NUMERO UNO CLOTHING LIMITEDOur Company was incorporated in Delhi on December 14, 2006 under the name...

DRAFT RED HERRING PROSPECTUS

Dated April 29, 2015

(The Draft Red Herring Prospectus will be updated upon filing with the RoC)

(Please read Section 32 of the Companies Act, 2013)

100% Book Built Issue

NUMERO UNO CLOTHING LIMITED

Our Company was incorporated in Delhi on December 14, 2006 under the name ―Numero Uno Clothing Limited‖ as a public limited company under the Companies Act, 1956 with the Registrar

of Companies, National Capital Territory of Delhi and Haryana. The Corporate Identification Number of our Company is U18101HR2006PLC037533. For further details in connection with

change in name and registered office of our Company, refer to the chapter titled ―History and Certain Corporate Matters‖ on page 152 of this Draft Red Herring Prospectus.

Registered Office: 568/1, PMW Complex, Railway Road, District Gurgaon – 122 001, Haryana, India

Contact Person: Man Singh, Company Secretary and Chief Legal Officer cum Compliance Officer;

Telephone: +91-124-4555 222; Facsimile: +91-124-4555 255 | E-mail: [email protected]; Website: www.numerounojeanswear.com OUR PROMOTERS: NARINDER SINGH DHINGRA AND ROHINI SINGH DHINGRA

PUBLIC ISSUE OF [●] EQUITY SHARES OF FACE VALUE OF ₹ 10 EACH (“EQUITY SHARES”) OF NUMERO UNO CLOTHING LIMITED (OUR “COMPANY” OR

“ISSUER”) FOR CASH AT A PRICE OF ₹ [●] PER EQUITY SHARE INCLUDING A SHARE PREMIUM OF ₹ [●] PER EQUITY SHARE, AGGREGATING UP TO ₹ [●] LACS

(THE “ISSUE”) COMPRISING OF A FRESH ISSUE OF [●] EQUITY SHARES BY OUR COMPANY AGGREGATING UP TO ₹ 6,500 LACS (THE “FRESH ISSUE”) AND AN

OFFER FOR SALE OF UP TO 16,00,000 EQUITY SHARES AND UP TO 68,00,000 EQUITY SHARES BY NARINDER SINGH DHINGRA AND AA DEVELOPMENT

CAPITAL INDIA FUND 1, LLC RESPECTIVELY (THE “SELLING SHAREHOLDERS”)AGGREGATING UP TO ₹ [●] LACS (THE “OFFER FOR SALE”). THE ISSUE

SHALL CONSTITUTE [●] % OF THE FULLY DILUTED POST-ISSUE PAID UP EQUITY SHARE CAPITAL OF OUR COMPANY. OUR COMPANY AND THE SELLING

SHAREHOLDERS MAY (IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGERS) OFFER A DISCOUNT TO RETAIL INDIVIDUAL BIDDERS (“RETAIL

DISCOUNT”) IN ACCORDANCE WITH THE SEBI ICDR REGULATIONS. THE DETAILS OF RETAIL DISCOUNT (IF ANY) SHALL BE DISCLOSED IN THE RED

HERRING PROSPECTUS PRIOR TO FILING IT WITH THE REGISTRAR OF COMPANIES.

THE FACE VALUE OF THE EQUITY SHARES IS ₹ 10 EACH AND THE ISSUE PRICE IS [●] TIMES THE FACE VALUE OF THE EQUITY SHARES. THE PRICE BAND

AND THE MINIMUM BID LOT SIZE WILL BE DECIDED BY OUR COMPANY AND THE SELLING SHAREHOLDERS, IN CONSULTATION WITH THE BOOK

RUNNING LEAD MANAGERS AND WILL BE ADVERTISED AT LEAST FIVE WORKING DAYS PRIOR TO THE BID/ISSUE OPENING DATE

In case of any revision in the Price Band, the Bidding Period shall be extended for at least three additional Working Days after such revision of the Price Band, subject to the total Bidding

Period not exceeding 10 Working Days. Any revision in the Price Band, and the revised Bidding Period, if applicable, shall be widely disseminated by notification to the BSE Limited (―BSE‖)

and the National Stock Exchange of India Limited (―NSE‖ together with the BSE, the ―Stock Exchanges‖) by issuing a press release and also by indicating the change on the website of the

Book Running Lead Managers (―BRLMs‖) and on the terminals of the Syndicate Members and the Self Certified Syndicate Banks (―SCSBs‖).

Pursuant to Rule 19(2) (b)(i) of the Securities Contracts (Regulation) Rules, 1957, as amended (the ―SCRR‖), this Issue is being made for at least 25% of the post-Issue paid-up Equity Share

capital of our Company. This Issue is being made through the Book Building Process in compliance with provision of Regulation 26(1) of the Securities and Exchange Board of India (Issue of

Capital and Disclosure Requirements) Regulations, 2009, as amended (the ―SEBI ICDR Regulations‖), wherein 50% of the Issue shall be allotted on a proportionate basis to Qualified

Institutional Buyers (―QIBs‖). Our Company and the Selling Shareholders, in consultation with the BRLMs may allocate up to 60% of the QIB Portion to Anchor Investors at the Anchor

Investor Issue Price, on a discretionary basis, out of which at least one-third will be available for allocation to domestic Mutual Funds subject to valid bids being received at or above the Anchor

Investor Issue Price. Such number of Equity Shares representing 5% of the QIB Portion (excluding Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual

Funds only, and the remaining QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above Issue

Price. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non Institutional Investors and not less than 35% of the Issue shall be available for

allocation to Retail Individual Bidders, subject to valid Bids being received from them at or above the Issue Price, such that subject to availability of Equity Shares. Under-subscription, if any,

in any category, except the QIB Portion, would be met with spill-over from any other category or categories, as applicable, on a proportionate basis, subject to applicable law. All QIBs (other

than Anchor Investors) and Non-Institutional Investors must compulsorily, and Retail Individual Bidders may optionally, participate in this Issue though the ASBA process by providing the

details of their respective bank accounts in which the corresponding Bid Amounts will be blocked by the SCSBs. Specific attention of investors is invited to the chapter titled “Issue Procedure”

on page 384 of this Draft Red Herring Prospectus.

RISKS IN RELATION TO THE FIRST ISSUE

This being the first issue of the Issuer, there has been no formal market for the Equity Shares of our Company. The face value of the Equity Shares is ₹ 10 each and the Floor Price is [●] times

of the face value and the Cap Price is [●] times of the face value. The Issue Price (as determined and justified by our Company and the Selling Shareholders, in consultation with the BRLMs),

as stated in the chapter titled ―Basis for Issue Price‖ on page 98 of this Draft Red Herring Prospectus should not be taken to be indicative of the market price of the Equity Shares after such

Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after

listing.

GENERAL RISKS

Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their entire

investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own

examination of the Issuer and this Issue, including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of

India (―SEBI‖), nor does SEBI guarantee the accuracy or adequacy of the contents of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled ―Risk

Factors‖ on page 16 of this Draft Red Herring Prospectus.

COMPANY‟S AND SELLING SHAREHOLDERS‟ ABSOLUTE RESPONSIBILITY

Our Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to our Company and this

Issue, which is material in the context of this Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any

material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole

or any of such information or the expression of any such opinions or intentions, misleading, in any material respect. Each Selling Shareholders accepts responsibility only for and confirms that

the statements in relation to itself and the Equity Shares being sold by it in the Offer for Sale contained in this Draft Red Herring Prospectus are true and correct in all material respects. The

Selling Shareholders do not assumes any responsibility for any other statements, including, among others, any statements made by or relating to our Company or its business in this Draft Red

Herring Prospectus.

LISTING

The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the BSE and the NSE. Our Company has received in-principle approvals from the BSE and the NSE

for listing of the Equity Shares pursuant to their letters dated [●] and [●], respectively. For the purposes of this Issue, the [●] shall be the Designated Stock Exchange.

BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE

Anand Rathi Advisors Limited

10th Floor, Trade Tower D, Kamala City,

Senapati Bapat Marg, Lower Parel,

Mumbai - 400 013, Maharashtra, India

Telephone: +91 22 6626 6666

Facsimile: +91 22 6626 6544

Email ID: [email protected]

Website: www.rathi.com

Investor Grievance ID: [email protected]

Contact Person: Chintan Hefa / Kunal Safari

SEBI Registration Number: INM000010478

Motilal Oswal Investment Advisors Private Limited

Motilal Oswal Tower, Rahimtullah Sayani Road,

Opposite Parel ST Depot, Prabhadevi

Mumbai- 400 025, Maharashtra, India

Telephone: +91 22 3980 4380

Facsimile: +91 22 3980 4315

E-mail: [email protected]

Website: www.motilaloswal.com


Contact Person: Rupesh Khant

SEBI Registration No.: INM000011005

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound

L.B.S. Marg, Bhandup (West)

Mumbai - 400 078, Maharashtra, India.

Telephone: +91 22 2596 3838

Facsimile: +91 22 2594 6969

Email: [email protected]

Website: www.linkintime.co.in


Contact Person: Ranjeet Mahadam

SEBI Registration Number: INR000004058

BID/ISSUE PROGRAMME

BID/ISSUE OPENING DATE: [●]* BID/ISSUE CLOSING DATE**: [●]

*Our Company and the Selling Shareholders may, in consultation with the BRLMs, consider participation by Anchor Investors in accordance with the SEBI ICDR Regulations. The Anchor

Investor Bid/Issue Period shall be one Working Day prior to the Bid / Issue Opening Date.

** Our Company and the Selling Shareholders may, in consultation with the BRLMs, consider closing the Bid/Issue Period for QIBs one Working Day prior to the Bid/Issue Closing Date in

accordance with the SEBI ICDR Regulations

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TABLE OF CONTENT

SECTION I – GENERAL ............................................................................................................................................. 3

DEFINITIONS AND ABBREVIATIONS ..................................................................................................................... 3

PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ............................................................... 13

FORWARD-LOOKING STATEMENTS ..................................................................................................................... 15

SECTION II: RISK FACTORS ................................................................................................................................. 16

SECTION III: INTRODUCTION ............................................................................................................................. 38

SUMMARY OF INDUSTRY ....................................................................................................................................... 38

SUMMARY OF OUR BUSINESS, STRENGTHS AND STRATEGIES .................................................................... 43

SUMMARY OF FINANCIAL INFORMATION ......................................................................................................... 48

THE ISSUE ................................................................................................................................................................... 56

GENERAL INFORMATION ....................................................................................................................................... 57

CAPITAL STRUCTURE .............................................................................................................................................. 68

SECTION IV: PARTICULARS OF THE ISSUE .................................................................................................... 81

OBJECTS OF THE ISSUE ........................................................................................................................................... 81

BASIS FOR ISSUE PRICE .......................................................................................................................................... 98

STATEMENT OF TAX BENEFITS .......................................................................................................................... 101

SECTION V: ABOUT THE COMPANY ............................................................................................................... 113

INDUSTRY OVERVIEW .......................................................................................................................................... 113

OUR BUSINESS ........................................................................................................................................................ 128

KEY REGULATIONS AND POLICIES .................................................................................................................... 142

HISTORY AND CERTAIN CORPORATE MATTERS ............................................................................................ 152

OUR MANAGEMENT ............................................................................................................................................... 158

OUR PROMOTERS AND PROMOTER GROUP ..................................................................................................... 173

OUR GROUP ENTITIES ........................................................................................................................................... 176

DIVIDEND POLICY .................................................................................................................................................. 179

SECTION VI: FINANCIAL INFORMATION ...................................................................................................... 180

FINANCIAL STATEMENTS .................................................................................................................................... 180

MANAGEMENT‘S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION ...... 304

FINANCIAL INDEBTEDNESS ................................................................................................................................. 323

SECTION VII: LEGAL AND OTHER INFORMATION .................................................................................... 334

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ................................................................. 334

GOVERNMENT AND OTHER APPROVALS ......................................................................................................... 347

OTHER REGULATORY AND STATUTORY DISCLOSURES .............................................................................. 363

SECTION VIII – ISSUE RELATED INFORMATION ........................................................................................ 375

TERMS OF THE ISSUE ............................................................................................................................................. 375

ISSUE STRUCTURE ................................................................................................................................................. 379

ISSUE PROCEDURE ................................................................................................................................................. 384

SECTION IX – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ............................................ 432

SECTION X: OTHER INFORMATION ................................................................................................................ 485

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION .................................................................... 485

DECLARATION ........................................................................................................................................................ 487

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SECTION I – GENERAL

DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates, requires or implies, the following terms shall have the following

meanings in this Draft Red Herring Prospectus. References to statutes, rules, regulations, guidelines and policies

will be deemed to include all amendments and modifications notified thereto.

Company and Business Related Terms

Term Description

―Articles‖ or ―Articles of

Association‖ or ―AoA‖

The Articles of Association of our Company, as amended.

Audit Committee The committee of the Board of Directors constituted as our Company‘s audit

committee in accordance with Clause 49 of the Listing Agreement and the

Companies Act, 2013.

―Auditor‖ or ―Statutory

Auditor‖

The statutory auditors of our Company, being M/s. B S R & Co. LLP,

Chartered Accountants.

―Board‖ or ―Board of

Directors‖ or ―our Board‖

The Board of Directors of our Company, as duly constituted from time to time

including any committees thereof.

Director(s) Unless the context requires otherwise, the director(s) of our Company

Equity Shares Equity shares of our Company of ₹ 10 each, fully paid up

Group Companies The companies, firms, ventures, etc. promoted by our Promoters, as described

in the chapter titled ―Our Group Entities‖ on page 176 of this Draft Red

Herring Prospectus, irrespective of whether such entities are covered under

section 370 (1B) of the Companies Act, 1956 or not.

―Key Managerial Personnel‖ or

KMP

The personnel listed as key managerial personnel in the chapter titled ―Our

Management‖ on page 158 of this Draft Red Herring Prospectus.

―Memorandum‖ or

―Memorandum of Association‖

or ―MoA‖

The Memorandum of Association of our Company, as amended.

Mid-Premium Products ranging from ₹1,001 to ₹ 2,000

―Our Company‖ or ―the

Company‖ or ―NUCL‖

Numero Uno Clothing Limited, a public limited company incorporated under

the Companies Act, 1956.

Our Brand Numero Uno

Premium Range Products ranging from ₹ 2,001 to ₹ 4,000

Promoter(s) Narinder Singh Dhingra and Rohini Singh Dhingra.

Promoter Group The persons and entities constituting our promoter group pursuant to

Regulation 2(1) (zb) of the SEBI ICDR Regulations.

Registered Office The registered office of our Company located at 568/1, PMW Complex,

Railway Road, District Gurgaon – 122 001, Haryana, India

Registrar of Companies/RoC Registrar of Companies, National Capital Territory of Delhi and Haryana

Selling Shareholders Narinder Singh Dhingra and AA Development Capital India Fund 1, LLC, a

limited liability company organized in Mauritius, having its registered office

at Cim Fund Services Ltd., 33, Edith Cavell Street, Port Louis, Republic of

Mauritius

Subsidiary or ―NUBL‖ Numero Uno Brands Limited, a public limited company incorporated under

the Companies Act, 1956.

―We‖ or ―us‖ or ―our‖ , the

―Issuer‖

Unless the context otherwise indicates or implies, refers to Numero Uno

Clothing Limited.

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Issue Related Terms

Term Description

AADC AA Development Capital India Fund 1, LLC, a limited liability company

organized in Mauritius, having its registered office at Cim Fund Services Ltd.,

33, Edith Cavell Street, Port Louis, Republic of Mauritius

―Allot‖ or ―Allotment‖ or

―Allotted‖

The allotment of Equity Shares pursuant to the Fresh Issue and transfer of the

Equity Shares offered by the Selling Shareholders pursuant to the Offer for

Sale.

Allotment Advice The note or advice or intimation of Allotment of the Equity Shares sent to the

Bidders except Anchor Investors who have been or are to be allotted the Equity

Shares after the Basis of Allotment has been approved by the Designated Stock

Exchange.

Allottee A successful Bidder to whom Allotment is made.

―Anand Rathi‖ or ―ARAL‖ Anand Rathi Advisors Limited having its office at 10th Floor, Trade Tower D,

Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013,

Maharashtra, India

Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor Portion,

who has Bid for an amount of at least ₹ 1,000 lacs.

