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DRAFT RED HERRING PROSPECTUS

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

Please read Section 60B of the Companies Act, 1956

Book Building Issue

Dated November 01, 2012

SMC GLOBAL SECURITIES LIMITED

Our Company was incorporated in New Delhi on December 19, 1994 under the Companies Act, 1956, as amended (the “Companies Act”), as ‘SMC Global Securities Limited’, a public limited company.

Registered and Corporate Office: 11/6B, Shanti Chamber, Pusa Road, New Delhi 110 005, India Tel: +91 (11) 3011 1000 Fax: +91 (11) 2575 4365

For information on change in the registered office of our Company, see the section titled “History and Other Corporate Matters” on page 142.

Company Secretary and Compliance Officer: Mr. Suman Kumar Tel: +91 (11) 3011 1000 Fax: +91 (11) 2575 4365 E-mail: [email protected]

Website: www.smcindiaonline.com

PROMOTERS: MR. SUBHASH CHAND AGGARWAL, MR. MAHESH CHAND GUPTA, MS. SUSHMA GUPTA AND MR. DAMODAR KRISHAN AGGARWAL

FURTHER PUBLIC ISSUE OF 1,58,67,380 EQUITY SHARES OF FACE VALUE OF ` 2 EACH (“EQUITY SHARES”) OF SMC GLOBAL SECURITIES LIMITED (“SMC GLOBAL” OR “OUR COMPANY”) AGGREGATING ` [●] CRORE (HEREINAFTER REFERRED TO AS THE “ISSUE”). THE ISSUE COMPRISES A FRESH ISSUE OF 79,33,690 EQUITY SHARES BY OUR COMPANY (THE “FRESH ISSUE”) AND AN OFFER FOR SALE OF 79,33,690 EQUITY SHARES (THE “OFFER FOR SALE”) BY

MILLENNIUM INDIA ACQUISITION COMPANY INC. (THE “SELLING SHAREHOLDER”). THE ISSUE COMPRISES A NET ISSUE TO THE PUBLIC OF UP TO

1,45,98,000 EQUITY SHARES (“THE NET ISSUE”) AND A RESERVATION OF 6,34,690 EQUITY SHARES FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (AS DEFINED HEREIN) (THE “EMPLOYEE RESERVATION PORTION”) AND 6,34,690 EQUITY SHARES FOR SUBSCRIPTION BY EXISTING RETAIL SHAREHOLDERS

OF OUR COMPANY (AS DEFINED HEREIN) (“SMC RETAIL SHAREHOLDER RESERVATION PORTION”). THE ISSUE WOULD CONSTITUTE 13.11% OF THE

POST ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY AND THE NET ISSUE WOULD CONSTITUTE 92.00% OF THE ISSUE AND 12.06% OF THE POST

ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY.

THE FACE VALUE OF THE EQUITY SHARE IS ` 2 EACH AND THE ISSUE PRICE IS [●] TIMES THE FACE VALUE.

THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY OUR COMPANY AND THE SELLING SHAREHOLDER IN CONSULTATION WITH THE

BOOK RUNNING LEAD MANAGERS AND PUBLISHED ATLEAST ONE WORKING DAY PRIOR TO THE BID OPENING DATE, IN ONE HINDI NATIONAL DAILY

NEWSPAPER AND ONE ENGLISH NATIONAL DAILY NEWSPAPER, EACH WITH WIDE CIRCULATION (HINDI ALSO BEING THE REGIONAL LANGUAGE IN

THE STATE WHERE THE REGISTERED OFFICE IS LOCATED), WITH THE RELEVANT FINANCIAL RATIOS CALCULATED AT THE FLOOR PRICE AND AT THE

CAP PRICE. THE RELEVANT FINANCIAL RATIOS WILL ALSO BE DISCLOSED ON THE WEBSITES OF THE STOCK EXCHANGES (AS DEFINED BELOW) AND

SHALL ALSO BE PRE-FILLED IN THE APPLICATION FORMS AVAILABLE ON THE WEBSITES (WHERE AVAILABLE) OF THE STOCK EXCHANGES.

In case of revision in the Price Band, the Bidding Period will be extended for at least three additional Working Days after the revision of the Price Band subject to the Bidding Period not

exceeding 10 Working Days. Any revision in the Price Band and the revised Bidding Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a

press release, and also by indicating the change on the websites of the Book Running Lead Managers (“BRLMs”) and the Self Certified Syndicate Banks (“SCSBs”) and at the terminals of

the members of the Syndicate.

This Issue is being made through the Book Building Process where up to 50% of the Net Issue will be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”) (“QIB

Portion”). Further, 5% of the QIB Portion will be available for allocation on a proportionate basis to Mutual Funds only. The remainder of the QIB Portion will be available for allocation on

a proportionate basis to QIBs including Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Not less than 15% of the Net Issue will be available for

allocation on a proportionate basis to Non-Institutional Bidders. Further, not less than 35% of the Net Issue will be available for allocation to Retail Bidders, subject to valid Bids being

received at or above the Issue Price, such that subject to availability of Equity Shares, a Retail Bidder is alloted not less than the Minimum Bid Lot, and the remaining Equity Shares, if

available, are alloted on a proportionate basis. Any Bidder may participate in this Issue through the ASBA process by providing the details of the ASBA Accounts in which the corresponding

Bid Amounts will be blocked by the SCSBs. For more information, specific attention is invited to the section titled “Issue Procedure” on page 397.

GENERAL RISKS

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

investment. Bidders are advised to read the Risk Factors carefully before making an investment decision in this Issue. For making an investment decision, Bidders must rely on their own

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

Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the Bidders is invited to the section titled “Risk

Factors” on page 13.

COMPANY’S AND THE SELLING SHAREHOLDER’S ABSOLUTE RESPONSIBILITY

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

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

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

whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

The Selling Shareholder having made all reasonable inquiries, accepts responsibility for and confirms the information relating to such Selling Shareholder contained in this Draft Red Herring

Prospectus is true and correct in all material aspects and is not misleading in any material respect.

LISTING

The Equity Shares of our Company are listed on the DSE, the LSE, the CSE, the ASE and the GSE and we propose to list our Equity Shares on the BSE and the NSE. We have received in-

principle approval from the DSE, the LSE, the CSE, the ASE, the GSE, the BSE and the NSE for the listing of the Equity Shares issued and transferred, as applicable, in the Issue pursuant to

letters dated [●] , [●] , [●] , [●] , [●] , [●] and [●] respectively. [●] is the Designated Stock Exchange.

BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE

Tata Securities Limited

One Forbes, Dr. V.B. Gandhi Marg,

Fort, Mumbai – 400 001

Tel: +91 (22) 6745 9000

Fax: +91 (22) 2261 8215

Email: [email protected]

Investor Grievance Email:

[email protected]

Website: www.tatacapital.com

Contact Person: Mr. Abhishek Jain

SEBI Registration No.: INM000011302

IL&FS Capital Advisors Limited

The IL&FS Financial Centre, 3rd Floor, Plot C-22, G

Block, Bandra Kurla Complex, Bandra (East)

Mumbai 400 051

Tel: +91 (22) 2659 3560

Fax: +91 (22) 2659 2966



[email protected]

Website: www.ilfscapital.com

Contact Person: Mr. Bhavin Ranawat / Mr. Ritesh Sapre

SEBI Registration No.: INM000011955

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound,

L.B.S Marg, Bhandup (West)

Mumbai 400 078, India

Tel: +91 (22) 2596 7878, 1-800-22-0878 (Toll Free)

Fax: +91 (22) 2596 0329



[email protected]

Website: www.linkintime.co.in

Contact Person: Mr. Sanjog Sud

SEBI Registration No: INR000004058

BID/ISSUE PROGRAM

BID OPENS ON [] [] BID CLOSES ON (FOR QIB BIDDERS)# []

BID CLOSES ON (FOR ALL OTHER BIDDERS) [] #Our Company and the Selling Shareholder in consultation with the BRLMs may consider closing the QIB Bidding Period a day before the Bid Closing Date for other

Bidders.

i

TABLE OF CONTENTS

SECTION I – GENERAL .................................................................................................................................... 1

