter corporate loans for the current year.”

a. The previous auditors have further quantified the above qualification in their report dated 28th May 2007 on the audited financial statements of the company for the year ended 31st March 2007, as under: “The company has not provided for interest of Rs. 60.36 lakhs on inter‐company loans for the current year and Rs. 68.90 lakhs for earlier years. Accordingly. the loss for the current year is understated by Rs. 60.36 lakhs, the accumulated losses are understated by Rs. 129.26 lakhs and the liabilities by Rs. 129.26 lakhs”.

In response to the above qualifications, the directors, in their report to the shareholders, have stated that since the terms with respect to interest were not finalized, no interest was provided for the aforesaid period. However, the directors have negotiated with the lenders on treating the loans as interest free during the year 2008.

Since, the aforesaid qualification has no financial implication in the light of a reasons stated therein, no effect is necessitated in the Restated Financial Information for the respective years.

7. We have also examined the following other financial information set out in the annexures prepared by the

management and approved by the Board of Directors relating to the Company for the years ended 31st March, 2010, 2009, 2008, 2007 and 2006.

a. Statement of Share Capital, as restated (Annexure 4)

b. Statement of Reserves and Surplus, as restated (Annexure 5)

c. Statement of Unsecured Loan, as restated (Annexure 6)

d. Statement of Current Liabilities and Provisions, as restated (Annexure 7)

e. Summary Statement of Fixed Assets, as restated (Annexure 8)

f. Statement of Inventories, as restated (Annexure 9)

g. Statement of Debtors, as restated (Annexure 10)

h. Statement of Cash and Bank Balances, as restated (Annexure 11)

i. Statement of Loan and Advances as restated (Annexure 12)

j. Statement of Other Income, as restated (Annexure 13)


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k. Statement of Operating Expenses, as restated (Annexure 14)

l. Statement of Personnel Expenses, as restated (Annexure 15)

m. Statement of Administration Expenses, as restated (Annexure 16)

n. Statement of Accounting Ratios, as restated (Annexure 17)

o. Statement of Capitalization as at 31st March 2009 and 31st December 2009 (Annexure 18)

p. Statement of Tax Shelter (Annexure 19).

q. Statement of Related Party Disclosures (Annexure 20)

r. Statement of Significant Accounting Policies, as restated (Annexure 21)

s. Notes to the Statement of Assets and Liabilities & Profit and Losses, as restated (Annexure 22)

8. We further confirm that the company has not declared any dividend on its equity shares during the years

ended 31st March 2010, 2009, 2008, 2007 and 2006.

9. In our opinion, the financial information contained in Annexure 4 to 20 of this report read along with the Significant Accounting Policies, Changes in Significant Accounting Polices and Notes (Refer Annexure 21 and 22) prepared after making adjustments and regroupings, as considered appropriate, have been prepared in accordance with Part IIB of Schedule II of the Act and the ICDR Regulations except stated in 9 above.

10. This report is intended solely for your information and for inclusion in the offer document prepared in

connection with the Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

For Patel Mohan Ramesh & Co Chartered Accountants Firm Registration No: 002597 S S.Mohan Partner Membership No. 019695 Place: Trichy Date: 21.06.2010


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Summary Statement of Assets and Liabilities, As Restated

(Rs. in lakhs)

2010 2009 2008 2007 2006

1. Fixed AssetsGross Block 2,614.95 2,435.70 2,427.19 2,430.81 2,429.35 Less‐Depreciation 1,405.76 1,420.88 1,448.18 1,354.67 1,251.07 Net Block 1,209.19 1,014.82 979.01 1,076.14 1,178.28

Net Deferred Tax Assets 369.61 375.68 344.73 308.10 273.23

2. Current Assets, Loans and AdvancesInventories 29.91 15.64 7.54 13.34 15.53 Debtors 140.77 50.48 10.01 7.93 8.32 Cash and Bank Balances 8.86 8.60 18.64 1.64 1.03 Loans and Advances 24.90 20.65 25.40 26.50 25.93 Total 204.44 95.38 61.60 49.40 50.80

Total Assets (A) 1,783.24 1,485.87 1,385.34 1,433.64 1,502.32

3. Liabilities and ProvisionsUnsecured Loans 1,554.01 1,225.32 885.19 564.47 658.47 Current Liabilities 64.64 72.86 59.80 172.78 64.16 Provisions 54.05 52.77 47.11 44.03 40.19

Total Liabilities (B) 1,672.70 1,350.95 992.10 781.27 762.82

Net Worth (A)‐(B) 110.54 134.92 393.24 652.37 739.50

Represented by1. Share Capital 125.45 1,254.50 1,254.50 1,254.50 1,254.50 2. Reserves and Surplus 301.82 301.82 301.82 301.82 301.82 Less:3. Debit Balance of Profit & Loss A/c (316.74) (1,421.40) (1,163.08) (903.95) (816.82)

Net Worth 110.54 134.92 393.24 652.37 739.50


Refer Notes on Adjustments made in Restated financial statements on Page No. 84 of the Draft Letter of Offer


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Summary Statement of Profits and Losses, As Restated(Rs. in lakhs)

2010 2009 2008 2007 2006

1. IncomeIncome from Operations 853.70 327.38 84.00 196.95 280.53 Other Income 6.17 21.73 19.19 16.00 9.73

Total 859.87 349.11 103.18 212.95 290.27

2. ExpenditureConsumption of Medicines etc 161.76 61.03 30.59 57.20 87.29 Operating Expenses 213.49 90.51 14.96 15.81 33.11 Personnel Expenses 196.87 103.40 51.20 76.17 102.88 Administration Expenses 219.54 151.68 101.29 81.61 118.77 Finance Charges 114.08 139.81 101.63 ‐ 10.88 Depreciation 86.53 91.03 98.40 103.60 112.85

Total 992.27 637.46 398.06 334.39 465.78

3. Profit before Tax & Extraordinary Items (132.40) (288.36) (294.87) (121.45) (175.51) Extra ordinary Items 114.08 ‐ ‐ ‐ ‐

4. Profit/(Loss) before Tax (18.32) (288.36) (294.87) (121.45) (175.51) Less: Provision for TaxesIncome Tax ‐ ‐ ‐ ‐ ‐ Deferred Tax 6.07 (30.94) (36.63) (34.87) (25.89) Fringe Benefit Tax ‐ 0.90 0.88 0.56 1.04

5. Profit/(Loss) for the year (24.39) (258.31) (259.13) (87.14) (150.66) Profit/(loss) brought forward (1,421.40) (1,163.08) (903.95) (816.82) (666.16) Less: Adjusted against Share Capital 1,129.05 ‐ ‐ ‐ ‐

Profit/(Loss) carried to Balance Sheet (316.74) (1,421.40) (1,163.08) (903.95) (816.82)

Notes:

1. Extraordinary item of Rs.114.08 lakhs for the period ended 31st March 2010 comprise of waiver of interest on loans taken from a company under the same management.

2. The company has implemented a scheme of Capital Reduction approved by the Honourable High Court of Madras vide order

dated 24th November 2009. As a result, the Face Value has been reduced to Re.1. Consequently, share capital amounting to Rs. 1,129.05 lakhs has been utilized to write off accumulated losses.


Refer Notes on Adjustments made in Restated financial statements on Page No. 84 of the Draft Letter of Offer Notes on Adjustments made in Restated financial statements


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Statement of Significant Accounting Policies, As Restated (Annexure 21)

1. Basis of preparation The Restated Summary Statements of Assets and Liabilities, Profits and Losses and Cash Flows have been prepared by applying the necessary adjustments to the financial statements of the company. These financial statements have been prepared under the historical cost convention on an accrual basis in accordance with the Notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The Restated Unconsolidated Summary Statements comply in all material respects with the requirements of: a. Paragraph B(1) of Part II of Schedule II to the Companies Act, 1956. b. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,

2009.

2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates.

3. Fixed Assets Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase cost and any expense attributable directly in bringing the asset to its working condition for its intended use.

4. Depreciation Depreciation on Leasehold Improvements is provided over the primary period of lease or over the useful lives of the respective fixed assets; whichever is shorter. Depreciation on all other fixed assets is provided using the Straight Line Method at the rates prescribed under Schedule XIV of the Companies Act, which is the management’s estimate of useful lives of the assets. Depreciation on new assets acquired during the year is provided at the applicable rates from the date of acquisition to the year end. Depreciation on assets sold or discarded is provided till the date of disposal.

5. Expenditure on substantial expansion Expenditure directly related to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized to the extent to which the expenditure is related to construction or is incidental thereto. Only those expenditure that increase future benefits of the asset beyond its originally assessed standard of performance are capitalized. Borrowing costs relating to acquisition or construction of fixed assets which take substantial period of time to get ready are capitalized till such time when substantially all activities in connection with its intended use or sale is complete.

6. Intangibles

Intangible assets are stated at cost of acquisition less accumulated amortization. Application software are amortized over the license period.


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7. Impairment a. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of

impairment based on internal/ external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

b. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

8. Leases a. Where the Company is the lessee:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss account on a straight‐line basis over the lease term.

b. Where the Company is the lessor:

Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss account on a straight‐line basis over the lease term. Costs, including depreciation are recognised as expense in the Profit and Loss account.

9. Inventories

Inventories are valued as follows: a. Medical Consumables, Stores and Spares and Fuel ‐ Valued at Cost b. Pharmacy Medicines – Valued at Lower of Cost and Net Realizable value Cost is determined on First In First Out method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs incurred to make the sale.

10. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. a. Operating Income:

Income from Healthcare services is recognised on completed service contract method. Pharmacy sales are accounted inclusive of sales tax net of discounts.

b. Interest: Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

11. Employee benefits:

a. Contributions to Provident fund:

The Company makes a fixed monthly contribution to statutory provident fund of eligible employees in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952. Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss account of the year when the contributions to the respective funds are due.

b. Gratuity The company makes contribution to a scheme administered by the Life Insurance Corporation of India (LIC) to discharge the Gratuity liabilities of its employees. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the year using projected unit credit method. Actuarial gains/losses are recognised in the Profit and Loss account as they occur.


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c. Short Term Benefits Short Term Benefits are those benefits which are payable within twelve months after the end of the period in which the employees render service and these are measured at cost.

12. Income Taxes

Tax expense comprises current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income tax reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date, the Company re‐assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes‐down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write‐down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

. 13. Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

14. Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Notes to the Statements of Assets and Liabilities, Profits & Losses and Cash Flows, As Restated (Annexure 22)

1. Material Regroupings Appropriate adjustments have been made in the Restated Summary Statements of Assets and Liabilities, Profits and Losses and Cash Flows, wherever required, by reclassification of the corresponding items of income, expenses, assets and liabilities, in order to bring them in line with the groupings as per the audited financials of the Company for the year ended March 31, 2009 and the requirements of the Guidelines issued by the Securities and Exchange Board of India (Disclosure and Investor Protection Guidelines 2000) as amended from time to time.


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2. Material Adjustments

Summary of the results of restatement made in the audited financial statements of the company for the respective periods/years and their impact on the losses of the company is as under.

(Rs. in lakhs)

Adjustments

Year ended 31st March Against P&L as on 1st April 2005

2010 2009 2008 2007 2006

Prior period items 3.53 (5.55) 0.80 0.57 0.65 ‐ Balances written back (28.49) (19.41) 14.94 4.72 8.40 19.84 Provision for Deferred Tax ‐ (344.73) 36.63 34.87 25.89 247.34 Provision for Property Tax Revision

45.70 (4.30) (2.80) (2.80) (2.97) (32.82)

Municipal Rent Revision ‐ 3.32 (0.47) (0.47) (0.47) (1.91) Provision for Claims 1.00 ‐ ‐ ‐ (1.00) Net effect in Profit & Loss Account

20.74 (369.67) 49.10 36.90 31.50 231.45

Notes on material adjustments made on restatement

a. Prior period items

In the preparation of the restated financial statements, those items of income or expenses that have been identified as prior period as per the audited financial statements for the year ended from 2006 to 2009 have been adjusted appropriately to the respective years to which they relate. Further, the debit balance in Profit and Loss account as at April 1, 2005 has been adjusted to reflect the impact of prior period items pertaining to years prior to 2005.

(Rs. in lakhs)

Particulars


2010 2009 2008 2007 2006

Doctor Fees 1.23 (1.23) ‐ ‐ ‐ ‐ Repairs & Maintenance 0.26 (0.26) ‐ ‐ ‐ ‐ Telephone Expenses ‐ (0.87) 0.87 ‐ ‐ ‐ Hospital Income 2.04 (2.04) ‐ ‐ ‐ ‐ Miscellaneous Income ‐ (1.15) (0.07) 0.57 0.65 ‐ Net effect on Profit & Loss Account

3.53 (5.55) 0.80 0.57 0.65 ‐

b. Balances Written Back In the preparation of the restated financial statements, those liabilities that have been identified as no longer payable/waived as per the audited financial statements for the year ended from 2006 to 2010 have been adjusted appropriately to the respective years to which they relate. Further, the debit balance in Profit and Loss account as at April 1, 2005 has been adjusted to reflect the impact of write backs/waiver pertaining to years prior to 2005.

(Rs. in lakhs)

Particulars


2010 2009 2008 2007 2006

Creditors written back (28.49) (14.55) 14.94 2.36 5.90 19.84 Bonus Payable ‐ (4.86) ‐ 2.36 2.50 ‐ Net effect in Profit & Loss Account

(28.49) (19.41) 14.94 4.72 8.40 19.84


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c. Provision for Deferred Taxes

The company had not adopted Accounting Standard‐22 till year 2008‐09 as there was no virtual certainty of the company making taxable profits for set off in future. However, from the year 2008‐09 owing to significant turnaround in business and increase in turnover, the company has started recognizing Deferred Taxes. As a result, the company has credited a sum of Rs.375.68 lakhs being Deferred Tax Asset on account of Timing differences on depreciation and depreciation loss from inception. However, the company has not recognized Deferred Tax Assets on Business Loss as a matter of prudence. Due to retrospective application of the standard from 2008‐09, there was an additional credit to the Profit & Loss Account for the year ended 31st March 2009 to the extent of Rs. 344.73 lakhs being deferred assets tax pertaining to previous years. In the preparation of the restated financial statements, this additional credit has been adjusted appropriately to the respective years to which it relates as per working below. Further, the debit balance in Profit and Loss account as at April 1, 2005 has been adjusted to reflect the impact of Deferred Taxes pertaining to years prior to 2005

(Rs. in lakhs)

Particulars


2010 2009 2008 2007 2006

Deferred Tax Asset on i. Difference in

Depreciation ii. Depreciation Loss iii. Changes in Tax rates iv. Total

‐ ‐ ‐ ‐

13.83

17.12‐

30.95

21.16

12.293.18

36.63

21.07

13.80 ‐ 34.87

22.12

15.87

(12.09) 25.89

(338.70)

584.04‐

208.64 Deferred Tax Asset recognized in Profit & Loss Account

‐ 375.68

‐ ‐ ‐ ‐

Net effect in Profit & Loss Account

‐ (344.73) 36.63 34.87 25.89 247.34

d. Provision for Property Tax Revision

The company had received a demand notice from Thiruchirapalli City Corporation for an amount of Rs.89.86 lakhs being arrears of property tax due to revision of rates from year 1993‐94 onwards. Against this, the company has provided a sum Rs.50 lakhs on 30th June 2009. In the preparation of the restated financial statements, this additional charge has been adjusted appropriately to the respective years on pro‐rata basis to which it relates as per working below. Further, the debit balance in Profit and Loss account as at April 1, 2005 has been adjusted to reflect the impact of the portion of property tax provision pertaining to years prior to 2005.

(Rs. in lakhs)

Particulars


2010 2009 2008 2007 2006

Arrears of Property Tax (8.46) (8.46) (5.51) (5.51) (5.84) (59.64) Provision made on 30th June 2009

50.00 ‐ ‐ ‐ ‐ ‐

Pro‐rata arrears based on provision

4.30 4.30 2.80 2.80 2.97 32.82


45.70 (4.30) (2.80) (2.80) (2.97) (32.82)


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e. Provision for Municipal Rent Revision

The company had received a demand notice from Trichy Municipal Corporation for an amount of Rs. 3.80 lakhs being arrears of rent due to revision of rent w.e.f 2001‐02 onwards. Against this, the company has provided Rs.3.79 lakhs in the year 2008‐09. In the preparation of the restated financial statements, this additional charge has been adjusted appropriately to the respective years to which it relates as per working below. Further, the debit balance in Profit and Loss account as at April 1, 2005 has been adjusted to reflect the impact of the portion of property tax provision pertaining to years prior to 2005.

(Rs. in lakhs)

Particulars


2010 2009 2008 2007 2006

Arrears of Municipal Rent ‐ (0.47) (0.47) (0.47) (0.47) (1.91) Provision made in Profit & Loss Account for the year ended 31st March 2009

‐ 3.79 ‐ ‐ ‐ ‐


‐ 3.32 (0.47) (0.47) (0.47) (1.91)

f. Provision made against claims

The company has provided a sum of Rs.1.00 lakhs in the Profit & Loss Account for the year ended 31st March 2009 in connection with an alleged incorrect diagnosis made to a patient for which the company has gone on an appeal which is pending before the District Consumer Disputes Redressal Forum, Trichy. Since, the appeal was pertaining to the year 2003; the aforesaid amount has been adjusted against the debit balance in Profit and Loss account as at April 1, 2005.

3. Reconciliation of Statement of Profit & Loss

The following table shows reconciliation between the figures reported as per the audited financial statement of the respective years and the restated figures after giving effect to the adjustments stated in paragraph 2 above.

(Rs. in lakhs)

Particulars Year ended 31st March P&L as on

1st April 2005

2010

2009

2008

2007 2006

Profit / (Loss) as per audited financial statements

(45.13) 111.36 (308.23) (124.04) (182.16) (897.61)

Net effect on Profit &Loss Account (as per table 2.b)

20.74 (369.67) 49.10 36.90 31.50 224.45

Loss as per Restated Financial Statement

(24.39) (258.31) (259.13) (87.14) (150.66) (673.16)


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4. Auditor’s Qualifications:

Audit Qualifications which do not require any corrective adjustments in the financial information:

a. For the year ended 31st March 2005 and 31st March 2006 The company has not provided for pro‐rata interest on the inter company loans for the current year.

b. For the year ended 31st March 2007 The company has not provided for interest of Rs. 60.36 lakhs on inter‐company loans for the current year and Rs. 68.90 lakhs for earlier years. Accordingly the loss for the current year is understated by Rs. 60.36 lakhs, the accumulated losses are understated by Rs. 129.26 lakhs and the liabilities by Rs. 129.26 lakhs. CARO, 2003 The company is irregular in repaying the principal amounts and has been irregular in payment of interest.

c. For the year ended 31st March 2009 and 31st March 2010 CARO, 2003

i. The fixed assets register maintained by the company is not in proper format. The company was found to be maintaining records relating to fixed assets in an electronic format in which location and identification details are not furnished.

ii. There was no repayment terms fixed for loans taken from parties covered in register to be maintained under section 301 of the Companies Act, 1956 as per records produced.

5. Capital Commitments:

(Rs. in lakhs)


2010 2009 2008 2007 2006Estimated amount of Contracts remaining to be executed on capital account not provided for (net of advances) as on

59.14 2.26 ‐ ‐ ‐

6. Contingent Liabilities

(Rs. in lakhs)


2010 2009 2008 2007 2006Show cause notice received from The Department of Customs towards customs duty for the medical equipment imported during the year 1989‐93.

85.25 85.25 85.25 85.25 85.25

Show cause notice from The Municipal Corporation, Trichy in connection with the construction of the 4th, 5th & 6th floors of the hospital building without approval.

* * * * *

Claims against the company not acknowledged as debt

4.35 6.76 ‐ ‐ ‐

Liability on account of legal cases pending against the company

‐ ‐ * * *

Appeal seeking injunction from conveyance of ownership of the land on which the building was constructed to a third party

‐ ‐ * ‐ ‐

Corporate Guarantee given to Axis Bank Ltd in respect of loan taken by Sri Kavery Medical Care (Trichy) Pvt Ltd

* * * ‐ ‐

* The financial effect cannot be ascertained, hence no amounts are provided.


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7. Employee Benefits

The company makes contribution to a scheme administered by LIC. Gratuity liability is accounted based on actuarial valuation as at balance sheet date. The following table shows the movement in plan assets. Gratuity liability and amount charged to profit and loss account. (Rs. in lakhs)

Particulars Year ended 31st March 2010

Year ended 31st March 2009

Opening Defined Benefit Obligation 0.84 0.67Interest Cost 0.12 ‐Current Services Cost 0.45 0.17Benefits Paid ‐ ‐Actuarial (Gain)/ Losses on Obligation ‐ ‐Closed Defined Benefit Obligation 1.41 0.84

Defined Benefit Obligation liability as at the balance sheet is wholly funded by the company.

(Rs. in lakhs)



Change in Plan Assets Opening Fair Value of Plan Assets 0.84 ‐Expected Return on Plan Assets 0.08 ‐Contributions 1.06 0.84Benefits Paid ‐ ‐Actuarial Gain/ (Loss) ‐ ‐Closing Fair Value of Plan Assets 1.98 0.84Reconciliation of Present Value of theobligation and the fair value of the Plan assets

Fair Value of the defined benefit 1.41 0.84Fair Value of the plan assets at the end of the year 1.98 0.84Liability/ (Assets) (0.57) ‐Unrecognised past service cost 0.57 ‐Liability/ (Assets) recognised in the balance sheet ‐ ‐Expenses to be recognised in Profit and Loss Current Service Cost 0.45 0.17Interest Cost 0.12 ‐Expected Return on Plan Assets (0.08) ‐Unrecognised past service cost 0.57 ‐Actuarial (Gain)/ Loss ‐ ‐Expenses recognised in the Income Statement 1.06 0.17Balance Sheet Reconciliation Opening Net Liability 0.84 0.67Expenses as above 1.06 0.17Employers Contribution 1.90 0.84Amount recognised in the Balance Sheet ‐ ‐

Actuarial assumptions used:‐



Mortality LIC (1994‐96) LIC (1994‐96)Discount Rate 8% 8%Withdrawal Rate 1‐3% 1‐3%Salary Escalation 5% 7%Method used for Present value of plan liability Projected Unit

Credit Method Projected Unit Credit

Method


92

8. Dues To Micro, Small And Medium Industries Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from 2nd October, 2006, certain disclosures are required to be made relating to Micro, Small & Medium Enterprises. The Group is in the process of compiling relevant information from its suppliers about their coverage under the said Act. Since the relevant information is not readily available, no disclosures have been made in the accounts

9. Segment Information The company is engaged in only one business segment namely hospital service and hence this constitutes only a single primary segment. As such, Accounting Standard 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of India is not applicable.

10. Restated Earnings Per Share


2010 2009 2008 2007 2006Profit after Tax before extraordinary items(Rs. in lakhs)

(138.47) (258.31) (259.13) (87.14) (150.66)

Profit after Tax after extraordinary items(Rs. in lakhs)

(24.39) (258.31) (259.13) (87.14) (150.66)

Weighted Average number of equity shares outstanding (Nos in lakhs)

125.45 125.45 125.45 125.45 125.45

Basic & Diluted Earnings Per Share before extraordinary items (Rs.)

(1.10) (2.06) (2.07) (0.69) (1.20)

Basic & Diluted Earnings Per Share after extraordinary items (Rs.)

(0.19) (2.06) (2.07) (0.69) (1.20)

Face Value of share (Re/Rs.) 1 10 10 10 10


93

11. Previous year figures have been regrouped / rearranged where ever necessary to confirm to current year’s classification.

Summary Statement of Cash Flows, As Restated

(Rs. in lakhs)

2010 2009 2008 2007 20061. Cash Flow From Operating Activities:Net Profit Before Tax and Extraordinary Items (132.40) (288.36) (294.87) (121.45) (175.51) Adjustments for:Depreciation 86.53 91.03 98.40 103.60 112.85 Interest Paid 114.08 139.81 101.63 ‐ 10.88 Loss on Sale/Discard of Fixed Assets 37.01 ‐ 0.48 ‐ 1.86 Interest Income (1.64) (0.62) (1.08) ‐ Profit on Sale assets ‐ (6.62) ‐ ‐ (1.58) Provision for Claims ‐ 4.77 3.27 3.27 3.44

Operating Profit Before Working Capital Changes 105.22 (61.00) (91.71) (15.65) (48.06)

Adjustments for Working Capital ChangesChanges in Inventories (14.27) (8.10) 5.80 2.19 3.64 Changes in Debtors (90.29) (40.47) (2.09) 0.39 10.44 Changes in Loans and Advances (4.25) 4.75 1.09 (0.57) 5.84 Changes in Current Liabilities (4.63) 13.05 (112.96) 108.60 (32.58)

Cash Generated from Operations: (8.22) (91.76) (199.87) 94.96 (60.72) Taxes Paid (2.30) ‐ (1.08) ‐ ‐ Net Cash Flow from Operating Activities (10.53) (91.76) (200.95) 94.96 (60.72)

2. Cash Flow From Investing Activities:Purchase of Fixed Assets (338.20) (132.84) (5.10) (1.45) (0.89) Sale of Fixed Assets 20.30 12.61 3.35 ‐ 7.50 Interest Income ‐ 1.64 0.62 1.08 ‐ Net Cash Flow from Investing Activities (317.91) (118.59) (1.13) (0.36) 6.61

3. Cash Flow from Financing Activities:Proceeds from Long Term Borrowing 478.01 232.00 851.00 6.00 145.23 Repayment of Long Term Borrowing (149.32) ‐ (571.47) (100.00) (80.00) Interest Paid (114.08) (31.68) (60.45) ‐ (11.02) Cash flow before extraordinary items 214.61 200.32 219.08 (94.00) 54.21 Extraordinary Items 114.08 ‐ ‐ ‐ ‐ Net Cash Flow from Financing Activities 328.69 200.32 219.08 (94.00) 54.21

Net Increase in cash and cash Equivalents 0.26 (10.03) 17.00 0.60 0.10

Cash and Cash Equivalents as at Opening 8.60 18.64 1.64 1.03 0.93

Cash and Cash Equivalents as at Closing 8.86 8.60 18.64 1.64 1.03

Note:1. The Cash Flow Statement has been prepared under indirect method as set out in Accounting Standard‐3 on Cash Flow Statements as per Companies Accounting Standard Rules , 20062. Cash and Cash equivalents comprise Cash and Bank Balances



94

Summary Statement of Accounting Ratios, As Restated (Annexure 17)

2010 2009 2008 2007 2006

1. Restated Profit (including Other Income) to Income from Operations (%) ‐2% ‐88% ‐351% ‐62% ‐63%

2. a. Earnings per Share (1.27) 0.89 (2.46) (0.99) (1.45) b. Restated Earnings per Share (1.10) (2.06) (2.07) (0.69) (1.20)

3. a. Cash Earnings per Share (0.58) 1.62 (1.68) (0.16) (0.55) b. Restated Cash Earnings per Share (0.41) (1.33) (1.28) 0.13 (0.30)

4. a. Net Asset Value per Share 0.88 1.24 0.35 2.81 3.80 b. Restated Net Asset Value per Share 0.88 1.08 3.13 5.20 5.89

5. Return on Net worth (%) ‐125.27% ‐191.46% ‐65.90% ‐13.36% ‐20.37%

Notes:1. Ratios have been computed using the following formulae:

2. Earnings Per Share has been computed in accordance with Accounting Standard ‐ 20 (Earnings Per Share) of The Companies Accounting Standard Rules 2006.

