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SECTION I: GENERAL

DEFINITIONS AND ABBREVIATIONS

Term Description
“We”, “us”, “our”, “the Unless the context otherwise indicates or implies, refers to YOU
Issuer”, “the Company”, “our Broadband & Cable India Limited on a standalone basis.
Company” or “YOU”

Conventional and General Terms/ Abbreviations

Term Description
Act or Companies Act Companies Act, 1956 and amendments made from time to time
AGM Annual General Meeting
AS Accounting Standards issued by the Institute of Chartered Accountants of
India
BIS Bureau of Indian Standards
BSE Bombay Stock Exchange Limited
CAGR Compounded Annual Growth Rate
CDSL Central Depository Services (India) Limited
CESTAT Central Excise and Service Tax Appellate Tribunal
Companies Act Companies Act, 1956 as amended from time to time
Depositories NSDL and CDSL
Depositories Act The Depositories Act, 1996 as amended from time to time
DER Debt Equity Ratio
Diluted EPS Diluted Earning Per Share
DIN Director Identification Number
DP/ Depository Participant A depository participant as defined under the Depositories Act, 1996
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
ECS Electronic Clearing Service
EGM Extraordinary General Meeting
EPS Earning Per Share
FDI Foreign Direct Investment
FEMA Foreign Exchange Management Act, 1999 read with rules and regulations
thereunder and amendments thereto
FEMA Regulations FEMA (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000 and amendments thereto
FII(s) Foreign Institutional Investors as defined under SEBI (Foreign Institutional
Investor) Regulations, 1995 registered with SEBI under applicable laws in
India
Financial Year/ Period of twelve months ended March 31 of that particular year
Fiscal/fiscal/ FY
FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of
India
FVCI Foreign Venture Capital Investor registered under the Securities and
Exchange Board of India (Foreign Venture Capital Investor) Regulations,
2000
GDP Gross Domestic Product
GoI/Government Government of India
HUF Hindu Undivided Family
IFRS International Financial Reporting Standards
Income Tax Act The Income Tax Act, 1961, as amended from time to time
INR/Rs. Indian Rupees
IT Information Technology
IT Department Income Tax Department
i
Term Description
Indian GAAP Generally Accepted Accounting Principles in India
IPO Initial Public Offering
JV Joint Venture
JVA Joint Venture Agreement
Mn / mn Million
MoU Memorandum of Understanding
NA Not Applicable
NAV Net Asset Value
NM Not Meaningful
NEFT National Electronic Fund Transfer
NOC No Objection Certificate
NR Non Resident
NRE Account Non Resident External Account
NRI Non Resident Indian, is a person resident outside India, as defined under
FEMA and the FEMA (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000
NRO Account Non Resident Ordinary Account
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OCB A company, partnership, society or other corporate body owned directly or
indirectly to the extent of up to 60% by NRIs including overseas trusts in
which not less than 60% of 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
p.a. per annum
PAN Permanent Account Number allotted under the Income Tax Act, 1961
PAT Profit After Tax
PBT Profit Before Tax
P/E Price by Earning Per Share
RBI The Reserve Bank of India
RoC The Registrar of Companies Maharashtra, Mumbai located at Everest, 100
Marine Drive, Mumbai 400 002
RoNW Return on Net Worth
Rs. Indian Rupees
RTGS Real Time Gross Settlement
SEBI The Securities and Exchange Board of India constituted under the SEBI Act,
1992
SEBI Act Securities and Exchange Board of India Act 1992, as amended from time to
time
SEBI ICDR Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as
amended from time to time
SEBI Takeover Securities and Exchange Board of India (Substantial Acquisition of Shares
Regulations and Takeovers) Regulations, 1997, as amended from time to time
Sec. Section
Securities Act US Securities Act, 1933, as amended
SICA Sick Industrial Companies (Special Provisions) Act, 1985, as amended from
time to time
Stamp Act The Indian Stamp Act, 1899, as amended
State Government The government of a state of India
Stock Exchange(s) BSE and/ or NSE as the context may refer to
U.S. / USA / US United States of America
US GAAP Generally Accepted Accounting Principles in the United States of America
USD/ US$ / US Dollars United States Dollar
ii
Term Description
VCFs Venture Capital Funds as defined and registered with SEBI under the SEBI
(Venture Capital Fund) Regulations, 1996, as amended from time to time

Issue Related Terms

Term Description
Allotment/Allot Unless the context otherwise requires, the allotment of Equity Shares
pursuant to the Issue
Allottee A successful Bidder to whom the Equity Shares are Allotted
Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor
Portion with a minimum Bid of Rs.100 million.
Anchor Investor The date one day prior to the Bid/Issue Opening Date, on which Bidding
Bid/Issue Period by Anchor Investors shall open and shall be completed
Anchor Investor Issue The final price at which Equity Shares will be issued and Allotted to
Price Anchor Investors in terms of the Red Herring Prospectus and Prospectus,
which price will be equal to or higher than the Issue Price but not higher
than the Cap Price. The Anchor Investor Issue Price will be decided by our
Company in consultation with the BRLM.
Anchor Investor Portion Up to 30% of the QIB Portion which may be allocated by the Company to
Anchor Investors on a discretionary basis. One-third of the Anchor
Investor Portion shall be reserved for domestic mutual funds, subject to
valid Bids being received from domestic mutual funds at or above the
price at which allocation is being done to Anchor Investors
Application Supported An application, whether physical or electronic, used by a Bidder (other
by Blocked Amount/ than QIBs) to make a Bid authorising a SCSB to block the Bid Amount in
ASBA their specified bank account maintained with the SCSB
ASBA Bidder Any Bidder (other than a QIB) who intends to apply through ASBA
ASBA Bid cum The form, whether physical or electronic, used by an ASBA Bidder to
Application Form or make a Bid, which will be considered as the application for Allotment for
ASBA BCAF the purposes of the Red Herring Prospectus and the Prospectus
Banker(s) to the The banks which are clearing members and registered with SEBI as
Issue/ Escrow Collection Banker to the Issue with whom the Escrow Account will be opened, in this
Bank(s) case being [●]
Basis of Allotment The basis on which Equity Shares will be Allotted to Bidders under the
Issue and which is described in “Issue Procedure” beginning on page 209
of this Draft Red Herring Prospectus
Bid An indication to make an offer during the Bidding Period (including, in
the case of Anchor Investors, the Anchor Investor Bid/Issue Period) by a
Bidder pursuant to submission of a Bid cum Application Form to
subscribe to the Equity Shares of our Company at a price within the Price
Band, including all revisions and modifications thereto, as applicable and
in accordance with the SEBI ICDR Regulations.
For the purposes of ASBA Bidders, it means an indication to make an
offer during the Bidding Period by a Bidder (other than QIBs) to subscribe
for the Equity Shares of the Company.
Bid Amount The highest value of the optional Bids indicated in the Bid cum
Application Form and which is payable by the Bidder (other than an
Anchor Investor) on submission of the Bid in the Issue.
Bid/Issue Closing Date The date after which the Syndicate and SCSB will not accept any Bids for
the Issue, which shall be notified in an English national newspaper, a
Hindi national newspaper and a Marathi newspaper, each with wide
circulation (except for the Anchor Investors)
Bid/Issue Opening Date The date on which the Syndicate and SCSB shall start accepting Bids for
the Issue, which shall be the date notified in an English national
newspaper, a Hindi national newspaper and a Marathi newspaper, each
with wide circulation except for the Anchor Investors
Bid cum Application Form The form used by a Bidder to make a Bid and which will be considered
as the application for Allotment for the purposes of the Red Herring
Prospectus and the Prospectus
Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red
Herring Prospectus and the Bid cum Application Form and the ASBA Bid-
cum-Application Form

iii
Term Description
Bidding/Issue Period The period between the Bid/ Issue Opening Date and the Bid/ Issue
Closing Date inclusive of both days and during which prospective Bidders
(excluding Anchor Investors) can submit their Bids, including any
revisions thereof
Book Building Book building route as provided in Schedule XI of the SEBI ICDR
Process/ Method Regulations, in terms of which this Issue is being made
BRLM/Book Running Edelweiss Capital Limited
Lead Manager/Edelweiss
Business Day Any day, other than Saturday and Sunday, on which commercial banks are
open for business in Mumbai, India.
CAN/Confirmation Note or advice or intimation of allocation of Equity Shares sent to the
of Allocation Note Bidders who have been allocated Equity Shares after discovery of the
Issue Price in accordance with the Book Building Process including
revision thereof.
In relation to Anchor Investors, the note or advice or intimation of
allocation of Equity Shares sent to the successful Anchor Investors who
have been allocated Equity Shares after discovery of the Anchor Investor
Issue Price, including any revisions thereof.
Cap Price The higher end of the Price Band, above which the Issue Price will not be
finalised and above which no Bids will be accepted
Controlling Branches Such branches of the SCSB which coordinate with the BRLM, the
Registrar to the Issue and the Stock Exchanges
Cut-off Price Issue Price, finalised by our Company in consultation with the BRLM.
Retail Individual Bidders and Eligible Employees whose Bid Amount does
not exceed Rs.100,000 are entitled to bid at the Cut Off Price, for a Bid
Amount not exceeding Rs.100,000. QIBs and Non-Institutional Bidders
are not entitled to bid at the Cut-Off Price.
Designated Branches Such branches of the SCSBs which shall collect the ASBA Bid cum
Application Form used by ASBA Bidders and a list of which is available
on http://www.sebi.gov.in
Designated Date The date on which funds are transferred from the Escrow Account to the
Public Issue Account or the amount blocked by the SCSB is transferred
from the bank account of the ASBA Bidder to the Public Issue Account, as
the case may be, after the Prospectus is filed with the RoC, following
which the Board of Directors shall Allot Equity Shares to successful
Bidders
Designated Stock [●]
Exchange
DP ID Depository Participant’s Identity
Draft Red Herring This Draft Red Herring Prospectus dated March 30, 2010 issued in
Prospectus or DRHP accordance with Section 60B of the Companies Act, which does not
contain complete particulars of the price at which the Equity Shares are
issued and the size (in terms of value) of the Issue
Eligible Employee All or any of the following:
(a) a permanent and full-time employee of our Company as of the date of
the Red Herring Prospectus and based and working in India or abroad as
on the date of submission of the Bid cum Application Form; and
(b) a Director, whether whole-time or part-time, of the Company as of the
date of the Red Herring Prospectus and based in India as on the date of
submission of the Bid cum Application Form and does not include
Promoter and an immediate relative of the Promoter (i.e. any spouse of
that person, or any parent, brother, sister or child of the person or of the
spouse)
For the purpose of this definition, an employee of the Company who is
recruited against regular vacancy but is on probation as on the date of
submission of the Bid cum Application Form will also be deemed as a
permanent employee.
Eligible NRI NRIs from jurisdictions outside India where it is not unlawful to make an
issue or invitation under the Issue and in relation to whom the Red Herring
Prospectus constitutes an invitation to subscribe to the Equity Shares
Allotted herein
Employee Reservation The portion of the Issue aggregating upto Rs. 15 million, available for
Portion allocation to the Eligible Employees.
Equity Shares Equity shares of our Company of face value of Rs.10/- each, unless
otherwise specified
iv
Term Description
Escrow Account Account opened with the Escrow Collection Bank(s) for the Issue and in
whose favour the Bidder (including Anchor Investor and excluding the
ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount
when submitting a Bid
Escrow Agreement Agreement to be entered into by our Company, the Registrar to the Issue,
the BRLM, the Syndicate Members and the Escrow Collection Bank(s) for
collection of the Bid Amounts and where applicable, refunds of the
amounts collected to the Bidders (excluding the ASBA Bidders) on the
terms and conditions thereof
Escrow Collection Bank [●]
First Bidder The Bidder whose name appears first in the Bid cum Application Form or
Revision Form or the ASBA Bid cum Application Form
Floor Price The lower end of the Price Band, at or above which the Issue Price will be
finalised and below which no Bids will be accepted
Foreign Investment Limits Shareholding of FIIs in aggregate not exceeding 24% of the total issued
equity share capital of our Company and individual shareholding of each
FII in our Company not exceeding 10% of the total paid up equity share
capital and the total foreign shareholding in our Company not exceeding
49% of the total paid up equity share capital of our Company
Issue Public issue of [•] Equity Shares of Rs.10 each of YOU Broadband &
Cable India Limited for cash at a price of Rs.[•] per Equity Share
(including a share premium of Rs.[•] per Equity Share) aggregating up to
Rs.3,600 million
Issue Price The final price at which Equity Shares will be issued and allotted in terms
of the Red Herring Prospectus and the Prospectus. The Issue Price will be
decided by our Company in consultation with the BRLM on the Pricing
Date
Issue Proceeds The proceeds of the Issue that are available to the Company
Mutual Fund Portion 5% of the QIB Portion (excluding the Anchor Investor Portion) or such
number of Equity Shares of Rs.10 each aggregating to Rs.[•], (assuming
the QIB Portion is for 50% of the Net Issue Size) available for allocation
to Mutual Funds only, out of the QIB Portion on a proportionate basis
Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds)
Regulations, 1996
Net Issue Issue less the Employee Reservation Portion, consisting of [●] Equity
Shares to be Allotted pursuant to this Issue
Net Proceeds The Issue Proceeds less the Issue expenses. For further information about
use of the Issue Proceeds and the Issue expenses see “Objects of the Issue”
on page 39 of this Draft Red Herring Prospectus
Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders and who have
Bid for Equity Shares for an amount more than Rs.100,000 (but not
including NRIs other than eligible NRIs) including sub-accounts of FIIs
registered with SEBI which are foreign corporate or foreign individuals
Non-Institutional Portion The portion of the Issue being not less than [●] Equity Shares of Rs.10
aggregating to Rs. [●] million each available for allocation to Non-
Institutional Bidders
Non-Resident A person resident outside India, as defined under FEMA and includes a
non-resident Indian
Pre-IPO Placement A pre-issue placement of up to 90,000,000 Equity Shares for cash
aggregating upto Rs. 900 million with certain investors, at the sole
discretion of the Company. If undertaken, the Pre-IPO Placement shall be
completed by the Company, prior to the filing of the Red Herring
Prospectus with the Registrar of Companies Maharashtra, Mumbai. If the
Pre-IPO Placement is completed, the Issue size offered to the public would
be reduced to the extent of such Pre-IPO Placement, subject to minimum
public Issue size being at least 25% of our post-Issue share capital.
Price Band Price band of a minimum price (floor of the price band) of Rs.[•] and the
maximum price (cap of the price band) of Rs.[•] and includes revisions
thereof. The price band will be decided by the Company in consultation
with the Book Running Lead Manager and advertised in the English
language, in the Hindi language and in the Marathi language newspapers
with wide circulation at least two working days prior to the Bid/Issue
Opening Date.
Pricing Date The date on which our Company in consultation with the BRLM finalizes
the Issue Price

v
Term Description
Preference Shares Non-cumulative Redeemable Preference Shares of our Company of Rs.10
each, unless otherwise specified.
Prospectus The Prospectus to be filed with the RoC in accordance with Section 60 of
the Companies Act, containing, inter alia, the Issue Price that is
determined at the end of the Book Building process, the size of the Issue
and certain other information
Public Issue Account Account opened with the Bankers to the Issue to receive monies from the
Escrow Account on the Designated Date
QIB Portion The portion of the Issue being not less than [●] Equity Shares of Rs.10
each aggregating to Rs.[•] million, to be allotted to QIBs
Qualified Institutional Public financial institutions specified in Section 4A of the Companies Act,
Buyers or QIBs FIIs (and their sub-accounts registered with SEBI, other than a sub-account
which is a foreign corporate or foreign individual), scheduled commercial
banks, mutual funds registered with SEBI, multilateral and bilateral
development financial institutions, FVCIs registered with SEBI, venture
capital funds registered with SEBI, state industrial development
corporations, insurance companies registered with the Insurance Regulatory
and Development Authority, provident funds with a minimum corpus of Rs.
250 million, pension funds with a minimum corpus of Rs. 250 million,
insurance funds set up and managed by the army, navy and air force of the
Union of India and the National Investment Fund set up by resolution F.
No. 2/3/2005-DD-II dated November 23, 2005 of the GoI, published in the
Gazette of India
Refund Account The account opened with Escrow Collection Bank(s), from which refunds,
if any, of the whole or part of the Bid Amount (excluding to the ASBA
Bidders) shall be made.
Refund Banker(s) [•]
Refunds through Refunds through electronic transfer of funds means refunds through ECS,
electronic transfer of funds Direct Credit, RTGS or the ASBA process as applicable
Registrar to the Issue Registrar to the Issue, in this case being Karvy Computershare Private
Limited
Retail Individual Bidder(s) Individual Bidders (including HUFs applying through their Karta and
eligible NRIs) who have not Bid for Equity Shares for an amount more
than Rs.100,000 in any of the bidding options in the Issue
Retail Portion The portion of the Issue being not less than [•]Equity Shares of Rs.10 each
aggregating to Rs.[•] million available for allocation to Retail Individual
Bidder(s)
Revision Form The form used by the Bidders, excluding ASBA Bidders, to modify the
quantity of Equity Shares or the Bid Price in any of their Bid cum
Application Forms or any previous Revision Form(s)
RHP or Red The Red Herring Prospectus issued in accordance with Section 60B of the
Herring Prospectus Companies Act, which does not have complete particulars of the price at
which the Equity Shares are offered and the size of the Issue. The Red
Herring Prospectus will be filed with the RoC at least three (3) days before
the Bid Opening Date and will become a Prospectus upon filing with the
RoC after the Pricing Date
Self Certified Syndicate The Banks which are registered with SEBI under SEBI (Bankers to an
Bank or SCSB Issue) Regulations, 1994 and offers services of ASBA, including blocking
of bank account and a list of which is available on http://www.sebi.gov.in
Stock Exchanges BSE and NSE
Syndicate The BRLM and the Syndicate Members collectively
Syndicate Agreement The agreement to be entered into between the Syndicate and our Company
in relation to the collection of Bids in this Issue (excluding Bids from the
ASBA Bidders)
Syndicate Members [•]
TRS/ Transaction The slip or document issued by a member of the Syndicate or the SCSB
Registration Slip to the Bidder as proof of registration of the Bid
Underwriters The BRLM and the Syndicate Members
Underwriting Agreement The agreement among the Underwriters and our Company to be entered
into on or after the Pricing Date

vi
Company Related Terms

Term Description
Articles/Articles The Articles of Association of our Company
of Association
Auditors The statutory auditors of our Company, M/s. B S R & Associates,
Chartered Accountants
Board of Directors/Board The board of directors of our Company or a committee constituted thereof
CVCIEL Citigroup Venture Capital International Ebene Limited
CVCIGPML Citigroup Venture Capital International Growth Partnership Mauritius
Limited
CVCIJL Citigroup Venture Capital International Jersey Limited
CVCIML Citigroup Venture Capital International Mauritius Limited
Director(s) Director(s) of our Company, unless otherwise specified
DOPL Digital Outsourcing Private Limited and its subsidiaries and associate
company on a consolidated basis where relevant
DOPL Acquisition Proposed acquisition of additional equity shares of DOPL over and above
our current shareholding of 36.24% in of the paid-up equity share capital of
DOPL by our Company
DOPL Selling Shareholders Mrs. Rambhaben Ukabhai, Mrs. Gita T. Tanti, Mrs. Sangita V. Tanti, Mrs.
Lina J. Tanti and Radha Girish Tanti
DOPL Share Subscription Share Subscription and Purchase Agreement dated March 30, 2010 entered
and Purchase Agreement into between Mrs. Rambhaben Ukabhai, Mrs. Gita T. Tanti, Mrs. Sangita
V. Tanti, Mrs. Lina J. Tanti and Radha Girish Tanti through their
representative Mr Jitendra R Tanti and our Company
Group Companies Means those companies, firms and ventures promoted by our Promoters,
irrespective of whether such entities are covered under section 370(1)(B)
of the Companies Act and disclosed in the section “Our Promoters and
Group Companies” on page 119 of this Draft Red Herring Prospectus
KMP Key Managerial Personnel
Memorandum/Memorand The Memorandum of Association of our Company.
um of Association
Promoters Mr. Eyyuni Venkat Srinivas Chakravarthy, You Telecom (Mauritius)
Limited, and Citigroup Venture Capital International Growth Partnership
Mauritius Limited
Promoter Group Includes such persons and entities constituting our promoter group in
terms of Regulation 2(zb) of the SEBI ICDR Regulations
Registered Office The registered office of our Company located at Plot No. 54, Marol Co-
operative Industrial Estate, Makwana, Andheri East, Mumbai,
Maharashtra – 400059
Scheme of Amalgamation The scheme of arrangement and amalgamation pursuant to the provisions
under Sections 391 and 394 of the Companies Act, between the erstwhile
You Telecom India Private Limited and our Company, as approved by
Hon’ble High Court of Bombay vide its Order dated April 11, 2007.
Scheme of Capital Reduction The scheme of reduction of the issued, subscribed and paid up share
capital of our Company from Rs.3,913,220,040 to Rs.2,308,611,910,
reduction of securities premium account from Rs.171,017,920 to nil and
reduction of capital reserve account from Rs.60,528,942 to nil pursuant to
the provisions of Sections 78, 100 to 103 of the Companies Act, as
approved by the Hon’ble High Court of Bombay vide its order dated
December 18, 2009 and supplementary order dated January 28, 2010, as
effective from March 31, 2009.
YTML You Telecom (Mauritius) Limited

vii
Technical/Industry Related Terms

Term Description
3G International Mobile Telecommunications-2000 (IMT-2000)', better known
as 3G or 3rd Generation, is a family of standards for mobile
telecommunications defined by the International Telecommunication
Union
ADSL Asymmetric Digital Subscriber Line
ARPU Average Revenue Per User
Bandwidth A Measure of data transmission rate; the maximum amount of information
(bits/second) that can be transmitted along a channel
C&S Cable and Satellite
Cable Broadband Broadband Internet access using cable modem
CAGR Compounded Annual Growth Rate
CAS Conditional Access System
CAT5 Category 5 cable which is a twisted pair high signal cable used in Telecom
CDMA Code Division Multiple Access
CMTS Cable Modem Termination System
Dark Fiber Unused optical fibers, available for lease to other service providers
DNS Domain Name Server
DOCSIS Data Over Cable Service Interface Specifications
DoT Department of Telecommunications.
DSL Digital Subscriber Line
DSLAM Digital Subscriber Line Access Multiplexer
DTH Direct To Home.
DVD Digital Video Disc Or Digital Versatile Disk
DVR Digital Video Recorder
EPG Electronic Programme Guide
FICCI-KPMG Report, 2009 FICCI-KPMG Media & Entertainment Industry Report, 2009
GSM Global System for Mobile communications
HFC Hybrid Fibre Co-Axial.
HITS Head end in the Sky.
IPTV Internet Protocol Television.
IRD Integrated Receiver Descrambler/Decoder
ISP Internet Service Provider.
Kbps Kilo bits per second
LCO Local Cable Operator
LED Light Emitting Diode
MB Mega Byte
Mbps Mega bits per second
MHz Mega Hertz
MIB Ministry of Information and Broadcasting
Modem Modulator-demodulator
MPA report Report The Media Partners Asia Report titled Asia Pacific Pay TV &
Broadband Markets 2009.
MSO Multi Systems Operator
Non-C&S Non-Cable and Satellite
viii
Term Description
One Way Network Represents a HFC network where a service provider can offer only signals
on the downstream path on its cable network.
QAM Quadrature Amplitude Moderation
RF Radio Frequency
SEC A & SEC B Categories falling under a five-tiered socioeconomic classification ("SEC")
scale, which groups Indian households according to the occupation and
educational profile of the main wage earner, ranging from SEC A, SEC B,
SEC C, SEC D to SEC E. SEC A and SEC B comprise the top two
segments based on this socioeconomic classification.

STB Set Top Box


Starter Pack Product of the Company which is used to acquire new customers which
offers installation to the potential customer and limited trial usage
TDSAT Telecom Dispute Settlement & Appellate Tribunal
TRAI Telecom Regulatory Authority of India.
Two way Network Represents a HFC network where a service provider can offer signals on
both the upstream and downstream paths on its cable network.
VOD Video on Demand
VoIP Voice over Internet Protocol
Wi Fi Wireless Fidelity – This term is used to describe a set of standards for
devices that connect to a network using wireless technology
Wimax Worldwide Interoperability for Microwave Access, is a
telecommunications technology that provides wireless transmission of data
using a variety of transmission modes

ix
PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Financial Data

Unless indicated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our
Company’s restated financial statements as of and for the years ended March 31, 2005, 2006, 2007, 2008
and 2009 and as of and for the six months ended September 30, 2009, prepared in accordance with Indian
GAAP and the Companies Act, 1956 and restated in accordance with SEBI ICDR Regulations, as stated in
the report of our Auditor, B S R & Associates, Chartered Accountants, and included in this Draft Red
Herring Prospectus. Our fiscal/ financial year commences on April 1 and ends on March 31 of a particular
year. Unless stated otherwise, references herein to a fiscal year (e.g., fiscal 2007) or a financial year or to
“FY”, are to the year ended March 31 of a particular year.

Our Company currently holds 36.24% of the paid-up equity share capital of our associate company Digital
Outsourcing Private Limited. We have entered into agreements with certain other shareholders of Digital
Outsourcing Private Limited for the acquisition of additional equity shares in Digital Outsourcing Private
Limited. For further information, see “History and Certain Corporate Matters” beginning on page 101,
"Objects of the Issue" on page 39, "Risk Factors - We have entered into various agreements in connection
with the proposed acquisition of additional equity shares in Digital Outsourcing Private Limited. We may
not be able to complete such proposed acquisitions which could affect our business strategy and results of
operations" beginning on page xiv and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” beginning on page 130. We have also included in this Draft Red Herring Prospectus
the restated standalone and consolidated financial statements of Digital Outsourcing Private Limited as of
and for the years ended March 31, 2008 and 2009 and as of and for the six months ended September 30,
2009, together with the report thereon of B S R & Company, Chartered Accountants. See "Financial
Statements of Digital Outsourcing Private Limited" beginning on page 129.

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

There are significant differences between generally accepted accounting principles in India (Indian GAAP),
International Financial Reporting Standards (IFRS) and generally accepted accounting principles in the
United States of America (U.S. GAAP); accordingly, the degree to which the Indian GAAP financial
statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely
dependent on the reader’s level of familiarity with Indian accounting practices, Indian GAAP, the
Companies Act and the SEBI ICDR Regulations. Any reliance by persons not familiar with Indian
accounting practices, Indian GAAP, the Companies Act and the SEBI ICDR Regulations on the financial
disclosures presented in this Draft Red Herring Prospectus should accordingly be limited. Our Company
has not attempted to explain these differences or quantify their impact on the financial data included herein,
and we urge you to consult your own advisors regarding such differences and their impact on our financial
data.

Unless otherwise specified or the context otherwise requires, all references to “India” in this Draft Red
Herring Prospectus 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 otherwise indicated in the Draft Red Herring Prospectus, all figures have been expressed in millions.

Currency of Presentation

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

x
Period Average Rate (Rs.) Closing Rate (Rs.)
For the period January 01, 2006- 45.32 44.12
December 31, 2006
For the period January 01, 2007- 41.36 39.44
December 31, 2007
For the period January 01, 2008- 43.81 49.72
December 31, 2008
For the conversion of financial information of Promoter and Group Companies from USD to INR, we have used
average rate for items relating to Profit & Loss account and closing rate for items relating to Balance
Sheet(Source:www.oanda.com)

This Draft Red Herring Prospectus contains translations of certain US Dollar and other currency amounts
into Indian Rupees that have been presented solely to comply with the requirements of Item VIII (G) of Part
A to Schedule VIII of the SEBI ICDR Regulations. These translations should not be construed as a
representation that those US Dollar or other currency amounts could have been, or can be converted into
Indian Rupees, at any particular rate.

Unless otherwise stated, our Company has in this Draft Red Herring Prospectus used a conversion rate of
Rs.50.95 for one US Dollar, being the RBI reference rate as of December 31, 2009 (Source: RBI website at
www.rbi.org/in/scripts/BS_PressReleaseDisplay.aspx). Such translations should not be considered as a
representation that such U.S Dollar amounts have been, could have been or could be converted into Rupees
at any particular rate, the rates stated above or at all.

Industry and Market Data

Unless stated otherwise, industry data used throughout this Draft Red Herring Prospectus has been obtained
from industry publications. Industry publications generally state that the information contained in those
publications has been obtained from sources believed to be reliable but their accuracy and completeness are
not guaranteed and their reliability cannot be assured. Although our Company believes that the industry
data used in this Draft Red Herring Prospectus is reliable, neither we nor the BRLM have independently
verified such information.

Further, the extent to which the market data presented in this Draft Red Herring Prospectus is meaningful
depends on the reader’s familiarity with and understanding of the methodologies used in compiling such
data. There are no standard data gathering methodologies in the industry in which we conduct our business,
and methodologies and assumptions may vary widely among different industry sources.

In accordance with SEBI ICDR Regulations, we have included in the section “Basis for Issue Price” on
page 47 information relating to our peer group companies. Such information has been derived from publicly
available sources and neither we nor the BRLM have independently verified such information.

xi
NOTICE TO INVESTORS

The Equity Shares have not been recommended by any US federal or state securities commission or
regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined
the adequacy of this Draft Red Herring Prospectus. Any representation to the contrary is a criminal offence
in the United States.
The Equity Shares have not been and will not be registered under the US Securities Act of 1933, as
amended (“Securities Act”), and, unless so registered, may not be offered or sold within the United States
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the
Securities Act. Accordingly, the Equity Shares are being offered and sold (a) in the United States only to
persons reasonably believed to be “qualified institutional buyers” (as defined in Rule 144A under the
Securities Act and referred to in this Draft Red Herring Prospectus as “U.S. QIBs”, for the avoidance of
doubt, the term U.S. QIBs does not refer to a category of institutional investor defined under applicable
Indian regulations and referred to in this Draft Red Herring Prospectus as “QIBs”), in transactions exempt
from the registration requirements of the Securities Act and (b) outside the United States in compliance with
Regulation S and the applicable laws of the jurisdiction where those offers and sales occur.
This Draft Red Herring Prospectus has been prepared on the basis that all offers of Equity Shares will be
made pursuant to an exemption under the Prospectus Directive, as implemented in Member States of the
European Economic Area (“EEA”), from the requirement to produce a prospectus for offers of Equity
Shares. The expression “Prospectus Directive” means Directive 2003/71/EC of the European Parliament
and Council and includes any relevant implementing measure in each Relevant Member State (as defined
below). Accordingly, any person making or intending to make an offer within the EEA of Equity Shares
which are the subject of the placement contemplated in this Draft Red Herring Prospectus should only do so
in circumstances in which no obligation arises for the Company or any of the Underwriters to produce a
prospectus for such offer. None of the Underwriters and the Company has authorised, nor do they authorise,
the making of any offer of Equity Shares through any financial intermediary, other than the offers relating to
the Equity Shares contemplated in this Draft Red Herring Prospectus.

xii
FORWARD-LOOKING STATEMENTS

This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward-looking
statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”,
“estimate”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other
words or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or
goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties
and assumptions about us that could cause actual results to differ materially from those contemplated by the
relevant statement.
These forward looking statements are based on our current plans and expectations. Actual results may differ
materially from those suggested by the forward-looking statements due to risks or uncertainties associated
with our expectations with respect to, but not limited to, regulatory changes pertaining to the industries in
India in which we have our businesses and our ability to respond to them, our ability to successfully
implement our strategy, our growth and expansion, technological changes, our exposure to market risks,
general economic and political conditions in India which have an impact on our business activities or
investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in
interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial
markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition
in our industry. Important factors that could cause actual results to differ materially from our expectations
include, but are not limited to, the following:

i. Our inability to effectively manage our growth or to successfully implement our business plan and
growth strategy;

ii. General economic and business conditions in India and other countries;

iii. Statutory and/or regulatory changes relating to telecommunications, media and broadcasting industry
including the broadband industry and the cable television industry in India and our ability to respond to
them;

iv. Our ability to successfully implement our strategy, our growth and expansion, subject to technological
changes and our exposure to market risks that have an impact on our business activities or investments;

v. The occurrence of natural disasters or calamities;

vi. Change in political conditions in India;

vii. Foreign exchange rates, equity prices or other rates or prices; and

viii. The performance of the financial markets in India


For further discussion of factors that could cause our actual results to differ from our expectations, see “Risk
Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” on pages xiv, 76 and 130 of this Draft Red Herring Prospectus. By their nature,
certain market risk disclosures are only estimates and could be materially different from what actually
occurs in the future. As a result, actual future gains or losses could materially differ from those that have
been estimated. Neither our Company, our Directors, nor any of the Underwriters nor any of their respective
affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising
after the date hereof. In accordance with SEBI requirements our Company and the BRLM will ensure that
investors in India are informed of material developments until the time of the grant of listing and trading
permission by the Stock Exchanges.

xiii
SECTION II: RISK FACTORS

RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all the
information in this Draft Red Herring Prospectus, including the risks and uncertainties described below
and the sections "Business" and "Management's Discussion and Analysis on Financial Condition and
Results of Operations" beginning on pages 76 and 130, respectively, of this Draft Red Herring Prospectus,
before making an investment in the Equity Shares of our Company. The risks described in this section are
those that we consider to be the most significant to the offering of our Equity Shares. If any of the following
risks, or other risks that are not currently known or are now deemed immaterial, actually occur, our
business, results of operations and financial condition could suffer materially, the trading price of our
Equity Shares could decline, and all or part of your investment may be lost. The risks set out in this Draft
Red Herring Prospectus may not be exhaustive and additional risks and uncertainties not presently known
to us, or which we currently deem to be immaterial, may arise or may become material in the future.
Further, some events may have a material impact from a qualitative perspective rather than a quantitative
perspective and may be material collectively rather than individually. Unless specified or quantified in the
relevant risk factors below, we are unable to quantify the financial or other implication of any of the risks
mentioned herein.

This Draft Red Herring Prospectus also contains forward-looking statements that involve risks and
uncertainties. Our results could differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including the considerations described below and elsewhere in this Draft Red
Herring Prospectus.

In this section, in addition to the risks relating to our Cable Broadband business, we have also included
risks relating to the cable television business and operations of our associate company Digital Outsourcing
Private Limited and its subsidiaries and associate company. The cable television business of Digital
Outsourcing Private Limited and its subsidiaries and associate company is distinct from the business and
operations of our Company.

In this section, unless the context otherwise requires, a reference to our "Company" or to "we", "us" and
"our" refers to YOU Broadband & Cable India Limited, and a reference to "DOPL" refers to Digital
Outsourcing Private Limited and its subsidiaries and associate company, on a consolidated basis. Unless
otherwise stated or the context otherwise requires, the financial information used in this section is derived
from the restated financial statements of our Company and the restated consolidated financial statements of
DOPL, as applicable.

INTERNAL RISK FACTORS

RISKS RELATING TO OUR CABLE BROADBAND BUSINESS AND THE DOPL ACQUISITION

1. There are certain criminal proceedings pending against the Promoter and Directors of our
Company which if decided against them, could have a material adverse impact on our reputation,
financial condition and results of operations.

There are certain criminal proceedings against our Promoter and Directors of our Company. These
relate to unauthorized transmissions under the Indian Copyrights Act. As of the date of this Draft Red
Herring Prospectus, 5 (five) criminal proceedings are pending against the Promoter, Mr. Eyyuni
Venkat Srinivas Chakravarthy and another Director of our Company, namely Mr. Perumal Srinivasan.
In case any of the charges pending against our aforenamed Promoter and Directors of our Company.
They may be required to pay monetary compensation and/or be imprisoned.

We cannot provide any assurance that these matters will be decided in their favour. Further, there is
no assurance that similar proceedings will not be initiated against us, our Directors or Promoters in
xiv
the future. For further details of the cases mentioned above, see “Outstanding Litigation and
Material Developments” on page 161.

2. We have a history of net losses and there can be no assurance that we will not incur further losses
in the future.

In fiscal 2007, 2008 and 2009 and in the six months ended September 30, 2009, we incurred restated
loss for the year/period of Rs.266.47 million, Rs.366.14 million, Rs.159.49 million and Rs.90.96
million respectively. Depreciation and amortization expenses of Rs.216.98 million, Rs.256.53
million, Rs.269.45 million and Rs.138.33 million in fiscal 2007, 2008 and 2009 and in the six months
ended September 30, 2009, respectively, primarily relating to our Cable Broadband infrastructure and
equipment, have been a significant factor in the net losses we incurred. We have also incurred and
expect to incur significant other expenditure, including administrative and other expenses, primarily
comprising personnel expenses, rent and pre-operational expenses, in connection with the growth of
our business and development of our network infrastructure. As we continue to expand our network
infrastructure and grow through strategic acquisitions, including the proposed acquisition of
additional shareholding in Digital Outsourcing Private Limited and the acquisition of LCOs and other
MSOs to expand into the cable television business, we expect our depreciation and amortization
expenses and other expenditure to increase, and we expect this to continue to have a material adverse
effect on our results of operations. There can be no assurance that we will not incur losses in the
future. Our failure to generate profits may adversely affect the market price of our Equity Shares,
restrict our ability to pay dividends and impair our ability to raise capital and expand our business.

3. In the event that we do not receive sufficient Applications/Bids from Applicants/Bidders who are
persons resident in India to ensure that more than 50.00% of the shareholding of our Company
following the Issue will be held by resident Indian citizens and/or Indian companies which are in
turn owned by resident Indian citizens (“Residents”), we intend to withdraw the Issue subject to
compliance with applicable statutory and regulatory requirements.
As part of our growth strategy, we intend to acquire a majority equity interest in DOPL and other
MSOs and LCOs in order to integrate our broadband business and infrastructure with the cable
television business of DOPL and/or other MSOs and LCOs. Under applicable statutory and
regulatory requirements, our Company may acquire a majority equity interest in DOPL and /or other
MSOs and LCOs only if our Company is Indian owned and controlled, i.e., if (i) more than 50.00%
of the equity interest in our Company is beneficially owned by Residents and (ii) Residents have the
power to appoint a majority of the directors on the Board of our Company. In the event that we do not
receive sufficient Applications/Bids from Applicants/Bidders who are Residents to ensure that more
than 50.00% of the paid-up equity shareholding of our Company following the Issue will be held by
Residents, we intend to withdraw the Issue subject to compliance with applicable statutory and
regulatory requirements. In such event, we will not proceed to make any Allotments under the Issue
and will refund the application money received from Bidders/ Applicants in accordance with
applicable statutory and regulatory requirements. Under applicable regulations, we are required to
refund all Bid Amounts deposited within 15 days of the Bid/Issue Closing Date, and pay interest at
the rate of 15.00% per annum on the Bid Amounts received if refund orders are not dispatched within
15 days from the Bid/Issue Closing Date. For further information, see “Issue Procedure” beginning
on page 209.

4. We have entered into various agreements in connection with the proposed acquisition of additional
equity shares in Digital Outsourcing Private Limited. We may not be able to complete such
proposed acquisitions which could affect our business strategy and results of operations.

Our Company currently holds 36.24% of the paid-up equity share capital of Digital Outsourcing
Private Limited. We have entered into the following arrangements in connection with the proposed
acquisition of additional equity shares in Digital Outsourcing Private Limited (the “DOPL
Acquisition”):

DOPL Sale Shares I


We have on March 30, 2010 entered into a share subscription and purchase agreement with certain
xv
other shareholders of Digital Outsourcing Private Limited (the “DOPL Selling Shareholders”)
pursuant to to which our Company is entitled to to purchase 416,125 equity shares constituting
12.75% of issued and paid-up share capital of Digital Outsourcing Private Limited, (“DOPL Sale
Shares I”), inter-alia subject to allotment of 10,688,757 Equity Shares of our Company constituting
4.425% of our equity share capital as on the date of the DOPL Share Subscription and Purchase
Agreement in consideration for an absolute and perpetual right to our Company (either itself or
through its nominees or assignees) to acquire the DOPL Sale Share I, (ii) extinguishment of all rights
and privileges of Tanti Family with respect to our Company, (iii) termination of all obligations of our
Company under the shareholders agreement dated March 31, 2008 between our Company, the Tanti
Family and Digital Outsourcing Private Limited and (iv) Rs 100,000 (Rupees One Hundred Thousand
Only).

For further information relating to the DOPL Share Subscription and Purchase Agreement and the
proposed acquisition of the DOPL Sale Shares I, see "History and Certain Corporate Matters"
beginning on page 101.

DOPL Sale Shares II

Pursuant to the terms of the DOPL Share Subscription and Purchase Agreement, our Company has
also agreed to acquire, as soon as reasonably practicable and in any event within a period of 60
business days of the completion of the Issue, an additional 433,875 equity shares of, representing an
additional 13.29% of the equity shareholding in, Digital Outsourcing Private Limited (the “DOPL
Sale Shares II”, and together with the DOPL Sale Shares I, the “DOPL Sale Shares”) from the
DOPL Selling Shareholders, for an aggregate consideration of up to Rs.128.27 million to be agreed
between our Company and the DOPL Selling Shareholders. We intend to pay such consideration
amount out of the Net Proceeds of the Issue. For further information, see “Objects of the Issue”
beginning on page 39. The completion of the proposed acquisition of the DOPL Sale Shares II is
subject to certain closing conditions, including, among others, that (i) our Company shall have been
listed on the Stock Exchanges, (ii) the acquisition of the DOPL Sale Shares I shall have been
completed and (iii) our Company, the DOPL Selling Shareholders and DOPL shall have entered into
an agreement terminating the DOPL Shareholders Agreement with effect from the completion of the
acquisition of the DOPL Sale Shares II. For further information relating to the DOPL Share
Subscription and Purchase Agreement and the proposed acquisition of the DOPL Sale Shares II, see
"History and Certain Corporate Matters " beginning on page 101.

The transactions contemplated in the DOPL Share Subscription and Purchase Agreement are
therefore subject to various conditions, including the outcome of the Issue and applicable statutory
and regulatory conditions and the closing conditions stipulated in the DOPL Share Subscription and
Purchase Agreement. In the event that such conditions are not satisfied, we may not be able to
complete the proposed DOPL Acquisition. There can be no assurance that we will complete the
DOPL Acquisition as proposed, on schedule or at all. An inability to successfully complete such
proposed acquisition could materially and adversely affect our growth strategy, particularly our
strategy of expanding our operations into the cable television business in order to enable provision of
integrated Cable Broadband and cable television services. Investors should not place undue reliance
on the success of the proposed DOPL Acquisition.

5. If the DOPL Acquisition results in our Company acquiring a majority shareholding in Digital
Outsourcing Private Limited, our financial condition and results of operations may not be
comparable to those prior to such acquisition.

We have included in this Draft Red Herring Prospectus the restated financial statements of our
Company as of and for the years ended March 31, 2005, 2006, 2007, 2008 and 2009 and as of and for
the six months ended September 30, 2009. We have also included in this Draft Red Herring
Prospectus the restated standalone and consolidated financial statements of Digital Outsourcing
Private Limited as of and for the years ended March 31, 2008 and 2009 and as of and for the six
months ended September 30, 2009 (collectively, the "DOPL Financial Statements"). Since our
Company currently holds 36.24% of the paid-up equity share capital of Digital Outsourcing Private
Limited, the restated financial statements of our Company included in this Draft Red Herring
xvi
Prospectus do not reflect the financial condition and results of operations of Digital Outsourcing
Private Limited or its subsidiaries and joint ventures.

This Draft Red Herring Prospectus does not include any pro forma balance sheet or pro forma profit
and loss statement prepared in accordance with the laws and regulations of the United States or any
other jurisdiction, which would have shown the effect on our historical financial condition and results
of operations of DOPL pursuant to the proposed DOPL Acquisition, assuming that the DOPL
Acquisition had occurred at the beginning of the relevant reporting period. Investors will therefore
need to base their assessment of the financial condition and results of operations of our Company
subsequent to the DOPL Acquisition on the basis of the restated financial statements of our Company,
the DOPL Financial Statements and other information with respect to DOPL included in this Draft
Red Herring Prospectus.

In fiscal 2008 and 2009 and in the six months ended September 30, 2009, DOPL incurred losses (after
adjustment of minority interest) of Rs.25.71 million, Rs.481.59 million and Rs.171.12 million,
respectively. Since the results of operations of DOPL are not reflected in the restated financial
statements of our Company included in this Draft Red Herring Prospectus, the losses incurred by
DOPL are not reflected in the financial statements of our Company. In addition, the Board of
Directors of our Company have determined that these losses principally resulted from the high
startup costs of the cable television business of DOPL, and accordingly, no adjustments were required
to be made in our Company’s restated financial statements to the carrying value of the investments
made in, and loans advanced to, DOPL and its subsidiaries. If the DOPL Acquisition results in our
Company acquiring a majority shareholding in Digital Outsourcing Private Limited then the financial
statements of DOPL will be consolidated with that of our Company's, and we expect that the DOPL
Acquisition would materially affect our financial condition and results of operations. In addition,
since the cable television business of DOPL is distinct from the existing broadband business of our
Company, the form of presentation of the consolidated financial statements of our Company
following the DOPL Acquisition may not be comparable to the form of presentation of the financial
statements of our Company prior to such acquisition.

6. We may not be able to increase our customer base, revenues and profitability for our broadband
business, which could adversely affect our business, results of operations and financial condition.

Our revenues are dependent on our ability to expand our subscriber base, in both the residential
segment and the enterprise segment, as well as maintain our existing subscriber base. Our revenues
are also dependent on the nature of services provided to our subscribers and the extent of usage by
subscribers.

Our ability to increase our subscriber base is dependent on various factors, including the quality and
nature of services we provide, general economic conditions in India, the reach of our Cable
Broadband infrastructure as well as competition. There can be no assurance that we will be able to
increase our subscriber base in the residential or enterprise segments, or increase the average revenue
generated from each such subscriber. In order to increase our subscriber base, it may be necessary to
lower our rates or to increase our cost of customer acquisition. Turnover of subscribers in the form of
subscriber service cancellations, or churn, may adversely affect our results of operations, as does the
cost of upgrading and retaining subscribers. An increase in the upgrade and retention costs for our
existing subscribers or an increase in other operating costs may result in an increase in the price of our
services, leading to lower usage and decline in the average revenue generated from our subscribers, or
higher churn rate, either or both of which could result in lower margins, slower growth and lower
profitability. Churn may also increase due to factors beyond our control, including churn by
subscribers who are unable to pay their monthly subscription fees, a slowing economy, consumer
fraud and competitive offers. Any operational risks that could potentially have a material adverse
impact on our costs or service quality or that could result in higher prices for our subscribers could
also, in turn, cause an increase in churn and consequently have a material adverse effect on our
earnings and financial performance.

The launch of new and commercially viable products and services is important to the success of our
business. Commercial acceptance by consumers of the new or upgraded products and services we
offer may not occur at the rate, duration or level expected, and we may not be able to successfully
xvii
adapt the new services effectively and economically to meet consumers’ demand, which would limit
the return from our investments. In addition, we face the risk of unforeseen complications or delays in
the deployment of these new products and services, and we cannot assure you that our estimate of the
necessary capital expenditure to offer such products and services will not be exceeded. We may be
unable to develop and/or deploy new products and services according to expected schedules, and the
failure of any of our products and services to achieve commercial acceptance could result in
additional capital expenditures or a reduction in profitability. Any such failure may have a material
adverse effect on our results of operations and financial condition.

7. The development of our network infrastructure and the execution of our growth strategy involve
significant capital expenditure, and an inability to fund such capital requirements may adversely
affect our business strategies, financial condition and results of operations.
The development of our network infrastructure is capital intensive and we have incurred significant
capital expenditure in connection with the development and expansion of our quality triple-play
capable two-way HFC cable network infrastructure in a scalable manner. Moreover, we will need
substantial additional funding to implement our growth strategy, including the development of our
network infrastructure, as well as the proposed expansion of the cable television business following
the DOPL Acquisition and/or through other strategic acquisitions of MSOs and LCOs. In fiscal 2007,
2008 and 2009, and in the six months ended September 30, 2009, we incurred capital expenditure of
Rs.216.89 million, Rs.441.48 million, Rs.127.67 million and Rs.40.08 million, respectively.
Historically, we have funded such expenditure through a combination of equity and debt financing
and internal accruals.
We expect to incur significant additional capital expenditure and other capital costs in connection
with the proposed expansion of our cable broadband infrastructure to additional cities and towns in
the future, including for the establishment of additional network operations control centers and fees
payable to municipal authorities in connection with the laying of our cable infrastructure. We also
expect to incur capital expenditure relating to the rollout of our wireless services in high density areas
and in connection with the upgrading of our servers and billing systems. In addition, we expect to
incur further expenditure to acquire STBs and other related equipment in connection with the cable
television business and to upgrade DOPL's existing cable network infrastructure from one-way to
two-way HFC cable network enabling simultaneous data, voice and video transmission. For further
information relating to our planned capital expenditure, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" beginning on page 130.

Our ability to arrange financing and the cost of such financing are dependent on numerous factors,
including but not limited to general economic and capital market conditions, the availability of credit
from banks or other lenders, investor confidence in us and the performance of our business
operations. We cannot predict when, if ever, our operations will generate sufficient cash flows to fund
our capital investment requirements. Until they do, we will be required to finance our cash needs
through public or private equity offerings, bank loans or other debt financing, or otherwise. There can
be no assurance that international or domestic financing will be available on terms favorable to us or
at all, which could force us to delay, reduce or abandon our growth strategy, increase our financing
costs, or both.

Financial resources available to us may be inadequate and the actual amount and timing of future
capital requirements may differ from our estimates. Our growth and business strategies may depend
upon our ability to obtain funds through equity or debt financing. Our ability to continue to arrange
for financing and the costs of such capital is dependent on various factors, including general
economic and capital market conditions, availability of credit from banks and financial institutions,
the success of our business and operations and other factors beyond our control. Additional funding
from debt financings may make it more difficult for us to operate our business because we would
need to make principal and interest payments on the indebtedness and may be obligated to abide by
restrictive covenants contained in the debt financing agreements, which may, among other things,
limit our ability to make business and operational decisions and pay dividends. Furthermore, raising
capital through public or private sales of equity or equity-linked instruments to finance acquisitions or
expansion could cause earnings or ownership dilution to your shareholding interests in our Company.
There can no assurance regarding the availability of such financing on terms acceptable to us, and the

xviii
lack of such financing could have a material adverse effect on our business, results of operations and
financial condition.

8. We face significant competition in our broadband business which could adversely affect our results
of operations.

In our broadband business, we face significant competition from various established competitors,
including Bharti Airtel Limited, Tata Communications Limited (formerly Videsh Sanchar Nigam
Limited), Reliance Infocom Limited and Tata Teleservices Limited, and the government-controlled
telecommunication companies, Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam
Limited. Following the liberalization of the ISP business in India, various additional competitors have
emerged, including companies that provide comparable services through newer technologies, such as
through wireless high-speed data cards. In the future, we may also have to compete with new
technologies and additional products and services introduced by our competitors, including through
broadband wireless access, Wimax and 3G technologies.

Our ability to compete also depends on various factors beyond our control, such as availability of
skilled technical and marketing personnel, the price at which our competitors offer comparable
services, and the extent of our competitors’ responsiveness to customer needs. Our competitors may
enjoy significant competitive advantages over us, including greater financial resources and economies
of scale, which may enable such entities to charge prices that are lower than the price of our product
and service offerings in order to attract subscribers. We have in the past lowered the price of our
product and service offerings in response to competition and there can be no assurance that we will
not be similarly required to lower our prices in the future or that such decrease in the price of our
product and service offerings will not result in a decrease in our revenues. We expect the market for
the ISP and Cable Broadband services to remain extremely price competitive, and increased
competition may result in loss of market share. In addition, we may be required to adopt pricing,
service or marketing strategies that may result in a decrease in revenues and an increase in operating
expenses and resultant losses.

9. Our business and operations may be subject to various risks arising out of the proposed DOPL
Acquisition, including the integration and expansion of DOPL's operations, which could adversely
impact our business strategy, results of operations and financial condition.

Our business and operations will be subject to various risks arising out of the proposed DOPL
Acquisition, particularly if the DOPL Acquisition results in our Company acquiring a majority
shareholding in Digital Outsourcing Private Limited. These risks may adversely impact our business
strategy, financial condition and results of operations, which could in turn affect the value of the
Equity Shares. For further information on risks relating to the business and operations of DOPL, see
"Risk Factors - Risks Relating to the Cable Television Business of DOPL" beginning on page xiv.

We may not be successful in integrating the business and operations of DOPL with the operations of
our Company or achieve the anticipated benefits of the proposed DOPL Acquisition. While we
believe that the DOPL Acquisition is likely to result in increased operational synergies resulting from
the ability to provide integrated broadband and cable television services and the acquisition of
DOPL's existing subscriber base, there can be no assurance that we will be able to successfully carry
out the cable television business or otherwise achieve the synergies and other benefits we expect from
the DOPL Acquisition. Commercial acceptance by consumers of the integrated broadband and cable
television services that we may offer following the DOPL Acquisition may not occur at the rate or
level expected, and we may not be able to successfully adapt such integrated product and service
offerings effectively and economically to meet subscriber demand. In addition, we face the risk of
unforeseen complications in the integration of the cable network infrastructure and the deployment of
integrated product and service offerings, and there can be no assurance that our estimate of the
necessary capital expenditure to offer such integrated product and service offerings will not be
exceeded. Any difficulties encountered in integrating and/or managing the cable television business
could result in higher costs for our Company.

In addition, we may require additional capital for the successful expansion into the cable television
business and the integration of the DOPL business and operations with that of our Company. We
xix
expect to incur further expenditure to acquire additional STBs and other related equipment in
connection with the cable television business, to upgrade DOPL's existing cable network
infrastructure from one-way to two-way HFC cable network enabling simultaneous data, voice and
video transmission, and to upgrade "last mile" connections we may acquire through the acquisition of
the operations of DOPL. For further information relating to our planned capital expenditure in
connection with the cable television business, see "Objects of the Issue" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 39 and
page 130, respectively. An inability to raise adequate finances in a timely manner and on
commercially acceptable terms for the expansion of the cable television business and the integration
of the business and operations of DOPL with those of our Company could materially and adversely
affect our results of operations.

10. The proposed DOPL Acquisition may be subject to risks with respect to valuation and unforeseen
risks and liabilities resulting from such acquisition, which may adversely affect our financial
condition and results of operations.

Digital Outsourcing Private Limited was incorporated in 2007 and has a limited operating history and
we have a limited basis on which to evaluate the ability of DOPL to achieve its business objectives.
We currently have a minority interest in DOPL and do not control the operations of DOPL. The
information relied on by us with respect to the business and operations of DOPL may be incomplete
or inaccurate, and following the DOPL Acquisition, we may be subject to unforeseen risks, liabilities
and obligations. In addition, we may not have any recourse against the DOPL Selling Shareholders in
connection with any loss that may arise out of the proposed DOPL Acquisition.
In connection with the DOPL Acquisition, SSPA & Co., independent accountants, have carried out a
valuation of DOPL. There is however no standard valuation methodology for companies in the
entertainment and media industry in India, including the cable television industry. Current valuations
may not be reflective of future valuations within the entertainment and media industry or the cable
television industry. In addition, current valuations of listed companies in the cable television industry
may not be comparable with those of DOPL.
11. We may not be successful in implementing our business strategies, including the acquisition of
MSOs and LCOs, which could materially and adversely affect our business prospects, results of
operations and financial condition.

We may not be successful in implementing our business strategies with respect to our broadband
business, including the expansion of our broadband subscriber base by leveraging our existing
infrastructure at relatively low marginal cost or increasing our broadband revenues through the
introduction of new value added product and service offerings to our residential and enterprise
segment customers. We may also not be successful in implementing our strategy of expanding into
the cable television business through the acquisition of DOPL or other MSOs and LCOs or benefiting
from the operational and other synergies from the provision of integrated broadband and cable
television services.

As of the date of this Draft Red Herring Prospectus, we have not identified any specific MSOs or
LCOs for acquisition. We may not succeed or experience delays in the implementation of our
business strategies for various reasons, including a failure to build out our cable networks and
integrating the networks and technologies of DOPL or any other MSO or LCO that we may acquire in
the future, capital shortfalls, failure of third party suppliers to deliver services and products in a timely
manner and our inability to meet our own implementation schedules. There can be no assurance that
our business strategies will be satisfactorily implemented, and the growth of our business may be
adversely affected as a result of such failure, thereby adversely affecting our results of operations and
financial condition.

12. Our computer systems and network infrastructure may be damaged or disrupted, which may
adversely affect our reputation, business prospects and results of operations.

Due to the importance of computer systems and network infrastructure to our business, any event
affecting our systems could have a material adverse effect on our business. As part of our business
strategy, we use our information systems and the Internet to deliver services to and perform
xx
transactions on behalf of our customers. We depend extensively on the capacity and reliability of the
electronic systems supporting our operations. Although we have not experienced widespread
disruptions of service to customers in the past, there can be no assurance that we will not encounter
disruptions or damage in the future due to substantially increased numbers of customers and
transactions or for other reasons. If we experience system interruptions, errors or downtime which
could result from a variety of causes, including changes in client use patterns, technological failure,
changes to systems, linkages with third-party systems and power failures or are unable to develop
necessary technology, our business, prospects, financial condition and results of operations could be
materially and adversely affected.
Our network infrastructure may be damaged or disrupted by fire, lightning, flooding and other
calamities, technology failures, human error, terrorist attacks, power loss, telecommunications
failures, network software flaws, vandalism, transmission cable cuts, hacker attacks and malicious
actions and other similar events. Computer viruses or problems caused by third parties could lead to
disruptions in our services to our customers. We may experience failures or shutdowns relating to
individual points of presence or even catastrophic failure of our entire network. In addition to this, we
may also encounter difficulties incorporating new services and businesses into our information
technology systems and there can be no assurance that we will realize the efficiencies and other
benefits we anticipate from doing so. We attempt to mitigate these risks by employing a variety of
measures, including backup and protective systems, insurance and building security. We cannot,
however, be certain that these measures will be sufficient and effective under all circumstances and
that disruptions or damage will not occur. Any failure of our network, our servers, or any link in the
delivery chain, whether from operational disruption, natural disaster or otherwise, resulting in an
interruption in our operations, could have a material adverse effect on our reputation, business
prospects, financial condition and results of operations.
13. We may be unable to keep pace with technological developments that may result in an inability to
acquire additional or maintain existing customers, which may adversely affect our business,
financial condition and results of operations.

The broadband business is characterized by rapid technological changes and the introduction of new
products and services. The continuously changing nature of these services, and their increasingly
shorter life cycles require us to continually improve our performance, services and network in order to
compete successfully with the services offered by our competitors. Such changes could adversely
affect our ability to maintain, expand or upgrade our network infrastructure and our product and
service offerings and respond to competitive pressures. There can be no assurance that we will be able
to fund the capital expenditures necessary to keep pace with future technological developments or that
we will be able to successfully anticipate the demand for products and services requiring new
technology. An inability to keep pace with technological developments and provide advanced
products and services in a timely manner, or to anticipate current and future trends and demands of
our customers, could adversely affect our business, financial condition and results of operations.

While we recognize existing and currently evolving technologies that we compete against in the
broadband business, including DSL, LAN internet, dial-up services, wireless broadband services and
WiMAX, there can be no assurance that we will be able to anticipate how these technologies and the
use of such technologies will evolve in the future as a result of customer preferences or other
developments.

In addition, we may not be able to successfully anticipate the emergence of new technologies that we
may compete against in connection with the provision of cable television services in the future
following the DOPL Acquisition or the acquisition of other MSOs and LCOs in the future.

Future technological advances may require us to expend substantial financial resources in the
development or implementation of new competitive technologies and the integration of such
technologies in our current and future operations. We may not have sufficient financial resources to
fund the development or implementation of such technologies or access additional resources in
connection therewith. An inability to introduce new technology and services that can successfully
compete with products and services offered by our competitors may adversely affect our business,
financial condition and results of operations.

xxi
14. Our Cable Broadband business is subject to extensive governmental regulation, which may
adversely affect our results of operations and restrict our operations.

