MANAPPURAM FINANCE LIMITED - Kotak · PDF fileC M Y K C M Y K MANAPPURAM FINANCE LIMITED...

C M Y K

C M Y K

MANAPPURAM FINANCE LIMITED(Formerly ‘Manappuram General Finance and Leasing Limited’)

(Incorporated in the Republic of India with limited liability with Company Identification Number L65910KL1992PLC006623, under the Companies Act, 1956, as amended (the “Companies Act”))Registered Office: V/104, “Manappuram House”, Valapad, Thrissur 680 567, Kerala, India

Tel: (+91 487) 305 0000; Fax: (+91 487) 239 9298Compliance Officer and Contact Person: Mr. C. Radhakrishnan, Company Secretary

E-mail: [email protected]; Website: www.manappuram.com

PROSPECTUSDated August 9, 2011

ISSUE PROGRAMME ISSUE OPENS ON : AUGUST 18, 2011 ISSUE CLOSES ON : SEPTEMBER 5, 2011

PUBLIC ISSUE BY MANAPPURAM FINANCE LIMITED (“COMPANY” OR “ISSUER”) OF SECURED, REDEEMABLE, NON-CONVERTIBLE DEBENTURES (THE “BONDS”) OF FACE VALUE OF RS. 1,000 EACH AGGREGATING TO RS. 4,000 MILLION WITH AN OPTION TO RETAIN OVER SUBSCRIPTION UPTO RS. 3,500 MILLION, AGGREGATING TO RS. 7,500 MILLION (THE “ISSUE”). The Issue is being made pursuant to the provisions of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, as amended (the “SEBI Debt Regulations”).

GENERAL RISKS

For taking an investment decision, Investors must rely on their own examination of our Company and the Issue including the risks involved. Investors are advised to refer to section entitled “Risk Factors” beginning on page 11, before making an investment in this Issue.

ISSUER’S ABSOLUTE RESPONSIBILITY

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

CREDIT RATING

The Bonds proposed to be issued by our Company have been rated by Credit Analysis and Research Limited (“CARE”) and Brickwork Ratings India Pvt. Ltd. (“Brickwork”). CARE has vide its letter dated June 21, 2011 assigned a rating of “CARE AA-”. Instruments with this rating are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. Brickwork has vide its letter no. BWR/BLR/RA/2011-12/0075 dated July 1, 2011 assigned a rating of “BWR AA-” to the Bonds in the Issue. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. The above ratings are not a recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agency and should be evaluated independently of any other ratings. Please refer to Annexure to this Prospectus for rationale for the above ratings.

PUBLIC COMMENTS

The Draft Prospectus was filed with the Designated Stock Exchange pursuant to the provisions of the SEBI Debt Regulations. The Draft Prospectus was open for public comments.

LISTING

The Bonds offered through this Prospectus are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”). The Company has obtained ‘in-principle’ listing approval from BSE vide its letter dated August 3, 2011. For the purposes of the Issue, the Designated Stock Exchange shall be BSE.

LEAD MANAGERS TO THE ISSUE

MORGAN STANLEY INDIA COMPANY PRIVATE LIMITED18F/19F,Tower 2, One Indiabulls Centre,841,Senapati Bapat Marg, Mumbai 400 013Tel: (91 22) 6118 1000Fax: (91 22) 6618 1040E-mail: [email protected] Grievance Email: [email protected]: www.morganstanley.com/indiaofferdocumentsContact Person: Saurabh KumarSEBI Registration No.: INM000011203

A.K. CAPITAL SERVICES LIMITED30-39, Free Press House,Free Press Journal Marg,215, Nariman Point,Mumbai 400 021Tel: (91 22) 6754 6500/6634Fax: (91 22) 6610 0594Email: [email protected] Grievance Email: [email protected]: www.akcapindia.comContact Person: Mr. Hitesh ShahSEBI Registration No.: INM000010411

AXIS BANK LIMITEDCorporate OfficeLevel 5/ E Block,Bombay Dyeing Mills Compound,Pandurang Bhudkar Marg,Worli, Mumbai 400 025Tel: (91 22) 2425 4556Fax: (91 22) 4825 4700E-mail: [email protected] Grievance Email: [email protected]: www.axisbank.comContact Person: Mr. Dinkar RaiSEBI Registration No.: INM000006104

ICICI SECURITIES LIMITEDICICI Centre,H.T. Parekh Marg,Churchgate, Mumbai - 400 020Maharashtra, India.Tel.: (91 22) 2288 2460Fax: (91 22) 2282 6580E-mail: [email protected] Grievance Email: [email protected]: www.icicisecurities.comContact Person: Sumit AgarwalSEBI Registration Number: INM000011179

CO-LEAD MANAGERS TO THE ISSUE REGISTRAR TO THE ISSUE

RR INVESTORS CAPITAL SERVICES (P) LTD.133A, Mittal Tower, A Wing, 13th Floor, Nariman Point, Mumbai-400 021Tel: (91 22) 2288 6627/28Fax: (91 22) 2285 1925E-mail: [email protected] Grievance Email: [email protected]: www.rrfcl.comContact Person: Mr. Brahmdutta SinghSEBI Registration No. INM000007508

KARVY INVESTOR SERVICES LIMITEDRegent Chambers, 2nd floorNariman Point,Mumbai – 400021Tel : (91 22) 2289 5000Fax: (91 22) 3020 4040Email: [email protected] Grievance Email: [email protected]: www.karvy.comContact Person: Mr. Omkar BarveSEBI Registration No: INM000008365

SMC CAPITALS LIMITED3rd Floor, A-Wing, Laxmi Towers,Bandra Kurla Complex,Bandra (East), Mumbai - 400 051Tel: (91 22) 6138 3838Fax: (91 22) 6138 3899Email: [email protected] Grievance Email: [email protected]: www.smccapitals.comContact Person: Sanjeev BarnwalSEBI Registration No: MB/INM000011427

LINK INTIME INDIA PRIVATE LIMITEDC-13, Pannalal Silk Mills CompoundL.B.S. Marg, Bhandup (West)Mumbai 400 078Tel: (91 22) 2596 0320Fax: (91 22) 2596 0329E-mail: man.ncd @linkintime.co.in Investor Grievance Email: man.ncd @linkintime.co.in Website: www.linkintime.co.inContact Person: Mr. Sanjog SudSEBI Registration No.: INR000004058

TM LINK INTIMEINDIA PVT LTD

(Formerly INTIME SPECTRUM REGISTRY LTD)

The Issue shall remain open for subscription during banking hours for the period indicated above, except that the Issue may close on such earlier date as may be decided by the Board subject to necessary approvals. In the event of an early closure of the Issue, our Company shall ensure that notice of the same is provided to the prospective investors through newspaper advertisements on the day of such earlier date of Issue closure. A copy of the Prospectus shall be filed with the Registrar of Companies, Kerala and Lakshadweep, in terms of section 56 and section 60 of the Companies Act, along with the requisite endorsed/certified copies of all requisite documents. For further details please refer to the section titled “Material Contracts and Documents for Inspection” beginning on page 177 of this Prospectus.

http://www.manappuram.com/

mailto:[email protected]


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TABLE OF CONTENTS

DEFINITIONS AND ABBREVIATIONS .......................................................................................................... 1

PRESENTATION OF FINANCIAL INFORMATION AND OTHER INFORMATION ............................. 8

INDUSTRY AND MARKET DATA................................................................................................................... 9

FORWARD LOOKING STATEMENTS ........................................................................................................ 10

RISK FACTORS ................................................................................................................................................ 11

THE ISSUE ......................................................................................................................................................... 31

SELECTED FINANCIAL INFORMATION ................................................................................................... 33

SUMMARY OF BUSINESS .............................................................................................................................. 37

GENERAL INFORMATION ............................................................................................................................ 42

CAPITAL STRUCTURE ................................................................................................................................... 49

OBJECTS OF THE ISSUE................................................................................................................................ 76

STATEMENT OF TAX BENEFITS................................................................................................................. 78

OUR BUSINESS ................................................................................................................................................. 88

HISTORY AND MAIN OBJECTS ................................................................................................................. 105

OUR MANAGEMENT .................................................................................................................................... 106

OUR PROMOTERS ......................................................................................................................................... 121

OUR SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES ....................................... 122

STOCK MARKET DATA FOR EQUITY SHARES AND DEBENTURES OF OUR COMPANY ......... 123

DESCRIPTION OF CERTAIN INDEBTEDNESS ....................................................................................... 125

OUTSTANDING LITIGATION AND DEFAULTS ..................................................................................... 133

OTHER REGULATORY AND STATUTORY DISCLOSURES ................................................................ 136

THE ISSUE STRUCTURE .............................................................................................................................. 140

TERMS OF THE ISSUE ................................................................................................................................. 144

PROCEDURE FOR APPLICATION ............................................................................................................. 159

MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ............................................................... 171

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ..................................................... 177

RECENT FINANCIAL DEVELOPMENTS .................................................................................................. 179

AUDITOR EXAMINATION REPORT AND REFORMATTED STATEMENTS ................................... 182

DECLARATION .............................................................................................................................................. 185

ANNEXURE - CREDIT RATING LETTERS

1

DEFINITIONS AND ABBREVIATIONS

This Prospectus uses certain definitions and abbreviations which, unless the context indicates or implies

otherwise, have the meaning as provided below. References to any legislation, act or regulation shall be to such

term as amended from time to time.

General

Term Description

“MFL” or “Company” or “the

Company” or “the Issuer” or

“our Company”

Manappuram Finance Limited

“we” or “us” or “our” Unless the context otherwise requires, Manappuram Finance Limited

Company Related Terms

Term Description

Articles/ Articles of Association Articles of Association of our Company

Auditors S.R. Batliboi & Associates

Audited Unconsolidated

Financial Statements

The audited unconsolidated financial statements as of and for the years ended

March 31, 2011, 2010, 2009 and 2008.

Board / Board of Directors Board of Directors of our Company or any duly constituted committee thereof

Equity Shares Equity shares of face value of Rs. 2 each of the Company

Group Companies Includes those companies, firms, ventures, etc. promoted by the promoters of

the issuer, irrespective of whether such entities are covered under Section 370

(1)(B) of the Companies Act or as per Accounting Standard 18 issued under

the Companies Accounting Standard Rules

MAFIT Manappuram Finance (Tamil Nadu) Limited

MFL ESOP The Manappuram Finance Limited Employee Stock Option Plan 2009

MBFL Manappuram Benefit Fund Limited

Merger Merger of MAFIT with Our Company

Memorandum / Memorandum

of Association

Memorandum of Association of our Company

Prior Year Audited Financial

Statements

The audited unconsolidated financial statements as of and for the year ended

March 31, 2007 as audited by Mohandas & Associates.

Promoters The promoters of our Company being V.P. Nandakumar and Sushama

Nandakumar

Promoter Group Includes such persons and entities constituting our promoter group pursuant to

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

Reformatted Statements The reformatted statement of assets and liabilities of the Company as at March

31, 2011, 2010, 2009, 2008 and 2007, the related reformatted statement of

profit and losses and the reformatted statement of cash flows for the years

ended March 31, 2011, 2010, 2009, 2008 and 2007, prepared on the basis of

the Audited Unconsolidated Financial Statements and the Prior Year Audited

Financial Statements of the Company in connection with the Issue under the

SEBI Debt Regulations.

2

Term Description

Registered Office The registered office of our Company is situated at V/104, “Manappuram

House”, Valapad, Thrissur 680 567, Kerala, India

RoC Registrar of Companies, Kerala and Lakshadweep, located at Ernakulam

Issue Related Terms

Term Description

Allotment/ Allot/ Allotted Unless the context otherwise requires, the allotment of Bonds to the

successful Applicants pursuant to the Issue

Allottee A successful Applicant to whom the Bonds are allotted pursuant to the Issue

Applicant Any person who applies for issuance of Bonds pursuant to the terms of the

Prospectus and Application Form

Application Amount The aggregate value of the Bonds applied for, as indicated in the Application

Form

Application Form The form (including revisions thereof) in terms of which the Applicant shall

make an offer to subscribe to the Bonds and which will be considered as the

application for Allotment of Bonds in terms of the Prospectus

Banker(s) to the Issue/ Escrow

Collection Bank

The banks which are clearing members and registered with SEBI as Bankers

to the Issue with whom the Escrow Account will be opened The details of the

Banker to the Issue are provided in the section entitled ―General Information‖

on page 42

Basis of Allotment The basis on which Bonds will be allotted to Applicants under the Issue, more

particularly as detailed in the section entitled ―Procedure for Application –

Basis of Allotment‖ on page 167

Bondholder(s) Any person holding the Bonds and whose name appears on the beneficial

owners‟ list provided by the Depositories or whose name appears in the

Register of Bondholders maintained by the Issuer

Bonds Bonds, in the nature of secured, redeemable, non-convertible debentures of

our Company of face value of Rs. 1,000 being the Series I Bonds and the

Series II Bonds issued in terms of the Prospectus

Co-Lead Managers RR Investors Capital Services (P) Limited, Karvy Investor Services Limited

and SMC Capitals Limited

Consolidated Bond Certificate In case of rematerialized Bonds held in physical form, the certificate issued by

the Issuer to the Bondholder for the aggregate amount of the Bonds that are

rematerialized and held by such Bondholder

Debenture Trust Deed Trust deed to be entered into between the Debenture Trustee and our

Company

Debenture Trustee/ Trustee Trustees for the Bondholders in this case being IL&FS Trust Company

Limited

Deemed Date of Allotment The Deemed Date of Allotment shall be the date as may be determined by the

Board of our Company and notified to the BSE.

Designated Date The date on which funds are transferred from the Escrow Account to the

Public Issue Account or the Refund Account, as appropriate, subsequent to the

execution of documents for the creation of Security

Designated Stock Exchange/

DSE

The designated stock exchange for the Issue, being BSE

Draft Prospectus The draft prospectus dated July 26, 2011 filed by our Company with the

Designated Stock Exchange in accordance with the provisions of SEBI Debt

3

Term Description

Regulations

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

Applicants will issue cheques or drafts in respect of the Application Amount

when submitting an Application

Escrow Agreement Agreement to be entered into by our Company, the Registrar to the Issue, the

Lead Managers, Co-Lead Managers and the Escrow Collection Bank(s) for

collection of the Application Amounts and where applicable, refunds of the

amounts collected from the Applicants on the terms and conditions thereof

Institutional Portion Portion of Applications received from Category I of persons eligible to apply

to the Issue which includes public financial institutions, statutory

corporations, commercial banks, cooperative banks and regional rural banks

which are authorised to invest in the Bonds, insurance companies registered

with IRDA, provident, superannuation and gratuity funds, pension funds,

mutual funds in India which are authorised to invest in the Bonds, venture

capital funds registered with SEBI, and National Investment Fund set up by

resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the

Government of India published in the Gazette of India and does not include

foreign institutional investors and overseas corporate bodies

Issue Public issue of bonds in the nature of secured, redeemable, non-convertible

debentures of face value of Rs. 1,000 each aggregating to Rs. 4,000 million

with an option to retain over subscription upto Rs. 3,500 million, aggregating

to Rs. 7,500 million

Issue Closing Date September 5, 2011

Issue Opening Date August 18, 2011

Issue Period The period between the Issue Opening Date and the Issue Closing Date

inclusive of both days, during which prospective Applicants can submit their

Application Forms

Lead Managers Morgan Stanley India Company Private Limited, A.K. Capital Services

Limited, Axis Bank Limited and ICICI Securities Limited.

Lead Brokers Morgan Stanley Financial Services Private Limited, A.K. Stockmart Private

Limited, ICICI Securities Limited, RR Equity Brokers Private Limited, Karvy

Stock Broking Limited, SMC Global Securities Limited, Bajaj Capital

Investor Services Limited, Edelweiss Broking Limited, Enam Securities

Private Limited, Geojit BNP Paripas Financial Services Limited, HDFC

Securities Limited, India Infoline Limited, Integrated Securities Limited, JM

Financial Services Limited, Kotak Securities Limited and SPA Securities

Limited

Malegam Committee Report Report given by sub-committee of its central board of directors of RBI in

October 2010 set up under the Chairmanship of Shri Y.H. Malegam, a senior

member on the RBI‟s central board of directors to study the issues and

concerns in microfinance sector.

Market Lot One Bond

Maturity Date For Series I Bonds, the payment date falling 400 days after the Deemed Date

of Allotment. For Series II Bonds the payment date falling 24 months after the

Deemed Date of Allotment.

Non Institutional Portion Category II of persons eligible to apply for the Issue which includes

companies, bodies corporate and societies registered under the applicable laws

in India and authorised to invest in Bonds, public/private charitable/religious

trusts which are authorised to invest in the Bonds, scientific and/or industrial

research organisations, which are authorised to invest in the Bonds,

partnership firms in the name of the partners and Limited liability partnerships

4

Term Description

formed and registered under the provisions of the Limited Liability

Partnership Act, 2008

Pay-in Date Three (3) days from the date of receipt of application or the date of realisation

of the cheques/demand drafts, whichever is later

Portion Portion of Applicant in each Category, being the Institutional Portion, Non

Institutional Portion, Reserved Individual Portion or Unreserved Individual

Portion

Prospectus The prospectus dated August 9, 2011 to be filed with the RoC in accordance

with the provisions of SEBI Debt Regulations through which the Bonds are

being offered to the public.

Public Issue Account An account opened with the Banker(s) to the Issue to receive monies from the

Escrow Accounts for the Issue on the Designated Date

Record Date Date falling 3 Working Days prior to the date on which interest is due and

payable or the Maturity Date

Refund Account The account opened with the Refund Bank(s), from which refunds, if any, of

the whole or part of the Application Amount shall be made

Refund Bank Axis Bank Limited

Register of Bondholders The register of Bondholders maintained by the Issuer in accordance with the

provisions of the Companies Act and as more particularly detailed in the

section entitled ―Terms of the Issue – Register of Bondholders‖ on page 146

Registrar Agreement Agreement entered into between the Issuer and the Registrar under the terms

of which the Registrar has agreed to act as the Registrar to the Issue

Registrar to the Issue or

Registrar

Link Intime India Private Limited

Reserved Individual Portion Portion of Applications received from Category III of persons eligible to

apply to the Issue which includes resident Indian individuals and hindu

undivided families through the karta whose aggregate value of Applications is

not more than Rs. 5 Lacs

Resident Individual An individual who is a person resident in India as defined in the Foreign

Exchange Management Act, 1999

Security The Bonds shall be secured by mortgage of the immovable property of our

Company as identified in the Debenture Trust Deed and a charge in favour of

the Debenture Trustee, on all current assets, book debts, receivables (both

present and future) as fully described in the Debenture Trust Deed, except

those receivables specifically and exclusively charged, on a first ranking pari

passu basis with all other lenders to our Company holding pari passu charge

over the security such that a security cover of 1.10 times is maintained until

Maturity Date, more particularly as detailed in the section entitled ―Terms of

the Issue - Security‖ on page 153

Secured Obligation The Face Value of the Bonds to be issued upon the terms contained herein

together with all interest, costs, charges, fees, remuneration of Debenture

Trustee and expenses payable in respect thereof as more particularly described

in the section entitled ―Terms of the Issue - Security‖ on page 153

Series I Bonds Rs. 1,000 face value Series of Bonds paying no interest but an yield to

maturity of 12% p.a. for Category I, Category II and Category III

Bondholders, due in 400 days.

Series II Bonds Rs. 1,000 face value Series of Bonds paying semi-annually interest and having

rate of 12% p.a. for Category I and Category II Bondholders and 12.2% p.a.

for Category III Bondholders, due in 24 months

5

Term Description

Series of Bonds Series I Bonds and / or Series II Bonds, each of face value of Rs. 1,000,

proposed to be issued by the Company pursuant to this Issue.

Stock Exchanges The BSE, NSE, MSE and CSE

Trading Lot One Bond

Tripartite Agreements Agreements entered into between the Issuer, Registrar and each of the

Depositories under the terms of which the Depositories agree to act as

depositories for the securities issued by the Issuer.

Unreserved Individual Portion Portion of Applications received from Category III of persons eligible to

apply to the Issue which includes resident Indian individuals; and hindu

undivided families through the karta whose aggregate value of Applications is

more than Rs. 5 Lacs.

Working Days All days excluding Saturdays, Sundays or a public holiday in Mumbai or at

any other payment centre notified in terms of the Negotiable Instruments Act,

1881

Conventional and General Terms or Abbreviations

Term/Abbreviation Description/ Full Form

Act Income Tax Act, 1961, unless the context requires otherwise

AGM Annual General Meeting

AMC Asset Management Company

AS Accounting Standards issued by the ICAI

Brickwork Brickwork Ratings India Pvt. Ltd.

BSE Bombay Stock Exchange Limited

CARE Credit Analysis and Research Limited

CCTV Closed-circuit Television

CDSL Central Depository Services (India) Limited

Companies Act Companies Act, 1956, unless the context requires otherwise

CSE Cochin Stock Exchange

Debt Listing Agreement The agreement for listing of Bonds on the BSE

Depositories CDSL and NSDL

Depositories Act Depositories Act, 1996

DP/ Depository Participant Depository Participant as defined under the Depositories Act, 1996

DIN Director Identification Number

DRR Debenture Redemption Reserve

EGM Extraordinary General Meeting

Equity Listing Agreement(s) The equity listing agreement(s) with each of the Stock Exchanges

FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act, 1999

FII Foreign Institutional Investor (as defined under the SEBI (Foreign Institutional

Investors) Regulations,1995), registered with the SEBI under applicable laws

in India

6


Financial Year/ Fiscal Year/ FY Period of 12 months ended March 31 of that particular year

GAAP Generally Accepted Accounting Principles

GDP Gross Domestic Product

GoI or Government Government of India

HUF Hindu Undivided Family

ICAI Institute of Chartered Accountants of India

IFRS International Financial Reporting Standards

IMaCS ICRA Management Consulting Services Limited

Income Tax Act / IT Act Income Tax Act, 1961

India Republic of India

IRDA Insurance Regulatory and Development Authority

Indian GAAP Generally accepted accounting principles followed in India

IT Information technology

KYC Know your customer

MCA Ministry of Corporate Affairs, Government of India

MoU Memorandum of Understanding

Mn Million

MSE Madras Stock Exchange

Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds)

Regulations, 1996, as amended

NAV Net Asset Value

NBFC Non Banking Financial Company, as defined under applicable RBI guidelines

NCD Non Convertible Debenture

NECS National Electronic Clearing System

NEFT National Electronic Fund Transfer

NRI Non-resident Indian

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

p.a. Per annum

PAN Permanent Account Number

RBI Reserve Bank of India

RTGS Real Time Gross Settlement

Rs. or Rupees or Indian Rupees The lawful currency of India

SBI State Bank of India

SEBI Securities and Exchange Board of India

SEBI Act SEBI Act, 1992

SEBI Debt Regulations SEBI (Issue and Listing of Debt Securities) Regulations, 2008

SEBI ICDR Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

7

Technical and Industry Related Terms


AD II license Authorised Dealer II license

CAGR Compounded Annual Growth Rate, that is, the year-over-year growth rate of a

business activity or income from the same over a specified period of time

Gold Loans Loans against pledge of household and/or used gold jewellery

LTV Loan to Value

MFI Microfinance institutions

NPA Non-performing assets

Prudential Norms Directions Non-Banking Financial (Non - Deposit Accepting or Holding) Companies

Prudential Norms (Reserve Bank) Directions, 2007, as amended

8

PRESENTATION OF FINANCIAL INFORMATION AND OTHER INFORMATION

All references herein to “India” are to the Republic of India and its territories and possessions.

Currency and Unit of Presentation

In this Prospectus, references to „Rs.‟, „Indian Rupees‟ and „Rupees‟ are to the legal currency of India and

references to „U.S.$‟ and „U.S. dollars‟ are to the legal currency of the United States of America. All references

herein to the „Government‟ is to the Government of India, central or state, as applicable.

Financial Data

In this Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to

rounding off. All financial information has been rounded off to two decimals points and percentages to one

decimal point.

Our unconsolidated financial statements as of and for the years ended March 31, 2011, 2010, 2009 and 2008

(the “Audited Unconsolidated Financial Statements”) and the unconsolidated financial statements as of and for

the years ended March 31, 2007 as audited by Mohandas & Associates (Prior Year Audited Unconsolidated

Financial Statements”) form the basis for the reformatted statements as of and for the years ended March 31,

2011, 2010, 2009, 2008 and 2007, which were prepared in accordance with the provisions of the SEBI Debt

Regulations, as amended from time to time (the “Reformatted Statements”). The Reformatted Statements and

examination report dated July 19, 2011 issued by the auditor thereon are included in this Prospectus.

Our financials commence on April 1 of each year and ends on March 31 of the succeeding year, so all references

to particular “financial year”, “fiscal year”, and “Fiscal” or “FY”, unless stated otherwise, are to the 12 months

period ended on March 31 of that year. We publish our financial statements in Rupees in millions. The degree to

which the Reformatted Statements included in this 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 on the financial disclosures presented in this Prospectus should

accordingly be limited.

Manappuram Finance Tamil Nadu Limited (“MAFIT”) merged with the Company with retrospective effect

from April 1, 2008 and the merger was given effect to by the Company pursuant to an Order of the High Courts

in the three month period ended December 31, 2009. The published financial results and financial statements of

the Company prior to December 31, 2009 do not include the financial results or financial statements of MAFIT.

9

INDUSTRY AND MARKET DATA

Information regarding market position, growth rates and other industry data pertaining to our businesses

contained in this Prospectus consists of estimates based on data reports compiled by government bodies,

professional organizations and analysts, data from other external sources and knowledge of the markets in which

we compete. Unless stated otherwise, the statistical information included in this Prospectus relating to the

industry in which we operate has been reproduced from various trade, industry and government publications and

websites.

This data is subject to change and cannot be verified with certainty due to limits on the availability and

reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. Neither we

nor the Lead Managers or the Co-Lead Managers have independently verified this data and do not make any

representation regarding the accuracy of such data. We take responsibility for accurately reproducing such

information but accept no further responsibility in respect of such information and data. In many cases, there is

no readily available external information (whether from trade or industry associations, government bodies or

other organizations) to validate market-related analysis and estimates, so we have relied on internally developed

estimates. Similarly, while we believe our internal estimates to be reasonable, such estimates have not been

verified by any independent sources and neither we nor the Lead Managers or the Co-Lead Managers can assure

potential investors as to their accuracy. Accordingly, investors should not place undue reliance on this

information.

10

FORWARD LOOKING STATEMENTS

Certain statements contained in this Prospectus that are not statements of historical fact constitute „forward-

looking statements‟. Investors can generally identify forward-looking statements by terminology such as „aim‟,

„anticipate‟, „believe‟, „continue‟, „could‟, „estimate‟, „expect‟, „intend‟, „may‟, „objective‟, „plan‟, „potential‟,

„project‟, „pursue‟, „shall‟, „should‟, „will‟, „would‟, or other words or phrases of similar import. Similarly,

statements that describe our strategies, objectives, plans or goals are also forward-looking statements. All

statements regarding our expected financial conditions, results of operations, business plans and prospects are

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

revenue and profitability, new business and other matters discussed in this Prospectus that are not historical

facts. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could

cause actual results to differ materially from those contemplated by the relevant forward-looking statement.

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

others:

• general political, economic and business conditions in India and other countries;

• the Company‟s ability to successfully implement its strategy, growth and expansion plans and

technological changes;

• the level and volatility of interest rates and gold rates;

• increases in the level of competition in the gold loans business;

• any scarcity of credit or other financing in India;

• prevailing income conditions among Indian consumers and Indian corporations;

• performance of the Indian and global debt and equity markets;

• variation in exchange rates;

• fraud by employees and borrowers leading to increase in NPAs;

• downward revision in credit ratings;

• transfer restrictions set forth in this Prospectus;

• occurrence of natural calamities or natural disasters affecting the areas in which we have operations;

• occurrence of theft or burglary in the Company‟s premises and consequent loss of collateral;

• risk of fluctuation in the price of equity shares;

• changes in foreign control regulations and regulations applicable to non banking financial companies

and microfinance companies in India and;

• other factors discussed in this Prospectus, including under ―Risk Factors‖ beginning on page 11.

Additional factors that could cause actual results, performance or achievements to differ materially include, but

are not limited to, those discussed under the section entitled ―Our Business‖ beginning on page 88. The

forward-looking statements contained in this Prospectus are based on the beliefs of management, as well as the

assumptions made by, and information currently available to, management. Although we believe that the

expectations reflected in such forward-looking statements are reasonable at this time, we cannot assure investors

that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not to place

undue reliance on such forward-looking statements. If any of these risks and uncertainties materialize, or if any

of our underlying assumptions prove to be incorrect, our actual results of operations or financial condition could

differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent

forward-looking statements attributable to us are expressly qualified in their entirety by reference to these

cautionary statements.

11

RISK FACTORS

You should carefully consider all the information in this Prospectus, including the risks and uncertainties

described below, and in the sections entitled ―Our Business‖ beginning on page 88 as well as the Reformatted

Statement contained in this Prospectus, before making an investment in the Bonds. The risks and uncertainties

described in this section are not the only risks that we currently face or may face in the future. Additional risks

and uncertainties not known to us or that we currently believe to be immaterial may also have an adverse effect

on our business, results of operations and financial condition. If any of the following or any other risks actually

occur, our business, prospects, results of operations and financial condition could be adversely affected and the

price of, and the value of your investment in, the Bonds could decline and you may lose all or part of your

investment.

The financial and other related implications of risks concerned, wherever quantifiable, have been disclosed in

the risk factors mentioned below. However, there are certain risk factors where the effect is not quantifiable and

hence has not been disclosed in such risk factors. The numbering of risk factors has been done to facilitate the

ease of reading and reference, and does not in any manner indicate the importance of one risk factor over

another.

You should not invest in this Issue unless you are prepared to accept the risk of losing all or part of your

investment, and you should consult your tax, financial and legal advisors about the particular consequences to

you of an investment in the Bonds.

Unless otherwise stated, our financial information used in this section is derived from the Reformatted

Statement and accounting records of the Company.

RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY

1. We may not be able to successfully manage and maintain our growth.

Our business has rapidly grown since our inception in 1992. We have significantly expanded our

operations and anticipate further expansion of our operations. We have experienced significant growth

in terms of our loans portfolio and the number of our branches and employees. Our income from

services increased at a compounded annual growth rate (“CAGR”) of 146.34% from the fiscal year

ended March 31, 2008 to the fiscal year ended March 31, 2011. In this same period, the value of loans

advanced by us against pledged gold increased at a CAGR of 302.20% and our branch network

increased at a CAGR of 67.91%.

Our future growth depends on a number of factors, including increasing our ability to further penetrate

the loans against pledge of household, used, gold jewellery (“Gold Loans”) market, the competitive

scenario and future regulatory changes. We cannot assure you that we will continue to grow at

historical rates in the future. In addition, we are bound by certain financial covenants under our

financing agreements, including requiring us to maintain leverage at specified levels. Our inability to

fulfill such covenants may adversely affect our ability to maintain this source of funding and as a result,

adversely affect our ability to grow our business.

Our future growth also depends on our timely access to, and the cost associated with, raising capital. If

we do not have access to financing on terms acceptable to us, our growth could be adversely affected.

As we continue to grow, we are required to continue to improve our managerial, technical and

operational knowledge, resources and systems. In addition, we may be required to manage relationships

with a greater number of customers, third party agents, lenders and other parties. We cannot assure you

that we will not experience issues such as capital constraints, operational difficulties, difficulties in

expanding our existing business and operations and training an increasing number of personnel to

manage and operate our expanding business.

Further, we have expanded and will further expand our business into markets outside southern India.

We have less experience regarding markets outside southern India, which may lead to difficulties in

cultivating new customer relationships and managing such operations. Any of these issues may result

in a failure to implement our expansion plans in a timely manner or at all, and we cannot assure you

that any expansion plans, if implemented, will be successful.

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2. Volatility in the market price of gold may adversely affect our financial condition and results of

operations.

We extend loans secured by household, used, gold jewellery. A sharp downward movement in the price

of gold could result in a decline in pledged gold values. Further, a sustained decrease in the market

price of gold could also cause a decrease in new Gold Loans in our loan portfolio and, as a result, our

interest income. In addition, customers may not repay their loans and the gold jewellery securing the

loans may have decreased significantly in value, resulting in losses which we may not be able to

support. Although we use a technology-based risk management system and follow strict internal risk

management guidelines on portfolio monitoring, which include periodic assessment of loan to security

value on the basis of conservative market price levels, limits on the amount of margin, ageing analysis

and pre-determined margin call thresholds, we cannot assure you that if the price of gold decreases

significantly, our financial condition and results of operations would not be adversely affected.

3. We face increasing competition in our business which may result in declining margins if we are

unable to compete effectively.

Our principal business is the provision of personal loans to retail customers in India secured by

household, used, gold jewellery. Historically, the Gold Loan industry in India has been largely

unorganised and dominated by local jewellery pawn shops and money lenders, with little involvement

from public sector or private sector banks. Gold Loan financing was availed predominantly by lower

income group customers with limited or no access to other forms of credit, however, such income

group has gained increased access to capital through organised and unorganised money lenders, which

has increased our exposure to competition. The demand for Gold Loans has also increased due to

relatively lower and affordable interest rates, increased need for urgent borrowing or bridge financing

requirements, the need for liquidity for assets held in gold and increased awareness and acceptance of

Gold Loan financing.

All of these factors have resulted in increased competition from other lenders in the Gold Loan

industry, including commercial banks and other NBFCs, who also have access to funding from

customers‟ savings and current deposits. We are reliant on higher-cost loans and debentures for our

funding requirements, which may reduce our margins compared to competitors. Our ability to compete

effectively will depend, to some extent, on our ability to raise low-cost funding in the future. If we are

unable to compete effectively with other participants in the Gold Loan industry, our business, financial

condition and results of operations may be adversely affected.

Furthermore, as a result of increased competition in the Gold Loan industry, Gold Loans are becoming

increasingly standardised. Variable interest rates, variable payment terms and waiver of processing fees

are also becoming increasingly common. We cannot assure you that we will be able to react effectively

to these or other market developments or compete effectively with new and existing competitors.

Increasing competition may have an adverse effect on our business, market share and results of

operations.

4. We may not be able to realise the full value of our pledged gold, which exposes us to potential loss.

We may not be able to realise the full value of our pledged gold, due to, among other things, defects in

the quality of gold or wastage that may occur when melting gold jewellery into gold bars. In the case of

a default, we typically sell the pledged gold through publicly announced auctions in accordance with

the terms of our „auction policy‟. Manappuram Jewellers Private Limited, a company promoted by the

promoters of the Company also participates in such auctions. All sales made to Manappuram Jewellers

Private Limited are made for cash at prevailing market price. We cannot assure you that we will be able

to sell such pledged gold at prices sufficient to cover the amounts under default. Moreover, there may

be delays associated with the auction process. Any failure to recover the expected value of pledged

gold could expose us to a potential loss. Any such losses could adversely affect our financial condition

and results of operations.

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5. We are involved in certain legal and other proceedings in India and may face certain liabilities as a

result of the same.

We are involved in various civil, consumer and tax related litigation proceedings, which are at different

stages of adjudication. We are involved in litigation for a variety of reasons, which typically arise in the

normal course of business, when we seek to recover our dues from borrowers in default. As of June 30,

2011, we were party to two sales tax cases, three service tax proceedings, one income tax case, 64

consumer cases, 15 cases filed by owners of branch premises for eviction and one case pending before

the Supreme Court of India in relation to the requirement to register our branches under the Kerala

Money-lenders Act. As of June 30, 2011, the value of these pending cases other than the 15 cases filed

by owners of branch premises for eviction and rent escalation, excluding the provisioning made,

aggregates to a sum of Rs. 14.61 million. We are also party to a special leave petition filed in the

Supreme Court of India, challenging the applicability of Kerala Money-lenders Act, 1958 to our

activities and in addition to the above matters, are also involved in certain administrative and legal

proceedings pending before the relevant courts and authorities at various levels pursuant to show cause

notices and other communications received by us. For further details see ―Outstanding Litigation and

Defaults‖ on page 133. If any of the cases pending is decided against us, it may have an adverse effect

on our business, reputation, financial condition and results of operations.

6. Our business requires substantial capital, and any disruption in funding sources would have an

adverse effect on our liquidity and financial condition.

Our liquidity and ongoing profitability are, in large part, dependent upon our timely access to, and the

costs associated with, raising capital. Our funding requirements historically have been met from a

combination of borrowings such as working capital limits from banks and assigning our loan portfolio

to other lenders such as banks, issuance of commercial paper, non-convertible debentures, bonds and

equity. Thus, our business depends and will continue to depend on our ability to access diversified low

cost funding sources. The capital and lending markets remained highly volatile post the global credit

crisis and access to liquidity had been significantly reduced. These conditions resulted in increased

borrowing costs and difficulty in accessing debt in a cost-effective manner. In addition, it became more

difficult to renew loans and facilities as many potential lenders and counterparties also faced liquidity

and capital concerns as a result of the stress in the financial markets.

We are also required under applicable laws and regulations to maintain a capital adequacy ratio as per

Prudential Norms Directions of at least 15.0% of our risk-weighted assets, with the minimum

requirement of Tier I capital being 10.0%. Our capital adequacy ratio was 29.13% as of March 31,

2011, with Tier I capital comprising 26.36%. If we continue to grow our loan portfolio and asset base,

we may be required to raise additional Tier I and Tier II capital in order to continue to meet applicable

capital adequacy ratios with respect to our Gold Loan business. We cannot assure you that we will be

able to raise adequate additional capital in the future on terms favourable to us, or at all, which may

adversely affect the growth of our business.

We also face maturities of unsecured debt each year. Rs. 10,081 million of our outstanding unsecured

debt matures during the current fiscal year ending March 31, 2012. In order to retire these instruments,

we either will need to refinance this debt, which could be difficult in the event of volatility in the credit

markets, or raise equity capital or generate sufficient cash to retire the debt. If we are not able to do so,

our financial condition and results of operations may be adversely affected.

7. Our ability to access capital depends on our credit ratings.

The cost and availability of capital is, amongst other factors, also dependent on our short term and long

term credit ratings. Our current rating is P1+ from CRISIL (a subsidiary of Standard & Poor‟s) for our

short-term debt programme, including commercial paper. CRISIL has also given an A+ rating for our

NCD issues. ICRA Limited has given us a LA+ rating for our NCD programme. CARE has given us a

rating of CARE AA- and Brickwork has given us a rating of BWR AA- for the present Issue. Ratings

reflect a rating agency‟s opinion of our financial strength, operating performance, strategic position,

and ability to meet our obligations. The rating agencies reserve the right to suspend, withdraw or revise

ratings at any time based on new information or other circumstances. Any downgrade of our credit

ratings would increase borrowing costs and constrain our access to capital and lending markets and, as

a result, would adversely affect our business. In addition, downgrades of our credit ratings could

14

increase the possibility of additional terms and conditions being added to any new or replacement

financing arrangements.

8. Our financial performance is particularly vulnerable to interest rate risk.

Over the last several years, the Government of India has substantially deregulated the financial sector.

As a result, interest rates are now primarily determined by the market, which has increased the interest

rate risk exposure of all banks and financial intermediaries in India, including us.

Our results of operations are substantially dependent on our net interest margins. Interest rates are

sensitive to many factors beyond our control, including the RBI‟s monetary policies, domestic and

international economic and political conditions and other factors.

Our policy is to attempt to balance the proportion of our interest-earning assets, which bear fixed

interest rates, with interest-bearing liabilities. A portion of our liabilities, such as our NCDs,

subordinated debt and short term loans carry fixed rates of interest and the remaining are linked to the

respective banks' benchmark prime lending rate/base rate. As of March 31, 2011, 57% of our

borrowings were at fixed rates of interest. Moreover, we do not hedge our exposure to interest rate

changes. We cannot assure you that we will be able to adequately manage our interest rate risk in the

future or be able to effectively balance the proportion of our fixed rate loan assets and liabilities.

Further, changes in interest rates could affect the interest rates charged on interest-earning assets and

the interest rates paid on interest-bearing liabilities in different ways. Thus, our results of operations

could be affected by changes in interest rates and the timing of any re-pricing of our liabilities

compared with the re-pricing of our assets.

Furthermore, we are exposed to greater interest rate risk than banks or other NBFCs. In a rising interest

rate environment, if the yield on our interest-earning assets does not increase at the same time or to the

same extent as our cost of funds, or, in a declining interest rate environment, if our cost of funds does

not decline at the same time or to the same extent as the yield on our interest-earning assets, our net

interest income and net interest margin would be adversely affected.

Additional risks arising from increasing interest rates include:

• reductions in the volume of loans as a result of customers‟ inability to service high interest

rate payments; and

• reductions in the value of fixed income securities held in our investment portfolio.

9. A large number of our branches are located in southern India, and any downturn in the economy of

southern India or adverse change in consumer preferences in that region could adversely affect our

results of operations.

As of May 31, 2011, more than 75% of our branches were located in the southern states of Kerala,

Tamil Nadu, Karnataka and Andhra Pradesh. As of May 31, 2011, 86% of our Gold Loan advances

were made through branches located in the southern states of Andhra Pradesh, Karnataka, Kerala and

Tamil Nadu out of which about 16% were made through branches located in the state of Kerala alone.

Our concentration in states located in southern India exposes us more strongly to any adverse

geological, ecological, economic or political circumstance that may arise in that region as compared to

other NBFCs or commercial banks that have a more diversified national presence. If there is a

downturn in the economy of southern India or an adverse change in consumer preferences in that

region, our business, financial condition and results of operations may be adversely affected.

10. Inaccurate appraisal of gold by our personnel may adversely affect our business and financial

condition.

The accurate appraisal of pledged gold is a significant factor in the successful operation of our business

and such appraisal requires a skilled and reliable workforce. Inaccurate appraisal of gold by our

workforce may result in gold being overvalued and pledged for a loan that is higher in value than the

gold‟s actual value, which could adversely affect our reputation and business.

15

Further, we are subject to the risk that our gold appraisers may engage in fraud regarding their

estimation of the value of pledged gold. Any such inaccuracies or fraud in relation to our appraisal of

gold may adversely affect our reputation, business and financial condition.

11. Our branches are vulnerable to theft.

Storage of pledged gold jewellery as part of our business entails the risk of theft and resulting loss to

our reputation and business. The short tenure of the loans advanced by us and our practice of

processing loan repayments within short timelines require us to store pledged gold on our premises at

all points in time. There have been eight major burglaries at our branches since inception. With regard

to all burglaries, we may not be able to recover the entire amount of the loss suffered and may receive

only a partial payment of the insurance claim. While we are insured against the risk of burglary arising

from our business, such insurance may not be sufficient to fully cover the losses we suffer. Further, the

actual recovery of the insured amount from the insurer requires the undertaking of certain procedures,

and any delay in recovery could adversely affect our reputation and results of operation. We also

received a letter from the RBI dated October 11, 2010, wherein the RBI expressed its concern

regarding the frequency of burglaries at our branches. Pursuant to the same, while we have

strengthened our security policies and procedures, we cannot guarantee you that theft will not be

committed in the future, which could adversely affect our reputation, business and results of operations.

12. We are subject to the risk of fraud by our employees and customers.

We are exposed to the risk of fraud and other misconduct by employees and customers. While we

carefully recruit all of our employees and screen all our employees who are responsible for

disbursement of Gold Loans and custody of gold, there have in the past been acts of fraud with respect

to Gold Loans and cash related misappropriation committed by our employees. Our customers have

also committed such acts of fraud and misappropriation. The aggregate value involved in these cases

during fiscal year 2011, fiscal year 2010 and fiscal year 2009 was Rs. 24.87 million, Rs. 8.47 million

and Rs. 4.07 million. We are required to report cases of internal fraud to the RBI, which may take

appropriate action. Certain routine inspections have noted that there has been an increase in the number

of frauds committed from nine in Fiscal 2010 to 19 in Fiscal 2011 and also that a reassessment is

required in the classification adopted by the Company while reporting frauds to the RBI. While we

have risk monitoring policies in place, we cannot guarantee you that such acts will not be committed in

the future, and any such act could adversely affect our reputation, business and results of operations.

13. If we are unable to successfully manage the level of non performing assets in our loan portfolio, our

business and financial condition may be adversely affected.

The Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 create

certain provisioning requirements with respect to our outstanding loan portfolio. These provisioning

requirements may require us to reserve lower amounts than the provisioning requirements applicable to

financial institutions and banks in other countries. The provisioning requirements may also require the

exercise of subjective judgments of management. As of March 31, 2011, our gross non performing

assets (“NPAs”) were Rs. 249.30 million, or 0.39% of our total loans and advances, as compared to Rs.

336.66 million, or 1.29% of our total loans and advances as of March 31, 2010. Our provisions for

doubtful loans and advances amounted to Rs. 167.46 million as of March 31, 2011, as compared to Rs.

192.12 million as of March 31, 2010. The level of our provisions may not be adequate to cover further

increases in the amount of our non-performing loans or a decrease in the value of our pledged gold. If

such provisions are not sufficient to provide adequate cover for loan losses that may occur, or if we are

required to increase our provisions, this could have an adverse effect on our financial condition,

liquidity and results of operations and may require us to raise additional capital. In addition, we cannot

assure you that we will not have significant additional NPAs in our loan portfolio in the future on

account of new loans made or that we will be able to maintain the asset quality of our current loan

portfolio.

16

14. As part of our business strategy, we assign / securitize a significant portion of receivables from Gold

Loans advanced by us, which exposes us to the restrictions and conditions that are contained in the

assignment agreements.

As of March 31, 2011, the gold and hypothecation loans assigned to banks, financial institutions and

others aggregated to Rs. 11,182.83 million constituting 14.93% of our gross gold loan portfolio in

principal amount. We sanction and provide loans and then assign / securitize a portion of our loan

portfolio to banks. The assignment / securitization transactions are conducted on the basis of internal

estimates of our funding requirements, and may vary from time to time. Any change in RBI or other

government regulations in relation to assignments or securitisations by NBFCs could have an adverse

impact on our assignment / securitization program.

In the event the relevant bank does not realise the receivables due under such loans, the relevant bank

would have recourse to the corporate guarantee, cash collateral and the underlying security, in the event

such loans are secured. Some of these agreements also require us to obtain the consent of the relevant

bank before entering into any new line of business and certain such banks have a right of first refusal to

purchase receivables from us and our group companies. We are also liable to indemnify the relevant

banks in the occurrence of an event of default. We make a general provision for all loans and specific

provisions on our non-performing loans. Further any downgrade in the ratings of our securitized debt

may lead to additional collaterals or corporate guarantees required to be provided. In the event the

corporate guarantee and/or cash collateral underlying the security and general provisioning are

inadequate, and the loans are put back to us, this could have a material adverse effect on our operating

results and financial condition.

15. We have entered into assignment agreements to sell certain loans from our outstanding loan

portfolio. If such assignment of loans is held to be unenforceable under applicable law, our

business, financial condition and results of operations could be adversely affected.

From time to time we sell and assign a group of similar loans from our outstanding loan portfolio to

financial institutions in return for an upfront fixed consideration. As of March 31, 2011, our

outstanding portfolio of assigned loans was Rs. 11,182.83 million, constituting 14.93% of our gross

Gold Loan portfolio in principal amount. As a part of such transactions, we provide credit enhancement

through fixed deposits with banks or issue corporate guarantees to the purchaser for an amount equal to

a negotiated percentage of the value of the loans being assigned. In January 2009, the High Court of

Gujarat held that the provisions of the Banking Regulation Act, 1949 do not permit banks to assign

debt due to them, including the assignment of debt between two banks. However, on appeal, the

Supreme Court of India reversed the decision of the Gujarat High Court and held that a bank to bank

transfer of debt is not barred by law. If, in the future, one or more of the assignment agreements entered

into by us is held to be unenforceable by a court of law, we may be required to terminate the

assignment agreement(s) In addition, if such assignments of loans are sought to be regulated including

by way of securitization guidelines issued by the RBI, it could adversely affect our ability to raise

resources through loan assignments. Such events may adversely affect our business, financial condition

and results of our operations and our ability to assign our loans.

16. We are subject to certain restrictive covenants in our loan agreements, which may restrict our

operations and ability to expand our business.

We have entered into certain loan agreements in respect of our borrowings, which contain certain

restrictive covenants or require us to obtain approval from the lender in certain circumstances for

disposing of (including creating a charge on) our specified assets, undertaking any merger or

reorganisation, entering into a new line of business, declaring dividends in certain circumstances,

amending our memorandum and articles of association, making substantial change to the general nature

or scope of our business, incurring or assuming any debt, diluting the Promoters‟ equity share holdings

in our Company beyond certain agreed thresholds, reducing our share capital and making a substantial

change in our management. We cannot assure you that consents or waivers in connection with the

application of any of these restrictive covenants could be granted in the future. Some of our lenders

have a right to appoint a nominee director on the Board even before the occurrence of a default. The

occurrence of any of these events could adversely affect our financial condition and results of

operations.

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17. A routine inspection by the RBI has indicated certain deficiencies in the process that has been

followed by us to conduct in auctions.

A routine inspection has noted that there is a considerable time gap between the date of a loan

becoming overdue and the implementation of the auction procedure. This would imply that the

concerned customer would be required to pay the interest for such time period. Certain branches had

also not maintained details of the auction such as the details of bid amounts, list of successful bidders,

successful bid amounts, mode of payment of bid amount etc. It has also been indicated that an auction

surplus of Rs. 95.86 million was lying with the Company as on March 31, 2011 that were ploughed

back into the Company as working capital funds. This amount has been required to return to the

concerned borrowers or transferred to an escrow account to avoid it from being treated as public funds.

Although we are in the process of implementing steps to rectify these deficiencies, any delay or failure

in such implementation may subject us to penalties from the RBI.

18. We have entered into, and will continue to enter into, related party transactions.

We have entered into transactions with several related parties, including our Promoters, Directors and

Group Companies. We cannot assure you that we could not have achieved more favourable terms had

such transactions been entered into with unrelated parties. Furthermore, it is likely that we will enter

into related party transactions in the future. The transactions we have entered into and any future

transactions with our related parties have involved or could potentially involve conflicts of interest. The

following are summary transactions with related parties as per Accounting standard 18 issued under the

Companies Accounting Standard Rules entered into by us during the periods indicated:

• Debentures issued aggregating to Rs. 47.57 million during the fiscal year 2011 and Rs. 273.31

million during the fiscal year 2010;

• Debentures redeemed aggregating to Rs. 62.04 million during the fiscal year 2011 and Rs.

255.54 million during the fiscal year 2010;

• Subscription of Equity Shares by relative of key management personnel aggregating to Rs.

1,000 million during the fiscal year 2011 and subscription of share warrants by key

management personnel aggregating to Rs. 230.76 million during the fiscal year 2010;

• Donation of Rs. 6.20 million made to Manappuram Foundations during the fiscal year 2011;

and

• Sale of gold to Manappuram Jewellers Private Limited aggregating to Rs. 972.70 million

during the fiscal year 2011and Rs. 140.24 million during the fiscal year 2010.

Further certain transactions for the purchase and sale of services from/to parties covered under Section

297 of the Companies Act, 1956 contravened the said provision. These offences have since been

compounded vide order of the Company Law Board, Chennai Bench dated August 31, 2009. For

further details regarding our related party transactions, see “Auditor Examination Report and

Reformatted Statements” on page 182 and ―Our Business - Merger of MAFIT with Our Company‖ on

page 89.

19. Our Promoters, Directors and related entities have interests in a number of companies similar to

ours, which may result in potential conflicts of interest with us.

Certain decisions concerning our operations or financial structure may present conflicts of interest

among our Promoters, Directors, executive officers and other shareholders. Commercial transactions in

the future between us and related parties could result in conflicting interests. A conflict of interest may

occur between our business and the business of our Promoter group companies which could have an

adverse affect on our operations. Two of our Group Companies, Manappuram Benefit Fund Limited

and Manappuram Asset Finance Limited, are also engaged in the business of advancing Gold Loans. In

addition, certain sole proprietorships owned by our Promoter, V.P. Nandakumar, are involved in the

business of advancing Gold Loans. Conflicts of interest may also arise out of common business

objectives shared by us, our Promoters, directors and their related entities. Our Promoters, directors and

their related entities may compete with us and have no obligation to direct any opportunities to us. We

18

cannot assure you that these or other conflicts of interest will be resolved in an impartial manner, and

any of these conflicts could adversely affect our business and results of operations.

20. Our entire customer base comprises individual borrowers, who generally are more likely to be

affected by declining economic conditions than larger corporate borrowers.

Individual borrowers typically are less financially resilient than larger corporate borrowers, and as a

result, they are typically more adversely affected by declining economic conditions. In addition, a

significant majority of our customer base belongs to the low to medium income group. Furthermore,

unlike many developed economies, a nationwide credit bureau has only recently become operational in

India, so there is less financial information available about individuals, particularly our focus customer

segment of the low to medium income group. It is therefore difficult to carry out precise credit risk

analyses on our customers. While we follow certain procedures to evaluate the credit profile of our

customers before we sanction a loan, we generally rely on the quality of the pledged gold rather than on

a stringent analysis of the credit profile of our customers. Although we believe that our risk

management controls are sufficient, we cannot be certain that they will continue to be sufficient or that

additional risk management policies for individual borrowers will not be required. Failure to maintain

sufficient credit assessment policies, particularly for individual borrowers, could adversely affect our

loan portfolio, which could in turn have an adverse effect on our financial condition and results of

operations.

21. A rise in the general income level of our customers may adversely affect the demand for our loans.

The size of our Gold Loan portfolio is dependent upon the demand for Gold Loans in India, which is

inversely related to the general income level of our customers. A rise in the general income level in

India could make our loans unattractive to some customers due to their having increased disposable

income, making them less reliant on loans, including Gold Loans. Such a shift in income levels could

lower our interest income, which could in turn adversely affect our business, financial condition and


22. Major lapses of control, system failures or calamities could adversely affect our business.

We are vulnerable to risks arising from the failure of employees to adhere to approved procedures,

failures of security systems, computer system disruptions, communication systems failure and data

interception during transmission through external communication channels and networks. Failure to

prevent or detect such breaches in security or data and communications errors may adversely affect our

operations.

Despite our internal controls, policies and procedures, certain matters such as fraud and embezzlement

cannot be eliminated entirely given the cash nature of our business. If we fail to maintain and continue

to enhance our internal controls, policies and systems, we may be unable to prevent fraud, security

breaches or system failures.

Our business is increasingly dependent on our ability to process, on a daily basis, a large number of

transactions. Our financial, accounting or other data processing systems may fail to operate properly or

become disabled as a result of events that are wholly or partially beyond our control, including a

disruption of electrical or communications services.

If any of these systems do not operate properly or are disabled, or if there are other shortcomings or

failures in our internal processes or systems, financial loss, disruption of our business, regulatory

intervention or damage to our reputation may result. In addition, our ability to conduct business may be

adversely affected by a disruption in the infrastructure that supports our businesses and the localities in

which we are located. Our operations also rely on the secure processing, storage and transmission of

confidential and other information in our computer systems and networks. Our computer systems,

software and networks may be vulnerable to unauthorized access, computer viruses or other malicious

code and other events that could compromise data integrity and security.

Constant connectivity between our branches across India and our head office is key to the functioning

of our business. Each of our branches accesses the Manappuram data centre through the Internet, and

all data is stored centrally in the Manappuram data centre. Data is replicated at our Disaster Recovery

19

Centre in Chennai. While we are seeking to provide each branch with two internet connections for

redundancy to protect our systems in the event of failure of a broadband connection, as of May 31,

2011, we have not yet provided approximately 500 of our branches with such redundancy. Our disaster

recovery system is fully operational and we continue to engage in technical exercises to test and

improve our disaster plan. A study completed by IBM identified certain areas for improvement in our

IT support processes. As a result, we are in the process of setting up a service desk, service delivery

and service support in the near future.

23. The RBI has altered and may further alter regulations relating to priority sector advances.

The RBI currently mandates domestic commercial banks operating in India to maintain an aggregate

40.0% (32.0% for foreign banks) of their adjusted net bank credit or credit equivalent amount of off

balance sheet exposure, whichever is greater, as “priority sector advances”. These include advances to

agriculture, small enterprises, exports and similar sectors where the Government seeks to encourage the

flow of credit to stimulate economic development in India. As these commercial banks are unable to

meet these requirements, they often rely on specialised institutions, including microfinance institutions

(“MFIs”) and other financing companies, to provide them with access to qualifying advances through

lending programs and loan assignments. These bank requirements result in significant funding for the

microfinance sector. However, by way of a circular dated February 2, 2011, the RBI has clarified that

loans sanctioned to NBFCs for on-lending to individuals or other entities against the security of gold

jewellery, are not eligible for classification as loans made to the agricultural sector. Further,

investments made by commercial banks in securitised assets originated by NBFCs, where the

underlying assets are loans against gold jewellery, then the assignment of gold loan portfolio from

NBFCs are also not eligible for classification under agriculture sector. To the extent that similar

changes in RBI regulations eliminate or reduce the need of banks for priority sector advances or

modifies the understanding of the concept of MFIs, less capital would be available to MFIs and other

financing companies, such as ours. In such event, our access to funds and the cost of our capital would

be adversely affected, which may in turn adversely affect our financial condition and results of

operations.

24. In order to successfully manage and expand our business, we must be able to attract, train, motivate

and retain key employees.

In order to successfully manage and expand our business, we must be able to attract, train, motivate and

retain highly skilled employees, especially branch managers and gold appraisal personnel. If we cannot

hire additional personnel or retain existing qualified personnel, our ability to expand our business will

be impaired and our revenues could decline. Our ability to hire and retain qualified and skilled

managers and sales representatives is critical to our future, and competition for experienced employees

in the Gold Loan industry may be significant. In addition, we may not be able to hire and retain enough

skilled and experienced employees to replace those who leave or may not be able to re-deploy. We also

may not be able to retain the proper mix of employees to follow trends in technology, evolving industry

standards and changing customer preferences. Any failure by us to hire or retain key employees could

have an adverse impact on our business and results of operations.

25. Our insurance may not be adequate to protect us against all potential losses to which we may be

subject.

We maintain insurance for our free hold real estate and tangible properties, including gold and cash,

and infrastructure at all premises, which provides insurance cover against loss or damage by fire as

well as against natural calamities including earthquake and floods. Further we maintain insurance for

employee fidelity, cash and gold in the branch premises and in transit, which provides insurance cover

against loss or damage by employee theft, house breaking and hold up. However, the amount of our

insurance coverage may be less than the replacement cost of all covered property and may not be

sufficient to cover all financial losses that we may suffer should a risk materialise. There are many

events that could significantly affect our operations, or expose us to third party liabilities, for which we

may not be adequately insured. If we were to incur a significant liability for which we were not fully

insured, it could adversely affect our business, results of operations and financial condition.

20

26. Our business is highly regulated and we may be adversely affected by future regulatory changes.

Further, The restrictions imposed on NBFCs by the RBI through a Master Circular dated July 1,

2010 may restrict our ability to obtain bank financing for specific activities.

We are required under applicable laws and regulations to maintain a capital adequacy ratio as per

Prudential Norms Directions of at least 15.0% of our risk-weighted assets, with the minimum

requirement of Tier I capital being 10.0%. Our capital adequacy ratio was 29.13% as of March 31,

2011, with Tier I capital comprising 26.36%.

In addition to the above, we are also subject to the corporate, taxation and other laws in effect in India

which require continued monitoring and compliance. The introduction of additional government

control or newly implemented laws and regulations, depending on the nature and extent thereof and our

ability to make corresponding adjustments, may adversely affect our business, results of operations and

financial condition. In particular, decisions taken by regulators concerning economic policies or goals

that are inconsistent with our interests could adversely affect our results of operations. These laws and

regulations and the way in which they are implemented and enforced may change from time to time

and we cannot assure you that future legislative or regulatory changes will not have an adverse effect

on our business, financial condition and results of operations. The Micro Finance Institutions

(Development and Regulation) Bill, 2011 promulgated by the Ministry of Finance in June 2011, if

notified as legislation could be relevant in this regard. Further, as per the Monetary Policy Statement

that was released by the RBI on May 03, 2011, the RBI seeks to issue detailed guidelines on NBFCs

functioning as micro finance institutions.

The RBI has also designated certain activities that may be carried on by NBFCs as being ineligible for

bank credit. These activities include rediscounting of bills by NBFCs (except in certain specific cases)

and investment in shares or debentures of any other company. Banks are also prohibited from granting

bridge loans of any nature, or interim finance against capital/debenture issues to NBFCs. Under the

RBI Master Circular No. RBI/2010-11/68 DBOD No.Dir.BC.14/13.03.00/2010-11 issued on July 1,

2010, the exposure (both lending and investment, including off balance sheet exposures) of a bank to a

single NBFC cannot exceed 10.0% of the bank's capital funds as per its last audited balance sheet.

Banks may, however, assume exposures on a single NBFC up to 15.0% of their capital funds provided

the exposure in excess of 10.0% is on account of funds on-lent by the NBFC to the infrastructure

sector. Further, banks may also consider fixing internal limits for their aggregate exposure to all

NBFCs. These rules limit the exposure that banks may have on NBFCs such as us, which may restrict

our ability to borrow from such banks and may increase our cost of borrowing, which could adversely

impact our growth and results of operations.

Additionally, we are required to make various filings with the RBI, the Registrar of Companies,

Securities and Exchange Board of India and other relevant authorities pursuant to the provisions of RBI

regulations, the Companies Act and other regulations. If we fail to comply with these requirements, or

a regulator claims we have not complied with these requirements, we may be subject to penalties and

compounding proceedings. For instance, in the past, we have needed to approach the Company Law

Board for condoning the delay in filing certain forms and had to pay certain penalties. We have

received inspection reports from the RBI on a timely basis. Based on the recent RBI inspection report

dated June 4, 2011, the RBI has, inter alia, highlighted matters relating to improper and unfilled

application forms, deficiencies in our fair practices code, delay in auction of gold and deficiencies in

the Pawn Ticket. We replied to the inspection report on June 6, 2011. However, the issues raised in the

RBI inspection report may not be resolved in our favour, resulting in sanctions, which may have an

adverse impact on our financial condition and results of operations.

Further, pursuant to a Master Circular dated July 1, 2010, the RBI has imposed certain restrictions on

NBFCs relating to the availability of bank financing. Under this Master Circular, certain NBFC

activities are ineligible for financing by bank credit, such as certain types of discounting and

rediscounting of bills arising from the sale of commercial vehicles and unsecured loans or NCDs made

by NBFCs in other companies. In addition to the above, (i) banks are not permitted to grant bridge

loans of any nature, provide interim finance against capital or debenture issues and/or in the form of

loans of a temporary nature pending the raising of long term funds from the market by way of capital,

deposits, or other means to any category of NBFCs; (ii) shares and debentures are not permitted to be

accepted as collateral securities for secured loans granted to NBFCs; and (iii) banks are not permitted

to execute guarantees covering inter-company deposits or loans that guarantee refund of deposits or

21

loans accepted by NBFCs. The Master Circular also advises that guarantees should not be issued by

banks for the purpose of indirectly enabling the placement of deposits with NBFCs. All the

aforementioned restrictions may adversely affect our access to availability of bank finance, which may

in turn adversely affect our financial condition and results of operations.

27. If interest rate restrictions are imposed on lending by NBFCs, our operating results and financial

condition may be adversely affected.

We are subject to laws and regulations by Indian governmental authorities, including the RBI. There

may be future changes in the regulatory system or in the enforcement of the laws and regulations that

could adversely affect us. For instance, a number of states in India have enacted laws to regulate

transactions involving money lenders. These state laws establish maximum rates of interest that can be

charged by a person lending money. The RBI, however, has not established a ceiling on the rate of

interest that can be charged by an NBFC in our sector of operations. Currently, the RBI requires that

the board of all NBFCs adopt an interest rate model taking into account relevant factors such as the cost

of funds, margin and risk premium. The rate of interest and the approach for gradation of risk and the

rationale for charging different rates of interest for different categories of borrowers are required to be

disclosed to the borrowers in the application form and expressly communicated in the sanction letter.

If, in the future, the RBI imposes an interest rate ceiling on lending by NBFCs, our operating results

and financial condition may be adversely affected.

We may also fall within the ambit of the Usurious Loans Act, 1918 in the event that any of our loan

agreements are litigated. While the legislation contains no stipulation as to what rate of interest would

amount to an excessively high rate of interest, certain states in which our branches are located have

enacted amendments that have fixed such rates of interest at approximately 12.00% per annum for

secured loans. If any of our branches were to fall within the ambit of the Usurious Loans Act, 1918, we

may be subject to penalties and be forced to reduce interest rates accordingly, which could have an

adverse effect on our business and results of operations.

The National Bank for Agriculture and Rural Development has, on behalf of the RBI, issued a draft

microfinance bill which has been released for suggestions by stakeholders. Further, the RBI set up a the

Malegam committee to study issues and concerns in the microfinance sector which provided the

Malegam Committee Report. The Malegam Committee Report has made various operational and

financial recommendations on the microfinance sector and on the basis of the same we may get

classified as an MFI. If this bill is passed or the Malegam Committee Report adopted, we may be

covered by its provisions and consequently, restricted in our activities, which may adversely affect our

business and results of operations.

28. Our inability to obtain, renew or maintain our statutory and regulatory permits and approvals

required to operate our business may have an adverse effect on our business.

NBFCs in India are subject to strict regulation and close supervision by the RBI. In addition to the

numerous conditions required for the registration as an NBFC with the RBI, we are required to

maintain certain statutory and regulatory permits and approvals for our business. In the future, we will

be required to renew such permits and approvals and obtain new permits and approvals for any

proposed operations. We cannot assure you that the relevant authorities will issue any or all such

permits or approvals in our anticipated timeframe or at all. Failure by us to renew, maintain or obtain

the required permits or approvals may result in the interruption of our operations and may have a

material adverse effect on our business, financial condition and results of operations.

29. The implementation of our KYC norms as well as our measures to prevent money laundering may

not be completely effective, which could adversely affect our reputation and in turn have an adverse

impact on our business and results of operations.

Our implementation of anti-money laundering measures required by the RBI, including KYC policies

and the adoption of anti-money laundering and compliance procedures in all our branches, may not be

completely effective. There can be no assurance that attempts to launder money using us as a vehicle

will not be made. If we were associated with money laundering, our reputation may be adversely

affected, which in turn could have an adverse impact on our business and results of operations.

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30. We are required to comply with the requirements of certain labour laws which may impose

additional costs on us.

Our branches are required to be registered under the relevant shops and establishments laws and

verifications under Standards of Weights and Measures Act, 1976 of the states in which they are

located. The shops and establishment laws regulate various employment conditions, including working

hours, holidays, leave and overtime compensation. Some of our branches have not applied for such

registration and other branches have pending applications for registration. We have received notices

from labour authorities of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu pursuant to shops and

establishments laws for violating the norms laid down under such statutes, including the number of

permitted working days for these branches. We have replied to these notices and applied for

exemptions to keep these branches open seven days a week. If we fail to obtain or retain any of these

approvals, exemptions or licenses, or renewals thereof, in a timely manner, or at all, our business may

be adversely affected. If we fail to comply, or a regulator claims we have not complied, with any

conditions, our certificate of registration may be suspended or cancelled and we may not be able to

carry on such activities.