Particulars

Net Profit/(loss) after Tax but before extraordinary items, as restated attributable to equity shareholders

Weighted average number of equity shares outstanding during the year

Restated Profit (including Other Income) to Income from Operations (%) = Income from Operations

Net profit before tax

As at 31st March

Net Profit/(loss) after Tax but before extraordinary items, as restated attributable to equity shareholders

Net Worth, as restated, at the end of the year

Earnings Per Share (Rs.) =

Net Asset Value (NAV) per share = Net Worth, as restated, at the end of the yearNumber of equity shares outstanding at the end of year

Return on Net Worth (%) =

Cash Earnings Per Share (Rs.) = Net Profit/(loss) after Tax but before depreciation and extraordinary items, as

restated attributable to equity shareholdersWeighted average number of equity shares outstanding during the year


95

Statement of Capitalisation (Annexure 18)(Rs. in lakhs)

1. Borrowings

Short Term ‐ ‐ ‐ Long Term 1,554.01 1,225.32 1,554.01 Total Debt 1,554.01 1,225.32 1,554.01

2. Shareholders' Funds

Share Capital 125.45 1,254.50 1,630.85 Reserves & Surplus 301.82 301.82 301.82 Less: Debit balance in Profit & Loss Account (316.74) (1,421.40) (316.74) Total Shareholders' Funds 110.54 134.93 1,615.94

Total Debt Equity Ratio 14.06 9.08 0.96

Notes:1. The above Long Term Loan comprise of Loan taken from Promoter Group Company. The same has been considered as a long term debt for preparing this statement.

2. The figures disclosed above are based on the Summary Statement of Assets and Liabilities, as Restated

as at 31st March 2010

3. The Post Issue Debt Equity Ratio is computed on the basis of Rights Issue Ratio of 12: 1 i.e 12 shares of Re. 1 each for every 1 Re. 1 share held as on record date.

Shareholders' FundsTotal Debts

4. Total Debt Equity Ratio =

Year ended 31st

March 2010Particulars

Year ended 31st

March 2009Post Issue


96

Statement of Tax Shelter, As Restated (Annexure 19)(Rs. in lakhs)

2010 2009 2008 2007 2006

Tax Rate 30.90% 30.90% 30.90% 33.66% 33.66%

1. Profit before Tax as Restated (18.32) (288.36) (294.87) (121.45) (175.51)

2. Tax at notional rates (Tax saved) (5.66) (89.10) (91.12) (40.88) (59.08) 3 .Income Tax Provision in books ‐ ‐ ‐ ‐ ‐

4. Permanent Differences

Expenses disallowed under Income Tax 53.60 4.79 0.01 ‐ ‐ Loss on Sale of Asset 37.01 3.44 0.48 ‐ 1.86 Profit on Sale of Asset ‐ (10.05) ‐ ‐ (1.58) Long Term Capital Loss ‐ ‐ ‐ ‐ (0.28) Total (A) 90.61 (1.82) 0.49 ‐ ‐

5. Temporary DifferencesDifference between Book bepreciation and Tax depreciation 20.05 40.70 62.23 62.61 65.71 Provision for Gratuity ‐ ‐ 9.00 ‐ ‐ Provision for Bonus 6.39 ‐ 1.50 (4.36) 1.77 Other Disallowances ‐ ‐ ‐ ‐ (0.45) Total (B) 26.44 40.70 72.73 58.25 67.03

Net Adjustments (A+B) 117.05 38.88 73.22 58.25 67.03

Loss Carried Forward ‐ (249.48) (221.65) (63.20) (108.48)

Notes:1. The aforesaid Statement of Tax Shelters has been prepared as per the Restated Statement of Profits and Losses.

2. The permanent/timing differences have been computed considering the acknowledged copies of the income‐tax returns filed by the Company for each of the respective years presented in the above statement.

3. The figures for the period ended 31st March 2010 are based on the provisional computation of total income prepared by the Company for the period then ended and are subject to any changes that might be considered by the Company at the time of filing its return of income for the AY 2010‐11.



97

Statement Of Share Capital, As Restated (Annexure 4)(Rs. in lakhs)

2010 2009 2008 2007 2006

Authorised Share Capital(2,50,00,000 Equity Shares of Rs.10 each) ‐ 2,500.00 2,500.00 2,500.00 2,500.00 (25,00,00,000 Equity Shares of Re.1 each) 2,500.00 ‐ ‐ ‐ ‐

Issued, Subscribed and Paid up Capital(1,25,45,000 Equity Shares of Rs.10 each) ‐ 1,254.50 1,254.50 1,254.50 1,254.50 (1,25,45,000 Equity Shares of Re.1 each) 125.45 ‐ ‐ ‐ ‐

Total 125.45 1,254.50 1,254.50 1,254.50 1,254.50

Notes:1. Of the issued, subscribed and paid up, 2,59,270 shares were issued for consideration other than cash.

2. The Face Value of per share was reduced to Re.1 vide a scheme of Capital Reduction approved by the Honourable High Court of Madras vide order dated 24th November 2009 and 10th December 2009 and subsequently registered with The Registrar of Companies, Tamil Nadu on 15th December 2009.


Statement of Reserves and Surplus, As Restated (Annexure 5)

(Rs. in lakhs)

2010 2009 2008 2007 2006

Capital Reserve 301.82 301.82 301.82 301.82 301.82

Total 301.82 301.82 301.82 301.82 301.82

Note:The above Capital Reserve represents waiver of principal amount of loan taken from ICICI Bank Ltd, IDBI Ltd & IFCI Ltd pursuant to a scheme of One Time Settlement during the year 2004.



98

Statement of Unsecured Loans, As Restated (Annexure 6)(Rs. in lakhs)

2010 2009 2008 2007 2006

Inter Corporate LoansSea Horse India Private Limited ‐ ‐ ‐ 115.34 145.34 IMSA Shipping Agency Private Limited ‐ ‐ ‐ 30.00 ‐

Marine Container Services (South) Private Limited ‐ ‐ ‐ 150.50 147.50

Dalmia Cements (Bharath) Limited ‐ ‐ ‐ 10.00 110.00 Aarsree Investments Private Limited ‐ ‐ ‐ 110.00 110.00 Sea Horse Ship Agencies Private Limited ‐ ‐ ‐ 148.50 145.50 Poddar Pigments Limited ‐ ‐ ‐ 0.13 0.13 Sri Kavery Medical Care (Trichy) Limited 1,554.01 1,076.00 844.00 ‐ ‐ Interest Outstanding on above loan ‐ 149.32 41.19 ‐ ‐

Total 1,554.01 1,225.32 885.19 564.47 658.47

Note:The following are the principal terms and conditions of Unsecured loans obtained by the company from Promoter Group Companies

Lender Amount of loan taken

Repayment date

Sea Horse India Pvt Ltd 5.00 ^

Sea Horse Ship Agencies Pvt Ltd 2.00 ^

Sri Kavery Medical Care (Trichy) Ltd 1,554.01 *

^ The balance outstanding as on 31‐March‐2010 of these loans have been written back as they are no longer payable.* No repayment date has been fixed as per terms of agreement.

On demandUpto 31‐3‐09: 15% p.a

From 1‐4‐09 to 31‐3‐10: Nil

Repayment Conditions On demand

On demand

Rate of Interest

Nil

Nil


Statement of Current Liabilities and Provisions, As Restated (Annexure 7)

(Rs. in lakhs)

2010 2009 2008 2007 2006

a. Current LiabilitiesCreditors for Goods and Services* 46.45 41.21 12.42 21.73 25.50 Creditors for Capital Items 8.32 23.09 5.84 5.84 5.84 Due to Directors ‐ ‐ 13.47 ‐ ‐ Other Creditors 9.87 8.56 28.07 145.20 32.82

b. Provisions ‐ ‐ ‐ ‐ Provisions for Litigations & Claims 54.05 50.47 45.70 42.42 39.15 Provision for Fringe Benefit Tax ‐ 2.30 1.40 1.60 1.04

Total 118.69 125.63 106.91 216.80 104.36

* Of this Rs. 0.49 lakhs (Previous Year: Rs. Nil) is due to a company under the same management

As at 31st MarchParticulars


99

Summary Statement of Fixed Assets, As Restated (Annexure 8)(Rs. in lakhs)

2010 2009 2008 2007 2006 a. Opening Block of AssetsGross Block 2,435.71 2,427.19 2,430.80 2,429.35 2,438.25 Less: Accumulated Depreciation (1,420.89) (1,448.18) (1,354.67) (1,251.07) (1,140.24) Net Block 1,014.82 979.01 1,076.13 1,178.28 1,298.02

b. Add: Additions during the year 338.21 132.84 5.10 1.45 0.89

c. Less: Deletions during the yearGross Block 158.96 124.32 8.71 ‐ 9.79 Less: Accumulated Depreciation (101.65) (118.33) (4.89) ‐ (2.02) Net Block 57.31 5.99 3.82 ‐ 7.77

d. Less: Depreciation for the year (86.53) (91.03) (98.40) (103.60) (112.85)

e. Closing Block of AssetsGross Block 2,614.96 2,435.71 2,427.19 2,430.80 2,429.35 Less: Accumulated Depreciation (1,405.77) (1,420.89) (1,448.18) (1,354.67) (1,251.07)

Closing Net Block 1,209.19 1,014.82 979.01 1,076.14 1,178.28


Statement of Inventories, As Restated (Annexure 9)

(Rs. in lakhs)

2010 2009 2008 2007 2006Pharmacy 14.32 6.50 3.95 1.99 1.99 Medical Instruments and Consumables 9.81 8.15 2.95 9.73 11.32 Stores and Spares 5.78 0.99 0.64 1.62 2.22

Total 29.91 15.64 7.54 13.34 15.53


Statement of Debtors, As Restated (Annexure10 )

(Rs. in lakhs)

2010 2009 2008 2007 2006(Unsecured and Considered Good)More than Six months 30.35 7.60 2.32 3.27 5.14 Other Debts 114.02 42.89 7.69 4.65 3.17 Less: Provision for Doubtful Debts (3.60) ‐ ‐ ‐ ‐

Total 140.77 50.48 10.01 7.93 8.32


Statement of Cash and Bank Balances, As Restated (Annexure 11)

(Rs. in lakhs)

2010 2009 2008 2007 2006Cash on Hand 2.32 0.60 0.29 0.05 0.29 Balances with Scheduled Banks 6.54 8.01 18.35 1.58 0.74

Total 8.86 8.60 18.64 1.64 1.03



100

Statement of Loans and Advances , As Restated (Annexure 12)(Rs. in lakhs)

2010 2009 2008 2007 2006 a. Advances(Unsecured and Considered Good)Income Tax Payments 6.04 5.50 4.08 7.17 5.07 Prepaid Expenses 5.12 1.70 ‐ 0.14 0.27 Income Receivable ‐ 0.51 0.32 3.33 3.33 Other advances 9.00 7.82 15.89 6.76 6.29

b. Deposits ‐ ‐ ‐ ‐ with Government Departments 4.53 4.96 4.96 8.95 10.81 with Others 0.21 0.16 0.15 0.15 0.15

Total 24.90 20.65 25.40 26.50 25.93


Statement of Other Income, As Restated (Annexure 13)

(Rs. in lakhs)

2010 2009 2008 2007 2006

Interest Income 0.36 1.64 0.62 1.08 ‐ Miscellaneous Income 5.81 13.53 1.87 9.62 0.69 Balances written back ‐ 6.56 16.69 5.30 9.05

Total 6.17 21.73 19.19 16.00 9.73

Note:1. The classification of other income as recurring/non‐recurring and related/not related to business activity is based on the

current operation and business activity of the company as determined by the management.

2. Percentage of Other Income to Profit before tax has not been shown since there is a net loss before tax, as restated.

3. The details of 'Other Income' disclosed above are stated after adjusting the effect of restatement. The same has been

shown gross of restatement in the Summary Statement of Profits and Losses, as restated and the adjustments have

been listed separately under note 2 'Material Adjustments' in the Notes to Restated Financial Statements

4. Details of Other Income

Source of Other Income Nature Related/Not Related to Business Activity

Interest Recurring Not RelatedAmbulance Income Recurring RelatedInfrastructure Fees Recurring RelatedBalances written back Non‐Recurring RelatedMiscellaneous Income Recurring Related


Statement of Operating Expenses, As Restated (Annexure 14)

(Rs. in lakhs)

2010 2009 2008 2007 2006

Lab Charges and Testing Fees 54.69 24.88 5.00 1.31 2.71 Doctors Fees 140.16 46.14 9.95 14.50 30.40 IP Services Received 18.64 19.48 ‐ ‐ ‐

Total 213.49 90.51 14.96 15.81 33.11



101

Statement of Personnel Expenses, As Restated (Annexure 15)(Rs. in lakhs)

2010 2009 2008 2007 2006

Salaries, Wages and Bonus 180.46 96.02 47.83 67.15 87.83 Contribution to Provident Fund 2.69 1.42 2.91 6.55 8.03 Staff Welfare 12.11 2.91 0.45 2.47 7.02 Gratuity 1.61 3.05 ‐ ‐ ‐

Total 196.87 103.40 51.20 76.17 102.88


Statement of Administration Expenses , As Restated (Annexure 16)

(Rs. in lakhs)

2010 2009 2008 2007 2006

Audit Fees a. Statutory Audit 0.88 0.55 0.56 0.56 0.56 b. Tax Audit 0.22 0.06 0.06 0.06 0.06 c. Other Services 0.55 0.55 Business Promotion 4.50 3.54 0.04 0.04 0.08 Director’s Sitting Fees 3.53 2.72 0.25 0.34 0.23 Loss on Sale of Assets 37.01 ‐ 0.48 ‐ 0.28 Postage and Telephone 10.83 6.01 3.55 5.19 8.46 Power & Fuel 32.27 23.83 23.55 33.44 50.46 Printing and Stationery 9.74 6.91 2.15 2.44 4.01 Professional Charges 19.37 4.59 8.12 4.36 5.89 Property Tax 4.30 4.30 2.80 2.80 2.97 Publicity & Advertising 7.16 12.94 9.41 1.54 1.88 Rates & Taxes 7.69 5.68 4.71 4.19 4.50 Rent 30.00 30.00 2.24 2.24 2.27 Repairs & Maintenance 24.80 37.80 35.73 18.18 23.30 Sales Tax Expenses 3.22 0.95 0.52 0.17 1.87 Security Charges 3.69 3.23 1.90 1.96 3.19 Travelling & Conveyance 5.14 4.30 1.66 1.47 5.42 Uniform & Liveries 1.84 1.42 0.50 0.02 0.40 Other Administration Expenses 12.80 2.29 3.06 2.61 2.95

Total 219.54 151.68 101.29 81.61 118.77



102

Statement of Related Party Disclosures (Annexure 20) a. Names of related parties (As certified by the management)

S.No Relationship Name of entity/person 1 Key Managerial Personnel (KMP)

(Upto 30‐May‐08) i. Dr.A.K.Gandhi (MD) ii. Dr.S.Ramji (CEO)

2 Key Managerial Personnel (KMP) (From 31‐May‐08)

i. Dr. S.Chandrakumar (MD and CEO) ii. Dr.S.Manivannan (Director) iii. Dr.T.Senthil Kumar (Director) iv. Er.D.Selvaraj(Director)

3 Enterprises in which KMP (Upto 30‐May‐08) has significant influence

i. Seahorse India Private Limitedii. Seahorse Ship Agencies Private Limited iii. Marine Container Services (South) Private Limited iv. IMSA Shipping Agencies Private Limited

4 Enterprises in which KMP (From 31‐May‐08) has significant influence

i. Sri Kavery Medical Care (Trichy) Limitedii. New Heart City Hospitals Private Limited * iii. Kavery Medi CT Scan (Thuraiyur) Private Limited

* This company has been amalgamated with Sri Kavery Medical Care (Trichy) Limited . Hence, all transactions with this company after amalgamation would be deemed as transactions with Sri Kavery Medical Care (Trichy) Limited.

b. Transactions with related parties (Rs. in lakhs)

Details of transactions Year ended 31st March

2010 2009 2008 2007 2006Remuneration and Sitting Fees paid to KMP (Upto 30‐May‐08) i. Dr.A.K.Gandhi ii. Dr.S.Ramji

‐ ‐

‐ ‐

‐

3.40

19.47

‐ 15.49

‐

Remuneration paid to KMP (From 31‐May‐08)Dr. S. Chandrakumar 11.55 ‐

‐

‐ ‐

Loan Taken from Enterprises in which KMP (Upto 30‐May‐08) has significant influence i. Seahorse India Pvt Ltd ii. Marine Container Services (South) Pvt ltd iii. Seahorse Ship Agencies Pvt Ltd iv. IMSA Shipping Agencies Pvt Ltd

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

‐

3.00 3.00 ‐

20.24 47.50 47.50 30.00

Loan taken from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

1,406.00 232.00

844.00 ‐ ‐

Loan repaid to Enterprises in which KMP (Upto 30‐May‐08) has significant influence i. Seahorse India Pvt Ltd ii. Marine Container Services (South) Pvt Ltd iii. Seahorse Ship Agencies Pvt Ltd iv. IMSA Shipping Agencies Pvt Ltd

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

120.34 150.50 150.05 30.00

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

Interest paid on Loans taken from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08)has significant influence)

‐ 139.81

53.26 ‐ ‐

Interest waiver on Loans taken from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08)has significant influence)

114.08 ‐ ‐

‐ ‐

Services received (Enterprises in which KMP (From 31‐May‐08) has significant influence) i. New Heart City Hospitals Pvt Ltd

‐

10.90

‐

‐

‐


103

ii. Sri Kavery Medical Care (Trichy) Ltd

45.25 ‐ ‐ ‐ ‐

Services rendered to Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

20.21 4.87 ‐

‐ ‐

Land Lease Rentals paid to Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

30.00 30.00 ‐

‐ ‐

Purchase of Goods from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

‐ 0.23 ‐

‐ ‐

Sale of Fixed Assets to Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

13.58 ‐ ‐

‐ ‐

Purchase of Fixed Assets from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

15.68 ‐ ‐

‐ ‐

Reimbursement of expenses to Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

‐ 57.55 ‐

‐ ‐

Closing Balance of Loan taken from Enterprises in which KMP (Upto 30‐May‐08)has significant influence i. Seahorse India Pvt Ltd ii. Marine Container Services (South) Pvt ltd iii. Seahorse Ship Agencies Pvt Ltd iv. IMSA Shipping Agencies Pvt Ltd

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

‐ ‐ ‐ ‐

115.34 150.50 145.50 30.00

145.34 147.50 145.50

‐ Closing balance of Loan taken from Sri Kavery Medical Care (Trichy) Ltd (Enterprises in which KMP (From 31‐May‐08) has significant influence)

1554.01

1076.00

844.00

‐

‐

Closing balance of sums due other than loan from Enterprises in which KMP (From 31‐May‐08) has significant influence i. Sri Kavery Medical Care (Trichy) Ltd ii. New Heart City Hospitals Pvt Ltd

0.49 ‐

‐

7.08

7.29 ‐

‐ ‐

‐ ‐

All fixed assets of the company has been given as collateral security for loan taken by Sri Kavery Medical Care (Trichy) Ltd

* * *

‐ ‐

* Financial implication cannot be measured.


104

(C) Financial Information of Group Companies The Companies that form part our Promoter Group are as under:

a. Sri Kavery Medical Care (Trichy) Limited (Promoter Company) b. Udayam Medical Centre (Trichy) Pvt. Ltd. c. Kaveri‐Medi C.T.Scan (Thuraiyur) Pvt. Ltd. d. Kaveri Medical Trust

The details of each group companies mentioned above have been described below in the same order.

a. Sri Kavery Medical Care (Trichy) Limited (KMC)

Date of Incorporation November 26, 1997Nature of Activites KMC is involved in the business of providing health care

services

The summary of audited financial statements for the last three financial years is as follows: Rs. In Lacs

For financial year ended March 31, Particulars 2010 2009 2008Share Capital 663.56 575.30 495.30Share application money pending allotment ‐‐ 48.26 ‐‐Reserves(excluding revaluation reserve) 2095.98 1600.93 201.11Net Worth 2759.54 2224.49 696.41Total Income 3236.89 2947.73 2069.84PAT 164.41 390.44 244.93EPS (Rs.) 2.47 6.79 4.95NAV Per Share (Rs.) 41.59 37.82 14.06Face Value Per Share(Rs.) 10 10 10

Share Price Performance KMC is not listed on any stock exchange in India or abroad. Information regarding adverse factors KMC is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 nor is it under winding up. KMC has not made loss in the immediately preceding year. There are no litigations pending or against KMC. For more details refer Section ‘Legal and Other Information’ on page 113 of this Draft Letter of Offer.

b. Udayam Medical Centre (Trichy) Pvt. Ltd.

Date of Incorporation August 29, 1997Nature of Activites The Company is engaged in running Diagnostic Centers,

Scan Centers and related services


For financial year ended March 31, Particulars 2010 2009 2008Share Capital 15.00 15.00 15.00Reserves(excluding revaluation reserve) 60.17 86.88 54.48Net Worth 75.17 101.88 69.48Total Income 47.38 47.65 27.71PAT 28.81 46.44 27.02EPS (Rs.) 19.21 30.96 18.02NAV Per Share (Rs.) 50.11 67.92 46.32Face Value Per Share(Rs.) 10 10 10


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Share Price Performance The Company is not listed on any stock exchange in India or abroad. Information regarding adverse factors The Company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 nor is it under winding up. The Company has not made loss in the immediately preceding year. There are no litigations pending or against KMC. For more details refer Section ‘Legal and Other Information’ on page 113 of this Draft Letter of Offer.

c. Kaveri‐Medi C.T.Scan (Thuraiyur) Pvt. Ltd.

Date of Incorporation January 9, 2009Nature of Activities The Company is in the business of running Diagnostic

centers, Scan centers


For financial year ended March 31, Particulars 2010 2009 2008Share Capital 20.24 20.24 ‐Reserves(excluding revaluation reserve) 0.00 0.00 ‐Net Worth 18.78 17.59 ‐Total Income 15.94 2.38 ‐PAT/Loss 1.46 (2.65) ‐EPS (Rs.) 0.72 (1.31) ‐NAV Per Share (Rs.) 9.28 8.69 ‐Face Value Per Share(Rs.) 10.00 10.00 ‐

Share Price Performance The Company is not listed on any stock exchange in India or abroad. Information regarding adverse factors The Company is not a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 nor is it under winding up. The Company has not made loss in the immediately preceding year. There are no litigations pending or against KMC. For more details refer Section ‘Legal and Other Information’ on page 113 of this Draft Letter of Offer.


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d. Kavery Medical Trust A Trust created by Sri Kavery Medical Care (Trichy) Ltd on December 7, 2000. , is a Public Charitable Trust for the welfare of the poor in the field of medicine and education. The Board of Trustees comprises promoter directors of KMC.

Financial Highlights The audited financial highlights for the last 3 years are as follows:

Rs. In Lacs For the financial year ended March 31, Particulars 2010 2009 2008Capital Fund 11.86 10.54 10.85Total Income 9.98 3.66 10.51Expenditure Account 8.66 7.49 10.69Excess of Income over Expenditure 1.32 (3.83) (0.18)

(D) Changes in accounting policies in past three years We confirm that there was no change in the Accounting Policies of the Company during last three years, which would materially affect the results of the Company.


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(E) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations is based upon, and should be read in conjunction with, our restated financial statements for the fiscal years 2010, 2009, 2008, 2007 and 2006 and including the schedules, annexures and notes thereto and the reports thereon, beginning on page 82 of this Draft Letter of Offer. These financial statements are based on our audited financial statements and are restated in accordance with paragraph B(1) of Part II of Schedule II of the Companies Act and the SEBI Guidelines. Our audited financial statements are prepared in accordance with Indian GAAP. Our fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year are to the twelve month period ended March 31 of that year. The following discussion and analysis contains forward‐looking statements that involve risks and uncertainties. For additional information regarding such risks and uncertainties, see “Forward‐Looking Statements” and “Risk Factors” beginning on page 9 and page 10 of this Draft Letter of Offer. 1. Overview Our company was originally incorporated as Advanced Medical Care Private Limited on December 31, 1982 with the Registrar of Companies, Chennai at Tamil Nadu. The Company was converted into a Public Limited Company on July 15, 1988. The name of our company was changed to Seahorse Hospitals Limited on March 21, 1995 pursuant to the change in management to the Seahorse group in March 1994. Sri Kavery Medical Care (Trichy) Ltd. signed a Share Purchase Agreement to acquire 42,59,635 equity shares of Rs. 10 each (representing 33.95% of the then paid up capital) with Seahorse group to acquire control over our company in February 6, 2008; In response to the Public Announcement and subsequent open offer our promoters acquired 7,42,510 equity shares (5.92%). Our company was renamed to KMC Speciality Hospitals (India) Ltd. with effect from October 24, 2008 pursuant to the above take over to reflect the change in management Our primary sources of income are: (i) inpatient and outpatient hospital services and (ii) retail sales at the pharmacies we run at of our hospital. Key strengths We have currently 175 operational inpatient beds in use, other than beds in emergency. The hospital is equipped with modern equipments to support its operational activities. The new management appointed in May 30, 2008, has taken various steps to improve working of hospital which has resulted generation of income by nearly three fold in fiscal year ended in 2009 compared to fiscal year 2008. The expertise and experience of management continue to generate substantial income of Rs. 853.70 lacs for the fiscal year 2010 as compared to fiscal year ended 2009. 1. Significant Developments subsequent to the last financial year

The Directors confirm that there have been no events or circumstances since the date of the last financial statements as disclosed in the Draft Letter of Offer which materially or adversely affect or is likely affect the trading or profitability of the Company or the value of its assets, or its ability to pay liabilities within next twelve months.

2. Factors that may affect the results of the operations

Except as otherwise stated in the Draft Letter of Offer, the Risk Factors given in this Draft Letter of Offer and the following important factors could cause actual results to differ materially from the expectations include, among others: • We are subject to claims and legal proceedings in the ordinary course of business particularly medical

negligence • Major income is derived from inpatient service, which is dependent on the occupancy rates at our hospital


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• Our ability to retain specialized Doctors and healthcare personnel • Our ability to successfully implement overall strategy in utilization of hospital and its growth and expansion

plans • Patients volume related to seasonal illness cycles, climate and weather condition • Factors affecting healthcare industry activity • Increasing competition in the healthcare industry • Social or civil unrest in the region where the Company operates • Changes in laws and regulations that apply to the healthcare industry.

