Fineotex Chemical Ltd

7/28/2019 Fineotex Chemical Ltd.

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Draft Red Herring ProspectusSeptember 27, 201

Please read Section 60B of the Companies Act, 1956(The Draft Red Herring Prospectus will be updated upon ROC ling)

100% Book Building Issu

FINEOTEX CHEMICAL LIMITEDOur Company was incorporated as Fineotex Chemical Private Limited under the provisions of the Companies Act, 1956 vide Certi cate of Incorporation dated January30, 2004. Our Company was converted into a public limited company vide a fresh Certi cate of Incorporation dated October 19, 2007 and consequently the name of ourCompany was changed to Fineotex Chemical Limited. The Corporate Identi cation Number of our Company is U24100MH2004PLC144295.

Registered and Corporate Of ce : 42-43, Manorama Chambers, S.V. Road, Bandra (West), Mumbai 400 050.Tel No : +91 22 2655 9174 / 75; Fax No : +91 22 2655 9178; Email : ipo@ neotex.com ; Website : www. neotex.com

Contact Person : Mr. A.V. Nerurkar; Compliance Of cer & Company SecretaryPromoters: Mr. Surendra Kumar Tibrewala, Mr. Sanjay Tibrewala, Mrs. Kanaklata Tibrewala, Ms. Ritu Tibrewala, Proton Biochem Private Limited, Kamal

Chemicals Private Limited and Surendra Kumar Tibrewala (HUF)

PUBLIC ISSUE OF 42,11,160 EQUITY SHARES OF Rs. 10 EACH OF FINEOTEX CHEMICAL LIMITED (FCL OR THE COMPANY OR THE ISSUER)FOR CASH AT A PRICE OF Rs. [ l ] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF Rs. [ l ] PER EQUITY SHARE) AGGREGATING Rs.[l ] LAKHS (THE ISSUE). THE ISSUE WILL CONSTITUTE 37.50% OF THE POST ISSUE PAID UP CAPITAL OF THE COMPANY.

PRICE BAND: Rs. [ l ] TO Rs. [ l ] PER EQUITY SHARE OF FACE VALUE OF RS. 10 EACH.The Price Band and the minimum bid lot size will be decided by our Company, in consultation with the Book Running Lead Manager and advertised

at least two working days prior to the bid/issue opening date.THE FLOOR PRICE IS [ l ] TIMES OF THE FACE VALUE AND THE CAP PRICE IS [ l ] TIMES OF THE FACE VALUE.

In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to theBidding/Issue Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall bewidely disseminated by noti cation to the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE), whoseonline IPO system will be available for bidding, by issuing a press release and by indicating the change on the websites of the Book Running LeadManager (BRLM) and the terminals of the member(s) of the Syndicate.

This Issue is being made through a 100% Book Building Process wherein not more than 50% of the Issue will be allocated to Quali ed InstitutionalBuyers (QIBs) on a proportionate basis, subject to valid bids being received at or above the Issue Price. Out of the portion available for allocation tothe QIBs, 5% will be available for allocation to Mutual Funds only. Mutual Fund Bidders shall also be eligible for proportionate allocation under thebalance available for the QIBs. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non InstitutionalBidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to validbids being received at or above the Issue Price.

RISKS IN RELATION TO THE FIRST ISSUEThis being the rst issue of Equity Shares of our Company, there has been no formal market for our Equity Shares. The face value of the EquityShares is Rs.10/- and the Floor Price is [ l ] times of the Face Value and the Cap Price is [ l ] times of the Face Value. The price band (has beendetermined and justi ed by the BRLM and the Issuer as stated under the Chapter on Basis for Issue Price beginning on page 57 of the Draft RedHerring Prospectus) should not be taken to be indicative of the market price of our Equity Shares after our Equity Shares are listed. No assurancecan be given regarding an active or sustained trading in the Equity Shares of our Company, nor regarding the price at which the Equity Shares willbe traded after listing.

GENERAL RISKInvestments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they canafford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this

Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risk involved. TheEquity Shares have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does the SEBI guarantee theaccuracy or adequacy of this document. Speci c attention of the investors is invited to the statement of Risk Factors beginning on Page11 of the Draft Red Herring Prospectus.

ISSUERS ABSOLUTE RESPONSIBILITYOur Company, having made all reasonable enquiries, accepts responsibility for, and con rms that the Draft Red Herring Prospectus contains allinformation with regard to our Company and the Issue, which is material in the context of the Issue; that the information contained in the DraftRed Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect; that the opinions and intentionsexpressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of suchinformation or the expression of any such opinions or intentions misleading in any material respect.

IPO GRADINGThe Issue has been graded by [ l ] and has been assigned a grade of [ l ]/[l ] indicating [ l ] fundamentals. The IPO Grading is assigned on a 5 pointscale from 1 to 5 with an IPO Grade 5 indicating strong fundamentals and an IPO Grade 1 indicating poor fundamentals. For further details andgrading rationale, please refer to page no [ l ] of the Draft Red Herring Prospectus under the Chapter General Information.

LISTING ARRANGEMENTThe Equity Shares issued through the Draft Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited (BSE). In-principle approval has been received from BSE for the listing of the Equity Shares vide its letter dated [ l ]. For the purposes of this Issue, BSE shallbe the Designated Stock Exchange.

BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE

INDBANK MERCHANT BANKING SERVCES LIMITEDSEBI Registration No: INM00000139411, Varma Chambers, Homji Street, Fort, Mumbai 400 001.Tel No : +91 22 2263 4601, Fax No : +91 22 2265 8270Website : www.indbankonline.comEmail :[email protected] Grievance Id : [email protected] Person: M.Srinivas/Kishore Iyer

BIGSHARE SERVICES PRIVATE LIMITEDSEBI Registration No: INR000001385E/2, Ansa Industrial Estate, Saki Vihar Road, Sakinaka,Andheri (East), Mumbai - 400 072.Tel No : +91 22 2847 0652, Fax No : +91 22 2847 5207Website : www.bigshareonline.comEmail : [email protected] Person : Ashok Shetty

ISSUE PROGRAMMEBid/Issue Opens on: [ ] Bid/Issue Closes on: [ ]


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TABLE OF CONTENTS

CONTENTS PAGESection I Definitions and Abbreviations

Conventional/General Terms 1Issue Related Terms 1Issuer Related Terms 5

Industry Related Terms 6Abbreviations 7Section II General

Presentation of Financial Information and Use of Market Data 9Forward Looking Statements 10

Section III Risk Factors 11Section IV Introduction

Summary 21Brief Details of the Issue 26Summary of Financial Information 27General Information 31Capital Structure 39

Section V Objects of the Issue Objects of the Issue 49Basic Terms of the Issue 56Basis for Issue Price 57Statement of Tax Benefits 60

Section VI About Us Industry Overview 70Business Overview 75Key Industry Regulations and Policies 98History and Other Corporate Matters 99Our Management 102Our Promoters and their Background 116Currency of Presentation 123

Dividend Policy 124Section VII Financial Information Auditors Report and Financial Information of Our Company 125Financial Information of Group Companies 146Managements Discussion and Analysis of Financial Condition and Results ofOperations as Reflected in the Financial Statements

149

Section VIII Legal and other Regulatory Information Outstanding Litigations, Material Developments and Other Disclosures 156Government and Other Statutory Approvals 159Other Regulatory and Statutory Disclosures 162

Section IX Issue Related Information Terms of the Issue 171Issue Structure 174

Issue Procedure 176Restrictions on Foreign Ownership of Indian Securities 207

Section X Description of Equity Shares and Terms of the Articles of Association Main Provisions of Articles of Association 209

Section XI Other Information Material Contracts and Documents for Inspection 235

Section XII Declaration 237


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SECTION I - DEFINITIONS AND ABBREVIATIONS

CONVENTIONAL/GENERAL TERMS

Term DescriptionAct/ Companies Act The Companies Act, 1956, as amendedEquity Shares The Equity Shares of face value of Rs. 10 each of Fineotex Chamical Limited

Indian GAAP Generally Accepted Accounting Principles in IndiaNon Resident A person who is not an NRI, FII and is not a person resident in India

NRI/ Non-ResidentIndian

A person resident outside India, as defined under FEMA and who is a citizen ofIndia or a Person of Indian Origin as defined under FEMA (Transfer or Issue ofSecurity by a Person Resident Outside India) Regulations, 2000, as amended

RBI Act The Reserve Bank of India Act, 1934SEBI Securities and Exchange Board of IndiaSEBI Act Securities and Exchange Board of India Act, 1992 as amended

SEBI (ICDR)Regulations, 2009 / SEBI (ICDR)Regulations

Means the regulations for Issue of Capital and Disclosure Requirements issuedby Securities and Exchange Board of India, constituted in exercise of powersconferred by Section 30 of the Securities and Exchange Board of India Act, 1992(as amended), called Securities and Exchange Board of India (Issue of Capitaland Disclosure Requirements) Regulations, 2009, as amended

