A

Project Report

On

MEGHMANI ORGANICS LIMITED

Details of the Offer Document and

The Functioning of its IPO

Submitted To: Submitted By:

Anurag Mehta

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 TABLE OF CONTENTS

What is an Offer Document 3

Mobilization of Funds 4

About Meghmani Organics Limited 6

Meghmani Organics Limited IPO 6

Objects of the Issue 11

The Issue 11

Capital Structure 13

Balance Sheet 15

Statement of Profit And Loss 16

Dividend Policy 17

Assesment of fund Requirements 17

Liquidity and Capital of Resources 18

Performance of the IPO 19

Graphical analysis 19

The Trend so Far 21

References 22

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What is an Offer Document?

Any decision to invest in a mutual fund scheme ought to be an informed decision. Almost all
information needed in taking this decision is generally available in the offer document of the
scheme.
The offer document details the investment objective, investment strategy, past performance of the
other schemes offered by the fund house, the fund portfolio manager and other financial
information relating to the fund house. This document can generally be obtained from any
financial planner or advisor. It will also be available in the company website and all their
designated offices.
The offer document is a legal contract between the fund and the unit holder. Here is an outline of
what an offer document offers.

Investment Objective:
The investment objective gives the financial goal of the fund reflected by the type of securities
chosen to achieve the objective. Typically, investment objectives include long-term capital
growth, stable income, high total return, and so on. Though there is no guarantee that the
objectives will be met, the investment objective is the most important statement in the offer
document.
Fund houses cannot change these objectives unless investors provide their consent to the changes
through a vote. Any change in the fundamental attributes of the fund would also require the
investors' consent or an option to exit the fund without any load / expenses.

Risks Associated:
Mutual fund houses have a bouquet of products that cater to varied risk tolerance levels of the
investors. Considering that the risks associated with investing in the markets vary depending on
the type of investments, one needs to take serious cognisance of the risk factors outlined in the
offer document. This section of the offer document outlines the risks associated with every fund
such as credit risks, interest rate risks and market risks.

Past Performance:
In case of a new fund offer, one would obviously not have any history, but the performance of the
fund house and similar schemes will generally be available in the offer document. One needs to
bear in mind that the historical performance – both long term and short term – is no indication of
the performance of the fund being focused upon . This would only give an indication of the
policies and help in taking investment decision.

Investment Style / Strategy:

This section of the offer document will help one get an indication of the way in which the
portfolio manager allocates funds to achieve the investment objectives. The asset allocation
would depend on the investment destination of the fund and also its theme. This section would
also outline the investment restrictions.

Fees & Expenses:

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This section outlines the fund management fees, the expenses incurred by the fund house – either
during the new fund offer or on an ongoing basis – in managing the fund. One would also have
information about the load structure charged either at entry or at exit. This needs to be considered
while calculating effective returns from their investment in the particular fund.

To sum-up, an offer document serves the purpose of:

a. being a legal contract between the fund and the unit holder
b. outlining the features on the basis of which the fund will be managed
c. indicating clearly the risks that you would have to shoulder to achieve the financial
objective
d. giving the fee structure which will help you in calculating your effective returns

The offer document thus ensures that all the relevant information required for a prospective
investor in taking an informed decision is made available.

Mobilization of Funds:
In most of the financial institutions put together, the most important funds mobilization objective
is the generation of funds from convenient sources that guarantee cost effectiveness and time
efficiency. The most prominently used strategies for funds mobilization among the financial
institutions are the

• call marketing strategy,

• corporate image strategy,

• product innovation and packaging.

These strategies reveal obvious shifts in both orientation and policy along the following lines:

(a) Arm-chair banking increasingly being replaced with aggressive call marketing strategy,
revealing radical shifts from conservatism to aggressiveness;

(b) Made-to-measure replacing off-the-peg type of services; and

(c) General realization and awareness that efficient treasury management is a strategy in itself.

It is important to review resource mobilization and financial management from both a static and a
dynamic perspective.

From a static perspective, the financial resources at any point in time are the major input that
determines results, and analyzing their sources and uses is an essential part of tracking progress
and attributing results to the program.

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From a dynamic perspective, the processes of formulating the resource mobilization strategy,
managing the peculiarities of responding to diverse donor funding cycles, and committing and
allocating funds need to be examined in their own right, because these affect the ability of the
program to achieve its objectives on its current scale — as well as the potential to achieve its
objectives on a larger scale or in new ways.