3. Discussion on the results of Operations

a. Summary of past financial results (Rs. In Lacs)

Particulars 2010 2009 2008Income from Operations 853.70 327.38 84.00Other Income 34.66 45.05 4.31Expenditure 837.36 544.82 297.25Depreciation 86.53 91.03 98.40Net Profit / (Loss) before Tax (35.53) (263.44) (307.34)Provision for Tax 0.90 0.88Deferred Tax credit (6.07) (375.68) 0Net Profit / (Loss) after Tax (41.60) 111.36 (308.23)Prior period adjustments (3.53) 0.98 0Net Profit / (Loss) after Tax and adjustment (45.13) 111.36 (308.23)Balance brought from previous year (1400.68) (1512.04) (1203.81)Less: Adjusted against share capital 1129.05 0.00 0.00Balance carried to Balance Sheet (316.76) (1400.68) (1512.04)

b. Income on account of major product / activities

(Rs. In Lacs) Particulars 2010 2009 2008Income from inpatient service 146.40 76.49 15.60Income from out patient services 572.75 195.99 51.54Sales of medicines 134.55 54.90 16.86Total 853.70 327.38 84.00

c. Income on account of major product / activities

(Rs. In Lacs) Particulars 2010 2009 2008Interest received 0.36 1.64 0.62Miscellaneous income 5.82 17.32 1.87Miscellaneous balances written back 28.48 25.11 1.82Prior period items 0.00 0.98 0Total 34.66 45.05 4.31

Note: Other Income other than Miscellaneous balances written back and prior period items as shown above are recurring in nature.

d. We state that our business is not dependent upon a single customer or a few major customers. Also, no foreign customer constitutes a significant portion of our business, thus there would be no impact on our business of exchange rate fluctuation.

e. We state that we have not followed any unorthodox procedure for recording sales and revenues.

f. Miscellaneous income comprises sale of scrap and unusable equipments. Miscellaneous written back consists of credit balances / payables which need not pay any more.


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COMPARISON OF FINANCIAL RESULTS Fiscal Year 2010 Compared to Fiscal Year 2009 Income from Operations Operational income comprises of income from inpatient services, out patient services and sale of medicines at our hospital. Income from such services was Rs.853.70 lacs during fiscal year ended 2010 as compared to Rs. 327.38 lacs during the fiscal year ended 2009. This is an increase of 161% over the fiscal 2009. The increase in operational activity is on account of management’s expertise to provide specialized services and better medical facilities provided in the hospital. Other Income Other was Rs. 0.36 lacs for the fiscal ended 2010 compared to Rs. 1.64 lacs for fiscal 2009. Other income mainly comprises the interest received on deposits. Miscellaneous Income Miscellaneous income contributes Rs. 5.82 lacs for the fiscal ended 2010 compared to Rs. 17.32 lacs for fiscal 2009, which was 0.66% of total income for the fiscal 2010 compared to 4.65% for the fiscal 2009. Expenditure The total expenditure for the fiscal 2010 was Rs. 837.36 lacs compared to Rs. Rs. 544.82 lacs for the fiscal 2009. This is an increase of 54% over the fiscal 2009. The main expenditure incurred are hospital operative expenses, personnel cost, administrative expenses and financial expenses. Hospital Operative expenses Operating expenses was Rs. 375.24 lacs for the fiscal 2010 compared to Rs. 150.31 lacs for the fiscal 2009. This is an increase of 149% over fiscal 2009. Personnel cost Personnel cost was Rs. 196.87 lacs for the fiscal 2010 compared to Rs. 103.40 lacs for the fiscal 2009. This is an increase of 90% over fiscal 2009. Administrative and other expenses Administrative and other expenses were Rs. 265.24 lacs for the fiscal 2010 compared to Rs. 151.30 lacs for the fiscal 2009. This is an increase of 75% over fiscal 2009. Financial expenses Financial expenses was Rs. NIL for the fiscal 2010 compared to Rs. 139.11 lacs for the fiscal 2009, due to the waiver of interest by the Promoter company on the loans borrowed from them which are the only outside interest bearing loans. Depreciation Depreciation has been provided at the rates specified in Schedule XIV of the Companies Act, 1956. During the fiscal 2010 depreciation was Rs. 86.53 lacs compared to Rs. 91.03 lacs for the fiscal 2009. Profit / (Loss) The loss for the fiscal 2010 was Rs. 41.60 lacs compared to profit of Rs. 111.36 lacs for the fiscal 2009.


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Fiscal Year 2009 Compared to Fiscal Year 2008 Income from Operations Operational income comprises of income from inpatient services, out patient services and sale of medicines at our hospital. Income from such services was Rs. 327.38 lacs during fiscal ended 2009 as compared to Rs. 84.00 lacs in the fiscal ended 208. This is an increase of 389.74% over the fiscal 2008. The increase in operational activity is on account of new management’s expertise to provide specialized services and better medical facilities provided in the hospital. Other Income Other was Rs. 1.64 lacs for the fiscal ended 2009 compared to Rs. 0.62 lacs for fiscal 2008. Other income mainly comprises the interest received on deposits. Miscellaneous Income Miscellaneous income contributes Rs. 17.32 lacs for the fiscal ended 2009 compared to Rs. 1.87 lacs for fiscal 2008, which was 4.65% of total income for the fiscal 2009 compared to 2.12% for the fiscal 2008. Miscellaneous Balances written back Miscellaneous written back contributes Rs. 25.11 lacs for the fiscal ended 2009, compared to Rs. 1.82 lacs for the fiscal 2008 which was 6.74% of total income for the fiscal 2009 compared to 2.12% for the fiscal 2008. Prior period items Prior period items are results of errors of omissions in the preparation of the financial statements of one or more prior periods, which may be discovered in the current period. The prior period net income was Rs. 0.98 lacs, which is 0.26% of total income for the fiscal 2009. Deferred Tax Expenses / (Credit) Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. During the fiscal 2009 we have credited Rs. 375.68 lacs to the Profit and Loss account. Expenditure The total expenditure for the fiscal 2009 was Rs. 544.82 lacs compared to Rs. Rs. 297.25 lacs for the fiscal 2008. This is an increase of 83.29% over the fiscal 2008. The main expenditure incurred are hospital operative expenses, personnel cost, administrative expenses and financial expenses. Hospital Operative expenses Operating expenses was Rs. 150.31 lacs for the fiscal 2009 compared to Rs. 45.99 lacs for the fiscal 2008. This is an increase of 226.83% over fiscal 2008. Personnel cost Personnel cost was Rs. 103.40 lacs for the fiscal 2009 compared to Rs. 50.75 lacs for the fiscal 2008. This is an increase of 103.74% over fiscal 2008. Administrative and other expenses Administrative and other expenses were Rs. 151.30 lacs for the fiscal 2009 compared to Rs. 98.88 lacs for the fiscal 2008. This is an increase of 53.01% over fiscal 2008.


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Financial expenses Financial expenses were Rs. 139.11 lacs for the fiscal 2009 compared to Rs. 101.63 lacs for the fiscal 2008. This is an increase of 36.88 % over fiscal 2008. Depreciation Depreciation has been provided at the rates specified in Schedule XIV of the Companies Act, 1956. During the fiscal 2009 depreciation was Rs. 91.03 lacs compared to Rs. 98.40 lacs for the fiscal 2008. Fringe Benefit Tax During the fiscal 2009, we have incurred Fringe Benefit Tax of Rs. 0.90 lacs as compared to Rs. 0.88 lacs for the fiscal 2008. Profit / (Loss) Our restated profit for the fiscal 2009 was Rs. 111.36 lacs compared to loss of Rs. 308.23 lacs for the fiscal 2008. This profit is attributed is on account of credit of Deferred Tax of Rs. 375.68 lacs to the Profit and Loss Account. Fiscal Year 2008 Compared to Fiscal Year 2007 Income from Operations Operational income comprises of income from inpatient services, out patient services and sale of medicines at our hospital. Income from such services was Rs. 84.00 lacs during fiscal ended 2008 as compared to Rs. 196.95 lacs, which is a decrease of 57.34% over the fiscal 2007. Other Income Other was Rs. 0.62 lacs for the fiscal ended 2008 compared to Rs. 1.08 lacs for fiscal 2007. Other income mainly comprises the interest received on deposits. Miscellaneous Income Miscellaneous income contributes Rs. 1.87 lacs for the fiscal ended 2008 compared to Rs. 9.62 lacs for fiscal 2007, which was 2.12% of total income for the fiscal 2008 compared to 4.88% for the fiscal 2007. Miscellaneous Balances written back Miscellaneous written back contributes Rs. 1.81 lacs for the fiscal ended 2008, which was 2.12% of total income for the fiscal 2008. Expenditure The total expenditure for the fiscal 2008 was Rs. 297.25 lacs compared to Rs. Rs. 227.52 lacs for the fiscal 2007. This is an increase of 30.64% over the fiscal 2007. The main expenditure incurred are hospital operative expenses, personnel cost, administrative expenses and financial expenses. Hospital Operative expenses Operating expenses was Rs. 45.99 lacs for the fiscal 2008 compared to Rs. 108.92 lacs for the fiscal 2007, which is a decrease of 57.78% over fiscal 2007.


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Personnel cost

Personnel cost was Rs. 50.75 lacs for the fiscal 2008 compared to Rs. 73.70 lacs for the fiscal 2007 This is an increase of 103.74% over fiscal 2008.

Administrative and other expenses

Administrative and other expenses were Rs. 98.88 lacs for the fiscal 2008 compared to Rs. 44.90 lacs for the fiscal 2007. This is an increase of 120.22% over fiscal 2007.

Financial expenses

Financial expenses were Rs. 101.63 lacs for the fiscal 2008 incurred on borrowings.

Depreciation

Depreciation has been provided at the rates specified in Schedule XIV of the Companies Act, 1956. During the fiscal 2008 depreciation was Rs. 98.40 lacs compared to Rs. 103.60 lacs for the fiscal 2007.

OTHER INFORMATION

Unusual or infrequent events or transactions

There have been no unusual or infrequent events or transactions to knowledge that may be described as “unusual” or “infrequent” and may have taken place during the periods under review.

Significant economic changes

To our knowledge, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations other than as mentioned under “Factors that may affect the results of the operations” in this section on page 107 of this Draft Letter of Offer

Known trends or uncertainties

Other than as disclosed in the section titled “Risk Factors” on page no. 10 of this Draft Letter of Offer, to our knowledge there are no known factors which we expect to have a material adverse effect on our income.

Future relationship between costs and revenues

To our knowledge, there are no known factors which might affect future relationship between cost and income other than as stated in this section and the sections titled “Risk Factors” on page no. 10 and “Business Overview“ on page no. 53.

Total turnover of each major industry segment

We have only one business segment, which is health care.

New products or business segment

There are currently no publicly announced new products or business segments.

Seasonality of Business Our business is not related to seasonal trends. Dependence on few clients During the Fiscal 2010 around 40% of our revenue was from the Government Enterprises and other Corporate Clients. Any change in terms of service or adverse change in customer relationship with these clients, there may be changes in revenues in future. Competitive conditions We operate in a fragmented industry and face increasing competition from other hospitals and healthcare providers.


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SECTION VII: LEGAL AND OTHER INFORMATION A. OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS

Except as described below, there are no outstanding litigations, suits or civil proceedings, or criminal proceedings, or prosecutions, or tax liabilities by or against us, our Subsidiaries, against our Directors, or our Promoters or our Group Companies, and there are no defaults, non‐payment of statutory dues, over dues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues payable to holders of any debentures, bonds or fixed deposits, and defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ and other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act) that would result in material adverse effect on our business taken as a whole. None of the aforesaid persons / companies is on RBI’s list of willful defaulters. Unless stated to the contrary, the information provided below relating to the Company is as of the date of this Draft Letter of Offer.

1. Outstanding litigations involving our Company

a.) Litigations against the issuer Criminal Proceedings There are no criminal proceedings pending against the Company and its Directors as on the date of filing this Draft Letter of Offer Civil Proceedings The hospital of the Company was built by the Company on the land leased out from Dr. P. S. Mahadevan, the erstwhile promoter of the Company in the year 1992. The hospital building was wrongly assessed for property tax by the Tiruchirappalli Municipal Corporation separately for each floor on the assumption that the building is owned by the erstwhile promoter and that the same was leased out to the Company and levied property tax on such wrong basis. The Company had filed a suit against Tiruchirappalli Municipal Corporation before District Munsif Court, Tiruchirappalli in the year 1993 and a judgement was delivered in November 2003 directing the Tiruchirappalli Municipal Corporation to issue demand notice in the name of the company and to reconsider revision of property tax in line with the existing rules and procedures. The Company had filed an appeal to the Tiruchirappalli Municipal Commissioner on March 28, 2008 for revising the property tax taking into the fact that the hospital building is belonged to the Company and that the same not leased out from the erstwhile promoter. The accumulated arrears of the revised property tax work out to Rs. 98.32 lacs upto March 31, 2010. Response to the Company’s appeal from the Tiruchirappalli Municipal Corporation is awaited. Income Tax / Sales Tax Proceedings There are no income tax and Sales Tax proceedings pending against the Company as on date of filing of this Draft Letter of Offer. Customs Proceedings On April 27, 1999 Officers of Central Intelligence Unit of Customs Commissionerate, Tiruchirappalli visited our office for seizure of certain medical equipments imported earlier under concession notification no. 64/88 dated March 1, 1988 that dealt with exemption in payment of customs duty if the hospital is run for providing medical, surgical or diagnostic treatment without any distinction of caste, creed, race, religion or language and also free to at least 10% of in‐patients and 40% of out patients under Customs Duty Exemption Certificates (CDEC). We filed a writ petition of Certiorarified Mandamus against the Order of Director General of Health Services (DGHS), New Delhi that dealt with seizure and revocation of CDEC already issued earlier. The Hon. High Court of Madras in its order dated December 5, 2006 allowed the writ petition and remanded the matter for fresh consideration in terms of its order in the case of Apollo Hospitals Enterprises Ltd. Vs. Union of India. The Commissioner of Customs, Airport Customs has appealed against the said order, the same is admitted and is to come for hearing. The matter is currently pending. The hearing not yet fixed.


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Notices received by the Company / Claims against the Company (i) An appeal (No. OS 1275/2003) has been filed by the Company before the II District Munsif Court, Tiruchirappally, against demand notice number NA.Ka. No.A1/7809/2002 dated August 28, 2003 of Tiruchirappally Municipal Corporation towards abnormal ground rent from the existing Rs. 335 per month to Rs. 8580 per month with retrospective effect from April 1, 2001 for the promboku land occupied by the Radiology Block of the Hospital of the Company. The hearings are completed and judgement is awaited.

(ii) Allied Computer Technologies Pvt. Ltd., has been filed a Suit O.S. No. 92 of 1995 against the Company for the recovery of fees for services rendered for IPO in 1992 amounting to Rs. 1.71 lacs before the Honourable Court of Addl. District Judge, Delhi on March 20, 1995. The Honourable Court vide its Order dated May 25, 1999 passed a decree to recover a sum of Rs. 1.71 lacs with interest @ 18% per annum from the Company. Allied Computer Technologies Pvt. Ltd., has filed an Execution Petition vide E P No 36 of 2007 (No. O S No 92 of 1995), on June 27, 2007 before the Honourable Principal Sub‐Court, Tiruchirappalli, for the recovery of the amount under Decree. The hearing is yet to be notified.

b. Litigations against the directors involving violation of statutory regulations or alleging criminal offence: Nil

c. Criminal / civil prosecution against the directors for any litigation towards tax liabilities: Nil

d. Pending proceedings initiated for economic offences against the Company and its directors along with their present status is follows:

Economic Offences Our company came out with IPO in May 1992 for issue of 69lac equity shares of Rs. 10/‐ each at par aggregating Rs. 690.00 lacs. A Show cause notice dated June 17, 2002 was issued to the Company and its then directors and a case was filed in the Court of Additional Chief Metropolitan Magistrate (Economic Offences), Egmore, Chennai 600 008 (EOCC No. 586, 587, 588 of 2002) under Sections 62, 63 and 68 of the Companies Act, 1956 against the then directors of our company alleging that the company did not take any steps to implement the project referred to in its Prospectus and that it failed to fulfill the promises made by it to the public while offering shares through the prospectus issued by the company and the same were made with the intent to defraud the public to whom the shares were offered. Since none of the signatories of the original prospectus are involved in the present management the case was pressed for discharge but this could not be proceeded with as the original promoter Dr.P.S. Mahadevan has obtained a stay on the case from the Hon’ble High Court of Judicature of Madras. e. Adverse findings, if any, in respect of the issuer as regards compliance with the securities laws: Nil

f. Details of the past cases in which penalties were imposed by the authorities concerned on the Company or its directors: Nil g. Outstanding litigations, defaults, etc. pertaining to matters likely to affect operations and finances of the issuer, including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII to the Companies Act, 1956 (1 of 1956) etc.; Consumer Forum

Medical Negligence

There are 2 complaints pertaining to alleged medical negligence and deficiency of service that have been filed against the Company. The aggregate amount claimed in these complaints is approximately Rs. 8 lacs. The details of the complaints are as follows:


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(i) Mr. K.Ganesan, brother of minor Ms.Sathya filed a complaint (No.CDOP 43 of 2004) against Dr. V. Senthilkumar, Dr. T. Senthilkumar and the Company, before the District Consumer Disputes Redressal Forum, Thanjavur claiming compensation of Rs.3 lacs with appropriate costs for alleged wrong diagnosis and operation and alleged lack medical care in treatment of Cardiovascular and Thoroasic treatment of Ms. Sathya. The hearing has been completed and Orders are reserved.

(ii) Appeal against Order of State Consumer Forum – Chennai (913 / 01) in respect of case relating to Mrs Bhuvaneswari pending in National Consumer Forum – Delhi. This relates to a case of alleged negligence in the medical treatment given by the Hospital. Since the initial treatment (cesarean) was given by another hospital (Dr.Santhi, at Kumbakonam) and there are no proofs for the alleged negligence on the part of this hospital the State Consumer Forum has delivered judgment in our favour. However the aggrieved party has gone for an appeal against this judgment with the National Forum Delhi. The case has not yet come up for hearing.

Arbitration Proceedings There have been no Arbitration proceedings pending against the Company as on date of filing of this Draft Letter of Offer h. Dues owed by the Company to Micro, Small and Medium Industries

2. Our Company has no subsidiaries, thus details relating to litigations under this head are not

applicable. 3. Outstanding Litigations involving the Promoter Company

a) Civil Proceedings

A suit was filed by Sri Kavery Medical Care (Trichy) Ltd (KMC)., before District Munsif Court, Tiruchirappalli vide No. O.S.615/2003 against the notice issued by Tiruchirappalli Municipal Corporation for permanent injunction restraining the Tiruchirappalli Municipal Corporation from interfering with possession of the hospital building either by demolition or otherwise of the alleged deviation from the approved plan and unauthorized construction. Though there are minor deviations from the approved plan, the notice issued by Tiruchirappalli Municipal Corporation do not give the details of unauthorized constructions or deviations. Further under the amnesty scheme of regularization of deviations and unauthorized constructions announced by the Government of Tamil Nadu in the year 2003, KMC has applied to the Tiruchirappalli Municipal Corporation for regularization of the deviations and unauthorized constructions in the building by paying necessary application and charges as per the amnesty scheme announced by Government of Tamil Nadu. The same has been accepted and the charges paid by demand drafts have been encashed by Tiruchirappalli Municipal Corporation. Since the defendants remained exparte, the suits filed by KMC before District Munsif Court, Tiruchirappalli have been decreed exparte in favour of KMC on April 30, 2010 and applied for copy of judgement, which is awaited. b.) Other than the above pending civil litigation, there are no Litigations against Promoter Company involving

Statutory Regulations, Criminal Proceedings, Tax Proceedings and any past penalty imposed under Securities Law.

4. Litigation involving Group Companies ‐ Nil

5. a.) The names of small scale undertakings or any other creditors to whom the Company owes a some

exeecdings Rs. One Lac which is outstanding more than thirty days ‐ Nil

c.) Litigations filed by the company ‐ Nil

d.) Litigations not involving the issuer but whose outcome could have a materially adverse effect of the position of the issuer – Nil

e.) Litigations against Directors involving Statutory Regulations, Civil Proceedings, Criminal Proceedings, Tax Proceedings and any past penalty imposed under Securities Law ‐ Nil


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Contingent Liability Contingent Liability of the Company as on March 31, 2010

Sr. No.

Particulars

Amount (Rs. In Lacs)

1 Customs duty / penalty for the medical equipment imported during the years 1989‐93

85.25

2 Regularization of construction of 4th, 5th & 6th floors of the hospital building, which have no approval according to Tiruchirappalli Municipal Corporation

Amount not ascertainable

3 Arrears on rent on peramboke land 9.17 4 Arrears of property tax 108.32 5 Claims against the Company not acknowledged 4.35

Contingent Liability of the Promoter Company: Nil Contingent Liability of Group Companies: Nil

We confirm that:

1. Except as mentioned above, there is no material litigation, default or notices in relation to the Company, its Subsidiaries, Promoters and Group Companies.

2. There are no over dues to banks or financial institutions, defaults against banks or financial institutions by the

Company, Group Companies and Promoters.

3. There are no pending litigations in respect of Group Companies with which the Promoters were associated in the past but are no longer associated.

4. There have been no adverse findings in relation to compliance with securities laws.

5. There have been no past cases where penalties were imposed against the Company or its Directors.

6. None of the Group Companies are defunct and hence there are no litigations pending in that regard.

7. There are no past pending proceedings initiated for economic offences against our Company or our Directors;

8. There are no outstanding litigations, defaults, etc. pertaining to matters likely to affect operations and

finances of the issuer, including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII to the Companies Act, 1956 (1 of 1956) etc

9. There are no pending litigations, defaults, non‐payment of statutory dues, proceedings initiated for economic

offences or civil offences (including the past cases, if found guilty), any disciplinary action taken by SEBI or stock exchanges against our Company or our Directors

10. There are no small scale undertaking(s) or any other creditors to whom our Company owes a sum exceeding

Rs. one lac which is outstanding more than thirty days.

11. There are no actions taken by SEBI or any case under securities law pending as on date or which were concluded during the past three years against the Company, its directors, its Promoters and Promoter Group companies as well as directors of the Promoter Group companies.

12. Negative statement that no litigations have occurred after the filing of the offer document.

6. Material Developments since the last balance sheet date

There have been no material developments, since the date of the last balance sheet otherwise than as disclosed in the section titled ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 107 of this Draft Letter of Offer.


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B. GOVERNMENT APPROVALS OR LICENCING ARRANGEMENTS:

In view of the approvals listed below, the Company can undertake the Issue and its current business activities and except as stated in this Draft Letter of Offer, no further material approvals are required to undertake the Issue or continue the Company’s business activities. Unless otherwise stated, these approvals are all valid as on the date of this Draft Letter of Offer. The Company will obtain any licenses, approvals, registrations and permissions as may be required from time to time in connection with its activities. The Company has received all the necessary licenses, permissions and approvals from the Central and State Governments and other government agencies/certification bodies required for its business and no further approvals are required by the company for carrying on the present business activities of the Company. No further approvals from any Government authority/Reserve Bank of India (RBI) are required by the Company to undertake the existing activities, save and except those approvals, which may be required to be taken in the normal course of business from time to time It must, however, be distinctly understood that in granting the above approvals, the Government, RBI and other authorities do not take any responsibility for the financial soundness of the Company or for the correctness of any of the statements or any commitments made or opinions expressed in the Draft Letter of Offer. The following statement sets out the details of licenses, permissions and approvals taken by the Company under various Central and State Laws for carrying out its business.

Approvals for the Issue We have received or sought the following approvals relating to the Issue:

1. The Board of Directors has, pursuant to a resolution adopted at its meeting held on January 21,

2010, authorized the Issue. 2. In‐principle approval from the BSE dated [ ], 2010. 3. The Company has also obtained the necessary contractual approvals required for the Issue.

Approvals for our Business The Company has received the following major government and other approvals in relation to its business:

Sr. No.

Description Reference/License Number Date of Issue Date of Expiry

1 Permanent Account Number AADCS0189E 31.12.1982 N.A 2 Tax Deduction Account

Number CHES 12738F 26.12.2008 N.A

3 Registration with the Regional Provident Fund Commissioner, under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

TN/TRY/27058 March 1989 N.A

4 Municipal approval for the connection to authorized sewage

Trichy Municipal CorporationApproval 12

18‐09‐1994 N.A

5 Approval from the Tiruchirappalli Area Development Authority, for a sewerage connection

Trichy Municipal CorporationApproval 12

18‐09‐1994 N.A

6 Permission of the Estate Office, for occupancy of

Trichy Municipal CorporationApproval 15/88

15‐03‐1988 N.A


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the hospital building 7 Approval under the Income

Tax Act, 1961 CGA 106/(8) 195/96 13‐06‐1995 N.A

8 Consent of the Tamil Nadu Pollution Control Board, under the Air (Prevention and Control of Pollution) Act, 1981

Consent Order No. 17991 04‐09‐2009 # 31‐03‐2010

9 Registration under the Tamil Nadu Value Added Tax Act, 2006

TRT/538/20, 21 & 21B954/62/09

27‐01‐2009 26‐01‐2014

10 Municipal License for operation of the hospital

016909 01‐03‐2010 N.A

11 Registration with the Civil Surgeon under the Prenatal Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994 for the ultrasound operations

PNA 879/2001 13‐09‐2006 12‐09‐2011

12 Certificate of Approval of Blood Storage Centre for storage of whole human blood I.P./components

Renewal application dated May 13, 2010

Awaited #N.A

13 Certificate of Registration under Pre‐Natal Diagnostic Technique Act

PNA 879/2001 13‐09‐2006 N.A

14 Authorisation for generation, collection, reception, storage, transportation, treatment, disposal of Bio Medical Waste.

BMW ‐2217 12‐11‐2009 11‐11‐2010

15 Certificate of Importer‐Exporter Code under Export Import Policy from Foreign Trade Development officer

IEC Number : 0409036854 11th February 2010

N. A

16 Consent of the Tamil Nadu Pollution Control Board, under the water (Prevention and Control of Pollution) Act, 1974

Consent Order No. 21952 4th September 2009

# 31st March 2010

• The hospital was previously operating under the name ‘Advanced Medical Care Private Limited’ and ‘Seahorse Hospitals Limited’ and consequently the approvals/licenses received for operations were in these names. The concerned government authorities have been informed of the change of name to “KMC Specialty Hospital (India) Ltd.”

# The Company has applied for renewal.


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SECTION VIII: OTHER REGULATORY AND STATUTORY DISCLOSURES A. Authority for the Issue

The Issue is being made pursuant to a resolution passed under Section 81(1) of the Companies Act by the Board at its meeting held on January 21, 2010. The Issue Committee has in its meeting held on January 21, 2010 determined the terms of the Issue and the Issue Price as Re. 1 per Equity Share and the Rights Entitlement as Twelve Equity Shares for every one fully paid‐up Equity Share held on the Record Date. Our Board has approved the Draft Letter Of Offer pursuant to its resolution dated June 24, 2010, the Letter Of Offer pursuant to its resolution dated [●] 2010 .