Stock ExchangesBombay Stock Exchange Limited (BSE) and The National Stock Exhange of IndiaLimited (NSE), referred to as collectively

StockExchange/Designated Stock Exchange

Bombay Stock Exchange Limited (BSE)

ISSUE RELATED TERMS

Term DescriptionAllotment/ Allotmentof Equity Shares

Unless the context otherwise requires, Allotment of Equity Shares pursuant to thisIssue

Allottee The successful Bidder to whom the Equity Shares are being/have been allottedApplicationsSupported byBlocked Amount(ASBA)

An application, whether physical or electronic, used by all Bidders to make a Bidauthorising an SCSB to block the Bid Amount in their specified bank accountmaintained with the SCSB

ASBAInvestor/Bidder

Any Bidder in this Issue who intend to Bid/apply through ASBA

ASBA Bid CumApplication Form/ ASBA Form

The form, whether physical or electronic, used by a Bidder to make a Bid throughASBA process, which will be considered as the application for Allotment for thepurposes of the Red Herring Prospectus and the Prospectus

ASBA RevisionForm

The form used by the Bidders to modify the quantity of Equity Shares or the BidAmount in any of their ASBA Bid cum Application Forms or any previous ASBARevision Form(s)

Banker(s) to theIssue / EscrowCollection Banks

The banks which are clearing members and registered with SEBI as Banker to theIssue at which the Escrow Account for the Issue will be opened and in this casebeing [ ]

Bid An indication to make an offer made during the Bidding Period by a prospective

investor to subscribe to the Equity Shares of our Company at a price within thePrice Band, including all revisions and modifications theretoBid Amount The highest value of the optional Bids indicated in the Bid-cum-Application Form

and payable by the Bidder on submission of the Bid for this IssueBid/ Issue ClosingDate

The date after which the Syndicate and SCSBs will not accept any Bids for theIssue, which shall be notified in a widely circulated English and Hindi nationalnewspapers, and a Marathi language newspaper.

Bid-cum-ApplicationForm / Bid Form

The form in terms of which the Bidder shall make an offer to subscribe to theEquity Shares of our Company and which will be considered as the application forallotment in terms of the Red Herring Prospectus and the Prospectus including the


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Term DescriptionASBA Bid cum Application Form (if applicable)

Bid/ Issue OpeningDate

The date on which the Syndicate and SCSBs shall start accepting Bids for theIssue, which shall be the date notified in widely circulated English and Hindinational newspapers and a Marathi language newspaper.

Bidder Any prospective investor who makes a Bid pursuant to the terms of the RedHerring Prospectus and the Bid cum Application Form

Bid/ Issue Period The period between the Bid/Issue Opening Date and the Bid/Issue Closing Dateinclusive of both days and during which prospective Bidders can submit their Bidsincluding any revisions thereof.

Book BuildingProcess

Book Building Process as provided under Schedule XI of SEBI (ICDR)Regulations, 2009, in terms of which this Issue is being made

Brokers to this Issue Brokers registered with any recognized Stock Exchanges, appointed by theMembers of the Syndicate

BRLM/Book RunningLead Manager

Book Running Lead Manager to this Issue, in this case being Indbank MerchantBanking Services Limited

CAN/ Confirmationof Allocation Note

The note or advice or intimation of allocation of Equity Shares sent to the Bidderswho have been allocated Equity Shares in accordance with the Book BuildingProcess

Cap Price The higher end of the Price Band, above which the Issue Price will not be finalizedand above which no Bids will be accepted in this case being Rs. [ ]

Controlling Branches Such branches of the SCSBs which coordinate with the BRLM, the Registrar tothe Issue and the Stock Exchanges

Cut-off /Cut-off Price The Issue Price finalized by our Company in consultation with the BRLM, whichcan be any price within the Price Band. A Bid submitted at the Cut-off Price by aRetail Individual Bidder is a valid Bid. No other category of Bidders are entitled toBid at the Cut-off Price

DesignatedBranches

Such branches of the SCSBs which shall collect the ASBA Bid cum ApplicationForms used by the Bidders applying through ASBA process and a list of which isavailable on http://www.sebi.gov.in/pmd/scsb.pdf

Depository A body corporate registered with SEBI under the SEBI (Depositories andParticipants) Regulations, 1996, as amended

Depositories Act The Depositories Act, 1996, as amendedDepositoryParticipant

A Depository Participant as defined under the Depositories Act, 1996

Designated Date The date on which funds are transferred from the Escrow Account to the PublicIssue Account and/or the amount blocked by the SCSB is transferred from thebank account of the ASBA Bidder to the Public Issue Account, as the case maybe, after the Prospectus is filed with the RoC, following which the Board ofDirectors shall allot Equity Shares to successful bidders

Draft Red HerringProspectus/ DRHP

The Draft Red Herring Prospectus, which does not have complete particulars onthe price at which the Equity Shares are offered and size of the Issue, which isfiled with the SEBI and Stock Exchange. It will become a Red Herring Prospectusissued in accordance with the provisions of Section 60B of the Companies Actafter filing with the RoC at least three days before the opening of the Issue. It willbecome a Prospectus after filing with the RoC after determination of the IssuePrice

Eligible NRI NRIs from such jurisdiction outside India where it is not unlawful for our Companyto make this Issue or an invitation under this Issue and in relation to whom theRed Herring Prospectus constitutes an invitation to subscribe to the Equity Sharesoffered herein.

Equity Shares Equity shares of our Company of face value of Rs. 10 each unless otherwisespecified in the context thereof

Escrow Account An Account opened with Escrow Collection Bank(s) and in whose favour theBidder (excluding the Bidders applying through ASBA) will issue cheques or draftsin respect of the Bid Amount when submitting a Bid

Escrow Agreement Agreement entered into amongst our Company, the Registrar to this Issue, theEscrow Collection Banks, the BRLM and the Syndicate Member(s) in relation tothe collection of the Bid Amounts and where applicable, refunds of the amounts


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Term DescriptionAct, 1956;

(iv) a scheduled commercial bank;(v) a multilateral and bilateral development financial institution;(vi) a state industrial development corporation;(vii) an insurance company registered with the Insurance Regulatory and

Development Authority;

(viii) a provident fund with minimum corpus of twenty five crore rupees;(ix) a pension fund with minimum corpus of twenty five crore rupees;(x) National Investment Fund set up by resolution no. F. No. 2/3/2005-

DDII dated November 23, 2005 of the Government of India publishedin the Gazette of India;

(xi) Insurance funds set up and managed by Army, Navy or Air Force ofthe Union of India

QIB Portion The portion of this Issue being not more than 50% of the Issue, i.e. 21,05,580Equity Shares of Rs 10 each available for allocation on proportionate basis toQIBs of which 5% shall be available for allocation on proportionate basis to MutualFunds registered with SEBI, subject to valid bids being received at or above theIssue Price.

Refund Account The no-lien account maintained by the Refund Bank(s) to which the surplusmoney shall be transferred on the Designated Date and from which, refunds, if

any, (excluding to the ASBA Bidders) shall be made.Refunds throughelectronic transfer offunds

Refunds through NECS, Direct Credit, RTGS or the ASBA process, as applicable.

Refund Bank The bank(s) which have been appointed / designated for the purpose of refundingthe amount to investors either through the electronic mode as prescribed by SEBIand / or physical mode in accordance with the procedure contained in the Chaptertitled Issue Procedure beginning on page 176 of the Draft Red HerringProspectus.

Retail IndividualBidders

Individual Bidders (including HUFs and NRIs) who have not Bid for an amountmore than Rs. 1,00,000 in any of the bidding options in this Issue

Retail Portion The portion of this Issue being not less than 35% of the Issue i.e. 14,73,906 EquityShares of Rs. 10 each available for allocation to Retail Individual Bidder(s).

Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the BidPrice in any of their Bid-cum-Application Forms or any previous Revision Form(s)

Red HerringProspectus/ RHP

The Red Herring Prospectus to be issued in accordance with Section 60B of theCompanies Act, which will not have complete particular of the price at which theEquity Shares are offered and the size of the Issue. The Red Herring Prospectuswill be filed with the RoC at least three days before the bid/ Issue Opening dateand will become Prospectus after filing with the RoC after determination of theIssue Price

Registrar to theIssue or Registrar

In this case being, Bigshare Services Private Limited

Revision Form The form used by the Bidders, excluding Bidders applying through ASBA, tomodify the quantity of Equity Shares or the Bid Amount in any of their Bid cumApplication Forms or any previous Revision Form(s)

Self CertifiedSyndicate Bank(SCSB)

Self Certified Syndicate Bank (SCSB) is a Banker to an Issue registered underSEBI (Bankers to an Issue) Regulations, 1994 and which offers the service ofASBA, including blocking of bank account and a list of which is available onhttp://www.sebi.gov.in

Syndicate The BRLM and the Syndicate Member(s)SyndicateAgreement

The agreement to be entered into between our Company, BRLM and theSyndicate Member(s), in relation to the collection of Bids in this Issue

SyndicateMember(s)/Membersof the Syndicate

Intermediaries registered with SEBI and eligible to act as underwriters. SyndicateMember(s) are appointed by the BRLM in this case being Saffron Global MarketsPrivate Limited

TRS or Transaction The slip or document issued by the Syndicate Member(s) to the Bidder as proof of


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Term DescriptionRegistration Slip registration of the Bid on the online system of BSE/NSEUnderwriters The BRLM and the Syndicate Member(s)UnderwritingAgreement

The Agreement among the Underwriters and our Company to be entered into onor after the Pricing Date

Working Day All days other than a Sunday or a public holiday (except during the Bid/IssuePeriod where a working day means all days other than a Saturday, Sunday or a

public holiday), on which commercial banks in Mumbai are open for business

ISSUER RELATED TERMS

Term DescriptionFineotex ChemicalLimited, FCL, ourCompany, theCompany, theIssuer Company,the Issuer we,us, and our

Unless the context otherwise requires, refers to Fineotex Chemical Limited, apublic limited company incorporated under the Companies Act.

Articles/ Articles ofAssociation

The Articles of Association of Fineotex Chemical Limited

Auditors/StatutoryAuditors

The Statutory Auditors of our Company namely, M/s. UKG & Associates,Chartered Accountants.

Board / Board ofDirectors

The Board of Directors of Fineotex Chemical Limited unless otherwise specifiedor any committee constituted thereof

Memorandum/ Memorandum ofAssociation

The Memorandum of Association of Fineotex Chemical Limited

Objects of the Issue / Project

The present Issue is being made to raise the funds for the following purposes:

1. Setting up of Manufacturing facility for production of specialty chemicals2. Setting up of Sales Office in Mumbai3. Working Capital Requirements4. Meeting Public Issue Expenses5. General Corporate Purpose6.

Promoter(s) Unless the context otherwise requires, refers to1. Mr. Surendra Kumar Tibrewala2. Mr. Sanjay S. Tibrewala3. Mrs. Kanaklata S. Tibrewala4. Ms. Ritu S. Tibrewala5. Proton Biochem Private Limited6. Kamal Chemicals Private Limited7. Surendra Kumar Tibrewala (HUF)

Promoter Director(s) Unless the context otherwise requires, refers to Mr. Surendra Kumar Tibrewalaand Mr. Sanjay S. Tibrewala

Promoter GroupEntities/ GroupCompanies / AssociateCompanies

1. M/s. Shree Vinayak Industries2. M/s. Shree Ganesh Enterprises3. M/s. Sanjay Exports

Registered &Corporate Office ofour Company

42-43, Manorama Chambers, S.V. Road, Bandra (West), Mumbai 400 050.

RoC Registrar of Companies, Maharashtra, located at: 100, Everest, Marine Drive,Mumbai 400 002.


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INDUSTRY RELATED TERMS

Term Description

Agrochemicals Chemicals normally used in agriculture, including fertilizers, pesticides,herbicides, fungicides and growth regulantsD.G Diesel GeneratorDM De-MineralizedFIFO First in First OutGOI Government of IndiaHDPE High Density PolyethyleneHP Horse PowerJNPT Jawaharlal Nehru Port TrustKcal Kilo CaloriesKg Kilograms

KL Kilo LitresKVA Kilo Volt AmpereKWh Kilo Watt HourLDO Light Diesel OilLtrs LitresMW Mega WattMIDC Maharashtra Industrial Development CorporationMSEB Maharashtra State Electricity BoardMTPA Metric Tonnes Per AnnumOH Groups Oxygen- Hydrogen Group

pH Potential of Hydrogen (A measure of the degree of the acidity or the alkalinity of asolution as measured on a scale of 0-14)R&D Research & DevelopmentRPM Rotations Per MinuteQA Quality AssuranceQC Quality Control


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ABBREVIATIONS

Abbreviation Full FormAGM Annual General MeetingAS Accounting Standards issued by the Institute of Chartered Accountants of IndiaASBA Applications Supported by Blocked AmountBRLM Book Running Lead Manager

BSE Bombay Stock Exchange LimitedBn BillionCAN Confirmation of Allocation NoteCAGR Compounded Annual Growth RateCB Controlling BranchCDSL Central Depository Services (India) LimitedCENVAT Central Value Added TaxCESTAT Central Excise and Services Tax Appellate TribunalCIN Corporate Identification NumberDB Designated BranchDGFT Directorate General of Foreign TradeDIN Directors Identification NumberDP Depository ParticipantDP ID Depository Participants Identification NumberNECS National Electronic Clearing SystemEGM Extraordinary General Meeting of the shareholdersEPS Earnings per Equity ShareFCL Foreign Currency LoansFCNR Account Foreign Currency Non Resident Account

FEMA Foreign Exchange Management Act, 1999, as amended, and the rules and regulationsissued thereunderFDI Foreign Direct Investment

FII Foreign Institutional Investor [as defined under SEBI (Foreign Institutional Investors)Regulations, 1995, as amended] registered with SEBI under applicable laws in IndiaFIPB Foreign Investment Promotion BoardFIs Financial InstitutionsFY Financial Year

GAAP Generally Accepted Accounting PrinciplesGDP Gross Domestic ProductGIR Number General Index Registry NumberGoI / Government Government of IndiaHUF Hindu Undivided FamilyIEM Industrial Entrepreneur MemorandumICAI Institute of Chartered Accountants of IndiaICWAI The Institute of Cost and Works Accountants of IndiaINR Indian National RupeeIPO Initial Public OfferingMAPIN Market Participant and Investor DatabaseMODVAT Modified Value Added TaxMNCs Multi National CorporationsMn MillionNAV Net Asset ValueNEFT National Electronic Fund TransferNR Non-ResidentNRE Account Non Resident (External) AccountNRI Non-Resident IndianNRO Account Non Resident (Ordinary) AccountNSDL National Securities Depository LimitedNSE The National Stock Exchange of India LimitedOCB Overseas Corporate Body


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Abbreviation Full FormP/E Ratio Price / Earnings RatioPAN Permanent Account NumberPAT Profit After TaxPBT Profit Before TaxRBI The Reserve Bank of IndiaRoNW Return on Net WorthRs./INR Indian RupeesRTGS Real Time Gross SettlementSCRA Securities Contracts (Regulation) Act, 1956, as amendedSCRR Securities Contracts (Regulation) Rules, 1957, as amendedSCSB Self Certified Syndicate BankSEBI The Securities and Exchange Board of IndiaSPV Special Purpose VehicleTAN Tax Deduction Account NumberTIN Taxpayers Identification NumberTRS Transaction Registration Slip

UIN Unique Identification Number issued in terms of SEBI (Central Database of MarketParticipants) Regulations, 2003, as amended from time to timeUoI Union of India

WDV Written Down Valuew.e.f With effect from


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SECTION II - GENERAL

PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Financial Data

Unless stated otherwise, the financial information used in the Draft Red Herring Prospectus is derived

from our Companys restated financial statements as of and for the financial years ended March 31,2006, 2007, 2008, 2009 and 2010 prepared in accordance with Indian GAAP and the Companies Actand restated in accordance with SEBI (ICDR) Regulations, 2009, as stated in the report of ourStautory Auditors, M/s UKG & Associates, Chartered Accountants, beginning on page 125 of the Draft Red Herring Prospectus.

Our Financial Year commences on April 1 and ends on March 31 of the ensuing calendar year.Unless stated otherwise, references herein to a Financial Year (e.g., Financial Year 2010), are to theFinancial Year ended March 31 of that particular year.

In the Draft Red Herring Prospectus, any discrepancies in any table between the total and the sum ofthe amounts listed are due to rounding-off.

There are significant differences between Indian GAAP and U.S. GAAP; accordingly, the degree to

which the Indian GAAP financial statements included in the Draft Red Herring Prospectus will providemeaningful information is entirely dependent on the readers level of familiarity with Indian accountingpractices, Indian GAAP, Companies Act and SEBI (ICDR) Regulations, 2009. Any reliance by personsnot familiar with Indian accounting practices on the financial disclosures presented in the Draft RedHerring Prospectus should accordingly be limited. Our Company has not attempted to explain thesedifferences or quantify their impact on the financial data included herein, and we urge you to consultyour own advisors regarding such differences and their impact on financial data.

Market and Industry Data

Unless stated otherwise, industry data used throughout the Draft Red Herring Prospectus has beenobtained or derived from industry publications and/or publicly available government documents.Industry publications or publicly available government documents generally state that the informationcontained therein has been obtained from sources believed to be reliable but that their accuracy and

completeness are not guaranteed and their reliability cannot be assured. Accordingly, no investmentdecisions should be made based on such information. Although our Company believes that industrydata used in the Draft Red Herring Prospectus is reliable, it has not been verified by us or any otherperson connected with the Issue.