DEFINITIONS AND ABBREVIATIONS ......................................................................................................... 1 CERTAIN CONVENTIONS, USE OF FINANCIAL INFORMATION AND MARKET DATA AND

CURRENCY OF PRESENTATION .................................................................................................................. 9 FORWARD-LOOKING STATEMENTS ........................................................................................................ 12

SECTION II – RISK FACTORS ...................................................................................................................... 13

RISK FACTORS .............................................................................................................................................. 13

SECTION III – INTRODUCTION ................................................................................................................... 35

SUMMARY OF INDUSTRY ........................................................................................................................... 35 SUMMARY OF BUSINESS ............................................................................................................................ 38 SUMMARY FINANCIAL INFORMATION ................................................................................................... 44 THE ISSUE ...................................................................................................................................................... 55 GENERAL INFORMATION ........................................................................................................................... 56 CAPITAL STRUCTURE ................................................................................................................................. 68

SECTION IV – PARTICULARS OF THE ISSUE .......................................................................................... 88

OBJECTS OF THE ISSUE ............................................................................................................................... 88 BASIS OF ISSUE PRICE ................................................................................................................................. 95 STATEMENT OF TAX BENEFITS ................................................................................................................ 98

SECTION V – ABOUT US .............................................................................................................................. 108

INDUSTRY OVERVIEW .............................................................................................................................. 108 OUR BUSINESS ............................................................................................................................................ 119 KEY INDUSTRY REGULATIONS .............................................................................................................. 131 HISTORY AND OTHER CORPORATE MATTERS .................................................................................... 142 OUR MANAGEMENT .................................................................................................................................. 155 PROMOTER AND GROUP COMPANIES ................................................................................................... 170 DIVIDEND POLICY ..................................................................................................................................... 181

SECTION VI – FINANCIAL INFORMATION ............................................................................................ 182

FINANCIAL STATEMENTS ........................................................................................................................ 182 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATION.................................................................................................................................................. 286 MARKET PRICE INFORMATION ............................................................................................................... 313 FINANCIAL INDEBTEDNESS .................................................................................................................... 314

SECTION VII – LEGAL AND OTHER INFORMATION .......................................................................... 318

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ..................................................... 318 GOVERNMENT AND OTHER APPROVALS ............................................................................................. 353 OTHER REGULATORY AND STATUTORY DISCLOSURES .................................................................. 374

SECTION VIII – OFFERING INFORMATION .......................................................................................... 387

TERMS OF THE ISSUE ................................................................................................................................ 387 ISSUE STRUCTURE ..................................................................................................................................... 391 ISSUE PROCEDURE ..................................................................................................................................... 397 MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION .................................................................. 431 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ........................................................ 475

DECLARATION .............................................................................................................................................. 477

1

SECTION I – GENERAL

DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates or implies, the following terms have the following meanings in this Draft

Red Herring Prospectus, and references to any statute or regulations or policies will include any amendments or

re-enactments thereto, from time to time.

Company Related Terms

Term Description

“SMC Global”, “the

Company” and “Our

Company”

SMC Global Securities Limited, a public limited company incorporated under the

Companies Act with its registered office at 11/6B, Shanti Chamber, Pusa Road,

New Delhi 110 005, India

AoA/Articles of

Association or Articles

The articles of association of our Company, as amended from time to time

Audit Committee The audit committee of the Board of Directors described in the section titled “Our

Management” on page 170

Auditors The statutory auditors of our Company, being M/s. Atul & Rajinder, Chartered

Accountants

Board or Board of

Directors

The board of Directors of our Company

Director(s) The directors of our Company

MoA/Memorandum of

Association

The memorandum of association of our Company, as amended from time to time

Promoter Mr. Subhash Chand Aggarwal, Mr. Mahesh Chand Gupta, Ms. Sushma Gupta and

Mr. Damodar Krishan Aggarwal

Promoter Group Unless the context otherwise requires, refers to such persons and entities

constituting the promoter group of our Company, in terms of regulation 2(1)(zb) of

the SEBI Regulations and mentioned in the section titled “Promoter and Group

Companies” on page 170

Registered Office The registered office of our Company situated at 11/6B, Shanti Chamber, Pusa

Road, New Delhi 110 005, India

Selling Shareholder Millennium India Acquisition Company Inc.

Subsidiaries SMC Capitals Limited, SMC Comtrade Limited, SMC Insurance Brokers Private

Limited, SMC Comex International DMCC, Moneywise Financial Services Private

Limited, SMC ARC Limited, SMC Investments and Advisors Limited, SMC

Finvest Limited, Moneywise Finvest Limited

“We” or “us” or “our” Our Company and where the context requires, the Subsidiaries on a consolidated

basis

Issue Related Terms

Term Description

Allotted/Allotment/Allot Unless the context otherwise requires, means the allotment of Equity Shares

pursuant to the Fresh Issue and the transfer of the Equity Shares pursuant to Offer

for Sale to successful Bidders pursuant to this Issue

Allottee A successful Bidder to whom the Equity Shares are Allotted

Allotment Advice Note or advice or intimation of Allotment sent to the Bidders after the Basis of

Allotment has been approved by the Designated Stock Exchange

Application Supported

by Blocked

Amount/ASBA

Application (whether physical or electronic) used by a Bidder to make a Bid

authorizing the SCSB to block the Bid Amount in the specified bank account

maintained with the SCSB. ASBA is mandatory for QIBs and Non Institutional

Bidders participating in the Issue

ASBA Account An Account maintained with an SCSB and specified in the Bid cum Application

Form submitted by ASBA Bidders for blocking the amount mentioned in the Bid

cum Application Form

ASBA Bid A Bid made by an ASBA Bidder

2

Term Description

ASBA Bidder Any Bidder who Bids through ASBA

Bankers to the

Issue/Escrow Collection

Banks

The banks which are clearing members and registered with SEBI as bankers to an

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

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

under the Issue, as described in the section titled “Issue Procedure – Basis of

Allotment” on page 410

Bid An indication to make an offer during the Bid/Issue Period by a Bidder pursuant to

submission of the Bid cum Application Form, to subscribe to or purchase the Equity

Shares of our Company at a price within the Price Band, including all revisions and

modifications thereto

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

and payable by the Bidder upon submission of the Bid.

Bid/Issue Closing Date The date after which the members of the Syndicate and SCSBs will not accept any

Bids. Such date shall be notified in an English national daily newspaper, a Hindi

national daily newspaper, each with wide circulation (Hindi also being the regional

language in the state where the Registered Office is located) and in case of any

revision, the extended Bid Closing Date shall also be notified on the website and

terminals of the Syndicate and SCSBs. Our Company and the Selling Shareholder in

consultation with the BRLMs may consider closing QIB Bidding Period a day

before the Bid Closing Date.

Bidding Centre / Bidding

Location

A centre for acceptance of the Bid cum Application Form.

Bid cum Application

Form

The form used by a Bidder, including an ASBA Bidder, to make a Bid and which

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

Prospectus

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

Prospectus and the Bid cum Application Form, including an ASBA Bidder

Bid Lot [●]

Bid/Issue Period The period between the Bid Opening Date and the Bid Closing Date, inclusive of

both days, during which prospective Bidders can submit their Bids, including any

revisions thereof

Bid Opening Date The date on which the members of the Syndicate and SCSBs shall start accepting

Bids. Such date shall be notified in an English national daily newspaper, a Hindi

national daily newspaper, each with wide circulation (Hindi also being the regional

language in the state where the Registered Office is located).