B. Prohibition by SEBI

Neither (i) the Company, the Promoters, the Promoter Group entities, group companies (which are the companies, firms, ventures, etc. promoted by the promoters), the Directors, persons in control of the Company and natural persons in control of the promoter (if the promoter is a body corporate) nor (ii) the companies with which any of the Promoters, Directors or persons in control of the Company are or were associated as a promoter, director or person in control are debarred or prohibited from accessing the capital market, under any order or direction passed by SEBI or any other authority.

C. None of the directors of the Company are associated with the securities market in any manner. D. Eligibility for the Issue

The Company is an existing company registered under the Companies Act, who’s Equity Shares, are listed on the BSE, MSE and the DSE. It is eligible to make the Issue under the SEBI Regulations.

E. Further, except as disclosed in the section titled “Outstanding Litigation and Material Developments” beginning

on page 113 of this Draft Letter of Offer, none of the Company, the Promoters, the Promoter Group entities, group companies (which are the companies, firms, ventures, etc. promoted by the promoters) and the relatives (as defined under the Companies Act) of the Promoters have been declared willful defaulters by the RBI or any other authority and no violations of securities laws have been committed by them in the past and no proceedings in relation to such violations are currently pending against them.

F. This is not being a fast track issue Part B of Schedule A is not applicable. Compliance with Part E of Schedule VIII of the SEBI Regulations The Company is in compliance with the provisions specified in Part E of Schedule VIII of the SEBI Regulations. G. SEBI Disclaimer Clause:

AS REQUIRED, A COPY OF THIS DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI).

“IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF DRAFT LETTER OF OFFER TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. LEAD MERCHANT BANKER, V B DESAI FINANCIAL SERVICES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN DRAFT LETTER OF OFFER, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT


120

THE ISSUER DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER V B DESAI FINANCIAL SERVICES LIMITED HAS FURNISHED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) A DUE DILIGENCE CERTIFICATE DATED JUNE 23, 2010 WHICH READS AS FOLLOWS :

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT:

a. THE DRAFT LETTER OF OFFER FILED WITH THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

b. ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE REGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

c. THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF

OFFER ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID. 4. WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS TO FULFIL THEIR

UNDERWRITING COMMITMENTS: NOT APPLICABLE 5. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR

SPECIFIED SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK‐IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK‐IN SHALL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK‐IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS: NOT APPLICABLE

6. WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF

CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS: NOT APPLICABLE

7. WE UNDERTAKE THAT SUB‐REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF SUB‐

REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE: NOT APPLICABLE


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8. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.

9. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS

RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB‐SECTION (3) OF SECTION 73 OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE DRAFT LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION: NOTED FOR COMPLIANCE

10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT LETTER OF OFFER THAT THE INVESTORS

SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE. 11. WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE

BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION.

12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER:

a) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUER AND

b) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME.

13. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE

SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE.

14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN

VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE, ETC.

15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION‐WISE COMPLIANCE WITH THE APPLICABLE

PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING PROSPECTUS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY.

THE FILING OF THE OFFER DOCUMENTS DOES NOT, HOWEVER, ABSOLVE THE ISSUER FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME; WITH THE LEAD MERCHANT BANKER ANY IRREGULARITIES OR LAPSES IN OFFER DOCUMENT. Disclaimer of the Company and the Lead Manager The Company and the Lead Manager accept no responsibility for statements made otherwise than in this Draft Letter of Offer or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk. The Company and the Lead Manager shall make all information available to the Equity Shareholders and no selective or additional information will be available for a section of the Equity Shareholders in any manner whatsoever including at presentations or in research or sales reports, after the filing of this Draft Letter of Offer with the Stock Exchanges.


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H. Caution

Investors who invest in the Issue will be deemed to have represented to our Company and Lead Manager and their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of our Company, and are relying on independent advice / evaluation as to their ability and quantum of investment in this Issue.

I. Disclaimer with respect to Jurisdiction

This Draft Letter of Offer has been prepared under the provisions of Indian laws and the applicable rules and regulations thereunder. Any disputes arising out of the Issue will be subject to the jurisdiction of the appropriate courts in Tiruchirappalli, Tamil Nadu, India only.

European Economic Area Restrictions

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive at any relevant time (each, a “Relevant Member State”) the Company has not made and will not make an offer of the Equity Shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Equity Shares to the public in that Relevant Member State at any time: (a) to legal entities which are authorised or regulated to operate in the financial markets, or if not so authorised or regulated, whose corporate purpose is solely to invest in securities; or (b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €4,30,00,000 and (3) an annual net turnover of more than €5,00,00,000, as shown in its last annual or consolidated accounts; or (c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the lead manager; or (d) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purpose of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Equity Shares to be offered so as to enable an Investor to decide to purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. This European Economic Area selling restriction is in addition to any other selling restriction set out below. Unite Kingdom Restrictions. This Draft Letter of Offer is only being distributed to and is only directed at (i) persons who are outside the United Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The Equity Shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity Shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.


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J. Disclaimer Clause of the Stock Exchanges

Disclaimer Clause of the BSE

The BSE has given vide its letter no. ______ dated [ ], 2010 permission to our Company to use BSE’s name in this Draft Letter of Offer as one of the Stock Exchanges on which the Equity Shares are proposed to be listed. The BSE has scrutinized this Draft Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to our Company. BSE does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Letter of Offer; or (ii) warrant that this Company’s securities will be listed or will continue to be listed on BSE; or (iii) take any responsibility for the financial or other soundness of our Company, its Promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Draft Letter of Offer has been cleared or approved by the BSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the BSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

Disclaimer Clause of the MSE The MSE has given vide its letter no. ______ dated [ ], 2010 permission to our Company to use MSE’s name in this Draft Letter of Offer as one of the Stock Exchanges on which the Equity Shares are proposed to be listed. The MSE has scrutinized this Draft Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to our Company. MSE does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Letter of Offer; or (ii) warrant that this Company’s securities will be listed or will continue to be listed on MSE; or (iii) take any responsibility for the financial or other soundness of our Company, its Promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Draft Letter of Offer has been cleared or approved by the MSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the MSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. Disclaimer Clause of the DSE The DSE has given vide its letter no. ______ dated [ ], 2010 permission to our Company to use DSE’s name in this Draft Letter of Offer as one of the Stock Exchanges on which the Equity Shares are proposed to be listed. The DSE has scrutinized this Draft Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to our Company. DSE does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Letter of Offer; or (ii) warrant that this Company’s securities will be listed or will continue to be listed on DSE; or (iii) take any responsibility for the financial or other soundness of our Company, its Promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Draft Letter of Offer has been cleared or approved by the DSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the DSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

K. Disclaimer Clause of the RBI – Not Applicable


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L. Filing or registering of the offer document with the Board

This Draft Letter of Offer has been filed with the Corporation Finance Department of the SEBI, located at SEBI Southern Regional Office, D’Monte Building, 3rd Floor, No. 32, D’Monte Colony, TTK Road, Alwarpet, Chennai‐600018, India for its observations. After SEBI gives its observations, the final Letter of Offer will be filed with the Designated Stock Exchange as per the provisions of the Companies Act.

M. Listing

The Designated Stock Exchange for the purposes of this Issue will be the Bombay Stock Exchange.

The existing Equity Shares are listed on the BSE, MSE and DSE. The Company has made applications to the BSE, MSE and DSE for permission to deal in and for an official quotation in respect of the Equity Shares being offered in terms of this Draft Letter of Offer. The Company has received in‐principle approvals from BSE by letter dated [ ], 2010 MSE by letter dated [●] and DSE by letter dated [ ], 2010. The Company will apply to the BSE MSE and DSE for listing of the Equity Shares to be issued pursuant to this Issue. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above, we shall forthwith repay, without interest, all monies received from applicants in pursuance of this Draft Letter of Offer. If such money is not paid within 8 days after we becomes liable to repay it, then our Company and every Director of our Company who is an officer in default shall, on and from expiry of 8 days, be jointly and severally liable to repay the money with interest as prescribed under the Section 73 of the Act.

N. Consents

Consents in writing of the Auditors to our Company, the Directors, the Lead Manager, the Legal Advisor, Registrar to the Issue and Bankers to our Company to act in their respective capacities have been obtained and filed with Stock Exchanges, along with a copy of the Draft Letter of Offer and such consents have not been withdrawn up to the time of delivery of this Draft Letter of Offer for registration with the stock exchanges. The Auditors of our Company have given their written consent for the inclusion of their Report in the form and content as appearing in the Draft Letter of Offer and such consents and reports have not been withdrawn up to the time of delivery of this Draft Letter of Offer for registration for registration with the stock exchanges. To the best of our knowledge there are no other consents required for making this Issue. However, should the need arise, necessary consents shall be obtained by us.

O. Expert Opinion, if any

Except the “Auditors Report” on page 79 of this Draft Letter of Offer, no expert opinion has been obtained by our Company in relation to this Draft Letter of Offer.

P. Issue Related Expenses

The expenses of the Issue payable by the Company include brokerage, fees and reimbursement to the Lead Manager, Auditors, Legal Advisor, Registrar to the Issue, printing and distribution expenses, publicity, listing fees, stamp duty and other expenses and will be met out of the Issue Proceeds. Sr. No.

Activity, Nature of Expenses Amount Percentage of Total

Estimated Issue

Expenditure 1. Fee of the Lead Manager 15.00 [•]2. Fee of Registrar to the Issue 0.80 [•]3. Fee of Legal Advisors to the Issue 3.50 [•]4. Commission to SCSB’s for ASBA Applications [•] [•]5. Other Expenses (Printing and stationery, distribution and postage,

advertisement and marketing expenses etc.) [•] [•]

6. Total Estimated Issue Expenses [•] [•]


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Q. Previous Issue by our Company

The Company has not undertaken any public or rights issue during the last five years. R. Previous Issues of Securities for consideration other than cash

The Company has not issued Equity Shares for consideration other than cash or out of revaluation reserves, other than issuances mentioned in section titled “Capital Structure” on page 29 of this Draft Letter of Offer.

S. Commission or Brokerage on Previous Issues

The Company has not made any Public / Rights Issue during last five years, hence no commission or brokerage has been paid. However, Our Company made a Public Issue of Equity shares aggregating to Rs.690 lakhs during 1992. Further, no other listed company under the same management within the meaning of section 370 (1) (B) of the Act, has made any capital issue during the last five years.

T. Capital Issue during the last three years

The Company, Promoter Company and Group Companies have not made any capital Issues during the last three years.

U. Promise V/s. Performance

1. Our Company Our Company has not made any public/rights issues during the period of ten years immediately preceding the date of filing this Offer document with SEBI, details regarding “list of public / rights issues made during the period of ten years”. Our Company had come up with Public Issue of 69, 00,000 Equity Shares of Rs. 10/‐ each for cash at par aggregating to Rs. 690.00 lacs with retention of 15 % of the issue amount oversubscribed. The Issue was opened on July 6, 1992. The object of the Issue were to provide part of the finance required for setting up of 250 bed hospital with specialities and also meeting the expenses of the Public Issue. “The Promises verses Perfomance in respect of Public Issue was as under Rs. in Lacs 1992‐93 1993‐94 1994‐95 Projected Performance Projected Performance Projected PerformanceGross Receipt and other Income

1129 207 1367 205 1367 178

Cash Profit 357 (33) 547 (313) 577 (437)Net Profit 253 (88) 4450 (421) 348 (538)

On the basis of the disclosure made in the prospectus relating to the Public Issue made by the Company in the year 1992, the Company had made initial listing application to Madras Stock Exchange, Bombay Stock Exchange, Delhi Stock Exchange, Ahmedabad Stock Exchange and Calcutta Stock Exchange. The Company was not in receipt of any communication about listing of its shares from Ahmedabad and Calcutta Stock Exchanges. To update the compliances under the listing agreement, the present management has requested to Ahmedabad and Calcutta Stock Exchanges vide letter dated February 2 & 19, 2010, April 29, 2010 and May 5, 2010 to provide listing status of Company’s shares. The Company confirms that till filing of this Draft Letter of Offer, is not in receipt of any communication of listing of its equity shares on Ahmedabad and Calcutta Stock Exchanges in respect of initial listing application made on September 14, 1992.

2. Listed Group Companies / Associate Companies : Nil

V. Outstanding Debentures or Bonds and Preference Shares

The Company has not issued any debentures, bonds or preference shares other than those mentioned in section titled “Capital Structure” on page 29 of this Draft Letter of Offer.


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W. Stock market quotations Stock market quotations of shares/ convertible instruments of the company (high/ low price in each of the last three years and monthly high/low price during the last six months). The existing Equity shares of the Company are listed on Bombay Stock Exchange (BSE‐Designated Stock Exchange). The high and low closing prices recorded on BSE for the preceding three years and the number of shares traded on the days the high and low prices were recorded are stated below:

1. Bombay Stock Exchange Limited (BSE):

Price for the last three years

Year

High Low Date Price in

Rs Volume (Nos)

Date Price in Rs Volume (Nos)

2010 14.06.2010 28.35 1800 06.04.2010 5.25 1002009 No trading in the Equity Shares2008 12.09.2008 1.49 2000 2.09.2008 1.42 10002007 29.11.2007 1.36 400 29.01.2007 1.04 100

Source: http://www.bseindia.com

Price for the last six months Month High Low

Date Price in Rs

Volume (Nos)


June , 2010 14.06.2010 28.35 1800 01.06.2010 18.40 200May , 2010 31.05.2010 17.54 800 03.05.2010 6.67 600April , 2010 29.04.2010 6.36 100 06.04.2010 5.25 100March, 2010 No trading in the Equity SharesFerbruary, 2010 No trading in the Equity SharesJanuary , 2010 No trading in the Equity Shares

Source: http://www.bseindia.com 2. Madras Stock Exchange Limited (MSE) and Delhi Stock Exchange Association

Price for the last three years

Year High Low

Date Price in Rs

Volume (Nos)


2010 No trading in the Equity Shares2009 No trading in the Equity Shares2008 No trading in the Equity Shares2007 No trading in the Equity Shares

Month High Low Date Price in

Rs Volume (Nos)


June , 2010 No trading in the Equity SharesMay , 2010 No trading in the Equity SharesApril , 2010 No trading in the Equity SharesMarch, 2010 No trading in the Equity SharesFebruary, 2010 No trading in the Equity SharesJanuary , 2010 No trading in the Equity Shares


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X. Investor Grievances and Redressal System

The Company has adequate arrangements for redressal of Investor complaints. Well‐arranged correspondence system developed for letters of routine nature. The share transfer and dematerialization for the Company is being handled by Cameo Corporate Services Ltd., the Registrar and Share Transfer Agent. Letters are filed category wise after having attended to. Redressal norm for response time for all correspondence including shareholders complaints is within 10‐12 days. The contact details of the share registrars are: Cameo Corporate Services Limited Subramanian Building No.1 Club House Road Chennai ‐ 600 002. Tel: +91‐44‐2846 0390; Fax: +91‐44‐2846 0129 Website: http://www. www.cameoindia.com Email: [email protected] Contact Person: Mr. R.D. Ramasamy Status of Complaints: a) Total number of complaints received during the accounting year ended March 31, 2010: 5 b) No. of shareholders complaints during the current period: Nil c) Status of the complaints: There are no pending complaints d) Time normally taken by it for disposal of various types of Investor grievances: 10 to 12 days Investor Grievances arising out of this Issue: The Company’s Investor grievances arising out of the Issue will be handled by Cameo Corporate Services Ltd. who is the Registrar to the Issue. The Registrar will have a separate team of personnel handling only post‐Issue correspondence. The agreement between the Company and the Registrar will provide for retention of records with the Registrar for a period of one year from the last date of dispatch of Allotment Advice/ share certificate / refund orders to enable the investors to approach the Registrar for redressal of their grievances. All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio number, name and address, contact telephone / cell numbers, email id of the first Investor, number and type of shares applied for, CAF serial number, amount paid on application and the name of the bank and the branch where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the Renouncee should be furnished. The average time taken by the Registrar for attending to routine grievances will be 7 days from the date of receipt. In case of non‐routine grievances where verification at other agencies is involved, it would be the endeavour of the Registrar to attend to them as expeditiously as possible. The Company undertakes to resolve the Investor grievances in a time bound manner. Investors may contact the Compliance Officer / Company Secretary in case– of any pre‐Issue/ post ‐Issue related problems such as non‐receipt of allotment advice/share certificates/ demat credit/refund orders etc. Her address is as follows: Ms. N. Jayanthi KMC Speciality Hospitals (India) Limited No. 6, Royal Road Tiruchirappalli 620001 Tamil Nadu Tel. No.: +91‐431‐407 7777 Fax No.: +91‐431‐2415402 Email: [email protected]


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All grievances relating to the ASBA process may be addressed to the SCSB, giving complete details such as the name and address of the ASBA Applicant, the number of Equity Shares applied for, the Application Money paid on the CAF and the Designated Branch or the collection center of the SCSB where the CAF was submitted by the ASBA Applicant.

Y. Changes in Auditors during the last five years

At the Annual General Meeting held on July 14, 2008, the present Auditors M/s. Patel, Mohan, Ramesh and Company was appointed in lieu of M/s Guru and Ram the retiring Auditors. Other than this, there were no changes in Auditors in the past three years.

Z. Capitalisation of Reserves or Profits

The Company had been incurring losses continuously over the last few years and had a total accumulated losses of Rs. 14,00,68,083 as on March 31st , 2009, as against a paid up capital of Rs. 125450000 and Reserve and Surplus of Rs. 30182334. Company had no reserves except Capital Reserve of Rs. 30182334. The entire capital of the company has been lost, reflecting inappropriate capital structure. Hence to reflect the true financial position of the company, the company has gone for capital reduction to write off the accumulated losses.

AA. Revaluation of Fixed Assets

Our Company has not revalued its assets for the last five years. Option to Subscribe Other than the Issue, and except as provided in the section titled “Capital Structure” on page 29 of this Draft Letter of Offer, our Company has not given any person any option to subscribe to the Equity Shares of our Company. Outstanding Instruments There are no outstanding instruments. Important • This Issue is pursuant to the resolution passed by the Board of Directors at its meetings held on January 21, 2010.

• This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of our Company at the close of business hours on the Record Date i.e. [ ], 2010, after giving effect to the valid share transfers lodged with our Company up to the Record Date i.e. [ ], 2010,.

• Your attention is drawn to “Risk Factors” on page 10 of this Draft Letter of Offer.

• Please ensure that you have received the Composite Application Forms (“CAF”) with this Draft Letter of Offer/Abridged Letter of Offer.

• Please read the Draft Letter of Offer and the instructions contained therein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are each an integral part of this Draft Letter of Offer and must be carefully followed. An application is liable to be rejected for any noncompliance of the provisions contained in the Draft Letter of Offer or the CAF.

• All enquiries in connection with the Draft Letter of Offer or CAF should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAF.

• All information shall be made available to the Investors by the Lead Manager and the Issuer, and no selective or additional information would be available by them for any section of the Investors in any manner whatsoever including at presentations or in research or sales reports, etc.

• The Lead Manager and our Company shall update the Draft Letter of Offer and keep the public informed of any material changes till the listing and trading commences.


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Issue Schedule Issue Opening Date: [ ], 2010 Last Date for receiving requests for split forms: [ ], 2010 Issue Closing Date: [ ], 2010 The Board may however decide to extend the Issue period as it may determine from time to time but not exceeding 30 days including the Issue Opening Date. Allotment Letters / Refund Orders The Company will issue and dispatch allotment advice/ share certificates / demat credit and/or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of 15 days from the date of closure of the Issue. If such money is not repaid within eight days from the day our Company becomes liable to pay it, our Company shall pay that money with interest as stipulated under section 73 of the Companies Act. Applicants residing at centers where clearing houses are managed by the Reserve Bank of India (RBI) will get refunds through ECS only (Electronic Clearing Service) except where Applicants are otherwise disclosed as applicable/eligible to get refunds through direct credit and RTGS provided that the MICR details are recorded with the depositories or our Company. In case of those Applicants who have opted to receive their Equity Shares in dematerialized form using electronic credit under the depository system, and advice regarding their credit of the Equity Shares shall be given separately. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post intimating them about the mode of credit of refund within fifteen (15) working days of closure of the Issue. In case of those Applicants who have opted to receive their Equity Shares in physical form and our Company issues an allotment advice, the corresponding share certificates will be dispatched within one month from the date of allotment. In case of ASBA Investors, the Registrar to the Issue shall instruct the SCSBs to unblock the funds in the relevant ASBA Account to the extent of the refund to be made within 15 days of the Issue Closing Date. The refund order exceeding Rs.1,500 would be sent by registered post/speed post to the sole/first Applicant’s registered address. Refund orders up to the value of Rs.1,500 would be sent under certificate of posting. Such refund orders would be payable at par at all places where the applications were originally accepted. The same would be marked ‘Account Payee only’ and would be drawn in favour of the sole/first Applicant. Adequate funds would be made available to the Registrar to the Issue for this purpose.


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SECTION IX: OFFERING INFORMATION A. Terms of the Issue The Equity Shares are being issued pursuant to the Rights Issue are subject to the terms and conditions contained in the Draft Letter of Offer, the CAF (enclosed with the Draft Letter of Offer), the Memorandum of Association, the Articles of Association, approvals from the Government of India and the RBI, if applicable, the provisions of the Companies Act, guidelines issued by SEBI, FEMA, notifications and regulations for issue of capital and for listing of securities issued by the Government of India and/or other statutory authorities and bodies from time to time, the Listing Agreements entered into by our Company with the Stock Exchanges, the terms and conditions as stipulated in the allotment advice or letters of allotment or Consolidated Certificates and any other law, rules or regulations as applicable and introduced from time to time. 1. Ranking of the Equity Shares

The Equity Shares shall be subject to the Memorandum and Articles of Association of our Company. The dividend payable on Equity Shares allotted in this Issue shall rank for dividend in proportion to the amount paid up. The Equity Shares allotted in this Issue, shall be pari passu with the existing Equity Shares in all respects including dividend. For more details see section titled “Description of Equity Shares and Terms of Articles of Association” beginning on page 151 of the Draft Letter of Offer.

2. Mode of Payment of Dividend Dividend, if any declared by the Board and approved by our shareholders, will be paid in any of the modes permitted by the Companies Act, 1956

3. Face value and issue price Face value Each Equity Share shall have the face value of Re. 1 (Rupee One). Issue Price Re. 1 (Rupee One) per Equity share. 4. Rights of Equity Shareholders Subject to applicable laws, Equity Shareholders shall have the following rights:

a. Right to receive dividend, if declared b. Right to attend general meetings and exercise voting power, unless prohibited by law; c. Right to vote on poll, either in person or proxy; d. Right to receive offer for right shares and be allotted bonus shares if announced; e. Right to receive surplus on liquidation; f. Right of free transferability of share; and g. Such other rights as may be available to a shareholder of a listed public company under the Companies Act and Memorandum and Articles of Association of our Company and the terms of the listing agreement with the Stock Exchange. For further details on the main provisions of our Company’s Articles of Association dealing with voting rights, dividend, forfeiture and lien, transfer and transmission and/or consolidation/splitting, please refer section titled “Description of Equity Shares and Terms of Articles of Association” beginning on page 151 of the Draft Letter of Offer.

5. Market Lot The Equity Shares of our Company are tradable only in dematerialized form, and the market lot is one Equity Share. In case of holding of equity shares in physical form, our Company would issue to the allottees separate certificate for the Equity Shares allotted on rights basis with a split preference.


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However, our company would issue one certificate for the entire allotment. However, our Company would issue split certificates on written requests from the shareholders. The company shall not charge a fee for splitting any of the share certificates. Investors may please note that the Equity Shares can be traded on the Stock Exchanges in dematerialized form only.

6. Nomination Facility

In terms of Section 109A of the Companies Act, a nomination facility is available in case of Equity Shares. The applicant can nominate any person by completing the relevant details in the CAF in the space provided for this purpose. A sole Equity Shareholder or the first Equity Shareholder, along with other joint Equity Shareholders, being individuals, may nominate any person(s) who, in the event of the death of the sole holder or all the joint‐holders, as the case may be, shall become entitled to the Equity Shares. A person, being a nominee, who becomes entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. A nomination shall stand rescinded upon the sale of the Equity Shares by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Shares are held jointly by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the joint‐holders. Fresh nominations can be made only in the prescribed form available on request at the Registered Office or with such other person at such addresses as may be notified by our Company. Only one nomination will be applicable for one folio. Hence, if an Equity Shareholder has already registered a nomination with our Company, no further nomination needs to be made for the Equity Shares to be allotted in the Issue under the same folio. However, new nominations, if any, by an Equity Shareholder shall operate in supersession of any previous nomination. In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separate nomination for such Equity Shares to be allotted in the Issue. Nominations registered with the respective Depository Participant of the applicant will prevail. If the applicants wish to change the nomination, they are requested to inform their respective Depository Participants.

7. Minimum Subscription

If our Company does not receive the minimum subscription of 90% of the Issue, or the subscription level falls below 90%, after the Issue Closing Date on account of cheques being returned unpaid or withdrawal of applications, our Company shall refund the entire subscription amount received within 15 days from the Issue Closing Date. If there is delay in the refund of the subscription amount by more than eight days after our Company becomes liable to pay the subscription amount (i.e. 15 days after the Issue Closing Date), our Company will pay interest for the delayed period, as prescribed under subsections (2) and (2A) of Section 73 of the Companies Act. The Promoter holding Equity Shares in our Company have undertaken to fully subscribe for their Rights Entitlement. They reserve the right to subscribe for their Rights Entitlement either by themselves and/or through one or more entities controlled by them, including by subscribing for Equity Shares pursuant to any renunciation made by any member of the Company to any member of the Promoter Group. They also intend to apply for Equity Shares in addition to their Rights Entitlement to the extent of any undersubscribed portion of the Issue, subject to obtaining any approvals required under applicable law, to ensure that 100% of the Issue is subscribed. Such subscription for Equity Shares over and above their Rights Entitlement, if allotted, may result in an increase in their percentage shareholding above their current percentage shareholding. Further, such acquisition by them of additional Equity Shares shall (i) not result in a change of control of the management of our Company; and (ii) be exempt from the applicability of Regulations 11 and 12 of the Takeover Code in terms of the proviso to Regulation 3(1)(b)(ii) of the Takeover Code. Presently our Company is complying with clause 40A of the Listing Agreement and the minimum public shareholding required to be maintained for continuous listing is 25% of the total paid up equity capital. The Promoter and/or members of the Promoter Group intend to subscribe for any undersubscribed portion as per the provisions of applicable law. Allotment to the Promoter and/or members of the Promoter Group of any


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undersubscribed portion, over and above their Rights Entitlement, shall be completed in compliance with the Listing Agreements and other applicable laws prevailing at that time relating to continuous listing requirements. For further details of under subscription and allotment to the Promoter and Promoter Group, please refer to “Basis of Allotment” on page 147 of the Draft Letter of Offer.