In addition, our employees are required to be registered under the provisions of certain labour laws

such as the Employees‟ State Insurance Act, 1948, the Payment of Gratuity Act, 1972 the Kerala Shops

and Commercial Establishments Act, 1960, the Kerala Labour Welfare Fund Act, 1975, and the

Employees Provident Fund and Miscellaneous Provisions Act, 1952. We are also required to maintain

certain records under the provisions of these laws, which add to our costs. Certain claims have also

been raised against us for non compliance with the provisions of the Minimum Wages Act, 1948 and

the Maternity Benefits Act, 1961. If we are subject to penalties under these labour laws or if we do not

obtain the requisite approvals, our business, financial condition and results of operations may be

adversely affected.

31. We do not currently own the trademark to the “Manappuram” logo.

The “Manappuram” logo is registered with the Registrar of Trademarks in India under Class 36 in the

name of our Promoter, V. P. Nandakumar. The trademark has been licensed to us for use on a non-

exclusive, non-assignable basis for a period of ten years by way of a licensing agreement entered into

by us with V. P. Nandakumar on December 18, 2007. We cannot assure you that we will continue to

have the uninterrupted use and enjoyment of the “Manappuram” logo if we are unable to renew the

license agreement. Further, renewal of the agreement may be on terms and conditions that are

unfavorable to us. Termination, non renewal or renewal on unfavourable terms of this licensing

agreement may adversely affect our business, reputation, goodwill, financial condition and results of

operations.

All of our Group Companies use the “Manappuram” name and logo. If the actions of our Promoters or

our Group Companies damage the “Manappuram” name, our reputation, business and financial

condition may in turn be adversely affected.

32. We face difficulties and incur additional expenses in operating from rural and semi urban areas,

where infrastructural facilities are limited.

A significant portion of our operations are conducted in rural and semi urban areas. We face certain

difficulties in conducting such operations, such as accessing power facilities, transporting people and

goods and maintaining profitability at branches in remote areas. We may also face increased costs in

implementing security measures and expanding our advertising presence. We cannot assure you that

such costs will not increase in the future as we expand our network in rural and semi urban areas.

33. We depend on customer-supplied information when evaluating customer credit worthiness.

In deciding whether to extend credit or enter into other transactions with customers and counter parties,

we may rely on information furnished to us by or on behalf of our customers, including the financial

information from which we create our credit assessments. We may also rely on customer

representations as to the accuracy and completeness of customer-supplied information. Any relevant

changes in this information may not be made available to us. The information that we have gathered

may not be sufficient to create a complete customer risk profile. Because we rely on such customer-

23

supplied information, some or all of certain customers‟ risk profiles may be willfully or inadvertently

wrong or misleading, which may lead us to enter into transactions that may adversely affect our

financial condition and results of operations.

34. Our foreign currency exchange business may be adversely affected by exchange rate fluctuations

and is required to adhere to strict know-your-customer (“KYC”) norms.

Our income from our foreign currency exchange business for the financial year ended March 31, 2011

was Rs. 0.54 million and forms 2.69% of our total income from fee based services. We are authorised

to conduct this business under the Authorised Dealer II license (“AD II license”) that has been granted

to us by the RBI. Engaging in the foreign currency exchange business requires us to adhere to all the

terms that are contained in our AD II license, including periodic statements to the RBI and strict

compliance with KYC norms. Any failure by us to comply with such reporting requirements and KYC

norms may result in the imposition of significant penalties, which could adversely affect our financial

condition and results of operations.

35. Our money transfer business is strictly regulated by the RBI money transfer service scheme.

Our income from our money transfer business for the financial year ended March 31, 2011 was Rs.

1.92 million and constituted 95.65% of our total income from fee based services. Our money transfer

business is required to adhere to the requirements of the RBI money transfer service scheme with

regard to the nature of transactions permitted to be undertaken. The RBI has imposed strict KYC

requirements for agents as well as sub-agents of foreign principals who are engaged in providing

money transfer services. These KYC requirements would require us to adapt our policies on customer

acceptance, customer identification, monitoring of transactions and risk management in relation to our

money transfer business. Compliance with these requirements may increase costs and could adversely

affect our money transfer business.

36. All of our branches are located on leased premises and non renewal of lease agreements or their

renewal on terms unfavourable to us could adversely affect our operations.

All of our branches are located on leased premises. Any failure to renew the lease agreements for these

premises on terms and conditions favourable to us may require us to move certain branches to new

premises. We may incur considerable expenses in relation to such relocations, which may adversely

affect our results of operations.

Further, some branch owners have also filed suits to evict us from certain premises. We are currently

involved in 15 such suits. Some of our lease agreements for our branches may not be adequately

stamped or registered with the registering authority of appropriate jurisdiction, which may adversely

affect our rights in such litigations. If any of these litigations are not resolved in our favour, our

business and results of operations may be adversely affected.

37. We do not hold sole title to the land on which our registered office is located.

The land on which our registered office is located is jointly registered in our name and in the name of

one of our Group Companies, Manappuram Benefit Fund Limited (“MBFL”). We have not entered into

any arrangement to lease the land from MBFL. If MBFL requires us to relocate our registered office or

decides to relocate its registered office, we may face additional costs and other logistical difficulties in

carrying out such a relocation, which may adversely affect our financial condition and operations.

38. Our Promoters have given personal guarantees in relation to certain debt including assignment

facilities provided to us, which if revoked may require alternative guarantees, repayment of amounts

due or termination of the facilities.

Our Promoters have given personal guarantees aggregating to Rs. 6,636.02 million in relation to certain

debt including assignment facilities provided to us, which is the total limit sanctioned to us under such

debt including assignment facilities. In the event that any of the guarantees are revoked, the lenders for

such facilities may require alternate guarantees, repayment of amounts outstanding under such facilities

or may terminate such facilities. We may not be successful in procuring guarantees satisfactory to the

lenders, and as a result may need to repay outstanding amounts under such facilities or seek additional

24

sources of capital, which could adversely affect our financial condition.

39. Our Promoters have pledged Equity Shares under the terms of certain loan agreements that one of

our Promoters have entered into. Such agreements also contain certain restrictive provisions.

One of our Promoters, Sushama Nandakumar, has availed of a loan of Rs. 1,000.00 million from

Religare Finvest Limited (“Religare”) pursuant to a loan agreement dated August 12, 2010 (the “Loan

Agreement”). She has also availed of a loan of Rs. 350.00 million from Aditya Birla Finance Limited

(“ABFL”) by way of sanction letters dated December 28, 2010 and March 29, 2011 (collectively the

“Sanction Letters”). The security for the Religare loan is in part a pledge of the purchased

unencumbered Equity Shares of the Company by both our Promoters up to 2.5 times of the loan

amount availed of, not lesser than a market value of Rs. 2,500.00 million. Upon the occurrence of an

event of default as described in the Loan Agreement, Religare is entitled to sell the pledged shares by

way of an auction or private arrangement without court intervention. Religare is also entitled to recall

the loan and demand payment at any point in time depending on risk perception. The margin of the

loan is 40.0% of the value of the securities pledged and if the market value of our shares falls below

2.25 times the principal amount of the loan, our Promoters are required to provide additional

unencumbered shares to increase the margin to 2.5 times the principal amount of the loan within one

working day. As of May 31, 2011, our Promoters have pledged 31,576,110 Equity Shares with

Religare, which amounts to 7.57% of our paid up equity share capital.

Further, pursuant to the terms contained in the Sanction Letters, our Promoter Mr. V. P. Nandakumar

has pledged a total of 6,500,000 Equity Shares with ABFL as on May 31, 2011. This amounts to 0.78%

of our paid up capital as on that date. As per the terms of the loan arrangement with ABFL, the Equity

Shares are pledged at a margin of 50.00% and in case of a margin shortfall, the same would have to be

recouped by the pledge of additional Equity Shares. However, any margin shortfall due to a reduction

in share price beyond 30.00% would have to be recouped by way of repayment. We cannot assure you

that the interest and/or principal amount of these loans will be repaid on time or that an adequate

margin will be maintained at all times, which could result in a sale by of the pledged shares. A decrease

in Promoter holding below agreed thresholds could amount to an event of default under certain of our

loan agreements. The occurrence of any of these risks may adversely affect our financial condition and


40. We have certain contingent liabilities which may adversely affect our financial condition.

As of March 31, 2011, we had certain contingent liabilities. The contingent liability of amounts

disclosed in our Financial Statements represents estimates and assumptions of our management based

on advice received.

For further information on such contingent liabilities, see Schedule 18 to our Reformatted Statements.

In the event that any of these contingent liabilities materialise, our financial condition may be adversely

affected.

41. A routine inspection by the RBI in June 2011 has indicated certain deficiencies in the maintenance

and upkeep of our loan documentation including certain identity related documentation.

A routine inspection by the RBI has indicated certain deficiencies in our loan documentation. It has

been indicated that certain branches had failed to maintain a record of identity related documents

obtained from borrowers. Certain branches had also failed to maintain a record of the specific scheme

under which particular loans were sanctioned or the rate of interest that was chargeable to the specific

borrower. It has also been indicated that in relation to loans that are treated as being advanced to the

agricultural sector, certain branches had failed to obtain the relevant documents such as tax receipt for

land, details of holding etc. Certain details were also omitted to be filled up in the demand promissory

note issued in relation to the repayment of the loan. While we are in the process of rectifying these

defects, any delay or failure in doing so may subject us to a penalty being imposed in this regard by the

RBI.

25

42. We, our Executive Chairman, and certain of our employees are parties to a criminal proceeding.

We, our Executive Chairman, V. P. Nandakumar, and certain other of our employees are parties to a

criminal case which is pending before the Court of the Judicial Magistrate of First Class, Ottapalam,

Kerala. The case was filed as a result of a complaint by one of our customers alleging that we had

forcefully dispossessed the customer of a vehicle for which the customer had availed of a loan from us

despite the customer having no payment due to us in relation to the vehicle. This case is filed under

Sections 143, 147, 148, 149, 323, 394, 457 and 506 (iii) of the Indian Penal Code, 1860. We cannot

assure you that this case will be disposed of in our favour. In the event that any adverse order is passed

in this case, it may adversely affect our reputation.

Risks Related to Investments in an Indian Company

43. A slow-down in economic growth in India and other political and economic factors may adversely

affect our business.

We operate only within India and, accordingly, all of our revenues are derived from the domestic

market. As a result, we are highly dependent on prevailing economic conditions in India and our results

of operations are significantly affected by factors influencing the Indian economy. An uncertain

economic situation, in India and globally, could result in a further slowdown in economic growth,

investment and consumption. A slowdown in the rate of growth in the Indian economy could result in

lower demand for credit and other financial products and services and higher defaults. Any slowdown

in the growth or negative growth of sectors where we have a relatively higher exposure could adversely

impact our performance. Any such slowdown could adversely affect our business, prospects, results of

operations and financial condition.

Since 1991, successive central governments have pursued policies of economic liberalisation and

financial sector reforms. Nevertheless, the role of the central and state governments in the Indian

economy as producers, consumers and regulators has remained significant. However, there can be no

assurance that the liberalisation policies announced by the Government in the past will continue in the

future. A significant change in the Government‟s policies could affect business and economic

conditions in India and could also adversely affect our business.

44. Difficulties faced by other NBFCs, banks or financial institutions or the Indian financial sector

generally could cause our business to be adversely affected.

We are exposed to the risks of the Indian financial sector which in turn may be affected by financial

difficulties and other problems faced by Indian financial institutions. Certain Indian financial

institutions have experienced difficulties during recent years particularly in managing risks associated

with their portfolios and matching the duration of their assets and liabilities, and some co-operative

banks have also faced serious financial and liquidity crises. Any major difficulty or instability

experienced by the Indian financial sector could create adverse market perception, which in turn could

adversely affect our business, prospects, results of operations and financial condition.

45. Financial instability in other countries could disrupt our business.

The Indian market and the Indian economy are influenced by economic and market conditions in other

countries. Although economic conditions are different in each country, investors‟ reactions to

developments in one country can have adverse effects on the economy as a whole, in other countries,

including India. A loss of investor confidence in the financial systems of other emerging markets may

cause volatility in Indian financial markets and indirectly, in the Indian economy in general. Any

worldwide financial instability could also have a negative impact on the Indian economy, including the

movement of exchange rates and interest rates in India.

In the event that the current difficult conditions in the global credit markets continue or if the recovery

is slower than expected or if there any significant financial disruption, this could have an adverse effect

on our cost of funding, loan portfolio, business, prospects, results of operations and financial condition

26

46. A decline in India‟s foreign exchange reserves may affect liquidity and interest rates in the Indian

economy, which could adversely impact our financial condition.

According to the RBI Weekly Statistical Supplement, India‟s foreign exchange reserves totaled US$

310,562.00 million as of June 17, 2011. A decline in India‟s foreign exchange reserves could impact

the valuation of the Rupee and could result in reduced liquidity and higher interest rates which could

adversely affect our future financial performance.

47. A downgrade of India‟s sovereign debt rating by an international rating agency could have a

negative impact on our business.

India's sovereign debt rating could be downgraded due to various factors, including changes in tax or

fiscal policy, which are outside our control. Such downgrading could cause a change in interest rates or

other commercial terms and could adversely affect our ability to raise additional financing as well as

our capital expenditure plans, business and financial performance. A decline in this reserve could

impact the valuation of the Indian Rupee and could result in reduced liquidity and higher interest rates,

which could adversely affect the availability of financing to us.

48. We will be required to prepare our financial statements in accordance with „Indian Accounting

Standards converged with IFRS‟ (“IND-AS”) effective from April 1, 2014. There can be no

assurance that our adoption of IND-AS will not adversely affect our reported results of operations or

financial condition and any failure to successfully adopt IND-AS from April 1, 2014 could have an

adverse effect on the price of the Equity Shares.

Based on the current timeline announced convergence of „Indian Accounting Standards‟ with IFRS for

Indian companies, we estimate that the earliest that our Company would need to prepare annual and

interim financial statements under IND-AS would be the financial period commencing from April 1,

2014. There is currently a significant lack of clarity on the adoption of, and convergence to IND-AS

and we currently do not have a set of established practices on which to draw on in forming judgments

regarding its implementation and application, and we have not determined with any degree of certainty

the impact that such adoption will have on our financial reporting. There can be no assurance that our

financial condition, results of operations, cash flows or changes in shareholders‟ equity will not appear

materially worse under IND-AS than under Indian GAAP. As we transition to IND-AS reporting, we

may encounter difficulties in the ongoing process of implementing and enhancing our management

information systems. Moreover, there is increasing competition for the small number of IFRS-

experienced accounting personnel as more Indian companies begin to prepare IND-AS financial

statements. There can be no assurance that our adoption of IND-AS will not adversely affect our

reported results of operations or financial condition.

49. Companies operating in India are subject to a variety of central and state government taxes and

surcharges.

Tax and other levies imposed by the central and state governments in India that affect our tax liability

include: (i) central and state taxes and other levies; (ii) income tax; (iii) value added tax; (iv) turnover

tax; (v) service tax; (vi) stamp duty; and (vii) other special taxes and surcharges which are introduced

on a temporary or permanent basis from time to time. Moreover, the central and state tax scheme in

India is extensive and subject to change from time to time. For example, a new tax code is proposed to

be introduced in the Indian Parliament. In addition, a new goods and services tax is proposed to be

introduced effective April 2012, and the scope of the service tax is proposed to enlarged.

The statutory corporate income tax in India, which includes a surcharge on the tax and an education

cess on the tax and the surcharge, is currently 32.445% down from 33.99% for the fiscal year ended

March 31, 2010. The central or state government may in the future increase the corporate income tax it

imposes. Any such future increases or amendments may affect the overall tax efficiency of companies

operating in India and may result in significant additional taxes becoming payable. Additional tax

exposure could adversely affect our business and results of operations.

50. Our ability to raise foreign capital may be constrained by Indian law.

As an Indian company, we are subject to exchange controls that regulate borrowing in foreign

27

currencies. Such regulatory restrictions limit our financing sources and hence could constrain our

ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, we

cannot assure you that the required approvals will be granted to us without onerous conditions, if at all.

Limitations on raising foreign debt may have an adverse effect on our business.

51. Terrorist attacks, civil disturbances, regional conflicts and other acts of violence in India and abroad

may disrupt or otherwise adversely affect the Indian economy, the health of which our business

depends on.

Certain events that are beyond our control, such as terrorist attacks and other acts of violence or war,

including those involving India, the United Kingdom, the United States or other countries, may

adversely affect worldwide financial markets which could adversely affect our business, and any of

these events could lower confidence in India‟s economy. South Asia has, from time to time,

experienced instances of civil unrest and political tensions and hostilities among neighbouring

countries, including India, Pakistan and China. Political tensions could create a perception that there is

a risk of disruption of services provided by India-based companies, which could have an adverse effect

on our business.

52. India is vulnerable to natural disasters that could severely disrupt the normal operation of our

business.

Parts of India are susceptible to tsunamis and earthquakes and other natural disasters. Because all of

our facilities and employees are located in India, if any of our branches or offices are damaged by a

natural disaster, our business could be interrupted or delayed. As a result, a natural disaster in India

could adversely affect our results of operations.

53. An outbreak of an infectious disease or any other serious public health concerns in Asia or

elsewhere could adversely affect our business.

The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concern,

such as swine influenza, could have a negative impact on the global economy, financial markets and

business activities worldwide, which could adversely affect our business. Although, we have not been

adversely affected by such outbreaks in the past, we can give you no assurance that a future outbreak of

an infectious disease among humans or animals or any other serious public health concern will not have

a material adverse effect on our business.

Risks Related to the Bonds

54. Payments to be made on the Bonds will be subordinated to certain tax and other liabilities preferred

by law.

The Bonds will be subordinated to certain liabilities preferred by law such as the claims of the

Government on account of taxes, and certain liabilities incurred in the ordinary course of our

Company‟s trading or banking transactions. In particular, in the event of bankruptcy, liquidation or

winding-up, our Company‟s assets will be available to pay obligations on the Bonds only after all of

those liabilities that rank senior to these Bonds have been paid as per Section 530 of the Companies

Act, 1956. In the event of bankruptcy, liquidation or winding-up, there may not be sufficient assets

remaining to pay amounts due on the Bonds.

55. Certain lenders of the Company have exclusive first charge over gold loan receivables of identified

branches of the Company.

There are some lenders whose loans are secured by „exclusive first charge‟ over gold loan receivables

of identified branches of the Company by virtue of the terms and conditions contained in the

documents entered into by the Company with such creditors and in the event of bankruptcy, liquidation

or winding-up of the Company, the amounts recoverable by Bondholders will be reduced to that extent.

56. There are other lenders who have pari passu charge over the Security provided.

There are other lenders of the Company who have pari passu charge over the Security provided for the

28

Issue. While the Company is required to maintain an asset cover of 1.10 times the outstanding amount

of the Bonds, upon the Company‟s bankruptcy, winding-up or liquidation, the other lenders will rank

pari passu with the Bondholders and to that extent, may reduce the amounts recoverable by the

Bondholders.

57. The lenders of the Company who have exclusive charges over gold loan receivables of identified

branches of the Company may rank pari passu with the Debenture Holders in the event their

security gets re-characterized.

The Company has taken various loans from banks and financial institutions which are secured by

„exclusive first charge‟ over gold loan receivables of identified branches of the Company. However the

Company periodically changes the identified branches depending on the amounts outstanding with the

respective lender and depending on the financial covenants to be maintained under the documents

entered into by the Company with the respective lender. Due to the ability of the Company to deal with

the receivables over which the charge is created, the purported exclusive charge may be pari passu

charge over all assets of the Company. In this event, such creditors will rank pari passu along with all

the charge holders of the Company which would include the Bondholders and this may therefore

reduce the amounts recoverable by Bondholders in the event of the Company‟s bankruptcy, winding-up

or liquidation

58. The Company may raise further borrowings and charge its assets after receipt of necessary consents

from its existing lenders.

The Company may, subject to receipt of all necessary consents from its existing lenders and the

Debenture Trustee to the Issue, raise further borrowings and charge its assets. The Company is free to

decide the nature of security that may be provided for future borrowings and the same may rank pari

passu with the security created for this Issue. In such a scenario, the Bondholders will rank pari passu

with other creditors and to that extent, may reduce the amounts recoverable by the Bondholders upon

the Company‟s bankruptcy, winding-up or liquidation.

59. The liquidity for the Bonds in the secondary market is very low and it may remain so in the future,

and the price of the Bonds may be volatile.

The Issue will be a new public issue of bonds for the Company and the liquidity in bonds at present is

very low in the secondary market. Although an application has been made to list the Bonds on BSE,

there can be no assurance that liquidity for the Bonds will improve, and if liquidity for the Bonds were

to improve, there is no obligation on us to maintain the secondary market. The liquidity and market

prices of the Bonds can be expected to vary with changes in market and economic conditions, our

financial condition and prospects and other factors that generally influence market price of Bonds.

Such fluctuations may significantly affect the liquidity and market price of the Bonds, which may trade

at a discount to the price at which you purchase the Bonds.

Moreover, the price of the Bonds on the BSE may fluctuate after this Issue as a result of several other

factors.

60. You may not be able to recover, on a timely basis or at all, the full value of the outstanding amounts

and/or the interest accrued thereon in connection with the Bonds.

Our ability to pay interest accrued on the Bonds and/or the principal amount outstanding from time to

time in connection therewith would be subject to various factors inter-alia including our financial

condition, profitability and the general economic conditions in India and in the global financial

markets.

We cannot assure you that we would be able to repay the principal amount outstanding from time to

time on the Bonds and/or the interest accrued thereon in a timely manner, or at all. Although our

Company will create appropriate security in favour of the Debenture Trustee for the Bondholders on

the assets adequate to ensure 110% asset cover for the Bonds, the realizable value of the Secured

Assets, when liquidated, may be lower than the outstanding principal and/or interest accrued thereon in

connection with the Bonds. A failure or delay to recover the expected value from a sale or disposition

of the Secured Assets could expose you to a potential loss.

29

61. Debenture Redemption Reserve (“DRR”) would be created only up to an extent of 50% for the

Bonds. Further, if we do not generate adequate profits, we may not be able to maintain an adequate

DRR, for the Bonds issued pursuant to this Prospectus.

Section 117C of the Companies Act states that any company that intends to issue debentures must

create a DRR to which adequate amounts shall be credited out of the profits of the company until the

debentures are redeemed. The Ministry of Corporate Affairs has, through its circular dated April 18,

2002, (“Circular”), specified that the quantum of DRR to be created before the redemption liability

actually arises in normal circumstances should be „adequate‟ to pay the value of the debentures plus

accrued interest, (if not already paid), till the debentures are redeemed and cancelled. The Circular

however further specifies that, for NBFCs like our Company, (NBFCs which are registered with the

RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value of

debentures issued through the public issue. Accordingly our Company is required to create a DRR of

50% of the value of debentures issued through the public issue. This may affect speed of repayment to

Bondholders or otherwise affect availability to pay in a timely manner all amounts due and payable on

the Bonds.

As further clarified by the Circular, the amount to be credited as DRR will be carved out of the profits

of the company only and there is no obligation on the part of the company to create DRR if there is no

profit for the particular year. Accordingly, if we are unable to generate adequate profits, the DRR

created by us may not be adequate to meet the 50% of the value of the Bonds. This may have a bearing

on the timely redemption of the Bonds by our Company.

62. Any downgrading in credit rating of our Bonds may affect our trading price of the Bonds.

The Bonds proposed to be issued under this Issue have been rated “CARE AA-” from CARE and

„BWR AA-‟ from Brickwork. We cannot guarantee that these ratings will not be downgraded. The

ratings provided by CARE or Brickwork may be suspended, withdrawn or revised at any time. Any

revision or downgrading in the above credit ratings may lower the value of the Bonds and may also

affect our Company‟s ability to raise further debt.

63. Changes in interest rates may affect the price of our Company‟s Bonds.

All securities where a fixed rate of interest is offered, such as our Company‟s Bonds, are subject to

price risk. The price of such securities will vary inversely with changes in prevailing interest rates, i.e.

when interest rates rise, prices of fixed income securities fall and when interest rates drop, the prices

increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity

and the increase or decrease in the level of prevailing interest rates. Increased rates of interest, which

frequently accompany inflation and/or a growing economy, are likely to have a negative effect on the

price of our Company‟s Bonds.

64. You may be subject to Indian taxes arising on the sale of the Bonds.

Sales of Bonds by any holder may give rise to tax liability in India, as further discussed in section

entitled ―Statement of Tax Benefits‖ on page 78 of this Prospectus.

65. There may be a delay in making refunds to applicants.

We cannot assure you that the monies refundable to you, on account of (a) withdrawal of your

applications, (b) our failure to receive minimum subscription in connection with the base amount of the

Issue, (c) withdrawal of the Issue, or (d) failure to obtain the final approval from the BSE for listing of

the Bonds, will be refunded to you in a timely manner. We however, shall refund such monies, with the

interest due and payable thereon as prescribed under applicable statutory and/or regulatory provisions.

NOTES TO RISK FACTORS:

1. This is a public issue of Bonds by the Company aggregating to Rs. 4,000 million with an option to

retain over subscription upto Rs. 3,500 million, aggregating to Rs. 7,500 million

30

2. For details on interests of the Company‟s Directors, please refer to the sections titled “Our

Management” and ―Capital Structure‖ beginning on pages 106 and 49 of this Prospectus respectively.

3. The Company has entered into certain related party transactions as disclosed in the section “Auditor

Examination Report and Reformatted Statements” beginning on page 182 of this Prospectus.

4. Any clarification or information relating to the Issue shall be made available by the Lead Managers, the

Co-Lead Managers and our Company to investors at large and no selective or additional information

will be available for a section of investors in any manner whatsoever.

5. Investors may contact the Registrar to the Issue, the Compliance Officer, the Lead Managers or the Co-

Lead Managers for any complaints or queries pertaining to the Issue. In case of any specific queries on

allotment / refund, investors may contact the Registrar to the Issue.

6. In the event of oversubscription to the Issue or the Tranche Issue, allocation of Bonds will be as per the

―Basis of Allotment‖ set out on page 167 of this Prospectus.

7. Our Company‟s Equity Shares are listed on the BSE, MSE and CSE. It is a permitted security on NSE.

8. Some of our privately placed non-convertible debentures are listed on BSE.

9. Investors may note that this being a public issue of Bonds, as per the SEBI Debt Regulations, the Draft

Prospectus was not submitted to SEBI for comments. However, the Draft Prospectus was filed with the

BSE on July 26, 2011 for receipt of public comments till 5 p.m. of the 7th Working Day from the date

of filing.

10. For further information relating to certain significant legal proceedings that we are involved in, see

―Outstanding Litigation and Defaults‖ beginning on page 133 of this Prospectus.

31

THE ISSUE

The following is a summary of the terms of the Bonds to be issued under the terms of this Prospectus. This

section should be read in conjunction with, and is qualified in its entirety by, more detailed information in the

section entitled ―Issue Structure‖ and ―Terms of the Issue‖ on page 140 and 144 respectively.

COMMON TERMS FOR ALL SERIES OF THE BONDS

Issuer Manappuram Finance Limited

Issue Public issue of bonds in the nature of secured, redeemable, non-convertible


with an option to retain over subscription upto Rs. 3,500 million,

aggregating to Rs. 7,500 million. The Bonds shall be issued at par on the

terms contained in this Prospectus.

Minimum Application Five Bonds (Rs. 5,000) and in multiples of one Bond thereafter.

The minimum number of Bonds per Application Form will be calculated on

the basis of total number of Bonds applied for under each such Application

Form and not on the basis of number of Bonds applied for in each Series of

Bonds.

Rating “CARE AA-” from CARE

“BWR AA-” from Brickwork

Stock Exchange proposed for

listing

BSE

Issuance and Trading Compulsorily in dematerialized form

Market Lot / Trading Lot One Bond

Issue Schedule* The Issue shall be open from August 18, 2011 to September 5, 2011 with

an option to close earlier and/or extend upto a period as may be determined

by the Board.

Pay-in Date 3 (three) days from the date of receipt of application or the date of

realisation of the cheques/demand drafts, whichever is later.

Deemed Date of Allotment The Deemed Date of Allotment shall be the date as may be determined by

the Board of our Company and notified to the BSE. The actual allotment

may occur on a date other than the Deemed Date of Allotment.

* The Issue shall remain open for subscription during banking hours for the period indicated above, except that

the Issue may close on such earlier date as may be decided by the Board subject to necessary approvals. In the

event of an early closure, our Company shall ensure that notice of the same is provided to the prospective

investors through newspaper advertisements on the day of such earlier date of Issue closure.

SPECIFIC TERMS FOR EACH SERIES OF BONDS

Series I II

Frequency of Interest payment NA Semi-annually

Face Value per Bond Rs. 1,000 Rs. 1,000

Issue Price per Bond Rs. 1,000 Rs. 1,000

32

Series I II

Interest Rate**

1) For Bondholders in

Category I

NA 12% p.a.


Category II

NA 12% p.a.


Category III

NA 12.2% p.a.

Maturity Date 400 days from the Deemed Date of

Allotment

24 months from the Deemed Date of

Allotment

Maturity Amount per Bond Rs. 1,132.25*** for Bondholders in all

categories (Face Value of the Bonds

plus redemption premium)

Face Value of the Bonds plus any

interest that may have accrued

Yield to Maturity


Category I

12% p.a. 12.34% p.a.


Category II

12% p.a. 12.34% p.a.


Category III

12% p.a. 12.56% p.a.

* For various modes of interest payment, please refer to the section entitled “Terms of the Issue – Manner

and Mode of Payment” on page 151.

** As per the “Procedure for Application - Basis of Allotment” on page 167 of this Prospectus, in the event

Bonds are allocated to any Portion beyond the reservation for such category, the interest on such Bonds will

be as per rate specified for such applicants.

***Rounded to the nearest decimal place.

33

SELECTED FINANCIAL INFORMATION

The summary financial information set out below is derived from the Reformatted Statements and details can be

found in the section “Auditor Examination Report and Reformatted Statements” beginning on page 182 of this

Prospectus.

Summary Statement of Balance Sheet Data

(Rs. in millions, unless otherwise stated) As at

March 31,

2011

March 31,

2010

March 31,

2009

March 31,

2008

March 31,

2007

SOURCES OF FUNDS

Shareholders' funds

Share capital 833.75 340.39 212.56 618.00 150.00

Share warrants - - 29.98

Reserves and surplus 18,405.82 5,765.21 1,436.19 311.83 131.25

Loan funds

Secured loans 43,723.07 16,500.50 3,712.45 1,351.08 511.93

Unsecured loans 12,817.03 1,856.12 793.34 388.67 420.95

Deferred tax liability (net) - - - 0.39 0.96

75,779.67 24,462.22 6,184.52 2,669.97 1,215.09

APPLICATION OF FUNDS

Fixed assets

Gross block 1,651.82 669.80 325.70 196.10 129.98

Less : Accumulated depreciation /

amortisation 332.80 135.63 71.85 42.06 25.28

Net block 1,319.02 534.17 253.85 154.04 104.70

Capital work in progress including

advances

68.64 1.23 2.60 -

Intangible assets (net) 59.84 33.55 23.92 9.17 2.17

Deferred tax asset (net) 87.07 33.35 13.59 - -

Investments 403.20 1,406.70 10.77 29.28 29.01

Current Assets, Loans and Advances

Cash and bank balances 6,663.69 2,682.08 1,133.96 672.23 215.65

Other current assets 4,947.51 1,878.88 675.91 202.71 156.22

Loans and advances 64,141.68 18,907.13 4,486.04 1,853.06 959.11

75,752.88 23,468.09 6,295.91 2,728.00 1,330.98

Less : Current liabilities and provisions

Current liabilities 1,126.34 810.28 347.97 225.81 217.76

Provisions 784.64 204.59 68.15 24.71 34.01

1,910.98 1,014.87 416.12 250.52 251.77

Net current assets 73,841.90 22,453.22 5,879.79 2,477.48 1,079.21

75,779.67 24,462.22 6,184.52 2,669.97 1,215.09

34

Summary Statement of Profit and Loss account data

(Rs. in millions, unless otherwise stated)

Year ended

March 31,

2011

March 31,

2010

March 31,

2009

March 31,

2008

March 31,

2007

INCOME

Income from services 11,654.20 4,699.77 1,605.34 779.60 420.32

Other income 161.06 82.24 55.77 17.00 16.18

11,815.26 4,782.01 1,661.11 796.60 436.50

EXPENDITURE

Personnel expenses 1,605.00 536.40 283.95 116.38 60.61

Operating and other expenses 2,438.71 1,000.75 494.71 198.84 111.87

Depreciation / amortization 212.96 57.38 33.71 18.26 10.66

Financial expenses 3,319.63 1,369.23 385.91 143.51 89.85

7,576.30 2,963.76 1,198.28 476.99 272.99

Profit before tax 4,238.96 1,818.25 462.83 319.61 163.51

Less: Provision for tax

- Current tax 1,466.04 640.11 171.44 109.20 57.50

- Deferred tax (53.72) (19.07) (13.98) (0.57) (0.38)

- Fringe benefit tax - - 2.40 1.08 0.27

Profit after tax 2,826.64 1,197.21 302.97 209.90 106.12

Balance brought forward from previous

year

917.11 188.74 39.00 6.14 2.80

Profit after tax and appropriation for the

financial year 2008-09 - 88.12 - - -

Profit available for appropriation 3,743.75 1,474.07 341.97 216.04 108.92

Appropriations:

- Transfer to Statutory Reserve 565.33 239.45 60.60 42.00 22.00

- Transfer to General Reserve 282.67 119.72 31.00 100.00 50.00

- Transfer to Capital Redemption Reserve - 17.14 5.72 5.72 5.71

- Interim Dividend on Equity Shares - - 1.64 16.50 -

- Dividend on Redeemable Preference

Shares

- - 3.00 3.00 -

- Proposed Dividend on Equity Shares 500.25 165.89 43.14 5.50 19.80

- Tax on distributed profit 81.14 27.22 8.13 4.26 3.64

- Dividend on Convertible Preference

Shares - - - 0.06 1.63

Net profit carried forward to balance

sheet 2,314.36 904.65 188.74 39.00 6.14

35

Summary Statement of Cash Flow data

(Rs. in millions, unless otherwise stated)

Year ended

March 31,

2011

March 31,

2010

March

31, 2009

March

31, 2008

March

31,

2007

A. Cash flow from operating activities

Net profit before taxation, and extraordinary items 4,238.96 1,818.25 462.83 319.61 163.51

Adjustments for:

Depreciation / amortization 212.96 57.38 33.71 18.26 10.66

Loss on sale of fixed assets 2.28 4.34 2.32 0.84 -

Write back of diminution in value of investments - - - (1.27) -

(Profit) / Loss on sale of investments (3.96) 0.43 (0.42) - 1.27

Interest income (124.67) (66.26) (41.95) (12.34) (12.43)

Dividend income (3.62) (0.48) (6.26) - -

Interest expense 3,156.59 1,304.54 355.87 141.92 88.28

Provision for standard assets 158.47 - - - -

Bad debts written off and provision for bad debts 224.28 141.99 177.86 33.72 21.32

Operating profit before working capital changes 7,861.29 3,260.19 983.96 500.74 272.61

Movements in working capital :

Decrease / (Increase) in other current assets (3,026.12) (999.34) (473.21) (34.76) (117.96)

Decrease / (Increase) loans and advances (45,458.84) (14,218.30) (2,810.82) (923.95) (382.89)

Increase / (Decrease) in current liabilities and provisions 228.75 254.41 125.59 (11.34) 14.43

Cash generated from operations (40,394.92) (11,703.04) (2,174.48) (469.31) (213.81)

Direct taxes paid (net of refunds) (1,442.22) (653.38) (177.35) (101.44) (48.96)

Net cash from operating activities (41,837.14) (12,356.42) (2,351.83) (570.75) (262.77)

B. Cash flows from investing activities

Purchase of fixed assets (1,096.42) (297.24) (153.19) (75.43) (68.63)

Proceeds from sale of fixed assets 2.63 0.74 - - 2.03

Purchase of investments (5,770.00) (2,680.13) - - (12.34)

Sale / maturity of investments 6,777.46 1,284.24 18.92 1.00 2.40

Interest received 82.16 44.21 41.95 12.34 12.43

Dividends received 3.62 - 6.26 - 0.00

Net cash from investing activities (0.55) (1,648.18) (86.06) (62.09) (64.11)

C. Cash flows from financing activities

Proceeds from issuance of share capital 11,124.38 2,677.19 525.23 468.00 20.00

Share issue expenses adjusted against securities premium /

not written off or adjusted

(235.64) (76.19) (23.39) (11.72) -

Redemption of preference shares - (40.00) - - -

Increase / (decrease) in secured debentures including

application money (net)

2,410.52 1,801.77 166.60 258.62 75.05

Increase / (decrease) in bank borrowings (net) 24,388.01 9,640.91 2,266.20 583.55 (23.38)

Increase / (decrease) in borrowings from others (net) 450.00 200.00 - - (0.00)

Increase / (decrease) in subordinate bond (net) 613.62 477.88 370.47 114.69 99.70

Increase / (decrease) in deposits including inter-corporate

deposits (net)

(19.74) (29.95) (42.84) (146.32) 125.12

Proceeds from commercial paper 21,810.03 3,316.31 - - -

Repayment of commercial paper (12,452.89) (2,665.58) - - -

Increase / (decrease) in vehicle loans (net) 8.39 (0.39) 0.96 1.59 -

Proceeds from subordinated debt 1,000.00 - - - -

Interest paid (3,079.25) (1,227.99) (338.23) (148.12) (84.25)

Dividends paid (169.86) (54.85) (23.64) (24.42) (9.75)

Tax on dividend paid (28.27) (9.14) (1.74) (6.45) (1.37)

Net cash used in financing activities 45,819.30 14,009.97 2,899.62 1,089.42 201.12

Net increase in cash and cash equivalents (A + B + C) 3,981.61 5.37 461.73 456.58 (125.76)

Cash and cash equivalents at the beginning of the year 2,682.08 1,133.96 672.23 215.65 341.41

Add: Adjustment on account of amalgamation - 1,542.75 - - -

Cash and cash equivalents at the end of the year 6,663.69 2,682.08 1,133.96 672.23 215.65

Components of cash and cash equivalents

Cash and cheques on hand 1,188.01 644.98 182.62 166.71 66.07

With banks

36

Year ended

March 31,

2011

March 31,

2010

March

31, 2009

March

31, 2008

March

31,

2007

- on current account# 2,480.92 841.12 126.72 213.86 56.94

- on deposit account* 2,992.30 1,193.85 823.38 274.70 92.13

- on unpaid dividend accounts** 2.46 2.13 1.24 16.96 0.51

6,663.69 2,682.08 1,133.96 672.23 215.65

* Includes cash collateral deposits held with banks which

are not available for use by the Company. 2,119.41 1,182.57 702.86 270.76 55.55

# includes amounts in Escrow account towards closed

public deposits not available for use by the Company as

they represent corresponding deposit liabilities

11.44 - - - -

**These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities.

37

SUMMARY OF BUSINESS

We are one of the leading listed NBFCs lending money against the pledge of household, used, gold jewellery

(“Gold Loans”) in India, in terms of gold loan portfolio as of March 31, 2011, 2010 and 2009, and we are also

the fastest growing gold financing company in India in terms of gold loan portfolio for the fiscal year 2010. (See

IMaCS Industry Report (2010 Update). We provide these short-term personal and business Gold Loans

primarily to retail customers who require immediate availability of funds, but who do not have access to formal

credit on an immediate basis, or at all. Our Gold Loan portfolio as of March 31, 2011 comprised more than 2

million Gold Loan accounts with 1.19 million customers aggregating to Rs. 63,705.41 million of Gold Loans in

principal amount (net of assignments), which is 99.32% of our total loans and advances. As of March 31, 2011,

we disburse Gold Loans to our customers from a network of 2,064 branches in 20 states and union territories of

India, including 1,567 branches in the southern states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.

We are headquartered in the southern Indian state of Kerala. Our group commenced operations at Valapad,

Thrissur, Kerala and has decades of established history in the money lending business, mainly in small-scale

money lending against household, used, gold jewellery. Our Company has been in the Gold Loan financing

business since 1999. Historically, we have also provided other related services, including asset finance, money

transfer and foreign exchange, sales of gold coins and business and personal lending. We focus on rapid, on-the-

spot approval and disbursement of loans with minimal procedural formalities which our customers need to

complete in order to avail a loan from us. We have developed various Gold Loan schemes, which offer variable

terms in relation to the amount advanced per gram of gold, the interest rate and the amount of the loan, to meet

the different needs of various customers.

Our lending functions are supported by an in-house, custom developed information technology platform that

allows us to, record relevant customer details and approve and disburse the loan. Our proprietary technology

platform also handles internal audit, risk monitoring and management of the relevant loan and pledged gold

related information. Our employees undergo periodic training sessions related to evaluation of the worth and

authenticity of the gold that is pledged with us.

Our Gold Loan customers are individuals primarily from rural and semi-urban areas who require funds typically

for social obligations, emergencies, agriculture-related activities, small scale business operations or

consumption purposes. We strive to complete our Gold Loan transactions within short timelines. What

distinguishes us from banks is our focus on non-organized sections of society and our turn-around time. Loan

amounts advanced by us are generally in the range of Rs. 1,000.00 to Rs. 1.00 million per loan transaction and

typically remain outstanding approximately for an average tenor of 120 days. All of our Gold Loans have a

maximum of a 12 month term. In the financial year ended March 31, 2011, our gross Gold Loan portfolio yield

representing gross interest income on gross gold loans as a percentage of gross average outstanding of gold

loans, for the same period was, on average, 24.95% per annum.

We have had an investment grade rating from approved credit rating agencies since 1995. Our current rating is

P1+ from CRISIL (a subsidiary of Standard & Poors) for our short-term debt instruments, including commercial

paper, which is the highest rating for short-term debt instruments. CRISIL has also given an A+ rating for our

NCD issues. In addition, we have a LA+ rating from ICRA Limited. For the current Issue, we have a rating of

BWR AA- from Brickwork and a rating of CARE AA- from CARE Limited.

In the fiscal years 2011, 2010 and 2009, our total income was Rs. 11,815.26 million, Rs. 4,782.01 million and

Rs. 1,661.11 million respectively. Our profit after tax for the fiscal years 2011, 2010 and 2009 was Rs. 2,826.64

million, Rs. 1,197.21 million and Rs. 302.97 million respectively.

In the fiscal years 2011, 2010 and 2009, revenues from our Gold Loan business constituted 97.62%, 95.67% and

86.20%, respectively, of our total income. As of March 31, 2011, 2010 and 2009, our portfolio of Gold Loans

under management in principal amount (net of assignments) was Rs. 63,705.41 million, Rs. 18,512.26 million

and Rs. 4,000.63 million respectively, and approximately 52.97 tons, 22.45 tons and 13.34 tons, respectively, of

gold jewellery was held by us as security for our Gold Loans. Gross non-performing gold loan assets were

0.28%, 0.55% and 0.95% of our gross Gold Loan portfolio under management as of March 31, 2011, 2010 and

2009, respectively.

38

Merger of MAFIT with Our Company

Manappuram Finance Tamil Nadu Limited (“MAFIT”) an affiliate of our Company merged with the Company

with retrospective effect from April 1, 2008 and the merger was given effect to by the Company pursuant to an

Order of the High Courts in the three month period ended December 31, 2009. Our financial statements as of

and for the fiscal year ended 2010 and 2011 reflect the financial results of MAFIT for such fiscal year; however,

as the merger was approved in December 2009, our financial statements as of and for the fiscal year 2007, 2008

and 2009, do not include the financial results of MAFIT for such periods.

MAFIT was engaged in the same line of business as our Company, and as a result, we have benefited from

increased operations, cost savings and operational synergies.

As a result of the Merger, shareholders of MAFIT received 2.1 Equity Shares in our Company in exchange for

every issued and outstanding share of MAFIT. On January 11, 2010 we issued 11,677,382 equity shares of Rs.

10 each credited as fully paid to the shareholders of MAFIT.

Competitive Strengths

We believe that the following competitive strengths position us well for continued growth:

One of the leading gold financing companies in India with a long operating history and loyal customer base

We have been engaged in the business of Gold Loan financing since 1999. We have, over the years, been

successful in expanding our brand name, as well as our customer base to different geographical locations in

India. Our total number of customers grew from 0.22 million as of March 31, 2008 to 0.34 million as of March

31, 2009 and then to 0.55 million as of March 31, 2010 and to 1.19 million as of March 31, 2011. We attribute

our growth, in part, to our market penetration, particularly in areas less served by organized lending institutions

and the efficient and streamlined procedural formalities which our customers need to complete in order to

complete a loan transaction with us, which makes us a preferred mode of finance for our customers. We also

attribute our growth to customer loyalty. We believe that a large portion of our customer base returns to us when

they are in need of funds. Our average principal amount of loan per customer has increased from Rs. 35,734 for

the fiscal year 2009 to Rs. 63,106 for the fiscal year 2011.

Flexible loan schemes, high quality customer service and short response time

We believe the growth in our Gold Loan portfolio is partly due to the flexible Gold Loan schemes that we offer

to our customers and high quality customer service. Depending on their individual needs, we are able to

customize loans for our customers in terms of the loan amount, advance rate per gram of gold and interest rate.

We also allow customers to prepay their loans with us without penalty, and we do not have a minimum loan

size.

We provide our customers with a transparent process and a secure environment in which to transact their

business, and we believe that our staff is professional and attentive at all our branch locations. Each of our

branches is staffed with customer representatives who possess local knowledge and understanding of customers‟

needs.

In addition, we strive to complete our Gold Loan transactions within a short timeframe, as this forms an

important component in our competitive edge over other lenders. We are able to process Gold Loans within a

short timeframe as a result of our efficient technology support, skilled workforce and clear policies on internal

processes. Although disbursement time may vary depending on the loan size and the number of items pledged,

we can generally disburse an average loan of Rs. 30,000 within a few minutes from the time the gold is tendered

to the appraiser. Furthermore, since our loans are all over-collateralized by gold jewellery, there are minimal

documentary and credit assessment requirements, which also shortens our turnaround time and increases the

ease with which our customers can do business with us.

Rapid expansion of our branch network

We have rapidly expanded our branch network in the past, which we believe has provided us with an advantage

over our competitors. Our total number of branches grew from 644 branches in 14 states and union territories as

of March 31, 2009 to 1,005 branches in 15 states and union territories as of March 31, 2010 and to 2,064

39

branches in 20 states and union territories as of March 31, 2011 and then to 2,192 branches in 22 states and

union territories as of May 31, 2011. In order to manage our expanding operations as well as our increased

customer base, we have developed a proprietary technology framework that provides an integrated, robust

platform to run our operations and scale our branch network. In addition, on a per branch basis, increase in

principal amount of loans and revenues is generally more than the increase in proportionate operating costs year

on year, providing us with economies of scale as branches mature. We intend to continue to develop our

technology framework in order to equip ourselves for further growth of our business.

Strong capital raising ability and high credit rating

We have a track record of successfully raising capital from a variety of sources. We have received private equity

financing from affiliates of Sequoia Capital, India Equity Partners, Ashmore Alchemy and Granite Hill. As of

May 31, 2011, these private equity investors (except for Sequoia Capital and Granite Hill, which sold their

investment) hold an aggregate of 14.23% of our outstanding Equity Shares.

In addition, as of March 31, 2011, we have borrowing relationships with more than 38 banks. As of March 31,

2011, March 31, 2010 and March 31, 2009, our secured loans from banks, financial institutions and NBFCs

were Rs. 38,696.60 million, Rs. 13,858.59 million and Rs. 2,978.69 million respectively. Our bank borrowings

and private equity financings have aided us in achieving growth in our business.

We also raise funds by assigning receivables from Gold Loan advances to banks and other institutions. As at

March 31, 2011, March 31, 2010 and March 31, 2009, the assigned amounts outstanding were Rs. 11,182.83

million, Rs. 7,077.02 million and Rs. 5,381.42 million.





BWR AA- rating from Brickwork and a rating of CARE AA- from CARE Limited.

The rating reflects our well established presence in the Gold Loan business, our track record of maintaining

good risk-adjusted returns while expanding our scale of operations and our moderate capitalization levels in

relation to our proposed expansion plans. Our liquidity position is comfortable with a well matched asset

liability management profile on account of the relatively shorter tenure of the advance portfolio and availability

of funding lines. The shorter tenure of advances aided by our P1+ rating also helps us to raise money by way of

short term borrowings and by way of issue of commercial paper at attractive rates.

Robust support system and IT infrastructure, including appraisal, internal audit and inventory control and

safety systems

Our IT infrastructure has been developed in house and links our network of branches across the country with the

head office. We migrated to a .NET platform in December 2008, and have reaped benefits in the form of

minimizing errors, faster transmission of data and risk monitoring. Our management has also benefited from

availability of real time information. We upload data at each branch to facilitate online information access for

faster decision making. In addition, our technology platform has helped us develop an effective risk based

internal control system and internal audit. We also have a disaster recovery system located outside of Kerala

which replicates data on a real time basis. Our centralized technology aids us in offsite surveillance of all our

branches. Our technology also helps reduce the time it takes to complete Gold Loan transactions.

Our ability to accurately appraise the quality of the gold jewellery to be pledged in a short period of time is

critical to our business. We do not engage third parties to assess the gold jewellery, but instead employ in-house

staff for this purpose, which leads to better customer service. Assessing gold jewellery quickly and accurately is

a specialized skill that involves an assessment for gold content and quality manually without damaging the

jewellery. We use tested methods of appraisal of gold, such as the nitric acid test, the touchstone test, checking

for hallmarks and the sound test, and an independent appraisal is carried out by different sets of officials before

disbursement is made depending on the ticket size. In addition, branch heads are required to independently

verify loans that are above Rs. 20,000. Since we generally lend only against household, used jewellery and

avoid lending against bullion or lending to jewellers and goldsmiths, the risk of use of low quality gold or

spurious jewellery as security for our Gold Loans is limited.

40

In addition, the gold that is pledged for each loan is typically as much as the worth of gold that is owned by an

average Indian household, which prevents our exposure to larger-sized loans where the chances of default and

subsequent losses are increased. Only a small portion of the loans advanced by us are for relatively larger

amounts, and in such cases we follow a more detailed process for evaluation of such loans. For larger loans, the

head office will verify the profile of the customer and approve limits for loan sanctions.

Once the Gold Loan is made, we have a system in place for continuous monitoring of the pledged gold by

internal audit and risk management teams. In accordance with our internal audit policy, all of our branches are

subject to inspection every 90 days, a branch audit every 45 days and a spot audit can be conducted at any

branch at any time. At the time of conducting an inspection, a quality check on the inventory is also carried out.

Our inventory control procedures involve physical security checks and checks on the quality of pledged gold. In

addition, the branch head and the assistant branch head are the joint custodians of the gold stored in strong

rooms or vaults, which means that the strong rooms or vaults can only be opened if two keys are inserted at the

same time. The safes and strong rooms are reinforced concrete cement structures built per industry standards

and practices.

Experienced management team and skilled personnel

Our management team has over 35 years of experience in the banking and Gold Loan business. Our senior and

operating level management teams have extensive experience in the Gold Loan business and we believe that

their considerable knowledge of and experience in the industry enhances our ability to operate effectively. Our

staff, including professionals, covers a variety of disciplines, including gold appraisal, internal audit,

technology, accounting, marketing and sales. Some of our key management personnel have been employed by

us since our inception. Our management has experience in identifying market trends and suitable locations for

expanding and setting up branches to suit our target customers. Our workforce also consists of appraisers who

are skilled in the evaluation of the worth and authenticity of the gold that is pledged with us and we conduct

periodic training programs to augment their knowledge and efficiency in performing this task.

Strategy

Our business strategy is designed to capitalize on our competitive strengths and enhance our leadership position

in the Gold Loan industry. Key elements of our strategy include:

Further grow our Gold Loan business

Historically, Indians have been one of the largest consumers of gold due to the strong preference for gold

jewellery among Indian households and its widespread use as a savings instrument. A large proportion of gold

stock is held by rural India, as gold is viewed as a secure, liquid and easily accessible savings instrument, apart

from its ornamental status. (Source: IMaCS Industry Report 2009)

As a result, the market for Gold Loan financing in India is largely untapped and offers good potential for further

growth. The organized Gold Loan market is approximately 1.2% of the value of total gold stock in India

(Source: IMaCS Industry Report (2010 Update)).

We intend to increase our presence in under-served rural and semi-urban markets, where a large portion of the

population has limited access to credit either because they do not meet the eligibility requirements of banks or

financial institutions, or because credit is not available in a timely manner at reasonable rates of interest, or at

all. A typical Gold Loan customer expects high loan-to-value ratios, rapid and accurate appraisals, easy access,

low levels of documentation, quick approval and disbursement and safekeeping of their pledged gold. We

believe we meet these criteria, and thus our focus is to expand our Gold Loan business.

Continue to expand branch network

We intend to continue to grow our Gold Loan portfolio by expanding our network through the addition of new

branches. We have added 1,059 branches in the last fiscal year and 128 branches between March 31, 2011 and

May 31, 2011. We propose to increase our branch strength by at least 500 additional branches in the fiscal year

2012, including in states where we do not currently have any operations, subject to certain conditions being

satisfied. We carefully assess the market, location and proximity to target customers when selecting branch sites

to ensure that our branches are set up close to our target customers. We believe our customers appreciate this

convenience and it enables us to reach new customers. In addition, on a per branch basis, our increase in

41


on year, providing us with economies of scale as branches mature.

Continue to build the Manappuram brand

Our brand is key to the growth of our business. We believe that we have built a recognizable brand in the rural

and semi-urban markets of India, particularly in the southern states of Kerala, Tamil Nadu, Karnataka and

Andhra Pradesh. We intend to continue to build our brand by using celebrities in our advertising campaigns and

undertaking other marketing efforts on radio, television and outdoor advertising.

Strengthen our technology platform and continue to develop robust risk management procedures and related

systems

Since we plan to expand our geographic reach as well as our scale of operations, we intend to further develop

and strengthen our technology platform to support our growth and improve the quality of our services. We are

focused on improving our comprehensive knowledge base and customer profile and support systems, which in

turn will assist us in the expansion of our business. We also propose to strengthen the technology in our

jewellery appraisal process. We believe that improvements in technology will also reduce our operational and

processing time and thereby improve our operating efficiencies.

In addition, we view risk management as crucial to the expansion of our Gold Loan business. We therefore

continually focus on improving our integrated risk management framework with processes for identifying,

measuring, monitoring, reporting and mitigating key risks, including credit risk, appraisal risk, custodial risk,

market risk and operational risk. We propose to make significant investments in personnel, technology and

infrastructure in order to improve process efficiencies and mitigate business risks. We have recruited individuals

who have significant risk management experience and plan to retain this focus in hiring additional risk

management personnel. Going forward, we plan to continue to adapt our risk management procedures to take

account of trends we have identified, including our loan loss experience. We believe that prudent risk

management policies and development of tailored credit procedures will allow us to expand our Gold Loan

financing business without experiencing significant increases in non-performing assets.

Attract and retain high quality talent

The intellectual capital of our management and finance teams, as well as other professionals in our business, is

critical to our success, and we accordingly intend to continue to focus on attracting and retaining high quality

talent. In order to achieve this, we will continue to capitalize on our strengths in the area of recruiting. In

particular, we plan to consolidate our position as an employer of choice within the NBFC sector. We currently

conduct training programs periodically across our regional training centers. We have also developed and will

continue to develop targeted compensation schemes designed to retain our key management personnel and

professionals, such as offering performance-linked salaries.

New line of business

Pursuant to the approval of our shareholders in the EGM on May 31, 2011, we intend to commence a new line

of business in travel and tourism. Our Company holds an Authorised Dealer Category II license from the RBI

for its FOREX operations. To augment our Company‟s income from such operations, it was thought desirable to

venture into this new line of business. Our Company proposes to act as a travel agent, tour operator, transport

agent and contractor. Further, our Company proposes to arrange and operate tours and to act as representatives

of airlines, railways and arranging road, air, water ticket booking.

42

GENERAL INFORMATION


We were incorporated as a public limited company on July 15, 1992 as “Manappuram General Finance and

Leasing Limited”. Our name was subsequently changed to “Manappuram Finance Limited” on June 22, 2011.

Registered Office

The Company has its registered office at V/104 “Manappuram House”, Valapad P.O., Thrissur 680 567, Kerala.

Registration

Corporate Identification Number: L65910KL1992PLC006623 issued by the Registrar of Companies, Kerala.

Certificate of incorporation No. 09-06623 of 1992 dated July 15, 1992. Fresh Certificate of Incorporation dated

June 22, 2011 for change of name to “Manappuram Finance Limited”.

The Company was issued a certificate for commencement of business on July 31, 1992 by the Registrar of

Companies, Kerala. We received a certificate of registration no. 16.00029 dated May 25, 1998 issued by the

RBI allowing our Company to commence/ carry on the business of a deposit accepting NBFC, under section 45-

IA of the RBI Act. Subsequently our registration was changed to that of a non-deposit accepting NBFC vide

certificate of registration no. B-16.00029 dated March 22, 2011.

Compliance Officer

Mr. C. Radhakrishnan,

Company Secretary

V/104 “Manappuram House”,

Valapad P.O.,

Thrissur 680 567, Kerala

Tel: (91 487) 305 0000

Fax: (91 487) 239 9298

Email: [email protected]

Investors may contact the Registrar to the Issue or the Compliance Officer in case of any pre-issue or post Issue

related issues such as non-receipt of letters of allotment demat credit or refund orders.

Lead Managers

Morgan Stanley India Company Private Limited

18F/19F, Tower 2

One Indiabulls Centre

841, Senapati Bapat Marg,

Mumbai – 400013

Tel: (91 22) 6118 1000

Fax: (91 22) 6618 1040

E-mail: [email protected]

Investor Grievance Email: [email protected]

Website: www.morganstanley.com/indiaofferdocuments

Compliance officer: Mr. Anil Shenoy

Contact Person: Mr. Saurabh Kumar

SEBI Registration No.: INM000011203

A.K. Capital services limited

30-39, Free Press House,

Free Press Journal Marg, 215,

Nariman Point, Mumbai 400 021

Tel: (91 22) 6754 6500 / 6634

Fax: (91 22) 6610 0594

43



Website: www.akcapindia.com

Compliance officer: Mr. Vikas Agarwal

Contact Person: Mr. Hitesh Shah


Axis Bank Limited

Corporate Office,

Level 5/ E Block,

Bombay Dyeing Mills Compound,

Pandurang Bhudkar Marg, Worli,

Mumbai - 400025

Tel: (91 22) 2425 4556

Fax: (91 22) 4325 4700



Website: www.axisbank.com

Compliance officer: Mr. Advait Majmudar

Contact Person: Mr. Dinkar Rai


ICICI Securities Limited

ICICI Centre, H.T. Parekh Marg, Churchgate,

Mumbai - 400 020. Maharashtra, India.

Tel.: (91 22) 2288 2460

Fax: (91 22) 2282 6580



Website: www.icicisecurities.com

Compliance officer: Mr. Subir Saha

Contact Person: Mr. Sumit Agarwal

SEBI Registration Number: INM000011179

Co-Lead Managers:

RR Investors Capital Services (P) Limited

133A, Mittal Tower, A Wing,

Nariman Point,

Mumbai-400 021

Tel: (91 22) 2288 6627 / 28

Fax: (91 22) 2285 1925


Investor Grievance Email:[email protected]

Website: www.rrfcl.com

Contact Person: Mr. Brahmdutta Singh

Compliance Officer: Mr. Sandeep Mahajan

SEBI Registration Number: INM000007508

Karvy Investor Services Limited

Regent Chambers, 2nd floor

Nariman Point, Mumbai – 400021

Tel : (91 22) 2289 5000

Fax: (91 22) 3020 4040



Website: www.karvy.com

Contact Person: Mr. Omkar Barve

Compliance Officer: Mr. V. Madhusudan Rao

SEBI Registration No: INM000008365


44

SMC Capitals Limited

3rd Floor, A-Wing, Laxmi Towers,

Bandra Kurla Complex,

Bandra (East), Mumbai 400 051

Tel: (91 22) 6138 3838

Fax: (91 22) 6138 3899



Website: www.smccapitals.com

Contact Person: Sanjeev Barnwal

Compliance Officer: Sanjeev Barnwal

SEBI Registration No: MB/INM000011427

Debenture Trustee

IL&FS Trust Company Limited

The IL& FS Financial Centre, Plot C-22,G –block


Bandra East Mumbai 400 051

Tel: (91 22) 2659 3097

Fax: (91 22) 2653 3297


Contact Person: Ms. Labanya Mukherjee

SEBI Reg. No. IND000000452

All the rights and remedies of the Bondholders under this Issue shall vest in and shall be exercised by the

appointed Debenture Trustee for this Issue without having it referred to the Bondholders, subject to the terms of

the Debenture Trust Deed. All investors under this Issue are deemed to have irrevocably given their authority

and consent to the Debenture Trustee so appointed by our Company for this Issue to act as their trustee and for

doing such acts and signing such documents to carry out their duty in such capacity. Any payment by our

Company to the Bondholders / Debenture Trustee, as the case may be, shall, from the time of making such

payment, completely and irrevocably discharge our Company pro tanto from any liability to the Bondholders.

For details on the terms of the Debenture Trust Deed, please refer to the section entitled ―Terms of the Issue‖ on

page 144 of this Prospectus.

Registrar to the Issue

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound

L.B.S. Marg,

Bhandup (West)

Mumbai 400 078

Tel: (91 22) 2596 0320

Fax: (91 22) 2596 0329



Website: www.linkintime.co.in

Contact Person: Mr. Sanjog Sud

SEBI Registration No.: INR000004058

Statutory Auditor

S. R. Batliboi & Associates, Chartered Accountants

2nd Floor, TPL House

Cenotaph Road, Teynampet

Chennai 600 018

Tel: (91 44) 2431 1440

Fax: (91 44) 2431 1450

45

Credit Rating Agency

Credit Analysis & Research Limited

4th Godrej Coliseum,

Somaiya Hospital Road,

Off Eastern Express Highway

Sion (East),

Mumbai – 400 022

Tel: (91 22) 6754 3456

Fax: (91 22) 6754 3457

Brickwork Ratings India Pvt. Ltd.

3rd

Floor, Raj Alkaa Park,

29/3 & 32/2. Kalena Agrahara,

Banerghatta Road,

Bangalore – 569 076

Tel: (91 80) 4040 9940

Fax: (91 80) 4040 9941

Legal Advisor to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & Co.

Peninsula Chambers, Peninsula Corporate Park

Ganpatrao Kadam Marg, Lower Parel

Mumbai 400 013

Tel: (91 22) 2496 4455

Fax: (91 22) 2496 3666

Bankers to the Issue

Axis Bank Limited

IInd Floor, City Centre

Round West,

Thrissur-680 001

Tel: (91 487) 2338 5820

Fax: (91 487) 2338 8550


Contact Person: Pradeep Kumar C.K.

SEBI Registration Number: INB100000017

Dhanlaxmi Bank Limited

Janmabhoomi Bhavan,

Janmabhoomi Marg,

Mumbai – 400 001

Tel: (91 22) 2287 2535

Fax: (91 22) 2287 1637


Website: www. dhanbank.com

Contact Person: Venkataraghavan T.A.


ICICI Bank Limited

Capital Market Division,

Rajabahadur Mansion,

30, Mumbai Samachar Marg,

Fort, Mumbai 400 001

Tel: (91 22) 6631 0322

Fax: (91 22) 6631 0350


Website: www.icicibank.com

Contact Person: Anil Gadoo


Yes Bank Limited

3rd Floor, Ion House,

Dr. E. Moses Road,

Mahalaxmi, Mumbai 400 011

Tel: (91 22) 6622 9031

Fax: (91 22) 2497 4875


Website: www.yesbank.in

Contact Person: Mahesh Shirali


Bankers to our Company

Axis Bank

2nd

Floor, City Centre

Roundwest,

Thrissur – 680 001,

Kerala

Tel: (91 487) 233 5820

Fax: (91 487) 233 8550

Federal Bank Limited

Sakthan Thampuran Nagar,

Thrissur – 680 001,

Kerala

Tel: (91 487) 242 3115

ING Vysya Bank Limited

KR Road, 757/11,

13th

Cross. Jayanagar

BR Bangalore – 560 082 Karnataka

Tel: (91 80) 26712674

Punjab National Bank

Palace Road,

Thrissur – 680 020

Kerala

IDBI Bank Limited

Panampilly Nagar,

Post Bag No, 4253

Kochi – 682 036,

Development Credit Bank

Limited 128/1 Prestige Meridian Annexe,

MG Road,

46

Tel: (91 487) 233 0127

Fax: (91 487) 233 8550

Kerala

Tel: (91 484) 2423115

Bangalore – 560 001,

Karnataka

Tel: (91 80) 6631 0516

Fax: (91 80) 2555 0115

ICICI Bank

2nd Floor, Adonai Tower

SA Road, Kadavantra

Kochi – 682 016,

Kerala

Tel: (91 484) 401 1360

Yes Bank Limited

PMO, Nehru Centre,

Dr. A.B. Road,

Worli, Mumbai - 400018

Tel: (91 22) 6620 9068

Fax: (91 22) 6669 9177

Kotak Mahindra Bank Limited

Zone II, 4th

Floor, Kotak Infiniti,

Building No. 21, Infinity Park

Gen. A.K. Vaidya Marg,

Malad (East), Mumbai - 400097

Tel: (91 22) 6605 4139

Indusind Bank Limited

652-656, Tristar Towers,

Avinashi Road,

Plot No. 24, Phase 2

Coimbatore - 641037

Tel: (91422)221 3551

Fax: (91 422) 221 2770

Bank of India

Subhashchanddra Bose Road,

Jawahar Nagar(E), Ponnurunni,

Vyttila P.O., Kochi – 682 019

Tel: (91 484) 230 2364

Catholic Syrian Bank

Round South

Thrissur, Kerala

Tel: (91 487) 242 5890

Jammu & Kashmir Bank

787, Karim Mansion,

Mount Road, Chennai

Tamil Nadu – 600 002

Tel: (91 44) 2852 7631

UCO Bank

1st Floor, Mafatlal Centre,

Nariman Point,

Mumbai – 400 021

Tel: (91 22) 4054 9191

The South Indian Bank Limited

Thrissur, Kerala

Tel: (91 487) 242 4215

HDFC Bank Limited

SL Plaza, First Floor,

Palarivattom, Kochi

Tel: (91 484) 443 3206

Fax: (91 484) 443 3205

Karnataka Bank

351 Avvai Shanmugam (Lloyds)

Road,

Gopalapuram,

Chennai – 600 086

Tel: (91 44) 2345 3229

The Dhanalaxmi Bank Limited

Thrissur, Kerala

Tel: (91 487) 232 1618

Lakshmi Vilas Bank

Thrissur, Kerala

Tel: (91 487) 233 1053

Syndicate Bank

Palace Road,

Thrissur, Kerala – 680 020

Tel: (91 487) 233 1130

Fax: (91 487) 233 1422

Karur Vysya Bank

First Floor, Amritha Towers,

KPCC Junction, M.G. Road,

Ernakulam - 682011

Tel: (91 484) 236 6283

Fax: (91 484) 238 2291

State Bank of India

1st Floor, Vankarath Towers,

By-pass Junction, Padivattom,

Kochi – 682024, Kerala

Tel: (91 484) 234 0100

Fax: (91 484) 234 1100

Corporation Bank Limited

MMKS Trust Building,

Star Junction,

Mattanchery – 682002, Kerala

Tel: (91 484) 222 4576

Central Bank of India

Metro Palace1st Floor,


Tel: (91 484) 239 8121

Fax: (91 484) 239 8132

Union Bank of India

Shakthan Arcade,

Thrissur – 680 001, Kerala

Tel: (91 487) 242 0330

Fax: (91 484) 242 1590

Ratnakar Bank

One Indiabulls Centre,

Tower 2, 6th

Floor,

841,Senapati Bapat Marg,

Mumbai 400 013,

Tel: (91 80) 2550 4323

Central Bank of India

Metro Palace1st Floor,


Tel: (91 484) 239 8121

Fax: (91 484) 239 8132

Indian Overseas Bank

Thrissur, Kerala

Tel: (91 487) 233 1295

DBS Bank Limited

Salarpuria Windsor, No. 3

Ulsoor Road,

Bangalore – 560 042,

Tel: (91 80) 6632 8828

Barclays Bank

20/21 Kamrajar Salai,

Kanchipuram – 631 501

Tel: (91 44) 6720 2000

47

Andhra Bank

No. 17 Mill Road,

Coimbatore – 641 001

Tel: (91 422) 230 0504

Dena Bank

C-10, G Block,

Bandra Kurla Complex

Bandra (East),

Mumbai – 400 051,

Tel: (91 22) 2654 5003

State Bank of Bikaner & Jaipur

Sir P.M. Road,

United India Life Building,

Fort, Mumbai – 400 023

Tel: (91 22) 2266 3189

State Bank of Travancore

P.b. No. 3689, Malankara Centre,

Shenoy‟s Junction,

M.G. Road,

Ernakulam – 682 035, Kerala

Tel: (91 44) 641 5211

Lead Brokers to the Issue

Morgan Stanley India Financial

Services Private Limited

18F/19F, Tower 2,

One India Bulls Centre,

841, Senapati Bapat Marg,

Mumbai 400 013

Tel: (91 22) 6118 1000

Fax: (91 22) 6118 1034

Email: pwmindia.