Our Cable Broadband business is subject to extensive regulation by the Telecom Regulatory
Authority of India (“TRAI”), the Department of Telecommunications (“DoT”) and other regulatory
authorities which, inter alia, require us to obtain and maintain various consents, approvals and
licenses, including licenses in connection with offering ISP services, as well as requirements in
relation to offering our services at regulated tariffs. These requirements may require us to change our
business policies and practices and plans and may also increase the costs of providing services to
customers, which could have a material adverse effect on our financial condition and results of
operations.

Under our ISP license, we are required to ensure that objectionable, obscene, unauthorized or any
other content, messages or communications infringing copyright, intellectual property rights and
international and domestic cyber laws in any form or that are inconsistent with the laws of India, are
not carried in our network. Any violation of these requirements can result in penalties and criminal
action under the Information Technology Act, 2000, as amended. For more information, see
“Regulations and Policies” beginning on page 93.

Under the current policy of the Government of India on foreign investment, foreign investment in
companies carrying out ISP activities without gateway, infrastructure providers providing Dark Fiber,
right of way, duct space tower (category I) and/or electronic mail and voice mail is permitted up to
100.00%, of which up to 49.00% foreign investment is permitted under the automatic route and an
FIPB approval is required for any foreign exceeding 49.00%. However, pursuant to Press Note 2
(2007 Series) the Government of India has mandated all such companies to divest 26.00% of their
equity in favor of the Indian public within five years, if such companies are listed in other parts of the
world. Further, such limits are subject to applicable licensing and security requirements. Such
regulatory restrictions limit our ability to obtain foreign investment, which in turn could constrain our
ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, we
cannot assure you that the required statutory/regulatory approvals, inter alia, including any approval
from FIPB will be granted to us without onerous conditions, or at all. Limitations on foreign capital
may have a material adverse impact on our business growth, financial condition and results of
operations.

We cannot assure you that we will not be subject to any adverse regulatory action in the future.
Further, these regulations are subject to frequent amendments and depend upon the relevant
government policies from time to time. Our present operations may not meet all regulatory
requirements or subsequent regulatory amendments. The costs of compliance may be high, which
may affect our profitability. If we are unable to comply with any such regulatory requirements, our
business and results of operations may be materially and adversely affected.

15. We may be unable to modify our existing network infrastructure to adapt to changes in industry
standards and broadband service delivery methods, which could adversely affect our business,
results of operations and financial condition.

We face the risk that fundamental changes may occur in the delivery of internet access services.
Currently, our broadband services are accessed primarily through computers and are delivered by
modems using our HFC Network on DOCSIS technology platform. As the internet becomes
accessible by Wimax enabled devices, 3G cellular telephones, personal data assistants, television set-
top boxes and other consumer electronic devices, and becomes deliverable through other means
involving digital subscriber lines, or wireless transmission mediums, we may be required to modify
our existing technology to enable the integration of our network infrastructure to such delivery
methods and service offerings. The acquisition or development of such advanced technology, whether
internally or pursuant to third-party licenses, may involve substantial time and expense. There can be
no assurance that we will be able to modify our existing network infrastructure to other delivery
systems and such new technologies may not be available to us at reasonable cost, or at all.

Further, our ability to compete successfully depends upon the continued compatibility and inter-
operability of our services with products and network architectures offered by various vendors.
xxii
Industry standards for internet access and broadband service delivery methods may not be established
and, if such industry standards are established in the future, we may not be able to adopt such
standards in a timely manner or maintain a competitive position in the market. The introduction of
new services by our competitors and any adverse development in industry standards may result in
customers deferring or canceling purchases of our products and services and this may result in
customer churn, which could adversely affect our business, results of operations and financial
condition.

16. We depend on leased wireline connectivity for a significant part of our inter-city network and to a
limited extent, for "last mile" connectivity, and disruptions in or inadequate performance of such
systems and connections may adversely affect our business and results of operations.

We lease a significant part of our inter-city network, bandwidth and capacity requirements. We also
lease some intra-city network from third party service providers, through cable or wireless
connectivity. We do not have direct control over leased cable networks or wireless systems, including
control over maintenance of these cables and systems. Moreover, the parties leasing the cables to us
retain responsibility for repairing any breakages or other damage to the cables and rectify the
functioning of wireless systems that we lease from them. If a third party service provider fails to
repair or rectify such wireline or wireless networks in a timely manner, our broadband services may
remain disrupted for an extended period of time. In addition, our broadband services may slow down
at peak times, especially with respect to transmission of multimedia content over such leased wireline
and wireless connections. Failure to properly maintain or promptly repair the relevant cables networks
and wireless systems on the part of a third party service provider from whom we lease capacity or
inadequate performance of such systems and connections could result in reduced revenues, increased
costs, service disruptions, loss of customers and damage to our reputation.

17. We may be liable for information disseminated over our Cable Broadband services network which
could increase our costs or cause us to discontinue certain services, thereby adversely affecting our
business and results of operations.

We intend to continue developing our Cable Broadband and internet telephony services for our
residential and enterprise segment customers. Computer viruses, break-ins and other inappropriate or
unauthorized uses of our network could affect the provision of our full suite of Internet access
services, could result in interruption, delays or cessation in services to our customers, jeopardize the
security of confidential information stored in the computer system of our customers and result in
costly litigation. We may incur significant costs to protect us against the threat of security breaches or
to alleviate problems caused by such breaches. In addition, alleviating these problems may cause
interruptions, delays or cessation in service to our users, which could cause them to stop using our
service or assert claims against us. We may be required to spend substantial resources or discontinue
certain services, which could have a material adverse effect on our business, operating results and
financial condition as a result of liability under Indian law for dissemination of information. Laws in
India relating to liability of Internet service providers for information carried on or disseminated
through their networks is relatively untested. The imposition of potential liability upon Internet
service providers, such as liability for defamatory speech or copyright infringement, for materials
carried on or disseminated over a network may cause us to adopt measures to reduce our exposure to
such liability.

18. Our business relies on intellectual property, some of which is owned by third parties, and we may
inadvertently infringe proprietary rights of others, which could expose us to civil and criminal
proceedings.

Many entities, including some of our competitors, have obtained or may in the future obtain
intellectual property rights that cover or affect products or services related to those that we currently
offer or may offer in the future including value added services. In general, if it is determined that one
or more of our services or the products used to transmit or receive our services infringes intellectual
property owned by others, we and the applicable manufacturers or vendors may be required to cease
developing or marketing those services and products, to obtain licenses from the owners of the
intellectual property or to redesign those services and products in such a way as to avoid infringing
the intellectual property rights. If a third party holds an intellectual property right, it may not allow us
xxiii
or the applicable developers to use its intellectual property at any price, which could materially
adversely affect our competitive position.

We cannot estimate the extent to which we may be required in the future to obtain intellectual
property licenses or the availability and cost of any such licenses. Those costs, and their impact on
our earnings, could be material. To the extent that we are required in the future to pay royalties to
third parties to whom we are not currently making payments, these increased costs of doing business
could materially adversely affect our operating results. There can be no assurance that the courts will
conclude that our services or the products used to transmit or receive our services do not infringe on
the rights of third parties, that we or the manufacturers would be able to obtain licenses from these
persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we or
the manufacturers would be able to redesign our services or the products used to transmit or receive
our services to avoid infringement.

19. The loss of key suppliers or their failure to deliver equipment on a timely basis could negatively
impact our business prospects and results of operations.

We rely on various suppliers to provide equipment, underground cables and other key components in
building our network infrastructure such as CMTS, coaxial cable, fiber, nodes, coaxial amplifiers,
cable modems and transmitters. We must have an adequate supply of such equipment on hand to
respond to new customer subscriptions in a timely manner. We purchase all of our network
infrastructure component and other equipment from our suppliers on a purchase order basis and have
no long-term contracts with our suppliers. If our suppliers are unable to supply us with these products
in a timely manner or the costs of these products increase due to unforeseen circumstances, this could
negatively impact our operating results, particularly if we are unable to add new subscribers or pass
on such costs to our customers. In addition, if we are unable to source hardware, cables and other key
components required for building our HFC cable network infrastructure, the build out of our network
infrastructure may be delayed or impeded, which may adversely affect our ability to implement our
business strategies and our results of operations.

20. Any significant increase in subscriber acquisition costs or subscriber upgrade and retention costs
may adversely affect our results of operations.

We incur subscriber acquisition costs relating to subscribers acquired by us and subscribers acquired
through third parties. In addition, we pay commissions to our distribution agents for their efforts in
offering our services at a lower cost to consumers. Our subscriber acquisition costs may materially
increase to the extent we continue or expand current sales promotion activities or introduce other
more aggressive promotions, or due to increased competition. Any material increase in subscriber
acquisition costs from current levels would negatively impact our earnings and could materially
adversely affect our financial performance.

21. The success of our Cable Broadband business depends on the costs which customers have to incur
for accessing the internet in our markets. High initial or recurring costs will curtail our broadband
services subscriber base and adversely affect our business and results of operations.

Bandwidth, as measured by the volume of data capable of being transported in a communication


system in a given amount of time, remains expensive in India. We lease all the international
bandwidth that we use to provide broadband services from gateway providers including Tata
Communications Limited and Bharti Airtel Limited. There are only a few gateway providers of
international bandwidth in India and consequently, the price that they may charge may not be
competitive. Although prices for bandwidth in India have substantially declined recently, they are
relatively high compared to other regions due to, among other reasons, capacity constraints and
limited competition. An increase in bandwidth costs would increase our operating costs and may
adversely affect our profitability.

Further, the market penetration rates of personal computers and online access in India is low.
Alternate methods of obtaining access to the internet, such as through set-top boxes for televisions,
are currently not popular in India. There can be no assurance that the number or penetration rate of
personal computers in India will increase rapidly or at all or that alternate means of accessing the
xxiv
internet, which we can service through our existing broadband technology, will develop and become
widely available in India. Customers will have to bear significant costs for obtaining the hardware and
software necessary to connect to the internet in India. If such costs do not become affordable, our
broadband services subscriber base will be curtailed, which may adversely affect our business and
results of operations.

22. A significant portion of the equipment used in our Cable Broadband infrastructure is imported and
as a result we are subject to foreign currency fluctuations, which may have a material adverse
effect on our results of operations.

We import a significant portion of our equipment such as cable modems, coaxial cables, and other
equipment for our broadband services and as a result we are subject to foreign currency fluctuations
in respect of purchases made in various foreign currencies, most significantly the U.S. Dollar.
Further, any political or economic disturbances in these areas could interrupt the timely supply of
these equipment. The exchange rate between the Rupee and the U.S. Dollar and other currencies that
we make purchases in, have changed substantially in recent years and may fluctuate substantially in
the future. We do not have any outstanding forward contracts to hedge the risk of fluctuations in
foreign exchange rates. Therefore, the depreciation of the Rupee may have a material adverse effect
on our results of operations.

23. We are required to obtain and maintain certain governmental and regulatory licenses and permits
and the failure to obtain and maintain such licenses and permits in a timely manner, or at all, may
adversely affect our business and operations.

We are required to obtain and maintain certain approvals, licenses, registrations and permits in
connection with its business and operations. There can be no assurance that we will be able to obtain
and maintain such approvals, licenses, registrations and permits in the future. An inability to obtain or
maintain such registrations and licenses in a timely manner, or at all, and comply with the prescribed
conditions in connection therewith may adversely affect our ability to carry on our business and
operations, and consequently our results of operations and financial condition.

24. Strategic investments or acquisitions and joint ventures may result in additional risks and
uncertainties in our business.

To the extent we make strategic investments or acquisitions or enter into joint ventures for furthering
our business, we face numerous risks and uncertainties in relation to combining or integrating
businesses, including integrating relationships with customers, business partners and internal data
processing systems. In the case of joint ventures whether existing or proposed, we are subject to
additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or
damage to our reputation relating to, systems, controls and personnel that are not under our control. In
addition, conflicts or disagreements between us and our joint venture partners may adversely impact
our business.

Future acquisitions and joint ventures could entail a number of risks, including problems with the
effective integration of operations, the inability to maintain key pre-acquisition business relationships
and integrate new relationships, the inability to retain key employees, increased operating costs,
exposure to unanticipated liabilities, risks of misconduct by employees not subject to our control,
difficulties in realizing projected efficiencies, synergies and cost savings, and exposure to new or
unknown liabilities. Any future growth of our business may require significant resources and/or result
in significant unanticipated losses, costs or liabilities. In addition, expansions, acquisitions or joint
ventures may require significant managerial attention, which may divert us from our other operations.

RISKS RELATING TO OUR COMPANY

25. We, our Promoters and our Directors are involved in certain legal and other proceedings that if
determined against us or our Promoters or Directors, could have a material adverse effect on our
financial condition and results of operations.

Our Company, our Directors, and our Promoters are currently involved in a number of proceedings in
xxv
India, pending at different levels of adjudication before various authorities. The table below sets forth
certain information with respect to legal proceedings that we and/or our Promoters and Directors are
involved in:
Category Company Directors Promoters Group Companies
Number Amount Number Amount Number Amount Number Amount
Involved in Involved in Involved in Involved in
Rs. in Rs. in Rs. in Rs. in
Million Million Million Million
(where (where (where (where
quantifiable) quantifiable) quantifiable) quantifiable)
Criminal - 5 NA 3 NA - -
proceedings
Securities law - - - - - - -
proceedings
Civil proceedings 3 10.53 1 NA 1 NA 1 NA
Tax proceedings 3 - - - - - -
Labor cases - - - - - - -
Consumer cases 5 1.10 - - - - - -
Other 5 1,017.05 - - - - - -
proceedings/Notices
etc.

Should any new development arise, such as a change in the Indian law or rulings against us by
appellate courts or tribunals, we may need to make provisions in our financial statements, which may
increase our expenses and current liabilities. We can give no assurance that these legal proceedings
will be decided in our favor or in favor of our Directors or Promoters. Any adverse decision may have
a significant effect on our business, financial condition and results of operations. For further
information relating to these proceedings, see “Outstanding Litigation and Material Developments”
on page 161.

26. We have had negative cash flow from operating and investing activities in the past. Any negative
cash flow from operating and investing activities in the future would adversely affect our results of
operations and financial condition.

We had negative net cash flow from operating activities of Rs.233.61 million, Rs.265.94 million,
Rs.46.93 million in fiscal 2007, 2008 and 2009 respectively. In the six months ended September 30,
2009, we generated nominal net cash from operating activities of Rs.5.94 million. In fiscal 2007, 2008
and 2009 and in the six months ended September 30, 2009, we had negative net cash flow from
investing activities of Rs.102.47 million, Rs.514.50 million, Rs.128.51 million and Rs.32.31 million,
respectively.

There can be no assurance that our net cash flow from operating and investing activities will be
positive in the future. Any negative cash flows from operating and investing activities in future would
adversely affect our results of operations and financial condition. See “Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on page 130 of this Draft Red
Herring Prospectus.

27. Our insurance coverage may not adequately protect us against all material hazards and such
hazards, if they occur, could adversely affect our business and results of operation.

Our insurance policies provide cover for risks relating to physical loss, theft or damage to our assets.
The price, terms and availability of insurance vary significantly and all insurance policies on
equipment may not continue to be available on commercially reasonable terms or at all. Although we
believe that our Company have insurance that is customary for Cable Broadband companies in India,
this insurance may not provide adequate coverage in certain circumstances and is subject to certain
deductibles, exclusions and limits on coverage. There can be no assurance that our operations will not
be affected by any of the incidents and hazards, or that the terms of our insurance policies, will
xxvi
adequately, if at all, cover all damage or losses caused by any such incidents and hazards as they
contain exclusions and limitations on coverage. To the extent that we suffer damage or losses which
exceeds our insurance coverage the loss would have to be borne by us. The proceeds of any insurance
claim may also be insufficient to cover the rebuilding costs as a result of inflation, changes in
regulations regarding Cable Broadband and cable television operations, and other factors. We cannot
assure you that material losses in excess of insurance proceeds will not occur in the future. We do not
maintain insurance policies to cover business interruption, telecommunications professionals’
liability, intellectual property claims, communications claims and certain other insurable risks. We
cannot assure you that any losses we suffer would be adequately covered by our insurance policies. It
may also not be possible to obtain adequate insurance against some risks on commercially reasonable
terms. In addition, insurance coverage may not be available to us at economically acceptable
premiums, or at all, in the future at any time that we may seek to purchase or renew such insurance.
Failure to effectively cover ourselves against risks could expose us to substantial costs and potentially
lead to material losses, and, as a result, our results of operations and financial condition could be
adversely affected.

28. Our future results of operations could fluctuate because our expenses are relatively fixed in the
short term while future revenues are uncertain and any adverse fluctuations could adversely
impact the price of our Equity Shares. Further, you should not rely on period to period
comparisons of our results of operations as indicators of future performance

Our revenues and expenses have varied in the past and may fluctuate in the future due to a number of
factors, many of which are outside our control. A significant portion of our investment and cost base
is relatively fixed in the short term. Our revenues for the future may depend on many factors,
including, without limitation, the following: our ability to acquire and retain subscribers for our
broadband services; the number of subscribers to our broadband internet services and the prevailing
prices charged by our competitors; the range of products and services provided by us and the usage
thereof by our subscribers; services, products or pricing policies introduced by our competitors;
capital expenditure and other costs relating to our operations; the timing and nature of, and expenses
incurred in, our marketing efforts; our ability to successfully integrate operations and technologies
from any acquisitions, joint ventures or other business combinations or investments; the introduction
of alternative technologies; and technical difficulties or system failures affecting the
telecommunication infrastructure in India or the internet generally. In addition, following the DOPL
Acquisition, our results of operations will be affected by various factors affecting the cable television
business of DOPL, including the subscription and carriage revenues received by DOPL and the costs
of integrating DOPL's operations with our existing infrastructure and operations. If we acquire other
MSOs or LCOs in the future, our results of operations will be similarly affected by factors relating to
the business and operations of such acquired entities. We may be unable to adjust spending quickly
enough to offset any unexpected revenues shortfall.

You should not rely on period to period comparisons of our results of operations as indicators of
future performance. It is possible that in some future periods our results of operations may be below
the expectations of public market analysts and investors. In such event, the price of our Equity Shares
may decline.

29. Our ability to pay dividends in the future will depend on various factors, including our financial
condition, results of operations and capital expenditure requirements.

In the past, we have not made dividends payments to our equity shareholders in any form. We may
retain all future earnings, if any, for use in the operations and expansion of the business. Our future
ability to pay dividends will depend on our earnings, financial condition and capital requirements and
those of our subsidiaries. We cannot assure you that we will receive dividends from our subsidiaries
sufficient to cover our operating expenses or pay dividends to our shareholders.

Our business is capital intensive and we plan to make substantial capital expenditures to implement
our growth strategies. We may be unable to pay dividends in the near or medium term, and our future
dividend policy will depend on our capital requirements and financing arrangements we enter into,
our financial condition and results of operations. Accordingly, realization of a gain on shareholders'
investments would depend on the appreciation of the price of the Equity Shares. There is no guarantee
xxvii
that our Equity Shares will appreciate in value.

30. Our indebtedness and the conditions and restrictions imposed by our financing arrangements
could restrict our ability to conduct our business and operations and thereby adversely affect our
business and results of operations.

As of September 30, 2009, our Company’s indebtedness aggregated to Rs.300.78 million, comprising
(a) certain vendor financing arrangements with CISCO Systems Capital India Private Limited, and (b) a
commercial loan facility from our Promoter, YTML. We expect to incur additional indebtedness in the
future, including in connection with the expansion of our Cable Broadband infrastructure and the
expansion of the cable television business following the DOPL Acquisition and/or through other
strategic acquisitions of MSOs and LCOs. Some of our borrowings are secured by our movable and
other assets. A significant indebtedness in the future could have several important consequences,
including but not limited to the following:

• a portion of our cash flow may be used towards repayment of our existing debt, which will
reduce the availability of cash to fund working capital, capital expenditures, acquisitions and
other general corporate requirements;

• our ability to obtain additional financing in the future at reasonable terms may be restricted or
our cost of borrowings may increase due to sudden adverse market conditions, including
decreased availability of credit or fluctuations in interest rates;

• fluctuations in market interest rates may affect the cost of our borrowings, as some of our
indebtedness are and are expected to be at variable interest rates;

• there could be a material adverse effect on our business, financial condition and results of
operations if we are unable to service our indebtedness or otherwise comply with financial and
other covenants specified in the financing agreements; and

• we may be more vulnerable to economic downturns, may be limited in our ability to withstand
competitive pressures and may have reduced flexibility in responding to changing business,
regulatory and economic conditions.

Some of our financing agreements also include various conditions and covenants that require us to
obtain lender consents prior to carrying out certain activities and entering into certain transactions.
Failure to meet these conditions or obtain such consents in a timely manner, or at all, could have
significant consequences on our business and operations. Specifically, under some of our financing
agreements, we require, and may be unable to obtain, consents from the relevant lenders for, among
others, the amendment of our charter documents, any merger, amalgamation, reconstruction,
consolidation, restructuring, reorganization or other similar transaction, as well as transactions related
to a change in our shareholding pattern (whether legal or beneficial) or management structure, where
our Company is not the surviving entity or as a result of which an event of default arises, and
undertaking any winding-up or liquidation proceedings. Some of our financing agreements are also
subject to certain conditions and covenants, including the absence of a material adverse change in our
business, assets, financial condition, prospects and credit standing, specified financial ratios and
maintaining our shareholding and management structure. Such covenants may restrict or delay certain
actions or initiatives that we may propose to take from time to time.

A failure to observe such covenants or conditions under our financing arrangements or to obtain
necessary consents required thereunder may lead to the termination of our credit facilities, acceleration
of all amounts due under such facilities and the enforcement of any security provided. Any acceleration
of amounts due under such facilities may also trigger cross default provisions under our other financing
agreements. Any of these circumstances could adversely affect our business, financial condition and
results of operations, as well as adverse affect the price of the Equity Shares.

xxviii
31. An inability to effectively manage our growth could disrupt our business and adversely affect our
results of operations.

We expect our growth strategy will place significant challenges and demands on our management,
financial and other resources and we may not be successful in expanding our business in accordance
with our business plan. Our ability to successfully implement our business plan requires adequate
information systems and resources and oversight from senior management. We will need to
continuously develop and improve our financial, internal accounting and management controls,
reporting systems and procedures as we continue to grow and expand our business. If we are unable
to manage our costs effectively our business prospects, financial condition and results of operations
may be adversely affected.

32. Our Promoters and certain related entities will continue to have significant influence on our
Company after the completion of the Issue.

After the completion of the Issue, our Promoters and certain related entities will continue to exercise
significant influence over us, including having influence over the composition of our Board, as well
as over matters requiring shareholder or Board approval. Our Promoters may take or block actions
with respect to our business, which may conflict with the interests of our Company or the interests of
our minority shareholders. By exercising their influence, our Promoters could delay, defer or cause a
change in our capital structure, delay, defer or cause a merger, consolidation, takeover or other
business combination involving us, discourage or encourage a potential acquirer from making a
tender offer or otherwise attempting to obtain control of us.
For further details, see the sections “Capital Structure”, “History and Certain Corporate Matters”,
"Our Promoters and Group Companies” beginning on pages 24, 101 and 119, respectively, of this
Draft Red Herring Prospectus.
33. The interests of our Promoters, Directors and some of our Group Companies may cause significant
conflicts of interest in the ordinary course of our business.

Certain decisions concerning our operations or financial structure may present conflicts of interest
among our Promoters, other shareholders, Directors, executive officers and the holders of the Equity
Shares. Commercial transactions in the future between us and related parties could result in
conflicting interests. A conflict of interest may occur between our business and the business of the
Group Companies which could have an adverse effect on our operations. Conflicts of interest may
also arise out of common business objectives shared by us, our Promoters, directors and their related
entities. There can be no assurance that these or other conflicts of interest will be resolved in an
impartial manner.

Among other matters, conflicts may arise in connection with our negotiations and dealings with our
Promoters and their affiliates with respect to services that they may be required to provide to us and
the arrangements that we may enter into with them. In addition, there may be conflicts of interest if
Promoter Group companies invest in or carry out the same or similar businesses as us. One of our
promoters, CVCIGPML, is engaged in the business of investing in Indian and overseas companies,
listed and unlisted, in various sectors, which may include the sector in which the Company operates,
and certain directors of our Company who are appointed by CVCIGPML may currently or in the
future also serve on the boards of directors of such investee companies. Some of these actions may
result in some of our board members also joining the board of such competing companies.

34. Our Promoters and Directors have interests in us other than reimbursement of expenses incurred
or normal remuneration or benefits.

Our Promoters are interested in our Company to the extent of any transactions entered into or its
shareholding and dividend entitlement in our Company. Our Directors are also interested in our
Company to the extent of remuneration paid to them for services rendered as Directors of our
Company and reimbursement of expenses payable to them. Our Directors may also be interested to
the extent of any transaction entered into by our Company with any other company or firm in which
they are directors or partners. Our Promoter, YTML has provided an external commercial loan facility
to our Company. Additionally, our Directors may be interested in the Equity Shares held by them or
xxix
by entities with which they are associated as promoters, directors, partners, proprietors or trustees or
held by their relatives or that may be subscribed by or allotted to the companies, firms, ventures,
trusts in which they are interested as promoters, directors, partners, proprietors, members or trustees,
pursuant to this Issue.

35. Increases in interest rates may adversely impact our results of operations and financial condition.

As our business is capital intensive, we are exposed to interest rate risk. Our Company is seeking to
finance growth in part with debt which means that any increase in interest expense may have an
adverse effect on our financial results and business prospects. Our current debt facilities carry interest
at variable rates. As of September 30, 2009, Rs.242.30 million, or 80.56% of our total debt was
subject to variable rates, and an increase in interest expense is likely to have a significant adverse
effect on our results of operations and also increase the cost of capital to our Company.

36. We have applied for, but have not yet received, trademark registrations for certain of our brand
names.

The registration of any trademark is a time-consuming process, and there can be no assurance that any
such registration will be granted. Our applications may not be allowed or our competitors may
challenge the validity or scope of our intellectual property. Unless our trademarks are registered, we
may only get passing off relief for our marks if used by others, which could materially and adversely
affect our brand image, goodwill and business. It is only upon registration that we can prohibit other
persons from using our trademarks. However, we cannot provide any assurance that third parties will
not infringe upon our trademark, trade names, logos or brand names, and thereby cause damage to our
business prospects, reputation or goodwill. For example, we have applied for registration of the
trademark “YOU Broadband” in classes 9, 16, 35, 38 and 41, which are currently pending.

37. We may have increased risks relating to associate companies that are partially owned by us.

We face increased risks relating to associate companies that are partially owned by us. For example,
we currently hold 36.24% of the shareholding in Digital Outsourcing Private Limited. In the event
that there are disagreements between us and the other shareholders regarding the business and
operations of DOPL, we cannot assure you that we will be able to resolve them in a manner that will
be in our best interests. Similarly, we own 50.00% of the equity shareholding in YOU Snapper
Wireless India Private Limited ("YOU Snapper"). To the extent there are disagreements between us
and any joint venture partner, we cannot assure you that we will be able to resolve them in a manner
that will be in our best interests.

38. We may not be able to successfully develop and maintain our brand image, which could adversely
affect our subscriber base, revenues and affect our results of operations.

Our success, particularly in relation to our growth strategy for the broadband business, depends
significantly on our ability to maintain the “YOU Broadband”, “YOU Digivision” and our other
brands and effectively develop the brand image and reputation of our existing product and service
offerings and that of our new value added services and integrated offerings. Although we continue to
devote significant time and resources to advertising, promotional and other marketing events, there
can be no assurance that we will be able to successfully develop and maintain our brand image, which
could adversely affect our subscriber base, revenues and results of operations.

39. We are significantly dependent on our management team and our ability to attract and retain key
personnel. Any failure to attract and retain such personnel could have a material adverse effect on
our business, financial condition and results of operations.
We depend on our senior executives and other key management personnel for their business vision,
management skills and technical expertise in the telecommunication and media industry, particularly
the Cable Broadband and cable television industry, as well as their working relationships with
relevant government agencies and other intermediaries and participants in the industry. We do not
maintain key-man life insurance for any of our executive officers. If any of these executive officers
were unable or unwilling to continue in their present positions, or if they left our Company, we may
not be able to replace them with comparably skilled executives, which would adversely affect our
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ability to manage our business. If we are unable to retain or replace our key senior management
personnel and other key employees, we may not be able to implement our business strategy and our
financial condition and results of operations may be materially and adversely affected.

40. We have certain contingent liabilities which may adversely affect our financial condition.

Contingent liabilities as of September 30, 2009 included the following:


Particulars Amount

(Rs. in millions)
Revenue share on internet telephony services governed by ISP license relying 22.23
on TDSAT judgment dated August 30, 2007 on Petition No. 7 of 2003
Notice issued by Mahanagar Gas Limited (“MGL”) seeking compensation 1,000.00
damages with respect to fire accident in the gas pipeline of MGL
Consideration of contractual obligation to take on lease Dark Fiber from IOL 9.93
Broadband Limited terminated by exercising force majeure clause

If a significant portion of these liabilities materializes, it could have a material adverse effect on our
business, financial condition and results of operations. For further information on such contingent
liabilities, see "Management's Discussion and Analysis of our Results of Operations - Contingent
Liabilities" and the section “Financial Statements” beginning on page 130 and 129 of this Draft Red
Herring Prospectus, respectively.
41. Certain of our Group Companies have incurred losses in recent financial years.

Certain of our Group Companies have incurred losses in recent financial years. CVCIEL incurred
losses of Rs.2.07 million and Rs.1.45 million in the year ended December 31, 2009 and 2008,
respectively. YHCAPL also incurred losses of Rs. 32 million and Rs. 13 million in the year ended
December 31, 2009 and 2008, respectively.

42. Our management will have flexibility in applying the Proceeds received from the Issue and the
deployment of the Proceeds is not subject to any monitoring by any independent agency. The
purposes for which the Proceeds of the Issue are to be utilized are based on management estimates
and have not been appraised by any banks or financial institutions.

We intend to use the Proceeds that we receive from the Issue for the purposes described in “Objects of
the Issue” on page 39. Our management may determine that it is appropriate to revise our estimated
costs, fund requirements and deployment schedule owing to factors relating to our business and
operations and external factors which may not be within the control of our management.

The utilization of the Proceeds of the Issue and other financings will be monitored only by the Board
and is not subject to any monitoring by any independent agency. In proceeds of the Issue allocated to
general corporate purposes and will be used at the discretion of the management. Further, pending
utilization of the Proceeds of the Issue and other financings, we intend to invest such Proceeds in
interest-bearing liquid instruments including money market mutual funds and bank deposits as
approved by our Board of Directors.

Our funding requirements and the deployment of the Proceeds of the Issue are based on management
estimates and have not been appraised by any banks or financial institutions. In view of the highly
competitive nature of the industry in which we operate, we may have to revise our management
estimates from time to time and, consequently, our funding requirements may also change.

43. We currently have not entered into any arrangements for borrowings, bank finance or institutional
finance in respect of working capital requirements.

We currently have not entered into any arrangements for borrowings, bank finance or institutional
finance in respect of working capital requirements. The working capital requirement of our Company
is estimated to be Rs. 171 million. The working capital requirement has been calculated on the basis
xxxi
of working capital requirement for FY 2011 considering growth in activities of our Company. For
further details please refer to the section titled “Capital Structure” beginning on page 24 of this Draft
Red Herring Prospectus. Our Company proposes to meet the aforesaid estimated working capital
requirements from the Net Proceeds of the Issue. Our working capital requirements have been
calculated based on management estimates and have not been appraised by any bank or financial
institution. Hence we may have to revise our management estimates from time to time and,
consequently, our funding requirements may also change.

44. We have allotted Equity Shares for consideration other than cash in the last six months preceding
the date of this Draft Red Herring Prospectus.
On March 30, 2010, our Company has allotted 10,688,757 Equity Shares constituting 4.425% of our
equity share capital pursuant to the DOPL Share Subscription and Purchase Agreement in
consideration for an absolute and perpetual right to our Company (either itself or through its
nominees or assignees) to acquire the DOPL Sale Share I, (ii) extinguishment of all rights and
privileges of Tanti Family with respect to our Company, (iii) termination of all obligations of our
Company under the shareholders agreement dated March 31, 2008 between our Company, the Tanti
Family and Digital Outsourcing Private Limited and (iv) Rs 100,000 (Rupees One Hundred Thousand
Only). The aforementioned allotment of our Equity Shares is for a consideration other than cash .

45. We intend to use a portion of Proceeds of this Issue to procure equipment for planned activities.
Any delay in procuring the necessary equipment may delay the implementation of our business
plans, and thereby affect our business and results of operations.

A portion of the Proceeds of the Issue is proposed to be deployed for the purchase of equipment. We
have not yet placed orders for all of the equipment required for our planned activities. As on the date
of this Draft Red Herring Prospectus, we have not entered into any definitive agreements in
connection with such purchase of equipment. We intend to place the orders as and when they are
required in accordance with our implementation schedule. However, any delay in placing orders or in
procuring the necessary equipment may delay our planned activities. Such delays may lead to
increases in prices of the equipment, which may affect our cost and profit estimates. For more
information, see “Objects of the Issue” beginning on page 39.

46. As of the date of this Draft Red Herring Prospectus, we have not identified the use of the funds, out
of the proceeds of the Issue proposed to be utilized for general corporate purposes and the
deployment of such funds will be at the discretion of our management and Board of Directors.

As of the date of this Draft Red Herring Prospectus, we have not entered into any definitive
agreements for the deployment of the funds from the proceeds of the Issue proposed to be utilized for
general corporate purposes as approved by our Board. The deployment of such funds is entirely at the
discretion of our management and our Board of Directors.

47. We have entered into certain transactions with related parties and will continue to enter into
related party transactions in the future.

We have, in the course of our business, entered into various transactions with related parties,
including lease arrangements over our Company's assets to DOPL, provision of customer billing
services to DOPL through our Company's billing services platform, and loans extended by our
Company and DOPL. While we believe that all such transactions have been conducted on an arm’s
length basis, there can be no assurance that we could not have achieved more favorable terms, had
such transactions not been entered into with related parties.
For example, as of September 30, 2009, our Company had made an investment of Rs.187.74 million
in DOPL, and had granted a loan of Rs.189.04 million to DOPL. In addition, a part of the Net
Proceeds of the Issue will be used for extending loans to DOPL. In addition, we lease Dark Fiber and
other network equipment to DOPL and receive income from lease rental of network equipment from
DOPL. For further information, see “Related Party Transactions” on page 127. We expect to
continue to enter into related party transactions in the future. There can be no assurance that such
xxxii
transactions, individually or in the aggregate, will not have an adverse effect on our financial
condition and results of operations.
48. We do not own our registered office and other premises from which we operate.

We do not own the premises on which our registered corporate office and other offices are located.
All our offices are located on leased premises. At times some equipment and network elements are
also kept at such premises. If any of the owners of these premises does not renew an agreement under
which we occupy the premises, or if any of the owners seeks to renew an agreement on terms and
conditions unfavorable to us, we may suffer a disruption in our operations or increased costs, or both,
which may adversely affect our business and results of operations.

49. Some of the lease agreements entered into by our Company with respect to our immovable
properties may not be duly registered or inadequately stamped, which may adversely affect our
operations.

Some of our lease agreements with respect to our immovable properties may not be adequately
stamped or duly registered. Unless such documents are adequately stamped or duly registered, such
documents may be rendered as inadmissible as evidence in a court in India or attract penalty as
prescribed under applicable law, which may result in a material adverse effect on the continuance of
the operations and business of our Company.

50. Our results of operations could be adversely affected by strikes, work stoppages or increased wage
demands by our employees or any other kind of disputes with our employees.

We employ a significant number of employees for our operations. Our employees are not affiliated to
any trade or labor union. There can be no assurance that we will not experience disruptions to our
operations due to disputes or other problems with our work force, which may adversely affect our
business and results of operations. In addition, there can be no assurance that partners that we use to
reach subscribers or our suppliers will not experience strikes, work stoppages or other such industrial
action in the future.

We enter into contracts with independent contractors to complete specified assignments and these
contractors are required to source the labor necessary to complete such assignments. Although we do
not engage these laborers directly, it is possible under Indian law that we may be held responsible for
wage payments to laborers engaged by contractors should the contractors default on wage payments.
Any requirement to fund such payments may adversely affect our business, financial condition and
results of operations. Furthermore, pursuant to the provisions of the Contract Labour (Regulation and
Abolition) Act, 1970, we may be required to absorb a portion of such contract laborers as our
employees. Any such order from a court or any other regulatory authority may adversely affect our
business and results of our operations.

51. Significant differences exist between Indian GAAP and other accounting principles, such as US
GAAP and IFRS, which may be material to investors’ assessment of our financial condition and
results of operations. Our failure to successfully adopt IFRS required effective April 2013 could
have a material adverse effect on our stock price.

Our financial statements, including the audited consolidated financial statements included in this
Draft Red Herring Prospectus are prepared in accordance with Indian GAAP. We have not attempted
to quantify the impact of IFRS or U.S. GAAP on the financial data included in this Draft Red Herring
Prospectus, nor do we provide a reconciliation of our financial statements to those of U.S. GAAP or
IFRS. U.S. GAAP and IFRS differ in significant respects from Indian GAAP. We have made no
attempt to quantify the effect of any of those differences. Accordingly, the degree to which the Indian
GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful
information is entirely dependent on the reader’s level of familiarity with Indian accounting practices.
Any reliance by persons not familiar with Indian accounting practices 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 us, the terms of this Issue and
the financial information contained in this Draft Red Herring Prospectus.

xxxiii
The Institute of Chartered Accountants of India, the accounting body that regulates the accounting
firms in India, has announced a road map for the adoption of, and convergence with, the International
Financial Reporting Standards, or IFRS, pursuant to which all public companies in India, such as us,
will be required to prepare their annual and interim financial statements under IFRS beginning with
financial year period commencing April 1, 2013. Because there is significant lack of clarity on the
adoption of and convergence with IFRS and there is not yet a significant body of established practice
on which to draw in forming judgments regarding its implementation and application, we have not
determined with any degree of certainty the impact that such adoption will have on our financial
reporting. There can be no assurance that our financial condition, results of operations, cash flows or
changes in shareholders' equity will not appear materially different under IFRS than under Indian
GAAP. As we transition to IFRS reporting, we may encounter difficulties in the ongoing process of
implementing and enhancing our management information systems. Moreover, there is increasing
competition for the small number of IFRS-experienced accounting personnel available as more Indian
companies begin to prepare IFRS financial statements. There can be no assurance that our adoption of
IFRS will not adversely affect our reported results of operations or financial condition and any failure
to successfully adopt IFRS by April 2013 could have a material adverse effect on our stock price.

52. The requirements of being a listed company may strain our resources and distract management.

We have no experience as a listed company and have not been subjected to the increased scrutiny of
our affairs by shareholders, regulators and the public at large that is associated with being a listed
company. As a listed company, we will incur significant legal, accounting, corporate governance and
other expenses that we did not incur as an unlisted company. We will be subject to the listing
agreements with the Stock Exchanges which requires us to file audited annual and unaudited quarterly
reports with respect to our business and financial condition. If we experience any delays, we may fail
to satisfy our reporting obligations and/or we may not be able to readily determine and accordingly
report any changes in our results of operations as timely as other listed companies. As a listed
company, we will need to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, for which significant resources and
management oversight will be required.

53. Our Company has availed unsecured loans from CISCO Systems Capital India Private Limited and
our promoter YTML, which subject to the terms and conditions of relevant agreements may be
recalled at any time. Further our Group Companies and/or associates may have availed of
unsecured loans which can can be recalled by the relevant lenders at any time.

Our Company has availed unsecured loans from CISCO Systems Capital India Private Limited and
our promoter YTML, which subject to the terms and conditions of relevant agreements may be
recalled at any time. In the event the aforementioned loans are recalled by the aforesaid lenders our
financial condition and profitability could be adversely affected. Further our Group Companies and/or
associates may have availed of unsecured loans which could be recalled by the relevant lenders at any
time, which in turn could adversely affect the value of the investments of our Promoter and/or our
Company, in such Group Companies and/or associates, as the case may be.

RISKS RELATING TO THE CABLE TELEVISION BUSINESS OF DOPL

1. DOPL's revenues are adversely affected by under-reporting of analog cable subscribers by LCOs.

DOPL delivers television channels on its cable distribution network through LCOs, who provide the
"last mile" cable link to the homes of subscribers. Subscribers pay a fee for the provision of cable
television to the LCOs, who in turn pay a fixed monthly fee to DOPL. DOPL's revenues from cable
television subscriptions are therefore based on the number of subscribers connected to an LCO. Due to
the non-addressable nature of analog cable television services technology, DOPL is unable to
independently determine the number of analog subscribers that receive DOPL's cable television
services through the LCOs, and relies on the subscriber count provided by the LCOs. LCOs may
under-report their subscriber base to DOPL, thereby reducing the subscription revenues payable to
DOPL. Such unauthorized usage may continue to result in a lower subscriber base being accounted for
DOPL and adversely affecting its subscription revenues.
xxxiv
2. DOPL's cable television business is subject to extensive governmental regulation, which could result
in increased operating expenses for DOPL or limit its operational flexibility.

DOPL's cable television business is subject to extensive regulation by the Telecom Regulatory
Authority of India (“TRAI”) and the Ministry of Information and Broadcasting (“MIB”) and other
regulatory authorities. Some of the key restrictive regulatory provisions affecting DOPL's business and
operations include:

• In areas where CAS has not been notified, TRAI has imposed a ceiling on monthly tariffs
payable by individual subscribers to LCOs and MSOs. For further information on the
Government mandated CAS in India, see "Industry Overview” and "Regulations and
Policies".

• MSOs are required to re-transmit signals of television channels received from a broadcaster,
on a nondiscriminatory basis to LCOs. MSOs are not allowed to engage in any practice or
activity or enter into any understanding or arrangement, including exclusive contracts, with
any broadcaster or distributor of TV channels that prevents any LCO from obtaining such TV
channels;

• DOPL can disconnect the TV signals that it supplies to LCOs, including for non-payment of
its share of subscription fees or breach of other terms of its interconnection agreements with
such LCOs, only as provided under the procedure prescribed by the Telecommunication
(Broadcasting and Cable Services) Interconnection Regulation, 2004, as amended, and not at
the discretion of DOPL. DOPL may be unable to secure any compensation for continued use
of its signals by LCOs in breach of its interconnection agreements pending the completion of
such procedure;

• DOPL is required to maintain certain quality standards established by the Standards of


Quality of Service (Broadcasting and Cable Services) (Cable Television – Non CAS Areas)
Regulation, 2009 and other laws and regulations. Any amendment in such standards may
require DOPL to incur additional costs in order to comply with such laws and regulations; and

• Foreign investment (consisting of FDI and FII investments combined) in activities relating to
a cable network is also restricted to 49.00% of the paid-up equity capital of a company
engaged in such activities and is subject to prior FIPB approval and to the Cable Television
Network Rules, 1994, as amended. Under the Cable TV Act, Indian nationals are required to
hold at least 51.00% of the paid-up equity capital of a cable television company. This restricts
the amount of capital that DOPL may raise by means of foreign investments.

Although we believe that DOPL is in material compliance with such laws and regulations, government
authorities may allege non compliance, and there can be no assurance that DOPL will not be subject to
any adverse regulatory action in the future. Increased regulation or changes in existing regulation may
require DOPL to change its business strategies and operations resulting in an increase in its operating
expenses. For example, in July 2008, TRAI submitted recommendations to the MIB for the
introduction of a separate licensing framework for MSOs and LCOs, including district, state and
national level licenses for MSOs and LCOs, specifying a minimum quality of service and performance
standards, digitization and software standardization. For further information, see “Regulations and
Policies” beginning on page 93 of this Draft Red Herring Prospectus.

DOPL's present operations may not meet all regulatory requirements or subsequent regulatory
amendments. In addition, the laws and regulations under which DOPL operates, and its obligation to
comply with such laws and regulations, may result in delays in the development and production of its
products and services, cause it to incur increased costs, or prohibit or severely restrict its business and
operations. Additionally, DOPL relies on LCOs to provide the "last mile" connection to its secondary
subscribers. In the event the LCOs which DOPL use are subjected to any adverse regulatory action, it
may have a material and adverse effect on DOPL's business prospects and results of operations.

xxxv
3. DOPL is required to obtain and maintain certain governmental and regulatory licenses and permits
and the failure to obtain and maintain such licenses and permits may adversely affect its business
and operations.

DOPL is required to obtain and maintain certain approvals, licenses, registrations and permits in
connection with its business and operations. There can be no assurance that DOPL will be able to
obtain and maintain such approvals, licenses, registrations and permits in the future. An inability to
obtain or maintain such registrations and licenses and comply with applicable conditions may
adversely affect DOPL's ability to carry on its business and operations, and consequently its results of
operations and financial condition.

4. The failure by an LCO to maintain cable infrastructure and service standards or any violation of
applicable laws and regulations by an LCO may adversely affect DOPL's reputation and business
prospects.

DOPL delivers television channels on its cable distribution network through LCOs, who provide the
"last mile" cable link to the homes of subscribers. LCOs, which typically have direct contact with
subscribers in respect of sales, billing, technical support and general customer services, may not
successfully deliver the digital and analog services in a manner consistent with the prescribed standards
and requirements. Any negative publicity regarding the brand or services resulting from such
circumstances could adversely affect the business and results of operations of DOPL.

DOPL does not have any control over the quality of cable infrastructure that LCOs use to provide
services to the subscriber. Further, DOPL's subscription revenue is dependent on the LCOs' ability to
generate and maintain subscription revenue. Therefore, any failure by LCOs to obtain adequate
subscription fees from subscribers may materially and adversely affect DOPL's results of operations.
Any illegal activity by LCOs could also potentially expose DOPL to liability. For example, LCOs may
offer content and programs on their network for which it may not have obtained appropriate permission
or consent. DOPL may not have any control over any such action by the LCOs but such actions may
result in DOPL being exposed to legal proceedings and claims. Any failure by an LCO in providing
appropriate service quality may also adversely affect DOPL's reputation and business prospects and
may expose it to legal and regulatory proceedings. For further information, please see “Regulations
and Policies” beginning on page 93.

5. An inability to convert its subscribers from analog to digital cable television services will materially
and adversely affect DOPL's business, results of operations and financial condition.

DOPL's revenue growth in the future will be significantly dependent on its ability to convert its
subscribers from analog to digital cable television services and the provision of paid-for value-added
services to its digital subscribers. Analog cable television services are more susceptible to piracy and
unauthorized access since the signals transmitted through an analog platform and are not protected by
encryption technology. Such piracy and unauthorized access may lead to a loss of revenue. The
conversion of its subscribers from analog to digital cable television services is expected to result in a
decrease in the under-reporting of number of subscribers by LCOs and enable DOPL to offer value-
added services. While the shift from analog to digital cable services is mandatory in the limited areas
where CAS has been implemented, it is currently unclear whether a further rollout of CAS will be on a
mandatory or voluntary basis. There can be no assurance that DOPL will be able to successfully
convert its subscribers who currently utilize analog cable television services to digital cable television
services in non-CAS areas. Additionally, television viewers in India are accustomed to receiving
terrestrial broadcast television channels for free and analog cable transmission at a relatively low
monthly price and may not be willing to pay higher costs for digital television services, or additional
fees for value-added services.

6. Broadcasters may discontinue providing program content to DOPL, which may adversely affect its
subscription revenues and results of operations.

Subscription agreements between DOPL and broadcasters relating to the supply of television channel
signals by the broadcaster to DOPL set out the commercial and technical terms for such arrangements.
A broadcaster may choose to terminate its agreement with DOPL and/or discontinue supplying such
xxxvi
television channel signals either at will or as a result of any default by DOPL in complying with the
terms of such arrangements. Any discontinuation of such supply of television channel signals to DOPL
will prevent DOPL from providing such channels to the LCOs, resulting in a decrease in, or refund of,
subscription revenues. An inability to provide the LCOs with such channels or programs may also
result in LCOs terminating their arrangements with DOPL and entering into arrangements with
competing MSOs, which may adversely affect DOPL's business prospects and results of operations.

7. DOPL may experience increased customer attrition in the future, which may materially and
adversely affect its business, financial condition and results of operations.

Customer attrition, or “churn”, results in the loss of future revenues from customers whose services are
discontinued and the inability to recover the costs incurred in acquiring such customer. Customer
attrition may result from various factors, including as a result of customers switching to other cable
television service providers or other television service providers such as DTH or IPTV, LCOs
switching to other MSOs which compete against DOPL, as well as a result of disconnection of LCOs
and primary subscribers for non-payment of subscription fees. A high rate of churn may materially and
adversely affect DOPL's business, financial condition and results of operations. There can be no
assurance that DOPL will be able to implement measures to reduce customer churn or that its churn
rate will not increase in the future.

8. The cable television business is highly competitive, which affects DOPL's ability to attract and retain
subscribers, thereby having an adverse effect on its business and results of operations.

The cable television business is highly competitive and is subject to rapid and significant changes in
the industry, technology and regulatory and legislative environments. Certain competitors of DOPL
may have longer operating histories, easier access to financing, greater operational and other resources,
better brand name recognition and access to larger customer bases, as well as long-standing
relationships with regulatory authorities and industry intermediaries, including other MSOs and LCOs.
DOPL primarily competes with other cable television service providers in the markets in which it
operates, as well as with direct-to-home (“DTH”) service providers, internet protocol television
(“IPTV”) service providers and their respective local affiliates, including Hathway Cable Datacom
Limited, DEN Networks Limited, Indusind Media & Communications Limited, Digicable Network
(India) Private Limited and Wire and Wireless (India) Limited. Many of these competitors have
established operations in several cities across India, including cities and towns that DOPL operates in.
DTH service providers that DOPL competes with include Tata Sky, Dish TV, Sun Direct TV, BIG TV,
Videocon and Bharti Airtel.

Increasingly, competition in the cable television business is based not only on program offerings,
customer satisfaction, network quality and price, but also with respect to value-added services offered
by cable television operators. In addition, other factors such as the development of new technologies
and services within the industry may require DOPL to compete with new types of services offered by
other providers. DOPL may also face increased competition from cable television operators and other
competitors with greater financial, operational and other resources that commence operations in the
markets currently serviced by DOPL. Such competitors may also be able to identify and acquire other
MSOs and LCOs resulting in increased competition for DOPL.

DOPL may also face competition from newer technology platforms introduced in the cable television
business, such as head-end in the sky ("HITS") technology. The government recently permitted HITS
technology to commence tier services in India. The emergence of cable television service providers
based on HITS technology may result in increased competition for contracts with LCOs.

In addition to the various competitive factors applicable to the cable television industry, DOPL's
business is subject to various risks relating to increasing competition for the leisure and entertainment
time of consumers. The cable television business generally competes with all other sources of
entertainment and information delivery, including broadcast television, films, live events, radio
broadcasts, home video products, console games, print media and the internet. Technological
advancements, such as new video formats and internet streaming and downloading, have increased the
number of entertainment and information delivery choices available to consumers and intensified the
challenges posed by audience fragmentation. The increasing number of choices available to audiences
xxxvii
could negatively impact demand for DOPL's products and services.

There can be no assurance that DOPL will be able to compete successfully in the future, and this may
adversely affect its business prospects, results of operations and financial condition.

9. DOPL faces risks in relation to its plans for acquisitions of MSOs and the MSOs acquired may not
be profitable.

The MSOs that DOPL has acquired a majority interest in have collectively contributed losses after tax
to DOPL's consolidated financial statements.

DOPL faces risks in connection with its acquisition of MSOs, including: integration of the acquired
business; disruption of DOPL's ongoing business operations; incurrence of higher than anticipated
costs in the continuing support and development of acquired cable networks; problems in coordinating
the sales and marketing functions of an acquired business with the existing business; and cultural
challenges associated with integrating employees from the acquired business.

DOPL’s due diligence process may fail to identify all of the problems, liabilities or other shortcomings
or challenges of an acquired business. While DOPL typically acquires only the businesses (excluding
past liabilities) of an MSO, DOPL may face litigation or other claims in connection with the businesses
acquired, including claims from customers and other third parties. These difficulties could disrupt the
ongoing business of DOPL, distract its management and employees, and adversely affect its results of
operations. Moreover, even though the share subscription, share purchase and shareholder agreements
entered into when acquiring MSO businesses typically contain provisions indemnifying DOPL in
respect of various types of claims, there can be no guarantee that DOPL will be successful in making a
claim against an MSO in the event that DOPL incurs costs or expenses in relation to a claim for which
DOPL is indemnified.

10. New value-added services introduced by DOPL may not be successful, which could affect its
business, results of operations and financial condition.

DOPL plans to further enhance its digital cable services by offering additional value-added services
such as pay-per-view, premium digital content tiers, digital recording devices, mosaic viewing, and
interactive educational offerings. DOPL may be unable to provide unique and compelling value-added
services to differentiate its offerings from those provided by other pay television operators. DOPL has
limited prior experience in delivering such services and may not be able to successfully provide these
services due to unforeseen technical, operational or regulatory challenges. Commercial acceptance by
consumers of such services may not occur at the rate or level expected and DOPL may not be able to
successfully adapt such services effectively and economically to meet consumer demand. In addition,
there can be no assurance that DOPL's estimate of the necessary capital expenditure to offer such
services will not be exceeded, and any such new services it introduces may not be technically or
commercially successful or launched according to expected schedules.

11. DOPL's revenue may decrease significantly in the event of a decline in demand for channel carriage
and placement services.

DOPL derives a significant portion of its subscription revenue from carriage and placement fees paid
by broadcasters for carrying their channels and placing their channels on their preferred signal and
frequency bands. Placement and carriage fees are dependent on the number of households reached, the
availability of preferred frequency bandwidth, the socioeconomic status of the subscriber base, the
markets and regions served, and competition among television broadcasters for the preferred frequency
band. In the event of any decline in the growth of the broadcasting business in India or if new channels
are not introduced, revenues from carriage and placement fees may decrease. In addition, if the
preferred frequencies requested by a broadcaster have already been allocated to another broadcaster, or
if DOPL is otherwise unable to provide the preferred frequency requested, its revenues from carriage
and placement fees may be materially and adversely affected.

xxxviii
12. DOPL relies on the cooperation of the minority shareholders of the MSOs in which DOPL has
acquired a majority interest to conduct its operations. If DOPL's relationships with these minority
shareholders deteriorate, it could have a material adverse effect on DOPL's business and results of
operations.

DOPL's expansion strategy is based to a large extent on the acquisition of majority interests in MSOs
with a view to maintaining and leveraging such partnerships. Generally, DOPL enters into a joint
venture with either an existing MSO owner or with other members of the cable trade, which then holds
a significant minority interest in the MSO. If these minority shareholders do not assist DOPL in
successfully operating and growing these MSOs, DOPL could lose subscribers, revenues and market
share.

Moreover, in the event any of these minority shareholders breaches its non-compete obligation under
the relevant shareholder agreement or enters into any dispute with DOPL, it may have an adverse
effect on the business, financial condition and results of operations of DOPL.

13. LCOs may terminate their affiliation agreements with DOPL, resulting in loss of subscribers and
subscription revenues for DOPL.

DOPL enters into affiliation agreements with LCOs, pursuant to which the LCOs receive the signal
feed and offer DOPL's cable television services. DOPL competes with other MSOs to enter into such
affiliation agreements with LCOs. An LCO may generally terminate such affiliation agreement subject
to the 21 days’ statutory notice period, provided that all accounts are fully settled between DOPL and
such LCO. LCOs are therefore not under any long-term obligation to remain affiliated with DOPL.
Termination of the affiliation agreement by the LCO may result in a loss of subscribers, which may
adversely affect DOPL's results of operations. In addition, an LCO may terminate such affiliation
agreement with DOPL in breach of the terms of its agreement with DOPL, enter into affiliation
agreements with other MSOs without providing the requisite notice to DOPL, or fail to settle its
accounts with DOPL on the termination of the affiliation agreement. Under applicable regulations,
cable television service providers are prohibited from discontinuing signal feeds to LCOs, even under
circumstances such as non-payment of subscription fees by the LCO or breach of the terms of the
affiliate agreement by the LCO, unless pursuant to the procedure prescribed by the Telecommunication
(Broadcasting and Cable Services) Interconnection Regulation, 2004, as amended. DOPL may
therefore be unable to secure any compensation for the continued supply of signal feeds to such LCOs
until the completion of such procedure, and any such losses may adversely affect its business and
results of operations.

14. An inability to acquire distribution rights for third party programs and content on commercially
acceptable terms may adversely affect its DOPL's ability to attract and retain subscribers.

DOPL acquires distribution rights from broadcasters and content aggregators for the content that it
transmits to subscribers. Under applicable regulations, broadcast content must be made available by all
content providers to all platforms on a non-discriminatory basis. There can be no assurance that the
distribution rights to such third party programs and content will be available to DOPL on commercially
acceptable terms, or that such programs and content will be attractive to its subscribers. Furthermore,
DOPL's ability to offer content to cater to local preferences depends upon its ability to acquire
distribution rights for such contents. Any inability to provide adequate local content may affect its
ability to compete effectively with other MSOs with more popular local content. Any failure on
DOPL's part to anticipate, identify and respond effectively to subscriber demands could adversely
affect subscriber acceptance of its cable television services and result in subscriber churn. In addition,
DOPL may be unable to pass on to the LCOs or the subscribers any increased costs relating to the
acquisition of distribution rights for popular third party programs and content, which could adversely
affect its results of operations.

15. An inability to provide quality product and service offerings including value-added services may
result in increased subscriber churn and decrease in DOPL's revenues.

An inability to provide high quality digital cable television and value-added services may adversely
affect DOPL's business, resulting in increase in subscriber churn and decrease in DOPL's revenues. In
xxxix
addition, actual or perceived problems with the quality of DOPL's product and service offerings may
lead to a lack of consumer confidence and adversely affect its ability to successfully introduce and
monetize new products and services.

16. In the event that an increased investment in STBs is necessary, onerous conditions in vendor
contracts or financing arrangements could have a material adverse effect on DOPL's cash flow,
revenues and financial condition.

Since fiscal 2008, DOPL has not been able to recover its investment in STBs, which DOPL provides to
subscribers. In order to continue to increase its subscriber base in India, DOPL may need to further
reduce entry costs. Depending upon DOPL's suppliers' pricing of STBs, this may translate into a
higher investment requirement. As a result, continued or increased investments in STBs in the future
or an adverse change in the terms of vendor contracts or financing arrangements for the procurement of
STBs could have a material adverse effect on DOPL's cash flow, revenues and financial condition.

17. DOPL is exposed to liability under the Cable TV Act and other laws in connection with the third
party content it carries.

Under the Cable TV Act, DOPL must comply with program and advertisement code on the channels
that it provides to customers. Programs and advertisements provided by a broadcaster is beyond
DOPL's control. However, DOPL may face potential liability in the event of breach of the program or
advertisement code by a broadcaster.

EXTERNAL RISK FACTORS

RISKS RELATING TO THIS ISSUE AND INVESTMENT IN OUR EQUITY SHARES

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

Prior to this Issue, there has been no public market for our Equity Shares. The trading price of our
Equity Shares may fluctuate after this Issue due to a variety of factors, including our results of
operations and the performance of our business, competitive conditions, general economic, political
and social factors, the performance of the Indian and global economy and significant developments in
India’s fiscal regime, volatility in the Indian and global securities market, performance of our
competitors, the Indian media and entertainment sector, particularly the ISP and cable television
services industry and the perception in the market about investments in these sectors, changes in the
estimates of our performance or recommendations by financial analysts and announcements by us or
others regarding contracts, acquisitions, strategic partnerships, joint ventures, or capital commitments.
There can be no assurance that an active trading market for our Equity Shares will develop or be
sustained after this Issue, or that the price at which our Equity Shares are initially offered will
correspond to the prices at which they will trade in the market subsequent to this Issue.