Additional Subscription by the Promoter The Promoter has confirmed that they intend to subscribe to the full extent of their Rights entitlement in the Issue. Subject to compliance with the Take Over Code, the Promoter reserve their right to subscribe for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholders. The Promoter has provided an undertaking dated June 23, 2010 to our Company to apply for additional Equity Shares in the Issue, to the extent of the unsubscribed portion of the Issue As a result of this subscription and consequent allotment, the Promoter may acquire Equity Shares over and above their entitlement in the Issue, which may result in their shareholding in the Company being above their current shareholding with the Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by the Promoter through this issue, if any, will not result in change of control of the management of the Company and shall be exempt in terms of provision to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The Promoter have confirmed that in case the Rights Issue of the Company is completed with their subscribing to equity shares over and above their entitlement and as a result, if the public shareholding in the Company after the Issue falls below the permissible minimum level as specified in the listing condition or listing agreement, they will undertake to maintain the minimum public shareholding in such manner and within such period as specified in Clause 40A of the Listing Agreement.

8. Arrangements for disposal of odd lots

Since the market lot for our Company’s Equity Shares is one (1), there is no question of disposal of odd lots

9. Restrictions, if any, on transfer and transmission of Equity Shares and on their consolidation/splitting

For details on restrictions, if any, on the transfer and transmission of Equity Shares and on their consolidation/splitting, please refer chapter titled “Description of Equity Shares and Terms of Articles of Association” beginning on page 152 of the Draft Letter of Offer.

10. Option to receive Equity Shares in Dematerialized Form Investors to the Equity Shares of the Company issued through this Issue shall be allotted the securities in dematerialized (electronic) form at the option of the Investor. The Company signed a tripartite agreement with NSDL on March 03, 2010 which enables the Investors to hold and trade in securities in a dematerialized form, instead of holding the securities in the form of physical certificates. The Company has also signed a tripartite agreement with CDSL on February 25, 2010 which enables the Investors to hold and trade in securities in a dematerialized form, instead of holding the securities in the form of physical certificates. The ISIN No. allotted to the Company is INE879K01018. In this Issue, the allottees who have opted for Equity Shares in dematerialized form will receive their Equity Shares in the form of an electronic credit to their beneficiary account as given in the CAF, after verification with a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Allotment advice, refund order (if any) would be sent directly to the Investor by the Registrar to the Issue but the Investor’s depository participant will provide to him the confirmation of the credit of such Equity Shares to the Investor’s depository account. CAFs, which do not accurately contain this information, will be given the Equity Shares in physical form. No separate CAFs for Equity Shares in physical and/or dematerialized form should be made. If such CAFs are made, the CAFs for physical Equity Shares will be treated as multiple CAFs and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the Equity Shares sought in demat and balance, if any, will be allotted in physical Equity Shares.


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Others 11. Basis for the Issue

The Equity Shares are being offered for subscription to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the Depositories in respect of the Equity Shares held in the electronic form and on the register of members of our Company in respect of the Equity Shares held in the physical form at the close of business hours on the Record Date, i.e., [ ], 2010, fixed in consultation with the Designated Stock Exchange.

12. Rights Entitlement

As your name appears as a beneficial owner in respect of the Equity Shares held in the electronic form or appears in the register of members as an Equity Shareholder as on the Record Date, you are entitled to the number of Equity Shares specified in Block I of Part A of the enclosed CAF.

The eligible equity shareholders are entitled to 12 (Twelve) equity share for every 1 (One) fully paid up equity share held on the Record Date i.e. [●]

Joint‐Holders

Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold such Equity Shares as joint holders with benefits of survivorship, subject to the provisions contained in the Articles of Association. Notices All notices to the Equity Shareholder(s) required to be given by our Company shall be published in one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language daily newspaper in with wide circulation where the Registered Office is situated and/or will be sent to the registered holders of the Equity Share at the address registered with the registrar from time to time.

Terms of payment

The entire amount of Re. 1/‐ per Equity Share shall be payable on application. A separate cheque/ demand draft pay order must accompany each Application form.

Payment should be made in cash (not more than Rs.20,000) or by cheque/demand draft/pay order drawn on any bank (including a co‐operative bank) which is situated at and is a member or a sub‐member of the bankers clearing house located at the center where the CAF is accepted. Outstation cheques/demand drafts/pay orders will not be accepted and CAFs accompanied by such outstation cheques/demand drafts/pay orders are liable to be rejected. Payments in cash in excess of the amount specified above will not be accepted. In case of ASBA Applicants, payment should be made in accordance with the procedure set out under “ Procedure for ASBA” below under this section titled “Terms and Procedure of the Issue” beginning on page 130 of this Draft Letter of Offer. Pursuant to the RBI Circular DBOD No. FSC BC 42/24.47.00/2003‐04 dated November 5, 2003, the Stockinvest scheme has been withdrawn and accordingly, payment through Stockinvest will not be accepted in the Issue. Where an applicant has applied for additional shares and is allotted lesser number of shares than applied for, the excess application money shall be refunded. The excess application monies would be refunded within 15 days from the closure of the Issue, and if there is a delay beyond 8 days from the stipulated period, the Company and every Director of the Company who is an officer in default shall be jointly and severally liable to repay the money with interest for the delayed period, at the rates stipulated under sub‐sections (2) and (2A) of section 73 of the Companies Act, 1956.


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B. Issue Procedure Procedure for Application The CAF for Equity Shares would be printed in black ink for all Equity Shareholders. In case the original CAFs are not received by the Investor or is misplaced by the Investor, the Investor may request the Registrars to the Issue, for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address.

Acceptance of the Issue You may accept the Issue and apply for the Equity Shares offered, either in full or in part, by filling Part A of the enclosed CAFs and submit the same along with the application money payable to the Bankers to the Issue or any of the collection branches as mentioned on the reverse of the CAFs before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board of Directors of the Company in this regard. Investors at centers not covered by the branches of collecting banks can send their CAFs together with the cheque drawn at par on a local bank at Chennai/demand draft payable at Chennai to the Registrar to the Issue by registered post. Such applications sent to anyone other than the Registrar to the Issue are liable to be rejected. For further details on the mode of payment, see “Mode of Payment for Resident Equity Shareholders/Investors and ―Mode of Payment for Non‐Resident Equity Shareholders/Investors” on pages 146 and 146, respectively, of this Draft Letter of Offer.

The CAF consists of four parts: Part A : Form for accepting the Equity Shares offered and for applying for additional Equity Shares Part B : Form for renunciation Part C : Form for application for renouncees Part D : Form for request for split application forms Option available to the Equity Shareholders Option available to the Equity Shareholders The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF: Option Option Available Action Required

A Accept whole or part of your entitlement without renouncing the balance

Fill in and sign Part A (All joint holders must sign)

B Accept your entitlement in full and apply for additional Equity Shares

Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign)

C Renounce your entitlement in full to one person (Joint renouncees not exceeding three are considered as one renouncee).

Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand over the entire CAF to the renouncee. The renouncees must fill in and sign Part C of the CAF (All joint renouncees must sign)

D 1. Accept a part of your entitlement and renounce the balance to one or more renouncee(s)

OR 2. Renounce your entitlement to all the Equity Shares offered to you to more than one renouncee

Fill in and sign Part D (all joint holders must sign) requesting for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. Splitting will be permitted only once. On receipt of the Split Form take action as indicated below. (i) For the Equity Shares you wish to accept, if any, fill in and sign Part A of one split CAF (only for option 1). (ii) For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand over the split CAFs to the renouncees. (iii) Each of the renouncees should fill in and sign Part C


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for the Equity Shares accepted by them. E Introduce a joint holder or change the

sequence of joint holders This will be treated as a renunciation. Fill in and sign Part B and the renouncees must fill in and sign Part C.

Option A: Acceptance of the Issue in full or in part You may accept the Issue and apply for the Equity Shares offered, either in full or in part by filling part A of the enclosed CAF. For details of submission of CAF and mode of payment please refer to the paragraph titled “Acceptance of the Issue” and “Mode of payment” beginning on page 137 of this Draft Letter of Offer. Option B: Additional Equity Shares You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favor of any other person(s). The application for additional Equity Shares shall be considered and allotment shall be made at the sole discretion of the Board and in consultation if necessary with the Designated Stock Exchange. This allotment of additional Equity Shares will be made on an equitable basis with reference to number of Equity Shares held by you on the Record Date. If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for additional shares in Part A of the CAF. Applications for additional Equity Shares shall be considered and allotment shall be in the manner prescribed under the paragraph titled “Basis of Allotment” beginning on page 147 of this Draft Letter of Offer. The renouncees applying for all the Equity Shares renounced in their favor may also apply for additional Equity Shares. Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. In case of change of status of holders i.e. from Resident to Non‐Resident, a new demat account shall be opened for the purpose. Option C & D: Renunciation This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favour of any other person or persons. Your attention is drawn to the fact that the Company shall not allot and/or register and Equity Shares in favour of more than three persons (including joint holders), partnership firm(s) or their nominee(s), minors, HUF, any trust or society (unless the same is registered under the Societies Registration Act, 1860 or the Indian Trust Act, 1882 or any other applicable law relating to societies or trusts and is authorized under its constitution or bye‐laws to hold Equity Shares, as the case may be).

Any renunciation from Non‐resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the approval of the FIPB and/or necessary permission of the RBI under the FEMA and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approvals are liable to be rejected. Additionally, any renunciation by any Equity Shareholder resident in/outside India to any non‐resident is prohibited. By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas Corporate Bodies (“OCBs”) have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe to the Equity Shares being offered but wish to renounce the same in favour of Renouncee shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s). Part “A” of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part “B” of the CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Equity Shares in Part “C” of the CAF to receive allotment of such Equity Shares. The Renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part “A” of the CAF must not be used by


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the Renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right to renounce any Equity Shares in favour of any other person. Your attention is drawn to the fact that our Company shall not allot and / or register any Equity Shares in favor of: 1. More than three persons including joint holders; 2. Partnership firm(s) or their nominee(s); 3. Minors (unless application is made through a guardian) ;and 4. Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable Trust laws and is authorized under its Constitutions to hold Equity Shares of a Company). The right of renunciation is subject to the express condition that the Board / Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof.

Procedure for renunciation To renounce all the Equity Shares offered to a shareholder in favour of one Renouncee If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of joint Renouncees, all joint Renouncees must sign this part of the CAF. To renounce in part/or renounce the whole to more than one person(s) If you wish to either accept this offer in part and renounce the balance or renounce the entire offer under this Issue in favour of two or more Renouncees, the CAF must be first split into requisite number of forms. Please indicate your requirement of SAFs in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for SAFs. On receipt of the required number of SAFs from the Registrar, the procedure as mentioned in paragraph above shall have to be followed. In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimen registered with the Company, the application is liable to be rejected. Renouncee(s) The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part „C� of the CAF and submit the entire CAF to the Bankers to the Issue on or before the Issue Closing Date along with the application money in full. Option E: Change and/ or introduction of additional holders If you wish to apply for Equity Shares jointly with any other person(s), not more than three, who is/are not already a joint holder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed. However, this right of renunciation is subject to the express condition that the Board of Directors of the Company shall be entitled in its absolute discretion to reject the request for allotment from the Renouncee(s) without assigning any reason thereof. Please note that:

- Part “A” of the CAF must not be used by any person(s) other than the Equity Shareholder to whom this Draft Letter of Offer has been addressed. If used, this will render the application invalid.

- Request for SAF should be made for a minimum of one Equity Share or, in either case, in multiples thereof and one SAF for the balance Equity Shares, if any.

- Request by the Investor for the SAFs should reach the Company on or before [●]. - Only the Equity Shareholder to whom this Draft Letter of Offer has been addressed shall be entitled to

renounce and to apply for SAFs. Forms once split cannot be split further. - SAFs will be sent to the Investor (s) by post at the applicant’s risk.


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Availability of duplicate CAF In case the original CAF is not received, or is misplaced by the Investor, the Registrar to the Issue will issue a duplicate CAF on the request of the Investor who should furnish the registered folio number/ DP and Client ID number and his/ her full name and address to the Registrar to the Issue. Please note that the request for duplicate CAF should reach the Registrar to the Issue within [•] days from the Issue Opening Date. Please note that those who are making the application in the duplicate form should not utilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the Investor violates such requirements, he / she shall face the risk of rejection of both the applications.

Procedure for Application through the Applications Supported by Blocked Amount (“ASBA”) Process This section is for the information of the ASBA Investors proposing to subscribe to the Issue through the ASBA Process. The Company and the Lead Manager are not liable for any amendments or modifications or changes in applicable laws or regulations, which may occur after the date of this Draft Letter of Offer. Equity Shareholders who are eligible to apply under the ASBA Process are advised to make their independent investigations and to ensure that the CAF is correctly filled up. The list of banks who have been notified by SEBI to act as SCSB for the ASBA Process are provided on http://www.sebi.gov.in/pmd/scsb.pdf. For details on designated branches of SCSB collecting the CAF, please refer the above mentioned SEBI link. Equity Shareholders who are eligible to apply under the ASBA Process The option of applying for Equity Shares in the Issue through the ASBA Process is only available to Equity Shareholders of the Company on the Record Date and who: - Are holding the Equity Shares in dematerialised form and have applied towards his/her Rights Entitlements

or additional Equity Shares in the Issue in dematerialised form; - Have not renounced his/her Rights Entitlements in full or in part; - Are not a Renouncee; - Are applying through a bank account with one of the SCSBs.

CAF The Registrar will dispatch the CAF to all Equity Shareholders as per their Rights Entitlement on the Record Date for the Issue. Those Equity Shareholders who wish to apply through the ASBA payment mechanism will have to select for this mechanism in Part A of the CAF and provide necessary details. Equity Shareholders desiring to use the ASBA Process are required to submit their applications by selecting the ASBA Option in Part A of the CAF only. Application in electronic mode will only be available with such SCSB who provides such facility. The Equity Shareholder shall submit the CAF to the SCSB for authorising such SCSB to block an amount equivalent to the amount payable on the application in the said bank account maintained with the same SCSB. Acceptance of the Issue You may accept the Issue and apply for the Equity Shares either in full or in part, by filling Part A of the respective CAFs sent by the Registrar, selecting the ASBA process option in Part A of the CAF and submit the same to the SCSB before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board of Directors of the Company in this regard.

Mode of payment The Equity Shareholder applying under the ASBA Process agrees to block the entire amount payable on application with the submission of the CAF, by authorizing the SCSB to block an amount, equivalent to the amount payable on application, in a bank account maintained with the SCSB. After verifying that sufficient funds are available in the bank account provided in the CAF, the SCSB shall block an amount equivalent to the amount payable on application mentioned in the CAF until it receives instructions from the Registrars. Upon receipt of intimation from the Registrar, the SCSBs shall transfer such amount as per Registrar’s instruction allocable to the Equity Shareholders applying under the ASBA Process from bank account with the SCSB mentioned by the Equity Shareholder in the CAF. This amount will be transferred in terms of the SEBI Regulations, into the separate bank account maintained by the Company as per the provisions of section


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73(3) of the Companies Act, 1956. The balance amount remaining after the finalisation of the basis of allotment shall be either unblocked by the SCSBs or refunded to the investors by the Registrar on the basis of the instructions issued in this regard by the Registrar to the Issue and the Lead Managers to the respective SCSB.

The Equity Shareholders applying under the ASBA Process would be required to block the entire amount payable on their application at the time of the submission of the CAF. The SCSB may reject the application at the time of acceptance of CAF if the bank account with the SCSB details of which have been provided by the Equity Shareholder in the CAF does not have sufficient funds equivalent to the amount payable on application mentioned in the CAF. Subsequent to the acceptance of the application by the SCSB, the Company would have a right to reject the application only on technical grounds.

Options available to the Equity Shareholders applying under the ASBA Process The summaries of options available to the Equity Shareholders are presented below. You may exercise any of the following options with regard to the Equity Shares, using the respective CAFs received from Registrar: Sr. No. Option Available Action Required

1 Accept whole or part of your entitlement without renouncing the balance.

Fill in and sign Part A of the CAF (All joint holders must sign)

2 Accept your entitlement in full and apply for additional Equity Shares

Fill in and sign Part A of the CAF including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign)

The Equity Shareholder applying under the ASBA Process will need to select the ASBA option process in the CAF and provide required necessary details. However, in cases where this option is not selected, but the CAF is tendered to the SCSB with the relevant details required under the ASBA process option and SCSB blocks the requisite amount, then that CAF would be treated as if the Equity Shareholder has selected to apply through the ASBA process option.

Additional Equity Shares You are eligible to apply for additional Equity Shares over and above the number of Equity Shares that you are entitled too, provided that (i) you have applied for all the Equity Shares (as the case may be) offered without renouncing them in whole or in part in favour of any other person(s). Applications for additional Equity Shares shall be considered and allotment shall be made at the sole discretion of the Board, in consultation with the Designated Stock Exchange and in the manner prescribed under “Basis of Allotment” on page 147. If you desire to apply for additional Equity Shares please indicate your requirement in the place provided for additional Securities in Part A of the CAF. Renunciation under the ASBA Process Renouncees cannot participate in the ASBA Process.

Option to receive Securities in Dematerialized Form

Equity shareholders under the asba process may please note that the equity shares of the company under the asba process can only be allotted in dematerialized form and to the same depository account in which the equity shares are being held on record date.

General instructions for Equity Shareholders applying under the ASBA Process a) Please read the instructions printed on the respective CAF carefully. b) Application should be made on the printed CAF only and should be completed in all respects. The CAF found

incomplete with regard to any of the particulars required to be given therein, and/or which are not completed in conformity with the terms of this Draft Letter of Offer are liable to be rejected. The CAF must be filled in English.

c) The CAF in the ASBA Process should be submitted at a Designated Branch of the SCSB and whose bank account details are provided in the CAF and not to the Bankers to the Issue/Collecting Banks (assuming that such Collecting Bank is not a SCSB), to the Company or Registrar or Lead Manager to the Issue.


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d) All applicants, and in the case of application in joint names, each of the joint applicants, should mention his/her PAN number allotted under the Income‐Tax Act, 1961, irrespective of the amount of the application. Except for applications on behalf of the Central or State Government and the officials appointed by the courts, CAFs without PAN will be considered incomplete and are liable to be rejected.

e) All payments will be made by blocking the amount in the bank account maintained with the SCSB. Cash payment is not acceptable. In case payment is affected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon.

f) Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company/or Depositories.

g) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with the Company. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant.

h) All communication in connection with application for the Securities, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the name of the first/sole applicant Equity Shareholder, folio numbers and CAF number.

i) Only the person or persons to whom the Equity Shares have been offered and not renouncee(s) shall be eligible to participate under the ASBA process.

Do‘s: a) Ensure that the ASBA Process option is selected in part A of the CAF and necessary details are filled in. b) Ensure that you submit your application in physical mode only. Electronic mode is only available with

certain SCSBs and not all SCSBs and you should ensure that your SCSB offers such facility to you. c) Ensure that the details about your Depository Participant and beneficiary account are correct and the

beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only. d) Ensure that the CAFs are submitted at the SCSBs and details of the correct bank account have been

provided in the CAF. e) Ensure that there are sufficient funds (equal to {number of Equity Shares as the case may be applied for}

X {Issue Price of Equity Shares, as the case may be}) available in the bank account maintained with the SCSB mentioned in the CAF before submitting the CAF to the respective Designated Branch of the SCSB.

f) Ensure that you have authorised the SCSB for blocking funds equivalent to the total amount payable on application mentioned in the CAF, in the bank account maintained with the respective SCSB, of which details are provided in the CAF and have signed the same.

g) Ensure that you receive an acknowledgement from the SCSB for your submission of the CAF in physical form.

h) Except for Bids on behalf of the Central or State Government and the officials appointed by the courts, each applicant should mention their PAN allotted under the I. T. Act.

i) Ensure that the name(s) given in the CAF is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the CAF is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the CAF.

j) Ensure that the Demographic Details are updated, true and correct, in all respects. Don‘ts: a) Do not apply on duplicate CAF after you have submitted a CAF to a Designated Branch of the SCSB. b) Do not pay the amount payable on application in cash, by money order or by postal order. c) Do not send your physical CAFs to the Lead Manager to Issue / Registrar / Collecting Banks (assuming

that such Collecting Bank is not a SCSB) / to a branch of the SCSB which is not a Designated Branch of the SCSB / Company; instead submit the same to a Designated Branch of the SCSB only.

d) Do not submit the GIR number instead of the PAN as the application is liable to be rejected on this ground.

e) Do not instruct your respective banks to release the funds blocked under the ASBA Process.


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Grounds for Technical Rejection under the ASBA Process: In addition to the grounds listed under “Grounds for Technical Rejection” on page 145 of this Draft Letter of Offer, applications under the ABSA Process are liable to be rejected on the following grounds: a) Application for Rights Entitlements or additional shares in physical form. b) DP ID and Client ID mentioned in CAF not matching with the DP ID and Client ID records available with

the Registrar. c) Sending CAF to a Lead Manager / Registrar / Collecting Bank (assuming that such Collecting Bank is not a

SCSB) / to a branch of a SCSB which is not a Designated Branch of the SCSB / Company. d) Renouncee applying under the ASBA Process. e) Insufficient funds are available with the SCSB for blocking the amount. f) Funds in the bank account with the SCSB whose details are mentioned in the CAF having been frozen

pursuant to regulatory orders. g) Account holder not signing the CAF or declaration mentioned therein. Depository account and bank details for Equity Shareholders applying under the ASBA Process IT IS MANDATORY FOR ALL THE EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT�S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE CAF. EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS MUST ENSURE THAT THE NAME GIVEN IN THE CAF IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE CAF IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE CAF. Equity Shareholders applying under the ASBA Process should note that on the basis of name of these Equity Shareholders, Depository Participant’s name and identification number and beneficiary account number provided by them in the CAF, the Registrar to the Issue will obtain from the Depository demographic details of these Equity Shareholders such as address, bank account details for printing on refund orders and occupation (“Demographic Details”). Hence, Equity Shareholders applying under the ASBA Process should carefully fill in their Depository Account details in the CAF. These Demographic Details would be used for all correspondence with such Equity Shareholders including mailing of the letters intimating unblock of bank account of the respective Equity Shareholder. The Demographic Details given by Equity Shareholders in the CAF would not be used for any other purposes by the Registrar. Hence, Equity Shareholders are advised to update their Demographic Details as provided to their Depository Participants. By signing the CAFs, the Equity Shareholders applying under the ASBA Process would be deemed to have authorised the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. Letters intimating allotment and unblocking or refund (if any) would be mailed at the address of the Equity Shareholder applying under the ASBA Process as per the Demographic Details received from the Depositories. Refunds, if any, will be made directly to the bank account in the SCSB and which details are provided in the CAF and not the bank account linked to the DP ID. Equity Shareholders applying under the ASBA Process may note that delivery of letters intimating unblocking of bank account may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Equity Shareholder in the CAF would be used only to ensure dispatch of letters intimating unblocking of bank account. Note that any such delay shall be at the sole risk of the Equity Shareholders applying under the ASBA Process and none of the Company, the SCSBs or the Lead Managers shall be liable to compensate the Equity Shareholder applying under the ASBA Process for any losses caused due to any such delay or liable to pay any interest for such delay. In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Equity Shareholders (including the order of names of joint holders), the DP ID and the beneficiary account number, then such applications are liable to be rejected.


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Application on Plain Paper An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with Demand Draft, net of bank and postal charges payable at Chennai which should be drawn in favor of the “KMC SHIL – Rights Issue” and the Equity Shareholders should send the same by registered post directly to the Registrar to the Issue. The envelope should be superscribed “KMC SHIL – Rights Issue” and should be postmarked in India. The application on plain paper, duly signed by the Investors including joint holders, in the same order as per specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars:

- Name of Issuer, being KMC Speciality Hospitals (I) Limited; - Name and address of the Equity Shareholder including joint holders; - Registered Folio Number/ DP and Client ID no.; - Number of Equity Shares held as on Record Date; - Number of Equity Shares entitled to; - Number of Equity Shares applied for; - Number of additional Equity Shares applied for, if any; - Total number of Equity Shares applied for; - Total amount paid at the rate of Re. 1 per Equity Share; - Particulars of cheque/draft; Savings/Current Account Number and name and address of the bank where

the Equity Shareholder will be depositing the refund order; and - Except for applications on behalf of the Central or State Government and the officials appointed by the

courts, PAN number of the Investor and for each Investor in case of joint names, irrespective of the total value of the Equity Shares applied for pursuant to the Issue.

Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the Investor violates such requirements, he/she shall face the risk of rejection of both the applications. The Company shall refund such application amount to the Investor without any interest thereon.

Underwriting The present Issue is not underwritten.

Allotment Advices / Refund Orders The Company will issue and dispatch allotment advice/ share certificates/demat credit and/or letters of regret along with refund order or credit the allotted Equity Shares to the respective beneficiary accounts, if any, within a period of 15 days from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to repay it, (i.e. 15 days after the Issue Closing Date or the date of the refusal by the Stock Exchange(s), whichever is earlier) the Company and every Director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to pay the money with interest as prescribed under Section 73 of the Companies Act. Investors residing at the 68 centers where clearing houses are managed by the Reserve Bank of India (“RBI”) will get refunds through Electronic Clearing Service (“ECS”) except where Investors are otherwise disclosed as applicable/eligible to get refunds through direct credit and real time gross settlement (“RTGS”). In case of those Investors who have opted to receive their Rights Entitlement in dematerialized form using electronic credit under the depository system, advice regarding their credit of the securities shall be given separately. Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date. In case of those Investors who have opted to receive their Rights Entitlement in physical form and the Company issues letter of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Company Law Board under Section 113 of the Companies Act or other applicable provisions, if any. Investors are requested


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to preserve such letters of allotment, which would be exchanged later for the share certificates. For more information see “Terms of the Issue” on page 130. The letter of allotment / refund order exceeding Rs. 1,500 would be sent by registered post/speed post to the sole/first Investors registered address. Refund orders up to the value of Rs. 1,500 would be sent under certificate of posting. Such refund orders would be payable at par at all places where the applications were originally accepted. The same would be marked „Account Payee only� and would be drawn in favour of the sole/first Investor. Adequate funds would be made available to the Registrar to the Issue for this purpose. Payment of Refund Mode of making refunds The payment of refund, if any, would be done through any of the following modes: 1. ECS – Payment of refund would be done through ECS for Investors having an account at any of the 68

centers where such facility has been made available. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf, from the Depositories. The payment of refunds is mandatory for Investors having a bank account at any centre where ECS facility has been made available by the RBI (subject to availability of all information for crediting the refund through ECS), except where the Investor, being eligible, opts to receive refund through National Electronic Fund Transfer (“NEFT”), direct credit or RTGS.

2. NEFT – Payment of refund shall be undertaken through NEFT wherever the Investors� bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a MICR, if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the Investors have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the Investors through this method.

3. Direct Credit – Investors having bank accounts with the Bankers to the Issue shall be eligible to receive refunds through direct credit. Charges, if any, levied by the relevant bank(s) for the same would be borne by the Company.

4. RTGS – Investors having a bank account at any of the 68 centers where such facility has been made available and whose refund amount exceeds Rs. 50 lacs, have the option to receive refund through RTGS. Such eligible Investors who indicate their preference to receive refund through RTGS are required to provide the IFSC code in the CAF. In the event the same is not provided, refund shall be made through ECS. Charges, if any, levied by the refund bank(s) for the same would be borne by the Company. Charges, if any, levied by the Investor’s bank receiving the credit would be borne by the Investor.

