Dated: September 29, 2008 FOR EQUITY …Issuer Call Option One-time call option available with our...

TEBMA SHIPYARDS LIMITED(Our Company was incorporated as Tebma Engineering Private Limited on July 9, 1984 under the Companies Act vide Certificate of Incorporation bearingRegistration No. 10994. The name of our Company was changed to Tebma Engineering Limited with effect from October 21, 1993 consequent uponconversion of our Company into a public limited company under Section 44 of the Companies Act. Subsequently our Company’s name was changed toTebma Shipyards Limited with effect from July 17, 1998. Our Corporate Identity Number is L27209TN1984PLC010994).

Registered Office: No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai - 600 097, Tamil Nadu, Tel. no. + 91-44-24968295/24968200, Fax no. + 91-44-24967717. For details of changes in the Registered Office of our Company, please see chapter titled “History and Other

Corporate Matters” beginning on page [%] of the Draft Letter of Offer.Contact Person: Mr. P.R. Kannan, Company Secretary and Compliance Officer, Tel. no. + 91-44-24967701,

Fax no. + 91-44-24967717, E-mail: [email protected]; Website: www.tebma.comFOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY

DRAFT LETTER OF OFFERISSUE OF [�] COMPULSORILY CONVERTIBLE PREFERENCE SHARES OF RS. 10/- EACH AT AN ISSUE PRICE OF Rs.[�] PERCOMPULSORILY CONVERTIBLE PREFERENCE SHARE (INCLUDING A PREMIUM OF Rs. [�] PER COMPULSORILY CONVERTIBLEPREFERENCE SHARE), PAYABLE IN CASH, AGGREGATING UPTO Rs. 7000 LAKH TO THE EXISTING EQUITY SHAREHOLDERSON RIGHTS BASIS IN THE RATIO OF [�] FULLY PAID-UP COMPULSORILY CONVERTIBLE PREFERENCE SHARES FOR EVERY[�] EQUITY SHARES HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE, i.e. [�]. THE FACE VALUE OFCOMPULSORILY CONVERTIBLE PREFERENCE SHARES IS Rs. 10 EACH AND THE ISSUE PRICE IS [�] TIMES OF THE FACEVALUE OF THE COMPULSORILY CONVERTIBLE PREFERENCE SHARES. EACH COMPULSORILY CONVERTIBLE PREFERENCESHARE SHALL BE CONVERTIBLE INTO [�] EQUITY SHARES. FOR MORE DETAILS, PLEASE REFER TO THE CHAPTER TITLED“TERMS OF THE ISSUE” BEGINNING ON PAGE [�] OF THE DRAFT LETTER OF OFFER.

GENERAL RISKSInvestments in equity and equity related securities involve a high degree of risk and investors should not invest any funds in this Issue unless they canafford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in thisIssue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. Thesecurities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy oradequacy of this document. Investors are advised to refer to the section titled “Risk Factors” beginning on page [�] of the Draft Letter of Offerbefore making an investment in this Issue.

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

IPO GRADINGNot applicable, as this is a Rights Issue

LISTINGThe existing Equity Shares of our Company are listed on Over The Counter Exchange of India Limited (“OTCEI”). Our Company has received“in-principle” approval from OTCEI for listing of the Compulsorily Convertible Preference Shares arising from this Issue vide letter dated [�]. For thepurpose of this Issue, the Designated Stock Exchange is OTCEI.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

Enam Securities Private Limited801-802, Dalamal Towers,Nariman Point,Mumbai – 400 021 (India)Tel: + 91 – 22 – 6638 1800Fax: + 91 – 22 – 2284 6824E-mail: [email protected] Grievances Email id: complaints @enam.comWebsite: www.enam.comContact Person: Mr. Pranav MahajaniSEBI Registration No.: INM000006856

Cameo Corporate Services LtdSubramanian BuildingNo.1 Club House RoadChennai: 600 002Tel: +91- 44 28460425Fax: +91-44-28460129E-mail: tebma @ cameoindia.comWebsite: www.cameoindia.comContact Person: R.D. Ramasamy, DirectorSEBI Registration No.: INR000003753

ISSUE PROGRAMME

ISSUE OPENS ON LAST DATE FOR RECEIPT OF REQUEST ISSUE CLOSES ONFOR SPLIT APPLICATION FORMS

[�] [�] [�]

DRAFT LETTER OF OFFERDated: September 29, 2008

FOR EQUITY SHAREHOLDERS OF THE COMPANY ONLY

TABLE OF CONTENTS

SECTION PAGE

DEFINITIONS AND ABBREVIATIONS INO OFFER IN OTHER JURISDICTIONS VPRESENTATION OF FINANCIALS AND USE OF MARKET DATA VI EXCHANGE RATES VII FORWARD LOOKING STATEMENTS IX RISK FACTORS XSUMMARY 1THE ISSUE 4SUMMARY STATEMENT OF FINANCIAL INFORMATION 5GENERAL INFORMATION 18CAPITAL STRUCTURE 25OBJECTS OF THE ISSUE 37BASIS FOR ISSUE PRICE 53STATEMENT OF TAX BENEFITS 55INDUSTRY OVERVIEW 66OUR BUSINESS 73KEY INDUSTRY REGULATIONS AND POLICIES 89HISTORY AND OTHER CORPORATE INFORMATION 94OUR MANAGEMENT 101 OUR PROMOTERS 115 OUR PROMOTER GROUP 117 RELATED PARTY TRANSACTIONS 120 DIVIDEND POLICY 121 FINANCIAL STATEMENTS FS - 1 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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STOCK MARKET DATA 130 OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 131 GOVERNMENT/ STATUTORY APPROVALS 135 OTHER REGULATORY AND STATUTORY DISCLOSURES 146 TERMS OF THE ISSUE 156 PROVISIONS OF ARTICLES OF ASSOCIATION OF THE COMPANY 192 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 228 DECLARATION 230

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DEFINITIONS AND ABBREVIATIONS

In the Draft Letter of Offer, the terms “we”, “us”, “our”, “the Company”, “our Company” or “TSL”, unless the context otherwise implies, refer to Tebma Shipyards Limited.

Unless the context otherwise requires, the following abbreviations and terms shall have the same meanings as stated hereinbelow

General Terms / Issue Related Terms

Term Definition Act The Companies Act, 1956 and amendments thereto from time to time. Allotment Allotment of CCPS pursuant to this Issue Articles Articles of Association of our Company, as amended from time to time. Auditors Refers to M/s. B S R & Associates., Chartered Accountants unless otherwise

specified. Auditors Report Unless otherwise specified, refer to the report of our statutory auditors, M/s. B

S R & Associates, datedSeptember 26, 2008 providing the restated unconsolidated and consolidated financial information of our Company for periods/ years ending, March 31, 2008, 2007, 2006, 2005,and 2004.

Bankers to the Issue [ ]Board or Board of Directors

Board of Directors of Our Company or Committee(s) thereof duly authorised.

Advisor to the Issue Centrum Capital Limited

Collection Centre As defined in SEBI Guidelines and amended thereafter, and mentioned in the CAF

Compulsorily Convertible Preference Share(s) or CCPS

Means the compulsorily convertible preference share(s) of face value of Rs. 10 each

CCPS Holder Put Option The put option available to every CCPS holder to convert whole or part of the CCPSs into Equity Shares at the Conversion Ratio during the Conversion Period

Conversion Refers to the conversion of the CCPS into Equity Shares Conversion Period The Conversion Period, in relation to a CCPS, shall be the earlier of the

following:

(i) Exercise of the CCPS Holder Put Option by the CCPS holder; (ii) Exercise of the Issuer Call Option by our Company; and Expiry of five years from the date of Allotment, which shall be the maximum tenure of the CCPS, and beyond which the tenure of the CCPS shall not stretch.

Conversion Ratio The ratio of conversion of CCPS into Equity Shares, being [ ] Equity Shares per CCPS.

Conversion Request Form

The Form in which the CCPS holder is to apply for the conversion of the CCPS into Equity Shares

Depositories NSDL and CDSL Depositories Act The Depositories Act, 1996 as amended from time to time Designated Stock Exchange

OTCEI.

Draft Letter of Offer Draft Letter of Offer of our Company as filed with SEBI and the Stock Exchange.

Equity Share(s) or Share(s)

Equity Shares of our Company of face value of Rs. 10/- each which are listed on OTCEI, and includes the Equity Shares to be issued on Conversion.

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Term Definition Equity Shareholders Unless otherwise stated, means the holder of Equity Shares of our Company

as on Record Date . Erstwhile Promoters Late Captain B. N. Rao, Mr. Eapen Chacko, Mr. A. K. Singh, Mr. K. A.

Thomas, Mr. Biren Mukherjee and Mrs. Kripa Balan Fiscal/FY Financial Year ending March 31. IAF – VI India Advantage Fund-VI Indian GAAP Generally Accepted Accounting Principles in India. Investor (s)/Applicant(s) Means the holder(s) of the Equity Shares of our Company as on the Record

Date who make an application for CCPS pursuant to the Issue and Renouncees.

Issue Issue of [ ] Compulsorily Convertible Preference Shares of Rs. 10/- each at an Issue Price of Rs. [ ] per Compulsorily Convertible Preference Share (Including a premium of Rs. [ ] per Compulsorily Convertible Preference Share), payable in cash, aggregating upto Rs. 7000 Lakh to the existing Equity Shareholders on rights basis in the ratio of [ ] fully paid-up Compulsorily Convertible Preference Share for every [ ] Equity Shares held by the existing Equity Shareholders as on the Record Date. [ ] Compulsorily Convertible Preference Share Shall Be Convertible Into [ ] Equity Shares.

Issue Closing Date [ ], or such other date as may be decided by our Board, which shall not be more than 30 days from the Issue Opening Date

Issue Opening Date [ ]Issue Price Rs. [ ] per CCPS Issuer Call Option One-time call option available with our Company for converting all

outstanding CCPSs, which can be exercised by our Company on any date from the date of listing of the CCPS till the end of five years from the date of allotment of the CCPS.

IT Act The Income-tax Act, 1961 and amendments thereto. Lead Manager Enam Securities Private Limited. Letter of Offer Letter of Offer circulated to the Shareholders of Our Company. Memorandum Memorandum of Association of our Company, as amended from time to time. OTCEI OverThe Counter Exchange of India Limited Promoters Mr. P.K. Balasubramanian and India Advantage Fund-VI Promoter Group Entities/Entities in the Promoter Group/group companies

Companies(including trusts) as promoted by our Promoters

Record Date [ ]Registrar to the Issue or Registrar / Transfer Agent

Cameo Corporate Services Ltd

Renouncees The persons who have acquired Rights Entitlements from Equity Shareholders.

Rights Entitlement/Entitlement

The number of CCPS that an Equity Shareholder is entitled to in proportion to his/her existing shareholding of Equity Shares in our Company as on Record Date.

Rights Issue The issue of Compulsorily Convertible Preference Shares on rights basis. Tebma Shipyards Limited or the Company or the Issuer

Tebma Shipyards Limited, a company incorporated as Tebma Engineering Private Limited on July 9, 1984, under the Companies Act, 1956. For further details please refer to chapter titled “ History and Other Corporate Matters” beginning on page 94 of the Draft Letter of Offer

SEBI Act, 1992 Securities and Exchange Board of India Act, 1992 and amendments thereto. SEBI DIP Guidelines/SEBI

The Guidelines for Disclosure and Investor Protection issued by SEBI on January 19, 2000 read with amendments issued thereafter from time to time

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Term Definition Guidelines till the date of filing of the Draft Letter of Offer with SEBI. Subsidiary Tebma Gardens Limited. Stock Exchange OTCEI, where the Equity Shares of our Company are listed, and where the

CCPS are proposed to be listed Takeover Code/SEBI Takeover Code/SEBI SAST

The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as amended to date.

Company / Industry Related Terms

Term Definition OSV Offshore Support Vessels QIPO Qualified Initial Public Offering Subscription Amount the amount agreed by IAF - VI towards subscribtion of 2,566,800 Equity

Shares of a face value of Rs. 10/- each of the our Company for cash at a premium of Rs. 223.75 per share aggregating to Rs. 599,989,500

CSL Cochin Shipyard Limited

Abbreviations

Abbreviation Full Form AGM Annual General Meeting AY Assessment Year CAF Composite Application Form CAGR Compounded Annual Growth Rate Capex LC Line of Credit for Capital Expenditure CEO Chief Executive Officer CDSL Central Depository Services (India) Limited CFBP Council for Fair Business Practices Demat Refers to the dematerialization of Equity Shares of our Company DIN Directors Identification Number DP Depository Participant EGM Extraordinary General Meeting Enam Enam Securities Private Limited EPS Earning Per Share FEMA Foreign Exchange Management Act, 1999 FII(s) Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of

India GIR Number General Index Registry Number GoI Government of India. HUF Hindu Undivided Family. ICAI Institute of Chartered Accountants of India. IT Information Technology. ISIN International Security Identification Number MD Managing Director. MIS Management Information Systems. MoU Memorandum of Understanding. NAV Net Asset Value. NEFT National Electronic Funds Transfer NOC No Objection Certificate.

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Abbreviation Full Form NR Non Resident. NRE Account Non-Resident (External) Account NRI(s) Non Resident Indian(s). NRO Account Non-Resident (Ordinary) Account NSDL National Securities Depository Limited. OCB Overseas Corporate Body PAN Permanent Account Number. P/E Ratio Price/Earnings Ratio RBI The Reserve Bank of India. RoC/Registrar of Companies

Registrar of Companies, Tamil Nadu at Chennai having its office at 26, Haddows Road, 2nd Floor, Shastri Bhavan, Chennai – 600 006, Tamilnadu, India.

SEBI Securities and Exchange Board of India.

Notwithstanding the foregoing,

(i) In the section titled ‘Main Provisions of the Articles of Association of our Company’ beginning on page 192 of the Draft Letter of Offer, defined terms shall have the meaning given to such terms in that section;

(ii) In the section titled ‘Financial Statements’ beginning on page 1 of the Draft Letter of Offer, defined terms shall have the meaning given to such terms in that section;

(iii) In the sub-sections titled ‘Disclaimer Clause of Over the Counter Exchange of India’ beginning on page no. 150 of the Draft Letter of Offer, defined terms shall have the meaning given to such terms in that sub-section.

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NO OFFER IN OTHER JURISDICTIONS

The rights entitlement and CCPS of our Company have not been and may not be offered or sold, directly or indirectly, and the Draft Letter of Offer may not be distributed in any jurisdiction outside of India. Receipt of the Draft Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, those circumstances, the Draft Letter of Offer must be treated as sent for information only and should not be copied or redistributed. No person receiving a copy of the Draft Letter of Offer in any territory other than in India may treat the same as constituting an invitation or offer to him, nor should he in any event use the CAF. Our Company will not accept any CAF where the address as indicated by the applicant is not an Indian address. Accordingly, persons receiving a copy of the Draft Letter of Offer should not, in connection with the Issue of CCPS or the rights entitlements, distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. If the 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 CCPS or the rights entitlements referred to in the Draft Letter of Offer.

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PRESENTATION OF FINANCIALS AND USE OF MARKET DATA

Unless stated otherwise, the financial data in the Draft Letter of Offer is derived from our restated financial statements for the years ended March 31, 2008; 2007; 2006; 2005 and 2004; prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with SEBI Guidelines, as stated in the report of our statutory Auditors, M/s.B S R & Associates., Chartered Accountants, in the section titled “Financial Information” beginning on page FS - 1 of the Draft Letter of Offer. 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” mean “100 thousand” and the word “million” means “10 lakh” and the word “crore” means “10 million” or “100 lakhs” and the word “billion” means “1,000 million” or “100 crores”.

All references to “US$”; “U.S. Dollar” or “US Dollars” are to United States Dollars, the official currency of the United States of America.

All references to “Euro”; or “€” refers to Euro,.

“GBP” or “£” refers to the British Pound Sterling, the official currency of Great Britain

Our fiscal year commences on April 1 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a fiscal year (e.g., fiscal 2007), are to the fiscal year ended March 31 of a particular year.

In the Draft Letter of Offer, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding-off.

All references to “India” contained in the Draft Letter of Offer are to the Republic of India.

All references to “Rupees” or “Rs.” or “INR” are to Indian Rupees, the official currency of the Republic of India.

Market and industry data used throughout the Draft Letter of Offer has been obtained from publications (including websites) available in public domain and internal Company reports. These publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe that the market data used in the Draft Letter of Offer is reliable, it has not been independently verified. Similarly, internal Company reports, while believed to be reliable, have not been verified by any independent source.

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EXCHANGE RATES

The following table sets forth, for the periods indicated, information with respect to the exchange rate between the rupee and the American dollar (in rupees per American dollar). The exchange rate as at September 25, 2008 was Rs. 46.27 = USD 1.00. No representation is made that the rupee amounts actually represent such American dollar amounts or could have been or could be converted into American dollars at the rates indicated, any other rate or at all.

Rupee and American Dollars Exchange Rates

Year ended March 31 Period End Average High Low2008 39.90 40.2855 43.5900 39.2250 2007 43.4417 45.2538 46.9350 42.7500 2006 44.6176 44.2872 46.317 43.015 2005 43.79 44.94 46.41 43.22 2004 44.125 46.02 47.51 43.92

Source: www.oanda.com

The following table sets forth, for the periods indicated, information with respect to the exchange rate between the rupee and the Singapore dollar (in rupees per Singapore dollar). The exchange rate as at September 26, 2008 was Rs. 32.5975 = SGD 1.00. No representation is made that the rupee amounts actually represent such Singapore dollar amounts or could have been or could be converted into Singapore dollars at the rates indicated, any other rate or at all.



The following table sets forth, for the periods indicated, information with respect to the exchange rate between the rupee and the British Pound (in rupees per British Pound). The exchange rate as at September 26, 2008 was Rs. 85.8069 = GBP 1.00. No representation is made that the rupee amounts actually represent such British Pound amounts or could have been or could be converted into British Pound at the rates indicated, any other rate or at all.



The following table sets forth, for the periods indicated, information with respect to the exchange rate between the rupee and the Euro (in rupees per Euro). The exchange rate as at September 26, 2008 was Rs. 67.9087 = Euro1.00. No representation is made that the rupee amounts actually represent such Euro amounts or could have been or could be converted into Euro at the rates indicated, any other rate or at all.

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The following table sets forth, for the periods indicated, information with respect to the exchange rate between the rupee and the Canadian Dollar (in rupees per Canadian Dollar). The exchange rate as at September 26, 2008 was Rs. 44.7118 = Canadian Dollar1.00. No representation is made that the rupee amounts actually represent such Canadian Dollar amounts or could have been or could be converted into Canadian Dollar at the rates indicated, any other rate or at all.



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FORWARD LOOKING STATEMENTS

We have included statements in the Draft Letter of Offer which contain words or phrases such as “will”, “may”, “aim”, “is likely to result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward-looking statements”.

All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include but are not limited to:

• General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

• Changes in laws and regulations relating to the sectors/areas in which we operate;

• Increased competition in the sectors/areas in which we operate;

• Our ability to successfully implement our growth strategy and expansion plans, and to successfully launch and implement various projects and business plans for which funds are being raised through this Issue;

• Our ability to meet our capital expenditure requirements;

• Fluctuations in operating costs;

• Our ability to attract and retain qualified personnel;

• Changes in technology;

• Changes in political and social conditions in India or in countries that we may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

• The performance of the financial markets in India and globally; and

• Any adverse outcome in the legal proceedings in which we are involved.

• The other risk factors discussed in the Draft Letter of Offer, including those set forth under Risk Factors

Neither we, our Directors, the Lead Manager, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company, the Lead Manager will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchange for the CCPS being offered on a rights basis.

For a further discussion of factors that could cause our actual results to differ, see the sections titled “Risk Factors” “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages x, 1 and 122 of the Draft Letter of Offer respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated.

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RISK FACTORS

An investment in the CCPS involves a high degree of risk. You should carefully consider all the information in the Draft Letter of Offer, including the risks and uncertainties described below before making an investment decision. If any of the risks described below actually occur, our business, prospects, financial condition and results of operations could be seriously harmed, the trading price of our Equity Shares and/or the CCPS could decline, and you may lose all or part of your investment. However, there are a few risk factors where the impact is not quantifiable and hence the same have not been disclosed in such risk factors.

This Draft Letter of Offer also contains forward looking statements that involve risks and uncertainties. Our Company’s actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors, including the considerations described below and elsewhere in the Draft Letter of Offer.

Internal risk factors

1. Our Company, our Promoter-Director, Mr P.K Balasubramanian, wife of our Promoter-Director, Ms. Kripa Balasubramanian (former Promoter) and certain other former Promoters of our Company have been issued show cause notices by SEBI relating to non compliance of SEBI SAST requirements, in pursuance of which proceedings have been instituted by SEBI

Division of Regulatory Action, Enforcement Department, SEBI has issued Show Cause Notice No EAD/DSR/ ADJ/00667/2007/EIF-163 dated August 6, 2007, in terms of SEBI order dated July 23, 2008, to our Company, our Promoter-Director Mr. P.K. Balasubramanian, and our Erstwhile Promoters, under Rule 4(3) of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995 for failure to comply with th requirements of chapter II of SEBI SAST, and with provisions of regulations 6(1), 6(3), 8(1) and 8(2) of SAST. Subsequent to various hearings and representations made by us, our Company, Mr. P.K Balasubramanian and our erstwhile Promoters have submitted an application for consent dated November 2, 2007 with SEBI, in terms of circular No. EFD/ED/Cir-1/2007 dated April 20, 2007 (Guidelines for Consent Orders and for considering requests for composition of offences) requesting SEBI to compound the default and for imposition of fine not exceeding Rs. 10,000 in the aggregate in respect of our Company and Rs. 5000 each on Mr. P.K Balasubramanian and all the Erstwhile Promoters. Thereafter by letters dated January 7, 2008 to SEBI, our Company, our Promoter Mr. P.K Balasubramanian and the Erstwhile Promoters have offered to pay a sum of Rs. 2,50,000 , Rs. 50,000 and RS. 50,000 each towards settlement of the matter. and SEBI has by its letter no. EFD/DRA-II/VKT/PT/138324/2008 dated September 18, 2008 has informed us of an Internal Committee meeting to be held between September 18, 2008 and September 26, 2008 wherein the consent applications submitted is proposed to be taken up for hearing between September 18, 2008 and September 26, 2008. On communicating our inability to attend on the captioned dates, the hearing has currently been fixed for October 1, 2008.

We cannot assure you that our consent application will be accepted by SEBI, or that the adjudicating proceeding will otherwise be decided in favour of our Company, our Promoter and Erstwhile Promoters. Decisions in such proceedings adverse to the interest of our Company or such persons may have an adverse effect on us and our Promoter which may in turn affect our business and operations.

2. The Shipbuilding Subsidy Scheme which expired on August 14, 2007 may not be extended by the government to the shipbuilding industry

All our export shipbuilding orders under execution which have been procured before August 14, 2007, are eligible for subsidy under the Shipbuilding Subsidy Scheme extended by the Government of India. In FY 2008, revenue from subsidy was Rs. 5,153.18 lacs while our restated consolidated profit before tax was Rs. 6,268.91 lacs. Until August 14, 2007, the GOI provided a shipbuilding subsidy of 30% to

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shipbuilding companies in connection with (i) the ocean-going merchant ships that were over 80 meters in length and were manufactured for the domestic market, and (ii) ships of all types that were manufactured for export, subject to fulfilment of certain conditions. Under that policy, the subsidy was available to private shipyards in respect of ships that met the GOI eligibility requirements and only upon completion of construction and delivery of eligible ships. However the subsidy policy has expired on August 14, 2007 and has thereafter not been renewed. There is currently no shipbuilding subsidy policy in force and there is no assurance that the GOI will provide any subsidy or other incentives to us in the future. In respect of all shipbuilding orders placed post August 14, 2007, our profitability may be materially and adversely affected.

3. Risk of delays in getting shipbuilding subsidies on account of procedural delays in government or budget allocation

In FY 2008, revenue from subsidy was Rs. 5,153.18 lacs, all of which has not been received by us as on date, while a majority amount has not yet been claimed by us, and would be claimed on delivery of the vessels. We may face significant delays in claiming the aforesaid amounts, and non-receipt of these amounts may require us to incur further borrowings and adversely affect our ability to pay dividends.

4. We may not be able to avail of certain tax benefits, which are presently available or may need to forego tax benefits claimed in the past.

As our Shipyard at Malpe is a 100% EOU we are eligible for certain income tax exemptions under section 10B of the Income Tax Act, 1961 which will expire in March 2010. Further, these income tax benefits are subject to our continuous compliance with certain terms and conditions. We cannot assure that we would continue complying with these terms and conditions, in the event of which we would lose the income tax benefits being currently enjoyed by us. For details of tax benefits available to our Company please refer to section tilted “Statement of Tax Benefits” begining on page 55 of the Draft Letter of Offer

5. Vessels comprising our order book may be delayed or modified, which could materially harm our cash flow position, financial conditions and results of operations.

Our order book represents business that is considered likely, but cancellations or scope or schedule adjustments may and do occur. Further we rely on third party suppliers for vital components and raw materials such as engines, equipment and steel used in construction of various vessels. We may also encounter problems executing the shipbuilding order, or executing it on a timely basis. Moreover, factors beyond our control or the control of our customers may cause our customers or us to postpone vessel delivery or cause its cancellation, including delays or failures to obtain necessary permits, authorizations, permissions, delivery of raw materials, components and parts and other types of difficulties or obstructions. Due to the possibility of cancellations or changes in contract scope and schedule as a result of exercises of our customers’ discretion, problems we encounter in execution, or reasons outside our control or the control of our customers, we cannot predict with certainty when, if or to what extent the order book will be executed. For example, delays in the completion of a vessel or failure to meet the specifications agreed with the customer can lead to customer delaying or refusing to make payment to us of some or all of the amounts we expect to be paid pursuant to the vessel construction contract.

Even relatively short delays or surmountable difficulties in the execution of vessel construction could result in our failure to receive, on a timely basis or at all, all balance payments otherwise due to us on a project. In addition, even where a project proceeds as scheduled, it is possible that the contracting parties may default or otherwise fail to pay amounts owed. Any delay, reduction in scope, cancellation, execution difficulty, payment postponement or payment default in regard to order book projects or disputes with customers in respect of any of the foregoing, could materially harm our financial condition, results of operations and cash flows.

6. Our shipbuilding contracts are largely fixed price, and actual profits may differ significantly vis-a vis

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estimated profits

Due to the nature of the shipbuilding industry, most of our shipbuilding contracts are currently executed on a fixed-price basis and typically do not provide for a price escalation clause. We attempt to cover anticipated increase in costs of labour and materials through an estimation of such costs, which is reflected in the original price and normally obtain back-to back commitments for major cost elements. Key raw materials and components comprise a major portion of the cost of the vessel, which have in the recent past been subject to considerable price volatility and increase. Any such substantial increase in price of inputs and raw materials or unanticipated increase in equipment, materials costs not factored into the contract may therefore lead to increased cost and may significantly affect our margins, which in turn may adversely affect our business and results of operations.

7. Our shipyard at Malpe is located close to a fishermen’s harbour and to Malpe town, and there exists potential for localized social unrest

Our shipyard at Malpe is situated close to a fishermen’s harbour and to Malpe town. Large scale infrastructure projects located within or close to existing settlements have faced local resistance in the past. We would be undertaking shipbuilding activities at the shipyard at Malpe, which would entail employing a significant workforce, which may primarily comprise of non-local population. We would also be utilizing local resources including common waterways with the local fishermen. We may face localized social unrest from the existing fishermen/other local population in that area.

8. We may face claims and incur additional rectification costs for defects and warranties in respect of our vessels.

We may face claims by our customers in respect of defects, poor workmanship or non-conformity to our customers’ specifications in respect of vessels built by us and such claims could be substantial. Such claims could also adversely affect our reputation and ability to grow our business. We generally extend a warranty for a period of 12 months to our customers from the date of delivery of the vessel. Typically, we take back-to-back warranties from our key equipment suppliers for most of the key equipment used in the vessel, due to which we typically do not make any provision for outstanding warranties in our books of account. If there is a claim from our customers during the warranty period, we may need to incur additional costs to address the same. Further, there can be no assurance that our key equipment suppliers would honour the warranties extended to us, which would require us to bear the cost in relation to such equipments. The aforesaid may have a material adverse effect on our business, results of operations and financial condition.

9. Invocation of bank guarantees by our customers could impact our result of operations and we may face potential liabilities from lawsuits or claims by customers in the future.

Pursuant to the terms of our existing shipbuilding contracts, we are required to provide bank guarantees to our customers prior to receiving stage payments (that is, installment of the contract price payable at pre-defined stages). If the contract is terminated by the customer in the event of breach of contractual terms by our Company, the customer has the right to invoke such guarantees and the entire amount that has been paid by the customer to us may become payable. If the guarantees are invoked by a customer, we would be required to repay these amounts to the bank which issued such guarantees. There can also be no assurance that we will be able to obtain the necessary guarantees we may require, on reasonable terms, or at all.

In addition to the above, we face the risk of legal proceedings and claims, including on account of interest and/or liquidated damages claimed, being brought against us by our customers in the event of any breach in respect of shipbuilding contracts. This may, in turn, result in liabilities and/or financial claims against our Company, as well as loss of business and reputation.

10. An inability to renew or maintain our statutory and regulatory permits and approvals required to operate our businesses may have a material adverse effect on our business.

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We require certain statutory and regulatory permits and approvals to operate our business. For further details of various statutory and regulatory permits obtained by us please see section titled “Government/ Statutory Approvals”

Approvals applied for but not received in relation to our business and objects of the Issu

Tamil Nadu

(i) Application of Acknowledgment for Industrial Entrepreneur Memorandum for our Chengelpet facility to Secretariat for Industrial Assistance, Government of India by our letter dated September 27,2008

Cochin

(ii) Application dated May 31, 2008, for renewal of license No KCLL-9/2005 under Contract Labour (Regualation And Abolition) Rules.

(iii) Application dated May 31, 2008, for renewal of license No. ISMW(L) EMPT-2/2005 dated May 27, 2005 under Interstate Migrant Workmen Rules.

Karnataka

(iv) Application dated September 11, 2008 to Karnataka State Coastal Regulation Zone Management Authority for environmental clearance (CRZ) for the development of infrastructure for Hangercutta.

(v) Letter Sl No. Ba. O. Ja. Saa-53/Bhoomi-1/2007 of Public Works, Ports and Inland Water Transport Department to the Secretary for Government Port And Inland Water Transport for clearance from the government for operation of hull through jetty and change of jetty at Hangercutta.

We will be required to renew those permits and approvals that are subject to renewal, and obtain new permits and approvals in relation to our business activities including any expansion. While we believe that we will be able to renew or obtain such permits and approvals as and when required, there can be no assurance that the relevant authorities will issue any of such permits or approvals in the time-frame anticipated by us or at all or on terms that are not less favourable than current terms. Failure by us to renew, maintain or obtain the required permits or approvals may result in the interruption of our operations or delay or prevent our expansion plans and may have a material adverse effect on our business, financial condition and results of operations.

11. We have not placed firm orders for plant and machinery aggregating Rs. 2290.58 lacs which constitutes 21.53 % of the total Plant & Machinery costs for the Malpe facilities

We are yet to place firm orders in respect of plant and machinery aggregating to Rs. 2,290.58 lacs aggregating 21.53% of the total plant and machinery cost of the Project. Any increase in total estimated capital expenditure may impact our financial condition, results of operation and liquidity position adversely. For further details please see section titled “Objects of the Issue” beginning on page 37 of the Draft Letter of Offer.

12. Our current order book(in revenue terms) is substantially dependent on two major customers

Our current order book(in revenue terms) is substantially dependent on two major customers. Any material failure or inability, financial or otherwise, on their part to fulfill their obligations under the terms

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and conditions of the contracts entered into with us would have a material adverse effect on the business and operations of our Company.

13. Our Company has negative cash flows

Our net cash flows from operative activities were negative in FY 2008, 2007 and 2005 amounting to Rs. 9,686.31 lacs, 3,400.57 lacs and 124.78 lacs respectively on account of increase in current assets due to continued expansion. Any negative cash flow in the future may have an adverse affect on our profitability and financial performance.

14. Non trading in OTCEI

The shares of our Company are listed on OTCEI, Mumbai only. Our equity shares were last traded on OTCEI on December 11, 1999. Since, currently the Equity Shares of our Company are not traded, it limits the liquidity available to the investor with respect to these shares.

15. We do not currently have an internal audit system commensurate to the nature and size of our business

Our Company does not, as on date of the Draft Letter of Offer, have an internal audit system commensurate to the nature and size of our business. The same has also been mentioned as a qualification by our Auditors in the Auditor’s Report issued under the Companies Act for FY 2007-2008 and Auditor’s Report issued under SEBI Guidelines, both on standalone and consolidated accounts. We have appointed R. Subramanian & Co., as the internal auditor with effect from September 1, 2008 and are taking steps to establish an internal control system in this regard.

16. In addition to our internal audit system not being commensurate to the nature and size of our business, there are certain other qualifications/observations in the Auditor’s report issued under the Companies Act for FY 2007-2008 and the Auditors Report issued under SEBI Guidelines, both on standalone and consolidated accounts

In addition to the qualifications in relation to our internal audit system:

a. the Auditor’s Report issued under the Companies Act for FY 2007-2008 had certain qualifications, the relevant portions in relation to which are reproduced hereinbelow:

(i) According to information and explanations given to us and on basis of our examination of the records of our Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Service Tax, Sales Tax, Customs Duty and other material statutory dues have generally been regularly deposited with the appropriate authorities except for payment of advance income tax, in respect of which there have been significant delays and in respect of payment of Provident Fund and Employees’ State Insurance deducted from o Company’s contractors wherein there have been several delays pending receipt of necessary information from contractors,

(ii) According to information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Service Tax, Sales Tax, Customs Duty and other material statutory dues were in arrears as at March 31, 2008 for a period of more than six months from the date on which they became payable except Provident Fund and Employees’ State Insurance payments deducted from Company’s contractors amounting to Rs. 200,009 pending receipt of necessary information from contractors.

b. The Auditor’s Report issued under SEBI Guidelines, both on standalone and consolidated accounts,

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had certain qualifications, relevant portions in relation to which are reproduced hereinbelow:

a) Auditors’ qualification which do not require any corrective adjustment in the Consolidated Restated Summary Statements are as follows:

Financial year ended March 31, 2008 –

i) There were significant delays in respect of payment of advance income taxes and several delays in respect of payment of Provident fund and Employee State Insurance deducted from the Company’s contractors pending receipt of necessary information from contractors.

b) The Auditor’s Report issued under SEBI Guidelines, issued on standalone and consolidated basis, has certain qualifications in relation to Dharti Dredging Corporation Limited. The qualifications are as follows:

a. Report issued on standalone basis –

Matters relating to Dharti Dredging and Construction Limited (‘DDCL’)

As at and for the years ended March 31, 2003 and 2004, the Company held 21,82,500 equity shares in Dharti Dredging and Construction Limited (‘DDCL’), representing 48.73% of equity share capital of DDCL. Currently, the Company does not have adequate and relevant information relating to the other share holders of DDCL. Based on its share holding percentage, the management believes that DDCL was an associate company and accordingly disclosures have been made in the Unconsolidated Restated Summary Statements. During the year ended 31 March, 2005, the Company sold 19,82,500 equity shares and DDCL ceased to be an associate company thereafter. The Company sold the balance 2,00,000 equity shares during the year ended 31 March, 2006.

b. Report issued on consolidated basis

Matters relating to Dharti Dredging and Construction Limited (‘DDCL’)

As at and for the years ended March 31, 2003 and 2004, the Company held 21,82,500 equity shares in Dharti Dredging and Construction Limited (‘DDCL’), representing 48.73% of equity share capital of DDCL. Currently, the Company does not have adequate and relevant information relating to the other share holders of DDCL. Based on its share holding percentage, the management believes that DDCL is an associate company. During the year ended 31 March, 2005, the Company sold 19,82,500 equity shares and according to the management, DDCL ceased to be an associate company thereafter. The Company does not have the relevant information to account for under equity method in accordance with the Accounting Standard 23 – Accounting for investments in Associates in Consolidated Financial Statements and hence the investment in DDCL has been accounted for under Accounting Standard 13 - Accounting for Investments and disclosed under the head Investments.

Since the Company has sold its entire investment in DDCL during the years ended March 31, 2006, the management believes that there would not be any material impact on the reserves and surplus and net worth of the Company in the Consolidated Restated Summary Statements as at 31 March, 2006 and years ending thereafter.

The reserves and surplus of DDCL as at June 30, 2004 and 2003 based on the audited financial statement are Rs 746.90 lakhs and Rs 746.90 lakhs respectively and the debit balance in profit and loss account of DDCL as at June 30, 2004 and 2003 are Rs 459.65 lakhs and Rs 388.66 lakhs respectively.

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17. We are yet to file our Limited Review Report required under Listing Agreement for the quarter ended June 30, 2008, and hence arecurrently not in compliance of Clause 41 of the Listing Agreement.

Under Clause 41 of the Listing Agreement, we are required to file a limited review report on quarterly financials within two months of the end of the June quarter, which we are yet to complete for the quarter ended June 30, 2008. We have intimated the OTCEI within the prescribed period of 30 days of our inability to furnish the same . Our financial reporting systems are being upgraded to ERP, and during the implementation period, which started sometime in June-July 2008, we experienced software errors and shortcomings that required customization and rectification of the ERP software. The financial data of our Company is extracted from this ERP system, and due to the abovementioned factors, it was not possible to compile the financial data necessary for the completion of the limited review by the Auditors in a timely manner for the quarter ended June 30, 2008. The upgradation of our financial reporting systems to ERP is now at an advanced stage, and our Company would be in a position to complete the aforesaid review once the aforesaid implementation is completed.

18. Our Company is involved in certain legal proceedings which could render us liable to liabilities/penalties and have a material adverse effect on our business and profitability.

Our Company is involved in certain legal proceedings and claims in relation to certain civil, criminal and trademark matters incidental to our business and operations. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. Any adverse decision may render us liable to liabilities/penalties and may adversely affect our business and results of operations. A classification of these legal and other proceedings instituted by/against our Company is given in the following table:

Rs. in Lacs Type of Legal Proceedings Total number of pending cases Financial Implications Securities 1 2.50* Criminal 2 Not quantifiable Civil 4 Approximately Rs. 800 lacs Trademark 1 Not quantifiable

* As per application submitted, yet to be accepted by SEBI, and final amount may thus differ substantially.

For further details regarding the aforesaid litigations, please refer chapter titled “Outstanding Litigations and Material Developments” beginning on page 131 of the Draft Letter of Offer.

19. Some of the land purchased by us is not registered in our name

Certain properties aggregating to 101 cents, purchased at Hangerkatta, have not been registered in our name, and is currently in the name of an employee of our Company on account of pending application for conversion from agricultural to non-agricultural land. If we are unable to get the necessary registrations, our title to the said properties shall be defective.

20. Non-completion of the mutation records for certain freehold lands .

Our Company has acquired various freehold lands in Udipi district, including at Hangercutta and Babuthotta for the purpose of setting up our Malpe facility. In respect of some these freehold lands, we are yet to obtain the mutation of the title deeds. Though we have entered into registered sale deeds with the respective vendors of the land, pending the mutation of title deeds in the name of our Company will not be reflected in the record of rights maintained with the relevant sub-registrar.

For further details, please refer chapter titled “Our Business” beginning on page 74 of the Draft Letter of Offer.

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21. We may not be able to execute our plan to complete the construction of the Malpe facility as scheduled.

A key part of our growth strategy is dependent upon the timely completion of the Malpe facility. However, we cannot assure you that the setting up of the shipyard will be completed as scheduled, or that on completion, it will operate as efficiently as planned. The completion and full operationality of the shipyard, will be subject to engineering, construction and other commercial risks, including:

• the availability of financing on acceptable terms; • reliance on third parties to construct and complete, among other things, building and civil

construction; • delivery of plant and machinery • construction and development delays or defects; • engineering design and technological changes; • mobilizing the required resources, including housing and training a large workforce; • failure to obtain necessary governmental and other approvals; • changes in market conditions; • disputes with and defaults by contractors and subcontractors; • environmental, health and safety issues, including site accidents; • infrastructure and transport delays; • actions of our competitors; • accidents, natural disasters and weather-related delays; • time and cost overruns and unanticipated expenses; and • regulatory changes.

We have commenced partial operation and construction of vessels at the Malpe facility which is simultaneous with the on-going construction and setting up of the shipyard. Accordingly, any delay in the construction of the facility will delay the manufacturing and delivery of vessels to customers. As of the date of the Draft Letter of Offer, we have aggregate orders of approximately Rs.1,75,000 lac for the construction of 27 vessels for delivery. We may not be able to meet the delivery schedules if the facility is not completed as planned. Any delay in the completion and delivery of vessels under our shipbuilding contracts may result in our being liable to pay our customers damages, liquidated or otherwise. Delays beyond the time stipulated in the contracts may also result in termination of the same.

22. Cyclical trends in the shipbuilding business and related industries may adversely affect our businesses, profitability and financial condition.

Our primary focus currently is building of OSVs. The demand for OSVs will depend on many factors, including the financial condition of companies in the shipping, shipbuilding industry, offshore oil and gas and petrochemical industries, including companies that purchase marine vessels. Companies in these industries are subject to significant fluctuations in their revenue and profitability due to a variety of factors, including general economic conditions and factors affecting each of these industries individually. Due to the cyclical nature of these industries, we may also get excess orders which we may not be able to service when there is a boom and may have fewer orders and excess production capacity when there is a downturn in a particular industry.

We expect that freight rates will affect our shipbuilding business. The demand for vessels based on freight rates is cyclical in nature and can be difficult to predict. When freight rates are on the rise, ship owners generally place orders for new vessels. This generates additional capacity and eventually results in over-capacity. This over-capacity then exerts a downward pressure on freight rates which in turn reduces demand for new vessels and causes fleets to shrink. The cycle begins again when shrinking fleets create a capacity shortage, which once again leads to an increase in freight rates and results in an increase in orders for new vessels. We may be unable to accurately predict these cycles and this may

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have an adverse effect on our business. For example, we may incur substantial costs to increase our shipbuilding capacity in anticipation of a rise in freight rates and resultant demand for new vessels and, if demand for new vessels does not increase or if we are unable to secure sufficient orders for our enhanced shipbuilding capacity, we will be subject to significant operational costs and our revenues could be inadequate to meet our operational needs. Conversely, if we do not expand our capacity sufficiently to meet increased demand, we may be unable to take advantage of market growth. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Demand and price of oil generally has a significant effect on OSV segment. An increase in oil prices often leads to considerable growth in deepwater and sub-sea activity and demand for OSVs as oil companies increase their oil exploration and production activities. Conversely, when oil and gas prices fall, upstream oil and gas sector companies reduce their offshore exploration and production investments, and also often results in a decrease in demand for vessels. We expect to manufacture vessels that are used in the oil exploration industry. Declining oil or gas prices or declining demand for oil or gas can depress offshore exploration, development and production activities and result in decline in the demand for the products of OSVs which may have a material adverse effect on our business, prospects, financial condition and results of operations.

23. Changes in the availability and price of our raw materials, engines and equipment may adversely affect our business and results of operations.

Steel, alongwith, engines and equipment, currently accounts for a significant portion of the total cost of raw materials expected to be utilized by us in the construction of vessels. We expect our consumption of steel to increase as we expand our facilities and manufacture large vessels in the future. The price of steel generally varies with global commodity prices and can increase or fluctuate rapidly and significantly due to a number of factors which are beyond our control. As we expect most of our contracts to be fixed price contracts, we could be exposed to changes in the price of steel during the construction period after the fixed price has been agreed. In addition, any decrease in the availability of raw materials which we require, including steel and other metals, or increase in the price at which these raw materials are available to us, may significantly and adversely affect our business, financial condition and results of our operations if we are unable to proportionately increase the sale price of our products. Similarly, increase in the costs of engines and equipment may also adversely affect our business, financial condition and results of our operations if we are unable to proportionately increase the sale price of our products.

24. We face growing competition that may adversely affect our competitive position and our profitability.

We operate in a highly competitive environment, and face competition from private sector and public sector shipyards in India and also overseas. Some of our competitors may enjoy many of the same advantages that we do and may even have lower cost structures, greater financial strength and technical know-how, or greater goodwill/brand recognition amongst customers, thus enabling them to compete vigorously on price and quality. Although we believe that customers consider, among other things, the availability and technical capabilities of equipment and personnel, efficiency, condition of equipment, safety records and reputation, we believe timely delivery and price are currently the primary factors in determining which qualified shipbuilder is awarded a contract. We may face competition from shipbuilders that manufacture vessels for prices which are lower than ours. Additionally, in most of our export markets, global producers are significantly larger than us and have significantly stronger market positions, larger production capacities and greater financial resources than we do which may adversely affect our business if we are unable to compete against these competitors.

25. The shipyard at Malpe has been leased from the Ports And Inland Water Transport, Government of Karnataka.

The land for the Shipyard at Malpe has been obtained by us by way of a 30 year license on BOT basis from the Ports And Inland Water Transport, Karwar, Government of Karnataka. After the expiry of the

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aforesaid license period, the land is liable to the returned to the Government. Further, the license permission has several restrictive and other covenants, and if we do not comply with the same, we may face adverse consequences including re-claiming of land by the Government. For details, please refer refer chapter titled ”Our Business” beginning on page 73 of the Draft Letter of Offer.

26. Our Registered office is on lease and the lease deed is not registered

Our registered office is not owned by us, and we currently occupy the same pursuant to a lease. The lease currently expires on November 30, 2016 and we cannot assure that the same would renewed, or would be renewed on terms and conditions commercially acceptable to us. Further, this lease deed is not registered, and consequence of non-registration is that the document is not admissible in legal proceedings and parties to that agreement may not be able to legally enforce the same.

27. An increase in manpower costs may reduce our competitive advantage and result in lower profit margins

Employee compensation in India has been one of our competitive strengths. Historically, employee compensation in India has been comparatively lower than that prevailing in the United States and Western Europe and in Asian countries such as Korea, Japan and Singapore for comparably skilled professionals. However, compensation increases in India may reduce some of this competitive advantage which may negatively affect our profit margins. Additionally, we expect to face significant competition from China, which has labor costs similar to or lower than India. We may need to continue to increase the levels of our employee compensation to retain key employees and manage attrition. Such increase may have an adverse effect on our business, profitability and financial condition.

28. Our results of operations could be adversely affected by strikes, work stoppages or increased wage demands, either by contract laborers employed by our third party contractors, or by our employees.

As on September 15, 2008 we had a total manpower strength of 2587, out of which 348 employees are on our pay-rolls and 2239 have been hired on contract basis. We typically meet the labor requirement for construction of vessels, as well as for construction of our Malpe Facility, through contractors. The number of contract labor varies from time to time based on the nature and extent of work contracted. Any upward revision of wages payable to contract labor, including on account of revision of legally determined minimum wages or upward revisions otherwise in wages, or the unavailability of the required number of contract laborers, may adversely affect our delivery schedules and/or may result in increase in costs. There can be also no assurance that disruptions such as strikes and other work stoppages will not occur, which may adversely affect our business and results of operations. Further, we may also be directly affected by such upward revisions in wages, or by strikes and other work stoppages should we directly employ such labor in the future.

29. The success of our business is substantially dependent on our key employees and our inability to retain them could adversely affect our business.

Our ability to sustain our growth depends, in large part, on our ability to attract, train, motivate and retain skilled personnel. Our ability to hire and retain additional qualified personnel will impact our ability to continue to expand our business. We believe that there is a significant demand for personnel who possess the skills needed in our business. An increase in the rate of attrition of our employees would adversely affect our business. Our attrition rate has been approximately 54% and 28% for FY 2007 and FY 2008 respectively. We cannot assure you that we will be successful in recruiting and retaining a sufficient number or personnel with the requisite skills to replace those personnel who leave. This may adversely affect our business and results of operations. Further we cannot assure you that we will be able to re-deploy and re-train our personnel to keep pace with continuing changes in our business.

30. Taxes and other levies imposed by the Government of India or State Governments, as well as other

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financial policies and regulations, may have a material adverse effect on our business, financial condition and results of operations.

Taxes and other levies imposed by the central or state governments in India that affect our industry include:

• custom duties on imports of raw materials and components; • excise duty on certain raw materials and components; • central and state sales tax value added tax and other levies; and • other new or special taxes and surcharges introduced on a permanent or temporary basis from time to

time.

These taxes and levies affect the cost of building and prices of our vessels, and therefore demand for our vessels. An increase in any of these taxes or levies, or the imposition of new taxes or levies in the future, may have a material adverse effect on our business, profitability and financial condition.

31. Interruptions in our shipbuilding facilities may adversely affect our financial condition and results of operations.

Our shipbuilding processes depend upon certain critical shipyard facilities, such as slipway, berths and cranes that may be subject to unexpected interruptions, including from natural and man-made disasters. Our shipyard operations may be adversely affected by events such as the breakdown of equipment, difficulties or delays in obtaining spare parts and equipment, labor disputes, raw material shortages, fire, natural disasters, civil disorders, industrial accidents and the need to comply with government directives concerning matters such as hygiene, safety and environmental protection. Any major disruption or disaster at our production facilities could have a material adverse effect on our results of operations and financial condition.

32. Shipbuilding exposes us to potential liabilities that may not be covered by insurance.

Our Company’s and its customers’ businesses are subject to inherent risks, such as equipment defects, malfunctions and failures, equipment misuse and natural disasters that can result in uncontrollable flows of gas or well fluids, fires and explosions. Our Company’s activities also involve the fabrication and refurbishment of large steel structures, the operation of cranes and other heavy machinery and other operating hazards. These risks could expose us to substantial liability for personal injury, wrongful death, product liability, property damage, pollution and other environmental damages. Our insurance may not be adequate to cover these liabilities. Further, there is no assurance that insurance will be generally available in the future or, if available, that premiums will be commercially justifiable. If our Company incurs substantial liability and the damages are not covered by insurance or exceed policy limits, or if the Company is not able to obtain liability insurance, our Company’s business, results of operations and financial condition could be materially adversely affected.

33. We are subject to risks arising from currency exchange rate fluctuations, which could adversely affect our business, financial condition and results of operations.

Changes in currency exchange rates may affect our results of operations. A substantial portion of our revenues is earned in U.S. Dollars and a significant part of our raw material is imported in U.S. dollars and/ or Euros. Hence, any adverse movement of the Rupee versus these currencies may result in lower margins, which could adversely affect our profitability.

Some of our current capital expenditure, including imported equipment and machinery, are denominated in currencies other than Rupee. In addition, we may also borrow in U.S. dollars or other foreign currencies. Therefore, a decline in the value of the Rupee against U.S. dollar or other foreign currencies would increase the Rupee cost of servicing and repaying those borrowings and their value in our balance

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sheet. The exchange rate between the Rupee and the U.S. dollar has fluctuated substantially in recent years and may continue to fluctuate significantly in the future.

Although we take hedges for foreign currency risk, there can be no assurance that these hedges will successfully protect us from losses due to fluctuations in currency exchange rates. Further, the MTM(Mark-to-market) impact of these hedges may have an adverse impact on our profitability.

34. We are subject to restrictive covenants under various debt facilities provided to us by our lenders. We are yet to receive the no-objection from all of our lenders for this Issue, for which we have applied for

We have availed of loans and financial facilities from various banks. In respect of various agreements entered into by our Company with our lenders and sanction letters issued by our lenders to us, we are bound by certain restrictive covenants including those regarding capital structure. For details of these restrictive covenants, please refer chapter titled Capital Structure of the Draft Letter of Offer. We are yet to receive the no-objection from all of lenders for this Issue, for which we have applied. For details, please refer chapter titled Capital Structure of the Draft Letter of Offer.

35. We have not applied applied for registration of our logo as a trademark.

As on the date of the Draft Letter of Offer, we have not applied for registration of our logo, as appearing on the cover page of the Draft Letter of Offer, as a trademark. Unregistered trademarks have lesser legal protection than registered trademarks, and we cannot assure that we would be able to enforce our aforesaid trademark in legal proceedings.

36. We have not applied for or obtained intellectual property registration for the designs developed by us in the shipbuilding process

Our Company has an in-house design team and has developed expertise in respect of design for tugs and dredgers. In respect of OSVs, the basic designs are bought from certain global design companies and our Company prepares the detailed working designs. We do not obtain intellectual property registration or protection for our designs, and are subject to the risk of theft/misappropriation or other unauthorised use , which may affect our business and our position in the shipbuilding industry.

37. Our management will have significant flexibility in applying the proceeds of the Issue. The fund requirement and deployment mentioned in the Objects of the Issue have not been appraised by any bank or financial institution.

Our financing requirements and the deployment of the net proceeds of the Issue are based on management estimates and have not been appraised by any bank or financial institution. We may have to revise our management estimates from time to time and consequently the expected deployment of the net proceeds of the Issue may also change. Accordingly, investors in this Issue will need to rely upon the judgment of our management with respect to the use of proceeds.

38. Our Promoter, IAF- VI has certain rights, including affirmative rights under shareholders agreement, that will continue after the listing of our CCPS offered in the Issue.

Pursuant to a subscription and shareholders’ agreement dated February 27, 2007 among our Company, our original promoters, and our current Promoter IAF- VI, our Promoter has certain rights including the right of first refusal, tag-along rights, anti-dilution rights and rights in relation to further purchase of Equity Shares/ other securities convertible or exchangeable for Equity Shares in our Company in the Company. In addition, No decision on any of the fundamental issues shall be taken at any meeting of the shareholders without the consent of IAF - VI. Such fundamental issues include amongst others:

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• amendment of the company’s articles of association or memorandum of association; • changes in the nature of its business, • approval or amendment to its annual business plan, any profit sharing schemes or any budgets; • approval of the aggregate remuneration of the directors, CEO, COO & CFO or other key personnel; • appointment or changes in senior management, i.e. CEO, COO and CFO; etc

For further details of this agreement, see the section “History and Certain Corporate Matters” beginning on page 94 of the Draft Letter of Offer.

39. We would continue to be controlled by our Promoters after the Issue, by virtue of their aggregate shareholding, as a result of which the remaining shareholders would not be able to affect the outcome of most of the items requiring shareholder voting.

Our Promoters and Promoter Group collectively own 57.93 % of our issued equity share capital as on date of the Draft Letter of Offer. Further, our Promoters have declared their intention to subscribe to the unsubscribed portion in this Issue, if any, as disclosed in accordance with the undertaking contained in the chapter titled “Capital Structure” beginning on page 25 of the Draft Letter of Offer. Our Promoters therefore have the ability to exercise a controlling influence over our business and may cause to take actions that may conflict with the interests of some of our shareholders.

40. CCPS holders may bear the risk of fluctuation of price in the Equity Shares

Stock markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of the underlying Equity Shares. While there has been infrequent trading in our Company’s Equity Shares on OTCEI in the past, there may be significant volatility in the market price of Equity Shares. The market price of the CCPS is expected to be affected by fluctuations in the market price of the Equity Shares and it is impossible to predict whether the price of the Equity Shares will rise or fall. Any decline in the price of the Equity Shares may have an adverse effect on the market price of the CCPS.

41. Our ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures.

While we declared dividends in fiscal year 2006, we may not pay dividends in the future. Such payments will depend upon a number of factors, including the results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions, applicable Indian legal restrictions and other factors considered relevant by our Board of Directors.

42. Any future equity offerings by us or sales by certain significant shareholders could lead to dilution of your shareholding or adversely affect the market price of our Equity Shares.

If we do not have sufficient internal resources to fund our investment requirements or working capital needs in the future, we may need to raise funds through equity financing. As a purchaser of CCPS in the Issue, you could experience dilution to your eventual equity shareholding in the event that we conduct future equity offerings. Such dilution can adversely affect the market price of our Equity Shares and could impact our ability to raise capital through an offering of our equity securities.

While there has been infrequent trading in our Company’s Equity Shares on OTCEI in the past, the market price of our Equity Shares/CCPS could decline if some of our existing shareholders sell a substantial number of Equity Shares/CCPS subsequent to listing of the CCPS or the perception that such sales or distributions could occur. This, in turn, could make it difficult for you to sell Equity Shares/CCPS in the future at a time and at a price that you deem appropriate.

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External Risk Factors

43. Political instability or changes in the Government could adversely affect economic conditions in India generally and our business in particular.

The Indian Government has traditionally exercised and continues to exercise a significant influence over many aspects of the economy. Our business, and the market price and liquidity of our Equity Shares, may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. Since 1991, successive Indian Governments have pursued policies of economic liberalization and financial sector reforms. The current coalition-led central government, which came to power in May 2004, has implemented policies and taken initiatives that support the economic liberalization policies that have been pursued by previous governments.

The central government has at various times announced its general intention to continue India’s current economic and financial liberalization and deregulation policies. However, since the present government is a multi-party coalition depending upon the support of other parties, there can be no assurance that it will be able to generate sufficient cross-party support to implement any liberalization policies adopted by the previous central government or that such policies will continue in the future. Government corruption and protests against privatizations, which have occurred in the past, could slow the pace of liberalization and deregulation. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. A significant change in India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India generally and adversely affect our business, prospects, financial condition and results of operations.

44. Terrorist attacks and other acts of violence or war involving India, the United States, and other countries could adversely affect the financial markets, result in loss of client confidence, and adversely affect our business, financial condition and results of operations.

Terrorist attacks, such as the bomb blasts that occurred in Delhi on September 13, 2008 , the World Trade Center attack in the United States on September 11, 2001 and the bomb blast in London on July 7, 2005, as well as other acts of violence or war, including those involving India, the United States or other countries, may adversely affect Indian and worldwide financial markets. These acts may also result in a loss of business confidence. More generally, terrorist attacks involving India could adversely affect client confidence in India and increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.

45. Natural calamities could have a negative impact on the Indian economy and cause our business to suffer.

India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past few years. The extent and severity of these natural disasters determines their impact on the Indian economy. For example, on account of the Tsunami in 2004 had adversey affected our luanching facility at Royapuram in Tamil Nadu.

46. If communal disturbances or riots erupt in India, or if regional hostilities increase, this would adversely affect the Indian economy, the health of which our business depends on.

The Asian region, including India, has from time to time experienced instances of civil unrest and hostilities among neighbouring countries. Hostilities and tensions may occur in the future and on a wider scale. Also, since 2003, there have been military hostilities and continuing civil unrest and instability in Iraq and Afghanistan. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy, create a greater perception that investments in

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Indian companies involve a higher degree of risk and could have a material adverse effect on the market for securities of Indian companies, including our Equity Shares.

47. Outbreak of contagious diseases in India may have a negative impact on the Indian Shipbuilding industry.

Recently, there have been threats of epidemics in the Asia Pacific region, including India and in other parts of the world. If any of our people are suspected of having contracted any of these infectious diseases, we may be required to quarantine such people or the affected areas of our facilities and temporarily suspend part or all of our operations. Further, the fear of contracting such contagious diseases could prevent our clients from traveling to India or to other parts of Asia Pacific and could restrict our people from traveling outside India, which would have a material adverse effect on our business, prospects, financial condition and results of operations and could cause the price of our Equity Shares to decline.

48. A slowdown in economic growth in India could cause our business to suffer.

Our performance and growth is dependent on the health of the Indian economy. India’s economy could be adversely affected by a general rise in interest rates, adverse weather conditions, commodity and energy prices or various other factors. Any slowdown in the Indian economy may adversely affect our business and financial performance and the trading price of our Equity Shares/ CCPS.

Notes to Risk Factors:

Issue of [ ] CCPS of Rs. 10 each at a premium of Rs. [ ] per CCPS aggregating up to Rs. 7,000.00 Lacs to the equity shareholders on rights basis in the ratio of [ ] CCPS for every [ ] Equity Shares held on the Record Date i.e. [ ]. For more details, refer to section titled “Terms of the Issue” beginning on page 156 of the Draft Letter of Offer.

Average cost of acquisition per share for the Promoters is as follows: IAF – VI: Rs. 233.94 per Equity Share Mr. P.K. Balasubramanian : Not available, since his capital build-up since inception is not available

Net worth of the Company on a consolidated basis as on March 31, 2008 was Rs. 13,740.56 Lacs. The net asset value per Equity Share on a consolidated basis as on March 31, 2008 was Rs. 176.66 per Equity Share.

Investors are advised to refer to the section titled “Basis of Issue Price” beginning on page 53 of the Draft Letter of Offer.

The aggregate value of related party `March 31, 2008 was Rs. 107.59 Lacs. For further details about related party transactions, please refer to section titled “Related Party Transactions” beginning on page 120 of the Draft Letter of Offer.

For interest of our Promoter/Directors/Key Managerial Personnel and other ventures promoted by Promoters, please refer to sections/chapters titled “Risk Factors”, “Our Promoters”, “Our Promoter Group”, “Our Management” and “Financial Statements” beginning on pages x, 115, 117, 101 and FS - 1 of the Draft Letter of Offer.

For details of all the loans and advances made to any persons or companies in whom our Directors are interested, please refer to “Financial Statements” on page FS - 1.

Please refer to the section titled “Terms of the Issue” on page 156 of the Draft Letter of Offer for details on basis of allotment.

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We and the Lead Manager are obliged to keep the Draft Letter of Offer updated and inform the public of any material change/development till the listing and commencement of trading of the Compulsorily Convertible Preference Shares to be issued pursuant to the Draft Letter of Offer.

You may contact the Compliance Officer or the Lead Manager for any complaints pertaining to the Issue including any clarification or information relating to the Issue. Lead Manager is obliged to provide the same to you.

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SUMMARY

This is only a summary and does not contain all the information that you should consider before investing in our CCPS. You should read the entire Draft Letter of Offer, including the information contained in the sections titled ‘Risk Factors’ and ‘Financial Information’ beginning on page nos. x and 1 of the Draft Letter of Offer before deciding to invest in our CCPS.

INDUSTRY OVERVIEW

Shipbuilding industry is driven by the fortunes of international shipping in the prevailing and the anticipated behaviour of the freight rates. The freight markets in turn, are influenced, inter alia, by

• the growth of global economy • sea – borne trade volumes, • existing shipping capacity, • age profile of current fleet etc.

The fortunes of shipbuilding industry are hinged firmly on the happenings in the shipping industry. The changing volumes and patterns of the international sea-borne trade in turn, underpin the dynamics of global shipping. Historical evidence suggests that increase in international tonnage closely follows the global economic growth rate. This observation continues to be a simple but useful rule-of-thumb even in today’s complex world.

Major factors influencing the placement of orders for new construction:

- Ageing world fleet - Rise in operating costs - Replacement enforced by regulation (for example, the ongoing phase-out of single-hull tankers) - Need for bigger ships to take advantage of economies of scale.

The current shipbuilding market, which offers an unprecedented opportunity for shipyards, continues to grow, with no sign yet of leveling off. The biggest beneficiaries of the current boom have been the Asian yards and their order books are overflowing. Ship owners are frantically scouting around for shipbuilding slots are willing to expose themselves to a degree of risk by placing orders even with new,untried yards. .

BUSINESS OVERVIEW

Overview

We are a shipbuilding company, primarily engaged in sourcing designs from designs, detailing designs for execution and construction of offshore support vessels (“OSV”), dredgers, tugs and fabrication of pressure vessels.

Our Company was established in the year 1984 with an initial focus on building of dredgers for the first decade of our operations, including launches, de-weeding dredgers, self-propelled barges, LPG carriers, dredge tender boats and floating cranes. Subsequently, in the year 1994, our Company expanded its product range to include tugs of SRP and Tractor versions. In the year 2005, our Company forayed into construction of OSVs, and has delivered seven (7) OSVs till date. Further, in 2006, we also began fabrication of pressure vessels for installation in offshore vessels and have received DNV certification for the same.

Since our commencement of ship building operations in the year 1984, we have built and delivered 114 vessels and have catered to the requirements of a diverse domestic and international clientele including offshore service providers, various ports, shipping companies, Government establishments (defence and

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irrigation), lake authorities and dredging service providers for the public as well as the private sector. During the last three years, our consolidated revenues and PAT have grown at a CAGR of 124.11% and 394.23% respectively. As of September 15, 2008, we have an order book position of twenty seven (27) vessels under design/ construction.

We were originally promoted by a team of six marine professionals i.e. Mr. P.K Balasubramanian, Late Captain B. N. Rao, Mr. Eapen Chacko, Mr. A. K. Singh, Mr. K. A. Thomas and Mr. Biren Mukherjee. In fiscal 2007, IAF- VI, acquired an equity stake of 25,66,800 Equity Shares in our Company, representing an approximate interest of 33%, and they subsequently acquired a 20% stake pursuant to an open offer made in terms of the SEBI Takeover Regulations. IAF-VI presently holds 53% of the paid up equity share capital of our Company, and is our single largest shareholder. Mr. P.K Balasubramanian and IAF-VI are our current Promoters. For further details regarding changes in our Promoters since our incorporation and acquisition of majority stake by IAF-VI into our Company, please refer to section titled “History And Other Corporate Information” beginning on page 94 of the Draft Letter of Offer.

We currently operate out of three shipbuilding facilities, one located at Chengalpet, at a distance of 70 km from Chennai, and the others at Malpe, near Udupi, South Karnataka, and at Cochin. Our Shipyard at Malpe has been granted Export Oriented Unit (“EOU”) status by the Government of India for a period of 5 years from May 21, 2008. We are operating under a MoU with Cochin Shipyard Limited, under which we can build tugs and OSVs at Cochin Shipyard.

On a consolidated basis, our income from operations in fiscal 2008 was Rs. 43,221.56 lacs compared to Rs. 14,705.34 lacs in the corresponding period of the previous fiscal, representing a growth of 193.92%.

Our Competitive Strengths

We believe that we are well positioned to sustain and strengthen our position in the markets in which we compete as well as to exploit significant growth opportunities that exist. We believe that the following are our principal strengths:

Experienced and professional management team

Our company is managed by an experienced and professional management team. We have over 200 engineers and 50 professionals from various branches of science and technologies. As on September 15, 2008 we had 348 employees are on permanent rolls of our Company. Our Chairman, Mr. P.K Balasubramanian has more than 35 years of experience in shipbuilding and ship repair. He is also a member of the Technical Committee of the Indian Registrar of Shipping and Lloyds Registrar of Shipping, the body responsible for formulating classification rules for design and building of various types of vessels. The CEO & Managing Director of our Company, Mr. Ajay Dhagat, has over 40 years of experience with companies such as GEC Alstom (formerly English Electric), Areva and BSES. He has expertise in the repositioning of businesses to meet global challenges and competition besides chalking out turnaround strategies for growth. Mr. Jayakumar, Director Technical, has over 16 years of experience in shipbuilding and heads the technical department of Tebma.

Competitive cost structure

As our operations will be based in India, we believe that our labour and overhead costs will generally be lower than some of our international competitors having manufacturing operations in developed regions. Further, our shipbuilding complex at Malpe provides us opportunities for a just-in-time manufacturing thereby generating cost advantages for us.

Advanced shipbuilding technology

We construct hi-tech OSVs with advanced design and production systems. Our value addition in Offshore Supply Vessels is significantly higher in terms of technology as against vessels in other categories. This enables us to create a niche for ourselves in the market.

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Focused on a niche market

As a company, we intend to remain focused on the niche market for OSVs in the near future. We believe that the demand for this category of vessels is subject to lesser cyclicality as compared to the demand for other categories of vessels. Demand for OSVs is directly linked to the exploration activities in the oil sector. Demand pull imperatives for OSVs are linked to offshore expenditure, rising global E&P budget, global subsea market capex and spend on deep/ shallow water drilling. We believe that the exploration and production activities in the oil sector is poised for a strong growth in the medium to long term which will consequently have a favourable impact on the demand for OSVs during the same period.

Our MOU with Cochin Shipyards Limited

Our Company has entered into an MOU with Cochin Shipyards Limited, a large public sector shipbuilding company in India, whereby, we manufacture OSVs using their yard facilities and limited material inputs. We have pre-determined revenue and cost sharing arrangement for the same. We believe that this model allows a significant return on our invested capital. The MoU is valid till November 21, 2011.

Integrated Facility at Malpe

The shipbuilding complex at Malpe, post-completion, will have a large covered shed enabling all-weather shipbuilding activities. Our main shipbuilding yard in Malpe will be supported by a pre-fabrication facility which will house all necessary capabilities for structural fabrication and hull work.

Our Strategy

Focus on OSV segment

We believe that strong fundamentals exist for the oil and gas industry. The increasing demand for sub-sea and deep sea drilling due to rising oil exploration activities and E&P activities is, we believe, likely to further strengthen the demand for OSVs. We believe that there are strong advantages of remaining focused on this segment due to higher margins as well as relatively lesser cyclicality in the OSV market.

Move higher in the value chain

A majority of our current order book comprises of OSVs which cater to shallow water drilling operations. We believe that the market for deep sea drilling has strong growth potential and remains attractive. In the medium to long term, we would like to move up the value chain from our current range of OSVs to more technically advanced OSVs involved in deep sea drilling. While moving up in the value chain, we will also protect our share for dredgers and tugs as well.

Further greenfield expansion plans:

We are witnessing a strong increase in enquiries for OSVs and hence believe that, after completion of our shipbuilding facility at Malpe, we can expand further by way of establishing additional shipbuilding facilities to meet further demand, and this may have flexibility to construct vessels for other segments as well.

Extending the business model of utilizing existing shipyard manufacturing facilities

The business model involving utilizing the shipbuilding facilities at other shipyards has helped increase our revenues and improve our overall returns on capital invested. In addition to our current MOU with Cochin Shipyards Limited, we intend to further explore possibilities of similar arrangements with other players in the future.

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THE ISSUE

CCPS proposed to be issued by our Company [ ]* CCPS in the Issue

Rights Entitlement [ ]* CCPS for every [ ]* Equity Shares held on the Record Date

Record Date [ ]*

Issue Price per CCPS Rs. [ ]*

Conversion Ratio [ ]* Equity Shares to be issued on conversion of every CCPS

Equity Shares outstanding prior to the Issue 77,78,180 Equity Shares

Equity Shares outstanding before conversion Conversion of CCPS

77,78,180 Equity Shares

Equity Shares outstanding after Conversion of CCPS

[ ]*

Dividend 0% dividend Conversion Period The Conversion Period, in relation to a CCPS, shall be the

earlier of the following:

(i) Exercise of the CCPS Holder Put Option by the CCPS holder;

(ii) Exercise of the Issuer Call Option by our Company; and

(iii) Expiry of five years from the date of Allotment, which shall be the maximum tenure of the CCPS, and beyond which the tenure of the CCPS shall not stretch.

Terms of the Issue For more information, refer to Section titled “Terms of The Issue” beginning on page 156 of the Draft Letter of Offer.

* On conversion of all Cumulative Compulsorily Convertible Preference Shares under this Issue. * - Will be updated at the time of filing Letter of Offer

Terms of Payment

Entire Issue Price of Rs. [ ] per CCPS would be payable on Application.

Redemption:

The CCPS are compulsorily convertible into Equity Shares at the Conversion Ratio, in the manner as mentioned in the section titled “Terms of the Issue” beginning on page 156 of the Draft Letter of Offer. Hence, there will be no redemption of the CCPS.

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SUMMARY STATEMENT OF FINANCIAL INFORMATION

You should read the following information together with the information contained in the Auditors’ report included in the section titled “Financial Statements” beginning on page no. FS - 1 of the Draft Letter of Offer.

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Unconsolidated Summary Statement of Assets and Liabilities, as Restated

As at March 31

2008 2007 2006 2005 2004

A Fixed Assets

Gross block 2,227.88 1,053.90 692.38 315.76 293.53 Less : Accumulated depreciation / amortization 742.31 455.80 277.72 197.94 190.87

Net block 1,485.57 598.10 414.66 117.82 102.66

Capital Work-in-progress 10,200.27 3,188.15 1,235.48 333.41 -

Sub Total 11,685.84 3,786.25 1,650.14 451.23 102.66

B Investments 32.82 131.85 161.85 42.99 168.49

C Deferred tax assets - - - - 4.88

D Current Assets, Loans and Advances

Inventories 3,597.35 130.38 348.21 16.96 30.96

Sundry debtors 1,474.78 778.61 630.07 135.56 218.96

Cash and bank balances 8,223.40 6,670.51 2,231.86 1,287.55 1,654.22

Other current assets 18,862.41 6,367.32 1,768.53 41.86 -

Loans and advances 8,246.58 730.27 283.88 376.55 558.96

Sub Total 40,404.52 14,677.09 5,262.55 1,858.48 2,463.10

E Total Assets (A+B+C+D) 52,123.18 18,595.19 7,074.54 2,352.70 2,739.13 Liabilities and Provisions

F Loan Funds

Secured loans 5,242.16 1,968.34 699.30 - -

Unsecured loans 21,011.39 3,343.24 - - -

Sub Total 26,253.55 5,311.58 699.30 - -

G Deferred tax liabilities, net 206.57 42.22 25.42 4.96 -

H Current Liabilities & Provisions

Current liabilities 11,289.35 5,017.13 5,523.36 2,095.69 2,242.58

Provisions 657.36 412.54 61.26 1.19 14.85

Sub Total 11,946.71 5,429.67 5,584.62 2,096.88 2,257.43

I Total Liabilities and Provisions (F+G+H) 38,406.83 10,783.47 6,309.34 2,101.84 2,257.43

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Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV.