2. Any future issuance of Equity Shares by our Company or sales of the Equity Shares by any of its
significant shareholders may adversely affect the trading price of the Equity Shares.

Any future issuance of our Equity Shares by our Company could dilute your shareholding. Any such
future issuance of our Equity Shares or sales of our Equity Shares by any of our significant
shareholders may also adversely affect the trading price of our Equity Shares, and could impact our
ability to raise capital through an offering of our securities. Any issuance of Equity Shares may dilute
our existing shareholders.

After the completion of the Issue, our Promoters will own, directly and indirectly, approximately [●]%
of our outstanding Equity Shares. Sales of a large number of our Equity Shares by our Promoters
could adversely affect the market price of our Equity Shares. Similarly, the perception that any such
primary or secondary sale may occur could adversely affect the market price of our Equity Shares.

There can be no assurance that we will not issue further Equity Shares or that our shareholders will not
dispose of, pledge or otherwise encumber their Equity Shares. In addition, any perception by investors

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that such issuances or sales might occur could also affect the trading price of our Equity Shares. Upon
completion of the Issue, 20.00% of our post-Offer paid-up capital held by certain of our Promoters will
be locked up for a period of three years from the date of allotment of Equity Shares in the Issue. For
further information relating to such Equity Shares that will be locked up, please see Note 4 (d) of the
Notes to the Capital Structure in the section “Capital Structure” on page 24. All other remaining Equity
Shares that are outstanding prior to the Offer will be locked up for a period of one year from the date of
allotment of Equity Shares in the Issue.

3. You will not be able to immediately sell any of the Equity Shares you purchase in this Issue on the
Stock Exchanges.

Under the ICDR Regulations, we are permitted to allot the Equity Shares within 15 days of the closure
of the Issue. Consequently, the Equity Shares you purchase in this Issue may not be credited to your
demat account with Depository Participants within 15 days of the closure of the Issue. You can start
trading in the Equity Shares only after they have been credited to your demat account and listing and
trading permissions are received from the Stock Exchanges. The Equity Shares will be listed on the
NSE and the BSE. Pursuant to Indian regulations, certain actions must be completed before the Equity
Shares can be listed and trading may commence. Investors’ book entry, or “demat” accounts with
depository participants in India are expected to be credited within two working days of the date on
which the Designated Stock Exchange approves the basis of allotment. Thereafter, upon receipt of final
approval of the stock exchanges, trading in the Equity Shares is expected to commence within seven
working days of the date on which the Designated Stock Exchange approves the basis of allotment.
Further, there can be no assurance that the Equity Shares allocated to you will be credited to your
demat account, or that the trading in Equity Shares will commence within the specified time periods.

4. There is no guarantee that the Equity Shares issued pursuant to the Issue will be listed on the BSE
and the NSE in a timely manner, or at all, and any trading closures at the BSE or the NSE may
adversely affect the trading price of our Equity Shares.

In accordance with Indian law and practice, permission for listing of the Equity Shares will not be
granted until after those Equity Shares have been issued and allotted. Approval requires all other
relevant documents authorizing the issuing of Equity Shares to be submitted. There could be a failure
or delay in listing the Equity Shares on the BSE and the NSE. In accordance with section 73 of the
Companies Act, in the event that the permission of listing the Equity Shares is denied by the Stock
Exchanges, our Company is required to refund all monies collected to investors. Please see the section
“Other Regulatory and Statutory Disclosures” beginning on page 186. Any failure or delay in
obtaining the approval would restrict your ability to dispose of your Equity Shares.

The regulation and monitoring of the Indian securities markets and the activities of investors, brokers
and other participants differ, in some cases significantly, from those in Europe and the U.S. A closure
or prolonged suspension of trading on either or both of the BSE and the NSE may adversely affect the
trading price of the Equity Shares.

5. There may be restrictions on daily movements in the price of the Equity Shares, which may
adversely affect a shareholder’s ability to sell, or the price at which it can sell, Equity Shares at a
particular point in time.

Following the Issue, we may be subject to a daily ‘circuit breaker’ imposed by the stock exchanges in
India, which does not allow transactions beyond specified increases or decreases in the price of the
Equity Shares. This circuit breaker operates independently of the index-based, market-wide circuit
breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on our circuit
breakers may be set by the stock exchanges based on the historical volatility in the price and trading
volume of the Equity Shares. The Stock Exchanges do not inform us of the percentage limit of the
circuit breaker in effect from time to time and may change it without our knowledge. This circuit
breaker may limit the upward and downward movements in the price of the Equity Shares. As a result
of this no assurance may be given regarding your ability to sell your Equity Shares or the price at
which you may be able to sell your Equity Shares at any particular time.

xli
6. There may be less information available about our Company and the Indian securities markets than
in securities markets in other more developed countries.

There is a difference between the level of regulation, disclosure and monitoring of the Indian securities
markets and the activities of investors, brokers and other participants and that of markets in the United
States and other more developed economies. SEBI is responsible for ensuring and improving
disclosure and other regulatory standards for the Indian securities markets. SEBI has issued regulations
on disclosure requirements, insider trading and other matters. There may, however, be less publicly
available information about Indian companies than is regularly made available by public companies in
more developed economies. As a result, shareholders may have access to less information about our
business, results of operations and financial condition than those of our competitors that are listed on
the BSE and the NSE and other stock exchanges in India on an ongoing basis than shareholders may
have in the case of companies subject to the reporting requirements of other more developed countries.

7. Rights of shareholders under Indian law may be more limited than under the laws of other
jurisdictions.

Our Articles of Association, regulations of our Board of Directors and Indian law govern our corporate
affairs. Legal principles relating to these matters and the validity of corporate procedures, Directors'
fiduciary duties and liabilities, and shareholders' rights may differ from those that would apply to a
company in another jurisdiction. Shareholders' rights under Indian law may not be as extensive as
shareholders' rights under the laws of other countries or jurisdictions. Investors may have more
difficulty in asserting their rights as a shareholder of our Company than as a shareholder of a
corporation in another jurisdiction.

8. We cannot guarantee the accuracy or completeness of facts and other statistics with respect to India,
the Indian economy and the broadband, cable, media and entertainment industries contained in this
Draft Red Herring Prospectus.

While facts and other statistics in this Draft Red Herring Prospectus relating to India, the Indian
economy as well as the broadband, media and entertainment industries and the cable television
industry have been based on various publications and reports from agencies that we believe are
reliable, we cannot guarantee the quality or reliability of such materials, particularly since there is
limited publicly available information specific to the energy sector. While we have taken reasonable
care in the reproduction of such information, industry facts and other statistics have not been prepared
or independently verified by us or any of our respective affiliates or advisers and, therefore we make
no representation as to their accuracy or completeness. These facts and other statistics include the facts
and statistics included in “Industry Overview” on page 60. Due to possibly flawed or ineffective data
collection methods or discrepancies between published information and market practice and other
problems, the statistics herein may be inaccurate or may not be comparable to statistics produced
elsewhere and should not be unduly relied upon. Further, there is no assurance that they are stated or
compiled on the same basis or with the same degree of accuracy, as the case may be, elsewhere.

9. After this Issue, the price of the Equity Shares may be highly volatile.

The price of the Equity Shares on the Stock Exchanges may fluctuate after this Issue as a result of
several factors, including:

• volatility in the Indian and global securities market or in the value of the Rupee relative to the
U.S. dollar, the Euro and other foreign currencies;

• our profitability and performance;

• perceptions about our future performance or the performance of Indian companies in general;

• performance of our competitors and the perception in the market about investments in the
businesses we operate;

xlii
• adverse media reports on us or the Indian media and entertainment industry in general and the
broadband and cable television industry in particular;

• changes in the estimates of our performance or recommendations by financial analysts;

• significant developments in India's economic liberalization and deregulation policies;

• significant developments in India's fiscal regulations; and

• any other political or economic factors.

10. Fluctuations in the exchange rate between the Rupee and the U.S. dollar could have a material
adverse effect on the value of the Equity Shares, independent of our operating results.

The Equity Shares are quoted in Rupees on the BSE and the NSE. Any dividends in respect of the
Equity Shares will be paid in Rupees and subsequently converted into US dollars for repatriation. Any
adverse movement in exchange rates during the time it takes to undertake such conversion may reduce
the net dividend to investors. In addition, any adverse movement in exchange rates during a delay in
repatriating the proceeds from a sale of Equity Shares outside India, for example, because of a delay in
regulatory approvals that may be required for the sale of Equity Shares may reduce the net proceeds
received by shareholders. The exchange rate between the Rupee and the U.S. dollar has changed
substantially in the last two decades and could fluctuate substantially in the future, which may have a
material adverse effect on the value of the Equity Shares and returns from the Equity Shares,
independent of our operating results.

11. Investors may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares.

Under current Indian tax laws and regulations, capital gains arising from the sale of Equity Shares in an
Indian company are generally taxable in India. Any gain realized on the sale of listed equity shares on
a stock exchange held for more than 12 months will not be subject to capital gains tax in India if
Securities Transaction Tax (“STT”) has been paid on the transaction. STT will be levied on and
collected by a domestic stock exchange on which the Equity Shares are sold. Any gain realized on the
sale of equity shares held for more than 12 months to an Indian resident, which are sold other than on a
recognized stock exchange and on which no STT has been paid, will be subject to long term capital
gains tax in India. Further, any gain realized on the sale of listed equity shares held for a period of 12
months or less will be subject to short-term capital gains tax in India. Capital gains arising from the
sale of the Equity Shares will be exempt from taxation in India in cases where the exemption from
taxation in India is provided under a treaty between India and the country of which the seller is
resident. Generally, Indian tax treaties do not limit India's ability to impose tax on capital gains. As a
result, residents of other countries may be liable for tax in India as well as in their own jurisdiction on a
gain upon the sale of the Equity Shares.

12. A third party could be prevented from acquiring control of us because of anti-takeover provisions
under Indian law.

There are provisions in Indian law that may delay, deter or prevent a future takeover or change in
control of our Company, even if a change in control would result in the purchase of your Equity Shares
at a premium to the market price or would otherwise be beneficial to you. These provisions may
discourage or prevent certain types of transactions involving actual or threatened change in control of
us. Under the SEBI Takeover Regulations, an acquirer has been defined as any person who, directly or
indirectly, acquires or agrees to acquire shares or voting rights or control over a company, whether
individually or acting in concert with others. Although these provisions have been formulated to ensure
that interests of investors/shareholders are protected, these provisions may also discourage a third party
from attempting to take control of our Company. Consequently, even if a potential takeover of our
Company would result in the purchase of the Shares at a premium to their market price or would
otherwise be beneficial to its stakeholders, it is possible that such a takeover would not be attempted or
consummated because of Indian takeover regulations.

xliii
13. Foreign investment restrictions under Indian law limit our ability to attract foreign investors, which
may adversely impact the market price of the Equity Shares and the ability of investors to sell or
trade the Equity Shares.

Under the foreign exchange regulations currently in force in India, transfers of shares between non-
residents and residents are freely permitted (subject to certain exceptions) if they comply with the
pricing guidelines and reporting requirements specified by the RBI. If the transfer of shares is not in
compliance with such pricing guidelines or reporting requirements or fall under any of the exceptions
referred to above, then the prior approval of the RBI will be required. Additionally, shareholders who
seek to convert the Rupee proceeds from a sale of shares in India into foreign currency and repatriate
that foreign currency from India will require a no objection or a tax clearance certificate from the
income tax authority. We cannot assure investors that any required approval from the RBI or any other
Government agency can be obtained on any particular terms, or at all.

As an Indian company, we are also subject to exchange controls that regulate borrowing in foreign
currencies. In addition, foreign investment in activities pertaining to cable television network is
restricted to 49.00% of the paid up equity capital of a company engaged in such activities subject to
prior FIPB approval with gateways and radio paging and the Cable Television Network Rules, 1994.

Under the current policy of the Government of India on foreign investment, foreign investment in
companies carrying out ISP activities without gateway, and in infrastructure providers providing Dark
Fiber, right of way, duct space tower (category I) and/or electronic mail and voice mail, is permitted up
to 100.00%, of which up to 49.00% foreign investment is permitted under the automatic route and an
FIPB approval is required for any foreign investment exceeding 49.00%. However, pursuant to Press
Note 2 (2007 Series) the Government of India has mandated all such companies to divest 26.00% of
their equity in favor of the Indian public within five years, if such companies are listed in other parts of
the world.

The restriction on foreign investment may restrict an investor's ability to sell the Equity Shares to
foreign investors, including FIIs. The restrictions on foreign investments may also restrict an investor's
ability to trade in the Equity Shares.

RISKS RELATING TO INDIA

1. Political instability or changes in the Government of India could adversely affect economic
conditions in India and consequently our business, financial condition and results of operations.

Our Company is incorporated in India, derive its revenues in India and all our assets is located in India.
Consequently, our performance and the market price and liquidity of the Equity Shares may be affected
by changes in exchange rates and controls, interest rates, Government policies, taxation, social and
ethnic instability and other political and economic developments affecting India. The Government has
traditionally exercised and continues to exercise a significant influence over many aspects of the
economy. Our business and the business of certain of our subsidiaries, and the market price and
liquidity of the Equity Shares may be affected by interest rates, changes in Government policy,
taxation, social and civil unrest and political, economic or other developments in or affecting India.
Since 1991, successive governments have pursued policies of economic and financial sector
liberalization and deregulation and encouraged infrastructure projects. The new Government, which
has came to power in May 2009 has announced policies and taken initiatives that support the economic
liberalization program pursued by previous governments. The policies of the new Government may
change the rate of economic liberalization, specific laws and policies affecting our industry as well as
foreign investment in our industry, which may have indirect implications for our business. A
significant change in the Government's policies in the future could affect business and economic
conditions in India, and could also adversely affect our business, financial condition and results of
operations.

xliv
2. If communal disturbances or riots erupt in India, or if regional hostilities increase, this would
adversely affect the Indian economy, and our business, financial condition and results of
operations.

India has experienced communal disturbances, terrorist attacks and riots during recent years. If such
events recur, our operational and marketing activities and those of our subsidiary may be adversely
affected, resulting in a decline in our income.

The Asian region has from time to time experienced instances of civil unrest and hostilities among
neighboring countries, including those between India and Pakistan. The hostilities between India and
Pakistan are particularly threatening because both India and Pakistan are nuclear powers. Hostilities
and tensions may occur in the future and on a wider scale. Military activity or terrorist attacks in India,
such as the recent attacks in Mumbai in November 2008, as well as other acts of violence or war could
influence the Indian economy by creating a greater perception that investments in India involve higher
degrees of risk. Events of this nature in the future, as well as social and civil unrest within other
countries in Asia, could influence the Indian economy and could have a material adverse effect on the
market for securities of Indian companies, including the Equity Shares. A slow down in economic
growth in India could cause our business to suffer.

3. An outbreak of an infectious disease or any other serious public health concerns in Asia or
elsewhere could adversely affect our business.

The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concern,
such as swine influenza, could have a negative impact on the global economy, financial markets and
business activities worldwide, which could adversely affect our business. Although, we have not been
adversely affected by such outbreaks in the past, we can give you no assurance that a future outbreak
of an infectious disease among humans or animals or any other serious public health concern will not
have a material adverse effect on our business.

4. A slowdown in economic growth in India and financial instability of the Indian financial market
could materially and adversely affect our results of operations and financial condition.

We currently derive all of our revenues from operations in India and consequently, our performance
and growth is dependent on the state of the Indian economy. The Indian financial market and the
Indian economy are influenced by economic and market conditions in other countries, particularly in
Asian emerging market countries. Financial turmoil in Asia and elsewhere in the world in recent years
has affected the Indian economy. Although economic conditions are different in each country,
investors’ reactions to developments in one country can have adverse effects on the securities of
companies in other countries, including India. A loss in investor confidence in the financial systems of
other emerging markets may cause increased volatility in Indian financial markets and, indirectly, in
the Indian economy in general. For example, the Annual Policy Statement of the Reserve Bank of India
released in April 2009 placed real GDP growth for the fiscal 2009 at approximately 7.1% as compared
to 9.0% in fiscal 2008 following the downturn precipitated by the global financial crisis. Any
worldwide financial instability could also have a negative impact on the Indian economy. Financial
disruptions may occur again and could harm our results of operations and financial condition.

5. Taxes and other levies imposed by the Central or State Governments, as well as other financial
policies and regulations, may have an adverse effect on our business, financial condition and results
of operations.

We are subject to taxes and other levies imposed by the Central or State Governments in India,
including customs duties, excise duties, central sales tax, state sales tax, fringe benefit tax, service tax,
income tax, value added tax, entertainment tax, and other taxes, duties or surcharges introduced on a
permanent or temporary basis from time to time. The central and state tax regime in India is extensive
and subject to change from time to time. Any adverse changes in any of the taxes levied by the Central
or State Governments, including on cable modems may adversely affect our competitive position and
profitability. We cannot assure you that any existing tax incentives will continue to be available in the
future. Changes in, or elimination of, such tax incentives could adversely affect our financial condition
and results of operations.
xlv
6. Difficult conditions in the global capital markets and a slowdown in economic growth in India or
financial instability in Indian financial markets have affected and may continue to affect our
business and results of operations.
Economic developments outside India have adversely affected the markets in which we operate and
our overall business. As widely reported, financial markets in the United States, Europe and Asia,
including India, have experienced extreme disruption in the recent past, including, among other things,
extreme volatility in security prices, severely diminished liquidity and credit availability, rating
downgrades of certain investments and declining valuations of others. These and other related events,
such as the collapse of a number of financial institutions, have had and continue to have a significant
adverse impact on the availability of credit and the confidence of the financial markets, globally as
well as in India.

Although economic conditions are different in each country, investors' reactions to developments in
one country can have adverse effects on the securities of companies in other countries, including India.
A loss in investor confidence in the financial systems of other emerging markets may cause increased
volatility in Indian financial markets and, indirectly, in the Indian economy in general. The
performance, quality and growth of our business are dependent on the health of the overall Indian
economy. There can be no assurance that future fluctuations of the economic or business cycle, or
other events that could influence the gross domestic product, will not have an adverse effect on our
financial results and business prospects, as well as the price of our Equity Shares. Additionally, the
price of our Equity Shares could decrease if investors have concerns that our business, financial
condition and results of operations will be negatively impacted by a worldwide macroeconomic
downturn.
In addition, if there is a tightening of credit in the financial markets in the future, financing for our
projects may not be available on commercially acceptable terms and as a result, we may experience
serious cash flow problems and the implementation and planning of our projects may be delayed.
Uncertainty and adverse changes in the economy could also increase costs associated with our business
operations in a number of ways, including increased interest rates, and increase our exposure to
material losses from our investments. Moreover, India has experienced high levels of inflation in the
past. In the event of high inflation rates, our costs, such as salaries and equipment, may increase, and
we may not be able to pass on our costs to our customers.

7. A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian
economy, which could adversely impact our financial condition.

According to a report released by the RBI, India’s foreign exchange reserves totaled USD 283.47
billion as at December 31, 2009. A decline in India’s foreign exchange reserves could impact the
valuation of the Rupee and could result in reduced liquidity and higher interest rates which could
adversely affect our future financial performance.

8. Any downgrading of India's debt rating by an international rating agency may have a negative
impact on our business.

Any adverse revisions to India's credit ratings for domestic and international debt by international
rating agencies may adversely impact our ability to raise additional financing, and the interest rates and
other commercial terms at which such additional financing may be available. This may have an adverse
effect on our business and future financial performance, our ability to obtain financing for capital
expenditures and the trading price of our Equity Shares.

9. It may not be possible for you to enforce any judgment obtained outside India, including in the
United States, against our Company or any of our affiliates in India, except by way of a suit in India
on such judgment.

We are incorporated under the laws of India and majority of our Directors and executive officers reside
in India. Furthermore, all of our Company's assets are located in India. As a result, you may be unable
to:

xlvi
• effect service of process in jurisdictions outside India, including in the United States, upon our
Company; or

• enforce in Indian courts judgments obtained in courts of jurisdictions outside India against our
Company, including judgments predicated upon the civil liability provisions of the securities
laws of jurisdictions outside India.

India has reciprocal recognition and enforcement of judgments in civil and commercial matters with a
limited number of jurisdictions. A judgment from certain specified courts located in a jurisdiction with

reciprocity must meet certain requirements of the Code of Civil Procedure, 1908, as amended, (the
"Civil Code"). The United States and India do not currently have a treaty providing for reciprocal
recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment
for the payment of money rendered by any federal or state court in a non-reciprocating territory, such as
the United States, for civil liability, whether or not predicated solely upon the general securities laws of
the United States, would not be enforceable in India under the Civil Code as a decree of an Indian
court. However, the party in whose favor such final judgment is rendered may bring a new suit in a
competent court in India based on a final judgment that has been obtained in the United States or other
such jurisdiction within three years of obtaining such final judgment. It is unlikely that an Indian court
would award damages on the same basis as a foreign court if an action is brought in India. Moreover, it
is unlikely that an Indian court would award damages to the extent awarded in a final judgment
rendered outside India if it believed that the amount of damages awarded were excessive or inconsistent
with Indian practice. In addition, any person seeking to enforce a foreign judgment in India is required
to obtain the prior approval of the RBI to repatriate any amount recovered.

10. Natural calamities could have a negative effect on the Indian economy, adversely affecting our
business and the price of our Equity Shares.

India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past
few years. The extent and severity of these natural disasters determines their effect on the Indian
economy. For example, as a result of drought conditions in the country during fiscal 2003, the
agricultural sector recorded negative growth for that period. The erratic progress of the monsoon in
2004 and 2009 affected sowing operations for certain crops. Further prolonged spells of below normal
rainfall or other natural calamities could have a negative effect on the Indian economy, adversely
affecting our business and the price of our Equity Shares.

Prominent Notes to Risk Factors

1. Investors may contact the BRLM who has submitted the due diligence certificate to SEBI for any
complaint pertaining to the Issue.

2. The net worth of our Company as of September 30, 2009 was Rs.2,247.36 million based on restated
financial information of our Company.

3. Public Issue of up to [●] Equity Shares for cash at a price of Rs. [●] per Equity Share (including a
share premium of Rs. [●] per Equity Share) aggregating to Rs. 3,600 million. The Issue will constitute
up to [●]% respectively of our post Issue paid-up equity share capital.

4. The average cost of acquisition of our Equity Shares by our Promoters:


Name of Promoters Average cost of acquisition per Equity Share
(In Rs.)*
YOU Telecom (Mauritius) Limited 10.36
Eyyuni Venkat Srinivas Chakravarthy 2.50
*The average cost of acquisition of our Equity Shares by our Promoters has been calculated by taking into account the
amount paid by them to acquire, by way of fresh issuance or transfer, the Equity Shares, and pursuant to the Scheme of
Capital Reduction. For more information, please refer to the section titled “Capital Structure” beginning on page 24 of
the Draft Red Herring Prospectus.

xlvii
5. The book value per Equity Share was Rs.9.73 as of September 30, 2009, based on the restated financial
information of our Company.

6. For details of our related party transactions, see section titled “Financial Statements” beginning on
page 129 of this Draft Red Herring Prospectus.

7. For details of transactions in the securities of our Company by our Promoters, directors of YTML
and/or CVCIGPML, the Promoter Group and Directors in the last six months, see section titled
“Capital Structure” beginning on page 24 of this Draft Red Herring Prospectus.

8. For information relating to the incorporation of our Company and change in name of our Company
during the last three years immediately preceding the date of filing of this Draft Red Herring
Prospectus, including changes in our Memorandum of Association see “History and Certain Corporate
Matters” beginning on page 101 of this Draft Red Herring Prospectus.

9. There are no financing arrangements whereby the Promoter Group, the directors of YTML and/or
CVCIGPML, the Directors of our Company and their relatives have financed the purchase by any other
person of securities of our Company other than in the normal course of the business of the financing
entity during the period of six months immediately preceding the date of filing this Draft Red Herring
Prospectus with SEBI.

10. Except as disclosed in the sections titled “Promoters and Group Companies” or “Our Management”
beginning on pages 119 and 109, respectively, none of our Promoters, our Directors and our other key
managerial employees have any interest in our Company except to the extent of remuneration and
reimbursement of expenses and to the extent of the Equity Shares held by them or held by the
companies in which they are interested as directors or members, and to the extent of the benefits
arising out of such shareholding.

11. The Issue is being made under sub-regulation (2) (a) (i) and (2) (b) (i) of Regulation 26 of the
Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,
2009 and through the 100% Book Building Process, wherein at least 50% of the Net Issue shall be
allocated on a proportionate basis to Qualified Institutional Buyers. Provided that our Company may
allocate up to 30% of the QIB portion to the Anchor Investors on discretionary basis. Further 5% of the
QIB Portion (excluding Anchor Investor Portion) shall be available for allocation on a proportionate
basis to Mutual Funds only and the remaining QIB portion shall be available for allocation to all QIB
Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. If at
least 50% of the Net Issue cannot be allocated to the QIBs then the entire application money will be
refunded forthwith. Further, not less than 35% of the Net Issue shall be available for allocation on a
proportionate basis to Retail Individual Bidders and not less than 15% of the Net Issue shall be
available for allocation on a proportionate basis to Non-Institutional Bidders, subject to valid Bids
being received at or above the Issue Price. For further details see section “Issue Structure” beginning
on page 203 of this Draft Red Herring Prospectus.

12. Other than as stated in section titled “Capital Structure” beginning on page 24 of this Draft Red
Herring Prospectus, we have not issued any Equity Shares for consideration other than cash.

13. Under-subscription, if any, in the Non-Institutional and Retail Portion would be allowed to be met with
spill over from any other category at the discretion of our Company in consultation with the BRLM
and the Designated Stock Exchange.

14. In case of over-subscription of the Issue, allotment to QIBs, Non-Institutional Bidders and Retail
Bidders shall be on a proportionate basis. For more information, please refer to the section titled “Issue
Procedure” beginning on page 209 of this Draft Red Herring Prospectus.

15. Investors are advised to refer to section titled “Basis for Issue Price” beginning on page 47 of this
Draft Red Herring Prospectus.

16. Trading in Equity Shares for all investors shall be in dematerialised form only. For further details, see
“Issue Procedure” beginning on page 209 of this Draft Red Herring Prospectus.

xlviii
17. Any clarification or information relating to the Issue shall be made available by the BRLM and our
Company to the investors at large and no selective or additional information would be available for a
section of investors in any manner whatsoever.

18. Other than as stated here, and as disclosed in “Financial Statements”, none of our Group Companies
have any business interest in our Company. For further details, see section titled “History and Certain
Corporate Matters” beginning on page 101 of this Draft Red Herring Prospectus.

xlix
SECTION III: INTRODUCTION

SUMMARY OF INDUSTRY
Unless noted otherwise, the information in this section is derived from industry sources and government
publications. None of the Company, the BRLM and any other person connected with the Issue has
independently verified this information. Industry sources and publications generally state that the
information contained therein has been obtained from sources believed to be reliable, but their accuracy,
completeness and underlying assumptions are not guaranteed and their reliability cannot be assured.
Industry sources and publications are also prepared based on information as of specific dates and may no
longer be current or reflect current trends. Industry sources and publications may also base their
information on estimates, projections, forecasts and assumptions that may prove to be incorrect.
Accordingly, investors should not place undue reliance on this information.

The Indian Economy

Over the last few years, India has shown strong economic growth. Despite the global economic downturn
during fiscal 2009, overall gross domestic product (“GDP”) growth for the fiscal 2009 was approximately
7.1% as compared to 9.0% in fiscal 2008 following the downturn precipitated by the global financial crisis
(Source: The Annual Policy Statement of the Reserve Bank of India in April 2009). India’s GDP is predicted
to be on an uptrend, keep increasing, with a concomitant increase in income levels across urban, semi-
urban and rural households. The demographic distribution, with the average consumer in the lower age
brackets, appears to be favorable for the country’s economic growth. Approximately 70% of the country’s
population is below 35 years of age, while more than 50% is likely to be under the age of 30, even in 2015
(Source: Euromonitor, FICCI – KPMG Report 2009).

The Indian Internet Broadband Industry

The Indian broadband internet subscriber market comprised approximately 5.52 million subscribers in 2008,
compared to 46,000 subscribers in 2003. The MPA Report 2009 projects that the number of broadband
internet households will increase to approximately 13.93 million by 2013. Expressed as a percentage of total
households, broadband internet subscription has relatively low penetration, with only 2% of total
households in India with internet access. This percentage is projected to grow to 5% of total Indian
households by 2013. (Source: MPA Report 2009). The penetration of broadband in India is also low in
comparison to as compared to other countries in Asia, indicating a potential for significant growth (For
further details, refer to Broadband Penetration in Asian Countries in the Industry Overview Section).

Consumer behavior for internet access has evolved over the years. When internet access became available in
India in 1995, a majority of users accessed the internet through dial-up connections. The websites accessed
were simple text pages that used low bandwidth. The proliferation and popularity of internet applications
has brought about a surge in internet usage. Now, the internet is commonly used for email communication
with large attachments, while narrow band e-commerce applications, such as online bill payment facilities,
are also gaining in popularity. In conjunction, the internet has emerged as source for personal
entertainment. New usage categories are also emerging, such as social networking sites, for example,
www.facebook.com, and file-sharing sites, such as www.youtube.com.

The resulting steep rise in internet traffic has created a growing requirement for internet service that is
“always on”, while capable of handing high throughputs levels. The cable TV infrastructure has the
capability of delivering higher speeds to consumers as compared to alternate modes such as a DSL service.

Due to the ability of the operator to bundle multiple products, such as television, telephone and internet
access, in a single package, such bundled services can be offered at lower cost to the customer. It is
estimated that these benefits of Cable Broadband internet will drive its growth in India, with the MPA
Report 2009 predicting that the number of Cable Broadband subscribers will increase to approximately 2.30
million in 2013, representing 16.5% of all Indian broadband internet subscribers, compared to 11% in 2008.
(Source: MPA Report 2009)

1
According to the MPA Report 2009, the total revenue in 2008 from Cable Broadband subscriptions in India
was US$42.0 million, up from US$7.8 million in 2003. The MPA Report 2009 estimates that Cable
Broadband subscription revenues will reach US$149.5 million in 2013, reflecting a significant increase in
Cable Broadband subscriptions through 2013.

The Indian Cable Television Industry

India’s cable television industry has grown rapidly since its inception almost twenty years ago. Cable
television is now established as a mass medium for entertainment and information, available in more than
80 million consumer households across India. This represents 64% of television-owning homes in the
country. Compared to cable industry in the United States and Europe, cable TV in India is still at a nascent
stage (For further details, please refer to “Industry Overview” section).

As of December 31, 2008, the Indian cable TV industry generated an approximate turnover of Rs. 230
billion: Rs. 151 billion derived from the distribution of television content over analogue cable networks; Rs.
4 billion from the distribution of television programming over addressable digital cable networks; and Rs.
75 billion from cable television advertising sales. (Source: Media Partners Asia, Asia Pacific Pay-TV &
Broadband Markets 2009) In recent years, the cable industry has added approximately 6 to 7 million new
TV subscribers per annum. (Source: Media Partners Asia, Asia Pacific Pay-TV & Broadband Markets 2009)

One of the challenges that face the industry is the under-declaration by LCOs of subscriber revenue.
Historically, the LCOs have declared only a small part of their subscriber base and have not paid
subscription fees based on their full analog customer base. This has led to low levels of subscription
revenue.

The deployment of digital cable TV provides an addressable distribution framework for the industry, which
will bring about more equitable revenue sharing arrangements within the industry value chain, lessen the
incidence of piracy, as well as provide a platform for the growth of pay channel services and value-added
interactive services, including video-on-demand (“VOD”). This will lead to better average revenue per
customer or “ARPU” for the MSO.

Other benefits of Digitization:


Better picture and sound quality: Digital cable television, with its DVD picture and sound quality, provides
an enhanced viewing experience compared to analog cable television.

Significantly more channels: Digital cable networks have significantly higher capacity to carry channels
than an analog cable network. This translates into a broader channel selection and caters to a wider
demographic compared to analog cable networks. Using the current technology and network design, the
maximum number of channels that can be carried on analog cable is 106. A digital cable service can cater to
over 500 channels.

Value-added services: Digital cable allows operators to provide subscribers with value-added services, such
as an electronic program guide, video-on-demand, pay-per view and interactive-TV services, which provide
multiple monetization opportunities for the MSO.

Television broadcasting has seen a very rapid growth in the past few years. The number of broadcasted
channels has increased very rapidly in the past few years - from 175 in 2006 to 485 in 2009, with numbers
expected to increase further. This trend points towards localization and specialization of content. A lot of
content / channels now cater to audiences in a specific area or of a certain demographic profile.

An analog cable service has limitations in terms of the number of channels that can be telecast. Hence, in
order to cater to the growing number of channels, a digital service tier is required to cater to the customers
who opt to view more channels. As consumers experience interactivity over the internet, the requirement to
bring interactivity on television has grown. Customers are opting for Video on Demand ("VoD") where the
customer uses his remote control to purchase content, such a movies, archived programs and serials. In a
DTH service, this is difficult to achieve without alternate or additional cables for the back channel. This is
more easily achieved on HFC cable that is two-way. Hence, a broadband cable service provider has
network infrastructure that is more suitable for meeting customer needs for interactivity.
2
SUMMARY OF OUR BUSINESS

The following information is qualified in its entirety by, and should be read in conjunction with, the more
detailed financial and other information included in the Draft Red Herring Prospectus, including the
information contained in the section “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” beginning on page xiv and page 130, respectively, of this
Draft Red Herring Prospectus.

In this section, unless the context otherwise requires, a reference to the "Company" or to "we", "us" and
"our" refers to YOU Broadband & Cable India Limited, and a reference to "DOPL" refers to Digital
Outsourcing Private Limited and its subsidiaries and associate company, on a consolidated basis. Unless
otherwise stated or the context otherwise requires, the financial information used in this section is derived
from the restated financial statements of our Company and the restated consolidated financial statements of
DOPL, as applicable.

Overview

We are one of the leading Cable Broadband service providers in India. We commenced operations in 2001
and currently provide high-speed broadband cable internet services to our residential and enterprise segment
customers across 11 cities in India. As of September 30, 2009, we owned and operated over 990 kilometers
of fiber optic cable and over 4,100 kilometers of trunk coaxial cable network, supported by 11 NOCs. As of
September 30, 2009, our residential broadband internet service subscriber base aggregated approximately
200,779 customers. Based on internal estimates, we believe that our network covers approximately 1.50
million homes passed, and our residential broadband internet service subscriber base represents an estimated
penetration of 13.4% of two-way broadband-enabled homes. Based on industry information derived from
the TRAI Report dated January 7, 2010 "The Indian Telecom Services Performance Indicators July -
September 2009" (“TRAI Report (January 2010)”), in such period, we had a market share of approximately
32.0% of the Cable Broadband internet market in India.

We currently offer high-speed broadband internet access through our two-way hybrid fiber optic coaxial
("HFC") cable network. Our technologically advanced cable network infrastructure is capable of
simultaneously supporting broadband internet, cable television and voice communication and we believe
that we are one of the few broadband service providers in India with such "triple-play" capabilities. Our
residential subscribers access our broadband internet through cable modem utilizing data over cable service
interface specifications ("DOCSIS") technology on a variety of data transfer and unlimited internet plans.
We deliver high bandwidth internet broadband services to our enterprise segment customers through cable
modem or through dedicated leased line access. We also provide storage and security services and solutions
to our enterprise segment customers. In addition, we lease our excess fiber network capacities and spare
duct inventories to other telecommunication service providers.

We have invested significantly in the development and expansion of our quality "triple-play" capable two-
way HFC cable network infrastructure in a scalable manner. In fiscal 2007, 2008 and 2009, and in the six
months ended September 30, 2009, we incurred capital expenditure of Rs. 216.89 million, Rs.441.48
million, Rs.127.67 million and Rs.40.08 million, respectively. Based on internal estimates, we believe that
our existing cable network infrastructure which accommodates an estimated 1.50 million home passes, is
capable of being expanded, at relatively low incremental investment, to accommodate an additional 0.50
million home passes. Our fiber optic backbone, broadband nodes and data centers provide a reliable
infrastructure for internet traffic, as well as any analog and digital television transmission. For our
enterprise segment customers located in areas not directly covered by our current infrastructure footprint,
we have entered into leased line agreements with other telecommunication infrastructure owners to provide
our services to such enterprise segment customers. We also offer limited wireless services connectivity to
some of our residential broadband customers.

We hold a pan-India Category "A" ISP license for our broadband internet services, as well as an
Infrastructure Provider Category – I (IP-I) license, which permits us to lease our passive network
infrastructure to other service providers. In addition, our ISP license enables us to offer voice over internet
protocol ("VoIP") services as an internet telephony services provider ("ITSP"), which allows our customers
3
to make international calls through our broadband network. In April 2007, we acquired the ISP business of
IceNet.Net Limited to enhance our enterprise solutions and VoIP products.

As of January 31, 2010, the Company had over 478 permanent employees. We are accredited by the
International Organization for Standardization, with our quality management systems certified to ISO
9001:2000 standards, and our operations are ISO-certified in all cities of operation.

Our total income increased by 63.49% from Rs.484.25 million in fiscal 2007 to Rs.791.73 million in fiscal
2009. Our total income in the six months ended September 30, 2009 was Rs.376.47 million.

Proposed DOPL Acquisition

In May 2007, we made a strategic investment in our associate company Digital Outsourcing Private
Limited. DOPL carries on cable television services business. DOPL currently provides cable television
services across 10 cities in India, including Mumbai, Navi Mumbai, Bangalore, Vishakapattam and Nagpur.
Of these 10 cities, four cities, namely Mumbai, Navi Mumbai, Bangalore and Vishakapatnam, overlap with
the Cable Broadband services footprint and network infrastructure of our Company. As of February 28,
2010, DOPL offered its services to an estimated 1.5 million homes through cable operators and
approximately 8,000 direct residential subscribers. For further information relating to DOPL and its
business and operations, see "Business " beginning on page 76 and “Financial Statements” beginning on
page 129.

We have entered into certain strategic arrangements with DOPL to benefit from our operational synergies.
In cities where there is an overlap of our and DOPL's operations, we lease out our fiber network to DOPL,
and DOPL lays additional fiber connecting to our network to develop an access network to cable operators.
We have also entered into service agreements to provide IT and billing support services to DOPL.
Our Company currently holds 36.24% of the paid-up equity share capital of Digital Outsourcing Private
Limited. We have entered into the DOPL Share Subscription and Purchase Agreement with the DOPL
Selling Shareholders who in the aggregate hold 26.05% of the equity shareholding in Digital Outsourcing
Private Limited for the acquisition of the DOPL Sale Shares. The transactions contemplated in the DOPL
Share Subscription and Purchase Agreement are subject to various conditions, including the outcome of the
Issue and applicable statutory and regulatory conditions and the closing conditions stipulated in the DOPL
Share Subscription and Purchase Agreement. In the event that such conditions are not satisfied, we may not
be able to complete the proposed DOPL Acquisition. For further information relating to the DOPL
Acquisition and the DOPL Share Subscription and Purchase Agreement, see “History and Certain
Corporate Matters” beginning on page 101, "Objects of the Issue" on page 39, "Risk Factors - We have
entered into various agreements in connection with the proposed acquisition of additional equity shares in
Digital Outsourcing Private Limited. We may not be able to complete such proposed acquisitions which
could affect our business strategy and results of operations" beginning on page xiv and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Proposed DOPL Acquisition
and Presentation of Financial Information” beginning on page 130.
Our Strengths

One of the leading Cable Broadband service providers in India with an extensive broadband cable
network infrastructure in key markets

We are one of the leading Cable Broadband service providers in India, offering high-speed broadband cable
internet services to residential and enterprise segment customers across 11 cities in India, namely Mumbai,
Navi Mumbai, Surat, Vadodara, Ahmedabad, Pune, Bangalore, Hyderabad, Vishakhapatnam, Chennai, and
Gurgaon. All these cities are in the top 20 cities in India in terms of maximum internet usage (Source:
IMRB I Cube 2008 – Home Segment Report). Our infrastructure is strategically located in high density areas
in these cities with high PC penetration and a concentration of SEC A and SEC B households.

As of September 30, 2009, we owned and operated over 990 kilometers of fiber optic cable and over 4,100
kilometers of trunk coaxial cable network, supported by 11 NOCs. As of September 30, 2009, our
residential broadband internet service subscriber base aggregated approximately 200,779 customers. Based
on industry information derived from the TRAI Report (January 2010), in such period, we had a market
4
share of approximately 32.0% of the Cable Broadband internet market in India. Based on internal estimates,
we believe that our existing cable network infrastructure which accommodates an estimated 1.50 million
home passes, is capable of being expanded, at relatively low incremental investment, to accommodate an
additional 0.50 million home passes. We believe that our contractual right-of-way for areas covered by our
network infrastructure was acquired at competitive terms.

Advanced HFC cable network infrastructure capable of supporting broadband internet, cable television
and voice communication

Our technologically advanced cable network infrastructure is capable of simultaneously supporting


broadband internet, cable television and voice communications and we believe that we are one of the few
broadband service providers in India with such "triple-play" capabilities. We believe that this will enable us
to capitalize on increasing business opportunities resulting from government policy and regulatory
environment in India supporting the expansion of broadband and telecommunications services and
digitization of cable television.

Our "triple-play" capable HFC infrastructure enables us to deliver convergent products and services and
new value added product and service offerings, including analog and digital cable television services, using
the same infrastructure and technical support personnel across various product and service lines. We are
therefore able to explore additional product and service offerings and new revenue streams at low
incremental operational cost and capital expenditure, and leverage our existing infrastructure to expand into
the cable television business. We believe that our network infrastructure provides us with a distinct
competitive advantage against competitors with limited network infrastructure and capabilities.

Billing systems and processes that enable convergence

We have implemented a convergent billing platform known as Oracle BRM (Billing and Revenue
Management System) under license from Oracle. This billing platform is capable of addressing
requirements of large-scale and diversified business operations. As we introduce additional product and
service offerings, we believe that our ability to integrate the delivery of multiple products and services
under a single billing platform will result in increased operational and cost efficiencies. We have also
developed and implemented customer relationship management ("CRM") software and systems to manage
service delivery and customer relations. We believe that our integrated processes and systems and ability to
provide multiple products and service offerings using the same billing infrastructure and process provide us
with a distinct competitive advantage.

Quality product and service delivery

We believe that our advanced network infrastructure, significant "last mile" network and direct operational
control over such infrastructure, enable us to deliver quality product and service offerings and maintain high
service levels in terms of response time and delivery quality. Our direct operational control also enables us
to efficiently and effectively address customer needs, including requests for additional services or
bandwidth upgrades.

We have implemented a range of training initiatives for our employees, including at our in-house training
institute in Pune, to ensure that our subscribers receive quality customer service. Customer inquiries are
handled through locally-focused and dedicated customer service centers trained in technological
developments, as well as technical and commercial matters relating to our operations and product and
service offerings. We believe that our dedicated customer service centers and relationship management
systems enable us to enhance our brand, increase customer loyalty and control churn. Our direct operational
control also enables us to establish direct relationships with customers and more effectively market our
products and services. We believe that this is a distinct competitive strength compared to operations of those
Cable Broadband providers whose customer relationships are handled by local cable operators.

Industry-experienced management team

Our management team includes experienced and qualified professionals, many of whom have been with the
Company since its initial operations. Our senior management team has extensive experience in the
5
telecommunications, internet services, as well as the cable television industry. Our senior management
team and capable middle management personnel have been responsible for the successful development and
expansion of our extensive cable network infrastructure, the implementation of our business strategies, and
achievement of our growth targets.

Our Strategies

Increase our subscriber base by expanding our network infrastructure and leveraging our brand and
direct marketing

We intend to leverage our significant broadband cable infrastructure and large residential customer base to
further consolidate our position in our existing markets. We continue to focus on markets, areas and
customer segments characterized by high PC penetration and a concentration of SEC A and SEC B
households, subject to technical and other considerations that affect the implementation of our network
infrastructure. We intend to expand our network in existing cities through low incremental investment to
increase the number of homes passed by approximately 30.0%. We are also in the process of evaluating
expansion opportunities in certain other key cities in India.

In order to expand our broadband footprint and improve customer experience, we also intend to establish
wireless access points in large high-density areas. We expect the wireless internet service to increase our
revenues and expand our subscriber base to include customers that require mobile internet access.

We continue to increase our subscriber base by leveraging our strong brand image, direct access to our
extensive residential customer base and our direct marketing and operational control. Our direct marketing
efforts, including door-to-door sales calls, and our aggressive marketing and sales promotions have been
and we believe will continue to be, a highly effective mode of acquiring new customers in the residential
subscriber segment. We also continue to focus on providing superior customer service through the
implementation of training programs and customer feedback processes to build customer loyalty and control
churn.

Continue to develop and market new value added products and services to generate additional revenue
streams

We continue to focus on the development and marketing of new value added products and services that we
can deliver on our extensive network infrastructure to generate additional revenue streams and increase the
revenue from existing customers.

According to IMRB I Cube 2008 – Home Segment Report, the use of broadband internet for entertainment
and e-commerce has steadily increased in India in recent years and the share of entertainment and e-
commerce as a percentage of total broadband internet use in India increased from 4.00% in 2000 to 16.00%
in 2008. We believe that that there will be increased use of the internet for e-commerce and for value-added
services, such as e-learning, net shopping, and online entertainment, and that we are well positioned to
capitalize in and benefit from such growth. We currently provide our customers various value-added
services, including online shopping, gaming and e-learning solutions pursuant to arrangements with third
party content and value-added service developers. We have also entered into arrangements with payment
gateways to facilitate online payments and transactions by our customers. We believe that by actively
developing and participating in the delivery of value-added services, we will be able to offer a better
customer experience on value-added services, resulting in increased customer loyalty, while increasing our
revenues from higher broadband usage. For our residential customers, we intend to increase our product
penetration for our internet telephony services. We also intend to introduce additional gaming services
available to our Cable Broadband subscribers on "YOU Play", as well as educational materials offered as
online customizable term and chapter based test packs through "YOU Learn".

We also continue to focus on generating additional revenue streams from our enterprise segment customers
by providing value added services such as unified threat management solutions that comprises advanced
security features and applications to monitor and control internet traffic. We also offer storage and security
services and solutions, web hosting and data disaster recovery services, and implement networking
solutions, including procurement of hardware, such as servers, routers and allied software and establishing
6
internet connectivity links.

Expand operations in the cable television business through the DOPL Acquisition and strategic
acquisitions of other MSOs and LCOs

We intend to expand our business and operations to include cable television services. We currently have a
36.24% shareholding in DOPL, which provides cable television services to an estimated 1.50 million
residential subscribers in 10 cities across India, of which four cities overlap with our broadband services
footprint. We have entered into certain strategic arrangements with DOPL to benefit from operational
synergies. In cities where there is an overlap of our and DOPL's operations, we lease out our fiber
infrastructure to DOPL, and DOPL lays additional fiber connecting to our network to develop an access
network to cable operators. We have also entered into service agreements to provide IT and billing services
to DOPL. We have entered into the DOPL Share Subscription and Purchase Agreement with the DOPL
Selling Shareholders for the acquisition of the DOPL Sale Shares. The proposed DOPL Acquisition is
however subject to various conditions, including the outcome of the Issue and applicable statutory and
regulatory conditions and the closing conditions stipulated in the DOPL Share Subscription and Purchase
Agreement. For further information on the proposed DOPL Acquisition, see "Business” beginning on page
76.

Subject to compliance with applicable regulatory requirements, we intend to expand the cable television
business in and around the cities where we have our cable network infrastructure. The DOPL Acquisition is
expected to result in increased operational synergies and other benefits resulting from the integration of our
broadband cable infrastructure and the ability to provide integrated internet and cable television services.
We also continue to evaluate opportunities for the strategic acquisition of other MSOs and LCOs. We intend
to grow the cable television business by introducing advanced video services, such as video on demand and
interactive set top boxes, and raising service quality and customer service standards through improved
infrastructure and operational efficiencies.

Acquire last mile connectivity

We continue to identify suitable acquisition opportunities among LCOs and MSOs to expand our subscriber
base and geographic reach and achieve economies of scale and delivery of standardized integrated
broadband internet and cable television services. Our strategy is to continue to acquire "last mile"
connections through strategic acquisitions of other MSOs and LCOs, in order to consolidate the cable
television business in DOPL's existing markets and expand into other cities in India that have significant
cable television viewership, particularly cities where we have an existing network infrastructure. We
believe the ability to provide integrated services, and direct marketing and operational control through "last
mile" connectivity, will enable us to introduce additional value added product and service offerings, and
increase subscription revenues through elimination of under-reporting of the subscriber base by LCOs.

Increase digital penetration

DOPL currently offers approximately 85 channels through its analog cable television services and about 200
channels through its digital television services. This channel count and the selection of channels vary based
on the demographic profile of customers in the area catered to by the respective head-end. We believe that
DOPL's ability to offer different local and regional content on its service provides a competitive advantage
over DTH satellite television, which broadcasts the same channels all over India.

We intend to increase the digitization of DOPL's cable television services to decrease the risk of subscribers
switching to another digital platform, such as DTH satellite television, consequently strengthening DOPL's
existing relationships with LCOs and its subscribers. Increased digitization of DOPL's cable television
services is also expected to result in a decrease in under-reporting of the subscriber base by LCOs
associated with the provision of analog cable television services in India.

Digitization also enables provision of additional channels, better quality picture and sound, value-added
services such as an interactive electronic program guides, pay-per-view program reservations, personal
video recording, audio music channels. We believe increased digitization of DOPL's service offerings will
enable it to compete more effectively with other digital technologies.
7
SUMMARY FINANCIAL INFORMATION

The following tables set forth summary financial information derived from our restated financial statements
as of and for the years ended March 31, 2005, 2006, 2007, 2008 and 2009 and as of and for the six months
ended September 30, 2009. These financial statements have been prepared in accordance with Indian
GAAP, the Companies Act and the SEBI ICDR Regulations and are presented in "Financial Statements"
beginning on page 129. The summary financial information presented in the following pages should be
read in conjunction with our restated financial statements, the notes thereto and "Management’s Discussion
and Analysis of Financial Condition and Results of Operations" on page 130.

8
SUMMARY FINANCIAL INFORMATION OF
YOU BROADBAND & CABLE INDIA LIMITED

Annexure I : Summary statement of assets and liabilities, as restated


(Rs in millions)
PARTICULARS 30-Sep-09 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06 31-Mar-05
A FIXED ASSETS
Gross block 2,768.18 2,722.82 2,464.97 2,188.00 452.27 392.36
Less : Accumulated depreciation and
amortisation 1,342.88 1,205.56 942.84 690.18 68.96 41.52
Net block 1,425.30 1,517.26 1,522.13 1,497.82 383.31 350.84
Capital work-in-progress 153.48 159.81 303.88 141.02 87.86 142.80
1,578.78 1,677.07 1,826.01 1,638.84 471.17 493.64

B INVESTMENTS 192.23 192.23 187.74 - - -


192.23 192.23 187.74 - - -
CURRENT ASSETS, LOANS AND
C ADVANCES
Inventories 2.80 3.28 10.45 2.32 - -
Sundry debtors 77.73 72.64 74.26 36.48 83.54 44.43
Cash and bank balances 300.35 91.93 246.08 584.97 1.16 17.85
Loans and advances 810.24 771.63 577.25 337.49 199.50 216.03
1,191.12 939.48 908.04 961.26 284.20 278.31
D LIABILITIES AND PROVISIONS
Secured loans 58.48 76.90 102.35 - - -
Unsecured loans 242.30 - - 223.70 11.23 11.23
Current liabilities 392.80 384.93 372.62 259.35 11.58 18.91
Provisions 21.19 19.10 16.97 8.70 - -
714.77 480.93 491.94 491.75 22.81 30.14
E NET WORTH 2,247.36 2,327.85 2,429.85 2,108.35 732.56 741.81
Represented by :
Share capital 2,308.61 2,308.61 3,894.97 825.45 102.35 102.35
Share application money - - - 2,573.29 720.00 700.00
Equity share – warrants* 0.00 0.00 0.00 - - -
Reserves and surplus 33.34 22.87 215.17 22.39 - -
Profit and loss account (debit balance) (94.59) (3.63) (1,680.29) (1,312.78) (89.79) (60.54)

NET WORTH 2,247.36 2,327.85 2,429.85 2,108.35 732.56 741.81


* Less than Rs. 10,000

The above statement should be read with notes to the summary of statements of restated assets and liabilities, profits and losses and
cash flows, as restated under Indian GAAP as appearing in Annexure IV

9
Annexure II : Summary statement of profits and losses, as restated
(Rs in millions)
PARTICULARS 30-Sep-09 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06 31-Mar-05
INCOME
Revenue 356.16 738.69 680.98 444.15 41.86 30.56
Other income 20.31 53.04 25.30 40.10 0.32 0.86
376.47 791.73 706.28 484.25 42.18 31.42
EXPENDITURE
Network operation expenses 79.95 184.83 197.93 133.48 15.62 5.78
Advertisement and sales promotions
expenses 16.40 34.29 102.74 33.48 - -
Personnel cost 83.79 176.84 194.07 179.71 - 14.49
Other expenditure 138.67 247.55 315.42 181.71 28.37 19.69
318.81 643.51 810.16 528.38 43.99 39.96
Restated profit / (loss) before
depreciation and amortisation,
miscellaneous expenditure and
interest and finance charges 57.66 148.22 (103.88) (44.13) (1.81) (8.54)

Depreciation and amortisation 138.33 269.45 256.53 216.98 27.44 22.59


Miscellaneous expenditure written off - - - 1.67 - -
Interest and finance charges 10.29 13.02 2.89 1.02 - 0.10
148.62 282.47 259.42 219.67 27.44 22.69

Restated (loss ) before exceptional


item and tax (90.96) (134.25) (363.30) (263.80) (29.25) (31.23)
Less: Exceptional Item [Refer Note 4
(XI) to Annexure IV] - 22.87 - - - -

Restated (loss ) before tax (90.96) (157.12) (363.30) (263.80) (29.25) (31.23)
Less: Fringe benefit tax - (2.37) (2.84) (2.67) - -
Less: Deferred tax [Refer Note 4 (x)
to Annexure IV] - - - - - -
Restated (loss) for the period / year (90.96) (159.49) (366.14) (266.47) (29.25) (31.23)
Profit/(Loss) in profit and loss
account brought forward (3.63) (1,680.29) (1,312.78) (89.79) (60.54) (29.31)
Loss brought forward of Merged
Company - - - (956.52) - -
Add: transitional liability in respect of
employees benefit - - 1.37 - - -
Less: Adjustment on account of
capital reduction - (1,836.15) - - - -
Restated (Loss)/Profit in profit and
loss carried forward (94.59) (3.63) (1,680.29) (1,312.78) (89.79) (60.54)

Basic & diluted earnings per equity (0.39) (0.41) (2.24) (3.43) (2.86) (3.05)
share of Rs. 10 each (in Rs.)

The above statement should be read with notes to the summary of statements of restated assets and liabilities, profits and
losses and cash flows, as restated under Indian GAAP as appearing in Annexure IV

10
Annexure III : Summary statement of cash flow, as restated
(Rs in millions)
30-Sep-09 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06 31-Mar-05
Cash flows from operating activities
Net (loss) before tax, as restated (90.96) (157.12) (363.30) (263.80) (29.25) (31.23)
Adjustments for:
Depreciation and amortization 138.33 269.45 256.53 216.98 27.44 22.59
Miscellaneous expenditure written off - - 1.67 - (0.00)
Pre-Operative expenses written off - - - 0.85 -
Loss on sale of fixed assets 0.21 6.25 5.08 1.89 - -
Interest income (18.34) (34.49) (17.66) (38.21) (0.32) (0.86)
Unrealised foreign exchange gain on loan (net) (1.41) - - - - -
Excess liability written back - 14.34 6.11 - - -
Interest expense 8.39 9.83 - - - -
Employees welfare scheme cost 10.47 32.50 27.87 22.39 - -
Operating cash flows before working capital
changes 46.69 140.76 (85.37) (59.08) (1.28) (9.50)
(Increase)/ decrease in sundry debtors (5.09) 1.62 (37.78) 23.38 (39.10) (30.56)
Decrease/ (increase) in inventories 0.48 7.17 (8.13) (1.48) - -
(Increase)/ decrease in loans & advances (26.28) (192.84) (245.39) (229.87) 16.58 (185.00)
(Decrease)/ increase in current liabilities and
provisions (10.34) 0.51 114.27 35.95 (7.33) (35.61)
Cash flows generated from / (used in) operating
activities 5.46 (42.78) (262.40) (231.10) (31.13) (260.67)
Direct taxes refund / (paid) 0.48 (4.15) (3.54) (2.51) (0.06) (0.15)
Net cash flows from operating activities 5.94 (46.93) (265.94) (233.61) (31.19) (260.82)

Cash flows from investing activities


Purchase of fixed assets (38.06) (160.05) (275.80) (153.03) (5.83) (70.69)
Assets taken over on business purchase - - (75.40) - - -
Proceeds from sale of fixed assets 0.22 1.30 0.66 4.27 - -
Interest received 5.53 34.73 23.78 31.01 0.33 0.90
Purchase of investment in units of mutual funds - - - (61.00) - -
Proceeds from sale of units of mutual funds - - - 76.28 - -
Investments made in equity shares (Associates) - (4.49) (187.74) - - -
Net cash (used) in investing activities (32.31) (128.51) (514.50) (102.47) (5.50) (69.79)

Cash flows from financing activities


Proceeds from issuance of equity share capital - 25.00 436.79 2,256.10 - -
Proceeds from receipt of share application money - - - (1,526.81) 20.00 320.00
Repayment of unsecured loan - - - (45.10) - -
Issue of debenture - - - 223.70 - -
Proceeds from term loan 243.70 12.57 4.76 - - -
Repayment of term loan (1.34) (6.95) - - - -
Interest on term loan / lease interest paid (7.57) (9.33) - - - -

Net cash generated from financing activities 234.79 21.29 441.55 907.89 20.00 320.00
Net increase/ (decrease) in cash and cash
equivalents 208.42 (154.15) (338.89) 571.81 (16.69) (10.61)

Cash and cash equivalents at beginning of period/


year 91.93 246.08 584.97 13.16 17.85 28.46
Cash and cash equivalents at end of period/ year 300.35 91.93 246.08 584.97 1.16 17.85

Cash and cash equivalents includes deposits pledged


with banks as margin money for guarantees / letter
of credits issued by bank on behalf of the Company. 61.33 66.15 56.38 26.31 0.61 0.58

* Includes cash and cash equivalents of the merged


company - - - 12.00 - -
Notes :
1. Cash and cash equivalents consist of Cash on hand, Bank balances in current account and deposit account and Cheques in hand.

The above statement should be read with notes to the summary of statements of restated assets and liabilities, profits and losses and cash flows, as restated under
Indian GAAP as appearing in Annexure IV

11
THE ISSUE

Equity Shares offered:

Issue to the Public(5) Upto [●] Equity Shares


Of which
QIB Portion(1)(2)(3)
(allocation on a proportionate basis) At least [●] Equity Shares to be Allotted

Out of which:
a) Reservation for Mutual Funds [●] Equity Shares

b) Balance for all QIBs including [●] Equity Shares


Mutual Funds

Non Institutional Portion(2)(3) Not less than [●] Equity Shares


(allocation on a proportionate Basis)

Retail Portion (2)(3) Not less than [●] Equity Shares


(allocation on a proportionate basis)

Employee Reservation Portion(4) [●] Equity Shares


Equity Shares outstanding prior to the Issue 241,549,948 Equity Shares
Equity Shares outstanding after the Issue [●] Equity Shares

Use of Issue proceeds Please see the section titled “Objects of the Issue”
beginning on page 39 of this Draft Red Herring
Prospectus.
_________

(1) Our Company in consultation with BRLM may consider allocation of up to 30% of the QIB Portion
to Anchor Investors on a discretionary basis. One-third of the Anchor Investor Portion shall be
reserved for domestic Mutual Funds, subject to valid Bids being received from Domestic Mutual
Funds at or above the price at which allocation is being done to Anchor Investors. Bidding in the
Anchor Investor Portion shall open and close on the Anchor Investor Bid/Issue Date, i.e., one day
prior to the Bid/Issue Opening Date. Allocation to QIBs is proportionate as per the terms of the Red
Herring Prospectus. QIBs will not be allowed to withdraw their Bid-cum-Application Forms
after the Bid/Issue Closing Date. For further details, see the section “Issue Procedure” beginning on
page 209 of the Draft Red Herring Prospectus.