5. For all other Investors, including those who have not updated their bank particulars with the MICR code, the refund orders will be dispatched under certificate of posting for value up to Rs. 1,500 and through Speed Post/ Registered Post for refund orders of Rs. 1,500 and above. Such refunds will be made by cheques, pay orders or demand drafts drawn in favour of the sole/first Investor and payable at par.

6. Credit of refunds to Investors in any other electronic manner permissible under the banking law, which are in force, and are permitted by the SEBI from time to time.

Printing of Bank Particulars on Refund Orders As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the Investor’s bank account are mandatorily required to be given for printing on the refund orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. The Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud. Allotment advice / Share Certificates/ Demat Credit Allotment advice/ share certificates/ demat credit or letters of regret will be dispatched to the registered address of the first named Investor or respective beneficiary accounts will be credited within 15 days, from the Issue Closing Date. In case the Company issues allotment advice, the relative shared certificates will be dispatched within one month from the date of the allotment. Allottees are requested to preserve such allotment advice (if any) to be exchanged later for share certificates.


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Option to receive Equity Shares in Dematerialized Form Investors to the Equity Shares of our Company issued through this Issue shall be allotted the securities in dematerialized (electronic) form at the option of the Investor. Our Company signed a tripartite agreement with NSDL on March 03, 2010 and CDSL on February 23, 2010 which enables the Investors to hold and trade in securities in a dematerialized form, instead of holding the securities in the form of physical certificates. In this Issue, the allottees who have opted for Equity Shares in dematerialized form will receive their Equity Shares in the form of an electronic credit to their beneficiary account as given in the CAF, after verification with a depository concerned. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Allotment advice, refund order (if any) would be sent directly to the Investor by the Registrar to the Issue but the Investor’s depository participant will provide to him the confirmation of the credit of such Equity Shares to the Investor’s depository account. CAFs, which do not accurately contain this information, will be given the Equity Shares in physical form. No separate CAFs for Equity Shares in physical and/or dematerialized form should be made. If such CAFs are made, the CAFs for physical Equity Shares will be treated as multiple CAFs and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the Equity Shares sought in demat and balance, if any, will be allotted in physical Equity Shares. INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM. Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under: Open a beneficiary account with any depository participant (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the Investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such beneficiary account(s) need not adhere to this step. For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on the Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later or those who change their accounts and wish to receive their Equity Shares pursuant to this Issue by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of Equity Shares arising out of this Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should be ensured that the depository account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of the Company. Responsibility for correctness of information (including Investor’s age and other details) filled in the CAF vis‐à‐vis such information with the Investor’s depository participant, would rest with the Investor. Investors should ensure that the names of the Investors and the order in which they appear in CAF should be the same as registered with the Investor’s depository participant. If incomplete / incorrect beneficiary account details are given in the CAF the Investor will get Equity Shares in physical form. The Equity Shares allotted to applicants opting for issue in dematerialized form, would be directly credited to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicant’s depository participant will provide to him the confirmation of the credit of such Equity Shares to the applicant’s depository account. Renouncees will also have to provide the necessary details about their beneficiary account for allotment of Equity Shares in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.


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General instructions for Investors a) Please read the instructions printed on the enclosed CAF carefully.

b) Application should be made on the printed CAF, provided by the Company except as mentioned under

the head “Application on Plain Paper” on page 141 and should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of the Draft Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled in English and the names of all the Investors, details of occupation, address, father’s / husband’s name must be filled in block letters. The CAF together with cheque/demand draft should be sent to the Bankers to the Issue/Collecting Bank or to the Registrar to the Issue and not to the Company or Lead Manager to the Issue. Investors residing at places other than cities where the branches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to make payment by Demand Draft payable at Mumbai of an amount net of bank and postal charges and send their CAFs to the Registrar to the Issue by registered post. If any portion of the CAF is/are detached or separated, such application is liable to be rejected. Applications where separate cheques/demand drafts are not attached for amounts to be paid for Equity Shares are liable to be rejected.

c) Except for applications on behalf of the Central and State Government and the officials appointed by the courts, all Investors, and in the case of application in joint names, each of the joint Investors, should mention his/her PAN number allotted under the Income‐Tax Act, 1961, irrespective of the amount of the application. CAFs without PAN will be considered incomplete and are liable to be rejected.

d) Investors are advised that it is mandatory to provide information as to their savings/current account number and the name of the bank with whom such account is held in the CAF to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees. Application not containing such details is liable to be rejected.

e) All payment should be made by cheque/DD only. Application through the ASBA process as mentioned

above is acceptable. Cash payment is not acceptable. In case payment is effected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon.

f) Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule

to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company.

g) In case of an application under power of attorney or by a body corporate or by a society, a certified true

copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the relevant investment under this Issue and to sign the application and a copy of the Memorandum and Articles of Association and / or bye laws of such body corporate or society must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF. In case the above referred documents are already registered with the Company, the same need not be a furnished again. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue Closing Date, then the application is liable to be rejected. In no case should these papers be attached to the application submitted to the Bankers to the Issue.

h) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as

per the specimen signature(s) recorded with the Company. Further, in case of joint Investors who are Renouncees, the number of Investors should not exceed three. In case of joint Investors, reference, if any, will be made in the first Investor’s name and all communication will be addressed to the first Investor.


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i) Application(s) received from NRs/NRIs, or persons of Indian origin residing abroad for allotment of Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a NR or NRI Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF.

j) All communication in connection with application for the Equity Shares, including any change in address

of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the name of the first/sole Investor, folio numbers and CAF number. Please note that any intimation for change of address of Equity Shareholders, after the date of allotment, should be sent to the Registrar and Transfer Agents of the Company, in the case of Equity Shares held in physical form and to the respective depository participant, in case of Equity Shares held in dematerialized form.

k) SAFs cannot be re‐split.

l) Only the person or persons to whom Equity Shares have been offered and not Renouncee(s) shall be

entitled to obtain SAFs.

m) Investors must write their CAF number at the back of the cheque /demand draft.

n) Only one mode of payment per application should be used. The payment must be by cheque / demand draft drawn on any of the banks, including a co‐operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted.

o) A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post‐dated

cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. (For payment against application in cash please refer point (e) above).

p) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/

Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at the bottom of the CAF.

Grounds for Technical Rejections Investors are advised to note that applications are liable to be rejected on technical grounds, including the following: - Amount paid does not tally with the amount payable for; - Bank account details (for refund) are not given; - Age of first Investor not given; - Except for CAFs on behalf of the Central or State Government and the officials appointed by the courts,

PAN number not given for application of any value; - In case of CAF under power of attorney or by limited companies, corporate, trust, relevant documents

are not submitted; - If the signature of the Equity Shareholder does not match with the one given on the CAF and for

renounce(s) if the signature does not match with the records available with their depositories; - If the Investors desires to have Equity Shares in electronic form, but the CAF does not have the Investor’s

depository account details; - CAFs are not submitted by the Investors within the time prescribed as per the CAF and the Draft Letter

of Offer; - CAFs not duly signed by the sole/joint Investors; - CAFs by OCBs CAFs accompanied by Stockinvest; - In case no corresponding record is available with the depositories that matches three parameters,

namely, names of the Investors (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s identity;


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- CAFs that do not include the certification set out in the CAF to the effect that the subscriber is not a “U.S. person” (as defined in Regulation S), and does not have a registered address (and is not otherwise located) in the United States and is authorized to acquire the rights and the securities in compliance with all applicable laws and regulations;

- CAFs which have evidence of being executed in/dispatched from the US; - CAFs by ineligible non‐residents (including on account of restriction or prohibition under applicable local

laws) and where a registered address in India has not been provided; - CAFs where the Company believes that CAF is incomplete or acceptance of such CAF may infringe

applicable legal or regulatory requirements; - In case the GIR number is submitted instead of the PAN; - Applications by renouncees who are persons not competent to contract under the Indian Contract Act,

1872, including minors; and - Multiple CAFs, including cases where an Investor submits CAFs along with a plain paper application. Please read the Draft Letter of Offer and the instructions contained therein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are each an integral part of the Draft Letter of Offer and must be carefully followed. CAF is liable to be rejected for any non‐compliance of the provisions contained in the Draft Letter of Offer or the CAF. Mode of payment for Resident Equity Shareholders/ Investors All cheques / drafts accompanying the CAF should be drawn in favour of the Collecting Bank (specified on the reverse of the CAF), crossed “A/c Payee only” and marked “KMC SHIL ‐Rights Issue”; Investors residing at places other than places where the bank collection centers have been opened by the Company for collecting applications, are requested to send their CAFs together with Demand Draft for the full application amount, net of bank and postal charges favouring the Bankers to the Issue, crossed “A/c Payee only” and marked “KMC SHIL ‐Rights Issue” payable at Chennai directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. The Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any. Investment by NRIs Investments by NRIs are governed by the Portfolio Investment Scheme under Regulation 5(3)(i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. Mode of payment for Non‐Resident Equity Shareholders/ Investors As regards the application by non‐resident Equity Shareholders, the following conditions shall apply: - Individual non‐resident Indian applicants can obtain application form at the following address: Cameo Corporate Services Limited Subramanian Building No.1 Club House Road Chennai ‐ 600 002. Tel: +91‐44‐2846 0390; Fax: +91‐44‐2846 0129 Website: http://www. www.cameoindia.com Email: [email protected] Contact Person: Mr. R.D. Ramasamy - Payment by non‐residents must be made by demand draft payable at Chennai /cheque payable drawn

on a bank account maintained at Chennai or funds remitted from abroad in any of the following ways: Application with repatriation benefits - By Indian Rupee drafts purchased from abroad and payable at Chennai or funds remitted from

abroad (submitted along with Foreign Inward Remittance Certificate); or - By cheque/draft on a Non‐Resident External Account (NRE) or FCNR Account maintained in Chennai;

or - By Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in India and

payable in Chennai; or FIIs registered with SEBI must remit funds from special non‐resident rupee deposit account.


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- Non‐resident investors applying with repatriation benefits should draw cheques/drafts in favour of “KMCSHIL – Rights Issue – Equity Shares – NR” and must be crossed “account payee only” for the full application amount, net of bank and postal charges.

Application without repatriation benefits - As far as non‐residents holding Equity Shares on non‐repatriation basis are concerned, in addition to

the modes specified above, payment may also be made by way of cheque drawn on Non‐Resident (Ordinary) Account maintained in Chennai or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Chennai. In such cases, the allotment of Equity Shares will be on non‐repatriation basis.

- All cheques/drafts submitted by non‐residents applying on a non‐repatriation basis should be drawn in favour of “KMCSHIL – Rights Issue – Equity Shares – NR and must be crossed „account payee only for the full application amount, net of bank and postal charges. The CAFs duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAFs before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

- Investors may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incomplete and is liable to be rejected.

- New demat account shall be opened for holders who have had a change in status from resident Indian to NRI.

Notes: - In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the

investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to IT Act.

- In case Equity Shares are allotted on non‐repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India.

- The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAFs before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

- In case of an application received from non‐residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

Impersonation As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection (1) of section 68A of the Companies Act, 1956 which is reproduced below; “Any person who‐ 1. Makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares

therein, or 2. Otherwise induces a company to allot, or register any transfer of shares therein to him, or any other

person in a fictitious name , Shall be punishable with imprisonment for a term which may extent to five years” Basis of Allotment Subject to the provisions contained in the Draft Letter of Offer, the Articles of Association of the Company and the approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority: a) Full allotment to those Equity Shareholders who have applied for their Rights Entitlement either in full or in

part and also to the Renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part.


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b) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as part of the Issue and have also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an under‐subscribed portion after making full allotment in (a) and (b) above. The allotment of such Equity Shares will be at the sole discretion of the Board / Committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and will not be a preferential allotment.

c) Allotment to Renouncees who having applied for all the Equity Shares renounced in their favour, have applied for additional Equity Shares provided there is surplus available after making full allotment under (a), (b) and (c ) above. The allotment of such Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and not preferential allotment.

After taking into account allotment to be made under (a) above, if there is any unsubscribed portion, the same shall be deemed to be “unsubscribed” for the purpose of regulation 3(1)(b) of the Takeover Code which would be available for allocation under (b), (c) and (d) above. The Promoter has confirmed that it intends to subscribe to the full extent of their Rights Entitlement in the Issue. Subject to compliance with the Takeover Code, the Promoter and promoter group reserve their right to subscribe for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholder. The Promoter has provided an undertaking dated June 23, 2010 to our Company to apply for additional Equity Shares in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and consequent allotment, the Promoter and promoter group may acquire Equity Shares over and above their Rights Entitlement in the Issue, which may result in an increase of the shareholding being above the current shareholding with the Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by the Promoter and promoter group through this Issue, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. The Promoter and promoter group shall subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the Promoter and promoter group of any unsubscribed portion, over and above their Rights Entitlement shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.

Disposal of application and application money No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part, and in either case without assigning any reason thereto. In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the Investor within a period of 15 days from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to repay it, the Company and every Director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money with interest as prescribed under Section 73 of the Companies Act. For further instruction, please read the CAF carefully. Important - Please read this Draft Letter of Offer carefully before taking any action. The instructions contained in the

accompanying CAF are an integral part of the conditions of this Draft Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected.

- All enquiries in connection with this Draft Letter of Offer or accompanying CAF and requests for SAFs

must be addressed (quoting the Registered Folio Number/ DP and Client ID number, the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed “GCL – Rights Issue” on the envelope and postmarked in India) to the Registrar to the Issue at the following address:


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Cameo Corporate Services Limited Subramanian Building No.1 Club House Road Chennai ‐ 600 002. Tel: +91‐44‐2846 0390; Fax: +91‐44‐2846 0129 Website: http://www. www.cameoindia.com Email: [email protected] Contact Person: Mr. R.D. Ramasamy

- It is to be specifically noted that this Issue of Equity Shares is subject to “Risk Factors” on page 10.

- The Issue will remain open for a minimum 15 days. However, the Board will have the right to extend the

Issue period as it may determine from time to time but not exceeding 30 days from the Issue Opening Date.

- Our Company will not be liable for any postal delays and applications received through mail after the

closure of the Issue, are liable to be rejected and returned to the applicants.

Undertakings by our Company 1. The complaints received in respect of the Issue shall be attended to by our Company expeditiously and

satisfactorily. 2. All steps for completion of the necessary formalities for listing and commencement of trading at the

Stock Exchange where the equity shares are to be listed will be taken within seven working days of finalization of basis of allotment.

3. The funds required for dispatch of refunds to unsuccessful applications as per the modes disclosed in the Draft Letter of Offer shall be made available to the Registrar to the Issue.

4. Where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the investors within 15 days of closure of the Issue giving details of the bank where refunds shall be credited along with the amount and expected date of electronic credit of refund.

5. The certificates of the securities/ refund orders to the applicants shall be dispatched within the specified time.

6. No further issue of securities affecting equity capital of our Company shall be made till the securities issued/offered through the Issue are listed or till the application moneys are refunded on account of non‐listing, under‐subscription etc.

7. Adequate arrangements shall be made to collect all Applications Supported by Blocked Amount and to consider them similar to non – ASBA applications while finalizing the basis of allotment.

8. In the event that the public shareholding falls below the minimum prescribed in the Listing Agreements, the Company will take such steps as may be necessary to restore the minimum public shareholding in accordance with the SEBI regulations and undertakes to comply with such directions as may be issued by the Stock Exchanges.

9. The Company accepts full responsibility for the accuracy of information given in this Draft Letter of Offer and confirms that to the best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this Draft Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts.

10. The Company accepts full responsibility for the accuracy of information given in this Draft Letter of Offer and confirms that to the best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this Draft Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts.

11. In accordance with Clause 43A of the Listing Agreements, a statement shall be furnished to the Stock Exchanges on a quarterly basis indicating material deviations, if any, in the utilization of the proceeds of the Issue. This information shall also be published in the newspapers simultaneously with the interim or annual financial results, after such information has been placed before the Audit Committee in terms of Clause 49 of the Listing Agreements.


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12. In accordance with Clause 49 of the Listing Agreements, the Company shall disclose to the Audit Committee, the uses/application of the proceeds of the Issue by major category, on a quarterly basis as a part of its quarterly declaration of financial results. Further, on an annual basis and until the full utilization of the proceeds of the Issue, the Company shall prepare a statement, which shall be certified by the statutory auditors of the Company, of the proceeds of the Issue utilized for purposes other than those specified in this Draft Letter of Offer and place such statement before the Audit Committee.

Utilisation of Issue Proceeds The Board of Directors declares that: i. The funds received against this Issue will be transferred to a separate bank account other than the bank

account referred to sub‐section (3) of Section 73 of the Companies Act, 1956. ii. Details of all moneys utilised out of the Issue shall be disclosed and continue to be disclosed till the time any

part of the issue proceeds remain unutilised under an appropriate separate head in the balance sheet of our Company indicating the purpose for which such moneys has been utilised.

iii. Details of all such un‐utilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of our Company indicating the form in which such un‐utilised moneys have been invested.

The funds received in the Issue (except to the extent utilized by the Company from any advance share application money brought in by the Promoters, if any, prior to the Issue Opening Date) will be kept in a separate bank account and the Company will not have any access to such funds unless only after the basis of allotment is finalized.


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SECTION X: DESCRIPTION OF EQUITY SHARES AND TERMS OF ARTICLES OF ASSOCIATION

Pursuant to Schedule II of the Companies Act and the SEBI Regulations, the main provisions of the Articles of Association relating to voting rights, dividends, liens, forfeiture, restrictions on transfer and transmission of Equity Shares or debentures and/or on their consolidation/splitting are detailed below. Please note that each provision herein below is numbered as per the corresponding article number in the Articles of Association and capitalised/defined terms herein have the same meaning given to them in the Articles of Association. 1. The Regulations contained in Table ‘A’ of the First Schedule of the Companies Act shall not apply to the Company

except in so far as are embodied in the following Articles. INTERPRETATION 2. Unless the content otherwise requires:

(a) The words or expressions contained in these regulations shall bear the same meaning as in the Act or any statutory modifications thereof.

(b) ”The Act” or “The Companies Act” shall mean “The Companies Act, 1956”. (c) ”The Board or “The Board of Directors” means a meeting of the Directors duly called and constituted or as

the case may be, the Directors assembled at a Board, or the requisite number of Directors entitled to pass a circular resolution in accordance with these Articles.

(d) ”The Company” or “this Company” means “KMC Speciality Hospitals (India) Limited”. (e) ”Directors” means the Directors for the time being of the Company. (f) ”Writing” includes printing, lithography, type‐writing and any other usual substitute for writing. (g) ”Members” means members of the Company holding a share or shares of any class. (h) ”Month” shall mean a calendar month. (i) ”Paid‐up” shall include “credited as fully paid‐up”. (j) ”Person” shall include any Corporation as well as individuals. (k) ”These presents” or “Regulations” shall mean these Articles of Association as now framed or altered from

time‐to‐time and shall include the Memorandum where the context so requires. (l) ”Section” or “Sec” means Section of the Act. (m) Words importing the masculine gender shall include the feminine gender. (n) Except where the context otherwise requires, words importing the singular, shall include the plural and the

words importing the plural shall include the singular. (o) ”Special Resolution” means special resolution as defined by Section 189. (p) ”The Office” means the Registered Office for the time being of the Company. (q) ”The Register” means the Register of members to be kept pursuant to Section 150 of the Companies Act. (r) ”Proxy” includes Attorney duly constituted under a Power of Attorney. (s) ”The Seal” means the common seal of the Company. (t) ” Shares” — “Shares” shall mean the equity shares of the Company, with one vote per equity share and at

par value of Re 1/‐ per equity share. (u) ” Share Capital” – “Share Capital” shall mean the total issued and paid up shares of the company,

determined on a fully diluted basis. (v) “Share Equivalent” – shall mean any instrument convertible into shares including without limitation global

depository receipts, American depository receipts, convertible debentures, warrants, convertible preference shares and Foreign Currency Convertible Bonds, of the company.

(w) ”Shareholding” – shall mean, in respect of any Person, the sum of the number of Shares held legally or beneficially by such Person on a fully diluted basis, such sum expressed as a percentage of the Share Capital.

(x) ” Stock Exchange” – shall mean all those Securities and Exchange Board of India recognized stock exchanges on which the shares of the company are listed as also stock exchanges on which the share equivalents of the company are listed.

(y) ”Transfer” – (including with correlative meaning, the term “Transferred by”) shall mean to transfer, sell, pledge, assign, hypothecate, create a security interest in or Lien on, place in trust (voting or otherwise), exchange, gift or transfer by operation of law or in any other way subject to any encumbrance or disposal thereof.

(z) ”Writing” – includes printing, lithography, type‐writing and any other usual substitute for writing 2


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CAPITAL 3. The Authorised Share Capital of the Company is Rs 25,00,00,000/‐ (Rupees Twenty Five crores only) divided into

25,00,00,000 Equity Shares of Re. 1/‐ each.” 4. Subject to the provisions of the Act and these Articles, the shares in the Capital of the Company for the time

being (including any shares forming part of any increased capital of the Company) shall be under the control of the Board who may allot or otherwise dispose off the same or any of them to such person, in such proportion and on such terms and conditions and either at a premium or at par or at a discount subject to compliance with the provisions of Section 79 and at such times as may from time‐to‐time think fit and proper, and with the sanction of the Company in General Meeting give to any person the option to call for or be allotted shares of any class of the Company either at par or at a premium or subject as aforesaid at a discount, such option being exercisable at such times and for such consideration as the Board thinks it fit.

5. In addition to and without derogating from the powers for that purpose conferred on the Board under Articles, the Company in General Meeting may determine that any shares (whether forming part of the original capital or of any increased capital of the Company) shall be offered to such persons (whether members or holders of debentures of the Company or not) giving them the option to call for or be allotted shares of any class of the Company either at premium or at par or at a discount (subject to compliance with the provisions of Section 79) such option being exercisable at such times and for such consideration as may be directed by such General Meeting or the Company in General Meeting may make any other provision whatsoever for the issue, allotment, or disposal of any shares.

6. The company may opt to avail the services of a depository pursuant to the Depositories Act, 1996, if the Board of Directors so consider and shall if the SEBI requires the company to avail the services of a depository, the Board of Directors may take such steps as may be necessary to have its securities dealt with in fungible form and partly in physical form or and partly in demat form as the case may be. The Board of Directors will also have power to have demat shares converted into shares in a physical form at the option of the shareholders, if such a course is permissible in law.

7. Every person subscribing to securities offered by the Company shall have the option to receive security / certificate or to hold the securities with a depository. Such a person who is the beneficial owner of the securities can at any time opt out of a depository, if permitted by the law, in respect of any security in the manner provided by the Depositories Act, and the company shall, in the manner and within the time prescribed provide to the beneficial owner the required certificates or securities.

8. If a person opts to hold his security with a depository, the company shall intimate such depository the details of allotment of the security and on receipt of the information the depository shall enter in its record the name of the allottee as the beneficial owner of the security.

9. Nothing contained in Section 153, 153A, 153B, 187C and 372A of the Act shall apply to a depository in respect of the securities held by it on behalf of the beneficial owners.

10. (1)The rights attached to each class of shares (unless otherwise provided by the terms of the issue of the shares of that class), may, subject to the provisions of Sections 106 and 107 of the Act be varied with the consent in writing of the holders of not less than three‐fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate General Meeting of the holders of the shares of that class. (2)To every such separate General Meeting, the provisions of these Articles relating to General Meetings shall mutatis mutandis apply, so that the necessary quorum shall be two persons at least holding or representing by proxy one‐tenth of the issued shares of that class.

11. The rights conferred upon the holders of the shares of any class issued with preferred or others rights shall not, unless otherwise expressly provided for the terms of the issue of shares of that class, be deemed to be varied by the creation of further shares ranking pari passu therewith.

12. The company may at any time pay a commission to any person for subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares, debentures or debenture‐stock of the Company or procuring or agreeing to procure subscriptions (whether absolute or conditional) for shares, debentures, or debenture‐stock of the Company subject to the provisions of Section 76 of the Act.

13. The joint‐holders of a share or shares shall be severally as well as jointly liable for the payment of all installments and calls due in respect of such share or shares.

14. Save as otherwise provided by these Articles, the Company shall be entitled to treat the Registered holder of any shares as the absolute owner thereof and accordingly the Company shall not, except as ordered by a Court of competent jurisdiction or as by a statue required, be bound to recognise any equitable, contingent, future or partial interest, lien, pledge, or a charge in any share or (except only as by these presents otherwise provided for) any other right in respect of any share except an absolute right to the entirety thereof in the registered holder.


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15. The Board may issue and allot shares in the capital of the Company as payment or part payment for any property sold or goods transferred or machinery or appliances supplied or for services rendered or to be rendered to the Company in or about the formation or promotion of the Company or the acquisition and or conduct of its business and Shares may be allotted as fully paid‐up shares, and if so issued, shall be deemed to be fully paid – up shares.

16. (1) every person whose name is entered as a member in the Register shall be entitled to receive without payment: (a) One Certificate for all his shares or. (b) Where the shares so allotted at any one time exceed the number of shares fixed as market lot in accordance with the usages of the Stock Exchange, at the request of the shareholder several certificates one each per marketable lot and one for the balance. (2) The Company shall within three months after the allotment and within one month from the date of lodgement of the documents to effect the transfer, transmission, sub‐division /consolidation of any shares or debentures complete and have ready for delivery, the share certificates for all the shares and debentures so allotted, transferred, transmitted or sub‐divided/consolidated. (3) Every Certificates shall be under the seal and specify the shares to which it relates and the amount paid‐up thereon.

17. If a certificate be worn out, defaced, destroyed or lost, or if there is no further space on the back thereof for endorsement of transfer, it shall, if requested, be replaced by a new certificate free of cost provided however that such new certificate shall not be given except upon delivery of the worn out or defaced or used up certificate, for the purpose of cancellation , or upon proof of destruction or loss, on such terms as to evidence, advertisement and indemnity and the payment of out of pocket expenses as the Board may require in the case of the certificate having been destroyed or lost. Any renewed certificate shall be marked as such in accordance with the Companies (Issue of Share Certificate) Rules, 1960 or any modification thereof for the time being in force. However where share/debenture certificates are issued for either more or less than marketable lots sub‐division or consolidation into marketable lots should be done free of charge.

18. Where any shares under the powers in that behalf herein contained are sold by the Directors and the Certificate thereof has not been delivered up to the Company by the former holder of the said shares, the Directors may issue a new certificate for such shares distinguishing it in such manner as they think fit from the certificate not so delivered up.

19. If, by the conditions of allotment of any share, the whole or part of the amount or issue price thereof shall be payable by instalments, every such instalment shall, when due, be paid to the Company by the person who for the time being and from time‐to‐time shall be the registered holder of the share or his legal representatives or representative, if any.

20. The Company may keep in any State or Country outside India, a branch register of members or debenture holders resident in that State or Country.

21. The Board of Directors shall also have power if and in any event of a legislation is made permitting the company to issue shares without voting rights, may issue shares without voting rights on such terms and conditions as they may deem fit subject to the provisions of the Companies Act and other applicable provisions regulating the voting rights.

