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
Investor Grievance ID: [email protected]
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
Investor Grievance ID: [email protected]
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
Abbreviation Full Form
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
Abbreviation Full Form
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
Abbreviation Full Form
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
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