(2) Subject to valid bids being received at or above the Issue Price allocation shall be made on a
proportionate basis. Any under-subscription in any category (except the QIB portion) would be
allowed to be met with spill-over from the Employee Reservation Portion or any other category at
the discretion of our Company, in consultation with the BRLM and the Designated Stock Exchange.
If however, at least 50% of the Net Issue cannot be allocated to QIBs, then the entire application
money will be refunded forthwith. Any unsubscribed portion in the Employee Reservation Portion
shall be added to the Net Issue.

(3) The Company is considering a pre-Issue placement of up to 90 million Equity Shares for cash
aggregating upto Rs. 900 million with various investors (“Pre-IPO Placement”). The Pre-IPO
Placement is at the sole discretion of the Company. If undertaken, the Pre-IPO Placement shall be
completed by the Company, prior to the filing of the Red Herring Prospectus with the Registrar of
Companies, Maharashtra, Mumbai. If the Pre-IPO Placement is completed, the Issue size offered to
the public would be reduced to the extent of such Pre-IPO Placement, subject to minimum public
Issue size being atleast 25% of our post-Issue Equity share capital.

(4) The portion of the Issue, aggregating upto Rs. 15.00 million.

(5) As disclosed in the Objects of the Issue on page 39 of this Draft Red Herring Prospectus, our
12
Company intends to invest in MSO/LCO companies, so as to have a controlling stake therein. As per
statutory/regulatory requirements, our Company can only have a controlling stake in MSO/LCO
companies, if our Company is Indian owned and controlled, (that is, if at least 51% of the equity
interest in our Company is beneficially owned by resident Indian citizens and/or Indian companies
which are in turn owned by resident Indian citizens). In furtherance of our intention of being Indian
owned and controlled as detailed above, allotments to successful Bidders will be made subject to the
following:

i. the shareholding of FIIs in aggregate will not exceed 24% and individual shareholding of each
FII will not exceed 10% of the total paid up equity share capital of the Company; and
ii. the total foreign shareholding of our Company will not exceed 49% of the aggregate post-Issue
paid-up equity share capital of our Company, (“Foreign Investment Limits”)

Proportionate allocation will be made in each category of Bidders (other than Anchor Investor
Portion) so as to ensure that the aforesaid Foreign Investment Limits are not exceeded. To further
clarify, in the event, that the allocation on a proportionate basis to Bidders who are persons resident
outside India, (“Non Resident Bidders”), results in breaching of the Foreign Investment Limits as
specified above, then such relevant Non Resident Bidders shall receive such lower proportion of the
allocation within the category of Bidders to which he belongs (that is, QIBs, Non-Institutional or
Retail, as the case may be), so as to ensure compliance with the Foreign Investment Limits. The
Equity Shares which would otherwise have been available for allocation to such Non Resident
Bidder/s shall be proportionately adjusted within the remaining Bidders who are resident in India in
the relevant category to which the aforesaid Non Resident Bidder/s belonged for further allocation
on a proportionate basis.

13
GENERAL INFORMATION

Our Company was originally incorporated as NetShastr Facilities India Private Limited under the
Companies Act, 1956 on November 13, 2000 in NCT of Delhi. The name of our Company was changed
to BG Broadband Networks India Private Limited and a fresh certificate of incorporation consequent to
change of name was issued by the Registrar of Companies, Delhi on June 29, 2001. The Registered office
of the Company was relocated from 11-A, Sucheta Bhawan, 2nd Floor, Vishnu Digambar Marg, New
Delhi – 110 002 to 1st Floor, Midas, Sahar Plaza, Kondivita, M.V. Road, Andheri (East), Mumbai – 400
059, Maharashtra pursuant to the order of Company Law Board, Northern Region Bench, Delhi dated
January 7, 2003 and a fresh certificate of incorporation was issued by the Registrar of Companies,
Maharashtra, Mumbai on February 24, 2003. Subsequently, the registered office of our Company was
relocated from 1st Floor, Midas, Sahar Plaza, Kondivita, M.V. Road, Andheri (East), Mumbai – 400 059
to Ground Floor, Building No.1-C, Nirlon complex, off Western Express Highway, Goregaon (East),
Mumbai – 400 063 with effect from March 25, 2003. Subsequently, our Company’s name was further
changed to YOU Broadband Networks India Private Limited and a fresh certificate of incorporation
consequent to change of name was issued by Registrar of Companies, Maharashtra, Mumbai on
December 21, 2006. Further, pursuant to the Scheme of Amalgamation, our Company’s name was
changed to YOU Telecom India Private Limited and a fresh certificate of incorporation was issued by the
Registrar of Companies, Maharashtra, Mumbai on November 23, 2007. The registered office of our
Company was further relocated from 1-C, Ground Floor, Nirlon Complex, Off Western Express
Highway, Goregaon – East, Mumbai – 400063 to Plot No.54, Marol Co-operative Industrial Estate,
Makwana, Andheri (East), Mumbai – 400059, with effect from September 1, 2008. The name of our
Company was once again changed to YOU Broadband & Cable India Private Limited and a fresh
certificate incorporation consequent upon change of name was issued by the Registrar of Companies,
Maharashtra, Mumbai on November 17, 2009. Our Company was converted into a public limited
company and the name was changed to YOU Broadband & Cable India Limited and a fresh certificate of
incorporation was issued by the Registrar of Companies, Maharashtra, Mumbai dated January 12, 2010.

Registered Office and Corporate Office of our Company

Plot No. 54, Marol Co-operative Industrial Estate,


Makwana, Andheri East, Mumbai, Maharashtra - 400059
Tel: 91-22 - 40190000
Fax: 91-22 - 40190155
Company Identification Number: U51909MH2000PTC139321
Registration Number: 00139321

Address of Registrar of Companies

Our Company is registered with the Registrar of Companies, Maharashtra, Mumbai situated at the
following address:

Registrar of Companies, Maharashtra, Mumbai


100 Everest,
Marine Drive,
Mumbai 400 002
Tel.: (91 22) 2281 2639

Board of Directors

Our Board comprises the following:

Name, Father’s Name, Address and Age (Years) Status of Director in our
Occupation Company

Mr. Girish Kasthuri Rangan 53 Chairman, Independent Non-


Executive Director
S/o A S K Rangan

102,
14
Name, Father’s Name, Address and Age (Years) Status of Director in our
Occupation Company

Venus, A. Soares Road, Chembur,


Mumbai-400071
Maharashtra, India

Management Consultant

DIN 01592833

Mr. Eyyuni Venkat Srinivas 49 Chief Executive Officer,


Chakravarthy Executive, Non-Independent
Director
S/o Mr. E Rangaswamy Chakravarthy

603 F Block, Great Eastern Gardens,


LBS Marg, Kanjur Marg (West),
Mumbai-400076, Maharashtra, India

Business

DIN 00603085

Mr. Michael David Kazma 45 Non Independent Non-Executive


Director
S/o Gerald Joseph Kazma

340 Sw 16th St, Boca Raton,


Florida, 33432, United States Of
America

Executive

DIN 02114978
Mr. Perumal Srinivasan 44 Non-Independent Non-Executive
Director
S/o Perumal Ramamurthy

7A Belvedere Court, Sane Guruji


Marg, Mahalaxmi, Mumbai-400011,
Maharashtra, INDIA

Service

DIN-00365025

Mr. Sean George Cronin Sutcliffe 46 Independent Non-Executive


Director
S/o John Vernon Sutcliffe

Thatched House, 1 High Street,


Wargrave, Reading, United Kingdom-
RG108JA

Service

DIN 03014252

15
For further details of our Directors, see “Our Management” on page 109 of this Draft Red Herring
Prospectus.

Company Secretary and Compliance Officer


Mr. Mohammad Abdul Nadeem.
Plot No. 54, Marol Co-operative Industrial Area,
Makwana Road, Andheri East,
Mumbai 400 059
Tel: 91-22-40190000
Fax: 91 –22 - 40190155
Email: compliance@youtelecom.com

Investors can contact the Compliance Officer, the BRLM or the Registrar to the Issue in case of any pre
or post- Issue related problems such as non receipt of letters of allotment, credit of allotted shares in the
respective beneficiary account and refund orders

Book Running Lead Manager

Edelweiss Capital Limited


14th Floor, Express Towers
Nariman Point
Mumbai – 400 021, India
Telephone: +91 22 4086 3535
Facsimile: +91 22 4086 3610
Contact Person: Mr. Chitrang Gandhi/ Mr. Jai Baid
Email: you.ipo@edelcap.com
Investor Grievance e-mail: customerservice.mb@edelcap.com
Website: www.edelcap.com
SEBI registration number: INM0000010650

Syndicate Member

[●]

Self Certified Syndicate Banks


The list of banks that have been notified by SEBI to act as SCSB for the ASBA Process are provided on
http://www.sebi.gov.in. For details on designated branches of SCSBs collecting the ASBA Bid cum
Application Form, please refer the above mentioned link on the SEBI website

Domestic Legal Advisor to the Issue

J Sagar Associates
Vakils House,
18, Sprott Road,
Ballard Estate,
Mumbai- 400 001
Tel: +91 22 6656 1500
Fax: +91 22 6656 1515
Email: mumbai.helpdesk@jsalaw.com
Contact Person: Mr. Avik Sen Gupta

International Legal Advisor to the BRLM

DLA Piper Singapore Pte. Ltd.


80 Raffles Place
UOB Plaza 1 #48-01
Singapore 048624
16
Tel: +65 6512 9595
Fax: +65 6512 9500

Registrar to the Issue


Karvy Computershare Private Limited
Plot No. 17 – 24, Vithalrao Nagar
Madhapur
Hyderabad 500 086, India
Tel : (+91 40) 2342 0815-20
Fax : (+91 40) 2342 0814
E-mail: you.ipo@karvy.com
Website: www.karisma.karvy.com
Contact Person: Mr. Murali Krishna
SEBI Registration No: INR000000221

Bankers to the Issue and Escrow Collection Banks


[●]

Bankers to the Company

ICICI Bank Limited


Ground Floor,
Om Shoppie Complex,
Opposite Prime Arcade,
Anand Mahal Road,
Adajan, Surat -395009
Tel: +91-261-2763642/2763620
Fax: +91-261-2763632
Email: mukundraj.deshpande@icicibank.com

CITIBANK N.A.
1st Floor, Pelican Building,
Opposite Race Course Tower,
Gotri Road,
Varodara -390 007
Tel: +91-265-6639255
Fax: +91-265-2324831
Email: Shyam.unnithan@citi.com

YES BANK LIMITED


Nehru Centre, 9th Floor,
Discovery of India,
Dr. Annie Beasant Road,
Worli,
Mumbai – 400 018
Tel: +91-22-66699000
Fax: +91-22-24900314
Email: Saurabh.sarayan@yesbank.in

HDFC Bank Limited


HDFC Bank House,
Senapati Bapat Marg,
Lower Parel (West),
Mumbai – 400 013
Tel: +91- 261-3227354
Fax: +91-261-2242780
Email: aashish.oza@hdfcbank.com

17
Auditors to the Company

B S R & Associates
Chartered Accountants
Lodha Excelus,
1st Floor, Apollo Mills Compound,
NM Joshi Marg, Mahalaxmi,
Mumbai 400 011.
Tel: 022 30440800
Fax: 022 30440900
Email: bdhupelia@kpmg.com
Contact Person: Bhavesh Dhupelia
ICAI Registration No: 116231W

Monitoring Agency

Since the Issue size is less than Rs. 5,000 million, our Company is not required to appoint a monitoring
agency in connection with the Issue in terms of Regulation 16 of the SEBI ICDR Regulations.

Appraising Entities:

Our Company has not appointed any appraising entity with respect to any of its activities.

Inter se Allocation of Responsibilities

S. Activity Responsibility Coordinator


No.
1. Capital structuring with relative components and formalities Edelweiss Edelweiss
such as composition of the debt and equity, type of
instruments, etc.
2. Due diligence of the Company’s operations/management/ Edelweiss Edelweiss
business/plans/legal etc. Drafting and design of the offer
document and of statutory advertisements including a
memorandum containing salient features of the offer
document.

The BRLM shall ensure compliance with stipulated


requirements and completion of prescribed formalities with
the Stock Exchanges, the RoC and SEBI including
finalization of the Prospectus and RoC filing of the same.
3. Drafting and approval of all publicity material other than Edelweiss Edelweiss
statutory advertisements as mentioned in (2) above but
including corporate advertisement, brochure, corporate
films, FAQs in relation to the Issue, etc.
4. Appointment of Registrar to the Issue, printers, advertising Edelweiss Edelweiss
agency and Bankers to the Issue.
5. Preparation of road show presentation and FAQs Edelweiss Edelweiss

6. Institutional marketing strategy Edelweiss Edelweiss


• Domestic and international

18
S. Activity Responsibility Coordinator
No.
7. Non-institutional and Retail marketing of the Issue, which Edelweiss Edelweiss
will cover, inter alia:
• Formulating marketing strategies, preparation of
publicity budget;
• Finalising media and public relations strategy;
• Finalising centres for holding conferences for brokers,
etc.;
• Co-ordination with Stock Exchanges for book building
software, bidding terminals and mock trading;
• Follow-up on distribution of publicity and Issue
material including forms, the Prospectus and deciding
on the quantum of Issue material; and
• Finalising collection centres.
8. Finalisation of pricing in consultation with the Company. Edelweiss Edelweiss

9. Post-Bidding activities including management of escrow Edelweiss Edelweiss


accounts, follow-up with Bankers to the Issue and SCSBs to
get quick estimates of collection and advising the Company
about the closure of the Issue, co-ordination of non-
institutional allocation, intimation of allocation and dispatch
of refunds to Bidders, etc.

The post-Issue activities will involve essential follow up


steps, which include, based on correct figures, finalisation
of the basis of Allotment or weeding out of multiple
applications, finalisation of listing of instruments and
dispatch of certificates and demat delivery of shares, with
the various agencies connected with the work such as the
Registrar to the Issue, the Bankers to the Issue, SCSBs and
the bank handling refund business and SCSBs. The BRLM
shall be responsible for ensuring that these agencies fulfill
their functions and enable it to discharge this responsibility
through suitable agreements with the Company.

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

IPO Grading
This Issue has been graded by [●] and has been assigned a grade of [●]/5 indicating [●] fundamentals.
The IPO Grading is assigned on a five point scale from 1 to 5, with IPO Grade 5/5 indicating strong
fundamentals and IPO Grade 1/5 indicating poor fundamentals. For details in relation to the rationale
furnished by [●], see “Annexure I” on page [●]. Attention is drawn to the disclaimer appearing on page
[●].

Experts
Except for the report of [●] in respect of the IPO Grading of this Issue (a copy of which will be annexed
to the Red Herring Prospectus as Annexure I), furnishing the rationale for its grading which will be
provided to the Designated Stock Exchange and except for such persons or entities deemed to be
‘experts’ under the Companies Act, our Company has not obtained any expert opinions.

Trustee
As this is an Issue of Equity Shares, the appointment of Trustees is not required.

Book Building Process

Book Building refers to the process of collection of bids from investors on the basis of the Red Herring
Prospectus within the Price Band. This Issue Price is determined by our Company, in consultation with
19
the BRLM after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process
are:

(1) Our Company;


(2) The Book Running Lead Manager, in this Issue being Edelweiss Capital Limited;
(4) The Syndicate Members, in this Issue being [●];
(5) The Registrar to the Issue, in this Issue being Karvy Computershare Private Limited;
(6) The Escrow Collection Banks; and
(7) The SCSBs.

The Issue is being made through the 100% Book Building Process, wherein atleast 50% of the Net Issue
shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIB Portion”). Provided
that our Company may allocate up to 30% of the QIB portion to the Anchor Investors on discretionary
basis (“Anchor Investor Portion”). Further 5% of the QIB Portion (excluding Anchor Investor Portion)
shall be available for allocation on a proportionate basis to Mutual Funds only and the remaining QIB
portion shall be available for allocation to all QIB Bidders, including Mutual Funds, subject to valid Bids
being received at or above the Issue Price. If atleast 50% of the Net Issue cannot be allocated to the QIBs
then the entire application money will be refunded forthwith. Further, not less than 35% of the Net Issue
shall be available for allocation on a proportionate basis to Retail Individual Bidders and not less than
15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional
Bidders, subject to valid Bids being received at or above the Issue Price. Further, [●] Equity Shares
aggregating upto Rs. 15 million shall be made available for allocation on a proportionate basis to the
Eligible Employees, subject to valid Bids being received at or above the issue price in the Employee
Reservation Portion.

In case of over-subscription in all categories, at least 50% of the Issue shall be available for allocation on
a proportionate basis to QIB Bidders, 5% of the QIB Portion (excluding Anchor Investor Portion) shall be
available for allocation on a proportionate basis to Mutual Funds only and the remaining QIB Portion
shall be available for allocation to all QIB Bidders, including Mutual Funds, subject to valid Bids being
received at or above the Issue Price. Furthermore, not less than 15% of the Issue shall be available for
allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% 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.

Under-subscription, if any, in any category, except the QIB Portion, would be allowed to be met with
spill-over from any other category or combination of categories at the discretion of our Company in
consultation with the BRLM and the Designated Stock Exchange. If at least 50% of the Issue is not
allocated to the QIBs then, the entire subscription monies shall be refunded. In case of under-subscription
in the Net Issue, would be allowed to be met with spill-over from the Employee Reservation Portion at
the discretion of our Company, in consultation with the BRLM and the Designated Stock Exchange. Any
unsubscribed portion in the Employee Reservation Portion shall be added to the Net Issue.

Bids by QIBs (including Anchor Investors) will have to be submitted to the BRLMs. QIBs are not
allowed to withdraw their Bid after the Bid/Issue Closing Date. Anchor Investors are not allowed to
withdraw their Bids after the Bid/Issue Closing date. QIBs that are Anchor Investors are required
to pay their Bid Amount in full at the time of submission of the Bid Allocation to QIBs will be on a
proportionate basis and allocation to Anchor Investors will be on discretionary basis. For details
please see the section titled “Issue Structure” beginning on page 203 of this Draft Red Herring
Prospectus.

Bids by ASBA Bidders will only have to be submitted to the SCSBs at the Designated Branches.

The process of Book Building under SEBI ICDR Regulations is subject to change from time to time
and investors are advised to make their own judgment about investment through this process prior
to making a Bid or application in the Issue.

Our Company will comply with the SEBI ICDR Regulations and any other ancillary directions issued by
SEBI in connection with the issue of securities by an Indian company to the public in India. In this
regard, our Company has appointed Edelweiss Capital Limited as the BRLM to manage the Issue and to
procure subscriptions for the Issue.

20
Illustration of Book Building and Price Discovery Process

(Investors should note that the following is solely for the purpose of illustration and is not specific to the
Issue)

Bidders can bid at any price within the price band. For instance, assuming a price band of Rs.20 to Rs.24
per share, an issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are
shown in the table below, the illustrative book would be as given below. A graphical representation of
the consolidated demand and price would be made available at the bidding centres during the bidding
period. The illustrative book as shown below indicates the demand for the shares of the company at
various prices and is collated from bids from various investors.

Cumulative Equity Shares Bid


Bid Quantity Bid Price (Rs.) for Subscription

500 24 500 16.67%


1,000 23 1,500 50.00%
1,500 22 3,000 100.00%
2,000 21 5,000 166.67%
2,500 20 7,500 250.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is
able to issue the desired number of shares is the price at which the book cuts off, i.e., Rs.22 in the above
example. The issuer, in consultation with the BRLM, will finalize the issue price at or below such cut
off, i.e., at or below Rs.22. All bids at or above this issue price and cut-off bids are valid bids and are
considered for allocation in the respective categories.

Steps to be taken by the Bidders for Bidding

1. Check eligibility for making a Bid (see “Issue Procedure” beginning on page 209 of this Draft
Red Herring Prospectus);

2. Ensure that you have a demat account and the demat account details are correctly mentioned in
the Bid cum Application Form and the ASBA Bid cum Application Form;

3. In accordance with the SEBI ICDR Regulations, the PAN would be the sole identification
number for participants transacting in the securities market, irrespective of the amount of
transaction except for Bids on behalf of the Central or State Government, residents of Sikkim
and the officials appointed by the courts;

4. Ensure that the Bid cum Application Form is duly completed as per instructions given in this
Draft Red Herring Prospectus and in the Bid cum Application Form and the ASBA Bid cum
Application Form;

5. Ensure the correctness of your demographic details (as defined in the “Issue Procedure” on page
209) given in the Bid cum Application Form and the ASBA Bid cum Application Form, with the
details recorded with your Depository Participant.

6. Bids by QIBs will only have to be submitted to the BRLM.

7. Bids by ASBA Bidders will have to be submitted to the designated branches of the SCSBs.
ASBA Bidders should ensure that their bank accounts have adequate credit balance at the time
of submission to the SCSB to ensure that the ASBA Bid cum Application Form is not rejected.

Withdrawal of the Issue

Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue anytime
after the Bid/Issue Opening Date but before the Allotment of Equity Shares. In such an event the
Company would issue a public notice in the newspapers, in which the pre-Issue advertisements were
published, within two days of the Bid/Issue Closing Date, providing reasons for not proceeding with the
21
Issue. The Company shall also inform the same to Stock Exchanges on which the Equity Shares are
proposed to be listed.

In the event that the Company decides not to proceed with the Issue after Bid/Issue Closing Date, the
Company would be required to file fresh draft red herring prospectus with SEBI.

Notwithstanding the foregoing, the Issue is also subject to obtaining (i) the final listing and trading
approvals of the Stock Exchanges, which our Company shall apply for only after Allotment, and (ii) the
final RoC approval of the Prospectus after it is filed with the Stock Exchanges.

Bid/Issue Programme*

BID/ISSUE OPENS ON [●]


BID/ISSUE CLOSES ON [●]
*The Company may consider participation by Anchor Investors. The Anchor Investor Bid/Issue Period shall be one day prior to the
Bid/Issue Opening Date

Bids and any revision in Bids shall be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard
Time) during the Bidding Period as mentioned above at the bidding centers mentioned on the Bid cum
Application Form or incase of bids submitted through ASBA, the designated branches of the SCSBs
except that on the Bid/Issue Closing Date, Bids shall be accepted only between 10.00 a.m. and 3.00 p.m.
(Indian Standard Time) and uploaded till (i) 4.00 p.m. in case of Bids by QIB Bidders and Non-
Institutional Bidders and Eligible Employees (ii) till until 5.00 p.m. in case of Bids by Retail Individual
Bidders. Due to limitation of the time available for uploading the Bids on the Bid/Issue Closing Date, the
Bidders are advised to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no
later than 3.00 p.m. (Indian Standard Time) on the Bid/Issue Closing Date. Bidders are advised that due
to clustering of last day applications, as is typically experienced in public offerings, some Bids may not
get uploaded on the last date. Such Bids that cannot be uploaded will not be considered for allocation
under the Issue. If such Bids are not uploaded, the Issuer, BRLM and Syndicate members will not be
responsible. Bids will be accepted only on Business Days, i.e. Monday to Friday (excluding any public
holiday). Bids by ASBA Bidders shall be uploaded by the SCSB in the electronic system to be provided
by the NSE and the BSE.

On the Bid/Issue Closing Date, extension of time may be granted by the Stock Exchanges only for
uploading the Bids received by Retail Individual Bidders after taking into account the total number of
Bids received up to the closure of timings for acceptance of Bid cum Application Forms and ASBA Form
as stated herein and reported by the BRLM to the Stock Exchange within half an hour of such closure.

In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the
physical Bid form, for a particular bidder, the details as per physical application form of that Bidder may
be taken as the final data for the purpose of allotment. In case of discrepancy in the data entered in the
electronic book vis-à-vis the data contained in the physical or electronic Bid cum Application Form, for a
particular ASBA Bidder, the Registrar to the Issue shall ask for rectified data from the SCSB.

The Company reserves the right to revise the Price Band during the Bid/Issue Period in accordance with
the SEBI ICDR Regulations provided that the Cap Price is less than or equal to 120% of the Floor Price.
The Floor Price can be revised up or down to a maximum of 20% of the Floor Price.

In case of revision of the Price Band, the Issue Period will be extended for three additional working
Days after revision of the Price Band subject to the total Bid /Issue Period not exceeding 10
working Days. Any revision in the Price Band and the revised Bid/Issue, if applicable, will be
widely disseminated by notification to the BSE and the NSE, by issuing a press release and also by
indicating the changes on the website of the BRLM and at the terminals of the Syndicate.

Underwriting Agreement

After the determination of the Issue Price and allocation of Equity Shares, but prior to filing of the
Prospectus with RoC, our Company and the Underwriters intend to enter into an Underwriting Agreement
for the underwriting of the Equity Shares proposed to be offered through the Issue. Pursuant to the terms
of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in
the event that the Syndicate Member does not fulfill its underwriting obligations. Pursuant to the terms of
22
the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain
conditions to closing, as specified therein.

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

(This portion has been intentionally left blank and will be completed before filing of the Prospectus with
the RoC.)

Name and Address of the Indicative Number of Equity Amount Underwritten (Rs.
Underwriters Shares to be Underwritten Million)

[●] [●] [●]

[●] [●] [●]

Total [●] [●]

The above-mentioned amount is an indicative underwriting and would be finalized after determination of
the Issue Price and actual allocation of the Equity Shares. The Underwriting Agreement has been entered
into on [●], 2010 and has been approved by our Company’s Board of Directors.

Allocation among the Underwriters may not necessarily be in the proportion of their underwriting
commitments. Notwithstanding the above table, the BRLM and the Syndicate Members shall be
severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured
by them in accordance with the terms of the Underwriting Agreement. In the event of any default in
payment, the respective Underwriter, in addition to other obligations defined in the Underwriting
Agreement, will also be required to procure/subscribe to Equity Shares to the extent of the defaulted
amount, except in case where allocation to QIBs is less than 50% in which case the entire subscription
money will be refunded.

The underwriting arrangements mentioned above shall not apply to the subscriptions by the ASBA
Bidders in this Issue.

In the opinion of the Board of Directors (based on a certificate given by the Underwriters), the resources
of the Underwriters are sufficient to enable them to discharge their respective underwriting obligations in
full. Each Underwriter is registered with SEBI under Section 12(1) of the Securities and Exchange Board
of India Act, 1992 or registered as brokers with the Stock Exchanges.

The BRLM has an interest in our Company as a shareholder of 1,076,555 Equity Shares, representing
approximately 0.45% of the pre-Issue share capital of the Company. For further information, see "Capital
Structure" on page 24 of this Draft Red Herring Prospectus.

23
CAPITAL STRUCTURE

The share capital of the Company as at the date of filing this Draft Red Herring Prospectus, before and
after the Issue, is set forth below.
(Rs. in Million)
Aggregate Aggregate
nominal value at
Value Issue
Price
A. Authorized Share Capital
750,000,000 Equity Shares of face value of Rs 10 each 7,500.00 -
B. Issued, Subscribed and Paid-up Share Capital before the Issue
241,549,948* Equity Shares of Rs 10/- each fully paid up 2,415.50 -
C. Present Issue in terms of this Draft Red Herring Prospectus
[●] Equity Shares [●] 3,600.00
D. Employee Reservation Portion#
[●] Equity Shares [●] 15.00
E. Net Issue to the Public
[●] Equity Shares [●] 3,585.00
F. Paid up capital after the Issue
[●] Equity Shares [●] -
G. Securities Premium Account
Before the Issue NIL -
After the Issue [●] -
* Pursuant to the Scheme of Capital Reduction vide an order dated December 18, 2009 and
supplementary order dated January 28, 2010 of the High Court of Bombay the paid up equity share
capital of our Company was reduced from Rs.3,913,220,040 to Rs.2,308,611,910. Pursuant to resolution
dated March 30, 2010 passed by the shareholders of our Company, 10,688,757 equity shares of face
value of Rs. 10 each were allotted for consideration other than cash.

# subject to such reservation not exceeding Rs. 15.00 million


The Issue has been authorized under section 81 (1A) of the Companies Act by the shareholders of our
Company at an extra-ordinary general meeting dated February 16, 2010

Changes in Authorised Share Capital

1. The initial Authorised Share capital of Rs.500,000 divided into 50,000 Equity Shares of Rs.10
each was increased to Rs.200,000,000 divided into 20,000,000 Equity Shares of Rs.10 each
ranking pari passu with the existing Equity Shares of the Company pursuant to a resolution of
shareholders passed at an EGM held on July 31, 2002.

2. The Authorised Share capital of Rs.200,000,000 divided into 20,000,000 Equity Shares of Rs.10
each was increased to Rs.500,000,000 divided in to 50,000,000 Equity Shares of Rs.10 each
pursuant to resolution of shareholders passed at an EGM held on March 31, 2004.

3. The Authorised Share capital of Rs.500,000,000 divided into 50,000,000 Equity Shares of Rs.10
each was increased to Rs.830,000,000 and reclassified comprising of 10,250,000 Equity Shares
of Rs.10 each and 72,750,000 Preference Shares of Rs.10 each pursuant to resolution of
shareholders passed at an EGM held on May 30, 2006.

4. The Authorised Share capital of Rs.830,000,000 comprising of 10,250,000 Equity Shares of


Rs.10 each and 72,750,000 Preference Shares of Rs.10 each was reclassified as Rs.830,000,000
comprising of 83,000,000 Equity Shares of Rs.10 each pursuant to resolution of shareholders
passed at an EGM held on January 5, 2007.

5. The Authorised Share capital of Rs.830,000,000 comprising of 83,000,000 Equity Shares of


Rs.10 each was increased to Rs.3,430,000,000 divided into 188,000,000 Equity Shares of Rs 10
each and 155,000,000 Preference Shares of Rs 10 each pursuant to a resolution passed by the
shareholders of our Company at an EGM dated January 5, 2007 and subsequently approved by
24
Hon’ble High Court vide its Order dated April 11, 2007 under the Scheme of Amalgamation.

6. The Authorised Share capital of the Company of Rs.3,430,000,000 divided in to 188,000,000


Equity Shares of Rs.10 each and 155,000,000 Preference Shares of Rs.10 each was reclassified
as Rs.3,430,000,000 comprising of 242,999,998 Equity Shares of Rs.10 each and 100,000,002
Preference Shares of Rs.10 each pursuant to resolution of shareholders passed at an EGM held
on May 25, 2007.

7. The Authorised Share capital of Rs.3,430,000,000 divided into 242,999,998 Equity Shares of
Rs.10 each and 100,000,002 Preference Shares of Rs.10 each were reclassified as
Rs.3,430,000,000 comprising of 247,999,998 Equity Shares of Rs.10 each and 95,000,002
Preference Shares of Rs.10 each pursuant to a resolution of shareholders passed at an AGM held
on October 29, 2007.

8. The Authorised Share Capital of the Company consisting of Rs.3,430,000,000 divided in to


247,999,998 Equity Shares of Rs.10 each and 95,000,002 Preference Shares of Rs.10 each was
increased and reclassified to consist of Rs.4,180,000,000 divided in to 418,000,000 Equity
Shares of Rs.10 each pursuant to a resolution of shareholders at an EGM on February 29, 2008.

9. The Authorised Share Capital of the Company consisting of Rs. Rs.4,180,000,000 divided in to
418,000,000 Equity Shares of Rs.10 each was increased to Rs. 7,500,000,000 divided in to
750,000,000 Equity Shares of Rs.10 each pursuant to the resolution of shareholders at an EGM
on February 16, 2010

Pre-IPO Placement

Our Company is considering Pre-IPO Placement of up to 90 million Equity Shares for cash aggregating
upto Rs. 900 million with various investors. If undertaken, the Pre-IPO Placement shall be completed by
our Company, prior to the filing of the Red Herring Prospectus with the Registrar of Companies,
Maharashtra, Mumbai. If the Pre-IPO Placement is completed, the Issue size offered to the public would
be reduced to the extent of such Pre-IPO Placement, subject to minimum public Issue size being atleast
25% of our post-Issue equity share capital.

Notes to the Capital Structure

1. Share Capital History of our Company

a. The following is the history of the Equity Share capital of our Company:

Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative


Allotment Equity Allotment Value Price Consideration No. of Share Capital Share
(*) Shares (Rs.) (Rs.) Equity (Rs.) Premium
Shares Account (Rs.)
November 2 Subscription 10.00 10.00 Cash 2 20.00 0.00
06, 2000 to
Memorandum
of Association
of our
Company
September 10,000 Preferential 10.00 10.00 Cash 10,002 100,020.00 0.00
5, 2001 allotment of
Equity Shares
to
BG India
Telecom
(Mauritius)
Limited
(erstwhile
name for YOU
Telecom

25
Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative
Allotment Equity Allotment Value Price Consideration No. of Share Capital Share
(*) Shares (Rs.) (Rs.) Equity (Rs.) Premium
Shares Account (Rs.)
(Mauritius)
Limited)
September 10,225,488 Preferential 10.00 10.00 Cash 10,235,490 102,354,900.00 0.00
11, 2002 allotment of
Equity Shares
to BG India
Telecom
(Mauritius)
Pte Limited
(erstwhile
name for YOU
Telecom
(Mauritius)
Limited)
January 5, 72,310,000 Allotment of 10.00 NA Conversion of 82,545,490 825,454,900.00 0.00
2007 Equity Shares Preference
pursuant to Shares
conversion of
Preference
Shares allotted
to YOU
Telecom
(Mauritius)
Limited
October 95,009,998 Allotment of 10.00 NA Consideration 177,555,488 1,775,554,880.00 0.00
26, 2007 Equity Shares other than
to YOU cash, (pursuant
Telecom to the Scheme
(Mauritius) of
Limited Amalgamation)
pursuant to the
Scheme of
Amalgamation
October 2 Allotment of 10.00 NA Consideration 177,555,490 1,775,554,900.00 0.00
26, 2007 Equity Shares other than
to Growth cash, (pursuant
Partnership to the Scheme
P.R. of
Srinivasan Amalgamation)
Co-Investment
Trust
October 66,088,190 Allotment of 10.00 10.00 Cash 243,643,680 2,436,436,800.00 0.00
26, 2007 Equity Shares
to YOU
Telecom
(Mauritius)
Limited
February 85,500,002 Allotment of 10.00 NA Conversion of 329,143,682 3,291,436,820.00 0.00
29, 2008 Equity Shares Preference
to YOU Shares
Telecom
(Mauritius)
Limited
pursuant to
conversion of
Preference
26
Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative
Allotment Equity Allotment Value Price Consideration No. of Share Capital Share
(*) Shares (Rs.) (Rs.) Equity (Rs.) Premium
Shares Account (Rs.)
Shares
February 9,500,000 Allotment of 10.00 NA Conversion of 338,643,682 3,386,436,820.00 0.00
29, 2008 Equity Shares Preference
to YOU Shares
Telecom
Employee
Welfare Trust
pursuant to
conversion of
Preference
Shares
February 32,781,004 Preferential 10.00 13.70 Cash 371,424,686 3,714,246,860.00 121,289,714.80
29, 2008 allotment of
Equity Shares
to You
Telecom
(Mauritius)
Limited
March 31, 100 Preferential 10.00 13.70 Cash 371,424,786 3,714,247,860.00 121,290,084.80
2008 allotment of
Equity Shares
to Mrs.
Rambhaben
Ukabhai
Tanti, Mrs.
Gita T. Tanti,
Mrs. Lina J.
Tanti,
Mrs. Sangita
V. Tanti, and
Mrs. Radha
Girish Tanti

March 31, 18,072,400 Allotment of 10.00 NA Conversion of 389,497,186 3,894,971,860.00 164,302,396.80


2008 Equity Shares convertible
To Bennett debentures
Coleman &
Company
Limited
pursuant to
conversion of
convertible
debentures
November 1,824,818 Preferential 10.00 13.70 Cash 391,322,004 3,913,220,040.00 171,054,223.40
24, 2008 allotment of
Equity Shares
to Edelweiss
Capital
Limited
December (160,460,813) Pursuant to the Scheme of Capital Reduction vide 230,861,191 2,308,611,910.00 NIL
18, 2009 an order dated December 18, 2009 and
supplementary order dated January 28, 2010 of the
High Court of Bombay
March 30, 10,688,757 Equity shares 10.00 N.A. Consideration 241,549,948 2,415,499,480.00 NIL
2010 allotted other other than cash
than for
27
Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative
Allotment Equity Allotment Value Price Consideration No. of Share Capital Share
(*) Shares (Rs.) (Rs.) Equity (Rs.) Premium
Shares Account (Rs.)
cash**

(*) – All of the Equity Shares issued by the Company were fully paid up when issued and allotted.

(**) - Pursuant to a special resolution dated March 30, 2010 passed by the shareholders of our Company,
10,688,757 Equity Shares of our Company were allotted to Mrs. Rambhaben Ukabhai Tanti, Mrs. Gita T. Tanti,
Mrs. Lina J. Tanti, Mrs. Sangita V. Tanti, and Mrs. Radha Girish Tanti .

b. The following is the history of the Preference Share capital of our Company:

Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative


Allotment Preference Allotment Value Price Consideration No. of Preference Share
(*) Shares (Rs.) (Rs.) Preference Share Capital Premium
Shares (Rs.) Account
(Rs.)
May 31, 72,310,000 Preferential 10.00 10.00 Cash 72,310,000 723,100,000.00 0.00
2006 allotment of
Preference
Shares to
YOU Telecom
(Mauritius)
Limited
January 5, (72,310,000) Allotment of 10.00 - Conversion of 0 0.00 0.00
2007 Equity Shares Preference
pursuant to Shares
conversion of
Preference
Shares allotted
to YOU
Telecom
(Mauritius)
Limited
October 95,000,002 Allotment of 10.00 - Consideration 95,000,002 950,000,020 -
26, 2007 Preference other than
Shares to cash, (pursuant
YOU Telecom to the Scheme
(Mauritius) of
Limited Amalgamation)
pursuant to
Scheme of
Amalgamation
February (85,500,002) Allotment of 10.00 - Conversion of 9,500,000 95,000,000.00 -
29, 2008 Equity Shares Preference
to YOU Shares
Telecom
(Mauritius)
Limited
pursuant to
conversion of
Preference
Shares
February (9,500,000) Allotment of 10.00 - Conversion of 0 0.00 -
29, 2008 Equity Shares Preference
to YOU Shares
Telecom
Employee
28
Date of Number of Nature of Face Issue Nature of Cumulative Cumulative Cumulative
Allotment Preference Allotment Value Price Consideration No. of Preference Share
(*) Shares (Rs.) (Rs.) Preference Share Capital Premium
Shares (Rs.) Account
(Rs.)
Welfare Trust
pursuant to
conversion of
Preference
Shares

(*) – All of the Preference Shares issued by the Company were fully paid up when issued and allotted.

2. a) The following Equity Shares were issued and allotted by our Company for
consideration other than in cash:

Date of Number Face Value Reasons for Persons to whom Equity Benefit to the Issuer
allotment of Equity (Rs.) allotment Shares allotted
Shares
January 05, 72,310,000 10.00 Conversion of YOU Telecom (Mauritius) None
2007 Preference Shares Limited
October 26, 95,009,998 10.00 Pursuant to scheme YOU Telecom (Mauritius) None
2007 of amalgamation Limited
October 26, 2 10.00 Pursuant to scheme Growth Partnership P.R. None
2007 of amalgamation Srinivasan Co-Investment Trust
February 29, 85,500,002 10.00 Conversion of YOU Telecom (Mauritius) None
2008 Preference Shares Limited
February 29, 9,500,000 10.00 Conversion of YOU Telecom Employee None
2008 Preference Shares Welfare Trust
March 31, 18,072,400 10.00 Conversion of Bennett Coleman & Company None
2008 convertible Limited
debentures
March 30, 10,688,757 10.00 Consideration for a Mrs. Rambhaben Ukabhai Tanti, Consideration for a right
2010 right to acquire Mrs. Gita T. Tanti, Mrs. Lina J. to acquire equity shares in
equity shares in Tanti, Mrs. Sangita V. Tanti, and Digital Outsourcing
Digital Outsourcing Mrs. Radha Girish Tanti Private Limited, pursuant
Private Limited, to the DOPL Share
pursuant to the Subscription and Purchase
DOPL Share Agreement
Subscription and
Purchase Agreement

b) The following Preference Shares were issued and allotted by our Company for
consideration other than in cash:

Date of Number Face Value Reasons for Persons to whom Preference Benefit to the Issuer
allotment of (Rs.) allotment Shares allotted
Preference
Shares
October 26, 95,000,002 10.00 Pursuant to the YOU Telecom (Mauritius) None
2007 Scheme of Limited
Amalgamation*
* For further details in connection with the Scheme of Amalgamation please refer to the section “History
and Certain Corporate Matters” on page 101 of this Draft Red Herring Prospectus.

3. History of Equity Shares held by our Promoters

The Equity Shares held by the Promoters were allotted /acquired in the following manner:

29
Date of Allotment/ Consideration No of Shares Face Issue/ % of Pre- % of Pledged
Allotment/ Transfer (Cash, Bonus, Value Acquisition Issue Paid Post- Shares
Transfer(#) kind, etc.) (Rs.) Price (Rs.) Up Capital Issue
(##) paid
Up
Capital
No %
YOU Telecom (Mauritius) Limited
September Allotment Cash 10,000 10.00 10.00 Negligible [●] NIL NIL
5, 2001
September Allotment Cash 10,225,488 10.00 10.00 4.23 [●] NIL NIL
11, 2002
January 5, Conversion Other than 72,310,000 10.00 10.00 29.94 [●] NIL NIL
2007 from Pref Cash
Shares (*)
October 26, Transfer to Cash (24,364,368) 10.00 10.00 (10.09) [●] NIL NIL
2007 YOU Telecom
Employee
Welfare Trust
October 26, Under scheme Other than 95,009,998 10.00 10.00 39.33 [●] NIL NIL
2007 of Cash
Amalgamation
(**)
October 26, Allotment Cash 66,088,190 10.00 10.00 27.36 [●] NIL NIL
2007
February Conversion Other than 85,500,002 10.00 10.00 35.40 [●] NIL NIL
29, 2008 from Pref Cash
Shares (***)
February Allotment Cash 32,781,004 10.00 13.70 13.57 [●] NIL NIL
29, 2008
December Pursuant to the scheme of (138,415,939) 10.00 - (57.30) - - -
18, 2009 capital reduction under section
100 of the Companies Act and
vide order dated December 18,
2009 and supplementary order
dated January 28, 2010 of the
High Court of Bombay

Total 199,144,375 82.44


Mr. Eyyuni Venkat Srinivas Chakravarthy
March 22, Transfer from YOU Telecom 1 10.00 2.50 Negligible [●] NIL NIL
2010 Employee Welfare Trust
Total 1 Negligible

(#) – All of the Equity Shares issued by the Company were fully paid up when issued and allotted.
(##)-Percentage of Pre-Issue Paid up Capital has been calculated after considering the impact of capital
reduction in the Equity Share capital pursuant to the Scheme of Capital Reduction vide an order dated
December 18, 2009 and supplementary order dated January 28, 2010 of the High Court of Bombay

(*) - 72,310,000 Equity Shares were issued and allotted pursuant to the conversion of 72,310,000
convertible Preference Shares allotted on May 31, 2006
(**) - 95,009,998 Equity Shares were issued and allotted on October 26, 2007 pursuant to a Scheme of
Amalgamation between erstwhile You Telecom India Private Limited and our Company
(***) - 85,500,002 Equity Shares were issued and allotted pursuant to the conversion of 85,500,002
convertible Preference Shares allotted on October 26, 2007

As on the date of this Draft Red Herring Prospectus one of our Promoters, namely, Citigroup Venture
Capital International Growth Partnership Mauritius Limited does not hold any Equity Shares in the issued
and paid-up Equity Share capital of our Company.

4. Promoters’ Contribution and Lock -in

30
a. Pursuant to Regulation 36 of the SEBI ICDR Regulations, an aggregate of 20% of the
post-Issue equity share capital of the Company shall be locked in by the Promoters for a
period of three years from the date of Allotment in the Issue.

b. The Equity Shares, which are being locked-in, are not ineligible for computation of
Promoter’s contribution under Regulation 33 of the SEBI ICDR Regulations. In this
respect, the Company confirms that the Equity Shares being locked in do not consist of:

i. Equity Shares acquired during the preceding three years (a) for consideration other
than cash and revaluation of assets or capitalization of intangible assets or (b)
arising from bonus issue by utilization of revaluation reserves or unrealized profits
of the Company or from a bonus issue against Equity Shares which are otherwise
ineligible for computation of Promoters’ contribution;

ii. Equity Shares acquired by the Promoters during the one year preceding the date of
the Draft Red Herring Prospectus, at a price lower than the price at which Equity
Shares are being offered to the public in the Issue; and

iii. Equity Shares issued to the Promoters upon conversion of a partnership firm.

iv. Equity shares offered by Promoters and offered for minimum promoter
contribution are not subject to pledge.

c. The Promoters have given an undertaking whereby they have consented to offer such
number of Equity Shares held by them to be considered as promoters’ contribution
which aggregate to 20% of the post-Issue equity share capital and are locked-in for a
period of three years from the date of Allotment. Further, the Promoters have consented
to not sell/transfer/dispose of in any manner, Equity Shares forming part of the
Promoters’ contribution from the date of filing the Draft Red Herring Prospectus till the
date of commencement of lock-in as per the SEBI ICDR Regulations

d. Details of the Equity Shares forming the Promoters’ contribution, which shall be
locked-in for three years, are as follows:

(This portion has been intentionally left blank and will be completed upon finalization of the
number of Equity Shares to be issued pursuant to this Issue.)

You Telecom (Mauritius) Limited


Date of Consideration No. of Face Issue/ Nature of % of Pre- % of Date
Allotment (Cash, Bonus, Equity value Acquisition Allotment Issue Post- upto
(*)/ Other than Shares (Rs.) Price (Rs.) paid up issue which
Acquisition Cash) capital paid Equity
up Shares
capital are
subject
to
Lock-
in
September 5, Cash 5,900 10.00 10.00 Allotment Negligible [●] [●]
2001
September Cash 6,032,547 10.00 10.00 Allotment 2.50 [●] [●]
11, 2002
January 5, Other than Cash 28,285,620 10.00 NA Conversion 11.71 [●] [●]
2007 (**) from Pref
Shares
October 26, Other than 56,051,337 10.00 N.A. Under scheme 23.20 [●] [●]
2007 Cash(***) of
Amalgamation
(**)
October 26, Cash 38,988,858 10.00 10.00 Allotment 16.14 [●] [●]
2007
31
You Telecom (Mauritius) Limited
Date of Consideration No. of Face Issue/ Nature of % of Pre- % of Date
Allotment (Cash, Bonus, Equity value Acquisition Allotment Issue Post- upto
(*)/ Other than Shares (Rs.) Price (Rs.) paid up issue which
Acquisition Cash) capital paid Equity
up Shares
capital are
subject
to
Lock-
in
February 29, Other than Cash 50,440,895 10.00 NA Conversion 20.88 [●] [●]
2008 (****) from Pref
Shares
February 29, Cash 19,339,218 10.00 13.70 Allotment 8.01 [●] [●]
2008
Total 199,144,375 82.44

(*) - All of the Equity Shares issued by the Company were fully paid up when issued and
allotted. None of these Equity Shares were allotted pursuant to any rights, bonus or
preferential issue.

(**) - 28,285,620 Equity Shares were issued and allotted pursuant to the conversion of
28,285,620 convertible Preference Shares allotted on May 31, 2006
(***) - 56,051,337 Equity Shares were issued and allotted on October 26, 2007 pursuant to a
Scheme of Amalgamation between erstwhile You Telecom India Private Limited and our
Company
(****) - 50,440,895 Equity Shares were issued and allotted pursuant to the conversion of
50,440,895 convertible Preference Shares allotted on October 26, 2007

e. For details regarding individual allotments of Equity Shares of our Company to our
Promoters, from the date of incorporation of our Company, please see the “History of
Equity Shares held by our Promoters” in the section “Capital Structure” on page 24 of
this Draft Red Herring Prospectus.

f. Except as otherwise disclosed herein, none of our Promoters have acquired any Equity
Shares of the Company in the secondary market.

g. Details of Pre-Issue Equity Share capital locked in for one year:

In terms of the SEBI ICDR Regulations, in addition to the lock-in of 20% of the post-
Issue shareholding of the Promoters for three years, as specified above, the balance pre-
Issue share capital of the Company ([•] Equity Shares) shall be locked-in for a period of
one year from the date of Allotment in the Issue.

h. Other requirements in respect of lock-in

Pursuant to Regulation 39 of the SEBI ICDR Regulations the locked-in Equity Shares
held by the Promoters can be pledged only with banks or financial institutions as
collateral security for any loans granted by such banks or financial institutions,
provided that the pledge of shares is one of the conditions under which the loan is
sanctioned. Further, Equity Shares locked in as minimum promoters’ contribution may
be pledged only in respect of a financial facility which has been granted for the purpose
of financing one or more of the objects of the Issue;

Pursuant to Regulation 40 of the SEBI ICDR Regulations, Equity Shares held by


persons other than Promoters prior to the Issue may be transferred to any other person
holding the Equity Shares which are locked-in in accordance with Regulation 37 of the
SEBI ICDR Regulations, subject to the continuation of the lock-in in he hands of the
transferees for the remaining period and compliance with the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997, as applicable;
32
Pursuant to Regulation 40 of the SEBI ICDR Regulations, Equity Shares held by the
Promoters may be transferred to another Promoter or any person of the Promoter Group
or a new promoter or a person in control of the Company subject to continuation of the
lock-in in the hands of the transferees for the remaining period and compliance with the
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as
applicable.

i. Lock in of Equity Shares Allotted to Anchor Investors

Equity Shares, if Allotted to Anchor Investors, in the Anchor Investor Portion, shall be
locked in for a period of 30 days from the date of Allotment of Equity Shares in the
Issue.

5. Shareholding pattern of our Company

The shareholding pattern of our Company as on the date of filing of this Draft Red Herring Prospectus is
as follows:

Category of No. of Total No. of Total No. No. of Total shareholding as Total shareholding Shares pledged or
shareholder shareholders shares of shares shares a percentage of total as a percentage of otherwise
(Pre Issue) (Post held in no. of shares (pre total no. of shares encumbered
Issue) de Issue) (post Issue)
material
ized
form
As a As a As a As a Numbe As a
percent percentage percent percent r of percent
age of of age of age of shares age of
(A+B) (A+B+C) (A+B) (A+B+ (A+B+
C) C)

(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) (X) (XI) (XII)=(
XI)/(IV
)*100
Shareholding of
Promoter and
(A) Promoter Group
(1) Indian
Individuals/ Hindu 1.00 1.00 [●] 0.00 Negligi Negligible [●] [●]
(a) Undivided Family ble NIL NIL
Central 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
Government/ State
(b) Government(s) NIL NIL
(c) Bodies Corporate 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●] NIL NIL
Financial 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(d) Institutions/Banks NIL NIL
Any Other 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(e) (specify) NIL NIL
Sub-Total (A) (1) 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●] NIL NIL
(2) Foreign
Individuals (Non- 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●] NIL NIL
Resident
Individuals/Foreig
(a) n individuals)
(b) Bodies Corporate 1.00 199,144,375 [●] 0.00 82.44 82.44 [●] [●] NIL NIL
(c) Institutions 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●] NIL NIL
Any Other 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●] NIL NIL
(d) (specify)
Sub-Total (A) (2) 2.00 199,144,376 [●] 0.00 82.44 82.44 [●] [●] NIL NIL
Total 2.00 199,144,376 [●] 0.00 82.44 82.44 [●] [●] NIL NIL
Shareholding of
Promoter and
Promoter Group
(A) =
(A)(1)+(A)(2)
33
Category of No. of Total No. of Total No. No. of Total shareholding as Total shareholding Shares pledged or
shareholder shareholders shares of shares shares a percentage of total as a percentage of otherwise
(Pre Issue) (Post held in no. of shares (pre total no. of shares encumbered
Issue) de Issue) (post Issue)
material
ized
form
As a As a As a As a Numbe As a
percent percentage percent percent r of percent
age of of age of age of shares age of
(A+B) (A+B+C) (A+B) (A+B+ (A+B+
C) C)

(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) (X) (XI) (XII)=(
XI)/(IV
)*100
Public
(B) Shareholding
(1) Institutions
Mutual Funds 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(a) /UTI
Financial 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(b) Institutions/Banks
Central 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
Government/ State
(c) Government(s)
Venture Capital 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(d) Funds
Insurance 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(e) Companies
Foreign 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
Institutional
(f) Investors
Foreign Venture 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(g) Capital Investors
Any Other 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(h) (specify)
Sub-Total (B) (1) 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(2) Non-Institutions
(a) Bodies Corporate 2.00 11,738,403 [●] 0.00 4.86 4.86 [●] [●]
(b) Individuals
i. Individual 12 10,688,824 [●] 0.00 4.42 4.42 [●] [●]
shareholders
holding nominal
share capital up to
Rs. 0.1 million
ii. Individual 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
shareholders
holding nominal
share capital in
excess of Rs. 0.1
million
Any Other
(c)
(specify)
i. Clearing 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
Members
ii. Non Resident 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
Indians
iii. Non Resident 0.00 0.00 [●] 0.00 0.00 0.00 [●] [●]
(Non Repatriables)
iv.Trusts 2.00 19,978,345 [●] 0.00 8.27 8.27 [●] [●]
Sub-Total (B) (2) 16.00 42,405,572 [●] 0.00 17.56 17.56 [●] [●]
Total Public 16.00 42,405,572 [●] 0.00 17.56 17.56 [●] [●]
Shareholding (B)
= (B)(1)+(B)(2)
Total (A) + (B) 18.00 241,549,948 [●] 0.00 100 100 [●] [●]

(C) Shares held by


Custodians and
against which

34
Category of No. of Total No. of Total No. No. of Total shareholding as Total shareholding Shares pledged or
shareholder shareholders shares of shares shares a percentage of total as a percentage of otherwise
(Pre Issue) (Post held in no. of shares (pre total no. of shares encumbered
Issue) de Issue) (post Issue)
material
ized
form
As a As a As a As a Numbe As a
percent percentage percent percent r of percent
age of of age of age of shares age of
(A+B) (A+B+C) (A+B) (A+B+ (A+B+
C) C)

(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) (X) (XI) (XII)=(
XI)/(IV
)*100
Depository
Receipts have
been issued
GRAND TOTAL 18.00 241,549,948 [●] 0.00 100 100 [●] [●]
(A)+(B)+(C)

6. The list of top ten shareholders of our Company and the number of Equity Shares held by
them is as under:

a. As of the date of filing of this Draft Red Herring Prospectus

Sr. Name of Shareholders Number of Equity Percentage


No. Shares Shareholding
1. YOU Telecom (Mauritius) 199,144,375 82.44
Limited
2. YOU Telecom Employee 19,978,343 8.27
Welfare Trust
3. Bennett Coleman & Company 10,661,848 4.41
Limited
4. Mrs. Radha Girish Tanti. 2,137,764 0.89
5. Mrs. Lina J. Tanti; 2,137,764 0.89
6. Mrs. Sangita V. Tanti 2,137,763 0.89
7. Mrs. Gita T. Tanti 2,137,763 0.89
8. Mrs. Rambhaben Ukabhai Tanti; 2,137,763 0.89
9. Edelweiss Capital Limited 1,076,555 0.45
10. P R Srinvasan Growth 2 Negligible
Partnership Co-Investment Trust

b. Ten days prior to the filing of this Draft Red Herring Prospectus:

Sr. Name of Shareholders Number of Equity Percentage


No. Shares Shareholding
1. YOU Telecom (Mauritius) 199,144,375 86.26
Limited
2. YOU Telecom Employee 19,978,351 8.65
Welfare Trust
3. Bennett Coleman & Company 10,661,848 4.62
Limited
4. Edelweiss Capital Limited 1,076,555 0.47
5. Mrs. Rambhaben Ukabhai Tanti; 12 Negligible
6. Mrs. Gita T. Tanti 12 Negligible
7. Mrs. Lina J. Tanti; 12 Negligible
8. Mrs. Sangita V. Tanti 12 Negligible
9. Mrs. Radha Girish Tanti. 12 Negligible
35
Sr. Name of Shareholders Number of Equity Percentage
No. Shares Shareholding
10. P R Srinvasan Growth 2 Negligible
Partnership Co-Investment Trust

c. Two years prior to the filing of this Draft Red Herring Prospectus:

Sr. Name of Shareholders Number of Equity Percentage


No. Shares* Shareholding
1. YOU Telecom (Mauritius) 337,560,314 90.87
Limited
2. You Telecom Employee Welfare 33,864,368 9.12
Trust
3. P.R. Srinivasan Co-Investment 4 Negligible
Trust
* Number of Equity Shares in the above table are prior to the impact of capital reduction in the Equity
Share capital pursuant to the Scheme of Capital Reduction vide an order dated December 18, 2009 of the
High Court of Bombay and supplementary order dated January 28,2010.

7. Each of the Company, its Directors, the Promoters, the Promoter Group, their respective
directors and the BRLM have not entered into any buy-back and/or safety net and/or standby
arrangements for purchase of Equity Shares from any person.

8. None of our Directors or key managerial personnel hold Equity Shares in the Company, except
as stated in the section titled “Capital Structure” and “Our Management” beginning on page 24
and page 109 respectively of this Draft Red Herring Prospectus.

9. The Promoter Group and the directors of the Promoters do not currently hold any Equity Shares
in our Company.

10. Except as stated hereinafter, the Promoter Group, the directors of the Promoters, the Directors of
the Company and their immediate relatives have not purchased or sold any Equity Shares during
a period of six months preceeding the date on which this Draft Red Herring Prospectus is filed
with SEBI:

Date of Allotment/ Consideration No of Shares Face Issue/


Allotment/ Transfer (Cash, Bonus, Value Acquisition
Transfer kind, etc.) (Rs.) Price (Rs.)
March 22, Transfer from YOU Cash 1 10.00 2.50
2010 Telecom Employee
Welfare Trust to
Mr. Eyyuni Venkat
Srinivas
Chakravarthy

11. We have allotted the following Equity Shares during the preceding one year for consideration
other than cash (which may be construed to be at a price which may be lower than the issue
price):

Sr. Date of Name of Number of Nature of Issue Price


No. Allotment Shareholders Equity Consideration (Rs.)
Shares
1. March 30, Mrs. Radha 2,137,752 Other than cash NA
2010 Girish Tanti.
2. March 30, Mrs. Lina J. 2,137,752 Other than cash NA
2010 Tanti;
3. March 30, Mrs. Sangita V. 2,137,751 Other than cash NA
2010 Tanti
4. March 30, Mrs. Gita T. Tanti 2,137,751 Other than cash NA
2010
36
Sr. Date of Name of Number of Nature of Issue Price
No. Allotment Shareholders Equity Consideration (Rs.)
Shares
5. March 30, Mrs. Rambhaben 2,137,751 Other than cash NA
2010 Ukabhai Tanti;

12. There are no financing arrangements whereby the Promoter Group, and/or the directors of the
corporate Promoter, and/or the directors of the Company and their relatives have financed the
purchase by any other person of securities of the Company during the period of six months
immediately preceding the date of filing of this Draft Red Herring Prospectus with the SEBI.

13. The Company, the Directors, the Promoters or the Promoter Group shall not make any, direct or
indirect, payments, discounts, commissions or allowances under this Issue, except as disclosed
in this Draft Red Herring Prospectus

14. There are no outstanding warrants, options or rights to convert debentures, loans or other
instruments convertible into the Equity Shares.