J Net Worth (E-I) 13,716.35 7,811.72 765.20 250.86 481.70

Represented by -

Shareholders Funds

Share Capital 777.82 777.82 521.14 521.14 521.14

Reserves & Surplus -

Securities Premium 5,793.04 5,793.04 134.43 134.43 134.43

General Reserve 228.33 228.33 228.33 228.33 228.33

Profit and Loss Account 6,917.16 1,012.53 (118.70) (633.04) (402.20)

Net Worth 13,716.35 7,811.72 765.20 250.86 481.70

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Unconsolidated Summary Statement of Profits and Losses, as Restated

For the year ended March 31

2008 2007 2006 2005 2004

A Income

Income from operations 43,897.41 13,747.62 8,763.72 4,266.67 2,763.35

Other income 469.57 564.07 165.92 164.17 57.80

Total Income 44,366.98 14,311.69 8,929.64 4,430.84 2,821.15

B Expenditure Consumption of raw material and components for shipbuilding projects

28,730.49 10,178.23 6,720.45 3,375.68 1,441.41

Other expenses 7,064.89 2,925.68 1,429.18 736.04 1,246.00

Depreciation 340.47 103.89 53.11 21.39 20.63

Finance charges 1,339.55 494.67 201.84 100.64 76.61

Total Expenditure 37,475.40 13,702.47 8,404.58 4,233.75 2,784.65

C Profit before taxes (A-B) 6,891.58 609.22 525.06 197.09 36.50

D Taxation

Current tax 865.24 170.00 50.78 15.73 2.74

MAT credit entitlement (392.13) - - - -

Fringe benefit tax 9.01 6.70 3.76 - -

Deferred tax 164.35 9.81 20.46 9.84 12.85

Provision for taxation 646.47 186.51 75.00 25.57 15.59

E Net Profit before adjustments (C-D) 6,245.11 422.71 450.06 171.52 20.91

FADJUSTMENTS (Refer Note 2 and 3 of Annexure IV)

Impact of changes in accounting policies and estimates: -

Revenues including subsidy income (675.85) 957.72 307.50 (426.80) (129.71)

Provision for contract losses - - 25.93 (25.93) -

Provision for contract expenses - 195.34 (195.34) - -

Provision for gratuity - 1.85 (0.66) 13.66 (2.55)

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Depreciation 53.94 (107.52) (30.52) - -

Other adjustments:

Prior period items - 61.69 23.51 20.98 (4.33)

Total Adjustments (621.91) 1,109.08 130.42 (418.09) (136.59)

Tax impact of adjustments 281.44 (400.57) (6.72) 15.73 2.74 Total of adjustments after tax impact (340.47) 708.51 123.70 (402.36) (133.85)

G Net Profit, as Restated (E-F) 5,904.64 1,131.22 573.76 (230.84) (112.94) Balance as at the beginning of the year 1,012.52 (118.70) (633.04) (402.20) (289.26)

Balance available for appropriation, as Restated 6,917.16 1,012.52 (59.28) (633.04) (402.20)

Appropriations

Dividend - - 52.11 - -

Dividend distribution tax - - 7.31 - - Balance carried forward, as Restated 6,917.16 1,012.52 (118.70) (633.04) (402.20)

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV

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Unconsolidated Statement of Cash Flows, as Restated


2008 2007 2006 2005 2004

A Cash Flow from Operating Activities

Net Profit / (Loss) before taxes 6,269.67 1,718.31 655.48 (221.00) (100.09)

Adjustments for:

Depreciation / amortization 286.53 211.41 83.63 21.39 20.63 Provision for loans and advances 38.46 - - - -

Loss / (Profit) on sale of fixed assets 0.05 (3.79) (10.69) (10.51)

Loss / (Profit) on sale of investments (1.55) - 0.86 (48.96) 8.41

Interest Income received (420.37) (143.62) (112.52) (44.84) (54.40)

Income from investments (0.18) (0.27) (0.10) (0.39) (0.18)

Interest and finance Charges 1,279.56 444.66 201.84 101.81 76.61 Effect of exchange rate change 1,440.17 40.16 (23.51) (20.98) 4.33

Operating Profit before working capital changes 8,892.34 2,266.86 794.99 (223.48) (44.69)

(Increase) / decrease in Inventories (3,466.97) 217.83 (331.25) 14.00 (21.73)

(Increase) / decrease in Sundry debtors (696.17) (130.38) (512.67) 83.40 233.21

(Increase) / decrease in Loans and advances and other current assets

(19,218.26) (5,030.75) (1,710.52) 142.63 (60.54)

Increase / (decrease) in Current liabilities & provisions

5,291.68 (593.68) 3,489.35 (138.47) 1,596.77

Cash generated from Operations (9,197.38) (3,270.12) 1,729.90 (121.92) 1,703.02

Taxes paid, net (488.92) (130.45) (4.10) (3.18) (29.15) Net Cash flows (used in) / from operating activities (9,686.30) (3,400.57) 1,725.80 (125.10) 1,673.87

B Cash Flow from Investing Activities

Purchase of fixed assets (8,186.20) (2,355.05) (1,307.81) (380.86) (12.35) Proceeds from sale of fixed assets 0.03 11.32 35.96 21.41 -

Proceeds from sale of investments 101.73 40.00 21.14 174.46 56.46

Purchase of investments (0.97) (10.00) (140.86) - -

Investment in subsidiary - - - - (20.53)

Interest income received 191.65 129.46 112.62 45.23 54.58

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Net Cash flows (used in) / from investing activities (7,893.76) (2,184.27) (1,278.95) (139.76) 78.16

C Cash Flow from Financing Activities

Proceeds from issue of new equity shares, net of issue expenses

- 5,915.29 - -

Proceeds from Long-term borrowings 3,741.15 1,269.04 699.30 - -

Repayment from Long-term borrowings (467.33) - - - -

Repayment of unsecured loans - - - - (139.81)

Proceeds from short-term borrowings, net 16,768.62 3,343.24 - - -

Dividend and dividend tax paid - (59.42) - - -

Bank interest and finance charges paid (909.49) (444.66) (201.84) (101.81) (76.61)

Net Cash flows (used in)/from financing activities 19,132.95 10,023.49 497.46 (101.81) (216.42)

Net Increase/(decrease) in cash and cash equivalents (A+B+C)

1,552.89 4,438.65 944.31 (366.67) 1,535.61

Cash and cash equivalents at the beginning of the year 6,670.51 2,231.86 1,287.55 1,654.22 118.61

Cash and cash equivalents at the end of the year 8,223.40 6,670.51 2,231.86 1,287.55 1,654.22

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV

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Consolidated Summary Statement of Assets and Liabilities, as Restated

As at March 31

2008 2007 2006 2005 2004

A Fixed Assets

Gross block 2,227.88 1,053.90 692.38 315.76 293.53 Less : Accumulated depreciation / amortization 742.31 455.80 277.72 197.94 190.87

Net block 1,485.57 598.10 414.66 117.82 102.66


Sub Total 11,685.84 3,786.25 1,650.14 451.23 102.66

B Investments 12.29 111.32 141.32 22.46 147.96


D Current Assets, Loans and Advances

Inventories 3,597.35 130.38 348.21 16.96 30.96

Sundry debtors 1,474.78 778.61 630.07 135.56 218.96


Other current assets 18,862.41 6,367.32 1,768.53 115.45 74.23


Sub Total 40,449.80 14,722.56 5,307.75 1,887.25 2,492.79

E Total Assets (A+B+C+D) 52,147.93 18,620.13 7,099.21 2,360.94 2,748.29 Liabilities and Provisions

F Loan Funds

Secured loans 5,242.16 1,968.34 699.30 - -

Unsecured loans 21,011.39 3,343.24 - - -

Sub Total 26,253.55 5,311.58 699.30 - -


H Current Liabilities & Provisions


Provisions 657.34 412.54 61.26 1.19 14.85

Sub Total 11,947.25 5,429.66 5,584.61 2,096.88 2,257.43

I Total Liabilities and Provisions (F+G+H) 38,407.37 10,783.46 6,309.33 2,101.84 2,257.43

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Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV.

J Net Worth (E-I) 13,740.56 7,836.67 789.88 259.10 490.86

Represented by -

Shareholders Funds

Share Capital 777.82 777.82 521.14 521.14 521.14



General Reserve 228.33 228.33 228.33 228.33 228.33


Net Worth 13,740.56 7,836.67 789.88 259.10 490.86

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Consolidated Summary Statement of Profits and Losses, as Restated


2008 2007 2006 2005 2004

A Income


Other income 469.57 564.34 183.21 164.91 66.68

Total Income 44,366.98 14,311.96 8,946.93 4,431.58 2,830.03

B Expenditure Consumption of raw material and components for shipbuilding projects

28,730.49 10,178.23 6,720.45 3,375.68 1,441.41

Other expenses 7,065.64 2,925.67 1,430.03 737.06 1,266.50

Depreciation 340.47 103.89 53.11 22.03 20.63

Finance charges 1,339.55 494.67 201.84 100.64 76.61



D Taxation

Current tax 865.24 170.00 50.78 15.73 2.74



Deferred tax 164.35 9.81 20.46 9.84 12.85


E Net Profit before adjustments (C-D) 6,244.36 422.99 466.50 170.60 9.29

FADJUSTMENTS (Refer Note 2 and 3 of Annexure IV)

Impact of changes in accounting policies and estimates:

Revenues including subsidy income (675.85) 957.72 307.50 (426.80) (129.71)

Provision for contract losses - - 25.93 (25.93) - Provision for contract expenses - 195.34 (195.34) - -

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Depreciation 53.94 (107.52) (30.52) - -

Other adjustments:



Tax impact of adjustments 281.44 (400.57) (6.72) 15.73 2.74 Total of adjustments after tax impact (340.47) 708.51 123.70 (402.36) (133.85)

G Net Profit, as Restated (E-F) 5,903.89 1,131.50 590.20 (231.76) (124.56)

Balance as at the beginning of the year 1,037.48 (94.02) (624.80) (393.04) (268.48)

Balance available for appropriation, as Restated 6,941.37 1,037.48 (34.60) (624.80) (393.04)

Appropriations

Dividend - - 52.11 - -

Dividend distribution tax - - 7.31 - - Balance carried forward, as Restated 6,941.37 1,037.48 (94.02) (624.80) (393.04)

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV

16

Consolidated Statement of Cash Flows, as Restated


2008 2007 2006 2005 2004

A Cash Flow from Operating Activities

Net Profit / (Loss) before taxes 6,268.92 1,718.57 671.92 (221.92) (111.71)

Adjustments for:

Depreciation / amortization 286.53 211.41 83.63 22.03 20.63 Provision for loans and advances 38.46 - - - -

Loss / (Profit) on sale of fixed assets 0.05 (3.79) (10.69) (10.51) 20.50

Loss / (Profit) on sale of investments (1.55) - 0.86 (48.96) 8.41



Interest and finance Charges 1,279.56 444.66 201.84 101.81 76.61 Effect of exchange rate change 1,440.17 40.17 (23.51) (20.98) 4.33

Operating Profit before working capital changes 8,891.59 2,266.86 830.18 (223.76) (35.81)

(Increase) / decrease in Inventories (3,466.97) 217.83 (331.25) 14.00 (21.73)

(Increase) / decrease in Sundry debtors (696.17) (130.38) (512.67) 83.40 233.21


(19,218.26) (5,030.75) (1,682.12) 143.24 (60.54)


5,292.42 (593.68) 3,489.34 (138.48) 1,587.89

Cash generated from Operations (9,197.39) (3,270.12) 1,793.48 (121.60) 1,703.02

Taxes paid, net (488.92) (130.45) (4.10) (3.18) (29.15) Net Cash flows (used in) / from operating activities (9,686.31) (3,400.57) 1,789.38 (124.78) 1,673.87

B Cash Flow from Investing Activities

Purchase of fixed assets (8,186.20) (2,355.05) (1,307.81) (380.86) (12.35) Proceeds from sale of fixed assets 0.03 11.32 35.96 21.41 -

Proceeds from sale of investments 101.73 40.00 21.14 174.46 56.46




17

Net Cash flows (used in) / from investing activities (7,893.76) (2,184.00) (1,297.70) (139.76) 78.16

C Cash Flow from Financing Activities

Proceeds from issue of new equity shares, net of issue expenses

- 5,915.29 - - -

Proceeds from Long-term borrowings 3,741.15 1,269.04 699.30 - -

Repayment from Long-term borrowings (467.33) - - - -

Repayment of unsecured loans - - - - (139.81)

Proceeds from short-term borrowings, net 16,768.62 3,343.24 - - -

Dividend and dividend tax paid - (59.42) - - -

Bank interest and finance charges paid (909.49) (444.66) (201.84) (101.81) (76.61)

Net Cash flows (used in)/from financing activities 19,132.95 10,023.49 497.46 (101.81) (216.42)

Net Increase/(decrease) in cash and cash equivalents (A+B+C)

1,552.87 4,438.92 989.14 (366.35) 1,535.61

Cash and cash equivalents at the beginning of the year 6,716.00 2,277.06 1,287.92 1,654.27 118.66

Cash and cash equivalents at the end of the year 8,268.87 6,715.98 2,277.06 1,287.92 1,654.27

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV

18

GENERAL INFORMATION

Dear Equity Shareholders(s),

Pursuant to the resolutions passed by the Board of Directors of the Company at their meeting held on July 30, 2008 and by the shareholders at the EGM held on September 10, 2008, it has been decided to make the following offer to the Equity Shareholders of the Company, with a right to renounce:

ISSUE OF [ ] COMPULSORILY CONVERTIBLE PREFERENCE SHARES (“CCPS”) OF RS. 10/- EACH AT AN ISSUE PRICE OF Rs. [ ] PER COMPULSORILY CONVERTIBLE PREFERENCE SHARE (INCLUDING A PREMIUM OF Rs. [ ] PER COMPULSORILY CONVERTIBLE PREFERENCE SHARE), PAYABLE IN CASH, AGGREGATING UPTO Rs. 7000 LAKH TO THE EXISTING EQUITY SHAREHOLDERS ON RIGHTS BASIS IN THE RATIO OF [ ] FULLY PAID-UP CCPS FOR EVERY [ ] EQUITY SHARES HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE, i.e. [ ]. THE FACE VALUE OF CCPS IS Rs. 10 EACH AND THE ISSUE PRICE IS [ ] TIMES OF THE FACE VALUE OF THE CCPS. EACH COMPULSORILY CONVERTIBLE PREFERENCE SHARE SHALL BE CONVERTIBLE INTO [ ] EQUITY SHARES. FOR MORE DETAILS, PLEASE REFER TO THE CHAPTER TITLED “TERMS OF THE ISSUE” BEGINNING ON PAGE [ ] OF THE DRAFT LETTER OF OFFER.

Our Company was originally incorporated as Tebma Engineering Private Limited on July 9, 1984, as a private limited company vide Certificate of Incorporation bearing Registration No. 10994 of 1984 under the provisions of the Companies Act, 1956. The name of our Company was subsequently changed to Tebma Engineering Limited with effect from October 21, 1993 consequent upon conversion of our Company into a public limited company under Section 44 of the Companies Act. Subsequently our Company’s name was changed to Tebma Shipyards Limited with effect from July 17, 1998. Our Company is registered with the Registrar of Companies, Tamil Nadu at Chennai.

Registered Office of our Company

Tebma Shipyards Limited No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai- 600 097 Phone: + 91-44-24968295/24968200 Fax: + 91-44-24967717 Website: www.tebma.com Email: [email protected]

The registration number of our Company is 10994 and CIN (Corporate Identity Number) is L27209TN1984PLC010994.

The address of the RoC is as follows:

Registrar of Companies, Tamil Nadu at Chennai26, Haddows Road, 2nd Floor, Shastri Bhavan, Chennai – 600 006 Tamilnadu India.

Board of Directors of Our Company

19

Our Board of Directors as on the date of filing the Draft Letter of Offer with SEBI is as follows:

Sr.No.

Name Designation Nature of Directorship DIN

1. Mr. P. K. Balasubramanian,

Chairman Executive and Non- Independent 00098557

2. Mr. Ajay Dhagat Managing Director and Chief Executive Officer

Executive and Non- Independent 02190030

3. Mr. B. Jayakumar Director (Technical) Executive and Non- Independent 01107423

4. Mr. G. Sriram Director Non-Executive and Independent 00092192

5. Mr. M.M Kamath Director Non-Executive and Independent 01454797 6. Mr. Sumit Chandwani Nominee Director Non-Executive and Non-

Independent 00179100

7. Ms. Shweta Jalan Nominee Director Non-Executive and Non-Independent

00291675

8. Mr. Raj Narain Bharadwaj

Director Non-Executive and Independent 01571764

9. Mr. N Kantha Kumar Director Non-Executive and Independent 00890532 10. Mr. T. Raghunandana Director Non-Executive and Independent 00628914

For a detailed profile of our Directors, please refer to the chapter titled “Our Management” beginning on page 101 of the Draft Letter of Offer.

Company Secretary and Compliance Officer

Mr. P. R. Kannan

No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai Tamil Nadu - 600 097 Phone: + 91-44-24968295/24968200 Fax: + 91-44-24967717 Email: [email protected]

Note: Investors are advised to contact the Registrar to the Issue, Cameo Corporate Services Ltd / Company Secretary and Compliance Officer, Mr. P.R. Kannan in case of any pre Issue / post Issue related problems such as non-receipt of Abridged Letter of Offer / Letter of Offer / Letter of Allotment / share certificate(s) / refund orders / demat credit / electronic refund of funds.

Bankers of our Company

The relavant details of the bankers to our Company are as follows:

20

ICICI Bank ICICI Bank Towers 9th Floor, East Wing, 93 Santhome High Road, Chennai - 600028Tel: +91 -44 42062000 Fax: +91- 44 42063126 E-Mail: [email protected]

Andhra Bank Mount Road Branch 95 Anna Salai Chennai – 600 002 Tel: +91 44 28606339 Fax: +91 44 28602642 E-Mail: [email protected]

State Bank of India Siruthozil Branch 320, Valluvar Kottam High Road Nungambakkam, Chennai 600034 Tel: +91 44 28278845 Fax: +91 44 28278845 E-Mail: [email protected]

The Dhanalakshmi Bank Ltd George Town Branch 269 Thambu Chetty Street George Town, Chennai 600 001 Tel: +91 44 25243541 Fax: +9144 25210097 E-Mail: [email protected]

Syndicate Bank Corporate Finance Branch 170 Eldams Road, Teynampet Chennai 600 018 Tel: +91 44 24323213 Fax: +91 44 24352182 E-Mail: [email protected]

State Bank of Hyderabad Industrial Finance Branch First Floor, 45 Second Line Beach Chennai 600001 Tel: +91 44 25340485 Fax: +91 44 25358322 E-Mail: [email protected]

Corporation Bank Mascot Building 37-A, Casa Major Road, Egmore, Chennai – 600 008 Tel: +91 44 28195170 Fax: +91 44 28192375 E-Mail: [email protected]

Centurion Bank of Punjab Padma Complex, 320 Anna Salai, Nandanam, Chennai – 600 035 Tel: +91 44 24348791 Fax: +91 44 24348794 E-Mail: [email protected]

Development Credit Bank Limited 61, Nungambakkam High Road, Nugambakkam, Chennai – 600 034. Tel: +91 44 28312267 Fax: +91 44 28312268 E-Mail: [email protected]

IDBI Bank Limited P.M. Tower, 37, Greams Road, Thousand Lights, Chennai 600 006. Tel: +91 44 28293413 Fax: +91 44 28293413 E-Mail: [email protected]

ABN Amro Bank N.V. Haddows Road, Chennai – 600 006 Tel: +91 44 28217171 Fax: +91 44 28240951 E-Mail: [email protected]

Yes Bank Limited 143/1, Nungambakkam High Road, Chennai – 600 034. Tel: +91 44 28319000 Fax: +91 44 28319001 E-Mail: [email protected]

State Bank of Indore Oriental House, 115, Broadway, Chennai – 600 108. Tel: +91 44 25383109 Fax: +91 44 25387441 E-Mail: [email protected],

Standard Chartered Bank 19 Rajaji Salai, Chennai – 600 001 Tel: +91 44 25349146 Fax: +91 44 25349184 E-Mail:[email protected]

21

[email protected]

Axis Bank Limited 82 Dr. Radhakrishnan Salai, Mylapore, Chennai – 600 004 Tel: +91 44 28111086 Fax: +91 44 28111084 E-Mail: [email protected]

State Bank of Mysore Industrial Finance Branch, II Floor, MOH Building, 576 Anna Salai, Teynampet, Chennai – 600 006 Tel: +91 44 24320175 Fax: +91 44 24320174 E-Mail: [email protected]

State Bank of Bikaner and Jaipur UTI House, 29, Rajaji Salai, Chennai – 600 001 Tel: +91 44 25230282/25229820 Fax: +91 44 25222326 E-Mail: [email protected]

The Federal Bank Ltd. SVS Club Building 61 Anna Salai, Chennai – 600 002 Tel: +91 44 28419496 Fax: +91 44 28523058 E-Mail: [email protected]

Oriental Bank of Commerce 63, Dr.Radhakrishnan Salai, Mylapore, Chennai – 600 004 Tel: +91 44 24990806 Fax: +91 44 24998117 E-Mail: [email protected]

State Bank of Travancore Mount Road Branch, 162, Anna Salai, Chennai – 600 002. Tel: +91 44 28521005 Fax: +91 44 28523310 E-Mail: [email protected]

Barclays Bank Plc No. 20-21 Kamraj Salai, Kancheepuram, Chennai- 631 501 Tel: +91 44 27232074 Fax: +91 44 27232076 E-Mail: [email protected]

Citibank N.A Ground Floor No. 2, Club House Road Chennai 600 002 Tel: +91 44 42226028 Fax: +91 44 28460054 Email: [email protected]

Note: Of the oforesaid banks, our Company has recieved consents from The Dhanalakshmi Bank Limited, Development Credit Bank Limited, ABN Amro Bank N.V and Axis Bank Limited to be named as Bankers to our Company, while our Company has applied to the other bankers for their consent and their consent is pending.

The Equity Shares of our Company are listed on OTCEI.

ISSUE MANAGEMENT TEAM Lead Manager to the Issue Enam Securities Private Limited 801-802, Dalamal Towers, Nariman Point, Mumbai 400 021, India Tel: +91 – 22- 6638 1800 Fax: +91 – 22 – 2284 6824 E-mail: [email protected] Investor Grievances Email id:[email protected]: www.enam.com Contact person: Mr. Pranav Mahajani SEBI Registration No.: INM000006856

Advisor to the Issue

22

Centrum Capital Limited Centrum House, CST Road, Vidya Nagari Marg, Kalina, Santa Cruz (East), Mumbai 400 098, India. Tel: +91- 22- 6724 9000 Fax: +91- 22- 6724 9360 Website: www. centrum.co.inContact person: Mr. Alpesh Shah / Mr. Amit Wagle Email: [email protected] SEBI Registration No.: INM0000010445

Registrar to the Issue and Share Transfer Agents for our Company [

Cameo Corporate Services Ltd Subramanian Building, No.1 Club House Road, Chennai 600 002, India. Tel: +91- 44- 28460425 Fax: +91- 44-28460129 Website: www.cameoindia.com Contact Person: Mr. R.D. Ramasamy, Director Email: [email protected] SEBI Registration No.: INR 000003753

Legal Advisor to the Issue

M/s. Crawford Bayley & Co Advocates and SolicitorsState Bank Buildings, 4th floor, N.G.N Vaidya Marg, Fort, Mumbai 400 023, India. Tel: +91-22-2266 8000 Fax: +91-22-2266 3978 Email: [email protected]

Statutory Auditors

M/s. B S R & Associates.Chartered Accountants KPMG House, No. 10, Mahatma Gandhi Road Nungambakkam, Chennai 600 034, India. Tel: +91-44-3914 5000 Fax: +91-44-3914 5999 E-mail: [email protected]

Bankers to the Issue

[ ]

Refund Bankers

[ ]

Inter-se Allocation of Responsibilities

23

Since Enam Securities Private Limted is the sole Lead Manager to the Issue and hence is responsible for all Issue related activities. The details of responsibility of Enam Securities Private Limited are as follows:

1. Capital structuring with the relative components and formalities such as composition of debt and equity, type of instruments

2. Drafting and Design of the offer document and of advertisement / publicity material including newspaper advertisements and brochure / memorandum containing salient features of the offer document. To ensure compliance with the SEBI Guidelines and other stipulated requirements and completion of prescribed formalities with Stock Exchange and SEBI.

3. Retail/Non-institutional marketing strategy which will cover, inter alia, preparation of publicity budget, arrangements for selection of (i) ad-media, (ii) bankers to the issue, (iii) collection centres (iv) distribution of publicity and issue material including composite application form and the abridged letter of offer and the draft letter of offer to the extent applicable

4. Institutional marketing strategy to the extent applicable

5. Selection of various agencies connected with the issue, namely Registrar to the Issue, Printers, and Advertisement agencies.

6. Follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures.

7. The post-issue activities will involve essential follow-up steps, which must include finalisation of basis of allotment / weeding out of multiple applications, listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as registrar to the issue, bankers to the issue, and bank handling refund business. Even if many of these post-issue activities would be handled by other intermediaries, the Lead Manager shall be responsible for ensuring that these agencies fulfill their functions and enable him to discharge this responsibility through suitable agreements with the our Company.

Credit Rating Details

This being an issue of CCPS, there is no credit rating for this Issue.

IPO Grading

As this Issue is not an IPO, grading is not mandatory

Debenture Trustees

Since this is not a debenture issue, appointment of debenture trustee is not required.

Monitoring Agency

As the size of the Issue, will not exceed Rs. 5000 million, appointment of monitoring agency under clause 8.17 of the SEBI Guidelines is not required.

Appraising Entity

Not Applicable

Impersonation

24

Attention of the applicants is specifically drawn to the provisions of subsection (1) of section 68A of the Companies Act which is reproduced below:

“Any person who makes in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or 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 extend to five years”.

Underwriting / Standby arrangements and minimum subscription

This Issue has not been underwritten and our Company has not made any standby arrangements for the present Rights Issue.

If our Company does not receive the minimum subscription of 90% of the Issue on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 15 days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than 8 days after our Company becomes liable to pay the subscription amount (i.e. 15 days after closure of the Issue), our Company shall pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of section 73 of the Companies Act 1956.

Under-subscription of the issue will be determined after considering the number of shares applied as per the entitlement plus additional shares applied for by the existing shareholders and the renouncees, in the manner as mentioned in the chapter titled “Terms of the Issue” of the Draft Letter of Offer. In the event of undersubscription, our Promoters (either by themselves or through entities controlled by them) intend to apply for additional Compulsorily Convertible Preference Shares, which would subsequently get converted into Equity Shares, which if allotted to the Promoters, shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of Regulations 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1) (b) (ii) of the Takeover Code. Further this acquisition will not result in change of control of management of our Company.

25

CAPITAL STRUCTURE

PARTICULARS AS ON THE DATE OF THIS DRAFT LETTER OF OFFER

Aggregate nominal value (Rs. in lacs)

Aggregate Value at Issue Price

(Rs. lacs)

Authorised Share Capital 1,50,00,000 Equity Shares 1,500.00

20,00,000 Preference Shares of Rs. 10/- each 200.00 Issued, Subscribed & Paid-up Share Capital 77,78,180 Equity Shares fully paid- up 777.82

Present Issue being offered to the existing Shareholders through the Letter of Offer [ ] CCPS of Rs. 10/- each, [ ] [ ]

Paid-up Capital after the Rights Issue prior to conversion of all CCPS[ ] Equity Shares of Rs. 10/- each fully paid-up[ ] CCPS of Rs. 10/- each fully paid-up

Notes to the Capital Structure:

1. Details of increase in Authorised Share Capital since December 4, 1992

Sr.No.

Particulars of Increase Date of Shareholders

Meeting

AGM/EGM

1. 1,00,000 Equity Shares of Rs. 100/- each aggregating to Rs. 1,00,00,000/-

Upto December 4, 1992

2. From 1,00,000 Equity Shares of Rs. 100/- each aggregating to Rs. 1,00,00,000/- to 2,00,000 Equity Shares of Rs. 100/- each aggregating to Rs. 2,00,00,000/-.

December 5, 1992

EGM

3. From 2,00,000 Equity Shares of Rs. 100/- each aggregating to Rs. 2,00,00,000/- to 50,00,000 Equity Shares of Rs. 10/- each aggregating to Rs. 5,00,00,000/-.

October 16, 1993 EGM

4. From 50,00,000 Equity Shares aggregating to Rs. 5,00,00,000/- to 60,00,000 Equity Shares aggregating to Rs. 6,00,00,000/-.

July 6, 1998 EGM

5. From 60,00,000 Equity Shares aggregating to Rs. 6,00,00,000 to 1,50,00,000 Equity Shares aggregating to Rs. 15,00,00,000.

April 5, 2006 EGM

6. Alteration and increase in authorized share capital from 1,50,00,000 Equity Shares aggregating to Rs. 15,00,00,000 to Rs 17,00,00,000 divided into 1,50,00,000 Equity Shares aggregating to Rs 15,00,00,000 and 20,00,000 Preference Shares of

September 24, 2008

AGM

26

Sr.No.

Particulars of Increase Date of Shareholders

Meeting

AGM/EGM

Rs. 10/- each aggregating Rs. 2,00,00,000 *Our Company does not have the complete set of requisite corporate records in relation to build-up of authorised share capital prior to December 4, 1992.

**The shareholders have at the AGM held on September 24, 2008 passed a resolution to alter the authorized share capital of our Company.

2. Share Capital History

(i) From June 1994 till date of filing of the Draft Letter of Offer

Date of allotment/ when madefully paid up

No. of Equity Shares

Cumulative No. of Shares

Face Value (Rs.)

Issue Price (Rs.)

Nature of payment of considerati

on

Reasons for allotment

Cumulative Paid –up Capital

(Rs.)

Closingbalance as on June 7,

1994

18,15,690 18,15,690 10 - - Various allotments

1,81,56,900

June 8, 1994

7,90,000 26,05,690 10 60 Cash Preferential allotment to

various Financial

Institutions

2,60,56,900

September 24, 1996

13,02,845 39,08,535 10/- - Other than cash

Bonus# 3,90,85,350

August 3, 1998

13,02,845 52,11,380 10/- - Other than cash

Bonus## 5,21,13,800

February27, 2007

25,66,800 77,78,180 10/- 233.75 Cash Preferential Allotment

7,77,81,800

*Our Company does not have the complete set of requisite corporate records in relation to build-up of issued and paid-up Equity Share capital prior to December 12, 1992.

# Bonus issue in the ratio of 1 Equity Share for every 2 Equity Shares held by way of capitalization of share premium account to the tune of Rs. 1,30,28,450.

## Bonus issue in the ratio of 1 Equity Share for every 3 Equity Shares held by way of capitalization of share premium account to the tune of Rs. 1,30,28,450.

§ Allotment pursuant to a Shareholders Agreement dated February 27, 2007, entered into between our Company, our original promoters and IAF- VI for subscription and allotment on a preferential basis of 25,66,800 Equity Shares at a price of Rs. 233.75/- per Equity Share to IAF - VI in accordance with the SEBI Guidelines on preferential issue. For further details on the same please refer to the chapter titled “History and Certain Corporate Matters” beginning on page 94 of the Draft Letter of Offer.

(ii) Build up of securities premium account from June 8, 1994.

27

FinancialYear

Particulars No. of Equity Shares

Premiumper share

(Rs.)

Amount (Rs. in lacs)

Cumulative amount (Rs.

in lacs) Opening balance as on June 7, 1994

- - - Nil

1994-1995 Issue of Equity Shares at a premium

7,90,000 50 395 395

1996-1997 Bonus Issue of Equity Shares in the ratio of 1:2

13,02,845 - (130.28) 264.72

Bonus Issue of Equity Shares in the ratio of 1:3

13,02,845 - (130.28) 134.43 1998-1999 2006-2007

Issue of Equity Shares at a premium

25,66,800 223.75 5,743.21 5,877.64

(iii) Build up of share capital of our Promoters.

(a) Share holding particulars of Mr P.K.Balasubramanian

Sl.No.

Date of Allotment / Acquistion No. of Shares

Allotted/ acquired

Facevalue per

share(Rs.)

Issue Price /

Acquired price per

share (Rs.)

Cumulative total of No. of shares

held

Remarks

1 As on June 08, 1994 1,864 10/- 100/- 1,03,500 Allotment 2 August 24, 1996 2,237 10/- 100/- 51,750 Allotment 3 August 03, 1998 2,547 10/- 100/- 51,749 Allotment 4 June 21, 2000 3,072 10/- 100/- 1 Allotment 5 February 27, 2002 3,450 10/- 100/- 7,000 Allotment 6 March 31, 2003 6,900 10/- 100/- 12,800 1:1 Rights issue

Total 226,800

(b) Share capital build up of IAF-V I*

Sl.No.

Date of Allotment / Acquistion

No. of Shares

Allotted/ acquired

Face value pershar

e(Rs.)

Issue Price /

Acquired price per

share(Rs.)

Cumulative total of No. of shares

held

Remarks

1 February 27, 2007 2,566,800 10/- 233.75 25,66,800 Preferential Allotment**

2 July 31, 2007 15,55,636 10/- 233.75 41,22,436 Acquired through open offer pursuant to the Takeover Code#

28

* Held by the Western India Trustee and Executor Company Limited on account of IAF – VI

**Pursuant to Clause 13.3 of the SEBI Guidelines, out of a total of 25,66,800 Equity Shares issued to our Promoter, IAF-VI, on February 27, 2007, 20% or 5,13,360 Equity Shares of IAF-VI shall be locked in for a period of 3 years from the date of the allotment. Accordingly 5,13,360 Equity Shares of IAF-VI continue to be under lock in. These locked in shares may be transferred to and amongst Promoter/ Promoter Group or to a new promoter(s) or person(s) in control of the company, subject to continuation of lock-in in the hands of transferee(s) for the remaining period and compliance of the Takeover Code, as applicable.

# In fiscal 2007, IAF – VI acquired an equity stake of 25,66,800 Equity Shares in our Company,which was more than 15% of our outstanding Equity Share capital and hence have, made an open offer pursuant to the provisions of Takeover Code, pursuant to which they acquired 20% stake as detailed hereinabove.

29

(iv) Shareholding Pattern of our Company as on June 30, 2008 is as under:

Total Shareholding as a percentage of total number of shares

Category Code

Category of shareholder

Number of Shareholders

Total no. of

shares*

No. of shares held in

dematerialized form As a

percentage of (A+B)

As a percentage

of (A+B+C)

(A) Shareholding of Promoter and Promoter Group

(1) Indian

Individuals/ Hindu Undivided Family

2 3,83,500 3,83,500 4.93 4.93

Central Government/ State Government(s)

0 0 0 0 0

Bodies Corporate 0 0 0 0 0

Financial Institutions/ Banks

0 0 0 0 0

Any (other)- Trusts 2 41,22,436 41,22,436 53.00 53.00

Sub Total (A) (1) 4 45,05,936 45,05,936 57.93 57.93

(2) Foreign - - -

-

Individuals (Non-Resident Individuals/Foreign Individuals)

0 0 0 0 0

Bodies Corporate 0 0 0 0 0

Institutions 0 0 0 0 0

Any Other 0 0 0 0 0

Sub Total (A)(2) 0 0 0 0 0

Total shareholding of Promoter and Promoter Group (A)

4 45,05,936 45,05,936 57.93 57.93

(B) Public Shareholding

(1) Institutions

(a) Mutual Funds / UTI

8 27,500 0 0.35 0.35

30


Category Code



Total no. of

shares*



percentage of (A+B)

As a percentage

of (A+B+C)

Financial Institutions / Banks

0 0 0 0 0

Central Government/State Government

0 0 0 0 0

Venture Capital Funds

0 0 0 0 0

Insurance Companies

0 0 0 0 0

Foreign Institutional Investors

1 35,333 0 0.45 0.45

Foreign Venture Capital Investors

0 0 0 0 0

Any Other - -

Sub Total(B)(1) 9 62,833 0 0.81 0.81

(2) Non-Institutions

(a) Bodies Corporate 74 3,45,829 81,283 4.45 4.45

(b) Individuals

(I) Individual shareholders holding nominal share capital up to Rs. 1 lakh

1736 5,72,816 1,20,072 7.36 7.36

(II) Individual shareholders holding nominal share capital in excess of Rs. 1 lakh

27 17,57,098 2,35,776 22.59 22.59

Any Others 0 0 0 0 0

Foreign Nationals 9 4,13,874 0 5.32 5.32

Hindu Undivided Families

6 11,094 11,094 0.14 0.14

Non Resident Indians

3 97,600 1000 1.25 1.25

Trusts 1 11,100 0 0.14 0.14

Sub Total 19 32,09,411 12,094 41.26 41.26

Total Public shareholding (B)

1865 32,72,244 4,49,225 42.06 42.06

31


Category Code



Total no. of

shares*



percentage of (A+B)

As a percentage

of (A+B+C)

Total (A)+(B) 1869 77,78,180 49,55,161 100 100

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

0 0 0 0 0

Pre – Issue Capital (Total (A)+(B)+(C))

1869 77,78,180 49,55,161 100 100

3. Details of the shareholding of the Promoter and Promoter Group date of filing of the Draft Letter of Offer is as follows:

Name of Entity No. of Shares % of Pre – Issue Share Capital IAF – VI* 41,22,436 53.00 Mr. P.K Balasubramanian 2,26,800 2.92 Ms. Kripa Balan 1,56,700 2.01

* Held by the Western India Trustee and Executor Company Limited on account of IAF – VI

Our Promoters have confirmed that each of them along with the entities controlled by them (together referred to as “Promoters” in this clause) intend to subscribe to the full extent of their entitlement in the Issue. Each of our Promoters reserve their right to subscribe to their entitlement in this Issue, either by themselves or through a combination of entities controlled by them, including by subscribing for renunciation if any made by the Promoter Group. Our Promoters have provided undertakings to our Company expressing their intention to apply for additional CCPS in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and consequent allotment, our Promoters may acquire CCPS over and above their entitlement in the Issue, which may result in an increase of their percentage of CCPS beyond the percentage of their entitlement and percentage of equity shareholding (on Conversion) being above their current percentage of equity shareholding with the entitlement of CCPS and consequent Conversion into Equity Shares in the Issue. This subscription and acquisition of additional CCPS (and consequently Equity Shares) by each of our Promoters through this Issue, if any, will not result in change of control of the management of our Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the chapter titled “Objects of the Issue” beginning on page [ ] of the Draft Letter of Offer, there is no other intention/purpose for this Issue, including any intention to delist our Company, even if, as a result of allotments to our Promoters in this Issue, our Promoter’s shareholding in our Company (as detailed hereinabove) exceeds their current shareholding. Our Promoters shall subscribe to such unsubscribed portion as per the relevant legal provisions. Allotment to any of our Promoters of any unsubscribed portion, over and above their entitlement, shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.

After such allotment(s) as above to our Promoters, including the application for rights/renunciation and additional CCPS, any additional CCPS shall be disposed off by the Board (including a Committee thereof duly authorised) of our Company, in such manner as they think most beneficial to our Company and the decision of the Board of our Company in this regard shall be final and binding. In the event of oversubscription, allotment will be made within the overall size of the Issue.

32

4. In order to support the business growth of our Company, either of our Promoter(s) may bring in subscription amount towards this Rights Issue as advance share application money. In case of shortfall in the share application money vis-a-vis subscription money towards their entitlement, such shortfall shall be brought in before the Issue closure. In case advance share application money is brought prior to the Issue Opening Date, our Company shall furnish disclosures as may be required. Further, the advance subscription, if any, would not be entitled to any interest payable to the Promoter(s).

5. Details of purchase and sale of securities of our Company by the Promoters and Directors, in the last 6 months:

There has been no purchase and/or sale of securities of our Company by our Promoters and Directors in the 6 months preceding the date of the Draft Letter of Offer.

6. Details regarding Top 10 Shareholders:

The details of our top 10 shareholders and the number of Equity Shares held by them are as below:

A. As on date of filing the Draft Letter of Offer with the Stock Exchange *

Sr.No

Name of Shareholder Number of Equity Shares

% holding

1. IAF – VI # 41,22,436 53.00 2. Mr. Eapen Chacko 2,73,000 3.51 3. Mr. A.K Singh 2,44,289 3.14 4. Mr. P.K Balasubramanian 2,26,800 2.92 5. Mr. K.A Thomas 1,64,320 2.11 6. Ms. Kripa Balan 1,56,700 2.01 7. Mr. Srikant Rao 1,45,811 1.87 8. Mr. Sumant Rao 1,45,811 1.87 9. Mr. Sriram N 1,45,810 1.87 10. Tebma Marine Private Limited 1,05,128 1.35

Total 57,30,105 73.67

* As per the beneficial position as on the September 26, 2008 # Held by the Western India Trustee and Executor Company Limited on account of IAF – VI

B. 10 days prior to filing the Draft Letter of Offer with the Stock Exchange.

Sr.No


% holding

1. IAF – VI # 41,22,436 53.00 2. Mr. Eapen Chacko 2,73,000 3.51 3. Mr. A,K Singh 2,44,289 3.14 4. Mr. P.K Balasubramanian 2,26,800 2.92 5. Mr. K.A Thomas 1,64,320 2.11 6. Ms. Kripa Balan 1,56,700 2.01 7. Mr. Srikant Rao 1,45,811 1.87 8. Mr. Sumant Rao 1,45,811 1.87 9. Mr. Sriram N 1,45,810 1.87 10. Tebma Marine Private Limited 1,05,128 1.35

Total 57,30,105 73.67

*As per the beneficial position as on September 19, 2008 # Held by the Western India Trustee and Executor Company Limited on account of IAF – VI

33

C. Two years prior to filing the Draft Letter of Offer with the Stock Exchange

Sr.No.


% holding

1. Mr. B.N Rao 4,37,432 5.62 2. Juliane Vandee 2,81,818 3.62 3. Mr. Eapen Chacko 2,73,000 3.51 4. Mr. A. K. Singh 2,44,289 3.14 5. Mrs. Kripa Balan 2,34,700 3.02 6. Mr. Biren Mukherjee 2,28,900 2.94 7. Mr. P.K. Balasubramanian 2,07,000 2.66 8. K. Kantarao 2,03,231 2.61 9. CDR. Subramanian 1,69,866 2.18 10. Mr. K.A. Thomas 1,64,320 2.11

Total 24,44,556 31.43 *As per the beneficial position as on September 22, 2006

7. The present Issue being a rights Issue, as per extant SEBI guidelines, the requirement of promoters’ contribution and lock-in are not applicable.

8. No further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner which will affect the equity capital of our Company, shall be made during the period commencing from the filing of the Draft Letter of Offer with SEBI and the date on which the CCPS issued under the Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue except that we entered into acquisition(s), we may consider additional capital to fund such activities or to use Equity Shares / other convertibles as a currency for such acquisition(s) or participation in such joint venture(s).

9. Further, presently our Company does not have any intention to alter the equity capital structure by way of split/consolidation of the denomination of the shares or issue of shares on a preferential basis or issue of bonus or rights shares or public issue of shares or any other securities within a period of 6 months from the date of opening of the Issue. However, if the business needs of our Company so require, our Company may, for the purposes of raising funds, alter its capital structure by way of issue of Equity Shares or other securities on a preferential basis or on rights basis or by way of issue to the public during the period of 6 months from the date of opening of the Issue. Further we may issue securities that may be decided under an ESOP scheme as mentioned in note (10) above.

10. Our Board vide its resolution dated March 12, 2008 and the shareholders vide resolution passed at the EGM held on April 16, 2008 have authorised the constitution of an ESOP scheme under the SEBI (Employees Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999. However our Board has not as on date adopted any scheme, neither have any options been granted as on date under the aauthority of the aforesaid resolutions. Thus, our does not have any ESOP / ESPS scheme as on date.

11. Our Company has 1,923 Equity Shareholders as on the date of the Draft Letter of Offer (as per the beneficial position as on September 26, 2008).

12. At any given point of time there shall be only one denomination for the Equity Shares and one denomination of CCPS of our Company and we shall comply with such disclosure and accounting norms as may be prescribed by SEBI from time to time.

13. Our Company has not raised any bridge loan against the proceeds of this Issue.

14. The Issue will remain open for 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.

34

15. The equity shareholders of our Company do not hold any warrants, options or convertible loans or debentures, which would entitle them to acquire further shares in our Company. There are no outstanding options, warrants, debentures, convertible instruments held by any person that will entitle such persons to acquire further Equity Shares in our Company.

16. From October 12, 1994 until date, we have not revalued our assets and have not issued any Equity Shares out of revaluation reserves. Data prior to December 12, 1994 is not available with our Company.

17. We have issued 26,05,690 Equity Shares since June 1994 for consideration other than cash as follow:

(a) Bonus issue of 13,02,845 Equity Shares done on September 24, 1996 in the ratio of 1 Equity Share for every 2 Equity Shares by way of capitalization of share premium account to the tune of Rs. 1,30,28,450.

(b) Bonus issue of 13,02,845 Equity Shares done on August 3, 1998 in the ratio of 1 Equity Share for every 3 Equity Shares by way of capitalization of share premium account to the tune of Rs. 1,30,28,450

18. The present Issue is not underwritten. Neither our Company nor the Promoters and 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 the Draft Letter of Offer.

19. Our Company has not made a public offering of its Equity Shares in the immediately preceding 2 years from the date of filing of the Draft Letter of Offer.

20. The terms of issue to Non-Resident Equity Shareholders/Applicants have been presented under the chapter titled “Terms of the Issue” beginning on page [ ] of the Draft Letter of Offer.

21. Minimum Subscription

If our Company does not receive the minimum subscription of 90% of the Issue on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 15 days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than 8 days after our Company becomes liable to pay the subscription amount (i.e. 15 days after closure of the Issue), our Company shall pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of section 73 of the Companies Act 1956.

Under-subscription of the issue will be determined after considering the number of shares applied as per the entitlement plus additional shares applied for by the existing shareholders and the renouncees, in the manner as mentioned in the chapter titled “Terms of the Issue” beginning on page [•] of the Draft Letter of Offer. In the event of undersubscription, our Promoters (either by themselves or through entities controlled by them) intend to apply for additional Compulsorily Convertible Preference Shares, which would subsequently get converted into Equity Shares, which if allotted to the Promoters, shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of Regulations 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1) (b) (ii) of the Takeover Code. Further this acquisition will not result in change of control of management of our Company.

22. Fractional entitlement will be ignored. Equity shareholders whose fractional entitlements are being ignored would be given preferential allotment of one additional CCPS, if they apply for additional CCPS.

35

Those Equity Shareholders whose holding is less than [ ] Equity Shares and therefore are entitled to zero CCPS under the Rights Issue, shall be dispatched a CAF with zero entitlement. Such Equity Shareholders are entitled to apply for one CCPS. However, they cannot renunciate the same to third parties. CAF with zero entitlement shall be non-negotiable / non-renunciable.

Those Equity Shareholders whose holding is less than [ ] Equity Shares and therefore are entitled to zero CCPS under the Rights Issue, shall be dispatched a CAF with zero entitlement. Such Equity Shareholders are entitled to apply for additional Equity Shares. However, they cannot renunciate the same to third parties. CAF with zero entitlement shall be non-negotiable / non-renunciable.

23. CCPS offered through the Issue shall be fully paid-up on allotment and the entire amount of Rs. [ ](face value of Rs. 10 each and a premium of Rs. [ ] per CCPS) is payable on Application.

24. The Equity Shares of our Company are fully paid up and there are no partly paid up shares as on the date of the Draft Letter of Offer.

25. No payment, direct or indirect in the nature of discount, commission, and allowance or otherwise shall be made either by us or our Promoters to the persons who receive allotments, if any, in the Issue.

26. We have availed of several loans and financial facilities from various banks (Lenders).There are restrictive covenants in the agreements that our Company has entered into with certain banks for short-term loans and long term borrowings. Some of these restrictive covenants require the prior consent of the said banks and include, for example, restrictions pertaining to the declaration of dividends, alteration of the capital structure, entrance into any merger/amalgamation, expenditure in new projects, change in key personnel, change in the constitutional documents and the right to appoint a nominee Director on the Board of Directors of our Company upon an event of default. Our Company has in accordance with such agreements applied to all our Lenders on September 29, 2008 for the no-objection to proceed with the Issue.

Restrictive Covenants:

Our agreements with our Lenders, in relation to financial facilities sanctioned by them, have certain several restrictive covenants. A summary of certain significant restrictive covenants is as follows:

• All unsecured loans / deposits raised by our Company for financing a project are always subordinate to the loans of the Lenders and should be permitted to be repaid only with the prior approval of all the Lenders concerned.

• During the currency of the Lender’s credit facilities, our Company will not without written consent from the Lenders ; (i) Effect any change in our Company’s capital structure. (ii) Formulate any scheme of amalgamation or reconstruction. (iii) Undertake any new project, implement any scheme of expansion or acquire fixed assets

expect those indicted in the funds flow statement submitted to the Lender(s) from time to time and approved by the Lender(s) concerned.

(iv) Invest by way of share capital in / lend or advance funds to or place deposits in the normal course of business or advance funds to or place deposits with any other concern (including subsidiary and other group companies) so long as any money is due to the Lender(s). Normal trade credit security deposits in the normal course of business or advance to employees can, however, be extended.

(v) Enter into borrowing arrangement either secured or unsecured with any other bank, financial institution, company or otherwise or accept deposits apart from the arrangement indicated in the funds flow statement submitted to the bank from time to time and approved by the Lender.

(vi) Undertake any guarantee obligation on behalf of any other company (including group companies).

36

(vii) Declare dividends for any year except out of profits relating to that year meeting all dues and making all the necessary provisions and provided further that no default had occurred in any payment obligations.

(viii) Create any charge, lien or encumbrance over its undertaking or any part thereof in favour of any financial institution, bank, company, firm or persons.

(ix) Sell, assign, mortgage or otherwise dispose off, alienate them or transfer possession thereof any of the hypothecated assets charged to the bank.

(x) Enter into any contractual obligation of a long term nature or affecting our Company financially to a significant extent.

(xi) Change the practice with regard to remuneration of directors by means of ordinary remuneration or commission, scale of sitting fees, etc.

(xii) Undertake any trading activity other than the sale of products arising out of its own manufacturing operations.

(xiii) Permit any transfer of the controlling interest or make any drastic change in the management set – up.

(xiv) Repay monies brought in by the promoters / directors / principal shareholders and their friends and relatives by way of deposits / loans / advances. Further, the rate of interest, if any payable on such deposits / loans / advances should be lower that the rate of interest charged by the bank on its term loan and payment of such interest will be subject to regular repayment of installments under term loans granted / deferred payment guarantees executed by the bank or other repayment obligations, if any, due from our Company to the bank.

(xv) Withdraw or allow to be withdrawn the money brought in by Promoters and Directors or relatives or friends and

(xvi) Receive, compound or realise or commit any act with respect to the hypothecated assets whereby the recovery thereof is impeded, delayed or prevented.

37

OBJECTS OF THE ISSUE

The objects of the Issue are:

I. Part funding of capital expenditure requirements in respect of Malpe facilities II. Repayment of Buyers’ Credit III. To meet Issue expenses IV. To utilize remaining Net Issue proceeds for General Corporate Purposes

The main objects clause of our Memorandum of Association enable us to undertake our existing activities and the activities for which funds are being raised by our Company through this Issue.

Funds Requirement and Funding Plan (Rs. in Lacs)

Funding Plan

Particulars EstimatedCost Debt &

Capex LC

Equity and

Internal Accruals

Rights Issue

Balance Funds to be

tied up through

debt/internal accruals

Total

Capital expenditure requirements in respect of Malpe facilities

27,034.88 11,415.00 6,487.48 3,800.00 5,332.40 27,034.88

Repayment of Buyers Credit 2,500.00 - - 2,500.00 - 2,500.00

General Corporate Purposes [ ] - - [ ] - [ ]

Issue Expenses [ ] - - [ ] - [ ]Total [ ] 11,415.00 6,487.48 [ ] 5,332.40 [ ]

We confirm that we have made firm arrangements of finance through verifiable means towards minimum 75% of the stated means of finance, excluding the amount to be raised through the Issue.

The funds requirement described above is based on management estimates and is not appraised by any bank or financial institution. In view of the dynamic nature of the ship building industry, our Company may have to revise its capital expenditure requirements due to variations in the cost structure, changes in estimates, non-receipt of critical governmental approvals, exchange rate fluctuation and external factors, which may not be within the control of the management. Any shortfall in the proceeds of the Issue would be funded through debt/internal accruals.

No part of the Issue proceeds will be paid as consideration to promoters, directors, key managerial personnel, associates or group companies except in the normal course of our business.

Details of funds requirement are as under:

I. Capital expenditure requirements in respect of Malpe facilities

We planned a project of Rs. 13,161.64 lacs in the year 2005-06 for Malpe facilities to primarily construct OSVs. However, the scope of project has been enhanced for handling higher capacity vessels and building of larger blocks at Hangerkutta facility resulting in additional civil work, purchase of transporter, higher capacity cranes, a barge to transport the blocks, etc. Accordingly, the estimated project cost has been revised to Rs. 27,034.88 lacs. Malpe facilities include the shipyard complex at Malpe, the Hangerkutta facility, Babuthota storage complex and the Barkur workshop.

38

Details of the estimated capital expenditure on the Malpe facilities are as follows:

Particulars Rs. in lacs Land and civil works 13,932.13 Plant and Machinery 10,640.87Miscellaneous Assets 961.88Preoperative Expenses 1,500.00

Total 27,034.88

1. Land and civil works:

We have been awarded the work of erection, commissioning, operation, management and maintenance of slipway terminal for construction of sea going vessels on a Build Own Transfer (“BOT”) basis, in pursuance of which we have entered into a license agreement with the Director of Ports and Inland Water Transport, Karwar, Government of Karnataka for land admeasuring 40,000 sq mtrs. The license has been granted for a period of 30 years from November 10, 2000 upto Novmber 9, 2030. The main yard is supported by a storage facility in Babuthota and a facility for steel preparation & block construction at Hangerkutta facility. The main yard has a slipway for launching vessels. We also have a piping and carpentry facility based out of a leasehold premise at Barkur. For further land details, please refer subsection titled “Properties” under section titled “Our Business” on page 73 of the Draft Letter of Offer.

Our civil work in Malpe is mainly performed by M/s. Rangaprasad & Co. and Coastal Consolidated Structures Private Limited alongwith several other contractors. Civil activities primarily comprise of construction of slipway, new building bay sheds, pre-outfit sheds, repair and outfit workshops, equipment foundation, administration blocks, etc.

Our civil work in Hangerkutta facility is mainly constructed by Lloyd Insulation and Coastal Consolidated Structures Private Limited alongwith several other contractors. Civil activities at Hangerkutta facility primarily comprise of setting up of the panel and logistic shed and plate shed.

Coastal Consolidated Structures Private Limited, along with several other local contractors has been engaged for the civil work at Barkur and Babuthota. The civil activities in these locations primarily comprise of setting up the storage facility, workshop modification and site development.

The total estimated land and civil works for the above is presented in the table below:

Location Amount in Rs. Lacs Shipyard Complex at Malpe 10,178.23 Hangerkutta facility 3,271.61 Babuthota storage complex and Barkur workshop 482.29

Total 13,932.13

2. Plant and Machinery:

The details of plant and machinery which have already been purchased and delivered are as under:

(Rs. in lacs)Sr.No.

Particulars Supplier Date of Purchase Order/Invoice

Amount

1. Assembly Bay-EOT Crane-ZKKE:- Demag Hoisting System-SWL 30+30t - Span 45m Imported Components including Electric Hoists, LT Drives, Wheel Blocks, KBK Tracks, Radio Remote , and Imported Accessories to the Crane

Demag Cranes andComponents

March 28, 2007

201.40

39

2. Assembly Bay-EOT Crane ZKKE :- Demag Hoisting System-SWL 7.5+7.5/3.2t - Span 45m Imported Components including Electric Hoists, LT Drives, Wheel Blocks, KBK Tracks, Radio Remote, and Imported Accessories to the Crane.


March 28, 2007

147.40

3. Pre-outfit Shed - EOT Crane -ZKKE:- Demag Hoisting System-SWL 7.5/3.2t -Span 20.2m Imported Components including Electric Hoists, LT Drives, Wheel Blocks, KBK Tracks, Radio Remote and Imported Accessories to the crane.


May 17, 2007 13.31

4. Repair Outfit Shed -EOT Crane ZKKE:- Demag Hoisting System-SWL 7.5/3.2t - Span 9.9m Imported Components Including Electric Hoists. LT Drives, Wheel Blocks, KBK Tracks, Radio Remote and Imported Accessories to the Crane.


May 17, 2007 15.92

5. Storage Shed : EOT Crane ZKKE Demag Hoisting System-SWL 7.5/3.2t-Span 20.25m Imported Components Including Electric Hoists, LT Drives, Wheel Blocks, KBK Tracks, Radio Remote and Imported Accessories to the crane


April 26, 2007 13.35

6. Busbar System Type U 35/200 - 600 Amps -156m Bay-for 2 Nos. SWL 30+30t x 45m Span


April 16, 2007 18.25

7. Busbar System Type U 35/200 - 600 Amps -156m Bay for 2 Nos. SWL 7.5+7.5/3.2t EOT Crane


April 16, 2007 18.25

8. Busbar System Type DCL-GS-4-140-PE 140 Amps 41m Bay-for SWL 7.5/3.2t x 20.2m Span EOT Crane

Busbar System Type DCL-GS-4-140-PE 140 Amps 84.6m Bay for SWL 7.5/3.2t x 9.9m Span

Busbar System Type DCL-GS-4-140-PE -140 Amps 84.6m Bay- for SWL 7.5/3.2t x 20.25m Span


May 11, 2007

May 11, 2007

April 26, 2007

5.68

9. Double crane girders, crab structures, end carriages, control panel, other local access, to the crane and local components of busbar system-600 amps - suitable for EOT crane-ZKKE-Demag Hoisting System-SWL-30+30T in Assembly bay-156m bay length and span 45m


Various invoices dated

August 3, 2007, August

31, 2007, September 29,

2007, November 30,

2007

191.50

10. Double crane girders, crab structures, end carriages, control panel, other local access, to the crane and local components of busbar system-600 amps - suitable for EOT crane-ZKKE-Demag Hoisting System-SWL-7.5+7.5/3.2T in Assembly bay-156m bay length and span 45m


March 26, 2008, April 15, 2008, April 17, 2008, March

26, 2008, April 15, 2008, April 17, 2008, April

18, 2008, January 25,

2008, January 29, 2008,

January 30,

143.30

40

2008

11. Double crane girders, crab structures, end carriages, control panel, other local access, to the crane and local components of busbar system-140 amps - suitable for EOT crane-ZKKE-Demag Hoisting System-SWL-7.5/3.2T Repair Outfit shed 84.6m bay length and span 9.9m


June 21, 2007 8.76

12. Double crane girders, crab structures, end carriages, control panel, other local access, to the crane and local components of busbar system-140 amps - suitable for EOT crane-ZKKE-Demag Hoisting System-SWL-7.5/3.2T in Storage Shed 84.6m bay length and span 20.25m


June 21, 2007 12.83

13. Processed LT Rails 85mm x 50 mm - 156 m bay Demag Cranes andComponents

July 28, 2007 11.94

14. Double crane girders, crab structures, end carriages, control panel, other local access, to the crane and local components of busbar system-140 amps - suitable for EOT crane-ZKKE-Demag Hoisting System-SWL-7.5/3.2T in Pre Outfit Shed 41m bay length and span 20.2m


June 21, 2007 12.06

15. Processed LT Rails 50mm x 40 mm – 41m bay Demag Cranes andComponents

September 15, 2007

3.69

16. Steel (EN8) single Flanged Rail Wheel 250MM, suitable for 100 mm rail width fitted with bearing and axle to suit (for sea & land operation) with 300-350 bhn (max static load @14.35T with full tread contact)


Various invoices dated June 26, 2007 June 22, 2007

132.36

17. Steel (EN8) single Flanged Rail Wheel 315MM, suitable for 100 mm rail width fitted with bearing and axle to suit (for sea & land operation) with 300-350 bhn (max static load @18T with full tread contact)


Various invoices dated June 22, 2007, June 14, 2007, and June 26,

2007

168.77

18. Steel (EN8) single Flanged Rail Wheel 400MM, suitable for 100 mm rail width fitted with bearing and axle to suit (for sea & land operation) with 300-350 bhn (max static load @28.7T with full tread contact)


Various invoices dated

August 17, 2007,

September 13, 2007 and June

27, 2007

213.85

19. Design of manual blasting cum painting chamber. Reversed pulse jet dust collector. Portable blasting machine system. Abrasive vaccum recovery system. Design for dry filter spray booth steel enclosure and screen. Arrestor filter media screen. Spark resistant axial fan. Lift-up door system. ADH 1200 Dehumidifier. Design for ducting works and exhaust stack c/w testing platform. Electrical control panel. Operational safety equipment for blaster.

Speedo Marine P.O dated January 16,

2008

858.00

20. Ace-Zoomlion Crawler Crane Model QUY 70. Max lift capacity 70Ton. Main Boom 45 meters and Flyjib 6

ActionConstruction

P.O/ December 21, 2007

130.00

41

meters Equipment Ltd.

21. 120 Ton Section Life Transporter Scheuerle 2 axle section life transporter type SHT 120 4.2 with hydrostatic drive system and electronically controlled multi directional steering. Payload capacity approx. 120 tons

Scheuerle Fahrzeugfabrik Gmbh

P.O/ March 8, 2007

232.48

22. 100 ton double drum fiction winch with 2 nos. cast steel pulleys to suit 56 mm dia wire rope and as per technical specification and general layout as per conceptual drawing and 2 nos. VVVF drive NXS type for 2 Nos. 22kW motors with electro hydraulic thruster brakes for 2 motors and with panel and accessories and degree of protection IP54 with feedback arrangement with VVVF drive module for reducing speed automatically in case of over load, etc.

50 Ton single drum winding winch capable of winding 40 mm dia wire rope in three layers as pr technical specifications and general layout

Horizontal sheeves for 50 Ton pull and spare pulleys. Supply of horizontal balanced sheeve flag block assembly

Associated Magnets

Various Invoices

119.74

23. Primastic Universal Aluminium, Primastic Grey, Jotun Thinner No. 17, Muki EPS Red Make, Jotamastic 87 Aluminium, Jotamastic 87 Grey

Jotun NOF (Singapore) Pte Limited

P.O/May 7, 2007

50.36

24. Nieland vertical automatic working hydraulic 2 – column ship building plate bending machine SBP 275 which is prepared for an integrated rolling installation. Type PWU 100 with tools and accessories

Machinefabriek G.v.d. Ploeg b.v.

P.O/February 15, 2008

231.68

25. Assembly Jack spring return HT J10 10 ton capacity, 150 mm stroke complete with HTS 550 pump 2mtr hydraulic hose

Double Acting Push Pull Jack Model HPJ-100 H15-100 Cap.150mm stock complete with HTW 1800B Handpump with value M-321 for operating double acting tools, 2 Nos. of 2 mtrs. Hydraulic hose model H2SOU with 119 Coupler and 2 Nos of pulling eyes and air freight and insurance charges. Hydraulic Jack Spring return model HCJ 50 S 15- 100 ton capacity, 150 stroke complete with HTW2800b handpump, 2mt hydraulic hose sou with A 119 coupler

Holmatro Industrial & Rescue Equipment

P.O/ May 4, 2007

PO/ July 9, 2007

PO/ July 25, 2007

34.68

26. Crane rails as per technical specifications quality steel grade, C.R-V-398.462 MT

Arcelor Internations Singapore Private Limited

May 15, 2007 317.49

27. 25x3mm G.I Earth Strip

65 mm diameter 3 meters long G.I Earth electrode

Power Net July 22, 2008 0.16

42

450x450 mm cast iron chamber cover

28. 3.5 Cx 300 sq mm aluminium UG Cable Power Net August 9, 2008 17.70

29. For Malpe ‘KPRS’ make 1250 KVA, 11KV/433V Transformer

Silica Gel Breather

Kiran Power Rectification Services (P) Limited

February 20, 2008

12.35

30. 3.5C x 300 sq mm Aluminium UG Cable Power Net July 31, 2008 3.92

31. 3.5 core x 240 sq mm Aluminium UG Cable Power Net July 31, 2008 12.84

32. 3.5 core x 35 sq mm Aluminium UG Cable Power Net July 31, 2008 0.74

33. 250 KVA, 11KV/433V Transformer

Silicage Breather

Kiran Power Rectification Services (P) Limited

Delivered on February 28,

2008

3.37

34. Roller Hillman 150 mt M/s Hillman Rollers New Jersey 07746

July 1, 2008 42.24

35. Blasting cum painting chamber unit having inside size 25 m(L) X 16m(W) x 14m(H) (including design, supply, delivery, installation and commissioning)

Speedo Marine (Pte) Limited

P.O/January 16, 2008

858.00

36. Miscellaneous Machines Several Vendors

Severalinvoices

120.87

Total 4,379.24

Details of plant and machinery for which purchase orders have been placed:

Sr.No.

Particulars Supplier Details of Purchase

Order

Qty Estimated month of delivery

Unit Rate Total Price (including

transportation cost, duties, freight etc. wherever

applicable)

Amt . Rs. (in lacs)

1. Air Compressor Model GA 160-10 Pack with FAD 869 CFM

Air Receiver Capacity 10 Cu.m at Pr of 10 Bar

Atlas CapcoIndia Limited

P.OMalpe\0375Dated March 6, 2008

3Nos

1Nos

May 2008 Rs. 11,25,000

Rs. 3,43,000

Rs. 33,75,000

Rs. 3,43,000

37.18

2. Air Cooled RefrigerantType Dryer Model FD 750

Filter Model DD 520

Atlas CapcoAirpower NV Belgium

P.OMalpe\0376Dated March 6, 2008

3Nos

.

3Nos

April 2008 Euros 14,000

Euros 1325

Euros42,000

Euros3975

31.96

43

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

Filter Model PD 520

3Nos

Euros 1325

Euros3975

3. Bus Ducting System 1600 A

Waves ElectronicsPrivateLimited

P.OC10001464Dated July 14, 2008

1Nos

August 2008

Rs. 45,05,617 Rs. 45,05,617 45.06

4. Block Production Line-EOT Crane-Type ZKKE Demag Hoisting System

BusbarSystem-450 Amps- 107 mtrs. bay

Panel Line I-EOT Crane type ZKKE Demag Hoisting System

BusbarSystem-450 Amps- 107 mtrs bay

Panel Line EOT Crane-Type ZKKE Demag Hoisting System

BusbarSystem-450 Amps- 107 mtrs bay

Demag CranesAndComponents (India)PrivateLimited

P.OMalpe\0209Dated September 4, 2007

2sets

1set

1set

1set

2sets

1set

March 2008

March 2008

December 2007

December 2007

March 2008

March 2008

Rs. 7,460,000

Rs. 1,240,000

Rs. 7,350,000

Rs. 1,240,000

Rs.7,350,000

Rs.1,240,000

Rs. 14,920,000

Rs.1,240,000

Rs.7,350,000

Rs.1,240,000

Rs.14,700,000

Rs.1,240,000

406.90

5. MCCB 4 Pole 100 Amps

MCCB 3 Pole 200 Amps

Waves ElectronicsPrivateLimited

P.OC10001468Dated July 15, 2008

10Nos

30Nos

August 2008

Rs.6450

Rs. 10249

Rs. 64,500

Rs. 3,07,470

3.71

44

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

6. Double Cranegirders, crabstructures, endcarriages, controlpanel, other local accessories to the crane and local components of bus bar system 450 amps suitable for EOT crane-ZKKE- Demag Hoisting System- SWL 12.5t +12.5t in block production line 107 m bay length and span 38 m(c/c of column)

Processed LT rails 80x80mm-107m bay

Double Cranegirders, crabstructures, endcarriages, controlpanel, other local accessories to the crane and local components of bus bar system 450

Demag CranesAndComponents (India)PrivateLimited

P.OMalpe\0210Dated September 4, 2007

2sets

1set

1set

March 2008

March 2008

March 2008

Rs. 70,00,000

Rs. 8,50,000

Rs. 36,00,000

Rs. 1,40,00,000

Rs. 8,50,000

Rs. 36,00,000

265.70

45

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

amps suitable for EOT crane-ZKKE- Demag Hoisting System- SWL 10t +10t in Panel Line-I

107 m bay length and span 21 m(c/c of column) `Processed LT rails 75x50mm-107 m bay

Double Cranegirders, crabstructures, endcarriages, controlpanel, other local accessories to the crane and local components of bus bar system 450 amps suitable for EOT crane-ZKKE- Demag Hoisting System- SWL 10t +10t in Panel Line-II 107m bay length and span 21 m (c/c of

1set

2sets

March 2008

December 2007

Rs. 4,60,000

Rs. 36,00,000

Rs. 4,60,000

Rs.72,00,000

46

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

column)

Processed LT rails 75x50 mm-107m bay

1set

December 2007

Rs. 4,60,000 Rs. 4,60,000

7. CIG shed utility piping

Vertex Piping Engineers Private Limited

C10001151Dated June 24, 2008

1 no June 2008 Rs 2,088,000 Rs. 20,88,000 20.88

8. LC Structure (Fabrication, Erection andTesting)

Vertex Piping Engineers Private Limited

C10001156Dated June 24, 2008

1 June 2008 Rs.5,22,000 Rs. 5,22,000 5.22

9. KBM-18-100-CPortable Plate Edge BevellingMachine KBM-18-069 Self Alligningspring loaded caster wheelassembly with accessories and spares

Moggy Dual Torch Carriage with control for stitch weld orcontinuing travel with accessories and spares

KATOsillator System GK-200FM for Flex Track with accessories

Gullco InternationalLimited

C10001306Dated July 3, 2008

1

1nos

1nos

July 2008 CAD13889

7805

20106

CAD 42,052 18.92

47

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

and spares

10 lb portable oven

2nos

126

10. 1250 KVA Transformer

Rima Transformers AndConductors

P.OC10001581Dated July 17, 2008

1nos

August 2008

Rs. 8,87,000 Rs. 8,87,000 8.87



P.OC10001549Dated July 17, 2008

1nos

August 2008

Rs. 8,87,000 Rs. 8,87,000 8.87

12. Supply of Pipes used for Oxygen Carbon Di-oxide Acetylene and Fresh Water Piping Systems for Malpe

Vertex Piping Engineers

P.O.C1000219Dated: August 27, 2008

1 Rs. 21,655,696

Rs. 21,655,696 216.56

13. Erection, testing and commissioning of water piping systems

Vertex Piping Engineers

P.O.C2000236Dated: August 27, 2008

1 Rs. 54,13,924 Rs. 54,13,924 54.13

14. Ace Zoomlion Crawler Crane

ActionConstructionEquipmentLimited

P.OMalpe\0369Dated February 28, 2008

2nos.

Rs 47200000 Rs.9,44,00,000 944.00



P.OC10001553Dated July 18, 2008

1nos.

August 2008

Rs. 3,25,000 Rs. 3,25,000 3.25

16. Barge Vijai Marine Services

Memorandum of Understandingdated March 31, 2008

1 October 2008

Rs. 4,27,00,000 Rs.4,27,00,000 427.00

48

Sr.No.


Order




applicable)

Amt . Rs. (in lacs)

17. Tug QSA Marine &Logistics PteLimited

MOU/SC/TEBMA/2008/1dated August 29, 2008

1 October 2008

SGD21,26,000

SGD 21,26,000 722.84

Add: Freight, Transportation, Taxes, Duties and other charges (as per management estimates) 750.00 Total 3,971.05

Note: Conversion Rates - USD 1= Rs. 46, Euro 1= Rs. 67, CAD 1= Rs. 45, SGD 1= Rs. 34

None of the plant and machinery described above, except for the tug as described above, is used / second hand in nature, and we do not propose to purchase any used / second hand machinery for the Malpe facilities. The tug was manufactured in October 2007 and has a useful life of 20 years from the date of manufacture.

We have received the quotations for the following plant and machinery, for which orders will be placed in due course:

Sr. No.

Particulars of machinery Cost of machinery

(Rs. in Lacs)

Name of Supplier

Date of quotation

1 3 NOS – 500 KVA/400 KW DG set with Cummins engine model KTA 19 G9

61.95 PowericaLimited

Quotation Q040744/MR/2008/1 dated June 25, 2008

2 2 NOS – 250 KVA/200 KW DG set with Cummins engine model 6CTAA8.3G4

22.00 PowericaLimited

Quotation Q040744/MR/2008/1 dated June 25, 2008

Total 83.95

For the following plant and machinery negotiations are on with prospective suppliers:

Sr. No.

Description Estimated Amount (Rs. In Lac)

1. New Ship Transport System: Comprising of: Sloping cradle Transfer cradle Wire rope from Holland 56mm =900m 38mm =640m 32mm 600m + 1 metal thimble demountable] Auxiliary winch pulleys 16 Nos.608mm dia pulleys with structure 9 Nos.576mm dia pulleys with structure 10 Nos. 608dia pulleys only 10 Nos. 576 pulleys only

1,453.23

2. Semi automatic welding machinery and equipment 203.35 3. Piping fabrication machinery 550.05

Total 2,206.63

49

Miscellaneous Assets:

The total estimated cost of our miscellaneous assets is Rs. 961.88 lacs, details of which are provided below:

Sr.No.

Particulars Estimated Amount (Rs. in Lacs)

1. Fire fighting systems including fire extinguishers 112.23 2. Ambulance first aid sets, beds, diving equipment etc 19.97 3. Storage Systems 299.26 4. Office equipment 249.90 5. Other miscellaneous assets 280.52

Total 961.88

Preoperative Expenses:

We estimate the pre-operative expenses viz. interest during construction period, technical fees, bank processing charges, legal expenses, start up costs etc to the tune of Rs. 1,500 lacs.

(II) Repayment of Buyers Credit

Our Company imports equipments, steel, components and other materials for construction of vessels, which are backed by LCs. Some of these imports are paid for by availing Buyers Credit from various banks. The Buyers Credit is extended for a period of up to 360 days and is shown as unsecured loans in our financial statements. We intend to deploy part of the Issue proceeds aggregating Rs. 2,500 lacs towards repayment of some of the outstanding Buyers Credit to the Banks.

(III) Issue Expenses

The Issue expenses include, among others, issue management fees, Registrar fees, fees to advisor to the Issue, printing, stationary and distribution expenses, advertising and marketing expenses, fees of the legal advisor and auditors, legal fees, stock exchange fees, SEBI filing fees, depository fees, etc. The break-up of total issue expenses is as under:

Particulars EstimatedAmount (Rs.

in Lacs)

% of Total Issue

Expenses

% of Issue Size

Fees to the Lead Manager [ ] [ ] [ ]Fees to the Registrar to the Issue [ ] [ ] [ ]Fees to the Advisor to the Issue [ ] [ ] [ ]Printing, Stationary and Distribution Expenses [ ] [ ] [ ]Advertising and Marketing Expenses [ ] [ ] [ ]Other Expenses (Fees of Legal Advisor and Auditors; legal fees, stock exchange fees, SEBI filing fees, depository fees etc)

[ ] [ ] [ ]

Total [ ] [ ] [ ]

All expenses with respect to the Issue will be borne out of the Issue Proceeds.

(IV) General Corporate Purposes

Our Company intends to deploy the balance net Issue proceeds aggregating Rs. [•] lacs, towards the general corporate purposes, including but not restricted to, improving the working capital requirements of our Company, technology up-gradation, meeting exigencies and contingencies of business. Our

50

management, in accordance with the policies of our Board, will have flexibility in utilizing the issue proceeds available for general corporate purposes.

Details of Funding Plan

(1) Debt & Capex LC:

The following table provides details of the debt funding & Capex LC availed by our Company for the capital expenditure requirements in respect of Malpe facilities:

(Rs. in Lacs) Name of the Bank Sanction Limit Availed

as on September 1, 2008 State Bank of India First term Loan 1,150.00 1,150.00 State Bank of India Second Term Loan(incl. FCNR loan of USD 5.0 million)

2,850.00 2,715.00

State Bank of Hyderabad First Term Loan

915.00 913.00

State Bank of Hyderabad Second Term Loan

2,000.00 1,104.00

State Bank of Indore 1,500.00 1,020.00 Axis Bank (Capex LC for availing buyers credit)

3,000.00 575.00

Total 11,415.00 7,477.00

2) Equity and Internal Accruals- We have received Rs. 5,999.90 lacs from our Promoter IAF-VI by way of subscription to Equity Shares of our Company, on a preferential basis, including share premium thereon. Further, we have already incurred Rs. 487.58 lacs out of our internal accruals for the capital expenditure requirements in respect of Malpe facilities.

(3) Rights Issue: We intend to raise Rs. [•] Lacs from this Issue through issuance of [•] CCPS of Rs. 10 each at an issue price of Rs. [•] each.

(4) Balance Funds to be tied up through debt/internal accruals: The balance funds requirement aggregating Rs. 5,332.40 lacs towards capital expenditure requirements in respect of Malpe facilities shall be met through debt/internal accruals.

Schedule of Implementation

The progress made so far in respect of Malpe facilities is as under:

Sr. No. Particulars Expected Date of Completion 1 Land Acquisition Completed 2 Civil Works December 2009 3 Installation of Plant & Machinery March 2009 4 Trial Run & Commercial Production Not Applicable

Deployment of funds

Based on the certificate dated September 25, 2008 from M/s. Soleti Associates, Chartered Accountants, the details of deployment of funds for the current project and sources for the same till September 1, 2008 are as under:

51

Particulars Amount

(Rs. in Lacs)Deployment of Funds: Land and civil works 8,305.34 Plant and Machinery 4,379.24 Miscellaneous Assets 157.14 Preoperative Expenses 1,122.76

Total 13,964.48

Sources of Funds:Debt & Capex LC: State Bank of India First term Loan 1,150.00 State Bank of India Second Term Loan (incl. FCNR loan of USD 5.0 million)

2,715.00

State Bank of Hyderabad First Term Loan 913.00 State Bank of Hyderabad Second Term Loan 1,104.00 State Bank of Indore 1,020.00 Axis Bank (Capex LC for availing buyers’ credit) 575.00 Equity and Internal Accruals 6,487.48

Total 13,964.48

Details of Balance Fund Deployment

(Rs. in Lacs) Sr.No.

Particulars TillSeptember

1, 2008

FromSeptember 2, 2008 to March 31,

2009

FY 2010 Total

I Capital expenditure requirements in respect of Malpe facilities

Land and civil works 8,305.34 3,344.56 2,282.23 13,932.13 Plant and Machinery 4,379.24 6,261.63 0.00 10,640.87 Miscellaneous Assets 157.14 156.54 648.20 961.88 Preoperative Expenses 1,122.76 294.31 82.93 1,500.00 II Repayment of Buyers’ Credit - 2,500.00 - 2,500.00III General Corporate Purposes - [•] - [•]IV Issue Expenses - [•] - [•]

Total 13,964.48 [•] 3,013.36 [•]

Interim use of proceeds of the Issue

Our management, in accordance with the policies established by the Board, will have flexibility in deploying the net proceeds received from the Issue. Pending utilization of the net proceeds out of the Issue for the purposes described above, we intend to temporarily invest the funds in quality interest bearing liquid instruments including deposits with banks, other investment grade interest bearing securities as may be approved by the Board, mutual funds or temporarily deploy the funds in working capital loan accounts. Such investments would be in accordance with the investment policies approved by our Board of Directors from time to time.