Book Building Process The method of book building as described in Part A of Schedule XI of the SEBI

Regulations, in terms of which the Issue is being made

Book Running Lead

Managers / BRLMs

The book running lead managers to the Issue, in this case being Tata Securities

Limited and IL&FS Capital Advisors Limited

Cap Price Higher end of the Price Band, including revisions thereof, above which the Issue

Price will not be determined and above which no Bids will be accepted

Controlling Branches of

the SCSBs

Such branches of the SCSBs which coordinate Bids under the Issue by the ASBA

Bidders with the Registrar to the Issue and the Stock Exchanges, a list of which is

available on the SEBI website

Cut-off Price The Issue Price which will be any price within the Price Band. Only Retail Bidders,

Eligible Employees and SMC Retail Shareholders, whose Bid Amount does not

exceed ` 200,000 are entitled to Bid at the Cut-off Price. QIBs and Non-Institutional Bidders are not entitled to Bid at the Cut-off Price

Designated Branches Such branches of the SCSBs which will collect the Bid cum Application Form used

by ASBA Bidders, a list of which is available on

http://www.sebi.gov.in/pmd/scsb.html or at such other website which may be

prescribed by SEBI from time to time

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

Issue Account and the Registrar to Issue issues instructions to SCSBs for transfer of

funds from ASBA Accounts to the Public Issue Account in terms of the Red Herring

Prospectus

3

Term Description

Designated Stock

Exchange

[●]

“Draft Red Herring

Prospectus” or “DRHP”

This draft red herring prospectus dated November 01, 2012, filed with SEBI,

prepared and issued in accordance with the SEBI Regulations, which does not

contain complete particulars of the price at which the Equity Shares will be Allotted

and the size of the Issue

Eligible Employee A permanent and full-time employee of our Company and/or its Subsidiaries

(excluding the Directors and such other persons not eligible under applicable laws,

rules, regulations and guidelines), who are Indian nationals based, working and

present in India as on the date of submission of the Bid cum application Form and

does not include Promoters and immediate relatives of Promoters (i.e. any spouse of

that person, or any parent, brother, sister or child of that person or of the spouse)

Eligible NRI A NRI resident in a jurisdiction outside India where it is not unlawful to make an

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

Prospectus constitutes an invitation to subscribe to Equity Shares

Eligible QFIs QFIs from such jurisdictions outside India where it is not unlawful to make an offer

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

constitutes an invitation to purchase the Equity Shares offered thereby and who have

opened demat accounts with SEBI registered qualified depositary participants

Employee Reservation

Portion

The portion of the Issue, being 6,34,690 Equity Shares, available for allocation to

Eligible Employees.

Equity Listing

Agreement(s)

Equity listing agreement(s) entered into by our Company with the Stock Exchanges,

including all amendments made thereto from time to time.

Equity Share(s) Equity shares of our Company with a face value of ` 2 each. Escrow Account(s) Accounts opened with the Escrow Collection Banks for the Issue and in whose

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

of the Bid Amount

Escrow Agreement The agreement to be entered into amongst our Company, the Selling Shareholder,

the Registrar, the members of the Syndicate and the Escrow Collection Banks for

collection of the Bid Amounts and remitting refunds, if any, of the amounts to the

Bidders (excluding ASBA Bidders) on the terms and conditions thereof

First Bidder The Bidder whose name appears first in the Bid cum Application Form or the

Revision Form as the case may be

Floor Price Lower end of the Price Band and any revisions thereof, below which the Issue Price

will not be finalized and no Bids will be accepted

Fresh Issue The fresh issue of 79,33,690 Equity Shares aggregating up to ` [●] crore by our Company

IL&FS Capital IL&FS Capital Advisors Limited

Issue Further public issue by our Company of 1,58,67,380 Equity Shares for cash at a

price of ` [●] aggregating to ` [●] Crore comprising of the Fresh Issue and the Offer for Sale

Issue Agreement The agreement dated October 19, 2012 entered into amongst our Company, the

Selling Shareholder and the BRLMs pursuant to which certain arrangements are

agreed to in relation to the Issue

Issue Price The final price at which Equity Shares will be Allotted in terms of the Red Herring

Prospectus. The Issue Price will be decided by our Company and the Selling

Shareholder in consultation with the BRLMs on the Pricing Date

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

Shareholder

Mutual Funds Mutual funds registered with SEBI under the SEBI (Mutual Funds) Regulations,

1996, as amended

Mutual Funds Portion 5% of the QIB Portion equal to a minimum of 3,64,950 Equity Shares available for

allocation to Mutual Funds only, out of the QIB Portion on a proportionate basis

Net Issue Issue less the Employees Reservation Portion, and SMC Retail Shareholder

Reservation Portion consisting of 1,45,98,000 Equity Shares to be Allotted

Net Proceeds The Proceeds from Fresh Issue after deducting the proportionate underwriting and

Issue management fee, selling commissions and other Issue expenses associated

4

Term Description

with the Fresh Issue

Non-Institutional Bidders All Bidders, that are not QIBs, Retail Bidders, Eligible Employees and SMC Retail

Shareholders and who have Bid for Equity Shares for an amount more than ` 2,00,000 (but not including NRIs other than Eligible NRIs)

Non-Institutional Portion The portion of the Issue, being not less than 15% of the Net Issue or 21,89,700

Equity Shares, available for allocation to Non-Institutional Bidders

Non-Resident A person resident outside India, as defined under FEMA and includes a Non-

Resident Indian and FIIs registered with SEBI

Non-Resident Indian or

NRI

A person resident outside India, who is a citizen of India or a person of Indian origin

and will have the same meaning as ascribed to such term in the Foreign Exchange

Management (Deposit) Regulations, 2000, as amended

Offer for Sale Offer for sale of 79,33,690 Equity Shares by the Selling Shareholder

Price Band Price band of a minimum price (Floor Price) of ` [●] and a maximum price (Cap Price) of ` [●], including revisions thereof. The Price Band for the Issue will be decided by the Company and the Selling Shareholder, in consultation with the

BRLMs and advertised in an English national daily newspaper, a Hindi national

daily newspaper, each with wide circulation (Hindi also being the regional language

in the state where the Registered Office is located) at least one Working Day prior

to the Bid Opening Date, with the relevant financial ratios calculated at the Floor

Price and at the Cap Price

Pricing Date The date on which our Company and the Selling Shareholder, in consultation with

the BRLMs will finalize the Issue Price

Prospectus The Prospectus to be filed with the RoC in terms of Section 60 of the Companies

Act and SEBI Regulations, containing, among other things, the Issue Price that is

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

other information and including any addenda or corrigenda thereof

Public Issue Account The bank account to be opened with the Bankers to the Issue to receive monies from

the Escrow Account(s) and the ASBA Accounts, on the Designated Date

Qualified Foreign

Investors or QFIs

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

registered FVCIs, who meet ‘know your client’ requirements prescribed by SEBI

and are resident in a country which is (i) a member of Financial Action Task Force

or a member of a group which is a member of Financial Action Task Force; and (ii)

a signatory to the International Organisation of Securities Commission’s

Multilateral Memorandum of Understanding or a signatory of a bilateral

memorandum of understanding with SEBI.

Provided that such non-resident investor shall not be resident in a country which is

listed in the public statements issued by Financial Action Task Force from time to

time on: (i) jurisdictions having a strategic anti-money laundering/combating the

financing of terrorism deficiencies to which counter measures apply; and (ii)

jurisdictions that have not made sufficient progress in addressing the deficiencies or

have not committed to an action plan developed with the Financial Action Task

Force to address the deficiencies.

Qualified Institutional

Buyers or QIBs

Shall mean a mutual fund, venture capital fund and foreign venture capital investor

registered with the Board, a foreign institutional investor and sub-account (other

than a sub-account which is a foreign corporate or foreign individual), registered

with the Board, a public financial institution as defined in section 4A of the

Companies Act, 1956, a scheduled commercial bank, a multilateral and bilateral

development financial institution, a state industrial development corporation, an

insurance company registered with the Insurance Regulatory and Development

Authority, a provident fund with minimum corpus of ` 25 crore rupees, a pension fund with minimum corpus of ` 25 crore, National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government

of India published in the Gazette of India, insurance funds set up and managed by

army, navy or air force of the Union of India, insurance funds set up and managed

by the Department of Posts, India

QIB Portion The portion of the Issue being up to 50% of the Net Issue or 72,99,000 Equity

Shares to be Allotted to QIBs, on a proportionate basis

Red Herring Prospectus The red herring prospectus to be issued in accordance with Section 60B of the

5

Term Description

or RHP Companies Act and the SEBI ICDR Regulations

Refund Accounts Account(s) opened with Refund Bank(s) from which refunds of the whole or part of

the Bid Amount (excluding the ASBA Bidders), if any, will be made

Refund Bank(s) Escrow Collection Bank(s) with which Refund Account(s) are opened in this case

being, [●]

Registrar to the

Issue/Registrar

Link Intime India Private Limited

Registrar’s Agreement The agreement dated October 16, 2012 entered into amongst our Company, the

Selling Shareholder and the Registrar to the Issue pursuant to which certain

arrangements are agreed to in relation to the Issue

Retail Bidders Bidders (including HUFs and Eligible NRIs), other than Eligible Employees

submitting Bids under the Employee Reservation Portion and SMC Retail

Shareholders submitting Bids under the SMC Retail Shareholder Portion, who have

Bid for Equity Shares for an amount less than or equal to ` 200,000 in any of the bidding options in the Net Issue

Retail Portion The portion of the Net Issue, being not less than 35% of the Net Issue, or 51,09,300

Equity Shares at the Issue Price, available for allocation to Retail Bidders

SMC Retail Shareholders Individuals and HUFs who are equity shareholders of our Company (excluding such

other persons not eligible under applicable laws, rules, regulations and guidelines)

as at the date of the Red Herring Prospectus

SMC Retail Shareholder

Reservation Portion

The portion of the Issue, being 6,34,690 Equity Shares, available for allocation to

SMC Retail Shareholders.