15. As of the date of this Draft Red Herring Prospectus, the BRLM holds 1,076,555 Equity Shares
of our Company.

16. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the
Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to
each category of investor.

17. Except for the Pre-IPO Placement, as disclosed in the Draft Red Herring Prospectus, there will
be no further issue of Equity Shares, whether by way of issue of bonus shares, preferential
allotment, and rights issue or in any other manner during the period commencing from
submission of this Draft Red Herring Prospectus with SEBI and ending on the date on which our
Equity Shares to be issued pursuant to the issue are listed.

18. Our Company presently does not intend or propose to alter the capital structure for a period of
six months from the Bid/Issue Opening Date, by way of split or consolidation of the
denomination of Equity Shares or further issue of Equity Shares (including issue of securities
convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or
otherwise or issue of bonus or rights or further public issue of specified securities or qualified
institutional placements, except that if we enter into acquisitions, joint ventures or other
arrangements, we may, subject to necessary approvals, consider raising additional capital to fund
such activity or use Equity Shares as currency for acquisitions or participation in such joint
ventures.

19. At least 50% of the Net Issue shall be allotted on a proportionate basis to Qualified Institutional
Buyers, not less than 15% of the Net Issue shall be available for allocation on a proportionate
basis to Non Institutional Bidders and not less than 35% of the Net 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. 5% of the QIB portion (excluding Anchor Investor portion)
shall be available for allocation to Mutual Funds only. Mutual Funds participating in the 5%
share in the QIB Portion will also be eligible for allocation in the remaining QIB Portion.

20. Our Promoters and Group Companies will not participate in this Issue.

21. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law.
We shall comply with such disclosure and accounting norms as may be specified by SEBI from
time to time.

22. As of the date of filing of this Draft Red Herring Prospectus the total number of holders of the
Equity Shares is 18.

23. The Company has not raised any bridge loans against the proceeds of the Issue.

37
24. We have not issued any Equity Shares by way of bonus out of revaluation reserves. We have not
issued any Equity Shares for consideration other than cash except as stated in this Draft Red
Herring Prospectus

25. As per the RBI regulations, OCBs are not allowed to participate in the Issue.

26. An over-subscription to the extent of 10% of the net offer to public, subject to permissible limit,
can be retained for the purpose of rounding off to the nearer multiple of minimum allotment lot.

27. The Equity Shares issued pursuant to the Issue shall be fully paid-up.

28. Under-Subscription

a. Subject to valid bids being received at or above the Issue Price allocation shall be made
on a proportionate basis. Any under-subscription in the Net Issue, would be allowed to
be met with spill-over from the Employee Reservation Portion at the discretion of our
Company, in consultation with the BRLM and the Designated Stock Exchange. Any
unsubscribed portion in the Employee Reservation Portion shall be added to the Net
Issue.

b. Under-subscription, if any, in any category, except the QIB Portion, would be allowed
to be met with spill-over from any other category or combination of categories at the
discretion of our Company in consultation with the BRLM and the Designated Stock
Exchange. If at least 50% of the Issue is not allocated to the QIBs, the entire
subscription monies shall be refunded. For further details, see “Issue Structure”
beginning on page 203 of this Draft Red Herring Prospectus.

38
OBJECTS OF THE ISSUE

The objects of the Issue are (a) capital expenditure of our Company in connection with our broadband
business (b) acquisition of additional equity shares in Digital Outsourcing Private Limited, (c) to invest in
Digital Outsourcing Private Limited by way of providing loans and/or through purchase/subscription of
an equity interest therein for purchase of set-top boxes, head-end equipments, software, other related
equipment, and acquisition of customers in connection with cable network services, (d) to meet expenses
towards working capital, (e) repayment of outstanding loan and (f) to fund expenditure for general
corporate purposes.

The main objects clause of our Company’s Memorandum of Association and objects incidental or
ancillary to the main objects enable us to undertake our existing activities and the activities for which
funds are being raised by our Company pursuant to the Issue.

The details of proceeds of the Issue are summarized in the following table:
(Rs. million)
Sr. No. Description Amount
1. Gross Proceeds of the Issue 3,600.00
2. Issue Expenses * [●]
3. Net proceeds of the Issue [●]
*To be finalized upon completion of the Issue.

Requirement of Funds

We intend to utilize the Net Proceeds of the Issue of Rs. [●] million, for financing the objects as set forth
below:
(Rs. million)
Sr. Particulars Estimated Total
No. Cost
1. Capital expenditure of our Company in connection with our broadband 1,573.90
business
2. Acquisition of additional equity shares in Digital Outsourcing Private 128.27
Limited
3. To invest in Digital Outsourcing Private Limited by way of providing 850.00
loans and/or through purchase/subscription of an equity interest therein
for purchase of set-top boxes, head-end equipment, software, other related
equipments, and towards acquisition of customers in connection with
cable network services
4. To meet expenses towards working capital 171.00
5. Repayment of outstanding loan 48.40
6. To fund expenditure for general corporate purposes * [●]*
Total [●]*
*To be finalized upon determination of Issue Price.

The fund requirements described herein are based on management estimates and our Company’s current
business plan and have not been appraised by any bank or financial institution. In view of the dynamic
nature of the broadband and cable industry, our Company may have to revise its capital expenditure
requirements as a result of variations in the cost structure, changes in estimates, exchange rate
fluctuations and other external factors, which may not be within the control of the management of our
Company. This may entail rescheduling or revising the planned capital expenditure and increasing or
decreasing the capital expenditure for a particular purpose from its planned expenditure at the discretion
of our Company‘s management.

Means of Finance
The requirements of the funds detailed above are intended to be funded as under:
(Rs. million)
Description Amount
Net Proceeds of the Issue [●]
39
Description Amount
Total [●]

The entire requirements of the objects detailed above are intended to be funded from the Net Proceeds of
the Issue. Accordingly, we confirm that there is no requirement for us to make firm arrangements of
finance through verifiable means towards at least 75% of the stated means of finance, excluding the
amount to be raised through the Issue.

Estimated Schedule of Deployment of Funds - Year-wise Break-up of the Net Proceeds of the Issue

The year-wise break down of the Net Proceeds of the Issue to be utilized is set forth below in the
following table:
(Rs. million)
Sr. No. Object Estimated Schedule of Total
Deployment of Funds
FY 2011 FY 2012
1. Capital expenditure of our Company in connection 850.20 723.70 1,573.90
with our broadband business.
2. Acquisition of additional equity shares in Digital 128.27 - 128.27
Outsourcing Private Limited
3. To invest in Digital Outsourcing Private Limited 569.50 280.50 850.00
by way of providing loans and/or through
purchase/subscription of an equity interest therein
for purchase of set-top boxes, head-end
equipments, software, other related equipment, and
acquisition of customers in connection with cable
network services
4. Expenses towards Working Capital 171.00 - 171.00
5. Repayment of outstanding loan 48.40 - 48.40
6. Fund expenditure for general corporate purposes [●] [●] [●]
Total [●] [●] [●]

While we intend to utilise the Net Proceeds of the Issue in the manner provided above, in the event of a
surplus, we will use such surplus towards general corporate purposes including meeting future growth
requirements. In case of variations in the actual utilization of funds earmarked for the purposes set forth
above, increased fund requirements for a particular purpose may be financed by surplus funds, if any,
available in respect of the other purposes for which funds are being raised in this Issue. In the event of
any shortfall in the Net Proceeds of the Issue, our Company will bridge the fund requirements from
internal accruals or debt.

Details of the Objects

1. To fund the capital expenditure of our Company in connection with our broadband business.

We intend to utilize Rs. 1,573.90 million from the Net Proceeds of this Issue to fund the capital
expenditure of our Company in connection with our broadband business, including inter-alia for the
purposes of purchase of assets related to the broadband business. The capital investment in the
equipments and networks for our broadband business will allow us to expand geographically as well as in
the existing areas of operations.

The following sets forth the break-up of the details of such capital expenditure, based on the internal
estimates of our Company’s management and based on pro-forma invoices/ quotations received from
various parties. We have not entered into any contracts in relation to the estimated amount to be
deployed.

40
Item Brief description of Unit Rate per Total Qty Value (Rs Date of
equipments of Unit (Mtrs, nos) million) Quotation
Meas (Rs)
urem
ent
Amplifier MB Amplify the Signal Nos. 36,940.0 9,030 333.6 19-Jan-10
0
Line Power Inserter For line powering Nos. 3,536 33,110 117.1 19-Jan-10
500 Series Coaxial For Trunk network Mtrs. 44.1 3,000,000 132.3 15-Mar-10
cable and and carry RF Signal
Messenger Wire
Amplifier LE Amplify the Signal Nos. 15,637.0 6,020 94.1 19-Jan-10
0
Tap off (2 Port and Catering the signal Nos. 416 120,400 50.1 15-Mar-10
4 port) from main trunk to
Subscribers
500 Series pin Connector Nos. 167.508 90,300 15.1 11-Feb-10
connector
Equalizer Balancing of Signal Nos. 250 77,400 19.4 19-Jan-10
Level
500 Series Splice Jointer for 500 Series Nos. 325.71 15,050 4.9 11-Feb-10
Connector Cable
Reducers Connector Nos. 128.78 60,200 7.8 16-Mar-10
Node and Accessories
UPS 2.2 KVA For providing Nos. 25,480.0 195 5.0 13-Mar-10
electrical backup 0
Node Box Cabinet for installing Nos. 23,700.0 195 4.6 15-Mar-10
Node 0
Node with return For converting Nos. 15944.28 195 3.1 16-Feb-10
Kit Optical to RF Signal
Power Supply For powering Node Nos. 7,000.00 195 1.4 15-Mar-10
Optic Fibre Cables
Civil work & ROW charges (Metro Mtrs. 3310 57,362 189.9 Managem
Cities) ent
estimate
Civil work & ROW charges (Non Metro Mtrs. 1310 96,320 126.2 Managem
cities) ent
estimate
96 Fibre Cable For carrying optical Mtrs 57.2 201,240 11.5 15-Mar-10
signal to desired
location
40 MM HDPE For routing Mtrs 32.7 335,400 11.0 15-Mar-10
Ducts underground fiber
cable
12 Fibre Cable For carrying optical Mtrs 13.5 335,400 4.5 22-Jan-10
signal
06 Fibre cable For carrying optical Mtrs 9.1 335,400 3.1 12-Mar-10
signal
48 Fibre Cable For carrying optical Mtrs 41.6 67,080 2.8 15-Mar-10
signal
24 Fibre Cable For carrying optical Mtrs 24.96 67,080 1.7 16-Jan-10
signal
40 MM HDPE Joining Ducts Qty 190 1006 0.2 12-Mar-10
Coupler
Fiber Accessories Fiber management Qty - - 0.6 5-Feb-10
trays, coupler,
jointers

41
Item Brief description of Unit Rate per Total Qty Value (Rs Date of
equipments of Unit (Mtrs, nos) million) Quotation
Meas (Rs)
urem
ent
CPE
Modems Communication Nos. 1364.88 198,000 270.2 10-Dec-09
devise
RG11 Connectors For feeder network Nos. 90 396,000 35.6 11-Feb-10
cable
RG6 Coaxial Cable For drop connection Mtrs 7 4,464,000 31.2 15-Jan-10

RG11 Cable Feeder Network Mtrs 14.55 1,674,000 24.4 15-Mar-10


RG6 Connectors For drop cables Nos. 12 558,000 6.7 11-Feb-10
Cat5 Cable For drop connection Mtrs 8.85 620,000 5.5 15-Mar-10
Adapters for Cable For providing Power Nos. 180 11,000 2.0 5-Feb-10
Modems to Cable Modem
RJ45 Connectors For drop connection Nos. 1.9 620,000 1.2 5-Feb-10
Head End Equipment
CMTS For Converting Nos. 2,908,18 18 52.3 18-Mar-10
internet signal into 7
RF format and
manages modems
Transmitter with Convert RF to optical Nos. 176,970 26 4.6 19-Jan-10
accessories signal
Rack including For placement of Nos. 31,270 6 0.2 17-Mar-10
Accessories equipment
TOTAL 1,573.90

2. Acquisition of additional equity shares in Digital Outsourcing Private Limited

We intend to be ‘Indian owned and controlled’ (namely to have at least 50.00% of the equity interest of
our Company beneficially owned by resident Indian citizens and/or Indian companies which are in turn
owned by resident Indian citizens) on the completion of the Issue. As an Indian owned and controlled
Company we will be able to purchase or acquire a controlling stake in MSO/LCO companies. As part of
the objects of this issue, we intend to purchase 433,875 equity shares in Digital Outsourcing Private
Limited which constitute 13.29% of the equity share capital of Digital Outsourcing Private Limited.

We have entered into a Share Purchase Agreement dated March 30, 2010 with Mrs. Rambhaben Ukabhai,
Mrs. Gita T. Tanti, Mrs. Sangita V. Tanti, Mrs. Lina J. Tanti and Radha Girish Tanti (“Sellers”) to
acquire from the Sellers, 433,875 equity shares of Digital Outsourcing Private Limited for an aggregate
consideration of Rupees 128,265,084 (Rupees One Hundred and Twenty Eight Million Two Hundred and
Sixty Five Thousand and Eighty Four Only or such lower amount as agreed in writing between the
aforesaid parties. This price is based on a valuation carried out by SSPA & Company, Chartered
Accountants and as per their report dated March 26, 2010. See “History and Other Corporate Matters”
beginning on page 101, "Objects of the Issue" on page 39, and "Risk Factors" beginning on page xiv.

3. To invest in DOPL by way of providing loans and/or through purchase/subscription of an equity


interest therein for purchase of set-top boxes, head-end equipments, software, other related
equipments, and towards acquisition of customers in connection with cable network services

Our Company intends to invest in DOPL by way of providing loans and/or through
purchase/subscription of an equity interest therein for an amount of Rs. 628.50 million for purchase of
set-top boxes, head-end equipment, software and other related equipments.

Our associate company, DOPL provides cable television services to its customers. Digital cable

42
television service requires a set-top box to be provided to the subscriber. The set-top box is provided
with an encryption technology which is required to decode the encrypted signals. These set-top boxes
and encryption technology are purchased from third party suppliers. In addition to the set-top boxes
other equipments such as smart cards, digital compression equipments and infrastructure such as fiber
coaxial cable are also required.

We intend to utilize Rs. 628.50 million from the Net Proceeds of this Issue to to invest in Digital
Outsourcing Private Limited by way of providing loans and/or through purchase/subscription of an
equity interest therein for purchase of set-top boxes, digital head end equipments and other accessories
. The following sets forth the break-up of the details of such capital expenditure, based on the
quotations from above mentioned suppliers:
Item Description Qty Rate/ unit ( Value Date of
Rs ) (Rs quotation
million)
STB Set Top Box 387,000 1515 586.30 7-Dec-09
MPEG 2 ENCODER Analog to Digital 90 154536 13.9 25-Jan-10
Conversion
QAM Modulator Modulation of Digital 17 360114 6.1 25-Jan-10
Signal
Digital Content To Manage the encryption, 1 7,422,863 7.4 25-Jan-10
management hardware and transmission and
software with accessories compression of digital
signals
Analog Modulator RF Signal Modulation 86 26959 2.3 30-Jan-10
Premultiplexer Multiplexing of Digital 5 439920 2.2 25-Feb-08
signal
Encoder with built in Analog to digital signal 3 736020 2.2 13-Mar-10
Multiplexer conversion, compression &
multiplexing
Network Management Server for providing 1 2,780,443 2.8 20-Feb-10
hardware and software service information
Digital signal Receiver Reception of Digital 40 46192 1.8 25-Jan-10
signals
Connector Card Digital Satellite receiving 24 32372 0.8 20-Feb-10
accessory
Descrambler Digital Signal 12 56400 0.7 25-Jan-10
Descrambling
C-band Band Pass Filter - Interference blocking 15 28350 0.4 12-Mar-10
TI Filter
ASI Coprocessor Card Digital Headend Accessory 2 153972 0.3 20-Feb-10
12 feet dish antenna Signal reception from 6 27187 0.2 12-Mar-10
Satellite
Active Splitter Satellite signal splitter 4 38352 0.2 20-Feb-10
Modular Rack Rack Management 3 55554 0.2 25-Jan-10

Rack Power supply Power supply unit 3 67342 0.2 25-Jan-10


Ethernet Switch 24 ports Networking switch 15 10500 0.2 18-Mar-10
16 feet dish antenna Signal reception from 3 48982 0.1 12-Mar-10
Satellite
LNBC Noise Filtering & signal 18 6075 0.1 12-Mar-10
receiving from Dishes
Connector Card Accessory for Digital Head 12 6556 0.1 20-Feb-10
end
Total 628.50

Our Company also intends to invest in Digital Outsourcing Private Limited by way of providing loans
and/or through purchase/subscription of an equity interest therein for an amount of Rs. 221.50 million for
43
acquisition of new customers through acquisition of MSOs and LCOs.

We currently hold 36.24% of the equity share capital of Digital Outsourcing Private Limited as a strategic
investment. In continuation of our growth strategy we propose to acquire MSOs and LCOs either directly
or through Digital Outsourcing Private Limited, to the extent permitted under the applicable regulations.
Further, from the period beginning fiscal 2008 till date, Digital Outsourcing Private Limited acquired
interests in 5 MSOs and 9 LCOs. Acquisition of MSOs and LCOs provide the opportunity to expand the
areas of operation. Further, acquisition of LCOs enables to have the “last mile” access to the customer
and thereby enhance realisation.

The acquisition of MSOs and LCOs will be through equity investment or through an acquisition of their
assets and / or operations. Digital Outsourcing Private Limited constantly evaluates potential acquisitions
and its management makes the decision on such acquisitions and valuations based on amongst other
things, potential revenue realization, costs involved in the acquisition and the potential growth in
subscriber base as a result of such acquisition. However, as on the date of this Draft Red Herring
Prospectus, Digital Outsourcing Private Limited has not entered into any letter of intent, memorandum of
understanding or an agreement to acquire any MSO or LCO.

Our Company has executed a loan agreement dated March 22, 2010, whereby our Company has agreed to
provide an unsecured loan of upto Rs. 1,000 million to Digital Outsourcing Private Limited, at a rate of
interest which is equivalent to the State Bank of India prime lending rate plus 200 basis points, at any
given point of time, repayable within a period of 60 months, in 48 number of installments, payable
monthly, of principal outstanding and the interest which may have accrued thereon. As per the terms of
this loan agreement, the loan can be utilized by Digital Outsourcing Private Limited only for the purpose
of capital expenditure of its cable television service business and such other purposes as may be agreed to
in writing with our Company.

3. To meet expenses towards Working Capital

The working capital requirement of the Company is estimated to be Rs. 171 million. The working capital
requirement has been calculated on the basis of working capital requirement for FY 2011 considering
growth in activities of our Company.

(Rs. million)
Holding As on Holding Estimate
Particulars Level September Level for FY
(Days) 30, 2009 (Days) 2011
Debtors 54 77 45 85
Inventories 21 3 75 97
Loans, Advances and Others 254 150
Total Curent Assets (A) 334 332
Creditors 103 185 60 120
Advances and Deposits 122 70
Other Liabilities 77 21

Total Current Liabilities (B) 384 211

Net Working Capital (A-B) (50) 121


Additional working capital 171
requirement

Justification for holding period levels:

• Debtors holdings has been considered at 45 days revenue from the enterprise segment and the
post paid residential segment on the basis of the past trends and business situation
• Inventory holdings has been considered at 75 days of purchase of certain network equipments
based on their lead times for procurement and the criticality of the same to connect subscribers
on time so as to avoid backlog of connections and customer dissatisfaction.
44
• Creditors are considered at 30 days holding on the basis of standard terms
• Deposits from customers are considered at a specific rate on the basis of equipments already
deployed and reduced by churns

Our Company proposes to meet the working capital requirement to the extent of Rs. 171.00 million from
the Net Proceeds of the Issue. Our working capital requirements have been calculated based on
management estimates and have not been appraised by any bank or financial institution.

4. Repayment of outstanding loan

We have obtained loans from CISCO Systems Capital India Private Limited (“CISCO”) pursuant to loan
agreements whereby CISCO has sanctioned a total loan amount of Rs. 184.30 million for purchase of
equipments. Pursuant to these loan agreements, our Company had availed of loan amounting to Rs.
184.30 million from CISCO. As on March 23, 2010, we have outstanding loan aggregating Rs. 60.28
million (including interest) which we propose to prepay to the extent of Rs. 48.40 million, which is the
principal amount of the loans outstanding, out of the Net proceeds of the Issue, which will enable us to
bring down our interest costs.

The details of our current outstanding loan are detailed in the table below:

Particulars Particulars of the loan from CISCO


Nature of Loan Financial lease and loan
Object of the Loan To enable purchase of equipments
Nature of Interest Charge Fixed
Sanction Amount Rs. 184.30 million
(Rs. In Million)
Amount outstanding as on Rs. 60.28 million
March 23, 2010 (including
interest)
Rate of Interest on the Loan 20.78%
Security First charge on the equipments included in the objects of the loan
Prepayment Penalty Nil

As certified by GAR & Associates, Chartered Accountants, vide their certificate dated March 24, 2010,
our Company had utilised the loan amounts for procurement of equipments.

5. Fund expenditure for general corporate purposes.

Our management, in accordance with the policies of the Board of Directors, will have the flexibility in
utilizing any surplus amounts from the proceeds of the Issue for general corporate purposes including
meeting future growth requirements, repayment of existing loans, working capital and other general
corporate purposes.

In case of variations in the actual utilization of funds designated for the purposes set forth above,
increased fund requirements for a particular purpose may be financed by surplus funds, if any which are
not applied to the other purposes set out above.

Issue Related Expenses

The Issue related expenses inter alia includes, underwriting and management fees, selling commissions,
printing and distribution expenses, legal fees, advertisement expenses and registrar and depository
expenses and listing fees.

The estimated Issue expenses are as follows:

As a % of
Expense (Rs. Total As a % of
Activity million) (1) Issue Expenses Issue Size

Lead Management fees, brokerage and selling [●] [●] [●]


45
As a % of
Expense (Rs. Total As a % of
Activity million) (1) Issue Expenses Issue Size
commission and underwriting commission
Fees payable to the Registrar to the Issue [●] [●] [●]
Fees payable to Escrow Collection Banks [●] [●] [●]
Printing and Stationery [●] [●] [●]
SCSB commission [●] [●] [●]
IPO Grading expenses [●] [●] [●]
Other (Legal fees, auditors fess, advertising and [●] [●] [●]
marketing expenses etc.)
Total estimated Issue expenses [●] [●] [●]
________
(1) Will be updated in the Prospects, post the completion of the Issue

Funds Deployed

As on February 28, 2010, we have not deployed any funds towards the Objects of the Issue as stated
under this section, in this Draft Red Herring Prospectus.

Appraisal Report

None of the projects for which the Net Proceeds of the Issue will be utilised have been financially
appraised. The estimates of the costs of objects mentioned above are based on internal estimates of our
Company and quotes received from vendors of equipments.

Interim use of funds

The management of our Company, in accordance with the policies established by our Board from time to
time, will have flexibility in deploying the Net Proceeds of the Issue. Pending utilization for the purposes
described above, we intend to invest the funds in high quality interest/dividend bearing liquid instruments
including investments in mutual funds, deposits with banks and other investment grade interest bearing
securities. Such investments would be in accordance with investment policies approved by our Board
from time to time. Our Company confirms that pending utilization of the Net Proceeds of the Issue it shall
not use the funds for any investments in the equity markets.
Monitoring Utilization of Funds

As this is an Issue for less than Rs. 5,000 million, there is no need for an appointment of a monitoring
agency.

Our Board will monitor the utilization of the Net Proceeds of the Issue, through its Audit Committee. We
will disclose the details of the utilization of the Issue proceeds, including interim use, under a separate
head in our financial statements until FY 2012, specifying the purpose for which the Net Proceeds of the
Issue have been utilization as per the disclosure requirements of our listing agreements with the Stock
Exchanges and in particular clause 49 of the Listing Agreement. As per the requirements of clause 49 of
the Listing Agreement, we will disclose to the Audit Committee the uses/applications of funds on a
quarterly basis as part of our quarterly declaration of results.

Further, on an annual basis, we shall prepare a statement of funds utilized for purposes other than those
stated in this Draft Red Herring Prospectus and place it before the Audit Committee. The said disclosure
shall be made until such time that the money raised through the Issue has been fully spent. The statement
shall be certified by Auditors. Further, we will furnish to the Stock Exchanges on a quarterly basis, a
statement indicating material deviations, if any, in the use of proceeds from the objects stated in this Draft
Red Herring Prospectus.

No part of the proceeds from the Net Issue will be paid by us as consideration to our Promoters, our
Directors, Group Companies, associates or key managerial employees, except in the normal course of our
business.

46
BASIS FOR ISSUE PRICE

The Issue Price will be determined by the Company in consultation with the BRLM on the basis of
assessment of market demand for the Equity Shares through the Book Building Process. The face value of
the Equity Shares is Rs. 10 each, and the Issue Price is [●] times the face value at the lower end of the
Price Band and [●] times the face value at the higher end of the Price Band. The financial data presented
in this section are based on the Company‘s restated financial statements. Investors should also refer to the
sections “Risk Factors” and “Financial Information” on pages xiv and 129, respectively, to get a more
informed view before making the investment decision.

Qualitative Factors

Some of the qualitative factors which form the basis for computing the price are:

• One of the leading Cable Broadband service providers in India with an extensive broadband
cable network infrastructure in key markets
• Advanced HFC cable network infrastructure capable of supporting broadband internet, cable
television and voice communication
• Billing systems and processes that enable convergence
• Quality product and service delivery
• Industry-experienced management team

Quantitative Factors

1. Earnings Per Share (EPS)

Period Basic EPS (Rs.) Diluted EPS (Rs.) Weightage


Year ended March 31, 2009 (0.41) (0.41) 3
Year ended March 31, 2008 (2.24) (2.24) 2
Year ended March 31, 2007 (3.43) (3.43) 1
Weighted Average (3.05) (3.05)
Six months ended (0.39) (0.39)
September 30, 2009 (not
annualized)
Note:
The earning per share has been computed by dividing net profit, as restated, after tax and after excluding
extra ordinary items attributable to equity shareholders by weighted average number of Equity Shares
outstanding during the year. Weighted average number of Equity Shares has been computed as per
Accounting Standard -20 “Earning per Share” issued by Institute of Chartered Accountants of India. On
March 30, 2010, the number of outstanding Equity Shares of the Company stands at 241,549,948.

2. Price to Earnings (P/E) ratio in relation to Issue Price of Rs. [●]

a. Based on Basic EPS of Rs. (0.39) as per the restated financial statements of our Company for the
year ended March 31, 2009, the P/E ratio is [●].
b. Based on the Diluted EPS of Rs. (0.39) as per restated financial statements of our Company for the
year ended March 31, 2009, the P/E ratio is [●].
c. Based on the weighted average Basic EPS of Rs. (3.05), as per restated financial statements of our
Company, the P/E ratio is [●].
d. Based on the weighted average Diluted EPS Rs. (3.05), as per restated financial statements of our
Company the P/E ratio is [●].

e. Industry P/E#

(i) Highest: 106.6


(ii) Lowest: 14.7
(iii) Average: 27.3
47
#
Source: Capital Market Volume XXV/02; 22 March 2010 - 4 April 2010; 23/03/10
Industry Classification: Entertainment / Electronic Media Software

3. Return on Net Worth

Period Return on Net Worth Weightage


(%)
Year ended March 31, 2009 (6.85) 3
Year ended March 31, 2008 (15.07) 2
Year ended March 31, 2007 (12.64) 1
Weighted Average (21.11)

For the six months period ending September 30, 2009 (not annualised): (4.05) %

Note: Net worth has been computed by aggregating share capital and reserves and surplus as per our
audited restated financial statements.

4. Minimum Return on Increased Net Worth required to maintain pre-Issue earnings per share
(“EPS”) for fiscal 2009.

The minimum return on increased net worth required to maintain pre-Issue Basic EPS of Rs. [●].
The minimum return on increased net worth required to maintain pre-Issue Diluted EPS of Rs. [●]:

Based on restated financial statements of our Company:

a. At the Floor Price – [●]%

b. At the Cap Price – [●]%

5. Net Asset Value per Equity Share

a. As of March 31, 2009, as per our restated financial statements is Rs. 10.08

b. As of September 30, 2009, as per our restated financial statements is Rs. 9.73

• NAV per Equity Share after the Issue is Rs. [●]

• Issue Price per Equity Share is Rs. [●]*

*Issue Price per Equity Share will be determined on conclusion of book building process.

#Net Asset Value per Equity Share represents Net Worth at the end of the year / period, as restated
divided by the number of Equity Shares outstanding at the end of the period/ year.

6. Comparison of Accounting Ratios

EPS (Rs.) P/E Return on Net Book Value/


Worth (%) Share
You Broadband & Cable India Ltd. (0.41) [●] (6.85) 10.08
Hathway Cable NM NM NM 69.5
#
Source: Capital Market Volume XXV/02; 22 March 2010 - 4 April 2010; 23/03/10
Industry Classification: Entertainment / Electronic Media Software

Note: EPS, RONW and NAV based on March 31, 2009 and P/E based on trailing twelve months and
market data

48
The peer group above has been determined on the basis of listed public companies comparable in size to
our Company whose business portfolio is comparable with that of our business. The Issue Price of Rs. [●]
is determined by the Company, in consultation with the BRLMs, on the basis of assessment of market
demand for the Equity Shares through the Book Building Process and is justified based on the above
accounting ratios. See the section titled “Risk Factors”, “Our Business” and “Financial Information” on
pages xiv, 76 and 129 to have a more informed view.

49
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO
THE COMPANY AND ITS SHAREHOLDERS

The tax benefits listed below are the possible benefits available under the current tax laws in India.
Several of these benefits are dependent on the Company or its Shareholders fulfilling the conditions
prescribed under the relevant tax laws. Hence, the ability of the Company or its Shareholders to
derive the tax benefits is dependent upon fulfilling such conditions, which based on business
imperatives it faces in the future, it may not choose to fulfill.

You Broadband & Cable India Limited


(formerly You Telecom India Private Limited)
Plot No 54, Marol Co-operative Industrial Estate,
Makwana, Andheri (E),
Mumbai – 400 059
India.

Dear Sirs

Statement of Possible Tax Benefits available to the Company and its shareholders
We report that the enclosed statement states the possible tax benefits available to the Company and to the
shareholders of the Company under the Income-tax Act, 1961 and Wealth Tax Act, 1957, presently in
force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the
conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or
its shareholders to derive the tax benefits is dependent upon their fulfilling such conditions, which based
on business imperatives the Company faces in the future, the Company may or may not choose to fulfill.

The benefits discussed in the enclosed annexure are not exhaustive. This statement is only intended to
provide general information to the investors and is neither designed nor intended to be a substitute for
professional tax advice. In view of the individual nature of the tax consequences and the changing tax
laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax
implications arising out of their participation in the issue

We do not express any opinion or provide any assurance as to whether:

(i) the Company or its shareholders will continue to obtain these benefits in the future; or

(ii) the conditions prescribed for availing the benefits have been / would be met with.

The contents of the enclosed statement are based on information, explanations and representations
obtained from the Company and on the basis of their understanding of the business activities and
operations of the Company.

For B S R & Associates


Chartered Accountants

Bhavesh Dhupelia
Membership No: 042070
Place: Mumbai
Date: March 22, 2010

50
ANNEXURE

Statement of general direct tax benefits available to the Company and the shareholders

I. Tax Benefits available to the Company under the Income-tax Act, 1961

General Tax Benefits

1. Under section 10(34) of the Income-tax Act, 1s961 (“the IT Act”), any income by way of
dividends referred to in Section 115-O (i.e. dividends declared (whether interim or final),
distributed or paid on or after April 1, 2003 by domestic companies) received on the shares of any
company is exempt from tax in the hands of recipient. However, the expenses incurred for earning
such exempt dividend will not be allowed under Section 14A of the IT Act read with Rule 8D of
the Income-tax Rules, 1962 (“IT Rules”).

2. The Company is required to pay a Dividend Distribution Tax (“DDT”) currently at the rate of 15%
percent (plus applicable surcharge and education cess) on the total amount distributed or declared
or paid as dividend.

3. The short-term capital gains (as defined in section 2(42A) of the IT Act) accruing to the Company
on sale of shares in a transaction carried out through a recognized stock exchange in India, and
where such transaction is chargeable to securities transaction tax (“STT”), tax will be chargeable at
15 percent (plus applicable surcharge* and education cess) as per provisions of Section 111A of the
IT Act. Further, no deduction under Chapter VI-A of the IT Act would be allowed from such short
term capital gains subjected to tax under Section 111A. In other cases, where the transaction is not
subjected to STT, the short term capital gains would be taxable at the normal corporate tax rate as a
part of the total income.

4. The long-term capital gains (as defined in section 2(29B) of the IT Act) accruing to the Company
on sale of shares in a transaction carried out through a recognized stock exchange in India, and
where such transaction is chargeable to STT, is exempt from tax as per provisions of Section
10(38) of the IT Act.

5. As per the provisions of Section 112 of the IT Act, long term gains accruing to the Company from
the transfer of shares otherwise than as mentioned in point 3 above, is chargeable to tax at 10
percent (plus applicable surcharge* and education cess) after deducting from the sale proceeds the
cost of acquisition without indexation. However, the shareholders claiming the benefit of
indexation would be subject to tax at 20 percent (plus applicable surcharge* and education cess) on
the long term gains. Further, no deduction under Chapter VI-A of the IT Act would be allowed
from such long term capital gains subjected to tax under Section 112 of the IT Act.

6. Under Section 10(35) of the IT Act, any income received from units of a Mutual Fund specified
under Section 10(23D) of the IT Act, is exempt from tax.

7. Under Section 32 of the IT Act, the Company can claim depreciation allowance at the prescribed
rates on tangible assets such as building, plant and machinery, furniture and fixtures, etc. and
intangible assets such as patent, trademark, copyright, know-how, licenses, etc. if acquired after 31
March 1998. Unabsorbed depreciation if any, can be carried forward and set off against any source
of income in subsequent years in accordance with the provisions of the IT Act.

8. Under Section 72 of the IT Act, unabsorbed business losses, if any, for any year can be carried
forward and set off against business profits for subsequent years (up to 8 years) subject to the
conditions specified therein.

9. Under Section 74 of the IT Act, unabsorbed loss (if any) under the head “Capital gains”, for any
year can be carried forward and set off in the specified manner against the capital gains for
subsequent years (up to 8 years) subject to the conditions specified therein.

10. The filing of return of income within the time allowed under Section 139(1) of the IT Act is
mandatory for claiming the carry forward of the loss under Section 72(1) or Section 74(1) of the IT
Act
51
11. As per the provisions of Section 112 of the IT Act, long term gains accruing to the Company from
the transfer of shares, is chargeable to tax at 10 percent (plus applicable surcharge* and education
cess) after deducting from the sale proceeds the cost of acquisition without indexation. However,
the Company claiming benefit of indexation would be subject to tax at 20 percent (plus applicable
surcharge* and education cess) on the long term gains. Further, no deduction under Chapter VI-A
of the IT Act would be allowed to the Company from such long term capital gains subjected to tax
under Section 112 of the IT Act.

12. The Company is entitled to claim exemption in respect of tax on long term capital gains (other than
those exempt under Section 10(38) of the IT Act) under Section 54EC of the IT Act, if the amount
of capital gains is invested in certain specified bonds / securities within six months from the date of
transfer, subject to the fulfillment of the conditions specified therein. The maximum amount of
investment in the above bonds permissible on and after April 1, 2007 for claiming the exemption,
by any person in a financial year, is Rs. 5 million. However, according to Section 54EC(2) of the
IT Act, if the Company transfers or converts the notified bonds into money within a period of three
years from the date of their acquisition, the amount of capital gains exempted earlier would become
chargeable to tax as long term capital gains in the previous year in which such bonds are transferred
or otherwise converted into money.

13. The company is entitled to deduction under Section 80G of the IT Act in respect of amounts
contributed as donations to various charitable institutions and funds covered under that section,
subject to fulfillment of conditions specified therein.

14. Under Section 35D of the Act, the Company will be entitled to a deduction equal to 1/5th of the
expenditure incurred of the nature specified in the said section, including expenditure incurred on
present issue, such as under writing commission, brokerage and other charges, as specified in the
provision, by way of amortization over a period of 5 successive years, beginning with the previous
year in which the business commences, subject to the stipulated limits.

15. Under Section 35DD of the Act, the company will be entitled to a deduction equal to 1/5th of the
expenditure incurred in connection with amalgamation of an undertaking by way of amortization
over a period of 5 successive years, beginning with the previous year in which the amalgamation or
demerger takes place.

Special Tax Benefits

16. The company is eligible for deduction under section 80-IA(4)(ii) (any undertaking which has
started or starts providing telecommunication services, whether basic or cellular, including radio
paging, domestic satellite service, network of trunking, broadband network and internet services on
or after the 1st day of April, 1995, but on or before the 31st day of March,2005) for a period of 10
consecutive years in a block of 15 years starting from the commencement of business subject to the
fulfillment of the specified conditions.

* For the Assessment Year 2011-12 - Surcharge is applicable @ 7.5 percent if total income is in excess of INR
10,000,000 in the case of corporate tax payers, education cess of 3 percent.

II. Tax Benefits available to shareholders of the Company under the IT Act

A. Resident Shareholders

General Tax Benefits

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of
the parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500
per minor child whose income is so included.

2. Dividend (whether interim or final) declared, distributed or paid, as referred under Section 115-O
of the IT Act, by the Company is exempt in the hands of shareholders as per the provisions of
Section 10(34) of the IT Act. However, the expenses incurred for earning such exempt dividend
will not be allowed under Section 14A of the IT Act read with Rule 8D of the IT Rules. Further,
52
the credit of DDT paid by the Company will not be available to the resident shareholders of the
Company.

3. The characterization of the gains/losses, arising from sale of shares, as capital gains or business
income in the hands of shareholders would depend on the nature of holding and various other
factors.

4. The short-term capital gains (as defined in section 2(42A) of the IT Act) accruing to the
shareholders of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to securities
transaction tax (“STT”), tax will be chargeable at 15 percent (plus applicable surcharge* and
education cess) as per provisions of Section 111A of the IT Act. Further, no deduction under
Chapter VI-A of the IT Act would be allowed to a shareholder from such short term capital gains
subjected to tax under Section 111A. In other cases, where the transaction is not subjected to STT,
the short term capital gains would be taxable as a part of the total income and the tax payable
thereon would depend on the income tax rates applicable to the shareholders.

5. The long-term capital gains (as defined in section 2(29B) of the IT Act) accruing to the
shareholders of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT, is exempt
from tax as per provisions of Section 10(38) of the IT Act. In case the shareholder is a company
and the income is taxable under section 115JB of the IT Act then exemption on long term capital
gain would not be available.

6. As per the provisions of Section 112 of the IT Act, long term gains accruing to the shareholders of
the Company from the transfer of shares of the Company otherwise than as mentioned in point 5
above, is chargeable to tax at 10 percent (plus applicable surcharge* and education cess) after
deducting from the sale proceeds the cost of acquisition without indexation. However, the
shareholders claiming the benefit of indexation would be subject to tax at 20 percent (plus
applicable surcharge* and education cess) on the long term gains. Further, no deduction under
Chapter VI-A of the IT Act would be allowed to a shareholder from such long term capital gains
subjected to tax under Section 112 of the IT Act.

7. The shareholders are entitled to claim exemption in respect of tax on long term capital gains (other
than those exempt under Section 10(38) of the IT Act) under Section 54EC of the IT Act, if the
amount of capital gains is invested in certain specified bonds / securities within six months from
the date of transfer, subject to the fulfillment of the conditions specified therein. The maximum
amount of investment in the above bonds permissible on and after April 1, 2007 for claiming the
exemption, by any person in a financial year, is Rs. 5 million. However, according to Section
54EC(2) of the IT Act, if the shareholder transfers or converts the notified bonds into money within
a period of three years from the date of their acquisition, the amount of capital gains exempted
earlier would become chargeable to tax as long term capital gains in the previous year in which
such bonds are transferred or otherwise converted into money.

8. Shareholders who are individuals or Hindu undivided families can avail of an exemption in respect
of long term capital gain under Section 54F of the IT Act by utilization of the net sales
consideration arising from the sale of the Company’s share held for a period of more than 12
months (which is not exempt under Section 10(38)), for purchase / construction of a residential
house (“new asset”) within the specified time period and subject to the fulfillment of the conditions
specified therein which also includes conditions to be satisfied post acquisition of a new asset.

9. The filing of return of income within the time allowed under Section 139(1) of the IT Act is
mandatory for claiming the carry forward of the loss under Section 74(1) of the IT Act

10. In case the income of the Shareholder from transfer of shares is treated as business income then the
income would need to be computed under the head profit and gains from business / profession and
the provisions of the IT Act would apply accordingly. Further, the amount of STT paid by the
shareholder in respect of the taxable securities transactions entered into the course of his business
during the previous year would be eligible for deduction as per section 36(xv) of the IT Act.

* For the Assessment Year 2011-12 - Surcharge is applicable @ 7.5 percent if total income is in excess of INR
53
10,000,000 in the case of corporate tax payers, no surcharge for non-corporate taxpayers, education cess of 3
percent.

Special Tax Benefits

11. There are no special tax benefits available to the resident members.

B. Non Resident Shareholders

B.1 Non-resident shareholders– other than Foreign Institutional Investors and Non Resident
Indians

General Tax Benefits

1. Dividend (whether interim or final) declared, distributed or paid, as referred under Section 115-O
of the IT Act, by the Company is exempt in the hands of shareholders as per the provisions of
Section 10(34) of the IT Act. However, the expenses incurred for earning such exempt dividend
will not be allowed under Section 14A of the IT Act read with Rule 8D of the IT Rules. Further,
the credit of DDT paid by the Company to the non-resident shareholders of the Company will be
subject to the Double Taxation Avoidance Agreement (“DTAA”) between India and any specified
territory / country of residence of the non-resident shareholder and the local laws of the country of
residence of the non-resident shareholder

2. The characterization of the gains/losses, arising from sale of shares, as capital gains or business
income in the hands of shareholders would depend on the nature of holding and various other
factors.

3. The short-term capital gains (as defined in section 2(42A) of the IT Act) accruing to the
shareholder of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT, tax will be
chargeable at 15 percent (plus applicable surcharge* and education cess) as per provisions of
Section 111A of the IT Act. Further, no deduction under Chapter VI-A of the IT Act would be
allowed to a shareholder from such short term capital gains subjected to tax under Section 111A. In
other case, i.e. where the transaction is not subjected to STT, the short term capital gains would be
chargeable as a part of the total income and the tax payable thereon would depend on the income
tax rates applicable to the shareholders.

4. The long-term capital gains (as defined in section 2(29B) of the IT Act) accruing to the
shareholders of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT is exempt
from tax as per provisions of Section 10(38) of the IT Act. In case the shareholder is a company
having a Permanent Establishment (“PE”) in India and the income is taxable under section 115JB
of the IT Act then exemption on long term capital gain would not be available.

5. As per the provisions of Section 112 of the IT Act, long term gains accruing to the shareholders of
the Company, being non-residents, from the transfer of shares of the Company, otherwise than as
mentioned in point 4 above, are chargeable to tax at 20 percent (plus applicable surcharge* and
education cess) after deducting from the sale proceeds the cost of acquisition. Such non-resident
shareholders are allowed to adjust the cost of acquisition by the amount of foreign exchange rate
fluctuations in computing capital gains. The benefit of indexation would not be allowed to the non-
resident shareholders. As per the proviso to Section 112(1) of the IT Act, where the tax payable in
respect of any income arising on transfer of a long-term capital asset being listed securities etc.
exceeds 10 percent of the amount of capital gains before giving the effect to the provisions of the
second proviso to Section 48, then, such excess shall be ignored for the purpose of computing the
tax payable by the shareholder. Further, no deduction under Chapter VI-A of the IT Act would be
allowed to a shareholder from such long term capital gains subjected to tax under Section 112.

6. Under the provisions of Section 90(2) of the IT Act, if the provisions of the DTAA between India
and any specified territory / country of residence of the non-resident are more beneficial to the non-
resident, then the provisions of the DTAA shall be applicable provided the non-resident is the tax
resident of that country and fulfills the other condition specified in DTAA.
54
7. The shareholders are entitled to claim exemption in respect of tax on long term capital gains (other
than those exempt under Section 10(38) of the IT Act) under Section 54EC of the IT Act, if the
amount of capital gains is invested in certain specified bonds / securities within six months from
the date of transfer subject to the fulfillment of the conditions specified therein. The maximum
amount of investment in the above bonds permissible for claiming the exemption by any person in
a financial year is Rs. 5 million. However, according to Section 54EC(2) of the IT Act, if the
shareholder transfers or converts the notified bonds into money within a period of three years from
the date of their acquisition, the amount of capital gains exempted earlier would become chargeable
to tax as long term capital gains in the previous year in which such bonds are transferred or
otherwise converted into money.

8. Shareholders who are individuals can avail of an exemption in respect of long term capital gain
under Section 54F of the IT Act by utilization of the net sales consideration arising from the sale of
the Company’s share held for a period of more than 12 months (which is not exempt under Section
10(38)), for purchase / construction of a residential house (“new asset”) within the specified time
period and subject to the fulfillment of the conditions specified therein which also includes
conditions to be satisfied post acquisition of a new asset.

9. The filing of return of income within the time allowed under Section 139(1) of the IT Act is
mandatory for claiming the carry forward of the loss under Section 74(1).

10. In case the income of the Shareholder from transfer of shares is treated as business income then the
income would need to be computed under the head profit and gains from business / profession and
the provisions of the IT Act would apply accordingly. Further, the amount of STT paid by the
shareholder in respect of the taxable securities transactions entered into the course of his business
during the previous year would be eligible for deduction as per section 36(xv) of the IT Act.

* For the Assessment Year 2011-12 - Surcharge is applicable @ 7.5 percent if total income is in excess of INR
10,000,000 in the case of corporate tax payers, no surcharge for non-corporate taxpayers, education cess of 3
percent.

Special Tax Benefits

11. There are no special tax benefits available to the non- resident members.

B.2 Foreign Institutional Investors

General Tax Benefits

1. Dividend (whether interim or final) declared, distributed or paid, as referred under Section 115-O
of the IT Act, by the Company is exempt in the hands of shareholders as per the provisions of
Section 10(34) of the IT Act. However, the expenses incurred for earning such exempt dividend
will not be allowed under Section 14A of the IT Act read with Rule 8D of the IT Rules. Further, the
credit of DDT paid by the Company to the non-resident shareholders of the Company will be
subject to the DTAA between India and any specified territory / country of residence of the non-
resident shareholder and the local laws of the country of residence of the non-resident shareholder

2. The characterization of the gains/losses, arising from sale of shares, as capital gains or business
income in the hands of the shareholder would depend on the nature of holding and various other
factors.

3. The short-term capital gains (as defined in section 2(42A) of the IT Act) accruing to the
shareholders of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT, tax will be
chargeable at 15 percent (plus applicable surcharge* and education cess) as per provisions of
Section 115AD of the IT Act. In other case, i.e. where the transaction is not subjected to STT, as
per the provisions of Section 115AD of the IT Act, the short term capital gains would be
chargeable to tax at 30 percent (plus applicable surcharge* and education cess).

55
4. The long-term capital gains (as defined in section 2(29B) of the IT Act) accruing to the
shareholders of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT, is exempt
from tax as per provisions of Section 10(38). In case the shareholder is a company having a
Permanent Establishment (“PE”) in India and the income is taxable under section 115JB of the IT
Act then exemption on long term capital gain would not be available.

5. As per the provisions of Section 115AD of the IT Act, long term gains accruing to the shareholders
of the Company being Foreign Institutional Investors (“FIIs”) from the transfer of shares of the
Company listed on recognized stock exchanges, otherwise than as mentioned in point 4 above, are
chargeable to tax at 10 percent (plus applicable surcharge* and education cess). The benefit of
indexation would not be allowed to such shareholders. However, adjustment with respect to
fluctuation in foreign exchange rate would be available. Further, where the Gross Total Income
(“GTI”) of the shareholders includes any income on which tax has been paid as per special rates
provided under Section 115AD, then the GTI shall be reduced by the amount of such income and
deduction under chapter VIA shall be allowed in respect of reduced GTI.

6. The shareholders are entitled to claim exemption in respect of tax on long term capital gains (other
than those exempt under Section 10(38) of the IT Act) under Section 54EC of the IT Act, if the
amount of capital gains is invested in certain specified bonds /securities within six months from the
date of transfer subject to the fulfillment of the conditions specified therein. The maximum amount
of investment in the above bonds permissible for claiming the exemption by any person in a
financial year is Rs. 5 million. However, according to section 54EC(2) of the IT Act, if the
shareholder transfers or converts the notified bonds into money within a period of three years from
the date of their acquisition, the amount of capital gains exempted earlier would become chargeable
to tax as long term capital gains in the previous year in which such bonds are transferred or
otherwise converted into money.

7. Under the provisions of Section 90(2) of the IT Act, if the provisions of the DTAA between India
and any specified territory / country of residence of the non-resident are more beneficial to the non-
resident, then the provisions of the DTAA shall be applicable provided the non-resident is the tax
resident of that country and fulfills the other condition specified in DTAA.

8. The filing of return of income within the time allowed under Section 139(1) of the IT Act is
mandatory for claiming the carry forward of the loss under Section 74(1) of the IT Act.

9. In case the income of the Shareholder from transfer of shares is treated as business income then the
income would need to be computed under the head profit and gains from business / profession and
the provisions of the IT Act would apply accordingly. Further, the amount of STT paid by the
shareholder in respect of the taxable securities transactions entered into the course of his business
during the previous year would be eligible for deduction as per section 36(xv) of the IT Act.

* For the Assessment Year 2011-12 - Surcharge is applicable @ 7.5 percent if total income is in excess of INR
10,000,000 in the case of corporate tax payers, no surcharge for non-corporate taxpayers, education cess of 3
percent.

Special Tax Benefits

10. There are no special tax benefits available to the Foreign Institutional Investors.

B.3 Non-Resident Indians

General Tax Benefits

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of
the parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500
per minor child whose income is so included.

2. Dividend (whether interim or final) declared, distributed or paid, as referred under Section 115-O
of the IT Act, by the Company is exempt in the hands of shareholders as per the provisions of
56
Section 10(34) of the IT Act. However, the expenses incurred for earning such exempt dividend
will not be allowed under Section 14A of the IT Act read with Rule 8D of the IT Rules. Further, the
credit of DDT paid by the Company to the non-resident Indian shareholder of the Company will be
subject to the DTAA between India and any specified territory / country of residence of the non-
resident Indian shareholder and the local laws of the country of residence of the non-resident Indian
shareholder.

3. The characterization of the gains/losses, arising from sale of shares, as capital gains or business
income in the hands of shareholders would depend on the nature of holding and various other
factors.

4. The short-term capital gains (as defined in section 2(42A) of the IT Act) accruing to the
shareholder of the Company on sale of the Company’s shares in a transaction carried out through a
recognized stock exchange in India, and where such transaction is chargeable to STT, tax will be
chargeable at 15 percent (plus applicable surcharge* and education cess) as per provisions of
Section 111A of the IT Act. Further, no deduction under Chapter VI-A of the IT Act would be
allowed to a shareholder from such short term capital gains subjected to tax under Section 111A. In
other case, i.e. where the transaction is not subjected to STT, the short term capital gains would be
chargeable as a part of the total income and the tax payable thereon would depend on the income
tax rates applicable to the shareholders.

5. The long-term capital gains accruing to the shareholders of the Company on sale of the Company’s
shares in a transaction carried out through a recognized stock exchange in India, and where such
transaction is chargeable to STT is exempt from tax as per provisions of Section 10(38) of the IT
Act.

6. As per the provisions of Section 115E of the IT Act, long term capital gains accruing to the non-
resident Indian shareholders of the Company from the transfer of shares of the Company acquired
or purchased or subscribed in foreign currency is chargeable to tax at 10 percent (plus applicable
surcharge* and education cess).. The benefit of indexation would not be allowed to such
shareholders. Further as per Section 115D(2) of the IT Act, no deduction under Chapter VI-A of
the IT Act would be allowed to such shareholder from such long term capital gains subjected to tax
under Section 115E of the IT Act.

7. Under the provisions of Section 90(2) of the IT Act, if the provisions of the DTAA between India
and any specified territory / country of residence of the non-resident Indian are more beneficial to
the non-resident Indian, then the provisions of the DTAA shall be applicable provided the non-
resident Indian is the tax resident of that country and fulfills the other condition specified in DTAA.

8. The shareholders are entitled to claim exemption from capital gain (other than those exempt under
Section 10(38) of the IT Act) in respect of long term capital asset under Section 54EC of the IT
Act, if the amount of capital gains is invested in certain specified bonds / securities within six
months from the date of transfer, subject to the fulfillment of the conditions specified therein. The
maximum amount of investment in the above bonds permissible on and after April 1, 2007 for
claiming the exemption, by any person in a financial year, is Rs. 5 million. However, according to
Section 54EC(2) of the IT Act, if the shareholder transfers or converts the notified bonds into
money within a period of three years from the date of their acquisition, the amount of capital gains
exempted earlier would become chargeable to tax as long term capital gains in the previous year in
which such bonds are transferred or otherwise converted into money.

9. Exemption from capital gain (other than those exempt under Section 10(38) of the IT Act) in
respect of long term capital asset (other than residential house) can be availed under Section 54F of
the IT Act by the Shareholders by utilization of the net sales consideration arising from the sale of
the Company’s share held for a period of more than 12 months (which is not exempt under Section
10(38)), for purchase / construction of a residential house (“new asset”) within the specified time
period and subject to the fulfillment of the conditions specified therein which also includes
conditions to be satisfied post acquisition of a new asset.

10. Exemption in respect of long term capital gain (as defined in section 115C(d) of the IT Act) can be
availed under Section 115F of the IT Act by the non-resident Indian shareholders by investing the
net sales consideration arising from transfer of shares of the Company acquired or purchased or
57
subscribed in foreign currency, in any specified asset (as defined in section 115C(f) of the IT Act)
or in the savings certificates referred to in Section 10(4B) of the IT Act within the specified time
period and subject to the fulfillment of the conditions specified therein.

11. It is not necessary for a non-resident Indian Shareholder to furnish the return of income under
Section 139(1) of the IT Act if his total income consists only of the investment income (from a
foreign exchange asset) or income by way of long-term capital gain (from a foreign exchange asset)
and any tax deductible under the provisions of the IT Act have been so deducted. However, if the
total income of the non-resident shareholder consists of any other income then it is mandatory for
him to file the return of income within the time allowed under Section 139(1) for claiming the
carry forward of the loss under Section 74(1) of the IT Act

12. Under the provisions of Section 115G of the IT Act, it shall not be necessary for a non-resident
Indian to furnish his return of income if -
(a) his total income in respect of which he is assessable under this Act during the previous year
consisted only of investment income or income by way of long-term capital gains or both; and
(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from
such income.

13. As per Section 115H of the IT Act, in case the non-resident Indian shareholder becomes a resident
in India, the provisions of the Chapter XII-A can continue to apply in relation to investment made
when he was a non-resident Indian. Towards this, the non-resident Indian shareholder needs to
furnish a declaration in writing to the Assessing Officer along with his return of income.

14. A non-resident Indian Shareholder may elect not to be governed by the special provisions of the
Chapter XII-A of the IT Act and if he does so then the tax on total income will be charged in
accordance with the other provisions of the IT Act.

15. In case the income of the non-resident Indian shareholder from transfer of shares is treated as
business income then the income would need to be computed under the head profit and gains from
business / profession and the provisions of the IT Act would apply accordingly. Further, the
amount of STT paid by the shareholder in respect of the taxable securities transactions entered into
the course of his business during the previous year would be eligible for deduction as per section
36(xv) of the IT Act.

* For the Assessment Year 2011-12 - Surcharge is applicable @ 7.5 percent if total income is in excess of INR
10,000,000 in the case of corporate tax payers, no surcharge for non-corporate taxpayers, education cess of 3
percent.

Special Tax Benefits

16. There are no special tax benefits available to the Non- Resident Indians.

III. Tax Benefits available to the shareholders under the Wealth-Tax Act, 1957

Shares of company held by the shareholder will not be treated as an asset within the meaning of
Section 2(ea) of Wealth Tax Act, 1957. Hence, no Wealth Tax will be payable on the value of
shares held by the shareholder of the Company.

IV. Tax Benefits available to Mutual Funds

As per the provisions of Section 10(23D) of the IT Act, any income of Mutual Funds registered
under the SEBI Act, 1992 or regulations made thereunder, Mutual Funds set up by public sector
banks or public financial institutions or authorised by the Reserve Company of India would be
exempt from income tax, subject to the conditions as the Central Government may by notification
in the Official Gazette specify in this behalf. However, Mutual Funds will be liable to pay tax on
income distributed to unit holders under Section 115R of the IT Act.

V. Tax Deduction at Source

58
No income-tax is deductible at source from income by way of capital gains under the present
provisions of the IT Act, in case of residents. However, as per the provisions of section 195 of the
IT Act, any income by way of capital gains (except the long-term capital gains exempt under
section 10(38) of the IT Act), payable to non residents, may be covered by the provisions of
withholding tax, subject to the provisions of the relevant DTAA with the country of residence of
the non-resident provided the non-resident is the tax resident of that country and fulfills the other
condition specified in DTAA. Accordingly, income tax may have to be deducted at source in the
case of a non- resident shareholder at the rate under the domestic tax laws or under the DTAA,
whichever is beneficial to the non-resident unless a lower withholding tax certificate is obtained by
the non-resident from the Indian Tax authorities and the same is submitted to the Company.
Notes

a) All the above benefits are as per the Finance Act 2009 and Finance Bill 2010. Many of these
benefits are subject to the Company and the Shareholders complying with various conditions
specified in the relevant tax laws.

b) The above statement of possible tax benefits sets out the provisions of law in a summary manner
only and is not a complete analysis or list of all potential tax consequences. This is not an opinion
or assurance that the Company and/or shareholders will be eligible for any of the tax benefits.

c) In respect of non-residents, the tax rates and the consequent taxation, mentioned in this section
shall be further subject to any benefits available under the, if any, between the Government of India
and the Government of any specified territory / country in which the non-resident has fiscal
domicile provided the non-resident is the tax resident of that country and fulfills the other condition
specified in DTAA;

d) The stated benefits will be available only to the sole / first named holder in case the share is held by
joint holders.

59
SECTION IV: ABOUT OUR COMPANY

INDUSTRY OVERVIEW
Unless noted otherwise, the information in this section is derived from industry sources and government
publications. None of the Company, the BRLM and any other person connected with the Issue has
independently verified this information. Industry sources and publications generally state that the
information contained therein has been obtained from sources believed to be reliable, but their accuracy,
completeness and underlying assumptions are not guaranteed and their reliability cannot be assured.
Industry sources and publications are also prepared based on information as of specific dates and may
no longer be current or reflect current trends. Industry sources and publications may also base their
information on estimates, projections, forecasts and assumptions that may prove to be incorrect.
Accordingly, investors should not place undue reliance on this information.

The Indian Economy

Over the last few years, India has shown strong economic growth. Despite the global economic downturn
during fiscal 2009, overall gross domestic product (“GDP”) growth for the fiscal 2009 was approximately
7.1% as compared to 9.0% in fiscal 2008 following the downturn precipitated by the global financial
crisis (Source: The Annual Policy Statement of the Reserve Bank of India in April 2009). According to
the “Union Budget and Economic Survey 2007-2008” issued by the Ministry of Finance, Government of
India, the per capita income in India grew at an annual average rate of 7.2% during the period from fiscal
2004 to fiscal 2008.