52

Monitoring of use of Issue Proceeds

As the size of the Issue does not exceed Rs. 50,000 lacs, appointment of a monitoring agency under clause 8.17 of the SEBI DIP Guidelines is not required. The Audit Committee of our Company will monitor the utilization of the proceeds of the Issue. Our Company will disclose the utilization of Issue proceeds under a separate head in its balance sheet along with details for FY 2009 and FY 2010 clearly specifying the purpose for which such proceeds have been utilized. Our Company, in its balance sheet for FY 2009 and FY 2010, will provide details, if any, in relation to all such proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue in our Company’s financial statements for the relevant Financial Years commencing from Financial Year 2009.

Pursuant to clause 49 of the Listing Agreement, our Company shall on a quarterly basis disclose to the Audit Committee the uses and applications of the proceeds of the Issue. On an annual basis, our Company shall prepare a statement of funds utilised for purposes other than those stated in the Draft Letter of Offer and place it before the Audit Committee. Such disclosure shall be made only until such time that all the proceeds of the Issue have been utilised in full. The statement shall be certified by the statutory auditors of our Company. Furthermore, in accordance with clause 43A of the Listing Agreement we shall furnish to the Stock Exchange on a quarterly basis, a statement including material deviations if any, in the utilisation of the process of the Issue from the objects of the Issue as stated above. This information will also be published newspapers simultaneously with the interim or annual financial results, after placing the same before the Audit Committee.

53

BASIS FOR ISSUE PRICE

The Issue Price for the Compulsorily Convertible Preference Shares (CCPS) will be determined by our Company in consultation with the Lead Manager. Investors should also refer to the sections “Risk Factors” and “Audit Report” beginning on page x and FS - 1, respectively, of the Draft Letter of Offer to get a more informed view before making any investment decision.

Qualitative Factors

We believe the following business strengths allow us to successfully compete in the shipbuilding industry:

• Experienced and professional management team • Competitive cost structure • Advanced shipbuilding technology • Focused on a niche market • Our MOU with Cochin Shipyards Limited • Integrated Facility at Malpe

For further details, see the sections titled “Our Business – Our Competitive Strengths” and “Risk Factors” on pages 73 and x respectively of the Draft Letter of Offer.

Quantitative Factors

1. Earning Per Share (EPS) pre-issue for the last three years (as adjusted for changes in capital) [face value of Rs.10/- each]

Year Unconsolidated EPS (Rs.)

Consolidated EPS (Rs.) Weight

FY 2006 11.01 11.32 1 FY 2007 20.79 20.80 2 FY 2008 75.91 75.90 3

Weighted Average 46.72 46.77

Note: Earnings per share represent basic earnings per share calculated as per Accounting Standard – 20 (‘Earnings per share’).

2. Price/Earning (P/E) ratio in relation to Issue Price of [•]

Our equity shares was last traded on OTCEI on December 11, 1999 at Rs. 2.25/- Industry P/E*

(i) Highest: 10.3 (ii) Lowest: 6.1(iii) Industry average: 8.2 * Source: Capital Market, Volume: XXIII/15 September 22 – October 05, 2008

3. Weighted Average Return on Net Worth (RoNW) in the last three years

Year Unconsolidated RONW (%)

Consolidated RONW (%) Weight

FY 2006 74.98 74.72 1 FY 2007 14.48 14.44 2 FY 2008 43.05 42.97 3

Weighted Average

38.85 38.75

Note: Return on net worth is arrived by dividing adjusted profit after tax by total shareholder’s funds

54

(Net Worth) at the end of each year.

4. Minimum return on increased Net Worth required to maintain pre-Issue EPS of:

1. Rs. 75.91 (on unconsolidated basis) is [•]% 2. Rs. 75.90 (on consolidated basis) is [•]%

5. Net Asset Value per Equity Share

Particulars Unconsolidated NAV (Rs.)

ConsolidatedNAV (Rs.)

Net Asset Value per Equity Share as on March 31, 2008 Rs. 176.34 Rs.176.66Net Asset Value per Equity Share after the Issue (post conversion of CCPS into Equity Shares) Rs. [•] Rs. [•]

Issue Price Rs. [•] Rs. [•]

Note: Net Asset value per share is arrived by dividing total shareholder’s funds (Net Worth) by the total number of shares outstanding at the end of each year.

6. Comparison with other listed companies

Face Value (Rs.)

EPS (Rs)

P/E Ratio

RoNW (%)

Book Value (Rs.)

Tebma Shipyards Limited (on consolidated basis) 10 75.90 [ ]

42.97 176.66

Peer Group ABG Shipyard 10 34.2 10.3 26.3 134.5 Bharti Shipyard 10 41.7 6.1 35.5 206.7

Source: Capital Market, Volume: XXIII/15 September 22 – October 05, 2008

Note: The RONW and Book Value figures are based on the audited results for the year ended March 31, 2008 and EPS and P/E Ratio are based on trailing twelve months (TTM)

7. The face value of Equity Shares of the Company is Rs. 10.

Our Company is issuing Compulsorily Convertible Preference Shares of Rs. 10each at an Issue Price of Rs [ ] per Compulsorily Convertible Preference Share.

55

STATEMENT OF TAX BENEFITS

To

The Board of Directors Tebma Shipyards Limited No. 5/360, Rajiv Gandhi Salai (OMR) Okkiam, Thoriapakkam Chennai – 600 097 Tamil Nadu

We hereby report that we have received the enclosed annexure, prepared by the Company, stating the possible tax benefits available to Tebma Shipyards Limited (‘the Company’) and its shareholders under the current tax laws presently in force 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 that the Company faces in future, the Company may or may not choose to fulfill.

The benefits discussed in the annexure 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 issue.

We do not express any opinion or provide any assurance as to whether:

• the Company or its shareholders will continue to obtain these benefits in future; or

• the conditions prescribed for availing the benefits have been / would be met with.

The contents of this annexure are based on the information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company.

This report is intended solely for your information and for the inclusion in the Offer Document in connection with the proposed Rights Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for B S R & Associates Chartered Accountants

Subramanian Vivek Partner Membership No. 100332

Chennai September 26, 2008

56

STATEMENT OF POSSIBLE DIRECT TAX BENEFITS AVAILABLE TO TEBMA SHIPYARDS LIMITED AND TO ITS SHAREHOLDERS

A. Under the Income Tax Act, 1961 (“the Act”)

Special Benefits:-

There are no special benefits accruing to the Company or its shareholders.

General Benefits:-

These benefits are available to all companies or to its shareholders of any company after fulfilling certain conditions as required in the respective act.

I. Benefits available to the Company

1. Under section 32 of the Act, the Company is entitled to claim depreciation at the prescribed rates on specified tangible and intangible assets used by the Company for the purposes of its business and subject to other conditions listed in the Act.

Unabsorbed depreciation, if any, for an assessment year can be carried forward and set off against income from any other source in the subsequent assessment years as per section 32 subject to the provisions of section 72(2) and section 73(3) of the Act.

2. The Company would be required to pay tax on its book profits under the provisions of section 115JB of the Act in case where tax on its “total income” (as defined under section 2(45) of the Act) is less than 10% of its “book profits” (as defined under section 115JB of the Act). Such tax is referred to as Minimum Alternate Tax (‘MAT’).

The difference between the MAT paid for any assessment year commencing on or after 1 April 2006 and the tax on its total income payable for that assessment year shall be allowed to be carried forward as “MAT credit”. The MAT credit can be utilised for set off against taxes payable on the total income in the subsequent assessment years, restricted to a period of 7 assessment years succeeding the assessment year in which such MAT was paid.

3. As per section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e. dividends declared, distributed or paid on or after 1 April 2003 by domestic companies) is exempt from tax.

Also, section 94(7) of the Act provides that losses arising from the sale/transfer of shares or units purchased within a period of three months prior to the record date and sold/transferred within three months or nine months respectively after such date, will be disallowed to the extent dividend income on such shares or units are claimed as tax exempt.

4. As per section 10(35) of the Act, the following income will be exempt from tax in the hands of the Company:

a. Income received in respect of the units of a Mutual Fund specified under section 10(23D)i.e., a mutual fund registered under Securities Exchange Board of India (‘SEBI’) or such other mutual fund set up by specified institution; or

b. Income received in respect of units from the Administrator of the specified undertaking; or

c. Income received in respect of units from the specified company:

57

However, this exemption does not apply to any income arising from transfer of units of the administrator of the specified undertaking or of the specified Company or of a mutual fund, as the case may be.

For this purpose (i) “Administrator” means the Administrator as referred to in section 2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 and (ii) “Specified Company” means a company as referred to in section 2(h) of the said Act.

5. As per section 10(38) of the Act, long term capital gains arising to the Company from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt in the hands of the Company.

For this purpose, “equity oriented fund” means a fund:

i. where the investible funds are invested by way of equity shares in domestic companies to the extent of more than sixty-five percent of the total proceeds of such funds; and

ii. which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the Act.

As per section 115JB, while calculating “book profits” for the purpose of “Minimum Alternate Tax”, the Company will not be entitled to reduce the long term capital gains to which the provisions of section 10(38) of the Act apply.

6. One undertaking of the Company, in Malpe (Karnataka) is registered under the Export Oriented Units (EOU) scheme as a 100% EOU and is eligible for deduction under section 10B, whereby the income of such undertakings earned out of exports of articles or things or computer software is eligible for Tax holiday for 10 years from the year in which undertaking begins manufacturing or up to Income-tax Assessment year 2010-11, whichever is earlier subject to compliance of certain conditions specified in the said section.

7. Under section 32 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 patents, trademark, copyright, know-how, licenses, etc. if acquired after April 01, 1998, subject to conditions as prescribed.

8. Under section 35D of the Act, the Company will be entitled to a deduction equal to 1/5th of the expenditure incurred of the nature specified in the said section, including expenditure incurred on present issue, such as underwriting commission, brokerage and other charges, as specified in the section, by way of amortisation over a period of 5 successive years, beginning with the previous year in which the business commences, subject to the stipulated limits.

9. Under section 48 of the Act, the long term capital gains arising out of sale of capital assets excluding bonds and debentures (except Capital Indexed Bonds issued by the Government) will be computed after indexing the cost of acquisition/ improvement.

10. As per section 54EC of the Act and subject to the conditions and to the extent specified therein, long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a “long term specified asset” within a period of six months after the date of such transfer.

The investment made on or after April 1st 2007 in long term specified asset by an assessee during any financial year shall not exceed Rs. 50 Lakhs. In other words, there is a ceiling of Rs.50 Lakhs.

58

However, if the assessee transfers or converts the long term specified asset into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long-term capital gains in the year in which the long term specified asset is transferred or converted into money.

A “long term specified asset” means any bond, redeemable after three years and issued on or after the 1st day of April 2007:

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

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

11. The Company is entitled to deduction under section 80G of the Act in respect of amounts contributed as donations to various charitable institutions and funds covered under the section, subject to fulfilment of conditions specified therein to the extent specified in the section and upto 10 percent of the Gross total income (before availing any deduction under this section).

12. As per section 111A of the Act, short term capital gains arising to the Company from the sale of equity shares or units of an equity oriented mutual fund transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and education cess).

However, deduction under Chapter VI-A of the Act would not be allowed in respect of short term capital gains, subject to tax under section 111A of the Act

13. As per section 112 of the Act, long-term capital gains on sale of listed securities or units or zero coupon bonds (in cases not covered under section 10(38) of the Act) will be charged to tax at the rate of 20% (plus applicable surcharge and education cess) after considering indexation benefits in accordance with and subject to the provisions of section 48 of the Act or at 10% (plus applicable surcharge and education cess) without indexation benefits, whichever is less.

II. Benefits available to Resident Shareholders

1. Under section 10(32) of the Act, any income of minor children clubbed in the total income of the parent under section 64(1A) of the Act, will be exempt from tax to the extent of Rs. 1,500 per minor child, whose income is so included.

2. As per section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e.dividends declared, distributed or paid on or after 1 April 2003 by domestic companies) received on the shares of the Company is exempt from tax.


3. As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term capital asset being an equity share of the Company, where such transaction is chargeable to securities transaction tax, will be exempt from tax in the hands of the shareholder.

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4. As per section 111A of the Act, short term capital gains arising from the sale of equity shares of the Company transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and education cess).

However, deduction under Chapter VI-A of the Act would not be allowed from such short term capital gains, subject to tax under section 111A of the Act

5. Under section 48 of the Act, the long term capital gains arising out of sale of capital assets excluding bonds and debentures (except Capital Indexed Bonds issued by the Government) will be computed after indexing the cost of acquisition/ improvement.


7. The investment made on or after April 1st 2007 in long term specified asset by an assessee during any financial year shall not exceed Rs. 50 Lakhs. In other words, there is a ceiling of Rs. 50 Lakhs. However, if the assessee transfers or converts the long term specified asset into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long-term capital gains in the year in which the long term specified asset is transferred or converted into money




8. As per section 54F of the Act, long term capital gains (in cases not covered under section 10(38)) arising on the transfer of a long term capital asset other than a residential house held by an individual or Hindu Undivided Family will be exempt from tax if the net consideration is utilised, within a period of one year before, or two years after the date of transfer, in the purchase of a residential house, or for construction of a residential house within three years. Such benefit will not be available:

(a) if the individual or Hindu Undivided Family-

- owns more than one residential house, other than the new residential house, on the date of transfer of the shares; or

- purchases another residential house within a period of one year after the date of transfer of the shares; or

- constructs another residential house within a period of three years after the date of transfer of the shares; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house

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property”. If only a part of the net consideration is so invested, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new residential house bears to the net consideration will be exempt.

If the new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, will be deemed to be income chargeable under the head “capital gains” of the year in which the residential house is transferred.

9. As per section 112 of the Act, long-term capital gains on sale of listed securities or units or zero coupon bonds (in cases not covered under section 10(38) of the Act) will be charged to tax at the rate of 20% (plus applicable surcharge and education cess) after considering indexation benefits or at 10% (plus applicable surcharge and education cess) without indexation benefits, whichever is less.

10. As per section 88E of the Act, the securities transaction tax paid by the shareholder in respect of taxable securities transactions entered into in the course of the business will be eligible for deduction from the amount of income tax on the income chargeable under the head “Profits and Gains of Business or Profession” arising from taxable securities transactions, subject to certain limit specified in the section. As such, no deduction will be allowed in computing the income chargeable to tax as “capital gains” or under the head “Profits and gains of Business or Profession” for such amount paid on account of securities transaction tax from AY 2009-10.

III. Benefits available to Non-Resident Shareholders (Other than FIIs and Venture Capital Companies / Funds)

1. Under section 10(32) of the Act, any income of minor children clubbed in the total income of the parent under section 64(1A) of the Act, will be exempt from tax to the extent of Rs. 1,500 per minor child, whose income is so included.

2. As per section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e. dividends declared, distributed or paid on or after 1 April 2003 by domestic companies) received on the shares of the Company is exempt from tax.


3. As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term capital asset being an equity share of the Company, where such transaction is chargeable to securities transaction tax, will be exempt from tax.

4. As per section 111A of the Act, short term capital gains arising from the sale of equity shares of the Company transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 10% (plus applicable surcharge and education cess).

However, under Chapter VI-A of the Act would not be allowed from such short term capital gains, subject to tax under section 111A of the Act

5. As per section 112 of the Act, long-term capital gains on sale of listed securities or units or zero coupon bonds (in cases not covered under section 10(38) of the Act) will be charged to tax at the rate of 20% (plus applicable surcharge and education cess) after considering

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indexation benefits or at 10% (plus applicable surcharge and education cess) without indexation benefits, whichever is less.

6. As per the first proviso to section 48 of the Act, in case of a non resident shareholder, the capital gain/loss arising from transfer of shares of the Company, acquired in convertible foreign exchange, will be computed by converting the cost of acquisition, sales consideration and expenditure incurred wholly and exclusively incurred in connection with such transfer, into the same foreign currency which was initially utilized in the purchase of shares. Cost indexation benefit will not be available in such a case.

As per section 112 of the Act, long-term capital gains, if any, on sale of any long term capital asset (in cases not covered under section 10(38) of the Act) will be charged to tax at the rate of 20% (plus applicable surcharge and education cess).


The investment made on or after April 1st 2007 in long term specified asset by an assessee during any financial year shall not exceed Rs. 50 Lakhs. In other words, there is a ceiling of Rs. 50 Lakhs.





8. As per section 54F of the Act, long term capital gains (in cases not covered under section 10(38)) arising on the transfer of long term capital asset (other than a residential house) held by an individual or Hindu Undivided Family will be exempt from capital gains tax if the net consideration is utilised, within a period of one year before, or two years after the date of transfer, in the purchase of a residential house, or for construction of a residential house within three years. Such benefit will not be available:

(a) if the individual or Hindu Undivided Family- - owns more than one residential house, other than the new residential house, on the date of

transfer of the shares; or - purchases another residential house within a period of one year after the date of transfer

of the shares; or - constructs another residential house within a period of three years after the date of

transfer of the shares; and

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(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.

If only a part of the net consideration is so invested, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new residential house bears to the net consideration will be exempt.

If the new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, will be deemed to be income chargeable under the head “capital gains” of the year in which the residential house is transferred

9. As per section 88E of the Act, the securities transaction tax paid by the shareholder in respect of taxable securities transactions entered into in the course of the business will be eligible for deduction from the amount of income tax on the income chargeable under the head “Profits and Gains of Business or Profession” arising from taxable securities transactions, subject to certain limit specified in the section. As such, no deduction will be allowed in computing the income chargeable to tax as “capital gains” or under the head “Profits and gains of Business or Profession” for such amount paid on account of securities transaction tax from Ay 2009-10.

10. As per section 115E of the Act, in the case of a shareholder being a non-resident Indian, and subscribing to the shares of the Company in convertible foreign exchange, in accordance with and subject to the prescribed conditions;

(a) Long term capital gains arising on transfer of the shares of the Company (in cases not covered under section 10(38) of the Act) will be subject to tax at the rate of 10% (plus applicable surcharge and education cess), without any indexation benefit.

(b) Income by way of dividends under section 115-O of the Act shall be taxable at 20% .

11. As per section 115F of the Act and subject to the conditions specified therein, in the case of a shareholder being a non-resident Indian, gains arising on transfer of a long term capital asset being shares of the Company will not be chargeable to tax if the entire net consideration received on such transfer is invested within a period of six months in any specified asset or savings certificates referred to in section 10(4B) of the Act. If part of such net consideration is invested within the period of six months in any specified asset or savings certificates referred to in section 10(4B) of the Act, then such gains would not be chargeable to tax on a proportionate basis. Further, if the specified asset or savings certificate in which the investment has been made is transferred within a period of three years from the date of investment, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which such specified asset or savings certificates are transferred.

12. As per section 115G of the Act, non-resident Indians are not obliged to file a return of income under section 139 (1) of the Act, if their only source of income is investment income from specified investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Act.

13. As per section 115H of the Act, where a non-resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under section 139 of the Act to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money

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14. As per section 115I of the Act, a non-resident Indian may elect not to be governed by the provisions of Chapter XII-A for any assessment year by furnishing a declaration along with his return of income for that assessment year under section 139 of the Act, that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act.

15. The tax rates and consequent taxation mentioned above could be further subject to any benefits available under the Agreement for Avoidance of Double taxation (‘Tax Treaty’), if any, between India and the country in which the non-resident is a resident. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the nonresident. Further, in terms of section 91 of the Act, relief in respect of double taxation could also be availed in relation to countries where no Tax Treaty applies.

IV. Benefits available to Foreign Institutional Investors (‘FIIs’)

1. As per section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e. Dividends declared, distributed or paid on or after 1 April 2003 by domestic companies) received on the shares of the Company is exempt from tax.


2. As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term capital asset being an equity share of the Company, where such transaction is chargeable to securities transaction tax, will be exempt in the hands of the FIIs.

3. As per section 115AD read with section 111A of the Act, short term capital gains arising from the sale of equity shares of the Company transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and education cess).

4. As per section 115AD of the Act, FIIs will be taxed on the capital gains that are not exempt under the provisions of section 10(38) of the Act at the following rates:

Nature of income Rate of tax (%)

Long term capital gains: 10%

Short term capital gains (other than referred to in section 111A) 30%

The above tax rates will be increased by the applicable surcharge and education cess. In case of long term capital gains, (in cases not covered under section 10(38) of the Act), the tax is levied on the capital gains computed without considering the cost indexation and without considering foreign exchange fluctuation.

5. The tax rates and consequent taxation mentioned above could be further subject to any benefits available under the Tax Treaty, if any between India and the country in which the FII is a resident. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial.

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Further, in terms of section 91 of the Act, relief in respect of double taxation could also be availed in relation to countries where no Tax Treaty applies.


The investment made on or after April 1st 2007 in long term specified asset by an assessee during any financial year shall not exceed Rs. 50 Lakhs. In other words, there is a ceiling of Rs. 50 Lakhs.




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

V. Benefits available to Mutual Funds

As per section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorised by the Reserve Bank of India will be exempt from income tax, subject to such conditions as the Central Government may by notification in the Official Gazette, specify in this behalf.

VI. Benefits available to Venture Capital Companies/Funds

As per section 10(23FB) of the Act, all Venture Capital Companies/Funds registered with the Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on their entire income, including income from sale of shares of the company. However, under section 115U of the Act, income received by a person out of investment made in a venture capital company or in a venture capital fund will be chargeable to tax in the hands of such person.

B. Benefits available under the Wealth Tax Act, 1957

“Asset” as defined under section 2(ea) of the Wealth tax Act, 1957 does not include shares in companies and hence, shares are not liable to wealth tax.

C. Benefits available under the Gift Tax Act, 1958

Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of shares will not attract gift tax.

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NOTES

(i) The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of shares.

(ii) All the above benefits are as per the current tax laws; and

(iii) In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of his/her investments in the shares of the Company.

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INDUSTRY OVERVIEW

Data in this section has been sourced from :

I-Maritime Consultancy Private Limited (“I-Maritime”)– “India Shipbuilding Report 2006

The information presented in this section has been obtained from publicly available documents from various sources, including officially prepared materials from the Government bodies and industry websites/publications. Industry websites/publications generally state that the information contained in therein has been obtained from sources believed to be reliable but their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe industry, market and government data used in the Draft Letter of Offer is reliable, it has not been independently verified. Similarly, internal Company estimates, while believed by us to be reliable, have not been verified by any independent agencies.

Introduction

Shipbuilding industry is driven by the fortunes of international shipping in the prevailing and the anticipated behaviour of the freight rates. The freight markets in turn, are influenced, inter alia, by

• the growth of global economy • sea – borne trade volumes, • existing shipping capacity, • age profile of current fleet etc.

The fortunes of shipbuilding industry are hinged firmly on the happenings in the shipping industry. The changing volumes and patterns of the international sea-borne trade in turn, underpin the dynamics of global shipping. Historical evidence suggests that increase in international tonnage closely follows the global economic growth rate. This observation continues to be a simple but useful rule-of-thumb even in today’s complex world.

Major factors influencing the placement of orders for new construction:

- Ageing world fleet - Rise in operating costs - Replacement enforced by regulation (for example, the ongoing phase-out of single-hull tankers) - Need for bigger ships to take advantage of economies of scale.

The current shipbuilding market, which offers an unprecedented opportunity for shipyards, continues to grow, with no sign yet of leveling off. The biggest beneficiaries of the current boom have been the Asian yards and their order books are overflowing. Ship owners are frantically scouting around for shipbuilding slots are willing to expose themselves to a degree of risk by placing orders even with new,untried yards. .

(Source: I-Maritime– “India Shipbuilding Report 2006)

Present Indian shipbuilding scenario:-

Over the past decade, India has emerged as an increasingly important player in the global trade with the country’s port shipping sectors receiving significant attention from investors as well as policy makers. In its draft Maritime Policy, Government of India has identified shipbuilding as a major thrust area.

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Thanks to the buoyant freight markets and the support extended by the Indian Governement by way of tonnage tax since 2004-05, Indian shipping companies have in recent months, embarked upon an acquisition spree. ( Source: I-Maritime– “India Shipbuilding Report 2006)

From being an inward looking industry dominated by public sector yards until 1999, Indian shipbuilding has clearly undergone a transformation in recent years to position itself as an export-oriented industry. Increasing participation and contribution by the private sector yards, not only in the small vessel sector(as has been the case in the past), but also in the larger vessel segment. ( Source: I-Maritime– “India Shipbuilding Report 2006)

Growth in the Indian tonnage

Period Coastal Overseas Indian Tool World Ships mn

GRT Ships mn

GRTShips mn

GRT mn GRT

1997-98 234 0.643 244 6.200 478 6.843 439.0 1998-99 250 0.656 240 6.212 490 6.868 444.0 1999-00 273 0.682 240 6.231 513 6.913 449.4 2000-01 316 0.697 230 6.119 546 6.817 475.2 2001-02 336 0.734 224 6.087 560 6.821 487.0 2002-03 425 0.805 191 5.372 616 6.178 503.0 2003-04 436 0.808 203 6.136 639 6.944 533.3 2004-05 458 0.811 228 7.202 686 8.013 546.6

( Source: I-Maritime– “India Shipbuilding Report 2006)

Share of the Indian fleet in overseas trade

Year Total; Overseas Borne Trade (millin T)

Cargo Carried by Indian Ships (million T)

Share of Indian Shipping

1997-98 202.4 63.5 31.4% 1998-99 203.7 62.6 30.7% 1999-00 224.6 70.9 31.6% 2001-02 273.0 46.3 17.0% 2002-03 280.3 42.4 15.1% 2003-04 345.6 47.6 13.8%


India’s offshore Exploration and Production is accorded high priority by the Government and is now being taken up predominantly in deeper waters (>400m water depth) and further away from coast. Consequently, larger and more sophisticated offshore supply and support vessels are on demand. This trend is expected to become more dominant in the coming years. In addition, the older OSVs, acquired during the late seventies and early eighties, have become old and most of them unserviceable. Their replacement, coupled with the need for a new generation of larger vessels, is going to precipitate substantial demand for the shipbuilding industry in the near future.

Orderbook of Indian Shipping Companies (Jan 06)

Indian Foreign Owners TYPE OF SHIP No. DWT No. DWT

Tanker(Crude) - - 2 632,000 SCI Tanker(Product) - - 3 142,000 GE

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Bulk Carrier 10 438,000 - - GoodEarth AHTS 7 15,100 - - Ge&TagSea Chem & Oil - - 2 73,400 GE MPP 2 7200 - - SKS PSV - - 3 9,832 GE&Garware Ro Pax 1 1,560 - - SCI Total 20 461,860 10 857,232


Indian Shipyards –Order Book

Though India’s share in the global new building orders is small at present, it is expected to rise significantly in the near future. The additional ship building capacity needed is to the tune of four times the present level at the very minimum for the domestic market alone. The global requirement as of now remains largely unmet as reflected by the overflowing order books the world over .

Orders of Major Indian Commercial Shipyards (Jan 2006)

Type Of Ship No. DWT Yard General Cargo(AHTS, PV) 29 76,600 ABG General cargo(AHTS, Ro-Ro) 20 77,400 Bharti General Cargo(mpp) 14 60,600 Chowgule Bulk Carrier,PSV 10 254,000 CSL Bulk Carrier,Passenger,RV 14 439,560 HSL Product tanker 10 108,400 Alcock Total Orders 97 1,016,560 World new building order book 226,870,000 %share of Indian Yard 0.45%


Changing industry dynamics

After being stagnant for a prolonged period, several Indian shipyards are currently experiencing an increased activity and dynamism in terms of new orders and exposures to new market segment. This change has been brought about by a number of global as well as domestic factors.

At the global level

• Spill over effect from saturation of orders on shipyards world over with consequent stretching of the delivery time beyond two years.

• Owners wanting to expedite deliveries to cash in on current buoyancy in the freight market. • Need for replacement of single-hull tankers over the next ten years. • Continuing dominance of China factor

On the domestic front

• Introduction of the tonnage tax at a time when the freight markets have touched an all time high leading to accumulation of large-scale cash reserves and opening up of a wide range of investment options.

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• Vessel replacement needs coupled with growth requirement in certain segments (for example, mini bulk carriers, OSVs, tugs and other port craft.)

• Demand for large bulk carriers and crude tankers which can be met only partially by the Indian yards at the current output levels.

• The 30% subsidy announced by the Indian government. • Growing private sector contribution to shipbuilding and increasing overall investment in maritime

industry. • maturing of the Indian maritime industry as a whole with a number of simultaneous developments

occurring in port, marine equipment manufacture, maritime support services, offshore and other related sectors in the context of growing sea-borne trade

• Continuing GDP growth at 7-8% and spread of industrialization and the cosequent demand for sea-borne transportation of energy resources (crude, products, coal) and export of iron ore, semi finished and finished goods.

• Strong positive market perceptions about the coastal and inland shipping in the light of Government’s declared policies and inauguration of projects such as Sethusamudram Ship canal Project.

In December 2004, Fairplay Solutions placed India’s new building order book at 242,842DWT, ranking it as the 20th in the world (in term of DWT), with a share of just 0.11%. With four-fold increase in the order book in last one year, India’s current ranking has risen to the 13th place. The current order book of over one billion increases India’s share in the global shipbuilding to 0.45%


India’s ranking in terms of order book- globally

Sr.No. Country No.Of Yards No.Of Ships DWT Avg.DWT 1 S.Korea 26 1160 80,410,471 69,319 2 Japan 63 1022 73,007,322 71,436 3 China 78 1063 46,418,899 43,668 4 Germany 17 214 4,441,660 20,755 5 Taiwan 2 53 3,015,290 56,892 6 Croatia 5 69 2,792,769 40,475 7 Poland 4 76 2,263,400 29,782 8 Denmark 1 16 2,000,000 125,000 9 Vietnam 8 81 1,571,100 19,396

10 Iran 3 33 1,432,100 43,397 11 Netherland 13 136 1,069,690 7,865 12 Russia 13 63 1,069,581 16,977 13 India 7 97 1,016,560 10,480 14 Turkey 23 110 970,834 8,826 15 USA 15 42 865,982 20,619


Indian Shipyards – orderbook (as in Jan 2006)

Type of ship No. DWT Yard general cargo (AHTS, PV) 29 76,600 ABG General cargo (AHTS,Ro Ro) 20 77,400 Bharti General Cargo (MPP) 14 60,600 Chowgule Bulk Carrier, PSV 10 254,000 CSL Bulk carrier, Passenger, RV 14 439,560 HSL

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Product Tanker 10 108,400 Alcock Total Orders 97 1,016,560 World new building order book 226,870,000 %Share of Indian Yard 0.45% ( Source: I-Maritime– “India Shipbuilding Report 2006)

The new building orders coming to the Indian shipyards are more in the coastal and specialized vessels (i.i. OSVs, AHTS, etc.). These ships are used in the offshore oil and gas exploration. The major shipyards that have proved their capabilities in this segment are ABG Shipyard and Bharti Shipyard.

Shipbuilding vs. Ship-repairs

As industries, shipbuilding and ship-repairs have similarity in work & infrastructure used: hence, investments in shipbuilding have to be made keeping an eye on the ship-repair market for minimum gains. While the basic infrastructure & technical facilities of shipbuilding industry can be utilized for ship bearers, the converse is not true. It is therefore advisable, while setting-up a green –field or augmenting an existing building yard, to ascertain the ship-repair requirements, for which the facility can be put to use, whenever there is a need for it. Processing of ship repair orders could be viewed as a means to reduce the idle time. It is not cost effective if shipbuilding facilities are utilized for undertaking ship-repairs, particularly over a long period. This is however, what the Public sector had so far being doing in India.

On the other hand, when there is such a large market for shipbuilding as at present, the ship-repairers may find it worth upgrading their yards for ship building activity as well. There is a great risk of losing the market on account on un-reliable delivery schedules.

Factors in favour of the Indian Shipbuilding industry.

Various factors that augur well for the Indian shipbuilding industry at the present juncture may be summarized as follows:

Government support in the form of shipbuilding subsidy, hither-to-fre available for only the public sector yards, has now been extended to the private sector yards as well (from 2002 onwards).

Low cost labour although the unit labour cost for the Indian yards (especially the public sector ones) is still very high. However, with the interest being evinced by the private sector yards to expand their operations, the situatio is expected to improve fast.

Manufacturing hub with a number of steel plants and assembly/manufacture of marine equipment planned by the global majors in India, besides the government-provided fillip to the marine infrastructure development within the country.

Robust financial system and markets for raising funds. One of the private sector shipyards (Bharti) had raised funds for its expansion plans through an IPO (initial public offering), which got a very favourable response. ABG shipyard has also raised funds through an IPO in December 2005, apart from which part-funding has been made through financial institutions.

Skilled manpower and technicians; although in the past, considerable human talent migrates to the developed world for better prospects; however with the global focus shifting to India, much of the skill sets in areas like information technology, naval architecture, ship design welding, etc. can be attracted to employment opportunities in the shipbuilding sector in India.

Domestic market that will remain a major contributory factor for the future growth of India’s shipbuilding industry although export orders are likely to assume an increasingly dominant proportion.

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Government Initiatives for the Shipbuilding Sector

Shipbuilding Subsidies

In 2002, the Government of India (“GOI”) introduced a shipbuilding subsidy of 30% of the ship price for a period of 5 years, ending on August 14, 2007, on the construction of ocean-going merchant ships over 80 meters in length which are manufactured for the Indian market, and on all types of ships which are manufactured for export, subject to fulfilment of certain other conditions. The subsidy was payable to private shipyards for ships that met the eligibility requirements upon completion of construction and delivery of such eligible ships.

Shipbuilding management

Building of each ship can be visualized as a separate project. In most yards, more than one ship is under construction at any given point of time. Optimal allocation of resources (facilities, personnel, and material) among the ongoing projects and monitoring them to ensure their efficient utilization are the key managerial challenges in shipbuilding. Since resources are always finite and expensive, several tasks across the ongoing projects will need to be planned and sequenced.

Share of the Indian fleet in overseas trade

Year Total Overseas Sea-Borne Trade(million T)

Cargo Carried by Indian Ships(million T)

Share of Indian shipping

1997-98 202.4 63.5 31.4% 1998-99 203.7 62.6 30.7% 1999-00 224.6 70.9 31.6% 2001-02 273 46.3 17.0% 2002-03 280.3 42.4 15.1% 2003-04 345.6 47.6 13.8% ( Source: I-Maritime– “India Shipbuilding Report 2006)

Indian coastal shipping fleet

For the two years (2003-2005) coastal shipping has been stagnant. In the previous five year period (1998-2003) however, an annual growth rate of 7.5% was registered.

The table below shows the fleet composition of India’s coastal fleet as on December 31, 2004. In tonnage terms, dry bulk carriers contributed around 27% (226,388 GRT); dry cargo vessels 12% (98,127 GRT); specialist vessels 11% (90,394 GRT) and Offshore supply Vessel 10% (80428GRT).

Coastal fleet by type and GRT

Vessel type Nos. GRTTugs 179 48,876 OSVs 81 84,744 Gen. Cargo Vessels 62 94,501 Passenger Ferries 38 76,950 Specialised vessels (offshore) 36 87,081 Pilot & Survey Launch 28 15,701 Dredgers 19 83,522 Product Tankers 9 26,344 Bulk Carriers 9 226,388 Barges 3 1,220

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Crude Oil Carriers 2 50,080 Others 4 9,683 Total 470 805,090 ( Source: I-Maritime– “India Shipbuilding Report 2006)

In the terms of numbers, tugs, and OSVs form a substantial proportion of the coastal fleet. On the other hand, bulk carriers though small in number, make a dominant contribution to the overall GRT. These bulk carriers include chiefly, the thermal coal carriers operated by Poompuhar Shipping of Chennai that operate between Haldia/Paradip and Tuticorin.

Order book of Indian Shipping Companies (Jan 06)

Indian Foreign Owners TYPE OF SHIP No. DWT No. DWT

Tanker(Crude) - - 2 632,000 SCI Tanker(Product) - - 3 142,000 GE Bulk Carrier 10 438,000 - - Good Earth AHTS 7 15,100 - - GE & Tag Sea Chem & Oil - - 2 73,400 GE MPP 2 7,200 - - SKS PSV - - 3 9,832 GE& Garware Ro Pax 1 1,560 - - SCI Total 20 461,860 10 857,232 ( Source: I-Maritime– “India Shipbuilding Report 2006)

Domestic commercial Shipbuilding output-Total (Indian + foreign orders)

1999 2000 2001 2002 2003 2004 Vessel Type No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT Tug 8 1337 14 2255 8 1707 8 1184 7 650 9 2548 Bulk Carriers - - - 45792 - - - - - - - - Tanker(product) - - - - - - - 3500 - - - - Tanker(crude) 1 92500 - - - - 1 93000 - - - - OSVs - - 2 1832 1 73 2 2690 12 38443 5 4220 Ferries 1 4701 - - 6 815 2 225 3 235 3 375 Dredgers - - - - 1 50 - - - - 1 2768 Bulk Carriers (IV)

1 1894 2 8776 - - 5 17246 4 7746 17 32742

Total 11 100432 19 58655 16 2645 19 117845 26 47074 35 42653


The above table summarises India’s shipbuilding output over six-year period between 1999-2004. However, it may be noted that Year-on-Year comparison of shipbuilding output in India’s case could be misleading-especially in the case of larger vessels since they generally take much more than a year to build and the construction activity is not continuous.

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OUR BUSINESS

Overview

We are a shipbuilding company, primarily engaged in sourcing designs from designs, detailing designs for execution and construction of offshore support vessels (“OSV”), dredgers, tugs and fabrication of pressure vessels.

Our Company was established in the year 1984 with an initial focus on building of dredgers for the first decade of our operations, including launches, de-weeding dredgers, self-propelled barges, LPG carriers, dredge tender boats and floating cranes. Subsequently, in the year 1994, our Company expanded its product range to include tugs of SRP and Tractor versions. In the year 2005, our Company forayed into construction of OSVs, and has delivered seven (7) OSVs till date. Further, in 2006, we also began fabrication of pressure vessels for installation in offshore vessels and have received DNV certification for the same.

Since our commencement of ship building operations in the year 1984, we have built and delivered 114 vessels and have catered to the requirements of a diverse domestic and international clientele including offshore service providers, various ports, shipping companies, Government establishments (defence and irrigation), lake authorities and dredging service providers for the public as well as the private sector. During the last three years, our consolidated revenues and PAT have grown at a CAGR of 124.11% and 394.23% respectively. As of September 15, 2008, we have an order book position of twenty seven (27) vessels under design/ construction.

We were originally promoted by a team of six marine professionals i.e. Mr. P.K Balasubramanian, Late Captain B. N. Rao, Mr. Eapen Chacko, Mr. A. K. Singh, Mr. K. A. Thomas and Mr. Biren Mukherjee. In fiscal 2007, IAF- VI, acquired an equity stake of 25,66,800 Equity Shares in our Company, representing an approximate interest of 33%, and they subsequently acquired a 20% stake pursuant to an open offer for substantial acquisition of shares and change in control, made in terms of the SEBI Takeover Regulations. IAF-VI presently holds 53% of the paid up equity share capital of our Company, and is our single largest shareholder. Mr. P.K Balasubramanian and IAF-VI are our current Promoters. For further details regarding changes in our Promoters since our incorporation and acquisition of majority stake by IAF-VI into our Company, please refer to section titled “History And Other Corporate Information” beginning on page 94 of the Draft Letter of Offer.

We currently operate out of three shipbuilding facilities, one located at Chengalpet, at a distance of 70 km from Chennai, and the others at Malpe, near Udupi, South Karnataka, and at Cochin. Our Malpe shipyard has been granted Export Oriented Unit (“EOU”) status by the Government of India for a period of 5 years from May 21, 2008. We are operating under a MoU with Cochin Shipyard Limited, under which we can build tugs and OSVs at Cochin Shipyard.

On a consolidated basis, our income from operations in fiscal 2008 was Rs. 43,221.56 lac compared to Rs. 14,705.34 lac in the corresponding period of the previous fiscal, representing a growth of 193.92%.

Our Competitive Strengths

We believe that we are well positioned to sustain and strengthen our position in the markets in which we compete as well as to exploit significant growth opportunities that exist. We believe that the following are our principal strengths:

Experienced and professional management team

Our company is managed by an experienced and professional management team. We have over 200 engineers and 50 professionals from various branches of science and technologies. As on September 15, 2008 we had 348 employees are on permanent rolls of our Company. Our Chairman, Mr. P.K

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Balasubramanian has more than 35 years of experience in shipbuilding and ship repair. He is also a member of the Technical Committee of the Indian Registrar of Shipping and Lloyds Registrar of Shipping, the body responsible for formulating classification rules for design and building of various types of vessels. The CEO & Managing Director of our Company, Mr. Ajay Dhagat, has over 40 years of experience with companies such as GEC Alstom (formerly English Electric), Areva and BSES. He has expertise in the repositioning of businesses to meet global challenges and competition besides chalking out turnaround strategies for growth. Mr. Jayakumar, Director Technical, has over 16 years of experience in shipbuilding and heads the technical department of Tebma.

Competitive cost structure

As our operations will be based in India, we believe that our labour and overhead costs will generally be lower than some of our international competitors having manufacturing operations in developed regions. Further, our shipbuilding complex at Malpe provides us opportunities for a just-in-time manufacturing thereby generating cost advantages for us.

Advanced shipbuilding technology

We construct hi-tech OSVs with advanced design and production systems. Our value addition in Offshore Supply Vessels is significantly higher in terms of technology as against vessels in other categories. This enables us to create a niche for ourselves in the market.

Focused on a niche market

As a company, we intend to remain focused on the niche market for OSVs in the near future. We believe that the demand for this category of vessels is subject to lesser cyclicality as compared to the demand for other categories of vessels. Demand for OSVs is directly linked to the exploration activities in the oil sector. Demand pull imperatives for OSVs are linked to offshore expenditure, rising global E&P budget, global subsea market capex and spend on deep/ shallow water drilling. We believe that the exploration and production activities in the oil sector is poised for a strong growth in the medium to long term which will consequently have a favourable impact on the demand for OSVs during the same period.

Our MOU with Cochin Shipyards Limited

Our Company has entered into an MOU with Cochin Shipyards Limited, a large public sector shipbuilding company in India, whereby, we manufacture OSVs using their yard facilities and limited material inputs. We have pre-determined revenue and cost sharing arrangement for the same. We believe that this model allows a significant return on our invested capital. The MoU is valid till November 21, 2011.

Integrated Facility at Malpe

The shipbuilding complex at Malpe, post-completion, will have a large covered shed enabling all-weather shipbuilding activities. Our main shipbuilding yard in Malpe will be supported by a pre-fabrication facility which will house all necessary capabilities for structural fabrication and hull work.

Our Strategy

Focus on OSV segment

We believe that strong fundamentals exist for the oil and gas industry. The increasing demand for sub-sea and deep sea drilling due to rising oil exploration activities and E&P activities is, we believe, likely to further strengthen the demand for OSVs. We believe that there are strong advantages of remaining focused on this segment due to higher margins as well as relatively lesser cyclicality in the OSV market.

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Move higher in the value chain

A majority of our current order book comprises of OSVs which cater to shallow water drilling operations. We believe that the market for deep sea drilling has strong growth potential and remains attractive. In the medium to long term, we would like to move up the value chain from our current range of OSVs to more technically advanced OSVs involved in deep sea drilling. While moving up in the value chain, we will also protect our share for dredgers and tugs as well.

Further greenfield expansion plans:

We are witnessing a strong increase in enquiries for OSVs and hence believe that, after completion of our shipbuilding facility at Malpe, we can expand further by way of establishing additional shipbuilding facilities to meet further demand, and this may have flexibility to construct vessels for other segments as well.

Extending the business model of utilizing existing shipyard manufacturing facilities

The business model involving utilizing the shipbuilding facilities at other shipyards has helped increase our revenues and improve our overall returns on capital invested. In addition to our current MOU with Cochin Shipyards Limited, we intend to further explore possibilities of similar arrangements with other players in the future.

• Operations

Products

1. Offshore Support Vessels

OSVs are used for providing assistance to drilling rigs by supplying pipes, liquids, cement etc used in drilling operations. We build PSVs, MPSVs, Diving Support Vessels and AHTS within the category of OSVs. OSVs are designed and built to operate in very rough seas with accurate position keeping. These are complex vessels to build considering the density of equipment and instrumentation. In 2005 we forayed into construction of PSVs and the first PSV was delivered in January 2007 from the CSL facility. As on September 15, 2008 we have outstanding orders for building 12 MPSVs, for delivery from our Malpe shipyard and 1 PSV and 4 AHTS from the CSL facility.

2. Tugs

Tugs are used to assist ships to berth inside a harbour, tow ships through a navigation channel, position oilrigs, fire fighting operation and escort duties, cross-ocean towage and salvage operations, pushing and pulling duties etc. We have established ourselves as a key player in the tug market, moving up the value chain in the process, in terms of technology, size, and bollard pull. We have built tugs which are now operating in several ports in India including defense establishments. We have developed strong in-house capabilities for design and construction of tugs. We have a number of proven designs, designed and developed in-house, for Tugs with bollard pulls between 15 and 60 tonnes with a variety of propeller options. As on September 15, 2008 we have outstanding orders for building 2 tugs.

3. Pilot Launches/Survey Launches

We have built number of Pilot Launches in different sizes and varied designs. As on September 15, 2008 we have orders of 2 Survey Launches.

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4. DredgersWe produce various kinds of dredgers including the following:-

a) Amphibious cutter suction dredgers

We manufacture amphibious cutter suction dredgers under the brand name “Crawl Cat” which are primarily used to maintain depths of irrigation canals, lakes, reservoirs, etc. We commenced construction of such dredgers in 1984 and have since delivered over 25 Crawl Cat dredgers.

b) Tusker dredgers

Tusker dredgers are conventional cutter suction dredgers suitable for reclamation and large sized dredging projects. We commenced construction of tusker dredgers in 1989 which included dredger with cutting depth of 18.5 meters.

c) De-weeding Dredger

These are used for removal of weeds, floating vegetation and underwater growth. As on September 15, 2008 we have outstanding orders for building 6 dredgers.

5. Floating cranes

We have the capacity to build Floating Cranes from 5 Tons to 75 tons

Shipbuilding Process

Shipbuilding is based on principles such as steel fabrication, outfitting to a large degree, modularization of outfitting into units, prefabrication in pipe work, ducting and cable trays, pre-assembly of pipe packages, and outfitting of units such as cabins, cold rooms, etc. All these activities require concurrent engineering, assembly and installation. Planning and production control is a major step in the process. Production begins with steel cutting, steel parts fabrication and block manufacturing. Steel production is a well defined process and the steel cutting and steel fabrication becomes the basis for steel blocks and hull errection.

A typical ship building process is outlined below:

Typically, the key components and equipments required for a particular vessel are identified at the contract stage itself, with the assistance of the technical and design department. Besides these bought out materials, steel is procured which is fabricated into hull shapes and used for hull construction. Steel preparation and steel parts manufacturing is the first point of manufacturing in the entire shipbuilding cycle. This phase usually includes cleaning and preservation, cutting and profiling the steel, and keeping ready all the steel components needed for assembling of a block. Detailed instructions are received from the production department regarding the specifications for steel preparation. Once the individual modules are assembled into a hull, activities such as piping, electrical, installation of engines and other equipments and accommodation systems are carried out. Thereafter, the ship is ready for launching, post which activities such as trial and testing are carried out prior to ultimate delivery to the customer.

Material receiving and preparation

Making, cutting & conditioning steel Block assembly Erection of assembly Launch, testing and

final delivery

Block Outfitting

Blasting & Painting

Outfitting

Material receiving and preparation

Marking, cutting &conditioning steel Block assembly Erection of assembly Launch, testing and

final delivery

Block Outfitting

Blasting & Painting

Outfitting

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Our Location and Facilities

Manufacturing Facilities

We currently operate out of three shipbuilding facilities, one located at Chengalpet, at a distance of 70 km from Chennai, and the others at Malpe, near Udupi, South Karnataka, and at Cochin.We are operating under a MoU with Cochin Shipyard Limited, under which we can build tugs and OSVs at Cochin Shipyard.

Our Chengelpet Facility

The yard is a structural block fabrication and component fabrication facility with plate press, plate rolling machines and a machine shop. This facility is a feeder unit for our construction activitied at Malpe and Cochin and can accommodate 6 dredgers at one time. We have DNV process approval for fabrication of pressure vessels. The facility is used for:

• Production of Cutter suction dredgers • Production of vessels under 22 m length • Structural block fabrication • Fabrication of cement tanks/Mud tanks for PSV s • Production of hull outfit items such as doors, hatches, ladders, man holes etc

Major equipment installed for the above are:

Equipment Uses EOT Cranes Material handling

Welding Equipment Welding Plate Rolling Machine Rolling of plates

Shipbuilding Press Forming

Our Malpe Facility

We are in the process of setting up our shipbuilding facilities i.e, at Malpe. The Shipyard at Malpe will be an integrated shipyard with slipway at Malpe and includes a storage complex, pre-fabrication complex, fabrication facility and shed. The yard shall have a peak shipbuilding capacity of 10 OSVs incuding a dedicated 2 repair bays. However the number of vessels will depend upon the type and size of the vessels for which we get orders. If the orders are for bigger vessels the number of vessels built may come down. The yard is further equipped to for undertaking construction of PSVs, MPSVs, AHTS and DSVs. The shipyard has a layout which we believe will considerably improve efficiency & productivity in constructing and repairing of ships.

Our Shipyard at Malpe complex has a covered shed of 140m x 40m area available for simultaneous and modular construction of four [4] Offshore Supply Vessels. Additionally, the wet basin can house 2 OSVs on which construction activities post launch are usually carried out. Our main yard shall be supported by a pre-fabrication facility as well as piping and carpentry facility which will facilitate the parallel construction of vessels. We believe that post completion, our yard in Malpe will potentially have a peak capacity of up to 10 Offshore Supply Vessels in a year.

Features of the Malpe facility are as follows:

Malpe:

We have been awarded the work of erection, commissioning,operation, management and maintenance of slipway terminal for construction of sea going vessels on a Build Own Transfer (“BOT”) basis, in pursuance of which we have entered into a license agreement with the Director of Ports And Inland Water

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Transport, Karwar, Government of Karnataka for land admeasuring 40,000 sq mtrs. The license has been granted for a period of 30 years from November 10, 2000 upto Novmber 9, 2030, after which we shall be eligible to bid for the operation of the terminal. Under this license arrangement we are required to pay a royalty to the Government of Karnataka for every vessel constructed or repaired at the facility. The complex consists of a Slipway, transfer bay, outfit bay, winches, shipbuilding shed, repair bay-shed, and an outfit-repair shop.

Babuthota- Storage shed located within a kilometer from the ship building complex

Hangerkatte-

• Pre-fabrication complex housing steel cutting capabilities • Facility for block construction, plate shop, profile shop, logistics and welding • Located around 20 km from the ship building complex

We have entered into an MoU with Centraal Industry Group (“CIG”) dated June 11, 2007 for delivery of pre-processed steel kits. We have also entered into a lease agreement with CIG dated January 31, 2008 for leasing part of our premises to facilitate the process. However as on date of the Draft Letter of Offer both the terms MoU and the lease agreement are being re-negotiated.

Barkur-

• In-house capabilities for piping and carpentry work required for the vessels • Furniture and accommodation materials to be placed in the vessel are made here • Located around 10 km from the ship building complex

Power & Water Supply

The power requirement for our shipyard at Malpe is 2500 KVA, out of which 750 KVA has been sanctioned by state electricity board and the balance power requirement is met through own DG sets. The total requirement of water for our shipyard is 20,000 litres per day which is met through water tankers.

Major Equipments

Equipment Uses

Blasting and Painting Equipment Blasting and painting of hull Transporter Transportation of blocks within the yard EOT Cranes For material handling

Sub-Transport System consisting of sloping cradle, transfer cradle and ship trolleys

Movement of vessel

Fork Lift Material handling Transformers Power supply

Welding Outfits Welding Winches Launching

Cochin Facility

We are working at Cochin Shipyard under an MoU, where orders for OSVs are executed. We have employed a work force of over 1000 workers and about 100 managerial and supervisory staff along with requisite production machinery to produce up to six platform supply vessels or equivalent per year. Production under this arrangement commenced in 2005 and till September 15 2008, we have delivered seven PSVs from this facility and we have unexecuted orders for 5 (five) OSVs. Under the existing MOU with Cochin Shipyards we have an understanding for the construction of atleast 4 vessels per annum at the Cochin Shipyard.

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Materials and Supplies

The principal materials used by us in the ship building business are standard steel products such as steel plate, bulb sections, angles, I beams and so on. Other materials used in large quantities include steel pipe, electrical cable and fittings. We also purchase components such as propulsion systems, generators, marine engines, navigation equipment, pumps and so on. The material requirement for a particular ship is based on the specifications laid down in the contract. In a typical ship being constructed 50 to 80% (depending on the type of ship) of the materials & components are imported. All these materials and parts are currently available in adequate supply from domestic and foreign sources. The major equipments for a ship are imported and tailor made for each ship. The lead time for delivery after placing the order may range from four (4) to eighteen (18) months. The suppliers for key components are identified at the tendering stage and are part of the negotiation process for the final contract.

Offices

Our Company’s registered office is located at No. 5/360, Rajiv Gandhi Salai (Old Mahabalipuram Road) Okkiam Thorapipakkam, Chennai 600 097. The activities of purchase, planning and coordination, finance and accounts, marketing and after sales service are controlled from this office. This office in all employs around 125 employees, reporting to the respective head of departments, who in turn report to the Managing Director.

Sales & Marketing

We believe that we are an important player in building OSVs. We believe that we have a thorough understanding of customer needs which gives us an edge in developing customized products. We believe that the reputation and experience of our Company and senior management team will facilitate our marketing efforts. While our customer base will generally be a mix of Indian and foreign companies, we believe that the latter would form a major portion of our overall customer profile. We have in the past developed our network of potential customers through various marketing efforts including sales visits, interaction with shipbrokers, advertising, participation in industry conferences, etc. We believe that this will form the core of our sales and marketing efforts in future as well. Besides the above, we are also invited by potential customers to bid for competitive tenders. While currently, we build OSVs to support shallow water drilling and E&P activities, going forward, we would like to expand our presence in offshore vessels that support deep sea drilling activities. Towards this, a part of our sales and marketing efforts, will be focused on sub sea vessels and deep sea vessels in the short to medium term and shall eventually target highly specialized vessels such as Diving Support Vessels, Remotely Operated Vessels and Pipe and Cable Laying Vessels in the medium to long term.

Contract Procurement, structure and pricing

While our contracts for tugs, dredgers and barges in the past have been largely through competitive bidding process, our current contracts for OSVs have been significantly through direct negotiations and reverse enquiries by customers. Organizationally, we have segregated our efforts to comprise of a dedicated team of experts focusing on the contracts for smaller vessels (e.g. dredgers, barges, etc.) and a specialized team for the larger Offshore Supply Vessels. Further, under our current joint manufacturing arrangement with CSL, the contracts are largely procured and negotiated by CSL, although we provide significant inputs during the entire process. We expect that a substantial number of contracts entered by us will be of a fixed price nature under which we will be liable for major cost over-runs. The customers of our product category usually limit their tenders/ negotiations to a pre-qualified set of contractors based on a number of criteria including experience, technological capacity and performance, reputation for quality safety record, timely delivery, financial strength, etc. Our contract terms usually provide for a stage payment during the contract period beginning with a down payment at the commencement of the contract and continuing with progress payments at specified and pre-agreed stage of construction. Final payment is generally provided at delivery of the vessel. Generally speaking, our vessels are subject to periodic and final testing certified by a classification society. A large part of our contracts are expected to require bank guarantees for pre-delivery instalments, letters of credit, or similar obligations. With respect to our commercial vessel contracts, we

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have in the past provided a warranty for a period of 12 months with respect to workmanship and materials furnished by us.

Shipbuilding Subsidy

Until August 14, 2007, the GOI provided a ship building subsidy of 30% to shipbuilding industry in connection with the construction of (i) ocean-going merchant ships over 80 meters in length manufactured for the domestic market, and (ii) ships of all types that were manufactured for the export market, subject to fulfillment of certain conditions. Under this GOI policy, the subsidy was available to private shipyards in respect of ships that met the GOI eligibility requirements upon completion of construction and delivery of eligible ships. However, on August 14, 2007, the shipbuilding subsidy policy of the GOI expired. There is currently no shipbuilding subsidy policy in force and there is no assurance that the GOI will provide any subsidy or provide any other incentives to us in the future. For details of certain risks relating to shipbuilding subsidy, please refer to section titled “Risk Factors” beginning on page x of the Draft Letter of Offer.

Competition

In the product range that we are focused currently, we expect to face competition from international markets such as Vietnam, Brazil and Singapore as well as competition from domestic companies.

International Competition:

We expect to face significant competition from shipbuilding players in countries such as Vietnam and Singapore. Due to a higher cost base in developed economies such as Europe, a significant shift in the market share in the shipbuilding industry began to occur from the shipyards in Europe to shipyards in Asian countries having a lower cost base. The companies in these countries are believed to use more sophisticated methods of manufacturing, thereby, having a faster turnaround in building of ships. A large number of the shipbuilding companies in these countries have their capacities fully booked for the next 2 to 3 years.

Domestic Competition:

We expect to face significant competition from domestic players as well. While historically several players in India were focused on the large vessel category, such as bulkers and tankers, recently some of them have forayed into the OSV category as well. Accordingly, we expect to face a relatively higher competition from the Indian companies as well in the OSV category. Many of the Indian players have an established track record in shipbuilding and already have strong order books. Additionally, the industry has also attracted a large number of new entrants. However, we believe that we have a strong niche in this market for ourselves as a specialized OSV player, which provides us a competitive advantage over the others. Further, we are amongst the select few players who can accept new orders for deliveries starting from calendar year 2010, which strengthens our competitive position.

Health and Safety

We maintain high standards on safety at our shipyards. We are concerned with the safety and health of our employees and maintains a safety assurance program to reduce the possibility of costly accidents. We have safety managers identified for Malpe / Kochi under whom safety assistants are engaged with the primary responsibility of ensuring absolutely safe working environment.

Capacity and Capacity Utilisation

The capacity and capacity utilization details are not applicable to our Company.

Quality Assurance

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We believe in ensuring high quality standards so as to ensure operational efficiency and reliability of ship systems and equipment in high seas, in remote areas and adverse conditions. The personnel of the Quality Control department are trained and motivated for high levels of commitment to quality, which does not stop at the inspection of material, processes and the finished product. There is a constant endeavor to identify and introduce better materials and processes. Quality Assurance personnel are involved at all stages of production to prevent defects before they occur. We have evolved our own quality standards, in line with the demands of the industry. A detailed quality plan is drawn up before commencement of construction of any project, laying down stringent standards and hold points for various inspections and tests and trials.

We have been awarded ISO 9001:2000 certification by Bureau Veritas for design, manufacture, deliver and ship repair works of ocean going vessels such as tugs, launches, ferries, self propelled barges and floating crafts like dredgers, deweeding vessels, work boats, product carriers & floating carnes.

Manpower

We are professionally managed by a team of directors, supported by a group of over 200 engineers and 50 professionals from various branches of science and technologies. As on September 15, 2008 we had 348 employees are on permanent rolls of our Company. We also employ over 40 sub-contractors for carrying various ship building activities who in turn commands a labour force of over 2000. For further details of the manpower break up in our Company please see section titled “Our Management” beginning on page 101 of the Draft Letter of Offer.

Properties

The following table sets forth the location and other details of such properties owned or occupied by our Company:

Owned Properties

Sr. No. Details of land acquired and details of seller

Documentation details Consideration(Rs.)

LAND AT MALPE

1. Area: 0.47 acres*

Survey No. 45 with S. D. No. 2A10 and Survey No. 45 with S.D. Nos. 2A11 at Kodavoor Village, within Kodavoor ward of Udipi Municipality, Udipi Taluk, Sub-District, Udipi District.

Freehold land

Non – Agricultural land

Seller(s):

(1) Mr. Dayananda K. Suvarna (2) Mr.s Indira D. Suvarna

The sale deed dated June 22, 2007 has been executed between

(1) Mr. Dayananda K. Suvarna (2) Mr.s Indira D. Suvarna

and

Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Udipi.

19,54,735

LAND AT HANGERKATTA

2. Area: 1.58 acres The sale deed dated May 24, 41,49,390

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Survey No. 180 with S. D. No. 1 and 2 at Kodavoor Village, within Kodavoor ward of Udipi Municipality, Udipi Taluk, Sub-District, Udipi District.

Freehold land

Non – Agricultural land Seller: Mr. Stany D’Souza

2008 has been executed between Mr. Stany D’Souza and Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Udipi.

3. Area: 3 Acres 36.50 Cents*

Survey No. 73 with S. D. Nos. 15, 21, 23, 5, 4, 3, 16, 17, 2P1, 24-P1; Survey No. 74 with S. D. No. 1 and Survey No. 69 with S. D. No. 4CP1 at Balakudru village, Udupi Taluk, Brahmavara Registration Sub- District Udupi District.

Freehold land Non – Agricultural land Seller(s): (1) M/s Subhadra Tile Works

represented by Smt. Shubha Shetty

(2) Mrs. Rajeevi. R. Shetty (3) Mr. K. Jayakara Shetty(4) Smt. Shubha R. Shetty (5) Mrs. Nirmala B. Bhandary

The sale deed dated October 05, 2006 has been executed between

(1) M/s Subhadra Tile Works represented by Smt. Shubha Shetty

(2) Mrs. Rajeevi. R. Shetty (3) Mr. K. Jayakara Shetty(4) Smt. Shubha R. Shetty (5) Mrs. Nirmala B. Bhandary

and

Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Brahmavara.

34,15,325

4. Area: 1 Acre and 20.5 Cents*

Survey No. 68 with S.D. No. 22CP2; Survey No. 73 with S. D. Nos. 13, 22, 19-P2 and 6 and Survey No. 74 with S. D. No. 36, 37, 20-P1 at Balakudru village, Udupi Taluk, Brahmavara Registration Sub- District Udupi District.

Freehold land Non – Agricultural land Seller(s): (1) Mrs. Shubha R. Shetty (2) Mrs. Sachi. R. Shetty (3) Mr. T. Sudhakar Kini

The sale deed dated October 05, 2006 has been executed between

(1) Mrs. Shubha R. Shetty (2) Mrs. Sachi. R. Shetty (3) Mr. T. Sudhakar Kini

and

Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Brahmavara.

5,10,210

5. Area: 0.024 Cents*

Survey No. 73 with S. D. No. 20 at

The sale deed dated December 27, 2007 has been executed between Mr. Subhash and Tebma

3,68,605

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Balakudru village, within Airody Grama Panchayath, Udupi Taluk, Udipi Sub- District, Udupi District.

Freehold land Non – Agricultural land Seller: Mr. Subhash

Shipyards Limited. The deed was registered with the Sub Registrar, Brahmavara.


Survey No. 73 with S. D. No. 20 at Balakudru village, within Airody Grama Panchayath, Udupi Taluk, Udipi Sub- District, Udupi District.

Freehold land


Seller: Shree Neelkanteshwara Bhajana Mandali represented by Mr. B. Vasudeva

The sale deed dated December 27, 2007 has been executed between Shree Neelkanteshwara Bhajana Mandali represented by Mr. B. Vasudeva and Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Brahmavara.

2,74,480

7. Area: 22.05 cents*

Survey No. 73 with S. D. No. 7 at Balakudru village, within Airody Grama Panchayath, Udupi Taluk, Brahmavar Sub- District, Udupi District.

Freehold land Non – Agricultural land Seller: Mrs. Lakshmiamma

The sale deed dated March 15, 2008 has been executed between Mrs. Lakshmiamma and Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Brahmavara.

2,56,177

LAND AT BABUTHOTA

8. Area: 1.45 acres.*

Survey No. 254 – 1 and 254 – 18 at Kodavoor Village, Udipi Taluk, Udipi Registration Sub-District and Udipi District, falling within the Jurisdiction of Malpe central ward of Udipi City Municipality.

Freehold land Non – Agricultural land Seller: Dr. B. Ganesh Bhat

The sale deed dated December 01, 2005 has been executed between Dr. B. Ganesh Bhat and Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Udipi.

41,24,360


Survey No. 254 – 20, 254 – 21 and

The sale deed dated December 01, 2005 has been executed between Dr. B. Ganesh Bhat and

30,24,805

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254 – 42 at Kodavoor Village, Udipi Taluk, Udipi Registration Sub-District and Udipi District, falling within the Jurisdiction of Malpe central ward of Udipi City Municipality.

Freehold land Non – Agricultural land Seller: Dr. B. Ganesh Bhat

Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Udipi.

LAND AT CHENGELPET10. Area: 2.60 acres

Survey No. 377 at Pazhamathur Village, within Pazhamathur Village panchayat, Madhuranthagam Taluk, Chengelpet District.

Freehold land Non – Agricultural land Seller:(1) Perumal

The sale deed dated February 20, 1986 has been executed between

(1) Mr. Perumal

and

Tebma engineering private Limited. The deed was registered with the Sub Registrar, Madras (south) .

35,185

LAND AT KERALA

11. Area: 2 acres and half cent

Resurvey No. 51/9, Block No. 31 at Kavassery II Village, Alathur Taluk, Palakkad District.

Freehold land


Seller:(1) Vidya. K. Nair

The sale deed dated November 15, 2006 has been executed between

Ms. Vidya. K. Nair

and

Tebma Shipyards Limited. The deed was registered with the Sub Registrar, Palakkad .

16,32,061

* - Mutation completed. Mutation pending for other properties.

Property on lease/license

Sr.No.

Location/ Description of Property

Area Nature of Interest

Consideration (in Rs)

Remarks

1. I) Land situated at no. 135, Okkiam Thoraipakkam Village, Old Mahabalipuram Road, Tambaran Taluk, Kancheepuram District, Admeasuring 2400 Sq.ft. Comprising in part of Survey No. 282 (part of

1)2400 sq.ft. 2)11172 Sq. ft.3) 11,424 Sq.ft measuring by physical measurement a total extent

Leasehold Rs. 80,00,000 (non – interest bearing refundable amount)

September 17,2007 to November 30,

This lease deed dated September 17, 2007 was entered into between Optigrab International (Lessor) And Tebma Shipyards

85

Sr.No.




Remarks

UDR No. 282-1) lying within the Registration District of South Chennai and Registration Sub-District of Neelankarai.

II) Land situated at no. 135, Okkiam Thoraipakkam Village, Old Mahabalipuram Road, Tambaran Taluk, Kancheepuram District, Admeasuring 11172 Sq.ft. Comprising in part of Survey No. 282 (part of UDR No. 282-1) lying within the Registration District of South Chennai and Registration Sub-District of Neelankarai.

III) Land situated at no. 135, Okkiam Thoraipakkam Village, Old Mahabalipuram Road, Tambaran Taluk, Kancheepuram District, Admeasuring 11,424 Sq.ft measuring by physical measurement a total extent of 13,013 Sq.ft. Comprising in part of Survey No. 282 (part of UDR No. 282-1) together with building measuring 15,000 Sq.ft lying within the Registration District of South Chennai and Registration Sub-District of Neelankarai.

of 13,013 Sq.ft. with buildingmeasuring 15,000 Sq.ft

2007 – Rent free fitment period.

December 01,2007 to November 30,2009 – Rs 10,00,000 per month





Ltd. (Lessee)

2. Land situated at survey no 71, Hissa No. 5 (part) at Yedthady Gram Panchayat, Herady village, Udupi taluk and Udupi district.

Two sheds of prefabricated steel structure admeasuring 20000 square feet carpet area at Survey No 71 –

6,480 square meters

Leasehold 50,000 Rs (deposit which will be adjusted towards the rent for the 3rd month of occupation) Compensation of Rs. 80,000 per month for the first five

This lease agreement dated July 09, 2007 was entered into between M/s Unitop Estate Private Limited (Lessor) And Tebma Shipyards Ltd. (Lessee)

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Sr.No.




Remarks

4A, 71 – 4 BP1, 71 – 5P3, 71 – 5P2 of Herady village, Opposite Government College, Barkur

years and Rs. 1,00,000 per month during the next five years.

3. Land situated at malpe Fishing Habour within the limits of Malpe port in Udipi taluka in Udipi district in Karnataka.

40,000 square meters

Licensed License fee for land stackyard / approach roads and any other additional land: Rs. 1100 per 100 square meter per year (shall be increased by 10% on rates indicated above per year)

The License agreement dated November 10, 2000 was entered into between Director of Ports and Inland water transport, Karwar on behalf of Government of Karnataka (Licensor) and Tebma Shipyard Limited (Licensee)

Intellectual Property

We rely on trademarks, to help establish and preserve limited proprietary protection for our products. We have three registered trademarks. These trademarks are used to establish brand recognition and distinction in our markets.

We currently have the following intellectual property rights for our business:

Sr.No

Trademark

No. Date of Application/ Registration

Validity Issued to Class Status Product

1. Turtle 1249766 March 4, 2006

March 3, 2016

Tebma Shipyards Limited

12 Registered Apparatus with Locomotion on Water

2. Tusker 1249767 March 4, 2006

March 3, 2016



3. Beetle 1249769 March 4, 2006

March 3, 2016



4. Turtle 1249766 March 4, 2006

March 3, 2016


12 Registered Apparatus with Locomotion

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on Water 5. Tusker 1249767 March 4,

2006 March 3, 2016



6. Beetle 1249769 March 4, 2006

March 3, 2016



Insurance

Our Company has taken various insurance policies including Burglary Policy, Marine Hull Builders Risk Policy, standard fire and special perils policy for our offices and various ship building and fabrication facilities.

These insurance policies are reviewed periodically to ensure that the coverage is adequate. All these policies are in existence and premiums have been paid thereon.

Key Business Contracts

1) Memorandum of Understanding (“MOU”) dated November 22, 2004 between our Company and Cochin Shipyard Limited and Addendum I to the MOU dated October 11, 2007 (the “Addendum”)

Salient features of the MoU are as follow:

• MoU has been entered into for design, procurement, construction and delivery of tugs and OSVs for customers in the agreed territories.

• The MOU shall initially be valid for a period of seven (7) years • The MOU shall be mutually exclusive to the extent that the parties shall not directly or indirectly enter

into agreement or understanding with any other agency for construction of tugs and OSVs in the agreed territory. However in terms of the Addendum the Parties have thereafter agreed that they shall be permitted to accept by both Parties for construction and delivery of vessels in the Territories independently without intending to utilize the services of each other, only after attaining the annual capacities to be executed under the MOU. However CSL and TSL shall have full freedom to enter into any agreement for construction of ships, barges other floating craft etc., other than those listed under the head “Vessels”.

• Parties shall mainitain confidentiality as regards business and project/ construction related information • In terms of the Addendum the

Memorandum of Understanding (“MoU”) dated August 23, 2008 between our Company and Garden Reach Shipbuilders and Engineers Limited (GRSE) and Hoogly Dock and Port Engineers Limited (HDPE).

Salient features of the MoU are as follows:

• The parties to the MoU shall share the infrastructure and other available facilities. • A tripartite agreement for co-operation will be signed amongst GRSE and HDPE and our Company. • The parties will sign a confidentiality agreement before commencement of any work. • The MoU shall come into force on the date of its signature and shall remain valid for a period of seven

(7) years from the date of its coming into force

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Memorandum of Understanding (“MoU”) dated June 11, 2007 between our Company and Central Industry Group N.V. (CIG) and Framework Agreement dated November, 2007

The salient features of the MoU:

Our Company has entered in MoU with CIG for purchase of pre-processed steel kits from CIG as a sole preferred supplier. Our Company is required build the production facility of Centraalstaal India and will rent and put at the disposal of Centraalstaal India) as a fabrication facility (building) in correspondence with the specification by CIG. We have also entered into a Framework Agreement which will govern the terms under which our Company will buy products from Centraalstaal India during the years 2008, 2009 and 2010. We have entered into a lease agreement for leasing out our facility Hangrkutta to CIG. However as date we are in the process of renegotiating the terms of the MoU, the Framework Agreement and the lease arrangement.

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KEY INDUSTRY REGULATIONS AND POLICIES

Shipbuilding Sector

The Merchant Shipping Act, 1958

The Merchant Shipping Act, 1958, as amended (the “Merchant Shipping Act”) is the principal legislation that applies to ships that are registered in India or which are required to be registered under this statute. This statute also provides for the regulations governing the transfer, mortgage and sale of ships. Pursuant to the Merchant Shipping Act, the National Shipping Board and a Shipping Development Fund has been established for the development of Indian shipping and for providing financial assistance for acquisition and maintenance of ships, respectively. The Merchant Shipping Act provides for, among other things, certification of competency of the officers, engagement and discharge of seamen, payment of wages to seamen, health and accommodation of seamen, the duties of the shipping masters, agreements with the crew, disputes between seamen and employers, inspection by shipping master of provisions, accommodation on board and a certificate of survey for passenger carrying ships. In addition, with a view to ensure safety of the vessels, the Merchant Shipping Act makes it compulsory for the installation of life saving appliance, fire appliance and radio telegraphy, radio telephony and direction finder. The statute also sets out the requirements in relation to the following, among other things, dangerous goods and grain cargoes; collisions, accidents at sea and limitation of liability; wreck and salvage; and weights and measures on board.

The Merchant Shipping (Cargo Ship Construction and Survey) Rules, 1991

The Merchant Shipping (Cargo Ship Construction and Survey) Rules, 1991, as amended (the “Cargo Ship Rules”), prescribe the requirements related to the hull, equipment and machinery of all sea-going cargo ships of 500 tons gross or more, registered in India and have been enacted in order to implement the provisions of the Convention for the Safety of Life at Sea, 1948, as amended from time to time. The Cargo Ship Rules classify the ships and prescribe the specifications relating to, among other things, construction of hull including structural strength; construction and testing of watertight bulkheads, decks and inner bottoms; construction and testing of watertight decks, trunks, tunnels, duet keels and ventilators, watertight doors, ballast and bilge pumping and drainage arrangements; the type of machinery, boilers and electrical installations required; unattended machinery spaces including alarm and other safety systems; protection of cargo ships against shock, fire, flooding; additional requirements for tankers; and periodical surveys of cargo ships.

Merchant Shipping (Construction and Survey of Passenger Ships) Rules, 1981

The Merchant Shipping (Construction and Survey of Passenger Ships) Rules, 1981, as amended (the “Passenger Ship Rules”), are applicable to all passenger ships that are at a port in India or within the territorial waters of India or registered in India. The Passenger Ship Rules provide for requirements of the hulls of passenger ships related to, among other things, structure, watertight sub-division into compartments, fitting of collision bulkhead, double bottom tanks and watertight recesses and trunk ways. The Passenger Ship Rules also prescribe fire protection measures that are required to be adopted in the structure, bulkheads and decks including automatic sprinkler, fire alarm and fire detection systems as well as means of escape for the passengers. In addition, these rules deal with carriage of passengers and provide requirements related to position of passenger accommodation, lighting and ventilation, supply of food and water, medical stores and space requirements for different classes of passengers.

Dock Workers (Regulation of Employment) Act, 1948

The Dock Workers (Regulation of Employment) Act, 1948 (the “Dock Workers Act”) regulates the employment of dock workers, which are defined as persons employed or to be employed in, or in the vicinity of any port on work in connection with the loading, unloading, movement or storage of cargoes, or work in connection with the preparation of ships or other vessels for the receipt or discharge of cargoes or leaving a port. The Government of India may formulate a scheme under the Dock Workers Act for the

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registration of dock workers and employers for regulating the employment of dock workers. In addition, Dock Labour Boards may be established for administering the scheme and exercising the powers and perform the functions specified in the scheme. However, the Dock Workers Act and the Dock Labour Boards are not in effective as yet.

Shipbuilding Subsidy Scheme

The GOI announced a Shipbuilding Subsidy Scheme pursuant to a press note dated October 25, 2002 (the “Shipbuilding Subsidy Scheme”) issued through a letter by the Ministry of Shipping (Letter No. SY-12025/3/98-SBR) dated October 25, 2002. The Shipbuilding and Ship repair Division of the Ministry of Shipping, GOI also prescribed detailed procedures and guidelines pursuant to a press note dated March 7, 2003. The Shipbuilding Subsidy Scheme was valid for a period of five years ending August 14, 2007. This scheme has not been extended as yet. Representatives from the shipping industry have represented for a further extension of the Shipbuilding Subsidy Scheme.

The main features of the Shipbuilding Subsidy Scheme were as follows:

a. Shipbuilding subsidy on domestic order: A subsidy of 30% was payable for ocean-going merchant vessels that were at least 80 meters in length on the price at which the tender was won and any subsequent escalation was not be taken into account.

b. Shipbuilding subsidy on export order: A subsidy of 30% was admissible on each export order irrespective of whether the order was obtained through a tender process or otherwise, and irrespective of the size and type of vessel.