Anchor Investor Bid/ Issue

Period

The day, one Working Day prior to the Bid/Issue Opening Date, on which Bids

by Anchor Investors shall be submitted and allocation to Anchor Investor shall

be completed

Anchor Investor Issue Price The price at which Allotment will be made to Anchor Investors in terms of the

Red Herring Prospectus and Prospectus, which will be a price equal to or

higher than the Issue Price but not higher than the Cap Price. The Anchor

Investor Issue Price will be decided by our Company and the Selling

Shareholders in consultation with the BRLMs

Anchor Investor Portion Up to 60% of the QIB Portion which, may be allocated by our Company and

the Selling Shareholders in consultation with the BRLMs, to Anchor Investors,

on a discretionary basis. One third of the Anchor Investor Portion is reserved

for domestic Mutual Funds, subject to valid Bids being received from domestic

Mutual Funds at or above the Anchor Investor Issue Price

―ASBA‖ or ―Application

Supported by Blocked

Amount‖

An application, whether physical or electronic, used compulsorily by all QIBs

(except Anchor Investors) and Non-Institutional Bidders and optionally by

Retail Individual Bidders to make to make a Bid authorizing the SCSB, either

directly or through the Syndicate ASBA Members, to block the Bid Amount in

their specified bank account maintained with the SCSB.

ASBA Account Account maintained with an SCSB which will be blocked by such SCSB to the

extent of the Bid Amount of the ASBA Bidder/ Applicant.

ASBA Bidder A Bidder, other than Anchor Investors in this Issue, who Bids through ASBA

process.

Bankers to the Issue/Escrow

Collection Bank(s)

Banks which are clearing members and registered with SEBI as banker to an

issue with whom the Escrow Account will be opened, in this case being [●].

Basis of Allotment Basis on which the Equity Shares will be Allotted to successful Bidders under

the Issue and which is described in the chapter titled ―Issue Procedure‖ on page

384 of this Draft Red Herring Prospectus.

Bid An indication to make an offer during the Bidding Period by a Bidder (other

than an Anchor Investor), or on the Anchor Investor Bid/Issue Period by an

Anchor Investor, to subscribe or purchase the Equity Shares of our Company at

a price within the Price Band, including all revisions and modifications thereto.

Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red

Herring Prospectus and the Bid-cum-Application Form, including an Anchor

Investor unless stated or implied otherwise

Bidding The process of making a Bid.

Bid Amount The highest value of optional Bids indicated in the Bid-cum-Application Form

and payable by the Bidder/blocked in the ASBA Account on submission of a

Bid in the Issue, less discount to Retail Individual Bidders, if applicable.

Bid cum Application Form The form used by a Bidder, including an ASBA Bidder, to make a Bid and

which will be considered as an application for Allotment in terms of the Red

5

Term Description

Herring Prospectus and the Prospectus.

Bid Price The prices indicated against each optional Bid in the Bid cum Application

Form.

Bid/Issue Closing Date Except in relation to any Bids received from the Anchor Investors, the date

after which the Syndicate, the Designated Branches and the Registered Brokers

will not accept any Bids, and which shall be notified in one English national

daily newspaper with wide circulation and one Hindi national daily newspaper

each with wide circulation which shall also serve as the regional language

newspaper with wide circulation, with Hindi being the regional language of

Haryana where the Registered Office is located, and in case of any revision, the

extended Bid Closing Date also to be notified on the website and terminals of

the Syndicate and SCSBs, as required under the SEBI ICDR Regulations. Our

Company and the Selling Shareholders in consultation with the BRLMs, may

decide to close the Bidding by QIBs one Working Day prior to the Bid/Issue

Closing Date, which shall also be notified in an advertisement in the same

newspapers in which the Bid/Issue Opening Date was published

Bid/Issue Opening Date Except in relation to any Bids received from the Anchor Investors, the date on

which the Syndicate, the Designated Branches and the Registered Brokers shall

start accepting Bids, and which shall be notified in an English national daily

newspaper with wide circulation and one Hindi national daily newspaper with

wide circulation which shall also serve as the regional language newspaper

with wide circulation, with Hindi being the regional language of Haryana

where the Registered Office is located

Bidding Centre/ Broker

Centre

Broker centres notified by the Stock Exchanges, where Bidders can submit the

Bid cum Application Forms to a Registered Broker. The details of such Broker

Centres, along with the names and contact details of the Registered Brokers are

available on the websites of the Stock Exchanges.

Bid/Issue Period Except in relation to Anchor Investors, the period between the Bid/Issue

Opening Date and the Bid/Issue Closing Date (inclusive of such date and the

Bid Opening Date) during which prospective Bidders, other than Anchor

Investors, can submit their Bids, inclusive of any revision thereof. Provided

however that the Bidding shall be kept open for a minimum of three Working

Days for all categories of Bidders, other than Anchor Investors.

Our Company and the Selling Shareholders, in consultation with the BRLMs,

may decide to close Bidding by QIBs one day prior to the Bid Closing Date

which shall also be notified in an advertisement in same newspapers in which

the Bid Opening Date was published.

Bid Lot [●] Equity Shares

Book Building

Process/Method

The book building route as provided under Schedule XI of the SEBI ICDR

Regulations.

Book Running Lead Managers

or BRLMs

Book running lead managers to this Issue, being Anand Rathi Advisors Limited

and Motilal Oswal Investment Advisors Private Limited.

CAN/Confirmation of

Allotment Note

The note or advice or intimation sent to each successful Bidder/Applicant

indicating the Equity Shares which may be Allotted, after approval of Basis of

Allotment by the Designated Stock Exchange

Cap Price The higher end of the Price Band, in this case being ₹ [●], and any revisions

thereof, above which the Issue Price will not be finalized and above which no

Bids will be accepted.

Controlling Branches Such branches of the SCSBs which co-ordinate Bids under this Issue by the

ASBA Bidders with the Registrar to the Issue and the Stock Exchanges, a list

of which is available on the website of SEBI at

http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised- Intermediaries

or at such other website as may be prescribed by SEBI from time to time

Cut-Off Price Issue Price, as finalised by our Company and the Selling Shareholders in

consultation with the BRLMs. Only Retail Individual Bidders are entitled to

Bid at the Cut-off Price. QIBs and Non-Institutional Bidders are not entitled to

Bid at the Cut-off Price.

Depository NSDL and CDSL or any other depository registered with the SEBI under

6

Term Description

Securities and Exchange Board of India (Depositories and Participants)

Regulations, 1996 as amended from time to time read with the Depositories

Act, 1996.

Depositories Act The Depositories Act, 1996, as amended from time to time.

Depository Participant or DP A depository participant registered with the SEBI under the Depositories Act.

Designated Branches Such branches of the SCSBs, which shall collect the Bid cum Application Form

from ASBA Bidders, a list of which is available on the website of SEBI at

http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries

or at such other website as may be prescribed by SEBI from, time to time.

Designated Date The date on which funds are transferred by the Escrow Collection Bank(s) from

the Escrow Account, or the amounts blocked by the SCSBs are transferred

from the ASBA Accounts, as the case may be, to the Public Issue Account or

the Refund Account, as appropriate, or the amount blocked by the SCSB is

transferred from the bank account of the ASBA Bidder to the Public Issue

Account, as the case may be, after the Prospectus is filed with RoC, following

which the Board of Directors shall Allot the Equity Shares to successful

Bidders in the Fresh Issue and the Selling Shareholders shall give delivery

instructions for the transfer of the Equity Shares constituting the Offer for Sale.

Designated Stock Exchange [●]

Draft Red Herring Prospectus

or DRHP

This draft red herring prospectus dated April 29, 2015 filed with SEBI,

prepared and issued by our Company in accordance with the SEBI ICDR

Regulations.

Eligible NRIs NRIs from such a jurisdiction outside India where it is not unlawful to make an

offer or invitation under this Issue and in relation to whom the Red Herring

Prospectus constitutes an invitation to subscribe to or purchase the Equity

Shares.

Eligible QFIs Qualified Foreign Investors from such jurisdictions outside India where it is not

unlawful to make an invitation under the Issue and in relation to whom the Red

Herring Prospectus constitutes an invitation to subscribe to or purchase the

Equity Shares issued thereby, and who have opened dematerialized accounts

with SEBI registered qualified depositary participants, and are deemed as FPIs

under the SEBI FPI Regulations

Escrow Account(s) Account opened with the Escrow Collection Bank(s) and in whose favour the

Bidders (excluding the ASBA Bidders) will issue cheques or drafts in respect

of the Bid Amount when submitting a Bid.