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

of Equity Shares or the price options, as applicable, in any of their Bid cum

Application Forms or any previous Revision Form(s).

Self-Certified Syndicate

Bank or SCSB

Banks which are registered with SEBI under the SEBI (Bankers to an Issue)

Regulations, 1994, as amended and offer services of ASBA, including blocking of

ASBA Accounts, a list of which is available on

http://www.sebi.gov.in/pmd/scsb.html

Specified Cities Cities specified in the SEBI circular no. CIR/CFD/DIL/1/2011 dated April 29, 2011,

namely, Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur, Bengaluru,

Hyderabad, Pune, Baroda and Surat

Stock Exchanges Refers collectively to the Delhi Stock Exchange Limited (DSE), Ludhiana Stock

Exchange Limited (LSE), Calcutta Stock Exchange Limited (CSE), Ahmedabad

Stock Exchange Limited (ASE), the Guwahati Stock Exchange Limited (GSE), the

BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE)

Syndicate Collectively, the BRLMs and the Syndicate Members

Syndicate Agreement The agreement to be entered into amongst the Syndicate, the Selling Shareholder

and our Company in relation to the collection of Bids (excluding Bids from the

ASBA Bidders) in this Issue

Syndicate Members [●]

Tata Securities / TSL Tata Securities Limited

Transaction Registration

Slip or TRS

The slip or document issued by the Syndicate, or the SCSB (only on demand), as the

case may be, to the Bidder as proof of registration of the Bid

Underwriters The BRLMs and the Syndicate Members

Underwriting Agreement The Agreement between the Underwriters, the Registrar, our Company and the

Selling Shareholder to be entered into, on or after the Pricing Date

Working Day Any day, other than Saturdays and Sundays, on which commercial banks in Mumbai

are open for business, provided however, for the purpose of the time period between

the Bid/Issue Closing Date and listing of the Equity Shares on the Stock Exchanges,

“Working Days” shall mean all days excluding Sundays and bank holidays in Delhi

or Mumbai in accordance with the SEBI circular no. CIR/CFD/DIL/3/2010 dated

April 22, 2010

Conventional and General Terms/ Abbreviations and References to Other Business Entities

Term Description

6

Term Description

Act or Companies Act Companies Act, 1956, as amended

BAN Beneficiary account number

BSE The BSE Limited

CAGR Compounded annual growth rate

CDSL Central Depository Services (India) Limited

CLB Company Law Board

Competition Act The Competition Act, 2002, as amended

Competition

Commission

Competition Commission of India

CSR Corporate social responsibility

Depositories NSDL and CDSL

Depositories Act SEBI Depositories Act, 1996, as amended

Depository Participant or

DP

A depository participant as defined under the Depositories Act

DGCX Dubai Gold and Commodities Exchange DMCC

DP ID Depository participant’s identity

DTC Bill The Direct Tax Code Bill, 2010

EBITDA Earnings before interest, taxes, depreciation and amortization

ECS Electronic clearing service

EGM Extraordinary general meeting of the shareholders of a company

EPF Act Employees (Provident Fund and Miscellaneous Provisions) Act, 1952, as amended

EPS Earnings per share

FCNR Account Foreign currency non-resident account established in accordance with the FEMA

FDI Foreign direct investment

FEMA Foreign Exchange Management Act, 1999, as amended, together with rules and

regulations thereunder

FIIs Foreign institutional investors (as defined under the Securities and Exchange Board

of India (Foreign Institutional Investors) Regulations, 1995) registered with SEBI

FIPB Foreign investment promotion board

Fiscal or fiscal or

Financial Year or FY

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

stated.

FPO Further public offering

GIR No General index register number

GoI or Government Government of India

HR Human resources

HUF Hindu undivided family

ID Act Industrial Disputes Act, 1947, as amended

IFRS International financial reporting standards

Income Tax Act or I.T.

Act

Income Tax Act, 1961, as amended

Indian GAAP Generally accepted accounting principles in India

Industrial Policy The policy and guidelines relating to industrial activity in India, issued by the GoI

from time to time

Insurance Regulatory

and Development

Authority or IRDA

Statutory body constituted under the Insurance Regulatory and Development

Authority Act, 1999, as amended

MCA Ministry of Corporate Affairs, GoI

MCX Multi Commodity Exchange of India Limited

MCX-SX MCX Stock Exchange Limited

Minimum Wages Act Minimum Wages Act, 1948, as amended

MoU Memorandum of understanding

N/A Not applicable

NBFC Non-banking financial company

NEFT National electronic fund transfer

Non-Resident or NR A person resident outside India, as defined under the FEMA and includes a non-

resident Indian

7

Term Description

NRE Account Non-Resident external account established in accordance with the FEMA

NRO Account Non-Resident ordinary account established in accordance with the FEMA

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

OCB A company, partnership, society or other corporate body owned directly or

indirectly to the extent of at least 60% by NRIs including overseas trusts in which

not less than 60% of the beneficial interest is irrevocably held by NRIs directly or

indirectly and which was in existence on October 3, 2003 and immediately before

such date was eligible to undertake transactions pursuant to the general permission

granted to OCBs under the FEMA. OCBs are not allowed to invest in this Issue.

PAN Permanent account number allotted under the I.T. Act

Preference Shares Preference Shares of our Company of ` 10 each RBI Reserve Bank of India

Re. One Indian rupee

Regulation S Regulation S of the U.S. Securities Act, 1933

RoC Registrar of Companies, National Capital Territory Delhi and Haryana

` / INR / Rupees/ Rs. Indian rupees

RTGS Real time gross settlement

RTI Right to information

SCRA Securities Contract (Regulations) Act, 1956, as amended

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

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

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

SEBI Insider Trading

Regulations

SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended

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

amended

STT Securities transaction tax

Supreme Court Supreme Court of India

US GAAP or U.S.

GAAP

Generally accepted accounting principles in the United States of America

U.S. Securities Act U.S. Securities Act of 1933, as amended

wef. With effect from

Industry/ Business Related Terms

Term Description

AMC Asset Management Company

AMFI Association of Mutual Funds of India

Commodities Segment An exchange for buying and selling of commodities for future delivery

Currency Segment Market where currency futures are traded

Derivatives Derivative is a financial product which derives its value from an underlying asset

(either financial or physical) on which it is based. The underlying asset can be

equity, currency, commodity or any other derivative

Equities (Cash) Segment Market where equities are traded and settlements are done in cash

Equities (Derivatives)

Segment

Markets where derivatives based on equities are traded; such derivatives are

typically futures contracts and options

Extreme Loss Margin Margins collected to cover losses than could occur outside the coverage of VaR

margins; fixed at the beginning of the month

F&O Futures and Options

Fixed Income Securities Debt instruments issued typically by corporate, Central and State governments,

public bodies, statutory corporations, banks, financial institutions, and other

corporate bodies. Typically such instruments pay a constant coupon and thus are

called fixed-income instruments

FPO Further (Follow-On) Public Offer

Futures Contract A standardised contract to buy or sell a specified security (also, commodity with

8

Term Description

specific characteristics) in the future on a certain date at a market-determined price