[email protected]

Contact Person: Mr. Rahul Jaggia

SEBI Registration Number:

INB011301529

A.K. Stockmart Private Limited,

30-39 Free Press House. 3rd Floor,

Free Press Journal Marg, 215,

Nariman Point,

Mumbai - 400021

Tel: (91 22) 6754 6500

Fax: (91 22) 6754 4666


Contact Person: Ankit Gupta


INB231269532

ICICI Securities Limited,

ICICI Centre,

H.T. Parekh Marg,

Churchgate,

Mumbai 400020

Tel: (91 22) 2288 2460

Fax: (91 22) 2282 6580

Email: project.

[email protected]

Contact Person: Mites Shah

SEBI Registration

Number:INB011286854

RR Equity Brokers Private

Limited

47, MM Road,

Rani Jhansi Marg, Jhandewalan,

New Delhi - 110055

Tel: (91 11) 2363 6363

Fax: (91 11) 2363 6743


Contact Person: Manish Agrawal


INB011219632

Karvy Stock Broking Limited

“Karvy House”,

46, Avenue 4, Street No. 1,

Banjara Hills,

Hyderabad – 500034

Tel: (91 40) 2331 2454

Fax: (91 40) 6662 1474


Contact Person: Ramapriyan P.B.


INB010770130

SMC Global Securities Ltd.

11/6B, Shanti Chambers,

Pusa Road,

New Delhi, 110005,

Tel: (91 11) 3011 1000

Fax: (91 11) 2575 4365

Email:

[email protected]

Contact Person: Rakesh Gupta


INB011343937

Bajaj Capital Investor Services

Limited

5th Floor, Bajaj House,

97 Nehru Place,

New Delhi - 110019

Tel: (91 11) 6616 1111

Fax: (91 11) 6660 8888


Contact Person: Surajit Misra


INB231269334

Edelweiss Broking Limited

Edelweiss House,

Off C.S.T. Road,

Kalina, Mumbai-400 098

Tel: (91 22) 6747 1340

Fax: (91 22) 6747 1347

Email:

[email protected]

Contact Person: Nirmal Rewaria


INB011311637

Enam Securities Private Limited

Khatau Building, 2nd Floor,

44 Bank Street, Fort,

Mumbai – 400001

Tel: (91 22) 2267 7901

Fax: (91 22) 2266 5613


Contact Person: Ajay Sheth


INB011287852

Geojit BNP Paribas Financial

Services Limited

5th Floor, Finance Towers,

Kaloor, Kochi,

Pin 682 017

HDFC Securities Ltd.

Office Floor 8, “I Think” Building,

Jolly Board Campus Opposite

Crompton Greaves Factory,

Kanjurmarg (East)

India Infoline Limited

8th Floor, B-Wing, Kamala Hills

Compound,

Off Senapati Bapat Marg,

Lower Parel,

48

Tel: (91 484) 240 5501

Fax: (91 484) 240 5618


Contact Person: K. Venkitesh


INB011337326

Mumbai – 400042

Tel: (91 22) 3075 3442

Fax: (91 22) 3075 3435


Contact Person: Sunil Raula


INB011109437

Mumbai, 400013

Tel: (91 22) 4646 4753

Fax: (91 22) 2493 1073

Email:

[email protected]

Contact Person: Abhinay Chikne


INB011097533

Integrated Securities Limited

15, 1st Floor, Modern House,

Dr. V.B. Gandhi Marg, Fort,

Mumbai - 400023

Tel: (91 22) 4066 1800

Fax: (91 22) 2287 4676


Contact Person: V. Krishnan


INB231271835

JM Financial Services Private

Limited

141 Maker Chamber III, 13th

Floor,

Nariman Point, Mumbai 400 021

Tel: (91 22) 3021 3550

Fax: (91 22) 2266 5902


Contact Person: Rohit Singh


INB011054831

Kotak Securities Ltd.

3rd Floor, Nirlon House,

Dr. Annie Besant Road, Worli,

Mumbai - 400025

Tel: (91 22) 6652 9191

Fax: (91 22) 6661 7041


Contact Person: Sanjeeb Kumar

Das

SEBI Registration

Number:010808153

SPA Securities Limited

101-A, 10th Floor,

Mittal Court, Nariman Point,

Mumbai – 400021

Tel: (91 22) 2280 1240

Fax: (91 22) 2657 3608

Email:

[email protected]

Contact Person: Rajesh Gandhi


INB011178234

Credit Rating and Rationale

The Bonds proposed to be issued by our Company have been rated by CARE and Brickwork. CARE has vide its

letter dated June 21, 2011 assigned a rating of “CARE AA-”. Brickwork has vide its letter no.

BWR/BLR/RA/2011-2012/0075 dated July 1, 2011 assigned a rating of “BWR AA-” to the Bonds in the Issue.

For details in relation to the rationale for the credit rating, please refer to the Annexure to this Prospectus.

Minimum Subscription

If our Company does not receive the minimum subscription of 75% of the base issue amount of the Issue, being

Rs. 3,000 million, on or before the closure of the Issue, the entire subscription amount shall be refunded to the

applicants within 15 days from the date of closure of the Issue. If there is a delay in the refund of the

subscription amount by more than eight days after our Company becomes liable to pay the same, our Company

will pay interest for the period of delay, at rates prescribed under sub-section (2) and (2A) of Section 73 of the

Companies Act.

Issue Programme

The Issue shall remain open for subscription during the banking hours for the period indicated below, except

that the Issue may close on such earlier date as may be decided by our Company. In the event of an early closure

of the Issue, our Company shall ensure that notice of the same is provided to the prospective investors through

newspaper advertisements on the day of such earlier date of Issue closure.

ISSUE OPENS ON August 18, 2011 ISSUE CLOSES ON September 5, 2011

49

CAPITAL STRUCTURE

Details of share capital

The share capital of our Company as at the date of this Prospectus is set forth below:

Amount (in Rs. unless otherwise stated)

Authorised share capital

980,000,000 Equity Shares of Rs. 2 each 1,960,000,000

400,000 preference shares of Rs. 100 each 40,000,000

Issued, subscribed and paid up share capital

833,748,376 Equity Shares of Rs. 2 each, fully paid up 1,667,496,752

Securities premium account** 13,590.57 (in million)

** Post adjustments on account of Merger with MAFIT, utilisation towards Bonus issues and share issue

expenses.

Notes to Capital Structure

1. Equity Share capital history of our Company as of August 4, 2011:

Date of

Allotment

No. of equity

shares

Face

Value

(Rs.)

Issue

price per

equity

share

(Rs.)

Nature of

consideration

Type of

Allotment

Cumulative

no of equity

shares

Cumulative

paid-up

equity share

capital

Equity share

equity

premium

(Rs.)

Gross

Cumulative

share premium

(Rs.)

June 30, 1992 1,250,000 10 10.00 Cash Promoter

contribution

1,250,000 12,500,000 Nil -

August 21,

1995

1,750,000 10 10.00 Cash Public issue 3,000,000 30,000,000 Nil -

August 1, 2003 1,500,000 10 10.00 Cash Rights issue 4,500,000 45,000,000 Nil -

July 30, 2005 1,000,000 10 25.00 Cash Preferential

issue

5,500,000 55,000,000 15 15,000,000

January 15,

2007

5,500,000 10 10.00 Nil Bonus issue 11,000,000 110,000,000 Nil 15,000,000

June 21, 2008 3,283,582 10 142.53 Cash Conversion of

preference

share

14,283,582 142,835,820 132.53 450,173,122

March 16, 2009 2,972,246 10 166.62 Cash Conversion of

preference

share

17,255,828 172,558,280 156.62 915,686,291

January 11,

2010

11,677,382 10 10.00 Nil Allotment on

merger

28,933,210 289,332,100 Nil 9156862,91

March 4, 2010 3,540,420 10 691.00 Cash Qualified

institutional

placement

32,473,630 324,736,300 681.00 3,326,712,311

March 18, 2010 1,564,892 10 166.62 Cash Warrant

conversion

34,038,522 340,385,220 156.62 3,571,805,696

April 22, 2010 170,192,610 2 2.00 Nil Split of shares 170,192,610 340,385,220 Nil 3,571,805,696

May 11, 2010 170,192,610 2 2.00 Nil Bonus issue 340,385,220 680,770,440 Nil 3,571,805,696

September 9,

2010

13,210,039 2 75.69 Cash Preferential

issue

353,595,259 707,190,518 73.70 4,545,385,570

September 28,

2010

3,471,000 2 33.12 Cash Employee

stock option

357,066,259 714,132,518 31.12 4,653,403,090

November 18,

2010

59,523,809 2 168.00 Cash Qualified

institutional

placement

416,590,068 833,180,136 166.00 14,534,355,384

March 19, 2011 284,120 2 33.12 Cash Employee

stock option

416,874,188 833,748,376 31.12 14,543,197,199

June 11, 2011 41,6874188 2 - Nil Bonus 833,748,376 1,667,496,752 Nil 14,543,197,199

This, being an issue of Bonds, will not impact the equity share capital of our Company.

50

2. Shareholding pattern of our Company as on August 4, 2011:

S.

No.

Category of

shareholder

No. of

Shareholders

Total no. of

Equity Shares

No. of

Equity

Shares held

in

demateriali

sed form

Total shareholding as

a percentage of total

number of shares

Equity Shares pledged or

otherwise encumbered

% of

Equity

Shares

(A+B)

% of

Equity

Shares

(A+B+C

)

Number of

Equity

Shares

% No. of

Equity

Shares

(A) Promoter and Promoter Group

(1) Indian

(a) Individuals/ Hindu

Undivided Family

7 303992774 303992774 36.46 36.46 63152220 20.77

(b) Central Government/

State Government(s)

0 0 0 0.00 0.00 Nil Nil

(c) Bodies Corporate 0 0 0 0.00 0.00 Nil Nil

(d) Financial Institutions/

Banks

0 0 0 0.00 0.00 Nil Nil

(e) Any Others(Specify) 0 0 0 0.00 0.00 Nil Nil

Sub-Total (A)(1) 7 303992774 303992774 36.46 36.46 63152220 20.77

(2) Foreign

(a) Individuals (Non-

Resident Individuals/

Foreign Individuals)

0 0 0 0.00 0.00 Nil Nil

(b) Bodies Corporate 0 0 0 0.00 0.00 Nil Nil

(c) Institutions 0 0 0 0.00 0.00 Nil Nil

(d) Any Other (specify) 0 0 0 0.00 0.00 Nil Nil

Sub-Total (A)(2) 0 0 0 0.00 0.00 Nil Nil

Total Shareholding

of Promoter and

Promoter Group

(A)= (A)(1)+(A)(2)

7 303992774 303992774 36.46 36.46 63152220 20.77

(B) Public shareholding

(1) Institutions

(a) Mutual Funds/UTI 11 12219828 12219828 1.47 1.47 N.A N.A

(b) Financial Institutions/

Banks

0 0 0 0.00 0.00 N.A N.A

(c) Central Government/

State Government(s)

0 0 0 0.00 0.00 N.A N.A

(d) Venture Capital

Funds

0 0 0 0.00 0.00 N.A N.A

(e) Insurance Companies 0 0 0 0.00 0.00 N.A N.A

(f) Foreign Institutional

Investors

70 255049977 255049977 30.59 30.59 N.A N.A

(g) Foreign Venture

Capital Investors

0 0 0 0.00 0.00 N.A N.A

(h) Any Other (specify) 0 0 0 0.00 0.00 N.A N.A

Sub-Total (B)(1) 81 267269805 267269805 32.06 32.06 N.A N.A

(2) Non-institutions N.A N.A

(a) Bodies Corporate 531 9044399 9040299 1.08 1.08 N.A N.A

(b) Individuals -

Individual

shareholders holding

nominal share capital

up to Rs. 1 lakh.

37600 49336879 39579198 5.92 5.92 N.A N.A

Individual

shareholders holding

nominal share capital

in excess of Rs. 1

lakh.

223 58594705 55904785 7.03 7.03 N.A N.A

(c) Any Other (specify) N.A N.A

Trusts 3 5858 5858 0.00 0.00 N.A N.A

Directors & their

relatives

29 18897484 18635484 2.27 2.27 N.A N.A

Non resident Indians 926 5679010 5099010 0.68 0.68 N.A N.A

Clearing members 245 1333022 1333022 0.16 0.16 N.A N.A

Hindu Undivided

Families

256 730060 730060 0.09 0.09 N.A N.A

Foreign Corporate

Bodies

3 118524380 118524380 14.22 14.22 N.A N.A

NRI Directors 1 340000 340000 0.04 0.04 N.A N.A

Sub-Total (B)(2) 39817 262485797 249192096 31.48 31.48 N.A N.A

Total Public

Shareholding (B)=

(B)(1)+(B)(2)

39898 529755602 516461901 63.54 63.54 N.A N.A

TOTAL (A)+(B) 39905 833748376 820454675 100.00 100.00 63152220 7.57

(C) Shares held by

Custodians and

against which

Depository Receipts

have been issued

0 0 0 0.00 0.00 N.A N.A

51

S.

No.

Category of

shareholder

No. of

Shareholders

Total no. of

Equity Shares

No. of

Equity

Shares held

in

demateriali

sed form

Total shareholding as

a percentage of total

number of shares

Equity Shares pledged or

otherwise encumbered

% of

Equity

Shares

(A+B)

% of

Equity

Shares

(A+B+C

)

Number of

Equity

Shares

% No. of

Equity

Shares

GRAND TOTAL

(A)+(B)+(C)

39905 833748376 820454675 100.00 100.00 63152220 7.57

Pursuant to a resolution passed at the EGM dated April 22, 2010 the face value of one equity share of

Rs. 10 each was split and sub-divided into equity shares of Rs. 2 each. The record date for the above

split was May 4, 2010.

3. List of top 10 holders of Equity Shares of our Company as on August 4, 2011:

Sr.

No.

Name of the

Shareholder

Address Total Equity

Shares held

Percentage of the

shareholding (%)

i. V.P. Nandakumar Padma Saroj

Vazhappully House

P.O. Valapad

Thrissur Kerala

Pin-680567

193,119,056 23.16

ii. Hudson Equity

Holdings Limited

C/o Kotak Mahindra Bank

Limited

Kotak Infiniti,

Bldg. No.21,

6th Flr Zone IV,

Custody Services,

Infinity Park

Gen. AK Vaidya Marg,

Malad (E), Mumbai

Pin-400097

71,805,840 8.61

iii. V.P. Nandakumar along

with Sushama

Nandakumar

Padma Saroj

Vazhappully House

P.O. Valapad

Thrissur Kerala

Pin-680567

56,873,640 6.82

iv. Smallcap World Fund

Inc.

Deutsche Bank AG

DB House,

Hazarimal Somani Marg,

Post Box No. 1142,

Fort Mumbai

Pin-400001

54,812,814 6.57

v. AA Development

Capital India Fund 1,

LLC

HSBC Securities Services

2nd floor ''Shiv'',

Plot no.139-140b

Western Exp Highway,

Sahar Rd Junction,

Vile Parle (E),

Mumbai - 400057

43,568,540 5.22

vi. Vazhoor

Sankaranarayanan

Sushama

Vazhapully House

Valapad P.O

Trichur - 680567

26,420,078 3.17

vii. Sushama Nandakumar Padma Saroj

Vazhappully House

P.O. Valapad

Thrissur Kerala

21,580,000 2.59

52

Sr.

No.

Name of the

Shareholder

Address Total Equity

Shares held

Percentage of the

shareholding (%)

Pin-680567

viii. Copthall Mauritius

Investment Limited

J.P.Morgan Chase Bank N.A.

India Sub Custody

6th Floor, Paradigm B

Mindspace, malad (W),

Mumbai - 400064

21,209,014 2.54

ix. Sloane Robinson LLP

A/c SR Global


2nd floor ''Shiv'',

Plot no.139-140b


Sahar Rd Junction,

Vile Parle (E),

Mumbai – 400057

17,305,668 2.08

x. CLSA (Mauritius)

Limited

Citibank N.A. Custody

Services, 3rd

Floor, Trent

house, G Block, Plot No 60,

BKC, Bandra (e), Mumbai –

400051

15,389,565 1.85

TOTAL 522,084,215 62.61

4. List of top 10 holders of different series of non-convertible debentures issued on private placement

basis of our Company as on August 4, 2011:

MFL Secured NCD- 12.25% - Series B-1

Maturity Date: March 28, 2014

ISIN – INE 522D07073

Face Value: Rs. 100,000

Sr.

No.

Name of the

debenture holder

Address Total

debentures

held

Percentage of

the holding (%)

i. Axis Bank Limited A Wing, 3rd

Floor,

Bezzola Complex, Suman

Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

1,500 75.75

ii. Bank of Maharashtra Apeejay House, 1st Floor,

130 Dr. V.B. Gandhi Marg,

Fort,

Mumbai – 400001

300 15.15

iii. Bank of Maharashtra

Employees Provident

Fund

1501, Shivaji Nagar,

Lokmangal,

Pune - 411005

90 4.55

iv. Bank of Maharashtra

Employees Pension

Fund


Lokmangal,

Pune - 411005

90 4.55

TOTAL 1,980 100

53

MFL Secured NCD- 12.25%- Series B-2




Sr.

No.

Name of the debenture

holder

Address Total

debentures held

Percentage of the

holding (%)


Floor,


Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

1,500 75.75



Fort,

Mumbai – 400001

300 15.15


Employees Provident

Fund


Lokmangal,

Pune - 411005

90 4.55


Employees Pension

Fund


Lokmangal,

Pune - 411005

90 4.55

TOTAL 1,980 100





Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)


Floor,


Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

2,000 75.75



Fort,

Mumbai – 400001

400 15.15


Employees Provident

Fund


Lokmangal,

Pune - 411005

120 4.55


Employees Pension Fund


Lokmangal,

Pune - 411005

120 4.55

54

Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)

TOTAL 2,640 100





Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)

i. UCO Bank, Treasury Branch,

UCO Building,

Mezzanine Floor,

359 Dr. DN Road,

Fort,

Mumbai - 400001

750 76.22

ii. Dena Bank Employees

Gratuity Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

114 11.58


Employees Provident

Fund


Lokmangal,

Pune - 411005

60 6.10




Lokmangal,

Pune - 411005

60 6.10

TOTAL 984 100





Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)


UCO Building,

Mezzanine Floor,

359 Dr. DN Road,

Fort,

Mumbai - 400001

750 76.22


Gratuity Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

114 11.58


Employees Provident

Fund


Lokmangal,

Pune - 411005

60 6.10


Employees Pension


Lokmangal,

60 6.10

55

Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)

Fund Pune - 411005

TOTAL 984 100





Sr.

No.


holder

Address Total

debentures held

Percentage of the

holding (%)


UCO Building,

Mezzanine Floor,

359 Dr. DN Road,

Fort,

Mumbai - 400001

1,000 76.22


Gratuity Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

152 11.58


Employees Provident

Fund


Lokmangal,

Pune - 411005

80 6.10




Lokmangal,

Pune - 411005

80 6.10

TOTAL 1,312 100

MFL Secured NCD-10.65%



Face Value: Rs. 1,000,000

Sr.

No.


holder

Address Total debentures

held

Percentage of the

holding (%)

i. Reliance Capital Trustee

Co. Ltd. A/c

Reliance Floating Rate

Fund – Short Plan

Deutsche Bank AG,

DB House, Hazarimal

Somani Marg,

Post Box No. 1142, Fort,

Mumbai - 400001

500 50.00

ii. Hero Honda Motors

Limited

HDFC Bank Limited,

Custody Services,

Lodha – I Think Techno

Campus,

Off Floor 8, Kanjunmarg

(E)

Mumbai - 400042

250 25.00

iii. Nomura Capital (India)

Limited

HSBC Securities Services,

2nd

Floor, Shiv, Plot No.

139-140B,

250 25.00

56

Sr.

No.


holder


held

Percentage of the

holding (%)

Western Express Highway,

Saghar Road Junction,

Ville Parle (E),

Mumbai - 400057

TOTAL 1,000 100


Maturity Date: February 18, 2012



Sr.

No.


holder


held

Percentage of the

holding (%)

i. Bank of India Treasury Branch,

Head Office, Star House,

7th Floor,


Bandra (East),

Mumbai - 400051

250 100.00


Maturity Date: August 16, 2011



Sr.

No.

Name of the

debenture holder

Address Total

debentures

held

Percentage of the

holding (%)

i. Central Bank of India Central Bank of India,

Treasury Department,

Chandramukhi Building,

Nariman Point,

Mumbai - 400021

250 100.00

MFL Secured NCD-12.00%%- Series A-1




Sr.

No.

Name of the

debenture holder

Address Total

debentures held

Percentage of the

holding (%)

i. Corporation Bank Corporation Bank, General

Account,

Investment Division,

15 Mittal Chambers, 1st

Floor,

Nariman Point,

Mumbai - 400021

1000 100.00

57

MFL Secured NCD-12.00%- Series A-2




Sr.

No.

Name of the

debenture holder

Address Total

debentures held

Percentage of the

holding (%)

i. Corporation Bank Corporation Bank,

General Account,

Investment Division,

15 Mittal Chambers, 1st

Floor,

Nariman Point,

Mumbai - 400021

1000 100.00


Maturity Date: June 29, 2012



Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

i. Reliance Capital

Trustee Co. Ltd. A/c

Reliance Floating

Rate Fund – Short

Plan

Deutsche Bank AG,

DB House, Hazarimal

Somani Marg,


Mumbai - 400001

1000 100.00

MFL Secured NCD- 12%

Maturity Date: May 15, 2012



Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

i Morgan Stanley

Investments

(Mauritius) Limited


2nd floor ''Shiv'',

Plot no.139-140b


Sahar Rd Junction,

Vile Parle (E),

Mumbai - 400057

500 100.00

TOTAL 1,000 100

MFL Secured NCD- 12.25%




Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

i Akshay Kumar

Bhatia and Aruna

Bhatia

GR2, Ground Floor,

Prime Beach I,

Gandhigram Road,

Juhu, Santacruz (West),

60 95.24

58

Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

Mumbai – 400049

ii Amit Asharatan

Pachisia and

Asharatan Shivchand

Pachisia

11, Dream Queen,

V.P. Road,

Santacruz (West),

Mumbai 400054

3 4.76

TOTAL 63 100





Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

i Akshay Kumar

Bhatia and Aruna

Bhatia

GR2, Ground Floor,

Prime Beach I,

Gandhigram Road,


Mumbai – 400049

60 95.24

ii Amit Asharatan

Pachisia and

Asharatan Shivchand

Pachisia

11, Dream Queen,

V.P. Road,

Santacruz (West),

Mumbai 400054

3 4.76

TOTAL 63 100





Sr.

No.

Name of the

debenture holder


held

Percentage of the

holding (%)

i Akshay Kumar Bhatia

and Aruna Bhatia

GR2, Ground Floor,

Prime Beach I,

Gandhigram Road,


Mumbai – 400049

80 95.24

ii Amit Asharatan

Pachisia and

Asharatan Shivchand

Pachisia

11, Dream Queen,

V.P. Road,

Santacruz (West),

Mumbai 400054

4 4.76

TOTAL 84 100

59





Sr.

No.

Name of the

debenture holder


held

Percentage of the holding

(%)

i Axis Bank Limited A Wing, 3rd

Floor,

Bezzola Complex,

Suman Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

2,400 82.47

ii Bank of Maharashtra Apeejay House, 1st

Floor,

130 Dr. V.B. Gandhi

Marg,

Fort,

Mumbai – 400001

300 10.31

iii Dena Bank

Employee‟s Provident

Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

105 3.61

iv Dena Bank

Employee‟s Pension

Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

105 3.61

TOTAL 2,910 100





Sr.

No.

Name of the

debenture holder


held


(%)

i Axis Bank Limited A Wing, 3rd

Floor,

Bezzola Complex,

Suman Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

2,400 82.47

ii Bank of Maharashtra Apeejay House, 1st

Floor,

130 Dr. V.B. Gandhi

Marg,

Fort,

Mumbai – 400001

300 10.31

iii Dena Bank

Employee‟s

Provident Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

105 3.61

60

Sr.

No.

Name of the

debenture holder


held


(%)

Mumbai - 400056

iv Dena Bank


Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

105 3.61

TOTAL 2,910 100





Sr.

No.

Name of the

debenture holder


held


(%)


Floor,

Bezzola Complex,

Suman Nagar,

Sion Trombay Road,

Chembur,

Mumbai - 400071

3,200 82.47

ii. Bank of Maharashtra Apeejay House, 1st

Floor,

130 Dr. V.B. Gandhi

Marg,

Fort,

Mumbai – 400001

400 10.31

iii. Dena Bank

Employee‟s

Provident Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

140 3.61

iv. Dena Bank


Fund

Sharda Bhavan,

1st Floor,

V.M. Marg,

Juhu Ville Parle

Mumbai - 400056

140 3.61

TOTAL 3,880 100





Sr.

No.

Name of the

debenture holder


held


(%)

i. Moiz Vaswadawala

and Anisa Moiz

Vaswadawala

A – 1303, Floor 13,

2 Infinity,

CS 103, Shivdas Chapsi

Marg,

5 50.00

61

Sr.

No.

Name of the

debenture holder


held


(%)

Mazgaon,

Mumbai – 400 010

ii. Heminiben Jariwala

and Pareshbhai

Jariwala

Zenith Sil Mills Pvt. Ltd.

Vadtal Devdi Road,

Surat – 395 008

5 50.00

TOTAL 10 100





Sr.

No.


holder


held

Percentage of the

holding (%)

i Moiz Vaswadawala and

Anisa Moiz Vaswadawala

A – 1303, Floor 13,

2 Infinity,

CS 103, Shivdas

Chapsi Marg,

Mazgaon,

Mumbai – 400 010

5 50.00

ii Heminiben Jariwala and

Pareshbhai Jariwala

Zenith Sil Mills Pvt.

Ltd.

Vadtal Devdi Road,

Surat – 395 008

5 50.00

TOTAL 10 100





Sr.

No.


holder


held

Percentage of the

holding (%)

i Kotak Mahindra Trustee

Company Limited A/c

Kotak Credit Opportunities

Fund

DB House,

Hazarimal Somani

Marg,

Post Box No. 1142,

Fort Mumbai

Pin-400001

600 60.00

ii Kotak Mahindra Trustee

Company Limited

DB House,

Hazarimal Somani

Marg,

Post Box No. 1142,

Fort Mumbai

Pin-400001

400 40.00

TOTAL 1,000 100

62





Sr.

No.


holder


held

Percentage of the

holding (%)

i Oriental Bank of

Commerce


A 30 33 A-Block,

1st

Floor, Connaught

Place,

New Delhi – 110 001

500 100





Sr.

No.


holder


held

Percentage of the

holding (%)

i Oriental Bank of

Commerce


A 30 33 A-Block,

1st

Floor, Connaught

Place,

New Delhi – 110 001

500 100





Sr. No. Name of the debenture

holder


held

Percentage of the

holding (%)

i. Bank of Maharashtra

Employees Pension

1501, Lokmangal,

Shivajinagar,

Pune – 411 005

150 50.00

ii. Bank of Maharashtra

Employees Gratuity

1501, Lokmangal,

Shivajinagar,

Pune – 411 005

150 50.00

TOTAL 300 100






holder


held

Percentage of the

holding (%)


Employees Pension

1501, Lokmangal,

Shivajinagar,

Pune – 411 005

150 50.00

ii. Bank of Maharashtra 1501, Lokmangal,

Shivajinagar,

150 50.00

63


holder


held

Percentage of the

holding (%)

Employees Gratuity Pune – 411 005

TOTAL 300 100






holder


held

Percentage of the

holding (%)


Employees Pension

1501, Lokmangal,

Shivajinagar,

Pune – 411 005

200 50.00

ii. Bank of Maharashtra

Employees Gratuity

1501, Lokmangal,

Shivajinagar,

Pune – 411 005

200 50.00

TOTAL 400 100

5. List of top 10 holders of different series of non-convertible debentures issued on retail basis of our

Company as on August 4, 2011:

MFL Retail NCDs


Sr.

No.

Name of the holder Address Total units held Percentage of

the holding (%)

i. A.R. Chadha & Co India

Private limited

Off No:8,

1st Floor,

Atma Ram Mansion,

Connaught Circus 32,000 1.60

ii. M/s Atma Ram Properties

Pvt. Ltd.

Off No:8,

1st Floor,

Atma Ram Mansion,

Connaught Circus 20,000 1.00

iii. Amforge Industries

Limited

108-111 Rahja Temple,

Sree Press Journal Marg. 20,000 1.00

iv. Pushpabai K. Seksaria Seksaria Chambers, 4th

floor

139, Nagindas Master

Road,

Fort, Mumbai 10,000 0.50

v. Ramadas M.R. Pillai Manakkattampally,

Muhamma P. O.,

Trivandrum 6,700 0.33

vi. Jitha Prasad T.C.24/934, Brindavan,

Thycaud, Trivandrum 5,000 0.25

vii. Som Mittal F15 Ground Floor,

Hauz Khas Enclave,

5,000 0.25

64

Sr.

No.

Name of the holder Address Total units held Percentage of

the holding (%)

Hauz Khas, Bangalore

viii. Krishna Prasad T.C.24/934, Brindavan,

Thycaud, Trivandrum 5,000 0.25

ix. Bala Mahadevan 301,Shanti Nilaya

Apartments,

House No.60,

15th Cross Malleshwaram,

Bangalore 4,191 0.21

x. Srawan Kumar Bagla No-11,Bride Street,

LangFord,

C M P Centre & School,

Bangalore 4,000 0.20

TOTAL 111,891 5.59

6. List of top 10 holders of different series of subordinated debentures of our Company as on August 4,

2011:

MFL Subordinated Debentures


Sr.

No.

Name of the holder Address Total units held Percentage of the

holding (%)

i. Lathika Vijayaraghava Kokkala,

Thrissur

10,300 0.51

ii. Bright Credits and Real

Estates (P) Ltd.

St. Thomas College

Road,

Thrissur

10,000 0.49

iii. Bright Kuries and Loans

Pvt. Ltd.

St. Thomas College

Road,

Thrissur

2,500 0.12

iv. M. Vinod Chandran 4/450 Gul Mohar

House,

Manikkassery

2,300 0.11

v. Xavier K.P. Kallookaran H. No.

I/921/A, Padamugal,

Kakkanad,

Ernakulam, Kerala

2,000 0.10

vi. Mandaralakshmi Swandanam,

Kalladikode, Palakkad

2,000 0.10

vii. Juguna. G.

Panikkaparambil

Saw Mill road,

Koorkenchery,

Thrissur

2,000 0.10

viii. M.V. Premkumar Marath House, q

Edamuttam, Thrissur 1,994 0.10

ix. Sarita Rahul Sable B Flat No, 401,

Florida County,

Keshav Nagar,

Mundhwa, Pune

1,600 0.08

x. Kunjimoithu Pazhampulliparambil

House,

Pazhuvil, Thrissur 1,549 0.08

65

Sr.

No.

Name of the holder Address Total units held Percentage of the

holding (%)

TOTAL 36,243 1.79

7. List of top 10 holders of commercial papers of our Company as on August 4, 2011:

MFL CP

Maturity Date: September 9, 2011


Sr.

No.

Name of the CP holder Address Total CPs held Percentage of the

holding (%)

i FIL Trustee Company Pvt.

Ltd. A/c

Fedility Short Term

Income Fund

Standard Chartered Bank,

CRESCENZO Securities

services, 3rd

floor, C-

38/39, G Block, BKC,

Bandra (E), Mumbai -

400051

500 100.00

MFL CP

Maturity Date: December 12, 2011


Sr.

No.

Name of the CP

holder

Address Total CPs held Percentage of the

holding (%)

i. Cholamandalam MS

General Insurance

Company Ltd.

HDFC Bank Ltd. Custody

services Lodha – I Think

Techno Campus, Off Floor

8, Next to Kanjurmarg Stn,

Kanjurmarg (e), Mumbai -

400042

200 100.00

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. Principal Trustee Co.

Pvt. Ltd. A/c – PRIN


Services, 3rd

Floor, Trent

house, G Block, Plot No 60,

BKC, Bandra (e), Mumbai –

400051

200 100.00

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. Cholamandalam MS

General Insurance

Company Ltd.

HDFC Bank Ltd.Custody





100 100.00

66

Sr.

No.

Name of the CP

holder


holding (%)

400042

MFL CP

Maturity Date: October 24, 2011


Sr.

No.

Name of the CP

holder


holding (%)

i. BNP Paribas Money

Plus Fund

Deutsche Bank AG, DB

House, Hazarimal Somani

Marg, Post Box No. 1142,

Fort

Mumbai – 400001

1000 100.00

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. JM Trustee Co. Ltd.

A/c JM






400042

1000 50

ii. SBI Premier Liquid

Fund






400042

500 25

iii. Peerless Mutual Fund –

Peerless Ultra






400042

500 25

TOTAL 2000 100

MFL CP



Sr.

No.

Name of the CP

holder

Address Total CPs held Percentage of

the holding (%)

i. Axis Treasury

Advantage Fund

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


500 33

67

Sr.

No.

Name of the CP

holder


the holding (%)

Mumbai - 400001

ii. Peerless Mutual Fund

– Peerless Ultra



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,

Kanjurmarg (e), Mumbai

- 400042

500 33

iii. Pramerica Ultra Short

Term Bond Fund


Services, 3rd

floor, Trent

House, G Block, Plot No.

60, BKC, Bandra (E),

Mumbai – 400051

300 20

iv. Pramerica Ultra Short

Term Bond Fund


Services, 3rd

floor, Trent

House, G Block, Plot No.

60, BKC, Bandra (E),

Mumbai – 400051

200 14

TOTAL 1500 100

MFL CP



Sr.

No.

Name of the CP holder Address Total CPs held Percentage of the

holding (%)

i. TITCO Ltd. Taurus

Mutual Fund Taurus






400042

500 100

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. TITCO Ltd. Taurus

Mutual Fund Taurus






400042

500 100

MFL CP



68

Sr.

No.

Name of the CP

holder


holding (%)

i. L&T Mutual Fund A/c

L&T Liquid Fund






400042

998 99.8

ii. L&T Mutual Fund A/c

L&T Short Term

Floating Rate Fund






400042

2 0.2

TOTAL 1000 100

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. Kotak Mahindra


Kotak Mahindra Liquid

Scheme

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

1200 48

ii. Kotak Mahindra


Kotak floater short

term scheme

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

800 32

iii. Canara Robeco Mutual

Fund A/c Canara

Robeco Monthly

Income Plan


2nd

Floor “Shiv”, Plot No.

139-140 B

Western Exp Highway, Sahar

RDJUNCT,

Vile Parle – E, Mumbai –

400057

320 13

iv. Canara Robeco Mutual

Fund A/c Canara

Robeco Indigo Fund


2nd


139-140 B


RDJUNCT,


400057

100 4

v. Canara Robeco Mutual

Fund A/c Canara

Robeco Income Plan


2nd


139-140 B


RDJUNCT,


400057

80 3

TOTAL 2500 100

69



Sr.

No.

Name of the CP holder Address Total CPs held Percentage of

the holding

(%)

i. BNP Paribas Fixed Term

Fund – Series 21 E

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

389 97

ii. BNP Paribas Monthly

Income Plan

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

11 3

TOTAL 400 100

MFL CP



Sr.

No.


the holding (%)

i. BNP Paribas Fixed Term

Fund Series 16A

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

600 100

MFL CP



Sr.

No.


the holding (%)

i. BNP Paribas Fixed

Term Fund – Series 21

H

Deutsche Bank AG

DB House, Hazarimal

Somani Marg


Mumbai – 400001

800 61

ii. Principle Trustee Co.

Pvt. Ltd. A/c – PRI


services

3rd

floor, Trent House G

Block,

Plot No 60, BKC Bandra

(e), Mumbai – 400098

356 27

iii. Principle Trustee Co.

Pvt. Ltd. A/c – Principal

Mutual Fund – Principal

NEA term fund –

Conservative Plan


services

3rd


Block,


(e), Mumbai – 400098

144 12

70

Sr.

No.


the holding (%)

TOTAL 1300 100

MFL CP



Sr.

No.


the holding (%)



C


House, Hazarimal

Somani Marg, Post Box

No. 1142, Fort

Mumbai – 400001

500 36

ii. BNP Paribas Fixed


A


House, Hazarimal


No. 1142, Fort

Mumbai – 400001

400 29

iii. Canara HSBC Oriental

Bank of Commerce Life

Insurance Co. Ltd.


House, Hazarimal


No. 1142, Fort

Mumbai – 400001

300 21

iv. BNP Paribas Money

Plus Fund


House, Hazarimal


No. 1142, Fort

Mumbai – 400001

200 14

TOTAL 1400 100

MFL CP



Sr.

No.


the holding (%)

i. Oriental Bank of

Commerce

Treasury Department

A 30 33 A Block 1st

floor,

Connaught Place

New Delhi – 110001

500 100

MFL CP



Sr.

No.


the holding (%)

i. L And T Mutual Fund

A/C L And T Liquid

Fund



Techno Campus, Off

Floor 8, Next to

1000 100

71

Sr.

No.


the holding (%)

Kanjurmarg Stn,


400042

MFL CP



Sr.

No.

Name of the CP

holder


the holding (%)

i. UTI – Treasury

Advantage Fund

UTI Mutual Fund, UTI

Assestmanagement Co.

Ltd. Dept of Fund

accounts, UTI Tower, GN

Block, BKC, Bandra (e),

Mumbai – 400051

3000 75

ii. Religare Trustee Co.

Ltd. A/c Religare Ultra

Short Term Fund




Fort

Mumbai – 400001

1000 25

TOTAL 4000 100

MFL CP

Maturity Date: December 27, 2011

ISIN – INE522D14657

Sr.

No.

Name of the CP

holder


the holding (%)

i. IFCI Limited IFCI Limited

IFCI Tower

61 Nehru Place

New Delhi

Pin-110019

500 100

MFL CP


ISIN – 522D14640

Sr.

No.

Name of the CP

holder


the holding (%)

i. Union KBC Liquid

Fund


services

3rd


Block,


(e), Mumbai – 400098

500 100

MFL CP


ISIN – 522D14632

72

Sr.

No.

Name of the CP

holder


the holding (%)

i. Indusind Bank Limited

Treasury Dept

Indusind House

Fourth Floor

425, D.B. Marg, Opera

House

Mumbai-400004

1000 100

MFL CP


ISIN – 522D14699

Sr.

No.

Name of the CP

holder


the holding (%)

i. Escorts Mutual Fund-

A/C Escorts Liquid

Plan



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,


400042

200 100

MFL CP

Maturity Date: April 16, 2012

ISIN – 522D14681

Sr.

No.

Name of the CP

holder


the holding (%)


Term Fund - Series 21F




Fort

Mumbai – 400001

360 100

MFL CP


ISIN – 522D14673

Sr.

No.

Name of the CP

holder


the holding (%)

i. L And T Mutual Fund

A/C L And T Freedom

Income



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,


400042

500 100

MFL CP


ISIN – 522D14665

Sr.

No.

Name of the CP

holder


the holding (%)

73

Sr.

No.

Name of the CP

holder


the holding (%)

i. Religare Trustee

Company Limited-A/C

Religare Credit

Opportunities Fund




Fort

Mumbai – 400001

500 100

MFL CP



Sr.

No.

Name of the CP

holder


the holding (%)

i. Titco Ltd. Taurus

Mutual Fund Taurus



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,


- 400042

2000 61

ii. Peerless Mutual Fund

– Peerless Liquid

Fund



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,


- 400042

800 24

iii. Canara Robeco

Mutual Fund A/c

Canara



Techno Campus, Off

Floor 8, Next to

Kanjurmarg Stn,


- 400042

500 15

TOTAL 3300 100

MFL CP



Sr.

No.

Name of the CP

holder


holding (%)

i. SBI Short Horizon

Debt Fund - Ultra






400042

1500 68

ii. L&T Mutual Fund A/c

L&T Select






400042

300 14

74

Sr.

No.

Name of the CP

holder


holding (%)

iii. L&T Mutual Fund A/c

L&T Monthly






400042

200 9

iv. Religare Trustee

Company Limited-A/C

Religare Credit

Opportunities Fund




Fort

Mumbai – 400001

200 9

TOTAL 2200 100

8. List of top 10 holders of series of debentures issued at a discount having a face value of Rs. 1,000,000

each of our Company as on August 4, 2011

Sr.

No

Name of the

debenture holder

Full Address Total

debenture

held

Percentage

of the

holding

(%)

1 Alkem Laboratories

Ltd

Devasish Building Adj Matulya Mill

Compound 462 Senapati Bapat Marg,

Lower Parel, Mumbai-400013

100 17.67

2 Pramerica Mutual

Fund

2nd Floor, Nirlon House Dr. A. B.

Road, Worli, Mumbai-400030

100 17.67

3 Shree Holdings 15 Race Course Road,1st Floor Guindy,

Chennai-600032

40 7.07

4 Uma Kannan Thiagarajar Mills Premises, Kappalur,

Madurai-625008

34 6.01

5 Goldiam International

Limited

Gems & Jewellery Complex, Seepz,

Andheri(East) Mumbai-400096

25 4.42

6 Vikram Aditya &

Associate Pvt Ltd

620, Antriksh Bhawan, 22KG Marg,

New Delhi-110001

23 4.06

7 Sudhir Menon / Rita

Menon

501, Swapna Lok, Marve Road, Malad

(W)

20 3.53

8 Sridhar Panuganti 20 3.53

9 Kareena Shares &

Stocks Pvt.Ltd

B-103, Bhaveshwar Plaza, LBS Marg,

Ghatkopar (West), Mumbai - 400086

14 2.47

10 Bhamidipati Ravi /

Sudha Bhamidipati

A/1 1st Floor Amber, Perry Cross Rd,

Bandra W, Mumbai-400050

11 1.94

10 Jamshed Desai No.2,Central Avenue, Maharani Bagh,

New Delhi-110065

11 1.94

10 Naveen Munjal 156/E Sainik Farms, Country Club

Road, New Delhi-110062

11 1.94

TOTAL 566 100

9. Debt - equity ratio:

The debt to equity ratio of our Company as on March 31, 2011 (prior to this Issue) is based on a total

outstanding debt of Rs. 56,540.10 million, and shareholders‟ funds amounting to Rs. 19,239.57 million

which was 2.94 times as on March 31, 2011. The debt to equity ratio post the Issue (assuming

subscription of Rs. 7,500 million) is 3.32 times, based on a total outstanding debt of Rs. 64,040.10

million and shareholders‟ fund (as on March 31, 2011) of Rs. 19,239.57 million.

75

(Rs. in millions)

Particulars As on March 31, 2011* Post-Issue

Debt

Secured Loans from Banks, Financial

Institution, NBFC and Vehicle loans 38,707.54 38,707.54

Non Convertible Debentures 5,015.53 5,015.53

Fresh Issue of Debenture 7500.00

Unsecured Funds 12,817.03 12,817.03

Total Debt 56,540.10 64,040.10

Share Capital

Equity Share Capital 833.75 833.75

Preference Share Capital - -

Share application money pending

allotment

- -

Reserves and surplus 18405.82 18405.82

Total Shareholders‟ Funds 19239.57 19239.57

Long Term Debt to Equity Ratio 2.94** 3.32**

*Please note that the above particulars as on March 31, 2011 have been taken as the particulars prior

to the Issue.

** Based on the unaudited financial statements, for June 30 2011, and assuming a full subscription

of Rs. 7,500 million for the Issue, pre-issue and post-issue debt - equity ratios are 3.48 and 3.85

respectively. The debt - equity ratio represents ratio of debt (being total of secured loans and

unsecured loans as per the financial statements as at June 30, 2011) over equity (being total of paid

up share capital and reserves and surplus).

10. This is a public issue of Bonds in the nature of secured, redeemable, non-convertible debentures of face

value of Rs. 1,000 each aggregating to Rs. 4,000 million with an option to retain over subscription

upto Rs. 3,500 million, aggregating to Rs. 7,500 million.

11. Except as stated in note 1 above, our Company has not issued any equity shares for consideration other

than cash, whether in whole or part.

12. Our Company has not issued any debt securities for consideration other than cash, whether in whole or

part.

13. Our company has issued 566 debentures of face value of Rs. 1,000,000 each on July 29, 2011. The

debentures were issued at a discount of Rs. 118,300 each and the tenure of the debentures is 390 days

from the date of allotment. Other than the above mentioned issue, at the time of the Issue, our

Company has not issued any debt securities at a premium or at a discount. However, the Company may

issue them in future

14. For details of the outstanding borrowings of our Company, please see the section entitled ―Description

of Certain Indebtedness‖ on page 125.

76

OBJECTS OF THE ISSUE

Issue Proceeds

Our Company has filed this Prospectus for a public issue of the Bonds aggregating to Rs. 7,500 million. The

funds raised through this Issue will be utilized for our various financing activities including lending and

investments and towards our business operations including for our capital expenditure and working capital

requirements, after meeting the expenditures of, and related to, the Issue.

The main objects clause of the Memorandum of Association of our Company permits our Company to

undertake its existing activities as well as the activities for which the funds are being raised through this Issue.

Further, in accordance with the SEBI Debt Regulations, our Company will not utilize the proceeds of the Issue

for providing loans to or acquisition of shares of any person who is a part of the same group as our Company or

who is under the same management as our Company or any subsidiary of our Company.

The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other

acquisition, inter alia by way of a lease, of any property.

Further the Company undertakes that Issue proceeds from Bonds allotted to banks shall not be used for any

purpose, which may be in contravention of the RBI guidelines on bank financing to NBFCs.

Issue Expenses

A portion of the Issue proceeds will be used to meet Issue expenses. The following are the estimated Issue

expenses:

Particulars Amount

(Rs. in

Million)

Percentage of net

proceeds of the Issue

(in %)

Percentage of total

expenses of the Issue

(in %)

Fees to Intermediaries

Fees paid to the Registrar to the Issue 0.8 0.01 0.51

Fees paid to the Lead Managers and the Co-

Lead Managers (excluding selling and

brokerage commission)

60.6 0.81 38.28

Fees paid for advertising and marketing 4 0.05 2.53

Miscellaneous (including fees paid to

Debenture Trustee and selling and brokerage

commission)

92.9 1.24 58.69

Total 158.3 2.11 100.00

The fees detailed in the table above may also be paid by way of commission to various intermediaries, which

may include subsidiaries of our Company. The above expenses are indicative and subject to change depending

on the actual level of subscription, number of Allottees, market conditions and other relevant factors.

Monitoring of Utilization of Funds

There is no requirement for appointment of a monitoring agency in terms of the SEBI Debt Regulations. The

Board of Directors of our Company shall monitor the utilisation of the proceeds of the Issue. Our Company will

disclose in the Company‟s financial statements for the relevant financial year commencing from Fiscal 2012, the

utilization of the proceeds of the Issue under a separate head along with details, if any, in relation to all such

proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized

proceeds of the Issue. We shall utilize the proceeds of the Issue only upon the execution of the documents for

creation of security as stated in this Prospectus in the section entitled ―Terms of the Issue - Security‖ on page

153 and upon the listing of the Bonds.

Interim Use of Proceeds

The management of the Company, in accordance with the policies formulated by it from time to time, will have

77

flexibility in deploying the proceeds received from the Issue. Pending utilization of the proceeds out of the Issue

for the purposes described above, the Company intends to temporarily invest funds in high quality interest

bearing liquid instruments including money market mutual funds, deposits with banks or temporarily deploy the

funds in investment grade interest bearing securities as may be approved by the Board / Committee of Directors

of the Company, as the case may be. Such investment would be in accordance with the investment policy of our

Company.

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STATEMENT OF TAX BENEFITS

The information provided below sets out the possible tax benefits available to the debenture holder in a

summary manner only and is not a complete analysis or listing of all potential tax consequences of the

subscription, ownership and disposal of redeemable Non Convertble Debentures (―NCDs‖), under the current

tax laws presently in force in India. Several of these benefits are dependent on the debenture holder fulfilling the

conditions prescribed under the relevant tax laws. Hence the ability of the debenture holder to derive the tax

benefits is dependent upon fulfilling such conditions, which based on business imperatives it faces in the future,

it may not choose to fulfil. The following overview is not exhaustive or comprehensive and is not intended to be

a substitute for professional advice. Investors are advised to consult their own tax consultant with respect to the

tax implications of an investment in the NCDs particularly in view of the fact that certain recently enacted

legislation may not have a direct legal precedent or may have a different interpretation on the benefits, which

an investor can avail.

Benefits under the Income Tax Act, 1961 („the Act‟)

(A) To the Company

General Tax Benefits

1. Dividends earned are exempt from tax in accordance with and subject to the provisions of section

10(34) read with section 115-O of the Act. However, as per section 94(7) of the Act, losses arising

from sale/ transfer of shares, where such shares are purchased within three months prior to the record

date and sold within three months after the record date1 (for entitlement to receive dividend), to the

extent such loss does not exceed the amount of dividend claimed exempt, shall be ignored for the

purpose of computing income chargeable to tax.

2. Income earned from investment (other than income from transfer of investment) in units of a specified

Mutual Fund is exempt from tax under section 10(35) of the Act. However, as per section 94(7) of the

Act, losses arising from the sale/ redemption of units purchased within three months prior to the record

date (for entitlement to receive income) and sold within nine months after the record date, will be

disallowed to the extent such loss does not exceed the amount of income claimed exempt.

3. Further, as per section 94(8) of the Act, if an investor purchases units within three months prior to the

record date for entitlement of bonus, is allotted bonus units without any payment on the basis of

holding original units on the record date and such person sells/ redeems the original units within nine

months after the record date, while continuing to hold all or any of the additional units, then the loss

arising from purchase and sale of the original units will be ignored for the purpose of computing

income chargeable to tax and the amount of loss so ignored shall be regarded as the cost of acquisition

of such bonus units.

4. If the Company invests in the equity shares of another Company or units of an equity-oriented fund, as

per the provisions of section 10(38), any income arising from the transfer of a long term capital asset

being an equity share in a Company/ units of an equity-oriented fund2 is not includible in the total

1 Record date is defined as per Explanation (aa) to Section 94 as follows:

―record date‖ means such date as may be fixed by—

(i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or

(ii) a Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the

Explanation to clause (35) of section 10, for the purposes of entitlement of the holder of the units to receive

income, or additional unit without any consideration, as the case may be.

2 Equity oriented fund is defined Explanation to section 10(38) as under:

Explanation.—For the purposes of this clause, ―equity oriented fund‖ means a fund

(i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than

[sixty-five] per cent of the total proceeds of such fund; and

(ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D):

Provided that the percentage of equity of the fund shall be computed with reference to the annual average of the

79

income, if the transaction is chargeable to Securities Transaction Tax. However, such long-term capital

gains shall be taken into account while computing book profits for the purposes of section 115JB of the

Act.

5. Section 14A of the Act restricts claim for deduction of expenses incurred in relation to incomes which

do not form part of the total income under the Act. Thus, any expenditure incurred to earn tax exempt

income, to the extent computed under Rule 8D of the Income-tax Rules, 1962 would not be allowed as

a deduction in computing the total income.

6. Under section 32 of the Act, the Company can claim depreciation allowance at the prescribed rates on

tangible assets such as building, machinery, plant or furniture and on intangible assets such as know-

how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of

similar nature acquired after 1 April 1998.

7. As per the provisions of section 32(2) of the Act, where full allowance cannot be given to the

depreciation allowance in any year, the same can be carried forward and set-off in the subsequent years

subject to provisions of section 72(2)/72(3).

8. Under section 36(1)(vii), any bad debt or part thereof written off as irrecoverable in the accounts is

allowable as a deduction from the total income subject to conditions specified under section 36(2) of

the Act. As per section 36(2) of the Act inter alia no deduction shall be allowed unless such debt or part

thereof has been taken into account in computing the income of the Company of the Previous year

(„PY‟) in which the amount of such debt or part thereof is written off or of an earlier PY, or represents

money lent in the ordinary course of the business of banking or money-lending which is carried on by

the Company.

9. Under section 36(1)(viii) of the Act, subject to the conditions specified therein, a deduction is

allowable in respect of an amount not exceeding 20% of the profits derived from eligible business viz.

providing long-term finance for industrial or agricultural development or development of infrastructure

facility in India or development of housing in India, before making deduction under that section

provided such amount is transferred to a special reserve account created and maintained for this

purpose. However where the aggregate of the amounts carried to such reserve account from time to

time exceeds twice the amount of the paid up share capital and general reserves, no allowance under

this clause shall be made in respect of such excess.

10. The Company will be entitled to amortise preliminary expenditure (underwriting commission,

brokerage, charges for drafting, typing, printing and advertisement of prospectus) being expenditure

incurred on public issue of shares or NCD under section 35D(2)(c)(iv) of the Act, subject to the limit

specified in section 35D(3) and subject to satisfaction of conditions specified in section 35D. The

deduction is allowable for an amount equal to one-fifth of such expenditure for each of five successive

Assessment years („AY‟).

11. Under the provision of section 71 of the Act, losses under the head “Profit and Gains from Business or

Profession” can be set-off against other heads of income, in the year in which loss was incurred.

Further, as per the provisions of section 72 of the Act, unabsorbed business losses (other than loss

sustained in speculation business) which are not set-off in any PY can be carried forward and set off

against the business profits of the subsequent AY, subject to a maximum of eight AY.

12. Under the provisions of the Act, if the investments in shares or other security listed in a recognized

stock exchange in India or a unit of a specified Mutual fund are sold after being held for more than

twelve months, the taxable gains, if any, will be treated as long-term capital gains which will be

calculated by deducting from the full value of consideration, the indexed cost of acquisition/

improvement and expenditure incurred wholly & exclusively in connection with the transfer. The

indexed cost of acquisition/ improvement means an amount which bears to the cost of acquisition/

improvement the same proportion as cost inflation index for the year in which the asset is transferred

bears to the cost inflation index for the first year in which the asset was held by the Company/

improvement to the asset took place respectively.

monthly averages of the opening and closing figures;

80

13. Under section 54EC of the Act, capital gain arising from transfer of long-term capital assets is exempt

from tax, if the capital gains are invested in certain notified bonds within a period of six months from

the date of transfer, up to a maximum limit of Rs. 50 lakhs during any financial year and held for a

period of three years in accordance with section 54EC(2). The notified bonds are those (redeemable

after three years) issued by :

(i) „National Highways Authority of India‟ constituted under section 3 of National Highways

Authority of India Act, 1988 and notified by the Central Government in the Official Gazette

for the purpose of this section; or

(ii) „Rural Electrification Corporation Limited‟, a company formed and registered under the

Companies Act, 1956 and notified by the Central Government in the Official Gazette for the

purpose of this section.

14. If only part of the capital gain is invested in such bonds, the exemption will be proportionately

determined. However, if the new bonds are transferred or otherwise converted into money within three

years from the date of their acquisition, the capital gains earlier exempted will be chargeable to tax in

the year of transfer or conversion.

15. Under section 111A of the Act, short-term capital gains (ie, if the shares/ units are held for a period not

exceeding twelve months), arising on sale of listed equity shares/ units of an equity-oriented fund are

taxed at the rate of 15% (plus applicable surcharge and cess) in cases where Securities Transaction Tax

has been levied. Further, if the gross total income of the Company includes any short term capital gains

referred to above, deduction under Chapter VI-A of the Act is only allowed from the gross total income

as reduced by such short term capital gains.

16. Under section 112 of the Act, long-term capital gains (other than those covered under section 10(38) of

the Act) are subject to tax at a rate of 20% (plus applicable surcharge and cess) after indexation, as

provided in the second proviso to section 48 of the Act. However, in case of listed securities or units,

the amount of such tax could be limited to 10% (plus applicable surcharge and cess), without

indexation benefit, at the option of the Company. Further, if the gross total income of the Company

includes any long term capital gains referred to above, deduction under Chapter VI-A of the Act is only

allowed from the gross total income as reduced by such long term capital gains.

17. Under section 115JAA(1A) of the Act, credit is allowed in respect of any Minimum Alternate Tax

(“MAT”) paid under section 115JB of the Act for any AY commencing on or after 1 April 2006. Tax

credit eligible to be carried forward will be the excess of MAT paid over the tax computed as per the

normal provisions of the Act for that AY. Such MAT credit is allowed to be carried forward for set-off

against tax liability computed under normal provisions of the Act for upto 10 AY succeeding the AY in

which the MAT credit becomes allowable subject to other conditions specified in section 115JAA.

18. The Company is entitled to a deduction under section 80G of the Act in respect of amounts contributed

as donations to various charitable institutions and funds covered under that section, subject to

fulfillment of conditions stipulated therein.

Special Tax Benefits

19. There are no special tax benefits available to the Company.

Tax rates

For the AY 2012 - 2013

20. The tax rate is 30%. A surcharge on Income tax of 5% would be levied if the total income exceeds Rs 1

Crore. Education cess and Secondary Higher Education cess of 3% is levied on the amount of tax and

surcharge.

21. Minimum Alternate Tax is at 18.5 % of the Book profits computed in accordance with provisions of

section 115JB. A surcharge on Income tax of 5% would be levied if the total income exceeds Rs 1

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Crore. Education cess and Secondary Higher Education cess of 3% is levied on the amount of tax and

surcharge.

(B) To the Debenture Holders of the Company

I To the Resident Debenture Holder

1. Interest on NCD issued at par would be subject to tax at the normal rates of tax in accordance with and

subject to the provisions of the Act.

2. In respect of NCD issued at discount, the Central Board of Direct Taxes („CBDT‟) has earlier clarified

by way of certain letters issued to the Reserve Bank of India and others that the difference between the

bid price (subscription price) and the redemption price (face value) of Deep Discount Bonds („DDB‟)

(Refer Annexure 1) will be treated as interest income assessable under the Act in case the NCD are

redeemed as on the redemption date. In respect of transfer of the NCD before maturity, the income

will be taxable as capital gains.

The point of time at which the discount would be taxable as interest in the hands of Debenture Holder

is a debatable issue. The CBDT circular issued in the context of DDB suggests that interest would need

to be offered to tax based on accrual system of accounting (i.e. by marking such bonds to market

value). The concept articulated in the context of DDBs could also be extended to NCDs in question.

However, it should be possible to argue that interest should be offered to tax depending on the method

of accounting followed by the Debenture Holder.

3. No income tax is deductible at source on interest on NCD inter alia in respect of the following:

(a) On any security issued by a Company in a dematerialized form and is listed on recognized

stock exchange in India.

(b) In case the payment of interest on NCD to resident individual Debenture Holder in the

aggregate during the financial year does not exceed Rs. 2,500 provided the NCD are listed on

a recognized stock exchange in India and the interest is paid by an account payee cheque.

(c) When the Assessing Officer issues a certificate on an application by a Debenture Holder on

satisfaction that the total income of the Debenture Holder justifies no/lower deduction of tax at

source as per the provisions of section 197(1) of the Act and that certificate is filed with the

Company.

(d) When the resident Debenture Holder with PAN (not being a Company or a firm or a senior

citizen) furnishes a declaration in writing in duplicate in the prescribed form (Form 15G) and

verified in the prescribed manner to the effect that the tax on his estimated total income of the

PY in which such income is to be included in computing his total income will be Nil.

HOWEVER under section 197A (1B) of the Act, Form 15G cannot be submitted nor considered for

exemption from deduction from tax at source if the aggregate of income of the nature referred to in the

said section, viz. dividend, interest, etc as prescribed therein, credited or paid or likely to be credited or

paid during the PY in which such income is to be included exceeds the maximum amount which is not

chargeable to tax. To illustrate, as on 01.04.2011,the maximum amount of income not chargeable to tax

in case of individuals (other than women assesses, senior citizens and super senior citizens) and HUFs

is Rs. 1,80,000; in the case of every individual being a woman resident in India and below the age of 60

years at any time during the PY is Rs. 1,90,000; in the case of every individual being a resident in

India, who is of the age of 60 years or more but less than 80 years at any time during the PY (Senior

Citizen) is Rs. 2,50,000; and in the case of every individual being a resident in India, who is of the age

of 80 years or more at any time during the PY (Super Senior Citizen) is Rs. 5,00,000 for PY 2011-12.

Senior citizens, who are 65 or more years of age at any time during the financial year, enjoy the special

privilege to submit a self-declaration in the prescribed Form 15H for non deduction of tax at source in

accordance with the provisions of section 197A (1C) of the Act provided that the tax due on total

income of the person is Nil. In all other situations, tax would be deducted at source as per prevailing

provisions of the Act; Form No.15G with PAN / 15H with PAN / Certificate issued u/s 197(1) has to be

filed with the Company.

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4. In case of sale of NCD (originally issued at a discount) prior to redemption date, the gains arising on

such sale of NCD will be taxable as “Capital Gains”.

The capital gains will be computed by deducting cost of acquisition of the NCD and expenditure

incurred in connection with such transfer from the full value of sale consideration.

In case of NCD issued originally at a discount, the cost of acquisition will be taken to be the aggregate

of the cost for which the bond was acquired by the Debenture Holder (including the intermediate

purchaser of NCD) and the income, if any, already offered to tax by such Debenture Holder upto the

date of transfer.

5. Under section 2(29A) of the Act, read with section 2(42A) of the Act, a listed NCD is treated as a long

term capital asset if the same is held for more than 12 months immediately preceding the date of its

transfer.

Under section 112 of the Act, capital gains arising on the transfer of long term capital assets being

listed securities are subject to tax at the rate of 10% of capital gains as increased by applicable

surcharge and education cess calculated without indexation of the cost of acquisition.

In case of an individual or HUF, being a resident, where the total income as reduced by such long-term

capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-

term capital gains shall be reduced by the amount by which the total income as so reduced falls short of

the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-

term capital gains shall be computed at the rate mentioned above.

6. Short-term capital gains on the transfer of listed NCD, where NCD are held for a period of not more

than 12 months would be taxed at the normal rates of tax in accordance with and subject to the

provisions of the Act.

The provisions relating to maximum amount not chargeable to tax, surcharge and education cess as

described in the preceding paragraph would also apply to such short term capital gains.

7. The Circular issued in the context of DDB (Refer Annexure 1) suggests that the period of holding will

be calculated from the date of purchase/subscription, or last valuation date, whichever is later.

Consequently the capital gains would always be short term capital gains, since the period of holding

would always be less than one year. However, a contrary view that the period of holding of DDB

should be calculated from the date of purchase/ subscription could also be explored.

8. In case the NCD are held as stock in trade, the income on transfer of NCD would be taxed as business

income or loss in accordance with and subject to the provisions of the Act.

9. However in case where tax has to be deducted at source while paying interest on NCD, the Company is

not required to deduct surcharge, education cess and secondary and higher education cess.

10. Under section 94(1) of the Act, where the owner of any securities („the owner‟) sells or transfers those

securities, and buys back or reacquires the securities, including similar securities, then, if the result of

the transaction is that any interest becoming payable in respect of the securities is receivable otherwise

than by the owner, the interest payable as aforesaid shall, whether it would or would not have been

chargeable to income-tax be deemed, to be the income of the owner and not to be the income of any

other person.

Under section 94(2) of the Act, where any person has had at any time during any previous year any

beneficial interest in any securities, and the result of any transaction relating to such securities or the

income thereof is that, in respect of such securities within such year, either no income is received by

him or the income received by him is less than the sum to which the income would have amounted if

the income from such securities had accrued from day to day and been apportioned accordingly, then

the income from such securities for such year shall be deemed to be the income of such person.

83

However, as per provisions of section 94(3), the provisions of sub-section (1) or sub-section (2) of

section 94 of the Act shall not apply if the owner, or the person who has had a beneficial interest in the

securities, as the case may be, proves to the satisfaction of the Assessing Officer

(a) that there has been no avoidance of income-tax, or

(b) that the avoidance of income-tax was exceptional and not systematic and that there was not in

his case in any of the three preceding PYs any avoidance of income-tax by a transaction of the

nature referred to in sub-section (1) or sub-section (2) of section 94 of the Act.

11. As per section 56(2)(vii)(c) of the Act, in case and individual or HUF receives NCD from any person

on or after 1st October, 2009:

(i) without consideration, aggregate fair market value of which exceeds fifty thousand rupees,

then the whole of the aggregate fair market value of such NCD; or

(ii) for a consideration which is less than the aggregate fair market value of the NCD by an

amount exceeding fifty thousand rupees, then the aggregate fair market value of such NCD as

exceeds such consideration;

shall be chargeable to tax as the income of the recipient under the head Income from Other Sources.

However, the above provisions would not apply in certain situations like receipts:

from any relative; or

on the occasion of the marriage of the individual; or

under a will or by way of inheritance; or

in contemplation of death of the payer or donor, as the case may be; or

from any local authority as defined in the Explanation to clause (20) of section 10; or

from any fund or foundation or university or other educational institution or hospital or other

medical institution or any trust or institution referred to in clause (23C) of section 10; or

from any trust or institution registered under section 12AA

II To the Mutual funds

All mutual funds registered under Securities and Exchange Board of India or set up by public sector

banks or public financial institutions or authorised by the Reserve Bank of India are exempt from tax

on all their income under the provisions of section 10(23D) of the Act subject to and in accordance

with the provisions contained therein.

Benefits under the Wealth Tax Act, 1957

(A) To the Company

As per the provisions of section 2(m) of the Wealth tax Act, 1957, the Company is entitled to reduce

debts owed in relation to the assets which are chargeable to wealth tax in computing the net taxable

wealth.

(B) To the Debenture Holder of the Company

NCD of the Company held by the Debenture Holder will not be treated as an asset within the meaning

of section 2(ea) of Wealth Tax Act, 1957. Hence, NCD are not liable to wealth tax.

84

Gift Tax

Gift-tax is not levied on gift of NCD in the hands of the donor as well as the donee because the provisions of the

Gift-tax Act, 1958 have ceased to apply in respect of gifts made on or after October 1, 1998.

Proposals made in Direct Taxes Code

The Hon‟ble Finance Minister has presented the Direct Tax Code Bill, 2010 („DTC Bill‟) on August 30, 2010,

which is proposed to be effective from April 1, 2012. The DTC Bill is likely to be presented before the Indian

Parliament. Accordingly, it is currently unclear what effect the Direct Tax Code would have on the investors.