Escrow Agreement An agreement to be entered among our Company, the Selling Shareholders, the

Registrar to the Issue, the Escrow Collection Bank(s), Refund Bank(s), the

BRLMs and the Syndicate Members for the collection of Bid Amounts and

where applicable, for remitting refunds, if any, to the Bidders (excluding the

ASBA Bidders) on the terms and conditions thereof.

First Bidder Bidder whose name appears first in the Bid cum Application Form in case of a

joint bid and whose name shall also appear as the first holder of the beneficiary

account held in joint names or any revisions thereof.

Floor Price The lower end of the Price Band, and any revisions thereof, below which the

Issue Price will not be finalized and below which no Bids will be accepted and

which shall not be less than the face value of the Equity Shares

Fresh Issue The issue of [●] Equity Shares aggregating up to ₹ 6,500 lacs offered by our

Company for subscription pursuant to the terms of this Draft Red Herring

Prospectus.

General Information

Document/GID

The General Information Document for investing in public issues prepared and

issued in accordance with the circular (CIR/CFD/DIL/12/2013) dated October

23, 2013, notified by SEBI, suitably modified and included in the chapter titled

―Issue Procedure‖ on page 384 of this Draft Red Herring Prospectus

Issue The Fresh Issue and the Offer for Sale are together referred to as the Issue.

Issue Agreement The agreement entered into on April 29, 2015 entered into between our

Company, the Selling Shareholders and the BRLMs, pursuant to which certain

arrangements are agreed to in relation to the Issue.

Issue Expense Expenses in connection with the Issue which (other than listing fees), will be

7

Term Description

shared between each of the Selling Shareholders and our Company, in the

proportion to the Equity Shares offered for sale by the Selling Shareholders and

issued by our Company in the Fresh Issue.

Issue Price The price, as determined by our Company and the Selling Shareholders in

consultation with the BRLMs on the Pricing Date, at which the Equity Shares

will be issued and Allotted/transferred in terms of the Red Herring Prospectus

Unless otherwise stated or the context otherwise implies, the term Issue Price

refers to the Issue Price applicable to investors other than Anchor Investors.

Issue Proceeds The proceeds of this Issue available to our Company and the Selling

Shareholders.

Listing Agreement The listing agreement(s) to be entered into by our Company with the Stock

Exchanges

MOIAPL or Motilal Oswal Motilal Oswal Investment Advisors Private Limited having its office at Motilal

Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi,

Mumbai- 400 025, Maharashtra, India

Mutual Fund Portion [●] Equity Shares or 5% of the Net QIB Portion (excluding the Anchor Investor

Portion), available for allocation to Mutual Funds only.

Net Proceeds The proceeds of the Fresh Issue less our Company‘s share of the Issue related

expenses.

Net QIB Portion QIB Portion less the Anchor Investor Portion.

Non-Institutional Bidders All Bidders that are not Qualified Institutional Buyers or Retail Individual

Bidders and who have Bid for Equity Shares for a cumulative amount more

than ₹ 200,000. (but not including NRIs other than Eligible NRIs and QFIs

other than Eligible QFIs )

Non-Institutional Portion /

Non-Institutional Category

The portion of the Issue being not less than 15% of the Issue consisting of [●]

Equity Shares, available for allocation on a proportionate basis to Non-

Institutional Bidders subject to valid bids received at or above the Issue Price.

Non Syndicate Broker Centre All the locations, around 400 as mentioned by SEBI in the circular no.

CIR/CFD/14/2012 dated October 04, 2012 and consequently uploaded by

Stock Exchanges on their respective websites at www.bseindia.com and

www.nseindia.com, where the Bids can be submitted to a Non Syndicate Stock

Broker.

Non Syndicate Stock Broker A stock broker registered as a member of a Stock Exchange who has not

entered into a Sub-Syndicate Agreement with the Syndicate Member and is not

a part of the Syndicate

Non Syndicate Stock Broker

Mechanism

The process of investors applying through Non Syndicate Stock Broker at a

Non Syndicate Broker Centre pursuant to SEBI circular no. CIR/CFD/14/2012

dated October 4, 2012.

Offer for Sale The offer for sale of up to 16,00,000 Equity Shares by Narinder Singh Dhingra

and up to 68,00,000 Equity Shares by AADC.

Price Band Price band between the Floor Price and Cap Price (both included), including

any revisions thereof. The Price Band and the minimum Bid lot size for the

Issue will be decided by our Company and the Selling Shareholders in

consultation with the BRLMs and advertised in an English national newspaper

with wide circulation, a Hindi national newspaper each with wide circulation

which shall also serve as the regional language newspaper with wide

circulation, with Hindi being regional language of Haryana where our

Registered Office is situated, at least five Working Days prior to the Bid/Issue

Opening Date and all such advertisement(s) shall be available on the websites

of the Stock Exchanges

Pricing Date The date on which the Issue Price is finalised by our Company and the Selling

Shareholders, in consultation with the BRLMs.

Prospectus The prospectus of our Company to be filed with the RoC for this Issue after the

Pricing Date, with the provisions of Section 26 of the Companies Act, 2013 and

the SEBI ICDR Regulations containing, inter alia, the Issue Price that is

determined at the end of the Book Building Process, the size of the Issue and

certain other information.

Public Issue Account The bank account opened with the Bankers to the Issue by our Company and

8

Term Description

the Selling Shareholders under Section 40 of the Companies Act, 2013 to

receive money from the Escrow Accounts on the Designated Date, and into

which the funds shall be transferred by the SCSBs from the ASBA Accounts.

Qualified Foreign Investors or

QFIs or Eligible QFI

Non-resident investors (other than SEBI registered FIIs or sub-accounts or

SEBI registered FVCIs) who meet ‗Know Your Customer‘ requirements

prescribed by SEBI and are resident in a country which is (i) a member of

Financial Action Task Force or a member of a group which is a member of

Financial Action Task Force; and (ii) a signatory to the International

Organisation of Securities Commission‘s Multilateral Memorandum of

Understanding or a signatory of a bilateral memorandum of understanding with

SEBI. Provided that such non-resident investor shall not be resident in a

country which is listed in the public statements issued by Financial Action Task

Force from time to time on: (i) jurisdictions having a strategic anti-money

laundering/combating the financing of terrorism deficiencies to which counter

measures apply; and (ii) jurisdictions that have not made sufficient progress in

addressing the deficiencies or have not committed to an action plan developed

with the Financial Action Task Force to address the deficiencies and such other

person(s), entities, etc. as may be identified as QFIs by SEBI in its Circulars

No. Cir/IMD/FII&C/3/2-2012 dated January 13, 2012,

Cir/IMD/FII&C/13/2012 dated June 07, 2012 and Cir/IMD/FII&C/18/2012

dated July 20, 2012 and such other circulars as may be issued by SEBI in this

regard from time to time.

QIBs or Qualified Institutional

Buyers

Qualified Institutional Buyers as defined under Regulation 2(1)(zd) of the SEBI

ICDR Regulations.

QIB Portion /QIB Category The portion of the Issue (including the Anchor Investor Portion) being [●]

Equity Shares which shall be available for allocation to QIBs (including the

Anchor Investor Portion).

Red Herring Prospectus or

RHP

The red herring prospectus to be issued in accordance with Section 32 of the

Companies Act, 2013 and the SEBI ICDR Regulations, which will not have

complete particulars of the price at which the Equity Shares shall be offered

and the size of the Issue. The Red Herring Prospectus will be filed with the

RoC at least three Working Days before the Bid/Issue Opening Date and will

become the Prospectus upon filing with the RoC after the Pricing Date.

Refund Account(s) The account(s) opened by our Company, from which refunds of the whole or

part of the Bid Amount (excluding the ASBA Bidders), shall be made.

Refunds through electronic

transfer of funds

Refunds through NECS, NEFT, direct credit or RTGS, as applicable.

Refund Banks Escrow Collection Banks with whom Refund Accounts will be opened and

from which a refund of the whole or part of the Bid Amount, if any, shall be

made, in this case being, [●]

Registered Brokers Stock brokers registered with the stock exchanges having nationwide terminals,

other than the members of the Syndicate

Registrar or Registrar to the

Issue

Link Intime India Private Limited

Retail Individual Bidders Bidders (including HUFs applying through their karta, Eligible NRIs and

Resident Retail Individual Bidders) whose Bid Amount for Equity Shares in the

Issue is not more than ₹ 200,000 in any of the Bidding options in the Issue.