Accountability for the final use of funds in a strict legal sense, however, is normally done through
the formal audit process.

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 About Meghmani Organics Limited
• Company’s Name : Meghmani Organics Limited

• Company’s Age :

1986: Gujarat Industries established as a partnership firm.

1995: Transformed to a joint stock company, under the name of Meghmani

Organics Limited.

Meghmani Organics Limited’s Depository Receipts are listed on the Singapore Stock
Exchange. Meghmani Organics Limited has been awarded the Investors Choice Awards for the
Most Transparent Company for two consecutive years.

Meghmani Organics Limited IPO

- A Brief Introduction

1. Bid/Issue
Bidding Period/Issue Period

BID/ISSUE OPENED ON June 04, 2007

BID/ISSUE CLOSED ON June 07, 2007

2. Bankers to the Company

State Bank of India

ICICI Bank Limited

HDFC Bank Limited

3. Issue Management Team

Book Running Lead Managers (BRLMs)

Edelweiss Capital Limited

IL&FS Investsmart Limited

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 4. Syndicate Members
Edelweiss Securities Private Limited

IL&FS Investsmart Limited

5. Registrar to the Issue

Intime Spectrum Registry Limited

6. Bankers to the Issue and Escrow Collection Banks

HDFC Bank Ltd

ICICI Bank Ltd. (Capital Markets Division)

UTI Bank Limited

Standard Chartered Bank

Kotak Mahindra Bank Limited

7. Statutory Auditors to the Company

M/s Patel & Khandwala,

Chartered Accountants

8. International Auditors of the Company

Deloitte Haskins & Sells

9. Strategic Partners
The Company does not have any strategic partners.

10. Financial Partners

The Company does not have any financial partners.

11. Bids at different Price Levels

The Price Band was fixed at Rs. 17/- to Rs. 19/- per Equity Share of Re.1 each, Rs. 17/-
being the lower end of the Price Band and Rs. 19/- being the higher end of the Price Band. The
Bidders could bid at any price within the Price Band, in multiples of Re. 1 (One).

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 The Bidder has to bid for the desired number of Equity Shares at a specific price. Retail
Individual Bidders applying for a maximum Bid in any of the bidding options not exceeding Rs.
100,000 could bid at Cut-off Price. However, bidding at Cut-off Price was prohibited for QIB or
Non-Institutional Bidders and such Bids from QIBs and Non-Institutional Bidders was rejected.

12.Credit Rating
As this is an Issue of Equity Shares, there was no credit rating for this Issue.

13.IPO Grading
The Company did not opted for IPO grading in relation to this Issue of Equity Shares.

14.Trustees
As this was an Issue of Equity Shares, the appointment of Trustees was not required.

15.Appraising Entity
The Objects of the Issue was not appraised by any agency, and the cost and means of finance
were based on the estimates by the Company.

16.Monitoring Agency
There is no requirement for a monitoring agency in terms of clause 8.17 of the SEBI (DIP)
Guidelines.

17.Book Building Process

Book Building refers to the process of collection of bids from investors, which is based on
the Price Band. This Issue Price is fixed after the Bid/Issue Closing Date.

The principal parties involved in the Book Building Process are:

- The Company;

- Book Running Lead Managers (BRLM) ;

- Syndicate Members

who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible
to act as underwriters. The BRLMs appoint the Syndicate Members;

- Registrars to the Issue; and

- Escrow Collection Bank(s).

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The SEBI Guidelines, had permitted an issue of securities to the public through the 100% Book
Building Process, wherein a minimum of 60% of the Issue shall be allocated on a proportionate
basis to Qualified Institutional Buyers (QIBs) including upto 5 % of the QIB portion that shall be
available for allocation on proportionate basis to Mutual Funds only and the remainder of the
QIB portion shall be available for allocation on a proportionate basis to all QIB bidders,
including Mutual Funds. Further, upto 10% of the Issue shall be available for allocation on a
proportionate basis to Non Institutional Bidders and upto 30 % of the Issue shall be available for
allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Issue Price. The Company will comply with the SEBI Guidelines for
this Issue. In this regard, the Company had appointed the BRLMs to procure subscriptions to the
Issue

18.Underwriting Agreement
After the determination of the Issue Price but prior to filing of the Prospectus with RoC
the company entered into an Underwriting Agreement with the Underwriters for the Equity
Shares proposed to be issued through the Issue. It was proposed that pursuant to the terms of
the Underwriting Agreement, the BRLMs will be responsible for bringing in the amount
devolved in the event that the Syndicate Members do not fulfill their underwriting
obligations.