National Maritime Development Programme

The National Maritime Development Programme (the “NMDP”) was formulated by the Ministry of Shipping, Road Transport and Highways, GOI on December 30, 2005. The objective of the NMDP is to raise the performance of the Indian maritime sector to international standards through an investment of approximately Rs.1,003.39 billion comprising an investment of Rs.558.04 billion in major ports and Rs.445.35 billion in the shipping and inland water transport (“IWT”) sectors. The NMDP has identified 111 projects in the shipping sector, which will be implemented over a period of 20 years. In the ship building sector, the proposals of the NMDP include the revival and modernization of the public sector shipyards and the setting up of two international size shipyards through an investment of Rs.71.96 billion.

Major and Minor Ports

The Indian Ports Act, 1908 (the “Ports Act”) defines the jurisdiction of the GOI and various state governments over ports. The Ports Act specifies rules for safety of shipping and conservation of ports and regulates matters pertaining to the administration of port dues, pilotage fees and other charges. Ports are classified into two categories, i.e., major ports and minor ports. The GOI is responsible for policy formulation and regulation in relation to major ports, while minor ports are under the jurisdiction of state governments. Major ports are governed by the Major Port Trusts Act, 1963 (the “Major Port Act”), which provides for the constitution of port authorities responsible for the administration, control and management of certain major ports. The ports at Kolkata, Mumbai and Chennai are administered by the respective port trusts, which are statutory bodies, whereas the remaining major ports are administered directly by the GOI. Port trusts comprise a chairman, elected representatives of the GOI, elected representatives from the commercial shipping and trade industry and representatives of certain departments of the GOI.

Environmental and Labour Regulations

Depending upon the nature of the projects undertaken by the Company, applicable environmental and labour laws and regulations include the following:

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• Air (Prevention and Control of Pollution) Act, 1981; • Contract Labour (Regulation and Abolition) Act, 1970; • Employees’ State Insurance Act, 1948; • Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; • Environment (Protection) Act, 1986 and Environment (Protection) Rules, 1986; • Factories Act, 1948; • Hazardous Waste (Management and Handling) Rules, 1989; • Hazardous Chemicals Rules, 1989; • Minimum Wages Act, 1948; • Industrial Disputes Act, 1971 and Industrial Disputes (Central) Rules, 1957; • Minimum Wages Act, 1948; • Payment of Bonus Act, 1965; • Payment of Gratuity Act, 1972; • Payment of Wages Act, 1936; • Shops and Commercial Establishments Acts, where applicable; and • Water (Prevention and Control of Pollution) Act, 1974.

A brief description of certain labour legislation is set forth below:

Contract Labour (Regulation and Abolition) Act, 1970

The Contract Labour (Regulation and Abolition) Act, 1970, as amended (the “CLRA”), requires establishments that employ or have employed on any day in the previous 12 months, 20 or more workmen as contract labour to be registered and prescribes certain obligations with respect to the welfare and health of contract labour.

The CLRA requires the principal employer of an establishment to which the CLRA applies to make an application to the registering officer in the prescribed manner for registration of the establishment. In the absence of registration, contract labour cannot be employed in the establishment. Likewise, every contractor to whom the CLRA applies is required to obtain a licence and not to undertake or execute any work through contract labour except under and in accordance with the licence issued.

To ensure the welfare and health of the contract labour, the CLRA imposes certain obligations on the contractor including the establishment of canteens, rest rooms, drinking water, washing facilities, first aid facilities, other facilities and payment of wages. However, in the event the contractor fails to provide these amenities, the principal employer is under an obligation to provide these facilities within a prescribed time period.

Penalties, including both fines and imprisonment, may be imposed for contravention of the provisions of the CLRA.

Employees Provident Fund and Miscellaneous Provisions Act, 1952

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (the “EPF Act”), provides for the institution of compulsory provident fund, pension fund and deposit linked insurance funds for the benefit of employees in factories and other establishments. A liability is placed both on the employer and the employee to make certain contributions to the funds mentioned above.

Factories Act, 1948

The Factories Act, 1948, as amended (the “Factories Act”), defines a ‘factory’ to be any premises on which on any day in the previous 12 months, 10 or more workers are or were working and on which a manufacturing process is being carried on or is ordinarily carried on with the aid of power; or at least 20 workers are or were working on any day in the preceding 12 months and on which a manufacturing process is being carried on or is ordinarily carried on without the aid of power. State governments prescribe rules with respect to the prior submission of plans, their approval for the establishment of factories and the registration and licensing of factories.

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The Factories Act provides that the ‘occupier’ of a factory (defined as the person who has ultimate control over the affairs of the factory and in the case of a company, any one of the directors) shall ensure the health, safety and welfare of all workers while they are at work in the factory, especially in respect of safety and proper maintenance of the factory such that it does not pose health risks, the safe use, handling, storage and transport of factory articles and substances, provision of adequate instruction, training and supervision to ensure workers’ health and safety, cleanliness and safe working conditions.

If there is a contravention of any of the provisions of the Factories Act or the rules framed thereunder, the occupier and manager of the factory may be punished with imprisonment for a term of up to two years or with a fine up to Rs.100,000 or with both, and in case of contravention continuing after conviction, with a fine of up to Rs.1,000 per day of contravention. In case of a contravention which results in an accident causing death or serious bodily injury, the fine shall not be less than Rs.25,000 in the case of an accident causing death, and Rs.5,000 in the case of an accident causing serious bodily injury.

Employees State Insurance Act, 1948

The Employees State Insurance Act, 1948 (the “ESI Act”), provides for certain benefits to employees in case of sickness, maternity and employment injury. All employees in establishments covered by the ESI Act are required to be insured, with an obligation imposed on the employer to make certain contributions in relation thereto. In addition, the employer is also required to register itself under the ESI Act and maintain prescribed records and registers.

Minimum Wages Act, 1948

State governments may stipulate the minimum wages applicable to a particular industry. The minimum wages may consist of a basic rate of wages and a special allowance; or a basic rate of wages and the cash value of the concessions in respect of supplies of essential commodities; or an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions, if any.

Workmen are to be paid for overtime at overtime rates stipulated by the appropriate government. Contravention of the provisions of this legislation may result in imprisonment for a term up to six months or a fine up to Rs.500 or both.

Payment of Bonus Act, 1965

Pursuant to the Payment of Bonus Act, 1965, as amended (the “Bonus Act”), an employee in a factory or in any establishment where 20 or more persons are employed on any day during an accounting year, who has worked for at least 30 working days in a year is eligible to be paid a bonus.

Contravention of the provisions of the Bonus Act by a company is punishable with imprisonment for a term of up to six months or a fine of up to Rs.1,000 or both, against persons in charge of, and responsible to the company for the conduct of the business of the company at the time of contravention.

Payment of Gratuity Act, 1972

Under the Payment of Gratuity Act, 1972, as amended (the “Gratuity Act”), an employee who has been in continuous service for a period of five years will be eligible for gratuity upon his retirement or resignation, superannuation or death or disablement due to accident or disease. However, the entitlement to gratuity in the event of death or disablement will not be contingent upon an employee having completed five years of continuous service. The maximum amount of gratuity payable may not exceed Rs.350,000.

An employee in a factory is said to be ‘in continuous service’ for a certain period notwithstanding that his service has been interrupted during that period by sickness, accident, leave, absence without leave, lay-off, strike, lock-out or cessation of work not due to the fault of the employee. The employee is also deemed to be in continuous service if the employee has worked (in an establishment that works for at least six days in a week) for at least 240 days in a period of 12 months or 120 days in a period of six months immediately preceding the date of reckoning.

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Foreign Ownership

Under the Industrial Policy and FEMA, foreign direct investment up to 100% is permitted in the shipbuilding industry.

Pursuant to A.P. (DIR Series) Circular No. 16 dated October 4, 2004, the RBI granted general permission for the transfer of shares of an Indian company by Non-Residents to residents and from residents to Non-Residents, subject to the terms and conditions, including pricing guidelines, specified in such circular.

Investment by Foreign Institutional Investors

Foreign Institutional Investors (“FIIs”) including institutions such as pension funds, mutual funds, investment trusts, insurance and reinsurance companies, international or multilateral organizations or their agencies, foreign governmental agencies, foreign central banks, asset management companies, investment managers or advisors, nominee companies and institutional portfolio managers can invest in all the securities traded on the primary and secondary markets in India. FIIs are required to obtain an initial registration from the SEBI and a general permission from the RBI to engage in transactions regulated under FEMA. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors) Regulations, 1995, as amended. The initial registration and the RBI’s general permission together enable the registered FII to buy (subject to the ownership restrictions discussed below) and sell freely securities issued by Indian companies, to realize capital gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares, to appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income received by way of interest and any compensation received towards sale or renunciation of rights issues of shares.

Ownership Restrictions of FIIs

Under the portfolio investment scheme, the total holding of all FIIs together with their sub-accounts in an Indian company is subject to a cap of 24% of the paid-up capital of the company, which may be increased up to the percentage of sectoral cap on FDI in respect of the said company pursuant to a resolution of the board of directors of the company and the approval of the shareholders of the company by a special resolution in a general meeting.

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HISTORY AND OTHER CORPORATE INFORMATION

Our Company was originally incorporated as Tebma Engineering Private Limited on July 9, 1984, as a private limited company vide Certificate of Incorporation bearing No. 10994 of 1984 under the provisions of the Companies Act. The name of our Company was subsequently changed to Tebma Engineering Limited with effect from October 21, 1993 consequent upon conversion of our Company into a public limited company under section 44 of the Companies Act. Our Company’s name was thereafter changed to Tebma Shipyards Limited with effect from July 17, 1998.

Our Company was originally promoted by Mr. P.K Balasubramanian, who is also our current Promoter, as also Late Captain B. N. Rao, Mr. Eapen Chacko, Mr. A. K. Singh, Mr. K. A. Thomas and Mr. Biren Mukherjee, a team of six marine professionals having considerable experience in the shipbuilding and repair industry. However on acquisition of equity stake by IAF-VI in our Company in the year 2007, all the original Promoters other than our Mr. P.K Balasubramanian have disassociated as ‘Promoter’ from our Company, with effect from January 2008, and hence are Erstwhile Promoters.

We are a shipbuilding company engaged in shipbuilding activities, primarily engaged in the design and construction of offshore support supply vessels dredgers, tugs, offshore vessles and fabrication of pressure vessels.

We were established in the year 1984 with an initial focus on building of dredgers for the first decade of our operations, including launchers, de-weeding dredgers, self-propelled barges, LPG carriers, dredge tender boats and floating cranes. Subsequently, in the year 1994, our Company expanded its product range to include tugs of SRP and Tractor versions. In the year 2005, our Company forayed into construction of offshore vessels, and has delivered seven (7) offshore vessels till date. Further, in 2006, we also began fabrication of pressure vessels for installation in offshore vessels, and have also received DNV certification for the same. As on September 15, 2008 we have constructed and delivered 114 vessels.

We currently operate out of three shipbuilding facilities, one located at Chengalpet, at a distance of 70 km from Chennai, and the others at Malpe, near Udupi, South Karnataka, and at Cochin. Our Malpe Facilityhas also been granted approval for conversion of the yard to 100% Export Oriented Unit (“EOU”) by the Government of India for a period of 5 years from May 21, 2008. We are operating under a memorandum of understanding with Cochin Shipyard Limited, under which we build tugs and OSVs at Cochin Shipyard.

The Equity Shares of our Company are listed and traded only on the OTCEI. Our equity shares were last traded on OTCEI on December 11, 1999 at Rs. 2.25/-. Pursuant to an offer for sale in the year 1994 by certain shareholders of, our Company’s Equity Shares were listed on OTCEI.

Acquisition of shares of Tebma Gardens Limited (“TGL”)

Pursuant to agreement dated October 27, 2003 entered into between our Company, Tebma Farms Limited (the erstwhile holding Company of TGL) and TGL, we acquired 99.9% shares of TGL. The total consideration for the acquisition of 4,90,010 equity shares (at a book value of Rs. 4.19 per equity share) of TGL was Rs. 20.53 lacs and Tebma Gardens Limited became our subsidiary with effect from December 30, 2003. For further details on Tebma Gardens Limited please refer to heading “Our Subsidiary” hereinbelow.

Open Offer by our Promoter in relation to our Equity Shares

Our Company, Mr. P.K. Balasubramanian, our Erstwhile Promoters and IAF- VI entered into a shareholders’ agreement dated February 27, 2007, for subscription and allotment on a preferential basis of 25,66,800 Equity Shares of Rs. 10/- each at a price of Rs. 233.75/- per Equity Share to IAF - VI in accordance with the provisions of the SEBI Guidelines on preferential issues.

Pursuant to the aforesaid preferential allotment on February 27, 2007 IAF-VI acquired 33% of the enhanced fully paid-up equity share capital of our Company. Consequently, IAF-VI made an open offer to

95

acquire upto 15,55,636 Equity Shares representing 20% of the equity share capital of our Company at a price of Rs. 233.75 per Equity Share in accordance with the provisions of the Takeover Code. The offer opened on June 27, 2007 and closed on July 16, 2007. Pursuant to the aforesaid offer, 15,55,636 Equity Shares representing 20% of the equity share capital of our Company were acquired by IAF-VI. As on date IAF-VI holds 53% of the paid up equity share capital of our Company.

Changes in registered office

The registered office of our Company is situated at No. 5/360, Rajiv Gandhi Salai (Old Mahabalipuram Road) Okkiam Thorapipakkam, Chennai 600 097. The following have been the changes in our registered office:

Date Registered Address Changed From Changed To

May 25, 1990 No. 59, Josier Street, Nungambakkam, Madras – 600 034

Khaleeli Centre, 3rd Floor, 149, Montieth Road, Egmore, Chennai 600 008

March 26, 2008 Khaleeli Centre, 3rd Floor, 149, Montieth Road, Egmore, Chennai 600 008

No. 5/360, Rajiv Gandhi Salai (Old Mahabalipuram Road) Okkiam Thorapipakkam, Chennai 600 097

Major Events

Year Event

1984 Incorporation as Tebma Engineering Private Limited 1993 Delivery of eight (8) crawl cat dredgers on a single order 1994 Conversion from private company to public limited company

1994-95 Offer for Sale of 6,52,000 Equity Shares and listing with the OTCEI Change of our name to Tebma Shipyards Limited Obtained ISO 9001: 1994 certification for supply of design, manufacture and delivery of ocean going vessels Execution of an order for 18M dredging depth tusker 1850 cutter section dredger

1998

Execution of orders for a twin screw multipurpose launch and a flat deck floating crane

1999 Execution of an order for supply of 3 tugs and 2 pilot launch 57T Bollard Pull Tug export to Singapore 2005 Agreement with CSL for construction of 4 nos. platform supply vessels

2007 Delivery of first platform supply vessel

Preferential Allotment of 25,66,800 Equity Shares of Rs. 10/- each at a price of Rs. 233.75/- per share to IAF - VI in accordance with the SEBI Guidelines

IAF – VI acquired controlling stake in the Company pursuant to an open offer made under the SEBI Takeover Regulations

Commencement of production at Shipyard at Malpe 2008 Secured our first order for deep sea OSV

Main Objects of our Company

The main objects of our Company to be pursued on its incorporation are:

1. To carry on the business of construction of dredgers, heavy engineering items, fabrication works, marine structurals.

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2. To manufacture, buy, sell, exchange, alter, improve, manipulate, prepare for market and otherwise deal in all kinds of plant and machinery.

3. Building of Ships, Ferries, Passenger Vessels, Survey Vessels, Defence Crafts, Catamarans, Boats, Tugs, Patrol Boats, Pollution Control Vessels, Oil Recovery Ship, Floating Cranes, Barges, Launches, Product Carriers, Oil Tankers, Special Purpose Sea Going Crafts, Work Platforms and all types of Floating Crafts for carrying men and materials.

Changes in the Memorandum of Association:

Since December 1992*, the following changes have been made to our Memorandum of Association:

Date of shareholders

approval

Changes

December 5, 1992

Alteration of Clause No. V of the Memorandum of Association of our Company as per the resolution passed by the shareholders at the Annual General Meeting increasing the Authorised Share Capital of our Company from 1,00,000 Equity Shares of Rs. 100/- aggregating to Rs. 1,00,00,000/- to 2,00,000 Equity Shares of Rs. 100/- each aggregating to Rs. 2,00,00,000/-

October 16, 1993

Alteration of Clause No. V of the Memorandum of Association of our Company as per the resolution passed by the shareholders at the Extraordinary General Meeting increasing the Authorised Share Capital of our Company from 2,00,000 Equity Shares of Rs. 100/- aggregating to Rs. 2,00,00,000/- to 50,00,000 Equity Shares of Rs. 10/- each aggregating to Rs. 5,00,00,000/-

September 24, 1997

Insertion of clause 3(B)(18) of Incidental to or ancillary objects clause of our Company

July 6, 1998 (i) Alteration of the main objects clause of our Company

(ii) Alteration of Clause No. V of the Memorandum of Association of our Company as per the resolution passed by the shareholders at the Annual General Meeting to raise the Authorised Share Capital of our Company from Rs. 5,00,00,000/- to Rs. 6,00,00,000/- divided into 60,00,000 equity shares of Rs. 10/- each

July 17, 1998 Change in the name of our Company from Tebma Engineering Limited to Tebma Shipyards Limited

April 5, 2006 Alteration of Clause No. V of the Memorandum of Association of our Company as per the resolution passed by the shareholders at the Extraordinary General Meeting increasing the Authorised Share Capital of our Company from60,00,000 Equity Shares of Rs. 10/- aggregating to Rs. 6,00,00,000 to 1,50,00,000 Equity Shares of Rs. 10/- each aggregating to Rs. 15,00,00,000

September 24, 2008

Alteration and increase in authorized share capital from 1,50,00,000 Equity Shares of Rs. 10/- each aggregating Rs. 15,00,00,000 to Rs. 17,00,00,000 divided into 1,50,00,000 Equity Shares aggregating to Rs. 15,00,00,000 and 20,00,000 Preference Shares of Rs. 10/- each aggregating Rs. 2,00,00,000

*Complete set of corporate records relevant to changes prior to December 1992 are not available with our Company.

Our Subsidiary

As on on date of the Draft Letter of Offer we have one wholly owned subsidiary, namely Tebma Gardens Limited, details of which are as follows:-

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Tebma Gardens Limited (“TGL”)

TGL was incorporated on March 1, 1995 with registration No. 30336, and obtained Certificate of Commencement of Business dated March 14, 1995. The registered office of TGL is situated at 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoraipakkam, Chennai, Kancheepuram- 600 097. TGL became our owned subsidiary with effect from December 30, 2003.

The main objects of TGL are – To carry on the business of commercial plantations, fruit gardens, agriculture, horticulture, floriculture, acquaculture, herbal plantations, dairy, poultry and other related activities.

TGL has suspended its business operations since fiscal 2007 and is in the process of being wound up.

Board of Directors

The board of directors of TGL, as on September 15, 2008, consists of:

Sr No Name of Directors 1. Mr. G. Sriram 2. Mr. K Ramanathan 3. Mr. K. Ramesh

Shareholding Pattern

The shareholding pattern of TGL as on September 15, 2008 is:

Name of Shareholders No. of Equity Shares held % ShareholdingTebma Shipyards Limited 4,90,010 99.99 Mr. P.K Balasubramanian 10 0 Mr. S. Subramanain 10 0 Mr. P.V Krishna 10 0 Mr. K. Kanta Rao 10 0 Colonel Vinod George 10 0 Late Captain B.N. Rao 10 0 Total 4,90,070 100

Financial Performance:

The summary audited financial statements for the last three years are as follows:

(Rs. In Lacs except per share data) Particulars FY 2007-08 FY 2006-07 FY 2005-06 Equity capital 49.01 49.01 49.01 Reserves (4.29) (3.53) (3.81) Sales - - - Profit After Tax (0.75) 0.27 16.44 Earning per Share (Rs.) (0.15) 0.06 3.35 Net Asset Value (Rs.) 44.71 45.47 45.19

TGL is an unlisted company and has not made any rights issue or public issue in preceding three years. It has not become sick company under the meaning of SICA.

TGL’s board of directors and our Board have approved the proposal to wind up TGL under section 560 of the Companies Act, or to alternatively explore the possibility of voluntary winding up or any other mode of winding up under the Companies Act.

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Shareholders Agreements

1. Share Subscription and Shareholders’ Agreement dated February 27, 2007 (the “Agreement”) between (i) our Company (ii) our Erstwhile Promoters, that is Mr. Eapen Chacko, Late Capt. B.N. Rao, K.A. Thomas, A.K. Singh, Kripa Balan and our Promoter, P.K. Balasubramanian (“Promoters”) and India Advantage Fund (represented by Trustee, Western India Trustee and Executor Company Ltd. acting through its investment manager, ICICI Funds Management Co. Ltd.) (hereinafter “Investor”)

Salient features of the Agreement:-

• Our Company had agreed to issue to the Investors 25,66,800 Equity Shares (“Subscription Shares”)of face value of Rs. 10/- each, at a premium of Rs. 223.75/- per share, aggregating to Rs. 59,99,89,500/- representing 33% of the post issue share capital of the Company on allotment.

• The subcription amount is to be used for the purpose of funding expansion plans of our Company, i.e. funding the construction of a new ship building facility at Malpe, Karnataka, and for working capital.

• In the event of any future round of investment in our Company by a third party, no rights that are superior to the rights given to the Investors under this Agreement shall be granted. In the event of grant of any such rights, the same shall be extended to the Investors.

• Covenants imposed by Agreement on our current Promoter Mr. P.K Balasubramanian

(i) shall not be involved or concerned with any other business or do any activity which jeapordises the interest of our Company or otherwise induce or cause any consultant or employee to leave the services of our Company, or engage in any competing or similar business, or disclose confidential information in relation to our Company

• Anti-Dilution Rights: Our Company shall not issue any Shares or equity linked securities at a price or terms more favourable to the subscriber than those terms on which the Investor has subscribed to the Subscription Shares. If our Company issues shares at any time before the QIPO, at a price less than the average price at which the Investor has acquired the Subscription Shares, then the Investor shall be entitled to receive such number of shares at the lowest price permissible under law, as may be required to equate the adjusted cost per share to the new price at which the dilutive issuance has been effected on a ‘weighted average’ formula basis.

• Promoters shall not sell or otherwise transfer any part of their shares of our Company, held directly or indirectly, except with the Investor’s consent. Promoter’s right to sell is subject to the Investor’s Right of First Refusal.

• Board will be reconstituted by our Company in consultation with the Investor. The Investor shall have a right to nominate such number of directors in proportion to its shareholding in our Company and its operating subsidiaries, subject to a minimum of one.

• Our Company shall, and the Promoters shall procure that our Company shall, make a QIPO on or before March 31, 2010. The shares are to be listed in BSE, NSE or an internationally recognized stock exchange, or a quotation system acceptable by the Investors. Merger with any other company shall not, under any circumstances, be construed as fulfillment of this requirement.

• The Agreement shall terminate by mutual agreement between the Parties, or in the event that the shareholding of the Investor together with its Affiliates in our Company falls below 7.5% of the paid up share capital of our Company, provided that such fall in shareholding is solely due to sale of shares by the Investor. However, so long as the Investor holds atleast 5% of the paid up equity share capital it shall have a right to nominate atleast one director on the Board.

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• Liquidation Preference: In the event of liquidation by virtue of winding up, acquisition, merger/amalgamation, any sale of all or substantially all of the assets of the Company, any exercise of Drag Along/ Tag Along Rights (“Deemed Liquidation”) by the Investor the total proceeds from such liquidation shall be first distributed to the Investor to the extent of an amount equivalent to the subscription amount plus an amount equal to IRR of 15% p.a compounded annually on the subscription amount and all declared but unpaid dividend, and only thereafter to the other Promoters and shareholders on a pro rata basis.

• Right of Pre-emption- Company shall not issue any further shares, warrants, or other convertible securities (other than ESOPs) unless the same have first been offered to the Investor. Company shall also give Investor first right of refusal in the event of further issuance of shares.

• Promoter shall not sell or otherwise transfer any part of their shares of our Company held by them directly/indirectly except with the consent of the Investor

• Tag Along and Co-Sale Rights- In the event that any of the Promoters propose to sell or otherwise transfer any or all of the shares held directly or indirectly by them, the Investor shall have the right to agree or refuse to transfer all or any part of their shares held in our Company on the same terms and conditions of transfer of the Promoters’ shares. Promoters shall ensire that the transferee in such case purchases the shares sold in pursuance of exercise of the Tag-along Rights. The same Tag Along Rights shall also apply to the Promoters in the event of sale/ transfer by the Investors.

• Others:

(i) Investor has a right to nominate such number of Nominee Directors on the Board in proportion to its shareholding. Such Nominee Directors shall not be liable to retire by rotation

(ii) Prior approval of the Board shall be required for appointment/ re-appointment of any person exercising substantial power of management of affairs of our Company. Further any and all changes in the management of our Company are to be informed to the Investor

(iii) In the event of default or material breach including mismanagement of affairs of our Company, misuse of subscription amount, management of our Company to the detriment of the Investors’ interest the Investor shall have right to appoint and change the CEO/CFO/ COO or senior management personnel cause spin off/ sale of assets/ businesses etc of our Company, cause changes in the business plan, bring in new investors, determine utilization of surplus cash, cause our company to undertake expansion or diversification, or merger or acquisition of our Company

(iv) Investors consent shall be mandatory in respect of matters including amendment to the constitutional documents of the company, change in nature of business, change in accounting policies, declaration of dividend/ bonus, change in authorised capital, reconstitute the Board, change class rights of shares, grant options for subscription to shares, borrow in excess of amounts approved by the Board, create a subsdiairy, enter into any Affiliated party transaction etc.

• Invalid Provisions

In the event that any of the provisions of the Agreement are held to be invalid, illegal or unenforceable under any present or future law, and if the rights or obligations under the Agreement of our Company or any of the shareholders will not be materially and adversely affected thereby affected thereby, (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a hereof; (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance, and in lieu of such legal, invalid, or enforceable provision will be added automatically as a Party of the Agreement.

Technical Collaboration and Technical Assistance Agreements

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We do not have any technical collaboration or assistance agreements as on date of the Draft Letter of Offer

Strategic Partners

We do not have any Strategic Partners as on date of the Draft Letter of Offer

Financial Partners

We do not have any Financial Partners as on date of the Draft Letter of Offer

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OUR MANAGEMENT

BOARD OF DIRECTORS

Under our Articles of Association we cannot have less than three directors and not more than 12 directors. We currently have 10 (ten) directors on our Board of which 5 (five) are independent Directors. Our Chairman is an Executive Director and half of our Board’s strength comprises of independent Directors as required under the Listing Agreement:

Sr.No.

Name, designation, father’s name, address, nature of Directorship, occupation, nationality,

term, DIN

Age Other directorships

1. Mr. P. K. Balasubramanian Chairman S/o Puthucode Krishnan 6-A Coromandel Towers 816/817, Poonamalle High Road, Kilpauk, Chennai – 600 010.

Executive and Non-Independent Occupation: Business Nationality: Indian Term: Liable to retire by rotation DIN 00098557

56 years

Nil

2. Mr. Ajay Dhagat Managing Director and Chief Executive Officer S/o Mr. Narayansankar Dhagat 3C, Elysium 2nd Main Road, Gandhi Nagar, Adyar, Chennai – 600 020

Executive and Non-Independent Occupation: Service Nationality: Indian Term: Not Liable to retire by rotation DIN 02190030

62 years

Revati Engineering Limited

3. Mr. B. Jayakumar, Director - Technical S/oMr. Balasubramaniam Q 101, The Atrium 49 Kalashetra Road, Thiruvanmiyur, Chennai – 600 041.

Executive and Non-Independent Occupation: Service Nationality: Indian Term: Liable to retire by rotation DIN 01107423

44 years

Nil

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Sr.No.


term, DIN


4. Mr. G. Sriram DirectorS/o Mr. Govindan 27, Kanakasrinagar, Cathedral Road, Chennai – 600 086.

Non-Executive and Independent Occupation: Consultant Nationality: Indian Term: Liable to retire by rotation DIN 00092192

54 years

Bhavani Distilleries & Chemicals Limited

5. Mr. M.M Kamath DirectorS/o Mr. Kamath Madhava Mulky Shree Matha, Mizar Ramakrishna Pai Compound, Mannagudda, Mangalore – 575 003

Non-executive and Independent Director Occupation: Consultant Nationality: Indian Term: Liable to retire by rotation DIN 01454797

67 years

Port and Infrastructure Consultancy (Madras) Private Limited

6. Mr. Sumit Chandwani Nominee Director of Promoter (IAF-VI) S/o Mr. Chandwani Mohan Tekchand 2001, Building Era III, Marathon Next Gen, Ganpatrao Kadam Marg, Lower Parel, Mumbai- 400 013

Non-Executive and Non-Independent Occupation: Service Nationality: Indian Term: Not liable to retire by rotation DIN 00179100

40 years

1. PVR Limited; 2. PVR Pictures Limited; 3. VA Tech Wabug Limited; 4. Rubamin Limited 5. Updater Services Private

Limited

7. Ms. Shweta Jalan Nominee Director of Promoter (IAF-VI), D/o Mr. Jalan Nirmal Kumar 801 Raheja Princess, S.K Bole Marg, Dadar (West), Mumbai- 400 028.

Non-Executive and Non-Independent Occupation: Service Nationality: Indian Term: Not liable to retire by rotation DIN 00291675

32 years

1. I –Ven Interactive Limited; and 2. Rubamin Limited

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Sr.No.


term, DIN


8. Mr. Raj Narain Bhardwaj S/o Late Mr. Murarilal Independant Director 402, Moksh Apartment, Upper Govind Nagar, Malad (E), Mumbai

Non-executive and Independent Occupation: Retired banker Nationality: Indian Term: Liable to retire by rotation DIN:01571764

63 1. Samvridhi Advisors Private Limited;

2. Core Projects & Technologies Limited;

3. SREI Venture Capital Limited;

4. Adhunik Thermal Energy Limited;

5. Lanco Kondapalli Power Private Limited;

6. Jaiprakash Power Ventures Limited;

7. Jaiprakash Associates Limited 8. Jaypee Hotels Limited 9. Milestone Capital Advisors

Private Limited 10. Milestone Propgain Realty

Advisors Private Limited 11. Singhi Advisors Limited

9. Mr. N Kantha Kumar S/o Mr. Nagendra Shenoy Additional Director Ashadeep, Cherupilly Road, Off Azad Road, Kaloor, Kochi 682 017

Independent Occupation: Retired bank executive Nationality: Indian Term: Liable to retire by rotation DIN: 00890532

52 years

1. City Union Bank Limited

10. Mr. T. Raghunandana S/o Venkata Subbiah Sarma Additional Director No.7, D’Silva Road, Mylapore, Chennai- 600 004

Independent Occupation: Businessman Nationality: Indian Term: Liable to retire by rotation DIN: 00628914

47 years

1. Best Security Services Private Limited

2. Updater Services Private Limited

3. Perfect Vending (India) Private Limited

4. Avon Solutions & Logistics Private Limited

5. Tangirala Infrastructure Development Private Limited

6. Integrated Technical Staffing & Solutions Private Limited

Note: None of the above mentioned Directors are on the RBI List of willful defaulters as on date.

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BRIEF BIOGRAPHY OF OUR DIRECTORS

Mr. P. K. Balasubramanian, 56 years, is an Executive and Non-Independent Chairman of our Company. He is a Shipwright from Calcutta Technical School. He is also a member of Institute of Marine Engineers. He started his career with Scindia Workshops Limited, Calcutta in 1970. He is one of the founder Promoters and a First Director of our Company. He has over 35 years of experience in shipbuilding, construction, and ship repairing especially in fabrication and hydraulic systems. He has served as the Managing Director of our Company with effect from September 21, 2003 before being re-designated as the Chairman of our Company on April 23, 2008. He has taken lead in setting up of our Shipyard at Malpe and growth of our Company. He is also responsible for business development and strategic initiatives.

Mr. Ajay Dhagat, 62 years, is the Managing Director and Chief Executive Officer of our Company. He holds a degree in Engineering from University of Jabalpur. He has over 39 years of experience in the engineering industry, and has been associated with a number of organisations in various capacities including as Country President and Managing Director of Areva T &D India (formerly GEC Alstom/ English Electric). Prior to joining our Board of Directors, he served as Chief Executive Officer with Delhi DISCOM. He has also been a Member of Areva Group of Senior Executives. As Managing Director and CEO of our Company he is responsible for overall business of our Company.

Mr. B. Jayakumar, 44 years, is the Director - Technical of our Company. He is an AMIE (Mechanical Engineering), Masters in Business Administration from Open University Business School, Milton Keyes, U.K and is also a First Class marine Chief Engineer (Foreign Going). He has over 20 years of experience in the operation, maintenance and repairing of ocean going vessels.

Mr. G Sriram, aged 54 years, is an Independent Director of our Company. He holds a Bachelor’s Degree in Technology from IIT, Madras. He has over 27 years of experience in project management and engineering, analysis and optimization of operations, financial analysis of projects and operations, quality system management and environment and safety management.

Mr. M.M. Kamath, 67 years, is an Independent Director of our Company. He holds a Bachelor’s Degree in Civil Engineering from Karnataka University. Mr. Kamath has over 35 years of experience in areas of construction operation and maintenance of port and harbour structures, and has been associated with various organizations over the years, including with the Mangalore Port Trust. He is also a member of various professional bodies including a life member of Institution of Engineers (India) and a Life Fellow of Institution of Valuers. He is currently associated as a consultant with various port trusts.

Mr. Sumit Chandwani, 40 years, is a Non-Executive and Non-Independent Director of our Company. He is a nominee Director appointed by our Promoter IAF- VI. He holds a Bachelor’s Degree in Engineering from IIT, Roorkee, and a Masters in Business Administration from IIM, Bangalore. He has over 15 years of experience in project finance related activities.

Ms. Shweta Jalan, 32 years, is a Non-Executive and Non-Independent Director of our Company. She is a nominee director appointed by our Promoter. She holds a Bachelor’s Degree in Economics and a Masters in Business Adminsitration from Mumbai University. She has over 8 years of experience in investment banking.

Mr. Raj Narain Bhardwaj, 62 years is an Independent Director of our Company. He holds a Post Graduate Degree in Economics from the Delhi School of Economics and a Diploma in Industrial Relations and Personnel Management from Punjabi University, Patiala. He has over 37 years of experience with the Life Insurance Corporation of India and has served in various positions including Managing Director and Chairman of Life Insurance Corporation of India. Mr. R. N. Bhardwaj has also served as a member of the Securities Appellate Tribunal.

Mr. N. Kantha Kumar, 62 years, is an Independent Director of our Company. He holds a Bachelors’ Degree in Commerce and Law from Kerala University and is also a Certified Associate of the Indian Institute of

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Bankers. He has over 41 years of experience in areas of planning and development, credit, agriculture and micro financing, treasury, risk management aspects of banking. He has over the years been associated with various organizations in a number of capacities including as Chairman of South Malabar Gramin Bank, Executive Director of Canara Bank, Chairman and Managing Director of Syndicate Bank. He has also served as a member of the working group constituted by the RBI on compliance by banks with accounting standards.

Mr. T Raghunandana, 47 years, is an Independent Director of our Company. He holds a Bachelor’s Degree in Commerce. He has over 23 years of experience in integrated facilities management services. He is currently the Managing Director of Updater Services Private Limited.

BORROWING POWERS OF BOARD OF DIRECTORS

Pursuant to an ordinary resolution passed at the EGM of our shareholders held on February 12, 2007, our Directors were authorised to borrow money(s) on behalf of our Company in excess of the paid up share capital and the free reserves of our Company from time to time, pursuant to the provisions of Section 293(1)(d) of the Companies Act, subject to an amount not exceeding Rs. 1,50,000 lakh. For further details of the provisions of our Articles of Association regarding borrowing powers, please refer to the section titled ‘Main Provisions of the Articles of Association of our Company’ beginning on page 192 of the Draft Letter of Offer.

COMPENSATION OF DIRECTORS

Our Company pays sitting fees of Rs. 10,000 to its independent Directors for attending each Board of Director meeting

Details of the compensation paid to non-executive Directors for the year ended March 31, 2008 are as under:

(Rs. in Lacs) Names of the Directors Remuneration (in Rs) Sitting Fees (Rs) Total (Rs.)

Mr. G Sriram 12.00 - 12.00 Mr. A.G Krishnan 1.95 - 1.95 Mr. M.M Kamath - 0.40 0.40 Mr. Raj Narain Bharadwaj - 0.20 0.20 Mr. Sumit Chandwani - - - Ms. Shweta Jalan - - - Mr. N. Kantha Kumar,* - NA NA Mr. Raghunandana* - NA NA Total 13.95 0.60 14.55 * Joined the Board with effect from September 20, 2008

Details of the remuneration paid to Whole Time Directors of our Company

(i). Terms of appointment of the Chairman, Mr. P. K Balasubramanian

Mr. P.K Balasubramanian was re-appointed as our Managing Director pursuant to the provisions of the Companies Act, 1956 for a period of three (3) years with effect from April 1, 2007, in pursuance of a agreement dated July 6, 2007 entered into between our Company which was approved at the EGM held on July 21, 2007 and further approved by the Central Government vide its letter dated February 21, 2008. The terms of his aforesaid appointment as Managing Director, were as set out in the agreement dated July 6, 2007, as amended by Supplemental Agreement dated February 23, 2008.

Subsequently Mr. Balasubramanian was re-designated as our Executive Chairman with effect from April 23, 2008 in pursuance of Supplemental Agreement dated April 25, 2008

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The significant employment terms as set out in the aforesaid resolution for his re-appointment are as follows:

Salary and Allowances Not exceeding Rs. 75,00,000/- per annum

Perquisite 1. Exgratia on salary equivalent to 15 days basic salary each year 2. LTA equivalent to 15 days basic salary each year 3. Medical expenses for managing director and his family members

subject to a ceiling of Rs. 50,000/- per annum, or Rs. 1,50,000/- over a block of 3 years

4. Provision of telephone and other communication facilities at residence and reimbursement of telephone expenses

5. Driver’s salary , reimbursement of fuel expenses and car repair/ maintenance charges for 2 cars

6. Fees of clubs subject to a maximum of two clubs (does not include admission and life membership fee)

Contribution towards I. Provident Fund and Super Annuation Fund on salary at the rate in

accordance with the rules of the Company II. Gratuity on salary in accordance with the rules of the Company

Shall not be included in the computation of the ceiling on remuneration to the extent these are not taxable under the Income Tax, 1961.

(ii). Terms of appointment of the Mr. Ajay Dhagat has been appointed as our Managing Director and Chief Executive Officer pursuant to the provisions of the Companies Act for a period of three (3) years with effect from April 23, 2008, in pursuance of a resolution of our Board on February 14, 2008 and the resolution passed at meeting of the shareholders on September 24, 2008 fixing the terms as set out hereinbelow

Salary Not exceeding Rs. 350,000 per month Perquisite Not exceeding Rs. 238,000 per month

Contribution towards Provident Fund on salary at the rate in accordance with the rules of the Company. Shall not be included in the computation of the ceiling on remuneration to the extent these are not taxable under the Income Tax Act, 1961 Mr. Dhagat shall be entitled to: -Performance linked incentive, based on the criteria and maximum amount to be determined by the Board after finalization of accounts for each financial year -company maintained car including driver --reimbursement of mobile and land line telephone expenses -mediclaim policy covering Mr Dhagat and his spouse -shares under ESOP scheme to be finalized

Minimum Remuneration The remuneration aforesaid shall be the minimum remuneration payable to Mr Dhagat

(iii). Terms of appointment of Director - Technical Mr. B. Jayakumar,

Mr. B. Jayakumar has been appointed as our Director (Technical) pursuant to the provisions of the Companies Act for a period of 3 (three) years with effect from November 20, 2006 in pursuance of a

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resolution of our Board of Directors on January 18, 2007 and resolution of our shareholders at the EGM held on February 12, 2007 approving the terms of his appointment.

Further pursuant to a resolution of our Board dated Februaury 14, 2008 the remuneration payable to Mr. Jayakumar has been revised for the period April 1, 2008 up to the end of his term. The key terms of his revised terms of remuneration are as follows:

Salary Not exceeding Rs. 2,50,000/- per month

Perquisite and Allowances Not exceeding Rs. 1,67,000/- per month

Contribution Provident Fund and gratuity on salary at the rate in accordance with the rules of the Company, Shall not be included in the computation of the ceiling on remuneration to the extent these are not taxable under the Income Tax Act, 1961

Minimum Remuneration The remuneration aforesaid shall be the minimum remuneration payable to Mr. Jaykumar.

Details of remuneration paid to Non-Executive and Independent Directors of our Company (other than sitting fees)

Terms of appointment of Non-Executive Director, Mr. G. Sriram

Mr. Sriram has been appointed as Director pursuant to the provisions of the Companies Act for a period of three (3) years with effect from June 9, 2007 in pursuance of a resolution of our Board on April 30, 2007. the initial remuneration payable to him, in terms of Central Government approval, was Rs. 20,000/- per month for three years from April 1, 2007, which were subsequently revised upwards and further the Central Government has given its approval to the payment of remuneration of Rs. 1,00,000 per month pursuant to the provisions of section 309(4)(a) of the Companies Act to Mr. Sriram vide its letter dated March 3, 2008 for a period of 2 years with respect to April 1, 2007.

SHAREHOLDING OF OUR DIRECTORS

As per our Articles, our Directors are not required to hold any qualification Equity Shares in our Company. Save and except as below, our Directors do not hold any Equity Shares in our Company as on September 26, 2000.

Sr. No. Name of the Directors No. of Equity Shares

1. P.K Balasubramanian 2,26,800 2. Mr. Ajay Dhagat Nil 3. Mr. B. Jayakumar Nil 4. Mr. G. Sriram Nil 5. Mr. M.M Kamath Nil 6. Mr. Sumit Chandwani Nil 7. Ms. Shweta Jalan Nil 8. Mr. Raj Narain Bhardwaj Nil 9. Mr. Kantha Kumar Nil 10. Mr Raghunandana Nil

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For details of Equity Shares held by our Directors, please refer to the chapter titled “Capital Structure”beginning on page 25 of the Draft Letter of Offer.

INTEREST OF DIRECTORS

Other than Mr.Sumit Chandwani and Ms. Shweta Jalan, Nominee Directors who have been appointed in pursuance of terms of the Shareholders Agreement dated February 27, 2007 between our Company, our Erstwhile Promoters, our current Promoter Mr. P.K. Balasubramanian and IAF-VI, being our single largest shareholder none of our Directors or key managerial personnel have been appointed pursuant to any understanding or arrangement with major shareholders, customers, suppliers or others.

All of our Directors may be deemed to be interested to the extent of fees payable to them for attending meetings of the Board, remuneration payable to our Non-executive Directors as well as to the extent of remuneration payable to our Executive Directors for their respective services and reimbursement of expenses payable to them. All our Directors may also be deemed to be interested to the extent of Equity Shares, if any, already held by them or their relatives or bodies corporate in which they have interest in our Company, or Equity Shares that may be subscribed for and allotted to them, out of the present Issue in terms of the Draft Letter of Offer and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares.

Further, save and except as stated otherwise in the chpaters titled ”Business Overview”,“Our Promoters” and “Financial Statements” beginning on page nos. 1,115 and FS - 1 respectively, of the Draft Letter of Offer, our Directors do not have any other interests in our Company as on the date of the Draft Letter of Offer with SEBI.

Our Directors are not interested in the appointment of or acting as Registrar and Bankers to the Issue or any such intermediaries registered with SEBI.

Changes in our Board of Directors during the last three years

The following are the changes in our Board of Directors during the last three years:

Name of our Director Date of Appointment Date of Resignation Reasons

Mr. A.G Krishnan June 9, 2007 September 17, 2008 Resignation Mr. A.G Krishnan June 9, 2007 - Appointment Mr. A.G Krishnan August 8, 2005 February 1, 2007 Resignation Mr. A.G Krishnan August 8, 2005 - Appointment Mr. Ajay Dhagat April 23, 2008 - Appointment M.M. Kamath April 30, 2007 - Appointment Mr. Hendrikus Van Berk December 16, 2005 October 31, 2007 Resignation Mr. B. Jayakumar November 20, 2006 - Appointment Cdr. S. Subramianian May 28, 1999 December 16, 2006 Resignation Mr. P.V. Krishna August 26, 2002 July 31, 2007 Resignation Mr. Vinod George August 26, 2002 September 14, 2005 Resignation Mr. G. Sriram August 08, 2005 - Appointment Mr. K.Kanta Rao August 26, 2002 August 08, 2005 Resignation Mr. Sumit Chandwani July 31, 2007 - Appointment Ms. Shweta Jalan July 31, 2007 - Appointment Mr. Raj Narain Bhardwaj October 31, 2007 - Appointment

CORPORATE GOVERNANCE

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Our Company is compliantwith SEBI guidelines in respect of corporate governance especially with respect to broad basing of Board, constituting the Committees such as Share Transfer / Investors Grievance Committee and Audit Committee.

Our Company is compliantwith all mandatory and also some of non-mandatory requirements of corporate governance norms as enumerated in Clause 49 of the Listing Agreements with the Stock Exchange. The Board has constituted an Audit Committee, Shareholder’s Investor Grievance and Share Transfer Committee and Compensation / Remuneration Committee in accordance with the Listing Agreements.

Audit Committee

Our Company constituted the Audit Committee in the year 2002. The Committee was thereafter re-constituted and was most recently re-constituted on September 20, 2008 Audit Committee comprises 3 non-executive Directors. The members of the Committee possess the sound knowledge of finance and accounts. The Audit Committee invites such of the executives, as it considers appropriate to be present at the meetings of the Committee. The names of the Committee members are as below:

Name of the Directors Status

Mr. N Kantha Kumar Chairman Mr. G. Sriram Member Mr. M.M Kamath Member

Terms of Reference

1. To discuss periodically with the management of the Company, its statutory Auditors, about internal control systems of the Company and adequacy thereof, the nature and scope of audit including observations, if any, of the Auditors as also to have post audit discussion to ascertain any areas of concern,

2. To review the half-yearly and annual financial statements of the Company before submission thereof to the Board

3. To ensure compliance of the internal control system

4. To recommend to the Board on any matter relating to financial management including audit report

5. To oversee the Company’s financial, reporting process, disclosure of financial information to ensure that the financial statements are correct, sufficient and credible

6. to have such additional functions and/ or features as are contained in the listing agreements made between the Company and the concerned stock exchanges

7. The Committee has been vested with the following powers:

(i) to investigate into any matters in relation ao all or any of the aforesaid matters or any other matter which may be referred to by the Board

(ii) to invite to any Committee meeting such as of the executives of the Company (particularly the head of the finance function) as it may consider appropriate and to seek information from any employee

(iii) to secure attendance of outsiders with relative expertise and to obtain external legal and/or professional advice, if considered necessary

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(iv) to recomment appointment or removal of external auditors, fixation of audit fees and approval for payment to the Auditors for any other service

(v) to discuss with the internal auditors any significnat findings and follow up thereon

(vi) to have full access to the information ocntained in the records of the company; and

(vii)to approve payment to the Auditors for any other services up to an overall limit of Rs. 2,00,000 with power to sub-delegate the same

The Committee periodically reviews with the management of the Company the following matters:

a) any change in the accounting policies and practices

b) major accounting entries based on exercise of judegement by management

c) qualification in draft report of the Auditors

d) significant adjustments arising out of Audit

e) the going concern assumption

f) compliance with the accounting standards

g) compliance with stock exchanges and legal requirements concerning financial statements

h) any related party transactions, being transactions of the Company of material nature, with ptomoters, or the management, their subsidiaries or relatives and other parties that may have potential conflict with the interests of the Company at large

i) the adequacy of internal audit function, including the structure of the internal audit department , staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit

j) the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting to the Board

k) the Company’s financial and risk management policies and

l) the reasons for substantial defaults in payment to depositiors, creditors and shareholders in case of non payment of declared divididends, if any

Remuneration Committee Our Company constituted the Remuneration Committee in the year 2003. The committee has been reconstituted most recently on September 20, 2008. The Committee after the latest reconstitution consists of the following Directors:


Mr. G. Sriram Chairman Mr N Kantha Kumar Member Mr. M.M Kamath Member

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The scope and terms of reference of this Committee is to specifically determine our Company’s policy on specific remuneration packages for Executive Directors and compensation payments.

Share Transfer/ Investor’s Grievance Committee

Our Company constituted the Committee, and was most recently re-constituted on September 20, 2008. The Committee comprises of 3 Directors. The composition of the committee is as under:


Mr. G. Sriram Chairman Mr. N Kantha Kumar Member Mr. M.M Kamath Member

Terms of reference

The Committee overseas share transfers, transmission, and monitors investors grievances such as complaints on transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc., and redress thereof, within the purview of the guidelines set out in the listing agreement.

KEY MANAGERIAL PERSONNEL

The key managerial personnel of our Company other than our executive Directors as on the date of the Draft Letter of Offer are as follows.

Mr. Muraleedharan Nair, aged about 46 years, is the VP (Projects) of our Company. He is qualified as a B.Tech in Naval Architecture & Shipbuilding Technology. He started his career in 1986 with Mazagon

BOARD OF DIRECTORS

CEO

HEAD MATERIALS DIRECTO

R

PPC PRODUCTION

GM COMMERIC

SAFETY

VP HR

DGM IT

CS & LEGAL

CFO FINANCE

DESIGNS PROJECTS & AFTER

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Docks Limited as junior naval architect and progressed to the post of senior naval architect. Thereafter he worked with Bureas Veritas from December 1994 to February 2002 as a Surveyor and with Eurasia International (India) from February 2002 until joining our Company on May 18, 2006. He has an industry experience of about 22 years. At our Company he started working as a senior superintendant heading the marine consultancy division of our company. Presently he is responsible for the overall functioning of project execution at Cochin. He is paid an annual remuneration of Rs.16,73,344/-.

Mr. V. Ramasubramani Sudhakar, aged about 37 years, is the GM (Design & Quality) of our Company. He is highly qualified with a diploma in Mechanical Engineering (with specialization in Machine Shop Technology.) from Tamil Nadu, A.M.I.E (Mechanical); a Post Graduate Diploma in Computer Management issued by the institution of Engineers, Kolkatta; a MOT First Class (Motor) and a Post Graduate Diploma in Computer Management from A.M Jain College, Chennai. He has worked in various capacities from Junior Engineer to Chief Engineer from 1991 till June 2001 on board various ships with various organizations including SISCO, Wallem Ship Management, Setramar Navigazione, Sanmar Shipping, and as Surveyor with National Classification Society for 5 years. Prior to joining our Company he was working with Goodearth Maritime Limited as a Technical Manager where he was responsible for studying feasibility of various projects, pre-purchase inspection, and budgeting etc. He has an industry experience of about 17 and half years. He joined our Company on September 13, 2007. He is paid an annual remuneration of Rs. 8,95,065/-.

Mr. P.Ravichnadran, aged about 49 years, is the VP (HR & Administration) of our Company. He has done his Bachelors of Science in Zoology from Madras University. He has also been awarded a Post Graduate Diploma in Labour Administration from Tamil Nadu Institute of Labour Studies and has also completed his MBA (with specialization in Human Resource Development) from Indira Gandhi National Open University. He started his career with TVS Suzuki Limited and went on to work in various capacities including as Assistant Manager and Deputy Manager-HR at S&S Industries Enterprises and as Manager - Human Resources to Country Head - HR at Sembcorp Logistics India Limited. Thereafter he worked as a Senior Manager - HR with Hyundai Motor India Limited from January 2004 up to July 2005. Prior to joining our Company on June 4, 2007, he was working as Head-Human Resources with Tamil Nadu Road Development Corporation. He has extensive experience in evolution and implementation of HR policies and performance management systems, organization restructuring etc for various organizations, negotiating and settlements with trade unions, and manpower planning and recruitment. He has an industry experience of over 25 years. He joined our Company on June 4, 2007 and is responsible for human resource and administration at our Company. He is paid an annual remuneration of Rs. 15,55,999/-.

Captain S Swaminathan, aged about 39 years, is the GM (Ship Building – Contracts) of our Company. He has done his B.Sc., in mathematics and physics, Master Mariner and is also a Member of Institute of Chartered ShipBrokers (M.I.C.S, London). He started his career with Ship Building Corporation of India as an entry cadet in August 1989. Thereafter from 1995 up to 1990 he worked as the chief officer on board ships with OMI Corporation, USA until 2003. He has also worked in various other capacities in several organizations including as Head Operations with Parikh Marine, as Vice President Esskay Shipping. Prior to joining our Company in June 6, 2008 he was Head Operations and Business Head at Adani Enterprises Limited. He has an industry experience of about 23 years He joined our Company on June 6, 2008 and is responsible for all marketing, tendering and commercial activities to achieve the goals in line with our Company’s business plans. As Captain S. Swaminathan joined our Company in the Fiscal 2007, no remuneration has been paid for the Fiscal 2007.

Mr. Narasimhan Ramanathan, aged about 46 years, is the Chief Financial Officer of our Company. He is an M.Com and AICWA. He started his career in 1985 as Senior Accounts Executive at Voltas India Limited and has worked with a number of organizations in various capacities including with Essar Oil Limited as Deputy Finance Manager, with Essar Sisco Ship Management Company Limited, India and with Pepsico India Holdings as Finance Manager. Prior to joining our Company he was the Finance Head at the Kewalram Chanrai Group in Indonesia. He has vast experience in financial planning and management, financial accounting and reporting and tax planning and compliance. He has an industry experience of about 23 years and joined our Company on April 23, 2008. He is responsible for overseeing the overall

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financial corporate finance and internal accounts of our Company. As Mr. Narasimhan Ramanathan joined our Company in the Fiscal 2007, no remuneration has been paid for the Fiscal 2007.

Mr. Harish Avadani, aged about 44 years, is the Head (Procurement & Material Management) of our Company. He has done B.com (Hons.), AICWA and GDMM. He has wide experience in purchase, import and export logistics, logistics and inventory management. He has been associated with various organizations in various capacities including as Accounts trainee with Vinar Systems Limited, as Assistant Manager Purchase with Raymond Wollen Mills Limited (now Lafarge Cement) and with India Foils Limited as Manager Commercial. Prior to joining our Company in January 28, 2008 he was working with BOC India Limited as Procurement Manager, India. He has an industry experience of 16 years. At our Company he is responsible for the entire purchase/ materials management functions. He is paid an annual remuneration of Rs. 9,74,928/-.

SHAREHOLDING OF OUR KEY MANAGERIAL PERSONNEL AS ON DATE THIS DRAFT LETTER OF OFFER.

None of our key managerial personnel except our Promoter Director - Mr. P.K. Balasubramanian hold any Equity Shares in our Company as on date of the Draft Letter of Offer. For shareholding of our Executive Directors, please refer to section titled “Capital Structure” beginning on page 25 of the Draft Letter of Offer.

Interest of key managerial personnel

Our Company has in place a “Tebma Shipyards Limited- Employees Group Gratuity Scheme" with the Life Insurance Corporation of India. This is a group gratutity scheme wherein our Company contributes certain sums periodically to cover liability for payment of gratuity to employees arising out of employee's retirement, cessation of service or in the event of their death, to their specified beneficiaries after a minimum period of service or to their nominees in case of death

Employee Stock Options

As on date we do not have any ESPS/ESOP scheme. However the Board Of Directors by their resolution dated March 12, 2008 and the shareholders vide resolution dated passed at the EGM dated April 16, 2008 have authorised the constitution of an ESOP scheme under the SEBI (Employees Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999. However, our Board has not as on date adopted any scheme.

Bonus or Profit sharing plan for the Key Managerial Personnel

We do not have any specific bonus or profit sharing plan for our key managerial personnel.

Changes in the Key Managerial Personnel in the last Three Years

Following are the changes in Key Managerial Personnel in the last three years:

Name / Designation Date of appointment Date of retirement / resignation

Reason

Muraleedharan Nair

May 18, 2006 - Appointed as Vice President (Projects)

Ramasubramani Sudhakar .V September 13, 2007 - GM (Design & Quality) Ravichandran P June 4, 2007 Vice President (HR & Admin) Harish Avadani January 28, 2008 - Head (Procurement & Material

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Management) S Swaminathan February 6, 2008 - GM (Ship Building Commercial) Narasimhan Ramanathan April 25, 2008 - Chief Financial Officer

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OUR PROMOTERS

Our current Promoters are India Advantage Fund VI and Mr. P.K. Balasubramanian

Mr. P.K. Balasubramanian Driving License number: NAPassport number is F4677641 Permanent Account Number is AACPB6484H Voter ID- NA

For more details on Mr. P.K. Balasubramanian, please refer to the section titled “Our Management” beginning on page 101 of the Draft Letter of Offer.

India Advantage Fund- VI(“IAF-VI”)

India Advantage Fund-VI was setup in terms of the Indenture of Trust dated September 23, 2005 and amened and restated Indenture of Trust dated September 25, 2006 between ICICI Venture Funds Management Company Limited and Western India Trustee & Executor Co Limited. IAF-VI is constituted under the provisions of Indian Trust Act, 1882 with Western India Trustee & Executor Company Limited as its trustees. The fund is managed by ICICI Venture Funds Management Company Limited.

Presently, IAF-VI is engaged in the activities of investing in equity, quasi-equity and equity related instruments issued companies, industrial and commercial undertakings. Various banks and institutions including ICICI Bank Limited and foreign investors have contributed to the Fund. IAF-VI is neither listed on any stock exchange in India or abroad nor registered with SEBI. IAF-VI has not been prohibited by SEBI from dealing in securities.

Board of Trustees of IAF-VI as on September 26, 2008

Name of Trustees

Mr. K.D. Hodavadkar Mr. G. Soundarrajan Mr. R.P. Maheshwari

Financial Performance of IAF-VI for the last two fiscals.

For the period ended Year Ended March 31, 2008

Year Ended March 31, 2007

Settlors Contribution 0.10 0.10 Capital 52,188.49 39759.42 Total income 1412.97 313.95 Total Expenses 1621.00 1480.27` Deficit transferred to Revenue Appropriation Accout (208.03) (1166.31)

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We confirm that the Permanent Account Number, bank account number and passport number of the above Promoters shall be submitted to the OTCEI at the time of filing the Draft Letter of Offer. Further, our Promoters have not been declared as willful defaulters by RBI or any other government authority and there are no violations of securities laws committed by our Promoters in the past nor any such proceedings are pending against our Promoters.

Our Promoters do not have any interest in any property acquired by our Company in a period of two years before filing the Draft Letter of Offer with SEBI nor do our Promoters have any interest in any property proposed to be acquired by us as on date of filing the Draft Letter of Offer with SEBI.

Interest of the Promoters

Except to the extent of reimbursement of expenses incurred at actuals, remuneration or benefits in their capacity as Directors and their shareholding in our Company our Promoters have no other interest in our Company.

Except as stated in "Related Party Transactions" beginning on page 120 of the Draft Letter of Offer (including remuneration as whole-time Directors and reimbursement of expenses), and to the extent of shareholding in our Company either by themselves or shareholding of companies in which they are interested, our Promoters do not have any other interest in our Company.

Related Party Transactions

Please refer to the section titled “Auditors’ Report to the Restated Financial Statements – Details of Transactions with Related Parties” beginning on page 120 of the Draft Letter of Offer.

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OUR PROMOTER GROUP

Apart from our Promoters and our Subsidiary, the following entities constitute our Promoter Group:

COMPANIES:

Clininvest Holding Private Limited (CHPL)

Clininvest Holding Private Limited was incorporated as Pan Century Oleochemicals India Private Limited on September 20, 2006. The name of the company was changed to Clininvest Holding Private Limited with effect from April 23, 2007 in order to change the business of the company.. The present registered office of the company is at Prestige Obelisk, 10th Floor, Kasturba Road, Bangalore – 560001.

CHPL is engaged inter alia in the business of conducting research and development in innovative technologies and products with special emphasis on Genetically Modified Organisms, transgenic seed varieties, plant genomics and bioinformatic sequencing etc. CHPL is incorporated to carry on the business as Clinical Research Organisation (CRO) or invest in companies undertaking CRO. The Company holds certain stake in Swiss Biosciences AG, a company incorporated under the Laws of Switzerland, as a joint venture with Wockhardt Group.

Shareholding pattern of Clininvest Holding Private Limited as on September 15, 2008

Shareholder No of equity shares % shareholding

Western India Trustee And Executer Company Limited (A/cIndia Advantage Fund VI )

9999 100.00

T.S Suresh (as nominee of IAF-VI) 1 0.00 Total 10,000 100.00

Board of Directors as on September 15, 2008

Name of Directors

Mr. T.S Suresh Mr. Rajiv Shukla

Financial Performance

Particulars Rs. in Lacs Share Capital 1.00 Reserves Nil Sales Nil Profit after Tax Nil Earnings per Share (Rs.) Nil Net Assets Value (Rs.) -

As CHPL was incorporated on September 20, 2006 and during the fiscal year 2006-07, there were no operations of the Company and hence the Company has not prepared a Profit and Loss Account. The annual accounts for the fiscal year 2007-08 are yet to receive shareholders approval.

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There are no defaults in meeting any statutory/bank/institutional dues/obligations. No proceedings have been initiated for economic offences against Clininvest Holding Private Limited except as stated in the Draft Letter of Offer.

There are no pending litigations, defaults, etc against Clininvest Holding Private Limited except as stated in the Draft Letter of Offer.

The above company is neither a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1995 nor under winding up.

TRUSTS:

CHAMI VADHYAR MEMORIAL TRUST (“CVM”) TRUST

CVM is a public charitable, educational trust constituted pursuant to a trust deed dated September 2, 2005. It is has been registered as a public charitable trust with registration no. 751/07-08 and has been formed with the object of inter alia running hospitals and other like charitable institutions. Its registered office is situated at new no. 8, old no. 45, III East Street, Kamraj Nagar, Thiruvanmayur Chennai 600 041.

Trustees as on September 26, 2008

The CVM Trust was settled by Mr. P.K Balasubramanian.

The natural person(s) in charge of the CVM Trust are

Mr. P.K Balasubramanian Chairman Mr. V. Narayan Secretary Mr. N Jayakrishnan Treasurer

Financial Performance

The audited financial results for the last financial year are as follows

(Rs. in lacs) Particulars FY [ ]Sources of FundsCorpus Fund 0.65Grant 16.57 Application of Funds Cash and Bank Balance 10.66 Excess of income over expenditure/ expenditure over income

0.64

Promoter Group Companies which are defunct

The following companies forming part of Promoter Group have been struck off/ have made applications for striking off as defunct companies under section 560 of the Companies Act.

Sr. No. Name of Company 1. T. J. Industries Private Limited 2. Tebma Securities Private Limited 3. Tebma Finance Limited 4. Tebma Farms Limited 5. Tebma Consultancy and Management Services Private Limited

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6. Tebma Pyrotechnics Private Limited 7. Tebma Pharma Private Limited 8. Tebma Dockyards Limited

Common Pursuits among Promoter Group Entities:

Currently, there are no common pursuits between our Company and any Promoter Group Entity.

Related business transactions within the group

Currently, there are no related business transactions within the entities under Promoter group, except as mentioned in the section titled “Financial Statements” beginning on page [ ] of the Draft Letter of Offer.

Sales or Purchase between Companies in the Promoter Group

Currently, there are no sales or purchase transaction between the entities in the Promoter Group, except as mentioned in the section titled “Financial Statements” beginning on page [ ] of the Draft Letter of Offer.

Companies / Firms from which our Promoters have disassociated itself during the preceding three (3) years

Our Promoters have not disassociated themselves from any company / firm in the three years preceding the date of the Draft Letter of Offer.

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RELATED PARTY TRANSACTIONS

Save and except as stated otherwise in the sections titled ‘Business Overview’ and ‘Our Management’ and the section titled ‘Financial Statements’ beginning on page nos. 1, 101 and FS - 1, respectively, of the Draft Letter of Offer, there have been no sales or purchases between our Company, our Promoters and our Promoter Group Entities exceeding the aggregate value of 10% of the total sales or purchases of our Company.

For further details of our related party transactions, please refer to the section titled ‘Financial Statements’ beginning on page FS - 1 of the Draft Letter of Offer.

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DIVIDEND POLICY

The declaration and payment of dividends on our Equity Shares will be recommended by our board of directors and approved by our shareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits, cash flows, capital expenditure, capital requirements and overall financial condition. Our Company has no stated dividend policy..

The dividend declared and paid by our Company to our Equity Shareholders in the last 5 (five) years is as provided herein:

Fiscal 2006

Face Value Per share 10Dividend (Rs. lacs) 52.11 Dividend rate (% to paid up capital) 10

Dividends paid in the past are not necessarily indicative of the dividends, if any, which may be paid in the future.

FINANCIAL STATEMENTS

AUDITORS’ REPORT

The Board of DirectorsTebma Shipyards LimitedNo. 5/360 Rajiv Gandhi Salai, (OMR) Okkiam ThoraipakkamChennai – 600 097

Dear Sirs

1) We have examined the financial information of Tebma Shipyards Limited (‘Tebma’ / ‘the Company’) annexed to this report and initialed by us for identification. The said financialinformation has been prepared by the Company in accordance with the requirements of paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 (‘Act’), the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, issuedby the Securities and Exchange Board of India in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992, as amended from time to time and the terms of our engagement agreed with you in accordance with our letter dated August 22, 2008 inconnection with its Proposed Issue of Compulsorily Convertible Preference Shares (‘CCPS’) on a Rights basis to the existing shareholders of the Company. The financial information has been prepared by the management and approved by the Board of Directors.

Financial Information as per Audited Financial Statements

2) We have examined the attached ‘Unconsolidated Summary Statement of Assets and Liabilities, as Restated’ of the Company as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure I) and the attached ‘Unconsolidated Summary Statement of Profits and Losses, asRestated’ (Annexure II) for each of the years ended March 31, 2008, 2007, 2006, 2005 and2004 together referred to as the ‘Unconsolidated Restated Summary Statements’.

These Unconsolidated Restated Summary Statements has been extracted by the managementfrom the unconsolidated financial statements of the Company as at and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 and has been approved by the Board of Directors and adopted by the Members for those respective years.

Audit for the financial years ended March 31, 2007, 2006, 2005 and 2004 was conducted byMr V. Pichaikutty (“the previous auditor”) and accordingly reliance has been placed on thefinancial statements audited by him for the said years. The previous auditor has also confirmed that the Unconsolidated Restated Summary Statements for the financial yearsended March 31, 2007, 2006, 2005 and 2004 has been prepared after incorporating:

i) Adjustments for the changes in accounting policies and estimates retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy and estimates, which the Company followed as at and for the yearended March 31, 2008, for all the reporting periods.

ii) Adjustments for the material amounts in the respective financial years to which theyrelate.

FS 1

iii) There are no extra-ordinary items which need to be disclosed separately in theUnconsolidated Restated Summary Statements.

iv) There are no qualifications in the auditors’ reports, which require any adjustments to theUnconsolidated Restated Summary Statements.

The Unconsolidated Restated Summary Statements included for these years and our opinionin so far as they relate to the amounts included in respect of these years are based solely onthe reports submitted by him. The unconsolidated financial statements of the Company as atand for the year ended March 31, 2008 have been audited by us.

In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, theSEBI Guidelines and terms of our engagement agreed with you, we further report that subject to our comments in paragraph c) below:

a) The Unconsolidated Summary Statement of Assets and Liabilities, as Restated of the Company, including as at 31 March, 2007, 2006, 2005 and 2004 examined and reportedupon by Mr V. Pichaikutty, and who has submitted his report on which reliance has been placed by us, and as at 31 March, 2008 examined by us, as set out in Annexure I to thisreport are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements (Refer Annexure IV)

b) The Unconsolidated Statement of Profits or Losses, as Restated of the Company for theyear then ended, including for the year ended 31 March, 2007, 2006, 2005 and 2004examined by Mr V. Pichaikutty and who has submitted his report on which reliance has been placed by us, and for the year ended 31 March, 2008 examined by us, as set out in Annexure II to this report are after making adjustments and regrouping as in our opinionwere appropriate and more fully described in Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements (Refer AnnexureIV)

c) As more fully explained in Note 7e) of Annexure IV of Unconsolidated RestatedSummary Statements, management represents that Dharti Dredging and Construction Limited (‘DDCL’) was an associate company based on the information available with theCompany. Accordingly, all disclosures relating to DDCL have been made in theUnconsolidated Restated Summary Statements and Annexure thereto as an Associate.

d) Based on the above and as per the reliance placed on the report submitted by the previousauditor, we are of the opinion that the Unconsolidated Restated Summary Statements ofthe Company have been made after incorporating:

i) Adjustments for the changes in accounting policies and estimates retrospectively inrespective financial years to reflect the same accounting treatment as per changedaccounting policy for all the reporting periods.

ii) Adjustments for the material amounts in the respective financial years to whichthey relate.

FS 2

iii) There are no extra-ordinary items which need to be disclosed separately in theUnconsolidated Restated Summary Statements.

iv) There are no qualifications in the auditors’ reports, which require any adjustmentsto the Unconsolidated Restated Summary Statements.

3) Other Financial Information

We have also examined the following information, relating to the Company as at and for theyears ended March 31, 2008, 2007, 2006, 2005 and 2004 of the Company, proposed to beincluded in the Draft Letter of Offer, as approved by the Board of Directors and annexed tothis report. In respect of the years ended March 31, 2007, 2006, 2005 and 2004 these information have been included based upon the reports submitted by previous auditors andrelied upon by us.

i) Unconsolidated Statement of Cash Flows, as restated for the years ended March 31, 2008,2007, 2006, 2005 and 2004 (Annexure III)

ii) Statement of Significant Accounting Policies and Notes on Unconsolidated RestatedSummary Statements (Annexure IV)

iii) Unconsolidated Statement of Secured Loans, as Restated as at March 31, 2008, 2007,2006, 2005 and 2004 (Annexure V)

iv) Unconsolidated Statement of Unsecured Loans, as Restated as at March 31, 2008, 2007,2006, 2005 and 2004 (Annexure VI)

v) Unconsolidated Statement of Investments, as Restated as at March 31, 2008, 2007, 2006,2005 and 2004 (Annexure VII)

vi) Unconsolidated Statement of Sundry Debtors, as Restated as at March 31, 2008, 2007,2006, 2005 and 2004 (Annexure VIII)

vii) Unconsolidated Statement of Other Current Assets, as Restated as at March 31, 2008,2007, 2006, 2005 and 2004 (Annexure IX)

viii) Unconsolidated Statement of Loans and Advances, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure X)

ix) Unconsolidated Statement of Other Income, as Restated for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XI)

x) Tax Shelter Statement based on Unconsolidated restated profits (Annexure XII)

xi) Statement of Related Party transactions, as Restated for the years ended March 31, 2008,2007, 2006, 2005 and 2004 (Annexure XIII)

xii) Unconsolidated Statement of Dividends paid for the years ended March 31, 2008, 2007,2006, 2005 and 2004 (Annexure XIV)

xiii) Statement of Adjusted Accounting Ratios (Annexure XV)

FS 3

xiv) Capitalisation Statement, as Restated as at March 31, 2008 (Annexure XVI)

xv) Unconsolidated Statement of contingent liabilities as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XVII)

4) Based on our examination of these Unconsolidated Restated Summary Statements and the reliance placed upon by us on the reports submitted by the previous auditor, subject to ourcomments in paragraph 2c) above, we state that in our opinion, the ‘Financial Information as per Audited Financial Statements’ and ‘Other Financial Information’ read along with theStatement of Significant Accounting Policies and Notes on Unconsolidated RestatedSummary Statements mentioned above as at and for the years ended March 31, 2008, 2007,2006, 2005 and 2004 have been prepared in accordance with Part II B of Schedule II of the Act and the SEBI Guidelines as amended from time to time.

5) The sufficiency of the procedures performed, as set forth in the above paragraphs of thisreport, is the sole responsibility of the Company. Consequently, we make no representationsregarding the sufficiency of the procedures described above either for the purposes for whichthis report has been requested or for any other purpose.

6) This report should not be in any way be construed as a reissuance or redating of any of theprevious audit report by other firms of Chartered Accountants nor should this be construed as a new opinion on any of the financial statements referred to herein.

7) This report is intended solely for your information and for inclusion in Draft Letter of Offerin connection with the proposed issue of CCPS on a rights basis to the existing shareholdersof the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for B S R & AssociatesChartered Accountants

Subramanian Vivek PartnerMembership No. 100332Place: Chennai Date: September 26, 2008

FS 4

Tebma Shipyards LimitedRs in Lakhs

FS 5

Unconsolidated Summary Statement of Assets and Liabilities, as Restated Annexure I

As at March 31

2008 2007 2006 2005 2004

A Fixed Assets

Gross block 2,227.88 1,053.90 692.38 315.76 293.53

Less : Accumulateddepreciation / amortization

742.31 455.80 277.72 197.94 190.87

Net block 1,485.57 598.10 414.66 117.82 102.66


Sub Total 11,685.84 3,786.25 1,650.14 451.23 102.66

B Investments 32.82 131.85 161.85 42.99 168.49


DCurrent Assets, Loans andAdvances

Inventories 3,597.35 130.38 348.21 16.96 30.96

Sundry debtors 1,474.78 778.61 630.07 135.56 218.96


Other current assets 18,862.41 6,367.32 1,768.53 41.86 -


Sub Total 40,404.52 14,677.09 5,262.55 1,858.48 2,463.10

E Total Assets (A+B+C+D) 52,123.18 18,595.19 7,074.54 2,352.70 2,739.13

Liabilities and Provisions

F Loan Funds

Secured loans 5,242.16 1,968.34 699.30 - -

Unsecured loans 21,011.39 3,343.24 - - -

Sub Total 26,253.55 5,311.58 699.30 - -


HCurrent Liabilities & Provisions


Provisions 657.36 412.54 61.26 1.19 14.85

Sub Total 11,946.71 5,429.67 5,584.62 2,096.88 2,257.43

ITotal Liabilities and Provisions (F+G+H)

38,406.83 10,783.47 6,309.34 2,101.84 2,257.43


FS 6

J Net Worth (E-I) 13,716.35 7,811.72 765.20 250.86 481.70

Represented by -

Shareholders Funds

Share Capital 777.82 777.82 521.14 521.14 521.14



General Reserve 228.33 228.33 228.33 228.33 228.33


Net Worth 13,716.35 7,811.72 765.20 250.86 481.70

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes onUnconsolidated Restated Summary Statements as appearing in Annexure IV.