Retail Portion The portion of the Issue being not less than 35% of the Issue, consisting of [●]

Equity Shares, available for allocation on a proportionate basis to Retail

Individual Bidders.

Revision Form The form used by the Bidders, including ASBA Bidders, to modify the quantity

of Equity Shares or the Bid Amount in any of their Bid cum Application Forms

or any previous Revision Form(s).

SEBI (Alternative Investment

Funds) Regulations/SEBI AIF

Regulations

Securities and Exchange Board of India (Alternative Investment Funds)

Regulations, 2012.

Self Certified Syndicate

Banks or SCSBs

The banks which are registered with SEBI under the Securities and Exchange

Board of India (Bankers to an Issue) Regulations, 1994 and offer services in

9

Term Description

relation to ASBA a list of which is available on website of SEBI

(http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised

Intermediaries) and updated from time to time

Specified Locations Bidding centres where the Syndicate shall accept Bid cum Application Forms,

a list of which is available on the website of the SEBI

(http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised

Intermediaries) and updated from time to time

Stock Exchanges The BSE and the NSE.

Syndicate Agreement The agreement dated [●] to be entered into amongst the members of the Syndicate, our Company, the Selling Shareholders and the Registrar to the

Issue in relation to the collection of Bids in the Issue (other than Bids directly

submitted to the SCSBs under the ASBA process or to Registered Brokers at

the Broker Centres)

Syndicate ASBA Bidders

ASBA Bidders submitting their Bids through the members of the Syndicate or

Sub-Syndicate Members at the Syndicate ASBA Centres.

Syndicate ASBA Branches Branches of SCSBs in the Syndicate ASBA Bidding Centres, which would

accept the Bid cum Application Forms from the Syndicate ASBA Members.

Syndicate ASBA Members Those members of the Syndicate who can procure Bid cum Application Forms

(in relation to ASBA).

Syndicate Members An Intermediary registered with the SEBI to act as a syndicate member and

who are permitted to carry out activities as an underwriter, namely [●]

Syndicate / members of the

Syndicate

The BRLMs and the Syndicate Members

Underwriters The BRLMs and the Syndicate Members.

Underwriting Agreement The agreement to be entered into between the Underwriters, our Company and

the Selling Shareholders on or after the Pricing Date.

Working Days All days, other than a Sunday or a public holiday on which commercial banks

are open for business, provided however, with reference to (a) announcement

of Price Band; and (b) Bid/Issue Period, ―Working Days‖ shall mean all days,

excluding Saturdays, Sundays and public holidays, which are working days for

commercial banks in India.

For the purpose of the time period between the Bid Closing Date and listing of

the Equity Shares on the Stock Exchanges, ―Working Days‖ shall mean all

days excluding Sundays and bank holidays, in accordance with the SEBI

circular no. CIR/CFD/DIL/3/2010 dated April 22, 2010.

Conventional and General Terms/ Abbreviations/ Industry Related Terms

Abbreviation Full Form

₹/Rs./ Rupees Indian Rupees

A/c Account

AGM Annual General Meeting.

AIF Alternative Investment Funds registered pursuant to SEBI (Alternative Investment

Funds) Regulations, 2012, as amended from time to time

Air Act The Air (Prevention and Control of Pollution) Act, 1981, as amended.

AS or Accounting

Standards

Accounting Standards as notified under Companies (Accounting Standards) Rules,

2006

AY Assessment Year

BSE BSE Limited

CAGR Compound Annual Growth Rate

Category III FPIs

FPIs registered as category III FPIs under the SEBI FPI Regulations, which shall

include all other FPIs not eligible under category I and II foreign portfolio investors,

such as endowments, charitable societies, charitable trusts, foundations, corporate

bodies, trusts, individuals and family offices

CDSL Central Depository Services (India) Limited

CIBIL Credit Information Bureau (India) Limited

CIN Corporate Identity Number

COCO Company Owned and Company Operated

10


Companies Act or Act Companies Act, 1956, as superseded and substituted by notified provisions of the

Companies Act, 2013

Competition Act Competition Act, 2002, as amended

CST Central Sales Tax Act, 1956, as amended.

DIN Directors Identification Number.

DP ID Depository Participant‘s Identity

EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation

EBOs Exclusive Brand Outlets

ECS Electronic Clearing System

EGM Extraordinary General Meeting

EPCG Export Promotion Capital Goods

EPS Earnings per share, which is the profit after tax for a fiscal year divided by the

weighted average of outstanding number of equity shares at the end of the fiscal year

ESOP Employee Stock Option Plan

ETP Effluent Treatment Plant

EU Europe

FCNR Account Foreign Currency Non-Resident Account.

FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act, 1999, together with rules and regulations

framed there under.

FEMA Regulations Foreign Exchange Management (Transfer or Issue of Security by a Person Resident

Outside India) Regulations, 2000, as amended.

FII Foreign Institutional Investors, as defined under the FII Regulations and registered

with SEBI under applicable laws in India.

FII Regulations Securities and Exchange Board of India (Foreign Institutional Investors)

Regulations, 1995, as amended.

Fiscal or Financial Year

or FY

Period of twelve months ended March 31 of that particular year, unless otherwise

stated.

FPIs

A foreign portfolio investor who has been registered pursuant to the SEBI FPI

Regulations, provided that any QFI or FII who holds a valid certificate of registration

shall be deemed to be an FPI until the expiry of the block of three years for which

fees have been paid as per the Securities and Exchange Board of India (Foreign

Institutional Investors) Regulations, 1995

FVCI Foreign Venture Capital Investor registered under the FVCI Regulations.

FVCI Regulations Securities and Exchange Board of India (Foreign Venture Capital Investors)

Regulations, 2000, as amended.

GDP Gross Domestic Product

GoI or Government of

India or Central

Government

The Government of India.

HNI High Net worth Individual

HUF Hindu Undivided Family.

ICAI The Institute of Chartered Accountants of India

ICRA ICRA Management Consulting Services Limited

ICT Information and Communication Technology

IFRS International Financial Reporting Standards.

Income Tax Act Income Tax Act, 1961, as amended

Indian GAAP Generally accepted accounting principles in India.

IPO Initial Public Offering

IRDA Insurance Regulatory and Development Authority.

IT Information Technology

IT Act Income Tax Act, 1961, as amended.

IT Department Income Tax Department, GoI.

LFS Large Format Stores

LIBOR London Interbank Offered Rate

Limited Liability

Partnership or LLP

Limited Liability Partnership registered under the Limited Liability Partnership Act,

2008.

11


Ltd. Limited.

MBOs Multi Brand Outlets

MoU Memorandum of Understanding

Mutual Funds Mutual funds registered with the SEBI under the Securities and Exchange Board of

India (Mutual Funds) Regulations, 1996.

N.A./NA Not Applicable.

NAV Net Asset Value

NCR National Capital Region

NEFT National Electronic Funds Transfer.

NIF National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated

November 23, 2005 of the Government of India.

No. Number.

NOC No objection certificate

NR Non Resident

NR or Non Resident A person resident outside India, as defined under FEMA, including an Eligible NRI

and FII.

NRE Account Non-Resident External Account.

NRI

A person resident outside India, as defined under FEMA and who is a citizen of

India or a person of Indian origin, such term as defined under the Foreign Exchange

Management (Deposit) Regulations, 2000.

NRO Account Non-Resident Ordinary Account.

NSDL National Securities Depository Limited

NSE The National Stock Exchange of India Limited

p.a. Per annum.

P/E Ratio Price/Earnings Ratio

PAN Permanent Account Number

PAT Profit After Tax

PBT Profit Before Tax

PCB Pollution Control Board.

PLR Prime Lending Rate.

QA Quality Assurance

QC Quality Check

R&D Research and Development.

RBI Reserve Bank of India.

Rft Running feet

RoNW Return on Net Worth

RTGS Real Time Gross Settlement

SCRA Securities Contracts (Regulation) Act, 1956, as amended.

SCRR Securities Contracts (Regulation) Rules, 1957, as amended.

SEBI Securities and Exchange Board of India constituted under the SEBI Act

SEBI Act The Securities and Exchange Board of India Act, 1992, as amended.