The Underwriters have indicated their intention to underwrite the following number of Equity
Shares

The above underwriting agreement is dated June 11, 2007.

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The above mentioned amount was an indicative of underwriting and was actually finalized after
pricing and actual allocation

19.Previous Rights and Public Issues

They have not made any previous rights and public issues during the last five years in India
for these class of Equity Shares, and are an "Unlisted Company" in terms of the SEBI Guidelines
and this Issue is an "Initial Public Offering" in terms of the SEBI Guidelines. However, our
Company has made a public issue in Singapore in form of Singapore Depository Shares (SDS)
and these SDS are listed on the SGX - ST Main Board.

20.Escrow Mechanism
The Company opened Escrow Accounts with one or more Escrow Collection Banks in whose
favour the Bidders could make out the cheque or demand draft in respect of his or her Bid and/or
revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a
certain category was deposited in the Escrow Account. The Escrow Collection Banks will act in
terms of the Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Bank(s)
for and on behalf of the Bidders maintain the monies in the Escrow Account. The Escrow
Collection Bank(s) do not exercise any lien whatsoever over the monies deposited therein and
shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow
Collection Banks transfer the monies from the Escrow Account to the Public Issue Account as
per the terms of the Escrow Agreement. Payments of refund to the Bidders shall also be made
from the Refund Account (s) as per the terms of the Escrow Agreement and the Red Herring
Prospectus.

The Bidders should know that the escrow mechanism is not prescribed by SEBI and has been
established as an arrangement between them, the members of Syndicate, the Escrow Collection
Bank(s) and the Registrar to the Issue to facilitate collections from the Bidders.

21. DESIGNATED DATE AND ALLOTMENT OF EQUITY SHARES

(a) The Company ensured that the allotment of Equity Shares was done within 15 days of the
Bid/Issue Closing Date. After the funds were transferred from the Escrow Account to the
Public Issue Account and Refund Account on the Designated Date, they allotted the Equity
Shares to the allottees. The Company ensured the credit to the successful Bidders depository
account. Allotment of the Equity Shares to the allottees had to be within two working days of
the date of allotment. In case, the Company fails to make allotment or transfer within 15 days
of the Bid/Issue Closing Date, interest was have to been paid to the investors at the rate of
15% per annum.

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 (b) In accordance with the SEBI DIP Guidelines, Equity Shares was issued and allotment
was made only in the dematerialised form to the allottees. Allottees will have the option
to re-materialise the Equity Shares, if they so desire, as per the provisions of the
Companies Act and the Depositories Act.

22.Listing
Our Singapore Depository Shares are listed on the Singapore Exchange Securities Trading
Limited. The Equity Shares issued through this Prospectus are proposed to be listed on National
Stock Exchange of India Limited (“NSE”) and Bombay Stock Exchange Limited (“BSE”).

OBJECTS OF THE ISSUE

The objects of the Issue are as follows:

(i) To finance setting up of a new high performance pigment plant ("HPP") at GIDC
Industrial Estate, Vatva, Ahmedabad;

(ii) To set up multipurpose Agro chemicals Plant at GIDC Industrial Estate, Panoli, Dist:
Bharuch;

(iii) To invest into our subsidiary Meghmani Energy Limited, to finance the 3 MW
Captive Power Plant to be located at Chharodi.;

(iv) To finance the requirements of funds for inorganic growth opportunities

/diversification opportunities/ general corporate purposes;

(v) To finance the working capital requirements of our Company; and

(vi) To meet Issue related expenses.

The objects of the Issue also include creating a public trading market for the Equity Shares of the
Company by listing them on the Stock Exchanges in India. They believed that the listing of their
Equity Shares will provide liquidity to their existing shareholders and enhance their visibility and
brand name and enable them to use their Equity Shares for strategic growth opportunities.

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 THE ISSUE

(1) Under-subscription, if any, in any of the above categories would be allowed to be met
with spill over inter-se from any other categories, at the sole discretion of our Company
and BRLMs.

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 CAPITAL STRUCTURE
The Share Capital of the Company as on the date of filing this Prospectus with RoC and after the
Issue is set forth below:

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#: 5% of the QIB portion, i.e. Rs. 612 million is available for allocation on a proportionate basis
to Mutual Funds only, and the remainder of the QIB portion shall be available for allocation on a
proportionate basis to all QIB Bidders, including Mutual Funds.