(futures price). These contracts are traded on the futures exchange

FX / Foreign Exchange

Segment

Markets where foreign exchange (or currency or forex) is traded

FMC Forward Market Commission

HNI High Net worth Individual

IP Intellectual Property

IPR Intellectual Property Rights

IRDA Insurance Regulatory and Development Authority

IS Information System

Mark-to-Market Margin Margin requirement that triggers when the transaction price of a security differs

from its closing price on a particular day

M-Cap / Market

Capitalisation

Number of securities outstanding multiplied by the price of one unit of the security

Options Contract A financial product which provides a right, but not an obligation, to buy or sell an

asset or a derivative on an asset at a specified price during a specified period of time

OTC Market An over-the-counter contract is a bilateral contract in which two parties agree on

how a particular trade or agreement is to be settled in the future

OTCEI OTC Exchange of India

PE Private Equity; Investment made by a fund through equity or convertible

instruments in a company

PMS Portfolio Management Services

Portfolio Manager A portfolio manager as defined under the SEBI (portfolio Managers) Regulations,

1993, as amended

SENSEX BSE Sensitive Index

SPAN Standard Portfolio Analysis of Risk; a method of calculating initial margins

Strike Price The fixed price at which an option contract owner can purchase/sell the underlying

asset

STT Securities Transaction Tax

TWS Trading Working Station

VaR Margin Value at Risk Margin; margin collected upfront and intended to cover largest loss

scenario

VSAT Very Small Aperture Terminal

Wholesale Debt Market A market for the issuance, trading and settlement in fixed income securities of

various types

The words and expressions used but not defined in this Draft Red Herring Prospectus will have the meaning

assigned to such terms under the Companies Act, SEBI Act, the SCRA, the Depositories Act and the rules and

regulations thereunder.

Notwithstanding the foregoing, terms in the sections titled “Main Provisions of Articles of Association”,

“Statement of Tax Benefits”, “Key Industry Regulations”, “Financial Statements” and “Outstanding Litigation

and Material Developments” on pages 431, 98, 131, 182 and 318 in this Draft Red Herring Prospectus

respectively, will have the same meaning given to such terms in these respective sections.

9

CERTAIN CONVENTIONS, USE OF FINANCIAL INFORMATION AND MARKET DATA AND

CURRENCY OF PRESENTATION

Certain Conventions

Unless otherwise specified or the context otherwise requires, all references to “India” in this DRHP are to the

Republic of India, together with its territories and possessions, and all references to the “US”, the “USA”, the

“United States” or the “U.S.” are to the United States of America, together with its territories and possessions.

Unless the context otherwise requires, a reference to the "Company" is a reference to SMC Global Securities

Limited and unless the context otherwise requires, a reference to "we", "us" and "our" refers to SMC Global

Securities Limited and its subsidiaries, as applicable in the relevant fiscal period, on a consolidated basis.

Financial Information

In this Draft Red Herring Prospectus, we have included (i) the audited restated unconsolidated financial

statements for fiscal 2008, 2009, 2010, 2011, 2012 and for the four months ended July 31, 2012; (ii) the audited

restated consolidated financial statements for fiscal 2008, 2009, 2010, 2011, 2012 and for the four months ended

July 31, 2012; and (iii) the unaudited unconsolidated/consolidated limited review financial statements for the

quarter ended September 30, 2012 and the six month-period ended September 30, 2012. These financial

statements except listed at (iii) above, are based on the audited standalone and consolidated financial statements

for such respective periods, which have been prepared in accordance with the Companies Act and Indian GAAP

and have been restated in accordance with the SEBI Regulations.

The fiscal year commences on April 1 and ends on March 31, and unless otherwise specified or the context

otherwise requires, all references to a particular fiscal year are to the twelve-month period ended March 31 of

that year.

Indian GAAP differs in certain material respects from U.S. GAAP and IFRS. We have not attempted to quantify

the impact of IFRS or U.S. GAAP on the financial data included in this Draft Red Herring Prospectus, nor do

we provide a reconciliation of the financial statements to those under U.S. GAAP or IFRS. Accordingly, the

degree to which the financial information prepared in accordance with Indian GAAP, Companies Act and the

SEBI Regulations included in this Draft Red Herring Prospectus will provide meaningful information is entirely

dependent on the reader’s level of familiarity with Indian accounting standards and accounting practices, Indian

GAAP, the Companies Act and the SEBI Regulations. See the section titled “Risk Factors – The proposed

adoption of IFRS could result in the financial condition and results of operations appearing materially different

than under Indian GAAP.” on page 28. Any reliance by persons not familiar with Indian accounting practices,

Indian GAAP, the Companies Act and the SEBI Regulations on the financial disclosures presented in this Draft

Red Herring Prospectus should accordingly be limited. In making an investment decision, investors must rely

upon their own examination of our Company, the terms of the Issue and the financial information relating to our

Company. Potential investors should consult their own professional advisors for an understanding of these

differences between Indian GAAP and IFRS or U.S. GAAP, and how such differences might affect the financial

information contained herein.

Currency and Units of Presentation

All references to “Rupees”, or “`” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. All references to “US$” or “USD” or “U.S. Dollar” are to United States Dollars, the official currency of the

United States of America. All references to “AED” are to United Arab Emirates Dirham, the official currency of

the United Arab Emirates. In this Draft Red Herring Prospectus, any discrepancies in any table between the total

and the sums of the amounts listed therein are due to rounding-off. All figures mentioned in this Draft Red

Herring Prospectus are denominated in crore, unless otherwise specified.

Industry and Market Data

Unless stated otherwise, industry and market data used throughout this Draft Red Herring Prospectus have been

derived from industry publications. Industry publications generally state that the information contained in those

publications has been obtained from sources believed to be reliable but that their accuracy and completeness are

not guaranteed and their reliability cannot be assured. Although we believe that the industry and market data

used in this Draft Red Herring Prospectus is reliable, neither we nor the Selling Shareholder nor the BRLMs nor

any of their respective affiliates nor advisors have prepared or verified it independently. The extent to which the

10

market and industry data used in this Draft Red Herring Prospectus is meaningful depends on the reader’s

familiarity with and understanding of the methodologies used in compiling such data.

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

factors, including those discussed in the section titled “Risk Factors” on page 13. Accordingly, investment

decisions should not be based on such information.

In accordance with the SEBI Regulations, we have included in the section titled “Basis for the Issue Price” on

page 95, information pertaining to the peer group companies of our Company. Such information has been

derived from publicly available annual reports of the peer group companies.

Exchange Rates

This Draft Red Herring Prospectus contains translations of U.S. Dollar and other currency amounts into Indian

Rupees that have been presented solely to comply with the requirements of item (VIII) sub-item (G) of Part A of

Schedule VIII of the SEBI Regulations. It should not be construed as a representation that such currency

amounts could have been, or can be converted into Indian Rupees, at any particular rate or at all.

The exchange rates of the USD and AED into Indian Rupees for the last five Financial Years i.e. 2008, 2009,

2010, 2011 and 2012 and on monthly basis commencing from September, 2011 up till September 2012 are

provided below.

USD - INR

Fiscal Year Year/ Month

End

Average Low High

2008 49.75 43.48 39.22 53.76

2009 46.95 48.78 46.08 52.91

2010 45.45 45.87 44.05 47.62

2011 54.64 47.17 44.25 55.25

2012 54.05 53.48 49.26 57.47

Month

Sep-11 49.75 48.08 45.87 50.51

Oct-11 49.50 50.00 49.26 51.02

Nov-11 52.36 51.02 49.26 52.91

Dec-11 54.64 53.48 51.55 55.25

Jan-12 50.25 52.36 50.25 54.64

Feb-12 49.50 49.75 49.26 50.51

Mar-12 52.08 51.02 49.26 52.63

Apr-12 53.48 52.63 51.55 53.48

May-12 56.50 54.95 53.19 56.50

Jun-12 56.18 56.18 55.25 57.47

Jul-12 55.25 55.56 54.64 56.18

Aug-12 55.56 55.56 54.95 55.87

Sep-12 52.91 54.35 52.63 55.87

Source: Oanda

AED - INR


End

Average Low High

2008 13.55 11.83 10.70 14.64

2009 12.77 13.30 12.55 14.41

2010 12.41 12.50 12.00 12.99

2011 14.84 12.82 12.06 15.04

2012 14.71 14.56 13.42 15.67

Month

11


End

Average Low High

Sep-11 13.55 13.07 12.52 13.76

Oct-11 13.46 13.61 13.42 13.87

Nov-11 14.22 13.91 13.40 14.43

Dec-11 14.88 14.53 14.03 15.04

Jan-12 13.70 14.25 13.66 14.93

Feb-12 13.48 13.55 13.44 13.77

Mar-12 14.18 13.91 13.42 14.33

Apr-12 14.60 14.33 14.04 14.60

May-12 15.36 14.93 14.49 15.36

Jun-12 15.31 15.31 15.02 15.67

Jul-12 15.08 15.08 14.84 15.31

Aug-12 15.15 15.13 15.02 15.22

Sep-12 14.37 14.81 14.33 15.20

Source: Oanda

12

FORWARD-LOOKING STATEMENTS

All statements contained in this Draft Red Herring Prospectus that are not statements of historical facts

constitute “forward-looking statements”. Investors can generally identify forward-looking statements by

terminology such as “aim”, “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intend”, “may”,