SEBI ICDR

Regulations

The Securities and Exchange Board of India (Issue of Capital and Disclosure

Requirements) Regulations, 2009, as amended.

Securities Act U.S. Securities Act of 1933.

SICA Sick Industrial Companies (Special Provisions) Act, 1985, as amended.

Sq. ft./ Sft/ sqft Square foot

Sq. mt. Square meter.

Sub-Account Sub-accounts registered with SEBI under the Securities and Exchange Board of India

(Foreign Institutional Investor) Regulations, 1995, other than sub-accounts which are

12


foreign corporates or foreign individuals.

T&C Textile and Clothing

Takeover Code The Securities and Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 2011, as amended.

TAN Tax Deduction Account Number allotted the Income Tax Act, 1961, as amended.

TDS Tax Deducted at Source

TUFS Technology Upgradation Fund Scheme

U.S. GAAP Generally accepted accounting principles in the United States of America.

U.S. or US or U.S.A or

United States The United States of America, together with its territories and possessions.

UAE United Arab Emirates

US$ United States Dollar, the official currency of the United States of America

VCFs Venture Capital Funds as defined and registered with SEBI under the Securities and

Exchange Board of India (Venture Capital Fund) Regulations, 1996.

Water Act The Water (Prevention and Control of Pollution) Act, 1974, as amended.

WGSN WGSN Limited

Y-O-Y Year-over-Year

The words and expressions used but not defined herein shall have the same meaning as is assigned to such terms

under the Companies Act, the SCRA, the Depositories Act and the rules and regulations made there under.

Notwithstanding the foregoing, terms in the sections titled ―Main Provisions of the Articles of Association‖,

―Statement of Tax Benefits‖ and ―Financial Statements‖ on pages 432, 101 and 180, respectively of this Draft

Red Herring Prospectus, shall have the meanings given to such terms in such sections.

13

PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

Certain Conventions

All references to ―India‖ contained in this Draft Red Herring Prospectus are to the Republic of India. In this

Draft Red Herring Prospectus, unless otherwise stated, our Company has presented numerical information in

―Lacs‖ units. One lac represents 1,00,000.

Financial Data

Unless stated otherwise the financial data in this Draft Red Herring Prospectus is derived from our restated

consolidated financial information of our Company as at and for the Fiscal 2011, 2012, 2013, 2014 and 2015

prepared in accordance with the SEBI ICDR Regulations, which are included in this Draft Red Herring

Prospectus, and as set out in the section titled ―Financial Information‖ on page 180 of this Draft Red Herring

Prospectus. Our Financial Year commences on April 1 and ends on March 31 of the next year. Unless stated

otherwise, all references to a particular Financial Year are to the 12-month period ended on March 31 of that

year.

There are significant differences between the Indian GAAP, the International Financial Reporting Standards

(―IFRS‖) and the Generally Accepted Accounting Principles in the United States of America (―U.S. GAAP‖).

Accordingly, the degree to which the financial statements included in this Draft Red Herring Prospectus will

provide meaningful information is entirely dependent on the reader‘s level of familiarity with Indian accounting

practices. Any reliance by persons not familiar with Indian accounting practices, Indian GAAP, the Companies

Act and the SEBI ICDR Regulations on the financial disclosures presented in this Draft Red Herring Prospectus

should accordingly be limited. We have not attempted to quantify the impact of IFRS or U.S. GAAP on the

financial data included in this Draft Red Herring Prospectus, nor do we provide a reconciliation of our financial

statements to those under U.S. GAAP or IFRS and we and the Selling Shareholders urge you to consult your

own advisors regarding such differences and their impact on our financial data.

In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the

amounts listed are due to rounding off.

Currency and Unit of presentation

All references to ―Rupees‖ or ―₹‖ are to Indian Rupees, the currency of the Republic of India. All references to

―US$‖ or ―U.S. Dollars‖ are to United States Dollars, the currency of the United States of America.

Our Company has presented certain numerical information in this Draft Red Herring Prospectus in ―lac‖ units.

One lac represents 1,00,000 and one million represents 1,000,000. All the numbers in the document have been

presented in lac or in whole numbers where the numbers have been too small to present in lac.

Market and Industry Data

The chapter titled ―Industry Overview” quotes and otherwise includes information from a commissioned report,

or the ICRA Report, prepared by ICRA Management Consulting Services Limited for purposes of this Draft

Red Herring Prospectus. We have not commissioned any report for purposes of this Draft Red Herring

Prospectus other than the ICRA Report. We commissioned ICRA‘s research division to provide an independent

assessment of the opportunities, dynamics and competitive landscape of the markets in India for the business we

are engaged in. Except for the ICRA Report, market and industry related data used in this Draft Red Herring

Prospectus has been obtained or derived from publicly available documents and other industry sources. Industry

sources and publications generally state that the information contained therein has been obtained from sources

generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not

guaranteed and their reliability cannot be assured and accordingly, investment decisions should not be based on

such information.

Such data involves risks, uncertainties and numerous assumptions and is subject to change based on various

factors, including those discussed in the section titled ―Risk Factors‖ on page 16 of this Draft Red Herring

Prospectus. Accordingly, investment decisions should not be based solely on such information.

14

The extent to which the market and industry data used in this Draft Red Herring Prospectus is meaningful

depends on the reader‘s familiarity with and understanding of the methodologies used in compiling such data.

There are no standard data gathering methodologies in the industry in which we conduct our business, and

methodologies and assumptions may vary widely among different industry sources. In addition, certain data in

relation to our Company used in this Draft Red Herring Prospectus has been obtained or derived from reports

published, or studies conducted, by ICRA Management Consulting Services Limited and differs in certain

respects from our restated consolidated financial information as a result of, inter alia, the methodologies used in

compiling such data. Accordingly, no investment decision should be made based on such information.

In accordance with the SEBI ICDR Regulations, the chapter titled ―Basis for Issue Price‖ on page 98 of this

Draft Red Herring Prospectus includes information relating to our peer group companies. Such information has

been derived from publicly available sources, and neither we, nor the BRLMs have independently verified such

information.

Further, in accordance with Regulation 51A of the SEBI ICDR Regulations, our Company may be required to

undertake an annual updation of the disclosures made in this Draft Red Herring Prospectus and make it publicly

available in the manner specified by SEBI.

15

FORWARD-LOOKING STATEMENTS

This Draft Red Herring Prospectus contains certain ―forward looking statements‖. All statements regarding our

expected financial condition and results of operations, business, plans and prospects are forward-looking

statements. These forward-looking statements include statements with respect to our business strategy, our

revenue and profitability, our projects and other matters discussed in this Draft Red Herring Prospectus

regarding matters that are not historical facts. These forward looking statements can generally be identified by

words or phrases such as ―will‖, ―aim‖, ―will likely 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. Similarly, statements that describe our

objectives, strategies, plans or goals are also forward looking statements. All forward looking statements are

subject to risks, uncertainties and assumptions about us that could cause our actual results to differ materially

from those contemplated by the relevant forward looking statement. Similarly, statements that describe our

strategies, objectives, plans or goals are also forward-looking statements.

Important factors that could cause actual results to differ materially from our expectations include, among

others:

Our ability to anticipate and manage changes or shortages in the supply of skilled or unskilled labour or technology and continue to operate our business;

Changes in buying habits and consumption pattern;

Changes in factors affecting discretionary consumer spending, changing footfall patterns

Our ability to maintain our market position;

Competition from existing or new entrants in the Indian apparel industry;

Growth of unorganized sector and threat from national/regional players;

Significant change in the Government‘s economic liberalization and deregulation policies;

Fluctuation of price of fabrics and our reliance on third party suppliers for our raw materials and for manufacture a significant part of our products;

Our inability to implement our expansion plans in a timely and efficient manner due to factors beyond our control;

Our inability to find locations to open and operate our stores on commercially viable terms;and

Our ability to successfully implement our strategy.

For a further discussion of factors that could cause our actual results to differ, refer to the chapters titled ―Risk

Factors‖, ―Our Business‖ and ―Management‟s Discussion and Analysis of Financial Condition and Results of

Operation‖ on pages 16, 128 and 304 respectively of this Draft Red Herring Prospectus. 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.