Notes to Capital Structure

1. Authorised Share Capital

Changes in Authorised Share Capitals

The change in the authorized share capital in various years are shown as below ;

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 BALANCE SHEET

Summary of Assets and Liabilities

STATEMENT OF PROFIT AND LOSS

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DIVIDEND POLICY

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The declaration and payment of dividends will be recommended by their Board of Directors and
approved by their shareholders, at their discretion, and will depend on a number of factors,
including but not limited to their profits, capital requirements, and overall financial requirements.
The amounts paid as dividends in the past are not necessarily indicative of their dividend policy
or dividend amounts, if any, in the future.

Assessment of fund requirements

Their assessment of fund requirement and deployment is based on internal management estimates
and have not been appraised by any bank or financial institution or any independent organization.

Their capital expenditure plans are subject to a number of variables, including

• Possible cost overruns

• Construction/development delays or defects; including availability of working capital
finance on acceptable terms
• Changes in management's views of the desirability of current plans, among others.

In case of any variations in the actual utilization of funds earmarked for the above activities or
increased fund deployment for a particular activity, the shortfall, if any, may be met with by
surplus funds, if any available in the other areas and/or their Company's internal accrual, and/or
the term loans/ working capital loans that may be availed from the banks/ financial institutions.
The balance proceeds of the Issue in addition to the above mentioned requirements, if any, will
be used for general corporate purposes.

Means of Finance

The total fund requirements in relation to the Objects of the Issue shall be financed out of Issue
proceeds. Shortfalls, if any, would be met by internal accruals.

Fund Requirements

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The fund requirements for each of the objects are given in the following table:

Liquidity and Capital Resources

Cash Flows

The net cash flow from operating activities declined in financial year 2006 on account of
deployment of operating funds towards meeting short term working capital requirements of our
company. The net cash flow from investment activities is negative as we have consistently
invested in fixed assets over the years. These investments have been funded through a mix of
medium to long term debt and equity infusions.

Performance of IPO

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Listing of IPO for the First Seven Working Days

Total Turnov
Seri Prev Open High Low Last Close
Date Traded er
es Close Price Price Price Price Price
Quantity in Lacs
28-Jun- 17,135.
EQ 19.00 33.25 33.25 26.00 26.40 26.60 60929763
2007 95
29-Jun- 2,503.8
EQ 26.60 26.85 27.45 25.55 26.10 25.95 9442446
2007 5
02-Jul- 3,876.2
EQ 25.95 26.50 29.25 25.25 28.70 28.65 13902278
2007 5
03-Jul- 2,144.2
EQ 28.65 29.25 29.25 27.60 27.90 27.80 7521910
2007 4
04-Jul-
EQ 27.80 29.00 29.00 26.55 26.65 26.75 2844773 771.33
2007
05-Jul-
EQ 26.75 26.85 26.95 25.60 26.00 25.90 1638123 426.32
2007
06-Jul-
EQ 25.90 26.45 27.75 25.30 26.85 26.65 3573559 958.58
2007

Column Graph Between Various Listed Prices and Number of Days

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Deviation in open price and closed price wrt the number of days

Graph between Return% and number of days

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 Return Percentage or Listing Performance:
It can be calculated by using the following formula :

100 * (Close price – Previous Close Price)/ Previous Close Price

For eg. For the first day listing performance will be

100 * (26.6-19)/19 = 40%

And subsequently for the other days it can be calculated.

The Trend So Far

Analysts Say:

Source: Kim Eng

“We checked with Meghmani Management on the time frame for the shares ( listed in BSE ) and
SDS ( listed in SGX )to be fungible across both exchanges. Management confirmed that share
and SDSs will be 2- way fungible from end June, 2008.

Since the dual listing of stock in India last June Meghmani has been very well received by
Indian/ International investors. We believe one reason is the broader number of peers in similar
agrochemicals/ pigments business listed there, allowing for better comparison.

The stock price in India has continuedvto notch new highs, currently sitting at Rs 48/share. This
translates to S$0.88/ SDS. On the SGX Meghmani continues to be priced at a steep 48% discount
to its Indian counterpart at the current price of S$0.46

We believe the odds are good for the valuation gap of the stock between the exchange to narrow
further”

Source: Kim Eng

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 References

Meghmanifinal.pdf

Meghmani.com

NSE India Ltd

BSE India Ltd

Moneycontrol.com

Economic Times.com

Business world.com

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