“objective”, “plan”, “potential”, “project”, “pursue”, “should”, “will”, “would”, or other words or phrases of

similar import. Similarly, statements that describe the strategies, objectives, plans or goals are also forward-

looking statements.

All statements regarding the expected financial condition and results of operations, business, plans and

prospects are forward-looking statements. These forward-looking statements include statements as to the

business strategy, the revenue, profitability, planned initiatives. These forward-looking statements and any other

projections contained in this Draft Red Herring Prospectus (whether made by us or any third party) are

predictions and involve known and unknown risks, uncertainties and other factors that may cause the actual

results, performance or achievements to be materially different from any future results, performance or

achievements expressed or implied by such forward-looking statements or other projections. Important factors

that could cause actual results, performance or achievements to differ materially include, but are not limited to,

those discussed under the sections titled “Risk Factors”, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations”, “Industry Overview” and “Our Business” on pages 13, 286, 108 and 119

of this Draft Red Herring Prospectus respectively.

The forward-looking statements contained in this Draft Red Herring Prospectus are based on the beliefs of our

management, as well as the assumptions made by and information currently available to our management.

Although we believe that the expectations reflected in such forward-looking statements are reasonable at this

time, we cannot assure investors that such expectations will prove to be correct. Given these uncertainties,

investors are cautioned not to place undue reliance on such forward-looking statements. If any of these risks and

uncertainties materialize, or if any of the underlying assumptions prove to be incorrect, the actual results of

operations or financial condition could differ materially from that described herein as anticipated, believed,

estimated or expected. All subsequent written and oral forward-looking statements attributable to us are

expressly qualified in their entirety by reference to these cautionary statements.

By their nature, certain market risk disclosures are only estimates and could be materially different from what

actually occurs in the future. As a result, actual future gains or losses could materially differ from those that

have been estimated. Our Company, the Selling Shareholder, the BRLMs, the Syndicate Members or their

respective affiliates do not have any obligation to, and do not intend to, update or otherwise revise any

statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying

events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our

Company, the Selling Shareholder and the BRLMs will ensure that investors are informed of material

developments until the time of the grant of final listing and trading permissions with respect to Equity Shares

being offered in this Issue, by the Stock Exchanges. The Company and the Selling Shareholder will ensure that

investors are informed of material developments in relation to statements about our Company and the Selling

Shareholder in this Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus until the Equity

Shares are Allotted to the investors.

13

SECTION II – RISK FACTORS

RISK FACTORS

An investment in equity securities involves a high degree of risk. You should carefully consider all the

information in this Draft Red Herring Prospectus, including our financial statements and the related notes and

the sections titled “Our Business” and “Management’s Discussion and Analysis of Financial Condition and

Results of Operations” beginning on pages 119 and 286, respectively, and the risks and uncertainties described

below, before making an investment in our Equity Shares. If anyone or some combination of the following risks

were to occur, our business, financial condition and results of operations could suffer, and the price of our

Equity Shares could decline and you may lose all or part of your investment. Unless specified in the relevant

risk factors below, we are not in a position to quantify the financial implication of any of the risks mentioned

below. Additional risks not presently known to us or that we currently deem immaterial may also impair our

business operations. The following factors have been considered for determining the materiality:

1. Some events may not be material individually but may be found material collectively;

2. Some events may have material impact qualitatively instead of quantitatively;

3. Some events may not be material at present but may have a material impact in the future.

The Risks described below are not the only risks which may affect our Company. This Draft Red Herring

Prospectus also contains forward-looking statements that involve risks and uncertainties. The actual results of

our operations could differ materially from those anticipated in these forward-looking statements as a result of

certain factors, including the risks we face as described below. You should also consider the warning regarding

forward looking statements in the section titled “Forward-Looking Statements” beginning on page 12.

Unless otherwise stated, financial information included in this section for the four month period ended July 31,

2012 and the Financial Years 2012, 2011, 2010, 2009 and 2008 has been derived from our restated and audited

consolidated financial statements as of and for the four month period ended July 31, 2012 and the Financial

Years ended March 31, 2012, March 31, 2011, March 31, 2010, March 31, 2009 and March 31, 2008. For

further information, see the section titled “Certain Conventions, Use of Financial Information and Market Data

and Currency of Presentation – Financial Information” and the section titled “Financial Statements”.

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

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

you of an investment in the Equity Shares.

INTERNAL RISK FACTORS

1. Restrictive or penal order may be passed against us by SEBI in ongoing and / or future proceedings that could restrict, stop or hamper our operations or services, or a part thereof, or levy penalties in connection therewith,

which may in turn adversely affect our operations and profitability.

SEBI issued a post enquiry show cause notice dated April 16, 2012 under regulation 28(1) of the SEBI

(Intermediaries) Regulations, 2008 (“Post Enquiry Show Cause Notice”) enclosing copy of designated

authority’s report dated December 12, 2011 which report provides that SEBI vide letter dated March 26, 2009

advised NSE to examine the matter and submit a report. NSE vide letter dated April 01, 2009 had submitted to

SEBI that an inspection of the clearing operations of our Company pertaining to F&O segment was conducted

during December 2008 and major violations relating to wrong reporting of margin and non-collection of dues

from trading members on time were observed. Subsequently, the Disciplinary Action Committee of NSE, after

taking into account the nature of the observations and submission by our Company inter-alia levied certain

penalty. Thereafter, SEBI conducted an inspection of the books of accounts, documents and various other

records maintained and furnished by our Company. On conclusion of the inspection process a designated

authority was appointed vide order dated August 31, 2010 to enquire into the possible violations of the

provisions of law by our Company as observed during the inspection.

The Post Enquiry Show Cause Notice provides that the allegations of violations committed by our Company are

grave and serious in nature and therefore the penalty recommended by the designated authority is not

commensurate with the violations committed. Further, the Post Enquiry Show Cause Notice states that our

Company failed to collect the requisite margin from its trading members and it allowed them to take additional

14

positions and risk in F&O segment. There can be no assurance that SEBI will not pass an order that could

restrict, stop or hamper our operations or services, or a part thereof, or levy penalties under Regulation 27(i) to

27(v) of SEBI (Intermediaries) Regulations, 2008, which may in turn adversely affect part of our operations and

profitability. For details of the SEBI’s show cause notice, please refer to the section titled “Outstanding

Litigation and Material Developments” beginning on page 318 of this Draft Red Herring Prospectus.

2. There are certain criminal cases pending against us and some of our Directors.

There are certain criminal cases pending against our Company and some of our Directors. These include sixteen

criminal cases against us and some of our Directors under various sections of Indian Penal Code including 406,

409, 420, 467, 468, 120(B) which have been pending before various adjudicatory authorities. Any adverse

outcome from these proceedings may have an adverse effect on our reputation and business or cause the price of

our Equity Shares to decline. For details of the above criminal cases, please refer to the section titled

“Outstanding Litigation and Material Developments” beginning on page 318 of this Draft Red Herring

Prospectus.

3. Our Company and our Subsidiaries are involved in a number of legal and regulatory proceedings that, if determined against us or our Subsidiaries, could have a material adverse impact on our business, financial

conditions and results of operations.