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FORWARD LOOKING STATEMENTS

We have included statements in the Draft Red Herring Prospectus which contain words or phrasessuch as will, aim, is likely to result, believe, expect, will continue, anticipate, estimate,intend, plan, contemplate, seek to, future, objective, goal, project, should, will pursueand similar expressions or variations of such expressions, that are forward-looking statements.

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

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

Changes in laws and regulations relating to the industry in which we operate;

Increased competition in industry/sector in which we operate;

Our ability to successfully implement our growth strategy and expansion plans, and tosuccessfully launch and implement various projects and business plans including those for which

funds are being raised through this Issue; Our ability to meet our capital expenditure requirements;

Fluctuations in operating costs;

Our ability to attract and retain qualified personnel;

Changes in technology;

Changes in political and social conditions in India or in other countries that may adversely affectus (directly or indirectly), the monetary and interest rate policies of India and other countries,inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

The performance of the financial markets in India and globally; and Any adverse outcome in the legal proceedings in which we are involved.

For a further discussion of factors that could cause our actual results to differ, please refer Section titled Risk Factors beginning on page 11 of the Draft Red Herring Prospectus , and Chapters titledBusiness Overview and Managements Discussion and Analysis of Financial Condition and Results of Operations as Reflected in the Financial Statements beginning on pages 75 and 149 , respectively of the Draft Red Herring Prospectus. By their nature, certain market risk disclosures are onlyestimates and could be materially different from what actually occurs in the future. As a result, actualfuture gains or losses could materially differ from those that have been estimated. Neither ourCompany nor the BRLM, nor any of their respective affiliates have any obligation to update orotherwise revise any statements reflecting circumstances arising after the date hereof or to reflect theoccurrence of underlying events, even if the underlying assumptions do not come to fruition. In

accordance with SEBI requirements, our Company and the BRLM will ensure that investors in Indiaare informed of material developments until the time of grant of listing and trading permissions by theStock Exchange.


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SECTION III RISK FACTORS

An investment in equity shares involves a high degree of risk. You should carefully consider all of the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity Shares. To obtain a complete understanding of our Company, you should read this section in conjunction with the Chapters titled Business Overview and Management Discussion and Analysis. If any of the following risks actually occur, our business,

profitability and financial condition could suffer, the trading price of our Equity Shares could decline,and you may lose all or part of your investment. Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the financial or other implication of any risks mentioned herein under.

INTERNAL RISKS

1. We have experienced negative cash flows from operating activities for FY 2006 to FY 2008.Any negative cash flows in the future would adversely affect our results of operations and financial condition.

Following is the details of negative cash flow:(Rs. In Lacs)

For the year ended March 31

2006 2007 2008(0.07) (0.12) (70.12)

Cash flow of a company is a key indicator to show the extent of cash generated from operations tomeet capital expenditure, pay dividends, repay loans and make new investments without raisingfinance from external resources. If we are not able to generate sufficient cash flows, it may adverselyaffect our business and financial operations.

2. We reported a loss after tax in fiscal 2006 and may incur additional losses in the future.

We reported a loss after tax of Rs. 0.04 lakhs in fiscal 2006 mainly due to Administrative expensesand statutory charges when there were no operations in the Company. Our failure to generate profitsmay adversely affect the market price of our Equity Shares, restrict our ability to pay dividends andimpair our ability to raise capital and expand our business.

3. Contingent liabilities as at financial year, 2010 aggregating Rs. 44.79 lakhs which have not been provided for could adversely affect our financial conditions.

Our contingent liabilities as at March 31, 2010 aggregated Rs. 44.79 lakhs. If any or all of thesecontingent liabilities materialize, it could have an adverse effect on our business, financial conditionand results of operation. For further information, see Section Financial Information beginning onpage 125

4. Our Company does not own the premises at which our registered office is located

Our Company does not currently own the premises at which its registered office and its corporateoffice are located. Premises No. 43, Manorama Chambers, 4 th Floor, S.V.Road, Bandra (West),Mumbai 400 050 has been taken on lease from our Promoter Mrs. Kanaklata S. Tibrewala(Licensor) and we pay rent for the occupation of the premises. In case of breach of any of thecovenants/conditions, the Licensor can terminate the Agreement which would affect our ability toconduct our business or increase our operating costs.

Further, Premises No. 42 Manorama Chambers, 4 th Floor, S.V.Road, Bandra (West), Mumbai 400050 also being our Registered and Corporate office is not owned by us. It is owned by our Chairmanand Managing Director, Mr. Surendra Kumar Tibrewala (Owner) and it has been granted to us freeof rent for office and administrative purpose. In the event that the Owner requires us to pay rent orvacate the premises, it would increase our operating costs and could also temporarily disrupt ouroperations.


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Further, please refer to Chapter titled Business Overview beginning on page 75 of this Draft RedHerring Prospectus for details of lease documents and rent free agreement pertaining to theregistered office and corporate office of our Company.

5. Some of our Promoter Group companies are in the similar line of business and this could cause a conflict of interest. Such conflict of interest could also lead to our business and

revenues being affected.

Proton Biochem Private Limited and Kamal Chemicals Private Limited our Promoter companies are inthe line of manufacturing chemicals and are in a similar line of business. Further, we have enteredinto non-compete agreements with both the above companies. Under the Non Compete agreementsthe above mentioned companies have agreed that the operations and the markets of thesecompanies shall not in any way infringe or compete with those of our Company.

For further details please refer our Chapter titled History and Other Corporate Matters beginning onpage 99 of this Draft Red Herring Prospectus

6. Our customers generally do not enter into long term contracts . There is no assurance that these customers will continue to purchase our products from us or that they will not scale down their orders. This could impact our financial performance.

Our customers generally do not enter into any long term contracts with us. Our ability to maintainclose and satisfactory relationships with our customers and to consistently manufacture products thatmeet their requirements is therefore important to our business. There is no assurance that thesecustomers will continue to purchase our products from us or that they will not scale down their orders.This could impact our financial performance.

7. The loss resulting from shutdown of operations at any of our plants could have an adverse effect on us.

Our plants are subject to operating risks, such as the breakdown or failure of equipment, powersupply or processes, performance below expected levels of output or efficiency, obsolescence, labourdisputes, natural disasters, industrial accidents. Our plants use complex equipment and machinery,and the breakdown or failure of equipment or machinery may result in us having to make repairs or

procure replacements which may require considerable time and expense. Although we have not hadsuch incident in the past and while we have insurance cover for both our facilities, including for loss ofprofit due to accidental shut down, the same may not be adequate to cover the loss in business.

Although we take precautions to minimize the risk of any significant operational problems at our plantsthey could have adverse effect on our financial performance.

8. Our business is dependent on our key customers and the loss of any significant customer could adversely affect our financial results.

For the financial year ended March 31, 2010, our five largest customers accounted for approximately56.42% of our net sales. The loss of a significant customer or customers would have a materialadverse effect on our financial results. We cannot assure you that we can maintain the historicallevels of business from these customers or that we will be able to replace these customers in case we

lose any of them.

9. Cordial relationship with the employees is crucial for smooth functioning of our operations. In the event there is a shortage of skilled labour or stoppage caused by disagreements with employees in future, it could affect our ability to meet the quality standards and timely completion of orders.

Our operations rely heavily on employees and on the employees' ability to provide high-qualityservices. In the event there is a shortage of skilled labour or stoppage caused by disagreements with


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employees in future, it could affect our ability to meet the quality standards and timely completion oforders, which could lead to reduced business or may potentially damage our reputation.

10. Any future acquisitions of businesses/ facilities, technologies and products may expose us to new risks and we may fail to realize the benefits of such acquisitions thereby adversely impacting our profitability.

In future, we may acquire businesses/ facilities, technologies and products believing them to be astrategic fit with our business. However, we may not be able to successfully integrate suchbusinesses, products, technologies or personnel without a significant expenditure on operating,financial and management resources. Further, we may fail to realize the anticipated benefits of certainacquisitions. Future acquisitions could dilute our shareholders interest in us and could cause us toincur substantial debt, expose us to contingent liabilities and negatively impact our profitability.However, as of the date of this Draft Red Herring Prospectus we have not entered into any definitivecommitment or agreement for any material investment, partnership or acquisition.

11. We have in the past entered into related party transactions with our Promoters and Promoter Group Entities and may continue to do so in the future. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations.

We have entered into related party transactions with our Promoters and Promoter Group Entities.While we believe that all such transactions have been conducted on an arms length basis and areaccounted as per Accounting Standard 18, however there can be no assurance that we could nothave achieved more favorable terms had such transactions not been entered into with related parties.Furthermore, it is likely that we may enter into related party transactions in the future. There can be noassurance that such transactions, individually or in the aggregate, will not have an adverse effect onour financial condition and results of operations.