FS 7

Unconsolidated Summary Statement of Profits and Losses, as Restated Annexure II


2008 2007 2006 2005 2004

A Income


Other income 469.57 564.07 165.92 164.17 57.80

Total Income 44,366.98 14,311.69 8,929.64 4,430.84 2,821.15

B Expenditure

Consumption of raw material and componentsfor shipbuilding projects

28,730.49 10,178.23 6,720.45 3,375.68 1,441.41

Other expenses 7,064.89 2,925.68 1,429.18 736.04 1,246.00

Depreciation 340.47 103.89 53.11 21.39 20.63

Finance charges 1,339.55 494.67 201.84 100.64 76.61



D Taxation

Current tax 865.24 170.00 50.78 15.73 2.74



Deferred tax 164.35 9.81 20.46 9.84 12.85


ENet Profit before adjustments (C-D)

6,245.11 422.71 450.06 171.52 20.91

FADJUSTMENTS(Refer Note 2 and 3 ofAnnexure IV) Impact of changes in accounting policies and estimates:

-

Revenues includingsubsidy income

(675.85) 957.72 307.50 (426.80) (129.71)

Provision for contractlosses

- - 25.93 (25.93) -


FS 8

Provision for contractexpenses

- 195.34 (195.34) - -


Depreciation 53.94 (107.52) (30.52) - -

Other adjustments:



Tax impact of adjustments 281.44 (400.57) (6.72) 15.73 2.74

Total of adjustments after tax impact

(340.47) 708.51 123.70 (402.36) (133.85)

GNet Profit, as Restated (E-F)

5,904.64 1,131.22 573.76 (230.84) (112.94)

Balance as at the beginning of the year

1,012.52 (118.70) (633.04) (402.20) (289.26)

Balance available forappropriation, as Restated

6,917.16 1,012.52 (59.28) (633.04) (402.20)

Appropriations

Dividend - - 52.11 - -

Dividend distribution tax - - 7.31 - -

Balance carried forward, as Restated

6,917.16 1,012.52 (118.70) (633.04) (402.20)

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes onUnconsolidated Restated Summary Statements as appearing in Annexure IV


FS 9

Unconsolidated Statement of Cash Flows, as Restated Annexure III


2008 2007 2006 2005 2004

ACash Flow fromOperating Activities Net Profit / (Loss) before taxes

6,269.67 1,718.31 655.48 (221.00) (100.09)

Adjustments for:

Depreciation / amortization

286.53 211.41 83.63 21.39 20.63

Provision for loans and advances

38.46 - - - -

Loss / (Profit) on sale of fixed assets

0.05 (3.79) (10.69) (10.51)

Loss / (Profit) on sale of investments

(1.55) - 0.86 (48.96) 8.41



Interest and finance Charges

1,279.56 444.66 201.84 101.81 76.61

Effect of exchange rate change

1,440.17 40.16 (23.51) (20.98) 4.33

Operating Profit before working capital changes

8,892.34 2,266.86 794.99 (223.48) (44.69)

(Increase) / decrease in Inventories

(3,466.97) 217.83 (331.25) 14.00 (21.73)

(Increase) / decrease in Sundry debtors

(696.17) (130.38) (512.67) 83.40 233.21


(19,218.26) (5,030.75) (1,710.52) 142.63 (60.54)


5,291.68 (593.68) 3,489.35 (138.47) 1,596.77

Cash generated from Operations

(9,197.38) (3,270.12) 1,729.90 (121.92) 1,703.02

Taxes paid, net (488.92) (130.45) (4.10) (3.18) (29.15)

Net Cash flows (used in) / from operating activities

(9,686.30) (3,400.57) 1,725.80 (125.10) 1,673.87

BCash Flow fromInvesting Activities

Purchase of fixed assets (8,186.20) (2,355.05) (1,307.81) (380.86) (12.35)

Proceeds from sale of fixed assets

0.03 11.32 35.96 21.41 -

Proceeds from sale of investments

101.73 40.00 21.14 174.46 56.46


FS 10




Net Cash flows (used in) / from investing activities

(7,893.76) (2,184.27) (1,278.95) (139.76) 78.16

CCash Flow fromFinancing Activities Proceeds from issue of new equity shares, net of issue expenses

- 5,915.29 - -

Proceeds from Long-termborrowings

3,741.15 1,269.04 699.30 - -

Repayment from Long-term borrowings

(467.33) - - - -

Repayment of unsecured loans

- - - - (139.81)

Proceeds from short-termborrowings, net

16,768.62 3,343.24 - - -

Dividend and dividend tax paid

- (59.42) - - -

Bank interest and finance charges paid

(909.49) (444.66) (201.84) (101.81) (76.61)

Net Cash flows (used in)/from financing activities

19,132.95 10,023.49 497.46 (101.81) (216.42)

Net Increase/(decrease)in cash and cash equivalents (A+B+C)

1,552.89 4,438.65 944.31 (366.67) 1,535.61

Cash and cash equivalents at the beginning of theyear

6,670.51 2,231.86 1,287.55 1,654.22 118.61

Cash and cash equivalents at the end of the year

8,223.40 6,670.51 2,231.86 1,287.55 1,654.22


Tebma Shipyards Limited Annexure IV Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements

1 Significant Accounting Policies

1.1 Basis of accounting

The financial statements are prepared and presented in accordance with Indian Generally AcceptedAccounting Principles (‘GAAP’) under the historical cost convention on the accrual basis, accountingstandards notified by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

1.2 Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period, reported balances of assets and liabilities, and disclosure of contingent assets andliabilities as at the date of the financial statements. Actual results could differ from those estimates.

1.3 Fixed assets and depreciation / amortisation

Fixed assets are carried at cost of acquisition or construction less accumulated depreciation. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalised.

Capital work in progress comprises outstanding advances paid to acquire fixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date.

Software initially purchased together with workplace computers are capitalized and depreciated at the rates applicable to workplace computers. Other software is capitalised as intangible assets, where it isexpected to obtain future enduring economic benefits. Capitalisation costs include license fees and costs of implementation/system integration services. The costs are capitalised in the year in which therelevant software is implemented for use.

Borrowing costs directly attributable to acquisition, construction or production of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalized. Other borrowing costs are accounted as expense in profit and loss account.

Depreciation is provided on the written-down value method. The manner and rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of theremaining useful life on a subsequent review is shorter than that envisaged in the aforesaid Schedule,depreciation is provided at a higher rate based on the management’s estimate of the usefullife/remaining useful life. The key fixed asset blocks and related useful lives, which in managementopinion reflect the estimated useful economic lives of the fixed assets, are:

Asset Category Useful Lives (number of years)

Tangible assets Buildings- Factory buildings 30- Other buildings 60

Plant and machinery 1 – 13

Office equipments 20

Furniture and fittings 9 – 15

Vehicles 10

FS 11


Computers 3 – 6

Intangible assets

Computer software 3 – 6

Leasehold land is amortised over the period of lease. Leasehold improvements are depreciated over thelower of remaining estimated useful lives and the lease period. Individual assets costing less than Rs0.05 are depreciated @100%.

1.4 Impairment of assets

The management assesses at each balance sheet date whether there is an indication that an asset maybe impaired. If any such indication exists, the company estimates the recoverable amount of the assets. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to whichthe asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverableamount. The reduction is treated as an impairment loss and is recognized in the profit and loss account.If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subjectto a maximum of depreciable historical cost.

1.5 Investments

Investments are classified as long term investments and current investments. Long-term investmentsare carried at cost with provision being made for diminution if any, other than temporary, in their value. Current investments are stated at lower of cost and fair value. The comparison of cost and fairvalue is done separately in respect of each category of investments.

1.6 Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of inventories comprises of allcosts of purchase and costs incurred in bringing the inventories to their present location and condition.Inventory of raw materials and components for ship building projects is valued based on the first-in, first-out method.

1.7 Revenue recognition

Shipbuilding revenue from fixed price construction contracts is recognised by reference to the estimated overall profitability of the contract under the percentage of completion method. Percentageof completion is determined as a proportion of the costs incurred to date to the total estimated contract costs. Contract revenue earned in excess of billing has been reflected under Other current assets and billing in excess of contract revenue has been reflected under Current liabilities in the balance sheet.Provision for expected loss is recognized immediately when it is probable that the total estimatedcontract costs will exceed total contract revenue.

Liquidated damages / penalties are provided for as per the contract terms where ever there is a delayeddelivery attributable to the Company.

The Company is eligible for export subsidy under the Ship Building Subsidy Scheme issued by theMinistry of Shipping, Government of India vide Press Note (2003). Ship building subsidy income is determined based on the percentage of completion method and accrued as and when the revenue forthe construction of ship is recognised.

Dividend income from investments is recognized and accounted for when the unconditional right to receive the amount is established. Interest income is recognized on the time proportion method.

FS 12


1.8 Foreign currency transactions

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheetdate are translated at the closing exchange rates on that date. Exchange differences arising on foreign exchange transactions during the year and on restatement of monetary assets and liabilities are recognized in the profit and loss account of the year.

Premium or discount arising at the inception of forward exchange contracts is amortized as expense orincome over the life of the contract. Any profit or loss arising on the cancellation or renewal offorward contracts is recognized as income or as expense for the period. In relation to the forward contracts entered into to hedge the foreign currency risk of the underlying outstanding at the balance sheet date, the exchange difference is calculated as the difference between the foreign currency amountof the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amounttranslated at the later of the date of inception of the forward exchange contract and the last reportingdate. Such exchange differences are recognized in the profit and loss account in the reporting period in which the exchange rates change.

In accordance with the announcement of “Accounting for Derivatives” made by the Institute ofChartered Accountants of India (‘ICAI’) on 29 March 2008, derivatives are marked to market and thechanges in the value of such derivatives are recognized in profit or loss account.

1.9 Employee Benefits

Provident fund: Contributions to provident fund (a defined contribution plan) are made to the Regional Provident Fund Commissioner and are charged to the profit and loss account.

Gratuity: Gratuity, which is a defined benefit, is accrued based on actuarial valuation done by anindependent actuary as at the balance sheet date. The actuarial gain / losses are charged to profit and loss account.

1.10 Leases

Lease payments under an operating lease, are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term.

1.11 Taxation

Income-tax expense comprises fringe benefit tax, current tax (i.e. amount of tax for the perioddetermined in accordance with the income-tax law) and deferred tax charge or credit (reflecting that tax effects of timing differences between accounting income and taxable income for the period).

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognizedusing the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is a reasonable certainty that the assetscan be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty supported byconvincing evidence of realization of such assets. Deferred tax assets / liabilities are reviewed as at the balance sheet date and written down or written up to reflect the amount that is reasonably/virtuallycertain (as the case may be) to be realized.

FS 13


Minimum alternative tax (MAT) paid in accordance to the tax laws, which gives rise to futureeconomic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company would pay normal income tax after tax holiday periodand accordingly, MAT is recognised as an asset in the balance sheet when it is probable that the futureeconomic benefit associated with it will flow to the Company and the asset can be measured reliably.

Company provides for and discloses the Fringe Benefits Tax (“FBT”) in accordance with theprovisions of the Income Tax Act, 1961 and guidance note on FBT issued by the ICAI.

1.12 Earnings per share

Basic earnings per share (‘EPS’) amounts are computed by dividing the net profit or loss for the yearattributable to equity shareholders by the weighted average number of shares outstanding during theyear.

For the purpose of calculating diluted earnings per share, the net profit for the year attributable toequity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

1.13 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the Company has a present obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reasonably estimated.

A disclosure for a contingent liability is made when there is a possible obligation or a presentobligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,no provision or disclosure is made.

Contingent assets are not recognized in the financial statements.

FS 14


2. Significant changes in accounting policies and estimates:

a) During the year ended March 31, 2006, the Company revised the accounting policy forrecognizing revenue on construction of ships to Percentage of Completion method in accordancewith Accounting Standard 7 – Construction Contracts (Revised 2002). Accordingly, revenue fromoperations, provisions for contract losses and other provision for contract expenses have been recomputed for the years ended March 31, 2007, 2006, 2005 and 2004 in the Unconsolidated Summary Statement of Profits and Losses, As Restated. Further, the accumulated profit and lossbalance as at April 1, 2003 has been appropriately adjusted to reflect the impact of the changepertaining to the periods ended on or before March 31, 2003. The other current assets and currentliabilities for those years have also been appropriately adjusted in the Unconsolidated SummaryStatement of Assets and Liabilities, as Restated.

b) The Company is eligible for export subsidy under the Ship Building Subsidy Scheme issued by theMinistry of Shipping, Government of India vide Press Note (2003). During the year ended March 31, 2008, the Company has determined the subsidy income based on percentage of completionmethod and accrued as and when the revenue for the construction of ship is recognised based on relevant accounting standards and recent industry developments. Accordingly, the Subsidy incomehas been recomputed for the years ended March 31, 2008, 2007, 2006 and 2005 in theUnconsolidated Summary Statement of Profits and Losses, As Restated. The other current assetsfor those years have been appropriately adjusted in the Unconsolidated Summary Statement of Assets and Liabilities, as Restated. No adjustments have been made for the year ended March 31, 2004 as the Company was not eligible for export subsidy during the year.

c) During the year ended March 31, 2008, the Company adopted revised Accounting Standard (AS) –15 (‘Employee Benefits’). For the purpose of this statement, the gratuity liability has been recomputed in accordance with revised AS 15 for years ended March 31, 2007, 2006, 2005, 2004and 2003 and accordingly, the employee costs has been restated. Further, the accumulated profit and loss balance as at April 1, 2003 has been appropriately adjusted to reflect the impact of the change pertaining to periods ended on or before March 31, 2003. The provisions for those yearshave been appropriately adjusted in the Unconsolidated Summary Statement of Assets and Liabilities, as Restated.

d) The useful life of certain plant and machinery has been revised by the Company with effect from April 1, 2007. For the purpose of this statement, the depreciation on plant and machinery for which the estimated useful life of the assets has been changed in the year ended March 31, 2008has been recomputed and accordingly restated in those respective years. The accumulateddepreciation and net block for those years have also been appropriately adjusted in the Unconsolidated Summary Statement of Assets and Liabilities, as Restated.

3. Adjustments relating to previous years

a) The Company had recorded certain income / expenses as prior period items in the financial statements for the year ended March 31, 2008. For the purpose of this statement, the effects of these items have been appropriately adjusted / recomputed for earlier periods and accordinglyadjusted in the respective years.

b) Short/excess provision for Income Tax: The profit and loss account of certain years includes amounts paid / provided for in respect of shortfall of income-tax arising out of assessments,appeals etc. These have been adjusted to the respective years to which they relate.

FS 15


4. Tax impact of adjustments

Tax impacts of adjustments relating to effect on adjustments made in respect of restatement of thefinancial statements have been adjusted in the respective years. The current taxes provided in theyear ended March 31, 2007, 2006, 2005 and 2004 on an estimated basis and adjusted in subsequentyears based on final determination of the tax liabilities or on completion of assessments by the tax authorities have been adjusted in the respective years to which they relate. The effect ofadjustments relating to financial years ending prior to March 31, 2003 has been adjusted against the Accumulated Profit and Loss balance as at April 1, 2003.

5. Material regroupings

a) Buyer’s Credit: For the year ended March 31, 2007, buyer’s credit taken by the Company for its purchases was included under the head Sundry creditors and hence classified as part of CurrentLiabilities. During the year ended March 31, 2008, the same has been classified under the head Unsecured Loans. In the Unconsolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2007, such buyer’s credit has been regrouped and disclosedaccordingly.

b) Deferred Revenue Expenditure and Miscellaneous expenditure: Upto year ended March 31, 2006,certain capital expenses incurred for Malpe project was classified as deferred revenue expenditureand certain technical know how expenses was classified under the head Miscellaneous expenditure. During the year ended March 31, 2007, the Company has changed its classificationand regrouped these expenses under the head Capital Work in Progress and fixed assets respectively. In the Unconsolidated Summary Statement of Assets and Liabilities as Restated, forthe year ended March 31, 2006 and 2005 such expenditure has been regrouped and disclosedaccordingly.

c) Advance tax and provision for taxation: Upto year ended March 31, 2007, advance taxes and taxes deducted at source and Provision for taxation was classified under the head was classified under Loans and Advances and Provisions respectively. During the year ended March 31, 2008, theCompany has netted of the advance tax and taxes deducted at source against the provision for taxation and the net impact is disclosed either under the head Provisions or under the head Loans and Advances. In the Unconsolidated Summary Statement of Assets and Liabilities as Restated,for the year ended March 31, 2007, 2006, 2005 and 2004 these classifications have been regroupedand disclosed accordingly.

d) Operating and other expenses: Upto year ended March 31, 2007, Material costs, Personnel costs,Operating and Administrative expenses were disclosed as separate line items in the Profit and Lossaccount. During the year ended March 31, 2008 the Company has combined these expenses underthe head Consumption of raw material and components for shipbuilding projects and Otherexpenses. In the Unconsolidated Summary Statement of Profits and Losses as Restated, for the year ended March 31, 2007, 2006, 2005 and 2004 these have been regrouped accordingly.

e) Cash and Bank Balances: During the ended March 31, 2007 and 2006, certain investments were combined under the head Cash and Bank Balances. During the year ended March 31, 2008 the Company disclosed the same under the head investments. In the Unconsolidated Summary Statement of Profit and Losses as Restated, for the year ended March 31, 2007 and 2006 theseclassifications have been regrouped and disclosed accordingly.

FS 16


f) Capital work in progress: During the year ended March 31, 2007, certain pre-issue expenses werecombined under the head Capital work in progress. During the year ended March 31, 2008 the Company has adjusted these pre-issue expenses against securities premium. In the UnconsolidatedSummary Statement of Profit and Losses as Restated, for the year ended March 31, 2007 theseclassifications have been regrouped and disclosed accordingly.

g) Sundry Debtors: Upto the year ended March 31, 2007, unbilled revenues and subsidy incomereceivable were disclosed under the head sundry debtors. During the year ended March 31, 2008 the Company has disclosed the same under a separate head other current assets. In the Unconsolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2007 and 2006 these have been regrouped accordingly.

h) Deposits: Upto the year ended March 31, 2007, deposits were disclosed under the head other current assets. During the year ended March 31, 2008 the Company has disclosed the same underthe head loans and advances. In the Unconsolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2007, 2006, 2005 and 2004 these have been regroupedaccordingly.

6. Non adjustment items

a) Leave Encashment: Upto the year ended March 31, 2007 the Company accounted for leave encashment as and when the leave credits are claimed by the employees or at the time ofresignation / retirement. During the year ended March 31, 2008, the company changed the basis of providing leave encashment, to an amount determined on the basis of accumulated leave, lying to the credit of the employees as at the year end. No adjustment has been made for earlier periodssince in the opinion of the Company the impact of the same on the unconsolidated restatedsummary statements is not material.

b) Auditors’ qualifications which do not require any corrective adjustment in the Unconsolidated Restated Summary Statements are as follows:


i.The Company does not have an internal audit system commensurate with the size and nature of its business.

ii.There were significant delays in respect of payment of advance income taxes and several delaysin respect of payment of Provident fund and Employee State Insurance deducted from the Company’s contractors pending receipt of necessary information from contractors.

FS 17


Rs. in Lakhs

7 Significant Notes to accounts

a. Disclosure for construction contracts

ParticularsYear ended

March 31, 2008Year ended

March 31, 2007

a. Contract revenue recognized as revenue in the period 38,068.37 14,029.45

b. Contract cost incurred and recognized profits till date* 50,837.21 14,581.11

c. Advances received 8,029.83 3,595.06

d. Gross amount due from customers for contract work ** 12,265.19 5,151.20

There are no amounts of retention for the above contracts as at the balance sheet date.

* The net amount for all contracts in progress for which cost incurred plus recognised profit (less recognisedlosses, if any).

** Excess of unbilled revenue over the stage payments

b. Segmental reporting

The Company is mainly engaged in construction of vessels and accordingly the said business segmentis the only primary reportable segment as per Accounting Standard 17 - Segment Reporting.

Secondary segment reporting is performed on the basis of the geographical location of customers.

Particulars Year endedMarch 31, 2008

Year ended March 31, 2007

RevenuesIndia 6,330.43 1,995.14Rest of the world 31,737.94 12,034.35

Fixed assets used in the Company’s business or liabilities contracted, other than those specificallyidentifiable, have not been identified to any of the reportable segments, as the fixed assets are usedinterchangeably between segments.

c. Deferred taxes

Particulars As atMarch 31, 2008

Deferred tax liabilitiesArising from timing differences in respect of a) Depreciation 41.00b) Subsidy 217.94

258.94Deferred tax assetsArising from timing differences in respect of: a) Retirement benefits and other tax disallowances 39.30b) Provision for loans and advances 13.07

52.37Net deferred tax Liability 206.57

FS 18


Rs. in Lakhs

d. Balance of Profit and Loss Account as at April 1, 2003 (Restated)

Balance of Profit and Loss Account as at April 1, 2003 (Audited) (231.75)Impact of changes in accounting policies and estimates: - Revenues (32.86) - Provision for gratuity (12.30)Tax impact of adjustments 16.20Short fall of taxes relating to earlier years (28.55)Balance of Profit and Loss Account as at April 1, 2003 (Restated) (289.26)

e. Matters relating to Dharti Dredging and Construction Limited (‘DDCL’)

As at and for the years ended March 31, 2003 and 2004, the Company held 21,82,500 equityshares in Dharti Dredging and Construction Limited (‘DDCL’), representing 48.73% of equityshare capital of DDCL. Currently, the Company does not have adequate and relevant informationrelating to the other share holders of DDCL. Based on its share holding percentage, themanagement believes that DDCL was an associate company and accordingly disclosures have been made in the Unconsolidated Restated Summary Statements. During the year ended 31 March, 2005, the Company sold 19,82,500 equity shares and DDCL ceased to be an associate company thereafter. The Company sold the balance 2,00,000 equity shares during the year ended 31 March, 2006.

f. During the year ended March 31, 2007, pursuant to a Shareholders Agreement dated February 27,2007, entered into between the Company, its original promoters and India Advantage Fund – VI(‘IAF - VI’) [IAF - VI was setup by Indenture of Trust, between Western India Trustee & ExecutorCompany Limited and ICICI Venture Funds Management Company Limited], IAF – VI has acquired approximately 33% stake in the Company and subsequently, through an open offer became a majority shareholder in financial year ended March 31, 2008. Out of the total amounts ofRs 6,000 lakhs (approx) received by the Company through preferential allotment, the Company has utilized Rs 4,117 lakhs (approx) as at March 31, 2007 and the balance has been utilized during the year ended March 31, 2008.

g. Previous year figures have been regrouped to conform to the presentation of current year’saccounts.

FS 19


FS 20

A. Unconsolidated Statement of Secured Loans, as Restated Annexure V

As at March 31

Particulars 2008 2007 2006 2005 2004

Term Loans from banks 5,242.16 1,968.34 699.30 - -

B. Principal Terms of Secured Loans as at March 31, 2008

Sl.No

Particulars Rate of InterestOutstanding

amountRepayment

termsSecurity

1 Term Loans frombanksState Bank of Hyderabad (SBH) – Term Loan I

1% below PLR 869.62 27 monthlyinstalmentscommencingfrom September2007.

Primary Security: Secured by first paripassu chargewith SBI, by way of equitable mortgage of land situated in Malpe and machinery / other assets, to be acquired out of the term loan. Collateral Security:(i) first paripassu chargeover the company's plant and machinery and landand building at Chengalpet.(ii) Cash collateral of Rs. 50 lakhs (iii) Second charge over the current assets of the Company.(iv)Personal Guarantee ofMr.P.K.Balasubramanian – Chairman.

State Bank of Hyderabad (SBH) – Term Loan II

SBH PLR + 0.25% with aminimum of13.25% p.a.

722.18 78 monthlyinstalmentscommencingfrom December2007.

Primary Security: (i) Assignment of licenseagreement issued by Director of ports and inlandwater transport (ii) first charge over machinery and other assets including Equitable mortgage of landat Hangarkate and Babuthota. Collateral Security: (i) Extention ofparipassu first charge overcompany's land andbuilding at Chengalpet and


FS 21

fixed assets at Malpe.Cashcollateral of Rs.37 lakhs (ii) Second charge oncurrent assets on pari passubasis with SBI and other working capital lenders.(iii) PersonalGuarantee ofMr.P.K.Balasubramanian – Chairman.

State Bank of India (SBI) – Term Loan I

SBLR – 1% with a minimum of9.25% p.a.

1,009.98 24 Quarterly instalmentscommencingfrom June 2007.

Primary Security:(i)Assignment of Licenseagreement issued by director of Ports & InlandWater Transport, Karwar tothe Co. in favour of SBI and SBH for an amount ofRs. 138 lakhs. (i)First charge over machinery and other assets to be acquiredout of the Term Loan onparipassu basis with SBH.(ii) Personal Guarantee ofMr.P.K.Balasubramanian – Chairman.

State Bank of India (SBI) – Term Loan II

SBLR + 0.50% 2,640.38 78 monthlyinstalmentscommencingfrom October2007.

Primary Security:Assignment of Licenseagreement issued by director of Ports & InlandWater Transport, Karwar tothe Co. in Favour of SBI and SBH. Collateral Security: (i) First paripassu charge over company’sland and building at Chengalpet (ii) Cashcollateral of Rs. 37 lakhs along with SBH (iii) second charge on current assets on paripassu basiswith SBH.(iv) Personal Guarantee ofMr.P.K.Balasubramanian – Chairman.

Total 5,242.16

PLR refers to Prime Lending Rate SBLR refers to State Bank Lending Rate



FS 22

A. Unconsolidated Statement of Unsecured Loans, as Restated Annexure VI

As at March 31

Sl.No

Particulars 2008 2007 2006 2005 2004

1 Buyer’s Credit 21,011.39 3,343.24 - - -

B. Principal Terms of Unsecured Loans as at March 31, 2008

S.No ParticularsOutstanding

amount Rate of Interest Repayment terms1 Axis bank, Singapore 1,437.36

2Bank of India, HongKong 295.04

3 Bank of India, Paris 93.90

4Bank of India, San Francisco 202.72

5 ICICI Bank, Singapore 399.01

6State Bank of India,Belgium 5,802.61

7State Bank of India,Hong Kong 137.66

8State Bank of India,Osaka 324.80

9State Bank of India,Singapore 301.64

10State Bank of India,Tokyo 5,352.68

11Standard Chartered Bank, Singapore 932.53

12 Scotia Bank, Singapore 1,208.25

13Svenska Bank, Singapore 2,395.60

LIBOR + 0.20% to LIBOR + 0.50%

14State Bank of India,Belgium 495.49

15 Banca Intesa, Italy 194.74

16Standard Chartered Bank, Singapore 1,437.36

EURIBOR + 0.30% to EURIBOR + 0.50%

As stipulated by each of the banks. All the amounts are repayable within one year.

Grand Total 21,011.39

LIBOR refers to London Inter Bank Offer Rate EURIBOR refers to Euro Inter Bank Offer Rate


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k E

quity

50.0

01,

728

0.86

1,72

80.

861,

728

0.86

--

--

In a

sub

sidi

ary

com

pany

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ma

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dens

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. E

quity

10.0

049

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.53

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20.5

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0,07

020

.53

490,

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20.5

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0,07

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.53

In a

n as

soci

ate

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pany

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rti

and

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ruct

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ited

(Ref

er

Not

e 7e

of

Ann

exur

e IV

)

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ity10

.00

--

--

--

200,

000

20.0

02,

182,

500

145.

50

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rent

inve

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ank

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--

--

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1,18

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ivid

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ual F

unds

10.0

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8,97

210

.97

100,

000

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--

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otal

– q

uote

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321.

321.

320.

460.

46T

otal

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nquo

ted

31.5

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0.53

160.

5342

.53

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rand

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al

32.8

213

1.85

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ggre

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ket

valu

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quo

ted

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stm

ents

4.68

4.74

5.27

4.97

2.33

Not

e:T

heab

ove

stat

emen

t sh

ould

be

read

alo

ng w

ith t

he S

tate

men

t of

Sig

nifi

cant

Acc

ount

ing

Polic

ies

and

Not

es o

n C

onso

lidat

ed R

esta

ted

Sum

mar

ySt

atem

ents

as

appe

arin

g in

Ann

exur

e IV

FS23


FS 24

Unconsolidated Statement of Sundry Debtors, as Restated Annexure VIII

As at March 31

Particulars 2008 2007 2006 2005 2004Debts outstanding over six months

Unsecured – Considered good 392.83 206.27 135.47 135.56 146.95

Other Debts

Unsecured – Considered good 1,081.95 572.34 494.60 - 72.01

Grand Total 1,474.78 778.61 630.07 135.56 218.96

Out of the above, debtors outstanding from related parties are as follows: Debts outstanding over six months

Unsecured – Considered good Dharti Dredging and Construction Limited, Associate Company (Refer Note 7e ofAnnexure IV) - - 73.84 17.11

Grand Total - - 73.84 17.11



FS 25

Unconsolidated Statement of Other Current Assets, as Restated Annexure IX

As at March 31

Particulars 2008 2007 2006 2005 2004

Unbilled revenue 12,265.19 5,151.20 1,258.53 - -Subsidy income accrued / receivable

6,352.67 1,185.86 510.00 41.86 -

Interest accrued on fixed deposits 244.55 30.26 - - -

Grand Total 18,862.41 6,367.32 1,768.53 41.86 -



FS 26

Unconsolidated Statement of Loans and Advances, as Restated Annexure X

As at March 31

Particulars 2008 2007 2006 2005 2004

Unsecured, considered good

Advance to subsidiary, TebmaGardens Limited

0.19 - - 45.58 45.00

Due from Tebma Marine PrivateLimited, a Company under thesame Management

- - - 0.93 -

Advance recoverable in cash or kind or for value to be received Advance receivable from DhartiDredging and ConstructionLimited, Associate Company(Refer Note 7e of Annexure IV)

- 10.00 10.00 145.00 148.42

Advance paid to suppliers and others

7,430.51 647.33 153.73 78.86 39.94

Balance with governmentauthorities

6.88 0.83 42.77 50.98 168.21

Deposits – Others 275.94 72.11 77.38 55.20 157.39

MAT credit entitlement 533.06 - - - -

Unsecured, considered doubtful

Other advances 38.46 - - - -

Less:

Provision for doubtful otheradvances

38.46 - - - -

TOTAL 8,246.58 730.27 283.88 376.55 558.96



FS 27

Unconsolidated Statement of Other Income, as Restated Annexure XI

For the year ended March 31 Sources and Particulars ofOther Income Nature 2008 2007 2006 2005 2004

Interest on fixed deposits Recurring 420.37 143.62 112.52 44.84 54.40

Foreign exchange difference, net Recurring - 432.25 23.51 24.88 -

Income from investments Recurring 0.18 0.27 0.10 0.39 0.18

Profit on sale of assets Non - recurring - 3.79 10.69 10.51 -

Profit on sale of investments Non – recurring 1.55 - - 48.96 -

Others Non - recurring 47.47 22.85 42.63 55.58 3.22

Total 469.57 602.78 189.45 185.16 57.80

Notes:

1) The classification of income into recurring and non-recurring and related or not related to business activity is based onthe current operations and business activities of the Company, as represented by the Management.

2) The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV.


FS 28

Tax Shelter Statement based on Unconsolidated Restated Profits Annexure XII

For the year ended March 31 Particulars 2008 2007 2006 2005 2004

A Profit before Tax, as Restated - Chargeable at Normal Rate 6,269.67 1,718.31 644.79 (269.36) (91.69) - Chargeable at Special Rate - - 10.69 48.36 (8.40)Total Profit before Tax 6,269.67 1,718.31 655.48 (221.00) (100.09)

BTax Rate (including surcharge& Education Cess) - Income tax rates 33.99% 33.66% 33.66% 36.60% 35.88% - Minimum alternate tax 11.33% 8.42% 8.42% 7.84% 7.69%- Special Rate on Long Term

Capital Gain (after indexing) (%) - - 0% 0% 0%Tax at Notional Rates - Chargeable at Normal Rate 2,131.06 578.38 217.04 (98.59) (32.90) - Chargeable at Special Rate - - - - -

C Total 2,131.06 578.38 217.04 (98.59) (32.90)Adjustments

D Permanent differences:Dividend income exemptunder Section 10(34) of the Income Tax Act, 1961 (0.18) (0.27) (0.09) (0.39) (0.17)Interest on Income taxes 25.21 - - - -Deduction under Section 24 of the Income Tax Act, 1961 - - - (0.18) (0.72)Others 13.14 - - - -Total 38.17 (0.27) (0.09) (0.57) (0.89)

E Timing differences:Difference between bookdepreciation and taxdepreciation 7.79 (39.62) (51.15) (7.10) 0.80(Reversal) / claim of subsidyincome (5,829.04) - - - -Deduction under Section 43B of the Income Tax Act, 1961 38.82 - - - (53.55)(Profit) / Loss on sale ofassets 0.04 (3.79) - 0.60 -Business losses carriedforward from previous yearset off - - (422.72) (140.63) -Others 38.46 - - - -Total (5,743.93) (43.41) (473.87) (147.13) (52.75)

F Net Adjustments (D+E) (5,705.76) (43.68) (473.96) (147.70) (53.64)

GTax Expense / (Saving)thereon ( F * B) (1,939.39) (14.70) (159.53) (54.06) (19.25)


FS 29

H Total Tax ( C + G) 191.67 563.68 57.50 - -

Book profit for MAT 6,396.54 1,718.04 655.39 - -Tax liability as per MAT 724.73 144.66 55.18 - -

ITax liability being higher of G or H 724.73 563.68 57.50 - -

J MAT credit 533.06 - - - -Write off for previous year tax - 6.89 - - -

KProvision for current tax (I-J) 191.67 570.57 57.50 - -

L Tax effect on restatements 281.44 (400.57) (6.72) 15.73 2.74

M

Provision for current tax as per books of accounts (K +L) 473.11 ` 170.00 50.78 15.73 2.74

Note:

1. The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV.

2. For the years ended March 31, 2008, 2007, 2006, 2005 and 2004, the above statement has been prepared based on the unconsolidated restated financial statements and tax audit report issued under Section 44AB ofthe Income tax Act, 1961 filed together with the income tax return.

Teb

ma

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imit

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ncon

solid

ated

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tem

ent

of R

elat

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arty

tra

nsac

tion

s, a

s R

esta

ted

A

nnex

ure

XII

I

As

at 3

1 M

arch

2008

2007

2006

2005

2004

Lis

t of

rel

ated

par

ties

Subs

idia

ry c

ompa

nyT

ebm

a G

arde

nsL

imite

d (“

TG

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T

ebm

a G

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imite

d (“

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L”)

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ma

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dens

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ited

(“T

GL

”)T

ebm

a G

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imite

d (“

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dens

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(“T

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te C

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Ann

exur

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)

Dha

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ctio

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ian

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P. K

. B

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ian

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P. K

. B

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ian

Mr.

Cdr

. Sub

ram

ania

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16

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m

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up to

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ul 2

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Mr.

B.J

ayak

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Mr.

B.J

ayak

umar

Ent

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l per

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e

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ma

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ate

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ited

(‘T

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(‘T

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Teb

ma

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ate

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ma

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FS30

Teb

ma

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yard

s L

imit

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s.in

Lak

hs

As

at 3

1 M

arch

2008

2007

2006

2005

2004

Tra

nsac

tion

s w

ith

rel

ated

par

ties

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ance

s gi

ven:

T

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0.19

--

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-56

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:T

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CL

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--

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Ren

tal c

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es p

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MPL

4.20

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3.00

3.00

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ent r

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of

spar

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DC

L-

--

-11

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ses

CV

MT

20.1

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--

-R

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paid

to K

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Mr.

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a K

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--

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--

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give

n to

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Loa

n re

paid

by

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--

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0-

-In

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st p

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by T

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145.

00C

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rant

ee

From

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--

--

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FS31

Teb

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yard

s L

imit

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s.in

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Out

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ding

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at t

he y

ear

end

Deb

tors

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--

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.11

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ance

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-

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– T

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--

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-45

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45.0

0N

ote:

The

abov

e st

atem

ent

shou

ld b

e re

ad a

long

with

the

Sta

tem

ent

of S

igni

fica

nt A

ccou

ntin

g Po

licie

s an

d N

otes

on

Con

solid

ated

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tate

d Su

mm

ary

Stat

emen

ts a

s ap

pear

ing

in A

nnex

ure

IV

FS32


FS 33

Unconsolidated Statements of Dividend paid Annexure XIV


Particulars 2008 2007 2006 2005 2004

A Equity Shares (numbers) 7,778,180 7,778,180 5,211,380 5,211,380 5,211,380

B Face Value per equity share (in Rs.) 10.00 10.00 10.00 10.00 10.00

C Rate of dividend - - 10% - -

D Dividend amount - - 52.11 - -

E Dividend distribution tax - - 7.31 - -



FS 34

Statement of Adjusted Accounting Ratios Annexure XV

As at March 31 2008 2007 2006 2005 2004

A Net worth 13,716.35 7,811.72 765.20 250.86 481.70

BAdjusted Profit / (loss) after Tax

5,904.64 1,131.22 573.76 (230.84) (112.94)

CNumber of sharesoutstanding at the end (*) (in numbers)

7,778,180 7,778,180 5,211,380 5,211,380 5,211,380

DWeighted average numberof shares outstanding (*)(in numbers)

7,778,180 5,440,217 5,211,380 5,211,380 5,211,380

Earnings Per Share in Rs.[B / D]

75.91 20.79 11.01 (4.43) (2.17)

Return on Net Worth (%)[B / A]

43.05 14.48 74.98 (92.02) (23.45)

Net Asset value per share in Rs. [A / C]

176.34 100.43 14.68 4.81 9.24

* At nominal value per share of Rs.10/-

Definition of Key accounting ratios

1) Earnings per share represent basic earnings per share calculated as per Accounting Standard – 20 (‘Earnings pershare’).

2) Return on net worth is arrived by dividing adjusted profit after tax by total shareholder’s funds (Net Worth) at the end of each year.

3) Net Asset value per share is arrived by dividing total shareholder’s funds (Net Worth) by the total number of shares outstanding at the end of each year.



FS 35

Capitalization Statement, as Restated Annexure XVI

ParticularsPre Issue as at

March 31, 2008Adjusted for Rights

after conversion

A Loan Funds:

Long Term Debts 5,242.16 5,242.16

Short Term Debts 21,011.39 21,011.39

Total Debts 26,253.55 26,253.55

B Shareholder's Funds

Share Capital 777.82 -


Securities Premium 5,793.04 -

General Reserve 228.33 -

Profit and Loss Account 6,917.16 -

Total Shareholder's Funds 13,716.35 -

Debt / Equity Ratio

Long term Debt / Equity 0.38 -

Total Debt / Equity 1.91 -

Notes:

1) The above have been computed on the basis of the Unconsolidated Restated Summary statements.

2) The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Unconsolidated Restated Summary Statements as appearing in Annexure IV.

3) Long term debts of Rs.5, 242.16 include a sum of Rs.893.00 repayable within one year as at March 31, 2008.


FS 36

Statement of Contingent Liabilities, based on Unconsolidated Restated Profits Annexure XVII


2008 2007 2006 2005 2004Disputed Income Tax demands contested in appeals, forwhich no provision has been made

- - 19.60 19.60 12.28

FS 37

FINANCIAL STATEMENTS

AUDITORS’ REPORT

The Board of Directors Tebma Shipyards Limited No. 5/360 Rajiv Gandhi Salai, (OMR) Okkiam Thoraipakkam Chennai – 600 097

Dear Sirs

1) We have examined the consolidated financial information of Tebma Shipyards Limited (‘Tebma’ / ‘the Company’) and its subsidiary, Tebma Gardens Limited (‘TGL’ / ‘subsidiary’) annexed to this report and initialed by us for identification. The said financial information has been prepared by the Company in accordance with the requirements of paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 (‘Act’), the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, issued by the Securities and Exchange Board of India in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992, as amended from time to time and the terms of our engagement agreed with you in accordance with our letter dated August 22, 2008 in connection with its Proposed Issue of Compulsorily Convertible Preference Shares (‘CCPS’) on a Rights basis to the existing shareholders of the Company. The financial information has been prepared by the management and approved by the Board of Directors.

Financial Information as per Audited Financial Statements

2) We have examined the attached ‘Consolidated Summary Statement of Assets and Liabilities, as Restated’ of the Company and its subsidiary as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure I) and the attached ‘Consolidated Summary Statement of Profits and Losses, as Restated’ (Annexure II) for each of the years ended March 31, 2008, 2007, 2006, 2005 and 2004 together referred to as ‘the Consolidated Restated Summary Statements’.

The Company did not prepare the consolidated financial statements as at and for the financial years ended March 31, 2007, 2006, 2005 and 2004 in those respective years. The Consolidated Financial Statements as at and for the financial years ended March 31, 2007, 2006, 2005 and 2004 have now been extracted by the management from the Company’s and its subsidiary’s Unconsolidated Financial Statements and has been approved by the Board of Directors. These consolidated financial statements have been audited by Mr V. Pichaikutty, Chartered Accountant.

The unconsolidated financial statement of the Company and the subsidiary for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 have been approved by the Board of Directors and adopted by the Members for those respective years. The Consolidated Restated

FS 38

Summary Statements of the Company and the subsidiary has been extracted by the management from the consolidated audited financial statements of the Company, Unconsolidated Restated Summary Statements of the Company and its subsidiary as at and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 and has been approved by the Board of Directors.

We did not audit the financial statements of the subsidiary, for the financial years ended March 31, 2007, 2006, 2005 and 2004, whose financial statements reflect total assets of Rs. 45.47 lakhs, 45.20 lakhs, 74.36 lakhs and 74.68 lakhs and total revenue of Rs. 0.27 lakhs, 36.04 lakhs, 0.74 lakhs and 8.80 lakhs for the financial years ended March 31, 2007, 2006, 2005 and 2004 respectively. These financial statements have been audited by another firm of Chartered Accountants, M/s V. Pichaikutty and Associates (“the other auditor”), whose reports have been furnished to us and our opinion in so far as it relates to the amounts included in these Consolidated Restated Summary Statements are based solely on the report of other auditors. The unconsolidated financial statements of the Company and the subsidiary company as at and for the year ended March 31, 2008 have been audited by us.

Audit of the Company for the financial years ended March 31, 2007, 2006, 2005 and 2004 was conducted by Mr V. Pichaikutty (“the previous auditor”) and accordingly reliance has been placed on the financial statements audited by him for the said years.

The previous auditor and the other auditor have also confirmed that the Unconsolidated Restated Summary Statements of the Company and the subsidiary respectively for the financial years ended March 31, 2007, 2006, 2005 and 2004 has been prepared after incorporating:

i) Adjustments for the changes in accounting policies and estimates retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy and estimates, which the Company followed as at and for the year ended March 31, 2008, for all the reporting periods.

ii) Adjustments for the material amounts in the respective financial years to which they relate.

iii) There are no extra-ordinary items which need to be disclosed separately in the Unconsolidated Restated Summary Statements.

iv) There are no qualifications in the auditors’ reports, which require any adjustments to the Unconsolidated Restated Summary Statements.

The Consolidated Restated Summary Statements included for these years and our opinion in so far as they relate to the amounts included in respect of these years in respect of the Consolidated Restated Summary Statements are based solely on the reports submitted by the previous auditor and other auditor. The consolidated financial statements of the Company as at and for the year ended March 31, 2008 have been audited by us.

In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Guidelines and terms of our engagement agreed with you, we further report that subject to our comments in paragraph (c) below:

FS 39

(a) The Consolidated Summary Statement of Assets and Liabilities, as Restated of the Company and its subsidiary, as at March 31, 2008, 2007 2006, 2005 and 2004 examined by us as set out in Annexure I to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies and Notes (Refer Annexure IV)

(b) The Consolidated Statement of Profits or Losses, as Restated of the Company and its subsidiary for the years ended March 31, 2008, 2007 2006, 2005 and 2004 examined by us as set out in Annexure II to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies and Notes (Refer Annexure IV)

(c) The Consolidated Restated Summary Statements does not include the financial statements of Dharti Dredging and Construction Limited (‘DDCL’). As more fully described in Note 1.3 of Annexure IV to this report, management represents that DDCL was an associate company based on the information available with the Company. The financial information which is required to account for DDCL under equity method in the Consolidated Financial Statements in accordance with the Accounting Standard 23 – Accounting for investments in Associates, is not available with the Company. Hence the investment in DDCL has been accounted for under Accounting Standard 13 – Accounting for Investments and disclosed under the head Investments.

(d) Based on the above and subject to our comments in paragraph (c) above, we are of the opinion that the Consolidated Restated Summary Statements of the Company have been made after incorporating:

i) Adjustments for the changes in accounting policies and estimates retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy for all the reporting periods.

ii) Adjustments for the material amounts in the respective financial years to which they relate

iii) There are no extra-ordinary items which need to be disclosed separately in the Consolidated Restated Summary Statement.

iv) There are no qualifications in the auditors’ reports, which require any adjustments to the Consolidated Restated Summary Statement.

Other Financial Information

3) We have also examined the following information, relating to the company and it subsidiary as at and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004, proposed to be included in the Draft Letter of Offer, as approved by the Board of Directors and annexed to this report.

i) Consolidated Statement of Cash Flows, as restated for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure III)

FS 40

ii) Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements (Annexure IV)

iii) Consolidated Statement of Secured Loans, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure V)

iv) Consolidated Statement of Unsecured Loans, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure VI)

v) Consolidated Statement of Investments, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure VII)

vi) Consolidated Statement of Sundry Debtors, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure VIII)

vii) Consolidated Statement of Other Current Assets, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure IX)

viii) Consolidated Statement of Loans and Advances, as Restated as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure X)

ix) Consolidated Statement of Other Income, as Restated for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XI)

x) Tax Shelter Statement based on Consolidated restated profits (Annexure XII)

xi) Statement of Related Party transactions, as Restated for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XIII)

xii) Consolidated Statement of Dividends paid for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XIV)

xiii) Statement of Adjusted Accounting Ratios (Annexure XV)

xiv) Capitalisation Statement, as Restated as at March 31, 2008 (Annexure XVI)

xv) Consolidated Statement of contingent liabilities as at March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XVII)

4) Based on our examination of these Consolidated Restated Summary Statements, subject to our comments in paragraph 2c) above, we state that in our opinion, the ‘Financial Information as per Audited Financial Statements’ and ‘Other Financial Information’ read along with the Significant Accounting Policies and Notes on Restated Summary Statements mentioned above as at and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 have been prepared in accordance with Part II B of Schedule II of the Act and the SEBI Guidelines as amended from time to time.

5) The sufficiency of the procedures performed, as set forth in the above paragraphs of this report, is the sole responsibility of the Company. Consequently, we make no representations

FS 41

regarding the sufficiency of the procedures described above either for the purposes for which this report has been requested or for any other purpose.

6) This report should not be in any way be construed as a reissuance or redating of any of the previous audit report by other firms of Chartered Accountants nor should this be construed as a new opinion on any of the financial statements referred to herein.

7) This report is intended solely for your information and for inclusion in Draft Letter of Offer in connection with the proposed issue of CCPS on a rights basis to the existing shareholders of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for B S R & Associates Chartered Accountants

Subramanian Vivek PartnerMembership No. 100332 Place: Chennai Date: September 26, 2008


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Consolidated Summary Statement of Assets and Liabilities, as Restated Annexure I

As at March 31

2008 2007 2006 2005 2004

A Fixed Assets

Gross block 2,227.88 1,053.90 692.38 315.76 293.53

Less : Accumulateddepreciation / amortization

742.31 455.80 277.72 197.94 190.87

Net block 1,485.57 598.10 414.66 117.82 102.66


Sub Total 11,685.84 3,786.25 1,650.14 451.23 102.66

B Investments 12.29 111.32 141.32 22.46 147.96


DCurrent Assets, Loans andAdvances

Inventories 3,597.35 130.38 348.21 16.96 30.96

Sundry debtors 1,474.78 778.61 630.07 135.56 218.96


Other current assets 18,862.41 6,367.32 1,768.53 115.45 74.23


Sub Total 40,449.80 14,722.56 5,307.75 1,887.25 2,492.79

E Total Assets (A+B+C+D) 52,147.93 18,620.13 7,099.21 2,360.94 2,748.29

Liabilities and Provisions

F Loan Funds

Secured loans 5,242.16 1,968.34 699.30 - -

Unsecured loans 21,011.39 3,343.24 - - -

Sub Total 26,253.55 5,311.58 699.30 - -


HCurrent Liabilities & Provisions


Provisions 657.34 412.54 61.26 1.19 14.85

Sub Total 11,947.25 5,429.66 5,584.61 2,096.88 2,257.43

ITotal Liabilities and Provisions (F+G+H)

38,407.37 10,783.46 6,309.33 2,101.84 2,257.43


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J Net Worth (E-I) 13,740.56 7,836.67 789.88 259.10 490.86

Represented by -

Shareholders Funds

Share Capital 777.82 777.82 521.14 521.14 521.14



General Reserve 228.33 228.33 228.33 228.33 228.33


Net Worth 13,740.56 7,836.67 789.88 259.10 490.86

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes onConsolidated Restated Summary Statements as appearing in Annexure IV.


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Consolidated Summary Statement of Profits and Losses, as Restated Annexure II


2008 2007 2006 2005 2004

A Income


Other income 469.57 564.34 183.21 164.91 66.68

Total Income 44,366.98 14,311.96 8,946.93 4,431.58 2,830.03

B Expenditure

Consumption of raw material and componentsfor shipbuilding projects

28,730.49 10,178.23 6,720.45 3,375.68 1,441.41

Other expenses 7,065.64 2,925.67 1,430.03 737.06 1,266.50

Depreciation 340.47 103.89 53.11 22.03 20.63

Finance charges 1,339.55 494.67 201.84 100.64 76.61



D Taxation

Current tax 865.24 170.00 50.78 15.73 2.74



Deferred tax 164.35 9.81 20.46 9.84 12.85


ENet Profit before adjustments (C-D)

6,244.36 422.99 466.50 170.60 9.29

FADJUSTMENTS(Refer Note 2 and 3 ofAnnexure IV) Impact of changes in accounting policies and estimates:Revenues includingsubsidy income

(675.85) 957.72 307.50 (426.80) (129.71)

Provision for contractlosses

- - 25.93 (25.93) -

Provision for contract - 195.34 (195.34) - -


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expenses


Depreciation 53.94 (107.52) (30.52) - -

Other adjustments:



Tax impact of adjustments 281.44 (400.57) (6.72) 15.73 2.74

Total of adjustmentsafter tax impact

(340.47) 708.51 123.70 (402.36) (133.85)

GNet Profit, as Restated (E-F)

5,903.89 1,131.50 590.20 (231.76) (124.56)

Balance as at the beginning of the year

1,037.48 (94.02) (624.80) (393.04) (268.48)

Balance available forappropriation, as Restated

6,941.37 1,037.48 (34.60) (624.80) (393.04)

Appropriations

Dividend - - 52.11 - -

Dividend distribution tax - - 7.31 - -

Balance carried forward, as Restated

6,941.37 1,037.48 (94.02) (624.80) (393.04)

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes onConsolidated Restated Summary Statements as appearing in Annexure IV


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Consolidated Statement of Cash Flows, as Restated Annexure III


2008 2007 2006 2005 2004

ACash Flow fromOperating Activities Net Profit / (Loss) before taxes

6,268.92 1,718.57 671.92 (221.92) (111.71)

Adjustments for:

Depreciation / amortization

286.53 211.41 83.63 22.03 20.63

Provision for loans and advances

38.46 - - - -

Loss / (Profit) on sale of fixed assets

0.05 (3.79) (10.69) (10.51) 20.50

Loss / (Profit) on sale of investments

(1.55) - 0.86 (48.96) 8.41



Interest and finance Charges

1,279.56 444.66 201.84 101.81 76.61

Effect of exchange rate change

1,440.17 40.17 (23.51) (20.98) 4.33

Operating Profit before working capital changes

8,891.59 2,266.86 830.18 (223.76) (35.81)

(Increase) / decrease in Inventories

(3,466.97) 217.83 (331.25) 14.00 (21.73)

(Increase) / decrease in Sundry debtors

(696.17) (130.38) (512.67) 83.40 233.21


(19,218.26) (5,030.75) (1,682.12) 143.24 (60.54)


5,292.42 (593.68) 3,489.34 (138.48) 1,587.89

Cash generated from Operations

(9,197.39) (3,270.12) 1,793.48 (121.60) 1,703.02

Taxes paid, net (488.92) (130.45) (4.10) (3.18) (29.15)

Net Cash flows (used in) / from operating activities

(9,686.31) (3,400.57) 1,789.38 (124.78) 1,673.87

BCash Flow fromInvesting Activities

Purchase of fixed assets (8,186.20) (2,355.05) (1,307.81) (380.86) (12.35)

Proceeds from sale of fixed assets

0.03 11.32 35.96 21.41 -

Proceeds from sale of investments

101.73 40.00 21.14 174.46 56.46


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Net Cash flows (used in) / from investing activities

(7,893.76) (2,184.00) (1,297.70) (139.76) 78.16

CCash Flow fromFinancing Activities Proceeds from issue of new equity shares, net of issue expenses

- 5,915.29 - - -

Proceeds from Long-termborrowings

3,741.15 1,269.04 699.30 - -

Repayment from Long-term borrowings

(467.33) - - - -

Repayment of unsecured loans

- - - - (139.81)

Proceeds from short-termborrowings, net

16,768.62 3,343.24 - - -

Dividend and dividend tax paid

- (59.42) - - -

Bank interest and finance charges paid

(909.49) (444.66) (201.84) (101.81) (76.61)

Net Cash flows (used in)/from financing activities

19,132.95 10,023.49 497.46 (101.81) (216.42)

Net Increase/(decrease)in cash and cash equivalents (A+B+C)

1,552.87 4,438.92 989.14 (366.35) 1,535.61

Cash and cash equivalents at the beginning of theyear

6,716.00 2,277.06 1,287.92 1,654.27 118.66

Cash and cash equivalents at the end of the year

8,268.87 6,715.98 2,277.06 1,287.92 1,654.27


Tebma Shipyards Limited Annexure IV

Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements

1 Significant Accounting Policies

1.1 Basis of accounting

The financial statements are prepared and presented in accordance with Indian Generally AcceptedAccounting Principles (‘GAAP’) under the historical cost convention on the accrual basis, accountingstandards notified by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

1.2 Principles of consolidation

The Consolidated Restated Summary Statements include the financial statements of Tebma ShipyardsLimited (‘the Company’), the parent company and its wholly owned subsidiary, Tebma Gardens Limited. These consolidated restated summary statements do not include the financial statements ofDharti Dredging and Construction Limited, an associate Company for which financial information was not available with the Company. The Consolidated Restated Summary Statements have been prepared on the following basis:

The Consolidated Restated Summary Statements of the Company and its subsidiary company have been combined on a line by line basis by adding together the book values of all items of assets, liabilities, incomes and expenses after eliminating the intra group balances and intra group transactionsas per Accounting Standard 21 – Consolidated Financial Statements. The financial statement of thesubsidiary company is drawn up to the same reporting dates as that of the Company i.e., March31,2008, 2007, 2006, 2005 and 2004. The subsidiary company did not have any significant operationsduring these years.

The Consolidated Restated Summary Statements are presented, to the extent possible, in the sameformat as that adopted by the parent company for its separate financial statements. The consolidatedfinancial statements are prepared using the uniform accounting policies for similar transactions and other events in similar circumstances.

1.3 Matters relating to Dharti Dredging and Construction Limited (DDCL):

As at and for the years ended March 31, 2003 and 2004, the Company held 21,82,500 equity shares in Dharti Dredging and Construction Limited (‘DDCL’), representing 48.73% of equity share capital of DDCL. Currently, the Company does not have adequate and relevant information relating to the othershare holders of DDCL. Based on its share holding percentage, the management believes that DDCL isan associate company. During the year ended 31 March, 2005, the Company sold 19,82,500 equityshares and according to the management, DDCL ceased to be an associate company thereafter. The Company does not have the relevant information to account for under equity method in accordance with the Accounting Standard 23 – Accounting for investments in Associates in Consolidated Financial Statements and hence the investment in DDCL has been accounted for under AccountingStandard 13 - Accounting for Investments and disclosed under the head Investments.

Since the Company has sold its entire investment in DDCL during the years ended March 31, 2006, the management believes that there would not be any material impact on the reserves and surplus and net worth of the Company in the Consolidated Restated Summary Statements as at 31 March, 2006 andyears ending thereafter.

The reserves and surplus of DDCL as at June 30, 2004 and 2003 based on the audited financial statement are Rs 746.90 lakhs and Rs 746.90 lakhs respectively and the debit balance in profit and loss account of DDCL as at June 30, 2004 and 2003 are Rs 459.65 lakhs and Rs 388.66 lakhs respectively.

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1.4 Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period, reported balances of assets and liabilities, and disclosure of contingent assets andliabilities as at the date of the financial statements. Actual results could differ from those estimates.

1.5 Fixed assets and depreciation / amortisation

Fixed assets are carried at cost of acquisition or construction less accumulated depreciation. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalised.

Capital work in progress comprises outstanding advances paid to acquire fixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date.

Software initially purchased together with workplace computers are capitalized and depreciated at the rates applicable to workplace computers. Other software is capitalised as intangible assets, where it isexpected to obtain future enduring economic benefits. Capitalisation costs include license fees and costs of implementation/system integration services. The costs are capitalised in the year in which therelevant software is implemented for use.

Borrowing costs directly attributable to acquisition, construction or production of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalized. Other borrowing costs are accounted as expense in profit and loss account.

Depreciation is provided on the written-down value method. The manner and rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of theremaining useful life on a subsequent review is shorter than that envisaged in the aforesaid Schedule,depreciation is provided at a higher rate based on the management’s estimate of the usefullife/remaining useful life. The key fixed asset blocks and related useful lives, which in managementopinion reflect the estimated useful economic lives of the fixed assets, are:

Asset Category Useful Lives (number of years)

Tangible assets Buildings- Factory buildings 30- Other buildings 60

Plant and machinery 1 – 13

Office equipments 20

Furniture and fittings 9 – 15

Vehicles 10

Computers 3 – 6

Intangible assets

Computer software 3 – 6 Leasehold land is amortised over the period of lease. Leasehold improvements are depreciated over thelower of remaining estimated useful lives and the lease period. Individual assets costing less than Rs0.05 are depreciated @100%.

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1.6 Impairment of assets

The management assesses at each balance sheet date whether there is an indication that an asset maybe impaired. If any such indication exists, the company estimates the recoverable amount of the assets. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to whichthe asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverableamount. The reduction is treated as an impairment loss and is recognized in the profit and loss account.If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subjectto a maximum of depreciable historical cost.

1.7 Investments

Investments are classified as long term investments and current investments. Long-term investmentsare carried at cost with provision being made for diminution if any, other than temporary, in their value. Current investments are stated at lower of cost and fair value. The comparison of cost and fairvalue is done separately in respect of each category of investments.

1.8 Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of inventories comprises of allcosts of purchase and costs incurred in bringing the inventories to their present location and condition.Inventory of raw materials and components for ship building projects is valued based on the first-in, first-out method.

1.9 Revenue recognition

Shipbuilding revenue from fixed price construction contracts is recognised by reference to the estimated overall profitability of the contract under the percentage of completion method. Percentageof completion is determined as a proportion of the costs incurred to date to the total estimated contract costs. Contract revenue earned in excess of billing has been reflected under Other current assets and billing in excess of contract revenue has been reflected under Current liabilities in the balance sheet.Provision for expected loss is recognized immediately when it is probable that the total estimatedcontract costs will exceed total contract revenue.

Liquidated damages / penalties are provided for as per the contract terms where ever there is a delayeddelivery attributable to the Company.

The Company is eligible for export subsidy under the Ship Building Subsidy Scheme issued by theMinistry of Shipping, Government of India vide Press Note (2003). Ship building subsidy income is determined based on the percentage of completion method and accrued as and when the revenue forthe construction of ship is recognised.

Dividend income from investments is recognized and accounted for when the unconditional right to receive the amount is established. Interest income is recognized on the time proportion method.

1.10 Foreign currency transactions

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheetdate are translated at the closing exchange rates on that date. Exchange differences arising on foreign exchange transactions during the year and on restatement of monetary assets and liabilities are recognized in the profit and loss account of the year.

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Premium or discount arising at the inception of forward exchange contracts is amortized as expense orincome over the life of the contract. Any profit or loss arising on the cancellation or renewal offorward contracts is recognized as income or as expense for the period. In relation to the forward contracts entered into to hedge the foreign currency risk of the underlying outstanding at the balance sheet date, the exchange difference is calculated as the difference between the foreign currency amountof the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amounttranslated at the later of the date of inception of the forward exchange contract and the last reportingdate. Such exchange differences are recognized in the profit and loss account in the reporting period in which the exchange rates change.

In accordance with the announcement of “Accounting for Derivatives” made by the Institute ofChartered Accountants of India (‘ICAI’) on 29 March 2008, derivatives are marked to market and thechanges in the value of such derivatives are recognized in profit or loss account.

1.11 Employee Benefits

Provident fund: Contributions to provident fund (a defined contribution plan) are made to the Regional Provident Fund Commissioner and are charged to the profit and loss account.

Gratuity: Gratuity, which is a defined benefit, is accrued based on actuarial valuation done by anindependent actuary as at the balance sheet date. The actuarial gain / losses are charged to profit and loss account.

1.12 Leases

Lease payments under an operating lease, are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term.

1.13 Taxation

Income-tax expense comprises fringe benefit tax, current tax (i.e. amount of tax for the perioddetermined in accordance with the income-tax law) and deferred tax charge or credit (reflecting that tax effects of timing differences between accounting income and taxable income for the period).

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognizedusing the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is a reasonable certainty that the assetscan be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty supported byconvincing evidence of realization of such assets. Deferred tax assets / liabilities are reviewed as at the balance sheet date and written down or written up to reflect the amount that is reasonably/virtuallycertain (as the case may be) to be realized.

Minimum alternative tax (MAT) paid in accordance to the tax laws, which gives rise to futureeconomic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company would pay normal income tax after tax holiday periodand accordingly, MAT is recognised as an asset in the balance sheet when it is probable that the futureeconomic benefit associated with it will flow to the Company and the asset can be measured reliably.

Company provides for and discloses the Fringe Benefits Tax (“FBT”) in accordance with theprovisions of the Income Tax Act, 1961 and guidance note on FBT issued by the ICAI.

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1.14 Earnings per share

Basic earnings per share (‘EPS’) amounts are computed by dividing the net profit or loss for the yearattributable to equity shareholders by the weighted average number of shares outstanding during theyear.

For the purpose of calculating diluted earnings per share, the net profit for the year attributable toequity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

1.15 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the Company has a present obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reasonably estimated.

A disclosure for a contingent liability is made when there is a possible obligation or a presentobligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,no provision or disclosure is made.

Contingent assets are not recognized in the financial statements.

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2. Significant changes in accounting policies and estimates:

a) During the year ended March 31, 2006, the Company revised the accounting policy forrecognizing revenue on construction of ships to Percentage of Completion method in accordancewith Accounting Standard 7 – Construction Contracts (Revised 2002). Accordingly, revenue fromoperations, provisions for contract losses and other provision for contract expenses have been recomputed for the years ended March 31, 2007, 2006, 2005 and 2004 in the ConsolidatedSummary Statement of Profits and Losses, As Restated. Further, the accumulated profit and lossbalance as at April 1, 2003 has been appropriately adjusted to reflect the impact of the changepertaining to the periods ended on or before March 31, 2003. The other current assets and currentliabilities for those years have also been appropriately adjusted in the Consolidated SummaryStatement of Assets and Liabilities, as Restated.

b) The Company is eligible for export subsidy under the Ship Building Subsidy Scheme issued by theMinistry of Shipping, Government of India vide Press Note (2003). During the year ended March 31, 2008, the Company has determined the subsidy income based on percentage of completionmethod and accrued as and when the revenue for the construction of ship is recognised based on relevant accounting standards and recent industry developments. Accordingly, the Subsidy incomehas been recomputed for the years ended March 31, 2008, 2007, 2006 and 2005 in theConsolidated Summary Statement of Profits and Losses, As Restated. The other current assets for those years have been appropriately adjusted in the Consolidated Summary Statement of Assetsand Liabilities, as Restated. No adjustments have been made for the year ended March 31, 2004 as the Company was not eligible for export subsidy during the year.

c) During the year ended March 31, 2008, the Company adopted revised Accounting Standard (AS) –15 (‘Employee Benefits’). For the purpose of this statement, the gratuity liability has been recomputed in accordance with revised AS 15 for years ended March 31,2007, 2006, 2005, 2004and 2003 and accordingly, the employee costs has been restated. Further, the accumulated profit and loss balance as at April 1, 2003 has been appropriately adjusted to reflect the impact of the change pertaining to periods ended on or before March 31, 2003. The provisions for those yearshave been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

d) The useful life of certain plant and machinery has been revised by the Company with effect from April 1, 2007. For the purpose of this statement, the depreciation on plant and machinery for which the estimated useful life of the assets has been changed in the year ended March 31, 2008has been recomputed and accordingly restated in those respective years. The accumulateddepreciation and net block for those years have also been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

3. Adjustments relating to previous years

a) The Company had recorded certain income / expenses as prior period items in the financial statements for the year ended March 31, 2008. For the purpose of this statement, the effects of these items have been appropriately adjusted / recomputed for earlier periods and accordinglyadjusted in the respective years.

b) Short/excess provision for Income Tax: The profit and loss account of certain years includes amounts paid / provided for in respect of shortfall of income-tax arising out of assessments,appeals etc. These have been adjusted to the respective years to which they relate.

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4. Tax impact of adjustments

Tax impact of adjustments relating to tax effect on adjustments made in respect of restatement of the financial statements have been adjusted in the respective years. The current taxes provided in the year ended March 31, 2007, 2006, 2005 and 2004 on an estimated basis and adjusted in subsequent years based on final determination of the tax liabilities or on completion of assessments by the tax authorities have been adjusted in the respective years to which they relate. The effect ofadjustments relating to financial years ending prior to March 31, 2003 has been adjusted against the Accumulated Profit and Loss balance as at April 1, 2003

5. Material regroupings

a) Buyer’s Credit: For the year ended March 31, 2007, buyer’s credit taken by the Company againstsupplies was included under the head Sundry creditors and hence classified as part of Current Liabilities. During the year ended March 31, 2008, the same has been classified under the headUnsecured Loans. In the Consolidated Summary Statement of Assets and Liabilities as Restated,for the year ended 31 March, 2007, such buyer’s credit has been regrouped and disclosedaccordingly.

b) Deferred Revenue Expenditure and Miscellaneous expenditure: Upto year ended March 31, 2006,certain capital expenses incurred for Malpe project was classified as deferred revenue expenditureand certain technical know how expenses was classified under the head Miscellaneous expenditure. During the year ended March 31, 2007, the Company has changed its classificationand regrouped these expenses under the head Capital Work in Progress and fixed assets respectively. In the Consolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2006 and 2005 such expenditure has been regrouped and disclosed accordingly

c) Advance tax and provision for taxation: Upto year ended March 31, 2007, advance taxes and taxes deducted at source and Provision for taxation was classified under the head was classified under Loans and Advances and Provisions respectively. During the year ended March 31, 2008, theCompany has netted of the advance tax and taxes deducted at source against the provision for taxation and the net impact is disclosed either under the head Provisions or under the head Loans and Advances. In the Consolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2007, 2006, 2005 and 2004 these classifications have been regrouped and disclosed accordingly.

d) Operating and other expenses: Upto year ended March 31, 2007, Material costs, Personnel costs,operating and administrative expenses were disclosed as separate line items in the Profit and Loss account. During the year ended March 31, 2008 the Company has combined these expenses underthe head Consumption of raw material and components for shipbuilding projects and Otherexpenses. In the Consolidated Summary Statement of Profits and Losses as Restated, for the yearended March 31, 2007, 2006, 2005 and 2004 these have been regrouped accordingly.

e) Cash and Bank Balances: During the ended March 31, 2007 and 2006, certain investments were combined under the head Cash and Bank Balances. During the year ended March 31, 2008 the Company disclosed the same under the head investments. In the Consolidated Summary Statementof Profit and Losses as Restated, for the year ended 31 March, 2007 and 2006 these classificationshave been regrouped and disclosed accordingly.

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f) Capital work in progress: During the year ended March 31, 2007, certain pre-issue expenses werecombined under the head Capital work in progress. During the year ended March 31, 2008 the Company has adjusted these pre-issue expenses against securities premium. In the Consolidated Summary Statement of Profit and Losses as Restated, for the year ended March 31, 2007 theseclassifications have been regrouped and disclosed accordingly.

g) Sundry Debtors: Upto the year ended March 31, 2007, unbilled revenues and subsidy incomereceivable were disclosed under the head sundry debtors. During the year ended March 31, 2008 the Company has disclosed the same under a separate head other current assets. In the Consolidated Summary Statement of Assets and Liabilities as Restated, for the year ended March 31, 2007, 2006, 2005 and 2004 these have been regrouped accordingly.

h) Deposits: Upto the year ended March 31, 2007, deposits were disclosed under the head other current assets. During the year ended March 31, 2008 the Company has disclosed the same underthe head loans and advances. In the Consolidated Summary Statement of Assets and Liabilities asRestated, for the year ended March 31, 2007, 2006, 2005 and 2004 these have been regroupedaccordingly.

i) Relating to Subsidiary Company: As the subsidiary company was not having any operations for the year ended March 31, 2008, 2007, 2006, 2005 and 2004, the Company has reclassified all the assets from Fixed assets to Assets held for sale and disclosed them under the head other current assets in the Consolidated Summary Statement of Assets and Liabilities, as Restated. These assetswere sold during the year ended March 31, 2006.

6. Non adjustment items

a) Leave Encashment: Upto the year ended March 31, 2007 the Company accounted for leave encashment as and when the leave credits are claimed by the employees or at the time ofresignation / retirement. During the year ended March 31, 2008, the company changed the basis of providing leave encashment, to an amount determined on the basis of accumulated leave, lying to the credit of the employees as at the year end. No adjustment has been made for earlier periodssince in the opinion of the Company the impact of the same on the Consolidated SummaryStatement of Profits and Losses, as restated is not material.

b) Auditors’ qualification which do not require any corrective adjustment in the Consolidated Restated Summary Statements are as follows:


i) The Company does not have an internal audit system commensurate with the size and natureof its business.

ii) There were significant delays in respect of payment of advance income taxes and severaldelays in respect of payment of Provident fund and Employee State Insurance deducted fromthe Company’s contractors pending receipt of necessary information from contractors.

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Rs in Lakhs

7 Significant Notes to accounts

a. Disclosure for construction contracts

ParticularsYear ended

March 31,2008Year ended

March 31,2007

a. Contract revenue recognized as revenue in the period 38,068.37 14,029.45

b. Contract cost incurred and recognized profits till date* 50,837.21 14,581.11

c. Advances received 8,029.83 3,595.06

d. Gross amount due from customers for contract work ** 12,265.19 5,151.20

There are no amounts of retention for the above contracts as at the balance sheet date.

* The net amount for all contracts in progress for which cost incurred plus recognised profit (less recognisedlosses, if any).

** Excess of unbilled revenue over the stage payments

b. Segmental reporting

The Company is mainly engaged in construction of vessels and accordingly the said business segmentis the only primary reportable segment as per Accounting Standard 17 - Segment Reporting.

Secondary segment reporting is performed on the basis of the geographical location of customers.

Particulars Year endedMarch 31,2008

Year ended March 31,2007

RevenuesIndia 6,330.43 1,995.14Rest of the world 31,737.94 12,034.35

Fixed assets used in the Company’s business or liabilities contracted, other than those specificallyidentifiable, have not been identified to any of the reportable segments, as the fixed assets are usedinterchangeably between segments.

c. Deferred taxes

Particulars As atMarch 31,2008

Deferred tax liabilitiesArising from timing differences in respect of a) Depreciation 41.00b) Subsidy 217.94

258.94Deferred tax assetsArising from timing differences in respect of: a) Retirement benefits and other tax disallowances 39.30b) Provision for loans and advances 13.07

52.37Net deferred tax Liability 206.57

FS 56



Rs in Lakhs

d. Balance of Profit and Loss Account as at April 1, 2003 (Restated)

Balance of Profit and Loss Account as at April 1, 2003 (Audited) (210.97)Impact of changes in accounting policies and estimates: - Revenues (32.86) - Provision for gratuity (12.30)Tax impact of adjustments 16.20Short fall of taxes relating to earlier years (28.55)Balance of Profit and Loss Account as at April 1, 2003 (Restated) (268.48)

e. During the year ended March 31, 2007, pursuant to a Shareholders Agreement dated February 27,2007, entered into between the Company, its original promoters and India Advantage Fund – VI(‘IAF - VI’) [IAF - VI was setup by Indenture of Trust, between Western India Trustee & ExecutorCompany Limited and ICICI Venture Funds Management Company Limited], IAF – VI has acquired approximately 33% stake in the Company and subsequently, through an open offer became a majority shareholder in financial year ended March 31, 2008. Out of the total amounts ofRs 6,000 lakhs (approx) received by the Company through preferential allotment, the Company has utilized Rs 4,117 lakhs (approx) as at March 31, 2007 and the balance has been utilized during the year ended March 31, 2008.

f. Previous year figures have been regrouped to conform to the presentation of current year’saccounts.

FS 57


FS 58

A. Consolidated Statement of Secured Loans, as Restated Annexure V

As at March 31

Particulars 2008 2007 2006 2005 2004

Term Loans from banks 5,242.16 1,968.34 699.30 - -

B. Principal Terms of Secured Loans as at March 31, 2008

Sl.No

Particulars Rate of InterestOutstanding

amountRepayment

termsSecurity

1 Term Loans frombanksState Bank of Hyderabad (SBH) – Term Loan I

1% below PLR 869.62 27 monthlyinstalmentscommencingfrom September2007.

Primary Security: Secured by first paripassu chargewith SBI, by way of equitable mortgage of land situated in Malpe and machinery / other assets, to be acquired out of the term loan. Collateral Security:(i) first paripassu chargeover the company's plant and machinery and landand building at Chengalpet.(ii) Cash collateral of Rs. 50 lakhs (iii) Second charge over the current assets of the Company.(iv)Personal Guarantee of MrP.K.Balasubramanian –Chairman.

State Bank of Hyderabad (SBH) – Term Loan II

SBH PLR + 0.25% with aminimum of13.25% p.a.

722.18 78 monthlyinstalmentscommencingfrom December2007.

Primary Security: (i) Assignment of licenseagreement issued by Director of ports and inlandwater transport (ii) first charge over machinery and other assets including Equitable mortgage of landat Hangarkate and Babuthota. Collateral Security: (i) Extention ofparipassu first charge overcompany's land andbuilding at Chengalpet andfixed assets at Malpe. Cash


FS 59

collateral of Rs.37 lakhs (ii) Second charge oncurrent assets on pari passubasis with SBI and other working capital lenders.(iii) PersonalGuarantee of Mr P.K.Balasubramanian –Chairman.

State Bank of India (SBI) – Term Loan I

SBLR – 1% with a minimum of9.25% p.a.

1,009.98 24 Quarterly instalmentscommencingfrom June 2007.

Primary Security:(i)Assignment of Licenseagreement issued by director of Ports & InlandWater Transport, Karwar tothe Co. in favour of SBI and SBH for an amount ofRs. 138 lakhs. (i)First charge over machinery and other assets to be acquiredout of the Term Loan onparipassu basis with SBH.(ii) Personal Guarantee ofMr P.K.Balasubramanian – Chairman.

State Bank of India (SBI) – Term Loan II

SBLR + 0.50% 2,640.38 78 monthlyinstalmentscommencingfrom October2007.

Primary Security:Assignment of Licenseagreement issued by director of Ports & InlandWater Transport, Karwar tothe Co. in Favour of SBI and SBH. Collateral Security: (i) First paripassu charge over company’sland and building at Chengalpet (ii) Cashcollateral of Rs. 37 lakhs along with SBH (iii) second charge on current assets on paripassu basiswith SBH.(iv) Personal Guarantee of Mr P.K.Balasubramanian –Chairman.

Total 5,242.16

PLR refers to Prime Lending Rate SBLR refers to State Bank Lending Rate



FS 60

A. Consolidated Statement of Unsecured Loans, as Restated Annexure VI

As at March 31

Sl.No

Particulars 2008 2007 2006 2005 2004

1 Buyer’s Credit 21,011.39 3,343.24 - - -

B. Principal Terms of Unsecured Loans as at March 31, 2008

S.No ParticularsOutstanding

amount Rate of Interest Repayment terms1 Axis bank, Singapore 1,437.36

2Bank of India, HongKong 295.04

3 Bank of India, Paris 93.90

4Bank of India, San Francisco 202.72

5 ICICI Bank, Singapore 399.01

6State Bank of India,Belgium 5,802.61

7State Bank of India,Hong Kong 137.66

8State Bank of India,Osaka 324.80

9State Bank of India,Singapore 301.64

10State Bank of India,Tokyo 5,352.68

11Standard Chartered Bank, Singapore 932.53

12 Scotia Bank, Singapore 1,208.25

13Svenska Bank, Singapore 2,395.60

LIBOR + 0.20% to LIBOR + 0.50%

14State Bank of India,Belgium 495.49

15 Banca Intesa, Italy 194.74

16Standard Chartered Bank, Singapore 1,437.36

EURIBOR + 0.30% to EURIBOR + 0.50%

As stipulated by each of the banks. All the amounts are repayable within one year.