There are certain outstanding legal proceedings against us pending at various levels of adjudication before

various courts, tribunals, authorities and appellate bodies in India. Should any new development arise, such as

change in applicable laws or rulings against us by the appellate courts or tribunals, we may need to make

provisions in our financial statements, which may increase our expenses and current liabilities. We cannot give

you any assurance that these legal proceedings will be decided in our favour. Any adverse decision may have a

significant effect on our business and financial condition, the implementation of our current or future projects

and our results of operations. Details of the proceedings that have been initiated against us and the amounts

claimed against us in these proceedings, to the extent ascertainable, are set forth below:

Litigation against our Company

Sr.

No.

Nature of the litigation Number of outstanding

litigations

Aggregate amount involved

(`) in crore 1. Civil Cases 14 Non Quantifiable

2. Cases under Negotiable Instrument Act

Nil Nil

3. Consumer Complaints 26 0.71

4. Arbitration Proceedings 10 0.68

5. Labour Matters 3 Non Quantifiable

6. Tax Cases 3 Non Quantifiable

Total 56 1.39

Litigation against our Subsidiaries

Sr.

No.

Nature of the litigation Number of outstanding

litigations

Aggregate amount involved

(`) in crore 1. Civil Cases 6 0.25

2. Cases under Negotiable Instrument Act

Nil Nil

3. Consumer Complaints 12 0.33

4. Arbitration Proceedings 9 0.44

5. Labour Matters 6 0.03

6. Tax Cases 8 0.07

Total 41 1.12

15

For further details of the legal proceedings, please see the section titled “Outstanding Litigation and Material

Developments” on page 318 of this Draft Red Herring Prospectus.

4. We have previously been penalized in past for not complying with the stock exchanges and regulator(s) directions and circulars and may face further penalties from any exchange and/or other regulatory bodies that

govern us in cases of non-compliance in future.

We have been penalized by various exchanges and regulators in the past with a total penalty of ` 0.37 crore for certain deficiencies noticed by exchanges and regulators on account of lapses such as discrepancies pertaining

settlement of funds and wrong reporting of margin collections, the PAN number not being available on contract

note, shortfall in collection of daily margins, receipts from clients through own bank accounts in some instances/

payments to clients through own bank account in some instances, non-issue of statement of accounts to some

constituents and error in format of contract notes. There can be no assurance that we will not be subjected to

such penalties in the future, which may in turn adversely affect our operations and profitability. For details of

the past penalties, please refer to the section titled “Outstanding Litigation and Material Developments”

beginning on page 318 of this Draft Red Herring Prospectus.

5. Certain of our Subsidiaries and our Group Companies have incurred losses during the last three fiscal years and the four month period ending July 31, 2012, which may adversely affect our results of

operations.

Certain of our Subsidiaries have incurred losses in the last three fiscal years and the four month period ending

July 31, 2012, as set forth in the table below:

(` in crore)

Subsidiary Four month

period ending July

31, 2012

Fiscal 2012 Fiscal 2011 Fiscal 2010

SMC Investments

and Advisors

Limited

1.41 9.43 21.45 6.85

SMC Capital

Limited

1.20 1.28 1.34 1.69

Moneywise

Financial Services

Private Limited

- - - 0.16

SMC Insurance

Brokers Private

Limited

- - 5.20 15.03

SMC Comex

International

DMCC

- - 0.37 0.47

SMC ARC Limited - - 0.19 -

In the event that these Subsidiaries continue to incur losses or any of our other Subsidiaries incur losses, our

Company’s consolidated results of operations and financial condition will be adversely affected. Further, our

Group Companies are also loss making companies as per their audited financial statements for past three fiscals

and which may affect our reputation. For further details, see the section titled “History and Other Corporate

Matters” and “Our Promoter and Group Companies” beginning on page 142 and page 170, respectively.

6. We had negative net cash flows in recent fiscal years.

We had negative net cash flows in the past three fiscals (on consolidated basis), the details of which is

summarized below:

(` in crore)

16

Particulars Four month

period

ending July

31, 2012

Fiscal 2012 Fiscal 2011 Fiscal 2010

Net cash from operating activities 7.49 (46.84) (47.83) (76.64)

Net cash from / (used in) investing activities 7.67 31.15 25.79 (58.21)

Net cash generated from / (used in) financing

activities

(40.09) 30.79 27.50 112.96

Adjustment on account of change in minority

interest

- 22.84 - 24.23

Net increase (decrease) in Cash & Cash

Equivalents

(24.93) 37.94 5.46 2.34

For further details please see the sections titled “Financial Statements” beginning on page 182.

7. Net Proceeds would not result in creation of fixed assets and our Objects of the Issue have not been appraised.

We intend to use a portion of the Net Proceeds towards enhancing margin requirements at stock exchange(s),

part repayment of the term loan, investment in our subsidiary, SMC Comtrade and other General Corporate

Purpose. The Net Issue proceeds shall not result in the creation of any fixed assets.

None of the Objects have been appraised by any bank or financial institution or any other independent third

party organisation. The funding requirements of our Company and the deployment of the Net Proceeds of the

Issue are currently based on management estimates. The funding requirements of our Company are dependent

on a number of factors which may not be in the control of our management, including variations in interest rate

structures, changes in our financial condition and current commercial conditions and are subject to change in

light of changes in external circumstances or in our financial condition, business or strategy. For further details

on the use of the Issue Proceeds, please see the section titled "Objects of the Issue" beginning on page 88.

8. Our Company has entered into several agreements including shareholders’ and share subscription agreements and our inability to comply with such covenants may result in violation of certain provisions

of these agreements leading to breach of our contractual obligations.

Our Company has entered into several agreements with its investors including various shareholders’ agreements

and share subscription agreements. These covenants include:

i. Our Company, Mr. Subhash Chand Aggarwal, Mr. Mahesh Chand Gupta, other promoter group individuals and Bennett, Coleman & Co. Limited (“BCCL”) have entered into a shareholders’

agreement dated March 10, 2008 and an amendment agreement dated December 18, 2010. Our

shareholders agreement with Bennett, Coleman & Co. Limited requires us to have the Company’s shares

listed on the BSE and/or NSE by March 31, 2013, failing which BCCL and our Company shall appoint a

reputed consultant to valuate the shares of our Company and the Promoters shall either buy-back the

shares or find a third party buyer to buy the BCCL shares at the price arrived at by the third part

consultant or at a price not less than the price which ensures a 12% annualized return, whichever is

higher.

ii. Our Company, Mr. Subhash Chand Aggarwal, Mr. Mahesh Chand Gupta, other promoter group individuals and the Selling Shareholder have entered into a share subscription agreement dated May 12,

2007 pursuant to which our Company and the promoters shall ensure that the equity shares of our

Company are listed on the BSE and/or the NSE by June 30, 2013.

iii. Our share subscription agreement with the Selling Shareholder can be terminated at the option of the Selling Shareholder, if by June 30, 2013, conditions exist to list the Equity Shares on the BSE and/or

NSE and the promoters decide not to seek such listing for their own reasons or unless such listing is

postponed at the request of the Selling Shareholder.

iv. In accordance with our shareholders agreement with the Selling Shareholder, we are required to file our red herring prospectus within 30 days of obtaining SEBI clearance.

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In case we fail to comply with our obligations under these agreements we may be in breach of our contractual

obligations. For further details of such agreements, please see the section titled “History and Other Corporate

Matters” beginning on page 142.

9. Investment out of the Net Proceeds in certain of our Subsidiaries may be in the form of equity or unsecured loan. Should the Company decide to make an investment through unsecured loan, in the

event of default on repayment of such loan or inability of our Subsidiaries to repay such loan, our

Company will not be in a position to enforce any security in order to recover such loan amounts

Our Company proposes to infuse funds out of the Net Proceeds from the Fresh Issue in certain of our operating

Subsidiaries, in order to achieve the Objects. For further details, please see the section titled “Objects of the

Issue” beginning on page 88. Investment out of the Net Proceeds from the Fresh Issue in certain of our

Subsidiaries may be in the form of equity or unsecured loan, including for instance, the investment by our

Company in SMC Comtrade, towards margin maintenance at the various commodity exchanges that it is

registered with in India. In the event of default on repayment of such loan or inability of our Subsidiaries to

repay such loan, our Company will not be in a position to enforce any security in order to recover such loan

amounts

10. We face intense competition in our businesses, which may limit our growth and prospects.

Our Company faces significant competition in all our lines of business. We compete with other Indian and

foreign brokerage houses, investment banks, insurance brokers, wealth managers and distributors of financial

products, operating in the market segments in which we are present. For further details, please refer to the

section titled “Our Business - Competition” beginning on page 119 of this Draft Red Herring Prospectus.