22. Company may, subject to the provisions of Section 77A & 77B of the Companies Act, purchase its own shares or other specified securities out of its free reserves or the securities premium account or the proceeds of any other shares or any specified securities and also issue sweat equity shares subject to fulfillment of conditions as mentioned in Section 79A of the Companies Act and also shares to the employees of the Company or its associate companies under the employees stock option scheme as may be framed and followed in accordance with the guidelines that are notified, issued or may be issued by the SEBI.

23. The Board may at any time increase the subscribed capital of the company by issue of new shares out of the unissued part of the Share capital in the original or subsequently created capital but subject to Section 81 of the Act and subject to the following conditions namely— A. a. such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date. b. the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days, from the date of the offer within which the offer if not, accepted will be deemed to have been declined. c. the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the share offered to him or any of them in favour of any other person and the notice referred to in clause (b) shall contain a statement to this effect.


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B. The Directors may with the sanction of the company in General Meeting offer and allot shares to any person at their discretion provided that such sanction is accorded either by‐‐ a. a special resolution passed at any General Meeting b. “by an ordinary resolution passed at a General Meeting by a majority of the votes cast with the approval of the Central Government in accordance with Section 81 of the Act,. Provided that an option or right to call of shares shall not be given to any or persons except with the sanction of the company in general meetings”.

24. The company shall have the right to issue any shares which carry voting rights or rights in the company as to dividend, capital or otherwise which are disproportionate to the rights attached to the holders of other shares.

25. As regards all allotment of shares, from time‐to‐time made, the Board shall duly comply with Section 75 of the Act.

26. An application signed by or on behalf of the applicant for shares in the company, followed by an allotment of any shares therein, shall mean acceptance of the shares within the meaning of these Articles,, and every person who thus or otherwise accepts any shares and whose name is on the Register shall, for the purpose of these Articles, be a shareholder.

27. In respect of any share or shares held jointly by several persons, the company shall not be bound to issue more than one certificate for the same share or shares and the delivery of a certificate for the share or shares to one of the several joint holders shall be sufficient delivery to all such holders. Subject as aforesaid, where more than one share is so held, the joint holders shall be entitled to apply jointly for the issue of several certificates in accordance with Article 21 below.

28. If by the conditions of allotment of any share, the whole or part of the amount or issue price thereof shall be payable by installments, every such installment shall, when due, be paid to the Company by the person who for the time being and from time‐to‐time shall be the registered holder of the share or his legal representatives or representative if any.

29. The Board of Directors may permit the holder of shares / debentures / deposits nominate any person, to whom his shares in or debentures / deposits of company shall vest in the event of death and may in addition to the manner prescribed under the provisions of the Companies Act consider framing of such procedure as may be necessary for regulating the nomination of shares in or debentures / deposits of the Company under the provisions of the Companies Act.

LIEN 30. “The Company shall have a first and paramount lien upon all the shares (other than fully paid‐up shares)

registered in the name of each member (Whether solely or jointly with others) and upon the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such shares and no equitable interest in any share shall be created except upon the footing and condition that this article will have full effect. And such Lien shall extend to all dividends and bonus from time to time declared in respect of such shares. Unless otherwise agreed the registration of transfer of shares shall operate as a waiver of the Company’s Lien if any on such shares. The Directors may at any time declare any shares wholly or in part to be exempt from the provisions of this clause.”

31. For the purpose of enforcing such lien the Board of Directors may sell the share subject thereto in such manner as it thinks fit but no sale shall be made until the expiration of 14days after a notice in writing stating and demanding payment of such amount in respect of which the lien exists has been given to the registered holder of the share for the time being or to the person entitled to the shares by reason of the death or insolvency of the registered holder.

32. (a). To give effect to such sale, the Board of Directors may authorize any person to transfer the shares sold to the purchaser thereof and the purchaser shall be registered as the holder of the shares comprised in any such transfer. (b). The purchaser shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceeding relating to the sale.

33. The net proceeds of any such sale shall be applied in or towards satisfaction of the said monies due from the member and the balance, if any, shall be paid to him or the person, if any, entitled by transmission to shares on the date of the sale.


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CALL ON SHARES 34. Subject to the provisions of Section 91 of the Act, the Board of Directors may from time – to – time make such

calls as they think fit upon the members in respect of all monies unpaid on the shares held by them respectively and not by the conditions of allotment thereof made payable at fixed times, and the members shall pay the amount of every call so made on him to the persons and at the time and place appointed by the Board of Directors.

35. A call shall be deemed to have been made at the time when the resolution of the Board authorizing the call was passed and may be required to be paid by installments.

36. Not less than twenty‐one days notice of any call shall be given specifying the time and place of payment provided that before the time for payment of such call the Directors may, by notice in writing to the members, extend the time for payment thereof.

37. If by the terms of issue of any share or otherwise, any amount is made payable at any fixed time or by installments at fixed times whether on account of the share or by way of premium every such amount or installments shall be payable as if it were a call duly made by the Directors, of which due notice had been given, and all the provisions herein contained in respect of call shall relate and apply to such amount or installment accordingly.

38. If the sum payable in respect of any call or installment be not paid on or before the day appointed for payment thereof the holder for time being of the share in respect of which the call shall have been made or the installment, shall be due, shall pay interest for the same at the rate of 20 percent per annum from the day appointed for the payment thereof to the time of the actual payment or at such lower rate as Directors may determine. The Board of Directors shall also be at liberty to waive payment of that interest wholly or in part.

39. The provisions of these Articles as to payments of interest shall apply in the case of non‐payment of any sum which by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share or by way of premium, as if the same had become payable by virtue of a call duly made and notified.

40. The Board of Directors may, if they think fit, receive from any member willing to advance all or any part of the moneys uncalled and unpaid upon any shares held by him and upon all or any of the moneys so advanced may (until the same would, but for such advance become presently payable) pay interest at such rate subject to maximum of 10% as the Board of Directors may decide but shall not in respect of such advances confer a right to the dividend or participate in profits.

41. Neither a judgement nor a decree in favour of the Company for calls or other moneys due in respect of any share nor any part payment or satisfaction thereunder nor the receipt by the company of a portion of any money which shall from time to time be due from any member in respect of any share either by way of principal or interest nor any indulgence granted by the Company from thereafter proceeding to enforce a forfeiture of such shares as hereinafter provided.

FORFEITURE OF SHARES 42. If a member fails to pay any calls or installment of a call on the day appointed for the payment thereof, the Board

of Directors may at any time thereafter during such time as any part of such call or installment remains unpaid serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest, which may have accrued. The Board may accept in the name and for the benefit of the Company and upon such terms and conditions as may be agreed upon, the surrender of and share liable to forfeiture and so far as the law permits of any other shares.

43. The notice shall name a further day ( not earlier than the expiration of fourteen days from the date of service of the notice), on or before which the payment required by the notice is to be made, and shall state that, in the event of non – payment on or before the day appointed the shares in respect of which the call was made will be liable to be forfeited.

44. If the requirements of any such notice as aforementioned are not complied with ‘ any share in respect of which the notice has been given may at any time thereafter before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

45. A forfeited or surrendered share may be sold or otherwise disposed of on such terms and in such a manner as the Board may think fit, and at any time before such a sale or disposal the forfeiture may be cancelled on such terms as the Board may think fit.

46. A person whose shares have been forfeited shall cease to be member in respect of the forfeited shares but shall, notwithstanding such forfeiture remain liable to pay and shall forthwith pay the Company all moneys, which at the date of forfeiture is payable by him to the Company in respect of the share whether such claim be barred by limitation on the date of the forfeiture or not but his liability shall cease if and when Company received payment in full of all such moneys due in respect of the shares.


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47. The forfeiture of a share shall involve the extinction of all interest in and also of all claims and demands against

the Company in respect of the shares and all other rights incidental to the share, except only such of these rights as by these Articles are expressly saved.

48. A duly verified declaration in writing that the declarant is a Director of the Company and that a share in the Company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts herein stated as against all persons claiming to be entitled to the share and that declaration and the receipt of the company for the consideration, if any given for the shares on the sale of disposal thereof, shall constitute a good title to the share and the person to whom the share is sold or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share.

49. The provisions of these regulations as to forfeiture shall apply in the case of non‐payment of any sum which by terms of issue of a share, becomes payable at a fixed time, whether, on account of the amount of the share or by way of premium or otherwise as if the same had been payable by virtue of a call duly made and notified.

50. Upon any sale after forfeiture or for enforcing a lien in proposed exercise of the powers hereinbefore given the Directors may cause the purchaser’s name to be entered in the register in respect of the shares sold and may issue fresh certificate in the name of such purchaser. The purchaser shall not be bound to see to the regularity of the proceedings, nor to the application of the purchase money and after his name has been entered in the register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

51. On the trial or hearing of any action or suit brought by the company against any shareholder or his representative to recover any debt or money claimed to be due to the company in respect of his share, it shall be sufficient to prove that the name of the defendant is or was, when the claim arose, on the Register of shareholders of the company as a holder, or one of the holders of the number of shares in respect of which such claim is made, and that the amount claimed is not entered as paid in the books of the company and it shall not be necessary to prove the appointment of the Directors who made any call not that a quorum of directors was present at the Board at which any call was made nor that the meeting at which any call was made was duly convened or constituted, nor any other matter whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

52. When any shares shall have been so forfeited, notice of the resolution shall be given to the member in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall not be in any manner invalidated by any omission or neglect to give such notice or to make such entry as aforesaid.

TRANSFER AND TRANSMISSION OF SHARES 53. (a) the instrument of transfer of any shares in the Company shall be executed both by the transferor and the

transferee and the transferor shall be deemed to remain holder of the shares until the name of the transferee is entered in the Register of members in respect thereof. (b) The Board shall not register any transfer of shares unless a proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the Company along with the certificate and such other evidence as the Company may require to prove the title of the transferor or his right to transfer that shares. Provided that, where it is proved to the satisfaction of the Board that an instrument to transfer signed by the transferee has been lost, the Company may, if the Board thinks fit, on an application in writing made by the transferee and bearing the stamp required for an instrument of transfer, register the transfer on such terms as to indemnity as the Board may think fit. (c) An application for the registration of the transfer of any share or shares may be made either by the transferor or the transferee, provided that where such application is made by the transferor, no registration shall, in the case of partly paid shares, be effected unless the Company gives notice of the application to the transferee. The Company shall, unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the Register the name of the transferee in the same manner and subject to the same conditions as if the application for registration was made by the transferee. (d) For the purpose of sub‐clause ( c ), notice to the transferee shall be deemed to have been duly given if dispatched by prepaid registered post to the transferee at the address given in the instrument of transfer and shall be deemed to have been delivered at the time at which it would have been delivered in the ordinary course of post. (e)Nothing in sub‐clause (d) shall prejudice any power of the Board to register as a share‐holder any holder any person to whom the right to any share has been transmitted by operation of law.


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(f) Nothing in this Article shall prejudice the power of the Board to refuse to register the transfer of any shares to a transferee, whether a member or not.

54. The instrument of transfer shall be in writing and all the provisions of section 108 of the companies Act 1956 and of any statutory modification thereof for the time being shall be complied with in all transfers of shares and the registration thereof.

55. (a) The Board may, at their absolute and without assigning any reason, decline to register : (1) Transfer of any share whether fully paid or not to a person of whom they do not approve, or (2) Any transfer or transmission of shares on which the Company has a lien.

Provided that registration of any transfer shall not be refused on the ground of the transferor being alone or jointly with any other persons indebted to the Company on any account whatsoever except a lien on the Shares.

(b) If the Board refuses to register any transfer or transmission of right, they shall within two months from the date on which the instrument of transfer or the intimation of such transmission was delivered to the Company send notice of the refusal to the transferee and the transferor or to the person given intimation of such transmission as the case may be,

(c) In case of such refusal by the Board, the decision of the Board shall be subject to the right of appeal conferred by Section 111 (3).

(d) The provision of this clause shall apply to transfers of stock also. 56. The Board may also decline to recognize any instrument of transfer unless :

(a) the instrument of transfer is accompanied by the certificate of the Shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer and : (b) The instrument of transfer is in respect of only one class of shares.

57. No fee shall be charged for transfer of shares or for effecting transmission or registering any letters of probate, letters of administration and similar other documents.

58. (1) In the event of death of any one or more of several joint holders. The survivor or survivors, alone shall be entitled to be recognized as having title to the Shares. (2) In the event of death of any sole holder or of the death of last surviving holder, the executors or administrators of the such holder or other person legally entitled to the shares shall be entitled to be recognized by the Company as having any title to the shares of the deceased. Provided that on production of such evidence as to title and on such indemnity or other terms as the Board may deem sufficient, any person may be recognized as having title to the Shares as their or legal representative of the deceased share holder. Provided further that in any case it shall be lawful for the Board in their absolute discretion to dispense with the production of probate or letters of administration or other legal representation upon such evidence and such terms as to indemnity or otherwise as the Board may deem just. Provided further that if the deceased shareholder was a member of Hindu joint family, the Board on being satisfied to that effect and on being satisfied that the shares standing in his name in fact belonged to the joint family, may recognize the survivors or the Kartha thereof as having title to the shares registered in the name of such members.

59. (1) Any person becoming entitled to a share in consequence of the death or insolvency of a member may, upon such evidence being produced as may from time‐to‐time be required by the Board and subject as hereinafter provided, elect either : (a) to be registered himself as a holder of the share : or (b) to make such transfer of the share as the deceased or insolvent member could have made. (2 ) The Board, shall, in either case, have the same right to decline or suspend registration as it would have had, if the deceased or insolvent member had transferred the share before his death or insolvency.

60. (1) If the person so becoming entitled shall elect to be registered as holder of the shares himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. (2) If the person so aforesaid shall elect to transfer the share, he shall testify his election by executing a transfer of the share. (3) All the limitations, restrictions and provision of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as if the death or insolvency of the member had not occurred and the notice or transfer had been signed by that member.

61. No transfer shall be made to an infant or a person of unsound mind or an insolvent. 62. The Board may after giving not less than seven days previous notice by advertisement in some newspapers

circulating in the district in which the Registered Office of the Company is situate, close the Register of members or the Register of Debenture Holders for any period or periods not exceeding in the aggregate forty five days in each year but not exceeding thirty days at any one time.


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63. The Company shall incur no liability or responsibility whatever in consequence of their registering or giving effect to any transfer of shares made or purporting to be any apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of persons having or claiming any equitable right, title or interest to or in the same shares not withstanding that Company may have had notice of such equitable right or title or interest prohibiting registration of such transfer and may have entered such notice referred thereto in any book of the Company and the company shall not be given to it of any equitable right, title or interest or be under any liability whatsoever for refusing or neglecting so to do, though it may have been entered or referred to in the books of the Company but the Company shall nevertheless be at liberty to have regard and to attend to any such notice and given thereto, if the Board shall think fit.

64. Every endorsement upon the certificate of any share in favour of any transferee shall be signed by the Managing Director or by some person for the time being duly authorized by the Board in that behalf. In case any transferee of a share shall apply for a new certificate in lieu of the old or existing certificate he shall be entitled to receive a new certificate without payment of any fee in this regard and upon his delivering up to be cancelled every old or existing certificate which is to be replaced by a new one.

65. The instrument of transfer shall, after registration, remain in the custody of the company or the Registrars and Share Transfer Agents / Common Agency of the Company. The Board may cause to be destroyed all transfer deeds lying with the company for a period of ten years or more.

66. a. The company shall keep a book to be called the “Register of Members” and therein shall be entered the particulars of every transfer or transmission of any shares and all other particulars of shares required by the act to be entered in such Register. b. All instruments of transfer which shall be registered shall be retained by the company but any instrument of transfer which the Directors may decline to register shall be returned to the person depositing the same.

67. The company shall be entitled to maintain the Register of Members in such form and such mode as may be permitted under the provisions of the Companies Act and the Company be permitted to maintain “Foreign Registers” at the place other than the Registered Office of the company as the Board of Directors may consider expedient.

68. Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of securities effected by a transferor and transferee both of whom are entered as beneficial owners in the records of a depository.

ALTERATION OF CAPITAL 69. (1) The Company may from time‐to‐time in accordance with the provisions of the Act alter the condition of its

Memorandum of Association as follows : (a) increase its share capital by such amount as it thinks expedient by issuing new shares ; (b) consolidate and divide all or any of its share Capital into Shares of larger amount than its existing Shares. ( c) convert all or any of its fully paid‐up shares into stock, and reconvert that stock into fully paid up shares of any denomination; (d) sub‐divide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum, so however, that by the sub‐division the proportion between the amount paid and the amount, if any, unpaid , on each reduced share shall be the same as it was in the case of the shares from which the reduced share is derived; (e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 69(2) The Company may, by Special Resolution, reduce in any manner and with, and subject to, any incident authorized and consent required by law‐ a. its share capital; b. any capital redemption reserve account; or c. any share premium account.

70. The resolution whereby any share is sub‐divided may determine subject to the provisions of the Act that, as between the holders, of the shares resulting from such sub‐division one or more such shares shall have some preference of special advantage as regards dividend, capital or otherwise over or as compared with the others.

SURRENDER OF SHARES 71. The Directors may subject to the provisions of the Act accept the surrender of any shares by way of compromise

of any question as to the holder being properly registered in respect thereof.

MODIFICATION OF RIGHTS 72. The rights and privileges attached to each of class of share, may be modified, commuted, affected, abrogated in

the manner provided in Section 107 of the Act.


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SET OFF OF MONEYS DUE TO SHAREHOLDERS 73. Any money due from the Company to a shareholder may, without the consent of such shareholder, be applied by

the Company in or towards payment of any money due from him, either alone or jointly with any other person, to the Company in respect of calls.

CONVERSION OF SHARES INTO STOCK 74. The Company may by ordinary resolution convert all or any fully paid shares of any denomination into stock and

vice versa. 75. The holders of stock may transfer the same or any part thereof in the same manner as and subject to the same

regulations under which, the shares from which the stock arose might before the conversion have been transferred or as near thereto as circumstances admit; provided that the Board may, from time‐to‐time fix the minimum amount of stock transferable, so however, that such minimum shall not exceed the nominal amount of the share from which the stock arose.

76. The holders of the stock shall according to the amount of the stock held by them have the same rights, privileges and advantages as regards dividends, voting at meeting of the Company and other matters, as if they hold the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the Company and its assets on winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage.

77. Such of the regulations contained in these presents other than those relating to share warrants as are applicable to paid up shares shall apply to stock and the words shares and share‐holder in these presents shall include stock and stock‐holder respectively.

SHARE WARRANTS 78. (a)The Company may issue share warrants subject to and in accordance with provisions of Sections 114 and 115

of the Act and accordingly the Board may in its discretion, with respect to any shares which is fully paid‐up on application in writing signed by the person registered as holder of the share and authenticated by such evidence, if any, as the Board may, from time‐to‐time, require as to the identity of the person signing in the application, and on receiving the certificate, if any, of the share, and the amount of the stamp duty on the warrant and such fee as the Board may from time‐to‐time require, issue a share warrant. (b) The bearer of a share warrant shall, on surrender of the warrant to the Company for cancellation and on payment of such sums as the Board may from time‐to‐time prescribe, be entitled to have his name entered as a Member in Register of Members in respect of the shares included in the warrant.

79. (1) The bearer of a share warrant may at any time deposit the warrant at the office of the Company and so long as it remains so deposited, the Depositor shall have the same inserted in the Register of Members as the holder of the share included in the deposited warrant. (2) Not more than one person shall be recognized as Depositor of the share warrant. (3) The Company shall on two day’s written notice return the deposited share warrant to the depositor.

80. Subject as herein otherwise expressly provided : (1) No person shall as bearer of a share warrant sign a requisition for calling a meeting of the Company or attend or vote or exercise any other privilege of a member at a meeting of the Company, or be entitled to receive any notices from the Company. (2) The bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the Register as the holder of the shares included in the warrant and he shall be a member of the Company.

81. The Board may, from time‐to‐time, make rules as to the terms on which, if it shall think fit, a new share warrant or coupon may be issued by way of renewal in case of defacement, loss or defacement, loss or destruction of the warrant.

82. Share Warrant shall entitle the bearer thereof to the shares included in it and the shares shall be transferred by the delivery of the share warrant and the provisions of the Articles of Association of the Company with respect to transfer and transmission of share shall not apply thereto.

GENERAL MEETINGS 83. (1) All meetings other than annual general meetings shall be called extraordinary general meetings.

(2) the Chairman or Managing Director may whenever they think fit and shall if so directed by the Board convene an Extraordinary General Meeting.

84. The accidental omission to give notice of any meeting to or the receipt of any such notice by any of the members shall not invalidate the proceedings, or any resolution passed at such meeting.

85. Five members personally present shall be a quorum for a General Meeting and no business shall be transacted at any general meeting unless the requisite quorum is present when the meeting proceeds to business.


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86. The Chairman of the Board of Directors shall preside at every general meeting of the Company and if he is not present within 15 minutes after the time appointed for holding the meeting, or if he is unwilling to act as Chairman, the Managing Director shall preside over that meeting.

87. If there is no such Chairman or Managing Director or if at any General Meeting either the Chairman or Managing Director is not present within 15 minutes after the time appointed for holding the meeting or if they are unwilling to act as Chairman the members present shall choose a Director present to be the Chairman of the Meeting and if no Director is Present, or unwilling to take the chair, the members present shall choose someone of their number to be the Chairman.

88. The Chairman may, with the consent of any meeting at which a quorum is present and shall, if so directed by the meeting, adjourn that meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of original meeting. Save as aforesaid, it shall be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

89. At a General Meeting, a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded in accordance with the provisions of Section 179. Unless a poll is so demanded a declaration by the Chairman that a resolution has, on a show of hands been carried unanimously or by a particular majority or lost and an entry to that effect in the book of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against that resolution.

90. In the case of an equality of votes, the Chairman shall, both on show of hand and on poll, have a casting vote in addition to the vote or votes to which he may be entitled as a member.

91. If a poll is duly demanded in accordance with the provisions of Section 179, it shall be taken in such manner as the Chairman, subject to the provisions of Section 184 and Section 185 of the Act, may direct, and the results of the poll shall be deemed to be the decision of the meeting on the resolutions on which the poll was taken.

92. A poll demanded on the election of Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time not being later than forty eight hours from the time when demanded was made as the Chairman may direct.

93. (1) Every member of the Company holding any Equity Share capital shall have a right to vote in respect of such capital on every resolution placed before the Company. On a show of hands, every such member present shall have one vote and shall be entitled to vote in person or by proxy and his voting right on a poll shall be in proportion to his share of the paid‐up Equity Capital of the Company. (2) Every member holding any Preference shares shall in respect of such shares have a right to vote only on resolutions which directly affect the right attached to the Preference shares and subject as aforesaid, every such member shall in respect of such capital be entitled to vote in person or by proxy if the dividend due on such preference shares or any part of such dividend has remained unpaid in respect of an aggregate period of not less than two years, preceding the date of the meeting. Such dividend shall be deemed to be due on Preference shares in respect of any period, whether a dividend has been declared by the Company for such period or not, on the day immediately following such period. (3) Whenever the holder of a Preference share has a right to vote on any resolution in accordance with the provisions of this Article, his voting right on a poll shall be in the same proportion as the capital paid up in respect of such preference shares bears to the total Equity paid up capital of the Company.

94. A demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than that on which a poll has been demanded. The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

95. In the case of joint holders, the vote of the first named of such joint holders who tender a vote whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders.

96. A member of unsound mind, or in respect of whom an order to that effect has been made by any Court having jurisdiction, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, and any such Committee or guardian may, on a poll, vote by proxy.

97. No member shall be entitled to vote at a general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.

98. (a) The instrument appointing a proxy shall be in writing under the hand of appointer or of his attorney duly authorized in writing, or if the appointer is a corporation, either under the common seal or under the hand of an officer or attorney so authorized. Any person may act as proxy whether he is a member or not. (b) A body corporate (whether a company within the meaning of this Act or not) may: (i) If it is a member of the Company by resolution of its Board of Directors or other governing body, authorize such person as it thinks fit to act as its representatives at any meeting of the Company, or at any meeting of any class of members of the Company.


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(ii) If it is a creditor (including a holder of debentures) of the Company, by resolution of its Directors or other governing body, authorize such person as it thinks fit to act as its representative at any meeting of any creditors of the Company held in pursuance of this Act or of any rules made thereunder, or in pursuance of the provisions contained any debenture or trust deed, as the case may be. (c ) A person authorized by resolution as aforesaid shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents, as if he were personally the member, creditor or debenture holder.

99. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company not less than forty‐eight hours before the time for holding the meeting or, adjourned meeting at which the person named in the instrument proposed to vote, and in default the instrument of proxy shall not be treated as valid.

100. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death of the appointer, or revocation of the proxy, or transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation or transfer shall have been received at the Registered Office of the Company before the commencement of the meeting or adjourned meeting at which the proxy is used.

101. Any instrument appointed a proxy shall be in either of the forms in schedule IX to the Act or a form as near thereto as circumstances may admit.

102. On a poll, votes may be given either personally or by proxy provided that no company shall vote by proxy as long as resolution of its directors in accordance with provisions of Section 187 is in force. DIRECTORS

103. (A)Subject to the provisions of Section 252 the number of Directors shall not be less than six and not more than twelve, unless otherwise determined by the Company in General Meeting. (b) 1. P S Mahadevan and 2. S Ramanujam Shall be the first directors of the Company and be entitled to hold office so long as they live and shall be called permanent Directors. ( c) (1) Notwithstanding anything to the contrary contained these Articles, so long as any moneys remain owing by the Company to the Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI(, or any financial institution including a bank owned or controlled by the Central Government or a State Government or the Reserve Bank of India or by two or more of them or by Central Government or a State Government by themselves (each of the above is hereinafter in this Article referred to as “the Corporation”) out of any loans / debenture assistance granted by them to the Company or so long as the Corporation holds or continues to hold Debentures / shares in the Company as a result of underwriting or by direct subscription or private placement, or so long as any liability of the company arising out of any Guarantee furnished by the Corporation on behalf of the Company remains outstanding, the Corporation shall have a right to appoint from time to time, any person or persons as a Director or Directors, whole‐time or non‐whole time, (which director or directors, is / are hereinafter referred to as “Nominee Director/s”) on the Board of the Company and to remove from such office any person or persons so appointed and to appoint any person or persons in his or their place/s. (2) The Board of Directors of the Company shall have no power to remove from office the Nominee Director/s. At the option of the Corporation such Nominee Director/s shall not required to hold any share qualification in the Company. Also at the option of the Corporation such Nominee Director/s shall not be liable to retirement by rotation of Directors. Subject as aforesaid, the Nominee Director/s shall be entitled to the same rights and privileges and be subject to the same obligations as may any other Director of the Company. (3) The Nominee Director/s so appointed shall hold the said office only so long as any moneys remain owing by the Company to the Corporation or so long as the Corporation holds or continues to hold Debentures / Shares in the Company as a result of underwriting or by direct subscription or private placement or the liability of the Company arising out of the guarantee is outstanding and the nominee Director/s so appointed in exercise of the said power shall ipso facto vacate such office immediately after the moneys owing by the Company to the Corporation are paid off or on the Corporation ceasing to hold Debentures / shares in the Company or on the satisfaction of the liability of the Company arising out of the guarantee furnished by the Corporation. (4) The Nominee Director/s appointed under this Article shall be entitled to receive all notices of and attend all General Meetings, Board Meetings and of the Meetings of the Committee of which the Nominee Director/s is/are member/s as also the minutes of such meetings. The Corporation shall also be entitled to receive all such notices and minutes. (5) The Company shall pay to the Nominee Director/s sitting fees and expenses to which the other Directors of the Company are entitled, but if any other fees, commission, monies or remuneration in any form is payable for the Directors to the Company, the fees, commission, monies and remuneration in relation to such Nominee


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Director/s shall accrue to the Corporation and the same shall accordingly be paid by the Company directly to the Corporation. Any expenses that may be incurred by the Corporation on such Nominee Director/s in connection with their appointment of Directorship shall also be paid or reimbursed by the Company to the Corporation or, as the case may be, to such Nominee Director/s. Provided that if any such Nominee Director/s is an officer of the Corporation, the sitting fees in relation to such Nominee Director/s shall also accrue to the Corporation and the same shall accordingly be paid by the Company directly to the Corporation. Provided also that in the event of the Nominee Director/s being appointed as whole time Director/s, such Nominee Director/s shall exercise such powers and duties as may be approved by the Corporation and have such rights as are usually exercised or available to a whole time Director in the management of the affairs of the Company. Such whole time Director/s shall be entitled to receive such remuneration, fees, commission and monies as may be approved by the Corporation.