Requirement to furnish Permanent Account Number under the Act

1. Section 139A(5A) of the Act:

Subsection (5A) of section 139A of the Act lays down that every person from whose income tax has

been deducted at source under chapter XVII B of the Income Tax Act shall furnish his Permanent

Account Number to the person responsible for deduction of tax at source.

2. Section 206AA of the Act:

(1) Notwithstanding anything contained in any other provisions of the Act, any person entitled to

receive any sum or income or amount, on which tax is deductible under Chapter XVIIB

(hereinafter referred to as deductee) shall furnish his Permanent Account Number to the

person responsible for deducting such tax (hereinafter referred to as deductor), failing which

tax shall be deducted at the higher of the following rates, namely:

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A

of the Act shall be valid unless the person furnishes his Permanent Account Number in such

declaration.

(3) In case any declaration becomes invalid under sub-section (2) of section 206AA of the Act,

the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1)

of section 206AA of the Act.

(4) Where the Permanent Account Number provided to the deductor is invalid or does not belong

to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account

Number to the deductor and the provisions of sub-section (1) of section 206AA of the Act

shall apply accordingly.

Annexure 1

246. Clarifications regarding tax treatment of deep discount bonds and STRIPS (Separate Trading of

Registered Interest and Principal of Securities)

1. A review of the tax treatment of income arising from Deep Discount Bonds has been under

consideration in the Board for some time. The Board had earlier clarified by way of certain

letters issued to the Reserve Bank of India and others that the difference between the bid price

(subscription price) and the redemption price (face value) of such bonds will be treated as

interest income assessable under the Income-tax Act. On transfer of the bonds before maturity,

the difference between the sale consideration and the cost of acquisition would be taxed as

income from capital gains where the bonds were held as investment, and as business income

where the bonds were held as trading assets. On final redemption, however, no capital gains

85

will arise. It was further clarified that tax would be deducted at source on the difference

between the bid price and the redemption price at the time of maturity.

2. Such tax treatment of Deep Discount Bonds, however, has posed the following problems :

(i) Taxing the entire income received from such a bond in the year of redemption as

interest income gives rise to a sudden and huge tax liability in one year whereas the

value of the bond has been progressively increasing over the period of holding.

(ii) Where the bond is redeemed by a person other than the original subscriber, such

person becomes taxable on the entire difference between the bid price and the

redemption price as interest income, since he is not able to deduct his cost of

acquisition from such income.

(iii) A company issuing such bonds and following the mercantile system of accounting

may evolve a system for accounting of annual accrual of the liability in respect of

such a bond and claim a deduction in its assessment for each year even though the

corresponding income in the hands of the investor would be taxed only at the time of

maturity.

(iv) Taxing the entire income only at the time of maturity amounts to a tax deferral.

3. The matter has now been examined in consultation with the Reserve Bank of India and the

Ministry of Law. The practice followed in several countries outside India has also been

examined. With a view to remove the anomalies in the existing system of taxation of income

from Deep Discount Bonds, and to formulate a system which is more in line with international

practice, the Board have decided that such income may hereafter be treated as follows.

General treatment

4. Every person holding a Deep Discount Bond will make a market valuation of the bond as on

the 31st March of each Financial Year (hereafter referred to as the valuation date) and mark

such bond to such market value in accordance with the guidelines issued by the Reserve Bank

of India for valuation of investments. For this purpose, market values of different instruments

declared by the Reserve Bank of India or by the Primary Dealers Association of India jointly

with the Fixed Income Money Market and Derivatives Association of India may be referred

to.

4.1 The difference between the market valuations as on two successive valuation dates will

represent the accretion to the value of the bond during the relevant financial year and will be

taxable as interest income (where the bonds are held as investments) or business income

(where the bonds are held as trading assets).

4.2 In a case where the bond is acquired during the year by an intermediate purchaser (a person

who has acquired the bond by purchase during the term of the bond and not as original

subscription) the difference between the market value as on the valuation date and the cost for

which he acquired the bond, will be taxed as interest income or business income, as the case

may be, and no capital gains will arise as there would be no transfer of the bond on the

valuation date.

Transfer before maturity

5. Where the bond is transferred at any time before the maturity date, the difference between the

sale price and the cost of the bond will be taxable as capital gains in the hands of an investor

or as business income in the hands of a trader. For computing such gains, the cost of the bond

will be taken to be the aggregate of the cost for which the bond was acquired by the transferor

and the income, if any, already offered to tax by such transferor (in accordance with para 4

above) upto the date of transfer.

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5.1 Since the income chargeable in this case is only the accretion to the value of the bond over a

specific period, for the purposes of computing capital gains, the period of holding in such

cases will be reckoned from the date of purchase/subscription, or the last valuation date in

respect of which the transferor has offered income to tax, whichever is later. Since such period

would always be less than one year, the capital gains will be chargeable to tax as short-term

capital gains.

Redemption

6. Where the bond is redeemed by the original subscriber, the difference between the redemption

price and the value as on the last valuation date immediately preceding the maturity date will

be taxed as interest income in the case of investors, or business income in the case of traders.

6.1 Where the bond is redeemed by an intermediate purchaser, the difference between the

redemption price and the cost of the bond to such purchaser will be taxable as interest or

business income, as the case may be. For this purpose, again, the cost of the bond will mean

the aggregate of the cost at which the bonds were acquired and the income arising from the

bond which has already been offered to tax by the person redeeming the bond.

STRIPS

7. Apart from original issue of Deep Discount Bonds, such bonds can also be created by

„stripping‟, i.e., the process of detaching the interest coupons from a normal coupon bearing

bond and treating the different coupons and the stripped bond as separate instruments or

securities („strips‟) capable of being traded in independently. Such a mechanism, referred to as

STRIPS (Separate Trading of Registered Interest and Principal of Securities) creates

instruments which are in the nature of Deep Discount or Zero Coupon Bonds from out of the

normal interest bearing bonds. Accordingly, the tax treatment of the different components of

principal and interest created by such stripping will be on the same lines as clarified in the

preceding paragraphs in respect of Deep Discount Bonds.

7.1 The process of stripping of a normal interest-bearing bond into its various components will not

amount to a transfer within the meaning of the Income-tax Act as it merely involves the

conversion of the unstripped bond into the corresponding series of STRIPS. Similarly, the

reconstitution of STRIPS to form a coupon bearing bond will not amount to a transfer.

Tax deduction at source

8. The difference between the bid price of a deep discount bond and its redemption price, which

is actually paid at the time of maturity, will continue to be subject to tax deduction at source

under section 193 of the Income-tax Act. Under the existing provisions of that section, no tax

is deductible at source on interest payable on Government securities. Further, the Central

Government is empowered to specify any such bonds issued by an institution, authority,

public sector company or co-operative society by way of notification, exempting them from

the requirement of tax deduction at source.

Option to investors

9. Considering the difficulties which might be faced by small non-corporate investors in

determining market values under the RBI guidelines and computing income taxable in each

year of holding, it has further been decided that such investors holding Deep Discount Bonds

upto an aggregate face value of rupees one lakh may, at their option, continue to offer income

for tax in accordance with the earlier clarifications issued by the Board referred to in para 1

above.

Circular : No. 2/2002, dated 15-2-2002. CLARIFICATION ONE

There have been certain reports in the press recently, suggesting that the tax treatment of Deep Discount Bonds

as specified in Circular No.2/2002, dated February 15, 2002 [See [2002] 120 Taxman 127 (St.)] issued by the

Central Board of Direct Taxes is anomalous, as it provides for taxation of income from such bonds on an annual

87

basis, even though no income is received by the bond-holder before maturity. It has been opined that a heavy tax

burden is being placed on persons who have been holding such bonds for a while, and a cumbersome obligation

of valuing the bonds every year on the basis of RBI Guidelines is being cast on small investors. The reports are

mis-conceived and based on an incorrect understanding and inadequate knowledge of facts and law. The

modified tax treatment now specified in fact corrects the anomalies in the existing system by providing a

mechanism for taxing income accruing from year to year on deep discount bonds, on the same lines as income

from normal coupon bearing bonds is taxed. Transfer of the bonds before maturity will attract capital gains tax,

as in the existing system.

The earlier system of taxing the entire income received from such bonds in the year of redemption as interest

income was anomalous in that it gave rise to a sudden and huge tax liability in one year whereas the value of the

bond had been progressively increasing over the period of holding. Further, where the bond was redeemed by a

person other than the original subscriber, such person was taxed on the entire difference between the bid price

and the redemption price as interest income. Such a system also created tax-induced distortions in the debt

market, and was an impediment to the development of a market in STRIPS, which are essentially zero coupon

instruments derived from normal coupon bearing bonds.

Taxation of income on accrual basis is an established principle of law, and always results in taxing income that

has not yet been received. Income from deep discount bonds accrues continuously over the period of holding

and can be realized at any time by selling the bond. Taxing income from such bonds on accrual basis annually

is, in fact, a practice followed world-wide.

It is also an established principle that a circular issued by CBDT cannot have a retrospective tax effect. The

present circular on deep discount bonds, therefore, specifies the tax treatment in respect of bonds which are

issued after the issue of the circular, and does not seek to impose the modified treatment on existing bond-

holders. Further, non-corporate persons who invest small amounts in new issues (face value upto Rs.1 lakh) can

still opt for the old system.

Valuing the bonds every year on the basis of RBI Guidelines will not pose any problem as such values can be

obtained from the issuers themselves, who will invariably be the RBI or a public financial institution.

The amount received on redemption would always be liable to tax deduction at source as per normal provisions

of the Income-tax Act. However, no TDS is required on interest payable on Government securities, and bonds

issued by an institution, authority, public sector company or co-operative society can also be exempted from the

requirement by notification.

Please note the above “Statement of Tax Benefits” is the “Details of Tax Benefits available to the Company

and its shareholders” which is referred to as Annexure 4 in the auditor report dated July 19, 2011 in

“Auditor Examination Report and Reformatted Statements” on page 182.

88

OUR BUSINESS

Overview

We are one of the leading listed NBFCs lending money against the pledge of household, used, gold jewellery

(“Gold Loans”) in India, in terms of gold loan portfolio as of March 31, 2011, 2010 and 2009, and we are also

the fastest growing gold financing company in India in terms of gold loan portfolio for the fiscal year 2010. (See

IMaCS Industry Report (2010 Update)). We provide these short-term personal and business Gold Loans

primarily to retail customers who require immediate availability of funds, but who do not have access to formal

credit on an immediate basis, or at all. Our Gold Loan portfolio as of March 31, 2011 comprised more than 2

million Gold Loan accounts with 1.19 million customers aggregating to Rs. 63,705.41 million of Gold Loans in

principal amount (net of assignments), which is 99.32% of our total loans and advances. As of March 31, 2011,

we disburse Gold Loans to our customers from a network of 2,064 branches in 20 states and union territories of

India, including 1,567 branches in the southern states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.

We are headquartered in the southern Indian state of Kerala. Our group commenced operations at Valapad,

Thrissur, Kerala and has decades of established history in the money lending business, mainly in small-scale

money lending against household, used, gold jewellery. Our Company has been in the Gold Loan financing

business since 1999. Historically, we have also provided other related services, including asset finance, money

transfer and foreign exchange, sales of gold coins and business and personal lending. We focus on rapid, on-the-

spot approval and disbursement of loans with minimal procedural formalities which our customers need to

complete in order to avail a loan from us. We have developed various Gold Loan schemes, which offer variable

terms in relation to the amount advanced per gram of gold, the interest rate and the amount of the loan, to meet

the different needs of various customers.

Our lending functions are supported by an in-house, custom developed information technology platform that

allows us to, record relevant customer details and approve and disburse the loan. Our proprietary technology

platform also handles internal audit, risk monitoring and management of the relevant loan and pledged gold

related information. Our employees undergo periodic training sessions related to evaluation of the worth and

authenticity of the gold that is pledged with us.

Our Gold Loan customers are individuals primarily from rural and semi-urban areas who require funds typically

for social obligations, emergencies, agriculture-related activities, small scale business operations or

consumption purposes. We strive to complete our Gold Loan transactions within short timelines. What

distinguishes us from banks is our focus on non-organized sections of society and our turn-around time. Loan

amounts advanced by us are generally in the range of Rs. 1,000.00 to Rs. 1.00 million per loan transaction and

typically remain outstanding approximately for an average tenor of 120 days. All of our Gold Loans have a

maximum of a 12 month term. In the financial year ended March 31, 2011, our gross Gold Loan portfolio yield

representing gross interest income on gross gold loans as a percentage of gross average outstanding of gold

loans, for the same period was, on an average, 24.95% per annum.





BWR AA- rating from Brickwork and a rating of CARE AA- from CARE Limited.

In the fiscal years 2011, 2010 and 2009, our total income was Rs. 11,815.26 million, Rs. 4,782.01 million and

Rs. 1,661.11 million respectively. Our profit after tax for the fiscal years 2011, 2010 and 2009 was Rs. 2,826.64

million, Rs. 1,197.21 million and Rs. 302.97 million respectively.

In the fiscal years 2011, 2010 and 2009, revenues from our Gold Loan business constituted 97.62%, 95.67% and

86.20%, respectively, of our total income. As of March 31, 2011, 2010 and 2009, our portfolio of Gold Loans

under management in principal amount (net of assignments) was Rs. 63,705.41million, Rs. 18,512.26 million

and Rs. 4,000.63 million respectively, and approximately 52.97 tons, 22.45 tons and 13.34 tons, respectively, of

gold jewellery was held by us as security for our Gold Loans. Gross non-performing gold loan assets were

0.28%, 0.55% and 0.95% of our gross Gold Loan portfolio under management as of March 31, 2011, 2010 and

2009, respectively.

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Operational Data

The table below sets forth operational data as at and for the fiscal years 2011, 2010, 2009 and 2008.

Fiscal Year

As at / year

ended March

31, 2011

As at / year ended

March 31, 2010

As at / year

ended March 31,

2009

As at / year

ended March 31,

2008

1. Assets under

Management (Rs. in

million) (net of

assignments)

63,835.58 18,884.68 4,503.94 1,754.18

2. Portfolio of Assigned

Loans (in principal

amount, Rs. in

million)

11,182.83 7,077.02 5,381.42 3,930.12

3. Number of Customers

(in million)

1.19 0.55 0.34 0.22

4. Cost of Borrowing 8.89% 9.84% 12.02% 11.83%

5. Leverage 3.52 4.17 5.89 6.10

6. Bad Debts and

Provisions (Rs. in

million)

382.75 142.00 177.86 33.72

7. Capital Adequacy

Ratio

29.13% 29.34% 31.74% 40.79%

8. Operating Expense /

Average Assets

5.32% 5.58% 6.41% 4.09%

9. Operating Expenses /

Total Income

20.64% 20.93% 30.20% 25.16%

10. Net NPAs (Gold

Loans)

0.11% 0.18% 0.13% 0.18%

Merger of MAFIT with Our Company

Manappuram Finance Tamil Nadu Limited (“MAFIT”) an affiliate of our Company merged with the Company

with retrospective effect from April 1, 2008 and the merger was given effect to by the Company pursuant to an

Order of the High Courts in the three month period ended December 31, 2009. Our financial statements as of

and for the fiscal year ended 2011 and 2010 reflect the financial results of MAFIT for such fiscal year; however,

as the merger was approved in December 2009, our financial statements as of and for the fiscal year 2007, 2008

and 2009 does not include the financial results of MAFIT for such periods.

MAFIT was engaged in the same line of business as our Company, and as a result, we have benefited from

increased operations, cost savings and operational synergies.

As a result of the Merger, shareholders of MAFIT received 2.1 Equity Shares in our Company in exchange for

every issued and outstanding share of MAFIT. On January 11, 2010 we issued 11,677,382 equity shares of Rs.

10 each credited as fully paid to the shareholders of MAFIT.

Acquisition of Manappuram Printers

With effect from April 1, 2009, we acquired all the assets and liabilities of Manappuram Printers, a sole

proprietorship of our Promoter which was engaged in the business of printing and sale of stationery items. The

printing requirements of our Company were quite substantial and prior to this acquisition, we were dependent on

third parties to meet our printing requirements.

Competitive Strengths

We believe that the following competitive strengths position us well for continued growth:

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One of the leading gold financing companies in India with a long operating history and loyal customer

base

We have been engaged in the business of Gold Loan financing since 1999. We have, over the years, been

successful in expanding our brand name, as well as our customer base to different geographical locations in

India. Our total number of customers grew from 0.34 million as of March 31, 2009 to 0.55 million as of March

31, 2010 and to 1.19 million as of March 31, 2011. We attribute our growth, in part, to our market penetration,

particularly in areas less served by organized lending institutions and the efficient and streamlined procedural

formalities which our customers need to complete in order to complete a loan transaction with us, which makes

us a preferred mode of finance for our customers. We also attribute our growth to customer loyalty. We believe

that a large portion of our customer base returns to us when they are in need of funds. Our average principal

amount of loan per customer has increased from Rs. 35,734 for the fiscal year 2009 to Rs. 63,106 for the fiscal

year 2011.

Flexible loan schemes, high quality customer service and short response time

We believe the growth in our Gold Loan portfolio is partly due to the flexible Gold Loan schemes that we offer

to our customers and high quality customer service. Depending on their individual needs, we are able to

customize loans for our customers in terms of the loan amount, advance rate per gram of gold and interest rate.

We also allow customers to prepay their loans with us without penalty, and we do not have a minimum loan

size.

We provide our customers with a transparent process and a secure environment in which to transact their

business, and we believe that our staff is professional and attentive at all our branch locations. Each of our

branches is staffed with customer representatives who possess local knowledge and understanding of customers‟

needs.

In addition, we strive to complete our Gold Loan transactions within a short timeframe, as this forms an

important component in our competitive edge over other lenders. We are able to process Gold Loans within a

short timeframe as a result of our efficient technology support, skilled workforce and clear policies on internal

processes. Although disbursement time may vary depending on the loan size and the number of items pledged,

we can generally disburse an average loan of Rs. 30,000 within a few minutes from the time the gold is tendered

to the appraiser. Furthermore, since our loans are all over-collateralized by gold jewellery, there are minimal

documentary and credit assessment requirements, which also shortens our turnaround time and increases the

ease with which our customers can do business with us.

Rapid expansion of our branch network

We have rapidly expanded our branch network in the past, which we believe has provided us with an advantage

over our competitors. Our total number of branches grew from 644 branches in 14 states and union territories as

of March 31, 2009, to 1,005 branches in 15 states and union territories as of March 31, 2010 and to 2,064

branches in 20 states and union territories as of March 31, 2011and then to 2,192 branches in 22 states and

union territories as of May 31, 2011. In order to manage our expanding operations as well as our increased

customer base, we have developed a proprietary technology framework that provides an integrated, robust

platform to run our operations and scale our branch network. In addition, on a per branch basis, increase in


on year, providing us with economies of scale as branches mature. We intend to continue to develop our

technology framework in order to equip ourselves for further growth of our business.

Strong capital raising ability and high credit rating

We have a track record of successfully raising capital from a variety of sources. We have received private equity

financing from affiliates of Sequoia Capital, India Equity Partners, Ashmore Alchemy and Granite Hill. As of

May 31, 2011, these private equity investors (except for Sequoia Capital and Granite Hill, which sold their

investment) hold an aggregate of 14.66% of our outstanding Equity Shares.

The results of operations also depend substantially on our net interest margin, which is the difference between

the interest rates on our interest-earning assets and interest-bearing liabilities. For the fiscal years 2011, 2010,

and 2009, our interest income represented 99.52%, 99.15% and 97.94% respectively, of our total income.

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In addition, as of March 31, 2011, we have borrowing relationships with 38 banks. As of March 31, 2011,

March 31, 2010 and March 31, 2009, our secured loans from banks, financial institutions and NBFCs were Rs.

38,696.60 million, Rs. 13,858.59 million and Rs. 2,978.69 million respectively. Our bank borrowings and

private equity financings have aided us in achieving growth in our business.

We also raise funds by assigning receivables from Gold Loan advances to banks and other institutions. As at

March 31, 2011, March 31, 2010 and March 31, 2009, the assigned amounts outstanding were Rs. 11,182.83

million, Rs. 7,077.02 million and Rs. 5,381.42 million.





BWR AA- from Brickwork and a rating of CARE AA- from CARE Limited.

The rating reflects our well established presence in the Gold Loan business, our track record of maintaining

good risk-adjusted returns while expanding our scale of operations and our moderate capitalization levels in

relation to our proposed expansion plans. Our liquidity position is comfortable with a well matched asset

liability management profile on account of the relatively shorter tenure of the advance portfolio and availability

of funding lines. The shorter tenure of advances aided by our P1+ rating also helps us to raise money by way of

short term borrowings and by way of issue of commercial paper at attractive rates.

Robust support system and IT infrastructure, including appraisal, internal audit and inventory control and

safety systems

Our IT infrastructure has been developed in house and links our network of branches across the country with the

head office. We migrated to a .NET platform in December 2008, and have reaped benefits in the form of

minimizing errors, faster transmission of data and risk monitoring. Our management has also benefited from

availability of real time information. We upload data at each branch to facilitate online information access for

faster decision making. In addition, our technology platform has helped us develop an effective risk based

internal control system and internal audit. We also have a disaster recovery system located outside of Kerala

which replicates data on a real time basis. Our centralized technology aids us in offsite surveillance of all our

branches. Our technology also helps reduce the time it takes to complete Gold Loan transactions.

Our ability to accurately appraise the quality of the gold jewellery to be pledged in a short period of time is

critical to our business. We do not engage third parties to assess the gold jewellery, but instead employ in-house

staff for this purpose, which leads to better customer service. Assessing gold jewellery quickly and accurately is

a specialized skill that involves an assessment for gold content and quality manually without damaging the

jewellery. We use tested methods of appraisal of gold, such as the nitric acid test, the touchstone test, checking

for hallmarks and the sound test, and an independent appraisal is carried out by different sets of officials before

disbursement is made depending on the ticket size. In addition, branch heads are required to independently

verify loans that are above Rs. 20,000. Since we generally lend only against household, used jewellery and

avoid lending against bullion or lending to jewellers and goldsmiths, the risk of use of low quality gold or

spurious jewellery as security for our Gold Loans is limited.

In addition, the gold that is pledged for each loan is typically as much as the worth of gold that is owned by an

average Indian household, which prevents our exposure to larger-sized loans where the chances of default and

subsequent losses are increased. Only a small portion of the loans advanced by us are for relatively larger

amounts, and in such cases we follow a more detailed process for evaluation of such loans. For larger loans, the

head office will verify the profile of the customer and approve limits for loan sanctions.

Once the Gold Loan is made, we have a system in place for continuous monitoring of the pledged gold by

internal audit and risk management teams. In accordance with our internal audit policy, all of our branches are

subject to inspection every 90 days, a branch audit every 45 days and a spot audit can be conducted at any

branch at any time. At the time of conducting an inspection, a quality check on the inventory is also carried out.

Our inventory control procedures involve physical security checks and checks on the quality of pledged gold. In

addition, the branch head and the assistant branch head are the joint custodians of the gold stored in strong

rooms or vaults, which means that the strong rooms or vaults can only be opened if two keys are inserted at the

same time. The safes and strong rooms, are reinforced concrete cement structures built per industry standards

and practices.

92

Experienced management team and skilled personnel

Our management team has over 35 years of experience in the banking and Gold Loan business. Our senior and

operating level management teams have extensive experience in the Gold Loan business and we believe that

their considerable knowledge of and experience in the industry enhances our ability to operate effectively. Our

staff, including professionals, covers a variety of disciplines, including gold appraisal, internal audit,

technology, accounting, marketing and sales. Some of our key management personnel have been employed by

us since our inception. Our management has experience in identifying market trends and suitable locations for

expanding and setting up branches to suit our target customers. Our workforce also consists of appraisers who

are skilled in the evaluation of the worth and authenticity of the gold that is pledged with us and we conduct

periodic training programs to augment their knowledge and efficiency in performing this task.

Strategy

Our business strategy is designed to capitalize on our competitive strengths and enhance our leadership position

in the Gold Loan industry. Key elements of our strategy include:

Further grow our Gold Loan business

Historically, Indians have been one of the largest consumers of gold due to the strong preference for gold

jewellery among Indian households and its widespread use as a savings instrument. A large proportion of gold

stock is held by rural India, as gold is viewed as a secure, liquid and easily accessible savings instrument, apart

from its ornamental status. (Source: IMaCS Industry Report 2009)

As a result, the market for Gold Loan financing in India is largely untapped and offers good potential for further

growth. The organized Gold Loan market is approximately 1.2% of the value of total gold stock in India

(Source: IMaCS Industry Report (2010 Update)).

We intend to increase our presence in under-served rural and semi-urban markets, where a large portion of the

population has limited access to credit either because they do not meet the eligibility requirements of banks or

financial institutions, or because credit is not available in a timely manner at reasonable rates of interest, or at

all. A typical Gold Loan customer expects high loan-to-value ratios, rapid and accurate appraisals, easy access,

low levels of documentation, quick approval and disbursement and safekeeping of their pledged gold. We

believe we meet these criteria, and thus our focus is to expand our Gold Loan business.

Continue to expand branch network

We intend to continue to grow our Gold Loan portfolio by expanding our network through the addition of new

branches. We have added 1,059 branches in the last fiscal year and 128 branches between March 31, 2011 and

May 31, 2011. We propose to increase our branch strength by at least 500 additional branches in the fiscal year

2012, including in states where we do not currently have any operations, subject to certain conditions being

satisfied. We carefully assess the market, location and proximity to target customers when selecting branch sites

to ensure that our branches are set up close to our target customers. We believe our customers appreciate this

convenience and it enables us to reach new customers. In addition, on a per branch basis, our increase in


on year, providing us with economies of scale as branches mature.

Continue to build the Manappuram brand

Our brand is key to the growth of our business. We believe that we have built a recognizable brand in the rural

and semi-urban markets of India, particularly in the southern states of Kerala, Tamil Nadu, Karnataka and

Andhra Pradesh. We intend to continue to build our brand by using celebrities in our advertising campaigns and

undertaking other marketing efforts on radio, television and outdoor advertising.

Strengthen our technology platform and continue to develop robust risk management procedures and related

systems

Since we plan to expand our geographic reach as well as our scale of operations, we intend to further develop

and strengthen our technology platform to support our growth and improve the quality of our services. We are

focused on improving our comprehensive knowledge base and customer profile and support systems, which in

93

turn will assist us in the expansion of our business. We also propose to strengthen the technology in our

jewellery appraisal process. We believe that improvements in technology will also reduce our operational and

processing time and thereby improve our operating efficiencies.

In addition, we view risk management as crucial to the expansion of our Gold Loan business. We therefore

continually focus on improving our integrated risk management framework with processes for identifying,

measuring, monitoring, reporting and mitigating key risks, including credit risk, appraisal risk, custodial risk,

market risk and operational risk. We propose to make significant investments in personnel, technology and

infrastructure in order to improve process efficiencies and mitigate business risks. We have recruited individuals

who have significant risk management experience and plan to retain this focus in hiring additional risk

management personnel. Going forward, we plan to continue to adapt our risk management procedures to take

account of trends we have identified, including our loan loss experience. We believe that prudent risk

management policies and development of tailored credit procedures will allow us to expand our Gold Loan

financing business without experiencing significant increases in non-performing assets.

Attract and retain high quality talent

The intellectual capital of our management and finance teams, as well as other professionals in our business, is

critical to our success, and we accordingly intend to continue to focus on attracting and retaining high quality

talent. In order to achieve this, we will continue to capitalize on our strengths in the area of recruiting. In

particular, we plan to consolidate our position as an employer of choice within the NBFC sector. We currently

conduct training programs periodically across our regional training centers. We have also developed and will

continue to develop targeted compensation schemes designed to retain our key management personnel and

professionals, such as offering performance-linked salaries.

New line of business

Pursuant to the approval of our shareholders in the EGM on May 31, 2011, we intend to commence a new line

of business in travel and tourism. Our Company holds an Authorised Dealer Category II license from the RBI

for its FOREX operations. To augment our Company‟s income from such operations, it was thought desirable to

venture into this new line of business. Our Company proposes to act as a travel agent, tour operator, transport

agent and contractor. Further, our Company proposes to arrange and operate tours and to act as representatives

of airlines, railways and arranging road, air, water ticket booking.

Our Gold Loan Business

Our core business is providing Gold Loans, which are typically small loans secured by the pledge of household,

used, gold jewellery. Loan amounts advanced by us are typically within the range of Rs. 1,000.00 to Rs. 1.00

million per loan transaction and typically remain outstanding approximately for an average tenor of 120 days.

As of March 31, 2011, we had approximately 1.57 million Gold Loan accounts, aggregating to Rs. 63,705.41

million in principal amount (net of assignments).

In the fiscal years 2011, 2010 and 2009, our gross Gold Loan portfolio yield representing gross interest income

on gross gold loans as a percentage of gross average outstanding of gold loans, for the same period were retail

loan portfolio yielded an interest rate of 24.95%, 27.88% and 25.50%, respectively, per annum. In the fiscal

years 2011, 2010 and 2009, income from interest earned on our Gold Loans constituted 97.62%, 95.67% and

86.20%, respectively, of our total income.

We are able to offer a variety of Gold Loan schemes to our customers to suit their individual needs. As of May

31, 2011, we have 21 different schemes in place. The schemes differ in relation to the amount advanced per

evaluated gram of gold, the interest rate chargeable and the amount of the loan. Some of our schemes are

available only in certain geographical areas and newly opened branches.

The elements of a scheme do not remain constant and are dependent on external factors such as the market price

of gold, our cost of funds, the advance and the rate of interest that is offered by our competitors. To maintain

consistency and ensure that our standards are not compromised, we have kept the procedures and processes

involved in each gold finance transaction generally the same across the different schemes. We also allow

customers to prepay their loans without penalty, and we do not have a minimum loan size.

Gold Loan Disbursement Process

94

The principal form of security that we accept is wearable, household, used, gold jewellery. We do not accept

bullion, gold biscuits, gold bars, new mass-produced gold jewellery or medallions unless it is pledged alongside

used jewellery, and we restrict acceptance of jewellery from other money-lenders. While these restrictions

narrow the pool of assets that may be provided to us as security, we believe that it provides us with the

following key advantages:

It filters out spurious jewellery that may be pledged by jewellers and goldsmiths. We find that

household, used jewellery is less likely to be spurious or fake.

The emotional value attached by each household to the pledged jewellery acts as a strong incentive for

timely repayment of loans and revoking the pledge.

As we only accept the pledge of household jewellery, the value of the pledged gold is typically only as

much as the worth of gold that is owned by an average Indian household. This prevents our exposure to

large-sized loans where the chances of default and subsequent losses are high.

The amount that we finance against the pledged gold jewellery is typically based on a fixed rate per gram of

gold content in the jewellery. We value the gold jewellery brought by customers based on our centralized

policies and guidelines. We generally lend between 70% and 85% of the price of gold assumed by us, which is

generally lower than the market price of gold at that time. Within this range, the actual loan amount varies

according to the type of jewellery pledged. While jewellery can be appraised based on a variety of factors, such

as total weight, weight of gold content, production cost, style, brand and value of any gemstones, we appraise

the gold jewellery solely based on its gold content. Our Gold Loans are therefore generally well collateralized

because the actual value of the gold jewellery is higher than our appraised value of the gold jewellery when the

loan is disbursed.

The amount we lend against an item and the total value of the pledged gold we hold fluctuates according to the

market price of gold. However, an increase in the price of gold will not automatically result in an increase in the

value of our Gold Loan portfolio unless the per gram rate is revised by our corporate office. Similarly, since

adequate margins are built in at the time of the loan disbursement and owing to the short tenure of these loans on

average, a decrease in the price of gold generally has little impact on our interest income. However, a sustained

decrease in the market price of gold could cause a decrease in the growth rate of Gold Loans in our loan

portfolio. See “Risk Factors - Volatility in the market price of gold may adversely affect our financial condition

and results of operations.”

All our Gold Loans have a maximum term of 12 months; however, customers may redeem the loan at any time.

Our Gold Loans typically remain outstanding approximately for an average tenor of 120 days. In most cases,

interest is paid only at the time the principal is repaid. In the event that a loan is not repaid on time and after

providing due notice to the customer, the unredeemed pledged gold is disposed of on behalf of the customer in

satisfaction of the principal and interest charges. Any surplus arising out of the disposal of the pledged gold is

refunded to the customer. In the event that the recoverable amount is more than the realizable value of the

pledged gold, the customer remains liable for the shortfall. We make provisions for losses that we believe are

not recoverable from the customer when the respective loans remain outstanding after six months from the date

of agreed tenor of the loan.

The processes involved in approving and disbursing a Gold Loan are divided into three phases: Pre-

disbursement; Post-disbursement; and Release of the pledge. When a loan is repaid, we give the customer the

option to pledge the security again and obtain another loan.

Pre-Disbursement

Pre-disbursement processes include all the actions that are carried out from the moment a customer enters any of

our branches for procuring a Gold Loan until the customer receives the loan amount and include the following:

Appraisal of the Gold

The first step in the process is the appraisal or evaluation of the gold to be used as security for the Gold Loan.

Each of our branches has designated personnel for gold appraisal who operate under a clear policy regarding

their function and responsibilities. The initial appraisal is performed by a trained employee who has experience

in appraising the gold content of jewellery. The initial appraisal is then verified by a second trained employee.

95

Additionally, if the loan amount is above Rs. 10,000, the appraisal must be verified by the assistant branch head.

However, if the loan amount is above Rs. 20,000, the appraisal must be verified by the branch head.

Several steps are involved in the gold appraisal process. We first test the authenticity of the gold in accordance

with standard guidelines that are applied across all our branches. This process involves several principal tests,

which include the nitric acid test, the touchstone test, checking for hallmarks and the sound test.

We then determine the gross weight of the gold jewellery by weighing the jewellery. From the gross weight, we

deduct for purity and stone weight to arrive at net weight. We have determined a constant percentage deduction

that applies depending on the purity of the gold, which is based on the proportion of gold contained in the

jewellery in relation to other metals. As purity decreases, the percentage deduction that is applied to the gross

weight increases in order to arrive at the net weight. The weight of stones and other material that is embedded in

the jewellery is also deducted from the gross weight to determine the net weight. The net weight is then

converted into 22 carat purity levels.

In order to determine the loan amount that can be advanced against a specific piece of jewellery, or the loan to

value, the net weight of the jewellery is multiplied against a fixed constant, which is the 90 days trailing average

of the price of gold, or the spot price of gold, whichever is lower.

Appraisal of the Customer

Since the disbursement of the Gold Loan is primarily based on the value of the pledged gold, the customer‟s

creditworthiness is not a major factor in the loan decision. However, each branch complies with standard “know

your customer” (“KYC”) policies and other customer appraisal procedures, depending on the amount of the

Gold Loan.

Compliance with the KYC policies ensures that the personal data provided by a particular customer is accurate.

For loans up to Rs. 50,000, the customer must provide a document that confirms the customer‟s identity, which

could be a Government issued document, such as a passport, driver‟s license, PAN card, election card or ration

card. For loans above Rs. 50,000, proof of address is also required. Any KYC document that is received is

verified for authenticity. A KYC register is maintained in every branch to enter all KYC related details of our

customers. We are in the process of implementing additional identification confirmation procedures, including

retaining a photograph of each customer in our system, and confirmation of the customer‟s mobile number by

generation of a unique identification number through text message at the time of the pledge.

If the outstanding loan in the account of a customer is Rs. 100,000 or more, an information statement is

generated by our internal system, which is tracked by the area head. Further, we monitor individually customers

who have loans outstanding in excess of Rs. 1,000,000. In addition, the system generates daily alert reports

based on certain pre-set parameters, which are tracked by the area head. All of these processes are supported by

our technology platform.

Documentation

The standard set of documents that are executed in a typical Gold Loan transaction include the gold loan slip,

the pawn ticket and the demand promissory note cum terms and conditions. Basic details of the pledge, such as

the name of the customer and the net weight of the jewellery pledged is recorded on the gold loan slip, which is

retained by us. The pawn ticket, which contains the details of the customer and the pledged jewellery, is filled in

by the employee who appraised the gold and a copy is retained by the customer. The demand promissory note is

an undertaking by the customer to repay the loan amount with the interest to the Company. The terms and

conditions that are contained in the demand promissory note empower us to sell the pledged jewellery if the

customer defaults on the Gold Loan. In addition to these documents, we keep additional internal records that

specify the customer and the pledged jewellery. We identify and correct data entry errors in customer data

through a process of day-book checking.

Post-Disbursement

Custody of the Pledged Gold

The pledged gold jewellery is packed separately by staff of the branch in a polythene pouch with the relevant

documents about the loan and the customer, and then stored in the safe or strong room of the branch. Once

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lodged in the safe or strong room of the concerned branch, the branch head and the assistant branch head are the

joint custodians of the gold.

The safes and strong rooms in which the gold jewellery is kept are built in accordance with industry practice.

The strong rooms are vaults with reinforced concrete cement structures. Separate cupboards are used within the

strong rooms for the safe keeping of the gold collateral. At present, approximately 489 of our branches are using

strong rooms. In 1,703 branches where the volume of business is comparatively low or where the construction

of a strong room is not possible, we use iron safes, which are also built in accordance with industry practice.

Inventory Control

Once the pledged gold is packed and moved to the safe or strong room, colour coded stickers are affixed on the

packet. Tamper proof stickers are also affixed on the jewellery packets to ensure inventory control. Additional

stickers are used to seal packets by persons examining packages subsequently, including our internal auditors. In

addition to the color coding, these stickers also contain details of the persons inspecting the gold. We have

procedures in place for random verification of gold packets by the branch heads.

Branch Security and Safety Measures

Ensuring the safety and security of the branch premises is vital to our business since cash and gold inventory are

stored in each branch. Branch security measures implemented by us include:

Burglar alarms: Burglar alarms are installed at all branches and phone numbers of the assistant branch

head, branch head, the concerned police station and control room are integrated into the alarm system,

which triggers a call to these numbers if the alarm goes off.

Joint custodianship by the branch head and the assistant branch head: Both the branch head and the

assistant branch head hold the keys to the safe or strong room, which can only be opened if both keys

are inserted at the same time.

Security guards: Security guards are recruited through approved agencies and are present at night at all

of our branches. Day time security is also provided at some of our branches, depending on the security

of the particular area and the Gold Loans outstanding in the respective branch. In the absence of a

security guard, the branch head or the assistant branch head informs the security control room at the

head office and alternative arrangements are made. In addition, we have recently implemented

patrolling services to reduce risk of burglary.

IP cameras/CCTVs: As of May 31, 2011, we have completed the installation of IP or CCTV cameras at

1,945 branches. We intend to continue to install cameras at our branches and at least two cameras at

branches that are located in high risk areas.

Rules in relation to the cash counter: The cash counter is always locked from the inside and the cashier

is required to tally the cash against the cash book at least every three hours. Shifting of cash from one

storage point to another is recorded in the cash movement register that is maintained for this purpose.

Cash that is held in the cash cabin at any point in time does not generally exceed the retention limit

prescribed for this purpose. If there is a case where such cash exceeds the retention limit, it is generally

due to a banking holiday or other business reasons.

Release of the Pledge

We monitor our loan accounts and recovery of interest on an ongoing basis. Once a loan is fully repaid, the

pledged gold jewellery is returned to the customer. When a customer does not repay a loan on or before its

maturity, we initiate the recovery process and dispose of the pledged gold to satisfy the amount owed to us,

including both the principal and accrued interest. Before starting the recovery process, we inform the customer

through registered letters or legal notices. The recovery procedure typically commences after 15 days from the

date of maturity.

When a loan is repaid, we give the customer the option to pledge the security again and obtain another loan. The

procedure of re-pledging entails the same procedure as that of a pledge and is accompanied by the same mode of

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documentation that a pledge entails.

We also reserve the right, subject to notification to the customer, to sell the pledged gold even before a loan

becomes past due in the event the market value of the underlying pledged gold falls below amounts outstanding

on the loan.

Our Other Business Initiatives

In the fiscal years 2011, 2010 and 2009, revenues from our businesses other than Gold Loans constituted 1.02%,

2.61% and 10.44% respectively, of our total income.

Fee Based Services

Fee based services accounted for 0.17% of our total income for the financial year ended March 31, 2011. Fee

based services include money transfer and foreign exchange services. We act as sub-agents to Indian

representatives for money transfer inward remittance and enter into representation agreements for the same.

Under these agreements, we are entitled to a commission for the services provided depending on the amount of

money transferred and the location from which the money is transferred to us. We are compliant with the

provisions contained in the Prevention of Money Laundering Act in relation to the business of money transfer.

Foreign exchange service involves the repatriation of money in the form of foreign exchange by an Indian

citizen to his account from an account outside India. We have an Authorized Dealer II License from the RBI in

connection with this business activity. We also have the right to appoint franchisees. In addition, we assist in

currency exchanges and sale of Travelers‟ Cheques for a variety of purposes as permitted under the FEMA. We

are associated with HDFC Bank, IndusInd Bank and Thomas Cook for money transfer outward remittance

facilities.

Asset Finance

We have in the past provided loans for the acquisition of assets, particularly vehicles. This loan portfolio as of

March 31, 2011 aggregated to Rs. 47.08 million in principal amount, which is 0.07% of total loans and

advances. We do not intend to continue this business.

Gold Coins, Gold Purchase and Gold Storage

We convert some of the forfeited gold into gold coins and we sell the same as gold coins through our branches

in those states where we have registration under the local VAT Acts. The weight of the gold coins ranges from

one gram to ten grams and their purity is either 22 carat or 24 carat.

Business, Personal and Security Loans

We are also engaged in the business of providing, personal loans and security loans, and this accounted for a

negligible portion of our total income for the financial year ended March 31, 2011. We are dedicated to

providing loans to meet the business needs of our customers. The minimum loan amount advanced by us is Rs.

10,000 and the duration of the loan varies from 30 days to 100 days. These business loans are sanctioned to

small size or medium sized enterprises. We also advance loans against the security of life insurance policies.

These loans are repayable in equal monthly installments. In addition, we offer customized gold purchase

programs, or Swarnanidhi schemes, which allow our customers to purchase gold over time ranging from 12

months to 60 months.

Our business, personal, security and other loan portfolio along with loans under the Swarnanidhi Scheme as of

March 31, 2011 aggregated to Rs. 83.09 million, which is 0.13% of our total gross loans in principal amount.

Marketing, Sales and Customer Care

Our sales and marketing efforts are led by a team of 19 managers who guide the marketing and sales efforts of

their respective regions and who are supported by 11 marketing executives and 89 customer relation executives.

Our marketing team provides advertisement support to all of our branches located in various parts of India,

creates new advertising materials, creates new marketing strategies before launching a branch office, monitors

the competition from other companies and creates new strategies to develop our businesses. Our marketing team

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also provides additional support to improve business of non-performing branches. We use multiple media

agencies for creative content and advertising campaigns, and our media department coordinates with various

internal departments for managing their publicity requirements.

For the financial year ended 2011 and 2010, our total advertisement expenditure was Rs. 1,038.51 million and

Rs. 482.81 million, respectively, to support our aggressive brand building initiatives. For the financial year

ended, 2011 and 2010, our advertising expenses were 8.79% and 10.10% of our total income, respectively, as

compared to 4.92% and 7.71% of our total income for the financial year ended 2009 and 2008, respectively.

Currently film and television celebrities, such as Akshay Kumar, Mithun Chakraborty, Vikram V. Vinod,

Mohanlal, Venkatesh, Puneeth Rajkumar and Sachin Khedekar, promote our brand in our advertisement

campaigns.

We have developed a number of policies to retain our customers, the most significant amongst them being the

issue of „royalty cards‟ and the sale of insurance policies. We issue royalty cards (categorized into silver, gold

and platinum) to our customers who meet certain standards with respect to KYC requirements, timely

repayment and quick redemption of the loan. Eligibility depends upon how long the customer has been doing

business with us, as well as the number of loans taken out. The royalty cards reward the customer with higher

LTV and lower interest rates as compared to other customers.

Risk Management

Risk management forms an integral element of our business. We continue to improve our policies and

implement our policies rigorously for the efficient functioning of our business. As a lending institution, we are

exposed to various risks that are related to our gold lending business and operating environment. Our objective

in our risk management processes is to appreciate, measure and monitor the various risks that we are subject to

and to follow policies and procedures to address these risks. We do so through our risk management

architecture. The major types of risk we face in our businesses are credit risk, operational risk and market risk.

Credit Risk

Credit risk is the possibility of loss due to the failure of any counterparty to abide by the terms and conditions of

any financial contract with us. Credit risk in our Gold Loan business is relatively low because all our loans are

generally over-collateralized by pledged gold. We aim to reduce credit risk through a rigorous loan approval and

gold appraisal process, KYC compliance procedures and a strong non-performing asset (“NPA”) monitoring and

recovery mechanism. This risk is diminished because the gold jewellery used as security for our loans can be

readily liquidated, and the possibility of recovering less than the amount due to us is relatively low.

We also mitigate credit risk by not disbursing loans in excess of specified limits to the same customer, and for

loan amounts exceeding a certain limit, we undertake a credit check or profiling of the borrower before a loan is

approved. We have developed methods to peg the value of the loan amount to the moving average price of gold.

We also decrease credit risk by focusing on the quality of the pledged gold. Our internal control system ensures

independent verification of the gold by at least two officials at the branch level. The level of verification at the

branch level increases as the loan value increases. In addition, the quality of gold is checked by the area head

through random check. The risk profile of each account is monitored by the risk management division on an

ongoing basis through exception reports.

Operational Risk

Operational risk is broadly defined as the risk of direct or indirect loss due to the failure of systems, people or

processes, or due to external events. We have instituted a series of checks and balances and audit reviews to

address the various operational risks.

Although we disburse loans in very short periods of time, we have clearly defined appraisal methods to mitigate

appraisal risk. Inaccurate appraisal of the pledged gold may lead to funds being advanced against low value or

spurious gold. This risk is also mitigated by our policies on internal control, generation of alert reports and

additional requirements for high value loans.

We also have detailed guidelines on movement of cash or gold to address custodial risk, which is the risk

associated with the safety and security of our gold inventory. Methods of internal control and vigilance

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mechanisms aid in controlling this risk. For example, the branch head and the assistant branch head are the joint

custodians of the pledged gold, which means that the strong rooms or vaults can only be opened if two keys are

inserted at the same time. In addition, we are in the process of installing surveillance cameras across of all our

branches, and security guards are present at night at all of our branches. We also have policies that require

employee rotation both within the branch, as well as within different branches located within the same area, and

we undertake significant employee profiling and background verification checks before hiring and continuously

monitor their lifestyle changes. In addition, our insurance covers employee theft or fraud and burglary.

Market Risk

Market risk arises from the decline in the value of the pledged gold due to fluctuation in gold prices. This risk is

in part mitigated by the 15% to 30% margin we build in to our rate per gram used to calculate the loan amount,

as well as linking the LTV to the 90 day average price of gold, or the spot rate, whichever is lower. This risk is

further reduced because we appraise the gold jewellery and fund loans based solely on the weight of gold

content without considering design cost, production cost or value of gemstones. In addition, the sentimental

value of the gold jewellery to the customers may induce repayment and redemption of the pledged gold even if

the value of the pledged gold falls below the value of the repayment amount. A prompt and effective recovery

mechanism also helps us deal with this risk.

Risk Management Architecture

In order to address the risks that are inherent to our business, we have developed a risk management architecture

that includes a risk management committee, internal audit department, vigilance department and a risk

management department.

Risk Management Committee. Our risk management committee, which is led by one of our Directors,

oversees our risk management policies, which help us to identify, measure, monitor and mitigate the

various risks that we face in our businesses.

Internal Audit Department. Our internal audit department assists in the management of operational risk

using our centralized monitoring systems. Separate divisions of our internal audit department have been

put in place to handle the audit of the departments of the head office and those of the branch offices.

The audit of the head office is divided into two categories: (i) system and compliance audit; and (ii)

accounts audit. A branch inspection is carried out every 90 days with the focus on the verification of

the Gold Loan pledges. In addition, a branch audit is carried out every 45 days to monitor the

incremental pledges since the date of the branch inspection and the documentation in connection with

Gold Loans, and a spot audit can be conducted at any branch at any time.

Vigilance Department. We have also put in place a separate department for vigilance inspections. The

vigilance team conducts surprise inspections of high/medium risk branches and other branches based

on any report or detection of serious deviations or irregularities and undertakes the responsibility of

visiting branches to oversee the implementation of risk mitigation initiatives and improvement of

customer service.

Risk Management Department. Our risk management department analyzes in-house data available in

the system to generate alert and exception reports on an ongoing basis with respect to Gold Loans.

Non-Performing Assets (NPAs)

The Non-Banking Financial (Non - Deposit Accepting or Holding) Companies Prudential Norms (Reserve

Bank) Directions, 2007, as amended (“Prudential Norms Directions”) require that every non-deposit taking

NBFC shall, after taking into account the degree of well defined credit weaknesses and extent of dependence on

collateral security for realisation, classify its lease/hire purchase assets, loans and advances and any other forms

of credit into the following classes:

• Standard assets;

• Sub-standard assets;

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• Doubtful assets; and

• Loss assets.

Further, the class of assets referred to above shall not be upgraded merely as a result of rescheduling, unless it

satisfies the conditions required for the upgradation. A non-deposit taking NBFC is required to make provisions

against sub-standard assets, doubtful assets and loss assets in the manner provided for in the Prudential Norms

Directions.

Based on the Prudential Norms Directions for asset classification, details of the classification of our gross NPAs

for significant classes of our assets as of March 31, 2011, 2010 and 2009 are set forth below:

(Rs. in million)

Asset Type As of March 31,

2011

As of March 31,

2010

As of March 31,

2009

Gold

Sub-standard 76.27 48.25 13.23

Doubtful 133.68 53.40 24.53

Loss - - -

Gross NPA 209.95 101.65 37.76

Hypothecation

Sub-standard 26.69 124.52 153.93

Doubtful - 70.71 5.40

Loss - - -

Gross NPA 26.69 195.23 159.33

Secured loans are classified or provided for, as per management estimates, subject to the minimum provision

required as per Prudential Norms Directions as follows:

Classification of Gold and other loans

Asset Classification Provisioning policy

Standard Assets* 0.25%

Sub-standard assets 10%

Doubtful assets 100% of unsecured portion + 20 to 50% of secured portion.

Loss assets 100% provided if not written off in books.

* as per notification DNBB 222/CGM (US) – 2011 issued by Reserve Bank of India on January 17, 2011..

Classification of hypothecation and stock on hire

Asset Classification Provisioning policy

Standard Assets Nil

Sub-standard assets 10% to 100%

Doubtful assets* 100% provided

Loss assets 100% provided if not written off in books.

* All loans overdue for more than 18 months are classified as doubtful.

We have written-off Rs. 248.94 million as of March 31, 2011. As per the provisioning norms prescribed by RBI,

as of March 31, 2011, we have made a total provision of Rs. 167.46 million, which constituted 67.17% of our

Gross NPAs. Details of provisions and amounts written off as of March 31, 2011, March 31, 2010 and March

31, 2009 are set out in the table below:

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(Rs. in million)

As of / Year ended

March 31,

2011

As of / Year ended

March 31, 2010

As of / Year

ended March 31,

2009

Gross NPAs 249.30 336.66 235.97

Provisions 167.46 192.12 96.70

Net NPAs 81.84 144.54 139.27

Net loans 64,141.68 18,907.13 4,486.04

Net NPAs/Net loans (%) 0.13% 0.76% 3.11%

Amounts written off 248.94 53.42 117.54

NPA Recovery

For non-performing assets, our credit department assigns interest collection targets for each branch, reviews

performance against targets, makes visits to the branches, and advises on timely corrective measures and

repossession action. Once repossession is advised by our credit department, we conduct public auctions of the

pledged jewellery in accordance with the terms of our „auction policy, or otherwise dispose of the pledged

jewellery, after serving requisite legal notices.

The following table sets forth information relating to bad debts recovered for the fiscal years 2011, 2010 and

2009:

(Rs. in million)

Fiscal year

ended

March 31, 2011

Fiscal year ended

March 31, 2010

Fiscal year ended

March 31, 2009

Bad debts recovered 8.64 3.55 3.15

Capital Adequacy Ratio

As per the Prudential Norms Directions, every non deposit taking NBFC is subject to capital adequacy

requirements. Currently, such NBFCs are required to maintain a minimum capital ratio consisting of Tier I and

Tier II capital which shall not be less than 15% of its aggregate risk weighted assets on balance sheet and of risk

adjusted value of off-balance sheet items. Also, the total of Tier II capital, at any point of time, shall not exceed

one hundred per cent of Tier I capital. We are also required to transfer up to 20.0% of our annual profit to a

reserve fund and make provisions for NPAs. We had a capital adequacy ratio of 29.13%, 29.34% and 31.74% as

of March 31, 2011, 2010 and 2009, respectively. We have satisfied the minimum capital adequacy ratios

prescribed by the RBI for the financial year ended March 31, 2011 and each of the past three financial years as

set out below:

Particulars Financial year

ended March 31,

2011

Financial year

ended March 31,

2010

Financial year

ended March 31,

2009

Financial year

ended March 31,

2008

Tier I Tier II Tier I Tier II Tier I Tier II Tier I Tier II

Capital Adequacy Ratio 26.36% 2.77% 26.04% 3.30% 24.54% 7.20% 32.46% 8.33%

Centralized Management and Technology

Our IT support system aids the performance of all the processes involved in a loan transaction. For example, at

the pre-disbursement stage, KYC details as well as other details of customer appraisal are entered and stored in

the system for future reference. All the details contained in the documents that are relevant to a loan transaction

are entered into the system. The system filters the transaction at each level to confirm whether a particular set of

pledged jewellery meets the required specifications.

Once the inputs to arrive at the net weight are entered into the system, the system generates the net weight as

well as the loan advance that can be made against it under the several schemes that we offer. Once the customer

chooses the scheme, an entry to that effect is made and a pawn ticket is generated.

With respect to the post-disbursement phase, the interest due on each loan at any given point in time after

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disbursement is generated by the system. If the loan is settled by the customer prior to maturity, the system

calculates the amount repayable and also records the repayment and recovery of the pledge. When a loan

matures, the system indicates the same and we subsequently notify the customer.

The system generates a list of all loans that are overdue on a particular date. All details of the sale process of

forfeited jewellery are also entered into the system.

Our business, though carried on across the country, is controlled centrally at the head office. All transactions of

pledging and release that occur in all our branches are recorded and results are generated on a real time basis by

our internal IT infrastructure. Access to this data is restricted to certain designated personnel and alerts are

passed on to the concerned regional head upon the occurrence of specified events.

Up-to-date information on gold inventory and cash reserves in each branch helps us track our liquidity position

and plan for shortfalls well in advance. We are able to avert liquidity shortfalls in any particular branch by

transferring cash from one branch to another. In this manner, we ensure that each branch is centrally managed

by the head office and off-site surveillance of each branch is an ongoing process.

Treasury Operations

Our treasury department undertakes liquidity management by seeking to maintain an optimum level of liquidity

and monitors cash and bank balances. The objective is to ensure sufficient cash reserves at all our branches

while at the same time avoid holding cash in excess of what may be required in the ordinary course. Since

almost all disbursements are made in cash, we maintain an average of Rs. 1.00 million in cash across our

branches. Each regional office has the primary responsibility for directing branches within the region to move

surplus funds to deficit branches. If there is a surplus of funds in the region as a whole, such surpluses are

deposited in cash credit/overdraft accounts at the corporate level. Deficits at a regional level are managed by

cash transfers from our treasury department. We monitor cash and balances on daily basis using our

management information systems, and have arrangements with various banks for the transfer of bank balances

between locations. Cost of movement of cash also is taken into consideration while deciding optimum cash

levels in each location. We use a real time gross settlement (“RTGS”) facility if the remitting and receiving

banks are different, or through internal transfer if both the branches belong to the same bank. We also use cash

van services for delivery and collection of cash to and from certain of our branches.

Funding Sources

Our lines of credit include borrowings from financial institutions and amounts raised through the issue of non-

convertible debentures (“NCDs”). We also undertake the assignment of receivables from Gold Loan advances to

specified financial institutions. Our interest on borrowings and assignments, as a percentage of our total loans

and assignments, have decreased from 12.0% as of March 30, 2009 to 9.8% as of March 30, 2010 to 9.16% as of

March 31, 2011.

Borrowings from financial institutions constitute a significant portion of the total borrowings from secured and

unsecured loans availed of by us as at March 31, 2011. We have executed loan agreements with several banks

with the object of availing funds from them on certain stipulated terms and conditions. As at March 31, 2011,

we have also issued 1,328,535 secured NCDs ranging between Rs. 1,000.00 and Rs. 1.00 million, each

redeemable at par at the end of the term of each series of these debentures, which ranges from one to five years.

We pay an interest ranging from 7.50% to 13.00 % per annum on these NCDs. See ―Description of Certain

Indebtedness‖ Beginning on page 125.

We also attempt to balance our interest-bearing liabilities, some of which bear floating interest rates, against our

interest-earning assets, which bear fixed interest rates. As of March 31, 2011, 43% of our borrowings had

floating rates of interest, comprising primarily working capital loans from banks and other financial institutions.

We also assign receivables from Gold Loan advances to banks, financial institutions and others. The assignment

transactions are conducted on the basis of internal estimates of our funding requirements, and may vary from

time to time. In the event an assignee bank does not realize the receivables due under such loans, the relevant

bank would have recourse to a corporate guarantee issued by us and/or cash collateral and the underlying

security. For the fiscal years 2011, 2010 and 2009, the amounts assigned were Rs. 11,182.83 million, Rs.

7,077.02 million and Rs. 5,381.42 million respectively.

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Branch Network

As of May 31, 2011, we had 2,192 branches located in 22 states and union territories in India.

Insurance

We maintain a range of insurance policies to cover our assets, risks and liabilities. Since we deal in gold

financing, money in the form of cash and other assets form an integral part of our business. The most vital

insurance policies that we purchase include policies on gold in storage and transit, cash in storage and transit,

burglary, machinery break-down insurance for all our machinery and electronic equipment, fire and special

perils policy. In addition, we also have fidelity insurance covering all our employees as well as directors‟ and

officers‟ liability insurance covering our Directors. For all our branches, we maintain insurance cover under the

name of our Company. We consider our insurance coverage to be adequate and as and when we expand our

business, we endeavor to ensure that we have adequate insurance.

Employees

As of May 31, 2011, we have 16,137 employees, as set out below:

Board of directors 3

Management Information System and Financial Analysis Wing 10

Finance and accounts 171

Audit 731

Human Resource Management 108

Gold loan 14065

Branch Opening 121

Deposit 18

Money transfer & FOREX 30

Information technology 206

Legal department 74

Insurance 27

Hostel 4

Administration 59

Press & Stores 40

Risk Management 14

Operation 84

Vigilance 34

Regional Manager‟s office 240

Security control 98

TOTAL 16,137

We have not experienced any significant labor disputes and believe that relations with our employees are

satisfactory. We have established training programs for our employees on a continuous basis and we intend to

continue investing in recruiting, training and maintaining a rewarding work environment. In addition to ongoing

on-the-job training, we provide employees courses in specific areas or specialized operations on an as-needed

basis. We have skilled laborers and experienced personnel, particularly in the process of gold appraisal and

determination of purity of the gold. In 2009, we adopted an employee stock option scheme.

Competition

We face competition from pawnshops, other gold financing companies, banks, co-operative societies and local

money lenders. Other lenders may lend money on an unsecured basis, at interest rates that may be lower than

our service charges and on other terms that may be more favorable than ours. We believe that the primary

elements of competition are the quality of customer service and relationship management, branch location and

the ability to loan competitive amounts at competitive rates.

Property

Our registered head office is located at V/104 “Manappuram House”, Valapad P.O., Thrissur 680 567, Kerala

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and is partly owned by our Company and partly by our Group Company, Manappuram Benefit Fund Limited.

The Company has also entered into an agreement for sale dated August 4, 2010 with Mr. Antony Joseph

Pattathu of M/s Pattathu Brothers for the purchase of approximately 2,254.10 square metres of land at Santacruz

(East), Mumbai. None of our branches are located on property that is owned by the Company. We enter into

lease agreements with the owners of such property, which are renewed on a timely basis. The Company is in the

process of undertaking the construction of a new corporate office building at Valapad and has entered into

agreements with third parties for the execution of plumbing works, execution of the work of power supply and

electrification, supply of electrical equipments etc. with regard to the same. The land on which the new

corporate office building is being constructed has been purchased by our Company from our Promoter, V. P.

Nandakumar.

Intellectual Property

The trademark in the Manappuram logo is held by one of our Promoters, V.P Nandakumar. The tradename

“Manappuram” is held by our Company and is used by all group companies. We have entered into a license

agreement dated December 18, 2007 with V. P. Nandakumar for the use of the Manappuram logo for a period of

10 years on a non-exclusive and non-assignable basis. No payment is made under the license agreement for the

use of the logo.

Corporate Social Responsibility

We believe that emphasis should be placed on social and community service, which is essential for building

sustainable businesses that create market value, as well as social value. The Manappuram Group registered a

charitable trust on October 24, 2009 under the name, the Manappuram Foundation (“Foundation”) at Valapad.

In furtherance to our commitment to corporate social responsibility, the Foundation has contributed to various

social causes during the course of its operations by setting up free health insurance for below poverty line

families in Thrissur District, Kerala. The Foundation also intends to operate several vocational training centers

to help the economically deprived sections in Southern India.

105

HISTORY AND MAIN OBJECTS

Manappuram Finance Limited was incorporated as a public limited company under the Companies Act as

“Manappuram General Finance and Leasing Limited” on July 15, 1992 by a Certificate of Incorporation No.

09-06623 of 1992 issued by the Registrar of Companies, Kerala under the Companies Act. The Company has

its registered office at V/104 “Manappuram House”, Valapad P.O., Thrissur 680 567, Kerala. The Company

was issued a certificate for commencement of business on July 31, 1992 by the Registrar of Companies, Kerala.

The name was subsequently changed to “Manappuram Finance Limited” on June 22, 2011 vide Fresh

Certificate of Incorporation issued by the Registrar of Companies, Kerala and Lakshadweep.

We are listed on the NSE, BSE, MSE and the CSE. We were earlier registered with RBI as a deposit accepting

NBFC as per certificate of registration no. 16.00029 dated May 25, 1998. However, subsequently, we registered

ourselves as non deposit accepting NBFC vide a new certificate of registration no. B-16.00029 dated March 22,

2011.

Main objects of our Company:

Our main objects as contained in our Memorandum of Association are:

1. To carry on and undertake the business of all types, of financing activities including hiring of

movables, granting assistance to trade, commerce, industry and agriculture.

2. To carry on and undertake the business of Merchant Bankers, Portfolio Investment Managers, Mutual

Fund Managers, Underwriters, Registrars and Managers to public issues and Stock Brokers, and to

undertake depository participant activities, functions and responsibilities and to provide custodial and

depository services of assets and securities, to collect dividends, interests, rights, entitlements, bonuses

and other benefits, incomes and entitlements accruing on such assets and securities.

3. To carry on and to act as agents in money changing business so as to deal in Foreign Exchange, to act

as full-fledged Money Changers, to act as Foreign Exchange Brokers, to provide FOREX advisory

services, to introduce Money Transfer Schemes, to act as Exchange House.

Material Agreements

We have received private equity financing from affiliates of Sequoia Capital, India Equity Partners, Ashmore

Alchemy and Granite Hill India Opportunities Fund. As of May 31, 2011, these private equity investors (except

for Sequoia Capital and Granite Hill which sold their investment) held an aggregate of 14.23% of our

outstanding Equity Shares.

Our shareholder agreements with these investors contain customary investor‟s rights, including (i) the

appointment of a nominee director on the Board of the Company; (ii) the appointment of a nominee director on

the Board of any subsidiary of the Company (iii) affirmative rights in relation to matters such as alteration in the

capital structure of the Company and commencement of a new line of business; and (iv) certain financial rights,

such as tag along rights and a right of first sale in certain specified situations. In addition, some of our

shareholder agreements require that the level of assets under management of Manappuram Benefit Fund Limited

(“MABEN”) may not exceed a certain per branch average and percentage of our total assets under management,

that MABEN may not open any additional branches and that Manappuram Asset Finance Limited (“MAFL”)

may not exceed a certain asset size or open any additional branches.

Other than the above-mentioned agreements and agreements in relation to this Issue, our Company has not

entered into material agreements which are not in the ordinary course of business.

106

OUR MANAGEMENT

Board of Directors

The composition of the Board of Directors is governed by the provisions of the Companies Act and the Equity

Listing Agreements with the Stock Exchanges. The Articles of Association of the Company provide that the

Company shall not have less than three Directors and not more than fifteen 15 Directors, unless otherwise

determined by a special resolution.

Pursuant to the Companies Act, not less than two-thirds of the total number of directors shall be persons whose

period of office is subject to retirement by rotation and one third of such directors, or if their number is not three

or a multiple of three, then the number nearest to one-third, shall retire from office at every annual general

meeting. The Articles provide that the Directors to retire are those who have been the longest in the office since

their last appointment but as between persons who become Directors on the same day those to retire shall in

default of and subject to any agreement among themselves, be determined by lot. A retiring director is eligible

for re-election. The Articles provide that in the event of the Company borrowing any money from any financial

institution or corporation or Government or Government Body or any collaborator, bank person or persons or

any other agency or source while any money remains due to them or any of them, the said corporation,

institution or Government Body or as the case may be, shall have and may exercise the rights and powers to

appoint from time to time any person or persons to be a director or directors of the Company, that such directors

shall not be liable to retire by rotation subject to the limits prescribed under the Companies Act, nor be required

to holding qualification shares. Further from and with effect from the Closing Date (defined as November 5,

2008), as long as Hudson hold at least 6% of the Share Capital, Hudson shall have the right to appoint one

nominee director/non executive director on the Board.

The Board of Directors are authorised by the Articles to appoint any person as a Director as an addition to the

Board so that the total number of Directors shall not at any time exceed the maximum number fixed by the

Articles. Such Director so appointed shall hold office only up to the date of the next AGM of the Company and

shall be eligible for re-election. The Articles of Association, subject to the Companies Act, 1956 allow the

Board of Directors to appoint any person to act as an alternate Director for a Director during the latter‟s absence

for a period of not less than three months from the State in which meetings of the Board are ordinarily held.