Forward looking statements reflects the current views of our Company only as of the date of the Draft Red

Herring Prospectus and are not a guarantee of future performance. Our Company shall update the Red Herring

Prospectus on annual basis from the date of filing of the Red Herring Prospectus with the RoC. Except for such

annual update, none of our Company, the Selling Shareholders, (in respect of its own information and

information relating to the respective Equity Shares being Offered for Sale by the Selling Shareholders included

in this Draft Red Herring Prospectus), our Directors, our officers, any Underwriter, or any of their respective

affiliates or associates has any obligation to update or otherwise revise any statement 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. Our Company, the Selling Shareholders (in respect of its own information and

information relating to the respective Equity Shares being Offered for Sale by the Selling Shareholders included

in this Draft Red Herring Prospectus) and the BRLMs will ensure that investors in India are informed of

material developments until the commencement of listing and trading of the Equity Shares pursuant to the Issue.

16

SECTION II: RISK FACTORS

RISK FACTORS

An investment in our Equity Shares involves a high degree of risk and you should carefully consider all the

information in the Draft Red Herring Prospectus, including the risks and uncertainties described below, before

making an investment in our Equity Shares. This section addresses general risks associated with the industry in

which we operate and specific risks associated with our Company. If any, or some combination, of the following

risks actually occurs, our business, prospects, results of operations and financial condition could suffer, the

trading price of our Equity Shares could decline and you may lose all or part of your investment.

This Draft Red Herring Prospectus also contains forward-looking statements that involve risks and

uncertainties. We have described the risks and uncertainties that our management believes are material, but

these risks and uncertainties may not be the only ones we face. Additional risks and uncertainties, including

those we are not aware of or deem immaterial, may also result in decreased revenues, increased expenses or

other events that could result in a decline in the value of our Equity Shares. In making an investment decision,

prospective investors must rely on their own examination of our Company and the Issue, including the merits

and risks involved. Unless specified or quantified in the relevant risk factors below, we are not in a position to

quantify the financial or other implications of any of the risks described in this section. Investors are advised to

read the risk factors carefully before taking an investment decision in this Issue. Investors should not invest in

this Issue unless they are prepared to accept the risk of losing all or part of their investment, and they should

consult their tax, financial and legal advisors about the particular consequences to you of an investment in the

Equity Shares.

To obtain a better understanding of our business, you should read this section in conjunction with other

chapters of the Draft Red Herring Prospectus, including the chapters titled “Our Business”, “Management‟s

Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Information” on

pages 128, 304 and 180 respectively of this Draft Red Herring Prospectus, together with all other financial

information contained in the Draft Red Herring Prospectus. Our 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 this Draft Red Herring Prospectus.

Unless otherwise stated, the financial data in this chapter is derived from our restated consolidated financial

information prepared in accordance with Indian GAAP included in chapter titled “Financial Information” on

page 184 of this Draft Red Herring Prospectus.

The Risk factors have been determined on the basis of their materiality. The following factors have been

considered for determining the materiality.

(i) Some risks may not be material individually but may be material when considered collectively. (ii) Some risks may have an impact which is qualitative though not quantitative. (iii) Some risks may not be material at present but may have a material impact in the future.

Internal Risk Factors

1. If we are unable to maintain and enhance our „Numero Uno‟ brand, the sales of our products may suffer which would have a material adverse effect on our business operations.

Over the years, our brand Numero Uno has significantly contributed to the success of our business and

maintaining and enhancing the brand ‗Numero Uno‘ may require us to make substantial investments in areas

such as research and development, outlet operations, marketing and employee training, and these investments

may not be successful. In particular, as we expand into new geographical regions, consumers in these markets

may initially resist accepting our brand. Given the kind of competition, we anticipate that maintaining and

enhancing our brand may become increasingly difficult and expensive. Our success will depend largely on our

ability to maintain, anticipate, gauge and respond in a timely manner to changing fashion trends and consumer

demands and preferences, and to continue to provide high quality products and services. This will attract our

prospective consumers and develop faith for our brand. Further, our business is also dependent on the trust that

our customers have in our brand and products. If our Company is unable to maintain the quality of its products,

it could lead to a negative publicity of our brand name and image in the market. Such negative publicity of our

brand name could adversely affect our profitability and business operations.

17

2. If our Company is unable to continue being creative in our designs or if we are unable to keep up to the changing fashion trends, our sales could be affected.

Our results of operations depend upon the continued demand by consumers for our products. We operate in an

industry that is highly competitive and where customers‘ purchases are highly subjective and sensitive to trends

and fashion tastes. Creativity and being abreast with the latest fashion trends is one of the key attributes for

success in this industry. For our Company to remain competitive in respect of appealing designs, our designers

have to keep themselves abreast with the latest global trends, and fashion demands and more importantly

understand the requirements of the customers. If we are unable to anticipate consumer preferences or industry

changes, or if we are unable to modify our products on a timely basis, we may lose customers to our

competitors, or may be forced to reduce our sales realization on products by having to offer them at a discount,

thereby reducing our margins. For instance, our typical design for a season begins well in advance of the season

and we may not be able to incorporate trends that may be current to that season in the collection being released.

A part of our production is for those products where we may not have an order in hand and the quantities are

produced based on feedback received from merchandisers and management estimates. If we are not able to

anticipate the demand, or misjudge the quantity, inter alia, this could lead to lead to lower sales, higher

inventories and higher discounts, each of which could have a material adverse effect on our brand, reputation,

results of operations and financial condition.

3. Our growth strategy to expand into new geographic areas exposes us to certain risks which may be beyond our control and these factors may have a material adverse effect on our operations and financial

condition.

Pursuant to our growth strategy and to further deepen our presence pan India, we intend to open new COCO

stores, besides expanding our other distribution channels. Fast developing smaller towns are currently under

served and give a scope for our brands. The success of any EBO depends substantially on its location and our

ability to provide a distinctive in-store experience. Sales at such COCO stores are derived, in part, from the

volume of foot traffic in these locations. Outlet locations may become unsuitable due to, and our sales volume

and customer traffic generally may be harmed by, among other things: economic slowdown in a particular area

or city/region; competition from nearby retailers selling similar apparels; changing consumer demographics in a

particular market; changing lifestyle choices of consumers in a particular market; and the closing or decline in

popularity of other businesses location near our outlet.

Changes in areas around our outlet locations that result in reductions in customer foot traffic or otherwise render

the locations unsuitable could cause our sales to be less than estimated. Our ability to effectively obtain suitable

commercial property to open new outlets depends on the availability of commercial property that meets our

criteria for customer traffic, square footage, lease economics, demographics and other factors, including our

ability to negotiate terms that meet our financial targets. Failure to secure adequate new locations or failure in

providing a unique in-store experience could have a material adverse effect on our results of operations. In

addition, rising real estate prices may restrict our ability to lease new desirable locations and if we unable to

obtain such desirable locations at reasonable prices our ability to affect our growth strategy will be adversely

affected. If we are not able to manage the risk of such expansion it could have a material adverse effect on our

operations.

Further, our growth strategy creates the risk of sales cannibalisation, as the new points of sale could be in the

vicinity of existing ones. There can be no assurance that such sales cannibalisation will not inadvertently occur

or become more significant in the future as we gradually increase our presence in newer markets over time to

maximise our competitive position and financial performance in each market.

4. We depend on certain distributors for marketing our products. Conflict with or the loss of any of these distributors could affect our business, results of operations and financial condition.

Our Company depends on certain distributors for marketing and distribution of our products. As we continue to

expand our business, we will be required to engage with several entities that, we rely on for distribution for

apparels. We sell our products to the distributers at a price which are fixed as per the terms and conditions of the

respective distribution agreements. We have in the past experienced delays in receipt of dues from few of our

distributors. Consequently, our Company had to terminate their distribution agreements that had an impact on

our distribution network. Please refer the chapter titled ―Outstanding Litigations and Material Developments‖

and ―Financial Statements‖ on page 334 and 180 respectively, of this Draft Red Herring Prospectus for further

details of litigations against our distributors. There can be no assurance that we will not face such commercial

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conflicts and issues pertaining to delay payment or non-payment of dues with our other distributors in the future

also. The loss of one or more of such distributors could have a material effect on our operations and our

financial results.

5. Our Company, one of our Group Companies and one of our Directors are involved in certain legal proceedings. An adverse outcome in such proceedings may have a material adverse effect on our

business, results of operations and financial condition.