Grand Total 21,011.39

LIBOR refers to London Inter Bank Offer Rate EURIBOR refers to Euro Inter Bank Offer Rate


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FS61


FS 62

Consolidated Statement of Sundry Debtors, as Restated Annexure VIII

As at March 31

Particulars 2008 2007 2006 2005 2004Debts outstanding over six months

Unsecured – Considered good 392.83 206.27 135.47 135.56 146.95

Other Debts

Unsecured – Considered good 1,081.95 572.34 494.60 - 72.01

Grand Total 1,474.78 778.61 630.07 135.56 218.96

Debts outstanding over six months

Unsecured – Considered good - Dharti Dredging and Construction Limited, Associate Company (Refer Note 1.3 of Annexure IV) - - - 73.84 17.11

Grand Total - - - 73.84 17.11



FS 63

Consolidated Statement of Other Current Assets, as Restated Annexure IX

As at March 31

Particulars 2008 2007 2006 2005 2004

Unbilled revenue 12,265.19 5,151.20 1,258.53 - -Subsidy income accrued / receivable

6,352.67 1,185.86 510.00 41.86 -

Assets held for sale - - - 73.59 74.23

Interest accrued on fixed deposits 244.55 30.26 - - -

Grand Total 18,862.41 6,367.32 1,768.53 115.45 74.23



FS 64

Consolidated Statement of Loans and Advances, as Restated Annexure X

As at March 31

Particulars 2008 2007 2006 2005 2004

Unsecured, considered good

Due from Tebma Marine PrivateLimited

- - - 0.93 -

Advance recoverable in cash or kind or for value to be received Advance receivable from DhartiDredging and ConstructionLimited, Associate Company(Refer Note 1.3 of Annexure IV)

- 10.00 10.00 145.00 148.42

Advance paid to suppliers and others

7,430.32 647.33 141.98 60.74 37.59

Balance with governmentauthorities

6.88 0.83 54.52 69.47 170.95

Deposits – Others 275.94 72.11 77.38 55.22 157.41

MAT credit entitlement 533.06 - - - -

Unsecured, considered doubtful

Other advances 38.46 - - - -

Less:

Provision for doubtful otheradvances

38.46 - - - -

TOTAL 8,246.39 730.27 283.88 331.36 514.37



FS 65

Consolidated Statement of Other Income, as Restated Annexure XI

For the year ended March 31 Sources and Particulars ofOther Income Nature 2008 2007 2006 2005 2004

Interest on fixed deposits Recurring 420.37 143.89 112.52 44.84 54.40

Foreign exchange difference, net Recurring - 432.25 23.51 24.88 -

Income from investments Recurring 1.73 0.27 0.10 0.39 0.18

Profit on sale of assets Non - recurring - 3.79 10.69 10.52 -

Profit on sale of investments Non – recurring - - - 48.36 -

Others Non - recurring 47.47 22.85 59.92 56.90 12.10

Total 469.57 603.05 206.74 185.89 66.68

Notes:

1) The classification of income into recurring and non-recurring and related or not related to business activity is based onthe current operations and business activities of the Company, as represented by the Management.

2) The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV.


FS 66

Tax Shelter Statement based on Consolidated Restated Profits Annexure XII

For the year ended March 31 Particulars 2008 2007 2006 2005 2004

A Profit before Tax, as Restated - Chargeable at Normal Rate 6,268.92 1,718.57 661.23 (270.28) (103.30) - Chargeable at Special Rate - - 10.69 48.36 (8.41)Total Profit before Tax 6,268.92 1,718.57 671.92 (221.92) (111.71)

BTax Rate (including surcharge& Education Cess) - Income tax rates 33.99% 33.66% 33.66% 36.60% 35.88% - Minimum alternate tax 11.33% 8.42% 8.42% 7.84% 7.69%- Special Rate on Long Term

Capital Gain (after indexing) (%) - - 0% 0% 0%Tax at Notional Rates - Chargeable at Normal Rate 2,130.80 578.47 222.57 (98.92) (37.07) - Chargeable at Special Rate - - - - -

C Total 2,130.80 578.47 222.57 (98.92) (37.07)Adjustments

D Permanent differences:Dividend income exemptunder Section 10(34) of the Income Tax Act, 1961 (0.18) (0.27) (0.09) (0.39) (0.17)Interest on Income taxes 25.21 - - - -Deduction under Section 24 of the Income Tax Act, 1961 - - - (0.18) (0.72)Others 13.89 (0.26) (16.44) 0.92 11.62Total 38.92 (0.53) (16.53) 0.35 10.73

E Timing differences:Difference between bookdepreciation and taxdepreciation 7.79 (39.62) (51.15) (7.10) 0.80(Reversal) / claim of subsidyincome (5,829.04) - - - -Deduction under Section 43B of the Income Tax Act, 1961 38.82 - - - (53.55)(Profit) / Loss on sale ofassets 0.04 (3.79) - 0.60 -Business losses carriedforward from previous yearset off - - (422.72) (140.63) -Others 38.46 - - - -Total (5,743.93) (43.41) (473.87) (147.13) (52.75)

F Net Adjustments (D+E) (5,705.01) (43.94) (490.40) (146.78) (42.02)

GTax Expense / (Saving)thereon ( F * B) (1,939.13) (14.79) (165.07) (53.72) (15.08)

H Total Tax ( C + G) 191.67 563.68 57.50 - -


FS 67

Book profit for MAT 6,395.80 1,718.30 671.83 - -Tax liability as per MAT 724.64 144.68 56.57 - -

ITax liability being higher of G or H 724.64 563.68 57.50 - -

J MAT credit 532.97 - - - -Write off for previous year tax - 6.89 - - -

KProvision for current tax (I-J) 191.67 570.57 57.50 - -

L Tax effect on restatements 281.44 (400.57) (6.72) 15.73 2.74

M

Provision for current tax as per books of accounts (L +M) 473.11 ` 170.00 50.78 15.73 2.74

Note:

1. The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV.

2. For the years ended March 31, 2008, 2007, 2006, 2005 and 2004, the above statement has been prepared based on the consolidated restated financial statements and tax audit report issued under Section 44AB of the Income tax Act, 1961 filed together with the income tax return.

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FS70


FS 71

Consolidated Statements of Dividend paid Annexure XIV


Particulars 2008 2007 2006 2005 2004

A Equity Shares (numbers) 7,778,180 7,778,180 5,211,380 5,211,380 5,211,380

B Face Value per equity share (in Rs.) 10.00 10.00 10.00 10.00 10.00

C Rate of dividend - - 10% - -

D Dividend amount - - 52.11 - -

E Dividend distribution tax - - 7.31 - -



FS 72

Statement of Adjusted Accounting Ratios Annexure XV

As at March 31 2008 2007 2006 2005 2004

A Net worth 13,740.56 7,836.67 789.88 259.10 490.86

BAdjusted Profit / (loss) after Tax

5,903.89 1,131.50 590.20 (231.76) (124.56)

CNumber of sharesoutstanding at the end (*) (in numbers)

7,778,180 7,778,180 5,211,380 5,211,380 5,211,380

DWeighted average numberof shares outstanding (*)(in numbers)

7,778,180 5,440,217 5,211,380 5,211,380 5,211,380

Earnings Per Share in Rs.[B / D]

75.90 20.80 11.32 (4.45) (2.39)

Return on Net Worth (%)[B / A]

42.97 14.44 74.72 (89.45) (25.38)

Net Asset value per share in Rs. [A / C]

176.66 100.75 15.16 4.97 9.42

* At nominal value per share of Rs.10/-

Definition of Key accounting ratios

1) Earnings per share represent basic earnings per share calculated as per Accounting Standard – 20 (‘Earnings pershare’).

2) Return on net worth is arrived by dividing adjusted profit after tax by total shareholder’s funds (Net Worth) at the end of each year.

3) Net Asset value per share is arrived by dividing total shareholder’s funds (Net Worth) by the total number of shares outstanding at the end of each year.



FS 73

Capitalization Statement, as Restated Annexure XVI

ParticularsPre Issue as at March

31, 2008Pre Issue as at

March 31, 2008

A Loan Funds:

Long Term Debts 5,242.16 5,242.16

Short Term Debts 21,011.39 21,011.39

Total Debts 26,253.55 26,253.55

B Shareholder's Funds

Share Capital 777.82 -


Securities Premium 5,793.04 -

General Reserve 228.33 -

Profit and Loss Account 6,941.37 -

Total Shareholder's Funds 13,740.56 -

Debt / Equity Ratio

Long term Debt / Equity 0.38 -

Total Debt / Equity 1.91 -

Notes:

1) The above have been computed on the basis of the Consolidated Restated Summary statements.

2) The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV.

3) Long term debts of Rs.5,242.16 includes a sum of Rs.893.00 repayable within one year as at March 31, 2008.


FS 74

Statement of Contingent Liabilities, based on Consolidated Restated Profits Annexure XVII


2008 2007 2006 2005 2004Disputed Income Tax demands contested in appeals, forwhich no provision has been made

- - 19.60 19.60 12.28

122

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations is based on our restated consolidated financial statements as of and for the year ended March 31, 2008, 2007, 2006 and 2005 including the schedules and notes thereto and the report thereon, which appear in the section titled “Financial Statements” in the Draft Letter of Offer. The financial statements presented and discussed in the Draft Letter of offer are based on Indian GAAP, the Companies Act and the SEBI Guidelines and restated as required under SEBI Guidelines and adjusted as described in the report of our statutory auditors dated [ ] included in the section titled “Auditor’s Report`” beginning on page FS - 1 of the Draft Letter of Offer. 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 on March 31 of that year.

In this section references to “we”, “our” and “us” refers to the Company on a Restated Consolidated basis for any period. For the purpose of this section unless the context requires otherwise references to “Fiscal 2008”, “Fiscal 2007”, “Fiscal 2006”, “Fiscal 2005” are to the financial year ended March 31 of the relevant year and references to “year” are to the financial year of the Company.

This section contains forward-looking statements that involve risks and uncertainties. Our Company’s actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including those described under “Risk Factors” and ‘Forward-Looking Statements”. Our Company’s financial statements are prepared in conformity with the Indian GAAP

Overview

We are a shipbuilding company, primarily engaged in sourcing designs from designs, detailing designs for execution and construction of offshore support vessels (“OSV”), dredgers, tugs and fabrication of pressure vessels.Our Company was established in the year 1984 with an initial focus on building of dredgers for the first decade of our operations, including launches, de-weeding dredgers, self-propelled barges, LPG carriers, dredge tender boats and floating cranes. Subsequently, in the year 1994, our Company expanded its product range to include tugs of SRP and Tractor versions. In the year 2005, our Company forayed into construction of OSVs, and has delivered seven (7) OSVs till date. Further, in 2006, we also began fabrication of pressure vessels for installation in OSVs and have received DNV certification for the same. Since our commencement of ship building operations in the year 1984, we have built and delivered 114 vessels and have catered to the requirements of a diverse domestic and international clientele including offshore service providers, various ports, shipping companies, Government establishments (defence and irrigation), lake authorities and dredging service providers for the public as well as the private sector. During the last three years, our consolidated revenues and PAT have grown at a CAGR of 124.11% and 394.23% respectively. As of September 15, 2008, we have an order book position of twenty seven (27) vessels under design/ construction.We were originally promoted by a team of six marine professionals i.e. Mr. P.K Balasubramanian, Late Captain B. N. Rao, Mr. Eapen Chacko, Mr. A. K. Singh, Mr. K. A. Thomas and Mr. Biren Mukherjee. In fiscal 2007, IAF- VI, acquired an equity stake of 25,66,800 Equity Shares in our Company, representing an approximate interest of 33%, and they subsequently acquired a 20% stake pursuant to an open offer made in terms of the SEBI Takeover Regulations. IAF-VI presently holds 53% of the paid up equity share capital of our Company, and is our single largest shareholder. Mr. P.K Balasubramanian and IAF-VI are our current Promoters. For further details regarding changes in our Promoters since our incorporation and acquisition of majority stake by IAF-VI into our Company, please refer to section titled “History And Other Corporate Information” beginning on page 94 of the Draft Letter of Offer.

We currently operate out of three shipbuilding facilities, one located at Chengalpet, at a distance of 70 km from Chennai, and the others at Malpe, near Udupi, South Karnataka, and at Cochin. Our Shipyard at Malpe has been granted Export Oriented Unit (“EOU”) status by the Government of India for a period of 5 years from May 21, 2008. We are operating under a MoU with Cochin Shipyard Limited, under which we can build tugs and OSVs at Cochin Shipyard.

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Significant Developments subsequent to the last financial year

We received a new order of VS 485 type of OSV from an existing customer, for a deep sea OSV priced at USD 50 mn., with delivery in 2010. We have also received sanction of Working Capital Loans of Rs. 6,000 lacs and Rs. 2,000 lacs from Citibank and Barclays Bank respectively. Our Shipyard at Malpe has been granted Export Oriented Unit (“EOU”) status by the Government of India for a period of 5 years from May 21, 2008.

In the opinion of the Board of Directors no circumstances have arisen since the date of the last financial statements as disclosed in the Draft Letter of Offer and which materially and adversely affect or is likely to affect the trading or profitability of our Company, or the value of our assets, or our ability to pay liabilities within the next twelve months.

Factors Affecting Results of Operations

• Changes in the availability and price of raw materials, including steel: Steel is our primary raw material for construction of vessels. The price of steel generally varies with global commodity prices and can increase or fluctuate rapidly and significantly due to a number of factors over and above supply and demand factors. The fluctuations in prices of raw materials, including steel and other metals, and their availability may affect our cost of construction.

• Ability to complete construction of our facilities on schedule: Our Shipyard at Malpe is targeted to begin full-scale operations following the expected completion of construction in December 2008. We rely upon contractors for the construction of our Shipyard at Malpe. Any significant delay in our construction schedule could delay our commercial operations, and also could result in additional funding requirements, cost overruns, increased debt service obligations and additional financing & operating covenants that would restrict our operations. Further, any delay in completion of construction of our facilities may increase our cost of construction, and could cause delay in the manufacturing and delivery of vessels under our shipbuilding contracts. This may result inwe being liable to pay damages to our customers or loss of shipbuilding contracts currently reflected in our order book.

• Changes in interest rates: The interest rates on certain of our borrowings may fluctuate on account of changes in the prime lending rate of lenders or changes in LIBOR (“London Interbank Offer Rate”). If the interest rates for our existing or future borrowings increase significantly, our cost of funds will also increase. This may adversely impact our planned capital expenditures, financial condition and results of operation.

• Changes in charter rates, oil prices and financial conditions in certain sectors: The demand for OSVs is dependent upon many factors, including the financial condition of companies in the shipping, shipbuilding, off-shore oil and gas and petrochemical industries. In addition, we expect that charter rates and oil prices will significantly affect our business. The demand for ships based on charter rates is cyclical in nature and can be difficult to predict. When charter rates are on the rise, ship owners generally place orders for new ships. However, an excessive supply of ships exerts a downward pressure on charter rates which in turn reduces demand for new ships. Similarly, an increase in oil and gas prices often leads to considerable growth in deepwater and sub-sea activity and demand for offshore supply vessels as oil companies increase their oil exploration, development and production activities. However, a sustained decrease in oil and gas prices will generally result in a decrease in demand for OSVs. We may be unable to accurately predict these cycles and this may have an adverse effect on our business, financial condition and results of operations.

• Fluctuations in the rate of exchange between the Rupee and major foreign currencies: Since our imported purchases will generally be invoiced in foreign currencies, and principally in U.S. dollars and Euro, fluctuations in the rate of exchange between such currencies and the Rupee may adversely affect our operating results. A substantial portion of our revenues is generated in U.S. dollars and hence fluctuations in the exchange rate between the U.S. dollar and Rupee may adversely affect our margins.

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Changes in Accounting Policies in the last three years

Tebma Shipyards Limited - Consolidated

Significant changes in accounting policies and estimates

a. During the year ended March 31, 2006, the Company revised the accounting policy for recognizing revenue on construction of ships to Percentage of Completion method in accordance with Accounting Standard 7 – Construction Contracts (Revised 2002). Accordingly, revenue from operations, provisions for contract losses and other provision for contract expenses have been recomputed for the years ended March 31, 2007 and 2006 in the Consolidated Summary Statement of Profits and Losses, As Restated. Further, the opening accumulated profit and loss balance has been appropriately adjusted to reflect the impact of the change pertaining to the earlier periods. The other current assets and current liabilities for those years have also been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

b. The Company is eligible for export subsidy under the Ship Building Subsidy Scheme issued by the Ministry of Shipping, Government of India vide Press Note (2003). During the year ended March 31, 2008, the Company has determined the subsidy income based on percentage of completion method and accrued as and when the revenue for the construction of ship is recognised based on relevant accounting standards and recent industry developments. Accordingly, the Subsidy income has been recomputed for the years ended March 31, 2008, 2007 and 2006 in the Consolidated Summary Statement of Profits and Losses, As Restated. The other current assets for those years have been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

c. During the year ended March 31, 2008, the Company adopted revised Accounting Standard (AS) – 15 (‘Employee Benefits’). For the purpose of this statement, the gratuity liability has been recomputed in accordance with revised AS 15 for years ended March 31, 2007 and 2006 and accordingly, the employee costs has been restated. Further, the opening accumulated profit and loss balance has been appropriately adjusted to reflect the impact of the change pertaining to earlier periods. The provisions for those years have been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

d. The useful life of certain plant and machinery has been revised by the Company with effect from April 1, 2007. For the purpose of this statement, the depreciation on plant and machinery for which the estimated useful life of the assets has been changed in the year ended March 31, 2008 has been recomputed and accordingly restated in those respective years. The accumulated depreciation and net block for those years have also been appropriately adjusted in the Consolidated Summary Statement of Assets and Liabilities, as Restated.

Discussion on Results of Operations

The discussion on results of operations is after considering the net effect of the relevant adjustments for the respective fiscal.

Consolidated Summary Statement of Profits and Losses, as Restated Rs. in Lacs

For the year ended March 31 2008 2007 2006 2005 A Income

Income from operations 43,897.41 13,747.62 8,763.72 4,266.67Other income 469.57 564.34 183.21 164.91

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Total Income 44,366.98 14,311.96 8,946.93 4,431.58

B Expenditure Consumption of raw material and components for shipbuilding projects 28,730.49 10,178.23 6,720.45 3,375.68Other expenses 7,065.64 2,925.67 1,430.03 737.06Depreciation 340.47 103.89 53.11 22.03Finance charges 1,339.55 494.67 201.84 100.64

Total Expenditure 37,476.15 13,702.46 8,405.43 4,235.41 C Profit before taxes (A-B) 6,890.83 609.5 541.5 196.17

D Taxation

Current tax 865.24 170 50.78 15.73MAT credit entitlement -392.13 - - -Fringe benefit tax 9.01 6.7 3.76 -Deferred tax 164.35 9.81 20.46 9.84

Provision for taxation 646.47 186.51 75 25.57 E Net Profit before adjustments (C-D) 6,244.36 422.99 466.5 170.6

ADJUSTMENTS

F (Refer Note 2 and 3 of Annexure IV) Impact of changes in accounting policies and estimates: Revenues including subsidy income -675.85 957.72 307.5 -426.8Provision for contract losses - - 25.93 -25.93Provision for contract expenses - 195.34 -195.34 -Provision for gratuity - 1.85 -0.66 13.66Depreciation 53.94 -107.52 -30.52 -Other adjustments: Prior period items - 61.69 23.51 20.98

Total Adjustments -621.91 1,109.08 130.42 -418.09Tax impact of adjustments 281.44 -400.57 -6.72 15.73

Total of adjustments after tax impact -340.47 708.51 123.7 -402.36G Net Profit, as Restated (E-F) 5,903.89 1,131.50 590.2 -231.76

Balance as at the beginning of the year 1,037.48 -94.02 -624.8 -393.04Balance available for appropriation, as Restated 6,941.37 1,037.48 -34.6 -624.8

Appropriations Dividend - - 52.11 -

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Dividend distribution tax - - 7.31 - Balance carried forward, as Restated 6,941.37 1,037.48 -94.02 -624.8

Note: The above statement should be read along with the Statement of Significant Accounting Policies and Notes on Consolidated Restated Summary Statements as appearing in Annexure IV.

Year ended March 31, 2008 compared to the Year ended March 31, 2007:

Income from operations:

The income from operations increased by 193.92% in the year ended March 31, 2008 from Rs. 14,705.34 lacs to Rs. 43,221.56 lacs. The increase in income from operations is primarily on account of increased revenues from shipbuilding activities as well as a consequent higher recognition of subsidy on the existing order book of our Company.

Consumption of raw materials and components for shipbuilding projects:

Consumption of raw materials and other components is directly related to the execution of orders. As explained above, our company has significantly scaled up its operations. Consequently, the consumption of raw materials has also increased by 184.44% from Rs. 10,100.68 lacs in 2006-07 to Rs. 28,730.49 lacs in 2007-08. These expenses represented 68.69% of income from operations in 2006-07 and 66.47% of income from operations for 2007-08.

Other expenses:

Other expenses increased by 156.07% from Rs. 2759.27 lacs in 2006-07 to Rs. 7065.64 lacs in 2007-08. The increase in other expenses is also directly linked to the overall ramp up in the production at Malpe. Other expenses mainly comprise of labour and fabrication charges, machinery hire charges, salaries, wages and bonus, rent and legal and professional charges.

Finance Charges:

Finance Charges increased by 158.37% from Rs. 518.46 lacs in 2006-07 to Rs. 1,339.55 lacs in 2007-08. These expenses represented 3.53% of Income from Operations in 2006-07 and 3.10% in 2007-08. This increase is on account of higher utilization of non-fund based facilities like letters of credit and bank guarantees as well as higher draw down of working capital funding.

Provision for taxation:

Provision for tax has decreased by 37.82% in the year ended March 31, 2008, from Rs. 587.08 lacs to Rs. 365.03 lacs mainly due to tax benefits arising out of the Malpe facility being classified as an Export Oriented Unit.

Profits after Taxation:

As a result of the factors set forth above, our profit after taxes increased by 421.78% in year ended March 31, 2008, from Rs. 1131.50 lacs to Rs. 5903.89 lacs.



The income from operations increased by 62.11% in the year ended March 31, 2007 from Rs. 9071.20 lacs to Rs. 14705.34 lacs. The increase in income from operations is primarily on account of increased revenues

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from shipbuilding activities as well as a consequent higher recognition of subsidy on the existing order book of our Company.


Consumption of raw materials and other components is directly related to the execution of orders. Due to increased operations, the consumption of raw materials has also increased by 50.30% from Rs. 6720.45 lacs in 2005-06 to Rs. 10100.68 lacs in 2006-07. These expenses represented 74.09% of income from operations in 2005-06 and 68.69% of income from operations for 2006-07.

Other expenses:

Other expenses increased by 72.44% from Rs. 1600.10 lacs in 2005-06 to Rs. 2759.27 lacs in 2006-07. Other expenses mainly comprise of labour and fabrication charges, machinery hire charges, salaries, wages and bonus, rent and legal and professional charges.

Finance charges:

Finance Charges increased by 156.87% from Rs. 201.84 lacs in 2005-06 to Rs. 518.46 lacs in 2006-07. These expenses represented 2.23% of Income from Operations in 2005-06 and 3.53% in 2006-07. This increase is on account of higher utilization of non-fund based facilities like letters of credit and bank guarantees as well as higher draw down of working capital funding.

Provision for tax:

Provision for tax has increased by 618.40% in the year ended March 31, 2007, from Rs. 81.72 lacs to Rs. 587.08 lacs mainly due to higher profit before tax.

Profits after tax:

As a result of the factors set forth above, our profit after taxes increased by 91.71% in year ended March 31, 2007, from Rs. 590.20 lacs to Rs. 1131.50 lacs.



The income from operations increased by 136.24% in the year ended March 31, 2006 from Rs. 3,839.87 lacs to Rs. 9071.20 lacs. The increase in income from operations is primarily on account of increased revenues from shipbuilding activities.


Consumption of raw materials and other components is directly related to the execution of orders. Due to increased operations, the consumption of raw materials has also increased by 99.08% from Rs. 3375.68 lacs in 2004-05 to Rs. 6720.45 lacs in 2005-06. These expenses represented 87.91% of income from operations in 2004-05 and 74.09% of income from operations for 2005-06.

Other expenses:

Other expenses increased by 113.36% from Rs. 749.97 lacs in 2004-05 to Rs. 1,600.10 lacs in 2005-06. Other expenses mainly comprise of labour and fabrication charges, machinery hire charges, salaries, wages and bonus, rent and legal and professional charges.

Finance charges:

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Finance Charges increased by 100.56% from Rs. 100.64 lacs in 2004-05 to Rs. 201.84 lacs in 2005-06. These expenses represented 2.62% of Income from Operations in 2004-05 and 2.23% in 2005-06. This increase is primarily on account of higher utilization of non-fund based facilities like letters of credit and bank guarantees.

Provision for tax:

Provision for tax has increased by 730.49% in the year ended March 31, 2006, from Rs. 9.84 lacs to Rs. 81.72 lacs mainly due to higher profit before tax.

Profits after tax:

As a result of the factors set forth above, our profit after taxes increased by 354.66% in year ended March 31, 2006, from a loss of Rs. 231.76 lacs to a profit of Rs. 590.20 lacs.

An analysis of reasons for the changes in significant items of income and expenditure, inter alia, containing the following:

Unusual or infrequent events or transactions

Except as described in the Draft Letter of Offer particularly “History and Other Corporate Information” section, “Business Overview” section, there have been no other events or transactions that, to our knowledge, may be described as “unusual” or “infrequent”.

Significant economic changes that materially affected or are likely to affect income from continuing operations

Except as described in “Risk Factors” of the Draft Letter of Offer for discussion regarding Economic changes and conditions.

Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations

Except as described in “Risk Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”, to our knowledge there are no known factors that will have a material adverse impact on our revenues or results from continuing operations.

Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known

Except as described in “Risk Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”, to our knowledge there are no known factors that will have a material adverse impact on our cost and income.

The extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices

Major growth in sales is dependent upon increase in the number of contract received by our Company.

Total turnover of each major industry segment in which the issuer company operated

Our Company is primarily engaged in Ship Building segment. However, we do not have any authorized published industry data about total turnover of the ship building industry.

Status of any publicly announced new products or business segment.

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There is no publicly announced new products or business segment.

The extent to which business is seasonal.

Our business is not seasonal in nature.

Any significant dependence on a single or few suppliers or customers.

Please refer to the sections titled “Risk Factors” for discussion regarding significant dependence on a single or few suppliers or customers.

Competitive Conditions

Please refer to the sections titled “Risk Factors”, “Our Business - Competition”, “Industry Overview” beginning on pages x, 73 and 66 in the Draft Letter of Offer for discussion regarding Competition.

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STOCK MARKET DATA

The Equity Shares of our Company are listed on the OTCEI. Our equity shares was last traded on OTCEI on December 11, 1999 at Rs. 2.25/-

INFORMATION AS REQUIRED BY GOVERNMENT OF INDIA, MINISTRY OF FINANCECIRCULAR NO. F2/5/SE/76 DATED FEBRURARY 5, 1977 AS AMENDED VIDE

CIRCULAR OF EVEN NO DATED MARCH 8, 1997

The information for the period between the last date of the balance sheet and profit and loss account sent to the shareholders and up to the end of the last but one month preceding the date of the letter of offer shall be furnished.

Management accounts for the four months ended July 31, 2008

Details Rs. in Lacs Income from operations 11,552.90Other Income 30.77Total Income 11,583.66

Expenditure: Consumption of raw materials 7377.22Other Expenses 3178.27Finance Charges 174.86Profit before depreciation and tax 853.32Depreciation 90.59Profit before tax 762.73Provision for taxation 89.38Profit after Tax 673.34

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OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS

Except as stated below, there are no outstanding litigations, suits, civil or criminal prosecutions, proceedings before any judicial, quasi-judicial, arbitral or administrative tribunals, including pending proceedings for violation of statutory regulations or alleging criminal or economic offences or tax liabilities, penalties imposed in last five years against our Company, our Promoters, our Directors, our Subsidiary, our Promoter Group Entities that would have a material adverse effect on our business and there are no defaults, non-payments or overdue of statutory dues, institutional / bank dues and dues payable to holders of debentures or fixed deposits and arrears of cumulative preference shares that would have a material adverse effect on our business.

Further, except as stated below, our Company, our Directors, our Subsidiary, our Promoter and Promoter Group Entities have not been declared as willful defaulters by the Reserve Bank of India, have not been debarred from dealing in securities and/or accessing capital markets by SEBI and no disciplinary action has been taken against them by SEBI or any stock exchanges.

I. LITIGATION BY AND /OR AGAINST OUR COMPANY

(A) BY OUR COMPANY

(a) CIVIL CASES

1) Tebma Shipyard Limited v/s Chairman and Board of Trustees of Tutitcorin Port Trust before the High Court of Madras at Madurai bearing writ petition number 8224 of 2008.

Our Company has filed a writ petition under Article 226 of the Constitution against the Chairman and Board of Trustees of Tuticorin Port Trust (“TPT”) in the High Court of Madras at Madurai, disputing the forfeiture by TPT of the Earnest Money Deposit (“EMD”) and enforcement of the bank guarantee pursuant to their letter dated May 22, 2007 bearing file no. M-SSCP-F1/2006/1121. Our Company has alleged that TPT is not entitled to forfeit and withhold the EMD of Rs. 45 lacs towards the tender, for designing, construction and delivery of tugs, which has been cancelled by TPT. Our Company has further alleged that TPT is not entitled to encash the performance bank guarantee of Rs. 128.21 lacs. Therefore, our Company has filed this writ petition praying for (i) the issue of writ of certiorarified mandamus for quashing the aforesaid communication and directing TPT to refund the EMD and (ii) ad interim injunction restraining TPT to invoke the bank guarantee. The writ petition is pending before the High Court of Madras at Madhurai.

2) Tebma Shipyard Limited v/s Chairman and Board of Trustees of Tuticorin Port Trust before the High Court of Madras bearing original petition number 453 of 2008.

Our Company has filed a petition against the Chairman and Board of Trustees of Tuticorin Port Trust (“TPT”) before the High Court of Madras under Section 11(6) of the Arbitration and Conciliation Act, 1996. TPT had placed a work order bearing no. M/62/2/2003-T with our Company for construction and supply of one tug and a formal contract was executed dated August 27, 2004. The petition has been filed for appointing a sole arbitrator in terms of Clause 27 of the general conditions of the contract dated August 27, 2004 to arbitrate the dispute with regard to recovery of liquidated damages of Rs. 2,56,42,000 levied towards the alleged delay in delivery of the vessel under the work order placed by TPT. The matter is pending before the High Court of Madras.

3) Tebma Shipyard Limited v/s Chairman and Board of Trustees of Tutitcorin Port Trust before the High Court of Madras bearing original petition number 569 of 2008.

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Our Company has filed a petition against the Chairman and Board of Trustees of Tuticorin Port Trust (“TPT”) before the High Court of Madras under Section 11(6) of the Arbitration and Conciliation Act, 1996. TPT had placed a work order dated August 27, 2004 bearing no. M/62/2/2003-T with our Company for construction and supply of one tug and subsequently a formal contract was executed under a contract dated September 23, 2004. The petition has been filed for appointing a sole arbitrator in terms of Clause 27 of the general conditions of the contract dated September 23, 2004 to arbitrate the dispute with regard to non payment of outstanding amount of Rs. 3,56,14,840 which is due and payable under the work order placed by TPT. The matter is pending before the High Court of Madras.

4) Tebma Shipyards Limited v/s J & K Lakes and Waterways Development Authority (“LAWDA”) Srinagar before the High Court of Jammu and Kashmir

Our Company has filed a case before the High Court of Jammu and Kashmir against J & K Lakes and Waterways Development Authority (LAWDA), Srinagar, for recovery of the dues towards supply of Weed Harvesters. However, the High Court of Jammu and Kashmir has passed an order disposing the case with an observation that LAWDA may examine our Company’s claim/case under the active supervision of the vice-chairman and, after satisfaction in technicality and law, disburse any amount due to our Company on account of supply of Weed Harvesters. Consequentially, LAWDA deposited a part of the outstanding dues amounting to Rs. 38,87,900, which has been received by us. The case is pending to the extent of full and final payment of the outstanding dues to our Company towards the supply of the Weed Harvesters to LAWDA.

AGAINST OUR COMPANY

SECURITIES RELATED CASES

Show Cause Notice No. EAD/DSR/ADJ/00667/2007/EIF-163 dated August 6, 2007 issued by Division of Regulatory Action, Enforcement Department, SEBI.

Division of Regulatory Action, Enforcement Department, SEBI has issued Show CauseNotice No EAD/DSR/ ADJ/00667/2007/EIF-163 dated August 6, 2007, in terms of SEBI order dated July 23, 2008, to our Company, our Promoter-Director Mr. P.K. Balasubramanian, and our Erstwhile Promoters, under Rule 4(3) of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995 for failure to comply with th requirements of chapter II of SEBI SAST, and with provisions of regulations 6(1), 6(3), 8(1) and 8(2) of SAST. Subsequent to various hearings and representations made by us, our Company, Mr. P.K Balasubramanian and our erstwhile Promoters have submitted an application for consent dated November 2, 2007 with SEBI, in terms of circular No. EFD/ED/Cir-1/2007 dated April 20, 2007 (Guidelines for Consent Orders and for considering requests for composition of offences) requesting SEBI to compound the default and for imposition of fine not exceeding Rs. 10,000 in the aggregate in respect of our Company and Rs. 5000 each on Mr. P.K Balasubramanian and all the Erstwhile Promoters. Thereafter by letters dated January 7, 2008 to SEBI, our Company, our Promoter Mr. P.K Balasubramanian and the Erstwhile Promoters have offered to pay a sum of Rs. 2,50,000 , Rs. 50,000 and RS. 50,000 each towards settlement of the matter. and SEBI has by its letter no. EFD/DRA-II/VKT/PT/138324/2008 dated September 18, 2008 has informed us of an Internal Committee meeting to be held between September 18, 2008 and September 26, 2008 wherein the consent applications submitted is proposed to be taken up for hearing between September 18, 2008 and September 26, 2008. On communicating our inability to attend on the captioned dates, the hearing has currently been fixed for October 1, 2008

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CRIMINAL

a.) FIR No. 13/2001 has been filed by the J&K State Vigilance Organisation under Section 5 (1) (d) read with Section 5 (2) Prevention of Corruption Act, read with Section 120-B, CRPC, in connection with a case related to purchase of two. nos Weed Harvesting Dredger machines from our Company by Lakes and Waterways Development Authority (LAWDA) Srinagar. This case is related to supply of the Weed Harvesting Dredger machines.The matter is pending before the Special Court, Anti Corruption, Srinagar, J & K. Upon petition by our Company,the High Court of J & K had granted stay of further proceedings in the said case. Matter is still pending.

b) FIR No. 35/2000 for alleged commission of offences under Section 5 (1) (c)(d) read with Section 5 (2) of the J& K Prevention of Corruption Act, read with Section 409, 468, 471 and 120-B RPC, has been filed by the J&K State Vigilance Organisation in connection with supply of Dredger spare parts to Lakes and Waterways Development Authority (LAWDA) Srinagar. This case is related to supply of Dredger spare parts. The matter is pending before the Special Court, Anti Corruption, Srinagar, J & K. Upon petition by TSL, the Hon’ble High Court of J & K had granted stay of further proceedings in the said case. Matter is still pending.

TRADEMARK CASES

Caterpillar Inc, U.S.A (“Opponent”) has filed an opposition under section 21(2) of the Trade Marks Act, 1999 being Opposition No. MAS-219356 against our application No 1249768 for registration of the mark ‘Crawl Cat’ under class 12 in relatin to dredgers. The Opponent has filed the said notice of opposition on the alleged ground that our Company’s application for registration of the word ‘Crawl Cat’ is deceptively similar to the registered mark of the Opponent ie CAT used in connection with its products including inter alia excavators, construction equipment, earth moving equipment and other equipment. Our Company has filed its counter affidavit refuting the allegations made by the Opponent and that the there are no similarities between the products for which the trademark ‘CAT’ and ‘Crawl Cat’ are utilised for. The Opponent has further filed an interlocutory petition dated September 29, 2007 against the order of the Deputy Registrar admitting our counter affidavit despite delay in filing the same. We have thereafter submitted our comments on the interlocutory petition, and our arguments have been submitted at the hearing held on July 14, 2008. The matter is still pending.

Details FIR filed by against our Company

FIR No 0026 dated June 26, 2008 has been filed by one G. Ramakumar in connection with the death of a workmen at our shipyard at Malpe on account of an accident.

II. LITIGATION BY AND /OR AGAINST OUR DIRECTORS

Other than the litigation in the nature of show cause notice, instituted against our Director Mr. P.K Balasubramanian as disclosed in paragraph [ ] above there are no other litigation proceedings pending either by or against any other Director of our Company

III. LITIGATION BY AND /OR AGAINST OUR PROMOTERS

1. BY OUR PROMOTERS

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Other than the litigation in the nature of show cause notice, instituted against our Promoter Mr. P.K Balasubramanian as disclosed in para [ ] above there are no other litigation proceedings pending either by or against Mr. P.K Balasubramanian or IAF-VI as on date of the Letter of Offer.

IV. LITIGATION BY AND /OR AGAINST OUR PROMOTER GROUP

Other than the litigation in the nature of show cause notice, instituted against Ms. Kripa Balan who forms part of our Promoter group as disclosed in para [ ] above there are no other litigation proceedings pending either by or against any person/eentity forming part of our Promoter group as on date of the Draft Letter of Offer.

V. LITIGATION PENDING BY AND/OR AGAINST OUR SUBSIDIARY

As on date of the Draft Letter of Offer there are no outstanding litigations instituted by or against our Subsidiary – Tebma Gardens Limited

VI. PAST PENALTIES

A Paid By Our Company in the last five years

NIL

B Penalties paid by our Promoters in last five years

NIL

VII. Outstanding due to Small Scale Industries and other creditors

Outstanding due to Small Scale Industries As on March 31, 2008, there are no amounts outstanding to any small scale industry exceeding Rs.

1,00,000 which is pending for more that thirty days from the date on which it became due.

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GOVERNMENT/ STATUTORY APPROVALS

On the basis of the approvals including those listed below. we can undertake our current business activities and no further material approvals are required from any Government authority or the RBI to continue such activities. Except as stated hereinbelow, our Company has not applied for any licenses/approvals relating to the Malpe Facility, which forms the objects of the Issue

1. Approvals For Our Business And The Malpe Facility

Validity S.No Name of the License

Purpose Granting Authority

Number of License/

Registration From Up to

Head Office 1. Certificate of

Incorporation in the name of Tebma Engineering Private Limited

Incorporation Registrar of Companies, Tamil Nadu

10994 July 9, 1984

-

2. Fresh Certificate of Incorporation consequent to change in name from Tebma Engineering Private Limited to Tebma Engineering Limited

Change in name Registrar of Companies, Tamil Nadu

10994 October 21, 1993

-

3. Fresh Certificate of Incorporation consequent on change of name from Tebma Engineering Limited to Tebma Shipyards Limited

Change in name Registrar of Companies, Tamil Nadu

10994 July 16, 1998

-

4. Provident Fund Registration Code

Allotment of Provident Fund Code for our Malpe facility under section 2A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1954

Assisstant Provident Fund Commissioner, Employees’ Provident Fund Organisation, Regional Officer.

TN/22101 - -

5. TAN Number Registration with the Income Tax Department

Income Tax Officer, TDS Ward II(5) Chennai

CHET00687B June 5, 2002

Valid up to cancellation

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6. Profession Tax Registration

Profession Tax Collection

Corporation of Chennai, Profession

07106PE0038 - -

7. Permanent Account Number

Registration under the Income Tax Act, 1961

Commissioner of Income Tax (Computer Operations)

AAACT1281B

- Valid until cancelled

8. Export House Certificate

Status of Export House in terms of provisions of Foreign Trade Policy 2004-2009

Zonal Joint Director,General of Foreign Trade

A-0839 April 1, 2007

March 31, 2009

9. Acknowledgment for Industrial EntrepreneurMemorandum

Issued in respect of the manufacture of ships and other vessels drawn by power (Tugs, Dredgers, platform supply vessels, barges) for facility at Kodavoor Village, Udipi, Karnataka

Secretariat for Industrial Assistance

247/SIA/IMO/2007

January 22, 2007

Valid until modification or cancellation

10. ISO 9001:2000 Certification

Bureau Veritas Certification (India) Private Limited for systems relating to design manufacture and deliver of ocean going vessels such as tugs, launches, ferries, self propelled barges and floating crafts such as dredgers deweeding vessels, work boats, product carriers and floating cranes

Bureau Veritas

204441 December 18, 2006

December 15, 2009

11. DNV Approval of Manufacturer Certificate

Certificate for manufacture of welded pressure vessels, Class II

Det Norske Veritas

Certificate No.T-1110

December 2006

December 31, 2010

12. Certificate of Importer-Exporter Code (IEC)

Certificate of importer exporter code was allotted for the purpose of enabling our

Foreign Trade Development Officer, Ministry of Commerce, Government

0488000831 Re-issued on July 22, 2008on change of registered

Up to Cancellation

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Company to import and export for facilities at No.7, Pazhmathur village, Madhuranthakam T.K., Chenglepet District and Shipyard at Malpe premises, Malpe Fishing Harbour Complex, Kodavoor Village, Udipi, Karnataka

of India office

Kerala13. Central Sales

Tax Registration for our operations at Cochin

Registration under the Kerala Value Added Tax, Act 2003

Assistant Commissioner, KVAT, Special Circle-II, Ernakulam

TIN- 3207033887

CSTRegistration No.- 0703G003887

May 19, 2006

Valid until cancelled

Tamil Nadu 14. Central Sales

Tax registration Registration under Tamil Nadu Value Added Tax Act, 2006 for our registered office and Chengelpet facility

Commercial Tax Officer, Egmore-1, Assessment Circle

33700440717 January 3, 2007


15. Central Sales Tax Registration

Registration under the Central Sales Tax (Registration and Turnover) Rules, 1957 for our registered office at 3rd Floor, Khaleeli Centre No. 149, Montieth Road, Egmore, Chennai, other facility at Pezhamat.home, Pazzhameholai, Machurantagam Talat and its branch at Southern Shipyard,

Commercial Tax Officer, Egmore-1, Assessment Circle

615174 September 4, 1986


138

Fishing Harbour Complex, S.N. Chetty Street, New Washermanpet, Madras

16. Service Tax Registration

Registration Superintendent of Service Tax, Chennai-III Division

AAACT1281BST001

June 28, 2007


17. License for Industries And Factories

Registration under sections 159 and 161 of the Tamil Nadu Panchayat Act, 1994

Panchayat Assisstant

1217 February 13, 2008

2008-2009

Karnataka 18. Consent for

Establishment Clearance

Consent for establishment and clearance under Water (Prevention and Control of Pollution) Act 1974, Air (Prevention and Control of Pollution) Act 1981 and Environment (Protection) Act 1986 for construction/repairs of mechanized fishing boats/tugs/barges/dredgers and other vessesls of 10 vessels of 1000 tonne displacement and repair of 24 vessels of up to 1000 tonne displacement per year. Approval also covers setting up of the following capacity DG sets

500 KVA DG set

Deputy Enviornmental Officer, Karnataka State Pollution Control

40/KSPCB/RO-UDP/DEO/2006-07/1482

February 25, 2007

February 24, 2009

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380 KVA DG set

100 KVA DG set

19. Provident Fund Registration Code

Allotment of Provident Fund Code for our Malpe facility under section 2A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1954

Assisstant Provident Fund Commissioner, Employees’ Provident Fund Organisation, Regional Officer, Highlands Silver Road, Mangalore-2

KN/MNG/38687

July 9, 2008

Valid until certification

20. Employees’State InsuranceCorporation Establishment Code

Registration under Employees State Insurance Act, 1948 for our Malpe facility

Deputy Director,Employees’ State Insurance Corporation, Regional Office (Karnataka)

53-25240 May 2, 2007 (provisionally)

Valid up to cancellation

21. Entry Tax and Special Tax Exemption Registration Certificate

Registration under MSME Part II of government oder No 29/016/1/2/00033 for entry tax and special entry tax exemption on machinery equipments purchased for ship building

Joint Director, DistrictIndustries Centre, Udupi

DIC/UDPI//ETE/14/2008-09 dated August 13, 2008

February 15, 2007

Februrary 14, 2010

22. EntrepreneursMemorandum Part I Acknowledgement

Allocation of Entrepreneur’s Memorandum Number for set up as a manufacture enterprise at V.B Road Malpe, Udupi

Joint Director, DistrictIndustries Centre

P1MSM02126 August 13, 2008

August 12, 2010

23. Central Excise Registration Certificate

Registration under Rule 9 of Central Excise Rules, 2002 for manufacture of excisable goods

Assistant Commissioner of Central Excise, Udipi Division, Udupi

AAACT1281BXM005

July 4, 2008

Up to cancellatin

140

for the Malpe Slipway complex


Registration under Rule 9 of Central Excise Rules, 2002 for manufacture of excisable goods for the Hangarkatta complex

Assistant Commissioner of Central Excise, Udipi Division, Udupi

AAACT1281BXM003

July 3, 2008

Up to cancellatin


Registration under Rule 9 of Central Excise Rules, 2002 for manufacture of excisable goods for the Barkur complex

Assisstant Commissioner of Central Excise, Udipi Division, Udupi

AAACT1281BXM003

July 3, 2008

Up to cancellatin

26. Factory Registration and License

Registration under the Factories Act, 1948 in respect of the Shipyard at Malpe for employment of maximum of 400 workers and installation of maximum power of 788HP/576KW

Chief Director of Factories, Mangalore-1

MYSK-1858 January 1, 2007

Renewed up to December 31, 2009


Registration under the Factories Act, 1948 in respect of the Hangarkatta yard for employment of maximum of 145 workers and installation of maximum power of 75HP/322KW


my-104 January 1, 2007



Registration under the Factories Act, 1948 in respect of the Babuthotta storehouse complex for employment of maximum of 300 workers and installation of




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maximum power of 788HP/576KW


Registration under the Factories Act, 1948 in respect of the Barkur carpentry and piping complexfor employment of maximum of 245 workers and installation of maximum power of 452HP/2720KW




30. Warehouse License

For the bonded warehouse at Plot No. 157-Baikampady Industrial Area, Survey No. 82 Portion and 84 Portion, Baikampady village, Suratkal Hobli, Manglore, Karantaka

Assistant Commissioner of Customs, New Custom House,Manglore

08/2008 March 25, 2008

January 21, 2009

31. License for private bonded warehouse

Issued in respect of the private bonded Warehouse at Yedthadi Gram Panchayat, Herady Village, Barkur, Udipi, Karnataka

Assistant Commissioner, Central Excise, Udipi Division

01/2007 October 16, 2007

October 15, 2012

32. Central Excise, Registration

Registration for manufacture and repairs of ships and other floating structures issued in respect of our Private Bonded Warehouse at Yedthadi Gram Panchayat, Herady Village, Barkur, Udipi, Karnataka


01/2007, C.No.IV/07/14/2007 UDP-TECH

October 16, 2007

October 15, 2012

33. License for private bonded

Registration in respect of

Assistant Commissioner

02/2007 October 16,

October 15, 2012

142

warehouse Private Bonded Warehouse at Balakduru village, Udipi, Karnataka

, Central Excise, Udipi Division

2007

34. Letter from Office of The Assistant Commissioner of Central Excise, Udipi Division permitting manufacture and repairs of ships and other floating structures

Tebma Shipyards Limited having its Private Bonded Warehouse at Balakduru village, Udipi, Karnataka

AssistantCommissioner, Central Excise, Udipi Division

02/2007, C.No.IV/07/10/2007 UDP-TECH

October 16, 2007

October 15, 2012

35. Letter of renewal of license issued by Office of The Deputy Commissioner of Central Excise, Villupuram Division permitting warehousing of goods and manufacturing operations in the warehouse

Tebma Shipyards Limited having its Private Bonded Warehouse at 7, Pazhamathur, Pukkathurai village, Madhuranthagam Taluk, Kancheepuram

Assistant Commissioner, Central Excise, Chengalput Division

03/98, C.No. IV/16/95/2005(T)

October 4, 2007

October 4, 2008

36. Warehouse License issued by Office of Commissioner of Customs, Manglore

Tebma Shipyards Limited at its office in Fishing Harbour Complex, Malpe, Udipi District for the bonded warehouse at Baikampady village, Manglore, Karantaka

Assistant Commissioner of Customs, New Custom House,Manglore

12/2007 July 30, 2007

July 29, 2008

37. License for private bonded warehouse

Issued for private bonded warehouse for Babu Thota Warehouse Complex, Malpe,Kodavoor, Udipi, Karnataka


03/2006 November 29, 2006

November 28, 2011

38. License for private bonded

Issued for private Bonded

Assistant Commissioner

04/2006 November 29,

November 28, 2011

143

warehouse Warehouse at Fishing Harbour Complex, Kodavoor, Udipi, Karnataka

, Central Excise, Udipi Division

2006

39. License for manufacturing and operations in a bonded warehouse license under section 65 of the Customs Act, 1962 reas with manufacturig and other operations under the Bonded Warehouse Regulations Act, 1966

License granted in respect of Babuthotta storehouse complex for manufacture and repair of ships etc

Assistant Commissioner, Central Excise, Udupi division

IV/15/01/2006-UDP-TECH

July 29, 2008

July 29, 2013

40. Letter from Office of The Assistant Commissioner of Central Excise Udipi Division

Issued for permitting manufacture and repairs of ships and other floating structures in respect of private Bonded Warehouse at Fishing Harbour Complex, Kodavoor, Udipi, Karnataka


04/2006 November 29, 2006

November 28, 2011

41. Approval for 100% Export Oriented Unit

Approval under the Scheme in Foreign Trade Policy 2004-09 for conversion of existing DTA unit into EOU.

Assistant Development Commisioner, CochinSpecial Zone and EOU in Karanataka, Kerala and Lakshwadeep

1046 May 21, 2008

March 23, 2011

42. Green Card issued under the Special Scheme of the Government of India as a 100% export oriented unit.

Issued for manufacture of platform supply vessels and tugs at our Shipyard at Malpe.

Assistant Development Commissioner

1046 May 21, 2008

March 23, 2011

43. Letter of Permission for conversion of existing DTA

Approval as an EOU in respect of production of platform supply

Office of the Development Commissioner, Cochin

No.1/14/2008:PER:EOU:KR:CSEZ/614

March26, 2008

March 25, 2011

144

unit to an Export Oriented Unit at Malpe under 100% EOU Scheme for Platform Vessels

vessels up to a capacity of 8 vessels annually

Special Economic Zone, Sub Office for 100% EOUs in Karnataka.

44. Amendment to Letter of Permission for conversion of existing DTA unit to an Export Oriented Unit at Malpe under 100% EOU Scheme for Platform Vessels

Approval for manufacture of Platform Supply Vessels and Tugs for our Malpe facility. Amendment to the item of manufacture

Assisstant Development Commissioner, Cochin Special Economic Zone, Sub-office for 100% EOUs in Karnataka

No. 1/4/2008:EOU:CSE/925

March26, 2008

March 25, 2011

45. Power sanction to an extent of 960 KVA

Additional power sanction for HT-12 installation for Malpe

Mangalore Electricity Supply Company Limited

SEE/MNG/EE(O)/AEE-1/T-HT/08-09

July 5, 2008

October 3, 2008

46. Certificate of Registration under section 7(2) of the Contract Labour (Regulation And Abolition Act, 1970

Registration in respect of the Malpe shipyard for employment of a maximum of 100 workmen on any day through a contractor

Assisstant Labour Commissioner, Mangalore Division, Bendoorwell Circle, Kankanady, Mangalore

RGN/CLA/UDP-269/2005

February 21, 2005

-


Registration in respect of Hangarkatta for employment ofworkmen on any day through a contractor


ALCM/RGN/CLA/UDP-19/2007

February 28, 2007

-


Registration in respect of Babuthotta for employment of workmen on any day through a contractor


ALCM/RGN/CLA/UDP-20/2007

February 28, 2007

-

49. Registration Certificate of Establishment

Registration in re under the Karnataka Shops and Commercial Establishments Act, 1961

Office of the Inspector, Government of Karnataka-Department of Labour

MP/S/0026 September 24, 2007

December 31, 2011

50. Certificate of Registration to Assisstant RGN/ISMWA Otober -

145

Registration under section 4(2) of the InterstateMigrant Workmen (Regulation og Employment and Conditions of Service) Act, 1979

employ a maximum of 700 migrant workmen per day in respect of Malpe Slipway complex

Labour Commissioner, Mangalore Division

/MNG-7/2007-08

9, 2007

Approvals applied for but not received in relation to our business and objects of the Issu

Tamil Nadu Application of Acknowledgment for Industrial Entrepreneur Memorandum for our Chengelpet facility to Secretariat for Industrial Assistance , Government of India by our letter dated September 27,2008

Cochin

1) Application dated May 31, 2008, for renewal of license No KCLL-9/2005 under Contract Labour (Regualation And Abolition) Rules.

2) Application dated May 31, 2008, for renewal of license No. ISMW(L) EMPT-2/2005 dated May 27, 2005 under Interstate Migrant Workmen Rules.

Karnataka

Application dated September 11, 2008 to Karnataka State Coastal Regulation Zone Management Authority for environmental clearance (CRZ) for the development of infrastructure for Hangercutta.

Letter Sl No. Ba. O. Ja. Saa-53/Bhoomi-1/2007 of Public Works, Ports and Inland Water Transport Department to the Secretary for Government Port And Inland Water Transport for clearance from the government for operation of hull through jetty and change of jetty at Hangercutta.

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OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority of the Issue

This Issue is being made under the provisions of Section 81(1)(a) of the Companies Act pursuant to the resolution passed at the meeting of the Board of Directors of our Company on July 30, 2008 and the approval of our shareholders at the EGM held on September 10, 2008.

Prohibition by SEBI

Our Company, our Directors, our associate and group companies, our Promoter Group Entities, our Promoters, the Directors or the person(s) in control of our Promoter, firms and companies with which our Company’s Directors are associated as directors or promoters have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI.

Eligibility for the Issue

Our company is an existing listed company registered under the Companies Act, 1956, whose Equity Shares are listed on OTCEI. It is eligible to offer this Issue in terms of clause 2.4.1(iv) of the SEBI DIP Guidelines.

STATUTORY DECLARATION

1. The Issuer Company accepts full responsibility for the accuracy of the information given in the Draft Letter of Offer and confirms that to the best of our knowledge and belief, there are no other facts, the omission of which make any statement in the Draft Letter of Offer misleading and further confirm that they have made all reasonable inquiries to ascertain such facts. We further declare that the Stock Exchange to which an application for listing has been made does not take any responsibility for the financial soundness of this Issue or for the price at which the CCPS will be offered, or for the correctness of the statements made or opinions expressed in the Draft Letter of Offer.

2. In the opinion of the Directors of our Company, there are no circumstances that have arisen since the date of the last financial statement disclosed in the Draft Letter of Offer, that materially or adversely affect or are likely to affect the performance or profitability of our Company or value of its assets or its ability to pay its liabilities, within the next twelve months.

3. The funds received against the Rights Issue will be kept in a separate bank account(s) and our Company will not have any access to such funds unless it satisfies OTCEI (the Designated Stock Exchange) with suitable documentary evidence that the minimum subscription of 90 per cent of the Issue has been received by our Company.

Disclaimer Clause

AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED TO MEAN 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 FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. THE LEAD MANAGER, ENAM SECURITIES PRIVATE LIMITED, HAS CERTIFIED THAT THE DISCLOSURES MADE IN

147

THE DRAFT LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES AS FOR THE TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGER, HAS FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER 29, 2008 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:

(i) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE,

(ii) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, IT’S DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY,

WE CONFIRM THAT:

(A) THE DRAFT LETTER OF OFFER FORWARDED TO THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

(B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY THE BOARD, THE 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 SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

(iii) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF OFFER ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID;

(iv) WE HAVE SATISFIED OUR SELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS – NOT APPLICABLE;

(v) WE CERTIFY THAT THE WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FOR PART OF PROMOTERS CONTRIBUTION SUBJECT LOCK-IN, WILL NOT BE DISPOSED / SOLLED / TRASFERED BY THE PROMOTERS DURING THE PERIOD STARTING

148

FROM THE DATE OF FILING OF THE DRAFT LETTER OF OFFER WITH BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER – NOT APPLICABLE;

(vi) WE CERTIFY THAT CLAUSE 4.6 OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000, WHICH RELATES TO SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE CLAUSE HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER – NOT APPLICABLE.

(vii)WE UNDERTAKE THAT CLAUSES 4.9.1, 4.9.2, 4.9.3 AND 4.9.4 OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION AND SUBSCRIPTION FROM ALL FIRM ALLOTTEES WOULD 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 COMPANY ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE – NOT APPLICABLE.

(viii) WHERE THE REQUIREMENTS OF PROMOTERS’ CONTRIBUTION IS NOT APPLICABLE TO THE ISSUER, WE CERTIFY THE REQUIREMENTS OF PROMOTERS’ CONTRIBUTION UNDER CLAUSE 4.10 {SUB-CLAUSE (A), (B) OR (C), AS MAY BE APPLICABLE} ARE NOT APPLICABLE TO THE ISSUER – NOT APPLICABLE.

(ix) 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.

(x) 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 SECTION 73(3) 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 LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION.

(xi) WE CERTIFY THAT NO PAYMENT IN THE NATURE OF DISCOUNT, COMMISSION, ALLOWANCE OR OTHERWISE SHALL BE MADE BY THE ISSUER OR THE PROMOTERS, DIRECTLY OR INDIRECTLY, TO ANY PERSON WHO RECEIVES SECURITIES BY WAY OF FIRM ALLOTMENT IN THE ISSUE.

(xii)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.

(xiii) WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER:

149

(a) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME THERE SHALL BE ONLY ONE DENOMINATION FOR THE SHARES OF THE COMPANY 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.)

The filing of Draft Letter of Offer does not, however, absolve our Company from any liabilities under Section 63 or Section 68 of the Act or from the requirement of obtaining such statutory and 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 Manager any irregularities or lapses in the Draft Letter of Offer. In addition to the Lead Manager, the Issuer is also obligated to update the Draft Letter of offer and keep the public informed of any material changes till the date of listing and commencement of trading of the securities offered under the Draft Letter of offer.

Caution

Our Company and Lead Manager accept no responsibility for statements made otherwise than in the Draft Letter of Offer or in the advertisements or any other material issued by or at the instance of our Company and that anyone placing reliance on any other source of information including our website www.tebma.com would be doing so at his/her/their own risk.

All information shall be made available by the Lead Manager and the Issuer to the shareholders and no selective or additional information would be made available for a section of the shareholders or investors in any manner whatsoever including at presentations, research or sales reports etc. Investors that 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.

Disclaimer in Respect of Jurisdiction

This Draft Letter of Offer has been prepared under the provisions of Indian Law and the applicable rules and regulations hereunder.

The distribution of the Draft Letter of Offer and the offering of the securities on a rights basis to persons in certain jurisdictions outside India may be restricted by the legal requirements prevailing in those jurisdictions. Persons into whose possession the Draft Letter of Offer may come are required to inform themselves about and observe such restrictions. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Chennai, India only.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose, except that the Draft Letter of Offer has been filed with SEBI for observations and SEBI has given its observations. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and the Draft Letter of Offer may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of the Draft Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

The Draft Letter of Offer will be filed with SEBI, SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Mumbai 400 051,for its observations. After SEBI gives its observations, the Draft Letter of Offer will be filed with the Designated Stock Exchange as per the provisions of the Act

The Designated Stock Exchange for the purpose of this Issue will be OTCEI.

150

Disclaimer clause of OTCEI

As required, a copy of the Draft Letter of Offer has been submitted to the Over the Counter Exchange of India Limited (hereinafter referred to as “OTCEI”). The disclaimer clause of OTCEI shall be inserted from the in-principle approval letter of OTCEI.

Filing

The Draft Letter of Offer has been filed with Securities Exchange Board of India, SEBI Bhavan, Plot No C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051, for its observations and also with the Stock Exchange where the CCPS proposed to be issued in terms of the Draft Letter of Offer are proposed to be listed. OTCEI is the designated stock exchange for the purposes of this Issue.

Dematerialised Dealing

Our Company has entered into agreements dated December 21, 2005 and August 17, 2006 with NSDL and CDSL respectively and its Equity Shares bear the ISIN No INE279H01017.

Listing

The existing Equity Shares of our Company are listed on OTCEI. Our Company has paid the current annual listing fees of OTCEI where its Equity Shares are listed. Our Company has applied for in-principle approval from OTCEI for the securities proposed to be issued through the Draft Letter of Offer and has received in-principle approval from Over The Counter Exchange of India by its letter dated [ ].

If the permission to deal in and for an official quotation of the Equity Shares Is not granted by the OTCEI mentioned above, our Company shall forthwith repay, without interest, all monies received from the applicants in pursuance of the Draft Letter of Offer. If such money is not repaid within eight days after our Company becomes liable to repay it (i.e. 15 days after closure of the Issue), then our Company and every director of our 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 sub-sections (2) and (2A) of Section 73 of the Act.

Consent

Consent in writing of our Directors, Company Secretary and Compliance Officer, Auditors, Lead Manager to the Issue, Legal Advisor to the Issue, and Registrar to the Issue to act in their respective capacity have been obtained and filed with SEBI, along with a copy of the Draft Letter of Offer and such consents have not been withdrawn up to the time of delivery of the Draft Letter of Offer for registration with the stock exchange.

M/s. B S R & Associates, 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 upto the time of delivery of the Draft Letter of Offer for registration to the OTCEI. M/s. B S R & Associates, the Auditors of our Company have given their written consent for inclusion of income tax benefits in the form and content as appearing in the Draft Letter of Offer accruing to our Company and its members. 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.

Impersonation

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act, which is reproduced below:

“Any person who

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(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or

(b) 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 extend to five years.”

Expert Opinion

Save and except as stated in the sections titled “Financial Statement” and “Statement of Tax Benefits” beginning at page FS - 1 and 55 respectively of the Draft Letter of Offer, our Company has not obtained any expert opinions in relation to the Draft Letter of Offer.

Option to Subscribe

Other than in the present Issue and except as stated in the section titled “Capital Structure” beginning at page 25 of the Draft Letter of Offer, our Company has not given any option to subscribe for any shares of our Company.

Underwriting Commission, Brokerage and Selling Commission.

No Underwriting Commission, Brokerage and Selling Commission will be paid for the Issue.

Details of Public / Rights Issues During The Last 5 Years

Our Company has not made any public/rights issue in the last 5 years

Promise V/s. Performance

Our Company has not made any issue of shares in the last five yearsgot listed on OTCEI by way of an offer for sale in FY 1994-95. The promise v/s. performance of the projections made in the said offer for sale document is as under:

Rs. in lakhs Year ended March 31,

1995 1996 1997 Particulars Projections Actuals Projections Actuals Projections Actuals

Share Capital 260.57 260.57 260.57 260.57 260.57 390.85

Reserves & Surplus 995.01 996.73 1,322.97 1,383.96 1,667.65 1,150.36

Net worth 1,255.58 1,257.30 1,583.54 1,644.53 1,928.22 1,541.21

Book Value (Rs.) 48.19 47.86 60.77

59.28 74.00

36.66

PBT 464.60 458.79 493.60 483.35 515.30

14.11

PAT 357.74 352.79 380.07 318.35 396.78 8.91

EPS (Rs.) 13.73 13.54 14.59

12.22 15.23 0.23

Dividend(%) 20.00 20.00 20.00

20.00 20.00

10.00

Dividend 52.11 49.17 52.11

52.12 52.11

33.77

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Listed Ventures of Promoters:

There are no listed venture of promoters.

As against the above, our Company has achieved the following:

Our Company has not made any issue of shares in the last five years

Issue Programme

The subscription list will open upon the commencement of the banking hours and will close upon the close of banking hours on the dates mentioned below or on such extended date (subject to a maximum of 60 days) as may be determined by the Board, subject to necessary approvals:

Issue opens on Last date for receiving requests for split Application Forms

Issue closes on

[ ] [ ] [ ]

Issue expenses

The Issue expenses include, among others, issue management fees, Registrar fees, fees to advisor to the Issue, printing, stationary and distribution expenses, advertising and marketing expenses, fees of the legal advisor and auditors, legal fees, stock exchange fees, SEBI filing fees, depository fees, etc. The break-up of total issue expenses is as under:

Particulars Estimated Amount (Rs.

in Lacs)

% of Total Issue

Expenses

% of Issue Size

Fees to the Lead Manager [ ] [ ] [ ]Fees to the Registrar to the Issue [ ] [ ] [ ]Fees to the Advisor to the Issue [ ] [ ] [ ]Printing, Stationary and Distribution Expenses [ ] [ ] [ ]Advertising and Marketing Expenses [ ] [ ] [ ]Other Expenses (Fees of Legal Advisor and Auditors; legal fees, stock exchange fees, SEBI filing fees, depository fees etc)

[ ] [ ] [ ]

Total [ ] [ ] [ ]

All expenses with respect to the Issue will be borne out of the Issue Proceeds.

Details of Fees Payable

Fees to the Lead Manager

The total fees payable to the Lead Manager will be as per the Engagement Letter dated May 08, 2008 and as stated in the Memorandum of Understanding executed between our Company and Lead Manager dated September 27, 2008, copy of which is available for inspection at our Registered Office.

Fees to the Registrar to the Issue.

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The Fees Payable to the Registrar to the Issue is set out in relevant documents, copies of which are available for inspection at the Office of our Company Secretary of our Company situated at No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai Tamil Nadu - 600 097 from 10.00 a.m. to 1.00 p.m., from the date of filing of the Draft Letter of Offer until the date of closure of the Subscription List.

Fees to the Advisor to the Issue

The total fees payable to the Advisor to the Issue will be as per the Engagement Letter dated [ ] executed between our Company and the Advisor to the Issue, copy of which is available for inspection at our Registered Office.

Companies Under the same Management within the meaning of Section 370(1)(B) of the Act.

There are no listed companies within the same management within the meaning of section 370(1)(B) of the Companies Act, 1956.

Material changes after last Balance Sheet date

For details of material changes and commitments likely to affect the financial position of our Company since the last date upto which audited information is incorporated in the Draft Letter of Offer please refer to the chapter titled “Management’s Discussion and Analysis on Financial Condition and Results of Operations” beginning on page 122 of the Draft Letter of Offer .

Stock Market Data for the Equity Shares of our Company

The Equity Shares of our Company are listed on the OTCEI. Our equity shares was last traded on OTCEI on December 11, 1999 at Rs. 2.25/-

Issues for consideration other than cash

Except as stated in chapter titled “Capital Structure” beginning on page 25 of the Draft Letter of Offer, our Company has not issued Equity Shares for consideration other than cash or out of revaluation reserves.Outstanding Debentures or Bonds and Preference Shares

Our Company has no outstanding debentures or bonds and preference shares.

Investor Grievances and Redressal System

Our 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 our Company is being handled by registrar and share transfer agent. Letters are filed categorywise after having attended to Redressal norm for response time for all correspondence including shareholders complaints is 15 days.

Investor Grievances arising out of this Issue

Our Company’s investor grievances arising out of the Issue will be handled by Mr. P.R Kannan, Company Secretary and Compliance Officer, and Cameo Corporate Services Limited, who are the Registrar to the Issue. The Registrar will have a separate team of personnel handling only our post-Issue correspondence.

The agreement between us and the Registrar will provide for retention of records with the Registrar for a period of at least one year from the last date of dispatch of Letter of Allotment/ share certificate / refund order to enable the Registrar to redress grievances of Investors.

All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio no. name and address, contact telephone / cell numbers, email id of the first applicant, number and

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type of shares applied for, Application Form 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 15 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. We undertake to resolve the Investor grievances in a time bound manner.

Investors may contact the Company Secretary and Compliance Officer in case of any pre-Issue/ post -Issue related problems such as non-receipt of letters of allotment/share certificates/demat credit/refund orders etc. His address is as follows:

Mr. P. R. Kannan No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai Tamil Nadu - 600 097 Phone: + 91-44-24968295/24968200 Fax: + 91-44-24967717 Email: [email protected]

Allotment Letters / Refund Orders

Our Company will issue and dispatch share certificates within a period of two days from the date of allotment in the Issue. Refund orders and/or electronic credit of refunds shall be dispatched/completed within 15(fifteen) days from the date of closure of the Issue. Such refund orders, in the form of MICR warrants/cheque/pay order, marked “Account payee” would be drawn in the name of a sole/first applicant and will be payable at par at all the centers where the applications were originally accepted, except for those who have opted to receive refunds through the ECS facility or RTGS or Direct Credit. If such money is not repaid within 8 days from the day our Company becomes liable to pay it, our Company shall pay that money with interest at the rate of 15% per annum as stipulated under Section 73 of the Act, 1956. Letter(s) of Allotment/Refund Order(s) above the value of will be dispatched by Registered Post to the sole/first applicant’s address. However, Refund Orders for values not exceeding Rs.1,500/- shall be sent to the applicants under Certificate of Posting at the applicant’s sole risk at his address. Our Company would make adequate funds available to the Registrar to the Issue for this purpose. Adequate funds would be made available to the Registrar to the Issue for dispatch of the letters of allotment/ share certificates/ demat credit/ refund orders.

Our Company agrees that as far as possible the allotment of the Compulsorily Convertible Preference Shares shall be made within fifteen (15) days of the closure of Issue. .

Status of Complaints

Details of Complaints received for the period October 1, 2007 to September 20, 2008 are as follows:

Period Received Resolved Pending

1/10/2007 to 31/12/2007 [ ] [ ] [ ]1/01/2008 to 31/03/2008 [ ] [ ] [ ]1/04/2008 to 30/06/2008 [ ] [ ] [ ]1/07/2008 to 20/09/08 Nil Nil Nil

Changes in Auditors during the last three years

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Past Auditor Present Auditors Date of Change Reason for Change

V. Pichaikutty M/s. B S R & Associates

July 21, 2007 Resignation

Capitalisation of Reserves or Profits

Our Company has not capitalized any of its reserves or profits for the last five years other than those mentioned in the section “Capital Structure” beginning on page 25 of the Letter of Offer.

Revaluation of Fixed Assets

There has been no revaluation of our Company’s fixed assets for the last five years.

IMPORTANT

• 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. [ ].

• Your attention is drawn to the section titled ‘Risk Factors’ beginning on Page x of the Draft Letter of Offer.

• Please ensure that you have received the Composite Application Form (“CAF”) with the Letter of Offer.

• Please read the Draft Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are an integral part of the Draft Letter of Offer and must be carefully followed. An application is liable to be rejected for any non-compliance 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 road shows, presentations, 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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TERMS OF THE ISSUE

The Compulsorily Convertible Preference Shares being issued pursuant to the Rights Issue are subject to the terms and conditions contained in the Draft Letter of Offer, the enclosed Composite Application Form (“CAF”), the Memorandum and Articles of Association of our Company, the provisions of the Act, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or security certificate and rules as may be applicable and introduced from time to time.

Authority for the Issue

This Issue is being made under the provisions of Section 81(1)(a) of the Companies Act pursuant to the resolution passed at the meeting of the Board of Directors of our Company on July 30, 2008 and the approval of our shareholders at the EGM held on September 10, 2008.

Basis for the Issue

The Compulsorily Convertible Preference Shares are being offered for subscription for cash 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 shares held in the electronic form and on the Register of Members of our Company in respect of shares held in the physical form at the close of business hours on the Record Date, i.e., [ ] fixed in consultation with the Designated Stock Exchange, OTCEI.

Rights Entitlement:

As your name appears as beneficial owner in respect of the shares held in the electronic form or appears in the register of members as an equity shareholder of our Company as on the Record Date i.e. [ ]. You are entitled to the number of shares in Block I of Part A of the enclosed in the Composite Application Form.

The eligible shareholders shall be entitled to the following:

[ ] Compulsorily Convertible Preference Shares for every [ ] Equity Shares held on the Record Date

Market lot

The securities of our Company are tradable on the Stock Exchange in dematerialized form. The market lot for Compulsorily Convertible Preference Shares in dematerialised mode is one. In case of holding in physical form, our Company would issue to the allottees one seperate certificate for the Compulsorily Convertible Preference Shares allotted on rights basis to each folio (“Consolidated Certificate”).

Investors may note that the Compulsorily Convertible Preference Shares of our Company can be traded on the Stock Exchange in dematerialized form.

Nomination facility

In terms of Section 109A of the Act, nomination facility is available in case of Compulsorily Convertible Preference Shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose.

A sole Compulsorily Convertible Preference Shareholder or first Compulsorily Convertible Preference Shareholder, along with other joint Compulsorily Convertible Preference Shareholders being individual(s) 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 Compulsorily Convertible Preference Shares. A person, being a nominee, becoming entitled to the Compulsorily Convertible Preference Shares by reason of the death of

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the original Compulsorily Convertible Preference Shareholder(s) , shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Compulsorily Convertible Preference Shares. Where the nominee is a minor, the Compulsorily Convertible Preference Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Compulsorily Convertible Preference Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Compulsorily Convertible Preference Shares by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Compulsorily Convertible Preference Share(s) is/are held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the Registered Office of our Company or such other person at such addresses as may be notified by our Company. The applicant can make the nomination by filling in the relevant portion of the CAF.

In case the allotment of Compulsorily Convertible Preference Shares is in dematerialised form, there is no need to make a separate nomination for the Compulsorily Convertible Preference Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective DP.

The aforesaid particulars regarding nomination shall be equally applicable to Equity Shares arising on conversion of the Compulsorily Convertible Preference Shares, except that only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder(s) has already registered the nomination with our Company, no further nomination needs to be made for Equity Shares to be allotted on conversion of the Compulsorily Convertible Preference Shares under the same folio as the existing Equity Share(s) held by that shareholder/those joint holders (holding in the same order as the Equity Shares to be allotted on conversion are held).

Joint-Holders

Where two or more persons are registered as the holders of any Compulsorily Convertible Preference Shares, they shall be deemed to hold the same as joint-holders with benefits of survivorship subject to provisions contained in the Articles of Association of our Company.

Offer to Non-Resident Equity Shareholders/Applicants

As per regulation 6 of Notification No. FEMA 20/200-RB dated May 3, 2000, the RBI has given general permission to Indian companies to issue rights shares to non-resident shareholders including additional shares. Applications received from NRIs and non-residents for allotment of Compulsorily Convertible Preference Shares shall be inter alia, subject to the conditions imposed from time to time by the RBI under the Foreign Exchange Management Act, 1999 (FEMA) in the matter of refund of application moneys, allotment of Compulsorily Convertible Preference Shares, issue of letter of allotment / notification No. FEMA 20/200-RB dated May 3, 2000. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of Compulsorily Convertible Preference Shares, payment of dividend etc. to the non-resident shareholders. The rights shares purchased by non-residents shall be subject to the same conditions including restrictions in regard to the repatriability as are applicable to the original shares against which rights shares are issued.

By virtue of 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, OCBs shall not be eligible to subscribe to the Compulsorily Convertible Preference Shares. The RBI has however clarified in its circular, A.P. (DIR Series) Circular No. 44, dated December 8, 2003 that OCBs which are incorporated and are not under the adverse notice of the RBI are permitted to undertake fresh investments as incorporated non-resident entities. Further, the RBI in its Master Circular dated July 1, 2007 has stated that OCBs are not permitted to subscribe to Compulsorily Convertible Preference Shares of Indian companies on rights basis under the automatic route. OCBs shall not be eligible to subscribe to the Compulsorily Convertible Preference Shares pursuant to the Draft Letter

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of Offer unless they obtain the prior approval of the RBI in this regard.Thus, OCBs desiring to participate in this Issue must obtain prior approval from the RBI. On providing such approval to our Company at its registered office, the OCB shall receive the Letter of Offer and the CAF.

Applications received from the Non-Resident Equity Shareholders for the allotment of Compulsorily Convertible Preference Shares, shall, inter alia, be subject to the conditions as may be imposed from time to time by the RBI, in the matter of refund of application moneys, allotment of Compulsorily Convertible Preference Shares, issue of letters of allotment/ certificates/ payment of dividends etc.

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. DETAILS OF SEPARATE COLLECTING CENTRES FOR NON-RESIDENT APPLICATIONS SHALL BE PRINTED ON THE CAF.

The total holding by each FII/SEBI approved sub-account of FII shall not exceed 10% of the total issued and paid up CCPS capital of our Company. The total holdings of all FIIs/sub accounts of FIIs put together shall not exceed 24% of the issued and paid up capital of our Company.

The Letter of offer and CAF shall be dispatched to non-resident Equity Shareholders at their Indian address only.

Mode of Payment of Dividend

The CCPS shall carry nil dividend rate, that is, they shall not be entitled to any dividend

In relation to Equity Shares arising from exercise of the CCPS, 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.

Principal Terms of this Rights Issue of Compulsorily Convertible Preference Shares

The Compulsorily Convertible Preference Shares, now being issued, are subject to the provisions of the Act , terms and conditions contained in the Draft Letter of Offer, the enclosed Composite Application Form (“CAF”), the Memorandum and Articles of Association of our Company, guidelines issued by SEBI, Foreign Exchange Management Act 1999 (“FEMA”), guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or security certificate and rules as may be applicable and introduced from time to time.