The following table sets forth details regarding the Board as on the date of this Prospectus:

Name, DIN, Address,

Occupation

Designation Other Directorships

V.P. Nandakumar

DIN: 00044512

Address: Padmasaroj‟

Vazhappully House,

P.O.Valapad, Thrissur

Kerala 680 567

Occupation: Business

Executive Chairman 1. Manappuram Insurance Brokers (P) Limited

2. Manappuram Asset Finance Limited

3. Manappuram Health Care Limited

4. Manappuram Comptech and Consultants (P)

Limited

5. Manappuram Infrastructure and Builders

Private Limited

6. Manappuram Jewellers Private Limited

7. Manappuram Benefit Fund Limited

8. Manappuram Constructions & Properties (P)

Limited

9. Fivestar Business Credits Limited

10. Aptus Value Housing Finance India Limited

I. Unnikrishnan

DIN: 01773417

Address: Mannath House

Mannath Lane, Thrissur, Kerala

Managing Director 1. Manappuram Asset Finance Ltd

2. Manappuram Insurance Brokers (P) Limited

3. Manappuram Jewellers (P) Limited

107

Name, DIN, Address,

Occupation


680 001


B. N. Raveendra Babu

DIN: 00043622

Address: Blanghat House,

P.O. Kaipamangalam,

Thrissur, Kerala 680 681

Occupation: Consultant

Joint Managing Director 1. Manappuram Chits(India) Limited

2. Manappuram Comptech and Consultants (P)

Limited

3. Manappuram Insurance Brokers Private

Limited


A. R. Sankaranarayanan

DIN: 00046545

Address: 10 C, Skyline Brent

Wood, Saw Mill Road,

Koorkencherry, Thrissur, Kerala

680 007

Occupation: Retired from

service

Independent and Non Executive

Director

-

P. Manomohanan

DIN: 00042836

Address: Aswathy‟, No: 7/ 71A,

High School Road,

P.O. Chenthrappinny,



service


Director


V.R. Ramachandran

DIN: 00046848

Address: Valiparambil House,

50/840, Ayyanthole,


Occupation: Service


Director

-

V.M. Manoharan

DIN: 00044817

Address: TC 6/657, Vylappully

House, Kunduvara Road,

Chembukkavu



service


Director


2. Poomala Cottages Private Limited

108

Name, DIN, Address,

Occupation


Gaurav Mathur(1)

DIN: : 00016492

Address: C/o IEP Advisors

private Limited

505, Cee Jay House

Dr. Annie Besant Road, Worli

Mumbai, Maharashtra 400 018

Occupation: Service

Nominee and Non Executive

Director

1. Ocean Sparkle Limited

2. A2Z Maintenance and Engineering Services

Limited

3. High bridge Investments Private Limited

4. Ikya Human Capital Solutions Private Limited

5. Innovative Foods Limited

Shailesh J. Mehta

DIN: : 01633893

Address: 401 L Cerrito Ave

Hills Borough

California – 94010

United States of America

Occupation: Service


Director


2. First Source Solutions Limited

3. SAFARI Industries Limited

4. Arch Pharmalabs Limited

5. Account Now Corpn USA

6. All Services Under One Roof (P) Limited

Gautam Saigal(2)

DIN: : 00640229

Address: C/o AA India

Development Capital Advisors

Private Limited

63 Maker Maxity, Level 6, 3

North Avenue

Bandra Kurla Complex, Bandra

(East)

Mumbai, Maharashtra

400 051

Occupation: Service

Nominee and Non Executive

Director

1. AA Indian Development Capital Advisors

Private Limited

2. Numero Uno Clothing Limited

3. Siesta Logistics Corporation Limited

4. Barflex Poly Films Private Limited

M. Anandan

DIN: : 00033633

Address: House No AL 192

1st Street, 12th Main Road

Annanagar, Chennai, Tamil

Nadu 600 040



Director


2. Fivestar Business credits Limited

Jagdish Capoor

DIN: : 00002516

Address: 1601 Brooke Ville

359 Mogul Lane, Mahim

Mumbai, Maharashtra

400 016

Occupation: Service


Director

1. The Indian Hotels Company Limited

2. Assets Care Enterprises Limited

3. Quantum Trustee Company Private Limited

4. LIC Pension Fund Limited

5. Alankit Assignments Limited

(1) Nominee on behalf of Hudson Equity Holdings Limited

(2) Nominee on behalf of AA Development Capital India Fund I LLC

109

V.P. Nandakumar and Sushama Nandakumar are the promoters of our Company and V.P. Nandakumar is the

sole Promoter Director on the Board. No Directors of the Company are related to each other.

Brief Biographies of the Directors

V. P. Nandakumar, aged 57 years, is the Executive Chairman of our Company. He holds a masters degree in

science from Calicut University and is also a Certified Associate of Indian Institute of Bankers. He is the chief

Promoter of the Manappuram Group of Companies and has in the past been associated with the banking industry

in various capacities. He is the Chairman of the Equipment Leasing Association (India) and the Kerala Non-

Banking Finance Companies Welfare Association. He has been the Director of our Company since July 15,

1992.

I. Unnikrishnan, aged 47 years, is the Managing Director of our Company. He holds a bachelors degree in

commerce from Calicut University and is also a fellow member of the Institute of Chartered Accountants of

India. He has experience in rendering advisory services relating to NBFCs. He has in the past worked with

HAWA-MK Electrical Limited. He has been the Director of our Company since October 11, 2001. He was

appointed as the Managing Director on October 1, 2006.

B. N. Raveendra Babu, aged 59 years, is the Joint Managing Director of our Company. He holds a masters

degree in commerce from the Calicut University and completed his inter from the Institute of Certified

Management Accountants. He has worked in a senior position in the Finance and Accounts Department of Blue

Marine International in the U.A.E. He has been the Director of our Company since July 15, 1992. He was

appointed as the Joint Managing Director on January 11, 2010.

A. R. Sankaranarayanan, aged 85 years, is an Independent and Non Executive Director of our Company. He

holds a masters degree in science from Annamalai University and is a retired officer from the Indian Revenue

Service. He has over 50 years of work experience and has in the past worked as Director of the Prime Minister‟s

Secretariat, Managing Director of SAIL International Limited and Director of the Federal Bank Limited. He has

been the Director of our Company since August 18, 2003.

P. Manomohanan, aged 70 years, is an Independent and Non Executive Director of our Company. He holds a

bachelor‟s degree in commerce from Kerala University and also a diploma in Industrial finance from Indian

Institute of Bankers. He is also a Certified Associate of the Indian Institute of Bankers. He has over 38 years of

work experience in the RBI and in the regulatory aspects of NBFCs. He has in the past held the post of General

Manager of Reserve bank of India. He has been the Director of our Company since August 18, 2003.

V. R. Ramachandran, aged 59 years, is an Independent and Non Executive Director of our Company. He holds

a bachelors degree in science from the Calicut University and a bachelor‟s degree in law from the Kerala

Universty. He has over 32 years of work experience and is a civil lawyer enrolled with the Thrissur Bar

Association. He has been the Director of our Company since April 19, 2002.

V. M. Manoharan, aged 65 years, is an Independent and Non Executive Director of our Company. He holds a

masters degree in commerce from University of Kerala and holds a Doctor of Philosophy in International

Business (Commerce) from Cochin University of Science and Technology. He has over 40 years of work

experience and has in the past held the posts of Deputy Director, Collegiate Education, Thrissur Zone and Dean,

KMCT school of Business, Kozhikode. He also held the post of the Principal in various Government Colleges in

Kerala and was also a Syndicate Member of University of Calicut. Presently, he is a member of the steering

committee, Vidya International Charitable Trust, Thalakkottukara, Thrissur and of the All India Management

Association and the Association of Indian College Principals. He has been the Director of our Company since

August 18, 2003

Gaurav Mathur, aged 37 years, is a Nominee and Non Executive Director of our Company. He has completed

his bachelor of arts in economics (honours) from Delhi University and master of business administration from

Indian Institute of Management, Ahmedabad. He is the Co-founder and Managing Director of India Equity

Partners. He had worked with JP Morgan Partners, Singapore, and Deutsche Bank, London. He had also served

on the boards of Domino‟s Pizza India Limited, Gujarat Glass Limited, MTR Foods Private Limited and RSB

Transmission of India Limited. Currently, he is serving on the boards of A2Z Maintenance and Engineering

Services Private Limited and IKYA HR Services and Ocean Sparkle Limited. He has been the Director of our

Company since October 15, 2010.

110

Shailesh J. Mehta, aged 62 years, is an Independent and Non Executive Director of our Company. He has

completed his bachelor of technology in mechanical engineering from Indian Institute of Technology, Mumbai,

and holds a masters degree in science in Operations Research from Case Western Reserve University. He holds

a Doctor of Philosophy degree in Operation Research and Human Letters from the California State University

and in Operation Research and Computer Science from Case Western Reserve University. He has over 38 years

of work experience and has held the post of President Granite Hill Capital Ventures, Chairman and Chief

Executive Officer Providian Financial Corporation, operating general partner West Bridge Capital, president

and Chief Operating Officer Capital Holding and Executive Vice President Key Corp (formerly Ameritrust). He

has also held the post of Chairman and Chief Executive Officer, Providian Financial Corporation and President

and Chief Operating Officer Capital Holding. He has been the Director of our Company since August 17, 2009.

Gautam Saigal, aged 46 years, is a Nominee and Non Executive Director of our Company. He holds a masters

degree in commerce from the Calcutta University and is a qualified Chartered Accountant. He has over 19 years

of work experience of which over 13 years has been on buy side private equity advisory services. He is

presently the Managing Director of AA Indian Development Capital Advisory Services. Prior to this, he co-led

AIG Global Investment Group‟s private equity advisory team, advising on private equity investments by various

AIG Group sponsored funds in India, Earlier he was Vice President at SSKI Corporate Finance, Mumbai and

manager of Stewart & Mackertich.. He has been the Director of our Company since August 17, 2009.

M. Anandan, aged 61 years, is an Independent and Non Executive Director of our Company. He holds a

bachelors degree in commerce from the Madras University and is a qualified Fellow Chartered Accountant. He

has more than 30 years of work experience in the field of financial services. He has in the past worked with

Cholamandalam DBS Finance Limited and with Cholamandalam MS General Insurance Limited as its

Managing Director. He was also the Director in Charge of DBS Cholamandalam AMC Limited and DBS

Cholamandalam Securities Limited. Currently he is the Chairman of Aptus Value Housing Finance Limited and

he was on the board of Equitas Micro Finance India Private Limited as a non executive director. He has been the

Director of our Company since August 17, 2009.

Jagdish Capoor, aged 72 years, is an Independent and Non Executive Director of our Company. He holds a

masters degree in Commerce from Agra University and has also done his fellowship from Indian Institute of

Banking and Finance. He has more than 39 years of work experience in banking and finance. He has in the past

worked as the Deputy Governor of the Reserve Bank of India, Chairman of HDFC Bank, BSE, Deposit

Insurance and Credit Guarantee Corporation of India, Unit Trust of India and also as a Director on the boards of

several commercial banks. Currently he is on the board of Indian Hotels Company Limited, Assets Care

Enterprise Limited, Indian Institute of Management, LIC Pension Fund Limited and the Chairman of Quantum

Trustee Company Private Limited. He has been the Director of our Company since July 20, 2010.

Borrowing Powers of the Directors of the Company

Pursuant to a resolution passed by the shareholders of the Company at their EGM held on May 31, 2011 and in

accordance with provisions of the Companies Act, the Board has been authorised to borrow up to Rs. 200,000

million, apart from temporary loans obtained or to be obtained from the Company‟s bankers in the ordinary

course of business, notwithstanding that such borrowings may exceed the aggregate of the paid-up share capital

and free reserves of the Company.

Interest of Directors of the Company

All the Directors, including independent Directors, may be deemed to be interested to the extent of fees, if any,

payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other

remuneration and reimbursement of expenses and commission payable to them. The Executive Chairman and

the Managing Director are interested to the extent of remuneration and commission paid to them for services

rendered as officers or employees of the Company.

The Directors, including independent Directors, may also be regarded as interested in the Equity Shares and also

to the extent of any dividend payable to them and other distributions in respect of the Equity Shares. The

Directors, including independent Directors, may also be regarded as interested in the Equity Shares held by or

that may be subscribed by and allotted to the companies, firms and trusts, in which they are interested as

directors, members, partners or trustees.

111

All of the Directors may be deemed to be interested in the contracts, agreements/ arrangements entered into or to

be entered into by the Company with any company in which they hold directorships or any partnership firm in

which they are partners as declared in their respective capacity. Except as otherwise stated in this Prospectus

and statutory registers maintained by the Company in this regard, the Company has not entered into any

contract, agreement or arrangement during the two years immediately preceding the date of this Prospectus in

which the Directors are interested directly or indirectly and no payments have been made to them in respect of

these contracts, agreements, arrangements which are proposed to be made with them and none of the Directors

have taken any loans from the Company.

Shareholding of Directors

The following table sets forth the shareholding of our Directors in our Company as on May 31, 2011:

S. No. Name No. of Equity Shares Shareholding (%)

of Pre issue Equity

Share Capital

1 V.P. Nandakumar 127,996,348 30.70

2 I. Unnikrishnan 1,180,500 0.28

3 A. R. Sankaranarayanan 1,089,500 0.26

4 P. Manomohanan 691,791 0.16

5 V. R. Ramachandran 613,000 0.14

6 V. M. Manoharan 547,555 0.13

7 Gaurav Mathur NIL -

8 Shailesh J. Mehta 170,000 0.04

9 Gautam Saigal

NIL -

10 M. Anandan 410,000 0.09

11 B. N. Raveendra Babu 1,678,100 0.40

12 Jagdish Capoor 1000 Negligible

Remuneration and Terms of Employment of the Directors

1. Non-Executive Directors

The non-executive Directors are paid remuneration by way of sitting fees and other expenses

(travelling, boarding and lodging incurred for attending the Board/Committee meetings).

The Company pays sitting fees of Rs. 20,000 per meeting to the non-executive Directors for attending

meetings of the Board, Rs. 15,000 per each meeting of the Audit Committee and Rs. 7,500 per each

meeting of the Nomination, Compensation and Corporate Governance Committee and Shareholders‟

Grievance Committee. No sitting fee is paid for meetings of the Risk Management Committee of the

Board.

The following table sets forth all compensation paid by the Company to the existing non-executive

Directors for the year April 1, 2010 to March 31, 2011:

(Rs. in million)

Name Sitting Fees Commission Total

A. R. Sankaranarayanan 0.26 0.40 0.65

P. Manomohanan 0.23 0.40 0.63

V.R. Ramachandran 0.19 0.40 0.59

V. M. Manoharan 0.19 0.40 0.59

Shailesh J. Mehta 0.17 0.40 0.55

M. Anandan 0.23 0.40 0.63

Jagdish Capoor 0.08 0.25 0.33

Our directors Gaurav Mathur and Gautam Saigal are not paid any remuneration.

112

2. Executive Directors

The present remuneration structure of Executive Directors consists of fixed salary, commission and

other perquisites. The following table sets forth all compensation paid to the Executive Directors with

effect from April 1, 2011:

V.P. Nandakumar, Executive Chairman

Particulars Remuneration

Basic salary Rs. 1,875,000 per month with an annual increment of Rs. 187,500

Perquisites* Contribution to Provident Fund at 12% of salary; leave encashment at the end of

tenure; medical reimbursement expenses for self and family including premium

payable for medical insurance in accordance with the rules of the Company; personal

accident insurance as per the rules of the Company; leave travel concession for self

and family once in a year as per the rules of the Company; fee for clubs subject to

maximum of two clubs excluding admission and life membership fees

Commission Not exceeding 1% of the net profits of the Company calculated as per the provisions

of Sections 349 and 350 of the Companies Act, the quantum whereof to be

determined by the Board of Directors subject to norms framed by the Board

Others Provision of chauffeur driven car for official purposes and telephone at residence and

such other allowances, perquisites, benefits and amenities as may be provided by the

Company from time to time

* However, contribution to Gratuity Fund, encashment of leave at the end of the tenure of the appointment is not included in the

computation of remuneration or ceiling on perquisites.

I. Unnikrishnan, Managing Director


Basic salary Rs. 625,000 per month with an annual increment of Rs. 62,500







Commission Not exceeding 1% of the net profits of the company calculated as per the provisions



Others Provision of chauffeur driven car for official purposes and telephone at residence and

such other allowances perquisites and benefits and amenities as may be provided by

the Company from time to time

*However, contribution to Gratuity Fund, encashment of leave at the end of the tenure of the appointment is not included in the


B. N. Raveendra Babu, Joint Managing Director


Basic salary Rs. 500,000 per month with an annual increment of Rs. 50,000

113








Commission Not exceeding 1% of the net profits of the company calculated as per the provisions



Others Such other allowances perquisites and benefits and amenities as may be provided by

the Company from time to time

* However, contribution to Gratuity Fund, encashment of leave at the end of the tenure of the appointment is not included in the


Changes in Board in during the last three years

Sr

No

Director Description of Change Date Reason

1 B.N.Raveendra Babu Resignation October 30, 2008 --

2 Mr. K.P. Balaraj

Mr. Gautam Saigal

Mr. Shailesh J. Mehta

Appointment December 27, 2008 As per the terms of PE agreement

3 Jyothy Prasannan Resignation October 30, 2008 --

4 K.K.Mohandas Resignation December 27, 2008 On personal grounds

5 M.Anandan Appointment December 27, 2008 --

6 B.N.Raveendra Babu Appointment as joint

managing director

February 25, 2010 --

7 Juguna.GP Resignation March 18, 2010 On personal grounds

8 K.P.Balaraj Resignation May 11, 2010 On account of sale of share by Sequoia

9 K.P.Balaraj Re-appointment May 11, 2010 To continue till AGM

10 T.V.Antony Appointment May 11, 2010 --

11 Jagdish Capoor Appointment July 20, 2010 --

12 K.P.Balaraj Resignation July 24, 2010 On his own

13 T.V.Antony Resignation August 24, 2010 On health grounds

14 Ashvin Chadha

Resignation October 15, 2010 On account of change in employment

15 Gaurav Mathur Appointment October 15, 2010 Nominated in place of Mr.Ashvin

Chadha

Corporate Governance

The Company has been complying with the requirements of the applicable regulations, including the Equity

Listing Agreement with the Stock Exchanges, in respect of corporate governance including constitution of the

Board and Committees thereof. The corporate governance framework is based on an effective independent

Board of Directors, separation of the supervisory role of the Board of Directors from the executive management

team and constitution of the committees of the Board of Directors, as required under applicable law. The

114

Company‟s corporate governance policies recognize the accountability of the Board and the importance of

transparency to all constituents, including employees, customers, investors and the regulatory authorities.

The Board of Directors functions either as a full Board or through various committees constituted to oversee

specific operational areas. The executive management of the Company provides the Board of Directors with

detailed reports on its performance periodically.

Currently, the Board of Directors comprises 12 Directors. Consequently, in compliance with the requirements of

Clause 49 of the Equity Listing Agreement, the Board of Directors consists of nine independent Directors.

As per the mandatory requirements of Clause 49 of the Equity Listing Agreement, the Company has constituted

the following committees of the Board (“Committee”) and brief details of each of such Committee, its scope

and composition are given below:

1. Audit Committee

The Audit Committee was re-constituted by the Board of Directors through its resolution dated July 20,

2010.

The Audit Committee currently comprises the following Directors:

(i) P. Manomohanan;

(ii) A.R. Sankaranarayanan;

(iii) M. Anandan;

(iv) Shailesh J. Mehta; and

(v) Gautam Saigal.

The functions of the Audit Committee include:

(i) Oversight of the Company‟s financial reporting process and the disclosure of its financial

information to ensure that the financial statement is correct, sufficient and credible.

(ii) Recommending the appointment, reappointment, and if required, the replacement or removal

of the statutory auditor and the fixation of audit fee.

(iii) Approval of payment to statutory auditors for any other services rendered by the statutory

auditors.

(iv) Review, along with the management, the annual financial statements of the Company before

its submission to the Board for approval, with particular reference to:

a. Matters required to be included in the Directors‟ Responsibility Statement to be

included in the Board‟s report in terms of clause 2AA of Section 217 of the

Companies Act;

b. changes, if any in accounting policies and practices and reasons for the same;

c. major accounting entries involving based on exercise of judgment by management;

d. significant adjustments made in the financial statements arising out of audit findings;

e. compliance with listing and legal requirements concerning financial statements;

f. disclosure of any related party transactions; and

115

g. Qualifications in the draft audit report.

(v) Reviewing with the management the quarterly financial statements before submission to the

Board for approval.

(vi) Review of the adequacy of internal control systems with the management, external and

internal auditors.

(vii) Review the findings of any internal investigations by the internal auditors into matters wherein

fraud is suspected or irregularity or failure of internal control systems of a material nature and

reporting the matter to the Board.

(viii) Discussion with internal auditors regarding any significant findings and follow up thereon.

(ix) Discussion on the nature and scope of the audit with auditors before the audit commences as

well as post-audit discussion to ascertain any area of concern.

(x) To look into the reasons for substantial defaults in payments to depositors, debenture holders

and shareholders and creditors.

(xi) Any other function mentioned in the terms of reference of the Audit Committee.

2. Nomination, Compensation and Corporate Governance Committee

The Nomination, Compensation & Corporate Governance Committee was re-constituted by the Board

of Directors at its meeting held on July 20, 2010.

The Nomination, Compensation & Corporate Governance Committee currently consists of the

following Directors:

(i) A. R. Sankaranarayanan;

(ii) V. P. Nandakumar;

(iii) M. Anandan;

(iv) Shailesh J. Mehta

(v) Jagdish Capoor; and

(vi) Gautam Saigal.

The functions of the Nomination, Compensation and Corporate Governance Committee include:

(i) Determining on behalf of the Board and on behalf of the shareholders the Company's policies

on specific remuneration packages to executive directors including pension rights and any

compensation payment.

(ii) Acting as a “Compensation Committee” as required under the SEBI (Employee Stock Option

Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 for the purpose of

formulation of policy, procedures and scheme and the overall supervision and administration

of the MFL ESOP.

3. Shareholders‟ Grievance Committee

The Shareholders‟ Grievance Committee was re-constituted by the Board of Directors through its

resolution dated October 15, 2010.

116

The Shareholders‟ Grievance Committee currently consists of the following directors:

(i) V.R. Ramachandran;

(ii) P. Manomohanan; and

(iii) V.M.Manoharan.

The Shareholders‟ Grievance Committee, among other functions, focuses on shareholder grievances

which comprise monitoring and redressing the shareholders complaints in relation to share transfer, non

receipt of Annual Report etc.

4. Risk Management Committee

The Risk Management Committee was re-constituted by the Board of Directors through its resolution

dated August 17, 2009.

The Risk Management Committee currently consists of the following directors:

(i) P. Manomohanan;

(ii) V.P. Nandakumar;

(iii) I. Unnikrishnan; and

(iv) B.N. Raveendra Babu.

The Risk Management Committee, among other functions, focuses on reviewing on an ongoing basis

the measures adopted by the Company for the identification, measurement, monitoring and mitigation

of the risks involved in the various business activities carried on by the Company.

5. Financial Resources and Management Committee

The Financial Resources and Management Committee was re-constituted by the Board of Directors

through its resolution dated January 24, 2011.

The Financial Resources Committee currently consists of the following directors:

(i) V.P. Nandakumar;

(ii) I. Unnikrishnan; and

(iii) B.N. Raveendra Babu.

The committee‟s function is to oversee and deal with the following operational matters from time to

time:-

(i) Investments

To deliberate and make recommendation to the Board on all transactions and matters relating

to the business of the company or its investments.

(ii) Financial Arrangements

a) Approve financial arrangements whether as working capital demand loans or against

assignment of receivables of the company or buy out of port folios or by such other

means with banks and other financial institutions including the signing of such

documents for facilities within the borrowing powers of the Board.

117

b) Approve the creation of any mortgage/charge or other encumbrance over the

company‟s properties or assets for the above purposes.

c) Approve the issuing or providing or permitting the company to issue or provide any

form of guarantee or indemnity or other financial or non financial support in the

ordinary course of business.

d) To consider the issue of commercial papers and other short term or long term

instruments for raising funds from the market.

e) Authorize changes in signatories in respect of accounts maintained by the company

with banks and other financial institutions

(iii) Allotment of Debentures and Bonds

Approve the allotment of debentures and bonds issued by the company within in the overall

limit set for the issue and the creation/modification/satisfaction of mortgage/charge on such

debentures/bonds as the case may be.

(iv) Others

(a) Authorizing officers of the company for making necessary application for registration

under different enactments as employee welfare, fiscal and other municipal or local

or subordinate legislations.

(b) Authorizing officers of the company by grant of power of attorneys so as to represent

before Government, Judicial or quasi judicial bodies or other authorities for sanction,

approval or other permissions on such matters affecting the business of the company.

(c) Authorizing officers of the company by grant of power of attorneys or otherwise for

matters in connection with day to day business activities, opening of branches,

execution of rent/tenancy agreements etc.

118

Organisation chart of the Company

EXECUTIVE CHAIRMAN

MD

119

Key Management Personnel of the Company

C. Radhakrishnan, aged 46 years, is the General Manager and Company Secretary of our Company. He holds a

masters degree in commerce from the Calicut University and in business administration from the Mahatma

Gandhi University. He is a Fellow Company Secretary having completed his bachelor‟s degree in law from the

Tumkur University. He has 14 years of work experience with the Life Insurance Corporation of India, Mafatlal

Industries Limited, Transformers and Electricals Kerala Limited and Co-operative Colleges. He has been

working with our Company since December 11, 2001.

Bindhu A.L., aged 37 years, is the Chief Financial Officer and Senior General Manager of our Company. She

holds a bachelors degree in commerce from the Calicut University and is also a certified Chartered Accountant

from the Institute of Chartered Accountants of India. She has in the past worked with Mohandas and Associates.

She has been working with our Company since June 15, 1998.

N.R. Bahuleyan, aged 62 years, is the Chief General Manager of our Company. He holds a bachelors degree in

commerce from the Calicut University and is a Fellow Company Secretary. He has in the past worked with the

Kerala State Electronics Development Corporation Limited for 18 years. He has been working with our

Company since August 1, 1994.

P. Krishnaraj, aged 62 years, holds the post of „General Manager-Operations‟ in our Company. He holds a

master‟s degree in agricultural science from the Kerala University and is also a Certified Associate of Indian

Institute of Bankers. He has over 37 years of work experience and has worked as Block Development Officer,

Government of Tamil Nadu and with the State Bank of Travancore. He has been working with our Company

since March 9, 2009.

S.V.R. Jogarao, aged 61 years, holds the post of „General Manager-Gold Loan Marketing‟ in our Company. He

holds a masters degree in science from the Andhra University, a bachelor‟s degree in law from Ravisanker

University and is also an Associate of Indian Institute of Bankers (C.A.I.I.B). He has over 34 years of

experience with the Bank of India. He has been working with our Company since November 9, 2009.

Krishnamurthy, aged 53 years, holds the post of „Senior General Manager‟ in our Company. He holds a

bachelors degree in commerce from the Kerala University and is also a Certified Associate of Indian Institute of

Bankers. He has over 30 years of experience with the State Bank of India. He has been working with our

Company since October 29, 2009.

M.V.Babu, aged 62 years, holds the post of General Manager (Taxation) in our Company. He holds a bachelors

degree in Commerce from the Kerala University. He is a Chartered Accountant by profession and is also an

associate member of the Indian Institute of Bankers. He has 25 years of experience as the head of Accounts and

Taxation departments of The Federal Bank.

M. Satheesh Kumar aged 47 years, holds the post of General Manager (Information Technology) in our

Company. He holds a bachelors degree in history from the Calicut University. He has an experience spanning

more than 15 years in various departments of our Company.

Shareholding of Key Management Personnel

As of the date of this Prospectus, except as provided below, our Key Management Personnel do not hold any

Equity Shares in the Company.

S. No. Name Number of Equity

Shares Held

% of shareholding

1 C. Radhakrishnan 14,602 0.0017

2 Bindhu A. L. 1,04,020 0.0119

3 N.R. Bahuleyan 21,050 0.0025

4 P. Krishnaraj 10,520 0.0012

5 S.V.R. Jogarao 1,400 0.0001

6 Krishnamurthy - -

7 M.V. Babu 1,200 0.0001

8. M. Satheesh kumar 36,520 0.0039

120

Interests of Key Management Personnel

Except as disclosed in this Prospectus and other than to the extent of remuneration or benefits to which they are

entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the

ordinary course of business, the Key Management Personnel of the Company do not have any interest in the

Company.

None of our Key Management Personnel have been paid any consideration of any nature from our Company,

other than their remuneration and options granted under the MFL ESOP.

Payment or Benefit to Officers of the Company

Except statutory benefits upon termination of their employment in the Company or on reaching superannuation,

no officer of the Company is entitled to any benefit other than the stock option (being vested) upon termination

of his employment in the Company.

Employee Stock Option Scheme

We adopted an employee stock option scheme on August 17, 2009 (which was amended pursuant to the EGM

held on April 22, 2010) whereby stock options are proposed to be granted to identified employees of our

Company. Entitlements under this scheme are determined on the basis of various parameters as laid down by the

Board. The compensation committee of the Board is entrusted with the responsibility of implementing and

administering the MFL ESOP scheme. The total number of options proposed to be issued under the MFL ESOP

scheme is one million, being 5.78% of the issued equity capital of the Company as on August 17, 2009, the

effective date of the scheme. The total number of options pursuant to stock split and bonus stands to 9,147,500

options. The shares allotted pursuant to the exercise of the options granted under this scheme shall not be locked

for any period. Each option issued by the Company to the employees, would be eligible for the allotment of one

Equity Share of the Company by payment of the exercise price. As on March 31, 2011, we have granted a total

of 8,290,000 options under this scheme, out of which 37,55,120 options have been exercised.

The following table indicates the ESOPs granted and exercised by the Directors and the Key Management

Personnel as of the date of this Prospectus:

S.

No.

Name Directors Number of ESOPs

granted

Number of ESOPs

exercised

1. I. Unnikrishnan 1,200,000 600,000

2. B.N.Raveendra Babu 1,000,000 500,000

3. M.Anandan 300,000 150,000

4. P.Manomohanan 300,000 150,000

5. V.M.Manoharan 300,000 150,000

6. V.R. Ramachandran 300,000 150,000

7. Shailesh J Mehta 300,000 150,000

8. A.R.Sankaranarayanan 300,000 150,000

9. Bindu.A.L 300,000 150,000

10. C.Radhakrishnan 200,000 100,000

11. N.R.Bahuleyan 80,000 40,000

12. P.Krishnaraj 40,000 20,000

13. M. Satheesh Kumar 80,000 40,000

TOTAL 4,700,000 2,350,000

121

OUR PROMOTERS

The following individuals are the current promoters of our Company:

1. Mr. V. P Nandakumar; and

2. Mrs. Sushama Nandakumar.

Our Promoters collectively hold 36.46% stake in our Company as on July 22, 2011.

Mr. V. P. Nandakumar is also the Executive Chairman of our Company. The remuneration that is paid to him in

that capacity has been disclosed on page 112. Neither of our Promoters have any interest in our Company except

as disclosed in this Prospectus.

122

OUR SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

The following is the list of Companies under the same management:

1. Manappuram Insurance Brokers (P) Limited

2. Manappuram Asset Finance Limited

3. Manappuram Health Care Limited

4. Manappuram Comptech and Consultants (P) Limited

5. Manappuram Infrastructure and Builders Private Limited


7. Manappuram Chits India Limited


9. Manappuram Construction and Properties Private Limited

We do not have any subsidiaries, associates or joint venture companies of our Company.

123

STOCK MARKET DATA FOR EQUITY SHARES AND DEBENTURES OF OUR COMPANY

I. Equity Shares

Our Company‟s Equity Shares are listed on the BSE, MSE and CSE. It is a permitted security on NSE.

As our Company‟s shares are actively traded on the NSE and BSE, stock market data has been given

separately for each of these Stock Exchanges.

1. The high and low closing prices recorded on the NSE and BSE during the last three years and the

number of Equity Shares traded on the days the high and low prices were recorded are stated below.

NSE*

Year

ended

March 3

1

High

(Rs.)

Date of High Volume on

date of high

(no. of shares)

Low

(Rs.)

Date of

Low

Volume on

date of low

(no. of sha

res)

Average

price for

the year

(Rs.)

2011 181.65 November 22,

2010

2,634,608 69.9 July 6,

2010

35,441 127.65

2010 NA NA NA NA NA NA NA

2009 NA NA NA NA NA NA NA

Source: www.nseindia.com

The average price has been computed based on the daily closing price of Equity Shares.

*Trading started in NSE from June 30, 2010

BSE

Year

ended

March 3

1

High

(Rs.)

Date of High Volume on

date of high

(no. of shares)

Low

(Rs.)

Date of

Low

Volume o

n

date of

low

(no. of sh

ares)

Average

price for

the year

(Rs.)

2011 829.3 April 27, 2010 38,372 67.3 June 1,

2010

65,496 169.83

2010 789.8 March 19, 2010 72,111 126.8 April 1,

2009

263 442.89

2009 165.55 May 20, 2008 3,414 100 January

12, 2009

176 134.30

Source: www.bseindia.com


2. The high and low prices and volume of Equity Shares traded on the respective dates during the last six

months are as follows:

NSE*

Month,

Year

High

(Rs.)

Date of

High

Volume on date

of high (No. of

Equity Shares)

Low

(Rs.)

Date of

low

Volume on date of

low (No. of Equity

Shares)

Average Price

for the month

(Rs.)

July 2011 60.05 July 27,

2011 4,414,680 55.05

July 29,

2011 2,361,645 56.89

June 2011 124.75 June 6,

2011 1,376,402 56.3

June 30,

2011 1,396,638 74.04

May 2011 133.15 May 5,

2011 1,944,330 109.7

May 26,

2011 398,296 118.68

124

Month,

Year

High

(Rs.)

Date of

High

Volume on date

of high (No. of

Equity Shares)

Low

(Rs.)

Date of

low

Volume on date of

low (No. of Equity

Shares)

Average Price

for the month

(Rs.)

April 2011 135.95 April 5,

2011 1,072,867 125.6

April 19,

2011 622,449 130.78

March

2011

132.8 March 31,

2011 2,099,743 115

March 11,

2011 494,511 119.58

February

2011

130.75 February

23, 2011 1,848,047 91.3

February

10, 2011 1,640,201 113.27

Source: www.nseindia.com


*Trading started in NSE from June 30, 2010

BSE

Month,

Year

High (Rs.) Date of

High

Volume on date of

high (No. of

Equity Shares)

Low

(Rs.)

Date of low Volume on date of

low (No. of Equity

Shares)

Average Price

for the month

(Rs.)

July 2011 60 July 27,

2011 1,205,002 55.05

July 29,

2011 360,090 56.76

June 2011 124.5 June 6,

2011 298,472 56.15

June 30,

2011 98,426 74.01

May 2011 133.15 May 5,

2011 588,137 109.4

May 26,

2011 47,452 118.63

April

2011

135.55 April 5,

2011 311,773 125.85

April 19,

2011 110,352 130.87

March

2011

132.4 March 31,

2011 561,311 114.8

March 21,

2011 74,437 119.45

February

2011

130.25 February

23, 2011 1,101,899 91.2

February

10, 2011 559,895 113.23

Source: www.bseindia.com


II. Debentures

Debt securities listed by the Company, which are listed on BSE are infrequently traded with limited or no

volumes. Consequently, there has been no reported data available for the prices or volumes of such listed debt

securities.

125

DESCRIPTION OF CERTAIN INDEBTEDNESS

1. The statement of unconsolidated borrowings of our Company as on March 31, 2011 is provided below:

Particulars Amount (in Rs. in million)

Loan Funds

(a) Secured Loans (a) 43,723.07

7.5% - 14.5% Secured Non-convertible Debentures 5,012.85

Add: Interest accrued and due thereon 2.68

From Banks

Cash Credit 7,488.19

Working Capital Loans 30,558.41

From Others

Working Capital Loans 650.00

Vehicle Loans (secured by hypothecation of vehicles) 10.94

(b) Unsecured Loans (b) 12,817.03

Deposits -

Debenture Application Money 20.00

Inter corporate deposits 1.64

Commercial Paper 10,007.87

Subordinate bonds 1,778.76

Subordinated debt 1,000.00

Interest accrued and due 8.76

Total Debt (a+b) 56,540.10

2. Details of Secured Borrowings:

Our Company‟s secured borrowings other than vehicle loans as on March 31, 2011 amount to Rs.

38,696.60 millions. The details of the individual borrowings are set out below.

S.No. Particulars (Cash

credit/Overdrafts/

Working Capital

Loans)

Date of Sanction

Letter

Amount

outstanding as on

March 31, 2011

(Rs. in million)

Repayment

Schedule

1. IDBI Bank Ltd March 21, 2011 4,773.01 12 months

2. ING Vysya Bank Ltd October 11, 2010 50.01 12 months

3. Development Credit

Bank

March 21, 2011

267.30

182 days

4. Punjab National Bank September 28,

2010

2,936.09

CC (Rs. 1000

million) – 12

months

STL (Rs. 1000

million) – 200 days

5. South Indian Bank August 9, 2010 1,209.04 120 days

6. Yes Bank January 21, 2011

2,500.00

12 months

7. Lakshmi Vilas Bank September 15,

2010 499.90

On demand

8. Catholic Syrian Bank March 31, 2008 36.73 On demand

9. Kotak Mahindra Bank

Ltd

July 20, 2010

17.89

On demand

10. Dhanalakshmi Bank

Ltd

January 22, 2011

509.58

CC (Rs. 480

million) – 12

months

STL (Rs. 500

million) – 6 months

11. Tata Capital Ltd April 21, 2010 500.00 12 months (rollover

126

S.No. Particulars (Cash

credit/Overdrafts/

Working Capital

Loans)

Date of Sanction

Letter

Amount

outstanding as on

March 31, 2011

(Rs. in million)

Repayment

Schedule

quarterly)

12. Indusind Bank September 8,

2010

544.14

CC (Rs. 50 million)

– on demand

STL (Rs. 500

million) – 180 days

13. Karur Vysya Bank July 22, 2010 500.00 365 days

14. State Bank of India July 29, 2009

4,000.00

180 days

15. Corporation Bank July 27, 2010

2,000.00

180 days

16. Bank of Rajhastan March 16, 2011 24.40 12 months

17. Central Bank of India September 4,

2010

1,849.37

On demand

18. Indian Overseas Bank,

Thrissur

April 13, 2010

1,250.00

365 days

19. Indian Overseas Bank,

Mumbai

April 13, 2010

1,499.96

365 days

20. Union Bank of India December 14,

2010 1,762.42

On demand

21. DBS Bank Ltd June 22, 2010 750.00 12 months

22. State Bank of

Travancore

Rs. 1000 million

– August 19, 2010

Rs. 900 million -

December 15,

2010

1,900.00

6 months

23. Barclays Bank September 2,

2010

1,000.00

120 days

24. Andhra Bank August 27, 2010

2,000.00

On demand

25. Dena Bank September 21,

2010 750.00

365 days

26. Bank of India September 20,

2010

1,000.00

365 days

27. Jammu & Kashmir

Bank

October 30, 2010

March 23, 2011

1,000.00

Rs. 1000 million –

12 months

Rs. 500 million –

18 months (after 15

months – 50% and

18 months – 50%

28. State Bank of Bikaner

& Jaipur

October 29, 2010

500.00

On demand

29. UCO Bank February 9, 2011

2,000.00

12 months

30. Karnataka Bank December 14,

2010 416.77

12 months

31. Ratnakar Bank January 18, 2011 500.0 6 months

32. Aditya Birla Finance

Ltd

March 25, 2011

150.0

12 months

(payment quarterly)

Our Company has also entered into various assignment agreements for Rs 11,182.83 as at March 31,

2011.The details of the same are set out below:

127

S.No. Particulars (Assignment) Date of Agreement Amount

assigned as at

March 31, 2011

(Rs. in million)

1. ICICI Bank Ltd December 30, 2010 1,564.86

2. IDBI Bank Ltd December 16, 2010 548.36

3. Axis Bank Ltd December 9, 2010 1,118.19

4. ING Vysya Bank Ltd October 18, 2010 1,628.67

5. Federal Bank September 11, 2009 166.55

6. Yes Bank March 25, 2011 1,684.88

7. Kotak Mahindra Bank Ltd February 25, 2011 1,971.79

8. Dhanalakshmi Bank Ltd July 30, 2010,

August 31, 2010

September 9, 2010

September 29, 2010

1,849.41

9. Indusind Bank March 24, 2010

450.40

10. Development Credit Bank January 31, 2011 199.72

Our Company has issued rated, listed, secured, redeemable, non convertible debentures of face value of

Rs. 1,000,000 and Rs. 100,000 each on a private placement basis for cash at par of the aggregate

nominal value of Rs. 3,688.00 million carrying coupon rate ranging from 7.5% to 14.5% per annum

which is outstanding as on March 31, 2011 as follows:

ISIN Coupon

Rate

No. of

Debentures

Amount

outstanding as on

March 31, 2011

(Rs. in millions)

Maturity Date

INE522D07016 9.00% 250 250 August 16, 2011

INE522D07024 9.25% 250 250 February 18, 2012

INE522D07040 10.65% 1000 1,000 March 3, 2012

INE522D07057 12.00% 1000 100 March 28, 2013

INE522D07065 12.00% 1000 100 March 28, 2014

INE522D07073 12.25% 1980 198 March 28, 2014

INE522D07081 12.25% 1980 198 March 28, 2015

INE522D07099 12.25% 2640 264 March 28, 2016

INE522D07107 12.60% 1000 1,000 June 29, 2012

INE522D07115 12.25% 984 98.4 March 31, 2014

INE522D07123 12.25% 984 98.4 March 31, 2015

INE522D07131 12.25% 1312 131.2 March 31, 2016

Our Company has issued secured, redeemable, non convertible debentures of varying coupon rates on a

retail private placement basis other than the rated, secured and listed debentures mentioned above, of

the aggregate nominal value of Rs. 1,324.85 million which is outstanding as on March 31, 2011 as

follows:

Date of Allotment Number of

Debentures

Nominal amount

outstanding as at March

31, 2011 (Rs. in millions)

Tenure (in

Months)

September 16, 2006 4,812 4.81 60

November 15, 2006 5,781 5.78 60

March 24, 2007 12 0.01 48

March 24, 2007 410 0.41 60

October 13, 2007 50 0.05 48

128


Debentures

Nominal amount



Tenure (in

Months)

December 4, 2007 328 0.33 60

January 31, 2008 163 0.16 48

January 31, 2008 1,439 1.44 60

March 27, 2008 704 0.70 36

March 27, 2008 53 0.05 48

March 27, 2008 732 0.73 60

March 31, 2008 35 0.04 36

March 31, 2008 432 0.43 60

December 29, 2008 3,232 3.23 36

December 29, 2008 654 0.65 60

December 29, 2008 974 0.97 36

December 29, 2008 200 0.20 48

December 29, 2008 108 0.11 36

March 16, 2009 20 0.02 24

March 16, 2009 666 0.67 36

March 16, 2009 150 0.15 60

March 16, 2009 82 0.08 24

March 16, 2009 697 0.70 36

April 30, 2009 285 0.29 24

April 30, 2009 1,013 1.01 36

April 30, 2009 15 0.02 24

April 30, 2009 517 0.52 36

June 9, 2009 10 0.01 48

June 9, 2009 252 0.25 60

June 9, 2009 574 0.57 24

June 9, 2009 1,664 1.66 36

February 22, 2010 6,231 6.23 12

March 9, 2010 11,062 11.06 12

March30, 2010 62,119 62.12 12

April 22, 2010 61,460 61.46 12

April 22, 2010 62,359 62.36 12

April 22, 2010 57,124 57.12 12

July 20, 2010 66,273 66.27 12

July 20, 2010 45,428 45.43 12

July 24, 2010 39,627 39.63 12

October 15, 2010 50,164 50.16 12

October 15, 2010 60,986 60.99 12

October 15, 2010 92,655 92.66 12

October 15, 2010 107,254 107.25 12

November 29, 2010 1,312 1.31 36

November 29, 2010 79,561 79.56 12

November 29, 2010 75,076 75.08 12

129


Debentures

Nominal amount



Tenure (in

Months)

November 29, 2010 55,328 55.33 12

December 15, 2010 98,858 98.86 12

February 25, 2011 3,159 3.16 12

February 25, 2011 149,979 149.98 12

March 31, 2011 82,599 82.60 12

March 31, 2011 30,169 30.17 12

3. Details of Unsecured Borrowings:

Our Company has issued listed commercial papers aggregating to Rs. 10,007.87 million which is

outstanding as on March 31, 2011 as follows:

ISIN Tenure

(in

days)

Amount

outstanding as on

March 31, 2011 (Rs. in millions)

Maturity Date

INE522D14251 90 243.80 April 6, 2011

INE522D14251 90 243.80 April 6, 2011

INE522D14269 88 487.87 April 8, 2011

INE522D14269 88 243.94 April 8, 2011

INE522D14277 87 488.42 April 29, 2011

INE522D14285 86 243.70 May 11, 2011

INE522D14319 90 242.80 May 30, 2011

INE522D14319 90 242.80 May 30, 2011

INE522D14319 90 242.80 May 30, 2011

INE522D14327 91 242.73 May 31, 2011

INE522D14293 91 970.95 May 26, 2011

INE522D14194 363 92.29 29-Sept-2011

INE522D14301 109 482.66 June 14, 2011

INE522D14335 179 471.77 August 30, 2011

INE522D14343 92 485.32 June 7, 2011

INE522D14350 87 243.05 June 3, 2011

INE522D14343 91 485.48 June 7, 2011

INE522D14343 91 242.74 June 7, 2011

INE522D14384 360 178.68 March 5, 2012

INE522D14376 139 95.60 July 28, 2011

INE522D14368 188 470.78 September 15, 2011

INE522D14368 188 235.39 September 15, 2011

INE522D14368 188 235.39 September 15, 2011

INE522D14392 91 485,77 June 13, 2011

INE522D14392 91 485,77 June 13, 2011

INE522D14368 183 236.04 September 15, 2011

INE522D14400 124 173.35 July 27, 2011

INE522D14418 195 282.85 October 10, 2011

INE522D14426 125 192.52 August 1, 2011

INE522D14434 365 314.32 March 29, 2012

INE522D14434 365 224.52 March 29, 2012

Our Company has issued unsecured subordinated bonds of varying interest rates aggregating Rs.

1,787.52 million (including interest accrued and due of Rs. 8.76 million) which is outstanding as on

March 31, 2011 as follows:

130

Series Tenure (in

months)

Amount

outstanding as on

March 31, 2011(Rs.

in millions)

Maturity Date

BD18 60 0.60 31/08/2011

BD19 60 4.56 30/12/2011

BD1MAG09 60 0.01 23/12/2011

BD20 60 21.54 29/06/2012

BDMAF001 60 0.54 06/06/2012

BDMAF002 60 1.53 21/08/2012

BDMAF003 60 1.73 31/10/2012

BDMAF004 60 1.76 24/01/2013

BDMAF005 60 0.65 22/02/2013

BDMAF006 60 0.84 30/08/2013

BDMAF007 84 0.30 12/07/2015

BDMAF008 60 11.75 29/11/2013

BDMAF009 60 3.38 26/12/2013

BDMAF010 120 0.73 16/12/2018

BDMAF011 60 10.17 31/01/2014

BDMAF012 120 0.07 21/01/2019

BDMAF012 60 0.03 27/12/2013

BDMAF013 60 10.04 14/03/2014

BDMAF014 120 1.20 13/03/2019

BDMAF015 60 10.11 13/05/2014

BDMAF016 120 0.21 28/04/2019

BDMAF017 60 3.32 09/06/2014

BDMAF018 60 11.62 19/12/2014

BDMAF019 120 0.06 02/09/2019

BDMAG019 60 0.03 23/12/2011

BDMAG020 60 0.70 12/06/2012

BDMAG022 60 25.94 31/08/2012

BDMAG023 60 12.80 29/09/2012

BDMAG024 60 15.54 31/10/2012

BDMAG025 60 16.00 22/11/2012

BDMAG026 60 7.51 31/12/2012

BDMAG027 60 8.53 31/01/2013

BDMAG028 60 7.02 28/02/2013

BDMAG029 60 3.55 31/03/2013

BDMAG030 60 71.89 30/08/2013

BDMAG031 72 0.72 12/07/2014

BDMAG032 84 23.16 21/07/2015

BDMAG033 60 86.77 11/11/2013

BDMAG034 60 38.26 29/11/2013

BDMAG035 120 0.11 28/11/2018

BDMAG036 60 29.15 24/12/2013

131

Series Tenure (in

months)

Amount

outstanding as on

March 31, 2011(Rs.

in millions)

Maturity Date

BDMAG037 60 0.07 22/12/2013

BDMAG037 120 0.72 24/12/2018

BDMAG038 60 54.32 31/01/2014

BDMAG039 120 1.24 30/01/2019

BDMAG039 60 0.03 22/01/2019

BDMAG040 60 60.97 04/03/2019

BDMAG041 120 1.85 14/03/2019

BDMAG042 60 93.54 15/05/2014

BDMAG043 120 1.12 09/05/2019

BDMAG044 60 39.22 09/06/2014

BDMAG045 120 0.29 08/06/2019

BDMAG046 60 52.50 06/07/2014

BDMAG047 120 22.17 31/03/2021

BDMAG047 60 0.21 01/10/2015

BDMAG048 60 53.13 27/07/2014

BDMAG049 60 52.28 18/08/2014

BDMAG050 60 53.02 19/09/2014

BDMAG051 60 52.22 19/10/2014

BDMAG052 60 82.11 04/01/2015

BDMAG053 60 51.50 22/02/2015

BDMAG054 60 51.31 17/04/2015

BDMAG055 60 50.08 24/05/2015

BDMAG056 60 50.14 28/06/2015

BDMAG057 60 50.02 25/07/2015

BDMAG058 60 50.44 01/09/2015

BDMAG059 60 50.04 29/09/2015

BDMAG060 60 50.21 30/10/2015

BDMAG061 60 50.07 27/11/2015

BDMAG062 60 50.00 03/01/2016

BDMAG063 60 50.19 08/02/2016

BDMAG064 60 50.21 10/03/2016

BDMAG065 60 29.22 31/03/2016

Not Allocated 120 0.02 09/06/2019

Not Allocated 60 88.63 08/06/2014

There is also a subordinated debt of Rs. 1000 million from Syndicate Bank outstanding as on March

31, 2011 which was sanctioned vide sanction letter dated October 21, 2010, with a maturity of 5 years

and 6 months from the date of first drawdown at a floating interest rate of Base rate plus 350bps,

payable on a monthly basis.

4. Trustee Arrangements entered into by our Company

Our Company has entered into debenture trustee arrangements with Axis Trustee Services Limited and

132

IL&FS Trust Company Limited for their debenture issuances mentioned in point 2 above. Besides the

above, the Company has also entered into debenture trustee arrangements with V.K. Kerala Verma and

V. Sajith for the retail debentures listed above. The Company has not entered into any security trustee

arrangement and all security is created directly in favour of the working capital/short term loan

creditors.

5. Security Agreements entered into by our Company

Our Company has taken various loans from banks and financial institutions which are in most cases

secured by „exclusive first charge‟ over gold loan receivables of identified branches of the Company. In

some cases the charge created is a pari passu floating charge on all receivables of the Company in

favour of the lender. The charge is created by way of hypothecation agreements entered into with the

respective lenders and financial institutions and Form 8 filings with the RoC is made for perfection of

the charge created.

6. Servicing behaviour on existing debt securities, payment of accrued interest on due dates on term

loans and debt securities

As on the date of this Prospectus, there has been no default in payment of principle or interest on any

term loan and debt security issued by our Company in the past.

133

OUTSTANDING LITIGATION AND DEFAULTS

Our Company is subjected to various legal proceedings from time to time, mostly arising in the ordinary course

of its business. The legal proceedings are initiated by us and also by various customers. These legal proceedings

are primarily in the nature of (a) consumer complaints (b) arbitration claims (c) criminal complaints (d) civil

cases. We believe that the number of proceedings in which we are involved in is not unusual for a company of

its size in the context of doing business in India.

Except as described below, we are not involved in any legal proceedings, and no proceedings are threatened,

which may have, or have had, a material adverse effect on our business, properties, financial condition or

operations.

As on June 30, 2011, we have been made party to the following cases:

1. Our Company has filed writ appeal no. 35045 of 2009 before the Supreme Court of India against the

order of the Kerala High Court in 541 of 2007 dated November 18, 2009 directing all NBFCs to

register under the Kerala Money-Lenders Act. The High Court of Kerala had earlier struck down a

notification passed under the Kerala Money-Lender Act that imposed an interest ceiling of 12.00% on

advances made by all entities that are covered under that Act. Further, the Government of Karnataka

has issued an order exempting the Company from the applicability of the provisions of the

moneylenders‟ legislation of Karnataka. While our Company has received partial exemptions from two

States (Kerala and Karnataka) from the applicability of the provisions of similar money lending

legislations, in the event the Supreme Court decides the matter against us, our Company would be

required to register all branches located in Kerala as well as in other States which have enacted similar

legislations under such legislations in the respective States. A stipulated registration fee is payable on

the registration of each branch and in addition to that, each registered branch would also be required to

deposit a certain sum of money with the prescribed authority as security for observing the terms of the

licence issued. Further, the Company would not be able to charge interest beyond a limit specified

under such legislations and as a result the revenues of the Company may fall substantially.

The Kerala Money-Lenders Act prescribes a maximum penalty of imprisonment for a period up to 3

years and a fine of Rs. 50,000 for carrying out business without a license in the event that the Company

is found to be in violation of the same.

The matter is currently pending hearing before the Supreme Court of India. Now the Supreme Court

vide its order dated December 16, 2009 directed that status quo be maintained until further orders.

2. The Executive Chairman of our Company, V. P. Nandakumar, and certain other of our employees are

parties to a criminal case which is pending before the Court of the Judicial Magistrate of First Class,

Ottapalam, Kerala. The case was filed as a result of a complaint by one of our customers alleging that

we had forcefully dispossessed the customer of a vehicle for which the customer had availed of a loan

from us despite the customer having no payment due to us in relation to the vehicle. This case is filed

under Sections 143, 147, 148, 149, 323, 394, 457 and 506 (iii) of the Indian Penal Code, 1860.

3. The Company has been made parties to two Sales Tax cases relating to the financial years 1994 - 95,

1995 - 96, 1998 – 99, 2005 - 06, and 2006 – 07 respectively. In the first case, the Department had

demanded the payment of Sales Tax to an extent of 0.69 million on hospital equipments leased by our

Company to PVS Hospital, Ernakulam. The Company had filed a petition before the Kerala High Court

against the order of the Department. Pursuant to an interim order passed by the High Court, the

Company has remitted an amount of Rs. 0.23 million towards the demand made by the Department.

The case is still pending. The second one is in relation to the demand made by the Intelligence Officer,

Department of Commercial Taxes, Thrissur to pay tax on auction sale of vehicles re possessed by the

Company from borrowers who fail to meet the repayment obligations under hire purchase and

hypothecation loans. The Company has filed an appeal against the same before the Commissioner

(Appeals) Ernakulam. Pursuant to an interim order passed by this authority, the Company has remitted

40% of the total tax amount involved and furnished a bank guarantee for the balance amount. The total

amount of tax demanded by the Department is in the tune of Rs. 0.08 million. The case is still pending.

4. The Company is also party to an income tax case pursuant to an assessment order dated December 26,

2008 passed by the Assistant Commissioner of Income Tax, Thrissur disallowing Rs. 6.38 million

134

written off as bad debts during the assessment year 2005-06 since the same was not actually bad and

not recoverable. On an appeal made to the CIT (Appeals) Cochin, that authority has, by way of an

order dated September 20, 2010 allowed the writing off of the debt to the extent of Rs. 6.03 million.

The claim in relation to the balance amount is pending.

5. Our Company is party to a service tax appeal for alleged wrong availment of CENVAT credit from

April 1, 2004 to June 30, 2007 to an extent of Rs. 3.05 million. The appeal is arising out of order

March 19, 2010 passed by Commissioner of Central Excise and Service Tax, Calicut. Aggrieved by the

order, Additional Commissioner, Central Excise, Calicut has filed an appeal. The Company has filed

counter objections to the same on September 30, 2010. The proceedings are pending.

6. The special leave petition that was filed by the Company in relation to the payment of service tax on

hire purchase and leasing was dismissed by the Supreme Court of India. The Company has received a

show cause notice dated October 22, 2010 demanding the payment of service tax of Rs 2.34 million

with penalty and interest for the period from July 2001 to April 2007. The Company has replied to this

notice stating that the claim made by the department is „time barred‟ and would hence not be

maintainable. This case is yet to be posted for hearing. Our Company has created a provision for the

claim amount in our balance sheet.

7. Our Company has received show cause notices from the Labour Departments of Andhra Pradesh,

Kerala, Karnataka and Tamil Nadu requiring us to show cause as to why our branches within these

States are open for all seven days in the week. Subsequently, our Company has made applications to

the Labour Departments of five States (including West Bengal) seeking an exemption for keeping the

branches of the Company within these states open for all seven days of the week. We are yet to receive

exemption under these applications.

8. Our Company has been served two show cause notices in relation to the payment of service tax both

dated April 5, 2010, details of which are as follows: (i) Show cause notice bearing No. 30/2010 stating

that for assessment year 2008-09, the Company has short paid service tax amounting to Rs. 99,670; and

(ii) show cause notice bearing no. 29/2010 stating that for the assessment year 2008-09, the Company

has short paid tax amounting to Rs. 1,88,610. The Company has replied to both these notices by way of

letters dated May 13, 2010. By way of an order dated March 24, 2011, the Deputy Commissioner has

withdrawn the demand of Rs.99,670. In the second case, the demand of Rs.1,88,610 has been

confirmed. We have filed the second appeal against this order on June 8, 2011.

9. Our Company has received orders from the Employees State Insurance Corporation pursuant to an

inspection of the records of the company in May 2011 for payment of Rs 175,000. The Company will

be pay the amount forthwith.

10. Our Company has been made party to 64 consumer cases which are now pending before various district

and state consumer dispute redressal fora. These cases have been filed based on allegations of

deficiency in service rendered by us. Such grounds include the adoption of improper processes for

conducting the sale of forfeited jewellery, wrongful seizure of hypothecated goods and charging very

high interest rates on deposits. The aggregate value of the total compensation amount that has been

claimed against us in all these cases is Rs. 8.44 million.

11. 15 cases have been filed against us by owners of branch premises on grounds of eviction and rent

escalation.

In addition to the above matters, we are also involved in certain administrative and legal proceedings pending

before the relevant courts and authorities at various levels. We cannot predict the outcome of any pending or

future litigation, examination or investigation, based on the amounts sought in pending actions against us and

our history of resolving litigation matters in the past, as well as the advice of legal counsel.

Further, there have been eight major burglaries at our branches since inception. With regard to the first burglary

we were able to recover the entire amount of the loss suffered. With regard to the second burglary we were able

to recover approximately 90.0% of the loss suffered and received a partial payment of the insurance claim with

regard to the third burglary. The aggregate value of the gold and cash stolen in the second and third burglaries is

approximately Rs. 28.32 million. Survey of loss by the insurer and investigation into the burglaries by the police

is complete, and a final charge sheet has been submitted to the court. The fourth, fifth and sixth burglaries

135

occurred in August 2010 and September 2010 and the aggregate value of the gold and cash stolen is

approximately Rs. 35.50 million. We have filed insurance claims in relation to the last three burglaries, but we

have not yet received any payment in relation to the same. The seventh one occurred in May 2011 and we have

filed the first information report in relation to the same and the police investigation in relation to the same is

ongoing. The loss of cash is estimated at Rs. 766,323. The last burglary occurred in June 2011 and the loss of

gold through the same is estimated at Rs. 37.50 million and cash at Rs.639,139 which has since been recovered

by the police.

Material Developments after March 31, 2011

Except as stated in this Prospectus, there have not arisen, since March 31, 2011, which is the date of the last

Financial Statements, any circumstances that have materially and adversely affected the profitability of our

Company, or the value of our assets or our ability to pay our liabilities within the next 12 months.

136

OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

The Board of Directors, at its meeting held on April 28, 2011, has given its consent to create, offer, issue and

allot listed, rated, secured, redeemable, non-convertible debentures, in one or more tranches, of varying face

value aggregating to a maximum of Rs. 10,000 million including an option to retain over subscription for

issuance of additional non-convertible debentures aggregating to a maximum of Rs. 10,000 million, on a private

placement basis or to the public.

Eligibility to come out with the Issue

Our Company, persons in control of our Company and/or our Promoter have not been restrained, prohibited or

debarred by SEBI from accessing the securities market or dealing in securities and no such order or direction is

in force. Further, no member of our promoter group has been prohibited or debarred by SEBI from accessing the

securities market or dealing in securities due to fraud.

Consents

Consents in writing of: (a) the Directors, the Compliance Officer, Bankers to the Company, Bankers to the

Issue; and (b) Lead Managers, Co-Lead Managers, Lead Brokers, Registrar to the Issue, Advisors to the Issue,

Legal Advisors to the Issue, Credit Rating Agency and the Debenture Trustee to act in their respective

capacities, have been obtained and shall be filed along with a copy of the Prospectus with the Registrar of

Companies.

IL&FS Trust Company Limited has given its consent for appointment as Debenture Trustee under regulation

4(4) of the SEBI Debt Regulations.

The consent of the Statutory Auditors of our Company, namely S. R. Batliboi & Associates for (a) inclusion of

their names as the Statutory Auditors, (b) examination report on Reformatted Statements and (c) the statements

of tax benefits in the form and context in which they appear in this Prospectus, have been obtained and the same

will be filed along with a copy of this Prospectus with the RoC.

As provided in ―Terms of the Issue - Security‖ on page 153, the Company is going to provide a first ranking

pari passu charge over all of the current assets, book debts, receivables (both present and future) and such other

assets of the Company other than the assets that have been exclusively charged by the Company to the extent of

1.1 times of the amounts outstanding in respect of the Bonds at any time. As per Regulation 17(2) read with

Schedule I of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the Company is required to

obtain permissions / consents from the prior creditors in favour of the debenture trustee for creation of such pari

passu charge. The Company has obtained such permissions / consents from the prior lenders who have pari

passu charge.

Expert Opinion

Except the report of CARE and Brickwork in respect of credit rating of this Issue, furnishing rationale for its

rating, the Company has not obtained any expert opinions.

Common form of Transfer

Our Company undertakes that there shall be a common form of transfer for the Bonds held in physical form and

the provisions of the Companies Act and all applicable laws shall be duly complied with in respect of all transfer

of the Bonds and registration thereof.

Minimum Subscription

If our Company does not receive the minimum subscription of 75% of the base amount of the Issue, being Rs.

3,000 million, on or before the closure of the Issue, the entire subscription amount shall be refunded to the

applicants within 15 days from the date of closure of the Issue. If there is a delay in the refund of the

subscription amount by more than eight days after our Company becomes liable to pay the same, our Company

will pay interest for the period of delay, at rates prescribed under sub-section (2) and (2A) of Section 73 of the

137

Companies Act.

Previous Public or Rights Issues by our Company during last five years

Our Company has not undertaken any public or rights Issue during the last five years.

Commission or Brokerage on Previous Public Issues

Our Company paid an aggregate amount of Rs. 1.8 million on account of fees for management, underwriting

and selling commission, and out of pocket expenses in relation to its public offer of equity shares undertaken in

1995.

Particulars in regard to the Company, and other listed companies under the same management within the

meaning of Section 370 (1B), which made any capital issue during the last three years

None of the companies under the same management with our Company, within the meaning of section 370(1B)

of the Companies Act, have made any capital issue during the last three years.

Change in auditors of our Company during the last three years

Our Company has not changed its Statutory Auditors during the last three years.

Revaluation of assets

Our Company has not revalued its assets in the last five years.

Utilisation of Proceeds

Our Board of Directors certifies that:

(i) All monies received out of the Issue of the Bonds to the public shall be transferred to a separate bank

account other than the bank account referred to in sub-section (3) of section 73 of the Companies Act;

(ii) Details of all monies utilised out of the Issue referred to in sub-item (i) shall be disclosed under an

appropriate separate head in our balance sheet indicating the purpose for which such monies were

utilised; and

(iii) Details of all unutilised monies out of the Issue referred to in sub-item (i), if any, shall be disclosed

under an appropriate separate head in our balance sheet indicating the form in which such unutilised

monies have been invested.

(iv) We shall utilize the Issue proceeds only upon execution of documents for creation of security as stated

in this Prospectus in the section titled ―Terms of the Issue - Security‖ and on receipt of the minimum

subscription of 75% of the base amount of the Issue, being Rs. 3,000 million.

(v) The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other

acquisition, inter alia by way of a lease, of any property.

The funds raised by us from previous bonds issues have been utilised for our business as stated in the respective

offer documents.

Disclaimer clause of BSE

BOMBAY STOCK EXCHANGE (“THE EXCHANGE”) HAS GIVEN VIDE ITS LETTER DATED

AUGUST 3, 2011, PERMISSION TO THIS COMPANY TO USE THE EXCHANGE‟S NAME IN THIS

OFFER DOCUMENT AS ONE OF THE STOCK EXCHANGES ON WHICH THIS COMPANY‟S

SECURITIES ARE PROPOSED TO BE LISTED. THE EXCHANGE HAS SCRUTINUZED THIS

OFFER DOCUMENT FOR ITS LIMITED INTERNAL PURPOSE OF DECIDING ON THE MATTER

OF GRANTINIG THE AFORESAID PERMISSION TO THIS COMPANY. THE EXCHANGE DOES

138

NOT IN ANY MANNER:

(I) WARRANT, CERTIFY OR ENDORSE THE CORRECTNESS OR COMPLETENESS OF ANY

OF THE CONTENTS OF THIS OFFER DOCUMENT; OR

(II) WARRANT THAT THIS COMPANY‟S SECURITIES WILL BE LISTED AND WILL

CONTINUE TO BE LISTED ON THE EXCHANGE; OR

(III) TAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THIS

COMPANY, ITS PROMOTERS, ITS MANAGEMENT OR ANY SCHEME OR PROJECT OF

THIS COMPANY,

AND IT SHOULD NOT FOR ANY REASON BE DEEMED OR CONSTRUED THAT THIS OFFER

DOCUMENT HAS BEEN CLEARED OR APPROVED BY THE EXCHANGE. EVERY PERSON WHO

DESIRES TO APPLY FOR OF OTHERWISE ACQUIRES ANY SECURITIES OF THIS COMPANY

MAY DO SO PURSUANT TO INDEPENDENT INQUIRY, INVESTIGATION AND ANALYSIS AND

SHALL NOT HAVE ANY CLAIM AGAINST THE EXCHANGE WHATSOEVER BY REASON OF

ANY LOSS WHICH MAY BE SUFFERED BY SUCH PERSON CONSEQUENT TO OR IN

CONNECTION WITH SUCH SUBSCRIPTION/ACQUISITION WHETHER BY REASON OF

ANYTHING STATED OR OMITTED TO BE STATED HEREIN OF FOR ANY OTHER REASON

WHATSOEVER”

A copy of this Prospectus has been submitted with BSE.

Disclaimer clause of RBI

THE COMPANY IS HAVING A VALID CERTIFICATE OF REGISTRATION DATED MARCH 30,

2001 ISSUED BY THE RESERVE BANK OF INDIA UNDER SECTION 45I-A OF THE RESERVE

BANK OF INDIA ACT, 1934. HOWEVER, THE RESERVE BANK OF INDIA DOES NOT ACCEPT

ANY RESPONSIBILITY OR GUARANTEE ABOUT THE PRESENT POSITION AS TO FINANCIAL

SOUNDNESS OF THE COMPANY OR CORRECTNESS OF ANY OF THE STATEMENTS OR

REPRESENTATIONS MADE OR OPINIONS EXPRESSED BY THE COMPANY AND FOR

REPAYMENT OF DEPOSITS / DISCHARGE OF LIABILITIES BY THE COMPANY.

Listing

The Bonds will be listed on BSE.

If the permissions to deal in and for an official quotation of the Bonds are not granted by the BSE, we shall

forthwith repay, without interest, all such monies received from the Applicants in pursuance of this Prospectus.

If such money is not repaid within eight days after we becomes liable to repay it (i.e. from the date of refusal or

within seven days from the Issue Closing Date, whichever is earlier), then our Company and every Director of

our Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the

money, with interest at the rate of 15% p.a. on application money, as prescribed under Section 73 of the

Companies Act.

Our Company shall ensure that all steps for the completion of the necessary formalities for listing and

commencement of trading at the BSE mentioned above are taken within seven Working Days from the date of

Allotment.