Our Company, Group Companies and one of our Directors are currently involved in a number of legal

proceedings. These legal proceedings are pending at different levels of adjudication before various courts

tribunals and fora.

Mentioned below are the details of the total number of proceedings pending against our Company, our Group

entities, our Promoter and our Directors as on the date of this Draft Red Herring Prospectus along with the

amount involved, to the extent quantifiable, have been set out below:

(₹ in lacs, approximately)

Type of Proceedings Number of cases Amount to the extent quantifiable

Cases filed against our Company

Civil cases 7 157.71

Criminal cases 1 0.28

Total 8 157.99

Cases filed by our Company

Civil cases 8 620.70

Tax Proceedings 1 Not quantifiable

Total 9 620.70

Cases filed against our Directors

Civil cases 1 Not quantifiable

Criminal cases 1 Not quantifiable

Total 2 Not quantifiable

Cases filed by our Directors

Criminal cases 1 Not quantifiable

Total 1 Not quantifiable

Cases filed against our Group Entities

Tax Proceedings 1 176.00

Total 1 176.00

Cases filed by our Group Entities

Civil cases 3 7.50

Tax Proceedings 3 80.27

Total 6 87.77

Potential litigation

Against our Company, our

Directors and Promoter 2 40.00

Total 2 40.00

There can be no assurance that these legal proceedings will be decided in our favour or in favour of our

Directors and Group Companies and consequently it may divert the attention of our management and Promoters

and waste our corporate resources and we may incur significant expenses in such proceedings and may have to

make provisions in our financial statements, which could increase our expenses and liabilities. If such claims are

determined against us, our Directors, our Promoters or Group Companies, there could be a material adverse

effect on our reputation, business, financial condition and results of operations, which could adversely affect the

trading price of our Equity Shares.

For further details on cases filed by and against our Promoters, Company and Group Companies, please refer to

the chapter titled ―Outstanding Litigation and Material Developments‖ on page 334 of this Draft Red Herring

Prospectus.

6. Our continued operations are critical to our business and any shutdown of our manufacturing facilities may have an adverse effect on our business, results of operations and financial condition.

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We currently have two manufacturing facilities located at Selaqui and Gurgaon. We are in the process of

shifting our Gurgaon facility to Selaqui, subsequent to which our entire manufacturing capacity will be located

at one place. As a result, any local social unrest, natural disaster or breakdown of services and utilities in that

area could have material adverse effect on the business, financial position and results of our operations. Our

manufacturing facilities are subject to operating risks, such as breakdown or failure of equipment, power supply

or processes, reduction or stoppage of water supply, performance below expected levels of efficiency,

obsolescence, natural disasters, industrial accidents and the need to comply with the directives of relevant

government authorities. In the event that we are forced to shut down our manufacturing facility for a significant

period of time, it would have a material adverse effect on our earnings, our other results of operations and our

financial condition as a whole. Further, continuous addition of industries in and around our manufacturing

facility without commensurate growth of its infrastructural facilities may put pressure on the existing

infrastructure therein, which may affect our business. Further, spiralling cost of living around our manufacturing

facility may push our manpower costs in the upward direction, which may reduce our margin and cost

competitiveness.

7. Any delays and/or defaults in customer payments from our distributors and franchisees could result in increase of working capital investment and/or reduction of our Company‟s profits, thereby affecting our

operation and financial condition

We are exposed to payment delays and/or defaults by our customers and our financial position and financial

performance are dependent on the creditworthiness of our customers. As per our business network model, we

supply our products to our distributers and franchisees without taking any advance payment or security deposit

against the orders placed by them. Such delays in payments may require our Company to make a working

capital investment. We cannot assure you that payments from all or any of our customers will be received in a

timely manner or to that extent will be received at all. If a customer defaults in making its payments on an order

on which our Company has devoted significant resources, or if an order in which our Company has invested

significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse

effect on our Company‘s results of operations and financial condition. For the Fiscal ending March 31, 2015,

2014 and 2013 our trade receivables were ₹ 7,259.97 lacs, ₹ 6,015.41 lacs and ₹ 5,721.18 lacs, respectively, out

of which, debts amounting to ₹ 974.98 lacs, ₹ 645.20 lacs and ₹ 251.89 lacs were outstanding for a period

exceeding six months from the due date, out of which our management believes that ₹ 155.78 lacs, ₹ 142.32

lacs, and ₹ 100.86 lacs are doubtful trade receivables.

There is no guarantee on the timeliness of all or any part of our customers‘ payments and whether they will be

able to fulfil their obligations, which may arise from their financial difficulties, cash flow difficulties,

deterioration in their business performance, or a downturn in the global economy. If such events or

circumstances occur, our financial performance and our operating cash flows may be adversely affected.

8. Our Company faces seasonality in its business, due to concentration of business in northern India and uneven billing cycle. As a result, our revenues are skewed towards the second half of each financial year.

Our Company typically operates its production activities in accordance with ‗Make to Order‟ policy and runs its

production for two seasons viz, Autumn –Winter and Spring – Summer. Further, for our Autumn - Winter

season which is from October to February, our stores start building up their inventory for which we start

dispatching the products in the months of September and October. Similarly, for the Spring – Summer season

which is from March to September, the majority of the dispatch of our products are done in the months of

February and March. Majority of our revenues being booked on dispatch leads to an uneven billing cycle, due to

which our revenues are not evenly distributed in all four quarters of every financial year. As a result our revenue

and profits may vary significantly during different financial periods and certain periods may not be indicative of

our financial position for a full financial year and may be significantly below the expectations of the market,

analysts and investors.

Further, since majority of our revenues are generated during the second half of each financial year, any lower

revenues generated during such period may result in a material adverse effect on the business operations of our

9. Our Company does not have long term agreement with suppliers for supply of raw material. Our inability to obtain raw material in a timely manner, in sufficient quantities and/or at competitive prices could

adversely affect our operations, financial condition and/or profitability.

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Our business is dependent on suppliers for the supply of raw materials required for manufacturing its products.

For Fiscals 2015, 2014 and 2013, our cost of material consumed amounted to 26.41%, 30.84% and 25.91% of

our total expenses respectively. Typically, we do not enter into long term contracts with our suppliers and prices

for raw materials are normally based on the quotes we receive from various suppliers. Fluctuations in the price,

availability and quality of the fabrics or other raw materials used in our manufactured apparel, could have a

material adverse effect on cost of sales or our ability to meet customer demands. The prices of fabrics depend

largely on the market prices of the raw materials used to produce them. The price and availability of the raw

materials and, in turn, the fabrics used in our apparel may fluctuate significantly, depending on many factors.

There can be no assurance that we will always be successful in our efforts to protect our business from the

volatility of the market price of raw materials, and our business can be affected by dramatic movements in

prices of raw materials. Discontinuation of production by these suppliers or a failure of these suppliers to adhere

to the delivery schedule or the required quality could hamper our production schedule. There can be no

assurance that strong demand, capacity limitations or other problems experienced by our suppliers will not result

in occasional shortages or delays in their supply of raw materials to us. Further, we cannot assure you that our

suppliers will continue to be associated with us on reasonable terms, or at all. Since these suppliers are not

contractually bound to deal with us exclusively, we may face the risk of our competitors offering better terms to

such suppliers, which may cause them to cater to our competitors alongside, or even instead of us. In the event

that we fail to secure sufficient quantities of such raw materials from our suppliers at acceptable quality and

prices in a timely manner, our business, financial performance and cash flows may be adversely affected.

Further should there be any significant increases in prices of the raw materials used, and we are unable to pass

on such increases in prices to our customers or find alternative suppliers/sources of direct materials who are able

to supply us the raw materials at competitive prices, our business and financial performance will be adversely

affected.

10. Our operations and revenue are currently concentrated in the northern regions of India and the inability to retain and grow our business in these regions and also growth in other regions of India may have an

adverse effect on our business and prospect.

Our present operations and revenues are, currently, concentrated in the northern regions of India. Further, both

our manufacturing facilities are also located in northern India. While our strategic objectives include

geographical expansion across India, including in the southern and western regions of India, in the event of a

NUMERO UNO CLOTHING LIMITEDOur Company was incorporated in Delhi on December 14, 2006 under the name...

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Transcript of NUMERO UNO CLOTHING LIMITEDOur Company was incorporated in Delhi on December 14, 2006 under the name...