India’s GDP is predicted to be on an uptrend, keep increasing, with a concomitant increase in income
levels across urban, semi- urban and rural households. These gains are predicted to lead to an increase in
the number of households in the consuming class. The chart below shows the distribution of various
income groups in India in 2005, compared to projections for 2015 and 2025:

Classification of Households by Income Groups

The demographic distribution, with the average consumer in the lower age brackets, appears to be
favorable for the country’s economic growth. Approximately 70% of the country’s population is below
35 years of age, while more than 50% is likely to be under the age of 30, even in 2015.

60
100%
15 16 18 19

80%
25 24
25 27
60% Above 50 years
30 - 50 years
27 27 15 - 30 years
27
40% 27
Below 15 years

20%
34 33 30
27

0%
2000 2005 2010 2015

Population Distribution Across Various Age Groups


Source: Euromonitor, FICCI – KPMG Report 2009

The Indian Internet Broadband Industry

Internet services in India were launched on August 15, 1995 through Videsh Sanchar Nigam Limited, a
state owned entity. Subsequently, in November 1998, the Government permitted private participants to
provide internet services. Internet services grew by more than 200% per year from March 1998 to March
2001 due largely to a supportive policy stance by the Government, coupled with the entry of a large
number of private participants. (Source: TRAI Broadband Paper)

The Indian broadband internet subscriber market comprised approximately 5.52 million subscribers in
2008, compared to 46,000 subscribers in 2003. The MPA Report 2009 projects that the number of
broadband internet households will increase to approximately 13.93 million by 2013. Expressed as a
percentage of total households, broadband internet subscription has relatively low penetration, with only
2% of total households in India with internet access. This percentage is projected to grow to 5% of total
Indian households by 2013. (Source: MPA Report 2009)

Total Broadband Internet Subscribers in India

The penetration of broadband in India is also low in comparison to as compared to other countries in
Asia, indicating a potential for significant growth.

Broadband Penetration in Asian countries

Country 2008 2013


Singapore 88% 99%
Hong Kong 82% 83%
Korea 82% 86%
Taiwan 64% 71%
Japan 62% 73%
Australia 61% 73%
New Zealand 49% 74%
Malaysia 22% 41%
China 19% 33%
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Country 2008 2013
Thailand 8% 14%
Vietnam 8% 26%
Philippines 4% 11%
India 2% 5%
Indonesia 2% 7%
Source: MPA Report 2009

Technological Platforms for Broadband

Some of the more popular technological platforms for broadband are described below:

• ADSL Broadband
• Cable Broadband Internet
• Fiber Network
• Wireless Network

ADSL Broadband

As of June 2009, 86.6% of India's broadband subscribers accessed the internet via asymmetric digital
subscriber line (ADSL). ADSL works alongside frequencies used for telephone calls on a single
connection, allowing users to download data and make voice calls simultaneously. The distinguishing
feature of ADSL is that the flow of data is greater in one direction than it is in the other, hence the term
‘asymmetric’. ADSL download speeds are far greater than upload speeds. The top speeds for downloads
are usually 8 Mbps, and the top speeds for uploads are usually below 1 Mbps. (Source: MPA Report
2009) In ADSL technology, download speeds also vary depending on the subscriber’s distance from the
DSLAM, which typically needs to be placed about at a distance of within a kilometer from the end
customer.

Cable Broadband Internet

A Cable Broadband company lays bi-directional hybrid fiber coaxial ("HFC") cables to deliver its
services to customers. This HFC network consists of a combination of fiber cable and coaxial cable that
delivers broadband services to the end customer. This high-capacity network is capable of delivering
internet as well as cable television services to customers.

In Cable Broadband operations, subscribers receive data sent over a bi-directional cable television
network. Under currently implemented technology and equipment in India, Cable Broadband connection
speeds can range up to 38 Mbps, which is faster than ADSL or dial up internet. Cable Broadband internet
is generally considered the most reliable of internet connections, since transmission is through fiber-optic
material and coaxial cables (rather than a combination of fiber and ordinary twisted pair copper wires).
Coaxial cables are considered more suitable for high-speed data transfers, such as for cable television,
which require multiple channel delivery. In addition, coaxial cables are robust and can be laid out over
longer distances in an outdoor environment. In comparison, ADSL service runs broadband on twisted pair
cables. These cables are optimized to carry single-channel voice traffic, which is typically low
bandwidth.

Due to the ability of the operator to bundle multiple products, such as television, telephone and internet
access, in a single package, such bundled services can be offered at lower cost to the customer. It is
estimated that these benefits of Cable Broadband internet will drive its growth in India, with the MPA
Report 2009 predicting that the number of Cable Broadband subscribers will increase to approximately
2.30 million in 2013, representing 16.5% of all Indian broadband internet subscribers, compared to 11%
in 2008. (Source: MPA Report 2009)

According to the MPA Report 2009, the total revenue in 2008 from Cable Broadband subscriptions in
India was US$42.0 million, up from US$7.8 million in 2003. The MPA Report 2009 estimates that Cable
Broadband subscription revenues will reach US$149.5 million in 2013, reflecting a significant increase in
Cable Broadband subscriptions through 2013.

62
Total Cable Broadband Internet Subscribers in India

A year-on-year growth chart of the broadband internet market from 2005 till 2009 and its projected
growth until 2018 is shown below:

Broadband Internet Growth Potential

Broadband Internet
Y/E Dec 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Broadband internet subs (000) 903 2,211 2,963 5,521 7,248 8,771 10,327 11,939 13,925 15,947 17,649 18,943 19,895 20,435
Cable (000) 191 297 398 623 854 1,103 1,454 1,859 2,295 2,746 3,155 3,507 3,809 4,091
ADSL (000) 712 1,898 2,513 4,711 5,629 6,021 6,297 6,553 6,752 6,910 7,011 7,086 7,101 7,120
FTTx (000) 16 52 118 625 1,421 2,023 2,526 2,855 3,248 3,501 3,649 3,753 3,753
Wireless (000) 69 140 226 553 1,001 2,023 3,043 3,982 4,701 5,235 5,471
%Change % 692% 145% 34% 86% 31% 21% 18% 16% 17% 15% 11% 7% 5% 3%
(Source: MPA Report, 2009)

Fiber-Based Ethernet Network

Fiber optic cable uses lasers or light emitting diodes (LEDs) to transmit pulses of light through fiber
cable. Fiber optic cable transmits data in light form and can carry more data over longer distances. A
fiber-based network uses fiber cable up to the curb to transmit signals in light form, after which it is
reconverted to electrical data signals and carried over CAT5 cables to end customers. The network is
managed through switches and routers placed at multiple points throughout the network.

Unless there is a customer end device, such as a cable or DSL modem, which separates the customer’s
PCs from the network, such networks are regarded as less secure. Computer machines on such a shared
network are more vulnerable to hacking and data theft. To increase data security, a customer must either
be connected on a single fiber strand up to the ISP data center or high end routers must be used both at
the central data center as well at each distribution point to limit access and isolate the customers’
computers.

Wireless Network

Wireless technologies usually provide wider broadband access solutions in areas with limited
communications infrastructure. Wireless technology is suitable for harsh landscapes and thinly populated
areas, but can also be deployed to provide specialized services in urban areas. Amongst the various
technologies available for broadband, wireless service enjoys the advantage of ease of installation,
operation and maintenance, flexibility for service providers, and convenience on the part of end users.
Moreover, wireless technology is suitable in areas where copper loop installation is not wide-spread, such
as in rural areas.

Therefore, wireless technology could present an ideal solution for widespread last mile coverage through
a combination of different technologies, such as WiMAX, WiFi and 3G. For the deployment of any
wireless technology, suitable and sufficient spectrum availability at a cost-effective investment and its
efficient utilization is a pre-requisite. Presently, wireless internet is available through GSM and CDMA
networks (Source: TRAI Recommendations on Growth of Broadband 2007).

Similar to other wireless services, wireless broadband also requires higher amounts of spectrum to
accommodate increased usage and a growing customer base. The popular platforms for delivering
broadband are ADSL and Cable Broadband internet. An estimated 4.71 million, or 85.3% of all of
broadband internet subscribers, accessed the internet via ADSL through the telephone network in India in

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2008 (Source: MPA Report, 2009), with a further 11% access through Cable Broadband. However, Cable
Broadband has been hampered by the availability of bi-directional cable networks. These are being built
as cable networks and upgraded by various companies.

Trends in Broadband Access

Consumer behavior for internet access has evolved over the years. When internet access became available
in India in 1995, a majority of users accessed the internet through dial-up connections. The websites
accessed were simple text pages that used low bandwidth. At the time, the internet was used primarily as
a tool to obtain information easily and to facilitate communication through applications such as email.

The proliferation and popularity of internet applications has brought about a surge in internet usage. The
internet is commonly used for email communication with large attachments, while narrow band e-
commerce applications, such as online bill payment facilities, are also gaining in popularity. In
conjunction, the internet has emerged as source for personal entertainment. New usage categories are
also emerging, such as social networking sites, for example, www.facebook.com, and file-sharing sites,
such as www.youtube.com. Such sites require large bandwidth consumption at the consumer level.

The resulting steep rise in internet traffic has created a growing requirement for internet service that is
“always on”, while capable of handing high throughputs levels. The cable TV modem infrastructure has
the capability of delivering higher speeds to consumers as compared to a DSL service, where the speeds
to a consumer are dependent on the distance of the customer from the DSLAM. Cable TV infrastructure
is built with fiber and coaxial cable meant for carriage of television channels, since television channels
require higher bandwidth. Once interactivity is built into this infrastructure by making it two-way, the
same high capacity infrastructure can be used for the delivery of broadband internet.

The Indian Entertainment and Media Industry

The Indian entertainment and media industry which, according to the FICCI-KPMG Report 2009,
comprises television, film, radio, print, music, internet, animation, gaming and outdoor media, has been
one of the fastest-growing industries in India over the last few years, with a growth rate of 15% between
2006 and 2008. In 2008, the Indian entertainment and media industry recorded growth of 12.3% over the
previous year, from an estimated Rs. 520 billion in 2007 to Rs. 584 billion in 2008. The FICCI-KPMG
Report 2009 states that the key factors driving the growth of the industry have been deregulation,
regionalization of content, availability of organized funding, digitization, convergence of platforms,
creation of niche content, growing global demand for Indian content and a favorable socio-economic
environment. The total market size for India’s entertainment and media industry is projected to grow at
12.5% per year from Rs. 584 billion in 2008 to a total of Rs. 1.05 trillion in 2013. The following table
sets forth the historic and projected revenue of India’s entertainment and media industry as a whole and
for the various segments of this industry for the period 2005 through 2013 is as follows:

64
India’s Television Industry

As of the end of 2008, 123 million households in India had television sets, with 86 million of those
households being cable and satellite (“C&S”) households and 37 million of those households being non-
cable and satellite (“Non-C&S”) households with access to terrestrial television. The number of
households in India owning television sets increased by 15 million between 2005 and 2008, registering a
growth of 13.0%. Rapid urbanisation and an increase in disposable income have accelerated the addition
of new viewers thus driving up the viewership numbers.

The Indian television industry comprises two main categories:


• Broadcasters of television channels; and
• Distributors of television channels.

In addition, there are television content aggregators who bundle and create bouquets of television
channels and sell these bouquets to MSOs.

Television Broadcast Industry


The Indian television broadcast industry began in 1959 when Doordarshan, a Government-owned
channel, commenced operations. With the advent of the first Gulf war in 1990, satellite channels, such as
CNN and BBC, began beaming content in India through satellites. This was carried into homes via co-
axial cables through the entrepreneurial initiatives of small independent local area businessmen. In 1992,
the Government authorized the licensing of privately-owned cable and satellite television channels. The
number of channels has grown from two in 1992 to approximately 120 in 2003 and to 485 as of the end of
2009. This is also illustrated in the table shown below.
A table showing the number of channels that have been granted downlink permission follows:

2005 2006 2007 2008 2009


No of channels granted
downlink permission 15 39 74 160 76
Cumulative 136 175 249 409 485
Source: Ministry of Information & Broadcasting website

Television Distribution Industry

India’s television distribution industry can be divided into three main categories:
• Terrestrial television.
• DTH
• Cable television

In addition, the other television distribution technologies that have emerged in India are IPTV and head-
end in the sky ("HITS").

Terrestrial Television

Terrestrial television is a term that describes modes of television broadcasting that do not involve satellite
or cable transmission. Prasar Bharti, the Broadcasting Corporation of India, which is owned by the
Government, is the only terrestrial television broadcaster in India. It operates a network of free to air
channels in Hindi and several other regional languages under the umbrella brand of “Doordarshan”.
Terrestrial television enjoys greater penetration in rural areas where cable and satellite television are less
prevalent.

Competition to Doordarshan started in the early 1990s due to the growth of cable TV. The number of
non-C&S households (i.e., households only receiving terrestrial television) was 46 million in 2005, which
decreased to 37 million in 2008, and is projected to further decrease to 23 million in 2013.

DTH Satellite Television

A DTH service provider has a digital head-end to receive and encode the content of broadcast channels.
The DTH provider receives content, encodes and re-encrypts the signals before retransmitting the same
65
on satellite transponders. In a DTH service, a small dish antenna and a set top box ("STB") is installed at
the viewer’s premises, which is capable of directly receiving and unscrambling television signals from the
service provider.

DTH service has the advantage of wide reach. A DTH service may be offered to all customers within the
footprint of the transmitting satellite. A potential customer of a DTH service only needs to install a dish
antenna and an STB in his home. The DTH dish receives the signals from the satellite and connects to the
STB, which in turn descrambles and decodes the channels and displays it to the customers’ television
sets. In effect, in a DTH system, the HFC of the cable TV network is replaced by a satellite transponder
and a Dish antenna at the customer premises. However, the DTH network operates like a one way cable
plant, with dishes in the customer premises only receiving signals from the head end but not transmitting
anything back. Hence, a DTH operation cannot offer interactive services without the help of a third party
telecommunications network, such as a mobile, wireless or a telephony network.

The following chart sets forth the historic and projected number of pay DTH satellite television
households in India for the period 2005 through 2013:

The Indian Cable Television Industry

India’s cable television industry has grown rapidly since its inception almost twenty years ago. Cable
television is now established as a mass medium for entertainment and information, available in more than
80 million consumer households across India. This represents 64 per cent of television-owning homes in
the country.

Global Cable Television Industry Comparison

Compared to cable industry in the United States and Europe, cable TV in India is still at a nascent stage.
Cable has developed strongly in Europe and the United States over the last decade, even after reaching
high penetration levels by 2003. The conversion of subscribers from analog to digital services and the
introduction of broadband and interactive services was a key driver enabling this growth. Digitization
helped by adding subscriber addressability and opening a window for sale of additional services and
content. This was also a period when the cable industry migrated from being a single service provider to a
multi service provider. Most cable companies in the US and Europe now offer their customers a host of
services spread across the three core services of cable television, broadband access, and digital cable
telephony. This has helped to expand the subscriber base while growing revenues.

This digital transition and growth in the number of services offered to the customers that fueled the
growth in developed markets over the last decade has yet to take place in India, evidenced by the
comparatively small number of digital subscribers and low broadband penetration. This uniquely
positions Indian cable television companies to take advantage of growth in (a) the subscriber base; (b) the
introduction of broadband services; (c) the addition of new services and (d) the evolution of new value-
added services.

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Cable TV Subscribers and Penetration, Leading Global Markets (December 31, 2008)

Cable television distribution networks currently deliver television channels largely in the analog mode to
subscribers. The following chart sets forth the historic and projected number of cable households in India
as a whole and for the analog and digital segments for the period 2005 through 2013 in millions:

As of December 31, 2008, the Indian cable TV industry generated an approximate turnover of Rs. 230
billion: Rs. 151 billion derived from the distribution of television content over analogue cable networks;
Rs. 4 billion from the distribution of television programming over addressable digital cable networks; and
Rs. 75 billion from cable television advertising sales. (Source: Media Partners Asia, Asia Pacific Pay-TV
& Broadband Markets 2009) In recent years, the cable industry has added approximately 6 to 7 million
new TV subscribers per annum. (Source: Media Partners Asia, Asia Pacific Pay-TV & Broadband
Markets 2009)

Competition from emerging digital direct-to-home or “DTH” satellite pay-TV networks, which have
grown in scale over the past five years and had more than 11 million subscribers at the end of 2008, is
another key trend. Concurrently, there is increasing consumer demand for more entertainment and
information services from television distribution networks and communications platforms. To benefit
from this demand upswing, incumbent cable operators are investing to upgrade existing distribution
infrastructure and technology by quickening the deployment of digital set-top boxes (“STBs”),
consolidating last mile networks.

Cable television broadcasting operates by uplinking a broadcaster’s channel to a satellite which then
provides a downlink signal to a particular region. The downlink signal is received by ground-based MSOs
through dish antennas. Using modulators, decoders, encoders, transmitters and amplifiers, the signal is
then distributed to end-user subscribers. In India, the MSOs usually connect to LCOs that provide the
“last mile” cable link to a subscriber’s home. For further information on MSOs and LCos, see the section
"Business" beginning on page 76 of this Draft Red Herring Prospectus.

One of the evils that beset the industry is the under-declaration by LCOs of subscriber revenue.
Historically, the LCOs have declared only a small part of their subscriber base and have not paid
subscription fees based on their full analog customer base. This has led to low levels of subscription
revenue.

67
The deployment of digital cable TV provides an addressable distribution framework for the industry,
which will bring about more equitable revenue sharing arrangements within the industry value chain,
lessen the incidence of piracy, as well as provide a platform for the growth of pay channel services and
value-added interactive services, including video-on-demand (“VOD”). This will lead to better average
revenue per customer or “ARPU” for the MSO.

Cable Television Operations

A cable TV service provider (MSO type) has the following main components:

Reception unit: This consists of a satellite dish farm that received signals of various broadcast channels
via satellite.

Processing unit: The signals from the dishes are processed to get individual channels in analog form.
Signals of a chosen set of analog channels are processed and combined to form a single analog stream. In
addition, the channels are also encoded so that they may be carried in a digital format. The digital content
may then be encrypted and combined with the analog signal

Transmission and distribution: This combined signal (analog plus digital) is then transmitted over a fiber
cable infrastructure. The fiber terminates into nodes that interface with Coaxial cable. Coaxial cables then
carry the signals further. They interconnect with the cables of the cable operator. The cable operator then
carries the signals into the customer premises (i.e. the last mile).

Reception (Customer Premises Equipment or "CPE"): In homes where only an analog service is
available, the operator taps the customer's cable to connect the home, no CPE is needed. In places with a
digital service, a STB needs to be in place to convert the signals into a format suitable for television
viewing. Since the signals were encrypted earlier, the STB also needs to have decryption keys so that the
signals send by the operators can be decrypted. The STB is provided by the MSO alone and also
controlled by the MSO. The MSO is able to program the STB which channels to decrypt.

Multi-System Operators

There are approximately 6,000 MSOs and head ends in India. The MSOs receive broadcasters’ signals
and transmit the broadcasted signals to the LCOs for a fee, which is typically based on the number of
subscribers (agreed between the MSO and LCO) receiving the signals through each LCO. However, the
lack of transparency has resulted in under-reporting of subscriber numbers. Consequently, where the
MSOs access their customers through LCOs, a significant portion of the subscription revenues is retained
by LCOs. The growth of digital cable, is expected to result in a higher percentage of subscription
revenues being payable to MSOs.

Placement and carriage fees are paid by broadcasters to MSOs for the carriage of their channels, with a
premium paid for carriage on a preferred frequency band. This is of particular relevance for analog cable
transmission, since only a limited number of channels can be transmitted; in this regard, the frequency
band where the channel is placed can significantly impact the viewing experience and channel
viewership. The placement and carriage fees market doubled from approximately Rs. 6.0 billion in 2007
to Rs. 12.0 billion in 2008, but was flat in 2009.

Local Cable Operators


There are over 60,000 LCOs in India. LCOs are typically local operators who operate in specific areas
within a town or city and with operations are restricted to that particular area. LCOs receive their signals
from MSOs for onward transmission to the subscribers. LCOs act as franchisees to MSOs, providing the
"last mile connection" to the MSOs. Therefore while LCO services the end customer, the signal being
provided to the subscribers is that of the MSO. For digital cable, LCOs necessarily have to provide to its
subscribers the set-top boxes provided by the MSOs.

For further information on MSOs and LCos, see the section "Business " beginning on page 76 of this
Draft Red Herring Prospectus.

Digital Cable

68
In digital cable television, the MSO downlinks the broadcasters' channels and converts them to a digital
form. He then re-transmits the signals to the ultimate subscriber through the last mile connection provided
by the LCOs. The STBs decrypt the signals, allowing the subscriber to view the channels. In 2003, the
Government introduced the Conditional Access System ("CAS") in limited parts of some cities as a
measure of implementing compulsory digital cable TV service.

Benefits of Digitisation

Better picture and sound quality: Digital cable television, with its DVD picture and sound quality,
provides an enhanced viewing experience compared to analog cable television.

Significantly more channels: Digital cable networks have significantly higher capacity to carry channels
than an analog cable network. This translates into a broader channel selection and caters to a wider
demographic compared to analog cable networks. Using the current technology and network design, the
maximum number of channels that can be carried on analog cable is 106. A digital cable service can cater
to over 500 channels.

Value-added services: Digital cable allows operators to provide subscribers with value-added services,
such as an electronic program guide, video-on-demand, pay-per view and interactive-TV services, which
provide multiple monetization opportunities for the MSO.

Prevents under-reporting of subscribers and unauthorized access Digitisation enables encryption of


content, which helps to prevent unauthorized viewing of the content by non-subscribers and also makes it
much more difficult for LCOs to under-report subscriber numbers.

Due to the benefits resulting from digitisation, MSOs have encouraged digitisation of their cable services.
As per the MPA Report, in 2009, out of the estimated 105 million connected households (a household
with access to cable television, DTH, IP-TV or any other form of connectivity other than terrestrial),
digital platforms will have a market share of approximately 15.7 percent, representing 21.3 million
subscribers.

Revenue Drivers for the Indian Television and Cable Industry

Revenues of the Indian television industry are primarily derived from subscription revenues and
advertising revenues. The following chart illustrates the historic and projected growth of subscription
revenues and advertising revenues of India’s television industry over the period 2005 - 2013:

The growth of the television industry between 2009 and 2013 is likely to be driven by a variety of
factors including:

• rapid growth in the number of digitised households;


• increase in the ARPU’s realized through digital distribution platforms;
• growth in the number of television channels, especially in niche and regional categories;
• growth in the number of television and C&S households.

The total number of digital pay TV households (including digital cable, DTH satellite television and
IPTV) is projected to grow at a CAGR of 35.4% from 2009-2013 to reach 71 million by 2013, or about
56% the total C&S households at that time.

69
With digitization of distribution, the rapid growth in channels is likely to continue, which will lead to
increasing choice for subscribers. Television and C&S penetration is also likely to continue to increase at
a steady rate. By the end of 2013, the total number of households with televisions in India is projected to
increase to 149 million compared with 123 million at the end of 2008, with 84.6% of those households
being C&S households (compared to 69.9% at the end of 2008). The chart below illustrates the estimated
distribution of households with televisions in India between 2005 and 2013.

Of the projected 149 million television households in India as at the end of 2013, 60.4% are projected to
be cable households (36.9% analog cable households and 23.5% digital cable households), of which
18.8% are projected to be DTH satellite television households and 2.7% IPTV households.

The average pay television ARPU per month in India, at around US$ 4 in 2008, remains low by global
standards compared to the major Asia Pacific nations, as shown in the chart below:

The FICCI-KPMG Report 2009 states that pay television ARPUs are expected to increase from 2010
onwards, the main growth drivers being the increased usage of add-on services associated with digital
distribution (e.g., pay-per-view), as well as the cooling down of the highly competitive environment in
the television distribution sector that exists today.

Driven by rising ARPUs from digital distribution and increasing C&S penetration, subscription revenues
have been projected to grow at a CAGR of 14.9% over 2009-2013 compared with a CAGR of 12.4% over
2006-2008.

Cable TV subscription fees

Subscription fees are revenue earned by MSOs. Out of the total current revenues of Rs. 139 billion,
subscription contributed 53% . Primary operators receive subscription fees from the subscribers and share
these revenues with broadcasters. However, in the secondary network, subscription fee income is shared
between the LCOs and the MSOs, and ultimately the broadcaster. The following chart illustrates the
historical and projected growth of subscription revenues over the period 2006 through 2018:

Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Subscription
Revenues (US$ mn)

70
Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Analog Cable 2,930 3,299 3,775 4,038 4,337 4,566 4,881 5,189 5,572 5,949 6,380 6,765 7,122
Digital Cable 6 28 90 171 265 405 594 830 1,090 1,355 1,614 1,871 2,080

Source: Asia Pacific Pay – TV & Broadband Markets 2009 (MPA Report)

Advertising revenue
The following chart illustrates the historical and projected growth of advertising revenue over the period
2006 through 2018:

Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Advertising
Revenues (US$ mn)

Cable 1,241 1,483 1,719 1,836 2,004 2,271 2,574 2,895 3,241 3,591 3,911 4,216 4,495

DTH - - - 6 10 18 34 61 94 130 165 196 222


Total Advertising
Revenues (US$ mn) 1,241 1,483 1,719 1,842 2,014 2,289 2,608 2,956 3,335 3,721 4,076 4,412 4,717

Source: Asia Pacific Pay – TV & Broadband Markets 2009 (MPA Report)

Technology Overview of Cable TV Operations:

A cable company’s technical operations are divided into to two key parts:
• Head-end: content acquisition and processing takes place at the head-end to create a composite
signal consisting of all the content; and
• Network: the network performs the role of the delivering the composite signal created at the head-
end to the end customer.

The Head-end

Head-end processing is divided into two parts, consisting of reception and analog or digital processing.
Content is received through multiple dish antennas. Content (i.e. channels) is beamed down by
broadcasters. The channels may be “pay” channels or “free” channels. The pay channels are beamed in
encrypted form. The MSO operates its head-end contracts separately for content with each of the
broadcasting companies. After a contract is signed, the broadcasting company provides the head-end with
a decoder box. This decoder decrypts the channel of such a broadcaster. Thus, the set of channels that is
selected to be offered to customers is first received at the MSO’s head-end
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For analog transmission, the signal received is subsequently modulated. The process of modulation
determines the position of the channel in the reception sequence in the television set. After the selected
channels are modulated, they are then combined to form a single signal stream for analog transmission.
For digital transmission, each received channel is encoded into digital form (or converted to digital form)
by the process of encoding. The encoded channels are then encrypted and combined. The encryption
permits the MSO to control the availability of the channel at the STB level. Based on the rights granted to
a STB by the MSO, the box may be able to decrypt any specific channel. The analog combined stream
and the digital combined stream are then recombined to create a signal stream from the head-end.

Cable Television Network Architecture – One -way and Two-way Infrastructure

Network Architecture and Infrastructure

The network infrastructure performs the role of carriage and delivery of the composite signal created at
the head-end to the end customer.

Cable Network

Cable television uses a network of coaxial or fiber optic cable to transmit multiple channels between a
head end and a subscriber’s house. Coaxial cable is a type of cable used for broadband data and cable
systems. This type of cable has high-capacity, noise immunity and physical durability. Fiber optic cable is
a communication medium that uses hair-thin glass fibers to transmit signals overlong distances with less
signal loss or distortion than coaxial cable.

At the head-ends, programming signals are received, processed and sent through the distribution network,
which consists of fiber optic and coaxial cables. A node, which services a number of subscribers, is
connected to Fiber network at one end and coaxial network at the other end. Cable television signals then
travel, via coaxial cable, from nodes into subscribers’ homes.

In most of the cities, the signal is first carried up to a hub, which caters to an area with a city. Form the
hub, the signal is redistributed to local cable operators, who then carry the signal to individual customer
homes on their coaxial cable network.

A one-way cable TV system only permits transmission from the head end to the customer homes. In
comparison, a two-way cable television system allows customers to receive and send information
between the head end and their set-top box or any other device at the customer premise.

The figure below shows a two-way cable television system and some of the services that may run on it.
This diagram shows that the two-way cable television system adds a cable modem termination system
(CMTS) at the head-end and a cable modem (CM) at the customer’s location. The CMTS also provides
an interface to other networks such as the Internet.

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Two-Way Cable Television System

Internet Phone

Cable Set Top


Modem Box
Voice
Gateway
CAN
PSTN Upconverter Bi-Directional Bi-Directional
Data Amplifier Amplifier
Gateway
Internet

Modulator

Head End

Broadband on Cable

As discussed, traditional cable TV infrastructure is a “unidirectional” or a one-way non-interactive


infrastructure. This implies that while cable television signals can be transmitted from the MSO to the
home, no signals/request can be received back from the home by the head end. This is on account of
unidirectional components (similar to unidirectional amplifiers) being used in the network.

A vast majority of the networks laid by LCOs are unidirectional one-way networks. To launch broadband
and telephony services at homes on these networks, these networks need to be upgraded to be made bi-
directional.

After having made an investment in a two-way enabled cable plant, cable operators may, in conjunction
with MSOs, roll out high-speed internet access to consumers. This may be at an attractive incremental
cost, often bundled with existing cable television services, to grow consumer offerings, increase yields
and boost profit margins. This gradual structural transformation is similar to what has already been
witnessed in developed markets, such as the U.S. and Europe.

However in India, very few LCOs have upgraded their cable infrastructure. Broadband has largely been
deployed by MSOs directly by building parallel cable infrastructure into homes. Hence, its availability
has been limited to the reach of the MSO’s own direct cable plant.

Converged Cable TV and Broadband Operations

As mentioned, two-way cable TV infrastructure is capable of offering high speed broadband internet
apart from other services, like interactive digital cable and voice telephony.

Such operations will have the following components:

Head-end: The head-end of such an operator has a dish to receive broadcast channels via satellite. This is
converted to analog and digital signals by way of the head-end, and a composite signal for video service
is created.

CMTS: In addition, such a head-end has a CMTS to be able to control all the cable modems at homes.
The CMTS, in turn, is connected to the internet gateway to permit seamless connectivity between the
cable modems at the customer premises and the content on the world-wide-web.
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Voice gateway: Such a head-end also has a voice gateway. The voice gateway interfaces between
equipment of mobile and land line telephone providers and VoIP telephony devices installed in the
customer premises by the service provider.

DOWNSTREAM

UPSTREAM

Node Node Node

CMTS/ Router

HUB
Fiber
Node

HUB Fiber Node Coax

Head End Node


HUB

Internet Node Node

Cable Modem to PC and STB to TV

Signals in a converged HFC network service

In a converged network, signals for various services are carried on the same infrastructure. The capacity
of the cables is logically partitioned for each service. Such a service approach does not involve additional
network capital expenditure for each service and no additional operational maintenance expenditure is
required for each service.

Broadband Internet
Cable Television
Cable Telephony

HFC Cable Infra.

The signal partitioning is combined with the head end components described earlier and is implemented
across the entire network.
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This results in a converged HFC network that has the following main components:

 Head-end
o Reception unit – Ability to provide video signals and also connect to the world wide
web (i.e. internet) and interconnect with PSTN and mobile providers;
o Signal Processing – Conversion of the signals for the voice, video and broadband
internet services into a form that is suitable for carrying on HFC cable and also ease the
reception at the customer’s end.
 Distribution
o Fiber Distribution – to carry the signals over long distances with minimum distortion so
that the customer gets good quality;
o Nodes – for conversion that interface between a fiber cables and a high capacity co-
axial cable;
o Coaxial cable – to carry the signals up to the homes.
 Customer Premise Equipment
o Depending on the services opted by the customer - e.g. digital cable, broadband or
telephony – suitable end devices are put into the network so that the services may be
provisioned and activated for the customers.

Trends in Television Broadcasting and Customer Behavior

Television broadcasting has seen a very rapid growth in the past few years. The number of broadcasted
channels has increased very rapidly in the past few years - from 175 in 2006 to 485 in 2009, with
numbers expected to increase further. This trend points towards localization and specialization of
content. A lot of content / channels now cater to audiences in a specific area or of a certain demographic
profile.

An analog cable service has limitations in terms of the number of channels that can be telecast. Hence, in
order to cater to the growing number of channels, a digital service tier is required to cater to the
customers who opt to view more channels. Digital service may be offered ether via satellite (DTH) or by
an MSO over cable. In a satellite service, the number of channels is limited to amount of satellite capacity
contracted by the DTH service provider.

Another trend in consumer behavior in developed markets is interactivity on television. As consumers


experience interactivity over the internet, the requirement to bring interactivity on television will grow.
Developed markets such as US and Europe have seen a high preference for customers opting for Video
on Demand ("VoD"). VoD is a service where the customer uses his remote control to purchase content,
such a movies, archived programs and serials. The customer also has full control over the process and
can pause a live television program without the assistance of the service provider. The requirements for
running such an interactive service are that the customer premise equipment should be able to send a
service request to the MSO or the DTH head-end. In a DTH service, this is difficult to achieve without
alternate or additional cables for the back channel. This is more easily achieved on HFC cable that is
two-way. Hence, a broadband cable service provider has network infrastructure that is more suitable for
meeting customer needs for interactivity.

75
BUSINESS

The following information is qualified in its entirety by, and should be read in conjunction with, the more
detailed financial and other information included in the Draft Red Herring Prospectus, including the
information contained in the section “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” beginning on page xiv and page 130, respectively, of this
Draft Red Herring Prospectus.

In this section, in addition to a description of the business and operations of our Company, we have also
included a description of the cable television business and operations of our associate company Digital
Outsourcing Private Limited and its subsidiaries and associate company. The cable television business of
Digital Outsourcing Private Limited and its subsidiaries and associate company is distinct from the
business and operations of our Company.

In this section, unless the context otherwise requires, a reference to the "Company" or to "we", "us" and
"our" refers to YOU Broadband & Cable India Limited, and a reference to "DOPL" refers to Digital
Outsourcing Private Limited and its subsidiaries and associate company, on a consolidated basis. Unless
otherwise stated or the context otherwise requires, the financial information used in this section is
derived from the restated financial statements of our Company and the restated consolidated financial
statements of DOPL, as applicable.

Overview

We are one of the leading Cable Broadband service providers in India. We commenced operations in
2001 and currently provide high-speed broadband cable internet services to our residential and enterprise
segment customers across 11 cities in India. As of September 30, 2009, we owned and operated over 990
kilometers of fiber optic cable and over 4,100 kilometers of trunk coaxial cable network, supported by 11
NOCs. As of September 30, 2009, our residential broadband internet service subscriber base aggregated
approximately 200,779 customers. Based on internal estimates, we believe that our network covers
approximately 1.50 million homes passed, and our residential broadband internet service subscriber base
represents an estimated penetration of 13.4% of two-way broadband-enabled homes. Based on industry
information derived from the TRAI Report dated January 7, 2010 "The Indian Telecom Services
Performance Indicators July - September 2009" (“TRAI Report (January 2010)”), in such period, we had
a market share of approximately 32.0% of the Cable Broadband internet market in India.

We currently offer high-speed broadband internet access through our two-way hybrid fiber optic coaxial
("HFC") cable network. Our technologically advanced cable network infrastructure is capable of
simultaneously supporting broadband internet, cable television and voice communication and we believe
that we are one of the few broadband service providers in India with such "triple-play" capabilities. Our
residential subscribers access our broadband internet through cable modem utilizing data over cable
service interface specifications ("DOCSIS") technology on a variety of data transfer and unlimited
internet plans. We deliver high bandwidth internet broadband services to our enterprise segment
customers through cable modem or through dedicated leased line access. We also provide storage and
security services and solutions to our enterprise segment customers. In addition, we lease our excess fiber
network capacities and spare duct inventories to other telecommunication service providers.

We have invested significantly in the development and expansion of our quality "triple-play" capable
two-way HFC cable network infrastructure in a scalable manner. In fiscal 2007, 2008 and 2009, and in
the six months ended September 30, 2009, we incurred capital expenditure of Rs. 216.89 million,
Rs.441.48 million, Rs.127.67 million and Rs.40.08 million, respectively. Based on internal estimates, we
believe that our existing cable network infrastructure which accommodates an estimated 1.50 million
home passes, is capable of being expanded, at relatively low incremental investment, to accommodate an
additional 0.50 million home passes. Our fiber optic backbone, broadband nodes and data centers provide
a reliable infrastructure for internet traffic, as well as any analog and digital television transmission. For
our enterprise segment customers located in areas not directly covered by our current infrastructure
footprint, we have entered into leased line agreements with other telecommunication infrastructure
owners to provide our services to such enterprise segment customers. We also offer limited wireless
services connectivity to some of our residential broadband customers.
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We hold a pan-India Category "A" ISP license for our broadband internet services, as well as an
Infrastructure Provider Category – I (IP-I) license, which permits us to lease our passive network
infrastructure to other service providers. In addition, our ISP license enables us to offer voice over
internet protocol ("VoIP") services as an internet telephony services provider ("ITSP"), which allows our
customers to make international calls through our broadband network. In April 2007, we acquired the
ISP business of IceNet.Net Limited to enhance our enterprise solutions and VoIP products.

As of January 31, 2010, the Company had over 478 permanent employees. We are accredited by the
International Organization for Standardization, with our quality management systems certified to ISO
9001:2000 standards, and our operations are ISO-certified in all cities of operation.

Our total income increased by 63.49% from Rs.484.25 million in fiscal 2007 to Rs.791.73 million in
fiscal 2009. Our total income in the six months ended September 30, 2009 was Rs.376.47 million.

Proposed DOPL Acquisition

In May 2007, we made a strategic investment in our associate company Digital Outsourcing Private
Limited. DOPL carries on cable television services business. DOPL currently provides cable television
services across 10 cities in India, including Mumbai, Navi Mumbai, Bangalore, Vishakhapatnam and
Nagpur. Of these 10 cities, four cities, namely Mumbai, Navi Mumbai, Bangalore and Vishakhapatnam,
overlap with the Cable Broadband services footprint and network infrastructure of our Company. As of
February 28, 2010, DOPL offered its services to an estimated 1.5 million homes through cable operators
and approximately 8,000 direct residential subscribers. For further information relating to DOPL and its
business and operations, see "Business" beginning on page 76 and the "Financial Statements" beginning
on page 129.

We have entered into certain strategic arrangements with DOPL to benefit from our operational
synergies. In cities where there is an overlap of our and DOPL's operations, we lease out our fiber
network to DOPL, and DOPL lays additional fiber connecting to our network to develop an access
network to cable operators. We have also entered into service agreements to provide IT and billing
support services to DOPL.
Our Company currently holds 36.24% of the paid-up equity share capital of Digital Outsourcing Private
Limited. We have entered into the DOPL Share Subscription and Purchase Agreement with the DOPL
Selling Shareholders who in the aggregate hold 26.05% of the equity shareholding in Digital Outsourcing
Private Limited for the acquisition of the DOPL Sale Shares. The transactions contemplated in the DOPL
Share Subscription and Purchase Agreement are subject to various conditions, including the outcome of
the Issue and applicable statutory and regulatory conditions and the closing conditions stipulated in the
DOPL Share Subscription and Purchase Agreement. In the event that such conditions are not satisfied, we
may not be able to complete the proposed DOPL Acquisition. For further information relating to the
DOPL Acquisition and the DOPL Share Subscription and Purchase Agreement, see “History and Other
Corporate Matters” beginning on page 101, "Objects of the Issue" on page 39, and "Risk Factors"
beginning on page xiv and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” beginning on page 130.
History

Our Company was incorporated as “NetShastr Facilities India Private Limited” under the Companies Act,
1956, pursuant to a certificate of incorporation dated November 13, 2000 issued by the Registrar of
Companies, Delhi and Haryana. In 2001, the Company became a wholly-owned subsidiary of BG India
Telecom (Mauritius) Limited; subsequently, the name of the Company was changed to “BG Broadband
Networks India Private Limited” on June 29, 2001. In February 2003, the registered office of the
Company was transferred from the state of NCT of Delhi to the State of Maharashtra, Mumbai.

In June 2006, Citigroup Venture Capital International Growth Partnership Mauritius Limited acquired a
majority shareholding in our Company through YOU Telecom (Mauritius) Limited. Subsequently, on
December 21, 2006, our Company’s name was changed to “YOU Broadband Networks India Private
Limited”.

Pursuant to the order of the High Court of Bombay dated April 11, 2007 on the scheme of amalgamation
between YOU Telecom India Private Limited and our Company, our Company’s name was changed to
77
“YOU Telecom India Private Limited” on November 23, 2007. The name of our Company was thereafter
changed to “YOU Broadband & Cable India Private Limited” effective November 17, 2009. Our
Company was converted into a public limited company and its name changed to "YOU Broadband &
Cable India Limited" pursuant to a certificate of incorporation consequent to change of name dated
January 12, 2010.

For further information, please see “History and Certain Corporate Matters” on page 101 of this Draft
Red Herring Prospectus.

Our Strengths

One of the leading Cable Broadband service providers in India with an extensive broadband cable
network infrastructure in key markets

We are one of the leading Cable Broadband service providers in India, offering high-speed broadband
cable internet services to residential and enterprise segment customers across 11 cities in India, namely
Mumbai, Navi Mumbai, Surat, Vadodara, Ahmedabad, Pune, Bangalore, Hyderabad, Vishakhapatnam,
Chennai, and Gurgaon. All these cities are in the top 20 cities in India in terms of maximum internet
usage (Source: IMRB I Cube 2008 – Home Segment Report). Our infrastructure is strategically located in
high density areas in these cities with high PC penetration and a concentration of SEC A and SEC B
households.

As of September 30, 2009, we owned and operated over 990 kilometers of fiber optic cable and over
4,100 kilometers of trunk coaxial cable network, supported by 11 NOCs. As of September 30, 2009, our
residential broadband internet service subscriber base aggregated approximately 200,779 customers.
Based on industry information derived from the TRAI Report (January 2010), in such period, we had a
market share of approximately 32.0% of the Cable Broadband internet market in India. Based on internal
estimates, we believe that our existing cable network infrastructure which accommodates an estimated
1.50 million home passes, is capable of being expanded, at relatively low incremental investment, to
accommodate an additional 0.50 million home passes. We believe that our contractual right-of-way for
areas covered by our network infrastructure was acquired at competitive terms.

Advanced HFC cable network infrastructure capable of supporting broadband internet, cable
television and voice communication

Our technologically advanced cable network infrastructure is capable of simultaneously supporting


broadband internet, cable television and voice communications and we believe that we are one of the few
broadband service providers in India with such "triple-play" capabilities. We believe that this will enable
us to capitalize on increasing business opportunities resulting from government policy and regulatory
environment in India supporting the expansion of broadband and telecommunications services and
digitization of cable television.

Our "triple-play" capable HFC infrastructure enables us to deliver convergent products and services and
new value added product and service offerings, including analog and digital cable television services,
using the same infrastructure and technical support personnel across various product and service lines.
We are therefore able to explore additional product and service offerings and new revenue streams at low
incremental operational cost and capital expenditure, and leverage our existing infrastructure to expand
into the cable television business. We believe that our network infrastructure provides us with a distinct
competitive advantage against competitors with limited network infrastructure and capabilities.

Billing systems and processes that enable convergence

We have implemented a convergent billing platform known as Oracle BRM (Billing and Revenue
Management System) under license from Oracle. This billing platform is capable of addressing
requirements of large-scale and diversified business operations. As we introduce additional product and
service offerings, we believe that our ability to integrate the delivery of multiple products and services
under a single billing platform will result in increased operational and cost efficiencies. We have also
developed and implemented customer relationship management ("CRM") software and systems to
manage service delivery and customer relations. We believe that our integrated processes and systems
and ability to provide multiple products and service offerings using the same billing infrastructure and
process provide us with a distinct competitive advantage.
78
Quality product and service delivery

We believe that our advanced network infrastructure, significant "last mile" network and direct
operational control over such infrastructure, enable us to deliver quality product and service offerings and
maintain high service levels in terms of response time and delivery quality. Our direct operational control
also enables us to efficiently and effectively address customer needs, including requests for additional
services or bandwidth upgrades.

We have implemented a range of training initiatives for our employees, including at our in-house training
institute in Pune, to ensure that our subscribers receive quality customer service. Customer inquiries are
handled through locally-focused and dedicated customer service centers trained in technological
developments, as well as technical and commercial matters relating to our operations and product and
service offerings. We believe that our dedicated customer service centers and relationship management
systems enable us to enhance our brand, increase customer loyalty and control churn. Our direct
operational control also enables us to establish direct relationships with customers and more effectively
market our products and services. We believe that this is a distinct competitive strength compared to
operations of those Cable Broadband providers whose customer relationships are handled by local cable
operators.

Industry-experienced management team

Our management team includes experienced and qualified professionals, many of whom have been with
the Company since its initial operations. Our senior management team has extensive experience in the
telecommunications, internet services, as well as the cable television industry. Our senior management
team and capable middle management personnel have been responsible for the successful development
and expansion of our extensive cable network infrastructure, the implementation of our business
strategies, and achievement of our growth targets.

Our Strategies

Increase our subscriber base by expanding our network infrastructure and leveraging our brand and
direct marketing

We intend to leverage our significant broadband cable infrastructure and large residential customer base
to further consolidate our position in our existing markets. We continue to focus on markets, areas and
customer segments characterized by high PC penetration and a concentration of SEC A and SEC B
households, subject to technical and other considerations that affect the implementation of our network
infrastructure. We intend to expand our network in existing cities through low incremental investment to
increase the number of homes passed by approximately 30.0%. We are also in the process of evaluating
expansion opportunities in certain other key cities in India.

In order to expand our broadband footprint and improve customer experience, we also intend to establish
wireless access points in large high-density areas. We expect the wireless internet service to increase our
revenues and expand our subscriber base to include customers that require mobile internet access.

We continue to increase our subscriber base by leveraging our strong brand image, direct access to our
extensive residential customer base and our direct marketing and operational control. Our direct
marketing efforts, including door-to-door sales calls, and our aggressive marketing and sales promotions
have been and we believe will continue to be, a highly effective mode of acquiring new customers in the
residential subscriber segment. We also continue to focus on providing superior customer service through
the implementation of training programs and customer feedback processes to build customer loyalty and
control churn.

Continue to develop and market new value added products and services to generate additional revenue
streams

We continue to focus on the development and marketing of new value added products and services that
we can deliver on our extensive network infrastructure to generate additional revenue streams and
increase the revenue from existing customers.

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According to IMRB I Cube 2008 – Home Segment Report, the use of broadband internet for
entertainment and e-commerce has steadily increased in India in recent years and the share of
entertainment and e-commerce as a percentage of total broadband internet use in India increased from
4.00% in 2000 to 16.00% in 2008. We believe that that there will be increased use of the internet for e-
commerce and for value-added services, such as e-learning, net shopping, and online entertainment, and
that we are well positioned to capitalize in and benefit from such growth. We currently provide our
customers various value-added services, including online shopping, gaming and e-learning solutions
pursuant to arrangements with third party content and value-added service developers. We have also
entered into arrangements with payment gateways to facilitate online payments and transactions by our
customers. We believe that by actively developing and participating in the delivery of value-added
services, we will be able to offer a better customer experience on value-added services, resulting in
increased customer loyalty, while increasing our revenues from higher broadband usage. For our
residential customers, we intend to increase our product penetration for our internet telephony services.
We also intend to introduce additional gaming services available to our Cable Broadband subscribers on
"YOU Play", as well as educational materials offered as online customizable term and chapter based test
packs through "YOU Learn".

We also continue to focus on generating additional revenue streams from our enterprise segment
customers by providing value added services such as unified threat management solutions that comprises
advanced security features and applications to monitor and control internet traffic. We also offer storage
and security services and solutions, web hosting and data disaster recovery services, and implement
networking solutions, including procurement of hardware, such as servers, routers and allied software and
establishing internet connectivity links.

Expand operations in the cable television business through the DOPL Acquisition and strategic
acquisitions of other MSOs and LCOs

We intend to expand our business and operations to include cable television services. We currently have a
36.24% shareholding in DOPL, which provides cable television services to an estimated 1.50 million
residential subscribers in 10 cities across India, of which four cities overlap with our broadband services
footprint. We have entered into certain strategic arrangements with DOPL to benefit from operational
synergies. In cities where there is an overlap of our and DOPL's operations, we lease out our fiber
infrastructure to DOPL, and DOPL lays additional fiber connecting to our network to develop an access
network to cable operators. We have also entered into service agreements to provide IT and billing
services to DOPL. We have entered into the DOPL Share Subscription and Purchase Agreement with the
DOPL Selling Shareholders for the acquisition of the DOPL Sale Shares. The proposed DOPL
Acquisition is however subject to various conditions, including the outcome of the Issue and applicable
statutory and regulatory conditions and the closing conditions stipulated in the DOPL Share Subscription
and Purchase Agreement. For further information on the proposed DOPL Acquisition, see "Business” on
page 76.

Subject to compliance with applicable regulatory requirements, we intend to expand the cable television
business in and around the cities where we have our cable network infrastructure. The DOPL Acquisition
is expected to result in increased operational synergies and other benefits resulting from the integration of
our broadband cable infrastructure and the ability to provide integrated internet and cable television
services. We also continue to evaluate opportunities for the strategic acquisition of other MSOs and
LCOs. We intend to grow the cable television business by introducing advanced video services, such as
video on demand and interactive set top boxes, and raising service quality and customer service standards
through improved infrastructure and operational efficiencies.

Acquire last mile connectivity

We continue to identify suitable acquisition opportunities among LCOs and MSOs to expand our
subscriber base and geographic reach and achieve economies of scale and delivery of standardized
integrated broadband internet and cable television services. Our strategy is to continue to acquire "last
mile" connections through strategic acquisitions of other MSOs and LCOs, in order to consolidate the
cable television business in DOPL's existing markets and expand into other cities in India that have
significant cable television viewership, particularly cities where we have an existing network
infrastructure. We believe the ability to provide integrated services, and direct marketing and operational
control through "last mile" connectivity, will enable us to introduce additional value added product and
service offerings, and increase subscription revenues through elimination of under-reporting of the
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subscriber base by LCOs.

Increase digital penetration

DOPL currently offers approximately 85 channels through its analog cable television services and about
200 channels through its digital television services. This channel count and the selection of channels
vary based on the demographic profile of customers in the area catered to by the respective head-end. We
believe that DOPL's ability to offer different local and regional content on its service provides a
competitive advantage over DTH satellite television, which broadcasts the same channels all over India.

We intend to increase the digitization of DOPL's cable television services to decrease the risk of
subscribers switching to another digital platform, such as DTH satellite television, consequently
strengthening DOPL's existing relationships with LCOs and its subscribers. Increased digitization of
DOPL's cable television services is also expected to result in a decrease in under-reporting of the
subscriber base by LCOs associated with the provision of analog cable television services in India.

Digitization also enables provision of additional channels, better quality picture and sound, value-added
services such as an interactive electronic program guides, pay-per-view program reservations, personal
video recording, audio music channels. We believe increased digitization of DOPL's service offerings
will enable it to compete more effectively with other digital technologies.

Description of our Business

We are engaged in the distribution of high-speed broadband cable internet services to residential
subscribers, SMEs and large corporate customers across 11 cities. As of September 30, 2009, we owned
and operated over 990 kilometers of fiber optic cable and over 4,100 kilometers of trunk coaxial cable
network, supported by 11 NOCs.

We provide our broadband internet services through our HFC cable network. Our residential subscribers
access our broadband network through cable modem utilizing DOCSIS technology on a variety of
metered and unlimited internet plans. We deliver high bandwidth internet broadband services to our
enterprise segment customers through cable modem or through dedicated leased line access. We also
provide storage and security services and solutions to our enterprise segment customers. In addition, we
lease our excess fiber network capacities and spare duct inventories to other telecommunication service
providers.

As of September 30, 2009, our residential broadband internet service subscriber base aggregated
approximately 200,779 customers. Based on internal estimates, we believe that our network covers
approximately 1.50 million homes passed, and our residential broadband internet service subscriber base
represents an estimated penetration of 13.4% of two-way broadband-enabled homes. Based on industry
information derived from the TRAI Report dated January 7, 2010 "The Indian Telecom Services
Performance Indicators July - September 2009" (“TRAI Report (January 2010)”), in such period, we had
a market share of approximately 32.0% of the Cable Broadband internet market in India.

81
The map below indicates the cities in which we currently offer Cable Broadband services:

(Map not to scale)

Residential Broadband Internet Services

Our broadband internet service plans are divided into two categories: (a) unlimited access; and (b) data
transfer access plans. In the unlimited category, the customer opts for a specified download speed limit
and unlimited access to the Internet. In the data transfer access plans category, the customer pays a fixed
charge for higher download speed (up to 2 Mbps) with a limit on the total data transfer in the relevant
period. Additional data transfer is charged on an incremental basis, based on the total number of
additional bytes transferred in the period. Our broadband customers are also able to select either pre-paid
or post-paid plans, as well as single service (broadband only) or dual service combination plans
(broadband and VoIP). In a prepaid data transfer plan, the customer purchases a package with a
predefined MB download quota and a fixed validity period. When the allocated MB quota is utilized or
the validity period expires, the service is suspended and the customer is required to reactivate the account
through the purchase of additional prepaid data transfer packages.

The following table sets out our broadband internet service plans for residential subscribers:

Plans for New Sales

Plan Speed up to Free Data Transfer Plan Charges Validity


Mini 750 2 Mbps 3 GB Rs.680 2 Months
SP 5 GB 2 Mbps 5 GB Rs.1,499 3 Months
SP UN-450-N 192 Kbps Unlimited Rs.1,499 2 Months

Prepaid Plans - Data Transfer

Plan Speed up to Free GBs Plan Charges Validity


PP 1GB 2 Mbps 1 GB Rs.319 1 Month

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Plan Speed up to Free GBs Plan Charges Validity
PP 3 GB 2 Mbps 3 GB Rs.899 3 Months
PP 6 GB 2 Mbps 6 GB Rs.1,749 6 Months
PP 12 GB 2 Mbps 12 GB Rs.2,804 12 Months

Prepaid Plans - Unlimited Usage

Plan Speed up to Free GBs Plan Charges Validity


UN-450-N 192 Kbps Unlimited Rs.450 1 Month
UN-775-N 512 Kbps Unlimited Rs.775 1 Month

Post Paid Plans

Plan Speed up to Free GBs Monthly Excess Charges per Modem


Charges * MB Rental
YOU Explore 250 2 Mbps 1 GB Rs.250 Rs.0.9 60
YOU Explore 500 2 Mbps 2.5 GB Rs.500 Rs.0.8 60
DT650 512 Kbps 4 GB Rs.650 Rs.0.99 60
DT800 512 Kbps 5 GB Rs.800 Rs.0.99 60
DT950 512 Kbps 6 GB Rs.950 Rs.0.99 60

Broadband Internet and Voice - Combination Plans

Plan Speed up to Free GBs Monthly Free Talktime Modem Rental


Charges
Ultimate 649 2 Mbps 1 GB Rs.649 200 60
Ultimate 899-UL 192 Kbps Unlimited Rs.899 150 60
Ultimate 899 2 Mbps 2.5 GB Rs.899 300 60

Special Plans

Top-up Plans
Plan Speed up to Free Data Transfer Monthly Validity
Charges*
Unlimited from
Night Booster 256 Kbps Rs.199 30 Days
11p.m. to 7a.m.
Prepaid - Day Night Plans
Angel 192-512 kbps Day Speed - 192 kbps
Unlimited Rs.599 31 Days
Night Speed - 512 kbps
Angel 192-512 kbps Day Speed - 192 kbps
Unlimited Rs.2,720 184 Days
Night Speed - 512 kbps

Value-Added Services for Residential Broadband Customers

The Company offers a variety of value-added services to its residential broadband customers:

Internet telephony. Our internet telephony services provider ("ITSP") license authorizes us to offer VoIP
services, marketed as "YOU Call", enabling our subscribers to access our broadband network for
international phone calls. We distribute international calling cards, with a range of denominations, to
enable our subscribers to make VoIP calls. With our VoIP solutions, customers can substantially lower
their international subscriber dialing ("ISD") costs.

We introduced internet protocol ("IP") phones in India in 2003, marketed as "YOU Fone". IP phones are
fixed landline devices that link to a broadband connection, instead of a telephone line, for telephone calls.
VoIP telephony permits lower cost voice communications, since the network is used more efficiently.
However, under current regulations, VoIP telephony is limited to calls between VoIP devices or to
international connections. VoIP calls to landlines or mobile phones in India are currently not permitted.
However, TRAI has recommended to the Government that ISPs that provide VoIP be permitted to offer
unrestricted voice telephony, including interconnections to landlines or mobile phones in India.

Gaming services and educational materials. We provide access to "YOU Play", an online suite of
gaming services with new games added every month. Game content is provided by third party content
providers. In addition, we offer "YOU Learn", an education service for students featuring online
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customizable term- and chapter-based test packs and related material.

The key features of our broadband internet services are:

High speed. We offer high download speeds for the residential sector, ranging from 256 Kbps to 2 Mbps.

Flexible service plans. We offer flexible subscription plans at either flat fees, or on usage- or time-based
billing. We provide both pre-paid and post-paid services. In addition, the customer may opt for both
broadband and VoIP services simultaneously under a single service plan

Security. Our residential broadband internet services are provided utilizing DOCSIS technology, which
we believe provides robust online security. Our services require a DOCSIS cable modem to be installed
as customer premise equipment ("CPE") either in the subscriber's residence or in close proximity. This
device isolates the customer’s computer from the network and restricts any unauthorized access to the
computer, while permitting a continuous connection to the internet.

Customer service. We own and maintain our network, which provides us with direct operational control.
Accordingly, we are able to achieve better response time and quality control, thereby providing our
customers with a higher quality of service though higher uptimes.

Enterprise Segment Subscribers

We provide dedicated bandwidth solutions to small and medium enterprises ("SMEs") and large
corporate clients, i.e. our enterprise customers. Our HFC infrastructure allows us to deliver high
bandwidth broadband services to our enterprise subscribers either through cable modems or directly
through dedicated fiber core, according to customer requirements. In addition, we use other access
solutions, such as third party telecom leased lines and wireless links, to connect to enterprise customers in
places where we have not yet built our network.

We provide our enterprise customers premium bandwidth links, which offer enhanced throughput and
enhanced internet connectivity on account of the higher allocation of bandwidth. We enter into contracts
on negotiated terms with our corporate and SME customers. Our high service levels in response time and
quality control, which we are able to provide due to the direct operational control we exercise over our
network, attract new enterprise customers and enable us to retain our existing subscriber base. Our
operational control also enables us to efficiently respond to the requirements of enterprise customers,
such as urgent requirements for an upgrade in bandwidth throughputs.

We serve a large variety of enterprise subscribers across various geographical regions, sectors and
industries. Revenue from our enterprise segment subscribers represented 24.69% and 25.24% of our total
income in fiscal 2009 and in the six months ended September 30, 2009, respectively.

Value-Added Solutions for Enterprise Segment Subscribers

Unified Threat Management ("UTM") solutions. In addition to our internet bandwidth services, we offer
our enterprise segment customers unified threat management solutions as an optional value-added
service. Traditionally, an electronic firewall was the only security device enterprises deployed for
network protection, and other security solutions, such as virtual private networks, anti-virus, anti-spam,
content filtering, and intrusion detection and prevention are available as distinct solutions. A UTM device
is an integrated security suite that incorporates all these solutions, as well as bandwidth management and
multiple ISP link management.

Our UTM devices include advanced security features and applications that can assist the customer's
information technology officers to monitor and control internet traffic. The key functions performed by
UTM devices sold and managed by us include: (a) firewall; (b) intrusion detection and prevention; (c)
content filtering; (d) anti-virus; (e) anti-spam; (f) bandwidth management; and (g) multiple link
management.

Storage services and solutions. We also offer storage services and solutions to our enterprise customers,
as well as web hosting and disaster recovery services. For this service, we coordinate and implement
networking solutions for our customers, including the procurement of hardware, such as servers, routers
and allied software, and also setting up internet connectivity links for our customers.
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Wireless broadband. We offer limited wireless services to our broadband customers. In this connection,
we have also formed a joint venture company, YOU Snapper, with a Malaysian telecommunications
company.