The aggregate value of related party transactions as on March 31, 2010 was Rs. 722.18 lakhs and forFY 2009 was Rs. 729.70 lakhs. For further details please refer our Section titled FinancialInformation beginning on page 125 of this Draft Red Herring Prospectus

12. We have made application for registration of trademark, which is under process of registration. We are unable to assure that the future viability or value of any of our intellectual

property or that the steps taken by us to protect the proprietary rights of our Company will be adequate

We have made application for registration of trademark FINOCON, and the registration for the saidtrademark in our name is important to retain our brand equity. If our application for registration is notaccepted or if the oppositions filed against our trademark application if any, are successful, we maylose the statutory protection available to us under the Trade Marks Act, 1999 for such trademark.Further, we cannot assure that our pending application would be granted registration or will not bechallenged or if granted registration, will not be invalidated or circumvented or will offer us anymeaningful protection. Further, the laws of some countries in which we may market our products maynot protect our intellectual property rights adequately. We are unable to assure that the future viabilityor value of any of our intellectual property or that the steps taken by us to protect the proprietary rightsof our Company will be adequate.

For further details please refer our Chapter titled Government and Other Statutory Approvalsbeginning on page 159 of this Draft Red Herring Prospectus

13. Our success depends largely upon the services of our Promoters, Executive Directors and other key managerial personnel and our ability to attract and retain them. Demand for key managerial personnel in the industry is intense and our inability to attract and retain key managerial personnel may affect the operations of our Company

Our Chairman and Managing Director, Mr. Surendra Kumar Tibrewala and our whole time Director Mr.Sanjay S. Tibrewala have over the years built relations with suppliers, customers and other persons who


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are connected with us. Further, most of the key managerial personal of our Company have been knownto us for many years. Accordingly, our Companys performance is dependent upon the services of ourExecutive Directors and other key managerial personnel. Our future performance will depend upon thecontinued services of these persons. Demand for key managerial personnel in the industry is intense andour inability to attract and retain key managerial personnel may affect the operations of our Company.

14. We may not be able to maintain the pace of growth as exhibited historically. Our inability

to efficiently handle the abovementioned challenges may affect our business prospects,results of operations and financial condition

We have experienced significant growth in recent years and expect our business to grow further. Ourability to sustain our growth depends, in a large part, on our ability:

To augment financial resources for additional capacities at competitive terms and conditions; To complete capacity expansion / new projects without time and cost overrun; To employ and retain key management personnel; To design and implement strong internal control systems; and To control costs.

Our inability to efficiently handle the abovementioned challenges may affect our business prospects,results of operations and financial condition.

15. Members of our Promoter Group will continue to retain significant control in our Company after the Issue, which will allow them to influence the outcome of matters submitted to shareholders for approval. Such a concentration of ownership may also have the effect of delaying, preventing or deterring a change in control.

After this Issue, members of our Promoter group will beneficially hold approximately 62.50% of ourpost-Issue Equity Share Capital. As a result, our Promoter Group will have the ability to exercisesignificant influence over the matters requiring shareholders approval, including the election ofDirectors and approval of significant corporate transactions. The Promoter Group will also be in aposition to influence the result of any shareholders action or approval requiring a majority vote,except where they are required by applicable laws to abstain from voting. Such a concentration ofownership may also have the effect of delaying, preventing or deterring a change in control.

16. We face competition in India and internationally. There is no assurance that we will continue to compete successfully in future which may affect our business prospects

We operate in a competitive environment as our products are produced by a large number of othermanufacturers in India and abroad. Players in this market generally compete with each other on keyattributes such as technical competence, quality of products and services, pricing and track record.We compete with our competitors on the basis of our track record of quality, technical competence,distribution channels, logistical facilities and after sales relationships. There is however no assurancethat we will continue to compete successfully in future.

17. Increase in wages could reduce our profit margins.

Historically, wage costs in the Indian chemical industry have been significantly lower than wage costsin the developed countries for comparable skilled technical personnel. In the long term, wage

increases may make us less competitive unless we are able to continue increasing our efficiency andproductivity, and the prices we can charge to our customers. Any significant increase in wage costscould have an adverse effect on our business, financial condition and results of operations.

18. We are dependent on third-party transportation providers for the supply of raw materials and delivery of products.

We normally use third-party transportation providers for the supply of most of our raw materials andfor deliveries of our finished products to our customers. Transportation strikes by members of variousIndian Truckers Unions have had in the past, and could in the future, an adverse effect on our receipt


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of supplies and our ability to deliver our finished products. In addition, transportation costs have beensteadily increasing. Continuing increases in transportation costs may have an adverse effect on ourbusiness and results of operations.

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

The amount of our future dividend payments, if any, will depend upon our future earnings, financialcondition, cash flows, working capital requirements and capital expenditures. Any future determinationas to the declaration and payment of dividends will be at the discretion of our Board and will dependon factors that our Board deems relevant, including among others, our results of future earnings,financial condition, cash requirements, business prospects and any other financing arrangements. Wecannot guarantee our ability to pay dividends.

Project Related Risks

20. The objects of the Issue for which funds are being raised have not been appraised by any bank or financial institution. The deployment of funds in the project is entirely at our discretion and as per the details mentioned in the section titled Objects of the Issue. Any revision in the estimates may require us to reschedule our Project expenditure and may have a bearing on our expected revenues and earnings.

Our funding requirements and the deployment of the proceeds of the Issue are based onmanagement estimates and have not been appraised by any bank or financial institution. We mayhave to revise our management estimates from time to time and consequently our fundingrequirements may also change. Our estimates for the project may exceed the value that would havebeen determined by third party appraisals and may require us to reschedule our project expenditurewhich may have a bearing on our expected revenues and earnings. Further, the deployment of thefunds towards the objects of the Issue is entirely at the discretion of our Board of Directors and is notsubject to monitoring by external independent agency. However, the deployment of funds is subject tomonitoring by our audit committee.

21. We have not acquired land for our proposed project till now. Our inability to acquire the land at the right time and at the estimated price may delay the project or result in an increase in the cost of acquisition

We envisage a Land requirement of approximately 3 Acres at the estimated cost of Rs. 96.00 Lacs inand around Khopoli. Since we have not acquired the land till now, our inability to acquire the land atthe right time and at the above mentioned price may delay the project or result in an increase in thecost of acquisition; thereby resulting in an increase in the project cost or time overrun thus affectingour operations and profitability.

For further details refer to the Chapter titled Objects of the Issue beginning on page 49 of the DraftRed Herring Prospectus.

22. On identification and acquisition of the land for the proposed project, our Company will require the following approvals. Delay or non receipt of regulatory approvals may delay the production.

Sr. No.APPROVAL/CONSENT AUTHORITY

1. Factory License Chief Inspector OfFactory, Maharashtra

2. Consent for Operation of the Plant underWater(Prevention and Control of Pollution) Act, 1974

Maharashtra PollutionControl Board

3. Consent for Operation of the Plant underAir(Prevention and Control of Pollution) Act, 1981

Maharashtra PollutionControl Board


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4. Permission for DG Sets (Current as well as proposed) Electrical Inspector

Incase our Company fails to obtain within the prescribed time, any of the aforesaid approvals, ourability to execute our Project for setting up of new manufacturing plant for production of SpecialtyChemicals may be materially impacted.

For further details on Statutory Approvals and Licences, please refer to Page 159 Of the Draft Red

Herring Prospectus.

23. We have not identified Office Space for our sales operations in Mumbai. Our inability to identify a suitable office space at the right time and at the estimated price may affect our sales, operations and profitability

Our Company plans to run its sales operations from Mumbai but is yet to identify a suitable officespace. An amount of Rs. 150 lacs has been earmarked for this purpose, which constitutes [ ]% of thetotal cost of project. Our inability to identify a suitable office space at the right time and at theestimated price may affect our sales, operations and profitability and may also lead to an increase inthe implementation cost of the project.

For further details refer to the Chapter titled Objects of the Issue beginning on page 49 of the DraftRed Herring Prospectus.

24. We have not yet placed orders for Plant and Machinery aggregating Rs. 338 Lacs required by us for the proposed project. Any delay in placing the orders/ or supply of plant and machinery may result in time and cost overruns, and may affect our profitability.

We propose to acquire plant and machinery aggregating Rs. 338 Lacs for our proposed project whichis approximately [ ]% of the Issue Proceeds. We have not yet placed orders for plant and machineryaggregating 338 Lacs required by us which constitutes 100.00% of the total plant and machineryrequired. We are further subject to risks on account of inflation in the price of plant and machinery.

Our Company has received quotations for these machineries, and negotiations with the vendors havecommenced. The details of quotations received appear in paragraph titled Plant and Machinerybeginning on page 51 under the Section titled Objects of the Issue beginning on page 49 of the DraftRed Herring Prospectus. Since the funding for the plant and machinery is solely from the IPOproceeds, any delay in access to IPO proceeds would eventually delay the process of placing theorders. The purchase of plant and machinery would require us to consider factors including but notlimited to pricing, delivery schedule and after-sales maintenance. There may also be a possibility ofdelay at the suppliers end in providing timely delivery of these machineries, which in turn may delaythe implementation of our project.