Face value

Each Compulsorily Convertible Preference Share shall have the face value of Rs. 10

Each Equity Share arising on conversion of the Compulsorily Convertible Preference Share shall have the face value of Rs. 10.

Entitlement Ratio

The CCPS are being offered on a rights basis to the existing Equity Shareholders of our Company in the ratio of [ ] CCPS for every [ ] Equity Shares held as on Record Date.

Issue Price

Each Compulsorily Convertible Preference Share is being offered at a price of Rs. [ ] each for cash at a premium of Rs. [ ] per Compulsorily Convertible Preference Share.

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Terms of payment

On application, Rs. [ ], which constitutes the full amount of the Issue Price of Rs [ ] shall be payable (“Application Money”).

A separate cheque/ draft must accompany each Application form.

Payment should be made in cash (not more than Rs.20,000) or by cheque/bank demand draft/ 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 /money orders/postal orders will not be accepted and CAFs accompanied by such cheque/money orders/postal orders are liable to be rejected.

Where an applicant has applied for additional CCPS and is allotted lesser number of CCPS than applied for, the excess application money shall be refunded. The monies would be refunded within 15(fifteen) days from the closure of the Issue, and if there is a delay beyond 8 days from the stipulated period, our Company will pay interest on the monies in terms of sub-sections (2) and (2A) of section 73 of the Companies Act, 1956.

Conversion Period

The Conversion Period, in relation to a CCPS, shall be the earlier of the following:

(iv) Exercise of the CCPS Holder Put Option by the CCPS holder; (v) Exercise of the Issuer Call Option by our Company; and (vi) Expiry of five years from the date of Allotment, which shall be the maximum tenure of the

CCPS, and beyond which the tenure of the CCPS shall not stretch.

For details of terms of Conversion and manner of Conversion, please refer sub-section titled “Principal terms of conversion of the Compulsorily Convertible Preference Shares – CCPS Holder Put Option, Issuer Call Option and other details” hereinbelow.

Dividend

The CCPS shall carry a nil dividend rate, that is, they shall not be entitled to any dividend

Ranking of the Compulsorily Convertible Preference Shares

The Compulsorily Convertible Preference Shares shall be subject to the Memorandum and Articles of Association of our Company. In terms of Section 85(1) of the Companies Act, the preference shares carry preferential right to dividend and repayment of capital, in the event of winding-up. However, the Compulsorily Convertible Preference Shares carry nil dividend rate, and hence will not be entitled to dividend. The Equity Shares allotted upon conversion of the Compulsorily Convertible Preference Shares being issued in this Issue, shall be pari passu with the then existing Equity Shares in all respects including dividend. For more details see section titled “Main Provisions of Our Articles of Association” beginning on page 192 of the Draft Letter of Offer.

Rights of CCPS holders

Subject to applicable laws, the CCPS holders shall have the following rights

• The CCPS shall rank for repayment of capital in a winding up, pari passu inter-se and in priority to the Equity Shares of our Company but shall not confer any further or other right to participate either in profits or assets and that preferential rights shall automatically cease on conversion of these shares into

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Equity Shares. Since the CCPS carry nil dividend rate, the preferential rights as to dividend have not been elucidated herein

• The CCPS, as and when converted into Equity Shares, shall rank pari passu with the then existing Equity Shares of our Company in all respects.

• The right to vote of CCPS Holders shall be to the extent and in the manner provided for in the Companies Act or any re-enactment thereof.

• The CCPS shall not confer any right on the holders thereof to participate in any offer or invitation by way of rights or otherwise to subscribe for additional shares in our Company; nor shall the CCPS confer on the holders thereof any right to participate in any issue of bonus shares or shares issued by way of capitalization of reserves.

The rights, terms and conditions attached to the CCPS may be modified or dealt with by our Board in accordance with the provisions of the Articles of Association of our Company, terms of the Draft Letter of Offer, Letter of Offer, CAF and applicable legal provisions.

Rights of Equity Shareholders arising on conversion of Compulsorily Convertible Preference Shares

Subject to applicable laws, Equity Shareholders shall have the following rights:

Right to receive dividend, if declared Right to attend general meetings and exercise voting power, unless prohibited by law; Right to vote on poll, either in person or proxy; Right to receive offer for right shares and be allotted bonus shares if announced; Right to receive surplus on liquidation; Right of free transferability of share; and Such other rights as may be available to a shareholder of a listed public company under the Companies Act and our 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 “Main Provisions of the Articles of Association of our Company” beginning on page 192 of the Draft Letter of Offer.

Fractional entitlements

For Compulsorily Convertible Preference Shares being offered on rights basis under this Issue, if the shareholding of any of the Equity Shareholders is less than [ ] or is not in the multiples of [ ], the fractional entitlement of such holders shall be ignored. Shareholders whose fractional entitlements are being ignored would be given preferential allotment of ONE additional Compulsorily Convertible Preference Share each if they apply for additional Compulsorily Convertible Preference Shares.

For example, if a Equity Shareholder holds [ ] Equity Shares, he will be entitled to [ ] CCPS on rights basis. He will be given a preference for allotment of 1 additional CCPS if he has applied for the same.

Those Equity shareholders having holding less than [ ] Equity Shares and therefore entitled to zero Compulsorily Convertible Preference Shares under this Issue shall be despatched a CAF with zero entitlement. Such Equity Shareholders would be given preferential allotment of ONE additional Compulsorily Convertible Preference Share each. However, they cannot renunciate the same to third parties. CAF with zero entitlement will be non-negotiable /non-renunciable.

Notices

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All notices to the Compulsorily Convertible Preference Shareholder(s) required to be given by our Company shall be given in the manner as specified in the Draft Letter of Offer or otherwise may be decided by the Board from time to time.

Procedure for Application

The CAF would be printed in blue ink for all shareholders, with a additional separate advise for Non-resident shareholders. In case the original CAF is not received by the applicant or is misplaced by the applicant, the applicant may request the Registrar to the Issue, Cameo Corporate Services Limited (Unit: Tebma Shipyards Limited – CCPS), for issue of a duplicate CAF, by furnishing the registered folio number/DP ID Number, Client ID Number and their full name and address. Non-resident shareholders can obtain a copy of the CAF from the Registrar to the Issue, Cameo Corporate Services Limited (Unit: Tebma Shipyards Limited – CCPS), from their office situated at Subramanian Building, No.1 Club House Road, Chennai - 600 002, by furnishing the registered folio number/DP ID number, Client ID number and their full name and address. Compulsorily Convertible Preference Shares offered to you can be renounced either in full or in part in favour of any other person or persons. Such renouncees can only be Indian Nationals/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (unless registered under the Indian Trust Act), minors (through their legal guardians), societies (unless registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold compulsorily convertible preference shares and equity shares in a company and cannot be a partnership firm, more than three persons including joint-holders, HUF(unless application is made through Karta), foreign nationals (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of the Draft Letter of Offer could be illegal or require compliance with securities laws.

Acceptance of the Issue

You may accept the Issue and apply for the CCPS offered, either in full or in part, by filling Part A of the CAF enclosed 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 CAF 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 our Company in this regard. Applicants at centers not covered by the branches of collectingbanks can send their CAF together with the cheque drawn at par on a local bank at Chennai/demand draftpayable 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.

The CAF consists of four parts: Part A: Form for accepting the Compulsorily Convertible Preference Shares offered and for applying for additional Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shareholders

The Composite Application Form clearly indicates the number of Compulsorily Convertible Preference Shares that the Equity Shareholder is entitled to.

If the Equity Shareholder applies for an investment in Compulsorily Convertible Preference Shares, then he can:

Apply for his entitlement in part;

Apply for his entitlement in part and renounce the other part;

Renounce the entire entitlement

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Apply for his entitlement in full;

Apply for his entitlement in full and apply for additional Compulsorily Convertible Preference Shares.

Renouncees for Compulsorily Convertible Preference Shares can apply for the Compulsorily Convertible Preference Shares renounced to them and also apply for additional Compulsorily Convertible Preference Shares. If you renounce your Rights Entitlement, in whole or in part, you shall not be entitled to apply for additional Compulsorily Convertible Preference Shares in this Issue.

The shareholders with zero entitlement can apply for ONE additional Compulsorily Convertible Preference Share and they cannot renunciate the same to third party.

The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares

Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Compulsorily Convertible Preference 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 Compulsorily Convertible Preference 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 Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares you wish to accept, if any, fill in and sign Part A of one split CAF (only for option 1).

(ii) For the Compulsorily Convertible Preference Shares you wish to renounce, fill in and sign Part B indicating the number of Compulsorily Convertible Preference Shares renounced and hand over the split CAFs to the renouncees.

(iii) Each of the renouncees should fill in and sign Part C for the Compulsorily Convertible Preference Shares accepted by them.

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Option Option Available Action Required

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 Compulsorily Convertible Preference Shares offered, either in full or in part by filing part A of the enclosed CAF. For details of submission of CAF and mode of payment please refer to sub-section titled “Submission of Application and Mode of Payment for Rights Issue of Compulsorily Convertible Preference Shares” on page 167 of the Draft Letter of Offer.

Option B: Additional Compulsorily Convertible Preference Shares

You are eligible to apply for additional Compulsorily Convertible Preference Shares over and above the number of Compulsorily Convertible Preference Shares you are entitled to, provided that you have applied for all the Compulsorily Convertible Preference Shares offered without renouncing them in whole or in part in favor of any other person(s). The application for additional Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares will be made on an equitable basis with reference to number of Compulsorily Convertible Preference Shares held by you on the Record Date.

If you desire to apply for additional Compulsorily Convertible Preference Shares , please indicate your requirement in the place provided for additional shares in Part A of the CAF. Applications for additional Compulsorily Convertible Preference Shares shall be considered and allotment shall be in the manner prescribed under the section entitled ‘Basis of Allotment’ under section titled “Terms of The Issue” beginning on page 156 of the Draft Letter of Offer. The renouncees applying for all the Compulsorily Convertible Preference Shares renounced in their favor may also apply for additional Compulsorily Convertible Preference Shares .

Where the number of additional Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares offered to you either in full or in part in favour of any other person or persons subject to the approval of the Board. Such renouncees can only be Indian Nationals (including minor through their natural/legal guardian)/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (registered under the Indian Trust Act), societies (registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold equity shares and compulsorily convertible preference shares in a company and cannot be a partnership firm, foreign nationals or nominees of any of them (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of the Draft Letter of Offer could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board.

Any renunciation from Resident Indian Shareholder(s) to Non-resident Indian(s) or from Non-resident Indian Shareholder(s) to Resident Indian(s) or from Non-resident Indian shareholder(s) to other Non-resident Indian(s) is subject to the renouncer(s)/renounce(s) obtaining the approval of the FIPB and/or

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necessary permission of the RBI under the FEMA, as may be required and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approvals are liable to be rejected.

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 our Company who do not wish to subscribe to the Compulsorily Convertible Preference Shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s).

Your attention is drawn to the fact that our Company shall not allot and/or register any Compulsorily Convertible Preference Shares in favor of persons/categories of persons as mentioned in the paragraph titled “General” hereinbelow.

The right of renunciation is subject to the express condition that the Board (including a Committee thereof duly authorised) shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof.

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 our Company of the person(s) applying for Compulsorily Convertible Preference Shares in Part C to receive allotment of such Compulsorily Convertible Preference Shares . The renouncees applying for all the Compulsorily Convertible Preference Shares renounced in their favour may also apply for additional Compulsorily Convertible Preference Shares. Part ‘A’ must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will also have no further right to renounce any shares in favour of any other person.

Procedure for renunciation

To renounce all the Compulsorily Convertible Preference 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 favor 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.

Renouncee(s) shall not be entitled to furher renounce their entitlement in favour of any other person.

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 in favour of two or more renouncees, the CAF must be first split into requisite number of forms. For this purpose you shall have to apply to the Registrar to the Issue. Please indicate your requirement of split forms 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 split forms.

On receipt of the required number of split forms 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 Compulsorily Convertible Preference Shares, does not agree with the specimen registered with our Company, the application is liable to be rejected.

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Renouncee(s)

The person(s) in whose favour the offer is renounced should fill in and sign Part C of the Application Form and submit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money.

Option E: Change and/ or introduction of additional holders

If you wish to apply for Compulsorily Convertible Preference 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 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 those in whose favour this Issue has been made. If used, this will render the application invalid.

• Request for split form should be made for a minimum of one (1) Compulsorily Convertible Preference Share or in multiples of one (1) Compulsorily Convertible Preference Share;

• Request by the applicant for the Split Application Form should reach our Company on or before [ ].

• Only the person to whom the Draft Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again.

• Split form(s) will be sent to the applicant(s) by post at the applicant’s risk.

Availability of duplicate CAF

In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant 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 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. Thus in case the original and duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of duplicate CAF in transit, if any.

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 an Account Payee Cheque drawn on a local bank / Demand Draft payable at Chennai which should be drawn in favor of "Tebma - Rights Issue - R" in case of resident shareholders and non-resident shareholders applying on non-repatriable basis and in favour of "Tebma – Rights Issue - NR" in case of non-resident shareholders applying on repatriable basis and marked “A/c Payee Only” and send the same by registered post directly

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to the Registrar to the Issue so as to reach them on or before the closure of the Issue. The envelope should be superscribed "Tebma – Rights Issue - R" in case of resident shareholders and non-resident shareholders applying on non-repatriable basis, and in favour of "Tebma – Rights Issue - NR" in case of non-resident shareholders applying on repatriable basis.

The application on plain paper, duly signed by the applicant(s) including joint holders, in the same order as per specimen recorded with our 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 Tebma Shipyards Limited.

• Name and address of the Equity Shareholder including joint holders

• Registered Folio Number/ DP ID No. and Client ID No.

• Number of shares held as on Record Date

• Certificate numbers and distinctive numbers, if held in physical form.

• Number of Compulsorily Convertible Preference Shares entitled pursuant to the Issue

• Number of Compulsorily Convertible Preference Shares applied for in exercise of the Rights Entitlement

• Number of additional Compulsorily Convertible Preference Shares applied for, if any

• Total number of Compulsorily Convertible Preference Shares applied for

• Total amount paid on application at the rate of Rs. [ ] per Compulsorily Convertible Preference 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.

In case of Compulsorily Convertible Preference Shares allotted in Demat mode, the bank account details shall be obtained from the information available with the depositories.

• Permanent Account Number (PAN)

• Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of our Company.

• In case of Non Resident Shareholders, NRE/ FCNR/ NRO A/c No. Name and Address of the Bank and Branch;

• If payment is made by a draft purchased from NRE/ FCNR/ NRO A/c No., as the case may be, an Account debit certificate from the bank issuing the draft, confirming that the draft has been issued by debiting NRE/ FCNR/ NRO Account.

Attention of the shareholders is drawn to the fact that those shareholders making the application otherwise than on the CAF (i.e. on a plain paper as stated above) shall not be entitled to renounce their rights and should not utilise the CAF for any purpose including renunciation even if it is received subsequently. In case the original and duplicate CAFs and application on the plain paper or any two of these applications are lodged or if any shareholder violates any of these requirements, our Company will have the absolute right to reject any one or both of his/her/their application and refund the application money received.

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In case an application is rejected in full, the whole of the application money received will be refunded within 15 days from the closure of the Issue without interest. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares, will be refunded without interest to the applicant within 15 days from the closure of the Issue. .

Please refer to sub-section titled “Submission of Application and Mode of Payment for Rights Issue of Compulsorily Convertible Preference Shares” on page 167 of the Draft Letter of Offer for more information in this regard.

SUBMISSION OF APPLICATION AND MODE OF PAYMENT FOR RIGHTS ISSUE OF COMPULSORILY CONVERTIBLE PREFERENCE SHARES

Resident Equity Shareholders/ Applicants

• Applicants who are applying through CAF and residing at places where the bank collection centres have been opened by our Company for collecting applications, are requested to submit their applications at the corresponding collection centre. Payment should be made in cash (not more than Rs. 20,000) or by cheque / bank demand draft drawn on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the clearing house located at the centre where the CAF is accepted, for the full application amount favouring " Tebma-Rights Issue - R " and marked ‘A/c Payee only’.

• Applicants who are applying through CAF and residing at places other than places where the bank collection centres have been opened for collecting applications, are requested to send their applications together with a cheque/Demand Draft of amount net of bank and postal charges, for the full application amount favouring " Tebma -Rights Issue - R " and marked ‘A/c Payee only’ 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. Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

• Applicants who are applying on plain paper, are requested to send their applications on plain paper together with a local cheque/Demand Draft of amount net of bank and postal charges, for the full application amount favouring " Tebma -Rights Issue - R " and marked ‘A/c Payee only’ 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. Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

Non-Resident Equity Shareholders / Applicants

Application with repatriation benefits

Non-Resident Equity Shareholders / Applicants, applying on a repatriation basis, are required to submit the completed CAF / application on plain paper, as the case may be, alongwith the payment made through any of the following ways:

• By Indian Rupee drafts purchased from abroad or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or

• By cheque / bank drafts remitted through normal banking channels or out of funds held in Non--Resident External Account (NRE) or FCNR Account maintained with banks authorized to deal in foreign currency in India, along with documentary evidence in support of remittance; or

• FIIs registered with SEBI must remit funds from special non-resident rupee deposit account.

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• For Equity Shareholders / Applicants , applying through CAF, the CAF is to be sent at the bank collection centre specified in the CAF alongwith cheques/drafts in favour of " Tebma - Rights Issue - NR " payable at Chennai and crossed ‘A/c Payee only’ for the amount payable.

• For Equity Shareholders / Applicants, applying on a plain paper, the applications are to be directly sent to the Registrar to the Issue by registered post along cheques/drafts in favour of " Tebma - Rights Issue - NR " payable at Chennai and crossed ‘A/c Payee only’ for the amount payable so as to reach them on or before the Issue Closing Date.

A separate cheque or bank draft must accompany each application form. Applicants may note that where payment is made by drafts purchased from NRE/FCNR 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 account should be enclosed with the CAF. In the absence of the above the application shall be considered incomplete and is liable to be rejected.

In the case of NRIs who remit their application money from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF. In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, refunds and other disbursements, if any will be made in any convertible foreign currency at the rate of exchange prevailing at such time subject to the permission of RBI. Our Company will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into any convertible foreign currency or for collection charges charged by the applicant’s Bankers.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of application in transit, if any

Application without repatriation benefits

For non-residents Equity Shareholders / Applicants applying on a non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account or Rupee Draft purchased out of NRO Account. In such cases, the allotment of Compulsorily Convertible Preference Shares will be on non-repatriation basis.

For Equity Shareholders/Applicants, applying through CAF, the CAF is to be sent at the bank collection centre specified in the CAF along with cheques/drafts drawn in favor of "Tebma - Rights Issue - R" payable at Chennai and crossed ‘A/c Payee only’ for the amount payable.

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 business hours on or before the Issue Closing Date. Separate cheque or bank draft must accompany each CAF.

For Equity Shareholders/Applicants, applying on a plain paper, the applications are to be directly sent to the Registrar to the Issue by registered post along with cheques/demand drafts net of bank and postal charges drawn in favor of " Tebma - Rights Issue - R " payable at Chennai so as to reach them on or before the Issue Closing Date.

If the payment is made by a draft purchased from an NRO account, an Account Debit Certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account, should be enclosed with the CAF. In the absence of the above, the application shall be considered incomplete and is liable to be rejected.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of application in transit, if any

Note:

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• In case where repatriation benefit is available, sales proceeds derived from the investment in Compulsorily Convertible Preference Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961.

• In case Compulsorily Convertible Preference Shares are allotted on non-repatriation basis, the sale proceeds of the Compulsorily Convertible Preference Shares cannot be remitted outside India.

• 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.

Last date of Application

The last date for submission of the duly filled in CAF is [ ]. The Issue will be kept open for a minimum of 15 (Fifteen) days and the Board (including a Committee thereof duly authorised) will have the right to extend the said date for such period as it may determine from time to time but not exceeding 30 (thirty) days from the Issue Opening Date.

If the CAF together with the amount payable is not received by the Banker to the Issue/ Registrar to the Issue on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board, the offer contained in the Draft Letter of Offer shall be deemed to have been declined and the Board shall be at liberty to dispose off the Compulsorily Convertible Preference Shares hereby offered, as provided under the section entitled “Basis of Allotment” beginning at page 170 of the Draft Letter of Offer.

General

Applications should be made only on the prescribed CAFs provided by our Company and should be complete in all respects. Applications which are not complete or which are not accompanied with remittance of the proper amount calculated as aforesaid are liable to be rejected and the money paid in respect thereof will be refunded without interest.

Our Company will not allot any Compulsorily Convertible Preference Shares in favour of:

• more than three persons as joint holders (including the first holder), in the case of renouncees • a partnership firm • a trust or society (unless such trust or society is registered under the Societies Registration Act, 1860

and it is authorised under its Memorandum & Articles of Association and/or its Rules & Bye Laws to hold shares in a company)

• a minor (unless application is made through a guardian) • HUF (unless application is made through Karta) • any renouncee(s) whom the Board may not approve of

In case the applicants in the above categories are already shareholders of our Company, they will be eligible for their entitlement. In case of applications made under a Power of Attorney (POA) or by Limited Companies or Bodies Corporate or Societies, a certified true copy of the relevant POA or the relevant resolution or authority to make the application as the case may be, along with the copy of the Memorandum & Articles of Association and/or Bye laws must be lodged for scrutiny giving the serial number of the CAF with the Registrar to the Issue, simultaneously with the submission of the CAF failing which the application is liable to be rejected. In case the POA is already registered with our Company, the same need not be furnished again. However, the serial number under which the POA has been registered with our Company, must be mentioned below the signature(s) of the concerned applicants(s).

The CAF must be filled in English in BLOCK LETTERS.

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In case of joint holders, all joint holders must sign the CAF at the appropriate places in the same order as per specimen signatures recorded in the Register of Members of our Company / Depository.

Signatures in languages other than those prescribed in the 8th Schedule of the Constitution of India and thumb impressions must be attested by a Magistrate or a Notary Public or a Special Executive magistrate under his/her official seal.

In case of renouncee(s), the name of the applicant(s), details of occupation, address and father’s/husband’s name must be filled in Block Letters.

The CAF must be submitted to the Collection Centres as mentioned in the CAF/ Registrar to the Issue, as the case may be, in its entirety. If any of the parts A, B, C, D and the acknowledgement of the CAF is/are detached or separated, such applications will be rejected forthwith.

Any dispute or suit or action or proceeding arising out of or in relation to the Draft Letter of Offer or in respect of any matter or thing contained therein and any claim by either party against the other shall be instituted or adjudicated upon or decided solely by the appropriate Court in Chennai.

All communications in connection with your application for the Compulsorily Convertible Preference Shares should be addressed to the Registrar to the Issue.

Basis of Allotment

Subject to the provisions contained in the Draft Letter of Offer, the Articles of Association of our Company and the approval of the Designated Stock Exchange, the Board will proceed to allot the Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares renounced in their favour, in full or in part.

b) For Compulsorily Convertible Preference Shares being offered on rights basis under this issue, if the equity shareholding of any of the Equity Shareholders is less than [ ] or not in multiple of [ ], then the fractional entitlement of such holders shall be ignored and would be given preferential allotment of ONE additional Compulsorily Convertible Preference Share each if they apply for additional share(s). Allotment under this head shall be considered if there are any unsubscribed Compulsorily Convertible Preference Shares after allotment under (a). If number of Compulsorily Convertible Preference Shares available for allotment after allotment under (a) is less than the total demand in (b) the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

SHAREHOLDERS HOLDING LESS THAN [•] EQUITY SHARES AND THEREFORE ENTITLED FOR ZERO COMPULSORILY CONVERTIBLE PREFERENCE SHARES UNDER THIS ISSUE WILL NOT HAVE A RIGHT TO RENOUNCE. SUCH EQUITY SHAREHOLDERS ARE ENTITLED TO APPLY FOR ONE ADDITIONAL COMPULSORILY CONVERTIBLE PREFERENCE SHARE. HOWEVER THEY CAN NOT RENOUNCE THE SAME TO THIRD PARTIES. CAF WITH ZERO ENTITLEMENT SHALL BE NON-NEGOTIABLE / NON-TRANSFERABLE.

c) Allotment to the Equity Shareholders who having applied for all the Compulsorily Convertible Preference Shares offered to them as part of the Issue and have also applied for additional Compulsorily Convertible Preference Shares, the allotment of such additional Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares will be at the discretion of our Board (including a

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Committee thereof duly authorised) in consultation with the Designated Stock Exchange, as a part of the Issue and not as preferential allotment.

d) Allotment to the renouncees who having applied for the Compulsorily Convertible Preference Shares renounced in their favour have also applied for additional Compulsorily Convertible Preference Shares, provided there is an under-subscribed portion after making full allotment in (a), (b) and (c) above. The allotment of such additional Compulsorily Convertible Preference Shares will be made on a proportionate basis at the sole discretion of the Board ((including a Committee thereof duly authorised)) but in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential allotment.

e) Allotment to any other person as the Board may in its absolute discretion deem fit provided there is surplus available after making full allotment under (a), (b), (c) and (d) above.

After taking into account allotment to be made under (a) and (b) above, if there is any unsubscribed portion, the same shall be deemed to be ‘unsubscribed’ for the purpose of regulation 3(1)(b)(ii) of the Takeover Code which would be available for allocation under (c), (d) and (e) above. In the event of undersubscription, our Promoters (either by themselves or through entities controlled by them) intend to apply for additional Compulsorily Convertible Preference Shares, which would subsequently get converted into Equity Shares, which if allotted to the Promoters, shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of Regulations 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1) (b) (ii) of the Takeover Code. Further this acquisition will not result in change of control of management of our Company.

Our Promoters have confirmed that each of them along with the entities controlled by them (together referred to as “Promoters” in this clause) intend to subscribe to the full extent of their entitlement in the Issue. Each of our Promoters reserve their right to subscribe to their entitlement in this Issue, either by themselves or through a combination of entities controlled by them, including by subscribing for renunciation if any made by the Promoter Group. Our Promoters have provided undertakings to our Company expressing their intention to apply for additional CCPS in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and consequent allotment, our Promoters may acquire CCPS over and above their entitlement in the Issue, which may result in an increase of their percentage of CCPS beyond the percentage of their entitlement and percentage of equity shareholding (on Conversion) being above their current percentage of equity shareholding with the entitlement of CCPS and consequent Conversion into Equity Shares in the Issue. This subscription and acquisition of additional CCPS (and consequently Equity Shares) by each of our Promoters through this Issue, if any, will not result in change of control of the management of our Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the chapter titled “Objects of the Issue” beginning on page [ ] of the Draft Letter of Offer, there is no other intention/purpose for this Issue, including any intention to delist our Company, even if, as a result of allotments to our Promoters in this Issue, our Promoter’s shareholding in our Company (as detailed hereinabove) exceeds their current shareholding. Our Promoters shall subscribe to such unsubscribed portion as per the relevant legal provisions. Allotment to any of our Promoters of any unsubscribed portion, over and above their entitlement, shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.


Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement and the other applicable laws prevailing at that time.

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Our Company expects to complete the allotment of Compulsorily Convertible Preference Shares within a period of 15 (fifteen) days from the date of closure of the Issue in accordance with the listing agreement with the OTCEI. Our Company shall retain no oversubscription.

Listing and Trading of the Compulsorily Convertible Preference Shares proposed to be Issued

Our Company’s existing Equity Shares are currently traded on the OTCEI under the ISIN INE279H01017. The fully paid up Compulsorily Convertible Preference Shares proposed to be issued on a rights basis shall be listed and admitted for trading on the OTCEI under a new ISIN, which will be distinct from the existing ISIN for fully paid Equity Shares of our Company. The fully paid up Compulsorily Convertible Preference Shares allotted pursuant to this Issue will be listed as soon as practicable but in no case later than 7 working days from the date of allotment.

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 applicant’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. Our Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud.

Mode of Allotment and Refund

Applicants residing at 15 centres where clearing houses are managed by the Reserve Bank of India (RBI), will get refunds through ECS only except where applicant is otherwise disclosed as eligible to get refunds through direct credit & NEFT. In case of other applicants, Company shall ensure despatch of refund orders, if any, of value up to Rs.1,500 by “Under Certificate of Posting”, and shall dispatch refund orders above Rs.1,500, if any, by registered post or speed post. Applicants to whom refunds are made through Electronic transfer of funds will be send a letter through ordinary post intimating them about the mode of credit of refund within 15(fifteen) days of closure of this Issue.

In accordance with the requirements of the Stock Exchange and SEBI Guidelines, our Company undertakes that:

Allotment, despatch of refund orders/refund instructions shall be done within 15(fifteen) days of closure of this Issue; If such money is not repaid within 8 days from the day specified above, our Company shall pay interest at 15% per annum.

The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post or any other mode disclosed in the Draft Letter of Offer shall be made available by our Company to the Registrar to the Issue.

Refunds orders will be made by cheques, pay orders or demand drafts drawn on the Refund Bank (s) and payable at par at places where the applications were received and will be marked account payee and will be drawn in the name of Sole /First applicant. The bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Applicants.

For Compulsorily Convertible Preference Shares allotted in physical form, the share certificates will be despatched within two working days of the date of Allotment in the Issue.

Payment of Refund

Applicants should note that on the basis of name of the applicants, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Composite Application Form, the Registrar to the Issue will obtain from the Depositories, the applicant’s

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bank account details including nine digit MICR code. Hence, applicants are advised to immediately update their bank account details as appearing on the records of the depository participant. Pleasenote that failure to do so could result in delays in credit of refunds to applicants at the applicants sole risk and neither the Lead Manager nor our Company shall have any responsibility and undertake any liability for the same.

The payment of refund, if any, would be done through any of the following modes:

(i) Direct Credit

Applicants applying through the web/internet whose service providers opt to have the refund amounts for such applicants being by way of direct disbursement by the service provider through their internal networks, the refund amounts payable to such applicants will be directly handled by the service providers and credited to bank account particulars as registered by the applicant in the demat account being maintained with the service provider. The service provider, based on the information provided by the Registrar, shall carry out the disbursement of the refund amounts to the applicants.

(ii) NEFT

Payment of refund shall be undertaken through NEFT wherever the applicants’ bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a Magnetic Ink Character Recognition (MICR) , if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the applicants 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 applicants through this method.

(iii) ECS

Payment of refund would be done through ECS for applicants having an account at one of the following centres:

Centres

1. Ahmedabad 2. Nashik; 3. Sholapur; 4. Gorakhpur 5. Bangalore6. Panaji 7. Ranchi 8. Jammu; 9.

Bhubaneshwar; 10. Surat;

11. Tirupati (non-MICR);

12. Indore 13. Kolkata 14. Trichy 15. Dhanbad(non- MICR)

16. Pune 17. Chandigarh 18. Trichur 19. Nellore (non- MICR)

20. Salem

21. Chennai 22. Jodhpur 23. Kakinada (non- MICR)

24. Jamshedpur 25. Guwahati

26. Gwalior 27. Agra 28. Visakhapatnam 29. Hyderabad 30. Jabalpur

31. Allahabad 32. Mangalore 33. Jaipur 34. Raipur 35. Jalandhar

36. Coimbatore 37. Kanpur 38. Calicut 39. Lucknow 40. Rajkot

41. Mumbai 42. Siliguri (non- MICR)

43. Ludhiana 44. Kochi / Ernakulam

45. Nagpur

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46. Pondicherry 47. Varanasi 48. Bhopal 49. New Delhi 50. Hubli

51. Kolhapur 52. Madurai 53. Patna 54. Shimla (non- MICR)

55. Aurangabad

56. Amritsar 57. Thiruvananthapuram

58. Tirupur 59. Mysore 60. Haldia (non- MICR)

61. Baroda 62. Burdwan (non-MICR)

63. Erode 64. Vijaywada 65. Dehradun

66. Durgapur (non-

MICR)

67. Udaipur 68. Bhilwara

This would be subject to availability of complete Bank Account Details including MICR code wherever applicable from the depository. The payment of refund through ECS is mandatory for Applicants having a bank account at any of the 68 centres as mentioned in SEBI circular no SEBI/CFD/DILDIP/29/2008/01/02 dated February 1, 2008 named herein above, except where the Applicant is otherwise disclosed as eligible to get refunds through NEFT or Direct Credit or RTGS.

IV. RTGS

Applicants having a bank account at any of the abovementioned 68 centres and whose refund amount exceeds Rs. 1 million, have the option to receive refund through RTGS. Such eligible applicants 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 such applicant opting for RTGS as a mode of refund. Charges, if any, levied by the applicant’s bank receiving the credit would be borne by the applicant.

Only or all the other applicants except for whom payment of refund is possible through I, II, III and IV above, the refund orders would be dispatched “Under Certificate of Posting” for refund orders less than Rs.1,500/- and through Speed Post/Registered Post for refund orders exceeding Rs.1,500/-. Such refunds will be made by cheques, pay orders or demand drafts drawn in favour of the sole/first applicant and payable at par.

For shareholders opting for allotment in physical mode, bank account details as mentioned in the CAF shall be considered for electronic credit or printing of refund orders, as the case may be. Refund orders will be made by cheques, pay orders or demand drafts drawn on the Refund Bank(s) and payable at par at places where the applications were received and will be marked account payee and will be drawn in the name of Sole/First Applicant. The bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Applicants.

Refund payment to Non-Resident

Where applications are accompanied by Indian rupee drafts purchased abroad and payable at Chennai (as otherwise specified in this section titled “Terms of the Issue”), refunds will be made in convertible foreign exchange equivalent to Indian rupees to be refunded. Indian rupees will be converted into foreign exchange at the rate of exchange, which is prevailing on the date of refund. The exchange rate risk on such refunds shall be borne by the concerned applicant and our Company shall not bear any part of the risk.

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Where the applications made are accompanied by NRE/FCNR/NRO cheques, refunds will be credited to NRE/FCNR/NRO accounts respectively, on which such cheques were drawn and details of which were provided in the CAF. Export of letters of allotment (if any)/ share certificates/ demat credit to non-resident allottees will be subject to the approval of RBI.

Shareholder’s Depository Account and Bank details

Shareholder’s applying for shares in demat mode should note that on the basis of the name of the shareholder(s), Depository Participant’s Name, Depository Participant’s Identification Number and Beneficiary Account Number provided by them in the CAF, the Registrar to the Issue will obtain from the Depository the demographic details including the address, Shareholders bank account details, MICR code and occupation (hereinafter referred to as ‘Demographic Details’). These bank account details would be used for giving refunds to the shareholder(s). Hence, the shareholder(s) are requested to immediately update their bank account details as appearing in the records of the Depository Participant. Please note that failure to do so could result in delays in dispatch / credit of refunds to the shareholder(s) at the shareholder(s) sole risk and neither the Lead Manager or the Registrar or the Refund Bankers nor our Company shall have any responsibility and undertake any liability for the same. Hence, applicants should carefully fill their Depository Account details in the Composite Application Form.

These demographic details would be used for all correspondences with the shareholder(s) including mailing of Allotment advice and printing of bank particulars on the refund order or for refunds through electronic transfer of funds, as applicable. By signing the Composite Application Form, the shareholder(s) would be deemed to have authorized the depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available in its records.

In case of shareholder(s) receiving refunds through electronic transfer of funds, delivery of refund orders/allocation advice gets delayed if the same once sent to the address obtained from the depositories are returned undelivered.

Option to receive Compulsorily Convertible Preference Shares in Dematerialized Form

Applicants to the Compulsorily Convertible Preference Shares of our Company issued through this Issue shall be allotted the securities in dematerialised (electronic) form at the option of the applicant. Our Company has signed agreements dated December 21, 2005 and August 17, 2006 with NSDL and CDSL respectively, which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates.

In this Issue, the allottees who have opted for Compulsorily Convertible Preference Shares in dematerialised form will receive their Compulsorily Convertible Preference Shares in the form of an electronic credit to their beneficiary account with a depository participant. The CAF shall contain space for indicating number of shares applied for in demat and physical form or both. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accurately contain this information, will be given the securities in physical form. No separate applications for securities in physical and/or dematerialized form should be made. If such applications are made, the application for physical securities will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares.

The Compulsorily Convertible Preference Shares of our Company will be listed on the OTCEI.

Procedure for availing the facility for allotment of Compulsorily Convertible Preference 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

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records of our 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 our Company). In case of Investors having various folios in our 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 our 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 Compulsorily Convertible Preference Shares 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 Compulsorily Convertible Preference Shares arising out of this Issue may be made in dematerialized form even if the original Equity Shares of our 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 our Company.

Responsibility for correctness of information (including applicant’s age and other details) filled in the CAF vis-à-vis such information with the applicant’s depository participant, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicant’s depository participant.

If incomplete / incorrect beneficiary account details are given in the CAF or where the investor does not opt to receive the Compulsorily Convertible Preference Shares in dematerialized form, the applicant will get Compulsorily Convertible Preference Shares in physical form.

Applicants must necessarily fill in the details (including the beneficiary account number or client ID number) appearing in the CAF under the heading ‘Request for shares in Electronic Form’.

Applicants should ensure that the names of the Applicants and the order in which they appear in the CAF should be the same as registered with the Applicant’s depository participant.

The Compulsorily Convertible Preference Shares pursuant to this Issue allotted to investors opting for 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 Compulsorily Convertible Preference Shares to the applicant’s depository account.

Renouncees will also have to provide the necessary details about their beneficiary account for allotment of securities in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

Renouncees can also exercise the option to receive Compulsorily Convertible Preference Shares in the demat form by indicating in the relevant column in the CAF and providing the necessary details about their beneficiary account. It may be noted that Compulsorily Convertible Preference Shares arising out of this Issue can be received in demat form even if the existing Equity Shares are held in physical form. Nonetheless, it should be ensured that the depository participant account is in the name of the Applicant(s) in the same order as per specimen signatures appearing in the records of the depository participant/Company. It may be noted that shares in electronic form can be traded only on the Stock Exchange having electronic connectivity with NSDL or CDSL.

Dividend or other benefits with respect to the Compulsorily Convertible Preference Shares held in dematerialised form would be paid to those Equity Shareholders whose names appear in the list of beneficial owners given by the depository participant to our Company as on the Record Date. It may, however, be noted that the Compulsorily Convertible Preference Shares carry a 0% dividend rate, that is, they shall not receive any dividend.

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Investors may note that the Compulsorily Convertible Preference Shares of the Company can be traded on the Stock Exchange in dematerialized form.

Principal terms of conversion of the Compulsorily Convertible Preference Shares – CCPS Holder Put Option, Issuer Call Option and other details

Face value

Each Compulsorily Convertible Preference Share is convertible into [ ] Equity Shares of face value of Rs.10/- each, which is the Conversion Ratio. This Conversion Ratio shall be proportionately adjusted for any further bonus issue made by our Company prior to the expiry of the Conversion Period so as to ensure that the position of the CCPS holder is not prejudiced and remains the same as if the bonus would not have been declared. For example,should our Company declare a bonus issue of CCPS prior to the expiry of the Conversion Period in the ratio of 1:1, then the number of Equity Shares to be issued pursuant to Conversion of every CCPS shall double.

The face value of each Equity Share of our Company is Rs.10/-. In the event of any sub-division or consolidation of the face value, the Conversion Ratio shall be proportionately increased/ decreased such that the aggregate nominal value of the entitlement remains the same as the nominal value of the Equity Shares immediately prior to such subdivision or consolidation. For example, in case our Company decides to reduce the face value of Equity Shares to Rs.5 each, then upon Conversion of each CCPS, whether pursuant to exercise of CCPS Holder Put Option or Issuer Call Option or at the end of the Conversion Period, the CCPS holder would get [ ] Equity Shares of Rs.5 each instead of [ ]Equity Shares of Rs.10 each, and the Conversion Ratio would thus stand altered accordingly.

However, in case our Company announces a rights issue during the tenure of the CCPS, neither would any adjustment be made to the share entitlement on each CCPS nor would there be any reservations for CCPS holders.

Thus, the Conversion Ratio is subject to changes based on certain corporate actions

Conversion Period

The Conversion Period, in relation to a CCPS, shall be the earlier of the following:

(i) Exercise of the CCPS Holder Put Option by the CCPS holder; (ii) Exercise of the Issuer Call Option by our Company; and ‘ (iii) Expiry of five years from the date from Allotment, which shall be the maximum tenure of the

CCPS, and beyond which the tenure of the CCPS shall not stretch.

FURTHER, THE COMPULSORILY CONVERTIBLE PREFERENCE SHARES NOT CONVERTED AT THE END OF THE CONVERSION PERIOD SHALL BE COMPULSORILY CONVERTED INTO EQUITY SHARES.

No redemption: Investors may note that the CCPS are compulsorily convertible, and that they would be be converted into Equity Shares and would not be redeemed.

Tradeability of CCPS

One CCPS shall entitle the holder to receive [ ] Equity Shares upon Conversion. The Compulsorily Convertible Preference Shares can be freely traded till Conversion. The market lot for CCPS is one.

Conversion of CCPS during the Conversion Period will be carried out without the need for our Company to take any further approvals. However, the CCPS holders should independently check, if they require any approvals in relation to the Conversion, or holding the Equity Shares of our Company.

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The cost and consequences for not obtaining the required approvals by CCPS holders shall lie with them and our Company and its Directors shall not be liable or responsible for the same.

The Board (including any Committee thereof duly authorised), subject to the terms of the Draft Letter of Offer, our Memorandum and Articles, the CAF, approvals from the Government of India and RBI and provisions of the Companies Act, any other legislative enactments and rules as may be applicable, will proceed within the process of Conversion (of the CCPS into Equity Shares) in accordance with the applicable laws.

CCPS Holder Put Option

Each CCPS Holder has a put option known as the “CCPS Holder Put Option” for converting the CCPS into Equity Shares at any time commencing from the date of listing of the CCPS at any time commencing from the date of listing of the CCPS upto the earlier of the following::

(i) Exercise of the Issuer Call Option by our Company; and (ii) Expiry of the five year tenure of the CCPS.

The Conversion pursuant to the exercise of the CCPS Holder Put Option would happen at the Conversion Ratio applicable as on the date of allotment of Equity Shares pursuant to the exercise of the CCPS Holder Put Option.

Manner of exercise of the CCPS Holder Put Option

The exercise of CCPS Holder Put Option should be made in the manner and according to the procedure stated in the paragraph titled “Procedure for exercise of put/call option” beginning on page 179 of the Draft letter of Offer.

The CCPS Holder Put Option is an ongoing put option available to CCPS Holders, that is, the CCPS holders concerned may exercise the CCPS Holder Put Option one or more times, in respect of all or any CCPS held by him, at any time, and any number of times, during the Converion Period. However, resultant allotment of Equity Shares would happen as per the procedure as mentioned herein.

ISSUER CALL OPTION

Our Company has a one-time call option in relation to the Conversion referred to as the “Issuer Call Option”. The Issuer Call Option may be exercised by our Company on any one occasion on any date from the date of listing of the CCPS until the earlier of the following, that is:

(i) When all CCPS are converted into Equity Shares pursuant to exercise of the CCPS Holder Put Option by the CCPS Holders, that is, there are no CCPS outstanding; or

(ii) On the expiry of five years from the date of Allotment of CCPS in this Issue.

Effect of exercise of Issuer Call Option: The exercise of the Issuer Call Option will have the effect of compulsory Conversion of ALL CCPS outstanding as on date of the Issuer Call Option, at the Conversion Ratio applicable as on the date of allotment of Equity Shares pursuant to the exercise of the Issuer Call Option. If any CCPS are not voluntarily tendered by the CCPS Holders, they shall be automatically converted into Equity Shares as per procedure contained under the paragraph titled “Procedure for exercise of put/call option” beginning on page 179 of the Draft Letter of Offer.

NOTE: IN CASE THE CCPS HOLDER PUT OPTION OR THE ISSUER CALL OPTION IS NOT EXERCISED FOR A PERIOD OF FIVE YEARS FROM THE DATE OF ALLOTMENT OF THE CCPS IN THE ISSUE, ALL OUTSTANDING CCPS SHALL BE COMPULSORILY CONVERTIBLE INTO EQUITY SHARES AT THE END OF CONVERSION PERIOD AT THE CONVERSION RATIO APPLICABLE AS ON THE DATE OF ALLOTMENT OF EQUITY SHARES PURSUANT TO THE CONVERSION.

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Procedure for exercise of put/call option

(i) Procedure for exercise of CCPS Holder Put Option

Activity* Indicative time period as defined herein*

1. Application for the exercise of CCPS Holder Put Option by the CCPS Holder(s) pursuant to the CCPS Holder Put option in accordance with the requirements in the paragraphs “Manner of making application for exercise of CCPS Holder Put Option”beginning on page 183 of the Draft Letter of Offer

Day 1 (herein after referred to as “X”), which will be date when the application is actually received by the Registrar

2.i) Registrar to verify and scrutinize the

signature and other relevant details on the Conversion Request Form

ii) Registrar to send rejection letters for application(s) not approved, with reasons for rejection. The intimation may be sent by registered post/speed post/ordinary post at the discretion of our Company. The Registrar and our Company will not be responsible for any loss/delay in transit.

iii)Registrar to send approved applications to our Company for allotment.

7 working days from the receipt of the application(s) i.e (X+7)

4 working days from date of verification being complete, that is, X+11

4 working days from date of verification being completed, that is, X+11

3. On receipt of the approved applications, our Company to present the same to the next immediate meeting of Board (including Committee thereof duly authorised) for allotment of Equity Shares

Meeting of Board (including Committee thereof duly authorised) after the receipt of applications provided that the verified forms from the Registrar are received as on date of despatch of notice by the Company for such meeting. The Board/Committee concerned may take up applications received after date of dispatch of notice for allotment at its sole discretion.

4. Listing of allotted Equity Shares arising out of the exercise of CCPS Holder Put Option and consequent Conversion of CCPS into Equity Shares

Application for listing within 7 working days from allotment.

Listing of Equity shares would be consequent to the Stock Exchange approval

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(ii) Procedure for exercise of Issuer Call Option

Activity* Indicative time period as defined herein*

1. Decision to exercise the Issuer Call Option would be taken at a meeting of the Board of Directors (including Committee thereof duly authorized). Board will decide date from which the trading will stop in CCPS(hereinafter referred to as the “Compulsory Conversion Date”), in consultation with the stock exchange(s) where the CCPS are then listed.

Date of the Board meeting

2. Notice of exercise of Issuer Call Option to be given in national newspapers (one each in English and Hindi) and one regional newspaper circulating where the Registered Office of our Company is sitated, and and on the website of Company and Registrar in relation. The notice should specify the following, among other relevant particulars:

(i) Date of exercise of Issuer Call Option;

(ii) Number of CCPS outstanding as on date of exercise of Issuer Call Option;

(iii) Compulsory Conversion Date; (iv) Mannner and form in which the

applications for Conversion are to be sent to the Registrar or any other person;

(v) Manner of compulsory conversion of CCPS into Equity if not tendered for Conversion;

(vi) Date of next scheduled Board/Committee meeting for considering allotment of Equity Shares on conversion of CCPS

(vii)Indicative timelines for completion of the process and allotment and listing of Equity Shares arising out of the exercise of Issuer Call Option.

Within three days of the date of the Board meeting mentioned in 1. above

3.(i) Registrar to verify and scrutinize

the signature and

(ii) other relevant details on the application for Conversion

7 working days from the receipt of the application(s) i.e (X+7), X being date of receipt of application(s)

4 working days from date of verification being complete, that is, X+11

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(iii) Registrar to send rejection letters for application(s) not approved, with reasons for rejection. The intimation may be send by registered post/speed post/ordinary post at the discretion of our Company. The Registrar and our Company will not be responsible for any loss/delay in transit.

(iv) Registrar to send approved applications to our

(v) Company for allotment.

4 working days from date of verification being completed, that is, X+11

4. Compulsory Conversion Date:

(i) Trading on all stock exchanges where the CCPS are listed stops;

(ii) Company gives instructions to both Depositories (NSDL and CDSL) for deactivation of ISIN of the CCPS.

As decided in consultation with the stock exchange(s) where the CCPS are listed

On Compulsory Conversion Date

Instructions to Depositories: On the Compulsory Conversion Date

5.

(i) On receipt of the approved applications from the Registrar, our Company to present the same to the next immediate meeting of Board (including Committee thereof duly authorised) for allotment of Equity Shares

(ii) IN RESPECT OF CCPS HELD IN DEMAT FORM, REGISTRAR, BY WAY OF A CORPORATE ACTION, WITHOUT ANY CONSENT OR AUTHORISATION FROM THE CCPS HOLDERS (WHO SHALL BE DEEMED TO HAVE GIVEN THEIR CONSENT TO SUCH CONVERSION, WHETHER THEY HAVE BEEN ALLOTTED THE CCPS IN THIS ISSUE OR HAVE ACQUIRED THE SAME OTHER THAN THROUGH THIS ISSUE) , WOULD

Meeting of Board (including Committee thereof duly authorised) after the receipt of applications provided that the verified forms from the Registrar are received as on date of despatch of notice by the Company for such meeting. The Board/Committee concerned may take up applications received after date of dispatch of notice for allotment at its sole discretion.

Date of Board/Committee meeting as mentioned above

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CONVERT THE CCPS IN DEMAT ACCOUNTS OF THE CCPS HOLDERS INTO EQUITY SHARES AT THE CONVERSION RATIO.

6. After date of allotment of Equity Shares as above, Registrar will send individual intimations to all CCPS holders holding CCPS in physical and demat form, containing relevant information in each case, including the following :

(i) To CCPS Holders holding share certificates in physical form: that CCPS have ceased to exist, and that the certificate for Equity Shares allotted on conversion of the CCPS would be sent to the CCPS Holder once the original share certificates are surrendered to the Registrar in this regard; and

(ii) To CCPS Holders who held CCPS in demat form – that the ISIN had been deactivated, and that the requisite Equity Shares have been credited to their demat accounts by way of a corporate action

Within five working days of the date of Board meeting as stated in 5. above.

7. Listing of allotted Equity Shares arising out of the exercise of Issuer Call Option and consequent Conversion of CCPS into Equity Shares

Application for listing within 7 working days from allotment..

Listing of Equity shares would be consequent to the Stock Exchange approval

The aforesaid procedure in relation to the exercise of the Issuer Call Option, with appropriate modifications, would also be applicable to the compulsory conversion of CCPS at the end of five years from the date of Allotment.

*Investors may note that the aforesaid activities and time periods are indicative and subject to changes, modifications or replacements on account of several factors, many of them which may be unforeseen and not within our Company’s control, and that these timelines are subject to factors beyond our control including receipt of regulatory approvals. The assumptions on basis of which the aforesaid timelines have been drawn may not fructify. These timelines have been set out for the benefit and understanding of the investors, and no responsibility shall lie on our Company or the Lead Manager for any of the aforesaid timelines not being met for any reasons whatsoever. Further, the aforesaid is an indicative timeline containing the major steps involved, and this may involve other steps in the procedure for exercise of CCPS Holder Put Option or the Issuer Call Option and consequential matters not detailed hereinabove.

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Notes:

(i) Investors are required to note that our Company, Directors or any other person whatsoever shall not be liable to any CCPS Holder for any loss which may caused to him due to price fluctuations of CCPS between the period the application is submitted to the Registrar and allotment and listing of Equity Shares on Conversion of the CCPS.

(ii) Investors are required to note that the procedural disclosures hereinabove are made for understanding of investors, and every Applicant in this Issue and every holder of CCPS is deemed to have given to the Board (including Committee thereof duly authorized) of our Company the unqualified and irrevocable power to finally determine the most appropriate procedure to accomplish the Conversion including pursuant to put and call options, including to change the aforesaid procedures, develop alternative or additional procedures and to determine requisite terms and conditions in relation thereo, so as to meet the objectives of our Company and of the CCPS Holders. The aforesaid powers of the Board (including Committee thereof duly authorised) also extend to otherwise determining matters in relation to the CCPS which may not have been specifically provided for/detailed herein or in the CAF or in the Memorandum or Articles, and all CCPS Holders by subscribing to/buying the CCPS are deemed to consent to the aforesaid powers as described hereinabove of the Board (including Committee thereof duly authorized)

(iii) Every Applicant and CCPS Holder is also deemed to have given his/her/its irreovocable and unconditional consent and authorization to the Board (including Committee thereof duly authorized) and any person that the Board may nominate (including the Registrar) to do all acts, deeds and things deemed necessary, incidental or ancillary for purposes of Conversion, whether pursuant to a put/call option or otherwise. Transferees of CCPS will be equally bound by the aforesaid as the allottees of the CCPS.

Manner of making application for exercise of CCPS Holder Put Option

i. In case of CCPS held in Physical Mode

During the Conversion Period, the CCPS-holder should send his application in the Conversion Request Form, which will be available on the website of our Company and the Registrar from the date of listing of the CCPS being issued in the Issue. The same can also be sent by post or email by the Registrar on receipt of request from CCPS holder. The Conversion Request Form should be completed in all respects and should be accompanied with all necessary annexures and enclosures as may be stated therein, including the original CCPS certificates, with an entry on the reverse of the CCPS Certificate that they are being surrendered for the purposes of Conversion.

ii. In case of CCPS held in DEMAT Mode

The Registrar of our Company, will before the Conversion Period open a special depository account with NSDL “TSL- A/C CCPS Conversion” with a DP (the “Special Depository Account”). Our Company will open the Special Depository Account through the Registrar with NSDL within 2 working days of the commencement of the Conversion Period and the details of the account will be included by our Company in the Conversion Application Form. CCPS Holders of our Company having the depository account with CDSL must use inter depository delivery instruction slip for the purpose of crediting their CCPS in favour of the Special Depository Account with NSDL. Beneficial owners (holders of CCPS in dematerialized form) who wish to tender their CCPS for exercise, will be required to send their application for issue of Equity Shares on the Conversion Request Form sent separately, along with a photocopy of the delivery instruction in “off market” mode or counterfoil of the delivery instruction in “off market” mode, duly acknowledged by the depository participant (“DP”) in favour of the special depository account, to the Registrar of our Company, Cameo Corporate Services Limited, at any time or after the commencement of the Conversion Period. Equity Shares allotted on conversion

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of valid CCPS will be dispatched /credited to the applicant’s electronic account subject to requisite approvals from the statutory authorities. On allotment, our Company shall apply for listing of these Equity Shares.

Variance in the terms of the CCPS

The rights, privileges and conditions attached to the CCPS may be modified or varied or abrogated with the consent of the holders of the CCPS by a resolution passed with simple majority passed at a meeting of the CCPS Holders present and voting, provided that nothing in such resolution shall be operative against our Company when such resolution modifies or varies the terms and conditions governing the CCPS if the same is not acceptable to our Company. At a meeting of the CCPS Holders, every CCPS Holder, and in the case of joint holders, first holder of the CCPS shall be entitled to vote, either in person or by proxy, in respect of such CCPS. The CCPS Holder will be entitled to one vote on a show of hands and the CCPS Holders voting rights on a poll shall be in proportion to the outstanding number of the CCPS held by such CCPS Holder from the CCPS Holders present and voting. The quorum for such meetings shall be at least five CCPS Holders present in person. The proceedings of the meeting of the CCPS Holders shall be governed by the provisions contained in our Articles regarding meetings of shareholders and such other rules in force for the time being to the extent applicable and in relation to matters not otherwise provided for in terms of the Issue.

Caution:

Investors are advised not to close or transfer their DEMAT account between the period of application for Conversion, whether in exercise of CCPS Holder Put Option or Issuer Call Option or otherwise, till the time of allotment/receipt of credit in their account so as to avoid rejection of credit from the Depositories and resultant delay in receiving the intimation of Allotment;

CCPS may not be converted from within United States by/or on behalf of US citizens. Each person exercising the CCPS Holder Put Option or otherwise making an application for Conversion must provide a written certification that he/she is not a US person or that the CCPS is not being converted on behalf of US citizen. No application for Conversion, whether in exercise of CCPS Holder Put Option or Issuer Call Option or otherwise will be accepted from any person whose address is within United States;

General Instruction

Payment by Stockinvest

In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in this Issue

Underwriting

The present Issue is not underwritten.

Issue Period

Issue Opens on [ ]Last date for receiving request for Split Application Forms [ ]Issue Closes on [ ]

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Minimum Subscription and Additional subscription by Promoters

If our Company does not receive the minimum subscription of 90% of this Issue, on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 15(fifteen) days from the date of closure of this Issue. If there is a delay in the refund of subscription by more than 8 days after our Company becomes liable to pay the subscription amount (i.e. 15(fifteen) days after closure of this Issue), our Company shall pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act 1956.

The Issue will become undersusbcribed after considering the number of shares applied as per the entitlement plus additional shares. The undersubscribed portion can be applied for only after the close of the Issue.

Our Promoters have confirmed that each of them along with the entities controlled by them (together referred to as “Promoters” in this clause) intend to subscribe to the full extent of their entitlement in the Issue. Each of our Promoters reserve their right to subscribe to their entitlement in this Issue, either by themselves or through a combination of entities controlled by them, including by subscribing for renunciation if any made by the Promoter Group. Our Promoters have provided undertakings to our Company expressing their intention to apply for additional CCPS in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and consequent allotment, our Promoters may acquire CCPS over and above their entitlement in the Issue, which may result in an increase of their percentage of CCPS beyond the percentage of their entitlement, and percentage of equity shareholding (on Conversion) being above their current percentage of equity shareholding with the entitlement of CCPS and consequent Conversion into Equity Shares in the Issue. This subscription and acquisition of additional CCPS (and consequently Equity Shares) by each of our Promoters through this Issue, if any, will not result in change of control of the management of our Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the chapter titled “Objects of the Issue” beginning on page [ ] of the Draft Letter of Offer, there is no other intention/purpose for this Issue, including any intention to delist our Company, even if, as a result of allotments to our Promoters in this Issue, our Promoter’s shareholding in our Company (as detailed hereinabove) exceeds their current shareholding. Our Promoters shall subscribe to such unsubscribed portion as per the relevant legal provisions. Allotment to any of our Promoters of any unsubscribed portion, over and above their entitlement, shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.


In case the permission to deal in and for an official quotation of the Compulsorily Convertible Preference Shares is not granted by the Stock Exchange, the Issuer shall forthwith repay without interest, all monies received from the applicants in pursuance of the Draft Letter of Offer and if such money is not repaid within eight days after the day from which the Issuer is liable to repay it, the Issuer shall pay interest as prescribed under Section 73 (2) / 73 (2A) of the Companies Act 1956.

Allotment Schedule

• Our Company agrees that as far as possible allotment of securities offered to the shareholders shall be made within 15(fifteen) days from the date of the closure of the Issue.

• Our Company further agrees that it shall pay interest @ 15% per annum for the delayed period if the allotment has not been made and/or allotment letters / the refund orders have not been despatched to the applicants/ refund instruction beyond 8 days from the date specified above.

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Disposal of applications and application money

No separate receipt will be issued for application money received. However, the collection centres as listed in the CAF, will acknowledge its receipt by stamping and returning the acknowledgement slip at the bottom of each CAF. In the event of shares not being allotted in full, the excess amount paid on application will be refunded to the applicant or the refund instructions will be given within 2 working days from the date of Allotment in the Issue.

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 therefore. In case an application is rejected in full the whole of the application money received will be refunded to the applicant. Where an application is rejected in part, the excess application money, if any will be refunded to the applicant.

For further instruction, please read the Composite Application Form (CAF) carefully.

Unsubscribed Compulsorily Convertible Preference Shares

The unsubscribed portion, if any of the Compulsorily Convertible Preference Shares offered to the shareholders, after considering the applications for Rights/Renunciation and additional Compulsorily Convertible Preference Shares, as above, shall be disposed by the Board of the Company (including a Committee thereof duly authorised) at their full discretion and absolute authority, in such manner as they think most beneficial to our Company and the decision of the Board of the Company (including a Committee thereof duly authorised) in this regard shall be final and binding. For Compulsorily Convertible Preference Shares allotted in physical/demat form, the share certificates will be dispatched/demat credit will be completed within two working days of the date of Allotment in the Issue.

General instructions for applicants

(a) Please read the instructions printed on the enclosed CAF carefully.

(b) Application should be made on the printed CAF, provided by our Company except as mentioned under the head Application on Plain Paper 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 applicants, details of occupation, address, father’s / husband’s name must be filled in block letters.

(c) Payments should be made in cash/cheque/demand draft drawn on any bank which is situated at and is a member of sub-member of the banker’s clearing house located at the centre where application is accepted. Outstation cheques/ demand drafts will not be accepted and application(s) accompanied by such cheques/demand drafts will be rejected. The Registrar will not accept cash along with CAF

(d) 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 our Company or Lead Manager to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by our Company for collecting applications, will have to make payment by Demand Draft payable at Chennai of amount net of bank and postal charges, and send their application forms 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.

(e) PAN Number: Whenever the application(s) is / are made, the applicant or in the case of an application in joint names, each of the applicants, should mention his / her Permanent Account Number (PAN) allotted under the IT Act. The copy of the PAN card or PAN allotment letter is not required to be submitted with the CAF. Applications without this information will be considered incomplete and are

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liable to be rejected. It is to be specifically noted that Applicant should not submit the GIR number instead of the PAN as the application is liable to be rejected on this ground. In terms of SEBI Circular bearing no. MRD/DoP/Cir-20/2008 dated June 30, 2008, certain categories of investors (namely the Central Government, State Government, and the officials appointed by the courts e.g. Official liquidator, Court receiver etc. (under the category of Government)) shall be exempted from submitting their PAN, only if such organisations submit sufficient documentary evidence to support the veracity of their claim for such exemption.

(f) Bank Account Details: It is mandatory for applicants 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. Shareholders may please note that for shares held in DEMAT mode, the bank account details shall be obtained from the depositories. Shareholders may ensure that the bank account details are updated with the depositories.

(g) Payment by cash: The payment against the application should not be effected in cash if the amount to be paid is Rs. 20,000 or more. 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. Payment against the application if made in cash, subject to conditions as mentioned above, should be made only to the Bankers to the Issue.

(h) Signatures should be either in English or Hindi or in any other language specified in the Eight 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 our Company or depositories.

(i) 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 our 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.

(j) 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 our Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. 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.

(k) Application(s) received from Non-Resident / NRIs, or persons of Indian origin residing abroad for allotment of Compulsorily Convertible Preference 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 Compulsorily Convertible Preference Shares , subsequent issue and allotment of Equity Shares on conversion of Compulsorily Convertible Preference Shares, interest, export of share certificates, etc. In case a Non-Resident 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.

(l) All communication in connection with application for the Compulsorily Convertible Preference 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 applicant Equity Shareholder, 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 Registrar to our

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Company, Cameo Corporate Services Limited, in the case of Compulsorily Convertible Preference Shares held in physical form and to the repective depository participant, in case of Compulsorily Convertible Preference Shares held in dematerialized form.

(m) Split forms cannot be re-split.

(n) Only the person or persons to whom Compulsorily Convertible Preference Shares have been offered and not renouncee(s) shall be entitled to obtain split forms.

(o) Applicants must write their CAF number at the back of the cheque / demand draft.

(p) Only one mode of payment per application should be used. The payment must be either in cash or 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.

(q) 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 (f) above)

(r) 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

Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following:

• CAFs, which are not completed or are not accompanied with the application money payable, are liable to be rejected;

• Amount paid does not tally with the amount payable for;

• In case of physical shareholders, bank account details (for refund) are not given;

• Age of first applicant not given (Applicable only for Renouncees);

• PAN not given, irrespective of the size of the Appliation, except as specified in SEBI Circular bearing no. MRD/DoP/Cir-20/2008 dated June 30, 2008, wherein certain categories of investors (namely the Central Government, State Government, and the officials appointed by the courts e.g. Official liquidator, Court receiver etc. (under the category of Government)) have been exempted from submitting their PAN, only if such organisations submit sufficient documentary evidence to support the veracity of their claim for such exemption. ;

• In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted;

• If the signature of the existing shareholder does not match with the one given on the Application Form and for renouncees if the signature does not match with the records available with their depositories;

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• If the Applicant desires to receive Compulsorily Convertible Preference Shares in electronic form, but the Application Form does not have the Applicant’s depository account details (in which case the application may not be rejected and the Registrar may dispatch share certificate(s) in physical form) ;

• Application Forms are not submitted by the Applicants within the time prescribed as per the Application Form and the Draft Letter of Offer;

• Applications not duly signed by the sole/joint Applicants;

• Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue;

• Applications accompanied by Stockinvest;

• In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Applicants (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s identity (in which case the application may not be rejected and the Registrar may dispatch share certificate(s) in physical form);

• Applications by US persons;

• Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided.

• FIIs applying on forms used for accepting shares renounced in their favour or applications for additional shares without the copy of RBi permission / approval enclosed will be rejected;

• Multiple applications

Disposal of application and application money

No acknowledgment will be issued for the application moneys received by our 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 Compulsorily Convertible Preference Shares allotted, will be refunded to the applicant within fifteen days from the closure of the Issue in accordance with Section 73 of the Companies Act, 1956.

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 under an appropriate separate head in the balance sheet of our Company indicating the purpose for which such moneys has been utilised.

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(iii) Details of all such unutilised 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 unutilised moneys have been invested.

The funds received against this Issue will be kept in a separate bank account and our Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of this Issue has been received by our Company.

Interest in Case of Delay in Despatch of Allotment Letters/ Refund Orders

Our Company will issue and dispatch share certificates within a period of two days from the date of allotment in the Issue. Refund orders and/or electronic credit of refunds shall be dispatched/completed within 15(fifteen) days from the date of closure of the Issue. If If such money is not repaid within 8 days from the day our Company becomes liable to pay it, our Company shall pay that money with interest at the rate of 15% per annum as stipulated under Section 73 of the Act, 1956.

Our Company agrees that as far as possible the allotment of the Compulsorily Convertible Preference Shares shall be made within fifteen (15) days of the closure of Issue.

Undertakings by the 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 securities are to be listed will be taken within seven working days of finalization of basis of allotment.

3. The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post or any other mode 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(fifteen) 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 valid applicants shall be dispatched within the specified time.

6. No further issue of securities affecting equity capital of our Company except allotments of shares under various ESOP schemes 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. Our Company accepts full responsibility for the accuracy of information given in the Draft Letter of Offer and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in the Draft Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts.

8. All information shall be made available by the Lead Manager and the Issuer to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc.

Important

• Please read the Draft Letter of Offer carefully before taking any action. The instructions contained in the accompanying Composite Application Form (CAF) are an integral part of the conditions of the

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Draft Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected.

• All enquiries in connection with the Draft Letter of Offer or accompanying CAF and requests for Split Application Forms 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 ‘Tebma Shipyards Limited – Rights Issue’ on the envelope) to the Registrar to the Issue at the following address:

Cameo Corporate Services Ltd Unit: Tebma Shipyards Ltd - CCPS Subramanian Building No.1 Club House Road Chennai: 600 002 Ph : 044-28460390/0014 Email : [email protected] Contact Person : Ms.Sreepriya K Assistant Manager

• It is to be specifically noted that this Issue of Compulsorily Convertible Preference Shares is subject to the section entitled ‘Risk Factors’ beginning on page x of the Draft Letter of Offer

• 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.

The Issue will not be kept open for more than 15(fifteen) days unless extended, in which case it will be kept open for a maximum of 30(thirty) days.

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PROVISIONS OF ARTICLES OF ASSOCIATION OF THE COMPANY

Unclassified shares

6. Subject to the provisions of Section 81 of the Act and these Articles any unclassified shares (whether forming part of the original share capital or of any increased share capital of the company) may be issued either with sanction of the company in general meeting by the Board and upon such terms and conditions and the issue of such shares may direct and if no such direction be given and in all other cases, as the Board shall determine and in particular such and in distribution of the assets of the company.

Allotment of shares

7. Subject to the provision of these Articles the shares shall be under the control of the Board who may allot or otherwise dispose of the same to such persons on such terms and conditions at such times either at par or at premium and for such consideration as the Board thinks fit. Provided that option or rights to call of shares shall not be given to any person except with the sanction of the Company in General Meeting, Provided that, where at any time it is proposed to increase the subscribed capital of the Company by the allotment of further shares, then, subject to the provisions of Section 81 (1-A) of the Act, the Board shall issue such shares in the manner set out in Section 81 of the Act.

Return of allotments

8. As regards all allotments made from time to time the Company shall comply with Section 75 of the Act.

Restriction of allotments

9. The Company shall comply with Section 69 of the Act in respect of an offer of its shares to the public for subscription.

Redeemable preference shares

10. Subject to the provisions of these Articles, the Company shall have power to issue preference shares carrying a right to redemption out of profits which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or liable to be redeemed at the option of the Company and the Board may subject to the provisions of Section 80 of the Act, exercise such power in such manner as may be provided in these Articles.

Board may allot shares for consideration other than cash

11. The Directors may issue and allot shares in the capital of the Company as partly or fully paid up in consideration of any property sold or goods transferred or machinery supplied or services rendered to the Company in the conduct of its business and shares which may be issued as fully or partly paid - up shares and if so issued shall be deemed to be fully or partly paid up shares as the case may be.

Commission and brokerage

12. The Company may exercise the powers of paying commission conferred by Section 76 of the act and in such case shall comply with the requirements of that Section. Such Commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The Company may also on any issue of shares or debentures pay such brokerage as may be lawful.

Shares at a discount

13. With the previous authority of the Company in general meeting and the sanction of the Company Law Board and upon otherwise complying with Section 79 of the Act, the Board may issue at a discount shares of a class already issued.

Position of new shares

14. Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares shall be considered as part of the existing capital and shall be subject to the provisions therein contained with reference to the payment of calls and instalment forfeiture, lien surrender transfer and transmission of dividend and otherwise.

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Instalments on shares by duly paid

15. If, by conditions of allotment of any share the whole or part of the amount or issue price thereof shall be payable by installments. Every such installments shall when due be paid to the Company by the person who for the time being shall be registered holder of the share or by his executor or administrator.

Trusts not recognised

16. Save as herein otherwise provided and subject to Section 187 C of the Act, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not except as ordered by a Court of competent jurisdiction or as by statute required be bound to recognise any equitable or other claim to or in interest in such share on the part of any other person.

Who may be Registered

17. Shares may be registered in the name of any person, company or other body corporate. Not more than four persons shall be registered as joint holders of any share.

Register 18. The Company shall cause to be kept a Register of Members in accordance with provisions of the Act.

Shares to be numbered progressively & no Share to be subdivided

19. The shares in the capital shall be numbered progressively according to their several denomination and except in the manner hereinafter mentioned no share shall be subdivided.

Acceptance of shares

20. An application signed by or on behalf of any applicant for shares in the Company, followed by an allotment of any share shall be an acceptance of shares within the meaning of these Articles and every person who thus or otherwise accepts any share and whose name is on the Register shall for the purpose of these Articles be a member.

Deposit and call to be payable immediately

21. The money if any which the Director shall on the allotment of any shares being made by them, require or direct to be paid by way of deposit call or otherwise in respect of any shares allotted by them shall immediately on the inscription of name of the allottees in the register as the holder of such shares become a debt due to and recoverable by the Company from the allottee of the shares and shall be paid by him accordingly.

Liability of Members

22. Every member of his heirs, executors or administrators shall pay to the Company the proportion of the capital represented by his share or shares which may, for the time being remain unpaid thereon in such amounts at such time or times at such place or places and in such manner as the Directors shall from time to time in accordance with the Company’s regulations requires or fix for the payment thereof.

Of joint holders the persons first named deemed soleholders

23. If any share stands in the names of two or more persons, the persons first named in the Register shall as regards receipt of dividends or bonus service of notices and all or any other matters connected with the Company except at voting at meetings and the transfer of share be deemed the sole - holder thereof.

Company not bound to recognize any interest in share other than that of registered holder

24. If any share stands in the names of two or more persons the persons first named in the Register shall as regards receipt of dividends or bonus service of notices and all or any other matters connected with the Company except at voting at meetings and the transfer of share be deemed the sole - holder thereof.

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CERTIFICATES

Certificates to be issued

25. The certificate of title of share and duplicates thereof where necessary shall be issued under the seal of the Company which shall be affixed in the presence of Two Directors and Secretary or some other person appointed by the Board for the purpose and signed by them in the manner laid down in the Companies [issue of Share Certificates] Rules 1960. Share certificates shall be issued in marketable lots.

Issue of share certificates

26. The issue of share certificates and duplicates and the issue of new share certificates which are surrendered for cancellation due to their being defaced, torn, old, decrepit or worn out or the cages for recording transfers having been utilised or of share certificates which are lost or destroyed shall be in accordance with the provisions of the Companies [issue of Share Certificate] Rules, 1960 or any statutory modification or re-enactment thereof. If any share certificates be lost or destroyed, then proof thereof to the satisfaction of the Directors and on such indemnity as the Directors think fit being given, a new certificate in lieu thereof shall be given to the party entitled to the shares to which such lost or destroyed certificate shall relate.

Members right to certificate

27. Every member shall be entitled to one certificate for all the shares of each class registered in his name or if the Directors so approve to several certificates each for one or more of each shares. Unless the conditions of issue of any shares otherwise provide the company shall within three months after the date of allotment and on surrender to the Company of its Letter of Allotment or its fractional coupons of requisite value [save in the case of issue against letters of acceptance or of renunciation or in cases of issue of bonus shares] complete and have ready for delivery the certificates of such shares. In respect of any share held jointly by several persons company shall not be bound to issue more than one certificate and delivery of a certificate to one of several joint holders shall be sufficient delivery to all such holders.

Share / Debenture Certificates shall be issued in marketable lots and where share / debenture certificates are issued for either more or less than marketable lots, sub-division / consolidation into marketable lots shall be done free of charge.

The Company shall not make any charge :-

a) for subdivision and consolidations of share certificates into denominations corresponding to the market units of trading.

b) for issue of new certificates in replacement of those which are old decrepit or worn out or where the cages on the reverse for recording transfers have been fully utilised.

The Company shall not charge any fees exceeding those which may be agreed upon with the Stock Exchanges(s) on which the Company may get its shares listed.

a) for issue of new certificates in replacement of those that are torn, defaced, lost or destroyed;

b) for subdivisions and consolidation of share certificates into denominations other than those fixed for the market units of trading.

Board may make calls

28. Every certificate shall specify the name or names of the person or persons in whose favour the certificate is issued, the shares to which it relates and the amount paid up thereon. When issued with the same number as a share certificate which

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has been defaced, lost or destroyed, it shall state on the face of it and against the stud or counter - foil that it is a duplicate issue for the one so defaced, lost or destroyed.

CALLS

Extension of call 29. The Board may, from time to time, subject to the terms on which any share may have been issued, and subject to the provisions of section 91 of the Act make such calls as the Board thinks fit upon the members in respect of all money unpaid on the shares held by them respectively, whether on account of the nominal value of these shares or by way of premium and not by the conditions of allotment thereof, made payable at fixed times, and each member shall pay the amount of every calls so made to him to the persons and at the times and places appointed by the Board Unless otherwise determined by the Board, no call shall exceed one half of the nominal amount of the share or be made payable within one month after the last preceding call was payable. Not less than 30 days notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid.

“Option or right to call of shares shall not be given to any person except with the sanction of the company in General Meeting” – Vide Special Resolution dated 14th June, 1995.

Date of call 30. The Board may, from time to time, at their discretion extend the time fixed for the payment of any call and may extend such time to all or any of the members who on account of residence at a distance or some other cause, may be deemed fairly entitled to such extension but no members shall as a mater of right be entitled to such extension, save as matter of grace and favour.

Joint holder’s liability on call

31. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed and may be paid by instalments.

Call to carry interest

32. The joint holders of a share shall jointly and severally be liable to pay all calls in respect thereof.

Calls and instalments when payable

33. i) If a sum called in respect of shares is not paid before or on the day appointed for payment thereof the person from whom the sum is due shall pay interest thereon from the day appointed for payment thereof to the time of actual payment at a rate to be determined by the Directors.

ii) The Directors shall be at liberty to waive the payments of any such interest wholly or in part in the case of any person liable to pay such interest on calls.

Calls may be revoked

34. Any sum which by the term of issue of share becomes payable on allotment or at any fixed date or by instalments at fixed times, whether on account of the nominal value of the share or by way of premium, shall for the purpose of these regulations be deemed to be a call duly made payable on the date on which by terms of issue such sum becomes payable.