Dividend

The following table sets forth certain details regarding the dividend paid by our Company on the Equity Shares

for Fiscal 2011, 2010 and 2009:

(In Rs. million, except per share data)

Particulars Fiscal 2011 Fiscal 2010 Fiscal 2009

Face value of Equity Shares (Rs. per share) 2 10 (Face value as

on March 31,

2010)

10

139

Particulars Fiscal 2011 Fiscal 2010 Fiscal 2009

Interim dividend on Equity Shares (Rs. per share) - - 2.00

Final dividend of Equity Shares (Rs. per share) 0.60 0.50 (each Equity

Share was sub-

divided in May

2010 to Rs. 2 each

and dividend was

computed @25%

on sub-divided

Equity Share)

0.50

Total dividend on Equity Shares 500.24 (not paid

yet)

165.89 43.14

Dividend tax (gross) NA 27.21 8.13

Mechanism for redressal of investor grievances

Link Intime India Private Limited has been appointed as the Registrar to the Issue to ensure that investor

grievances are handled expeditiously and satisfactorily and to effectively deal with investor complaints. The

MoU between the Registrar to the Issue and the Company will provide for retention of records with the

Registrar to the Issue for a period of at least three years from the last date of despatch of the letters of allotment,

demat credit and refund orders to enable the investors to approach the Registrar to the Issue for redressal of their

grievances. All grievances relating to the Issue should be addressed to the Registrar to the Issue giving full

details of the Applicant, number of Bonds applied for, amount paid on application and the bank branch or

collection centre where the application was submitted etc.

140

THE ISSUE STRUCTURE

The Board of Directors, at its meeting held on April 28, 2011 approved the issue of the Bonds.

The following are the key common terms of the Bonds to be issued under the terms of this Prospectus. This

section should be read in conjunction with, and is qualified in its entirety by, more detailed information in the

section entitled ―Terms of the Issue‖ on page 144.

COMMON TERMS FOR ALL SERIES OF THE BONDS

Issuer Manappuram Finance Limited

Issue of Bonds Public issue of bonds in the nature of secured, redeemable, non-convertible


with an option to retain over subscription upto Rs. 3,500 million,

aggregating to Rs. 7,500 million. The Bonds shall be issued at par on the

terms contained in this Prospectus.

Status and Ranking The Bonds constitute direct and secured obligations of our Company and

shall rank pari passu and without any preference or priority among

themselves. Subject to any obligations preferred by mandatory provisions

of the law prevailing from time to time, the Bonds shall also, as regards

principal, all interest, redemption premium (as applicable) and all other

monies secured in respect of Bonds, rank pari passu with all other present

direct and secured lenders of our Company holding pari passu charge over

the Security, if any, such that a security cover of 1.10 times is maintained

until the Maturity Date.

Eligible Investors Category I

• Public financial institutions, statutory corporations, commercial banks,

co-operative banks and regional rural banks, which are authorised to

invest in the Bonds;

• Provident funds, pension funds, superannuation funds and gratuity

fund, which are authorised to invest in the Bonds;

• Venture capital funds registered with SEBI;

• Insurance companies registered with the IRDA;

• National Investment Fund;

• Mutual funds;

Category II

• Companies; bodies corporate and societies registered under the

applicable laws in India and authorised to invest in the Bonds;

• Public/private charitable/religious trusts which are authorised to invest

in the Bonds;

• Scientific and/or industrial research organisations, which are authorised

to invest in the Bonds;

• Partnership firms in the name of the partners; and

• Limited liability partnerships formed and registered under the

provisions of the Limited Liability Partnership Act, 2008.

Category III*

The following persons/entities

• Resident Indian individuals; and

• Hindu undivided families through the Karta.

141

Minimum Application Five Bonds (Rs. 5,000) and in multiples of one Bond thereafter.

The minimum number of Bonds per Application Form will be calculated on

the basis of total number of Bonds applied for under each such Application

Form and not on the basis of number of Bonds applied for in each Series of

Bonds.

Rating „CARE AA-‟ from CARE

“BWR AA-” from Brickwork

Security The principal amount of the Bonds, interest and other monies payable by

our Company in respect of the Bonds shall be secured by mortgage of the

immovable property of our Company as identified in the Debenture Trust

Deed and a charge in favour of the Debenture Trustee, on all current assets,

book debts, receivables (both present and future) as fully described in the

Debenture Trust Deed, except those receivables specifically exclusively

charged, on a first ranking pari passu basis with all other lenders to our

Company holding pari passu charge over the security such that a security

cover of 1.10 times is maintained until Maturity Date, more particularly as

detailed in the section entitled ―Terms of the Issue – Security‖ on page 153.

Security Cover 1.10 times the outstanding Bonds at any point of time.

Listing BSE

Debenture Trustee IL&FS Trust Company Limited

Depositories NSDL and CDSL

Registrar Link Intime India Private Limited

Terms of Payment Full amount on application

Issuance Dematerialized form

Trading Dematerialized form

Market Lot / Trading Lot One Bond

Issue Opening Date August 18, 2011

Issue Closing Date September 5, 2011

The Issue shall remain open for subscription during banking hours for the

period indicated above, except that the Issue may close on such earlier date

as may be decided by the Board subject to necessary approvals. In the event

of an early closure of the Issue, our Company shall ensure that notice of the

same is provided to the prospective investors through newspaper

advertisements on the day of such earlier date of Issue closure

Pay-in Date Three (3) days from the date of receipt of application or the date of

realisation of the cheques/demand drafts, whichever is later.

Deemed Date of Allotment The Deemed Date of Allotment shall be the date as may be determined by

the Board of our Company and notified to the BSE. The actual allotment

may occur on a date other than the Deemed Date of Allotment.

Lead Managers Morgan Stanley India Company Private Limited, A.K. Capital Services

Limited, Axis Bank Limited and ICICI Securities Limited

Co-Lead Managers RR Investors Capital Services (P) Limited, Karvy Investor Services

Limited and SMC Capitals Limited

Governing Law Indian Law

Events of Default See Condition Clause 15 of ―Terms of the Issue‖ beginning on page 153

Risk Factors See ―Risk Factors‖ beginning on page 11 for a discussion of risks you

should consider before investing in the Bonds

142

Use of Proceeds See ―Objects of the Issue‖ beginning on page 76

* With respect to applications received from Category III Applicants, applications by Applicants who apply for

Bonds aggregating to a value not more than Rs. 5 Lacs, across all Series of Bonds, shall be grouped together,

(“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value

exceeding Rs. 5 Lacs, across all Series of Bonds, (Option I and/or Option II), shall be separately grouped

together, (“Unreserved Individual Portion”).

Participation by any of the above-mentioned investor classes in this Issue will be subject to applicable

statutory and/or regulatory requirements. Applicants are advised to ensure that applications made by

them do not exceed the investment limits or maximum number of Bonds that can be held by them under

applicable statutory and/or regulatory provisions.

In case of Application Form being submitted in joint names, the applicants should ensure that the de-mat

account is also held in the same joint names, and the names are in the same sequence in which they appear in the

Application Form.

Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory

permissions/consents/approvals in connection with applying for, subscribing to, or seeking allotment of

Bonds pursuant to the Issue.

For further details, please see ―Procedure for Application‖ on page 159

SPECIFIC TERMS FOR EACH SERIES OF BONDS

Series I II

Frequency of Interest

payment

NA Semi-annually

Face Value per Bond Rs. 1,000 Rs. 1,000

Issue Price per Bond Rs. 1,000 Rs. 1,000

Mode of Interest Payment NA Through various modes available*

Interest Rate**


Category I

NA 12% p.a.


Category II

NA 12% p.a.


Category III

NA 12.2% p.a.

Maturity Date 400 days from the Deemed Date of

Allotment

24 months from the Deemed Date of

Allotment

Maturity Amount per Bond Rs. 1,132.25*** for Bondholders in

all categories (Face Value of the

Bonds plus redemption premium)

Face Value of the Bonds plus any

interest that may have accrued

Yield on Maturity


Category I

12% p.a. 12.34% p.a.


Category II 12% p.a. 12.34% p.a.


Category III

12% p.a. 12.56% p.a.

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* For various modes of interest payment, please refer to the section entitled “Terms of the Issue – Manner

and Mode of Payment” on page 151.

** As per the “Issue Procedure - Basis of Allotment” on page 167 of this Prospectus, in the event Bonds are

allocated to any Portion beyond the reservation for such category, the interest on such Bonds will be as per

rate specified for such applicants.

***Rounded to the nearest decimal place.

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TERMS OF THE ISSUE

The terms and conditions of Bonds being offered will be incorporated into the Debenture Trust Deed and are

subject to the provisions of the Companies Act, the Application Form and other terms and conditions as may be

incorporated in the Debenture Trust Deed, Letter(s) of Allotment and/or Consolidated Bond certificate(s). In

addition, the Issue of Bonds shall be subject to laws as applicable from time to time, including guidelines, rules,

regulations, notifications and any statutory modifications or re-enactments relating to the issue of capital and

listing of securities, or in relation to our Company, issued from time to time by SEBI, RBI, GOI, BSE and/or

other authorities (collectively, the ―Applicable Laws‖) and other documents that may be executed in respect of

the Bonds. The statements in these terms and conditions include summaries of and are subject to the detailed

provisions of the Debenture Trust Deed.

The Series I Bonds and the Series II Bonds, (together with the Series I Bonds referred to as the “Bonds”) are

constituted by a debenture trust deed (the “Debenture Trust Deed”) to be entered into between our Company

and IL&FS Trust Company Limited (in its capacity as the “Debenture Trustee”, which expression shall include

its successor(s) as trustee for the holders of the Bonds (the “Bondholders”). Link Intime India Private Limited

has been appointed as the registrar to the issue (the “Registrar” or “Registrar to the Issue”) pursuant to the

MoU entered between the Company and the Registrar to the Issue.

Words and expressions defined in the Debenture Trust Deed and the Tripartite Agreements (defined below)

shall have the same meanings where used in these terms and conditions unless the context otherwise requires or

unless otherwise stated.

Any reference to “Bondholders” or “holders” in relation to any Bond held in dematerialized form shall mean the

persons whose name appears on the beneficial owners list as provided by the Depository and in relation to any

Bond in physical form, such holder of the Bond (whose interest shall be as set out in a Consolidated Bonds

Certificate (as defined below) whose name is appearing in the Register of Bondholders (as defined below). The

Debenture Trustee acts for the benefit of the Bondholders in accordance with the provisions of the Debenture

Trust Deed.

1. Authority for the Issue

The Board of Directors, at its meeting held on April 28, 2011, has given its consent to create, offer,

issue and allot listed, rated, secured, redeemable, non-convertible debentures, in one or more tranches,

of varying face value aggregating to a maximum of Rs. 10,000 million including an option to retain

over subscription for issuance of additional non-convertible debentures aggregating to a maximum of

Rs. 10,000 million, on a private placement basis or to the public.

2. Issue, Status of Bonds

2.1 The Bonds are constituted, issued and secured pursuant to a Debenture Trust Deed. The Bondholders

are entitled to the benefit of the Debenture Trust Deed and are bound by and are deemed to have notice

of all the provisions of the Debenture Trust Deed.

2.2 The Bonds are issued in the form of secured, redeemable, non convertible debentures. The Bonds

constitute direct and secured obligations of our Company and shall rank pari passu inter se and without

any preference or priority among themselves. Subject to any obligations preferred by mandatory

provisions of the law prevailing from time to time, the Bonds shall also, as regards the principal

amount of the Bonds, interest and all other monies secured in respect of the Bonds, rank pari passu

with all other present and future debenture holders of our Company, who hold pari passu charge over

the Security. The security described in the section entitled ―Terms of the Issue - Security‖ on page 153

shall be pari passu with all the present and future borrowings of our Company from various lenders

(although such lenders do not have the benefit of any security over immovable property) which have a

pari passu charge over the Security. The claims of the Bondholders shall be superior to the claims of

the unsecured creditors of our Company (subject to any obligations preferred by mandatory provisions

of the applicable law prevailing from time to time).

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3. Form, Face Value, Title and Listing etc

3.1 Form

3.1.1 The allotment of the Bonds shall only be in a dematerialized form (i.e., not in the form of physical

certificates but fungible and represented by the statement issued through the electronic mode). Our

Company has made depository arrangements with National Securities Depository Limited (“NSDL”)

and Central Depository Services (India) Limited (“CDSL”, and together with NSDL, the

“Depositories”) for issue of the Bonds in a dematerialized form pursuant to the tripartite agreement

between:

(i) our Company, NSDL and the Registrar dated August 4, 2011; and

(ii) our Company, CDSL and the Registrar dated August 4, 2011.

(together the “Tripartite Agreements”)

Our Company shall take necessary steps to credit the Depository Participant account of the Applicants

with the number of Bonds allotted. Subject to section 3.1.2 below, the Bondholders will hold the Bonds

in dematerialised form and deal with the Bonds in accordance with the provisions of the Depositories

Act and/or rules as notified by the Depositories from time to time.

3.1.2 The Bondholders may rematerialize the Bonds at any time after allotment, in accordance with the

provisions of the Depositories Act and/or rules as notified by the Depositories from time to time.

3.1.3 In case of Bonds that are rematerialized and held in physical form, our Company will issue one

certificate to the Bondholder for the aggregate amount of the Bonds that are rematerialized and held by

such Bondholder (each such certificate a “Consolidated Bond Certificate”). In respect of the

Consolidated Bond Certificate(s), our Company will, upon receipt of a request from the Bondholder

within 30 days of such request, split such Consolidated Bond Certificate(s) into smaller denominations

in accordance with the Articles of Association, subject to a minimum denomination of one Bond. No

fees will be charged for splitting any Consolidated Bond Certificate(s) but, stamp duty, if payable, will

be paid by the Bondholder. The request to split a Consolidated Bond Certificate shall be accompanied

by the original Consolidated Bond Certificate which will, upon issuance of the split Consolidated Bond

Certificates(s), be cancelled by our Company.

3.2 Face Value

The face value of each Bond is Rs. 1,000

3.3 Title

3.3.1 In case of:

(i) Bonds held in the dematerialized form, the person for the time being appearing in the register

of beneficial owners maintained by the Depository; and

(ii) the Bond held in physical form, the person for the time being appearing in the Register of

Bondholders (as defined below) as Bondholder,

shall be treated for all purposes by our Company, the Debenture Trustee, the Depositories and all other

persons dealing with such person as the holder thereof and its absolute owner for all purposes whether

or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing

on, theft or loss of the Consolidated Bond Certificate issued in respect of the Bonds and no person will

be liable for so treating the Bondholder.

3.3.2 No transfer of title of a Bond will be valid unless and until entered on the Register of Bondholders or

the register of beneficial owners maintained by the Depository prior to the Record Date. In the absence

of transfer being registered, interest and/or Maturity Amount, as the case may be, will be paid to the

146

person, whose name appears first in the Register of Bondholders maintained by the Depositories and/or

our Company and/or the Registrar, as the case may be. In such cases, claims, if any, by the purchasers

of the Bonds will need to be settled with the seller of the Bonds and not with our Company or the

Registrar. The provisions relating to transfer and transmission and other related matters in respect of our

Company‟s shares contained in the Articles of Association of our Company and the Companies Act

shall apply, mutatis mutandis (to the extent applicable) to the Bond(s) as well.

3.4 Listing

The Bonds will be listed on the Bombay Stock Exchange Limited (the “BSE”).

3.5 Market Lot

3.5.1 In accordance with Section 68B of the Companies Act, the Bonds shall be allotted only in

dematerialised form. As per the SEBI Debt Regulations, the trading of the Bonds on the Stock

Exchange shall be in dematerialised form only in multiples of one Bond (“Market Lot”).

3.5.2 For details of allotment refer to chapter entitled ―Procedure for Application‖ beginning on page 159.

3.6 Procedure for Rematerialisation of Bonds

Allotment of Bonds will be in dematerialized form only. However, Bondholders who wish to hold the

Bonds in physical form may do so by submitting his or her request to his or her Depository Participant

in accordance with the applicable procedure stipulated by the Depository Participant.

4. Transfer of the Bonds, Issue of Consolidated Bond Certificates etc

4.1 Register of Bondholders

Our Company shall maintain at its registered office or such other place as permitted by law a register of

Bondholders (the “Register of Bondholders”) containing such particulars as required by Section 152

of the Companies Act. In terms of Section 152A of the Companies Act, the Register of Bondholders

maintained by a Depository for any Bond in dematerialized form under Section 11 of the Depositories

Act shall be deemed to be a Register of Bondholders for this purpose.

4.2 Transfers

4.2.1 Transfer of Bonds held in dematerialized form:

In respect of Bonds held in the dematerialized form, transfers of the Bonds may be effected only

through the Depository(ies) where such Bonds are held, in accordance with the provisions of the

Depositories Act, and/or rules as notified by the Depositories from time to time. The Bondholder shall

give delivery instructions containing details of the prospective purchaser‟s Depository Participant‟s

account to his Depository Participant. If a prospective purchaser does not have a Depository Participant

account, the Bondholder may rematerialize his or her Bonds and transfer them in a manner as specified

in section 4.2.2 below.

4.2.2. Transfer of Bonds in physical form:

The Bonds may be transferred by way of a duly completed, stamped and executed transfer deed or

other suitable instrument of transfer as may be prescribed by our Company for the registration of

transfer of Bonds. Purchasers of Bonds are advised to send the Consolidated Bond Certificate to our

Company or to such persons as may be notified by our Company from time to time. In accordance with

Article 77 of the Articles of Association, no fee shall be charged by our Company for the transfer of the

Bonds. If a purchaser of the Bonds in physical form intends to hold the Bonds in dematerialized form,

the Bonds may be dematerialized by the purchaser through his or her Depository Participant in

accordance with the provisions of the Depositories Act and/or rules as notified by the Depositories

from time to time.

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4.3 Formalities Free of Charge

Registration of a transfer of Bonds and issuance of new Consolidated Bond Certificates will be effected

without charge by or on behalf of our Company, but upon payment (or the giving of such indemnity as

our Company may require) in respect of any tax or other governmental charges which may be imposed

in relation to such transfer, and our Company being satisfied that the regulations concerning transfers

of Bonds have been complied with.

5. Debenture Redemption Reserve (“DRR”)

Section 117C of the Companies Act requires any company that intends to issue debentures to create a

DRR to which adequate amounts shall be credited out of the profits of our Company till the redemption

of the debentures. However, the Ministry of Company Affairs (the “MCA”) has, through its circular

dated April 18, 2002, specified that NBFCs which are registered with the RBI under Section 45-IA of

the RBI Act, 1934 shall create DRR to the extent of 50 percent of the value of the debentures issued

through public issue. Accordingly, our Company shall create DRR of 50 per cent of the value of Bonds

issued and allotted in terms of this Prospectus, for the redemption of the Bonds. As further clarified by

the circular, the amount to be credited as DRR will be carved out of profit of the Company only if there

is profit for the particular year and there is no obligation on the part of the Company to create DRR if

there is no profit for the particular year. Our Company shall credit adequate amounts to DRR from its

profits every year until the Bonds are redeemed. The amounts credited to the DRR shall not be utilized

by our Company for any purpose other than for the redemption of the Bonds.

6. Deemed Date of Allotment

The Deemed Date of Allotment shall be the date as may be determined by the Board of our Company

and notified to the BSE. All benefits under the Bonds including payment of interest will accrue to the

Bondholders from the Deemed Date of Allotment. The actual allotment may occur on a date other than

the Deemed Date of Allotment.

7. Subscription

7.1 Period of Subscription

The Issue shall remain open for:

Issue Opens on August 18, 2011

Issue Closes on September 5, 2011

The Issue shall remain open for subscription during banking hours for the period indicated above,

except that the Issue may close on such earlier date as may be decided by the Board subject to

necessary approvals. In the event of an early closure, our Company shall ensure that notice of the same

is provided to the prospective investors through newspaper advertisements on the day of such earlier

date of Issue closure.

7.2 Underwriting

The Issue is not being underwritten.

7.3 Minimum Subscription

Under the SEBI Debt Regulations, our Company is required to stipulate a minimum subscription

amount which it seeks to raise. The consequence of minimum subscription amount not being raised is

that the Issue shall not proceed and the application monies received are refunded to the Applicants.

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Accordingly, our Company has decided to set the minimum subscription for the issue at 75% of the

base amount of the Issue, being Rs. 3,000 million. If our Company does not receive the minimum

subscription of 75% of the base amount of the Issue on or before the closure of the Issue, the entire

subscription amount shall be refunded to the applicants within 15 days from the date of closure of the

Issue. If there is a delay in the refund of the subscription amount by more than eight days after our

Company becomes liable to pay the same, the Bank will pay interest for the period of delay at rates

prescribed under sub-section (2) and (2A) of Section 73 of the Companies Act.

8. Utilization of the proceeds

(a) All monies received pursuant to the Issue of Bonds to public shall be transferred to a separate

bank account other than the bank account referred to in sub-section (3) of section 73 of the

Act.

(b) Details of all monies utilised out of Issue referred to in sub-item (a) shall be disclosed under

an appropriate separate head in our Balance Sheet indicating the purpose for which such

monies had been utilised; and

(c) Details of all unutilised monies out of issue of Bonds, if any, referred to in sub-item (a) shall

be disclosed under an appropriate separate head in our Balance Sheet indicating the form in

which such unutilised monies have been invested.

(d) We shall utilize the Issue proceeds only upon execution of the documents for creation of

security as stated in this Prospectus and on receipt of the minimum subscription of 75% of the

base amount of the Issue, being Rs. 3,000 million.

(e) The Issue proceeds shall not be utilized towards full or part consideration for the purchase or

any other acquisition, inter alia by way of a lease, of any property.

9. Interest

9.1 Interest Rate

9.1.1 The Series I Bonds shall not bear any interest. The Series II Bonds shall bear interest from (and

including) the Deemed Date of Allotment at a fixed rate of 12% per annum for Category I and

Category II Bondholders and 12.2% per annum for Category III Bondholders.

9.2 Calculation of Interest

Series II Bond

9.1.2 Interest on the Series II Bonds at the rate mentioned above will be paid semi-annually from the

Deemed Date of Allotment.

9.1.3 For the first six month period, the interest shall be calculated from the Deemed Date of Allotment to

the last day of the six month period, both days inclusive.

9.1.4 For the subsequent six month periods (except the six month period in which the Maturity Date falls),

the interest shall be calculated from the first to the last day of the six month period, both days inclusive.

9.1.5 For the six month period in which the Maturity Date falls, the interest shall be calculated from the first

day of the six month period to one day prior to the Maturity Date, both days inclusive.

9.1.6 If default is made in any payment of any interest in respect of the Bonds or any of them when due and

such failure continues for a period of 90 days, our Company shall be liable to pay additional interest at

2% per annum over and above the rate payable from the Interest Payment Date.

9.3 Day Count Convention

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Interest shall be computed on a 365 days-a-year basis on the principal outstanding on the Bonds.

However, where the interest period (start date to end date) includes February 29, interest shall be

computed on 366 days-a-year basis, on the principal outstanding on the Bonds.

9.4 Accrual of Interest

Each Bond shall cease to bear interest from the Maturity Date along with the accrued interest thereon

unless, upon due presentation thereof, payment of principal is improperly withheld or refused, in which

event interest will continue to accrue as provided in this section 9.

9.5 Interest on Application and Refund Money

9.5.1 Application Interest

Interest on Application money on the amount allotted, subject to deduction of income tax under the

provisions of the Income tax act, 1961, will be paid separately by the Company @ 7% p.a. for all

categories of Applicants for all Series of Bonds, to Allottees and the same should not be deducted from

the amount on application. The interest shall be payable from the Pay-In Date, and shall be payable

until one day prior to the Deemed Date of Allotment.

9.5.2 Refund Interest

Interest on any refund of subscription amount paid by an Applicant, subject to deduction of income tax

under the provisions of the Income tax act, 1961, will be paid separately by the Company @ 3% p.a. on

the amount refunded to Allottees and Non-allottees (“Refund Interest”). The Refund Interest shall be

paid along with the refund of application money whether in case of total refund to Non-allotees or partial

refund to Allotees, as the case maybe. The interest shall be payable from the Pay-In Date, and shall be

payable until one day prior to the Deemed Date of Allotment.

10. Redemption

10.1 Unless previously redeemed as provided under the Debenture Trust Deed, our Company shall redeem

the Bonds on the Maturity Date.

10.2 Procedure for Redemption by Bondholders

The procedure for redemption is set out below:

10.2.1 Bonds held in electronic form:

No action is required on the part of Bondholders at the time of maturity of the Bonds.

10.2.2 Bonds held in physical form:

No action will ordinarily be required on the part of the Bondholder at the time of redemption and the

Maturity Amount will be paid to those Bondholders whose names appear in the Register of Bondholders

maintained by our Company on the Record Date fixed for the purpose of redemption. However, our

Company may require that the Consolidated Bond Certificate(s), duly discharged by the sole holder or

all the joint-holders (signed on the reverse of the Consolidated Bond Certificate(s)) to be surrendered

for redemption on Maturity Date and shall be sent by the Bondholders by registered post with

acknowledgment due or by hand delivery to the Registrar or Company or to such persons at such

addresses as may be notified by our Company from time to time. Bondholders may be requested to

surrender the Consolidated Bond Certificate(s) in the manner as stated above, not more than three

months and not less than one month prior to the Maturity Date so as to facilitate timely payment.

10.3 Loan against Bonds

Our Company, at its sole discretion, subject to applicable statutory and/or regulatory requirements, may

consider granting of a loan facility to the holders of Bonds against the security of such Bonds. Such

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loans shall be subject to the terms and conditions as may be decided by our Company from time to

time.

10.4 Buyback of Bonds

Our Company may, from time to time, subject to Applicable Laws and necessary approvals, buyback

the bonds on terms and conditions to be decided by our Company.

11. Payments

11.1 Payment of Interest

Payment of interest on the Bonds will be made to those Bondholders of the Bonds, whose name

appears first in the Register of Bondholders maintained by the Depositories and/or our Company and/or

the Registrar, as the case may be as, on the Record Date.

11.2 Record Date

The record date for the payment of interest or the Maturity Amount shall be 3 Working Days prior to

the date on which such amount is due and payable (“Record Date”).

11.3 Effect of holidays on payments

If the date of payment of interest or principal or any date specified does not fall on a Working Day,

then the succeeding Working Day will be considered as the effective date. Interest and principal or

other amounts, if any, will be paid on the succeeding Working Day. Payment of interest will be subject

to the deduction of tax as per Income Tax Act or any statutory modification or re-enactment thereof for

the time being in force. In case the Maturity Date falls on a holiday, the payment will be made on the

next Working Day, without any interest for the period overdue. Such payment of interest or principal

on the next Working Day shall not constitute non-payment on the Interest Payment Date or the

Maturity Date.

11.4 Payment on Maturity

The manner of payment on Maturity is set out below:-

11.4.1 Bonds held in electronic form:

On the Maturity Date, the Maturity Amount will be paid in a manner as detailed in the section entitled

“Manner and Mode of Payment” below. These payments will be as per the Depositories‟ records on the

Record Date fixed for this purpose. No action is required on the part of Bondholders.

11.4.2 Bonds held in physical form:

Payments with respect to maturity of Bonds will be made by way of cheques or pay orders or

electronically. However, if our Company so requires, payments on maturity may be made on surrender

of the Consolidated Bond Certificate(s). Dispatch of cheques or pay orders in respect of payments with

respect to redemptions will be made on the Maturity Date (if so requested by our Company in this

regard) within a period of 30 days from the date of receipt of the duly discharged Consolidated Bond

Certificate.

11.5 Our Company‟s liability to the Bondholders including for payment or otherwise shall stand

extinguished from the Maturity Date or upon dispatch of the Maturity Amounts to the Bondholders.

Further, our Company will not be liable to pay any interest, income or compensation of any kind from

the Maturity Date.

11.6 Applicable Laws

All payments are subject in all cases to any applicable laws and regulations, but without prejudice to

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the provisions of Condition 11.3. No commissions or expenses shall be charged to the Bondholders in

respect of such payments.

12. Manner and Mode of Payment

12.1 Manner of Payment:

All payments to be made by our Company to the Bondholders shall be made in any of the following

manners:

12.1.1 For Bonds applied or held in electronic form:

The bank details will be obtained from the Depositories for payments. Investors who have applied or

who are holding the Bond in electronic form, are advised to immediately update their bank account

details as appearing on the records of Depository Participant. Please note that failure to do so could

result in delays in credit of the payments to investors at their sole risk and neither the Lead Managers

nor the Co-Lead Managers or our Company shall have any responsibility and undertake any liability

for such delays on part of the investors.

12.1.2 For Bonds held in physical form (upon rematerialisation by the holder):

The bank details will be obtained from the Registrar for effecting payments.

12.2 Mode of Payment:

All payments to be made by our Company to the Bondholders shall be made through any of the

following modes:

12.2.1 Cheques or Demand drafts

By cheques or demand drafts made in the name of the Bondholders whose names appear in the Register

of Bondholders as maintained by our Company and/or as provided by the Depositories. Cheques or

demand drafts in excess of Rs. 1,500, as the case may be, shall be sent by registered/speed post at the

Bondholder‟s sole risk.

12.2.2 National Electronic Clearing System (―NECS‖)

Through NECS for Applicants having an account at any of the centers notified by the RBI. This mode

of payment will be subject to availability of complete bank account details including the Magnetic Ink

Character Recognition (“MICR”) code as per demographic details derived from Depository records

based on DP ID /Client ID appearing in the Application Form.

Please note that our Company shall not be responsible for any delay to the Bondholder receiving credit

of interest or refund or Maturity Amount so long as our Company has initiated the process in time.

12.2.3 Direct Credit

Payment of refunds, interest or principal redemption to Applicants having their bank accounts with the

Escrow Collection Bank shall be directly credited to their bank accounts with the Escrow Collection

Bank.

12.2.4 NEFT

Payment of refunds, interest or principal redemption shall be undertaken through NEFT wherever the

Applicants„ bank has been assigned the IFSC which can be linked to MICR, if any, available to that

particular bank branch, and where the Applicants have registered their nine-digit MICR number and

their bank account number while opening and operating the dematerialized account. The IFSC of that

bank branch will be obtained from the RBI„s website as on a date immediately prior to the date of

payment of refund, and will be duly mapped with the MICR numbers.

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12.2.5 RTGS

Applicants having a bank account at any of the centers notified by RBI and whose payment of refunds,

interest or principal redemption amounts exceeds Rs. 1 million have the option to receive the due

amounts through RTGS. Such eligible Applicants who indicate their preference to receive payment of

refunds, interest or principal redemption through RTGS are required to provide the IFSC in the

Application Form. In the event the same is not provided, payment of refunds, interest or principal

redemption shall be made through NECS. Charges, if any, levied by the Escrow Collection Bank for

the same would be borne by such Applicant opting for RTGS as a mode of payment of refunds, interest

or principal redemption. Charges, if any, levied by the Applicant‟s bank receiving the credit would be

borne by the Applicant.

12.3 Printing of Bank Particulars

As a matter of precaution against possible fraudulent encashment of Consolidated Bond Certificates

due to loss or misplacement, the particulars of the Applicant‟s bank account are mandatorily required to

be provided for printing on the Consolidated Bond Certificate. Applications without these details are

liable to be rejected at the sole discretion of our Company. However, in relation to Applications for

dematerialised Bonds, these particulars will be taken directly from the Depositories. In case of Bonds

held in physical form, the Bondholders are advised to submit their bank account details with the

Registrar before the Record Date failing which the amounts will be dispatched to the postal address of

the Bondholders as held in the records of our Company. Bank account particulars will be printed on the

Consolidated Bond Certificates which can then be deposited only in the account specified.

13. Taxation

13.1 The Applicants are advised to consider the tax implications of their respective investment in the Bonds.

13.2 No income tax is deductible at source on interest on the Bonds, inter alia, in respect of the following:

For Bonds held in dematerialized form:

(a) On any security issued by a Company in a dematerialized form and is listed on recognized

stock exchange in India.

For Bonds held in physical form (upon rematerialisation by the holder):

(b) In case the payment of interest on NCD to resident individual Debenture Holder in the

aggregate during the financial year does not exceed Rs. 2,500 provided the NCD are listed on

a recognized stock exchange in India and the interest is paid by an account payee cheque.

(c) When the Assessing Officer issues a certificate on an application by a Debenture Holder on

satisfaction that the total income of the Debenture Holder justifies no/lower deduction of tax at

source as per the provisions of section 197(1) of the Act and that certificate is filed with the

Company.

(d) When the resident Debenture Holder with PAN (not being a Company or a firm or a senior

citizen) furnishes a declaration in writing in duplicate in the prescribed form (Form 15G) and

verified in the prescribed manner to the effect that the tax on his estimated total income of the

PY in which such income is to be included in computing his total income will be Nil.

13.3 Senior citizens, who are 65 or more years of age at any time during the financial year, , and are holding

the bonds in physical form, can submit a self-declaration in the prescribed Form 15H for non-deduction

of tax at source in accordance with the provisions of section 197A even if the aggregate income

credited or paid or likely to be credited or paid exceeds the maximum limit for the financial year. To

ensure non-deduction/lower deduction of tax at source from interest on Bonds, a resident Bondholder is

required to submit Form 15G/15H/certificate under section 197 of the Income Tax Act or other

evidence, as may be applicable, with the Application Form, or send to the Registrar along with a copy

of the Application Form on or before the closure of the Issue. Subsequently, Form 15G/15H/ original

certificate issued under section 197 of the Income Tax Act or other evidence, as may be applicable,

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may be submitted to our Company or to such person at such address as may be notified by us from time

to time, quoting the name of the sole or first Bondholder, folio number and the distinctive number(s) of

the Bond(s) held, at least one month prior to the interest payment date.

13.4 Bondholders holding the bonds in physical form, are required to submit Form 15G or 15H or original

certificate issued under section 197 of the Income Tax Act or other evidence in each financial year to

ensure non-deduction or lower deduction of tax at source from interest on Bonds.

13.5 If the Bondholder is eligible to submit Form 15G or 15H, he or she is required to tick at the relevant

place on the Application Form, to send a blank copy of the form to the Bondholders. Blank declaration

form will be furnished to other Bondholders on request made at least two months prior to the interest

payment date. This facility is being provided for the convenience of Bondholders and we will not be

liable in any manner, whatsoever, in case the Bondholder does not receive the form.

13.6 As per the prevailing tax provisions, Form 15G cannot be submitted if the aggregate of income of the

nature referred to in section 197A of the Income Tax Act viz. dividend, interest etc. as prescribed

therein, credited or paid or likely to be credited or paid during the financial year in which such income

is to be included exceeds the maximum amount which is not chargeable to tax.

13.7 Tax exemption certificate or document, if any, must be lodged at the office of the Registrar prior to the

Record Date or as specifically required. Tax applicable on coupon will be deducted at source on

accrual thereof in our Company‟s books and / or on payment thereof, in accordance with the provisions

of the Income Tax Act and / or any other statutory modification, re-enactment or notification as the

case may be. A tax deduction certificate will be issued for the amount of tax so deducted on annual

basis.

14. Security

14.1 The principal amount of the Bonds to be issued upon the terms contained herein together with all

interest, costs, charges, fees, remuneration of Debenture Trustee and expenses payable in respect

thereof (the “Secured Obligations”) shall be secured in favour of the Debenture Trustee in the

following manner:

14.1.1 by mortgage of the immovable property of our Company as identified in the Debenture Trust Deed; and

14.1.2 a charge in favour of the Debenture Trustee, on all current assets, book debts, receivables (both present

and future) as fully described in the Debenture Trust Deed, except those receivables specifically

exclusively charged, on a first ranking pari passu basis with all other lenders to our Company holding

pari passu charge over the security.

14.2 Our Company agrees to maintain an asset cover of at least 1.10 times of the outstanding amount of

Bonds, at all times, till the Bonds are completely redeemed. In case of reduction of security cover

below 1.10 times for any reason whatsoever, our Company agrees to make-up the deficiency with

equivalent amount of receivables, free from any charge of whatsoever nature, so as to maintain the

minimum asset cover of 1.10 times.

14.3 Our Company shall ensure that the creation of security as contemplated in this section and all necessary

formalities including execution of relevant security documents in relation to perfection of the security

including but not limited to filings to be made with the RoC shall be completed within a period of 90

days from the Deemed Date of Allotment of the Bonds.

15. Events of Defaults

15.1 The Debenture Trustee at its discretion may, or if so requested in writing by the holders of not less than

75 per cent. in principal amount of the Bonds then outstanding or if so directed by a Special Resolution

shall (subject to being indemnified and/or secured by the Bondholders to its satisfaction), give notice to

our Company specifying that the Bonds and/or any particular Series of Bonds, in whole but not in part

are and have become due and repayable on such date as may be specified in such notice inter alia if any

of the events listed in 15.2 below (each an “Event of Default”) occurs.

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15.2 The list given below is an indicative list of events of default and a complete list of event of default and

its consequences shall be specified in the Debenture Trust Deed. Events of default shall include but not

be limited to the following:

15.2.1 Default is made in any payment of any interest due in respect of the Bonds or any of them and such

failure continues for a period of 90 days;

15.2.2 Our Company does not perform or comply with one or more of its other obligations and undertakings

in relation to the Bonds or the Debenture Trust Deed which default or breach is incapable of remedy or,

if in the opinion of the Debenture Trustee capable of remedy, is not remedied within 15 days after

written notice of such default or breach shall have been given to our Company by the Debenture

Trustee;

15.2.3 Our Company is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay (in the

opinion of the Debenture Trustee) a material part of its debts, or stops, suspends or threatens to stop or

suspend payment of all or (in the opinion of the Debenture Trustee) a material part of (or of a particular

type of) its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment

of all or (in the opinion of the Debenture Trustee) a material part of (or all of a particular type of) its

debts (or of any part which it will or might otherwise be unable to pay when due), proposes or makes a

general assignment or an arrangement or composition with or for the benefit of the relevant creditors in

respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any

part of (or of a particular type of) the debts of our Company;

15.2.4 A distress, attachment, execution or other legal process is levied, enforced or sued out on or against any

material part of the property, assets or revenues of our Company and is not discharged or stayed within

45 days;

15.2.5 An order is made or an effective resolution passed for the winding-up or dissolution, judicial

management or administration of our Company, or our Company ceases or threatens to cease to carry

on all or substantially all of its business or operations, except for the purpose of and followed by a

reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by an Special

Resolution of the Bondholders;

15.2.6 An encumbrancer takes possession or an administrative or other receiver or an administrator is

appointed of the whole or (in the opinion of the Debenture Trustee) any substantial part of the property,

assets or revenues of our Company (as the case may be) and is not discharged within 45 days;

15.2.7 Our Company commences a voluntary proceeding under any applicable bankruptcy, insolvency,

winding up or other similar law now or hereafter in effect, or consent to the entry of an order for relief

in an involuntary proceeding under any such law, or consent to the appointment or taking possession by

a receiver, liquidator, assignee (or similar official) for any or a substantial part of its property or take

any action towards its re-organisation, liquidation or dissolution;

15.2.8 It is or will become unlawful for our Company to perform or comply with any one or more of its

obligations under any of the Bonds or the Debenture Trust Deed;

15.2.9 Any step is taken by governmental authority or agency or any other competent authority, with a view to

the seizure, compulsory acquisition, expropriation or nationalisation of all or (in the opinion of the

Debenture Trustee) a material part of the assets of our Company which is material to our Company;

and

15.2.10 Any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of

the events referred to in any of the foregoing paragraphs.

15.3 If any Event of Default or any event which, after the notice, or lapse of time, or both, would constitute

an Event of Default has happened, our Company shall, forthwith give notice thereof to the Debenture

Trustee in writing specifying the nature of such event of default or of such event.

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15.4 If an Event of Default occurs which is continuing, the Debenture Trustee may with the consent of the

Bondholders, obtained in accordance with the provisions of the Debenture Trust Deed, and with a prior

written notice to our Company, enforce the Security in terms of the Debenture Trust Deed.

15.5 In case of default in the redemption of Bonds, in addition to the payment of interest and all other

monies payable hereunder on the respective due dates, our Company shall also pay interest on the

defaulted amounts. Arrears of liquidated damages shall carry interest at 2% per annum on the defaulted

amount and shall be payable on the footing of compound interest with quarterly rests.

16. Bondholder‟s Rights, Nomination Etc.

16.1 Bondholder Not a Shareholder

The Bondholders will not be entitled to any of the rights and privileges available to the equity and

preference shareholders of our Company.

16.2 Rights of Bondholders

Some of the significant rights available to the Bondholders are as follows:

(a) The Bonds shall not, except as provided in the Companies Act, confer upon the holders

thereof any rights or privileges available to members of our Company including the right to

receive notices or annual reports of, or to attend and / or vote, at our Company‟s general

meeting(s). However, if any resolution affecting the rights of the Bondholders is to be placed

before the shareholders, the said resolution will first be placed before the concerned registered

Bondholders for their consideration. In terms of Section 219(2) of the Companies Act, holders

of Bonds shall be entitled to a copy of the balance sheet on a specific request made to our

Company.

(b) The rights, privileges and conditions attached to the Bonds may be varied, modified and / or

abrogated with the consent in writing of the holders of at least three-fourths of the outstanding

amount of the Bonds or with the sanction of a Special Resolution passed at a meeting of the

concerned Bondholders, provided that nothing in such consent or resolution shall be operative

against our Company, where such consent or resolution modifies or varies the terms and

conditions governing the Bonds, if modification, variation or abrogation is not acceptable to

our Company.

(c) The registered Bondholder or in case of joint-holders, the person whose name stands first in the

Register of Bondholders shall be entitled to vote in respect of such Bonds, either by being

present in person or, where proxies are permitted, by proxy, at any meeting of the concerned

Bondholders summoned for such purpose and every such Bondholder shall be entitled to one

vote on a show of hands and on a poll, his or her voting rights shall be in proportion to the

outstanding nominal value of Bonds held by him or her on every resolution placed before such

meeting of the Bondholders.

(d) The Bonds are subject to the provisions of the SEBI Debt Regulations, the Act, the

Memorandum and Articles of Association of our Company, the terms of this Prospectus, the

Application Forms, the terms and conditions of the Debenture Trust Deed, requirements of the

RBI, other applicable statutory and/or regulatory requirements relating to the issue and listing,

of securities and any other documents that may be executed in connection with the NCDs.

(e) A register of Bondholders will be maintained in accordance with Section 152 of the Companies

Act and all interest and principal sums becoming due and payable in respect of the Bonds will

be paid to the registered holder thereof for the time being or in the case of joint-holders, to the

person whose name stands first in the Register of Bondholders as on the Record date.

(f) Bonds may be rolled over with the consent in writing of the holders of at least three-fourths of

the outstanding amount of the Bonds or with the sanction of a Special Resolution passed at a

meeting of the concerned Bondholders after providing at least 21 days prior notice for such

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roll-over and in accordance with the SEBI Debt Regulations. Our Company shall redeem the

Bonds of all the Bondholders, who have not given their positive consent to the roll-over.

The above rights of Bondholders are merely indicative. The final rights of the Bondholders will be as

per the Debenture Trust Deed to be executed by our Company with the Debenture Trustee.

Special Resolution for the purpose of this section is a resolution passed at a meeting of Bondholders of

at least three-fourths of the outstanding amount of the Bonds, present and voting.

16.3 Succession

Where Bonds are held in joint names and one of the joint holders dies, the survivor(s) will be

recognized as the Bondholder(s). It will be sufficient for our Company to delete the name of the

deceased Bondholder after obtaining satisfactory evidence of his death. Provided, a third person may

call on our Company to register his name as successor of the deceased Bondholder after obtaining

evidence such as probate of a will for the purpose of proving his title to the Bonds. In the event of

demise of the sole or first holder of the Bonds, our Company will recognize the executors or

administrator of the deceased Bondholders, or the holder of the succession certificate or other legal

representative as having title to the Bonds only if such executor or administrator obtains and produces

probate or letter of administration or is the holder of the succession certificate or other legal

representation, as the case may be, from an appropriate court in India. The directors of our Company

in their absolute discretion may, in any case, dispense with production of probate or letter of

administration or succession certificate or other legal representation.

Where a non-resident Indian becomes entitled to the Bonds by way of succession, the following steps

have to be complied with:

(a) Documentary evidence to be submitted to the Legacy Cell of the RBI to the effect that the

Bonds were acquired by the non-resident Indian as part of the legacy left by the deceased

Bondholder.

(b) Proof that the non-resident Indian is an Indian national or is of Indian origin.

Such holding by a non-resident India will be on a non-repatriation basis.

16.4 Nomination Facility to Bondholder

16.4.1 In accordance with Section 109A of the Act, the sole Bondholder or first Bondholder, along with other

joint Bondholders (being individual(s)) may nominate any one person (being an individual) who, in the

event of death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the

Bond. A person, being a nominee, becoming entitled to the Bond by reason of the death of the

Bondholders, shall be entitled to the same rights to which he will be entitled if he were the registered

holder of the Bond. Where the nominee is a minor, the Bondholders may make a nomination to appoint

any person to become entitled to the Bond(s), in the event of his death, during the minority. A

nomination shall stand rescinded upon sale of a Bond by the person nominating. A buyer will be

entitled to make a fresh nomination in the manner prescribed. When the Bond is held by two or more

persons, the nominee shall become entitled to receive the amount only on the demise of all the

Bondholders. Fresh nominations can be made only in the prescribed form available on request at our

Company‟s registered or administrative office or at such other addresses as may be notified by our

Company.

16.4.2 The Bondholders are advised to provide the specimen signature of the nominee to our Company to

expedite the transmission of the Bond(s) to the nominee in the event of demise of the Bondholders. The

signature can be provided in the Application Form or subsequently at the time of making fresh

nominations. This facility of providing the specimen signature of the nominee is purely optional.

16.4.3 In accordance with Section 109B of the Act, any person who becomes a nominee by virtue of the

provisions of Section 109A of the Act, shall upon the production of such evidence as may be required

by our Company‟s Board or Committee of Directors, as the case may be, elect either:

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(a) to register himself or herself as the holder of the Bonds; or

(b) to make such transfer of the Bonds, as the deceased holder could have made.

16.4.4 Further, our Company‟s Board or Committee of Directors, as the case may be, may at any time give

notice requiring any nominee to choose either to be registered himself or herself or to transfer the

Bonds, and if the notice is not complied with, within a period of 90 days, our Company‟s Board or

Committee of Directors, as the case may be, may thereafter withhold payment of all interests or other

monies payable in respect of the Bonds, until the requirements of the notice have been complied with.

16.4.5 Notwithstanding anything stated above, since the allotment of Bonds in this Issue will be made only in

dematerialised mode, there is no need to make a separate nomination with our Company. Nominations

registered with the respective Depository Participant of the Bondholder will prevail. If the Bondholders

require changing their nomination, they are requested to inform their respective Depository Participant.

17. Debenture Trustees

17.1 Our Company has appointed IL&FS Trust Company Limited act as the Debenture Trustee for the

Bondholders. Our Company intends to enter into a Debenture Trust Deed with the Debenture Trustee,

the terms of which will govern the appointment and functioning of the Debenture Trustee and shall

specify the powers, authorities and obligations of the Debenture Trustee. Under the terms of the

Debenture Trust Deed, our Company will covenant with the Debenture Trustee that it will pay the

Bondholders the principal amount on the Bonds on the relevant Maturity Date and also that it will pay

the interest due on Bonds on the rate specified under the Debenture Trust Deed.

17.2 The Bondholders shall, without further act or deed, be deemed to have irrevocably given their consent

to the Debenture Trustee or any of their agents or authorised officials to do all such acts, deeds, matters

and things in respect of or relating to the Bonds as the Debenture Trustee may in their absolute

discretion deem necessary or require to be done in the interest of the Bondholders. Any payment made

by our Company to the Debenture Trustee on behalf of the Bondholders shall discharge our Company

pro tanto to the Bondholders. All the rights and remedies of the Bondholders shall vest in and shall be

exercised by the Debenture Trustee without reference to the Bondholders. No Bondholder shall be

entitled to proceed directly against our Company unless the Debenture Trustee, having become so

bound to proceed, failed to do so.

17.3 The Debenture Trustee will protect the interest of the Bondholders in the event of default by our

Company in regard to timely payment of interest and repayment of principal and they will take

necessary action at our Company‟s cost.

18. Miscellaneous

18.1 Lien

Our Company shall have the right of set-off and lien, present as well as future on the monies due and

payable to the Bondholder whether in single name or joint name, to the extent of all outstanding dues by

the Bondholder to our Company.

18.2 Lien on Pledge of Bonds

Our Company, at its discretion, may note a lien on pledge of Bonds if such pledge of Bond is accepted

by any bank or institution for any loan provided to the Bondholder against pledge of such Bonds as part

of the funding.

18.3 Right to Reissue Bond(s)

Subject to the provisions of the Act, where our Company has redeemed or repurchased any Bond(s),

our Company shall have and shall be deemed always to have had the right to keep such Bonds alive

without extinguishment for the purpose of resale or reissue and in exercising such right, our Company

shall have and be deemed always to have had the power to resell or reissue such Bonds either by

reselling or reissuing the same Bonds or by issuing other Bonds in their place. This includes the right to

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reissue original Bonds.

18.4 Joint-holders

Where two or more persons are holders of any Bond (s), they shall be deemed to hold the same as joint

holders with benefits of survivorship subject to Articles and applicable law.

18.5 Sharing of Information

Our Company may, at its option, use its own, as well as exchange, share or part with any financial or

other information about the Bondholders available with our Company, its subsidiaries and affiliates and

other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and

neither our Company nor its subsidiaries and affiliates nor their agents shall be liable for use of the

aforesaid information.

18.6 Notices

All notices to the Bondholders required to be given by our Company or the Debenture Trustees shall be

published in one English language newspaper having wide circulation and one regional language daily

newspaper in Kerala, will be sent by post/courier or through email or other electronic media to the

registered Bondholders from time to time. All notices to be given by the Bondholders shall be sent by

registered post or by hand delivery to our Company at its Registered Office.

18.7 Issue of Duplicate Consolidated Bond Certificate(s)

If any Consolidated Bond Certificate is mutilated, defaced or the cages for recording transfers of Bonds

are fully utilized it may be replaced by our Company against the surrender of such Consolidated Bond

Certificates and upon payment by the claimant of such costs as may be incurred in connection

therewith, provided that where the Consolidated Bond Certificates are mutilated or defaced, they will

be replaced only if the certificate numbers and the distinctive numbers are legible.

If any Consolidated Bond Certificate is destroyed, stolen or lost then upon production of proof thereof

to our Company‟s satisfaction and upon furnishing such indemnity/security and/or documents as we

may deem adequate and further upon payment by the claimant of such costs as may be incurred in

connection therewith , duplicate Consolidated Bond Certificate(s) shall be issued.

18.8 Future Borrowings

Our Company shall be entitled to borrow or raise loans or create encumbrances or avail financial

assistance in whatever form, and also issue promissory notes or debentures or other securities in any

manner having such ranking, pari passu or otherwise and change the capital structure including the

issue of shares of any class, on such terms and conditions as our Company may deem appropriate

subject to the (i) prior written consent of the Debenture Trustee and (ii) the security cover of 1.10 times

as stipulated for the Bonds is maintained at all times.

18.9 Jurisdiction

The Bonds, the Debenture Trust Deed, the Tripartite Agreements with the Depositories and other

relevant documents shall be governed by and construed in accordance with the laws of India. Our

Company has in the Debenture Trust Deed agreed, for the exclusive benefit of the Debenture Trustee

and the Bondholders, that the courts of Mumbai are to have jurisdiction to settle any disputes which

may arise out of or in connection with the Debenture Trust Deed or the Bonds and that accordingly any

suit, action or proceedings (together referred to as “Proceedings”) arising out of or in connection with

the Debenture Trust Deed and the Bonds may be brought in the courts of Mumbai.

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PROCEDURE FOR APPLICATION

This section applies to all Applicants. Please note that all Applicants are required to make payment of the full

Application Amount along with the Application Form.

The Prospectus and the abridged prospectus containing the salient features of the Prospectus together with

Application Forms may be obtained from our Registered Office, from the Lead Managers, the Co-Lead

Managers or from the Lead Brokers, as mentioned on the Application Form. In addition, Application Forms

would also be made available to BSE where listing of the Bonds is sought, and to brokers, being members of

BSE, upon their request.

We may provide Application Forms for being filled and downloaded at such websites as we may deem fit.

Application Form

Applicants are required to submit their Applications through the Bankers to Issue. All Applicants shall have the

option to apply for any of or all categories of Bonds in the Application Form.

WHO CAN APPLY?

The following categories of persons are eligible to apply in the Issue:

Category I

• Public financial institutions, statutory corporations, commercial banks, co-operative banks and regional

rural banks, which are authorised to invest in the Bonds;

• Provident funds, pension funds, superannuation funds and gratuity fund, which are authorised to invest

in the Bonds;

• Venture capital funds registered with SEBI;

• Insurance companies registered with the IRDA;

• National Investment Fund;

• Mutual funds;

Category II

• Companies; bodies corporate and societies registered under the applicable laws in India and authorised

to invest in the Bonds;

• Public/private charitable/religious trusts which are authorised to invest in the Bonds;

• Scientific and/or industrial research organisations, which are authorised to invest in the Bonds;

• Partnership firms in the name of the partners; and

• Limited liability partnerships formed and registered under the provisions of the Limited Liability

Partnership Act, 2008.

Category III*

The following persons/entities

• Resident Indian individuals; and

• Hindu undivided families through the Karta.

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* With respect to applications received from Category III Applicants, applications by Applicants who apply for

Bonds aggregating to a value not more than Rs. 5 Lacs, across all Series of Bonds, shall be grouped together,

(“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value

exceeding Rs. 5 Lacs, across all Series of Bonds, (Option I and/or Option II), shall be separately grouped

together, (“Unreserved Individual Portion”).

Participation by any of the above-mentioned investor classes in this Issue will be subject to applicable

statutory and/or regulatory requirements. Applicants are advised to ensure that applications made by

them do not exceed the investment limits or maximum number of Bonds that can be held by them under

applicable statutory and/or regulatory provisions.

Foreign Institutional Investors, NRIs and Overseas Corporate Bodies are not permitted to apply in this

Issue.

The Lead Managers, the Co-Lead Managers, their associates and affiliates are permitted to subscribe in

the Issue. However, the Issue or any part thereof is not being underwritten by the Lead Managers or the

Co-Lead Managers to the Issue or by any of its associates and affiliates.

Applications by Mutual Funds

In terms of the SEBI (Mutual Funds) Regulations, 1996, as amended, no mutual fund scheme is allowed to

invest more than 15% of its net asset value (the “NAV”) in debt instruments issued by a single company, which

are rated not below investment grade by a credit rating agency authorised to carry out such activity. Such

investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the board of

trustees and the board of asset management company (the “AMC”).

A separate Application can be made in respect of each scheme of an Indian mutual fund registered with SEBI

and such Applications shall not be treated as multiple Applications. Applications made by the AMCs or

custodians of a Mutual Fund shall clearly indicate the name of the concerned scheme for which Application is

being made. In case of Applications made by Mutual Fund registered with SEBI, a certified copy of their SEBI

registration certificate must be submitted with the Application Form. The Applications must be also

accompanied by certified true copies of (i) Trust Deed (ii) resolution authorising investment and containing

operating instructions and (iii) specimen signatures of authorized signatories. Failing this, the Company reserves

the right to accept or reject any Application in whole or in part, in either case, without assigning any reason

therefor.

Applications by Provident, Superannuation and Gratuity Funds

Non-government provident funds, superannuation funds and gratuity funds may invest up to 55% of their funds

in: (a) Government securities; and (b) Government guaranteed securities. Further, up to: (i) 40% of their funds

may be invested in: (a) minimum 3 year debt securities issued by corporates, banks and PFIs, at least 75% of

which should be made in investment grade instruments; and (b) minimum 3 year Rupee bonds issued by

institutions like the International Bank for Reconstruction and Development, International Finance Corporation

and the Asian Development Bank; and (ii) 5% in money market instruments.

Application by Pension Funds

Pension funds under the PFRDA (Registration of Intermediaries) Regulations, 2005 may invest in (i) minimum

3 year debt securities issued by corporates, SCBs and PFIs, at least 75% of which should be invested in

investment grade instruments; (ii) credit rated PFIs or PSU bonds; (iii) credit rated municipal bonds or

infrastructure bonds; and (iv) State Government and Government securities.

Application by Scheduled Banks, Co-operative Banks and Regional Rural Banks

Scheduled banks, co-operative banks and regional rural banks can apply in the Issue based upon their own

investment limits and approvals. The Application must be accompanied by certified true copies of (i) a board

resolution authorising the Application; (ii) a letter of authorisation. Failing this, the Company reserves the right

to accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.

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Application by Insurance Companies

In case of Applications made by insurance companies registered with the Insurance Regulatory and

Development Authority, a certified true copy of certificate of registration issued by Insurance Regulatory and

Development Authority must be attached to the Application Form. Each Application must be accompanied by

certified copies of (i) the Applicant‟s memorandum of association and articles of association; (ii) a power of

attorney; (iii) a resolution authorising the Application and containing operating instructions; and (iv) specimen

signatures of authorized signatories. Failing this, the Company reserves the right to accept or reject any

Application in whole or in part, in either case, without assigning any reason therefor.

Application by Trusts

In case of Applications made by trusts, settled under the Indian Trusts Act, 1882, as amended, or any other

statutory and/or regulatory provision governing the settlement of trusts in India, must submit a (i) certified copy

of the registered instrument for creation of such trust, (ii) power of attorney, if any, in favour of one or more

trustees thereof, (iii) such other documents evidencing registration thereof under applicable statutory/regulatory

requirements. Further, any trusts applying for Bonds pursuant to the Issue must ensure that (a) they are

authorised under applicable statutory/regulatory requirements and their constitution instrument to hold and

invest in debentures, (b) they have obtained all necessary approvals, consents or other authorisations, which may

be required under applicable statutory and/or regulatory requirements to invest in debentures, and (c)

applications made by them do not exceed the investment limits or maximum number of Bonds that can be held

by them under applicable statutory and or regulatory provisions. Failing this, our Company reserves the right to

accept or reject any Applications in whole or in part, in either case, without assigning any reason therefor.

Applications cannot be made by:

(a) Minors without a guardian name;

(b) Non residents;

(c) FIIs;

(d) OCBs; and

(e) Foreign nationals.

Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory

permissions/consents/approvals in connection with applying for, subscribing to, or seeking Allotment of

Bonds pursuant to this Issue.

Application Size

Applications are required to be for a minimum of five Bonds and multiples of one Bond thereafter.

For the purpose fulfilling the requirement of minimum subscription of five Bonds, an Applicant may choose to

apply for five Bonds of the same series or five Bonds across different series.

INSTRUCTIONS FOR COMPLETING THE APPLICATION FORM

Applications must be:

(a) Made only in the prescribed Application Form.

(b) Completed in block letters in English as per the instructions contained herein and in the Application

Form, and are liable to be rejected if not so completed. Applicants should note that the Bankers to the

Issue will not be liable for errors in data entry due to incomplete or illegible Application Forms.

(c) In single name or in joint names (not more than three, and in the same order as their Depository

Participant details).

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(d) Applications are required to be for a minimum of five Bonds and in multiples of one Bond thereafter.

For the purpose of fulfilling the requirement of minimum subscription of five Bonds, an Applicant may

choose to apply for two Bonds of the same series or two Bonds across different series.

(e) Thumb impressions and signatures other than in English/ Hindi/ Marathi or any of the other languages

specified in the Eighth Schedule to the Constitution of India must be attested by a Magistrate or Notary

Public or a Special Executive Magistrate under his official seal.

(f) No receipt would be issued by our Company for the Application money. However, the Bankers to the

Issue, on receiving the applications will acknowledge receipt by stamping and returning the

acknowledgment slip to the Applicant.

IN CASE THE DP ID, CLIENT ID AND PAN MENTIONED IN THE APPLICATION FORM DO NOT

MATCH WITH THE DP ID, CLIENT ID AND PAN AVAILABLE IN THE RECORDS WITH THE

DEPOSITORIES, THE APPLICATION FORM IS LIABLE TO BE REJECTED.

The demat accounts for Applicants for which PAN details have not been verified shall be “suspended for

credit” and no credit of Bonds pursuant to the Issue shall be made into accounts of such Applicants.

GENERAL INSTRUCTIONS

Do‟s:

1. Check if you are eligible to apply.

2. Read all the instructions carefully and complete the Application Form.

3. Applications are required to be in single or joint names (not more than three).

4. Ensure that the details about the Depository Participant and beneficiary account are correct and the

demat account is active as Allotment of the Bonds will be in the dematerialised form only.

5. In case of an HUF applying through its Karta, the Applicant is required to specify the name of an

Applicant in the Application Form as “XYZ Hindu Undivided Family applying through PQR”, where

PQR is the name of the Karta.

6. Applicant‟s Bank Account Details: The Bonds shall be allotted in dematerialised form only. The

Registrars to the Issue will obtain the Applicant‟s bank account details from the Depository. The

Applicant should note that on the basis of the name of the Applicant, Depository Participant‟s (DP)

name, Depository Participants identification number and beneficiary account number provided by them

in the Application Form, the Registrar to the Issue will obtain from the Depositaries, the Applicant‟s

bank account details. The Applicants are advised to ensure that bank account details are updated in

their respective DP A/cs as these bank account details would be printed on the refund order(s), if any.

Please note that failure to do so could result in delays in credit of refunds to Applicants at the

Applicants sole risk and neither the Lead Managers nor the Co-Lead Managers or our Company nor the

Refund Bank nor the Registrar shall have any responsibility and undertake any liability for the same.

7. Applications under Power of Attorney: Unless our Company specifically agree in writing, and subject

to such terms and conditions as our Company may deem fit, in the case of Applications made under

Power of Attorney, a certified copy of the Power of Attorney is required to be lodged separately, along

with a copy of the Application Form at the office of the Registrar to the Issue simultaneously with the

submission of the Application Form, indicating the name of the Applicant along with the address,

Application number, date of submission of the Application Form, name of the bank and branch where

it was deposited, Cheque/Demand Draft Number and the bank and branch on which the

Cheque/Demand Draft was drawn.

8. Permanent Account Number: All Applicants except applicants on behalf of the Central or State

Government and the officials appointed by the courts should mention their PAN allotted under the

Income Tax Act in the Application Form. In case of joint applicants the PAN of the first Applicant

should be provided and for HUFs, PAN of the HUF should be provided. The PAN would be the sole

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identification number for participants transacting in the securities markets, irrespective of the amount

of the transaction. Any Application Form without the PAN is liable to be rejected. It is to be

specifically noted that Applicants should not submit the GIR Number instead of the PAN as the

Application is liable to be rejected on this ground. However, applicants residing in the State of Sikkim

are exempted from the mandatory requirement of PAN. The exemption for applicants on behalf of the

Central or State Government and the officials appointed by the courts and applicants residing in the

State of Sikkim is subject to the Depository participants‟ verifying the veracity of such claims of the

investors by collecting sufficient documentary evidence in support of their claims. At the time of

ascertaining the validity of these bids, the Registrar will check from Depository records for the

appropriate description under the PAN field.

9. Joint Applications: Applications may be made in single or joint names (not exceeding three). In the

case of joint Applications, all payments will be made out in favour of the first Applicant. All

communications will be addressed to the first named Applicant whose name appears in the Application

Form at the address mentioned therein.

10. Applicants are requested to write their names and Application serial number on the reverse of the

instruments by which the payments are made.

11. Category: All Applicants are requested to tick the relevant column “Category of Investor” in the

Application Form.

12. Ensure that you have obtained all necessary approvals from the relevant statutory and/or regulatory

authorities to apply for, subscribe to and/or seek allotment of Bonds pursuant to the Issue.

13. Ensure that the Applications are submitted to the Bankers to the Issue before the closure of banking

hours on the Issue Closing Date;

14. Ensure that the Applicant‟s name(s) given in the Application Form is exactly the same as the name(s)

in which the beneficiary account is held with the Depository Participant. In case the Application Form

is submitted in joint names, ensure that the beneficiary account is also held in same joint names and

such names are in the same sequence in which they appear in the Application Form.

Don‟ts:

1. Do not make an application for lower than the minimum Application size.

2. Do not pay the Application Amount in cash, by money order or by postal order or by stockinvest.

3. Do not send Application Forms by post or to the office of Lead Mangers or Registrar to the Issue;

instead submit the same to a Banker to the Issue only.

4. Do not submit the GIR number instead of the PAN as the Application Form is liable to be rejected on

this ground.

5. Do not submit the Application Forms without the full Application Amount.

6. Do not fill up the Application Form such that the Bonds applied for exceeds the issue size and/or

investment limit or maximum number of Bonds that can be held under the applicable laws or

regulations or maximum amount permissible under the applicable regulations

For further instructions, please read the Application Form carefully.

Tax Deduction at Source

Please refer to ―Terms of the Issue – Taxation‖

PAYMENT INSTRUCTIONS

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Escrow Mechanism

Our Company shall open Escrow Account(s) with one or more Escrow Collection Bank(s) in whose favour the

Applicants shall make out the cheque or demand draft in respect of his or her Application. Cheques or demand

drafts received for the Application Amount from Applicants would be deposited in the Escrow Account.

The Escrow Collection Banks will act in terms of the Prospectus and the Escrow Agreement. The Escrow

Collection Banks, for and on behalf of the Applicants, shall maintain the monies in the Escrow Account until the

documents for creation of security for the Bonds are executed. The Escrow Collection Banks shall not exercise

any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the

Applicants. On the Designated Date, the Escrow Collection Banks shall transfer the funds represented by

Allotment of the Bonds from the Escrow Account, as per the terms of the Escrow Agreement, into the Public

Issue Account maintained with the Bankers to the Issue. The amount representing the Applications that have

been rejected shall be transferred to the Refund Account. Payments of refund to the Applicants shall be made

from the Refund Account are per the terms of the Escrow Agreement and the Prospectus.

The Applicants should note that the escrow mechanism is not prescribed by SEBI or the BSE and has been

established as an arrangement between our Company, the Lead Managers, the Co-Lead Managers, the Escrow

Collection Banks and the Registrar to facilitate collection from the Applicants.

Payment into Escrow Account

Each Applicant shall draw a cheque or demand draft for the Application Amount as per the following terms:

(a) All Applicants would be required to pay the full Application Amount at the time of the submission of

the Application Form.

(b) The Applicants shall, with the submission of the Application Form, draw a payment instrument for the

Application Amount in favour of the Escrow Account and submit the same to Bankers to the Issue. If

the payment is not made favouring the Escrow Account along with the Application Form, the

Application shall be rejected.

(c) The payment instruments for payment into the Escrow Account should be drawn in favour of “Escrow

Account – Manappuram Bond Issue”.

(d) The monies deposited in the Escrow Account will be held for the benefit of the Applicants until the

Designated Date.

(e) On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow

Account as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to

the Issue after execution of documents for creation of security. The Escrow Collection Bank shall also

transfer all amounts payable to Applicants whose Applications have been rejected, fully or partially, by

our Company to the Refund Account with the Refund Bank. The Refund Bank shall refund all the

amounts to the Applicants in terms of the Escrow Agreement.

(f) Payments should be made by cheque, or a demand draft drawn on any bank (including a Co-operative

bank), which is situated at, and is a member of or sub-member of the bankers‟ clearing house located at

the centre where the Application Form is submitted. Outstation cheques/bank drafts drawn on banks

not participating in the clearing process/non-MICR cheques will not be accepted and applications

accompanied by such cheques or bank drafts are liable to be rejected.

(g) Cash/ stockinvest/money orders/ postal orders will not be accepted.