We compete on the basis of a number of factors and our competitors may have advantages over us, including,

but not limited to substantially greater financial resources, longer operating history than us in certain of our

businesses, greater brand recognition among consumers or a larger customer base than us. Also, certain Indian

and foreign commercial banks have begun offering services that we currently provide, such as broking,

depository participant services, merchant banking which has increased competition. These competitive pressures

may affect our business, and our growth will largely depend on our ability to respond in an effective and timely

manner to these competitive pressures.

11. Our growth will depend on our ability to develop our brand and failure to do so will negatively impact our ability to effectively compete in this industry.

We believe that we need to continue to build our brand, particularly in our new businesses, like investment

banking and wealth management which will be critical to achieving widespread recognition of our services.

Promoting and positioning our brand will depend largely on the success of our marketing efforts and our ability

to provide high quality services. The brand promotion activities that we may undertake may not yield increased

revenues, and even if they do, any increased revenues may not offset the expenses we incur in building our

brand. If we are unable to promote and maintain our brand, our business, financial condition and results of

operations could be adversely affected.

12. We have not complied with certain corporate governance requirements mentioned under Clause 49 of the Equity Listing Agreement relating to the composition of our Board.

Although we are currently in compliance under clause 49 of the Equity Listing Agreement, we have not

complied with certain corporate governance requirements envisaged under Clause 49 of the Equity Listing

Agreement, relating to the composition of our Board. The Securities Contracts (Regulation) Act, 1956

prescribes certain penalties for non-compliance with the conditions of the Equity Listing Agreement. While no

penalties or suspension of trading has been imposed on us by the Stock Exchanges, we cannot assure you that

such action will not be taken in the future or that we will remain in compliance with the Equity Listing

Agreement. In case the Stock Exchange(s) impose any penalty or take any action against us, it may have an

adverse effect on our operations and financial condition.

13. Some of our records relating to the forms and reports to be filed with the Stock Exchange(s), including those required pursuant to various SEBI Regulations and guidelines are not traceable and we cannot

assure you if these forms were duly filed on a timely basis or at all .

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We have been unable to locate copies of certain regulatory records that we are required to file under various

guidelines and regulations prescribed by SEBI and/or the Stock Exchanges(s), including prescribed forms and

filings under Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Since copies of these are unavailable with us, we cannot assure you that these forms or reports were duly filed

on a timely basis, or at all. We cannot assure you that records of these forms will be available in the future or

that we will not be subject to any penalty imposed by the competent regulatory authority in this respect. If either

the Stock Exchange(s) or SEBI impose any penalty or take any action against us, it may have an adverse effect

on our operations and financial condition.

14. We have not obtained certain licenses under certain state legislations and there can be no assurance that relevant authorities will issue such licenses or approvals to us in a timely manner or at all which may

adversely affect our results of operations.

We have not obtained licenses under the relevant state legislations governing the registration of shops and

establishments for our branches. There can be no assurance that the relevant authorities will issue such licenses

or approvals to us or that they will be issued on time.

Further, the competent authority under the relevant state legislations governing the registration of shops and

establishments, may find us in violation of the such legislation and impose statutory penalty for not obtaining

the registration, which may adversely affect our results of operations.

15. Our auditors had certain qualifications in their Audit Report for Fiscal 2010 and Fiscal 2011.

Our auditors, for such relevant specific periods, had qualified their audit reports on our consolidated financial

statements for the audited fiscal year March 31, 2010 and fiscal year March 31, 2011 and for the unconsolidated

financial statements for the audited fiscal year March 31, 2011. For further details see “Financial Statements –

Restated Consolidated Financial Statement – Auditor’s Report – 6 (e)” on page 286 and “Financial Statements

– Restated Unconsolidated Financial Statement – Auditor’s Report – 6 (f)” of this Draft Red Herring Prospectus.

Our Auditors in their restated consolidated financial statements and restated unconsolidated financial statements,

which been included in this Draft Red Herring Prospectus, have indicated that necessary adjustments pertaining

to such qualifications, wherever required, have been incorporated.

16. We operate in businesses which are subject to extensive regulatory requirements and any failure to comply with any of such regulations could subject us to penalties or sanctions.

Our businesses are subject to extensive regulation by the SEBI, the FMC, the RBI and the IRDA and other

governmental regulatory authorities. We are also regulated by industry self-regulatory organisations, stock and

commodities exchanges. The regulatory environment in which we operate is also subject to change and we may

be adversely affected as a result of new or revised legislation or regulations imposed by the SEBI, other

governmental regulatory authorities or self-regulatory organizations. We are also subjected to periodic reviews,

requests for submission of information, audit and inspections from various regulatory agencies. Non-compliance

with any of these regulations and/or adverse findings may expose us to various actions by the respective

authorities which may adversely affect our business operations and financial condition.

We are also subject to changes in Indian law, as well as to changes in regulations and accounting principles.

There can be no assurance that the laws governing the Indian financial services sector will not change in the

future or that such changes would not adversely affect our business and future financial performance. We face

the risk of significant intervention by regulatory authorities in all jurisdictions in which we conduct our

business. Among other things, we could be fined, prohibited from engaging in some of our business activities or

subject to limitations or conditions on our business activities.

Furthermore, we are required to incur substantial costs to monitor compliance and comply with such regulations.

If we are found to have violated an applicable regulation, administrative or judicial proceedings may be initiated

against us that may result in censures, fines, trading bans, deregistration or suspension of our business licenses,

the suspension or disqualification of our officers or employees, or other adverse consequences. We could also be

subjected to constraints or conditions on operating our business activities and may incur fines, receive

regulatory cautions or show cause notices and be barred from engaging in certain business activities. The

imposition of any of these or other penalties or restrictions could have a material adverse effect on our business,

reputation, financial condition and results of operations.

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17. We engage employees on a contractual basis for carrying out certain of our operations and we are responsible for paying the wages of such employees, if the independent contractors, through whom such

workers are hired, default on their obligations, which could have an adverse effect on our results of

operations and financial condition. In order to retain operational efficiencies, we engage independent contractors who in turn engage on-site

employees on a contract basis for performance of certain of our ancillary operations. As of September 30, 2012,

we have engaged 846 employees on contractual basis at our office(s). Although we do not engage these

employees directly, we are responsible for any wage payments to be made to such employees in the event of

default by such independent contractors. Any requirement to fund their wage requirements may have an adverse

impact on our results of operations and financial condition. In addition, under the Contract Labour (Regulation

and Abolition) Act, 1970, as amended, we may be required to absorb a number of such employees on

contractual basis as permanent employees. Thus, any such order from a regulatory body or court may have an

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

18. Our risk management policies and procedures may leave us exposed to unidentified or unanticipated risk

which could adversely affect our business and results of operations.

We are exposed to a variety of risks, including liquidity risk, interest rate risk, credit risk, operational risk and

legal risk. The effectiveness of our risk management is limited by the quality and timeliness of available data.

Our risk management techniques may not be fully effective in mitigating our risks in all market environments or

against all types of risk, including risks that are unidentified or unanticipated. Some methods of managing risks

are based upon observed historical market behaviour. As a result, these methods may not predict future risk

exposures, which could be greater than the historical measures indicated. Other risk management methods

depend upon an evaluation of information regarding markets, customers or other matters. This information may

not in all cases be accurate, complete, up-to-date or properly evaluated. Management of operational, legal or

regulatory risk requires among other things, policies and procedures properly to record and verify a number of

transactions and events. Although we have established these policies and procedures, they may not be fully

effective. Our future success will depend, in part, on our ability to respond to new technological advances and

emerging finance sector standards and practices on a cost-effective and timely manner. The development and

implementation of such technology entails significant technical and business risks. There can be no assurance

that we will be a

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