25. Our new Project is dependent on performance of external agencies

The timely commissioning of our new Project is dependent on the performance of third parties such ascontractors and engineers, who are responsible for construction of buildings, installation andcommissioning of plant & machinery and supply & testing of equipments. If the performance of thesethird parties is not satisfactory and results in a delay or low quality, we may be compelled to replacethese third parties, which could result in increased cost and time overruns. This could adverselyaffect our business operations and profitability.

26. Our proposed expansion plans are financially dependent on the Issue proceeds any delay in rasing of the the same may result in escalation of project cost thereby impacting the operations and financials of our Company.

Our proposed expansion plans are dependent on the proceeds of this Issue. We have not arrangedfor any alternate source of funding the major part of the project. Any delay in the proposed Issue mayincrease the project cost and also result in delay in project implementation. This may adversely affectour operations and profitability.


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EXTERNAL RISK FACTORS

1. Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

Global economic and political factors that are beyond our control, influence forecasts and directlyaffect performance. These factors include interest rates, rates of economic growth, fiscal and

monetary policies of governments, inflation, deflation, foreign exchange fluctuations, consumer creditavailability, consumer debt levels, unemployment trends, terrorist threats and activities, worldwidemilitary and domestic disturbances and conflicts, and other matters that influence consumerconfidence, spending and tourism. Increasing volatility in financial markets may cause these factors tochange with a greater degree of frequency and magnitude.

2. Global recession and market conditions could cause our business to suffer.

The developed economies of the world viz . U.S., Europe, Japan and others are in midst of recoveringfrom recession which is affecting the economic condition and markets of not only these economies butalso the economies of the emerging markets like Brazil, Russia, India and China. General businessand consumer sentiment has been adversely affected due to the global slowdown and there cannotbe assurance, whether these developed economies will see good economic growth in the near future.Consequently, this has also affected the global stock and commodity markets.

3. Any disruption in the supply of power, IT infrastructure, telecom lines and disruption in internet connectivity could disrupt our business process or subject us to additional costs.

Any disruption in basic infrastructure or the failure of the Government to improve the existinginfrastructure facilities could negatively impact our business since we may not be able to providetimely or adequate services to our clients. We do not maintain business interruption insurance andmay not be covered for any claims or damages if the supply of power, IT infrastructure, internetconnectivity or telecom lines is disrupted. This may result in the loss of a client, impose additionalcosts on us and have an adverse effect on our business, financial condition and results of operationsand could lead to decline in the price of our Equity Shares.

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

India has experienced natural calamities such as earthquakes, tsunami, floods and drought in thepast few years. Natural calamities could have a negative impact on the Indian economy and maycause suspension, delays or damage to our current projects and operations, which may adverselyaffect our business and our results of operations.

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

Recently, there have been threats of epidemics, including the H1N1 virus that causes "swine flu" andwhich the World Health Organization has declared a pandemic, in the Asia Pacific region, includingIndia, and in other parts of the world. If any of our people are suspected of having contracted any ofthese infectious diseases, we may be required to quarantine such people or the affected areas of ourfacilities and temporarily suspend part or all of our operations which would have a material adverseeffect on our business, prospects, financial condition and results of operations and could cause the

price of our Equity Shares to decline.

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

Terrorist attacks and other acts of violence or war, including those involving India, the United States orother countries, may adversely affect Indian and worldwide financial markets. These acts may alsoresult in a loss of business confidence and have other consequences that could adversely affect our


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business, results of operations and financial condition. Increased volatility in the financial markets canhave an adverse impact on the economies of India and other countries, including economic recession.

7. The price of our Equity Shares may be highly volatile, or an active trading market for its Equity Shares may not develop.

After this Issue, the price of our Equity Shares may be highly volatile, or an active trading market for

our Equity Shares may not develop. The prices of our Equity Shares on the Stock Exchange mayfluctuate as a result of several factors, including:

Volatility in the Indian and global securities market; Our results of operations and performance, in terms of market share; Performance of the Indian economy; Changes in Government policies; Changes in the estimates of our performance or recommendations by financial analysts; Perceptions about our future performance or the performance of Chemical companies generally; Performance of the Companys competitors in the Chemical Industry and market perception

of investments in the Indian Chemical Industry; Adverse media reports on our Company or the Chemical Industry; Significant developments in Indias economic liberalization and deregulation policies; and Significant developments in Indias fiscal and environmental regulations.

8. The Issue price of our Equity Shares may not be indicative of the market price of our Equity Shares after the Issue and the market price of our Equity Shares may decline below the issue price and you may not be able to sale your Equity Shares at or above the Issue Price.

The Issue Price of our Equity Shares will be determined on the basis of the Book Building Process.This price will be based on numerous factors ( For further information please refer Chapter titled Basis for Issue Price beginning on page 57of the Draft Red Herring Prospectus. ) and may not be indicativeof the market price of our Equity Shares after the Issue. The market price of our Equity Shares couldbe subject to significant fluctuations after the Issue, and may decline below the Issue Price. Wecannot assure you that you will be able to sale your Equity Shares at or above the Issue Price. Amongthe factors that could affect our share price are:

Quarterly variations in the rate of growth of our financial indicators, such as earnings per share,

net income and revenues; Changes in revenue or earnings estimates or publication of research reports by analysts; Speculation in the press or investment community; General market conditions; and Changes in economic, legal and regulatory factors (both domestic and international) unrelated to

our performance such as global recession, imposition of trade / non trade barriers and sanctionsetc.

9. You will not be able to immediately sell any of our Equity Shares purchased through this Issue on Stock Exchange until the receipt of appropriate trading approvals from Stock Exchange.

Our Equity Shares will be listed on the BSE. Pursuant to Indian regulations, certain actions must becompleted before the Equity Shares can be listed and trading may commence. Investors demataccounts with depository participants in India are expected to be credited within two working days of

the date on which the basis of allotment is approved by the Designated Stock Exchange. Thereafter,upon receipt of trading approval from the Stock Exchange, trading in the Equity Shares is expected tocommence within twelve working days from the Bid/Issue closure date. We cannot assure you that theEquity Shares will be credited to investors demat accounts, or that trading in the Equity Shares willcommence, within the time periods specified above. Any delay in obtaining the approvals wouldrestrict your ability to dispose of your Equity Shares.

Prominent Notes:

1. Investors may contact the BRLM or the Compliance officer for anycomplaint/clarification/information pertaining to the issue. For contact details of the BRLM and the


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Compliance Officer, please refer to Chapter titled General Information beginning on page 31 of the Draft Red Herring Prospectus.

2. Pre-Issue Net worth of our Company as as at March 31, 2010 is Rs. 1509.49 lacs.

3. Size of the Present Issue Public Issue of 42,11,160 Equity Shares of Rs.10 each at a Price ofRs. [ ] per Equity Share for (including a premium of Rs. [ ] per Equity Share) cash aggregating

Rs. [

] Lacs (The Issue), by Fineotex Chemical Limited (the Company or the Issuer). TheIssue will constitute 37.50% of the fully diluted Post Issue Paid-up capital of our Company.

4. The average cost of acquisition of Equity Shares of our Promoters is given below:

Sr. No Name of our Promoters Average cost of acquisition of shares(Rs.)

(a) Mr. Surendra Kumar Tibrewala 6.47(b) Mr. Sanjay S. Tibrewala 30.37(c) Mrs. Kanaklata S. Tibrewala 31.58(d) Ms. Ritu S. Tibrewala 31.58(e) Proton Biochem Private Limited 31.58(f) Kamal Chemicals Private Limited 31.58(g) Surendra Kumar Tibrewala (HUF) 31.58

For further details relating to the allotment of Equity Shares to our Promoter's, please refer to the Chapter titled Capital Structure beginning on page 39 of the Draft Red Herring Prospectus.

5. Other than as stated in the Chapter titled Capital Structure beginning on page 39 of this DraftRed Herring Prospectus, our Company has not issued any Equity Shares for consideration otherthan cash.

6. Book value of the Equity Shares of our Company as on March 31, 2010 is Rs. 21.51 per EquityShare.

7. The details of the business interest of our Group Companies are appearing under Related Party Transactions, Annexure 19 beginning on page 142 under Chapter titled Auditors Report And Financial Information of our Company beginning on page 125 of the Draft Red Herring Prospectus.

8. Our Company has entered into following transactions with our Promoters and Group Companies forthe FY 2010:

(Rs. Lacs)Related Party Relationship Nature of Transaction 31.03.10

Sanjay Exports Promoter Group Company Sale of goods by the company(inclusive of excise duty)

499.75

Labour Charges paid by thecompany

58.75Proton Biochem Pvt. Ltd. Corporate Promoter

Interest received on deposit bythe company

6.00

9. No part of the Issue proceeds will be paid as consideration to Promoters, Directors, KeyManagerial Personnel or persons forming part of Promoter Group.