Submission of Application Forms

All Application Forms duly completed and accompanied by account payee cheques or drafts shall be submitted

to the branches of the Bankers to the Issue during the Issue Period.

Applications shall be deemed to have been received by us only when submitted to Bankers to the Issue at their

designated branches and not otherwise.

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No separate receipts shall be issued for the money payable on the submission of Application Form. However,

the collection centre of the Bankers to the Issue will acknowledge the receipt of the Application Forms by

stamping and returning to the Applicants the acknowledgement slip. This acknowledgement slip will serve as

the duplicate of the Application Form for the records of the Applicant.

All applications by persons or entities belonging to Category I should be made in the form prescribed for

Category I Applicants and can only be procured by the Lead Managers or their respective affiliates and

any Category I application without a stamp of Lead Managers or their respective affiliates is liable to be

rejected.

Online Applications

Our Company may decide to offer an online Application facility for the Bonds, as and when permitted by

Applicable Laws, subject to the terms and conditions prescribed.

Joint Applications

Applications may be made in single or joint names (not exceeding three). In the case of joint applications, all

payments will be made out in favour of the first applicant. All communications will be addressed to the first

named applicant whose name appears in the Application Form and at the address mentioned therein.

Additional Applications

An Applicant is allowed to make one or more applications for one or more Series of Bonds, subject to a

minimum application size of Rs. 5,000 and in multiples of Rs. 1,000 thereafter, for each application. Any

application for an amount below the aforesaid minimum application size will be deemed as an invalid

application and shall be rejected. However, multiple applications by the same Applicant belonging to Category

III aggregating to a value exceeding Rs. 5 Lacs shall be grouped in the Unreserved Individual Portion, for the

purpose of determining the basis of allotment to such Applicant. However, any application made by any person

in his individual capacity and an application made by such person in his capacity as a karta of a Hindu

Undivided family and/or as joint applicant, shall not be deemed to be a multiple application.

For the purposes of allotment of Bonds under the Issue, applications shall be grouped based on the PAN, i.e.

applications under the same PAN shall be grouped together and treated as one application. Two or more

applications will be deemed to be multiple applications if the sole or first Applicant is one and the same. For the

sake of clarity, two or more applications shall be deemed to be a multiple application for the aforesaid purpose if

the PAN number of the sole or the first applicant is one and the same.

Bonds in dematerialised form with NSDL or CDSL

As per the provisions of Section 68B of the Companies Act, the Allotment of Bonds in this Issue shall be only in

a de-materialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the

statement issued through the electronic mode).

As per the provisions of the Depositories Act, the Bonds can be held in a dematerialised form, i.e., they shall be

fungible and be represented by a statement issued through electronic mode. In this context:

(i) The following two Tripartite Agreements have been signed amongst our Company, the respective

Depositories and the Registrar:

Tripartite Agreement between us, the Registrar and NSDL for offering depository option to

the Bondholders.

Tripartite Agreement between us, the Registrar and CDSL for offering depository option to

the Bondholders.

(ii) All Applicants can seek Allotment only in dematerialised mode. Applications without relevant details

of his or her depository account are liable to be rejected.

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(iii) An Applicant applying for the Bonds must have at least one beneficiary account with either of the

Depository Participants of either NSDL or CDSL prior to making the Application.

(iv) The Applicant must necessarily fill in the details (including the Beneficiary Account Number and

Depository Participant‟s identification number) appearing in the Application Form.

(v) Allotment to an Applicant will be credited in electronic form directly to the beneficiary account (with

the Depository Participant) of the Applicant.

(vi) Names in the Application Form should be identical to those appearing in the account details in the

Depository. In case of joint holders, the names should necessarily be in the same sequence as they

appear in the account details in the Depository.

(vii) If incomplete or incorrect details are given under the heading „Applicants Depository Account Details‟

in the Application Form, it is liable to be rejected.

(viii) The Applicant is responsible for the correctness of his or her Demographic Details given in the

Application Form vis-à-vis those with his or her Depository Participant.

(ix) Bonds in electronic form can be traded only on the stock exchanges having electronic connectivity with

NSDL and CDSL. BSE where the Bonds are proposed to be listed has electronic connectivity with

CDSL and NSDL.

(x) The trading of the Bonds shall be in dematerialised form only.

Allottees will have the option to re-materialise the Bonds so Allotted as per the provisions of the

Companies Act and the Depositories Act.

Communications

All future communications in connection with Applications made in the Issue should be addressed to the

Registrar to the Issue, quoting all relevant details regarding the Applicant/Application. Applicants may address

our Compliance Officer as well as the contact persons of the Lead Managers, the Co-Lead Managers and the

Registrar to the Issue in case of any pre-Issue related problems such as non-receipt of letters of Allotment/credit

of Bonds in the Depositary‟s beneficiary account/refund orders, etc.

Rejection of Applications

Our Company reserves its full, unqualified and absolute right to accept or reject any Application in whole or in

part and in either case without assigning any reason thereof.

Application would be liable to be rejected on one or more technical grounds, including but not restricted to:

Number of Bonds applied for is less than the minimum Application size;

Applications not duly signed by the sole/joint Applicants (in the same sequence as they appear in the

records of the depositary);

Application amount paid not tallying with the number of Bonds applied for;

Age of First Applicant not given;

Applications for a number of Bonds which is not in a multiple of one;

Investor category not ticked;

Bank account details not given;

Applications by persons not competent to contract under the Indian Contract Act, 1872, as amended,

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including a minor without a guardian name;

In case of Applications under Power of Attorney where relevant documents not submitted;

Application by stockinvest/money order/postal order;

Applications accompanied by cash;

Category not ticked;

Application under power of attorney or by limited companies, corporate, trust etc., where relevant

documents are not submitted;

Applications without PAN;

Application Form does not have applicant‟s depository account details;

GIR number furnished instead of PAN;

Applications for amounts greater than the maximum permissible amounts prescribed by applicable

regulations;

Applications by persons/entities who have been debarred from accessing the capital markets by SEBI;

DP ID, Client ID and PAN mentioned in the Application Form do not match with the DP ID, Client ID

and PAN available in the records with the depositories;

Signature of sole and/ or joint applicant(s) missing;

Application Forms not delivered by the applicant within the time prescribed as per the Application

Form and the Prospectus and as per the instructions in the Prospectus and the Application Form; or

In case the subscription amount is paid in cash;

Category I Applications not procured by the Lead Managers or their respective affiliates; and

Application Form accompanied with more than one cheque.

The collecting bank shall not be responsible for rejection of the Application on any of the technical grounds

mentioned above.

Application form received after the closure of the Issue shall be rejected.

In the event, if any Bond(s) applied for is/are not allotted, the Application monies of such Bonds will be

refunded, as may be permitted under the provisions of applicable laws.

Basis of Allotment

Our Company shall finalise the Basis of Allotment in consultation with the Lead Managers, Co-Lead Managers

and the Designated Stock Exchange and in compliance with the aforementioned provisions of this Prospectus.

The Designated Stock Exchange along with the Company, Lead Managers, the Co-Lead Managers and the

Registrar shall be responsible for ensuring that the Basis of Allotment is finalised in a fair and proper manner.

For removal of doubt, “Institutional Portion”, Non-Institutional Portion” “Reserved Individual Portion” and

“Unreserved Individual Portion” are individually referred to as “Portion” and collectively referred to as

“Portions”

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For the purposes of determining the number of Bonds available for allocation to each of the above mentioned

Portions, our Company shall have the discretion of determining the number of Bonds to be allotted over and

above the base amount of the Issue, in case our Company opts to retain any oversubscription in the Issue upto

Rs 7,500 million. The aggregate value of Bonds decided to be allotted over and above the base amount of the

Issue, (in case our Company opts to retain any oversubscription in the Issue), and the aggregate value of Bonds

upto the base amount of the Issue shall be collectively termed as the “Overall Issue Size”.

Subject to the provisions contained in this Prospectus, the Articles of Association of our Company and the

approval of the Designated Stock Exchange, Allocation for the Bonds shall be made on a first come first served

basis based on the date of presentation of Application to the Banker to the Issue in accordance with reservation

for each Portion as set out below. For each Portion, all applications received on the same day by the Bankers to

the Issue would be treated at par with each other. In case any Portion is under subscribed, the unsubscribed

portion of the reservation for such Portion will be allocated first to Reserved Individual Portion, second to

Unreserved Individual Portion, third to the Non Institutional Portion and finally to Institutional Portion. In case

of over subscription, Applications received on the day of such over-subscription in respect of such Portion, will

be allotted on a proportionate basis.

Applications received from various Applicants shall be grouped together on the following basis:

Particulars Category I

Category II

Category III

Institutional

Portion

Non

Institutional

Portion

Unreserved

Individual

Portion

Reserved

Individual

Portion

Reservation for each Portion 20% of the

Overall Issue

Size

10% of the

Overall Issue

Size

35% of the

Overall Issue

Size

35% of the

Overall Issue

Size

Minimum allotments of 5 Bonds and in multiples of 1 Bond thereafter would be made in case of each valid

application.

Proportionate Allotments: For each Portion, on the date of oversubscription

(a) Allotments to the Applicants shall be made in proportion to their respective application size, rounded

off to the nearest integer.

(b) If the process of rounding off to the nearest integer results in the actual allocation of Bonds being

higher than the Issue size, not all Applicants will be allotted the number of Bonds arrived at after such

rounding off. Rather, each Applicant whose allotment size, prior to rounding off, had the highest

decimal point would be given preference.

(c) In the event, there are more than one applicant whose entitlement remain equal after the manner of

distribution referred to above, our Company will ensure that the basis of allotment is finalised by draw

of lots in a fair and equitable manner.

Applicant applying for more than one Series of Bonds: If an Applicant has applied for more than one Series of

Bonds, and in case such Applicant is entitled to allocation of only a part of the aggregate number of Bonds

applied for, the Series-wise allocation of Bonds to such Applicants shall be in proportion to the number of

Bonds with respect to each Series, applied for by such Applicant, subject to rounding off to the nearest integer,

as appropriate in consultation with Lead Managers and Designated Stock Exchange.

The Company would allot Series II Bonds for all valid Applications, where the Applicants have not indicated

their choice of the relevant Series of Bonds.

Letters of Allotment/ Refund Orders

Our Company reserves, in its absolute and unqualified discretion and without assigning any reason thereof, the

right to reject any Application in whole or in part. The unutilised portion of the Application money will be

refunded to the Applicant by an account payee cheque/demand draft. In case the cheque payable at par facility is

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not available, we reserve the right to adopt any other suitable mode of payment.

The Company shall credit the allotted Bonds to the respective beneficiary accounts/despatch the Letter(s) of

Allotment or Letter(s) of Regret by Ordinary Post and Refund Orders by Registered Post/Speed Post at the

applicant‟s sole risk, within 30 days from the date of closure of the Issue. We may enter into an arrangement

with one or more banks in one or more cities for refund to the account of the applicants through Direct

Credit/RTGS/NEFT

Further,

(a) Allotment of the Bonds shall be made within 30 days of the Issue Closing Date;

(b) credit to dematerialised accounts will be made within two Working Days from the date of Allotment;

(c) our Company shall pay interest at 15% per annum if the Allotment has not been made and/ or the

Refund Orders have not been dispatched to the Applicants within 30 days from the date of the closure

of the Issue, for any delay beyond 30 days.

Our Company will provide adequate funds to the Registrar to the Issue, for this purpose.

Filing of the Prospectus.

A copy of the Draft Prospectus has been filed with the BSE and SEBI. The Prospectus shall be filed with the

Registrar of Companies, Kerala and Lakshadweep in terms of Sections 56 and 60 of the Companies Act.

Pre-Issue Advertisement

Our Company shall, on or before the Issue Opening Date, publish a pre-Issue advertisement, in the form

prescribed by the SEBI Debt Regulations, in at least one national daily newspaper with wide circulation.

Material updates, if any, between the date of filing of this Prospectus with RoC and the date of release of this

statutory advertisement will be included in the statutory advertisement.

IMPERSONATION

Attention of the Applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the

Companies Act, which is reproduced below:

“Any person who:

(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares

therein, or

(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other

person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five

years.”

Listing

The Bonds will be listed on BSE. BSE will be the Designated Stock Exchange with which the Basis of

Allotment will be finalised.

If the permissions to deal in and for an official quotation of the Bonds are not granted by the BSE, we shall

forthwith repay, without interest, all such monies received from the Applicants in pursuance of this Prospectus.

If such money is not repaid within eight days after we becomes liable to repay it (i.e. from the date of refusal or

within seven days from the Issue Closing Date, whichever is earlier), then our Company and every Director of

our Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the

money, with interest at the rate of 15% p.a. on application money, as prescribed under Section 73 of the

Companies Act.

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Our Company shall ensure that all steps for the completion of the necessary formalities for listing and

commencement of trading at the BSE are taken within seven Working Days from the date of Allotment.

Utilisation of Application Money

The sums received in respect of the Issue will be kept in the Escrow Account and we will have access to such

funds after the documents for creation of security for the Bonds as disclosed in this Prospectus are executed.

Investor Withdrawals and Pre-closure

Investor Withdrawal: Applicants are allowed to withdraw their applications at any time prior to the closure of

the Issue.

Pre-closure: Our Company, in consultation with the Lead Managers reserves the right to close the Issue at any

time prior to the Closing Date, subject to receipt of minimum subscription for Bonds aggregating to 75% of the

base amount of the Issue, being Rs. 3,000 million. Our Company shall allot Bonds with respect to the

applications received at the time of such pre-closure in accordance with the Basis of Allotment as described

hereinabove and subject to applicable statutory and/or regulatory requirements.

Undertaking by our Company

We undertake that:

(a) the complaints received in respect of the Issue shall be attended to by us expeditiously and

satisfactorily;

(b) we shall take necessary steps for the purpose of getting the Bonds listed in the BSE within the specified

time;

(c) the funds required for dispatch of refund orders/Allotment letters/certificates by registered post shall be

made available to the Registrar to the Issue by us;

(d) necessary cooperation to the credit rating agency(ies) shall be extended in providing true and adequate

information till the debt obligations in respect of the Bonds are outstanding;

(e) we shall forward the details of utilisation of the funds raised through the Bonds duly certified by our

statutory auditors, to the Debenture Trustee at the end of each six month period;

(f) we shall disclose the complete name and address of the Debenture Trustee in our annual report;

(g) we shall provide a compliance certificate to the Debenture Trustee (on yearly basis) in respect of

compliance of with the terms and conditions of issue of Bonds as contained in this Prospectus.

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MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION

1. Modification of Rights

As per Article 10 of the Articles of Association, if at any time the share capital is divided into different

classes of shares, all or any of the rights and privileges attached to any class (unless otherwise

prohibited by the terms of issue of the shares of that class) may, subject to the provisions of sections

106 and 107 of the Act, whether or not the Company is being wound up, be modified, commuted,

affected, abrogated, varied or dealt with by the consent in writing of the holders of not less than three

fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate

meeting of the holders of three fourths of the issued shares of that class. To every such separate

meeting the provisions of these regulations relating to general meeting shall mutatis mutandis apply but

so that necessary quorum shall be two persons at least holdings or representing by proxy one third of

the issued shares of the class in question. Article 11 of the Articles of Association states that the rights

conferred upon the holder of the shares of any class issued with preferred or other rights shall not

unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be

varied by the creation or issue of further shares ranking pari passu therewith.

2. Share Certificates

As per Article 12 of the Articles of the Company, every member shall be entitled, without payment, to

one or more certificates in marketable lots, for all the shares of each class or denomination registered in

his name, or if the Directors so approve (upon paying such fee as the Directors may from time to time

determine) to several certificates, each for one or more of such shares and the Company shall complete

and have ready for delivery such certificates within three months from the date of allotment, unless the

conditions of issue thereof otherwise provide, or within one month of the receipt of application of

registration of transfer, transmission, sub-division, consolidation or renewal of any of its shares as the

case may be (provided the shares are not held in an electronic and fungible form under the provisions

of the Depositories Act, 1996). Every certificate of shares shall be under the seal of the Company,

signed by two directors and the secretary or some other person authorized by the Board and shall

specify the number and distinctive numbers of shares in respect of which it is issued and amount paid-

up thereon and shall be in such form as the Directors may prescribe or approve, provided that in respect

of a share or shares held jointly by several persons, the Company shall not be bound to issue more than

one certificate and delivery of a certificate of shares to one of several joint holders shall be sufficient

delivery to all such holder.

3. Forfeiture and Lien

Forfeiture

(a) As per Article 20, if a member fails to pay the whole or any part of any call or installment or

any money due in respect of any shares either by way of principal or interest on or before the

day appointed for the payment of the same, the directors may at any time thereafter during

such time as the call or installment or other money remains unpaid serve a notice on such

member or on the persons (if any) entitled to the share by transmission, requiring him to pay

the same together with any interest that may have been accrued by reason of such

nonpayment.

(b) As per Article 21, the notice aforesaid shall name a further day not being earlier than the

expiry of fourteen days from the date of service of notice, on or before which the payment

required by notice is to be made. The notice shall state that in the event of non-payment, on or

before the date so named the shares in respect of which such call or installment was payable

shall be liable to be forfeited.

(c) As per Article 22, if the requirements of any such notice as aforesaid are not complied with,

any shares in respect of which such notice has been given may at any time thereafter, before

the payment of call or installment, interest and expense due in respect thereof, be forfeited by

a resolution of the Board to that effect and the forfeiture shall be recorded in the directors

minute book. Such forfeiture shall include all dividends declared in respect of the forfeited

shares and not actually paid before the forfeiture.

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(d) As per Article 23, when any share shall have been so forfeited, notice of the forfeiture shall be

given to the member in whose name it stood immediately prior to the forfeiture with the date

thereof shall forthwith be made in the Register of Members.

(e) As per Article 24, any shares so forfeited shall be deemed to be property of the Company, and

may be sold or otherwise disposed off on such terms and in such manner as the Directors

thinks fit, the Board may at any time before any share so forfeited shall have been sold or

otherwise disposed off, annul the forfeiture upon such terms and conditions, as it thinks fit.

(f) As per Article 25, a person whose shares have been forfeited shall cease to be member in

respect of forfeited shares, but shall not withstanding the forfeiture remain liable to pay to the

Company all calls, installments, interests and expenses owning upon or in respect of such

shares at the date of the forfeiture, together with interest thereon from time of forfeiture, until

payment at the rate of ten percent per annum and the directors may enforce the payment

thereof, if they think fit.

(g) As per Article 26, the forfeiture of a share shall involve extinction of all interest in and also of

all claims and demands against the Company in respect of the share, and all other rights

incidental to the share except only such of those rights as by the articles are expressly saved.

(h) As per Article 27, a duly verified declaration in writing that the declarant is a Director of the

Company and that certain shares in the Company have been duly forfeited on a date stated in

the declaration shall be conclusive evidence of the facts therein stated as against all persons

claiming to be entitled to the share. The Company may receive the consideration, if any, given

for the shares on any sale or disposal thereof and may execute a transfer of share in favour of

the person to whom the share is sold or disposed of. The transferee shall thereupon be

registered as the holder of such shares and the purchaser shall not be bound to see to the

application of purchase money, nor shall his title to such shares be affected by any irregularity

or invalidity in the proceedings in reference to such forfeiture, sale or disposition.

Lien

(a) As per Article 28, the Company shall have a first and paramount lien upon all the

shares/debentures (other than fully paid up shares/debentures) registered in the name of each

member (whether solely or jointly with others) and upon the proceeds of sale thereof for all

monies (whether presently payable or not) called or payable at a fixed time in respect of such

shares/debentures and no equitable interest in any shares shall be created except upon the

footing and condition that this Article will have full effect. And such lien shall extend to all

dividends and bonus from time to time declared in respect of such shares/debentures. Unless

otherwise agreed the registration of a transfer of shares/debentures shall operate as a waiver of

the Company's lien if any on such shares/debentures. The Directors may, at any time declare

any shares/debentures wholly or in part to be exempt from the provisions of this clause.

(b) As per Article 29, no member shall exercise any voting right in respect of any shares

registered in his name on which any calls or other sums presently payable by him, have not

been paid or in regard to which the Company has exercised any right of lien.

(c) As per Article 30, The Company may sell, in such manner as the Board thinks fit, any shares

on which the Company has a lien, provided that no sale shall be made a) unless a sum in

respect of which the lien exists is presently payable‟ or b) until the expiration of fourteen days

after a notice in writing stating and demanding payment of such part of the amount in respect

of which the lien exists as is presently payable, has been given to the registered holder for the

time being of the share or the person entitled thereto by reason of his death or insolvency.

(d) As per Article 31, the net proceeds of the sale shall be applied in or towards satisfaction of the

debts, liabilities or engagements of such member, his executors, administrators or

representatives and the residue, if any, shall subject to a like lien for sums not presently

payable as existed upon the shares before the sale be paid to the persons entitled to the shares

at the date of the sale.

173

(e) As per Article 32, upon any sale after forfeiture or for enforcing a lien purported in exercise of

the powers herein conferred, the Directors may cause the purchaser's name to be entered in the

register of members in respect of the share sold and the purchaser shall not be bound to see to

the regularity of the proceedings nor to the application of the purchase money after his name

has been entered into the register in respect of such share, the validity of the sale shall not be

impeached by any person on any ground whatsoever and the remedy of any person aggrieved

by such sale shall be in damages only.

4. Transfer and Transmission of Shares

(a) As per Article 33, save as provided in Section 108 of the Act, no transfer of shares or

debentures shall be registered unless a proper instrument of transfer duly stamped and

executed by or on behalf of the transferor and by or on behalf of transferee has been delivered

to the Company together with certificate or if no such certificate is in existence, the letter of

allotment of the shares. The instrument of transfer of the shares in or debentures of the

Company, shall specify the name, father‟s/husband‟s name, address, occupation, nationality

both of the transferor and of the transferee. The transferee shall be deemed to remain the

holder of such shares until the name of the transferee is entered in the Register of members.

Each signature to such transfer shall be duly attested by the signature of one witness who shall

add his address.

(b) As per Article 34, application for the registration of the transfer of a share may be made either

by the transferor or the transferee where such application is made by the transferor and relates

to a partly paid share, no registration shall be effected unless the Company gives notice of the

application to the transferee, in the manner prescribed by section 110 of the Act. Subject to

the provision of Articles thereof, if the transferee makes no objection within two weeks from

that date of receipt of the notice, the Company shall enter in the register of members the name

of the transferee in the same manner and subject to the same conditions as if the application

for registration as made by the transferee.

(c) As per Article 37A, every instrument of transfer of shares shall be in the form prescribed

under the Act.

(d) As per Article 38, every instrument of transfer shall be left at the office for registration,

accompanied by the certificate of the shares or if no such certificate is in existence, by the

letter of allotment of the shares to be transferred and such other evidence as the Board may

require to prove the title of the transferor or his right to transfer the shares, and upon payment

of the proper fee to the Company, the transferee shall (subject to the right of the Board to

decline to register as hereinafter mentioned) be registered as a member in respect of such

shares. The Board may waive the production of any certificate upon evidence satisfactory to it

of its loss or destruction.

(e) As per Article 40, subject to the provisions of Section 111A of the Act and Section 22A of the

Securities Contracts (Regulation) Act, 1956, the Directors may, at their own absolute and

uncontrolled discretion and by giving reasons, decline to register or acknowledge any transfer

of shares whether fully paid or not and the right of refusal, shall not be affected by the

circumstances that the proposed transferee is already a member of the Company but in such

cases, the Directors shall within one month from the date on which the instruments of transfer

was lodged with the Company, send to the transferee and the transferor notice of the refusal to

register such transfer provided that registration of transfer shall not be refused on the ground

of the transferor being either alone or jointly with any other person or persons indebted to the

Company on any account whatsoever except when the Company has a lien on the shares.

Transfer of shares/debentures in whatever lot shall not be refused.

(f) As per Article 41, the registration of transfer may be suspended after giving due notice at such

times and for such periods as the Board may from time to time determine. Provided that such

registration shall not be suspended for more than forty-five days in any year, and not

exceeding thirty days at any one time.

174

(g) As per Article 42, the shares in the Company shall be transferred in the form for the time being

prescribed under the rules framed under the Act. Notwithstanding anything contained in the Articles, in

the case of transfer of shares or other marketable securities, where the company has not issued any

certificates and where such shares or securities are being held in an electronic and fungible form, the

provisions of the Depositories Act, 1996, shall apply. The Company shall keep a book to be called the

register of transfers and therein shall be entered the particulars of every transfer or transmissions of any

shares held in dematerialized form.

(h) As per Article 43, the executors or administrators or the holder of a succession certificate in

respect of shares of a deceased member (not being one of several joint holders) shall be the

only person whom the Company shall recognize as having any title to the shares registered in

the name of such member and, in case of the death of any one or more of the joint holder of

any registered shares, the survivors shall be the only persons recognised by the Company as

having any title interest in such shares, but nothing herein contained shall be taken to release

the estate of a deceased joint-holder from any liability on shares held by him jointly with any

other person. Before recognizing any executor or administrator or legal heir the Board may

require him to obtain a grant of probate or letter of administration or succession certificate or

other legal representation as the case may be, from a competent court. Provided nevertheless

that in any case where the Board in its absolute discretion thinks fit it may dispense with

production of probate or letter of administration or a succession certificate or such other legal

representation upon such terms as to indemnify the company or otherwise as the Board may

consider desirable. Provided also that the holder of a succession certificate shall not be entitled

to receive any dividends already declared but not paid to the deceased member unless the

succession certificate declares that the holder thereof is entitled to receive such dividends.

(i) As per Article 44, any person becoming entitled to a share in consequence of the death, lunacy

or insolvency of a member may, upon producing such evidence of his title as the Board thinks

sufficient, be registration as a member in respect of such shares, or may subject to the

regulations as to transfer herein before contained, transfer such shares and as per Article 45, a

person becoming entitled to a share by reason of the death or insolvency of the holder shall be

entitled to the same dividends and other advantages to which he would be entitled if he were

the registered holder of the share, except that he shall not, before being registered as a member

in respect of the share be entitles in respect of it to exercise any right conferred by

membership in relation to meetings of the Company.

(j) As per Article 46, provided the Board may, at any time, give notice requiring any person to

elect either to be registered himself or to transfer the share, and if the notice is not complied

with within ninety days, the Board may there after withhold payment of all dividends, bonuses

or other money payable in respect of the share, until the requirements of the notice have been

complied with. If the person so becoming entitled shall elect to be registered as holder of the

share himself, he shall deliver or send to the Company a notice in writing signed by him

stating that he so elects. If the person aforesaid shall elect to transfer the shares to some other

person he shall execute an instrument of transfer in accordance with the provisions of these

Article relating to the transfer of shares. All the limitations, restrictions and provisions of these

Articles relating to the right of transfer and the registration of transfer of shares shall be

applicable to any such notice or transfer as aforesaid as if the death, lunacy or insolvency of

the member had not occurred and the notice of transfer where a transfer signed by that

member.

5. Votes of Members

(a) As per Article 66, subject to any rights or restrictions for the time being attached to any class

or classes of shares:

(i) on a show of hands, every member present in person shall have one vote; and

(ii) on a poll, the voting rights of members shall be as laid down in Section 87 of the Act

(b) As per Article 67, in the case of joint holders, the vote of the senior who tenders a vote,

whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint

175

holders. For this purpose seniority shall be determined by the order in which the names stand

in the register of members.

(c) As per Article 68, a member of unsound mind, or in respect of whom an order has been made

by any court having jurisdiction in lunacy, may vote whether on a show of hands or on a poll,

by his committee or other legal guardian, and any such committee or guardian may on a poll

vote by proxy.

(d) As per Article 69, no member shall be entitled to vote at any general meeting unless all calls

or other sums presently payable by him in respect of shares in the Company have been paid.

(e) As per Article 70, no objection shall be raised to the qualification of any vote except at the

meeting or adjourned meeting at which the vote objected to is given or tendered, and every

vote not disallowed at such meeting shall be valid for all purposes. Any such objection made

in due time shall be referred to the chairman of the meeting, whose decision shall be final and

conclusive.

(f) As per Article 71, the instruments appointing a proxy and the power of attorney or other

authority, if any, under which it is signed or a notarially certified copy of that power or

authority, shall be deposited at registered office of the Company not less than 48 hours before

the time for holding the meeting or adjourned meeting at which the person named in the

instrument proposes to vote, or in the case of a poll, not less than 24 hours before the time

appointed for the taking of the poll, and in default the instrument of proxy shall not be treated

as a valid.

(g) As per Article 72, an instrument appointing a proxy shall be in either form of proxy of the

forms in Schedule IX to the Act or a form as near there to as circumstances admit.

(h) As per Article 73 , a vote given in accordance with the terms of an instrument of proxy shall

be valid, notwithstanding the previous death or insanity of the principal or the revocation of

the proxy or of the authority under which the proxy was executed or the transfer of the shares

in respect of which the proxy is given. Provided that no intimation in writing of such death,

insanity revocation or transfer shall have been received by the Company at its office before

the commencement of the meeting or adjourned meeting at which the proxy is used.

(i) As per Article 73A, notwithstanding anything contained in the Articles of the company, the

company do adopt the mode of passing a resolution by the Members of the company by means

of a postal ballot and/or other ways as may be prescribed by the Central Government in this

behalf in respect of the following, matters instead of transacting such business in a general

meeting of the company.

6. Dividends

(a) As per Article 109, the Company in general meeting may declare dividends, but no dividend

shall exceed the amount recommended by the Board.

(b) As per Article 110, the Board may from time to time pay to the members such interim

dividends as appears to it to be justified by the profits of the company.

(c) As per Article 111, subject to the provisions of the Act, the Board may before recommending

any dividend set aside out of the profits of the Company such sums as at the discretion of the

Board, be applicable, for any purpose to which the profits of the Company may be properly

applied, including provisions for meeting contingencies or for equalizing dividends; and

pending such application, may at the like discretion either be employed in the business of the

Company or be invested in such investments (other than shares of the company) as the Board

may, from time to time, think fit. The Board may also carry forward any profits which it may

think prudent not to divide, without setting them aside as a reserve.

(d) As per Article 112, subject to the rights of persons, if any, entitled to shares with special rights

as to dividends, all dividends shall be declared and paid according to the amount paid or

176

credited as paid on the shares in respect whereof the dividend is paid, but if and so long as

nothing is paid upon any of the shares in the Company, dividends may be declared and paid

according to the nominal amounts of the shares. No amount paid or credited as paid on shares

in advance of calls shall be treated for the purpose of this Articles as paid on the shares.

Unless otherwise decided by the Board all dividends shall be apportioned and paid

proportionately to the amounts paid or credited as paid on the shares during any portion or

portions of the period in respect of which the dividend is paid, but if any share is issued on

terms providing that it shall rank for dividend as from a particular date such share shall rank

for dividend accordingly.

(e) As per Article 113, the Board may deduct from any dividend payable to any member all sums

of money, if any, presently payable by him to the Company on account of calls or otherwise in

relation to the shares of the Company.

(f) As per Article 114, where the Company has declared a dividend but which has not been paid

or the dividend warrant in respect thereof has not been posted within 30 days from the date of

declaration to any shareholder entitled to the payment of the dividend, the Company shall

within 5 days from the date of expiry of the said period of 30 days, open a special account in

that behalf in any scheduled bank called “Unpaid Dividend of Manappuram Finance Limited”

and transfer to the said account, the total amount of dividend which remains unpaid or in

relation to which no dividend warrant has been posted. Any money transferred to the unpaid

dividend account of the Company which remains unpaid or unclaimed for a period of seven

years from the date of such transfer, shall be transferred by the Company to the Investor

Education and Protection Fund Account of the Central Government. A claim to any money so

transferred to the Investor Education and Protection Fund Account may be preferred to the

Central Government by the shareholders to whom the money is due. No unclaimed or unpaid

dividend shall be forfeited by the Board.

(g) As per Article 115, any dividend, interest or other monies payable in cash in respect of shares

may be paid by cheque or warrant sent through the post directed to the registered address of

the holder or, in the case of joint holders, to the registered address of that one of the joint

holders who is first named on the register of members, or to such person and to such address

as the holders may in writing direct. Every such cheque or warrant shall be made payable to

the order of the person to whom it is sent.

(h) As per Article 116, any one of two or more joint holders of a share may give effectual receipts

for any dividends, bonuses or other monies payable in respect of such share.

(i) As per Article 117, notice of any dividend that may have been declared shall be given to the

persons entitled to share therein in the manner mentioned in the Act.

177

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts (not being contracts entered into in the ordinary course of business carried on by the

Company or entered into more than two years before the date of this Prospectus) which are or may be deemed

material have been entered or are to be entered into by the Company. These contracts and also the documents

for inspection referred to hereunder, may be inspected at the Registered Office of the Company situated at

V/104, “Manappuram House”, Valapad, Thrissur 680 567, Kerala, India, from 10.00 a.m. to 1.00 p.m., from the

date of this Prospectus until the date of closure of the Issue.

MATERIAL CONTRACTS

1. The Memorandum of Understanding between our Company and the Lead Managers dated July 21, 2011

and the Addendum to the Memorandum of Understanding between the Company and Co-Lead

Managers dated July 21, 2011.

2. The Memorandum of Understanding between our Company and Registrar to the Issue dated July 21,

2011.

3. Debenture Trust Deed to be executed between the Company and the Debenture Trustee on or about the

date of Allotment of the Bonds.

4. Escrow Agreement between our Company, Lead Managers, Co-Lead Managers, Registrar to the Issue

and the Escrow Collection Bank(s) dated August 3, 2011.

5. Tripartite Agreement between the National Securities Depository Limited, the Company and Registrar

dated August 4, 2011.

6. Tripartite Agreement between the Central Depository Services (India) Limited, the Company and the

Registrar dated August 4, 2011.

MATERIAL DOCUMENTS

1. The Memorandum and Articles of Association of Manappuram Finance Limited.

2. Certificate of incorporation of the Company dated July 15, 1992 and Fresh Certificate of Incorporation

Consequent upon Change of Name dated June 22, 2011;

3. Copy of the Board resolution dated April 28, 2011 approving the Issue.

4. Copy of the resolution dated July 21, 2011 passed by the Debenture Committee of Directors approving

the terms of the issue and the Draft Prospectus.

5. Copy of the resolution dated August 8, 2011 passed by the Debenture Committee of Directors approving

the terms of the issue and this Prospectus

6. Consents of the Directors, Compliance Officer of the Company, Lead Managers, Co-Lead Managers,

Lead Brokers, Legal Advisor, Registrars to the Issue, Banker to the Issue and the Debenture Trustee to

include their names in this Prospectus to act in their respective capacities.

7. Consent from the Auditors of the Company, for inclusion of their report dated July 19, 2011 on the

Reformatted Statements as at and for the years ended March 31, 2011, 2010, 2009, 2008 and 2007 in

the form and context in which they appear in this Prospectus and also in the ―Statement of Tax Benefits‖

mentioned therein.

8. Annual Report of the Company for last five Financial Years.

9. Consent of CARE and Brickwork dated July 19, 2011 and July 20, 2011 respectively for inclusion of

their ratings in this Prospectus.

178

10. Credit rating letter dated June 21, 2011 issued by CARE and credit rating letter no.

BWR/BLR/RA/2011-12/0072 dated July 1, 2011 issued by Brickwork.

11. Application for the in-principle listing approval made to BSE dated July 26, 2011.

12. In-principle listing approval obtained from BSE letter no. DCS/IPO/NP/IPO-IP/222/2011-12 dated

August 3, 2011.

13. Due Diligence Certificate dated August 9, 2011 from Lead Mangers and Co- Lead Managers.

14. Due Diligence Certificate dated August 9, 2011 from the Debenture Trustee.

Any of the contracts or documents mentioned above may be amended or modified any time without

reference to the holders in the interest of the Company in compliance with the applicable laws.

179

RECENT FINANCIAL DEVELOPMENTS

Review Report to

The Board of Directors

Manappuram Finance Limited (formerly Manappuram General Finance and Leasing Limited)

1. We have reviewed the accompanying statement of unaudited financial results of Manappuram Finance

Limited (formerly Manappuram General Finance and Leasing Limited) („the Company‟) for the quarter

ended June 30, 2011 (the “Statement”), except for the disclosures regarding „Public Shareholding‟ and

„Promoter and Promoter Group Shareholding‟ which have been traced from disclosures made by the

management and have not been reviewed by us. This Statement is the responsibility of the Company's

management and has been approved by the Board of Directors. Our responsibility is to issue a report on the

Statement based on our review.

2. We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, Review of

Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Institute of

Chartered Accountants of India. This standard requires that we plan and perform the review to obtain

moderate assurance as to whether the Statement is free of material misstatement. A review is limited

primarily to inquiries of company personnel and analytical procedures applied to financial data and thus

provides less assurance than an audit. We have not performed an audit and accordingly, we do not express

an audit opinion.

3. Based on our review conducted as above, nothing has come to our attention that causes us to believe that

the accompanying Statement of unaudited financial results prepared in accordance with recognition and

measurement principles laid down in Accounting Standard 25 “Interim Financial Reporting”, notified

pursuant to the Companies (Accounting Standards) Rules, 2006, (as amended) and other recognised

accounting practices and policies has not disclosed the information required to be disclosed in terms of

Clause 41 of the Listing Agreement including the manner in which it is to be disclosed, or that it contains

any material misstatement.

For S.R. BATLIBOI & ASSOCIATES

Chartered Accountants

Firm Registration Number 101049W

per S Balasubrahmanyam

Partner

Membership No: 53315

Place: Chennai

Date: July 27, 2011

180


Regd. & Corp. Office: V/104, Manappuram House, Valapad, Thrissur - 680567

Unaudited Financial Results for the quarter ended June 30,2011

(Rs. in Lakhs)

Particulars Quarter ended

June 30,2011

Quarter ended.

June 30,2010

Year ended March

31,2011 (Audited)

1 Income from Operations 49,290.20 18,606.69 117 875 30

2 Total Expenditure

a)Staff Cost

b)Advertisement

c)Provision for standard assets

d)Depreciation

e)Other Expenditure

15,545,50

6,573.80

2,080.70

389.80

748.70

5,752.50

7377.73

2,311.12

2,967.29

-

240.12

1,859.20

42,566.70

16,050.00

10,385.10

1,584.70

2,129.60

12,417.30

3 Profit from Operations before Other Income and Interest (1-2) 33,744.70 11,228.96 75,308.60

4 Other Income 58.70 73.90 277.30

5 Profit before Interest (3+4) 33803.40 11,302.86 75,585.90

6 Interest and finance charges 17,842.60 4386.78 33,196.30

7 Profit(+)/Loss(-)before tax (5-6) 15,960.80 6916.08 42,389.60

8 Tax expense 5,178.00 2,300.98 14,123.20

3 Net Profit (+)/loss(-) (7-8) 10,782.80 4,615.10 28,266.40

10 Paid up Equity Share Capital (Face value: Rs.2/- per share) 16,675.00 6,807.70 8,337.50

11 Reserves excluding Revaluation reserves 184,058.20

12

13

Earnings Per Share (Rs.)

-Basic

-Diluted

(Nominal value of equity share - Rs 2/-)

Aggregate of Public Shareholding

Number of Shares

Percentage of shareholding

1.29

1.29

(Not Annualised)

529,755,602

63.54

0.41

0.41

(Not Annualised)

201,963,332

59.33

3.81

3.75

264,877,801

63.54

14 Promoters and promoter group Share holding

a) Pledged/Encumbered

-Number of shares

-Percentage of shares (as a % of the total shareholding of

promoter and promoter group)

-Percentage of shares (as a% of the total share capital of the

company

b) Non-encumbered

-Number of shares

-Percentage of shares (as a % of the total shareholding of

promoter and promoter group)

-Percentage of shares (as a% of the total share capital of the

company)

63,152,220

20.77

7.57

240,840,554

79.23

28.89

-

-

-

138,421,888

100

40.67

34,576,110

22.75

8.23

117,420,277

77.25

28.17

181


Regd. & Corp. Office: V/104, Manappuram House, Valapad, Thrissur - 680567

Unaudited Financial Results for the quarter ended June 30,2011

Notes:

1. The above results have been reviewed by the Audit Committee and taken on records by the Board of

Directors in the meeting Held on July 27,2011 and have been subjected to a „Limited Review‟ by the

auditors.

2. The shareholders of the Company in their extra-ordinary general meeting held on May 31, 2011

approved the issuance of equity shares of Rs 2/-each, fully paid up, as bonus shares in the ratio of 1:1

to the shareholders existing as on the record date. Accordingly, the earnings per share data for all

periods have been restated. However, the promoter and public shareholding data for the previous

periods is based on the pre-bonus number of shares.

3. The Company did not have any unresolved investor complaints as at the beginning / end of the quarter.

During the quarter, the Company did not receive any investor complaints.

4. The Company is primarily engaged in the business of lending against security of gold and accordingly

segment reporting is not applicable.

5. Figures of previous period / year have been regrouped / reclassified, wherever necessary.

Place: Valapad

Date: July 27, 2011

By order o the Board

V.P. Nandakumar

Executive Chairman

182

AUDITOR EXAMINATION REPORT AND REFORMATTED STATEMENTS

Report of S R Batliboi & Associates on the reformatted unconsolidated financial information of each of

the years ended March 31, 2011, March 31, 2010, March 31, 2009 March 31, 2008 and March 31, 2007.

To

The Board of Directors


(formerly Manappuram General Finance and Leasing Limited)

V/104, “Manappuram House”

Valappad

Thrissur 680 567

Kerala, India

Dear Sirs,

1. We have examined the attached reformatted unconsolidated financial information (“Reformatted

Statements”) comprising of Balance Sheet, Profit and Loss Account, Cash Flow and notes therein of

Manappuram General Finance and Leasing Limited (“Company”) as at and for the years ended March 31,

2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 annexed to this report and

approved by the Board of Directors of the Company and prepared by the Company in accordance with the

requirements of:

a. paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act'); and

b. the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008

('the Regulations') issued by the Securities and Exchange Board of India ('SEBI'), as amended from

time to time in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 (the

“SEBI Act”).

2. We have examined such Reformatted Statements taking into consideration:

a. the terms of reference dated July 1, 2011 received from the Company, requesting us to carry out the

assignment, in connection with the Draft Prospectus and Prospectus being issued by the Company for

its proposed public offer Non-Convertible Debentures (“offering”); and

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

Accountants of India.

3. The Reformatted Unconsolidated Financial Information of the Company have been extracted by

management of the Company from the audited unconsolidated financial statements of the Company for the

years ended March 31, 2011 March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007,

which were approved by the Board of Directors of the Company. We have audited the financial statements

for the years ended March 31, 2011, March 31, 2010, March 31, 2009 and March 31, 2008 in respect of

which we have issued audit reports dated April 28, 2011, May 11, 2010, April 30, 2009 and May 8, 2008

respectively. We have not audited the unconsolidated financial statements of the Company for the year

ended March 31, 2007. Those financial statements were audited by, M/s Mohandas & Associates and we

have relied on their report for the purpose of this examination report.

4. The Reformatted Statements have been examined by us and are set out in Annexure 1. The Reformatted

statements annexed to this report are as they were produced in the respective years‟ audited financial

statements and have been rounded off to the nearest million of Indian rupees. The accounting policies and

notes to accounts have been reproduced as they were disclosed in the financial statements for the

respective years.

183

5. We have not audited any financial statements of the Company as of any date or for any period subsequent

to March 31, 2011. Accordingly, we express no opinion on the financial position, results of operations or

cash flows of the Company as of any date or for any period subsequent to March 31, 2011.

6. In the presentation of the Reformatted Statements based on the audited unconsolidated financial statements

referred to in paragraph 3 above, no adjustments have been made for any events occurring subsequent to

the dates of the audit reports specified therein.

7. In our audit report for the year ended March 31, 2008 on the unconsolidated financial statements of the

Company, without qualifying our opinion, we had drawn attention regarding the requirement of previous

approval of the Central Government in respect of certain transactions for the purchase and sale of services

from/to parties covered under Section 297 of the Companies Act, 1956 which are referred to in the

reformatted statements. Further, in our CARO (Companies Auditors Report Order, 2003) report for the

years ended March 31, 2008, March 31, 2009, March 31, 2010 and March 31, 2011, we had reported

instances of fraud on the Company for amounts aggregating Rs 24 Lakhs, Rs 40.69 Lakhs, Rs 84.70 Lakhs

and Rs 249 Lakhs respectively, which are referred to in Notes to the Reformatted Statements.

8. As stated in our audit reports referred to in paragraph 3 above, we conducted our audit in accordance with

auditing standards generally accepted in India to enable us to issue an opinion on general purpose financial

statements. Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes examining, on

test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by the management as

well as evaluating the overall financial statement presentation. We believe that our audit provided a

reasonable basis for our opinions.

9. Our audits referred to in paragraph 3 above were carried out for the purposes of examining the general

purpose financial statements. For none of the years referred to in paragraph 3, did we perform audit tests

for the purpose of expressing an opinion on individual balances of accounts or summaries of selected

transactions, and accordingly, we express no such opinion.

10. At the Company‟s request, we have also examined the following financial information relating to the

Company, proposed to be included in the Draft Prospectus and Prospectus prepared by the management

and approved by the Board of Directors of the Company and annexed to this report relating to the years

ended March 31, 2007, March 31, 2008, March 31, 2009, March 31, 2010 and March 31, 2011:

i. Statement of dividend paid/proposed, enclosed as Annexure 2 ;

ii. Pre issue capitalization Statement enclosed as Annexure 3; and

iii. Details of Tax Benefits available to the Company and its shareholders, enclosed as Annexure 4.

11. This report should not be in any way construed as a reissuance or redating of any of the previous audit

reports issued by us or by other firm of Chartered Accountants, nor should this report be construed as a

new opinion on any of the financial statements referred to herein.

12. We have no responsibility to update our report for events and circumstances occurring after the date of the

report.

13. This report is intended solely for your information and for inclusion in the Draft Prospectus and Prospectus

in connection with the proposed public issue of non-convertible debentures of the Company, and is not to

be used, referred to or distributed for any other purpose without our prior written consent.

For S.R. BATLIBOI & ASSOCIATES

Chartered Accountants

Firm Registration Number 101049W

184

per S Balasubrahmanyam

Partner

Membership No: 53315

Place: Chennai

Date: July 19, 2011

Manappuram General Finance and Leasing Limited (now changed to Manappuram Finance Limited)

Balance Sheet as at March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007(All amounts are in millions of Indian rupees unless otherwise stated)

As at As at As at Schedule March 31, 2011 March 31, 2010 March 31, 2009

SOURCES OF FUNDS

Shareholders' funds Share capital 1 833.75 340.39 212.56 618.00 150.00 Share warrants - - 29.98 Reserves and surplus 2 18,405.82 5,765.21 1,436.19 311.83 131.25

Loan fundsSecured loans 3 43,723.07 16,500.50 3,712.45 1,351.08 511.93 Unsecured loans 4 12,817.03 1,856.12 793.34 388.67 420.95

Deferred tax liability (net) 6 - - - 0.39 0.96 75,779.67 24,462.22 6,184.52 2,669.97 1,215.09

APPLICATION OF FUNDS

Fixed assets 5Gross block 1,651.82 669.80 325.70 196.10 129.98 Less : Accumulated depreciation / amortisation 332.80 135.63 71.85 42.06 25.28 Net block 1,319.02 534.17 253.85 154.04 104.70 Capital work in progress including advances 68.64 1.23 2.60 - -

Intangible assets (net) 5 59.84 33.55 23.92 9.17 2.17

Deferred tax asset (net) 6 87.07 33.35 13.59 - -

Investments 7 403.20 1,406.70 10.77 29.28 29.01

Current Assets, Loans and AdvancesCash and bank balances 8 6,663.69 2,682.08 1,133.96 672.23 215.65 Other current assets 9 4,947.51 1,878.88 675.91 202.71 156.22 Loans and advances 10 64,141.68 18,907.13 4,486.04 1,853.06 959.11

75,752.88 23,468.09 6,295.91 2,728.00 1,330.98 Less : Current liabilities and provisionsCurrent liabilities 11 1,126.34 810.28 347.97 225.81 217.76 Provisions 12 784.64 204.59 68.15 24.71 34.01

1,910.98 1,014.87 416.12 250.52 251.77 Net current assets 73,841.90 22,453.22 5,879.79 2,477.48 1,079.21

75,779.67 24,462.22 6,184.52 2,669.97 1,215.09 Notes to accounts 18

The schedules referred to above and the notes to accounts form an integral part of the Balance Sheet

As at March 31, 2008


Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31,2007


Profit and Loss Account for the years ended March 31, 2011, March 31, 2010, March 31, 2009 March 31, 2008 and March 31, 2007(All amounts are in millions of Indian rupees unless otherwise stated)

Year ended Year ended Year ended Year ended Year endedSchedule March 31, 2011 March 31, 2010 March 31, 2009 March 31, 2008 March 31, 2007

INCOMEIncome from services 13 11,654.20 4,699.77 1,605.34 779.60 420.32 Other income 14 161.06 82.24 55.77 17.00 16.18

11,815.26 4,782.01 1,661.11 796.60 436.50

EXPENDITUREPersonnel expenses 15 1,605.00 536.40 283.95 116.38 60.61 Operating and other expenses 16 2,438.71 1,000.75 494.71 198.84 111.87 Depreciation / amortization 6 212.96 57.38 33.71 18.26 10.66 Financial expenses 17 3,319.63 1,369.23 385.91 143.51 89.85

7,576.30 2,963.76 1,198.28 476.99 272.99

Profit before tax 4,238.96 1,818.25 462.83 319.61 163.51

Less: Provision for tax- Current tax 1,466.04 640.11 171.44 109.20 57.50 - Deferred tax (53.72) (19.07) (13.98) (0.57) (0.38) - Fringe benefit tax - - 2.40 1.08 0.27

Profit after tax 2,826.64 1,197.21 302.97 209.90 106.12 Balance brought forward from previous year (refer Sch. 2) 917.11 188.74 39.00 6.14 2.80

- 88.12 - - -

Profit available for appropriation 3,743.75 1,474.07 341.97 216.04 108.92

Appropriations:- Transfer to Statutory Reserve 565.33 239.45 60.60 42.00 22.00 - Transfer to General Reserve 282.67 119.72 31.00 100.00 50.00 - Transfer to Capital Redemption Reserve - 17.14 5.72 5.72 5.71 - Interim Dividend on Equity Shares - - 1.64 16.50 - - Dividend on Redeemable Preference Shares - - 3.00 3.00 - - Proposed Dividend on Equity Shares 500.25 165.89 43.14 5.50 19.80 - Tax on distributed profit 81.14 27.22 8.13 4.26 3.64 - Dividend on Convertible Preference Shares - - - 0.06 1.63 Net profit carried forward to balance sheet 2,314.36 904.65 188.74 39.00 6.14

Earnings per share information (Refer note 18.5 and note 18.8)

Earnings per share, prior to stock split- Weighted average number of equity shares- Basic 371,380,825 58,529,650 27,370,374 22,000,000 22,000,000- Diluted 376,492,274 58,895,744 27,370,374 23,840,000 22,000,000- Basic earnings per share (in Rs.) 7.61 20.46 10.94 9.38 9.48 - Diluted earnings per share (in Rs.) 7.51 20.33 10.94 8.65 9.48 Nominal value per equity shares Rs. 2/- Rs. 10/- Rs. 10/- Rs 10/- Rs 10/-

Earnings per share, subsequent to stock split- Weighted average number of equity shares- Basic 371,380,825 292,648,250 136,851,870 110,000,000 110,000,000- Diluted 376,492,274 294,478,720 136,851,870 119,200,000 110,000,000- Basic earnings per share (in Rs.) 7.61 4.09 2.19 1.88 1.90 - Diluted earnings per share (in Rs.) 7.51 4.07 2.19 1.73 1.90 Nominal value of equity shares Rs. 2/- Rs. 2/- Rs. 2/- Rs. 2/- Rs. 2/-

Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007

Profit after tax and appropriation for the financial year 2008-09


Cash Flow Statement for the years ended March 31, 2011, March 31, 2010, March 31, 2009 March 31, 2008 and March 31, 2007(All amounts are in millions of Indian rupees unless otherwise stated)

Year ended Year ended Year endedMarch 31, 2011 March 31, 2010 March 31, 2009

A. Cash flow from operating activitiesNet profit before taxation, and extraordinary items 4,238.96 1,818.25 462.83 319.61 163.51 Adjustments for:Depreciation / amortization 212.96 57.38 33.71 18.26 10.66 Loss on sale of fixed assets 2.28 4.34 2.32 0.84 - Write back of diminution in value of investments - - - (1.27) - (Profit) / Loss on sale of investments (3.96) 0.43 (0.42) - 1.27 Interest income (124.67) (66.26) (41.95) (12.34) (12.43)Dividend income (3.62) (0.48) (6.26) - - Interest expense 3,156.59 1,304.54 355.87 141.92 88.28 Provision for standard assets 158.47 - - - - Bad debts written off and provision for bad debts 224.28 141.99 177.86 33.72 21.32 Operating profit before working capital changes 7,861.29 3,260.19 983.96 500.74 272.61 Movements in working capital :Decrease / (Increase) in other current assets (3,026.12) (999.34) (473.21) (34.76) (117.96)Decrease / (Increase) loans and advances (45,458.84) (14,218.30) (2,810.82) (923.95) (382.89)Increase / (Decrease) in current liabilities and provisions 228.75 254.41 125.59 (11.34) 14.43 Cash generated from operations (40,394.92) (11,703.04) (2,174.48) (469.31) (213.81)Direct taxes paid (net of refunds) (1,442.22) (653.38) (177.35) (101.44) (48.96)Net cash from operating activities (41,837.14) (12,356.42) (2,351.83) (570.75) (262.77)

B. Cash flows from investing activitiesPurchase of fixed assets (1,096.42) (297.24) (153.19) (75.43) (68.63)Proceeds from sale of fixed assets 2.63 0.74 - - 2.03Purchase of investments (5,770.00) (2,680.13) - - (12.34)Sale / maturity of investments 6,777.46 1,284.24 18.92 1.00 2.40Interest received 82.16 44.21 41.95 12.34 12.43 Dividends received 3.62 - 6.26 - 0.00 Net cash from investing activities (0.55) (1,648.18) (86.06) (62.09) (64.11)

C. Cash flows from financing activitiesProceeds from issuance of share capital 11,124.38 2,677.19 525.23 468.00 20.00 Share issue expenses adjusted against securities premium / not written off or adjusted

(235.64) (76.19) (23.39) (11.72)

Redemption of preference shares - (40.00) - - Increase / (decrease) in secured debentures including 2,410.52 1,801.77 166.60 258.62 75.05 Increase / (decrease) in bank borrowings (net) 24,388.01 9,640.91 2,266.20 583.55 (23.38)Increase / (decrease) in borrowings from others (net) 450.00 200.00 - - (0.00)Increase / (decrease) in subordinate bond (net) 613.62 477.88 370.47 114.69 99.70 Increase / (decrease) in deposits including inter-corporate (19.74) (29.95) (42.84) (146.32) 125.12 Proceeds from commercial paper 21,810.03 3,316.31 - - - Repayment of commercial paper (12,452.89) (2,665.58) - - - Increase / (decrease) in vehicle loans (net) 8.39 (0.39) 0.96 1.59 - Proceeds from subordinated debt 1,000.00 - - - - Interest paid (3,079.25) (1,227.99) (338.23) (148.12) (84.25)Dividends paid (169.86) (54.85) (23.64) (24.42) (9.75)Tax on dividend paid (28.27) (9.14) (1.74) (6.45) (1.37)Net cash used in financing activities 45,819.30 14,009.97 2,899.62 1,089.42 201.12 Net increase in cash and cash equivalents (A + B + C) 3,981.61 5.37 461.73 456.58 (125.76)Cash and cash equivalents at the beginning of the year 2,682.08 1,133.96 672.23 215.65 341.41 Add: Adjustment on account of amalgamation - 1,542.75 - - - Cash and cash equivalents at the end of the year 6,663.69 2,682.08 1,133.96 672.23 215.65

Components of cash and cash equivalents

Cash and cheques on hand 1,188.01 644.98 182.62 166.71 66.07 With banks

- on current account# 2,480.92 841.12 126.72 213.86 56.94 - on deposit account* 2,992.30 1,193.85 823.38 274.70 92.13 - on unpaid dividend accounts** 2.46 2.13 1.24 16.96 0.51

6,663.69 2,682.08 1,133.96 672.23 215.65

* Includes cash collateral deposits held with banks which arenot available for use by the Company. 2,119.41 1,182.57 702.86 270.76 55.55

# includes amouts in Escrow account towards closed publicdeposits not available for use by the Company as they representcorresponding deposit liabilities

11.44 - - - -


**These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities.

Year ended Year ended March 31, 2008 March 31, 2007


Schedules to accounts(All amounts are in millions of Indian rupees unless otherwise stated)

As at As at As at As at As at March 31, 2011 March 31, 2010 March 31, 2009 March 31, 2008 March 31, 2007

Schedule 1: Share capital

Authorized106,000,000 equity shares of Rs. 10/- each 1,060.00 1,060.00 260.00 280.00 160.00 400,000 redeemable preference shares of Rs. 100/- each 40.00 40.00 40.00 40.00 40.00 Nil compulsorily convertible preference shares of Rs. 100/- each - - 500.00 480.00

Issued, subscribed and paid-upEquity shares, fully paid up* # 833.75 340.39 172.56 110.00 110.00

7.5% redeemable preference shares of Rs. 100 each fully paid up # - - 40.00 40.00 40.00 0.05% compulsorily convertible preference shares of Rs. 100 eachfully paid up #

- - - 468.00 -

833.75 340.39 212.56 618.00 150.00

# Number of shares, issued, subscribed and paid-up-Equity shares fully paid up 416,874,188 34,038,522 17,255,828 11,000,000 11,000,000-7.5% redeemable preference shares of Rs. 100 each fully paid up Nil Nil 400,000 400,000 400,000-0.05% compulsorily convertible preference shares of Rs. 100 each fully paid-up

Nil Nil Nil 4,680,000 Nil

-Face value of equity shares Rs. 2/- Rs. 10/- Rs. 10/- Rs. 10/- Rs. 10/-

Schedule 2: Reserves and surplus

Capital redemption reserveOpening balance 40.00 22.86 17.14 11.42 5.71 Add: Transferred from Profit and loss account - 17.14 5.72 5.72 5.71 Less: Capitalised for bonus issue (40.00) - - - -

- 40.00 22.86 17.14 11.42 Securities premium accountOpening balance 3,988.96 877.30 - - 15.00 Add: Securities premium on merger of MAFIT as at April 1, 2008 - 4.22 - - - Add: Securities premium of MAFIT from April 1, 2008 to March 31,2009 (net of share issues expenses)

- 527.51 - - -

Add: Securities premium on issue of shares 10,971.39 2,656.12 900.69 - - Less: Capitalised for bonus issue (300.39) - - - - Less: Transferred to Share Capital - - - - (15.00) Less: Share issues expenses adjusted against securities premium (235.64) (76.19) (23.39) - -

14,424.32 3,988.96 877.30 - - Statutory reserveOpening balance 450.75 152.90 92.30 50.30 28.30 Add: Statutory Reserve on merger of MAFIT as at April 1, 2008 - 23.60 - - - Add: Statutory Reserve of MAFIT from April 1, 2008 to March 31,2009

- 34.80 - - -

Add: Transferred from Profit and loss account 565.33 239.45 60.60 42.00 22.00 1,016.08 450.75 152.90 92.30 50.30

General reserveOpening balance 368.39 194.39 163.39 63.39 53.39 Add: General Reserve on merger of MAFIT - as at April 1, 2008 - 80.65 - - - Add: General Reserve of MAFIT from April 1, 2008 to March 31,2009

- 34.80 - - -

Less: Adjustment to General Reserve on merger with MAFIT - (61.17) - - - Less: Transferred to Share Capital - - - - (40.00) Add: Transferred from Profit and loss account 282.67 119.72 31.00 100.00 50.00

651.06 368.39 194.39 163.39 63.39

Profit & Loss Account 2,314.36 904.65 188.74 39.00 6.14 Add: Profit & Loss account on merger of MAFIT as at March 31,2008

- 12.46 - - -

2,314.36 917.11 188.74 39.00 6.14

18,405.82 5,765.21 1,436.19 311.83 131.25

*(i) 27,500,000 equity shares of Rs 2/- each are allotted as fully paid up bonus shares by capitalisation of General Reserve - Rs. 40 and Securities Premium - Rs. 15 in earlier years. (ii) 170,192,610 equity shares of Rs.2/- each are allotted as fully paid up bonus shares by capitalisation of Capital redemption reserve - Rs 40 and Securities Premium Account - Rs 300.39 in 2011





Schedule 3: Secured loans

7.5% - 14.5% Secured Non-convertible Debentures of Rs. 1,000/- -Rs. 1,000,000 each redeemable at par at the end of the term of eachseries of debentures ranging between 1-5 years # *

5,012.85 2,619.84 723.28 633.37 370.80

Add: Interest accrued and due thereon 2.68 19.52 7.54 3.25 11.82 5,015.53 2,639.36 730.82 636.62 382.62

From banks- Cash credit* 7,488.19 257.93 1,079.41 372.45 128.93 - Working Capital Loans* 30,558.41 13,400.66 1,899.28 340.04 -

From Others- Working Capital Loans* 650.00 200.00 - - -

Vehicle loans 10.94 2.55 2.94 1.97 0.38(Secured by hypothecation of vehicles)

43,723.07 16,500.50 3,712.45 1,351.08 511.93

# Number of secured debentures 1,328,535 2,619,833 723,280 633,375 370,797

* Refer note 18.14

Schedule 4: Unsecured loans

Deposits - 18.54 43.57 75.74 240.94 Debenture application money 20.00 2.49 97.27 20.57 15.96 Inter-Corporate Deposits 1.64 2.84 7.76 18.29 4.67 Commercial Paper 10,007.87 650.73 - - - Subordinate bond 1,778.76 1,165.14 641.58 271.11 152.06 Subordinate debt 1,000.00 - - - - Interest Accrued and Due 8.76 16.38 3.16 2.96 7.32

12,817.03 1,856.12 793.34 388.67 420.95

Schedule 5: on fixed assets is set out in the following page

Schedule 6: Deferred tax (liability) / asset (net)

Deferred Tax LiabilityDifferences in depreciation and other differences in block of fixedassets as per tax books and financial books

(34.39) (34.76) (21.02) (12.03) (6.62)

Deferred tax assetEffect of expenditure debited to profit and loss account in the currentyear but allowed for tax purposes in following years

15.71 4.29 1.74 - -

Provision for loans and advances 105.75 63.82 32.87 11.64 5.66 Net Deferred tax asset / (liability) 87.07 33.35 13.59 (0.39) (0.96)




Schedule 5: Fixed Assets

GROSS BLOCK DEPRECIATION/ AMORTIZATION NET BLOCK

DESCRIPTION As at April 1, 2010 Additions Deductions As at

March 31, 2011 As at

April 1, 2010 Additions Deductions As at March 31, 2011



Tangible Assets

Freehold Land* 31.32 - - 31.32 - - - - 31.32 31.32 Building 15.12 66.02 - 81.14 0.42 0.51 - 0.93 80.21 14.70 Office equipment 60.20 113.02 0.26 172.96 13.61 26.75 0.19 40.17 132.79 46.59 Computer equipment 168.82 203.33 9.50 362.65 62.68 106.05 6.10 162.63 200.02 106.14 Furniture and Fittings 383.89 595.34 0.29 978.94 56.38 69.51 0.28 125.61 853.33 327.51 Vehicle** 9.55 14.34 1.46 22.43 2.52 1.60 0.70 3.42 19.01 7.03 Plant & Machinery 0.90 2.16 0.68 2.38 0.02 0.03 0.01 0.04 2.34 0.88

Total 669.80 994.21 12.19 1,651.82 135.63 204.45 7.28 332.80 1,319.02 534.17 2009-10 # 325.70 353.04 8.94 669.80 71.85 67.63 3.85 135.63 534.17 2008-09 196.10 132.66 3.06 325.70 42.06 30.53 0.74 71.85 253.85 2007-08 129.98 67.14 1.02 196.10 25.28 16.96 0.18 42.06 154.04 2006-07 63.50 68.57 2.09 129.98 15.17 10.17 0.06 25.28 104.70

Intangible assetsSoftwares 46.03 34.80 - 80.83 12.48 8.51 - 20.99 59.84 33.55

Total 46.03 34.80 - 80.83 12.48 8.51 - 20.99 59.84 33.55 2009-10 29.95 16.08 - 46.03 6.03 6.45 - 12.48 33.55 2008-09 12.02 17.93 - 29.95 2.85 3.18 - 6.03 23.92 2007-08 3.73 8.29 - 12.02 1.55 1.30 - 2.85 9.17 2006-07 3.67 0.06 - 3.73 1.07 0.49 - 1.56 2.17

* The Company is in the process of registering the title of the land acquired in an earlier year for Rs 0.7 in its name.

** Includes vehicles taken on finance lease/hire purchaseParticulars 2010-11 2009-10 2008-09 2007-08 2006-07Gross block 18.39 6.62 5.21 3.53 0.99 Accumulated depreciation 1.58 0.97 0.46 0.30 0.14 Net block 16.81 5.65 4.75 3.23 0.85 Depreciation for the year 1.18 0.50 0.39 0.16 0.09

# Additions during the year ended March 31, 2010 includes Rs 70.50 been assets transferred on amalgamation of MAFIT and depreciation includes Rs 16.70 being transferred on amalgamation.




As at As at As at March 31, 2011 March 31, 2010 March 31, 2009

Schedule 7: Investments

Long Term Investments

(Quoted, at cost)A. Other than trade 17,000 (Previous year - 17,000) units of Rs. 100 each in 6.13% Govt. of IndiaLoan

- - 1.64 1.64 1.34

15,000 (Previous year - 15,000) units of Rs. 100 each in 6.17% Govt. of IndiaLoan

- - 1.40 1.40 1.23


3.15 6.15 6.15 6.15 5.95


- - 1.50 1.50 1.46

800 (Previous year - 800) equity share of Rs. 10 each fully paid in ChowguleSteamship

- - - - -

500 (Previous year - 500) equity share of Rs. 10 each fully paid in SterlingHoliday Resorts India Limited

- - - - -

100 (Previous year - 100) equity share of Rs. 10 each fully paid in Raipur Alloysand Steels Limited

- - - - -

100 (Previous year - 100) equity share of Rs. 10 each fully paid in WesternPaques India Limited

- - - - -

100 (Previous year - 100) equity share of Rs. 10 each fully paid in Rohit Pulpand Paper Mills Limited.

- - - - -

100 (Previous year - 100) equity share of Rs. 10 each fully paid in TheDhanalakshmi Bank Limited.

0.01 0.01 0.01 0.01 0.01

400 (Previous year - 400) equity share of Rs. 10 each fully paid in GlobalFinance Limited.

- - - - -

300 (Previous year - 300) equity share of Rs. 10 each fully paid in Vijaya BankLimited

0.01 0.01 0.01 0.01 0.01

Nil (Previous year - 53,700) units of Rs. 100 each in 6.85% Govt. of IndiaLoan

- - - 5.35 5.13

Nil (Previous year - 23,500) units of Rs. 100 each in 8% TN Loan - - - 2.46 2.34 Nil (Previous year - 30) units of Rs. 1,00,000 each in 8 % Gujarat ElectricityBoard

- - - 3.00 2.78

Nil (Previous year - 5,000) units of Rs. 100 each in 7.00% Govt of India Loan - - - 0.51 0.49

Nil (Previous year - 2,960) units of Rs. 100 each in 7.50% Govt of India Loan - - - 0.31 0.30

Nil (Previous year - 20,000) units of Rs. 100 each in 7.33% HAR Loan - - - 1.88 1.91 Nil(Prev year-Nil)(In 2007- 10000units of Rs 100 each in 13.30% APPFCLBonds)

1.00

(Unquoted, at cost)A. Other than trade1,000 (Previous year - 1,000) equity share of Rs. 10 each fully paid in TheCatholic Syrian Bank Limited.