Evidence in action of call

35. A call may be revoked or postponed at the discretion of the Board.

Sums deemed to be calls

36. On the trial or hearing of any action or suit brought by the company against any share - holder or his representative to recover any debt or money claimed to be due to the company in respect of his shares, it shall be sufficient to prove that the name of the defendant is or was when the claim arose, on the register of members of the company as a holder or one of the holders of the members of shares in respect of

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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 nor that a quorum was present at the Board at which any call was made, nor meeting at which any call made duly convened or constituted, nor any other matter whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

Partial payment or any indulgence shown not to preclude for forfeiture

37. Any sum, which by the terms of issue of a share / debenture becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share / debenture of by way of premium shall for the purpose of these Articles be deemed to be a call duly made and payable on the date on which by the terms of issue the same become payable and in case of nonpayment all the relevant provisions of these Articles as to payment of interest and expenses for forfeiture or otherwise. shall apply as if such sum had become payable by virtue of a call duly made and notified.

Payment of calls in advance.

38. Neither the receipt by the company of a portion of any money which shall from time to time be due from any member of the company in respect of his shares either by way of principal or interest nor any indulgence granted by the company in respect of the payment of any such money shall preclude the company from thereafter proceeding to enforce a forfeiture of such shares as hereinafter provided for non-payment of whole of any balance due in respect of the share.

If call or instalment not paid notice may be given

39. The Board may, if it thinks fit, receive from any member willing to advance the same all of any part of the money due upon the share held by him beyond the sums actually called for and upon the money so paid or satisfied in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such a rate not exceeding 6% p.a or as the member paying such sum in advance and the Board agrees upon. Money so paid in excess of the amount of calls shall not rank for dividends or confer a right to participate in profits. The Board may at any time repay the amount so advanced upon giving to such member not less than one month’s notice in writing.

FORFEITURE AND LIEN

Form of notice 40. If any member fails to pay any call, instalment of a call on or before the day appointed for the payment of the same or any such extension thereof as aforesaid, the Board may at any time thereafter during such time as the call or installment remains unpaid serve a notice on such member or his legal representative or if service of notice is not possible by way of an advertisement requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the company by reason of such non-payment.

If notice not complied with sharesmay be forfeited

41. The notice shall name a day [not being less than 30 days from the date of the notice] and a place or places on and at which such call or instalment and such interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made or instalment is payable will be liable to be forfeited.

Notice after forfeiture

42. If the requisitions of any such notice as aforesaid be not complied with any shares in respect of such notice has been given may at any time in respect thereof, be forfeited by a resolution of the Board to that effect where upon the holder of such shares shall cease to have any interest therein and his name [as holder of such shares] shall be removed from Register. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

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Forfeited share to become property of the company

43. When any share 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 with the date thereof shall forthwith be made in the Register, but not forfeiture shall be in any manner invalidated by a commission or neglect to give such notice or to make such entry as aforesaid.

Power to annual forfeiture

44. Any share so forfeited shall be deemed to be the property of the Company and the Board may sell re-allot or otherwise dispose of the same in such manner as thinks fit.

Arrears to be paid notwithstanding forfetiure

45. The Board may at any time before any share so forfeited shall have been sold, reallotted or otherwise disposed of annual the forfeiture thereof upon such conditions as it thinks fit.

Effect of forfetiure 46. Any member whose shares have been forfeited shall notwithstanding the forfeiture be liable to pay shall forthwith pay to the Company all calls instalment, interests, expenses and any other moneys owing upon or in respect of such shares at the time of the forfeiture with interest thereon from the time of the forfeiture until payment as such rate not exceeding eighteen percent per annum as the Directors may determine and the Directors may enforce the payment thereof it they think fit.

Evidence of forfeiture

47. The forfeiture of a share shall involve extinction, at the time of the forfeiture of all interest in and all claims and demands against the Company, in respect of the share and all other rights incidental to the share including dividends, except only such of those rights as by these presents are expressly saved.

Forfeiture provision to apply to non- payment in terms of issue

48. A certificate in writing under the hands of one Director that a call in respect of a share was made and due notice thereof given and that default in payment was made forfeiture and that forfeiture of the share was made by a resolution, of the Directors to that effect shall be conclusive evidence of the facts stated therein.

Company’s lien on shares

49. The provision of Articles 40 to 48 hereof shall apply in the case of non-payment of any sum which by the terms of a share becomes payable at a fixed time whether on account of the nominal value of a share or by way of premium, if the same had been payable by virtue of a call made and notified.

Share exempt form lien

50. The Company shall have a first and paramount lien upon every share not being fully paid up registered in the name of any member [whether solely or jointly with others] and upon the proceeds of sale thereof for moneys called or payable at a fixed time in respect of such share whether the time for the payment thereof shall have actually arrived except upon the footing and condition that Article 16 hereof is to have full effect. Such lien shall extend to all dividends from time to time declared in respect of such shares. Unless otherwise agreed the registration of a transfer of a share shall operate as waiver of the Company’s lien, if any, on such share.

As to enforcing lien by sale

51 The Board may at any time declare any share wholly or in part exempt from lien.

Application of proceeds of sales

52. For the purpose of enforcing such lien the Board may sell the share subject thereof in such manner as it thinks fit, but no sale shall be made until such time for payment as aforesaid shall have arrived and until notice in writing of the intention to sell shall have been served on such member, his executor or administrator or his committee curator bonus or other legal representatives as the case may be and default shall have been made by him or them in the payment of the money called or payable at a fixed time in respect of such share for seven days after the date of such notice.

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Validity of sales in exercise on lien and after forfeiture

53. The net proceeds of the sale shall be received by the Company and applied in or towards payment of such part of the amount in respect of which the lien exists as is presently payable and the residue if any shall [subject to alike lien for the sums not presently payable as existed upon the share before the sale] be appropriated in such manner as may be deemed fit by the Board and the defaulter shall have no right whatsoever on the sale proceeds.

Board may issue new certificates

54. Upon any sale after forfeiture or enforcing a lien in proposed exercise of the powers hereinbefore given, the Board may appoint some person to execute an instrument of transfer of the share sold and cause the purchaser’s name to be entered in the Register in respect of the share sold and the purchaser shall not be bound to see the regularity of the proceeding, nor to the application of the purchase money and after his name has been entered in the Register in respect of such share 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.

Surrender of shares 55. Where any share under the powers in this behalf herein contained is sold by the board and the certificates in respect thereof has not been delivered upto the Company by the former holder of such shares the Board may issue a new certificate for such share distinguishing it in such manner as it may think fit from the certificate not so delivered up.

SURRENDER OF SHARES

Registration of Transfer or transmission

56. Subject to the provision of Sections 100 to 104 of the Act the Board may accept from any member the surrender of all or any of his shares on such terms and condition as may be agreed.

TRANSMISSION AND TRANSFER

Instrument of transfer to be in writing

57. Except in the case where the Directors have declined to register the transfer of a share in terms of Article 63 the transfer or transmission of shares shall be registered by the Company within one month after the application for the registration of the transfer or transmission of shares, supported by the necessary documents referred to in these Articles is submitted to Company and the Company shall deliver the share certificate or share certificates to the transferee of the person to whom the shares have been transmitted within one month from the date of submission of application for the registration aforesaid.

Separate instrument to be executed

58. The instrument of the transfer shall be in writing and the provision of Sec. 108 of the Companies act 1956 and of any statutory modifications thereof for the time being shall be duly complied with in respect of all transfer of shares and the registration thereof. The shares of the Company are freely transferable provided such shares are fully paid up and the Company has no lien on the said shares.

To be executed by Transfer or and Transferee

59. Separate instrument of transfer shall be executed for each class of shares.

Transfer to be presented with evidence of the title

60. Every such instrument of transfer shall be signed by or on behalf of both the transfer and the transferee and the transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof.

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Conditions of registration of transfer

61. Every instrument of transfer shall be presented to the Company and duly stamped for registration accompanied by such evidence as the Directors may require to prove the title of the transferor, his right to transfer the shares and generally under the subject to such conditions and regulations as the Directors shall from time to time prescribe and every registered instrument of transfer shall remain in the custody of the Company until destroyed by order of the Directors.

Director’s power to refuse transfer

62. Along with the instrument of transfer, the certificate of the share to be transferred or if no such certificate is in existence, the letter of allotment must be delivered to the Company.

Share Transfer Committee

63. Subject to the provisions of Section III of the Act the Directors may at its discretion and without assigning any reason, decline to register or acknowledge any transfer of shares whether fully paid or not [notwithstanding the proposed transferee be already a member] but in such cases it shall within one month from the date on which the instrument of transfer was lodged with the company send to the transferee and transferor notice of the refusal to register such transfer. Provided that registration of a transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person indebted to the company on any account whatsoever except a lien on the shares.

No transfer to minor 64. The Board shall have power to constitute a committee of Board of Directors to deal with the transfer of shares / debentures in general to issue duplicate share / debenture certificates and that such committee shall keep complete records of issue of share certificate and debenture certificates under the seal of the company and in the manner required by the companies [issue of share certificate] Rules, 1950 and comply with the provisions of the Act and Rules made thereunder.

Notice of application when to be given

65. No transfer shall be made to a minor or person of unsound mind.

Registration of transfer conclusive evidence

66. Where in the case of partly paid shares an application for registration is made by the transferor, the company shall give notice of the application to transferee in accordance with the provision of section 110 of the Act.

Transfer book when closed

67. The registration of a transfer shall be conclusive evidence of approval by the Board of transfer so far only as the shares, debentures comprised in such transfer are concerned but no further or otherwise shall it incapacitate the Board from claiming the right to refuse registration of transfer of shares, debentures on any subsequent transfer applied for.

Death of one or more joint holder of shares

68. The Directors shall have power on giving not less than seven days previous notice by advertisement in some newspaper circulating in the district in which the Registered Office of the company is situated to close the Register of Members or the Register of Debenture holder of such times and for any period or periods not exceeding in the aggregate forty five days in each year, but not exceeding thirty days at one time.

Title of share of deceased memeber

69. In the case of the death of any one or more of the persons named in the Register as the joint holders of any share, the survivors or survivor shall be only persons recognised by the Company as having any title to or interest in such share but nothing herein contained shall be taken to or release the estate of a deceased joint - holder(s) from any liability on shares held by him or them jointly with any other person.

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Persons right to shares in case of death

70. The executors or administrators of deceased member [whether European, Hindu, Mohammedan, Parsi or otherwise, not being one of the two or more joint - holder] shall be the only persons recognized by the Company having any title to the share registered in the name of such member and the Company shall not be bound to recognize such executors or administrator unless such executors or administrators shall have first obtained Probate of Letters of Administration as the case may be from a competent court in India provided that in any case where the Directors in their absolute discretion think fit the Directors may dispense with the production of Probate of Letters of Administration and under the next Article, register the name any person who claims to be absolutely entitled to the shares standing in name of a deceased member as a member.

Company not liable for disregard to a notice prohibiting registration of a transfer.

71. Subject to the provisions of the last two preceding Articles any person becoming entitled to shares in consequence of the death, lunacy bankruptcy, or insolvency of any member or by any lawful means other by a transfer in accordance with these presents, may upon producing such evidence that he sustain the character in respect of which he proposed to act under this Article, or of his title either be registered himself as holder of the shares by delivering or sending to the Company a notice in writing signed by him stating the same or elect to have some person nominated by him registered as such holder provided nevertheless that if such person shall elect to have his nominees registered he will testify the election by execution to his nominee an instrument of transfer in accordance with the provision herein contained nominee and until he does so he shall not be free from any liability in respect of the shares.

Fees for transfer & transmission

72. The company shall incur no liability or responsibility whatsoever in consequence of its registering or giving effect to any transfer of shares, made or purporting to be made by any apparent legal owner thereof [as shown or appearing in the Register] to the prejudice of person having or claiming any equitable right, title or interest to or in the same shares notwithstanding that the Company may have had notice of such equitable right title or interest or notice or referred thereto in any book of the company and shall not be bound or required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or interest or be under any liability whatsoever for refusing or neglecting so to do through it may have been entered or referred to in some book of the Company, but the Company shall nevertheless be at liberty to regard and attend to any such notice and give effect thereto.

Power to increase captial

73. No fees shall be charged for Registration of Transfer Probate, Succession Certificate and Letters of Administration, Certificates of Death or Marriage, Power of Attorney or similar other document.

ALTERATION OF CAPITAL

Provision relating to the issue of shares

74. The Company in general meeting may, from time to time increase its capital by the creation of new shares of such amount as may be deemed expedient.

Inequality in number of new shares

75. Subject to any special rights or privileges for the time being attached to any shares in the capital of the Company then issued, the new share may be issued upon such terms and conditions, and with such rights and privileges attached thereto as the general meeting resolving upon the creation thereof shall direct and if no-direction be given as the Board shall determine and in particular such shares may be issued with a preferential or qualified right to dividend and in the distribution of assets of the Company.

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Reduction of capital 76. Before the issue of any new shares the Company in general meeting may make provisions as to the allotment and issue of the new shares and in particular may determine to whom the same shall be offered in the first instance and whether at par or at a premium or, subject to the provisions of Section 79 of the Act, at a discount. In default of any such provisions or so far as the same shall not extend the new shares may be issued in conformity with the provisions of Article 7.

Power to subdivide & consolidate shares

77. If owing at any inequality in the number of new shares to be issued and the number of shares held by members entitled to have the offer of such new shares any difficulty shall arise in the allotment of such shares or any of them amongst the members such difficulty shall in the absence of any direction the resolution creating the shares of by the Company in general meeting be determined by the Board.

Transfer of stock 78. The company may [Subject to the provisions of Sections 101 to 104 of the Act] from time to time by Special Resolution, reduce its capital and any Capital Redemption Reserve Fund or Shares Premium Account in any manner and with and subject to any incident authorised and consent required by law.

Rights of stock holders

79. The company in general meeting may from time to time :

a) Consolidate and divide all or any of the share capital into shares of larger amount than its existing shares.

b) Sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum so however that in sub-division the proportion between the amount paid and the amount if any unpaid on each reduced share shall be as it was in the case of the share from which the reduced share is derived.

c) Cancel any shares which, at the date of the passing of the resolution have not been taken or agreed to be taken by the person and diminish the amount of its share capital by the amount of shares so cancelled.

d) Convert all or any fully paid up shares into stock and reconvert that stock into fully paid up shares of any denomination.

RIGHTS OF STOCK HOLDERS

Stock & stock holders

80. The Holder of stock may transfer the same or any part thereof in the same manner and subject to the same regulations, as and subject to which the shares from the stock arose might previously to conversion, have been transferred or as near thereof as circumstances admit, and the Board may from time to time fix the minimum amount of stock transferable, provided that such minimum shall not exceed the nominal amount of the shares from which the stock arose.

Dematerialisation of shares

81. The holders of stock shall, according to the amount of stock held by them, have rights, same privileges and advantages as regards dividends, voting at meetings of the Company and other matters as if they held the shares from which the stock arose but no such privileges or advantage [except participation in the dividends and profit of the Company and in the assets on a winding up] shall be conferred by an amount of stock which would not if existing in shares have conferred that privilege or advantage.

Power of qualify rights

82. Such of the Articles of the Company as are applicable to paid up shares shall apply to stock and the words ‘Share’ and ‘Shareholder’ therein shall include ‘Stockholder’.

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* 82A: Demating of Equity Shares of the Company.

For the purpose of this Article:

1. DEFINITIONS

a) “Beneficial Owner” shall have the meaning assigned thereto in Section 2 of the Depositories Act, 1996.

b) “SEBI” means the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992.

c) “Depositories Act” means the Depositories Act, 1996, including any statutory modifications or reenactment thereof for the time being in force.

d) “By- Laws” means by-laws made by a Depository as defined under Section 26 of Depositories Act, 1996.

e) “Depository” shall mean a depository as defined under clause (e) of sub-section (1) of Sec. 2 of the Depositories Act, 1996.

f) “Member” means the duly registered holder from time to time of the shares of the company and includes every person whose name is entered as a beneficial owner in the records of the depository.

g) “Issuer” means any person making an issue of Securities. h) “Participant” means a person registered as such under section

12(1A) of the Securities and Exchange Board of India Act, 1992. i) “Registered Owner” means a depository whose name is entered as

such in the Register of the issuer. j) “Record” includes the record maintained in the form of books or

stored in computer or in such other form as may be determined by regulation made by SEBI in relation to the Depositories Act.

k) “Regulations” means the regulations made by the SEBI. l) “Security” means such security as may be specified by SEBI. m) “Words and expression” used and not defined in the Act but

defined in the Depositories Act shall have the same meanings respectively assigned to them in that Act.

2. DEMATERILISATION OF SECURITIES

Notwithstanding anything to the contrary or inconsistent contained in these Articles, the Company shall be entitled to dematerialize its existing securities, rematerialize its securities, held in the Depositories and/or offer its fresh securities in a dematerialized form pursuant to the Depositories Act and the Rules framed thereunder, if any

3. COMPANY TO RECOGNISE INTEREST IN DEMATERIALISED SECURITIES UNDER DEPOSITORY ACT.

Either the Company or the investor may exercise an option to issue, deal and hold the securities (including shares) with a Depository in electronic form and the Certificates in respect thereof shall be dematerilised in which event the rights and obligations of the parties concerned and matters connected therewith or incidental thereof, shall be governed by the provisions of the Depositories Act, as amended from time to time or any statutory modification thereto or re-enactment thereof.

4. OPTION FOR INVESTORS

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Every person acquiring / subscribing to or holding securities of the Company shall have the option to receive security certificates 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 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, issue to the beneficial owner the required certificate of securities.

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 records the name of the allottees as the beneficial owner of the security.

5. SECURITIES IN DEPOSITORIES TO BE IN FUNGIBLE FORM

All securities of the Company held by depository shall be dematialised and be in fungible form. Nothing contained in Sections 153, 153A, 153B, 187B, 187C and 372A of the Companies Act, 1956 shall apply to a Depository in respect of the securities held by it on behalf of the beneficial owners.

6. RIGHTS OF DEPOSITORIES AND BENEFICIAL OWNERS

a) Notwithstanding anything to the contrary in these Articles, a Depository shall be deemed to be registered owner for the purposes of effecting transfer of ownership of securities on behalf of the beneficial owner.

b) Save as otherwise provided in (a) above, the Depository as the registered owner of the securities shall not have any voting rights or any other rights of the securities held by it.

c) Every person holding securities of the Company and whose name is entered as the beneficial owner in the records of the Depository shall be deemed to be a member of the company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a Depository.

7. BENEFICIAL OWNER DEEMED AS ABSOLUTE OWNER

Except as ordered by a court of competent jurisdiction or as required by law, the Company shall be entitled to treat the person whose name appears on the Register of Members as the holder of any share or owner thereof and accordingly shall not be bound to recognize any benami trust of equitable, contingent, future or partial interest in any share, or (except only as is by these Articles otherwise expressly provided) any right in respect of a share other than an absolute right thereto in accordance with these Articles, the part of any person whether or not it has expressed or implied notice thereof, but the Board shall be at their sole discretion to register any share in the Joint Names of any two or more persons or the survivor or survivors of them.

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8. DEPOSITORY TO FURNISH INFORMATION

Every Depository shall furnish to the Company information about the transfer of securities in the name of the beneficial owner at such intervals and in such manner as may be specified by the bye laws to the Company in that behalf.

9. CANCELLATION OF CERTIFICATES UPON SURRENDER BY A PERSON

Upon receipt of certificate of securities on surrender by a person who has entered into an agreement with the Depository through a participant, the company shall cancel such certificate and substitute in its records the name of the Depository as the registered owner in respect of the said securities and shall also inform the Depository accordingly.

10. OPTION TO OPT OUT IN RESPECT OF ANY SECURITY

If a beneficial owner seeks to opt out of a Depository, in respect of any security and beneficial owner shall inform the Depository accordingly.

If a beneficial owner seeks on receipt of information as above, make appropriate entries in its records shall inform the Company.

The company shall within thirty (30) days of the receipt of intimation from the Depository and on fulfillment of such conditions and on payment of such fees as may be specified by the regulations, issue the certificate of securities to the beneficial owner or the transferee as the case may be.

11. SERVICE OF DOUCMENTS

Notwithstanding anything in the Articles to the contrary, where securities are held in a Depository of the records of the beneficial ownership may be served by such Depository on the Company by means of electronic mode or by delivery of floppies or discs.

12. PROVISIONS OF ARTICLES TO APPLY TO SECURITIES HELD IN DEPOSITORY

Except as specifically provided in these Articles the provisions relating to joint holders of Securities, Calls, Lien on securities, forfeiture, Transfer and Transmission of Securities shall be applicable to securities held in Depository so far as they apply to Securities held in physical form subject to the provisions of the Depositories Act.

13. ALLOTMENT OF SECURITIES DEALT WITHIN A DEPOSITORY

Notwithstanding anything in the Articles where securities are dealt with by a Depository the Company shall intimate the details thereof, to the Depository immediately on allotment of such securities.

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14. DISTINCTIVE NUMBER OF SECURITIES HELD IN A DEPOSITORY

The Securities in the Capital shall be numbered progressively zaccordingly to their several denominations, provided however, that the provisions relating to progressive numbering shall not apply to the securities of the Company which are dematerialized or may be dematerialized in future or issued in future in dematerialized form, except in the manner herein before mentioned. No securities shall be sub-divided. Every forefeited or surrendered securities held in material form shall continue to bear the number by which the same was originally distinguished.

15. REGISTER OF INDEX OF BENEFICIAL OWNERS

The Company shall cause to be kept a Register and Index of Members and a Register and Index of Debenture holders in accordance with section 151 and 152 of the Act respectively, and the Depositories Act, with details of shares and debentures held in material and dematerilised forms in Media as may be permitted by law including in form or electronic media. The Register and Index of beneficial owners maintained by a Depository under Section 11 of the Depositories Act shall be deemed to be Register and Index and Register and Index of Debenture Holders, as the case may be, for the purpose of the Act. The Company shall have powers to keep in any State or Country outside India a “Branch Register” of Members resident in that State or country.

16. REGISTER OF TRANSFER

The Company shall keep a Register of Transfers and shall have recorded therein fairly and distinctly particulars of every Transfer or Transmission of any Securities held in material form.

17. OVERRIDING EFFECT OF THE ARTICLE

Provisions of this Article will have effect and force notwithstanding anything to the contrary or inconsistent contained in any other Article of these presents.

* – Amended vide Special Resolution passed on 14-09-2005.

MODIFICATION OF RIGHT

Power to Borrow 83. If at any time share capital is divided into different classes of shares the rights attached to any class [unless otherwise provided by the terms of issue of the shares of that class] may whether or not the Company is being wound up be varied with the consent in writing of the holders of three fourths of the issued shares of that class or with the sanction of a Special Resolution passed at a separate General Meeting of holders of the shares of that class. To every such separate General Meeting the provisions of these Articles relating to general meeting shall apply but so that the necessary quorum shall be five person present in person and if a fewer number then it shall be two at least two persons holding or representing by proxy one-fifth of the issued shares of the class but so that if at any adjoured meeting of such holders a quorum as above defined is not present those members who are present shall be a quorum and that any holder of shares of the class present in person or by proxy may demand a poll and on a poll shall have one vote for each share of the class of which he is the holder. This Article is not be implication to

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curtail the power of modification which the Company would have if this Articles were omitted. The above provisions are subject of Section 106 of the Act. The Company shall comply with provision of Section 192 of the Act as to forwarding a copy of any such agreement or resolutions to the Registrar.

BORROWING POWERS

Conditions on which money may be borrowed

84. The Board of Directors may from time to time at its discretion subject to the provisions of Section 58A, 292, 293 and 370 of the Act raise or borrow, either for Directors of from elsewhere and secure that payment of any sums of money for the purposes of the Company.

Power to receive deposit

85. The Directors may raise or secure the payment of such sum or sums in such manner and upon such terms and conditions in all respect as it thinks fit and in particular by the issue of bonds, perpetual or redeemable debentures or debenture stock or any mortgage or other security on the undertaking of the whole or any part of the property of the Company [both present and future] including its uncalled capital for the time being.

Terms of issue of Debentures

86. Subject to Section 58A of the Act the directors may receive deposits for the purpose of the business of the Company on such terms and conditions, as they think fit.

Mortgage of uncalled capital

87. Any debentures, debenture - stock or other securities may be issued at a discount premium or otherwise and may be issued on conditions that they shall be convertible into shares of any denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of shares attending at General Meeting appointment of Directors and otherwise. The power to issue debenture stock or other securities on condition that they shall be convertible into shares of any denomination shall only be exercised by the Company in the General Meeting.

When Annual General Meeting to be held

88. If any uncalled capital is included in or charged by any mortgage or other security, the Directors may make calls on such Share for keeping the money so collected in trust for the person in whose favour such mortgage or security is executed.

GENERAL MEETING

When other general meeting to be held

89. In addition to any other meetings general meeting of the Company shall be held within such intervals as specified in Section 166[2] of the Act at such time and places as may be determined by the Board. Each such general meeting shall be called an ‘Annual General Meeting’ and shall be specified as such in the notice convening the meeting. Any other meeting of the Company other than Annual General Meeting shall be called an Extraordinary General Meeting.

Circulation of member’s resolution

90. The Board may whenever it thinks fit, call an Extraordinary General Meeting and it shall on the requisition of the member in accordance with Section 169 of the Act proceed to call an Extraordinary General Meeting. The requisitionists may, in default of the Board convening the same convene the Extraordinary General Meeting as provided by Section 169 of the Act.

Notice of meeting 91. The Company shall comply with the provisions of Section 188 of the Act as to give notice of resolutions and circulating statement on the requisition of members.

Business of meeting 92. Save as provided in sub-section [2] of Section 171 of the Act, not less than twenty one day’s notice shall be given for every general meeting of the Company.

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Every notice of a meeting shall specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted there at and there shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint a proxy instead of himself and that a proxy need not be a member of the Company. Where any such business consists of ‘Special Business’ as hereinafter defined there shall be annexed to the notice of a statement complying with Section 173[2] and [3] of the Act.

Notice of every meeting of Company shall be given to every member of the Company, to the Auditors of the Company and to any persons entitled to a share in consequence of the death or insolvency of member in any manner hereinafter authorised for the giving of notices to such person. Provided that where the notice of general meeting is given by advertising the same in a newspaper circulating in the neighborhood of the office under sub-section [3] of section 53 of the Act, the statement of material facts referred to in section 173[2] of Act need not be annexed to the notice as required by that Section but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the Company.

The accidental omission to give any such notice to or its non-receipt by any member or other person to whom it should be given shall not invalidate the proceedings of the meeting.

PROCEEDINGS AT GENERAL MEETINGS

Quorum to be Present when Business commenced

93. The ordinary business of Annual General Meeting shall be to receive and consider the Profit and Loss Account, the Balance Sheet and the Reports of the Directors and of the Auditors, to declare dividends to elect Directors in place of those retiring by rotation and to appoint Auditors and fix their remuneration. All other business transacted at Annual General Meeting and all business transacted at any other general meeting shall be deemed Special Business.

When, if quorum not present meeting to be dissolved and when to be adjourned

94. No business shall be transacted at any general meetings unless a quorum of members is present at the time when the meetings proceeds to business. Save as herein otherwise provided five members present in person shall be a quorum.

Resolution to be passed by the company in General meeting

95. If within half an hour from the appointed time for the meeting, a quorum shall not be present the meeting if convened upon such requisition as aforesaid, shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place or to such otherday and at such other time and place as the Board may by notice appoint and if at such adjourned meeting a quorum be not present within half an hour from the time appointed for holding the meeting those members who are present and not being less than two shall be a quorum and may transact the business for which the meeting was called.

Chairman of General Meeting

96. Any act or resolution which under the provisions of these Articles or of the Act is permitted or required to be done or passed by the Company in general meeting shall be sufficient so done or passed if effected by an Ordinary Resolution as defined in Section 189 [1] of the Act unless either the Act or these Articles specifically required such act to be done or resolution passed by a Special Resolution as defined in Section 189 [2] of the Act.

Business confined to the election of

97. The Chairman if any, of the Board or any one of the Directors if he is a member of the Company shall be entitled to take the chair at every general meeting. If the

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chairman whilst chair vacant

Chairman or the Director is not a member of the Company or being present declines to take the chair, or if there be no such Chairman of the Directors or if at any meeting he shall not be present within fifteen minutes of the time appointed for holding such meeting, the members present shall elect one of their member to be the Chairman of the Meeting.

Chairman with consent may adjourn meeting

98. No business shall be discussed at any General Meeting except the election of a Chairman while the Chair is vacant.

How questions to be decided at meeting

99. The Chairman with the consent of the meeting may adjourn any 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.

Poll 100. Every question submitted to a meeting shall be decided in the first instance by a show of hands and in the case of an equality of votes, both on a show of hands and on a poll, the Chairman of the meeting shall have a casting vote in addition to the vote to which he may be entitled as a member.

No member entitled to vote while call due to Company

101. Before or on the declaration of the result of the voting on any resolution on a show of hands a poll may be ordered to be taken by the Chairman of the meeting of his own motion and shall be ordered to be taken by him on a demand made in that behalf by any member or members present in person or by proxy and holding shares in the Company, which confer a power to vote on the Resolution, not being less than one-tenth of the total voting power in respect of the Resolution, or on which an aggregate sum of not less than fifty thousand rupees has been paid-up.

Votes of members 102. i) If a poll be demanded as aforesaid the poll shall be taken forthwith on a question of adjournment or election of a Chairman and in any other case in each manner and at such time not being later than forty eight hours from time when the demand was made and subject as aforesaid either at once or after an interval or adjournment or otherwise and the result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was demanded.

ii) The demand of a poll may be withdrawn at anytime.

iii) Where a poll to be taken the Chairman of the meeting shall appoint two scrutineers one at least of whom shall be a member [not being an officer or employee of the Company] present at the meeting provided such a member is available and willing to be appointed to scrutinise the votes on the poll and to report to him thereon.

iv) On a poll a member entitled to more than one vote or his proxy or other person entitled to vote for him, as the case may be, need not, if he votes use all his votes or cast in the same way all the votes he used.

v) The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than question on which a poll has been demanded.

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VOTES OF MEMBERS.

Procedure where company or body corporate is a member of the company.

103. No members shall exercise any voting right in respect of any share registered in his name on which any call or other sums presently payable by him have not been paid or in regard to which the Company has exercised any right to lien.

Vote in respect of deceased and insane and insolvent member

104. i) Save as hereinafter provided on a show of hands every member present and being a holder of equity shares shall have one vote.

ii) Save as hereinafter provided on a poll the voting rights of equity shares shall be as specified in section 87 of the Act.

iii) The holder of preference shares shall not be entitled to vote at a general meeting of the Company except as provided for in Section 87 of the Act.

Provided that no body corporate shall vote by proxy so long as resolution of its Board of Directors under the provisions of Section 187 of the Act is in force and representative named in such resolution is present at the general meeting at which the vote by proxy is tendered.

Jointholder 106. Any person entitled under the transmission Articles to transfer any shares may vote at any general meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that forty eight hours at least before the time of holding the meeting or adjourned meeting, as the case may be, at which he proposes to vote he shall satisfy Board of his right to transfer such shares, unless the Board shall have previously admitted his right to vote at such meeting in respect thereof. If any member be a lunatic, idiot or non-composementis, he may vote whether on a show of hands, or at a poll by his committee, curator, bonus or other legal curator and such last mentioned persons may give their vote by proxy.

Vote on a poll 107. Where there are joint registered holder of any share, any one of such persons may vote at any meeting either personally or by proxy in respect of such shares as if he were solely entitled thereto and if more than one of such joint holders be present at any meeting either personally or by proxy, then one of the said persons so present whose names stands first on the Register in respect of such share shall be entitled to vote in respect thereof.

Several executors or administrators of a deceased member in whose name any share a registered shall for the purpose of this Article be deemed joint holder thereof.

Appointment and qualification of proxy

108. On a poll votes may be given either personally or by proxy, and a person entitled to more than one vote need not use all this votes he uses in the same way.

No Proxy for a corporation to vote on show of hands

109. Every proxy shall be appointed in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation, under its common seal or the hands of its attorney, who may be the appointer, and any committee or guardian may appoint such proxy. A proxy who is appointed for a special meeting only shall be called a Special Proxy. Any other proxy shall be a General proxy.

Deposition of instrument of appointment of proxy

110. Member present only by proxy shall be entitled to vote on a show of hands, unless such a member is Corporation present by a proxy who is not himself a member in which case such proxy shall have a vote on the show of hands, as if he was a member.

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Share qualification of Directors

111. The instrument appointing a proxy and the Power of Attorney or other authority [if any] under which if is signed or a notarially certified copy of that power of authority, shall be deposited at the Registered Office not less than forty-eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall be treated as invalid. No instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution. Any such instrument deposited with the Company as aforesaid shall remain permanently or for such time as the Directors may determine in the custody of the Company.

Power to appoint ex-officio Directors

112. Every instrument appointing a Special Proxy shall be retained by the Company and shall be nearly as circumstances will admit be in any of the forms set out in Schedule IX to the Act or as near thereto as possible.

Debenture Directors

113. A vote given in accordance with terms of an instrument of proxy shall be valid notwithstanding the previous death of the principal, or revocation of the proxy or of any power of attorney under which such proxy was signed or the transfer of the shares in respect of which the vote is given provided that no intimation in writing of the death, revocation or transfer shall have been received at the office before the meeting.

Director’s fee remuneration & expenses

114. No objection shall be made to the validity of any vote, except at the meeting or poll at which such vote shall be tendered and every vote whether given personally or by proxy, not disallowed at such meeting or poll, shall be deemed valid for all purposes of such meeting or poll whatsoever.

Remuneration for extra services

115. The Chairman of any meeting shall be the sole judge of validity of every vote tendered at such meeting. The Chairman present at the taking of a poll shall be the sole judge of the validity of every vote tendered at such poll.

DIRECTORS

Travelling expenses to the Directors

116. The number of Directors shall be not less than three and not more than twelve.

Board may act Notwishstanding anyVacancy

117. The company in general meeting may from time to time increase or reduce the number of Directors within limits fixed by Article 116.

When Director of this Company appointed director of a Company of which the Company is interested either as a member or otherwise.

118. Not less than two thirds of the total number of Directors shall be persons whose period of office is liable to retire by rotation.

Director may contract with Company

119. The following persons shall be the first Directors of the Company.

1. Mr. Eapen Chacko 2. Mr. P.K. Balasubramanian

Disclosure of Director’s interest

120. The Board shall have power, at any time and from time to time, to appoint any person as a Director as an addition to the Board but so that the total number of

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Directors shall not at any time, exceed the maximum number fixed by these Articles. Any Directors so appointed shall hold office only until the next Annual General Meeting of the Company and shall then be eligible for re-election.

Discussion and voting by interested Director

121. It shall not be necessary for a Director to hold any qualification shares.

Rotation of Directors

122. a) Notwithstanding anything to the contrary contained in 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), The Industrial Credit and Investment Corporation of India Limited (ICICI) and Life Insurance Corporation of India (LIC) or to any other Finance Corporation or Credit Corporation or to any other Financing Company or body out of any loan granted by them to the Company or so long as IDBI, IFCI, ICICI, LIC and Unit Trust of India (UTI) or any other Financing Corporation or Credit Corporation or any other Financing Company or Body (each of which IDBI, IFCI, ICICI, LIC and UTI or any other Finance Corporation or Credit Corporation or any other Financing Company or Body is herein after in this Article referred to as THE CORPORATION) continue to hold Debentures in the Company by direct subscriptions or private placement, or so long as the Corporation holds shares in the Company as a result of underwriting or direct subscription 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 or as a Director or Directors whole time or non-wholetime [which Director or Directors is / are hereinafter referred to as “Nominee Directors”] of 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.

The Board of Directors of the company shall have no power to remove from office the Nominee Director/s. At the option of Corporation such nominee Director’s shall not be 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, any privileges and be subject to the same obligations as any other Directors of the Company.

The Nominee Director/s so appointed shall hold the said office only so long as any money remain owing by the Company to the Corporation or so long as the Corporation holds Debentures in the Company as a result of direct subscription or private placement or so long as the Corporation holds shares in the Company as a result of underwriting or direct subscription or the liability of the company arising out of any guarantee is outstanding and the Nominee Director/s so appointed in exercise of the said power shall ipso facto vacate such office immediately the moneys owing by the company to the Corporation is 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 any guarantee furnished by the Corporation.

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The Nominee Director/s appointed under this Article shall be entitled to receive all notices of and attend all General Meetings, Board Meetings and the Meetings of the committees 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.

The Company shall pay to their Nominee Director’s sitting fees and expenses which the other Directors of the Company are entitled but if any other fees commission monies or remuneration in any form is payable to the Directors of the Company, the fees, commission, monies and remuneration relation to such Nominee Director/s shall accrue to the Corporation and same shall accordingly be paid by the company directly to the Corporation. Any expenses that may be incurred by the Corporation on such Nominee Directors in that may be incurred by the Corporation on such Nominee Directors in connection with their appointment or Directorship shall also be paid or reimbursed by the Company to the Corporation or as the case may 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 Directors 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 Directors being appointed as Wholetime Directors such Nominee Directors shall exercise such power and duties as may be approved by the Lenders and have such rights as are usually exercised or available to a whole-time Director, in the management of the affairs of the Borrower. Such Nominee Directors shall be entitled toreceive such remuneration fees, commission, and monies as may be approved by the Lenders.

122. b) If it is provided by a Trust Deed securing or otherwise in connection with any issue of debentures of the Company that any person or persons shall have power to nominate a Director of the Company, then in case of any and every such issue of debentures, the person or persons having such power may exercise such power from time to time and appoint a Director accordingly. Any Director so appointed is herein referred to as a Debenture Director. A Debenture Director may be removed from office at any time by the person or persons in whom for the time being is vested the power under which he was appointed and another Director may be appointed in his place. A Debenture Director shall not be liable to retire by rotation.

Which Director to retire

123. The Maximum remuneration of Director for his services shall be such sums as may be prescribed by the Act or the Central Government from time to time for each meeting of the Board of Directors or any committee thereof attended by him Subject to section 309 of the Act, Directors may be paid remuneration upto one percent if there is Managing and / or whole time Director and three percent of the net profits of the Company, if there is no managing and / or whole time Director if the board so resolved.

Director by Ordinary Resolution on Special

124. If any Director, being willing shall be called upon to perform extra services or to make any special exertion in going or residing away from his usual place of residence for any purposes of the Company or in giving special attention to the

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Notice business of the Company or as a member of a Committee of the Board then, subject to the Sections 198, 309, 310 and 314 of the act, the Board may remunerate the Director so doing either by a fixed sum or by a percentage of profits or otherwise and remuneration may be in addition to or in substitution for his remuneration above entitled.

Board may fill up casual vacancy

125. The Board may allow and pay to any Director, who is not a bonafide resident of the place where the meetings of the Boards are ordinarily held and who shall come to such a place for the purpose of attending any meeting such sum as the Board may consider fair compensations for travelling, boarding, lodging and other expenses in addition to his fee for attending such meeting as specified; and if any director be called upon to go or reside out of the ordinary place of his residence on the Company’s business he shall be entitled to be repaid and reimbursed any travelling or other expenses incurred in connection with the business of the company.

Eligibility and appointment of a person other than a retiring Director

126. The continuing Directors may act notwithstanding any vacancy in their body so that if the number falls below the minimum above fixed, the Board shall not, except for the purpose of filling vacancies, act so long as the number is below the minimum.

Power to appoint alternate Director

127. 1) The office of a Director shall ipso facto become vacant if :

a) he fails to obtain within the time specified in sub-section [i] of Section 270 of the Act or at any time thereafter ceases to hold the share qualification if any, required of him by the Articles of the Company, or

b) he is found to be unsound mind by a Court of competent jurisdiction and finding is in force : or

c) he applies to be adjudicated as an insolvent and his application is pending or

d) he is adjudicated an insolvent : or

e) he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of sentence : or

f) he fails to pay call in respect of shares of the company held by him whether alone or jointly within six months from the last date fixed for the payment of the call unless the Central government has by notification in the official Gazette removed the disqualification incurred by such failure : or

g) he absents himself from three consecutive meetings of the Board of Directors, or from all meeting of the Directors for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board : or

h) he [whether by himself or by any person for his benefit or on his account] or in any firm in which he is partner or any private company of which he is a director, accepts a loan or any guarantee or security for a loan from the Company in contravention of Section 295 of the Act : or

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i) he acts in contravention of Section 299 of Act : or

j) he becomes disqualified by an order of the court under Section 203 of the Act : or

k) he is removed in pursuance of Section 284 of the Act : or

l) having been appointed a Directors by virtue of his holding any office or other employment in the company he ceases to hold such office or other employment in the company : or

m) he or any firm of which he or his relative is a partner or any private company of which he is a director or member, any director or manager of such private company without the sanction of the Company in general meeting by a special resolution hold any office of profit under the Company or under any of its subsidiaries : or

n) he submits to the Company his resignation in writing.

2) Notwithstanding any matter or thing in sub-clauses [d], [c], [i] of clause [1] the disqualification referred to in those sub-clause shall not take effect:

a) for thirty days from the date of adjudication, sentence or order or,

b) Where an appeal or petition is preferred within thirty days aforesaid against adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date of which such appeal or petition is disposed off : or

c) Where within seven days of the aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction or order, and the appeal or petition if allowed, would result in the removal of the disqualification until such further reappeal or petition is disposed off.

Meeting of Director 128. A director of this company may be or become a director of any other company promoted by this Company or in which he may be interested as a member, shareholder or otherwise and no such director shall be accountable for any benefits received as a Director or member of such company.

Director may summon meeting

129. Save as otherwise decided neither shall a Director be disqualified from contracting with the Company either as vendor, purchaser or otherwise for goods, materials, or for underwriting the subscription of any shares in or debentures of the Company nor shall any such contract of arrangement entered into or on behalf of the Company with a relative of such Director, or with a private company of which such Director is a member or Director, be void nor shall any Director so contracting or being so interested be liable to account to the company for any holding such office or of the fiduciary relation thereby established. Provided that no contract or arrangement shall be entered into between the Company and a firm in which a Director of the Company or his relative is a partner nor shall any remuneration be payable to any such firm whether in respect of the supply of property or the rendering of services or otherwise.

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Chairman 130. Every Director who is in any way where directly or indirectly, concerned or interested in a contract or arrangement entered into or to be entered into by or on behalf of the Company not being a contact or arrangement entered into or to be entered into between the company and any other company where any of the Directors of the Company or two or more of them together held or hold not more than two percent of the paid up share capital in the other Company shall disclose the nature of his concern or interest at a meeting of the board as required by the section 299 of the Act. A General notice renewable in the last month of each financial year of the Company that a Director is a Director or a member of any specified body corporate or is a member of any specified firm and is to be regarded as concerned or interested in any subsequent contract or arrangement with that body corporate or firm shall be sufficient disclosure of concern or interest in relation to any contract or arrangement so made and after such general notice, it shall not be necessary to give special notice relating to any particular contract or arrangement with such body corporate or firm provided such general notice is given at a meeting of the Board of Directors concerned takes responsible steps to secure that it is brought up and read at the first meeting of the Board after it is given. Every director shall be bound to give from time to time renew a general notice as aforesaid in respect of all bodies corporate of which he is a director or member and of all firms of which he is a partner.

Quorum 131. No Director shall, as a director take any part in the discussion of, or vote-on any contact or arrangement in which he is any way whether directly or indirectly concerned or interested nor shall his presence count for purpose of forming a quorum at the time of such discussion or vote. This prohibition shall not apply to [a] any contract of indemnity against any loss which the Directors or any of them may suffer by reason of becoming or being sureties or a surety or the Company or [b] any contract of arrangement entered into to be entered into by the Company with a Public Company in which the interest of the Director consists solely in his being a director of such company and the holders of shares not exceeding in number of value the amount requisite to qualify him for appointment as a director thereof he having been nominated as such Director by the company or in his being a member of the Company holding not more than two percent of the paid up share capital of the Company.

ALTERNATE DIRECTORS

Power of Board meeting

137. The Board may in accordance with and subject to the provision of Section 313 of the Act appoint any person to act as alternate Director during the latter’s absence for a period of not less than three months from the State in which meeting of the board are ordinarily held.

PROCEEDINGS OF DIRECTORS

How Questions to be decided

138. The Board shall meet for the despatch of business, adjourn and otherwise regulate its meetings, as it think fit; provided that a meeting of the Board shall be held at least once in ever three months and atleast four such meetings shall be held in every year. Notice in a writing of every meeting of the Board shall be given to every Director for the time being in India, and at his usual address in India to every other Director.

Power to appoint committee and to delegate

139. A Director may at any time, and the Secretary or any other officer authorised by the Board shall, upon the request of a Director made at any time, convene a meeting of the Board.

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Proceedings of Committee

140. The Directors may elect a Chairman and determine the period for which he is to hold office. The Directors may also elect a Vice - Chairman and determine the period for which he is to hold office. If no Chairman and Vice - Chairman be elected or if at any meeting of the Board the Chairman or Vice - Chairman be not present at the time for holding the same or decline to take the chair, then the Directors, present shall choose some one of their number to be Chairman of such meeting.

When acts of a Director valid notwithstanding defective appointment

141. The Quorum for a meeting of the Board shall be determined from time to time in accordance with the provision of section 287 of the Act. If a quorum shall not be present within fifteen minutes from the time appointed for a meeting of Board, it shall be adjourned until such date and time as the Chairman of the Board shall appoint.

Resolution without Board Meeting

142. A meeting of the Board at which a quorum be present shall be competent to exercise all or any of the authorities power and discretion by or under these articles of the Act for the time being vested in or exercisable by the Board.

Minutes Book 143. Subject to the provisions of Sections 316, 372[5] and 386 of the Act questions arising at any meeting shall be decided by a majority of votes and in case of an equality of votes the Chairman shall have a second or casting vote.

Power of Directors 144. The Board may subject to provisions of the Act from time to time and at any time delegate any of its power to committee consisting of such Directors as it thinks fit and may from time to time revoke such delegation. Any Committee so formed shall, in the exercise of the power so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.

To pay for property 145. The meeting and proceedings of any Committee consisting of two or more members shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far as the same are appreciable thereto and are not superseded by any regulations made by the Board under the last proceedings Articles.

To secure contracts 146. Acts done by a person as a Director shall be valid notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provisions contained in the Act or in these Articles. Provided that nothing in this articles shall be deemed to give validity to acts done by a Director after his appointment has been shown to the company to be invalid or to have determined.

To appoint officers etc.

147. Save in those cases where a resolution is required by Section 262, 282, 297, 316, 372 [5] and 386 of the Act, to be passed at a meeting of the Board a resolution shall be as valid and effectual as if it had been passed at a meeting of the Board or committee of the Board as the case may be duly called and constituted, if a draft thereof in writing is circulated, together with the necessary papers if any to all the Directors or to all the members of the committee of the Board as the case may be then in India [not being less in number than the quorum fixed for a meeting of the members of the Board or Committee as the case may be] and to all other Directors or members of the Committee at their usual address in India, and has been approved by them such as are then in India or by a majority of such of them are entitled to vote on the resolution.

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MINUTES

To appoint trustees 148. i) The Board shall in accordance with the provision of Section 193 of the Act cause minutes to be kept of every general meeting of Company and of every meeting of the Board or of every committee of the Board.

ii) Any such minutes of any meeting of the Board or any committee of the Board or of the Company in General Meeting, if kept in accordance with the provisions of Section 193 of the Act, shall be evidence of the matters stated in such minutes. The Minutes Book of General Meeting of the Company shall be kept at the office and shall be open to inspection by members as the Act requires them to be open of inspection.

POWERS OF DIRECTORS

To bring and defend action

149. Subject to the provisions of the Act, the business of the Company shall be managed by the Directors who may exercise all such powers of the Company as are not by the Act or by these Articles required to be exercised by the company in general meeting subject nevertheless to any regulations of these Articles and to such regulation being not inconsistent with the aforesaid regulation or the Act, or to any directions as may be made or given by the Company in general meeting but no regulation made or direction given by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation or direction had not been made or given.

To refer to arbitration

150. Without prejudice to the general powers conferred by the last proceeding Articles and to any other powers authorities to discretion conferred by these presents on the Directors it is hereby expressly declared that the Directors shall have the following powers that is to say, power;

i. To purchase take on lease or otherwise acquire for the company any property rights or privileges which the Company is authorised to acquire at such prices and generally on such terms and conditions as they think fit and subject to provisions of Section 293 of the Act to sell, let exchange or otherwise dispose of absolutely or conditionally any part of the property, privileges and undertakings of the company upon such terms and conditions and for such consideration as they think fit.

ii. At their direction to pay for any property rights, privileges acquires by or services rendered to the company either wholly or partly in cash or in shares subject to Section 81 of the Act, bonds, debentures or other securities of the Company and any such shares may be issued either as fully paid up or with such amount credited as paid up thereon as may be agreed upon any such bonds. Debentures or other securities may be specifically charged upon all or any part of the property of the Company and its uncalled capital or not so charged.

iii. To secure the fulfillment or any contracts, agreements entered into by the Company by mortgaged or charge of all or any of the property of the company and its unpaid capital for time being or in such other manner as they may think fit.

iv. To appoint at their discretion remove or suspend agents, managers, officers, clerks and employees for permanent, temporary or special services as they may from time to time think fit, and to determine their powers and duties and fix their salaries or emoluments and to require security in such amount as they think fit.

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v. To appoint any person or persons [whether incorporated or not] to accept or hold in trust for the Company any property belonging to the Company or in which it is interested or for any other purposes and to execute and do all such deeds documents and things as may be requisite in relation to any such trust and to provide for the remuneration of such trustee or trustees.

vi. To institute, prosecute conduct, defend, compromise, compound withdraw or abandon any legal proceedings by or against the Company or its officers or otherwise concerning the affairs of the Company and also subject to the provisions of Section 293 and 295 of the Act. to compound and allow time for payment of satisfaction of any debts due and to any claims or demands by or against the Company.

vii. To refer any claims or demands by or against the Company to arbitration and observe and perform the awards.

viii. To make and give receipts, releases and other discharges for money payable to the Company and for the claims and demands of the Company.

ix. To act as trustees in composition of the Company’s debts.

x. To act on behalf of the Company in all matters relating to bankruptcy and insolvency.

xi. To determine who shall be titled to draw sign accept, endorse and negotiate on the Company’s behalf. bills, notes, receipts, acceptances, endorsements, cheques, drafts, securities, releases, contracts and documents.

xii. From time to time to provide for the management of the affairs of the Company either in different part of India or elsewhere in such manner as they think fit and in particular to establish Branch offices and to appoint any person to be the Attorneys of the Company with such powers [including power to subdelegate] and upon such terms as may be though fit.

xiii. Subject to the provisions of Section 77, 292, 295, 369, 370, 372 of the Act to invest and deal with any of the moneys of the Company not immediately required for the purposes thereof upon such security or securities [not being shares in this company] and in such manners as they may think fit, and from time to time vary or realise such investments.

xiv. To execute in the name and on behalf of the Company in favour of any Director or other persons who may incur or be about to incur any personal liability for the benefit of the Company such mortgage of the Company’s property [present and future] as they think and any such mortgage may contain a power of sale and such other powers, covenants and provisions as shall be agreed on.

xv. From time to time to make, vary and repeal by-laws for the regulation of the business of the Company, its officers and employees.

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xvi. To enter into and carry out all such negotiations, arrangements and contracts and rescind and vary all such contracts on behalf of the Company as they may consider expedient.

xvii. To give an officer or any other person employed or not employed by the Company a commission on the profits of any particular business or transaction or share in the general profits of the company and such commission or share of profits shall be treated as part of the working expenses of the Company

xviii. Before recommending any dividend to set aside out of the profits of the Company such sums as they may think proper for depreciation or depreciation fund reserve fund or sinking fund or any special dividends for equalising, dividends or for repairing, improving, extending and maintaining any of the property of the Company, and for such other purposes [including the purposes referred to in the preceding clause] as the Director’s in their absolute discretion think conducive to the interest of the Company and to invest the several sums so set aside or so much thereof as are required to be invested upon such investments other than shares of the Company or of any other Company in the same group except to the extent and in accordance with the provisions of Section 372 of the Act, as they think fit and from time to time deal with and vary such investments and dispose of and apply and expand all or any part thereof for the benefit of the Company in such manner and for such purposes as the Directors, in their absolute discretion think conducive to the interest of Company notwithstanding that the matters to any part thereof, may be matter to or upon which the capital money of the Company might rightly be applied or expanded; and to divide the reserve fund into such special funds as they may think fit and to employ the assets constituting all or any of the above fund including the depreciation fund in the business of the Company or in the purchase or repayments of debentures or debenture stock and that without being bound to keep the same separate from the other assets and without being bound to pay interest on the same, with power, however to the Directors at their discretion to pay or allow to the credit of such funds, interest at such rate as the Directors may think proper.

xix. To act jointly and severally in all or and of the powers conferred on them by the Board of Directors.

xx. To establish maintain support and subscribe to any institution society or club which may be for the benefit of the Company or its employees or subject to Section 293 [1] [3] and Section 293 A of the Act, contribute for any other charitable or public objects to give pensions, allowances, donations, gratuities or charitable aid to any persons who have served or are serving the company or a Company subsidiary to it or the Directors just or proper whether any such person, his widow, children or dependents have not a legal claim upon the Company.

xxi. To open deal with the current account overdrafts accounts and any other accounts with any back or bankers for carrying on any business of the Company.

xxii. Subject to the provisions of Section 293 [1] [a] of the Act to sell lease or otherwise dispose of any of the properties of the Company to

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any person in consideration of cash payments in lump sum or by instalments or in return for any other service rendered to the Company.

xxiii) To get insured any or all of the properties of the Company and / or all of the employees and their dependents against any or all risks of which the insurance companies carry on any business.

To give receipts 151. [1] Subject to the provisions of the Act, the Board shall exercise the following powers on behalf of the company and the said power shall be exercised only by resolutions passed at the meetings of the Board.

[a] Power to make calls on shareholder in respect of moneys unpaid on their shares.

[b] Power to issue debentures. [c] Power to borrow moneys otherwise than on debentures. [d] Power to invest the funds of the company. [e] Power to make loans.

[2] The Board may by a Meeting delegate to any Committee of Directors, Managing Director, Chief Executive Manger or any other Principal Officer of the company the powers specified in clause [c], [d] and [e] above.

[3] Every Resolution delegating the power set out in sub-clause [c] shall specify the total amount outstanding at any one time upto which moneys may be borrowed by the said delegate.

[4] Every resolution delegating the power referred to in sub-clause [d] shall specify the total amount upto which funds may be invested and the nature of investments which may be made by the delegate.

[5] Every resolution delegating the power referred to in sub-clause [c] above shall specify the total amount upto which loans may be made by delegate the purposes for which the loans may be made and the maximum amount of loans that may be made for each such purpose in individual cases.

AUTHENTICATION OF DOCUMENTS

To act as trustees 152. Any Director or the Secretary or any other Officer authoised by the Board for the purpose shall have power to authenticate any document effecting the constitution of the Company any resolution passed by the Company or the Board, any books, records, documents and accounts relating to the business of the Company and to certify copies thereof or extracts therefrom as true copies or extracts; and where any books, records documents or accounts are kept elsewhere that at the office of the local manager or other officer of the Company having custody thereof shall be deemed to be a person appointed by the Directors as aforesaid.

To act in matter of bankruptcy & insolvency

153. A document purporting to be a copy of a resolution of the Board or an extract from the minutes of a meeting of the Board which is certified as such in accordance with the provisions of the last preceding Article shall be conclusive evidence in favour of all Persons dealing with the Company upon the faith thereof that such resolution has been duly passed or as the case may be that such extracts is true and accurate record.

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MANAGING DIRECTOR

To delegate powers 154. Subject to the provisions of Section 269, 309, 316 and 317 of the Act, the Board may, from time to time appoint a Managing Director of the Company, for a fixed term, not exceeding five years at a time and may from time to time [subject to the provisions of any contract between him and the Company] remove or dismiss him from office and appoint another in his place. The Board may also appoint from time to time one or more person[s] as Joint Managing Directors[s] wholetime Directors[s] and/or Deputy Managing Director[s] on such terms and conditions as may be agreed upon between him or them and the Company.

To appoint attorney 155. Subject to the provisions of Section 255 of the Act, a Managing Director Shall not while he continues to hold that office, be subject to retirement by rotation but [Subject to the provisions of any contract between him and the Company] he shall be subject to the same provisions as resignation and removal as the other Directors and he shall ipso facto and immediately cease to be a Managing Director if he ceases to hold the office of Director from any cause.

To give security by way of indemnity

156. Subject to the provisions of Section 198, 309, 310 and 311 of the Act a Managing Director, Joint Managing Director[s] whole-time Director[s] and / or Deputy Managing Director[s] shall in addition to the remuneration payable to him as a Director of the Company under these Articles receive such additional remuneration as may from time to time be sanctioned by the Company. The Managing Director, Joint Managing Director[s] Wholetime Director[s] and / or Deputy Managing Director[s] shall not be entitled to any sitting fee for attending the Board or Committee Meeting.

To make by laws 157. Subject to the provision of the Act and in particular to the prohibition and restriction contained in Section 292 thereof the Board may from time to time entrust to and confer upon a Managing Director for the time being such of the powers exercisable under these Articles by the Board as it may think fit and may confer such powers of such time and to be exercised for such objects and purposes and upon such terms and conditions and with such restrictions as it thinks fit and the Board may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the power of the Board in that behalf and may from time to time revoke withdraw alter or vary all over any of such powers.

SECRETARY

To make contract 158. Subject to the provisions of this Act, the Board may appoint any individual possessing the prescribed qualification, to be the Secretary of the Company for any period and may fix the remuneration to be paid to and determine the power exercisable and duties [in addition to the duties if any described in these Articles of the Act] to be performed by such Secretary. The Board may also appoint any person as joint secretary and / or Deputy Secretary.

THE SEAL

To give commission 159 The Board shall provide for the safe custody of the Seal and the Seal shall not be affixed to any instrument except by the authority of a resolution of the Board or a Committee of the Board authorised by it in that behalf and save as provided in Article 25 hereof; except in the presence of one Director who shall sign the same in token thereof and Secretary / Authorised Person who shall countersign the same in token thereof. Provided nevertheless that any instrument bearing the Seal of the Company and issued for valuable consideration shall be binding on the Company notwithstanding any irregularity touching the authority of the Board to issue the same. - Amended vide Special Resolution passed on 12-02-2007

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To establish reserve fund

160. The Directors may provide on official seal for use in any territory, district or place not situated in India where the Company may at any time carry on business which shall be a facimile of the Common Seal of the Company with the addition on its face of the name of the territory, district or place; and the Directors shall have power from time to time to destroy the same and to substitute a new official seal in lien thereof, and the Directors may be writing under the Seal authorise any person or persons to affix the official seal or document to which the company may be party in any such territory district or place.

RESERVE

To establish reserve fund

161. The Board shall subject to Section 205 [2A] of the Act from time to time, before recommending any dividend, set apart any and such portion of the profits of the Company as it thinks fit as Reserve to meet contingencies or for the liquidation for any debentures. debts or other liabilities of the company for equalisation of dividend for repairing improving or maintaining any of the property of the Company and for such other purpose of the Company as the Board in its absolute discretion thinks conducive to the interests of the Company, and may subject to the provisions of Section 372 of the Act, invest several sums so set aside upon such investments [other than shares of the Company] as it may think fit and from time to time deal with and vary such investments and dispose of all or any part thereof for the benefit of Company and may divide the reserves into such special funds as it thinks fit, with full power to employ the reserves or any parts thereof in the business of the Company, and that without being bound to keep the same separate form the other assets.

To deal with banking accounts

162. All money carried to the reserve shall nevertheless remain and be profits of the Company applicable, subject to due provisions being made for actual loss or depreciation or the payment of dividends and such moneys and all the other moneys of the company not immediately required for the purposes of the Company may subject to the provisions of Section 370 and 372 of the Act be invested by the board in or upon investments or securities as it may select or may be used as working capital or may be kept at any bank on deposit or otherwise as the Board may from time to time think proper.

CAPITALISATION OF RESERVES

To dispose of properties

163 Any general meeting may resolve that any moneys, investment or, other assets forming part of the undivided profits of the Company standing to the credit of the Reserves, or any Capital Redemption Reserves Account or in the hands of the Company and available for dividend or representing premium received on the issue of shares and standing to the credit of the shares premium account be capitalised and distributed amongst such of the shareholder as would be entitled to receive the same if distributed by way of dividend and in the same proportion in the footing that they become entitled thereto as capital and that all or any part of such capitalised fund be applied on behalf of such shareholders in paying up in full any unissued shares, of the Company which shall be distributed accordingly or in or towards payment of the uncalled liability in any issued shares and that such distribution or payment and shall be accepted by such shareholders in full satisfaction of their interest in the said capitalised sum. Provided that any sum standing to Share Premium Account or a Capital Redemption Reserve Account may for the purposes of the Article, only be applied for paying up on unissued share to be issued to members of the Company as fully paid bonus shares.

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Insurance 164. Subject to the provisions of the Act, the Company in general meeting may at any time and from time to time resolve that any surplus moneys in the hands of the Company in representing capital profits arising from the receipt of money received or recovered in respect of or arising from the realisation of any capital assets of the Company or any investment representing the same instead of being applied in the purchase of the other capital assets or for other capital purposes be distributed amongst the ordinary shareholders on the footing that they receive the same as capital and in the share and proportions in which they would have been entitled to receive the same if it had been distributed by way of dividend provided always that no such profit as aforesaid shall be so distributed unless there shall remain in the hands of the Company, a sufficiency of other assets to answer in full the whole of the labilities and paid up share capital of the Company for the time being.

Power to exercise by Board only at Board Meeting

165. For the purpose of giving effect to any resolution under the two last preceding Articles the Board of Directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient and in particular may issue fractional certificates and may determine that cash payment shall be made to any member upon the footing of the value of fixed in order to adjust the rights trusts for the persons entitled to the dividend or capitalised fund as may deem expedient to the Directors. Where requisite, a proper contract shall be filed in accordance with Section 75 of the Act and the Directors may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalised fund and such appointment shall be effective.

DIVIDEND

Power to authenticate documents

166. Subject to the rights of members entitled to shares [ if any with preferential rights attached thereto the profits of the Company which it shall from time to time determine to divide in respect of any year or other period shall be applied in the payment of a dividend on Equity Shares of the Company but so that a partly paid up shares only entitles the holder with respect thereof to such proportion of the distribution upon a fully paid up shares as the amount paid thereon bears to the nominal amount of such shares and so that where capital is paid up in advance of calls upon the footing that the same shall carry interest such capital shall not rank for dividends or confer a right to participate in profit.

Certified copies of resolution of the Directors

167. The Company in general meetings may declare a dividend to be paid to the members according to their rights and interest in the profit and may subject to the provisions of Section 207 of the Act, fix the time for payment.

Powers to appoint Managing Directors

168. Subject to the provisions of Section 205 of the Act, no dividend shall be payable except to of the profits of the Company or out of money provided by the Central or a State Government for the payment of the dividend in pursuance of any guarantee given by such Government and no dividend in pursuance of any guarantee given by such Government and no dividend shall carry interest against the Company.

To what provisions he shall be subject to

169. The Board may from time to time pay to the members such Interim dividends as appear to the Board to be justified by the profits of the Company.

Remuneration of Managing Director

170. The Board may deduct from any dividend payable to any member all sums of monies, if any, presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company.

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Power of Managing Director

171. Any General Meeting declaring a dividend may make a call on the member of such amount as the meeting fixes but so that the call on each member shall not exceed the dividend payable to him and so that the call be made payable at the same time as the dividend and the dividend may be set of against the call.

Appointment 172. No dividend shall be payable except in cash. Provided that nothing in the foregoing shall be deemed to prohibit the capitalisation of profits or reserves of the Company for the purpose of the issuing fully paid up bonus shares or paying any amount for time being unpaid on the share held by the members of the Company.

Custody of seal 173. A transfer of shares does not pass the right or any dividend declared thereon before the registration of the transfer by the Company.

Reserve 174. The Company may pay interest on capital raised for the construction on works or building when and so far as it shall be authorised to do so by Section 208 of the Act.

Investment of money

175. No dividend shall be paid in resect of any share or except of the registered holder of such share or to his bankers but nothing contained in this Article shall be deemed to required the bankers of a registered shareholder to make a separate application to the Company for the payment of the dividend. Nothing in this article shall be deemed to affect in any manner the operation of Article 167.

Capitalisation of reserves

176. Anyone of the several persons who are registered as the joint holders of any share may give effectual receipt for all dividends, bonuses and other payments in respect of such share.

Distribution of Capital Profits

177. Notice of any dividend whether interim or otherwise shall be given to the persons entitled to share therein in the manner herein after provided.

Fractional Certificates

178. Unless otherwise directed in accordance with Section 206 of the Act, any dividend, interest or other moneys payable in cash in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the holder and in the case of joint holders to the registered address of that one of joint-holders who is first named in the register in respect of the joint-holding or to such person and at such address as the holder or joint-holders as the case may be may direct and every cheque or warrant so sent shall be made payable to the order or person to whom it is sent.

How profits shall be divisible

179. The Company shall not be responsible for the loss of any cheque dividend warrant or postal order sent by post in respect of dividends, whether by request or otherwise at the registered address communicated to the office beforehand by the member or for any dividend lost to the member or person entitled thereto by the forged endorsement of any cheque or warrant or for the fraudulent recovery thereof by any other means.

Declaration of dividends

180. There will be no forfeiture of unclaimed dividends which shall be dealt with in accordance with the provisions of Section 205A, 205B and 205C of the Companies Act 1956.

BOOKS AND DOCUMENTS

Declaration of dividends

181. The Board shall cause proper books of account to be kept in accordance with section 209 of the Act.

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Dividends 182. The books of accounts shall be kept at the office or at such other place in India as the Board may decide and when the Board so decides the Company shall within seven days of the decisions file with the Registrar a notice in writing giving the full address of such other place.

Interim dividends

183. i) The Books of account shall be open for inspection by any Director during business hours.

ii) The Board shall from time to time determine whether and to what extent and at what times and places and under that conditions or regulations the books of account and books and documents of the Company other than those referred to in Article 148 [ii] and 181 shall be open to the inspection of the members not being Directors and no member [ not being a Director] shall have any right of inspection any books of account or book or document of the Company except as conferred by law or authorised by the Board or by the Company in general meeting.

BALANCE SHEET AND ACCOUNTS

Debits may be deducted

184. At every Annual General Meeting the Board shall lay before the Company a Balance Sheet and Profit and Loss Account made up in accordance with the provisions of Section 210 of the Act and such Balance Sheet and Profit and Loss Account shall comply with the requirements of Section 210, 211, 212, 215 and 216 and of Schedule VI to the Act, so far as they are applicable to the Company but save as aforesaid the Board shall not be bound to disclose greater details of the result or extent of the trading and transactions of the Company than it may deem expedient.

Dividend & call together

185. There shall be attached to every Balance Sheet laid before the Company a report by the Board complying with Section 217 of the Act.

Dividend in cash 186. A copy of every Balance sheet [including the Profit and Loss Account, the Auditors’ Report and every document required by law to be annexed or attached to the Balance Sheet] shall as provided by Section 219 to the Act not less than twenty one days before the meeting be sent to every such member debenture holder trustee and other person to whom the same is required to be sent by the said Section.

Effect of transfer 187. The Company shall comply with Section 220 of the Act as to filing copies of the Balance Sheet and Profit and Loss Account and documents required to be annexed or attached thereto with the Registrar.

Payment of interest on capital

188. Every Balance Sheet and Profit and Loss Account of the Company when audited and adopted by the Company in Annual General Meeting shall be conclusive subject to such modifications in the appropriations arising as a result of declaration of dividend transfer to reserves decided upon by the Annual General Meeting and except as regards any error discovered therein within three months next after the adoption thereof. Whensoever any such errors are discovered within that period the account shall forthwith be corrected and thenceforth shall be conclusive.

AUDITORS

Dividend to registered holders

189. Once atleast in every year the books of accounts of the Company shall be examined by one or more Auditor or Auditors.

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Dividends to joint holders

190. The Appointment, powers, rights, remuneration and duties of the Auditors, shall be regulated by Section 224 to 231 of the Act.

SERVICE OF NOTICE AND DOCUMENTS

Notice of dividend 191. A notice or other documents may be given by the Company to its members in accordance with Section 53 and 172 of the Act.

Payment by post 192. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share which previously to his name and address being entered on the Register shall have been duly given to the person from whom he derives his title to such share.

Loss of dividend warrants etc.

193. Any notice or document delivered or sent by post to or left at the registered address of any member in pursuance of these articles shall notwithstanding such member be then deceased and whether or not the Company have notice of his deceased, be deemed to have been duly served in respect of any registered share, whether held solely or jointly with other persons by such members until some other person be registered in his stead as the holder of joint-holdings thereof and such service shall for all purposes of these presents be deemed a sufficient service of such notice or document on heirs, executors or administrators and all persons if and jointly interested with him in any such share.

KEEPING OF REGISTERS AND INSPECTION

Unclaimed dividends

194. The Company shall duly keep and maintain at the office Registers in accordance with Section 49, 58A, 143, 150, 151, 152, 301, 303, 307 and 372 of the Act and Rule 7[2] of the Companies [issue of Share Certificates Rules 1960].

Books of Accounts to be kept

195. The Company shall comply with the provisions of the Act as to the supplying of copies of the registers, deeds, documents instruments, returns, certificates and books therein mentioned to the persons therein specified when so required by such persons of the charges if any, prescribed by the said section.

Where to be kept 196. Whereunder any provision of the Act any person, whether a member of the Company or not is entitled to inspect any register, return certificate deed instrument or document required to be kept or maintained by the Company the person so entitled to inspect shall be permitted to inspect the same on such business days as the Act requires to be open for inspection.

SECRECY

Inspection 197. Subject to the provision of the Companies Act, every Director, Manager, Secretary, Trustee for the Company, its members or debenture holders, members of a committee, officer, employee agent, accountant or other person employed in or about the business, of the Company shall observe a strict secrecy respecting all transactions of the Company with its customers and the state of accounts with individuals and matters relating thereto and shall pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of his duties except when required so to do by the Board or by any general meeting or by a Court of Law and except so far as may be necessary in order to comply with any of the provisions in these Articles contained.

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* WINDING – UP

Balance Sheet and profit and Loss Account

198. If the Company shall be wound up, whether voluntarily or otherwise the liquidators may, with the sanction of a Special Resolution or any other sanction required by law divide among the contributories in specie or kind any part Distribution of the assets of the Company and may with the like sanction, vest any part of the assets of the Company in Trustees upon such trusts for the benefit of the Contributories or any of them as the liquidators with the like sanction shall think fit.

* INDEMNITY

Annual Report of Directors

199. Subject to Section 201 of the Act every Directors, Manager, Secretary or officer of the Company or any person [whether an officer of the company or not] employed by the Company and any person appointed Auditor shall be indemnified out of the funds of the Company, against all claims liability incurred by him as such Director, Manager, Secretary, Officer, employee or Auditor in defending any proceedings whether civil or criminal in which judgement is given in his favour or in which he is acquitted or in connection with any application under Section 633 of the Act in which relief is granted to him by the Court.

* RECONSTRUCTION

Copies to be sent to members and others

200. On any sale of the undertaking of the Company the Board or the Liquidators on a winding up may, if authoised by a Special Resolution accept fully paid or partly paid up shares, debentures or securities of any other company whether incorporated in India or not either then existing or to be formed for the purchase in whole or in part of the property of the Company or the Liquidators [in a winding up] may distribute such shares or securities or any other property of the company amongst the members without realisation or vest the same in trustees for them and Special Resolution may provide for the distribution or appropriation of the cash, shares or other securities, benefit or property, otherwise than in accordance with the strict legal rights of the members contributories of the Company and for the valuation of any such securities or property such price and in such manner as the meeting may approve and all holders of shares shall be bound to accept and shall be bound by any valuation or distribution so authoised and waive all rights in relation thereto save only in case the Company is proposed to be or is in course of being wound-up such statutory rights [if any] under Section 494 of the Act as are incapable of being varied or excluded by these Articles.

Copies of Balance Sheet to be filed

201. Whenever any differences shall arise between the Company on the one hand and any of the members their executors administrators or assigness on the other hand, touching the true indent of construction, or the incidents or consequences of these presents, or of the statutes or enactments of the legislature or touching, anything then or thereafter done, executed, omitted suffered in pursuance of these presents or of the statutes or enactments or such breach or alleged breach of these presents or any claim on account of any such breach or alleged breach of these presents or any claim on account of any such breach or alleged breach or otherwise relating to these presents, every such differences shall be referred to arbitration and two arbitrations one to be appointed by each party or in the event of disagreement of the arbitrators, of an umpire appointed by them [i.e. the arbitrators] before entering on the reference or failing such agreement by the Court or to the arbitrators of a single arbitrator if the parties to the difference agree to such reference. The Arbitration Act, 1940 shall apply to such arbitration proceedings.

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MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts (not being contracts entered in to in the ordinary course of business carried on by our Company or entered into more than two years before the date of the Draft Letter of Offer) which are or may be deemed material have been entered or are to be entered in to by our Company. These contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of our Company situated at No. 5/360, Rajiv Gandhi Salai (OMR), Okkiam Thoriapakkam, Chennai - 600 097, Tamil Nadu from 10.00 a.m. to 1.00 p.m., from the date of the Draft Letter of Offer until the date of closure of the Subscription List on all working days except Saturdays, Sundays and Public holidays.

A) Material Contracts

1. Engagement Letter dated May 08, 2008 received from the Company appointing Enam Securities Private Limited to act as Lead Manager to the Issue.

2. Memorandum of Understanding dated September 27, 2008 between Enam Securities Private Limited as Lead Manager to the Issue and our Company.

3. Memorandum of Understanding dated September 24, 2008 between Cameo Corporate Services Limited as Registrar to the Issue and our Company

B) Documents

1. Memorandum and Articles of Association of our Company.

2. Certificate of Incorporation of the Company dated July 9, 1984 and the revised Certificates of Incorporation pursuant to changes in our Company’s name.

3. Copy of the resolution passed at the meeting of the Board of Directors held on July 30, 2008 and EGM held on September 10, 2008 approving this Issue.

4. Consents of the Directors, Company Secretary and Compliance Officer, Auditors, Lead Manager to the Issue, Bankers to the Issue, Legal Advisors to the Issue, and Registrar to the Issue, to include their names in the Draft Letter of Offer to act in their respective capacities.

5. The Report of the Auditors, M/s. B S R & Associates, dated September 26, 2008 for the financial years ending March 31, 2008, March 31, 2007, March 31, 2006, March 31, 2005 and March 31, 2004.

6. Statement of tax benefits of M/s. B S R & Associates dated September 26, 2008.

7. Annual Report of the our Company and that of Tebma Gardens Limited for the last five financial years.

8. Copies of the initial listing application made to the Stock Exchange.

9. In-principle approvals from Over-The-Counter-Exchange of India vide letter dated [ ].

10. Observation Letter No. [ ] dated [ ] issued by the Securities and Exchange Board of India for the Issue.

11. Due Diligence Certificate dated September 29, 2008 from Enam Securities Private Limited.

12. Agreement dated December 21, 2005 entered into with NSDL and the Registrar, to establish direct connectivity with the Depository.

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13. Agreement dated August 17, 2008 entered into with CDSL and the Registrar to establish direct connectivity with the Depository.

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DECLARATION

We, the Directors of our Company, hereby declare that, all the relevant provisions of the Companies Act, 1956, and the guidelines issued by the Government of India or the guidelines issued by the Securities and Exchange Board of India, as the case may be, have been complied with and no statements made in the Draft Letter of Offer contravenes any of the provisions of the Companies Act, 1956 and the rules made thereunder. All the legal requirements connected with the said Issue as also the guidelines, instructions, etc. issued by SEBI, Government and any other competent authority in this behalf have been duly complied with.

Yours faithfully,

For Tebma Shipyards Limited.

Name: P.K. Balasubramanian Designation: Chairman

Name: Ajay Dhagat Designation: Managing Director and Chief Executive Officer

Name: B. Jayakumar Designation: Director – Technical

Name: G. Sriram Designation: Director

Name: M.M. Kamath Designation: Director

Name: Sumit Chandwani Designation: Director

Name: Shweta Jalan Designation: Director

Name: Raj Narain Bharadwaj Designation: Director

Name: N. Kantha Kumar Designation: Director

Name: T. Raghunandana Designation: Director

Name: N. Ramanathan Designation: Chief Financial Officer

Dated: September 29, 2008 FOR EQUITY …Issuer Call Option One-time call option available with our...

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