10. For details of liens and hypothecation on the movable and immovable properties and assets ofour Company please refer Annexure 14 beginning on page 140 under Chapter titled Auditors Report And Financial Information of our Company beginning on page 125 of the Draft Red Herring Prospectus.

11. The contingent liabilities as on March 31, 2010 are as follows:

Particulars Rs. in Lacs


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Guarantee given by Indian Bank on behalf of our Company on the security offixed deposit of Rs. 3.85 lacs.

4.74

Cess payable to Navi Mumbai Municipal Corporation (Disputed) 38.98Property Tax payable to Navi Mumbai Municipal Corporation (Disputed) 1.07Total 44.79

12. Our Company and the BRLM shall update the Draft Red Herring Prospectus in accordance withthe Companies Act, 1956. All information shall be made available by our Company and the BRLMto the public and investors at large and no selective or additional information would be availablefor a section of the investors in any manner whatsoever including at road shows, presentations, inresearch or sales reports, at bidding centres etc.

13. Trading in Equity Shares for all investors shall be in dematerialized form only.

14. There are no financing arrangements whereby persons forming part of the Promoter Group, theDirectors of our Company and their relatives have financed the purchase by any other person ofsecurities of our Company during the period of six months immediately preceding the date of filingDraft Red Herring Prospectus with the Board.

15. This Issue is being made through a 100% Book Building Process wherein not more than 50% ofthe Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers, of which 5%shall be reserved for Mutual Funds. Further, not less than 15% of the Issue shall be available forallocation on a proportionate basis to Non Institutional Bidders and not less than 35% of the Issueshall be available for allocation on a proportionate basis to Retail Individual Bidders, subject tovalid Bids being received at or above the Issue Price.

16. Under-subscription, if any, in the Retail Individual Investors, Non-institutional Investor or QIBPortion would be allowed to be met with spill-over from any other category at the sole discretion ofour Company in consultation with BRLM.

17. Investors may note that in case of over-subscription in the Issue, allotment to QualifiedInstitutional Bidders, Non-Institutional Bidders and Retail Individual Bidders and shall be on aproportionate basis, in consultation with BSE, the Designated Stock Exchange.

18. Our Company was incorporated as Fineotex Chemical Private Limited under the provisions of

the Companies Act, 1956 vide Certificate of Incorporation dated January 30, 2004. Our Companywas converted into a public limited company vide a fresh Certificate of Incorporation datedOctober 19, 2007 and consequently the name of our Company was changed to FineotexChemical Limited.

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SECTION IV - INTRODUCTION

SUMMARY

You should read the following summary together with the risk factors and the more detailed information about us and our financial data included in the Draft Red Herring Prospectus. Unless otherwise indicated, all financial and statistical data relating to the industry in the following discussion

is derived from internal Company reports & data, industry publication and estimates. This data has been reclassified in certain respects for purposes of presentation. For more information, please refer to Chapters titled Forward Looking Statements and Presentation of Financial Information and Use of Market Data beginning on page 10 & 9 respectively of the Draft Red Herring Prospectus.

SUMMARY ABOUT THE INDUSTRY

GLOBAL CHEMICAL INDUSTRY

The Global Chemical Industry, estimated at US$ 2.4 trillion, is one of the fastest growing sectors ofthe manufacturing industry. Despite the challenges of escalating crude oil prices and demandinginternational environmental protection standards now adopted globally, the chemicals industry hasgrown at a rate higher than the overall-manufacturing segment.

According to industry reports the pharmaceutical segment contributes approximately 26% of the totalindustry output and approximately 35-40% is dominated by the petrochemical segment. Commoditychemicals are the largest segment in the chemicals market with an approximately size of $ 750 billionwhile the Specialty and Fine Chemicals segment accounts for $ 500 billion.

Some of the major markets for chemicals are North America, Western Europe, Japan and emergingeconomies in Asia and Latin America. The US consumes approximately one-fifth of the globalchemical consumption whereas Europe is the largest consumer with half the consumption. The US isthe largest consumer of commodity chemicals whereas Asia Pacific is the largest consumer ofagrochemicals and fertilizers.

Globalization has resulted in the location of manufacturing bases close to raw materials, cheaperenergy sources and lower tax regimes. Consolidation has necessarily emerged to seek economies ofscale in manufacturing, logistics and R&D. The impact of consolidation has often been improvement

in geographical reach and entry into new markets. The two main components in cost reduction havebeen aggressive identification of improved operating norms and financial restructuring to cut interestcosts. In R&D, there has been focus in knowledge areas designed to secure future revenues. Therehas been increased emphasis on application development especially in specialty chemicals along-with greater customer interaction.

( Source: 11 th Five year Planning Commission Report- 2007-2012)

INDIAN CHEMICAL INDUSTRY

Chemical Industry is one of the oldest industries in India, which contributes significantly towardsindustrial and economic growth of the nation. It is highly science based and provides valuablechemicals for various end products such as textiles, paper, paints and varnishes, leather etc., whichare required in almost all walks of life. The Indian Chemical Industry forms the backbone of the

industrial and agricultural development of India and provides building blocks for downstreamindustries.

The chemical industry includes basic chemicals and its products, petrochemicals, fertilizers, paintsand varnishes, gases, soaps, perfumes and toiletries and pharmaceuticals and is one of the mostdiversified of all industrial sectors covering thousands of commercial products. Its contribution to theGDP of the country is around 3 per cent.

The Indian Chemicals Industry comprises both small and large-scale units. The fiscal concessionsgranted to the small sector in mid-eighties led to the establishment of a large number of units in theSmall Scale Industries (SSI) sector. Currently, the Indian Chemical industry is in the midst of a major


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restructuring and consolidation phase. With the shift in emphasis on product innovation, brandbuilding and environmental friendliness, this industry is increasingly moving towards greater customerorientation. Even though India enjoys an abundant supply of basic raw materials, it will have to buildupon technical services and marketing capabilities to face global competition and increase its share ofexports.

(Source: Ministry of Chemicals and Fertilizers, Department of Chemicals and Petrochemicals,

Annual Report 2009-10)

Specialty Chemicals

The Specialty Chemicals segment in the Indian Chemical Industry is a new emerging sector whichbrings promises of huge growth. Specialty chemicals are those chemicals which are produced at alow volume; they are high priced and usually targeted at a wide variety of markets. These chemicalsare developed under the user's specifications which usually vary from one user to another. Themethods of development depend on the application and the function of the chemicals. This industryrequires the best technical know how. Main specialty chemicals are rubber chemicals, water treatmentchemicals, polymer additives, lubricating additives, specialty pigments etc. These chemicals aremainly based on organic chemicals.

Globally the contribution of specialty chemicals is upto 25% of the chemical sector i.e. it is

approximately worth US$ 453 billion. The average annual growth is expected to be 7.5%. In India, thecapacity of specialty chemical is 5272 thousand MTs and production is approx. 3690 thousand MTs.

Scope of Improvement in Specialty Chemicals Industry

Consolidation to leverage on reducing the overall cost of production. Focus on Research & Development to enable development of world class technological

capabilities in product and processes to become cost competitive globally. Manufacturing units to improve their operational efficiencies. - There must be a focus on training

human resources to enhance their skills. Also the industry needs to attract outsourcing partners through:

(a) Follow good manufacturing practices for attracting outsourcing(b) Benchmark global Quality systems (Assurance & Control)

( Source: 11 th Five year Planning Commission Report- 2007-2012)


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SUMMARY ABOUT OUR COMPANYS BUSINESS

Fineotex Chemical Limited is an ISO 9001:2000 certified Company engaged in manufacturing ofSpecialty Chemicals and Enzymes for various industries. Our Company was incorporated as a PrivateLimited Company in the year 2004 and was subsequently converted to a public limited Company in2007. The Registered office and Corporate office of our Company is situated at 42-43, ManoramaChambers, S.V. Road, Bandra (West), Mumbai 400 050.

We produce and provide Specialty Chemicals and Enzymes to Textile & Garment Industry,Construction Industry, Leather Industry, Water Treatment Industry, Agrochemicals, Adhesives andothers. FCL manufactures over 100 products for various Industries. We currently have ourmanufacturing facilities in our factory situated at Mahape in Navi Mumbai.

Our major customers include Pidilite Industries Limited, Croda Chemicals India (P) Limited (formerlyICI India Limited), Rashtriya Chemicals & Fertilizers Limited, The Bombay Dyeing & Mfg. Co. Limited.,Raymond Group, and others. Our other reputed clients include Grasim Industries Limited, ClariantChemicals India Limited, JCT Limited etc. Through merchant Exporters we have a reach in manycountries in the world.

For further details of our products please refer the Chapter Business Overview beginning on page 75of this Draft Red Herring Prospectus.