104. No qualification by way of holding shares in the capital of the Company shall be required of any Director. 105. (a) Subject to the provisions of Section 314 of the Act a Director may hold office or place of profit in the

Company. (b) In addition to remuneration payable to Directors in pursuance of the Act, the Directors may be paid a Sitting Fees as applicable, all traveling hotel and other expenses properly incurred by them: (i) in attending and returning from meetings of the Board of Directors or any committee thereof or general meetings of the Company; or (ii) in connection with the business of the Company.

106. If the Office of any Director becomes vacant before the expiry of the period of his Directorship in normal course, the resulting casual vacancy may be filled by the Board at a Meeting of the Board. Any person so appointed shall hold office only upto the date upto which the Director in whose place he is appointed would have held office if the vacancy had not occurred as aforesaid.

107. The Directors may, from time to time appoint any person as an additional Director provided that the number of Directors and additional Directors together shall not exceed the maximum number of Directors fixed under Article 103(a) above. Any person so appointed as an additional Director shall hold office upto the date of the next Annual General Meeting of the Company.

108. (1) The Board may appoint an Alternate Director to act for a Director, hereinafter called in this clause “The original Director” during his absence for a period of not less than 3 months from the State in which the meetings of the Board are ordinarily held. (2) An alternate Director appointed as aforesaid shall vacate office if and when the original Director returns to the State in which meetings of the Board ordinarily held.

109. Subject to the provisions of the Act, the Directors and the Managing Director shall not be disqualified by reason of their office as such from contracting with the Company either as Vendor, Purchaser, Lender, Agent, Broker, or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any Director or the Managing Director or with any company or partnership of or in which any Director or the Managing Director shall be a member or otherwise interested be avoided nor shall any Director or the Managing Director so contracting or being such member or so interested be liable to account to the Company for any profit realized by such contract or arrangement by reason only of such Director or the Managing Director holding that office or of the fiduciary relation thereby established, but the nature of the interest must be disclosed by the Director or Managing Director at the meeting of the Board at which the contract or arrangement is determined on, if the interest then exist for in any other case at the first meeting of the Board after the acquisition of the interest. Provided nevertheless that no Director shall vote as a Director in respect of any contract or arrangement in which he is so interested as aforesaid or take part in the proceedings there at and he shall not be counted for the purpose of ascertaining whether there is quorum of Directors present. This proviso shall not apply to any contract by or on behalf of the Company to give to the Directors or the Managing Director or any of them any security by way of indemnity against any loss which they or any of them suffer by becoming or being sureties for the Company. A general notice that the Managing Director or any Director is a Director or a member of any specified Company or is a member of any specified firm and is to be regarded as interested in any subsequent transaction with such Company or firm, shall, regards any such transaction, be sufficient disclosure under this Article and after such general notice it shall not be necessary to give any special notice relating to any particular transaction with such Company or firm. Any such general notice shall be renewed in accordance with the provisions of Sec 299 (3) (b) of the Act.

110. Except as otherwise provided by these Articles, all the Directors of the Company shall have in all matters equal rights and privileges, and be subject to equal obligations and duties in respect of the affairs of the Company.

111. (1) The business of the Company shall be carried on by the Board of Directors who may exercise all such powers of the Company as are not, by the Act, or any statutory modification thereof for the time being in force or by


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these Articles, required to be exercised by the Company in General Meeting subject to any regulation of these Articles or the Act. No regulation made by the Company in the General Meeting shall invalidate any prior act of the Directors which would have been valid if that regulations had not been made. The Board may appoint at any time and from time to time by a power of Attorney under the Company’s seal any person to be the attorney of the Company for such purpose and with such powers, authorities and discretion not exceeding those vested in or exercisable by the Board. (2) The Board may authorize any such delegate or attorney as aforesaid to sub delegate all or any of the powers, authorities or discretion for the time being vested in him.

112. A Director or the Secretary may at any time convene a meeting of the Directors. It shall not be necessary to give notice of a meeting of the Directors to Directors who are not in India, subject to Section 286 of the Act.

113. (1) Save as otherwise expressly provided in the Act, a meeting of the Directors for the time being at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions by or under the regulations of the Company for the time being vested in or exercisable by the Directors generally and all questions arising at any meeting of the Board shall be decided by a majority of the Board. (2) In case of an equality of votes, the Chairman shall have a second or casting vote in addition to his vote as a Director.

114. The continuing Directors may act notwithstanding any vacancy in the Board, but if and so long as their number is reduced below six, the continuing Directors or Director may act for the purpose of increasing the number of Directors to six or for summoning a general meeting of the Company and for no other purpose.

115. Subject to the provisions of the Act the company shall be entitled to appoint director/s on a non‐rotational basis. 116. Subject to the provisions of the Act, the Directors may, with the sanction of a Special Resolution passed in the

General Meeting, and such sanction if any of the Government of India as may be required under the Companies Act, 1956 sanction and pay to the Whole‐Time Directors such remuneration for their services as Whole Time Directors or otherwise and for such period an on such terms as they deem fit.

117. Subject to the provisions of the Act, the Board of Directors in their meeting may sanction and pay to the directors in addition to their remuneration, an incentive out of the after tax net profits of the company calculated in accordance with the provisions of Section 198 of the Act. The said amount of remuneration so calculated shall be divided in an agreed upon ratio, between the whole‐time directors of the company who held office as whole time directors at any time during the year of account in respect of which such remuneration is paid or during any portion of such year irrespective of the length of the period for which they had held office respectively as such whole time directors.

118. A Director may be or become a director of any company promoted by this company or in which this company may be interested as vendor, shareholder or otherwise and no such director shall be accountable to the company for any benefits received as a director or member of such company.

119. The business of the company shall be carried on by the Board of Directors. MEETINGS OF THE BOARD AND COMMITTEES 120. If no person has been appointed as Chairman of the Company or if at any Board Meeting the Chairman or

Managing Director is not present within 15 minutes after the time appointed for holding the meeting the Directors present may choose one of their number to be the Chairman of the meeting.

121. (1) The Board may from time‐to‐time and at any such time constitute one or more Committees consisting of such member or members as the Board may think fit. (2) Subject to the provisions of section 292 the Board may delegate from time‐to‐time and at any time to any Committee so appointed all or any of the powers, authorities and discretions for the time being vested in the Board and such delegation may be made on such term and subject to such conditions as the Board may think fit. (3) The Board may from time‐to‐time revoke, add to or vary any powers, authorities and discretions so delegated.

122. The meeting and proceedings of any such Committee consisting of two or more members shall be governed by the provisions herein contained for regulating the meeting and proceedings of the Directors so far as the same are applicable thereto, and not superseded by any regulations made by the Directors under the last preceding Articles.

123. Each committee shall have a Chairman to conduct the meeting; if he is not available or if for any meeting he is not present within five minutes after the time appointed for holding the meeting, the members present may choose one of their members to be Chairman of the meeting. The quorum of Committee may be fixed by the Board and until so fixed if the Committee is of a single member or two members the quorum shall be one and if more than two members it shall be two.


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124. (1) A Committee may meet and adjourn as it thinks proper. (2) Question arising at any meeting of a Committee shall be determined by the sole member of the Committee or by a majority of votes of the members present as the case may be and in case of an equality of votes, the Chairman shall have a second and casting vote in addition to his vote as a member of the Committee.

125. All acts done by any meeting of the Board or of a Committee thereof or by any person acting as a Director shall, notwithstanding that it may be afterwards discovered that there was some defect in the appointment of any one or more of such Directors or of any person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such Director and such person has been duly appointed and was qualified to be a Director.

126. Save as otherwise expressly provided in the Act, a resolution in writing circulated in draft together with the necessary papers, if any to all the members of the Committee then in India (not being less in number than the quorum fixed for the meeting of the Board or the Committee as the case may be) and to all other Directors or members at their usual addresses in India and approved by such of the Directors as are then in India or by a majority of such of them as are entitled to vote on the resolution shall be valid and effectual as if it had been a resolution duly passed at a meeting of the Board or Committee duly convened and held.

POWERS AND DUTIES OF DIRECTORS 127. In furtherance of and without prejudice to the general powers conferred by or implied in Article and other

powers conferred by these Articles and subject to the provisions of Sections 292 and 293 of the Act it is hereby expressly declared that it shall be lawful for the Directors to carry out all or any of the objects set forth in the Memorandum of Association and to do the following things; (a) To appoint and at their discretion remove or suspend such agents, secretaries, officers, clerks etc., for permanent, temporary or special services as they may from time to time think fit and determine their powers and duties and fix their salaries or emoluments and require their security in such instances and to such amount as they think fit. (b) To borrow any sums of money for and on behalf of the Company from the members or other persons, companies, banks or any of the Directors may himself advance money to Company on such interest as may be approved by the Directors subject to Section 58A of the Companies Act and the regulations attached thereto or any Statutory modifications thereof. ( c) To secure the payment of such money in such manner and upon such terms and conditions in all respects as they think fit and in particular by the issue of Debentures or Bonds of the Company or by mortgage or charge of all or any part of the property of the Company and of its uncalled capitals for the time being. (d) To vary the rate of dividends on shares issued to financial institutions under an agreement strictly in accordance with the agreement.

MANAGING DIRECTOR 128. (a) The Company may from time‐to‐time in accordance with the provisions of the Act appoint one or more of its

Directors to the Office of Managing Director or Managing Directors or Wholetime Directors. (b) The Directors may from time‐to‐time resolve that there shall be either one or two Managing Directors and unless otherwise resolved there shall be only one Managing Director. ( c) In the event of any vacancy arising in the Office of the Managing Directors, or if the Directors resolve to increase the number of Managing Directors, the vacancy shall be filled in accordance with the provisions of the Act.

129. If a Managing Director ceases to hold office as Director, he shall ipso facto and immediately cease to be a Managing Director.

130. The Managing Director shall not be liable to retirement by rotation so long as he holds office as Managing Director.

131. The Managing Director shall, subject to the provisions of the Act, receive such remuneration, whether by way of salary, commission or participation in profits or partly in one way and partly in another.

132. (1) The Managing Director shall, subject to the supervision and control of the Board of Directors, have the management of all the affairs and business of the Company and of all its assets and he shall have power to do all acts and things which he shall consider necessary or desirable in the management of the affairs of the Company to exercise and perform all the powers and duties vested in him for the time being in accordance with the provisions of these presents or by any resolution of the Board. The Directors may from time to time revoke, withdraw, alter or vary any of the powers vested in the Managing Director. (2) The Managing Director may delegate such of the powers vested in him by giving proper authorization, to such person/s, officers or other employees of the Company.


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COMMON SEAL 133. The Board shall provide a common seal of the company and shall have power from time‐to‐time to destroy the

same and substitute a new seal in lieu thereof. The common seal shall be kept at the registered office of the Company and committed to the custody of the Managing Director. The Company may exercise the powers conferred by Sec. 50 with regard to having official seal for use abroad and such powers shall be vested in the Board.

134. The seal shall not be affixed to any instrument except by authority of a resolution of the Board or Committee and unless the Board otherwise determines every deed or other instrument to which the seal is required to be affixed shall unless the same is executed by a duly constituted attorney for the Company, be signed by one Director, at least in whose presence the seal shall have been affixed and countersigned by the Managing Director, or such other person as may from time‐to‐time be authorised by the Managing Director, or by the Board, provided that the same person shall not sign in the dual capacity of a director and as representing the Managing Director and provided nevertheless that any instrument bearing the seal of the company issued for valuable consideration shall be binding on the Company notwithstanding any irregularity touching the authority to issue the same provided also the counter‐signature of the Managing Director, or other authorized person shall not be necessary in the case of instrument executed in favour of the Managing Director, which shall be sealed in the presence of any one Director and signed by him on behalf of the Company.

DIVIDENDS AND RESERVES 135. The Redeemable Preference Shares shall confer the right on the holders thereof to be paid out of any profits that

may at any time be determined to be distributed among the members a fixed cumulative preferential dividend at the rate of 12.5% per annum free of the Company’s tax but subject to deduction of taxes at source at the prescribed rates, on the Capital for the time being paid up thereon in priority to equity shares and to no further rights to participate in the profits of the Company.

136. The profits of the Company, subject to any special rights relating thereto created or authorized to be created by these presents, and subject to the provisions of these presents as to the Reserve Fund, shall be divisible among the equity shareholders.

137. The Company in Annual General Meeting may declare dividends but no dividend shall exceed the amount recommended by the Board.

138. The Board may from time‐to‐time pay to the members such interim dividends as appear to it to be justified by the profits of the Company.

139. The Company may in General Meeting declare any further dividend as recommended by the Board in relation to any year notwithstanding the fact that dividends have been already declared in Annual General Meeting in respect of such year.

140. The declaration of the Directors as to the amount of the net profits of the Company shall be conclusive. 141. No dividend shall be payable except out of the profits of the year or any other undistributed profits except as

provided by Section 205 and 208 of the Act. 142. (1) The Board may before recommending any dividends set aside out of the profits of the Company such sums

as it thinks proper as a reserve or reserves which shall, at the discretion of the Board be applicable for any purpose to which the profits of the Company may be properly applied, including provision for meeting contingencies or for equalizing dividends, and pending such application, may, at the like discretion whether be employed in the business of the Company or be invested in such investments (other than shares of the company) as the Board may, from time‐to‐time think fit. (2) The Board may also carry forward any profits which it may think prudent not to divide without setting them aside as Reserve.

143. (1) Subject to the rights of persons if any entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid or credited as paid on shares in respect whereof the dividend is paid. (2) No amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of these regulation as paid on the share. (3) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividends is paid but if any share is issued on terms providing that it shall rank for dividends as from a particular date such share shall rank for dividend accordingly.

144. The Board may deduct from any dividend payable to any member all sums of money if any, presently payable by him to the Company on account of calls in relation to the shares of the Company or otherwise.

145. Any General Meeting declaring a dividend or bonus may make a call on the members of such amount not exceeding the dividend and payable at the same time as the dividend, and dividend so declared may be set off against the call so made.


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146. (1) Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through post directed to the registered address of the holder or in the case of joint holders to the registered address of that one of the joint holders who is first named in the Register of Members or to such person and to such address of the holder as the joint holder may in writing direct. (2) Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. (3) Every dividend or warrant or cheque shall be posted with in forty‐two days from the date of declaration of the dividends.

147. The Directors may retain the dividends payable upon shares in respect of which any person is under the transmission clause entitled to become a member in respect thereof or shall duly transfer the same.

148. Any one of two or more joint holders of a share may give effectual receipt for any dividends, bonuses or other moneys payable in respect of such share.

149. Notice of any dividend that may have been declared shall be given to the person entitled to share therein in the manner mentioned in the Act.

150. No dividend shall bear interest against the Company. 151. No unclaimed dividends shall be forfeited by the Board and the Company shall comply with the provisions of

Section 205A of the Companies Act, 1956. 152. Any transfer of shares shall not pass the right to any dividend declared thereon before the registration of the

transfer. CAPITALISATION OF PROFITS 153. (1) The Company in General Meeting, may on the recommendation of the Board resolve:

(a) That the whole or any part of any amounts standing to the credit of the Share Premium Account or the Capital Redemption Reserve Account or any moneys, investments or other assets forming part of the undivided profits including profits or surplus moneys arising from the realization and (where permitted by law) from the appreciation in value of any Capital assets of the Company standing to the credit of the General Reserve, Reserve or any Reserve Fund or any amounts standing to the credit of the Company or in the hands of the Company and available for distribution as dividend capitalized and (b) that such sum be accordingly set free for distribution in the manner specified in sub‐clause (3) amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportion. (2) The sum aforesaid shall not be paid in cash but shall be applied, subject to the provisions contained in sub‐clause (3) either in or towards:‐ (i) paying up any amounts for the time being unpaid on any shares held by such members respectively; (ii) paying up in full unissued shares of the company to be allotted and distributed and credited as fully paid‐up to and amongst such members in the proportions aforesaid: or (iii) partly in the way specified in sub‐clause (i) and partly in that specified in the sub‐clause (ii). (3) A share premium account and a capital redemption reserve account may for the purpose of this regulation be applied only in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares. (4) The Board shall give effect to resolutions passed by the Company in pursuance of this Article.

154. (1) Whenever such a resolution as aforesaid shall have been passed the Board shall: (a) make all appropriations and applications of the undivided profits resolved to be capitalized thereby and all allotments and issues of fully paid shares if any, and (b) generally do all acts and things required to give effect thereto. (2) The Board shall have full power – (a) to make such provisions, for the issue of fractional certificates or by payments in cash or otherwise as it thinks fit, in the case of shares becoming distributable in fractions, and also, (b) to authorise any person to enter on behalf of all the members entitled thereto into an agreement with the company providing for the allotment to them respectively credited as fully paid‐up of any further shares to which they may be entitled upon such capitalization, or (as the case may require) for the payment by the Company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalized of the amounts or any part of the amounts remaining unpaid on the existing shares. (3) Any agreements made under such authority shall be effective and binding on all such members.

ACCOUNTS 155. (1) The Board shall cause proper books of accounts to be kept in respect of all sums of money received and

expended by the Company and the members in respect of which such receipts and expenditure take place, of all sales and purchases of goods by the Company and of the assets of the Company. (2) All the aforesaid books shall give a fair and true view of the affairs of the Company or of its branches as the case may be, with respect to the matters aforesaid, and explain its transactions.


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(3) The books of accounts shall be open to inspection by any Director during business hours. 156. The books of account shall be kept at the Registered Office or at such other place as the Board thinks fit subject

to the provisions of the Act. AUDIT 157. Every Balance Sheet and Profit and Loss account shall be audited by one or more Auditors to be appointed by the

Company. 158. The remuneration of the Auditors shall be fixed by the Company in General Meeting except that the

remuneration of any Auditors appointed to fill any casual vacancy may be fixed by the Board. 159. Every Account of the Company submitted by the Directors, when audited and approved by a General Meeting

shall be conclusive and any error discovered therein after the approval thereof shall be corrected in the succeeding year.

AUTHENTICATION OF DOCUMENTS 160. 160. Save as otherwise expressly provided in the Act or these Articles, a document or proceeding requiring

authentication by the Company may be signed by a Director, or the Managing Director or an authorized officer of the Company and need not be under its seal.

WINDING UP 161. If the Company shall be wound up whether voluntarily or otherwise the Liquidator may with sanction of a Special

Resolution or any other sanction required by the Act, divide among the members in specie or kind any part of the assets of the Company and may with the sanction vest any part of the Company as trustees upon such trust for the benefit of the members or any of them as the Liquidator, with the like sanction shall think of. In case any shares to be divided as aforesaid involve a liability to calls or otherwise any person entitled under such division to any of the said shares may within ten days after the passing of the Special Resolution by notice in writing, direct the liquidators to sell his proportion and pay him the net proceeds, and the liquidators shall, if practicable, act accordingly.

162. The Redeemable Preference Shares shall confer the right on the holder thereof, in a winding up to payment of the paid up capital and all arrears of the fixed cumulative preferential dividends, whether earned, declared or not, up to the date of commencement of the winding up, in the profits or assets of the company in priority to the equity shares.

INDEMNITY AND RESPONSIBILITY 163. (a) Subject to the provision of Section 201 of the Act every Director, Manager, Secretary and other officer or

employee of the Company shall be indemnified by the Company against and it shall be the duty of the Directors out of the funds of the Company to pay all costs, losses and expenses (including travelling expenses) which any such Director, officer, or employee may incur or become liable to, by reason of any contract entered into or act or deed done by him or in any other way in the discharge of his duties, as such Director, Officer or employee. (b) Subject as aforesaid every Director, Manager, Secretary, or other Officer or employee of the Company shall be indemnified against any liability incurred by them or him in defending any proceedings whether civil or criminal in which judgement is given in their or his favour or in which he is acquitted or discharged or in connection with any application under section 633 of the Act in which relief is given to him by the Court, and without prejudice to the generality of the foregoing, it is hereby expressly declared that the Company shall pay and bear all fees and other expenses incurred or incurable by or in respect of any Director for filing any return, paper or document with the Registrar of Companies or complying with any of the provisions of the Act in respect of or by reason of his office as a Director or other officer of the company.

164. Subject to the provisions of Section 201 of the Act, no Director or other officer of the Company shall be liable for the acts, receipts, neglects or defaults of any other Director or Officer, or for joining any receipt or other acts for conformity for any loss or expense happening to the other acts for conformity for any loss or expense happening to the Company through insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested, or for any loss or damages arising from the bankruptcy, insolvency or tortuous act of any person, Company or Corporation with whom any moneys, securities or effects shall be entrusted or deposited or for any loss or damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same happens through his own act or default.


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SECRECY CLAUSE 165. (a) No member shall be entitled to visit or inspect the Company’s works without the permission of the Directors

or Managing Director, or to require discovery of or any information respecting any detail of the Company’s trading or any matter which is or may be in the nature of a trade secret, mystery of trade or secret process or which may relate to the conduct of the business of the Company and which in the opinion of the Directors will be inexpedient in the interests of the Company to communicate to the public. (b) Every Director, Managing Director, Manager, Secretary, Auditor, Trustee, Members of a Committee, Officer, Servant, Agent, Accountant or other person employed in the business of the Company shall if so required by the Directors before entering upon his duties, or at any time during his term of office, sign a declaration pledging himself to observe strict secrecy respecting all transactions of the Company and the state of accounts and in matters relating thereto, and shall by such declaration pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of duties except when required so to do by the Board or by any General Meeting or by a Court of Law or by the persons to whom such matters relate and except so far as may be necessary in order to comply with any of the provisions contained in these Articles.


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SECTION XI: OTHER INFORMATION Material Contracts and Documents for Inspection The following contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of this Draft Letter of Offer) which are or may be deemed material have been entered or to be entered into by our Company. Copies of these contracts and the documents may be inspected at the Registered Office of our Company situated at No. 6, Royal Road, Cantonment, Tiruchirappalli ‐ 620 001, Tamil Nadu, India, from 11.00 AM to 3.00 PM on working days from the date of this Draft Letter of Offer until the Issue Closing Date. Material Contracts to the Issue 1. Memorandum of Understanding dated May 21, 2010 executed by our Company with Lead Managers, V B Desai

Financial Services Limited. 2. Memorandum of Understanding dated May 25, 2010 executed by our Company with Registrar to the Issue. 3. Agreement dated June 23, 2010, executed by our Company with Bankers to the Issue.

Material Documents 1. Our Memorandum and Articles of Association as amended till date. 2. Resolutions of the Board of Directors dated January 21, 2010, in relation to the Issue and other related

matters. 3. Report of the Statutory Auditors’ dated June 21, 2010 prepared as per Indian GAAP and mentioned in this

Draft Letter of Offer and Statement of Tax Benefits from the Auditor’s dated June 21, 2010. 4. Copies of annual reports of our Company for the past five financial years. 5. Letter dated [●], 2010, bearing reference no. _______from BSE granting in‐principle listing approval. 6. Letter dated [●], 2010, bearing reference no. _______from MSE granting in‐principle listing approval. 7. Letter dated [●], 2010, bearing reference no. _______from DSE granting in‐principle listing approval. 8. Consents of Auditor’s, Bankers to our Company, Bankers to the Issue, Lead Manager, Registrar to the Issue,

Directors of our Company, as referred to, in their respective capacities. 9. Tripartite Agreement between NSDL, our Company and the Registrar to the Issue dated March 03, 2010. 10. Tripartite Agreement between CDSL, our Company and the Registrar to the Issue dated February 23, 2010. 11. Offer Document of the previous Initial Public Offer made in the year 1992 by our Company in its erstwhile

name Advanced Medical Care Limited. 12. Offer Document dated March 31, 2008 for acquisition of substantial shares and takeover of the management

of the Company by the current promoters. 13. Due diligence certificate dated June 23, 2010 to SEBI from V B Desai Financial Services Limited. 14. Copy of SEBI Observation Letter No. _____________ dated [●], 2010.

Any of the contracts or documents mentioned in this Draft Letter of Offer may be amended or modified at any time if so required in the interest of our Company or if required by the other parties, without reference to the shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.


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DECLARATION This is to confirm that all the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government have been complied with and no statement made in this Draft Letter of Offer is contrary to the provisions of the Companies Act, 1956 and rules made there under. All the legal requirements connected with this said offer as also the guidelines, instructions etc., issued by SEBI, the Government and any other competent authority in this behalf have been duly complied with. Undertaking We the Directors of KMC Speciality Hospitals (India) Limited, declare and confirm that no information/material likely to have a bearing on the decision of the investor in respect of the equity shares offered in terms of this Draft Letter of Offer have been suppressed/withheld and/or incorporated in a manner that would amount to misstatement/misrepresentation and in the event of it transpiring at any point of time till allotment/refund, as the case may be, that any information/material has been suppressed/withheld and/or amounts to misstatement/misrepresentation, we undertake to refund the entire application moneys to all the subscribers within seven days thereafter, without prejudice to the provisions of Section 63 of the Act. Since the date of last financial statement disclosed in this Draft Letter of Offer, there have been no circumstances that materially and adversely affects or is likely to affect the profitability of the Company or the value of its assets or its ability to pay off its liabilities within a period of next twelve months. The Directors and Mr. P. Selvaraju (V P Administration and Finance) of the company certify that all disclosures made in the Draft Letter of Offer are true and correct. Signed by Mr. R. Mohan Dr. S. Chandrakumar Dr. S. Manivannan Dr. T. Senthilkumar Mr. D. Selvaraj Mr. A. Krishnamoorthy CA S. Chenthilkumar Mr. B. Pattabhiraman Mr. P. Selvaraju (Vice President Administration and Finance) Place: Tiruchirappalli Date: June 24, 2010

KMC SPECIALITY HOSPITALS (INDIA) LIMITED - … existing Equity Shares of the Company are listed on...

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