0.03 0.03 0.03 0.03 0.03

B. In Subsidiary CompaniesNil (Previous year - 500,000) equity shares of Rs. 10 each fully paid inManappuram Insurance Brokers Private Limited

- 5.00 5.00

Current Investments - Trade (Quoted, at lower of cost and market value) - 1,629 units (previous year - 1,629) of Rs. 20.46/- each in Sundaram MutualFund

- 0.03 0.03 0.03 0.03

279,730 units (previous year - Nil) of Rs. 1,001.29/- each in Reliance MoneyManager Fund - Institutional Option - Daily Dividend

- 280.09 - - -

13,978,308 units (previous year - Nil) of Rs. 10.0179/- each in DWS UltraShort Term Fund - Institutional Daily Dividend - Reinvest

140.03 - - -

98,035,440 units (previous year - Nil) of Rs. 10/- each in LICMF - FloatingRate Fund - Short term plan - Daily Dividend Plan

980.35 - - -

40,000,000 (previous year - Nil) of Rs. 10 each in State Bank of India - DebtFund Series - 370 Days - 7- Growth

400.00

403.20 1,406.70 10.77 29.28 29.01

Aggregate amount of quoted investments 3.17 6.17 10.74 24.25 25.42 Market value of quoted investments 3.37 6.37 10.57 23.26 24.04 Aggregate amount of unquoted investments 400.03 1,400.54 0.03 5.03 5.03

Refer Note 11 of Schedule 18 for details of investments purchased and sold during the year.







Schedule 8: Cash and bank balances

Cash on hand 1,188.01 644.98 182.62 166.71 66.07

Balances with scheduled banks- on current accounts* 2,480.92 841.12 126.72 213.86 56.94 - on deposit accounts** 2,992.30 1,193.85 823.38 274.70 92.13 - on unpaid dividend accounts 2.46 2.13 1.24 16.96 0.51

6,663.69 2,682.08 1,133.96 672.23 215.65

* Includes amounts in Escrow account towards closed public deposits 11.44 - - - - ** deposit accounts includes collateral deposit towards gold loans assigned and other facilities (Refer Note 12 to Schedule 18)

Schedule 9: Other current assets

Interest accrued 4,658.43 1,827.89 661.44 190.95 153.27Stock of foreign currency - - 0.01 0.04 2.95Stock of gold coins etc. 287.17 48.53 14.46 - - Others 1.91 2.46 - 11.72 -

4,947.51 1,878.88 675.91 202.71 156.22

Schedule 10: Loans and advances

Secured, considered goodLoans:

- Gold 63,574.42 18,456.23 3,974.87 977.17 197.62 - Hypothecation 18.79 172.38 355.50 620.17 441.05 - Stock on Hire 0.29 8.24 29.60 71.38 101.29 - Others 77.11 57.52 52.38 56.47 62.43

Unsecured, considered goodAdvances recoverable in cash or kind or for value to be received 123.88 62.15 9.36 36.78 4.67 Deposits 347.19 150.61 64.33 91.09 152.05

64,141.68 18,907.13 4,486.04 1,853.06 959.11 Secured, considered doubtfulLoans:

- Gold 130.99 56.03 25.76 6.97 6.08 - Hypothecation 26.69 114.40 53.50 15.48 6.36 - Stock on Hire 1.31 14.15 8.27 2.49 1.17 - Others 5.98 5.73 4.06 4.05 1.61

Unsecured, considered doubtfulAdvances recoverable in cash or kind or for value to be received 2.49 1.81 5.11 5.27 -

167.46 192.12 96.70 34.26 15.22 Less: Provision for doubtful loans and advances 167.46 192.12 96.70 34.26 15.22

64,141.68 18,907.13 4,486.04 1,853.06 959.11

Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009 March 31, 2008, and March 31, 2007




Schedule 11: Current liabilities

Sundry creditors for expenses* 275.56 148.81 91.09 29.92 15.55 Book overdraft 5.09 6.68 8.45 - - Interest accrued but not due on loans 270.91 169.11 30.71 17.57 23.77

197.90 339.17 155.42 121.03 13.29 Sundry deposits 10.95 20.08 21.22 22.92 13.83 Investor Education and Protection Fund shall be credited by following amounts (as and when due)

a) Unpaid dividends 2.46 2.13 1.24 0.46 0.51b) Unpaid matured Deposits 2.14 4.58 5.11 5.26 - c) Unmatured Deposits 9.30 - - - - Dividend payable - - - 16.50 - Other liabilities 352.03 119.72 34.73 12.15 150.81

1,126.34 810.28 347.97 225.81 217.76

Schedule 12: Provisions

Provisions for taxation (net of advance tax and tax deducted at source)

29.96 6.13 14.17 17.68 8.86

Provision for standard assets 158.47 - - - - Provision for gratuity 14.82 - - - - Provision for dividend on preference shares - - 3.00 0.07 1.63 Provision for Fringe benefit tax (net of advance tax) - - - - 0.08 Proposed final dividend 500.25 170.19 43.14 5.50 19.80 Tax on proposed dividend 81.14 28.27 7.84 1.46 3.64

784.64 204.59 68.15 24.71 34.01

* There are no dues outstanding to any enterprises covered under Micro, Small and Medium Enterprises Development Act, 2006, based on the information available withthe Company during the year and as at March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007.

Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31,2007



Year ended Year ended Year ended Year ended Year endedMarch 31, 2011 March 31, 2010 March 31, 2009 March 31, 2008 March 31, 2007

Schedule 13: Income from services

Interest and other income from- Gold and other loans 11,533.49 4,575.15 1,431.84 564.93 318.14 - Business loans 0.99 2.24 2.86 9.71 1.78 - Personal loans 0.62 4.36 8.18 11.40 0.20 - Hypothecation and hire purchase loans 93.70 90.86 139.68 182.36 93.84 - Others 5.32 2.49 2.34 1.60 -

Income from fee based activities*- Money transfer 19.21 21.26 18.85 9.28 5.71 - Others 0.87 3.41 1.59 0.32 0.65

11,654.20 4,699.77 1,605.34 779.60 420.32

Schedule 14: Other income

Interest (gross)* 124.67 66.26 41.95 12.34 12.43 Foreign exchange gain (net) 0.02 (0.01) (0.20) - 0.22 Bad debts recovered 8.64 3.55 3.15 2.10 1.64 Others 27.73 12.44 10.87 2.56 1.89

161.06 82.24 55.77 17.00 16.18 * Tax deducted at source 24.93 9.89 7.24 3.09 1.65

Schedule 15: Personnel expenses

Salaries, wages and bonus 1,419.26 492.87 266.54 109.89 56.63 Contribution to provident and other funds 180.71 41.37 16.90 6.12 3.93 Staff welfare expenses 5.03 2.16 0.51 0.37 0.05

1,605.00 536.40 283.95 116.38 60.61

Schedule 16: Operating and other expenses

Rent 328.40 133.27 54.44 27.53 15.68 Electricity 38.16 18.29 11.55 5.62 2.99 Insurance 23.75 4.64 0.47 0.89 0.69 Travel and conveyance 83.90 53.79 21.60 8.44 7.15 Communication expenses 44.23 14.74 28.05 16.34 6.68 Advertisement 1,038.51 482.81 81.70 61.44 23.21 Directors sitting fees 1.51 0.92 0.82 0.75 0.39 Repairs and maintenance

- Vehicles 1.78 1.56 0.91 0.56 0.38 - Others 62.79 17.64 7.95 3.86 2.07

Legal and professional fees 95.19 24.42 23.71 6.83 2.31 Security charges 204.16 54.90 29.24 15.23 6.79 Rates and taxes 40.47 9.96 18.25 5.66 4.47 Printing and stationery 41.51 17.65 13.34 9.68 4.02 Loss on sale of assets 2.28 4.34 - 0.08 0.01 Bad debts 248.94 53.42 117.54 14.69 21.32 Provision for standard assets 158.47 - - - - Provision for loans and advances, net of bad debts written off (24.66) 88.58 60.32 19.03 9.52 Miscellaneous expenses 49.32 19.82 24.82 2.21 4.19

2,438.71 1,000.75 494.71 198.84 111.87

Schedule 17: Financial expenses

Interest- on Debentures 299.67 288.69 105.69 46.47 33.96 - on Bonds 233.15 134.78 53.33 27.71 - - on Deposits 1.37 3.84 6.26 40.93 27.24 - on Banks borrowings 2,210.30 795.99 188.52 26.74 13.40 - on Other borrowings 34.30 16.94 0.27 - - - on Commercial Papers 369.88 57.47 - - - - Others 7.92 6.83 1.80 0.08 13.69

Bank and other charges 163.04 64.69 30.04 1.58 1.56 3,319.63 1,369.23 385.91 143.51 89.85


Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ Schedule 18: Notes to accounts (All amounts are in millions of Indian Rupees unless otherwise stated) 18. 1 Statement of significant accounting policies a) Basis of preparation The financial statements have been prepared to comply in all material respects with the Notified accounting standard by Companies Accounting Standards Rules, 2006, (as amended) the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Reserve Bank of India as applicable to a NBFC. The financial statements have been prepared under the historical cost convention and on an accrual basis except for interest and discounts on non performing assets which are recognized on realization basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. b) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. c) Fixed assets Fixed assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any cost attributable to bringing the asset to its working condition for its intended use. d) Depreciation Depreciation is provided using the straight line method at the rates prescribed under schedule XIV of the Companies Act, 1956, which is management’s estimate of the useful lives of the assets except as follows:

Nature of asset Rate of depreciation followed Computer equipment 16.21% to 33.33%

During the year ended March 31, 2011, the Company has changed its estimated useful life of computer equipments from 6 years to 3 years. This change in estimated useful life has resulted in provision of additional depreciation by Rs 57.09 million and the profit before tax of the Company is lower by the corresponding number.

Computer software cost capitalized is amortized over the estimated useful life of 6 years.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ e) Impairment i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. ii) After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. f) Leases Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised. If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease item, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term. g) Investments The Board of directors has spelt out the criteria to classify investments into current and long term investments in the investment policy. Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Any inter class transfer should be with the approval of the board and as per RBI regulation. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Quoted current investments for each category is valued at cost or market value whichever is lower. Unquoted equity shares in the nature of current investments is valued at cost or break-up value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ h) Revenues Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Interest income on loans given is recognised under the internal rate of return method. Such interests, where installments are overdue in respect of non performing assets are recognised on realization basis. Any such income recognised and remaining unrealized after the installments become overdue with respect to non performing assets is reversed. Revenues from fee-based activities are recognised as and when services are rendered. Interest on deposits is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Gains arising on direct assignment of assets are recognized over the tenure of agreements as per guideline on securitization of standard assets issued by the Reserve Bank of India, losses, if any are recognised upfront. i) Employee benefits

i. Retirement benefits in the form of Provident Fund are defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the fund maintained by the Central Government is due. There are no other obligations other than the contribution payable to the respective trusts.

ii. Gratuity liability under the Payment of Gratuity Act which is a defined benefit scheme is accrued and provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

iii. Short term compensated absences are provided for on based on estimates.

iv. Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

j) Foreign currency transactions (i) Initial Recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ (iii) Exchange Differences Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise. k) Income Tax Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writesdown the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. l) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split, if any. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. m) Provisions a) A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. b) Provision policy for gold loans and other loan portfolios Secured loans are classified / provided for, as per management estimates, subject to the minimum provision required as per Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 as follows: Classification of loans (Gold and other loans)

Asset Classification Provisioning policy Standard Assets # 0.25% Sub-standard assets 10% Doubtful assets 100% of unsecured portion + 20 to 50% of Loss assets 100% written off in books.

Classification of loans (Hypothecation and Stock on Hire)

Asset Classification Provisioning policy Standard Assets # 0.25% Sub-standard assets 10% to 100% Doubtful assets* 100% written off in books. Loss assets 100% written off in books.

* Company considers all loans overdue for more than 18 months as doubtful of recovery.

# As per notification DNBB.222 / CGM(US)-2011 issued by Reserve Bank of India (RBI) on January 17, 2011.

n) Segment reporting Identification of segments: The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. As the Company operates only in India it has a single geographical segment. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items Unallocable costs include general corporate income and expense items which are not allocated to any business segment.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ From financial year 2010-11, the Company primarily operates in the business of "Gold loan" and accordingly no segment reporting is applicable.

o) Cash and Cash Equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. p) Ancilliary borrowing costs Ancilliary borrowings costs incurred issue of debentures and other long term borrowings are expensed over the tenure of the loan. q) Share issue expenses Expenses incurred in connection with issue of shares are adjusted (net of tax effects, if any) against the securities premium account in accordance with Section 78 of the Companies Act, 1956. r) Insurance claims Insurance claims are accrued for on the basis of claims admitted and to the extent there is no uncertainty in receiving the claims. s) Surplus on auction of pledged gold The Company has a policy of refund of any surplus that arises on auction of pledged gold which has been re-possessed by the Company in accordance with the terms of the agreement with the customers. t) Employee stock compensation cost Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense, if any is amortized over the vesting period of the option on a straight line basis. 18. 2 Nature of operations Manappuram General Finance and Leasing Limited ('MAGFIL' or 'the Company') was incorporated on July 15, 1992 in Thrissur, Kerala. The Company is a non banking financial company (‘NBFC’), which provides a wide range of fund based and fee based services including gold loans, money exchange facilities etc. The Company currently operates through more than 1,900 branches spread across the country. The Board of Directors of the Company at its meeting held on February 25, 2011, decided to change the Category A (Deposit Taking) registration of the Company with Reserve Bank of India (RBI) and made an application for the change. RBI approved the same and issued a new Certificate giving Category B (Non

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ Deposit Taking) registration to the Company. As per the new registration, the Company is a Systemically Important Non-Deposit Taking NBFC. 18.3 Share Capital Issue of equity shares to promoters on preferential basis During the year ended March 31, 2011, the Company has issued 13,210,039 shares to its promoters on preferential basis at a price of Rs 75.70/- per share at a premium of Rs 73.70/- per share. The approval of the Board of Directors and shareholders has been taken and necessary regulatory requirements have been complied with by the Company. Bonus and share split The shareholders of the Company have on April 22, 2010 through a resolution, approved the sub-division of one fully paid equity share of Rs 10/- each of the Company into five equity shares of Rs 2/- each fully paid pursuant to Section 94 of the Act. Further, the shareholders of the Company have through a resolution passed on April 22, 2010 approved the issuance of equity shares of Rs 2/-each, fully paid up, as bonus shares (after considering the stock split as above) in the ratio of 1:1 to the shareholders existing as on the record date. These changes have been given effect to in the current period. Further, as per the requirements of paragraph 44 read with paragraph 24 of Accounting Standard 20 – ‘Earnings per share’ (AS-20), the number of equity shares outstanding as at March 31, 2010 has been adjusted for the amount of such bonus shares and sub-divided shares in the computation of the weighted average number of shares for the computation of EPS for the current year and previous year. Issue of equity shares through private placement to Qualified Institutional Buyers (“QIBs”) During the current year, the Company has issued 59,523,809 shares to certain QIBs by way of a private placement at a price of Rs 168/- per share at a premium of Rs 166/- per share. The issues of these shares are for the purposes of augmenting the funding needs of the Company and to meet capital adequacy norms. The Company raised a total amount of Rs 1,000 crores from these QIBs and incurred an amount of Rs 23 crores as share issues expenses which has been set off against the share premium account. Employee Stock Option Scheme (ESOS), 2009 The details of the Employee Stock Option Scheme 2009 are as under: Date of share holders’ approval August 17, 2009 Number of options approved 1,000,000 Date of grant August 17, 2009 Number of options granted 829,500 Method of settlement Equity Graded Vesting 50% after one year from the date of grant i.e.

August 16, 2010 and balance 50% after two years from the date of grant i.e August 16, 2011

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ Exercisable period 4 years from vesting date Vesting conditions on achievement of pre-determined performance

parameters in accordance with the Company Performance appraisal plans.

Subsequent to the share split and bonus issue, the number of options has been adjusted to 8,295,000 options and the exercise price has been adjusted to Rs 33.12/- per share in accordance with the terms of the scheme. The Company has adopted the (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 issued by Securities and Exchange Board of India, and has recorded a compensation expense using the intrinsic value method as set out in those guidelines. The summary of the movements in options is given below:

Particulars As at March 31, 2011


Options outstanding, beginning of year 7,850,000 - Options granted during the year - 8,295,000 Options exercised during the year 3,755,120 - Options lapsed during the year - 445,000 Options outstanding, end of year 4,094,880 7,850,000 Options outstanding at the year end comprise of :

- Options eligible for exercise at year end 169,880 - - Options not eligible for exercise at year end 3,925,000 7,850,000

Particulars As at March 31, 2011


Weighted average remaining contract life of options 2 years 5 month 3 years 5 month

The options outstanding at March 31, 2011 had an exercise price of Rs. 33.12/-

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________

The fair value of options estimated at the date of grant using the Black-Scholes method and the assumptions used are as under:

Particulars

Vesting I Vesting II August 16, 2010 August 16, 2011

50% 50% Option fair value (pre-split and bonus Rs 142.43 Rs 157.92 Risk-free interest rate 6.15% 6.53% Expected life 3 years 4 years Expected volatility 67.11% 66.62% Expected dividend yield 2.76% 2.76% Share price on the date of grant (face Rs. 331.15 /- Rs. 331.15 /-

The expected volatility of the stock has been determined based on historical volatility of the stock. The period over which volatility has been considered is the expected life of the option. Pro-forma Disclosures for ESOS 2009

In accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, had the compensation cost for ESOS 2009 been recognized based on the fair value at the date of grant in accordance with Black-Scholes method, the amounts of the Company’s net profit and earnings per share would have been as follows:

Particulars

Profit after tax Basic EPS (Rs.) Diluted EPS (Rs.)

Year ended March 31, 2011 - Amounts as reported 2,826.64 7.61 7.51 - Amounts as per pro-forma 2,774.52 7.47 7.37

Particulars

Profit after tax Basic EPS (Rs.) Diluted EPS (Rs.)

Year ended March 31, 2010

- Amounts as reported 1,197.22 4.09 4.07 - Amounts as per pro-forma 1,143.19 3.91 3.88

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited)Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007

Schedule 18: Notes to accounts (continued..)(All amounts are in millions of indian rupees unless otherwise stated)

18.4 Related Party Transanctions

Particulars

Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07

Sale of gold loans - - - - - - - 7,915.80 790.40 922.67 - - - - - - - - - - - - 7,915.80 790.40 922.67 Manappuram Finance Tamilnadu Limited - - - - - - - 7,915.80 790.40 922.67 - - - - - - - - - - - - 7,915.80 790.40 922.67

Purchase of gold loans - - - - - - - 705.20 151.63 800.57 - - - - - - - - - - - - 705.20 151.63 800.57 Manappuram Finance Tamilnadu Limited - - - - - - - 705.20 122.11 800.57 - - - - - - - - - - - - 705.20 122.11 800.57 Manappuram Finance - - - - - - - - 29.52 - - - - - - - - - - - - - - 29.52 -

Debentures issued during the year - - - - - - - - - - 46.03 272.18 - 0.28 - 1.54 1.13 - - - 47.57 273.31 - 0.28 - Mr. V.P.Nandakumar - - - - - - - - - - 46.03 272.18 - 0.28 - - - - - - 46.03 272.18 - 0.28 - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 0.11 0.28 - - - 0.11 0.28 - - - Mrs. Shelly Ekalavyan - - - - - - - - - - - - - - - 0.17 0.03 - - - 0.17 0.03 - - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - 0.29 0.24 - - - 0.29 0.24 - - - Mrs. Sathyalekshmy - - - - - - - - - - - - - - - 0.97 0.58 - - - 0.97 0.58 - - -

Debentures redeemed during the year - - - - - - - - - - 60.10 255.09 - - - 1.94 0.45 - - - 62.04 255.54 - - - Mr. V.P.Nandakumar - - - - - - - - - - 60.10 255.09 - - - - - - - - 60.10 255.09 - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 0.15 0.18 - - - 0.15 0.18 - - - Mrs. Shelly Ekalavyan - - - - - - - - - - - - - - - 0.18 0.03 - - - 0.18 0.03 - - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - 0.40 0.07 - - - 0.40 0.07 - - - Mrs. Sathyalekshmy - - - - - - - - - - - - - - - 1.21 0.17 - - - 1.21 0.17 - - -

Subordinate Bond issued during the year - - - - - - - - - - - - - - - 0.83 0.61 0.85 0.95 - 0.83 0.61 0.85 0.95 - Mrs. Sushama Nandakumar - - - - - - - - - - - - - - - 0.15 - 0.85 - - 0.15 - 0.85 - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - - 0.03 - - - - 0.03 - - - Mrs. Rajalakshmi Raveendra Babu - - - - - - - - - - - - - - - 0.68 0.50 - - - 0.68 0.50 - - - Mrs. Sathyalekshmy - - - - - - - - - - - - - - - - 0.08 - - - - 0.08 - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - - - - 0.95 - - - - 0.95 -

Subordinate Bond redeemed during the year - - - - - - - - - - - 45.00 - - - 0.63 0.09 0.85 - - 0.63 45.09 0.85 - -

Mr. V.P.Nandakumar - - - - - - - - - - - 45.00 - - - - - 0.85 - - - 45.00 0.85 - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - - 0.04 - - - - 0.04 - - - Mrs. Shelly Ekalavyan - - - - - - - - - - - - - - - - 0.02 - - - - 0.02 - - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - - 0.03 - - - - 0.03 - - - Mrs. Rajalakshmi Raveendra Babu - - - - - - - - - - - - - - - 0.63 - - - - 0.63 - - - -

Issue of Preference Shares - - - - - - - - - - - - - - 20.00 - - - - - - - - - 20.00 Mr. V.P.Nandakumar - - - - - - - - - - - - - - 20.00 - - - - - - - - - 20.00

Subscription to Equity shares - - - - - - - - - - - - - - - 1,000.00 - - - - 1,000.00 - - - - Mrs. Sushama Nandakumar - - - - 1,000.00 - 1,000.00 - - - -

Associates / Enterprises owned or significantly influenced by key management personnel or their

relatives

Key Management Personnel Relatives of key management personnel Total Subsidiary




Particulars



relatives


Interest paid - - - - - - 0.30 64.60 12.01 8.19 3.06 7.01 5.66 34.81 10.49 0.34 0.28 0.09 0.08 0.10 3.40 7.60 70.36 46.90 18.77 Mr. V.P.Nandakumar - - - - - - - - - - 3.06 7.01 5.66 34.81 10.49 - - - - - 3.06 7.01 5.66 34.81 10.49 Manappuram Comptech & Consultants P Ltd. - - - - - - - - - 0.00 - - - - - - - - - - - - 0.00 Manappuram Insurance Brokers Private Limited - - - - - - 0.09 - - - - - - - - - - - - - - 0.09 - - -

Manappuram Finance Tamilnadu Limited - - - - - - - 63.21 11.49 8.19 - - - - - - - - - - - - 63.21 11.49 8.19 Manappuram Asset Finance Limited - - - - - - - 1.11 0.52 - - - - - - - - - - - - - 1.11 0.52 - Manappuram Chits (India) Limited - - - - - - 0.21 0.28 - - - - - - - - - - - - - 0.21 0.28 - - Mrs. Shelly Ekalavyan - - - - - - - - - - - - - - - - 0.01 - - - - 0.01 - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 0.08 0.06 - 0.08 0.10 0.08 0.06 - 0.08 0.10 Mrs. Rajalakshmi Raveendra Babu - - - - - - - - - - - - - - - 0.04 0.06 - - - 0.04 0.06 - - - Mrs. Sushama Nandakumar - - - - - - - - - - - - - - - 0.14 0.15 0.09 - - 0.14 0.15 0.09 - - Mrs. Sathyalekshmy - - - - - - - - - - - - - - - 0.05 - - - - 0.05 - - - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - 0.03 - - - - 0.03 - - - -

Salary to Sooraj Nandan - - - - - - - - - - - - - - - - 0.42 0.40 - - - 0.42 0.40 - -

Interest received - - - - - - - 4.56 0.92 9.16 - - - - - - - - - - - - 4.56 0.92 9.16 Manappuram Finance Tamilnadu Limited - - - - - - - 4.56 0.92 9.16 - - - - - - - - - - - - 4.56 0.92 9.16

Deputation of staff to other Companies - - - - 1.03 - - - 14.99 3.78 - - - - - - - - - - - - - 14.99 4.81 Manappuram Benefit Fund Limited - - - - - - - - 10.00 3.53 - - - - - - - - - - - - - 10.00 3.53 Manappuram Finance Tamilnadu Limited - - - - - - - - 4.99 - - - - - - - - - - - - - 4.99 - Manappuram Chits (India) Limited - - - - - - - 0.04 - - - - - - - - - - - - 0.04 Manappuram Comptech & Consultants P Ltd. - - - - - - - 0.21 - - - - - - - - - - - - 0.21 Manappuram Insurance Brokers (P) Ltd - - - - 1.03 - - - - - - - - - - - - - - - - 1.03

Deputation of staff from other Companies - - - - 0.42 - - - - - - - - - - - - - - - - - - - 0.42 Manappuram Benefit Fund Limited - - - - 0.25 - - - - - - - - - - - - - - - - - - - 0.25 Manappuram Insurance Brokers (P) Ltd - - - - 0.17 - - - - - - - - - - - - - - - - - - - 0.17

Inter Corporate Deposits accepted - - - - - - 5.15 5.45 13.69 - - - - - - - - - - - - 5.15 5.45 13.69 - Manappuram Asset Finance Limited - - - - - - - - 13.69 - - - - - - - - - - - - - - 13.69 - Manappuram Chits (India) Limited - - - - - - 5.15 5.45 - - - - - - - - - - - - - 5.15 5.45 - -

Inter Corporate Deposits redeemed - - - - - - 10.60 13.69 - - - - - - - - - - - - - 10.60 13.69 - - Manappuram Asset Finance Limited - - - - - - - 13.69 - - - - - - - - - - - - - - 13.69 - - Manappuram Finance Tamilnadu Limited - - - - - - - - - - - - - - - - - - - - - - - - - Manappuram Chits (India) Limited - - - - - - 10.60 - - - - - - - - - - - - - - 10.60 - - -

Incentive reimbursement received - - - - - - - - 2.40 - - - - - - - - - - - - - - 2.40 - Manappuram Finance Tamilnadu Limited - - - - - - - - 2.40 - - - - - - - - - - - - - - 2.40 -

Incentive reimbursement paid - - - - - - - - 1.52 - - - - - - - - - - - - - - 1.52 - Manappuram Comptech & Consultants P Ltd. - - - - - - - - 1.52 - - - - - - - - - - - - - - 1.52 -

Advances made - - - - - - 1.78 - - - - - - - - 1.91 1.20 - - - 1.91 2.97 - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 1.31 1.20 - - - 1.31 1.20 - - - Sooraj Nandan 0.60 0.60 - - - - Manappuram Foundations - - - - - - 1.78 - - - - - - - - - - - - - 1.78 - - -




Particulars



relatives


Loans taken - - - - - - 0.51 - - - - - - - - - - - - - - 0.51 - - - Manappuram Insurance Brokers Private Limited - - - - - - 0.51 - - - - - - - - - - - - - - 0.51 - - -

Loans repaid - - - - - - 3.56 - - - - - - - - - - - - - - 3.56 - - - Manappuram Insurance Brokers Private Limited - - - - - - 3.56 - - - - - - - - - - - - - - 3.56 - - -

Subscription to share warrant - - - - - - - - - - - 230.76 29.98 - - - - - - - - 230.76 29.98 - - Mr. V.P.Nandakumar - - - - - - - - - - - 230.76 29.98 - - - - - - - - 230.76 29.98 - -

Conversion of share warrant - - - - - - - - - - - 260.74 - - - - - - - - - 260.74 - - - Mr. V.P.Nandakumar - - - - - - - - - - - 260.74 - - - - - - - - - 260.74 - - -

Rent Paid - - - - - - - - - - 0.51 0.51 0.51 - - - - - - - 0.51 0.51 0.51 - - Mr. V.P.Nandakumar - - - - - - - - - - 0.51 0.51 0.51 - - - - - - - 0.51 0.51 0.51 - -

Rent Received - - - - - 0.24 0.20 0.18 - - - - - - - - - - - - 0.24 0.20 0.18 - - Manappuram Jewellers Private Limited - - - - - 0.04 0.02 0.00 - - - - - - - - - - - - 0.04 0.02 0.00 - - Manappuram Insurance Brokers Private Limited - - - - - 0.18 0.18 0.18 - - - - - - - - - - - - 0.18 0.18 0.18 - -

Manappuram Asset Finance Limited - - - - - 0.02 - - - - - - - - - - - - - - 0.02 - - - -

Donation Made - - - - - 6.20 - - - - - - - - - - - - - - 6.20 - - - - Manappuram Foundations - - - - - 6.20 - - - - - - - - - - - - - - 6.20 - - - -

Sale of gold - - - - - 972.70 140.24 13.89 - - - - - - - - - - - - 972.70 140.24 13.89 - - Manappuram Jewellers Private Limited - - - - - 972.70 140.24 13.89 - - - - - - - - - - - - 972.70 140.24 13.89 - -

Purchase of stationery - - - - - - - 1.05 - - - - - - - - - - - - - - 1.05 - - Manappuram Printers - - - - - - - 1.05 - - - - - - - - - - - - - - 1.05 - -

Sale of stationery - - - - - - 0.06 - - - - - - - - - - - - - - 0.06 - - - Manappuram Benefit Fund Limited - - - - - - 0.06 - - - - - - - - - - - - - - 0.06 - - -

Purchase of assets - - - - - - - 0.66 - - - 25.41 - - - - 16.96 - - - - 42.37 0.66 - - Manappuram Healthcare - - - - - - - 0.66 - - - - - - - - - - - - - - 0.66 - - Mr. V.P.Nandakumar - - - - - - - - - - - 25.41 - - - - - - - - - 25.41 - - - Mrs. Sushama Nandakumar - - - - - - - - - - - - - - - - 6.86 - - - - 6.86 - - - Mrs. Sumitha Nandakumar - - - - - - - - - - - - - - - - 10.10 - - - - 10.10 - - -




Particulars



relatives


Balance outstanding as at the period end: - - - - -

Amounts payable (net) to related parties - - - - - - - 5.71 13.77 - 0.26 17.39 75.35 45.71 - 2.82 3.38 0.98 0.96 0.13 3.08 20.77 82.04 60.43 0.13 Mr. V.P.Nandakumar - - - - - - - - - - 0.26 17.39 75.35 45.71 - - - - - - 0.26 17.39 75.35 45.71 - Manappuram Asset Finance Limited - - - - - - - - 13.77 - - - - - - - - - - - - - - 13.77 - Manappuram Benefit Fund Limited - - - - - - - - - - - - - - - - - - - - - - - - - Manappuram Chits (India) Limited - - - - - - - 5.71 - - - - - - - - - - - - - - 5.71 - - Mrs. Rajalakshmi Raveendra Babu - - - - - - - - - - - - - - - 0.57 0.56 - - - 0.57 0.56 - - - Mrs. Shelly Ekalavyan - - - - - - - - - - - - - - - - 0.02 - - - - 0.02 - - - Mrs. Geeta Ravi - - - - - - - - - - - - - - - 0.09 0.24 - - - 0.09 0.24 - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 0.76 0.88 - 0.96 0.13 0.76 0.88 - 0.96 0.13 Mrs. Sushama Nandakumar - - - - - - - - - - - - - - - 1.04 1.03 0.85 - - 1.04 1.03 0.85 - - Mrs. Sathyalekshmy - - - - - - - - - - - - - - - 0.36 0.65 0.13 - - 0.36 0.65 0.13 - -

Amounts receivables (net) from related parties - - - - - 0.04 1.79 - 2.40 122.10 - - - - - 3.11 1.20 - - - 3.15 2.99 - 2.40 122.10

Manappuram Jewellers Private Limited - - - - - 0.01 - - - - - - - - - - - - - - 0.01 - - - - Manappuram Insurance Brokers Private Limited - - - - - 0.03 0.02 - - - - - - - - - - - - - 0.03 0.02 - - - Manappuram Comptech & Consultants P Ltd. - - - - - - - - - - - - - - - - - - - - - - - - - Manappuram Finance Tamilnadu Limited - - - - - - - - 2.40 122.10 - - - - - - - - - - - - - 2.40 122.10 Sooraj Nandan - - - - - - - - - - - - - - - 0.60 - - - - 0.60 - - - - Mrs. Jyothi Prasannan - - - - - - - - - - - - - - - 2.51 1.20 - - - 2.51 1.20 - - - Manappuram Foundations - - - - - - 1.78 - - - - - - - - - - - - - - 1.78 - - -

Names of Related Parties

Manappuram Finance Tamilnadu Limited [formerly Manappuram Finance (Tamilnadu) Private Limited]Manappuram Benefit Fund LimitedManappuram Chits (India) LimitedManappuram Comptech & consultants (P) LimitedManappuram Asset Finance LimitedManappuram Finance (Sole Proprietorship)Manappuram Insurance Brokers Private LimitedManappuram Jewellers Private LimitedManappuram HealthcareManappuram Foundations (charitable trust)Manappuram Printers

Key Management Personnel Mr. V P NandakumarMr. I UnnikrishnanMr. B.N Raveendra Babu

Relatives of key management personnel Mrs. Sushama NandakumarMr. Sooraj NandanMrs Sumitha NandakumarMrs. Jyothi PrasannanMrs. Shelly EkalavyanMrs. Geetha RaviMrs. Rajalakshmi Raveendra BabuMrs. Sathyalekshmy

Note: Remuneration to key management personnel is disclosed else where in the accounts in note 18.16(c)

Associates / Joint Ventures / Enterprises owned or significantly influencfed by key management personnel or their relatives

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited)


18.5 Segment Reporting

Primary Segment: Business Segment

The three identified reportable segments are:

1.Gold and other loans - financing of loans against pledging of gold and gold ornaments2.Asset financing - Financing of loans against hypothecation of vehicles3.Fee based activities - Money transfer, foreign currency exchange

Secondary Segment information

The Company has no reportable geograhical segment as it renders its services entirely in india.

Primary segment information

Particulars March 31, 2010

March 31, 2009

March 31, 2008

March 31, 2007

Segment revenuesGold and other loans 4,650.51 1,487.49 599.97 330.59 Asset financing 94.41 142.82 184.46 95.48 Unallocable Income 12.44 19.93 2.57 3.85 Fee based activities 24.65 10.87 9.60 6.58

4,782.01 1,661.11 796.60 436.50 Segment resultGold and other loans 1,926.43 623.74 262.05 137.29 Asset financing (54.08) (88.16) 72.07 27.43 Fee based activities 18.94 16.04 8.10 5.76 Unallocable Income 12.44 10.87 2.56 3.85 Net unallocable expenditure (85.48) (99.66) (25.17) (10.82) Profit before taxation 1,818.25 462.83 319.61 163.51 Taxes 621.04 159.86 109.71 57.39 Profit after taxation 1,197.21 302.97 209.90 106.12

Segment assetsGold and other loans 23,833.11 6,117.02 2,137.59 865.34 Asset financing 214.73 457.72 743.06 567.64 Fee based activities - 0.01 0.04 2.99 Unallocable Assets 1,429.25 12.46 24.34 31.14

25,477.09 6,587.21 2,905.03 1,467.11 Segment liabilitiesGold and other loans 18,958.45 4,611.04 1,887.58 37.81 Asset financing 192.68 234.60 79.48 33.56 Fee based activities - - - - Unallocated liabilities 220.36 62.85 19.87 1,114.49

19,371.49 4,908.49 1,986.93 1,185.86 DepreciationGold and other loans 56.83 32.14 15.86 8.95 Asset financing 0.55 1.56 2.40 1.71 Fee based activities - - - -

57.38 33.70 18.26 10.66 Capital expenditureGold and other loans 294.37 146.08 65.51 57.61 Asset financing 2.87 7.11 9.91 11.02 Fee based activities - - - -

297.24 153.19 75.43 68.63

Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 andMarch 31, 2007

For the financial year 2010-11, the Company, based on its risks and rewards has determined that it primarily operates in the business of "Gold loan".Accordingly, no segment reporting is applicable for year ended March 31, 2011. Segment dislcosures have been made for the years ended March 31,2007 to March 31, 2010.


Schedule 18: Notes to accounts (continued..)(All amounts are in millions of Indian rupees unless otherwise stated)

18.6 (a) Loan portfolio and Provision for Non Performing Assets for major categories of loan portfolio

2011 2010 2009 2008 2007 2011 2010 2009 2008 2007 2011 2010 2009 2008 2007

Gold loan- Standard assets 63,495.46 18,410.61 3,962.87 968.11 196.97 158.47 * - - - - 63,336.99 18,410.61 3,962.87 968.11 196.97 - Sub-standard assets 76.27 48.25 13.23 9.06 0.63 7.63 4.82 1.32 0.91 0.06 68.64 43.43 11.91 8.15 0.57 - Doubtful assets 133.68 53.40 24.53 6.97 6.10 123.36 51.21 24.44 6.06 6.02 10.32 2.19 0.09 0.91 0.08 - Loss assets - - - - - - - - - - - - - - -

Hypothecation loan- Standard assets 18.79 91.55 249.67 537.59 430.89 - - - - - 18.79 91.55 249.67 537.59 430.89 - Sub-standard assets 26.69 124.52 153.93 96.84 10.79 26.69 43.70 48.10 14.26 1.08 - 80.82 105.83 82.58 9.71 - Doubtful assets - 70.71 5.40 1.22 5.73 - 70.70 5.40 1.22 5.28 - 0.01 - - 0.45 - Loss assets - - - - - - - - - - - - - - -

TOTAL 63,750.89 18,799.04 4,409.63 1,619.79 651.11 316.15 170.43 79.26 22.45 12.44 63,434.74 18,628.61 4,330.37 1,597.34 638.67

* Disclosed separately under Provisions in Schedule 12 and not netted off against the loan.

18.6 (b) Provision for dimunition in value of investments

Particulars 2011 2010 2009 2008 2007

Provision for dimunition in value of investments - - - - -

Gross loan outstanding Provision for Assets Net loan outstanding

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.7 Employment benefits disclosures: 2011 2010 2009 2008 The amounts of Provident fund contribution charged to the Profit and loss account during the year aggregates to

96.51 26.25 9.95 3.35

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the gratuity plan. Profit and Loss account

Net employee benefit expense (recognised in Personnel expenses)

2011 2010 2009 2008

Current service cost 32.48 0.54 0.54 0.54 Interest cost on benefit obligation 0.31 0.12 0.07 0.06 Expected return on plan assets (1.86) (0.29) (0.19) (0.13) Net actuarial loss recognised in the year 15.16 1.73 0.02 (0.26) Net (benefit) / expense 46.09 2.10 0.44 0.21

Actual return on plan assets 2.01 0.29 0.19 0.13

Balance sheet

Reconciliation of present value of the obligation and the fair value of plan assets: 2011 2010 2009 2008 Defined benefit obligation (51.91) (3.88) (1.53) (0.93) Fair value of plan assets 37.09 4.06 2.41 1.80 Asset/(liability) recognised in the balance sheet (14.82) 0.18 0.88 0.87

Experience adjustments on plan liabilities (Gain) / Loss 14.90 - - - Experience adjustments on plan assets Gain / (Loss) 0.15 - - -


Changes in the present value of the defined benefit obligation are as follows: 2011 2010 2009 2008 Opening defined benefit obligation 3.88 1.53 0.93 0.74 Interest cost 0.31 0.12 0.07 0.06 Current service cost 32.48 0.54 0.54 0.54 Benefits paid (0.07) (0.04) (0.03) (0.15) Actuarial loss / (gain) on obligation 15.31 1.73 0.02 (0.26) Closing defined benefit obligation 51.91 3.88 1.53 0.93

Changes in the fair value of plan assets are as follows: 2011 2010 2009 2008 Opening fair value of plan assets 4.06 2.41 1.80 1.28 Expected return 1.86 0.29 0.19 0.13 Contributions by employer 31.09 1.40 0.46 0.54 Benefits paid (0.07) (0.04) (0.03) (0.15) Actuarial gains / (losses) 0.15 - - - Closing fair value of plan assets 37.09 4.06 2.41 1.80

The Company expects to contribute Rs 35 to gratuity in 2010-11.

The principal assumptions used in determining gratuity obligations for the Company’s plans are shown below:

2011 2010 2009 2008 % % % %

Discount rate 8.3% 8.0% 8.0% 7.5% Expected rate of return on assets 8.5% 5.0% 8.0% 7.5%

The fund is administered by Life Insurance Corporation of India (“LIC”). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.8 Earnings per share Particulars 2011 2010 2009 2008 2007 Net profit as per profit and loss account

2,826.64 1,197.21 302.97 209.90 106.12

Less: Dividends on Preference Shares

0.00 0.00 3.51 3.59 -

Net profit as per profit and loss account (used for calculation of EPS)

2,826.64 1,197.22 299.46 206.31 106.12

Weighted average number of equity shares in calculating basic EPS (Nos.)

371,380,825 292,648,250 136,851,870 110,000,000 110,000,000

Weighted average number of equity shares in calculating Dilutive EPS (Nos.) Weighted average number of equity shares in calculating basic EPS (Nos.)

371,380,825 292,648,250 136,851,870 110,000,000 110,000,000

Add: Number of dilutive shares under Empoyees Stock Options (Nos.)

5,111,449 1,830,470 - - -

Add: Weighted average equity shares to be issued on conversion of preference shares

- - - 9,200,000 -

Weighted average number of equity shares in calculating diluted EPS (Nos.)

376,492,274 294,478,720 136,851,870 119,200,000 110,000,000

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.9 Lease disclosure Operating leases: Office premises are obtained on operating lease which are cancellable in nature. Finance leases: 2011 2010 2009 2008 2007 Total minimum lease payments at the year end 12.57 2.83 3.32 2.23 0.41 Less : amount representing finance charges 1.63 0.28 0.38 0.26 0.03 Present value of minimum lease payments 10.94 2.55 2.94 1.97 0.38 Lease payments for the year 2.01 1.78 0.96 0.55 0.54 Minimum Lease Payments : Not later than one year [Present value Rs. 3.78 as on March 31, 2011]

4.55 1.79 1.34 0.90 0.33

Later than one year but not later than five years [Present value Rs. 7.16 as on March 31, 2011]

8.02 1.04 1.98 1.33 0.08

Later than five years [Present value Rs. Nil as on March 31, 2011]

- - - - -

18.10 Commitments and contingent liabilities Commitments Particulars 2011 2010 2009 2008 2007 Estimated amount of contracts remaining to be executed on capital account, net of advances is

89.54 1.53 - - -

Contingent liabilities 2011 2010 2009 2008 2007 i) Claims against the company not acknowledged as Debts Penalty under Kerala General Sales Tax Act and Kerala Money Lender Act

-

-

0.72 0.72 0.72

Income Tax demand -

- - 0.70 -

ii) The Company is contingently liable to banks and other financial institutions with respect to assignment of gold loans to the extent of the collateral deposits / guarantees.

1,702.76 707.17 1,258.38 534.07 263.23

Total 1,702.76 707.17 1,259.10 535.49 263.95

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ (iii) Applicability of Kerala Money Lenders' Act The Company has challenged in the Hon'ble Supreme Court the order of Hon'ble Kerala High Court upholding the applicability of Kerala Money Lenders Act to NBFCs. The Hon'ble Supreme Court has directed that a status quo on the matter shall be maintained and the matter is currently pening with the Supreme court. The Company has taken legal opinion on the matter and based on such opinion the management is confident of a favourable outcome. Pending the resolution of the same, no adjustments have been made in the financial statements for the required license fee and Security deposits. 18.11 Details of investments purchased and sold during the year For the year ended March 31, 2011

Particulars Purchased Sold

Units Rate (Rs) Total Units Rate

(Rs) Total

ICICI prudential Flexible Income Plan Premium - Growth 1.42 140.85 200.00 1.13 177.20 200.24

Kotak Floater short term Growth fund 19.23 15.60 300.00 19.23 15.61 300.22

Canara Robeco liquid Super Institutional Growth Fund 4.31 11.60 50.00 3.47 14.43 50.06

IDFC Cash fund - Super Institutional - Daily Dividend 5.00 10.00 50.00 5.00 10.01 50.05

SBI Magnum Insta cash Fund - cash option 36.80 21.20 780.00 36.80 21.21 780.67

SBI Magnum Insta cash Fund - cash option 11.79 21.20 250.00 11.79 21.22 250.19

Religare Ultra short term fund - Institutional Growth 19.08 13.10 250.00 19.03 13.16 250.40

Religare Liquid Fund - Super Institutional Growth Fund 76.31 13.10 1,000.00 76.31 13.11 1,000.19

Tata Liquid Super high investment fund 0.03 1,666.67 50.00 0.03 1,668.67 50.06

IDBI Liquid fund - Growth 39.07 10.24 400.00 39.07 10.25 400.56 PNB liquid fund - Growth 5.00 10.00 50.00 5.00 10.05 50.23 UTI Mutual Fund 199.00 10.00 1,990.00 199.00 10.00 ,990.76

417.04 5,370.00 415.86 5,373.63

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ For the year ended March 31, 2010

Particulars Purchased Sold

Units Rate (Rs) Total Units Rate

(Rs) Total

Reliance Liquidity Fund - Daily Dividend Reinvestment Option 32.99 10.00 330.04 32.99 10.00 330.04

LICMF - Liquid Fund Dividend Plan 89.26 10.98 980.09 89.26 10.98 980.09

122.25 1,310.13 122.25 1,310.13

18.12 Assignment of receivables The Company has assigned a portion of its gold loans / hypothecations loans to banks and financial institutions. These amounts have been reduced from the gross gold loan and hypothecation loan balances. A bank / institution wise breakup of the same is as under: Bank / Financial institution 2011 2010 2009 2008 2007 Dhanalakshmi Bank 1,849.41 - - - - Kotak Mahindra Bank 1,971.79 630.31 300.00 100.00 100.00 ING Vysya Bank 1,628.67 882.27 750.00 350.00 - Yes Bank 1,684.88 - - - - ICICI Bank 1,564.86 2,092.66 1,156.01 766.97 400.00 UTI Bank 1,118.19 1,499.98 968.26 - - Development Credit Bank 199.72 - 500.00 500.00 - Federal Bank 166.55 - 499.24 - - IndusInd Bank 450.40 - - - - IDBI Bank 548.36 1,971.80 500.00 - - Sundaram Finance - - 11.01 38.90 57.94 HDFC Bank - - - 300.00 90.00 Fullerton Credit Company Ltd - - 0.13 1,532.16 2,076.81 Unit Trust of India - - - 342.09 253.99 Punjab National Bank

-

-

496.77

-

- Catholic Syrian Bank

-

- 200.00 - -

11,182.83 7,077.02 5,381.42 3,930.12 2,978.74

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.13 Deposits with banks include cash collateral deposits towards assignments and other approved facilities. A bank / institution wise breakup of the same is as under:

Bank / Financial institution 2011 2010 2009 2008 2007 ICICI Bank 182.73 133.81 338.17 168.51 - Kotak Mahindra Bank 35.54 30.18 30.18 2.50 2.50 HDFC Bank 153.57 80.00 25.00 36.00 12.00 Development Credit Bank 25.00 - 28.09 25.00 20.05 ING Vysya Bank 54.79 34.43 21.93 8.75 - Federal Bank 50.00 54.24 25.00 - - South Indian Bank 127.89 136.85 50.00 - - IDBI Bank 155.00 120.00 25.00 - - YES Bank 209.24 50.00 5.00 - - Karur Vyasya Bank 25.00 12.50 - - - Indian Overseas Bank 275.32 50.00 - - - Bank of Rajastan 10.00 10.00 - - - Development Bank of Singapore 37.50 - - - - Dhanalakshmi Bank 365.33 - - - - United Bank of India 100.00 - - - - DENA Bank 37.50 - - - - Andhra Bank 125.00 - - - - Punjab National Bank - 50.00 50.00 - - UCO Bank 100.00 - - - - Jammu & Kashmir Bank 50.00 - - - - Catholic Syrian Bank - 20.56 20.00 - - State Bank of India - 400.00 - - - Axis Bank Limited 34.49 30.00 21.00 Allahabad Bank Limited 50.00 - -

2,119.41 1,182.57 702.86 270.76 55.55 18.14 Charges created on assets of the Company for Secured Loans A. From banks Cash credit, overdrafts and working capital loan accounts have been availed from various banks and are secured by Gold Loan receivables.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ B. Secured Non Convertible Debentures Details of security and series wise outstanding of secured non convertible debentures are as under:

Date of Allotment

Number of Debentures Amount Tenure Security

details Redemption details

16-Sep-06 4,812 4.81 60 Note 1 At par at the end of 60 months

15-Nov-06 5,781 5.78 60 Note 1 At par at the end of 60 months

24-Mar-07 12 0.01 48 Note 1 At par at the end of 48 months


13-Oct-07 50 0.05 48 Note 1 At par at the end of 48 months

4-Dec-07 328 0.33 60 Note 1 At par at the end of 60 months

31-Jan-08 163 0.16 48 Note 1 At par at the end of 48 months

31-Jan-08 1,439 1.44 60 Note 1 At par at the end of 60 months






29-Dec-08 3,232 3.23 36 Note 1 At par at the end of 36 months







16-Mar-09 150 0.15 60 Note 1 At par at the end of 60


months



30-Apr-09 285 0.29 24 Note 1 At par at the end of 24 months

30-Apr-09 1,013 1.01 36 Note 1 At par at the end of 36 months



9-Jun-09 10 0.01 48 Note 1 At par at the end of 48 months



9-Jun-09 1,664 1.66 36 Note 1 At par at the end of 36 months

22-Feb-10 6,231 6.23 12 Note 1 At par at the end of 12 months

9-Mar-10 11,062 11.06 12 Note 1 At par at the end of 12 months





20-Jul-10 66,273 66.27 12 Note 1 At par at the end of 12 months



15-Oct-10 50,164 50.16 12 Note 1 At par at the end of 12 months



15-Oct-10 107,254 107.25 12 Note 1 At par at the end of 12


months





15-Dec-10 98,858 98.86 12 Note 1 At par at the end of 12 months





15-Feb-10 250 250.00 18 Note 1 At par at the end of 18 months

18-Aug-10 250 250.00 18 Note 1 At par at the end of 18 months

3-Sep-10 250 250.00 18 Note 1

At par at the end of 18 months, with a put / call option on February 3,

2011, May 3, 2011, August 3, 2011 and November 3,

2011.

3-Sep-10 250 250.00 18 Note 1



2011.

3-Sep-10 500 500.00 18 Note 1



2011.

31-Mar-11 1,000 1,000.00 15 Note 2

At par at the end of 15 months, with a put / call option on June 29, 2011,

September 28, 2011, December 28, 2011 and


March 28, 2012.




























1,328,535 5,012.85 Note 1: Secured by a floating charge on the gold loan receivables and other unencumbered assets both present and future. Note 2: Secured by first pari passu charge on the receivables of the Company with a mimium asset cover ratio of 1.10 times. Note 3: The Company is in the process of creating a charge in respect of these debentures aggregating Rs 1,188.

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.15 Additional disclosures as required by circular no DNBS(PD).CC.No.125/03.05.002/2008-2009 dated August 1, 2008 issued by the Reserve Bank of India: a) Capital to Risk Assets Ratio Particulars March 31,

2011 March 31,

2010

CRAR (%) 29.13 29.34 CRAR - Tier I Capital (%) 26.36 26.04 CRAR - Tier II Capital (%) 2.77 3.30 b) Exposure to real estate sector The Company does not have any direct or indirect exposure to real estate sector.

c) Asset liability management Maturity pattern of certain items of assets and liabilities as at March 31, 2011 Liabilities 1 day to

30/31 days (one

month)

Over one month to 2 months

Over 2 month upto 3 months

Over 3 months to 6

months

Over 6 months to

1 year

Over 1 year to 3 years

Over 3

years to 5

years

Over 5

years

Total

Borrowings from banks 6,050.06 2,050.07 1,899.27 10,642.26 17,404.94 - - - 38,046.6

0 Market

borrowings # 1,708.20 2,686.12 3,060.99 2,204.00 1,002.40 4.80 2.30 - 10,668.81

Assets 1 day to

30/31 days (one

month)

Over one month to 2 months

Over 2 month upto 3 months

Over 3 months to 6

months

Over 6 months to

1 year

Over 1 year to 3 years

Over 3

years to 5

years

Over 5

years

Total

Advances

(net) 11,243.48 11,347.28 9,396.95 14,263.14 17,419.76 - - - 63,670.61

Investments - - - 3.15 400.00 - - 0.05 403.20


# Represents secured loans from others and vehicle loans under Schedule 3 and commercial papers under Schedule 4

These disclosures are given only for certain items of assets and liabilities from the Balance sheet as required by the above circular and is not a complete depiction of the asset liability maturity position of the Company as at March 31, 2011. As this is the first year of presentation of the above information, no comparatives have been disclosed.

18.16 Supplementary profit and loss data a) Legal and Professional fees (Schedule 16) includes remuneration to auditors as follows: Remuneration as auditors 2011 2010 2009 2008 2007 Statutory audit 2.50 2.00 1.2 0.45 0.20 Other services 1.50 0.90 0.9 0.30 0.03 Certification 0.50 0.20 0.38 0.15 0.14 Out of pocket expenses 0.20 0.13 0.13 0.10 -

4.70 3.23 2.61 1.00 0.37

Note: Excludes applicable service taxes Excludes Rs. 3.5 (previous year Rs. 1) included under Share issue expenses in Schedule 2 in connection with Qualified Institutional Placement. b) Expenditure in foreign currency 2011 2010 2009 2008 2007 Travel 2.52 1.12 - - - Consultancy charges 7.96 - - - - 10.48 1.12 - - -

c) Managerial remuneration 2011 2010 2009 2008 2007

Salary to whole time directors 28.80 14.70 4.00 3.77 2.76 Commission to whole time directors 18.60 9.60 5.79 1.55 0.00 Commission to Non - whole time directors 2.80 2.23 1.17 0.00 0.00 Contribution to provident fund/superannuation for whole time directors 3.46 1.76 0.25 0.14 0.07

53.66 28.29 11.21 5.46 2.83

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ Note: Provisions for / contribution to employee retirement/post retirement and other employee benefits which are based on actuarial valuations done on an overall Company basis are excluded above.

Computation of Net Profit in accordance with section 349 of the Companies Act, 1956 for calculation of commission payable to directors

2011 2010 2009 2008 2007 Profit before tax (as per Profit and Loss Account) 4,238.96 1,818.25 462.83 319.61 163.51 Add: Directors’ remuneration 53.66 28.29 11.21 5.46 2.83 Depreciation as per Profit and Loss account 212.96 57.38 33.71 18.26 10.66 Provision for doubtful debts and advances 133.81 88.58 60.32 19.03 9.52 Loss on disposal of investments - 0.43 - - - Loss on sale of fixed assets (net) as per Profit and Loss account 2.28 4.34 2.32 0 0.00

Less: Depreciation (to the extent specified in section 350 of the Companies Act, 1956)

(212.96) (57.38) (33.71) (18.26) (10.66)

(Loss)/Profit on sale of fixed assets as per Section349 of the Companies Act, 1956 (2.28) (4.34) (2.32) - (0.00)

Net profit as per Section 349 of the Companies Act, 1956

4,426.43 1,935.55 534.36 344.10 175.86

Maximum amount of Commission and Salary payable to Managing and Wholetime directors at 10% of the net profits as calculated above

442.64 193.55 53.44 34.41 17.59

Maximum amount of Commission payable to other directors at 1% of the net profits as calculated above 44.26 19.36 5.34 3.44 1.76

18.17 Remittance of dividend in foreign curreny

2011 2010 Final dividend

Period to which it relates -

2008-09 Number of non-resident shareholders -

4

Number of equity shares held on which dividend was due -

12,546,630

Amount remitted -

14.68

Manappuram General Finance and Leasing Limited (now Manappuram Finance Limited) Reformatted unconsolidated financial information for the years ended March 31, 2011, March 31, 2010, March 31, 2009, March 31, 2008 and March 31, 2007 ______________________________________________________________________________ 18.18

During the years there have been certain instances of fraud on the Company by employees where gold loan related misappropriations / cash embezzlements have occurred for amounts aggregating:

2011

2010 2009 2008 2007

24.87 8.47 4.07 2.4 1.57

The Company has fully provided for these amounts in the financial statements and is in the process of recovering these amounts from the employees and taking appropriate legal actions. 18.19 Comparatives In view of amalgamation of MAFIT with the Company with effect from April 1, 2008 and acquisition of Manapppuram Printers during the year ended March 31, 2010, the figures for the years ended March 31, 2011 and March 31, 2010 are not comparable with those of the earlier years. Also, the financial statements for the year ended March 31, 2007 have been audited by a firm other than S.R. Batliboi & Associates. Further, previous years figures have been reclassified to conform to the presentation of the current year.

Statement of Dividends paid/payable

(In Rs. million, except per share data) Particulars Fiscal 2011 Fiscal 2010 Fiscal 2009

Face value of Equity Shares (Rs. per share)

2 10 (Face value as on March 31,

2010)

10

Interim dividend on Equity Shares (Rs. per share)

- - 2.00

Final dividend of Equity Shares (Rs. per share)

0.60 0.50 (each Equity Share

was sub-divided in

May 2010 to Rs. 2 each

and dividend was

computed @25% on

sub-divided Equity Share)

0.50

Total dividend on Equity Shares 500.24 (not paid yet)

165.89 43.14

Dividend tax (gross) NA 27.21 8.13

Pre-issue Capitalization Statement

(Rs. in millions) Particulars As on March 31,

2011* Secured Loans from Banks, Financial Institution, NBFC and Vehicle loans

38,707.54

Non Convertible Debentures 5,015.53 Fresh Issue of Debenture Unsecured Funds 12,817.03 Total Debt 56,540.10 Equity Share Capital 833.75 Preference Share Capital - Share application money pending allotment - Reserves and surplus 18405.82 Total Shareholders’ Funds 19239.57 Long Term Debt to Equity Ratio 2.94

185

DECLARATION

No statements made in this Prospectus shall contravene relevant provisions of the Act and the SEBI Debt

Regulations. All the legal requirements connected with the said Issue as also the guidelines, instructions etc.

issued by SEBI, Government and any other competent authority in this behalf have been duly complied with.

We confirm that this Prospectus does not omit disclosure of any material fact which may make the statements

made therein, in light of circumstances under which they were made, misleading. We further certify that all

statements in this Prospectus are true and correct.

Yours faithfully,

V.P. Nandakumar ................................................................................................

I. Unnikrishnan ................................................................................................

B.N. Raveendra Babu ................................................................................................

A. R. Sankaranarayanan ................................................................................................

P. Manomohanan ................................................................................................

V.R. Ramachandran ................................................................................................

V.M. Manoharan ................................................................................................

Gaurav Mathur ................................................................................................

Shailesh J. Mehta ................................................................................................

Gautam Saigal

................................................................................................

M. Anandan ................................................................................................

Jagdish Capoor ................................................................................................

Place: Valapad

Date: August 9, 2011

Draft

www.brickworkratings.com June 2011

1

Rating Rationale

Brickwork Ratings assigns “BWR AA-” for Manappuram General Finance and Leasing Limited’s Non-Convertible Debentures issue of `̀̀̀ 750 crores with a tenor up to 5 years and reaffirms “BWR AA-” for NCD issue of `̀̀̀ 100 crores.

Brickwork Ratings has assigned and reaffirmed the rating of BWR AA- (pronounced BWR

Double A minus) for the following issues of Manappuram General Finance and Leasing

Limited (MAGFIL):

The rating “BWR AA-” stands for an instrument that is considered to have High degree of safety

regarding timely servicing of financial obligations. Such instruments carry very low credit risk. A

“Stable” rating outlook signifies the expectation of the rating being stable in the near term.

The rating has, inter alia, factored MAGFIL’s rich experience in gold loan business, recognized

brand name in the niche gold loan segment, strong asset quality, robust increase in AUM,

consistent profit margins and management quality. The rating is, however, constrained by

geographic concentration with maximum exposure to Southern States (75% of the branches are

in South), significant dependence on loans from Banks, regulatory risks and volatility in the

price of gold.

Background

Manappuram group was founded in 1949 by late Mr. V.C.Padmanabhan. The company

commenced its operations at Valapad, mainly with money lending activity. In 1986, Mr. V.P.

Nandakumar, son of late Mr. V.C.Padmanabhan, took over the reins of the group.

NCD Issue Rating: BWR AA- Outlook : Stable

Instruments Amount Rating Assigned/ Reaffirmed

Rating History

Review As on Rating As on

NCD ` 750 crores

BWR AA- (Stable)

Assigned - BWR AA- June 2011

NCD ` 100 crores BWR AA- (Stable)

Reaffirmed BWR AA- June 2011

BWR AA- June 2010

Draft


2

MAGFIL, presently the group’s flagship Company, was established in 1992 in Thrissur (Kerala)

as a deposit taking Non Banking Finance Company (NBFC). However, since January 15, 2007

the Company decided to phase out the public deposits. MAGFIL is mainly engaged in providing

retail advances against bullion asset collaterals, in the form of Household Used Jewellery.

MAGFIL had 16751 people and 2100 branches across India at the end of FY 11. MAGFIL is

having a strong presence in South India, ~ 75% of total branches are in southern states of

Kerala, Tamil Nadu, Karnataka, Andhra Pradesh. All branches are connected to the Head office

by appropriate IT system which provides real time information to the HO.

Objectives of the NCD Issue

MAGFIL proposes to utilize the proceeds from the proposed NCD issue essentially for expansion

of its core business. The proposed NCD issue will be secured by an appropriate charge on the

Gold loan receivables of the company. The Company would appoint a SEBI registered Debenture

Trustee to complete all requirements concerning obtaining/creation of securities and

monitoring the same for the benefit of and protection of the interests of the investors in the

proposed NCD issue.

Management

Manappuram group was founded by late Mr. V.C.Padmanabhan and is currently managed by his

son Mr. V.P. Nandakumar, Chairman and managing Director. He is a post graduate in science

with additional qualifications in Banking & Foreign Trade and was in the Banking Industry for

nearly 10 years. He is also the Chairman of Equipment Leasing Association and Chairman of

KNBFC Association. Mr. I.Unnikrishnan is the Managing Director of the company. He is an FCA

and has expertise in financial services Industry especially in NBFC’s. The company’s Board is

broad based and consists of highly qualified and well experienced professionals from the

Industry, Accounting, Legal and Academic fields and very senior retired Government/RBI

officials to guide the Company.

Loan Profile

MAGFIL, as a matter of policy, has a concentrated focus on the borrowing segment which is

serviced by money lenders. Essentially the Company confines to gold loans of small ticket size

with an average ticket size of ` 35,000. The Company has developed systems and skills which

Draft


3

enable a branch to disburse a normal ticket loan in about 15 minutes for a new customer and 7-8

minutes for an existing customer as KYC takes about 5 minutes. Occasionally loans are made for

higher amounts of ` 5 lakh to ` 10 lakh. Profiling of beneficiaries is done in depth as the amount

of the loan increases. Loans are for maximum duration of 12 months, however, average tenor of

a loan is about 3-4 months.

MAGFIL has been the fastest growing organized gold loan company in the country. It has tripled

its AUM in the one year and grown it eight times in the last two years. The AUM increased to `

7549.10 crores as on March 31, 2011 from ` 2598.40 crores as on March 31, 2010 (` 1260 crores

as on March 31, 2009). Total loan disbursement has increased by 153% in FY11. Total loan

disbursements amounts to ` 18057 crores in FY11 as against ` 7123 crores in FY10 and ` 4737

crores in FY09. The company has a strong presence in South comprising 86% of total loan

outstanding.

Financial Performance

The company has continued to perform well during FY11. Gold loan income forms the largest

part of its total income. MAGFIL’s interest income has substantially increased by 148% to `

1165.42 crores in FY11 from ` 469.98 crores in FY10. Due to increasing interest rate scenario

and loss of priority sector lending status on bank funding against assignments, the interest

expenses also increased substantially from ` 136.92 crores in FY10 to `331.97 crores inFY11. Due

to appropriate training and skill development of its employees and consequent increased

operating efficiency, profit before tax increased by 133% to ` 423.89 crores in FY11 from ` 181.83

crores in FY10. The company’s Net Profit as of March 20110 stood at ` 282.66 crores as against `

119.72 crores as of March 2010, a substantial increase of around 136%.

MAGFIL has a robust capital adequacy ratio of 29.46% as on March 31, 2011, substantially

higher than the regulatory floor of 15%. Capital Adequacy of the company was significantly

augmented by ` 1000 crores QIP issue in November 2010. Leverage was 3.47 as on March 31,

2011 as compared to 4.13 as on March 31, 2010. The Return on Assets stood at 5.04% during

FY11 while ROE was 22.31% in FY 11 as compared to 30.76% in FY10. The net interest margins

for the company as on FY11 stood at 17.25% in FY11 as compared to 19.39% in FY10. Due to

rising interest rate scenario and tight liquidity the yield on funds declined resulting in the

decline in net interest margins. The yield on funds was 25.55% in FY11 as compared to 29.18% in

FY10.

Draft


4

Asset Quality

The Company has an efficient system for monitoring and tracking defaults & remedial action has

resulted in practically no NPA. MAGFIL’s gross NPAs have decreased to `26.37 crores in FY11 as

compared to ` 33.66 crores in FY10. The company’s gross NPAs as a percentage to total

advances decreased to 0.35% in FY11 as compared to 1.29% in FY10 and net NPA decreased to

0.13% in FY11 as compared to 0.56% in FY10. The provision coverage ratio stood at 63.49% in

FY11.

Funding Mix

Nearly 56% of the funding comes from cash credit and working capital demand loans. 17% of the

funding comes from securitization transactions and the rest from retail borrowings and

commercial paper. Total borrowings for the year ended March 31, 2011 was ` 6737 crores.

Rating Outlook

MAGFIL has a well established presence in the niche gold loan segment. The company has been

performing well with good asset quality, strong risk management practices, adequate liquidity

and low cost of funds. The gold loan business is always exposed to the risk of steep price

movements which calls for constant vigil and immediate appropriate action to mitigate any loss.

MAGFIL’s ability to manage its business well and respond to market needs is displayed from its

established track record. BWR expects MFL to continue to demonstrate such abilities to further

improve its performance.

As per recent RBI announcement, priority agriculture sector lending benefit, available to banks

for lending to gold loan NBFC’s has been removed. Therefore, the cost of funds for the NBFC’s is

expected to increase which may result in lower profitability due to slight contraction in NIM’s.

Similarly, the impact of the State Money Lenders Act for NBFCs, the decision on which is

awaited from the Supreme Court, could affect the MFL’s lending rates and would also increase

the operational expenditure as the NBFC’s would be required to register with all state

authorities and to comply with state regulations.

Draft


5

Analysts Media

Sameer Singhvi [email protected]

Shilpi Agarwal

[email protected]

Anitha G

[email protected]

Relationship Contact

K.N.Suvarna

Sr.V.P. – Business Development

[email protected]

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other

reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it

does not examine the precision or completeness of the information obtained. And hence, the information in this report is

presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the

truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a

recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any

use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

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