Our Competitive Strengths

We believe that the following are our primary competitive strengths:

1. We manufacture over 100 Products of Specialty Chemicals

Our Company offers a wide range of specialty chemicals and enzymes used in many industries.Our Company has large number of products and offers an entire range of specialty chemicalsused in Textiles & Garments Processing namely the Pre-treatment, Printing, Dyeing andFinishing Process. We also offer specialty performance chemicals to the Leather, Agrochemicals,Construction, Water Treatment, Wood, Sticker and Adhesive Industries etc.

2. We cater to customers from Varied Industries

Our Company manufactures specialty chemicals to Textile & Garment Industry, Leather Industry,Water Treatment Industry, Construction, Paper, Paint, Adhesives, etc. We have a strong andvaried customer base from Multi National Companies to Big Corporate houses in each sector. Ourbusiness therefore is not cyclical in nature and a decline in any sector will not have an impact onour business as we supply to varied sectors. Certain products that are being used for watertreatment are being used in all industries where water is being used as a raw material. Thusindirectly our products are being used by majority of the industries. Our Company and Promotershave relations with Pidilite Industries Limited, Clariant Chemicals India Limited and CrodaChemicals India (P) Limited etc. for over 5 years.

3. Our Manufacturing Plants are ISO 9001:2000 certified from JAS-ANZOur existing manufacturing units at Mahape, Navi Mumbai are ISO 9001:2000 certified from JAS-ANZ. We are in the business of specialty chemicals in which quality and innovation are very

important while understanding customer needs. We focus on Quality not only of the final productbut at every stage of production, right from sourcing the raw materials. Our customer list includescompanies like Pidilite Industries Limited, Clariant Chemicals India Limited, Croda ChemicalsIndia (P) Limited (ICI India Limited) etc. which adheres to stringent international qualityspecifications.

4. We offer robust Technical Assistance to our customers

We have an experienced and technically qualified personnel lead by Mr. Suresh Desai and Mr.Sharad Nachane, our Technical Heads and our Promoter Mr. Surendra Kumar Tibrewala, who


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have an experience of more than 3 decades. All products are accompanied with the productLiterature which exhibits all details regarding, uses, dosages etc. Also, if our customers need anyother on site assistance our Company deputes a person from the technical team. The teamdelivers prompt technical service and attends to customer queries. We also have online webassistance and after sales service which ensures prompt solutions to customers.

5. We offer Customized products

Customization forms the essence of our Company. We offer tailor-make products to meet thecustomers needs & requirements, not deviating from the quality, packaging and pricing. Modifyingour products on various parameters like Viscosity, Appearance, Moisture Content, Solubility, pH as per customer requirements, helps us to deliver value to our customers.

6. We have in- house Research & Development

We have the latest technology required in this industry and are continually updated with in -houseR&D at our Mahape unit which comprises 2 laboratories. Also, our experienced and technicallyqualified personnel strive to develop and improve upon the product features by incorporating thelatest technology, customer feedback, suggestions from staff and developing new specialty andcost-effective products.

7. We are well supported by experienced Management and Key Management Personnel

The Chairman and Managing Director of our Company Mr. Surendra Kumar Tibrewala has beenin the business of Manufacturing Specialty Chemicals for more than 3 decades. His knowledgeand experience in the field of Specialty Chemicals and enzymes has helped us to have long termrelations with our customers and has also facilitated us to enter new segments of enzymes andConstruction chemicals etc.

8. We enjoy proximity to sources of Raw Material

Our Company consumes approximately 100 raw materials. We either procure them from domesticimporters or source them from indigenous manufacturers in India like Godrej Industries Limited,Andhra Petroleum Limited, Travancore Titanium Product Limited, etc. who have their warehouseslocated in close proximity to our manufacturing units. A continuous supply of raw material does

not hinder our manufacturing process and ensures effective logistics control.

Our Business Strategy

1. Innovation and Product Development

We believe that key factor to sustain, strengthen and succeed in our business, lies in our ability toinnovate new products and improvise our existing products. FCL started manufacturingconcentrated chemicals which reduces storage for the end user and customers can dilute it as pertheir requirements. This will meet or create new customer demands that are not presently beingsatisfied by available products.

2. Competitive Pricing

To remain aggressive and capitalize a good market share, we believe in offering competitiveprices to our customers. This helps us to sustain the cut-throat competition and withhold a strongposition in the market.

3. Indirect Exports

We offer our products to merchant exporters who export them to countries without anymodifications. Some of the countries are Brazil, Bangladesh, Indonesia, Thailand, Bulgaria,Pakistan, Colombia, Singapore, Sri Lanka, Tanzania, to name a few. By entering into internationalmarkets indirectly FCL can reduce its Marketing Cost, and at the same time create a brand for


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Fineotex globally, it also facilitates in exploring new markets and at the same time mitigate foreignexchange fluctuation risks.

4. Supplying to MNCS and Corporates

We supply to a host of multinationals like Croda Chemicals India Pvt. Ltd. (formerly ICI IndiaLimited), Clariant Chemicals India Limited, Pidilite Industries Limited, BASF Limited, The Bombay

Dyeing Mfg. Co. Ltd., the Raymond Group, Chenab Textile Mills, Rashtriya Chemicals &Fertilizers Limited (RCF) to name a few. We are also contract manufacturing many of theproducts like adhesives etc. MNCs and Corporates provide high volumes and have greatpotential. The Company gets a global feed back and quality is maintained as per internationalstandards this helps in building goodwill.

5. Strategic Location of Current and Future manufacturing Facility

Location of Manufacturing Facility is of importance as it helps in designing the cost structure andlead time for delivery. We procure raw materials from indigenous manufacturers in India likeGodrej Industries Limited, Andhra Petroleum Limited, Travancore Titanium Product Limited, etc.who have their warehouses located in close proximity to our manufacturing units. The finishedproducts markets are in Mumbai, Balotra, Erode, Karur, Surat, Ahmedabad, Rajasthan,Bangalore, Tirupur, etc. Our factory site is well connected with a network of transport facilities like

rail and road operating all over India. This helps our logistics department to ensure timely and costefficient delivery.


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SUMMARY OF FINANCIAL INFORMATION

The following summary of financial data has been prepared in accordance with Indian GAAP, theCompanies Act and the SEBI (ICDR) Regulations, 2009 and restated as described in the AuditorsReport of Statutory Auditor, M/s. UKG & Associates, Chartered Accountants, dated September 23,2010 in the Section titled Financial Information. You should read this financial data in conjunctionwith our financial statements for each of Financial Years 2006, 2007, 2008, 2009 and 2010 including

the notes thereto and the reports thereon, which appears under the Section titled Financial Information and Chapter titled Managements Discussion and Analysis of Financial Condition and Results of Operations as reflected in the Financial Statements beginning on pages 125 and 149 of the Draft Red Herring Prospectus.

Summary statement of Assets & Liabilities, as restated(Rs. in Lacs)

Particulars As at

31.03.06 31.03. 07 31.03.08 31.03.09 31.03.10

A Fixed Assets

Gross Block - - 283.83 358.73 370.49

Less: Depreciation - - 8.71 8.91 21.58

Net Block - - 275.12 349.82 348.91

Capital Work in Progress - - 67.66 76.09 80.59

Total Fixed Assets (A) - - 342.78 425.91 429.50

B Investments (B) - - - 201.80 350.64

C Current Assets, Loans and

Advances

Inventories - - 100.16 135.74 161.03

Sundry Debtors - 0.66 777.06 546.75 575.19

Cash and Bank Balances 0.66 1.00 217.10 23.79 83.14Other Current Assets - - 23.79 186.39 47.27

Loans and Advances 0.04 0.03 254.16 283.09 247.66

Total (C) 0.70 1.69 1372.27 1175.76 1114.29

D Liabilities and Provisions

Secured Loans - - 5.10 50.41 -

Unsecured Loans - - - 96.00 -

Deferred Tax Liability - - 7.13 16.80 24.62

Current Liabilities - 0.03 386.23 254.63 267.69

Provisions 0.03 0.24 292.41 155.58 92.63

Total (D) 0.03 0.27 690.87 573.42 384.93

E Net Worth (A+B+C-D) 0.67 1.42 1024.18 1230.05 1509.49

F Represented by:

1 Share Capital

Equity Share Capital 1.00 1.50 701.86 701.86 701.86


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Summary statement of Profit & Loss, as restated

(Rs. in Lacs)

For the Year Ended

Particulars 31.03.06 31.03.07 31.03.08 31.03.09 31.03.10

A IncomeSales Products

Manufactured

- - 1783.15 2048.08 2207.59

Traded Sales - 104.61 1365.51 648.18 -

Less : Excise Duty - - (184.97) (169.04) (132.88)

Net Sales - 104.61 2963.69 2527.22 2074.71

Increase/(Decrease) in Inventory - - - (12.29) 33.14

Other