Sales, Marketing and Distribution

In order to effectively serve the various territories in which we operate, we maintain a sales force
composed of dedicated sales teams ("feet-on-street" teams) and sales agents to market our broadband
services. As of January 31, 2010, we employed approximately 132 permanent employees as direct sales
personnel and engaged approximately 62 sales agents. These sales agents are typically compensated
based on a sales-target incentive-based system.

Our sales personnel conduct door-to-door marketing calls within our areas of operation, promoting our
broadband internet services, supported by a sales telemarketing team for lead generation. We believe that
our direct marketing approach is effective in acquiring new residential customers, and our door-to-door
sales account for most of new customer acquisition. Our marketing and promotional activities are locally
focused in media such as local area newspaper inserts, area-specific road shows and local area billboards.
Apart from these core marketing activities, we sponsor various local events and festivals to build a local
brand presence.

Customer Service

We believe that providing superior customer service helps to build customer loyalty and promotes
customer retention. We are able to maintain high service levels in response time and quality control, due
to the direct operational control we exercise over our propriety network. We also employ local customer
support teams, in order to provide high customer service levels.

We have implemented a range of training initiatives for our employees to ensure that our subscribers
receive quality customer service. Customer inquiries are routed to our outsourced dedicated call center,
which enables us to maintain high response levels to customer requirements. We have outsourced our
call center operations to a third party service provider, vCustomer India Private Limited (“vCustomer”).
We provide vCustomer with connectivity to all our locations so that inbound customer calls are routed to
their call center. We also provide customer relationship management software to the center, so that the
customer requests are logged into our system. We have provided the call center with tools to conduct
primary level customer fault diagnosis. This enables call center staff to provide customers with solutions
in the course of the call, which leads to higher first-call-resolution of customer requests and helps build
customer satisfaction. Call centre personnel are trained to respond to questions and complaints
concerning our broadband internet service packages and to arrange for service or repairs, in addition to
contacting potential subscribers, marketing our services and receiving payment.

Collection

Our broadband internet services are offered with the option of either pre-paid or post-paid payment plans.
Our prepaid customers subscribe to the service by advance payments for the applicable service period.
On expiry of the validity period or allowed usage limit, whichever occurs first, the customer can extend
the service period by making an additional payment. Post-paid customers subscribe to our broadband
internet service by making payments on a monthly basis. Billing is typically done in advance on a
monthly basis, although we also offer annual payment options. We process billing and payment
transactions through a centralized billing system.

Our subscribers may select from various payment alternatives. Subscribers have the option to (a) make
payments through designated drop boxes located at high-traffic areas in cities; (b) request for payment
collection at their residence; (c) make online payments through internet banking or by credit card; (d)
make payments through credit card through an interactive voice response ("IVR") gateway.

We operate a robust billing platform which allows us to offer convergent billing for multiple services.
We use customer relationship management software that is customized to our business, and allows us to
provide billing updates to customers through short message service methods ("SMS").

Subscribers who are in arrears in their scheduled payments are contacted through telephone or in writing.
85
If, after being contacted, the subscriber fails to make the payment within stipulated grace period
following the payment due date, the service is suspended.

Technology Overview

Network Operating Centre (NOC)

Our broadband network is monitored by our Network Operation Centre, or "NOC", which enables us to
ensure that the network infrastructure is functioning to provide high-quality service to broadband internet
customers. By maintaining a central NOC in Surat, and regional NOCs in each city we operate in we are
able to:

• Promptly detect and report problems in service area


• Co-ordinate with regional customer support centers in a timely manner to solve problems;
• Monitor the following aspects of the network: internet links and network parameters, such as
number of cable modems and traffic and corporate network devices; and
• Escalate service response based on priority of problems.

NOC Operations

The centralized NOC team is comprised of about ten expert network engineers working in shifts to
provide twenty-four hours a day, seven days a week technical support services. The network operations
provide centralized network monitoring, management and troubleshooting support for our regional NOCs
at each ISP locations. Using various network tools and monitoring systems, all of our NOCs are able to
proactively plan and predict network and bandwidth requirements.

Our IT System

We have our own in-house IT team consisting of about 15 experienced engineers. Our IT team is central
to our business operations as they are primarily responsible for our centralized IT infrastructure. The
team’s responsibilities include maintenance of the billing system and the generation of new bills. The
team has also developed a customer report and billing system that assists us in approaching prepaid
customers upon expiry of their account. Our IT team has built and maintains the customer relations
management software (“CRMS”) that helps log and track customer service requests to ensure that all
customer calls are attended to in a timely fashion. Apart from this, our IT team performs various
functions, such as the maintenance of the payment gateway, the implementation of new customer
offerings and promotional plans, as well as software development and configuration for the maintenance
of intranet applications for intra-office communication.

Competition

The key factors in competition are network availability, reputation for customer service, service offering
against broadband speed, ease of use, pricing and quality of service. We were one of the early movers in
the cable ISP space using HFC-DOCSIS technology. We believe that we are able to compete effectively
in the residential internet service segment using this technology, which is the focus of our broadband
internet service business. Our key competitors include telecommunications companies such as BSNL,
MTNL, Airtel, Tata Communications and Reliance Communications, which rely on ADSL and Ethernet
technology and cable companies such as Hathway Cable & Datacom Limited, which also use HFC-
DOCSIS technology. The principal advantage that our two-way enabled HFC technology enjoys over the
ADSL and Ethernet platform is our ability to provide cable television services over the same cable
infrastructure as our broadband internet services. We believe that this will enable us to offer competitive
pricing packages and bundled offerings for our subscribers resulting in operational efficiencies and lower
costs. In addition, we believe that our HFC network, designed as a video broadcast network, enables us to
provide higher quality content at comparatively higher speeds compared to the ADSL network, which is
based on voice and data-switching infrastructure.

Suppliers

We purchase all of our equipment from reputable manufacturers. We have not entered into any long-term
supply agreements. We use equipment that is based on widely adopted standards, such as DOCSIS

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Internet Protocol. In the event that our current suppliers are unable to fulfill our requirements, we believe
that there are various alternative suppliers, including suppliers in India.

Our principal suppliers include Motorola for field electronics and cable modems, Cisco for routers,
switches, CMTS, modems, and field electronics, and Commscope for coaxial cables.

As of September 30, 2009, we owned and operated over 990 kilometers of fiber optic cable and over
4,100 kilometers of trunk coaxial cable network, supported by 11 NOCs. Our trunk coaxial cable
suppliers provide us with a 10-year warranty covering any manufacturing defect from date of purchase.

Human Resources

As of January 31, 2010, the Company had over 478 permanent employees. We also hire temporary
employees to provide assistance in collection of dues and to provide installation support. Out employees
are not organized into any unions. We provide our employees with a range of benefits, including medical
coverage, incentive bonus schemes, workmen’s compensation and accident and life insurance.

Intellectual Property

We rely on a combination of trademark, service mark and domain name registrations, copyright
protection and contractual restrictions to protect our brand name and logos, marketing designs and
Internet domain names.

We have registered "YOU Digivision (label)" in Classes 9, 16. 38 and 41 on March 1, 2009, and in Class
35 on November 14, 2009. We are also the registered trademark owner of "YOU SCOD18 Digivision" in
Classes 9, 16, 35, 38 and 41 as of November 14, 2009. Moreover, we have registered the trademark
"YOU Telecom (label)" in Classes 9, 16 and 35 on March 1, 2009, December 12, 2008, March 8, 2009,
respectively, and in Classes 38 and 41 on October 1, 2009. We hold the trademark to "YOU (label)" in
Classes 9, 16, 35, 38 and 41 as of October 1, 2009. In addition we have applied for registration of the
trademark “YOU Broadband” in classes 9, 16, 35, 38 and 41.

Insurance

We are covered by commercial general liability insurance for loss caused to our property or operations by
theft, earthquakes, accident, fire, flood, riot, strike or malicious damage. We also maintain group medical
insurance and life insurance policies for the benefit of our employees, and maintain directors’ and
officers' liability cover.

Property

We operate all our businesses from leased and rental properties. Our registered corporate offices are also
located on leased property. We also have several offices across India, which house our local operations,
technical, sales and customer support staff in those areas. The following table sets out the details of our
material leased property:

Property Use Duration

2nd & 3rd Floors, Millenium Arcade, Opp. Samarth Park, office and internet data 11 years
Adajan-Hazira Road, Surat - 395009. Gujarat center commencing
September 1,
2001
54, Marol Co-Op. Industrial Estate, Marol, Andheri, Mumbai registered office and 5 years
corporate office commencing
February 1, 2008
1st Floor, Times Square Building, Block - A, Sushant Lok, Gurgaon office and NOC 6 years
commencing
May 20, 2005
2nd Floor Sarthik Bldg, Satellite, Ahmedabad office and NOC 9 years
commencing July
1, 2003
Sapphire Complex, Old Padra Road, Vadodara office and NOC 3 years
commencing

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Property Use Duration

October 1, 2007
Plot No. 11, Sector 19 – C, Crown Plaza, Vashi office and NOC 3 years
commencing
May 15, 2008
107, Zenith Complex, 28/2, Shivaji Nagar, Pune office and NOC 3 years
commencing
February 1, 2009
#10, Anna Mansion, Avenue Road, Nungabukkam, Chennai office and NOC 9 years
commencing
June 1, 2004
3rd Floor, Gowra Plaza, Sp Road, Secunderabad office and NOC 9 years
commencing
February 5, 2004
#47-11-11, Eswar Madhav Mansions, 1St Lane, Dwarakanagar, Vizag – office and NOC 3 years
530016 commencing
March 15, 2009
Plot No. 10/13, Marol Co-Op. Industrial Estate, Marol, Andheri, Mumbai office and NOC 5 years
commencing
August 9, 2007

CABLE TELEVISION BUSINESS OF DOPL


The following section describes the cable television business and operations of our associate company
Digital Outsourcing Private Limited and its subsidiaries and associate company. The cable television
business of DOPL is distinct from the business and operations of our Company. Our interest in the cable
television business is currently limited to the 36.24% shareholding held by our Company in Digital
Outsourcing Private Limited. We have entered into the DOPL Share Subscription and Purchase
Agreement with the DOPL Selling Shareholders for the acquisition of the DOPL Sale Shares. The
proposed DOPL Acquisition is however subject to various conditions, including the outcome of the Issue
and applicable statutory and regulatory conditions and the closing conditions stipulated in the DOPL
Share Subscription and Purchase Agreement. For further information relating to the DOPL Acquisition
and the DOPL Share Subscription and Purchase Agreement, see “History and Other Corporate Matters”
on page 101, "Objects of the Issue" beginning on page 39, "Risk Factors" on page xiv and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on
page 130.
Overview of the Cable Television Business of DOPL

DOPL (including its subsidiaries and associates) carrys on the business of cable television services.
DOPL currently provides analog cable services across 10 cities in India, including Mumbai – Navi
Mumbai, Bangalore Vishakapattam, and Nagpur. Of these 10 cities, four cities, namely Mumbai, Navi
Mumbai, Bangalore and Vishakapatnam, overlap with the Cable Broadband services footprint and
network infrastructure of our Company. Currently, with the exception of Dharwad, DOPL also provides
digital cable services in all of its cities of operation.

As of February 28, 2010, DOPL offered its services to an estimated 1.5 million homes through cable
operators and approximately 8,000 direct residential subscribers. DOPL has also commenced the
digitization of its cable services and over 100,000 customers of DOPL are provided with digital cable
television services. DOPL offers its digital cable television services under various brands, including
“YOU SCOD18 Digivision” and “YOU Digivision”.

Since its incorporation in February 2007, DOPL has acquired strategic interests in five MSOs in key
markets, and has integrated and expanded the cable television business of these MSOs to achieve
economies of scale and deliver standardized quality cable television services. For further information on
the corporate group structure of DOPL and its subsidiaries and associate company, see Financial
Statements beginning on page 129.

DOPL delivers cable television services through its own cable network infrastructure, which consists of
fiber from the head-end to the cable operator, or pursuant to arrangements with third parties for the lease
of cable network infrastructure. As of December 31, 2009, DOPL had entered into distribution
arrangements with approximately 1,100 LCOs. DOPL has also acquired significant “last mile”
connectivity in certain cities through the acquisition of LCOs with “last mile” network infrastructure. In
88
cities where our Company has operations, we enter into Dark Fiber lease arrangements with DOPL. Any
such lease arrangement is between our Company and DOPL is entered into on terms no more favorable
than those that would be extended by our Company to an unrelated third party.

In fiscal 2008 and 2009 and in the six months ended September 30, 2009, DOPL incurred losses (after
adjustment for minority interest) of Rs.25.71 million, Rs.481.59 million and Rs.171.12 million,
respectively. For further information, see the “Financial Statements” beginning on page 129.

Cable Television Operations

MSOs and LCOs

Cable television operations involve the downlinking of signals from a broadcaster’s satellite in a
particular region. The downlinked signal is received by MSOs through dish antennas. Using modulators,
decoders, encoders, transmitters, nodes and amplifiers, the signal is then distributed to end subscribers.

The Indian cable television distribution business is essentially two-layered, consisting of MSOs (or single
head-end operators) and LCOs. MSOs are entities which operate on several head-ends across various
regions of the country. A single head-end operator performs the same functions of an MSO, although at a
much smaller scale.

MSOs enter into content contracts with broadcasters, set up a head-end and fiber backbone infrastructure,
and transmit the broadcasters' channel content to LCOs, which in turn lay cables to carry the signals into
homes. MSOs usually enter into agreements with LCOs to provide the “last mile” cable link to the
subscriber’s home. The primary source of revenue of MSOs is comprised of subscription charges paid by
LCOs and fees received from certain broadcasters as carriage and placement fees. LCOs are local
operators in specific areas of a city that generally do not own head-ends, but obtain services and signals
from MSOs to provide the “last mile” connection to subscriber homes. LCOs contract for content from
MSOs for a fee, while collecting subscription fees from end customers.

A diagrammatic representation of the cable television business is set out below:

Broadcasters Customers
Single head- Signals Cable TV signals
end LCOs
operators
Purchasing

Sharing of fees Fees

The operation of the cable television business by an MSO is done either on a primary basis (i.e., the
operator provides directly to the end subscribers) or on secondary basis (i.e., the operator relies on a LCO
for the "last mile connection"). Most MSOs have mixed operations, comprising both primary and
secondary segments.

Cable television signals can be transmitted in either analog or digital form. An analog signal is sent as a
continuous data stream, while digital signals are sent in discrete coded signals that are less susceptible to
noise interference and data loss during transfer. Analog signals are directly received by television sets,
while digital signals require a STB installed at the customer's premises for reception on the television set.

DOPL sets up both analog and digital head-ends within the same premises and offers LCOs affiliated to it
the choice of analog and digital broadcast services. DOPL’s strategy is to encourage its LCOs to install
digital STBs in the customer premises to enhance the cable service offering. In this manner, DOPL
works with LCOs to strengthen customer relationships through improved service offerings, while enable
DOLP to sell additional content and value-added services to customers.

DOPL intends to leverage the digital STB platform and its operator relationships to sell additional content
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to cable customers. DOPL also intends to acquire full ownership of a significant number of LCOs to
which it provides cable services. DOPL also intends to selectively upgrade such networks and to offer
broadband services to customer homes.

Analog and Digital Television Services

Analog Cable Television Services

DOPL's analog cable television services involve the distribution of video programming from broadcast
channels through its own or third party fiber infrastructure network. A significant majority of DOPL's
subscribers currently receive analog cable services. Analog transmission is distributed to subscribers
through a franchise arrangement with an LCO, with the broadcast feed processed at an analog head-end
through a control room maintained by DOPL. The analog cable television service subscribers of DOPL
currently receive up to 85 channels. There is no selective bundling of channel content offered by DOPL
on its analog cable services platform.

DOPL's analog cable services are provided by downlinking signals containing content from various
broadcasters using multiple satellite dish antennas located at the various analog head-ends. As of
February 28, 2010, DOPL had 11 analog head-ends across the country. The signals received by the
antennas for a particular channel are then fed into an integrated receiver and decoder (“IRD”) which is
used to decrypt the scrambled channel. Signals from multiple channels are then modulated and combined
after which they are transmitted through a single cable throughout the network. The cable television
network distributes the signals from the head-end to LCOs in various service areas. These signals are then
retransmitted by the LCOs and delivered to end subscribers on the LCO’s cables.

Digital Cable Television Services

DOPL currently offers about 200 channels through its digital cable television services. Digital services
are currently offered in nine cities. DOPL's digital cable services are enhanced with value-added features,
such as interactive electronic program guides, program reservations, audio music channels and parental
controls. DOPL has recently commenced offering its digital cable subscribers additional value-added
services, pay-per-view and additional channels in a digital tier in certain key markets.

Digital cable services delivery to subscribers involves receiving signals containing content from various
broadcasters using satellite dish antennas located at various digital head-ends. DOPL currently has four
operational digital head-ends that feed their signals to nine cities across India. The signals received by the
antennas are then fed into an IRD, which has the ability to receive the signal. The signal is then encoded
and encrypted to prevent the unauthorized reception of the signal. Once encrypted, a signal undergoes a
final digital modulation process and is then combined with other analog-modulated signals before being
transmitted through the network for transmission of the signals from the head-ends to LCOs and DOPL's
direct subscribers.

DOPL installs STBs, which are required to receive digital cable signals, in subscribers’ homes. These
STBs are identified by a unique serial number assigned by their respective vendors. The STBs are
captured in DOPL's subscriber management system and inventory management system by these serial
numbers, and are assigned to subscribers in the process of activating their digital cable television services.
STBs are connected to the subscriber’s television in the LCO's network. The STB decodes and decrypts
the signals, which results in the conversion of the signals into the content that is displayed on the
subscriber’s television screen. The subscriber management system activates the STB and records
transactions for all STBs.

For digital transmission, each channel received is encoded into digital form (or converted to digital form)
by the process of encoding. The encoded channels are then encrypted and combined. The encryption
permits the MSO to control the availability of the channel at the STB level. Based on the rights granted to
an STB by the MSO, the STB may be able to decrypt specific channels enabling customers to view such
channels.

The analog combined stream and the digital combined stream are then recombined to create a signal
stream from the head-end.

The following diagram provides a description of the transmission process:


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Multiple
Channels Received Via Satellite Channels Encryption
from Broadcasters Channels Digitized Combined

Received by LCO
Decryption at STB after and sent to Transmission
authentication subscribers

HFC Distribution Network


Viewed on TV at
customers’ home

DOPL's digital cable television offerings are categorized into the following tiers:

Basic. These are benchmarked at analog cable prices and offerings include free-to-air channels, the most
popular general entertainment channels, and few genre specific-channels like news, children and themed
channels to complete the bouquet.

Premium. Certain channels for entertainment, movie, and sports features with a demand in select
consumer segments are offered at premium subscriptions in some markets. Selective bundling of channel
content determines the pace of conversion from analog to digital basic subscriptions, as well as from
digital basic to digital premium subscriptions.

Value-added services. These include pay-per view subscriptions to films and specific events, as well as
access to educational programs.

Customers, Sales and Marketing

DOPL delivers television channels on the cable distribution network directly and through distribution
arrangements with LCOs, who provide the “last mile” cable link to subscriber homes. In cases where
services are delivered through DOPL's own “last mile” cable link directly to the subscriber, the subscriber
is classified as a primary subscriber, while a subscriber who receives services through the “last mile”
cable link of an LCO is classified as a secondary subscriber.

DOPL collaborates with LCOs to serve subscribers for its cable television distribution services. Each
subscriber pays a subscription fee to the LCO, which then pays an agreed monthly amount to DOPL.
DOPL typically enters into agreements with LCOs, pursuant to which the LCOs receive the cable signal
feed and agree to offer cable services. DOPL also works with the LCO to sell digital services and to
install STBs into customer premises.

Programming

DOPL currently offers about 85 channels of local and international programming on its analog cable
television platform and about 200 channels on its digital cable television platform. The number of
channels offered is dependent on the location and subscriber demographics in the target market. To meet
the diverse needs of the large, culturally diverse and multi-lingual Indian market, DOPL offers a broad
range of content. Over the years, DOPL has developed strong relationships with broadcasters and content
providers, across popular, niche, ethnic and regional genres.

DOPL's program offering, in each of the digital platforms, is structured around popular categories, such
as General Entertainment, News and Current Affairs, Sports, Movies, Music, Infotainment. Regional
and Devotional program content.

Competition

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DOPL faces competition in the cable television services business from national cable television service
providers, as well as providers of television services through alternative technology platforms, such as
DTH satellite television and IPTV. DOPL's principal competitors include national level MSOs such as
Hathway Cable & Datacom Limited, DEN Networks, InCable and WWIL.

DOPL also competes with providers of DTH satellite television such as TataSky, DishTV, Sun Direct,
BIG TV and Airtel Digital. However, the bandwidth capacity of cable television networks is higher than
that of DTH satellite television, and this enables cable television service providers to provide subscribers
with a wider range of channels, including additional exclusive local content based on local demographic
profile of subscribers in a particular area. In the case of DTH, each additional channel requires additional
transponder space to be contracted, thus leading to an increase in operating costs with each additional
channel transmitted. In addition, adverse weather conditions, particularly heavy rain, may affect the
quality of DTH television services, whereas cable television services remain largely unaffected by
adverse weather conditions.

DOPL also faces competition from providers of IPTV, including BSNL, MTNL, and Airtel. However,
market penetration of IPTV has been relatively limited in India.

Suppliers

DOPL purchases all of its equipment from reputable manufacturers. DOPL has not entered into any long-
term supply agreements, except for the supply of STBs. DOPL's principal suppliers include Cisco for the
head-end, encryption devices, STBs and transmitters.

Employees

As of January 31, 2010, DOPL had approximately 219 permanent employees and 76 temporary contract
employees. DOPL hires temporary employees to provide assistance in the collection of subscription
payments and to provide technical support. DOPL’s employees are not organized into any unions. DOPL
provides its employees with a range of benefits, including medical coverage, incentive bonus schemes,
workmen’s compensation and accident and life insurance.

Intellectual Property

DOPL relies on a combination of trademark, service mark and domain name registrations, copyright
protection and contractual restrictions to protect its brand name and logos, marketing designs and Internet
domain names. DOPL contracts for its content from the relevant copyright holder. In the case of
broadcast channels, this is achieved by contracting for the content either directly with the broadcasters or
with their respective distribution arm.

Insurance

DOPL's cable network infrastructure is covered by commercial general liability insurance policies for loss
caused by earthquakes, accident, fire, flood, riot, strike or malicious damage. DOPL also has group
medical insurance and life insurance policies for the benefit of its employees.

Property

DOPL leases various properties across the various cities in which DOPL operates.

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REGULATIONS AND POLICIES

The following description is a summary of the relevant regulations and policies as prescribed by the
government that are applicable to us. The regulations set out below are not exhaustive, and are only
intended to provide general information to the investors and are neither designed nor intended to be a
substitute for professional legal advice.
The Primary Laws Applicable to the Business of the Company

Foreign Direct Investment

Under the current policy of the Government of India on foreign investment, foreign investment in
companies carrying out ISP activities without gateway, infrastructure providers providing dark fiber, right
of way, duct space tower (category I) and/or electronic mail and voice mail is permitted up to 100.00%,
of which up to 49.00% foreign investment is permitted under the automatic route and an FIPB approval is
required for any foreign investment exceeding 49.00%. However, pursuant to Press Note 2 (2007 Series)
the Government of India has mandated all such companies to divest 26.00% of their equity in favor of the
Indian public within five years, if such companies are listed in other parts of the world. Further, such
limits are subject to applicable licensing and security requirements prescribed by the DoT.

Other Regulations

The Indian Telegraph Act, 1885, as amended (the “ Telegraph Act”)

The Telegraph Act governs all forms of the usage of ‘telegraph’ which expression has been defined to mean any
appliance, instrument, material or apparatus used or capable of use for transmission or reception of signs, signals,
writing, images, and sounds or intelligence of any nature, by wire, visual or other electro-mangnetic emissions,
radio waves or hertzian waves, galvanic, electric or magnetic means. Under Section 4 of the Telegraph Act, the
Director-General of Posts and Telegraphs may grant a license to any person to establish, maintain or work a
telegraph within any part of India with such conditions as it may think fit. In addition, the Telegraph Act
provides that if the holder of a license granted under Section 4 contravenes any condition contained in the
license, such person shall be punished with fine which may extend to Rs.1,000 and with a further fine that may
extend up to Rs.500 for every week during which the breach of the condition continues.

The Wireless Telegraphy Act, 1933, as amended (“Wireless Telegraphy Act”)

In addition to a telegraph license under Section 4 of the Telegraph Act, land -based wireless providers
and users also require an additional license under the Wireless Telegraphy Act. Section 3 of the
Wireless Telegraphy Act forbids any person from possessing a wireless telegraphy apparatus without a
license. Under Section 5 of the Wireless Telegraphy Act, the license to possess the wireless and radio
equipment and to use it for wireless services is issued by the telegraph authority designated under the
Telegraph Act, i.e. the Director-General of Posts and Telegraphs. Section 11 of the Wireless
Telegraphy Act states that a license under the Wireless Telegraphy Act does not authorize the licensee
to do anything that is prohibited under the Telegraph Act and that such license shall not authorize any
person to do anything for which a license or permission under the Telegraph Act is required.

Broadband Policy, 2004 (the “Broadband Policy”)

The Broadband Policy issued by the DoT provides a framework for the creation of infrastructure
through various access technologies which can contribute to the growth of broadband services in India.

The Broadband Policy states that a cable TV network can be used as a franchisee network of the
service provider for providing broadband services. However, all responsibilities for ensuring compliance
with the terms and conditions of the license vest with the licensee company. The terms of the franchise
agreement between the licensee company and its franchisee are to be settled mutually by negotiation
between the two parties involved. Further, the licensee company must comply with the quality of service
parameters for broadband services by the TRAI.

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Guidelines and General Information for Grant of Licence for Operating Internet Services dated August
24, 2007, (“ISP License Guidelines”)

The DoT issued the ISP License Guidelines for the grant of licenses to provide Internet Services on a
non-exclusive basis. The ISP License Guidelines provide for inter alia, the following

a. Service area: Licenses are awarded in categories, namely, Category A and B depending on
the territory covered by the License.

b. Foreign direct investment: Foreign investment in companies carrying out ISP activities
without gateway, infrastructure providers providing dark fiber, right of way, duct space tower
(category I) and/or electronic mail and voice mail is permitted up to 100.00%, of which up to
49.00% foreign investment is permitted under the automatic route and an FIPB approval is
required for any foreign investment exceeding 49.00%. However, pursuant to Press Note 2
(2007 Series) the Government of India has mandated all such companies to divest 26.00% of
their equity in favor of the Indian public within five years, if such companies are listed in other
parts of the world. Further, such limits are subject to applicable licensing and security
requirements prescribed by the DoT.

c. Security conditions: The licensee company is required to take adequate and timely
measures to ensure that the information transacted through a network by subscribers is
secure and protected. In addition, a majority of the board of directors of the licensee
company is required to be Indian citizens.

d. Fees payable: A one-time entry fee of Rs.2 million is required to be paid for a Category A
Internet Service Licence before signing the license agreement. An annual license fee at the
rate of 6% of adjusted gross revenue, subject to a minimum of Rs.50,000 and Rs.10,000
for Category A and Category B respectively is charged per annum. Further, a financial
bank guarantee of Rs.1 million for Category A and Rs.0.1 million for category B each
valid for one year, and a performance bank guarantee of Rs.20 million for Category A,
and Rs.2 million for Category B, each valid for two years, are to be provided in favour of
DoT before signing the license agreement.

The licensee company is required to provide service within 24 months from the date of signing the
license agreement. The license is valid for a period of 20 years and access to the Internet through an
authorized cable operator is permitted to ISPs without additional licensing subject to the provisions of
the Cable Television Act. In addition, the license is governed by the provisions of the Telegraph Act,
the Wireless Telegraphy Act and the TRAI Act.

License Agreement for Provision of Internet Service

An internet service provider is required to obtain a license and enter into a standard agreement (the “ISP
License Agreement”) with the DoT before starting operations as an ISP. In addition to the conditions
required to be followed by a licensee company under the ISP License Guidelines, the ISP License
Agreement provides for further requirements to be adhered to by the licensee.

The licensee is required to make its own arrangements for the infrastructure involved in providing the
service and is solely responsible for the installation, networking and operation of the necessary
equipment and systems, treatment of subscriber complaints, issue of bills to subscribers, collection of
revenue, and attending to claims and damages arising out of its operations. In the process of operating
the Internet service, the licensee is responsible for the installation of the Internet nodes, i.e.,
routers/servers, and the proper operation and maintenance of its network infrastructure.

The licensee is required to adhere to such quality of service standards and to provide timely
information as required by DoT. The licensee is responsible for:

a. maintaining performance and quality of service standards;

b. maintaining the mean time to restore within the specified limits of the quality of service; and

c. keeping a record of number of faults and rectification reports in respect of the service, which is
94
required to be produced before the DoT or the TRAI as and when and in whatever form desired.

In addition, the licensee is required to ensure that objectionable, obscene, unauthorized or any other
content, messages or communications infringing copyright, intellectual property rights or
international and domestic cyber laws, in any form, or inconsistent with the laws of India, are not
carried in its network.

In particular, the licensee is obliged to provide, without delay, all tracing facilities with respect to
nuisance or malicious messages or communications transported through its equipment and network, to
authorized officers of Government of India and the relevant state government, when such information
is required for investigations of crimes or in the interest of national security. The licensee company
must also comply with the provisions of the Telegraph Act and the TRAI Act.

The DoT may, without prejudice to any other remedy available for the breach of any conditions of the
licence agreement, by written notice of 30 days after affording a reasonable opportunity of
hearing, issued to the licensee company at its registered office 30 days in advance, terminate the
licence agreement if the licensee company:

a. fails to perform any obligation(s) under the licence agreement including timely payments of fee
due to the DoT;

b. fails to commission or deliver Internet services within the time period specified in the license or
in any extension thereof granted by the DoT;

c. goes into liquidation or is ordered to be wound up; or

d. is recommended for termination by the TRAI for non-compliance of the terms and conditions of
the licence agreement.

The DoT reserves the right to impose any penalty as it may deem fit for violations of terms and conditions of
the license agreement.

The Telecom Regulatory Authority of India Act, 1997 (“TRAI Act”)

The Telecom Regulatory Authority of India (the “TRAI”) was established in 1997 by the TRAI Act, to
regulate telecommunication services in India, including broadcasting and cable services. The TRAI
is vested with recommendatory, regulatory and tariff setting functions, including (a) making
recommendations on the need and timing for introduction of new service providers, (b) making
recommendations on the terms and conditions of license to a service provider, (c) ensuring compliance
of terms and conditions of license, (d) ensuring technical capability and effective inter-connection
between service providers, (e) specifying standards of quality of service to be provided by the service
provider and ensuring the quality of service, and conducting a periodical survey of such service provided
by the service providers, (f) protecting interest of consumers of telecommunication services, (g) levying
fees and other charges at such rates and in respect of such services as may be determined by regulations.
In addition, the TRAI Act contains penalty provisions for offences committed by a company under the
TRAI Act.

TRAI Press Release – No. 73/2005

TRAI, by a press release dated September 12, 2005, issued a directive to all ISPs mandating ISPs to
obtain explicit consent of the subscribers before making value-added services chargeable.

The Telecommunication Tariff Order, 1999, as amended (“Tariff Order 1999”)

The Tariff Order 1999 issued by TRAI, provides the terms and conditions under which
telecommunication services within India and outside India may be provided, including rates and related
conditions under which messages shall be transmitted to any country outside India, deposits, installation
fees, rentals, free calls, usage charges and any other related fees or service charge. Reporting
requirements are not applicable for services provided to bulk customers, provided that all ISPs
providing dialing internet services shall, within seven days after the close of every quarter, furnish brief
details about the number of plans and the bulk customers availing of such plans along with a
95
certification for information and record.

A tariff plan, once offered by an ISP, is available to a subscriber for a minimum period of six months
from the date of enrolment of the subscriber to that tariff plan. However, any tariff plan presented,
marketed or offered as valid for any prescribed period exceeding six months or as having lifetime or
unlimited validity in lieu of an upfront payment shall continue to be available to the subscriber for the
duration of the period as prescribed in the plan and in the case of lifetime or unlimited validity plans,
as long as the ISP is permitted to provide such telecom service under the current license or renewed
license. In the case of plans with lifetime validity or unlimited validity, the service provider shall also
inform the subscribers of the month and year of expiry of his current license.

ISPs are free to reduce tariffs under any tariff plan at any time. However, no tariff item in a tariff plan
can be increased by ISPs:

a. In respect of tariff plans with prescribed periods of validity of more than six months,
including tariff plans with lifetime or unlimited validity and also involving an upfront
payment to be made by the subscriber towards such validity period, during the entire period
of validity specified in the tariff plan;

b. In respect of other tariff plans, within six months from the date of enrolment of the subscriber;
and

c. In the case of recharge coupons with a validity of more than six months under any tariff
plan, during the entire period of validity of such recharge coupon.

Guidelines for Issue of Permission to Offer Internet Telephony Services, 2002 (the “Internet Telephony
Guidelines”)

As per the Internet Telephony Guidelines, only ISP licensees are permitted to offer Internet telephony
services within their service area. ISPs desirous of offering Internet telephony services are required to
sign an amendment to their ISP license to such effect. The Internet Telephony Guidelines also
mandate security monitoring requirements.

Guidelines for Permission to offer Virtual Private Network (“VPN”) Services by Internet Service
Providers (ISPs), 2004 (the“VPN Guidelines”)

The VPN Guidelines provide for the provision of VPN services by ISPs in addition to the services
envisaged by their respective licenses. ISPs desirous of offering VPN services are required to sign an
amendment to their ISP license to such effect. Such amendment to the ISP license agreement is issued
and governed by the provisions of the Telegraph Act, the Wireless Telegraphy Act and the TRAI Act.
The VPN Guidelines also mandate security monitoring requirements.

Information Technology Act, 2000 as amended (“IT Act”)

The Information Technology Act regulates and governs the communications made and services
provided in the electronic form. The provisions of the IT Act are applicable to an internet service
provider who is a third party and does not actually host any content. The IT Act prescribes punishment
for publication of inter alia obscene, offensive materials through electronic means The IT Act has
been amended by the Information Technology Amendment Act, 2008.

As per Section 66A of the IT Act, any person who sends information which is grossly offensive or has
menacing character, or any information which he knows to be false for inter alia causing annoyance,
danger by making use of computer resource is punishable with imprisonment which may extend to
three years and fine. Under section 67 of the IT Act, the publication of or causing the publication in
electronic form, lascivious material or material which is likely to corrupt the persons who read, see or
hear the matter is punishable with on a first conviction with imprisonment of which may extend to three
years and with fine which may extend to Rs.5,00,000 and in the event of a second or subsequent
conviction with imprisonment of for a term which may extend to five years and also with fine which may
extend to Rs.1,000,000.

Further, Section 67A of the IT Act provides that whoever publishes or transmits or causes to be
96
published or transmitted in the electronic form, any material which contains sexually explicit act or
conduct will be punished on the first conviction with imprisonment for a term which may extend to five
years and with a fine which may extend to Rs.1,000,000 and in the event of a second or subsequent
conviction, with imprisonment which may extend to seven years and a similar fine, unless it can be
proved that the publication is justified for religious purposes or for public good on the ground that it is
in the interest of science, literature, art or learning or other objects of general concern. Similarly Section
67B of the IT Act provides that whoever publishes or transmits or causes to be published or transmitted
in the electronic form, any material which (a) depicts children engaged in sexually explicit act or
conduct or (b) creates text or digital images, collects, seeks, browses, downloads, advertises,
promotes, exchanges or distributes material which depicts children in obscene or indecent or sexually
explicit manner, (c) cultivates, entices or induces children to online relationships for sexually explicit
acts or in any manner which is offensive, (d) facilitates the abuse of children online, or (e) records in
any electronic form any sexually explicit acts which children, shall be liable to the similar penalties as
that provided in Section 67A of the IT Act.

Competition Act, 2002, as amended (the “Competition Act”)

The Competition Act 2002, has been enacted to prevent anti-competitive practices, promote and
sustain competition, protect the interests of consumers and ensure freedom of trade in markets in
India.

As per the notified sections of the Competition Act, entering into agreements between enterprises
which inter alia affect the prices, supply, distribution or other such collusive arrangements are anti –
competitive in nature and are prohibited under Section 3 of the Competition Act. Section 4 of the
Competition Act, prohibits an enterprise that is in a dominant position from abusing its dominant
position. Further, Section 5 of the Competition Act provides the assets/ turnover thresholds applicable to
acquisitions, merger and amalgamations in order to determine whether the transaction would be
regarded as a combination for the purposes of the Competition Act. However, Section 6 of the
Competition Act which provides for regulation of ‘combinations’ has not been notified yet. Section 6
(1) of the Competition Act provides that no person or enterprise shall enter into a combination which
causes or is likely to cause an appreciable adverse effect on competition within the relevant market in
India and such a combination shall be void .

Telecom Consumers Protection and Redressal of Grievances Regulations, 2007 (3 of 2007) f.no. 303-
10/2006-qos

The Regulation made it mandatory for the service provider to establish a “Call Centre” for redressal of
grievances of its consumers, and , such Call Centre shall be accessible to its consumers round the clock
during all days in a week.
The Regulation also stipulates handling of consumer grievances by authority of service providers namely
Nodal Officers and Appellate Authority and also stipulates the time frame within which such grievances
shall be addressed.
The Regulation also makes it mandatory upon the service provider to publish a manual of practice for
handling consumer complaints and file reports before TRAI.

Primary statutory and regulatory requirements in connection with Cable Television

The following acts, rules and regulations govern the Cable Television business that the Company
proposes to enter:

Foreign Direct Investment

FDI, including FII investments in the activities pertaining to proposed cable television network business
that the company is permitted up to 49% of the paid up equity share capital of the Company with prior
approval of FIPB. DOT August 24, 2007 No 820-1/2006-LR

The Cable Television Networks (Regulation) Act, 1995, as amended (the “Cable Television Act”)

Cable television services are governed by Cable Television Act and the guidelines and notifications
issued by the Telecom Regulatory Authority of India (the “TRAI”) and the Ministry of Information and
Broadcasting, Government of India (the “MIB”) from time to time. The Cable Television Act regulates
97
the operation of cable television networks in India. Section 3 of the Cable Television Act requires
any cable television network operator to be registered with the head post master of the area in which
the cable television network is proposed to be set up. Under the Cable Television Act and the Cable
Television Rules (as hereinafter defined), companies wherein minimum 51% of the paid up share capital
is held by Indian citizens are eligible to provide cable television services. The Cable Television Act
further stipulates that no programme or advertisement shall be transmitted or re-transmitted unless it is
in conformity with the prescribed programme and advertisement code provided in the Cable Television
Rules. The Cable Television Act also mandates that the equipment to be used by a cable operator has to
be in conformity with the standards prescribed by the Bureau of Indian Standards (the “BIS”). The
Cable Television Rules also stipulate that registration, as a cable operator should be renewed every 12
months.

Under an amendment to the Cable Television Act in 2002, every cable operator, in the CAS notified
area, whose transmission is through an addressable system, is required to submit a report to the
Government of India in a prescribed form regarding (i) the total number of subscribers, (ii) the
subscription rates and (iii) the number of subscribers receiving programmes transmitted in the basic
service tier or a particular programme or set of programmes transmitted on pay channels. Further, every
cable operator is also required to publicise, in a prescribed manner, to the subscribers, the subscription
rates and the periodic intervals at which such subscriptions are payable.

The Cable Television Network Rules, 1994 (the “Cable Television Rules”)

The Cable Television Rules stipulate that registration as a cable operator should be renewed every 12
months. Rule 11 of the Cable Television Rules stipulates that no MSO shall provide cable television
network services with addressable systems in any one or more of the notified areas (“CAS Areas”)
without the prior permission of the MIB. Every subscriber who seeks to receive one or more pay
channels is required to apply to the MSO to supply and install a set-top box. Upon the installation of
such set-top box, every MSO shall start transmitting the pay channel in encrypted as well as unencrypted
form for a period of not less than 15 days and in the event of a successful completion of the same, the
MSO shall transmit the pay channels only through an encrypted form. The Cable Television Rules
stipulates that no programme or advertisement shall be carried in a cable service which offends public
morality, decency and religious susceptibilities of subscribers.

TRAI Notifications Pertaining to the Cable TV Business.


`
The following regulations have been notified by the TRAI:

1. The Telecommunication (Broadcasting and Cable Services) Interconnection Regulation, 2004, as


amended (the “Interconnection Regulations”)

The Interconnection Regulations apply to all arrangements among service providers, including
MSOs, and LCO’s for interconnection and revenue sharing for all telecommunication services,
including cable services in India. Interconnection means the commercial and technical
arrangements under which the service providers connect, including through electro-magnetic
signals, their equipment networks and services to enable their customers to have access to the
customers, services/and or networks of other service providers. The Interconnection Regulations
issued by TRAI specify, inter alia, the following:

a. Must Provide Clause: Broadcasters are required to provide signals on non-discriminatory


terms to all distributors of television channels. Similarly, MSOs are required to re-transmit
signals received from a broadcaster on a non-discriminatory basis to LCOs. Broadcasters are
not allowed to engage in any practice or activity or enter into any understanding or
arrangement, including exclusive contracts with any distributor of TV channels, that prevents
any other distributor of TV channels from obtaining such TV channels for distribution.
However, these provisions do not apply in the event that a distributor of TV channels has
defaulted in payments.

b. Disconnection with respect to any of TV Channel Signals: No Broadcaster/MSO shall


disconnect the TV channel signals with respect to any distributor of TV channels
without giving three weeks’ prior written notice and public notices in two newspapers briefly
indicating the reasons for the proposed action.
98
c. Interconnection Agreements: In areas where CAS has not been notified, the
interconnection agreements between broadcasters and MSOs are required to be based on the
standard terms in the Reference Interconnection Offer ( the “RIO”) published by the
broadcasters, which, interalia, describes the technical and commercial conditions for
interconnection.

d. In March 2009, the TRAI, by an amendment to the Interconnection Regulations, made it


mandatory for all broadcasters to have RIO’s for their addressable systems in order to
facilitate the introduction and roll-out of CAS on a voluntary basis. The amendment bars
distributors of television channels from seeking signals in terms of the must provide clause of
the Interconnect Regulations from a broadcaster for those channels for which a carriage fee is
being demanded by such distributor. In addition, minimum technical specifications for
addressable systems have been specified. The amendment also makes it mandatory for the
broadcasters of pay channels and distributors of TV channels to provide the terms and
conditions of all their interconnection agreements to writing.

2. The Standards of Quality of Service (Broadcasting and Cable Services) (Cable Television – Non
CAS Areas) Regulation, 2009, as amended (the “SQS non-CAS Regulations”)

The SQS Non CAS Regulations contain provisions relating to connection/disconnection or


shifting of cable services, the billing procedure and billing related complaints, the mechanism for
the handling of complaints and additional standards of quality of service relating to digital
decoders and set-top boxes for digital cable service in non-CAS areas.

3. The Telecommunication (Broadcasting And Cable) Services (Second) Tariff 2004, as amended

In areas where CAS has not been notified, TRAI has imposed a ceiling on tariffs of bouquets
being offered by (i) broadcasters to MSOs, (ii) MSOs to LCOs, and (iii) MSOs/LCOs directly to
subscribers. By an amendment in 2007, tariffs applicable were fixed at rates prevalent as of
December 1, 2007 plus 4%. This was further increased by an amount not exceeding 7% of the
prevailing tariff by an amendment in 2008. However, there are no price caps on channels
being provided to subscribers through addressable platforms in such areas where CAS has not
been notified.

MSOs are permitted to subscribe to pay channels from broadcasters on an a-la-carte basis and
retransmit such pay channels to LCOs in a bouquet format.

4. Draft Recommendations on Restructuring of Cable TV Services, July 2008

In July 2008, TRAI submitted recommendations to the MIB relating to the restructuring of the
regulatory framework for cable TV services in India. TRAI has recommended, inter alia, the
introduction of a separate licensing framework for MSOs and LCOs, pursuant to which licenses
will be granted by the MIB either directly or through any other administrative unit under its direct
control. The duration of such licenses shall be five years. TRAI has recommended that all existing
MSOs and LCOs obtain the new prescribed license, within a period of 12 months from March 31
of the year in which the revised procedure is notified or from the date of expiry of their
respective existing registration, whichever is earlier. The non-refundable entry fee for MSO and
LCO licenses, based on the recommendations, was stipulated as follows:

Type of License LCO MSO

District Level Rs.10,000 Rs.100,000

State Level Rs.100,000 Rs.1,000,000

National Level N/A Rs.2,500,000

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Further, all cable television service providers, including MSOs, will be required to comply with
BIS Standard IS 13420 (revised) relating to system performance and ensure the delivery of proper
signals at subscriber premises. TRAI has made a provision for existing cable operators to digitise
their transmission within five years from the date of notification of the new licensing regime.
TRAI has also recommended that the Indian Broadcasting Federation maintain an indicative list of
accepted encryption and subscriber management softwares which can be deployed by MSOs. The
recommendations of TRAI are currently under consideration from the MIB.

Guidelines for obtaining License for Providing Direct-to-Home (DTH) Broadcasting Service in India
(the“DTH Guidelines”)

DTH service providers are licensed under the DTH Guidelines and are, subject to the mandatory
preliminary requirements stipulated thereunder. A DTH licensee is additionally required to execute a
separate license with the MIB.

Guidelines for Obtaining License for providing Head-End In The Sky (HITS) Broadcasting Service in
India), (the“HITS Guidelines”)

On November 26, 2009 the GoI issued the HITS Guidelines for Providing Headend-In-The-Sky (HITS)
Broadcasting Service in India.
The main features of the guidelines are detailed below
a. Total direct and indirect foreign investment including FDI is allowed up to 74%. However, prior
approval of the Foreign Investment Promotion Board or FIPB is required for FDI beyond 49%.
b. Cross media holding is restricted to 20% of total paid-up equity is prescribed for various segment of
broadcasting services so as to avoid vertical integration and prevent discriminatory practices among
various players in the distribution chain and to promote competition.
c. HITS service providers are allowed in both ‘C-Band’ and ‘Ku-Band’ to beam their signals
d. HITS operators will have to set up a monitoring facility as prescribed by the Government and can
carry only those channels registered with I&B and permitted under the downlink policy.
e. HITS operators are not permitted to provide signals directly to the end consumers or cable subscribers.
However, if a HITS operator is also an MSO or LCO, it can do so through its distribution network.
f. One-time, non-refundable entry fee of Rs.100 million is required to be paid to become a HITS
operator.
g. The HITS operator license is valid for 10 years.
h. There is no restriction on the number of permissions that may be given to operate as a HITS operator.
All those found to be eligible and fulfill the terms and conditions can apply for the license.

Entertainment Tax Regulations

In majority of states in India, the payment of entertainment tax is a liability of the cable operators.
Cable operators are required to register themselves under the respective state entertainment laws and to
deposit the entertainment tax with the concerned department on a monthly basis. Cable operators are
also required to file returns from time to time.

In the States of West Bengal, Karnataka and Andhra Pradesh, the respective State Governments have
amended the entertainment tax laws and rules such that the payment of entertainment tax is the liability
of the MSOs. The constitutional validity of such amendments of these regulations are pending before
the Karnataka High Court and other courts. In the other states, only the LCOs are liable for
entertainment tax for providing cable television services, which must be deposited with concerned
authority/department/agency.

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HISTORY AND CERTAIN CORPORATE MATTERS

Background:
Our Company was originally incorporated as NetShastr Facilities India Private Limited under the
Companies Act, 1956 on November 13, 2000 in NCT of Delhi. The name of our company was changed
to BG Broadband Networks India Private Limited and a fresh certificate of incorporation consequent
upon change of name was issued by the Registrar of Companies, Delhi on June 29, 2001 to reflect the
nature of business activities carried out by our Company. Subsequently, our Company’s name was further
changed to YOU Broadband Networks India Private Limited and a fresh certificate of incorporation
consequent upon change of name was issued by the Registrar of Companies, Maharashtra, Mumbai on
December 21, 2006, pursuant to change in name of our Promoter in our Company. Further, pursuant to
the order of High Court of Bombay on the Scheme of Amalgamation between YOU Telecom India
Private Limited and our Company, our Company’s name was changed to YOU Telecom India Private
Limited and a fresh certificate of incorporation was issued by the Registrar of Companies, Maharashtra,
Mumbai on November 23, 2007. The name of our Company was once again changed to YOU Broadband
& Cable India Private Limited and a fresh certificate incorporation consequent upon change of name was
issued by the Registrar of Companies, Maharashtra, Mumbai on November 17, 2009 to reflect the nature
of business activities in our Company. Our Company was converted into a public limited company and
the name was changed to YOU Broadband & Cable India Limited and a fresh certificate of incorporation
was issued by the Registrar of Companies, Maharashtra, Mumbai dated January 12, 2010.
We commenced operations in 2001 and currently provide high-speed broadband cable internet services to
our residential and enterprise segment customers across 11 cities in India. We currently offer high-speed
broadband internet access through our two-way HFC cable network. For further details, please refer to
section titled “Business” on page 76 of this Draft Red Herring Prospectus.
Change in Registered Office of our Company

Previous Address New Address Reasons for change Date of change


11-A, Sucheta Bhawan, 1st Floor, Midas, Sahar Growth of the Company February 24, 2003
2nd Floor, Vishnu Plaza, Kondivita, M.V. (Operational)
Digambar Marg, New Road, Andheri (East),
Delhi – 110 002 Mumbai – 400 059,
Maharashtra
1st Floor, Midas, Sahar Ground Floor, Building Growth of the Company March 25, 2003
Plaza, Kondivita, M.V. No.1-C, Nirlon (Larger premises)
Road, Andheri (East), complex, off Western
Mumbai – 400 059, Express Highway,
Maharashtra Goregaon (East),
Mumbai – 400 063
Ground Floor, Building Plot No.54, Marol Co- Growth of the Company September 1, 2008
No.1-C, Nirlon operative Industrial (Operational and Larger
complex, off Western Estate, Makwana, premises)
Express Highway, Andheri (East),
Goregaon (East), Mumbai – 400059
Mumbai – 400 063

Scheme of Amalgamation
The High Court of Bombay through its order dated April 11, 2007, approved the scheme of arrangement
and amalgamation of the then You Telecom India Private Limited (“Transferor Company”) with our
Company, (“Scheme of Amalgamation”) which became effective from the date on which the certified
copies of the orders of the High Court of Bombay under Sections 391 and 394 of the Companies Act
were filed with the RoC (“Effective Date”). The appointed date was April 1, 2006, (“Appointed Date”),
and the record date for the purposes of re-organisation and issue of shares was January 05, 2007
(“Record Date”). Upon the Scheme of Amalgamation taking effect, in consideration of the
amalgamation, our Company issued and allotted one equity share of Rs.10 each of our Company, and one
0.000001% non-cumulative redeemable preference share of face value Rs.10 each of our Company to the
shareholders of the transferor company, whose names appeared in the register of members on the Record
101
Date, in the ratio of one fully paid up equity shares of the face value of Rs 10/- each, of our Company, for
one fully paid up equity share of the face value of Rs.10/- each, of the transferor company, and one fully
paid up 0.000001% non-cumulative redeemable preference share of face value Rs.10/- each of our
Company, for 1 fully paid up 0.000001% non-cumulative redeemable preference share of face value
Rs.10/- each of the transferor company, respectively.
Upon the Scheme of Amalgamation becoming effective, the transferor company was dissolved. Further,
with effect from November 23, 2007, the name of our Company was changed from ‘YOU Broadband
Networks India Private Limited’ to ‘YOU Telecom India Private Limited’.
Scheme of Capital Reduction
The High Court of Bombay through its order dated December 18, 2009 and supplementary order dated
January 28, 2010 approved reduction of issued, subscribed and paid up equity share capital of our
Company from Rs.3,913,220,040 (divided into 391,322,004 Equity Shares of Rs.10 each) to
Rs.2,308,611,910 (divided into 230,861,191 Equity Shares of Rs.10 each), a reduction in securities
premium account from Rs.171,017,920 to nil and a reduction in capital reserve account from
Rs.60,528,942 to nil pursuant to the provisions of Sections 78, 100 to 103 of the Companies Act.
Our Company has 18 shareholders as on the date of filing of this Draft Red Herring Prospectus with
SEBI. For further details, please refer to section titled “Capital Structure” on page 24 of this Draft Red
Herring Prospectus.

Our Main Objects


Our main objects as contained in our Memorandum of Association are:
1. To carry on the business as Internet Service Provider, Application Service Provider and other related
value added services including video streaming, voice mail, electronic mail, videotext, video
conferencing, electronic commerce platform, close circuit messaging, interactive and enriched television
content to all users including industrial, commercial and residential users and to do all incidental acts or
things necessary for attainment of above objective.
2. To carry on the business of providing communications infrastructure including network facilities such as
dark fibre, fixed links and cables, right of way, duct space, towers, poles and pits to communication
service providers, cable operators, internet service providers, uplinking and broadcasting entities or any
other entity for transmission of data, voice, visual or any other electronic, electrical, magnetic or optical
signal whether now known or hereafter devised.
3. To buy, sell, lease, hire, own, lay or deal in all capacities, applications, specifications, characteristics and
descriptions of all kinds of wires and cables inter-alia including optical fibre cable, co-axial cables,
communication equipment and other allied goods used for all types of voice communication.
Key Milestones

Sr. No. Year Details


November Our Company was originally incorporated as Net Shastr Facilities India Private
1.
13, 2000 Limited with IP-I License
June 29, The name of our Company was changed to BG Broadband Networks Private
2.
2001 India Limited.

November Launch of the operations of the Company in Surat.


3.
2001

April 2002 Launch of operations in Baroda.


4.
February Launch of operations in Mumbai and Ahmedabad
5.
2003
February The registered office of our Company was relocated from 11-A, Sucheta
6.
24, 2003 Bhawan, 2nd Floor, Vishnu Digambar Marg, New Delhi – 110 002 to 1st Floor,
Midas, Sahar Plaza, Kondivita, M.V. Road, Andheri (East), Mumbai – 400 059,
Maharashtra
July 2003 Launch of operations in Vishakhapatnam
7.

102
Sr. No. Year Details
October Launch of operations in Pune and Hyderabad
8.
2003
February Launch of operations in Chennai, Bangalore, and Gurgaon including the
9.
2004 establishment of a national level call centre at Mumbai.
June 2006 Citigroup Venture Capital International Growth Partnership Mauritius Limited
10.
acquired YTML.
December The name of our Company was changed to YOU Broadband Networks India
11.
21, 2006 Private Limited.
April 2007 Our Company entered into the business transfer agreement with Icenet.Net
12.
Limited.
April 11, Our Company was amalgamated with then YOU Telecom India Private Limited
13.
2007 by an order of the High Court.
November Pursuant to the amalgamation, the name of our Company was changed to YOU
14.
23, 2007 Telecom India Private Limited.
April 2007 Our Company received approval from Foreign Investment Promotion Board to
15.
invest in downstream cable companies and then ventured into Cable TV
business and stake in Digital Outsourcing Private Limited was bought to
manage this business.
November The name of our Company was changed from YOU Telecom India Private
16.
17, 2009 Limited to YOU Broadband & Cable India Private Limited
January Pursuant to the conversion of our Company from a private limited company to a
17.
12, 2010 public limited company, the name of our Company has been changed to YOU
Broadband & Cable India Limited.
Awards/ Certifications Received by our Company
Our Company has received the following awards/ certifications:
ISO 9001-2000 certification bearing number FS 536974 for design development and provision of
broadband internet enabled data, voice services.
Amendments to the Memorandum of Association
Since our incorporation, the following changes have been made to our memorandum of association:

Date Particulars
June 29, 2001 Change of name from Netshastr Facilities India Private Limited to BG Broadband
Networks India Private Limited.
July 31, 2002 Increase in authorized share capital from Rs. 500,000 to Rs.200,000,000
February 24, Shifting of registered office from NCT of Delhi to State of Maharashtra
2003
March 31, 2004 Increase in the authorised share capital from Rs.200,000,000 to Rs. 500,000,000
The authorised share capital from Rs. 500,000,000 was increased to Rs.830,000,000
May 30, 2006
and reclassified comprising of 10,250,000 Equity Shares of Rs.10 each and
72,750,000 Preference Shares of Rs.10 each
December 21, Change of name from BG Broadband Networks India Private Limited to YOU
2006 Broadband Networks India Private Limited.
January 5, 2007 The authorised share capital of Rs.830,000,000 comprising of 10,250,000 equity
shares of Rs.10 each and 72,750,000 Redeemable Non-Cumulative Preference
shares of Rs.10 each is reclassified as Rs.830,000,000 comprising of 83,000,000
equity shares of Rs.10 each.
The authorised share capital of Rs.830,000,000 was increased to Rs.3,430,000,000
April 11, 2007
divided into 188,000,000 Equity Shares of Rs 10 each and 155,000,000 Preference
Shares of Rs 10 each under the Scheme of Amalgamation.
May 25, 2007 The authorised share capital of Rs.3,430,000,000 divided in to 188,000,000 Equity
Shares of Rs.10 each and 155,000,000 Preference Shares of Rs.10 each was
reclassified as Rs.3,430,000,000 comprising of 242,999,998 Equity Shares of Rs.10
103
Date Particulars
each and 100,000,002 Preference Shares of Rs.10 each
October 29, 2007 The authorised share capital of Rs.3,430,000,000 divided into 242,999,998 Equity
Shares of Rs.10 each and 100,000,002 Preference Shares of Rs.10 each was
reclassified as Rs.3,430,000,000 comprising of 247,999,998 Equity Shares of
Rs.10 each and 95,000,002 Preference Shares of Rs.10 each.
November 23, Change in the name of the Company from ‘YOU Broadband Networks India
2007 Private Limited’ to ‘YOU Telecom India Private Limited’
February 29, The authorized share capital consisting of Rs.343,00,00,000 divided into
2008 247,999,998 equity shares of Rs.10 each and 95,000,002 preference shares of Rs.10
each is increased and reclassified to consist of Rs.4,180,000,000 divided in to
418,000,000 equity shares of Rs.10 each
October 12, 2009 Shifting of other objects to the main objects
November 17, Change of name from YOU Telecom India Private Limited’ to YOU Broadband
2009 and Cable India Private Limited
January 12, 2010 Conversion from private limited company to public limited company
The authorised share capital consisting of Rs. Rs.4,180,000,000 divided in to
February 16,
2010 418,000,000 Equity Shares of Rs.10 each was increased to Rs. 7,500,000,000
divided in to 750,000,000 Equity Shares of Rs.10 each
Change in object clause of our Company
March 22, 2010
Changes in activities of our Company during the last five years

There have been no changes in the activities of our Company during the last five years preceding the date
of this Draft Red Herring Prospectus, which may have a material adverse effect on our profits or loss,
including discontinuance of our lines of business, loss of agencies or markets and similar factors.
Promoters and Subsidiaries
For details regarding our Promoters, please see “Our Promoters and Group Companies” on page 119 of
the Draft Red Herring Prospectus. Our Company does not have any subsidiary.

For details regarding corporate profile, history, the description of the activities, services, products, market
of each segment, the growth of our Company, the standing of our Company with reference to the
prominent competitors with reference to its products, management, major suppliers and customers,
environmental issues, segment, i.e. geographical, etc, please refer to section titled “Business” and
“Industry Overview” on page 76 and 60 respectively of this Draft Red Herring Prospectus respectively.

Strategic Investments

Our Company has invested in the paid-up share capital of Digital Outsourcing Private Limited, and holds
approximately 36.24% of the paid-up equity share capital thereof. DOPL is a Company incorporated
under the Companies Act pursuant to a certificate of incorporation dated February 8, 2007 and its
registered office is situated at Plot No. 97, Marol Co-operative Industrial Estate, Makwana, Andheri East,
Mumbai, Maharashtra – 400059. Digital Outsourcing Private Limited together with its subsidiaries and
associate companies is engaged in the business of providing cable television related services.

Shareholders and Investment Related Agreements

1. Share Subscription and Purchase Agreement dated March 30, 2010 between Mrs. Rambhaben
Ukabhai, Mrs. Gita T. Tanti, Mrs. Sangita V. Tanti, Mrs. Lina J. Tanti and Radha Girish
Tanti (collectively referred to as “Tanti Family”) through their representative Mr Jitendra R
Tanti and our Company, (“DOPL Share Subscription and Purchase Agreement”)

Pursuant to the DOPL Share Subscription and Purchase Agreement, our Company is entitled to
to purchase 416,125 equity shares constituting 12.75% of issued and paid-up share capital of
Digital Outsourcing Private Limited, (“DOPL Sale Shares I”), inter-alia subject to allotment of
104
10,688,757 Equity Shares of our Company constituting 4.425% of our equity share capital as on
the date of the DOPL Share Subscription and Purchase Agreement in consideration for an
absolute and perpetual right to our Company (either itself or through its nominees or assignees)
to acquire the DOPL Sale Share I, (ii) extinguishment of all rights and privileges of Tanti Family
with respect to our Company, (iii) termination of all obligations of our Company under the
shareholders agreement dated March 31, 2008 between our Company, the Tanti Family and
Digital Outsourcing Private Limited and (iv) Rs 100,000 (Rupees One Hundred Thousand
Only).

The DOPL Share Subscription Agreement further provides that our Company shall, subject to
certain conditions as stated in the DOPL Share Subscription Agreement, be entitled acquire, as
soon as reasonably practicable and in any event within a period of 60 business days of the
completion of the Issue, upto an additional 433,875 equity shares of, representing an additional
13.29% of the equity shareholding in, Digital Outsourcing Private Limited for an aggregate
consideration of up to Rs.128.27 million to be agreed between our Company and the Tanti
Family.

2. Deed of Termination dated March 30, 2010 between Mrs. Rambhaben Ukabhai, Mrs. Gita T.
Tanti, Mrs. Sangita V. Tanti, Mrs. Lina J. Tanti and Radha Girish Tanti (collectively referred
to as “Tanti Family”) through their representative Mr Jitendra R Tanti, our Company and
Digital Outsourcing Private Limited, (“Termination Agreement”)

Pursuant to the Termination Agreement, the Tanti Family, our Company and Digital
Outsourcing Private Limited have agreed in leiu of undertaking a proposed initial offering of our
Company’s Equity Shares, (a) that the shareholders agreement dated March 31, 2008 as
amended on February 19, 2010, (“DOPL First Shareholders Agreement”) shall stand
terminated from the date of execution of the Termionation Agreement, (b) that each of the
aforementioned parties to the DOPL First Shareholders Agreement, irrevocably and
unconditionally waives, releases and forever discharges each other Party from any and all
claims, demands, actions, suits, causes of action, duties, obligations, damages whenever incurred
and liabilities of any nature whatsoever (including, without limitation, fees, costs, expenses,
penalties, punitive and exemplary damages and legal fees), known, or unknown, suspected or
unsuspected, in law or in equity, that it, whether directly or indirectly, has ever had, now has or
can, shall or may have or purport to have relating in any way to or in connection with the DOPL
First Shareholders Agreement, and (c) each of the aforesaid parties fully and expressly gives up
all of its rights, benefits, privileges and entitlements available under the DOPL First
Shareholders Agreement. However, under the terms of the Termination Agreement, if the
proposed initial offering of our Company’s Equity Shares is not completed on or before
December 31, 2010 whereby the Equity Shares of our Company are not listed and traded on the
Bombay Stock Exchange Limited and the National Stock Exchange Limited, the said parties
have agreed that they shall mutually identify such rights under the DOPL First Shareholders
Agreement that could be provided to Tanti Family under applicable laws with respect to their
continued shareholding in our Company and shall execute such documents to give effect to the
same.

3. Escrow Agreement dated March 30, 2010 between Mrs. Rambhaben Ukabhai, Mrs. Gita T.
Tanti, Mrs. Sangita V. Tanti, Mrs. Lina J. Tanti and Radha Girish Tanti (collectively referred
to as “Tanti Family”) through their representative Mr Jitendra R Tanti, our Company and
YES Bank Limited,(“DOPL Escrow Agreement”)

Pursuant to the terms of the DOPL Escrow Agreement, YES Bank Limited has been appointed
as an escrow agent in connection with the shares proposed to be transferred by the Tanti Family
to our Company pursuant to the terms and conditions of the DOPL Share Subscription and
Purchase Agreement.

4. Shareholder dated March 30, 2010 between Mrs. Rambhaben Ukabhai, Mrs. Gita T. Tanti,
Mrs. Sangita V. Tanti, Mrs. Lina J. Tanti and Radha Girish Tanti (collectively referred to as
“Tanti Family”) through their representative Mr Jitendra R Tanti, our Company, and Digital
Outsourcing Private Limited, (“DOPL New Shareholder Agreement”)

105
Pursuant to the the New DOPL Shareholder Agreement, the Tanti Family are entitled to certain
rights in connection with their investment in Digital Outsourcing Private Limited which inter-
alia include the following:

Prior Consent: Till such time as the Tanti Family’s shareholding in Digital Outsourcing Private
Limited, continues to remain at 5% or more of the equity share capital of Digital Outsourcing
Private Limited computed on a fully diluted basis, decisions on the certain matters, whether at
the board or shareholders meeting of Digital Outsourcing Private Limited, shall not be taken
without the prior written consent of the Tanti Family, such as, (a) mergers, consolidations,
reconstructions, bankruptcy, winding up and/or liquidation other than for merger of Digital
Outsourcing Private Limited with our Company, (b) divestment, sale, lease, license, transfer of
any freehold or leasehold property or any other fixed assets or interest in any of the same of a
value exceeding 25% of the net-worth of Digital Outsourcing Private Limited, (c) acquisition of
other businesses whereby the consideration is paid by way of an issuance of shares or securities
of Digital Outsourcing Private Limited, incurring indebtedness, which adversely affects the
debt:equity ratio of 0.5:1 (other than by way of loans received from our Company), (d)
commencement of any new line of business which is unrelated to the business of Digital
Outsourcing Private Limited, and (e) amendment of constitutional documents of Digital
Outsourcing Private Limited.

Anti-dilution: In the event that Digital Outsourcing Private Limited issues additional shares or
any other instruments convertible into shares through a preferential allotment (“Further Issue”),
the Tanti Family along with our Company or its nominees, shall have the pre-emptive right to
subscribe to such Further Issue on the same terms and conditions. If the Tanti Family (the “Non-
participating Investor”) is unable to, or does not, for any reason whatsoever, subscribe to their
entitlement of the Further Issue, then (i) the shareholding of the Tanti Family in Digital
Outsourcing Private Limited shall stand diluted to that extent, and (ii) the unsubscribed
entitlement of the Tanti Family can be allotted to any other person as determined by the board of
directors of Digital Outsourcing Private Limited. In the event of a rights issue by Digital
Outsourcing Private Limited, the shareholders of Digital Outsourcing Private Limited shall have
the right to subscribe to such rights issue in their relevant proportion. Neither our Company nor
the Tanti Family shall renounce its right in respect of participation in such rights issue shares
directly or indirectly to any third party. If either our Company or the Tanti Family (the “Non-
participating Shareholder”) is unable to, or does not, for any reason whatsoever, subscribe to
their entitlement of the rights issue, then (i) the shareholding percentage of the Non-Participating
Shareholder in Digital Outsourcing Private Limited shall stand diluted to that extent; (ii) the
unsubscribed entitlement of the Non-participating Shareholder shall be offered first to the
participating party; and (iii) any further unsubscribed portion thereafter, can be allotted to any
other investor as determined by the board of directors of Digital Outsourcing Private Limited at
no more favourable terms as was offered to the shareholders.

5. Option Agreement dated December 4, 2007 entered into between YOU Telecom (Mauritius)
Limited (“YOU Mauritius”) and Girish Kasthuri Rangan (“Option Holder”); (“Option
Agreement”)

Pursuant to the Option Agreement, the Option Holder has agreed to acquire option(s) to
subscribe to Equity Shares of our Company, in consideration of acting as a director of our
Company for a period of three years from the date of the Option Agreement. Option granted by
YOU Mauritius to Option holder denotes call options in connection with 300,000 Equity Shares
of our Company exercisable at a price of Rs 2.50/- per share. Further in terms of the Option
Agreement, such options shall be exercisable by the Option Holder at any time before: (i) 2
years from the date of the Option Agreement, or (ii) within 13 months from the date of the
listing of our Company’s Equity Shares pursuant to an initial public offering.

6. Advertising agreement dated February 3, 2007 between Bennet, Coleman & Company Limited
(“BCCL”) and YOU Broadband Networks India Private Limited (“Company”); (“Advertising
Agreement”).

Pursuant to the Advertising Agreement, our Company has agreed to advertise on non-exclusive
basis products, services and brands offered by our Company itself or YOU Telecom Private
106
Limited or any other entity in which not less than 49% of the equity share capital is held by our
Company, through which our Company carries its video business on BCCL print publication and
BCCL’s non print media. The total commitment by our Company to place advertisements in the
BCCL media is of the value of Rs 223,700,000/-. However, the total value of advertisements
released in BCCL non print media shall not exceed 30% of the total commitment. The term of
Advertising Agreement shall be valid from the commencement date i.e. November 1, 2006 for
the period of four years.

7. Business Transfer Agreement dated April 05, 2007 between Icenet.Net Limited (“Icenet”) and
YOU Telecom India Private Limited (“the Company”), (“Business Transfer Agreement”)

Pursuant to the Business Transfer Agreement, Icenet transferred to the Company all of the rights,
title and interest of the Icenet in transferred business comprising (i) movable assets, (ii) assumed
liabilities, (iii) consents, (iv) contracts and (v) employees (and such other rights or tangible or
intangible properties which Icenet may acquire in the ordinary course of business) for the
purchase consideration as defined in clause 3.1 of the Business Transfer Agreement by the
Company to Icenet.

8. Joint Venture Agreement dated February 12, 2008 between The Red Snapper (M) Sdn Bhd
(“TRS”), YOU Telecom India Private Limited (“the Company”) (hereinafter collectively
referred to as “Parties”) and Red Snapper Wireless India Private Limited (“RSWIPL”),
(“Joint Venture Agreement”)

Pursuant to the Joint Venture Agreement, TRS and the Company have acquired an equal
shareholding in RSWIPL to establish and manage the business of providing WiFi broadband
access, voice over WiFi, VoIP buffet plans and WiMax. The Parties will equally hold the total
paid up capital of RSWIPL.

Certain key features of the Joint Venture Agreement are as follows:

(a) Share Capital

The authorized share capital of RSWIPL is Rs. 5,000,000/- divided into 500,000/- shares of face
value of Rs. 10/- each and the initial issued, subscribed and paid up capital of RSWIPL is Rs
4,000,000/-. The Company has subscribed to such number of equity shares of RSWIPL which
would amount to 50% of the initial issued share capital.

(b) Issuance of further shares


Pursuant to the Joint Venture Agreement, RSWIPL shall ensure that any further shares offered or
issued by RSWIPL shall be offered to the Parties in proportion of the percentage of shares held
by the Parties in RSWIPL. In the event TRS is unable to subscribe to further issue of shares then
TRS accepts a dilution to the extent TRS is unable to contribute and in consonance with the
Company a partner may be inducted for the extent of the capital to be contributed in the total
funding. However, the Company may have the further shares issued to it and thereby increase its
shareholding in RSWIPL. Whereas, the Company is not able to subscribe to an issue of further
shares, then the Company shall at its option designate a third party to subscribe to such further
shares.

9. Option Agreement dated March 22, 2010 entered into between YOU Telecom (Mauritius)
Limited (“YOU Mauritius”) and Sean George Cronin Sutcliffe (“Option Holder”); (“Option
Agreement”)

Pursuant to the Option Agreement, the Option Holder has agreed to acquire option(s) to
subscribe to Equity Shares of our Company, in consideration of acting as a director of our
Company for a period of two years from the date of the Option Agreement. Option granted by
YOU Mauritius to Option holder denotes call options in connection with 600,000 Equity Shares
(“Option Shares”) of our Company exercisable at a price of Rs 7.00/- per share. Further in
terms of the Option Agreement, 100% of the Option Shares shall be exercisable by the Option
Holder at any time after 13 months from the date of the listing of our Company’s Equity Shares
pursuant to an initial public offering.
107
10. Option Agreement dated March 23, 2010 entered into between YOU Employee Welfare Trust
(“YOU Trust”) and Girish Kasthuri Rangan (“Option Holder”); (“Option Agreement”)

Pursuant to the Option Agreement, the Option Holder has agreed to acquire option(s) to
subscribe to Equity Shares of our Company, in consideration of acting as a director of our
Company for a period of three years from December 4, 2007. Option granted by YOU Mauritius
to Option holder denotes call options in connection with 300,000 Equity Shares of our Company
exercisable at a price of Rs 5.00/- per share. Further in terms of the Option Agreement, such
options shall be exercisable by the Option Holder after 13 months from the date of the listing of
our Company’s Equity Shares pursuant to an initial public offering.

Collaborations

Our Company has not entered into any collaboration with any third party as per Clause (VIII) (B) (1) (c)
of Part A, Schedule VIII of the ICDR Regulations.

Strategic Partners

Our Company has not entered into any arrangements with any strategic partners as per Clause (VIII) (D)
(6) of Part A, Schedule VIII of the ICDR Regulations.

Financial Partners

Apart from our various arrangements with our lenders and bankers, which we undertake in the ordinary
course of our business, our Company does not have any other financial partners as per Clause (VIII) (D)
(7) of Part A, Schedule VIII of the ICDR Regulations

108
OUR MANAGEMENT

Board of Directors

The Articles of Association of our Company require that the number of Directors shall not be less than 3
(three) and shall not be more than 12 (twelve).

The following table set forth details regarding our Board of Directors as on the date of this Draft Red
Herring Prospectus:

Name, Father’s Name, Age (years) Designation Other Directorships


Address and Occupation
and DIN

Mr. Girish Kasthuri 53 Chairman, -NIL-


Rangan Independent Non-
Executive Director
S/o A S K Rangan

102,
Venus A. Soares Road
Chembur, Mumbai-
400071
Maharashtra, India

Management Consultant
DIN 01592833

Term: Liable to retire by


rotation

Mr. Eyyuni Venkat 48 Chief Executive • You Hits Conditional Access


Srinivas Chakravarthy Officer, Executive Services Private Limited
Non-Independent
S/o Mr. E Rangaswamy Director
Chakravarthy

603 F Block, Great


Eastern Gardens, LBS
Marg , Kanjur Marg
(West),
Mumbai-400076,
Maharashtra, India

Business

DIN 00603085

Term : Not liable to retire


by rotation

Mr. Michael David 45 Non Independent NIL


Kazma Non-Executive
Director
S/o Gerald Joseph Kazma

340 Sw 16th St, Boca


Raton,
Florida, 334327205, ,
109
Name, Father’s Name, Age (years) Designation Other Directorships
Address and Occupation
and DIN

United States Of America

Executive

DIN 02114978

Term: Liable to retire by


rotation

Mr. Perumal Srinivasan 44 Non-Independent • K S Oils Limited


Non-Executive • Human Value Developers
S/o Perumal Ramamurthy Director Private Limited
• Sharekhan Limited
7A Belvedere Court, Sane • JBF Industries Limited
Guruji Marg, Mahalaxmi, • Ind Barath Power Infra Private
Mumbai-400011, Limited
Maharashtra, INDIA • K S Natural Resources Pte
Limited (Singapore)
Service

DIN-00365025

Term: Liable to retire by


rotation

Mr. Sean George Cronin 46 Independent Non- • Green Biologies Limited


Sutcliffe Executive Director • Sutcliffe Solutions Limited
• Practical Action Limited
S/o John Vernon Sutcliffe

Thatched House, 1 High


Street, Wargrave,
Reading, Berks, United
Kingdom- RG108JA

Service

DIN-03014252

Term: Liable to retire by


rotation

Nationality and Relationship between Directors


All the Directors the Company except Mr. Michael David Kazma and Mr. Sean George Cronin Sutcliffe
are Indian nationals. Further, none of our Directors are related to each other.

Brief Profiles of the Directors

Mr. Girish Kasthuri Rangan, 53, is the Chairman, Independent Non-Executive Director of our
Company. Mr. Girish Kasthuri Rangan holds a masters degree in science and business administration. He
commenced his career with Procter & Gamble India in brand management and marketing. He has over 28
years of experience in spanning brand management, sales, communications and general management,
across industry segments as diverse as FMCG, pharmaceuticals, advertising, mobile telephony and
electronic transaction management. He has been associated as a chief executive officer/managing director
of Warner Lambert, Wockhardt, BPL Mobile and Venture Infotek Global. He was also an associate
110
director at Leo Burnett and associate director and general manager at Lintas India. In 2004, he started his
own management consultancy practice for two years. In 2006, he became country manager- India branch
of U21 Global and subsequently in the year 2008 he returned to his management consultancy practice.

Mr. Eyyuni Venkat Srinivas Chakravarthy, 48, is the Chief Executive Officer and an Executive Non-
Independent Director of our Company. Mr. Eyyuni Venkat Srinivas Chakravarthy holds a bachelors
degree in commerce and is a qualified chartered accountant and company secretary. He started his career
as a management trainee in Mafatlal Industries Limited, a leading textile conglomerate and went onto
head their knitted apparel division. In September 1999, he joined Hathway Cable as head of the southern
zone for the cable business. He joined our Company in March 2001 as operations and commercial
director and also as a member of the board. Since 2002, he has been the chief executive officer of our
Company. He joined our Company with general managerial and business experience in textiles and
apparels sectors and cable/broadband sector. He has been responsible for expanding the business of our
Company in 11 cities across India.

Mr. Michael David Kazma, 45, is Non Independent Non-Executive Director of our Company. Mr.
Michael David Kazma holds a bachelors degree in arts from the Bradley University. In 1992, he initiated
his family’s first overseas investment by purchasing a 25 year old cable franchisee in Aruba. His entire
career has been oriented to the business of building and operating cable franchises. He has been an
investor, entrepreneur and manager in HFC Networks in Central America.

Mr. Perumal Srinivasan, 44, is a Non-Independent Non-Executive Director of our Company. Mr.
Perumal Srinivasan is a graduate in Mechanical Engineering from College of Engineering, Guindy, Anna
University and a post graduate in Management from Indian Institute of Management, Bangalore.
Currently, He is a Managing Director of Citi Venture Capital International and is the India - Region
Head. He has been associated in the past with Hindustan Aeronautics Limited, HSBC Private Equity and
ICICI Ventures. His investment track record includes investments in Suzlon, Axis Bank, Yes Bank, JSW
and Balrampur Chini.

Mr. Sean George Cronin Sutcliffe, 46, is an Independent Non-Executive Director of our Company. He
is a Chartered Mechanical Engineer with an Engineering degree from Cambridge University. Sean
Sutcliffe has been chief executive of Green Biologics since April 2008, contributing to the company
extensive commercial and operational experience across the energy and renewables sector. Prior to
joining Green Biologics he was chief executive of Biofuels Corporation, a UK based biodiesel producer
from the year 2005, and in the year 2007 he was chairman of Tidal Generation Limited, a developer of
tidal stream devices. He has also worked for BG Group plc for 14 years in a variety of roles spanning
operations, business development and strategy, most recently as Executive Vice President with
responsibility for corporate development and new businesses. He is also a trustee of Practical Action, an
international development charity.

Details of Remuneration of the Directors

Mr. Eyyuni Venkat Srinivas Chakravarthy, Chief Executive Officer and Executive Non-
Independent Director

Mr. Eyyuni Venkat Srinivas Chakravarthy was appointed as an executive director of our Company with
effect from May 24, 2007 through a shareholders resolution dated October 29, 2007. The particulars of
the remuneration paid to Mr. Eyyuni Venkat Srinivas Chakravarthy for the financial year 2009 is as
detailed below:

Particulars ( Rs.)
Salary and bonus 4,305,125
Allowances and perquisites 2,069,054
Contribution to provident and other funds 516,616
Stock based compensation 10,396,921
Total 17,287,716

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Details of terms and conditions for the appointment of Non-Executive Directors

We have not entered into any formal arrangements with our non-executive Directors. We pay our Non-
Executive Directors a sitting fee of Rs. 20,000 per Board meeting and for each Committee meeting.
Our Company has entered into an agreement with Mr. Sean George Cronin Sutcliffe appointing him as an
Independent Director on the board of our Company with effect from March 22, 2010. Pursuant to the
agreement Mr. Sean George Cronin Sutcliffe will be entitled to a sitting fee of Rs. 20,000 per Board and
pursuant to Option Agreement dated March 22, 2010 entered into with YOU Telecom (Mauritius)
Limited, Sean George Cronin Sutcliffe is entitled to 600,000 equity shares of our Company at an exercise
price of Rs 7 per share

The Board of Directors of our Company are not entitled to any benefits pursuant to the termination of
their employment.

Borrowing Powers

Pursuant to an Extra-Ordinary General Meeting Resolution dated February 29, 2008 passed by the
shareholders of the Company in accordance with the provisions of the Companies Act, 1956, the Board
has been authorized to borrow any sum or sums of monies, from time to time, upon such terms and
conditions as the Board may deem fit, notwithstanding that, the monies to be borrowed, together with the
monies already borrowed by the Company (apart from temporary loan obtained from the Company’s
bankers in the ordinary course of business) will or may exceed in the aggregate, for the time being, the
paid-up capital and free reserves of the Company, that is to say reserves not set apart for any specific
purposes, provided however, the total amount so borrowed shall not at any time exceed Rs.
30,00,000,000/-.

Bonus or profit sharing plan for our Directors

Our Company has not instituted any bonus or profit sharing plan for our Directors

Details of any arrangement or understanding with major shareholders, customers pursuant to


which director or members of senior management were selected etc.
NIL

Corporate Governance

The provisions of the listing agreement to be entered into with the Stock Exchanges with respect to
corporate governance become applicable to us at time of seeking in-principal approval of the Stock
Exchanges. The Company has complied with such provisions, including with respect to the appointment
of independent Directors to the Board and the constitution of the following committees of the Board: the
Audit Committee, the Remuneration Committee and the Investors Grievances Committee. The Company
undertakes to take all necessary steps to comply with all the requirements of the guidelines on corporate
governance and adopt the Corporate Governance Code as per Clause 49 of the listing agreement to be
entered into with the Stock Exchanges, as would be applicable to the Company upon listing its Equity
Shares.
Board of Directors of the Company comprises of five (5) directors, of which one (1) is executive director
and four (4) are non-executive Directors including two (2) Independent Directors. The Company has also
constituted the various committees viz. Audit Committee, Share Transfer & Investor Grievance
Committee and Remuneration Committee.
Further, the Company undertakes to comply with all the other requirements of the SEBI ICDR
Regulations on Corporate Governance as may be applicable to the Company upon listing of its equity
shares.

112
Committees of the Board of Directors

Audit Committee:

Members:

1. Mr. Girish Kasthuri Rangan, Chairman, Independent Non-Executive Director


2. Mr. Perumal Srinivasan, Non-Independent Non-Executive Director
3. Mr. Sean George Cronin Sutcliffe, Independent Non Executive Director

Terms of Reference/ Scope of the Audit Committee

1. Overseeing the Company’s financial reporting process and disclosure of its financial information.
2. Regular review of accounts, accounting policies, disclosures, etc.
3. Regular review of the major accounting entries based on exercise of judgment by management.
4. Qualifications in the draft audit report.
5. Establishing and reviewing the scope of the statutory audit including the observations of the auditors
and review of the quarterly, half-yearly and annual financial statements before submission to the
Board, with particular reference to matters required to be included in the Directors Responsibility
Statement to be included in the Board’s report in terms of clause 2(AA) of S.217 of the Companies
Act, 1956, changes in the accounting policies and practices and reasons for the same, significant
adjustments made in the financial statements arising out of audit findings, and qualifications in the
draft audit report.
6. The Committee shall have post audit discussions with the statutory auditors to ascertain any area of
concern.
7. Regular review of the performance of statutory and internal auditors together with the management.
8. Discussion and follow up on any important findings with the internal auditors. In case there is a
suspected case of fraud or irregularity, review of the findings of the internal auditors and reporting
the matter to the board.
9. Establishing the scope and frequency of internal audit, reviewing the findings of the internal auditors
and ensuring the adequacy of internal control systems including structure of the internal audit
department, frequency of internal audit, staffing and seniority of the official heading the department.
Review the functioning of the whistle blower mechanism, in case the same is existing.
10. To look into reasons for substantial defaults in the payment to depositors, debenture holders,
shareholders and creditors.
11. To look into the matters pertaining to the Director’s Responsibility Statement with respect to
compliance with applicable accounting standards and accounting policies.
12. Compliance with Stock Exchange legal requirements concerning financial statements, to the extent
applicable.
13. The Committee shall look into any related party transactions i.e., transactions of the company of
material nature and disclose such transactions, with promoters or management, their subsidiaries or
relatives etc., that may have potential conflict with the interests of company at large.
14. Recommending to the Board the appointment, re-appointment, and replacement of the statutory
auditor and the fixation of audit fee.
15. Approval of payments to the statutory auditors for any other services rendered by them.
16. Review of management discussion and analysis of financial condition and results of operations,
statements of related party transactions submitted by management, management letters/letters of
internal control weaknesses issued by the statutory auditors, internal audit reports relating to internal
control weaknesses, and the appointment, removal and terms of remuneration of the chief internal
auditor.
17. Such other matters as may from time to time be required by any statutory, contractual or other
regulatory requirements to be attended to by the Audit Committee.

Share Debenture Transfer and Investor Grievance Committee:

Members:
1. Mr. Michael David Kazma, Non Independent Non-Executive Director
2. Mr. Eyyuni Venkat Srinivas Chakravarthy, Executive Director and Chief Executive Officer, Non-
Independent Director
3. Mr. Perumal Srinivasan, Non-Independent Non-Executive Director

113
Terms of Reference/Scope of Share Debenture Transfer and Investor Grievance Committee

1. Investor relations and redressal of shareholders grievances in general and relating to non receipt of
dividends, interest, non- receipt of balance sheet etc.
2. Approve requests for share transfers and transmission and those pertaining to rematerialisation of
shares/ sub-division/ consolidation/ issue of renewed and duplicate share certificates etc.
3. Such other matters as may from time to time be required by any statutory, contractual or other
regulatory requirements to be attended to by such committee.

Remuneration Committee:

Members:
1. Mr. Girish Kasthuri Rangan, Chairman, Independent Non-Executive Director
2. Mr. Perumal Srinivasan, Non-Independent Non-Executive Director
3. Mr. Sean George Cronin Sutcliffe, Independent Non Executive Director

Terms of Reference/Scope of Remuneration Committee

1. Framing suitable policies and systems to ensure that there is no violation, by an Employee of the
Company of any applicable laws in India or overseas, including:
• The Securities and Exchange Board of India (Insider Trading) Regulations, 1992; or
• The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair
Trade Practices relating to the Securities market) Regulations, 1995.
2. Determine on behalf of the Board and the shareholders the company’s policy on specific
remuneration packages for executive directors including pension rights and any compensation
payments.
3. Perform such functions as are required to be performed under Clause 5 of the Securities and
Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999
4. Such other matters as may from time to time be required by any statutory, contractual or other
regulatory requirements to be attended to by such committee

IPO Committee:

Members:
1. Mr. Eyyuni Venkat Srinivas Chakravarthy, Executive Director and Chief Executive Officer, Non-
Independent Director
2. Mr. Perumal Srinivasan, Non-Independent Non-Executive Director

Terms of Reference/Scope of IPOCommittee

1. To authorize any of the director or directors of the Company or such other officer or officers of the
Company, including by the grant of power of attorneys, to do such acts, deeds and things as such
authorized person in his/her/its absolute discretion may deem necessary or desirable in connection
with the issue, offer and allotment of the securities offered in the IPO, (“Offer Securities”);

2. To give or authorize the giving by concerned persons of such declarations, affidavits, certificates,
consents and authorities as may be required from time to time;

3. To appoint the Lead Managers to the Issue in accordance with the provisions of the ICDR
Regulations and other applicable statutory and/or regulatory requirements;

4. To seek, if required, consents and/or certifications from Directors and officers of the Company as
may be required in connection with the issue of securities;

5. To seek, if required, any approval, consent or waiver from the Company’s lenders, and/or parties
with whom the Company has entered into various commercial and other agreements, and/or any/all
concerned government and regulatory authorities in India, and/or any other approvals, consents or
waivers that may be required in connection with the issue, offer and allotment of the Offer
Securities;

114
6. To decide pricing and terms of the Offer Securities, and all other related matters, including the
determination of the minimum subscription for the IPO;

7. To approve the draft and final offer documents (including amending, varying or modifying the same,
as may be considered desirable or expedient) as finalized in consultation with the lead managers, in
accordance with all applicable laws, rules, regulations and guidelines;

8. To seek the listing of the Offer Securities on any Indian stock exchange/s, submitting the listing
application to such stock exchange/s and taking all actions that may be necessary in connection with
obtaining such listing;

9. To appoint the registrar and other intermediaries to the IPO, in accordance with the provisions of the
ICDR Regulations and/or other statutory and/or regulatory requirements;

10. To finalize the arrangement for the submission of the draft prospectus to be submitted to the stock
exchange(s) for receiving comments from the public and the prospectus to be filed with the stock
exchange(s), and any corrigendum, amendments supplements thereto;

11. To finalize the arrangement for the submission of the draft prospectus and any other representations,
documents etc. with the SEBI and any corrigendum, amendments supplements thereto;

12. To authorize maintenance of a register of holders of the Offer Securities;

13. To finalize the basis of allotment of the Offer Securities;

14. To finalize the allotment of the Offer Securities on the basis of the applications received;

15. To finalize acceptance and appropriation of the proceeds of the IPO; and

16. To issue, offer and allot the Offer Securities, and to execute any documents, provide consents and
certifications, and to generally do any other thing in connection with or incidental to the
consummation of the IPO;

17. To generally do any other act and/or deed, to negotiate and execute any document/s, application/s,
agreement/s, undertaking/s, deed/s, affidavits, declarations and certificates, and/or to give such
direction as it deems fit or as may be necessary or desirable with regard to the IPO.

Shareholding of Directors in our Company

The Articles does not require any director to hold any qualification shares in our Company. None of our
Directors hold any Equity Shares of our Company except Mr. Eyyuni Venkat Srinivas Chakravarthy who
holds 1(one) Equity Share in our Company.

Interest of our Directors`

All the Directors of our Company may be deemed to be interested to the extent of fees, if any, payable to
them for attending meetings of the Board or Committee thereof as well as to the extent of other
remuneration, reimbursement of expenses payable to them under the Articles of Association. All the
Directors may also be deemed to be interested to the extent of equity shares, if any, already held by them
and/or their friends and relatives in our Company or that may be subscribed for and allotted to them, out
of the present Issue in terms of the Draft Red Herring Prospectus and also to the extent of any dividend
payable to them and other distributions in respect of the said equity shares.

The Directors may also be regarded as interested in the shares, if any, held by or that may be subscribed
by and allotted to the companies, firms and trust, in which they are interested as Directors, Members,
partners and/or trustees.

Our Directors have no interest in any property acquired by us within two years of the date of filing of this
Draft Red Herring Prospectus.

115
Change in the Board of Directors during the last three years

The following changes have occurred in Board of Directors of our Company in the last three years:

Name of Director Date of Appointment/ Re- Date of cessation Reason


appointment
Mr. Neeraj Jaikrishan May 24, 2007 Resignation
Bhatia
Mr. Perumal Srinivasan May 24, 2007 Appointment
Mr. Marc Desaedeleer May 24, 2007 Appointment
Mr. Eyyuni Venkat May 24, 2007 Appointment
Srinivas Chakravarthy
Mr. Girish Kasthuri May 24, 2007 Appointment
Rangan
Mr. Michael David Kazma October 29, 2007 Appointment

Mr. Vinayak Shenvi March 22, 2010 Resignation


Mr. Marc Desaedeleer March 22, 2010 Resignation
Mr. Sean George Cronin March 22, 2010 Appointment
Sutcliffe

Functional Organisational Chart

Eyyuni Venkat
Srinivas
Chakravarthy

Chief Executive
Officer

Partha Choudhury Khushrav Kabraji Kishore Velankar G.R. Sridhar Hetal Shah

Chief Financial Sr.Vice President Sr. Vice President Sr. Vice President Sr. Vice President –
Officer Broadband Business – HR, Admin, Technology Enterprise
Training, Solutions Group
Quality Assurance &
Customer Care

Key Management Personnel

All of our key managerial employees are permanent employees of our Company and none of them are
related to each other or to any Director of our Company.

The details regarding our key management personnel are as follows:

Mr. Partha Choudhury, Chief Financial Officer, 45, holds a Masters degree in Commerce and is a
qualified Chartered Accountant. He has over 21 years of industry experience at senior levels in various
multinational companies. He worked for ABB for 8 years and for Coca-Cola for 3 years. He joined our
company in 2001 and thereafter during 2004 to 2006, he had moved to Gujarat Gas Company Limited, (a
BG Group plc Company) as finance director. He rejoined our Company towards the end to 2006.

Mr. Khushrav Kabraji, Senior Vice President, Broadband Business, 43, holds a masters degree in
business administration in marketing from Symbiosys Institute of Business Management. He joined our
116
company in June, 2007. He has over 18 years of experience in marketing with some well-known brands
such as Boots Heathcare International, Warner Lambert, Ogilvy & Mather, Parle Products Limited, etc.

Mr. Hetal Shah, Senior Vice President, Enterprise Solutions Group, 38, holds a masters degree in
business administration from NIIMS and is a computer engineer. He joined our Company in April, 2007.
He handles ESG vertical, providing Internet and Data Storage and Data security related solution and
services to various corporates. He brings along with him a rich experience and expertise of about 15 years
in developing Lease line and System Integration. Prior to joining our Company he was associated with
Icenet, D2VISP and Chase Technologies.

Mr. Kishore Velankar, Senior Vice President, Human Resource Administration, Training, Quality
Assurance & Customer Care, 45, graduated in commerce and postgraduated in human resource. He has
over 22 years of experience in the human resource domain. He has worked with organizations such as
Tata Infotech, Mahindra British Telecom, Datacraft India Limited and Integreon Managed Solutions. He
has been associated with our Company since July, 2008. He has been responsible for streamlining various
HR processes and making the HR function employee friendly in our Company. In addition to being in
charge of training function, he is also responsible for revamping the YOU Academy based at Pune as a
Hub for all trainings which take place in the Company.

Mr. G.R. Sridhar, Vice President, Technology, 41, holds a degree in Engineering. He joined our
Company in the year 2001. He heads the technology department in our Company and is responsible for
the Internet Data Center & IT Operations. He is also responsible for designing and developing the
technology strategy. He has over two decades of experience in the electronics & communications
industries and over 15 years in the Internet domain. He has worked with organizations such as Reliance
Infocomm, Hathway Datacom, Cyberwave Limited & Yemkay communications.
Retirement Benefits of Key Management Personnel
None of the KMP are entitled to any retirement benefits
Amount of Compensation paid to Key Management Personnel in the FY 2009
Compensation paid to our Key Management Personnels in the FY 2009 is as follows:

Sr. Key Management Personnel Compensation (Rs.)


No.
1. Mr. Partha Choudhury, Chief Financial Officer 4,210,152
2. Mr. Khushrav Kabraji, Senior Vice President, Broadband 3,364,092
Business
3. Mr. Hetal Shah, Senior Vice President, Enterprise Solutions 2,800,068
Group
4. Mr. Kishore Velankar, Senior Vice President, Human 5,200,200
Resource Administration, Training, Quality Assurance &
Customer Care

5. Mr. G.R. Sridhar, Vice President, Technology 2,688,300

Shareholding of the Key Management Personnel (barring Directors of our Company)


The following KMPs (barring Directors of our Company) hold Equity Shares in our Company as on the
date of filing of DRHP:

Sr. Name of the KMP No of Equity Shares


No.
1
1. Mr. Partha Choudhury, Chief Financial Officer
Mr. Kishore Velankar, Senior Vice President, Human 1
2.
Resource Administration, Training, Quality Assurance &
Customer Care

1
3. Mr. Mr. Khushrav Kabraji, Senior Vice President, Broadband
117
Sr. Name of the KMP No of Equity Shares
No.
Business
1
4. Mr. G.R. Sridhar, Vice President, Technology
5. Mr. Hetal Shah, Senior Vice President, Enterprise Solutions 1
Group
Bonus or profit sharing plan of Key Management Personnel
NIL
Interests of Key Management Personnel
The KMP of our Company do not have any interest in our Company other than to the extent of the
remuneration or benefits to which they are entitled to as per their terms of appointment and
reimbursement of expenses incurred by them during the ordinary course of business.
None of our KMP have been paid any consideration of any nature from our Company, other than their
remuneration.
Changes in the Key Management Personnel
The changes in our KMP in the last three years are as follows:

Name of the KMP Designation Date of change Reason for change


Ish Anand Head Customer Care July 03, 2009 Resignation
Sekhar Ariyur Chief Technology July 03, 2009 Resignation
Krishnan Officer
Dinesh Rao Chief Operating Officer November 07, 2008 Resignation

Employees Welfare Benefits

YTML, our Promoter, with an object of rewarding and providing an incentive to the employees of our
Company and certain other companies, for their past association and performance as well as to motivate
them to contribute to the growth and profitability of such companies, has formulated an employee welfare
benefit scheme dated March 22, 2010 formulated by our Promoter, YTML, (“Scheme”). For the purposes
of the Scheme YTML transferred (a) 9,500,000 preference shares of our Company which were
subsequently converted into 9,500,000 equity shares of face value Rs. 10/- each of our Company on
February 22, 2008, and (b) 24,364,368 equity shares of face value Rs. 10/- each of our Company,
(collectively “Trust Shares”), to a trust, namely the You Telecom Employee Benefit Trust, (“Trust”).
Pursuant to the terms and conditions of the Scheme, a committee constituted under the Scheme is
empowered to grant to current or future employees of the aforesaid companies, including those of our
Company working in India or out of India, or a director on the board of directors of any of the aforesaid
companies, including those of our Company, options which gives such employees and directors of the
aforesaid companies the right, but not an obligation, to purchase at a future date the Equity Shares out of
the Trust Shares and such other Equity Shares of our Company as may be transferred from time to time
by YTML to the Trust.

Details of any arrangement or understanding with major shareholders, customers pursuant to


which Key Management Personnel were selected etc.
NIL

Payment or Benefit to Officers of our Company


Except as stated otherwise in this Draft Red Herring Prospectus, no amount or benefit has been paid or
given or is intended to be paid or given to any of the officers except the normal remuneration for services
rendered as Directors, officers or employees, since the incorporation of the Company.
Except as stated in section “Related Party Transactions” beginning on page 127 of this Draft Red Herring
Prospectus, none of the beneficiaries of loans and advances and sundry debtors are related to the
Directors.

118
OUR PROMOTERS AND GROUP COMPANIES

Our Promoters are:


1. Mr. Eyyuni Venkat Srinivas Chakravarthy;
2. You Telecom (Mauritius) Limited (“YTML”); and
3. Citigroup Venture Capital International Growth Partnership Mauritius Limited (“CVCIGPML”)

Association of our Promoters with our Company

Our Company was originally promoted by BG India Telecom (Mauritius) Limited (“BGITML”) which
in turn was controlled by British Gas Asia Pacific Holdings Pte Limited. In June 2006, the entire
shareholding of British Gas Asia Pacific Holdings Pte Limited in the issued share capital of BGITML
was transferred to CVCIGPML. In June 2006, the name of BGITML was changed to Iqara India Telecom
(Mauritius) Limited (“Iqara”). The name of Iqara was changed to You Telecom (Mauritius) Limited
(“YTML”) on September 20, 2006. Consequently YTML and CVCIGPML became the promoters of our
Company.

OUR INDIVIDUAL PROMOTER

Mr. Eyyuni Venkat Srinivas Chakravarthy

Driving License No: MH03 20100033056


PAN: AAAPE0659D
Voter Identification No: Not Available
Passport Number: Z1785991

Please refer to the section titled “Our Management” beginning on page 109 of this Draft Red Herring
Prospectus, for further details in connection with Mr. Eyyuni Venkat Srinivas Chakravarthy.

OUR CORPORATE PROMOTERS


You Telecom (Mauritius) Limited (“YTML”)

YTML was incorporated under the laws of the Republic of Mauritius, as a private company limited by
shares, in the year 2001, with an object of acting as investment company and to generally trade in the
global business sector. The registered office of the Company is situated at 6th Floor, Tower A, 1
Cybercity, Ebene, Mauritius.

The Board of Directors of YTML is comprised of the following persons:

1. Marc Desaedeleer;
2. Nousrath Bhugeloo;
3. Gordon Lam;
4. Venkatesen Saminada Chetty;
5. Bhoomija Juwaheer; and
6. Amit Gupta (Alternate director to Nousrath Bhugeloo)

The issued share-capital of YTML comprises 25,408,728 ordinary shares at par value, which are held in
the following manner as on date:

Sl. Name of Holder Number of Shares Percentage Holding


No.
1. Citigroup Venture Capital International 21,912,328 86.24%
Growth Partnership Mauritius Limited
2. Mr. Mike Kazma 3,496,400 13. 76%
Total 25,408,728 100%

119
YTML was originally controlled by British Gas Asia Pacific Holdings Pte Limited, who held the entire
issued share capital of YTML. The entire shareholding in the issued share capital of YTML, of British
Gas Asia Pacific Pte Limited, comprising of 9,718,210 ordinary shares, was transferred to Citigroup
Venture Capital International Growth Partnership Mauritius Limited, on June 9, 2006. The
aforementioned acquisition did not require Citigroup Venture Capital International Growth Partnership
Mauritius Limited to make an open offer or a similar declaration under the laws of Mauritius.
Subsequently, You Telecom (Mauritius) Limited allotted an additional 11,914,000 ordinary shares, on
June 12, 2006, and 280,118 ordinary shares, on February 26, 2008, to Citigroup Venture Capital
International Growth Partnership Mauritius Limited.

Accordingly, the current promoter of YTML is Citigroup Venture Capital International Growth
Partnership Mauritius Limited.

The audited financial results of YTML for the last three financial years are as follows:

Particulars As of 31 December As of 31 December As of 31 December


2008 (Rs. In 2007 (Rs. In million) 2006 (Rs. In million)
million)

Equity capital 1,776.53 951.65 1,064.62


Reserves (excluding (2,349.36) (1,311.21) (163.58)
revaluation reserves)
Sales/Turnover 0.08 0.02 3.77
Profit/(Loss) after Tax (613.58) (1,221.75) (2,407.94)
Earning per Share (INR) (24.15) (48.71) (96.01)
Net Asset Value per (22.54) (14.34) 35.93
Share (INR)
For rate of conversion, refer to “Presentation of Financial Information and Use of Market Data –
Currency of Presentation” on page x of this Draft Red Herring Prospectus

Particulars As of 31 December As of 31 December As of 31 December


2008 (USD in million) 2007 (USD in million) 2006 (USD in million)

Equity capital 35.73 24.13 24.13


Reserves (excluding (47.25) (33.25) (3.71)
revaluation reserves)
Sales/Turnover 0.00 0.00 0.08
Profit/(Loss) after (14.00) (29.54) 53.13
Tax
Earning per Share (0.55) (1.18) 2.12
(USD)
Net Asset Value per (0.45) (0.36) 0.81
Share (USD)

YTML is an unlisted company. It is neither a sick company within the meaning of SICA nor is it under
winding up.

The auditors of YTML have given a negative opinion with respect to the consolidated financial
statements of YTML for the years ended December 31, 2008, 2007 and 2006, observing that YTML has
not prepared consolidated financial statements as required by IFRS IAS 27. Since, this constitutes a
departure from the aforesaid IFRS requirement, the auditors have not been able to provide a true and fair
view with respect to the consolidated financial position of the YTML as of December 31, 2008, 2007 and
2006. The auditors of YTML, however have noted that the unconsolidated financial statements of YTML
for the years ended December 31, 2008, 2007 and 2006 give a true and fair view of the financial position
of YTML.

120
Citigroup Venture Capital International Growth Partnership Mauritius Limited, (“CVCIGPML”)

Citigroup Venture Capital International Growth Partnership Mauritius Limited, ("CVCIGPML") was
incorporated under the laws of the Republic of Mauritius, as a private company limited by shares, in the
year 1998, and was licensed by the Financial Services Commission and started operating as a global
business company in 1998. CVCIGPML is engaged in the business of investing in Indian and overseas
companies, listed and unlisted, in various sectors inter-alia including the financial services sector,
infrastructure, construction and textiles. As on March 30, 2010, CVCIGPML directly holds investment in
10 companies, of which 6 are incorporated in India, 1 in Netherlands and 3 in Mauritius.

The registered office of CVCIGPML is located at c/o International Financial Services Limited, IFS Court,
Twenty Eight, Cyber City, Ebene, Mauritius.

Foreign Subsidiaries: The foreign subsidiaries of CVCIGPML include the following entities:

• Citigroup Venture Capital International Ebene Limited


• Citigroup Venture Capital International Mauritius Limited
• You Telecom (Mauritius) Limited

Except Citigroup Venture Capital International Ebene Limited, Citigroup Venture Capital International
Mauritius Limited and You Telecom (Mauritius) Limited, CVCIGPML does not have any controlling
rights in any other companies in which it has any equity shareholding.

The Board of Directors of CVCIGPML is comprised of the following persons:

• Dev Joory;
• Couldip Basant Lala;
• Marc Desaedeleer; and
• Gordon Lam.

The issued share-capital of CVCIGPML as on filing of this Draft Red Herring Prospectus comprises
100,000 A ordinary shares of par value USD 1, which are entirely held by Citigroup Venture Capital
International Jersey Limited, (“CVCIJL”). Consequently, the promoter of CVCIGPML is CVCIJL.
CVCIJL is controlled and managed by the board of directors thereof, comprising of the following
individuals:

• Michael Richardson
• Peter Byrne
• Gordon Lam
• Alfred Rodrigues

CVCIJL is an investment company within the structure of the Citigroup Venture Capital International
Growth fund L.P. (the “Fund”). The Fund is a private equity fund of which Citigroup Venture Capital
International Partnership G.P. Limited (an indirect 100% owned subsidiary of Citigroup Inc) is the
General Partner. The Fund has commitments from investors including Citicorp International Finance
Corporation (an indirect 100% owned subsidiary of Citigroup Inc.) and a broad based group of high net-
worth investors of Citigroup Private Bank and Smith Barney, and some institutional investors. Other than
Citigroup, no other investor has beneficial ownership of more than 10% in the Fund.

There has been no change in control of CVCIJL in the last 3 years immediately preceding the date of this
Draft Red Herring Prospectus.

The audited financial results of CVCIGPML for the last three financial years are as follows:

Particulars As of 31 December As of 31 December As of 31 December


2008 (Rs. In million) 2007 (Rs. In million) 2006 (Rs. In million)

Equity Capital 4.97 3.94 4.41


Reserves (excluding 12,209.82 15,322.74 13,309.34
revaluation reserves)
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Particulars As of 31 December As of 31 December As of 31 December
2008 (Rs. In million) 2007 (Rs. In million) 2006 (Rs. In million)

Sales/Income 3,671.26 3,179.96 58.45


Profit/(Loss) after Tax (1,187.12) 5,074.58 35.58
Earning per Share (INR) (11,871.21) 50,745.77 355.77
Net Asset Value per Share 122,147.94 153,266.83 133,137.54
(INR)
For rate of conversion, refer to “Presentation of Financial Information and Use of Market Data –
Currency of Presentation” on page x of this Draft Red Herring Prospectus

Particulars As of 31 December As of 31 December As of 31 December


2008 (USD in 2007 (USD in 2006 (USD in
million) million) million)
Equity Capital 0.1 0.1 0.1
Reserves (excluding 245.58 388.56 301.66
revaluation reserves)
Sales/Income 83.79 76.89 1.29
Profit/(Loss) after Tax (27.09) 122.70 0.79
Earning per Share (USD) (270.94) 1,227.02 7.85
Net Asset Value per Share 2,456.83 3,886.57 3,017.62
(USD)

CVCIGPML is an unlisted company. It is neither a sick company within the meaning of SICA nor is it
under winding up.

The auditors of CVCIGPML have given a negative opinion with respect to the consolidated financial
statements of CVCIGPML for the years ended December 31, 2008, 2007 and 2006, observing that
CVCIGPML has not prepared consolidated financial statements as required by IFRS IAS 27. Since, this
constitutes a departure from the aforesaid IFRS requirement, the auditors have not been able to provide a
true and fair view with respect to the consolidated financial position of the CVCIGPML as of December
31, 2008, 2007 and 2006. The auditors of CVCIGPML, however have noted that the unconsolidated
financial statements of CVCIGPML for the years ended December 31, 2008, 2007 and 2006 give a true
and fair view of the financial position of CVCIGPML.

Confirmations

We confirm that the Permanent Account Number (as may be applicable), Bank Account Numbers,
Passport Numbers, the Company Registration Number and the address of the Registrar of Companies
where the Promoters are registered, (as applicable), will be submitted to the Stock Exchanges at the time
of filing the Draft Red Herring Prospectus. Further, none of the Promoters or the relatives of our
individual Promoter have been declared as willful defaulters by the Reserve Bank of India, or any other
Government authority, and there are no violations of securities laws committed by any of the Promoters
in the past, nor are there any proceedings pending against any of the Promoters in this regard.

Interest of our Promoters in our Company

The number of Equity Shares and options held by our Promoters as of the date of this Draft Red Herring
Prospectus is set forth below:

Promoter No. of Equity % Shareholding No. of stock


Shares options
YTML 199,144,375 82.44% Nil
Total 199,144,375 82.44% Nil

Except as stated herein, the Promoters do not have any interest in our Company other than to the extent of
any dividend payable to them and other distributions in respect of their shareholding in our Company.
Mr. Eyyuni Venkat Srinivas Chakravarthy is also interested to the extent of remuneration or benefits to
which he is entitled to in his capacity as a director of our Company, as per his terms of appointment and
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reimbursement of expenses incurred by him during the ordinary course of business of our Company.
YTML may also be deemed to be interested in our Company to the extent of the dividends payable by our
Company to YTML as a shareholder of our Company. For further details, please refer to the section
titled “Our Management” on page 109 of this Draft Red Herring Prospectus.

No amount or benefit has been paid or given to our Promoters within the two years preceding the date of
this Draft Red Herring Prospectus, except to the extent of the following:

(a) the remuneration and/or benefits paid to Mr. Eyyuni Venkat Srinivas Chakravarthy to which he
is entitled to in his capacity as a director of our Company, as per the terms of his appointment.
These amounts include the reimbursement of expenses incurred by Mr. Eyyuni Venkat Srinivas
Chakravarthy during the ordinary course of business of our Company; and

(b) the dividends paid to YTML in its capacity as a shareholder of our Company.

None of our Promoters are interested in any property acquired by our Company in the two years
immediately preceding the date of this Draft Red Herring Prospectus, or proposed to be acquired by our
Company. None of our Promoters are interested in any transaction in acquisition of land, construction of
building and/or supply of machinery etc.

Pursuant to a loan agreement dated August 12, 2009 between YTML and our Company, YTML has
provided a loan facility to our Company for an aggregate amount of USD five million, in accordance with
the statutory and/or regulatory requirements in connection with external commercial borrowings. The
proceedings of the aforesaid loan facilities shall be utilized by our Company for general corporate
purposes in terms of the approval received from the RBI vide their letters dated June 11, 2009, July 9,
2009 and August 10, 2009. The aforesaid loan facilities shall accrue interest at a rate of 6 month LIBOR
plus 300 basis points per annum. The principal amount of the aforesaid loan facilities is payable in four
annual installments commencing from August 2010 in accordance with the following schedule:

Month Year Amount


August 2010 USD 0.1 million
August 2011 USD 0.5 million
August 2012 USD 1.5 million
August 2013 USD 2.9 million

Our Group Companies

Our Group Companies comprise of the following entities:

• Citigroup Venture Capital International Ebene Limited;


• Citigroup Venture Capital International Mauritius Limited;
• YOU Hits Conditional Access Services Private Limited (India); and

Citigroup Venture Capital International Ebene Limited (“CVCIEL”)

CVCIEL was incorporated under the laws of Mauritius as a private company limited by shares on March
24, 2006. The principal business activity of CVCIEL is to invest in the businesses of Indian and overseas
companies. CVCIEL is promoted by CVCIGPML which holds the entire issued share capital of CVCIEL.

The audited financial results of CVCIEL for the last three financial years are as follows:

Particulars As of 31 December As of 31 December As of 31 December


2008 2007 2006
(Rs. In million) (Rs. In million) (Rs. In million)

Equity Capital 1.24 0.99 1.10


Reserves (excluding revaluation 2,566.12 2,035.53 2275.43
reserves)
Sales/Turnover 0.00 864.96 0.07
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Profit/(Loss) after Tax (1.45) 861.56 (0.28)
Earning per Share (INR) (58.11) 34,462.45 (11.02)
Net Asset Value per Share 102,694.57 81,460.72 91,061.16
(INR)
For rate of conversion, refer to “Presentation of Financial Information and Use of Market Data – Currency of
Presentation” beginning on page x of this Draft Red Herring Prospectus

Particulars As of 31 December As of 31 December As of 31 December


2008 2007 2006
(USD in million) (USD in million) (USD in million)
Equity Capital 0.03 0.03 0.03
Reserves (excluding revaluation 51.61 51.62 51.57
reserves)
Sales/Turnover 0.00 20.91 0.00
Profit/(Loss) after Tax (0.03) 20.83 (0.01)
Earning per Share (USD) 1.33 833.29 (0.24)
Net Asset Value per Share 2,065.55 2,065.70 2,063.94
(USD)

Citigroup Venture Capital International Mauritius Limited (“CVCIML”)

CVCIML was incorporated under the laws of Mauritius as a private company limited by shares on June 6,
2005. The principal business activity of CVCIML is to invest in the businesses of Indian and overseas
companies. CVCIML is promoted by CVCIGPML which holds the entire issued share capital of
CVCIML.

The audited financial results of CVCIML for the last three financial years are as follows:

Particulars As of 31 December As of 31 December As of 31 December


2008 2007 2006
(Rs. In million) (Rs. In million) (Rs. In million)

Equity Capital 3.73 2.96 3.31


Reserves (excluding revaluation 3,159.48 3,792.14 3,576.81
reserves)
Sales/Turnover 1,330.40 1,443.04 0.23
Profit/(Loss) after Tax 1,313.30 1,542.12 (5.89)
Earning per Share (INR) 17,510.71 20,561.57 (78.55)
Net Asset Value per Share 42,176.06 50,601.35 47,734.92
(INR)

Particulars As of 31 December As of 31 December As of 31 December


2008 2007 2006
(USD in million) (USD in million) (USD in million)
Equity Capital 0.08 0.08 0.08
Reserves (excluding revaluation 63.55 96.16 81.07
reserves)
Sales/Turnover 30.36 34.89 0.01
Profit/(Loss) after Tax 29.97 37.29 (0.13)
Earning per Share (USD) 399.66 497.17 (1.73)
Net Asset Value per Share 848.31 1,283.16 1,081.93
(USD)

YOU Hits Conditional Access Services Private Limited (YHCAPL)

YHCAPL was originally incorporated as Iqara Hits Conditional Access Services Private Limited under
the Companies Act pursuant to a certificate of incorporation dated July 16, 2003. Its name was
subsequently changed to YOU Hits Conditional Access Services Private Limited pursuant to a fresh
certificate of incorporation dated December 21, 2006. YHCAPL was incorporated with an object of doing
124
the business of providing technology solutions for conditional access systems and subscriber management
system, and buying, leasing, acquiring, installing and dealing in necessary software, hardware systems &
equipments, set top boxes, rendering requisite technical services. YHCAPL has been promoted by
YTML, which holds 9,990 equity shares of face value Rs.10 each therein aggregating to 99.99% of the
total paid-up equity share capital of YTML.
The audited financial results of YHCAPL for the last three financial years are as follows:

Particulars As of 31 March As of 31 March As of 31 March


2009 2008 2007
(Rs. million) (Rs. million) (Rs. million)
Equity Capital 158.40 158.40 158.40
Reserves (excluding revaluation (158.2) (157.87) 157.74
reserves)
Sales/Turnover 0.19 0.19 0.09
Profit/(Loss) after Tax (0.32) (0.13) (2.44)
Earning per Share (INR) (32.56) (13.31) (243.97)
Net Asset Value per Share 20.00 53.00 66.00
(INR)

None of the Group Companies has become a sick company under SICA and no winding up proceedings
have been initiated against them. Further no application has been made, in respect of any of the Group
Companies, to the Registrar of Companies for striking off their names.

Additionally, none of our Group Companies have become defunct for which application would have to be
made to RoC in the five years preceding the filing of this Draft Red Herring Prospectus.

None of our Group Companies had a negative net worth in the last fiscal year.

Other Confirmations

The Group Companies have confirmed that they have not been declared as willful defaulters by the RBI
or any other governmental authority and there are no violations of securities laws committed by them in
the past and no proceedings pertaining to such penalties are pending against them.

Additionally, none of the Promoters and relatives of our Promoters have been debarred or prohibited from
accessing the capital markets for any reasons by the SEBI or any other authorities. None of the Promoter
Group and persons in control of the Promoters (whether promoters are body corporates) or any companies
in which the Promoters are or were associated as promoter, director or person in control have been
debarred or prohibited from accessing the capital markets for any reasons by the SEBI or any other
authorities.

Litigation

For details relating to the legal proceeding involving the Promoters and the Group Companies, see
“Outstanding Litigation and Material Developments” on page 161 of the Draft Red Herring Prospectus.

Common Pursuits

Our Group Company YHCAPL was incorporated with an object of doing the business of providing
technology solutions for conditional access systems and subscriber management system, and buying,
leasing, acquiring, installing and dealing in necessary software, hardware systems & equipments, set top
boxes, rendering requisite technical services and hence YHCAPL may be deemed to have a pursuit
common to our Company. Other than this, none of our Group Companies have common pursuits or are
engaged in activities similar to the business of our Company

Disassociations by our Promoters

Our Promoters have not disassociated themselves from any companies or firms promoted by them during
preceding three years, from the date of filing this Draft Red Herring Prospectus.

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Sales and Purchases between Companies in the Promoter Group

There have been no sales or purchase between companies in the Group companies where such sales or
purchases exceed in value in the aggregate 10% of the total sales or purchases of our Company except as
disclosed elsewhere in this Draft Red Herring Prospectus.

Payment of benefit to Promoter and Group Companies

Except as stated above in “Interests of our Promoter” and “Financial Statements” beginning on page
129, there has been no payment of benefits to the Promoter and Group Companies during fiscal 2009,
fiscal 2008 and the nine months period ended December 31, 2009.
For further information on our Promoters and Group Companies, please refer to the section titled
“Risk Factors”beginning on page xiv of this Draft Red Herring Prospectus

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RELATED PARTY TRANSACTIONS

For details of the related party transactions, see “Financial Statements” beginning on page 129 of this
Draft Red Herring Prospectus.

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DIVIDEND POLICY

The declaration and payment of dividends is recommended by the Board of Directors and approved by
the shareholders of our Company at their discretion and will depend on a number of factors, including the
results of operations, earnings, capital requirements and surplus, general financial conditions, contractual
restrictions, applicable Indian legal restrictions and other factors considered relevant by the Board. The
Board may also from time to time pay interim dividend. All dividend payments are made in cash to the
shareholders of our Company.

For details of dividends paid by the Company, see “Financial Statements” beginning on page 129 of this
Draft Red Herring Prospectus.

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SECTION V: FINANCIAL INFORMATION

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF YOU BROADBAND & CABLE INDIA LIMITED

Particulars Page N