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LETTER OF OFFER (Private and Confidential) For Equity Shareholders of the Company only DOLPHIN MEDICAL SERVICES LIMITED (Incorporated on 21st September, 1992 as Dolphin Scanning Services Ltd. and subsequently the name of the company was changed to Dolphin Medical Services Ltd. on 8 th November 1993 under Section 21 of the Companies Act, 1956) Registered & Corporate Office: Ramchandra Rao Road, Suryarao Pet, Vijayawada- 520 002. Tel: (0866) – 2575555/4965, 5519955 Fax: (0866) 2578039. Website: www.dolphinmedicalindia.com Email: [email protected] ISSUE OF 1,20,45,300 EQUITY SHARES OF RS.10/- EACH FOR CASH AT A PREMIUM OF RS. 2/- PER EQUITY SHARE AGGREGATING RS 1445.43/- LACS ON RIGHTS BASIS TO THE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 3 EQUITY SHARES FOR EVERY 1 EQUITY SHARE HELD ON RECORD DATE I.E. 05 SEPTEMBER, 2005. THE FACE VALUE OF THE EQUITY SHARE IS Rs.10/- PER SHARE AND THE ISSUE PRICE WHICH IS Rs.12/- PER SHARE IS 1.2 TIMES OF THE FACE VALUE. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. Note: The attention of investors is drawn to the statement of Risk Factors appearing on Page iii & 102 of the Letter of Offer. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer (LOO) contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this LOO is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing equity shares of the Company are listed on The Stock Exchange, Mumbai [BSE] (Designated Stock Exchange), The Hyderabad Stock Exchange Limited [HSE] and The Ahmedabad Stock Exchange Limited [ASE]. The Company will make applications to these Stock Exchanges for permission to deal in and for an official quotation in respect of the Equity Shares arising out of the issue. The Company has received ‘in-principle’ approvals from BSE, HSE and ASE vide their letter no. DCS/SMG/SDM/RK/NS/05 dated August 11, 2005, letter no. REF: HSE:LIST:2005:172 dated August 12, 2005 and letter no. 1668/05 dated August 12, 2005 respectively. LEAD MANAGERS TO THE OFFER REGISTRARS TO THE OFFER Meghraj Financial Services (India) Private Limited IKON VISIONS PRIVATE LIMITED SEBI Regn. No.MB/INM000001220 SEBI Regn. No. INR000000452 3 rd Floor, Khanna Construction House, 33, Sanali Heavens, 8-3-948, Ameerpet, 44, Dr. R. G. Thadani Marg, Worli, Hyderabad - 500073 Mumbai – 400 018.Tel: 91 (022) - 2493 1764 Tel: 040 – 2374 4138, 2374 4356, 5561 5699 Fascimile : 91 (022) - 2493 1765 Fax: 040 – 5582 9559 E-mail: [email protected] E-mail: [email protected] Website: www.meghrajindia.com Contact Person: D Vijay Kumar Contact Person: Mr. Rajesh U. Sonkusare ISSUE OPENS ON : TUESDAY 27th DECEMBER, 2005 LAST DATE FOR RECEIPT OF REQUESTS FOR SPLIT FORMS : TUESDAY 10 th JANUARY, 2006 ISSUE CLOSES ON : WEDNESDAY 25 th JANUARY, 2006 M B

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Page 1: DOLPHIN MEDICAL SERVICES LIMITEDDOLPHIN MEDICAL SERVICES LIMITED (Incorporated on 21st September, 1992 as Dolphin Scanning Services Ltd. and subsequently the name of the company was

LETTER OF OFFER

(Private and Confidential) For Equity Shareholders of the Company only

DOLPHIN MEDICAL SERVICES LIMITED(Incorporated on 21st September, 1992 as Dolphin Scanning Services Ltd. and subsequently the name of the companywas changed to Dolphin Medical Services Ltd. on 8th November 1993 under Section 21 of the Companies Act, 1956)

Registered & Corporate Office: Ramchandra Rao Road, Suryarao Pet, Vijayawada- 520 002. Tel: (0866) – 2575555/4965, 5519955 Fax: (0866) 2578039.

Website: www.dolphinmedicalindia.com Email: [email protected]

ISSUE OF 1,20,45,300 EQUITY SHARES OF RS.10/- EACH FOR CASH AT A PREMIUM OF RS. 2/- PER EQUITYSHARE AGGREGATING RS 1445.43/- LACS ON RIGHTS BASIS TO THE EQUITY SHAREHOLDERS OF THECOMPANY IN THE RATIO OF 3 EQUITY SHARES FOR EVERY 1 EQUITY SHARE HELD ON RECORD DATE I.E.05 SEPTEMBER, 2005. THE FACE VALUE OF THE EQUITY SHARE IS Rs.10/- PER SHARE AND THE ISSUE PRICEWHICH IS Rs.12/- PER SHARE IS 1.2 TIMES OF THE FACE VALUE.

GENERAL RISKS

Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in thisIssue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factorscarefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on theirown examination of the Issuer and the Issue including the risks involved. The securities have not been recommended orapproved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of thisdocument.

Note: The attention of investors is drawn to the statement of Risk Factors appearing on Page iii & 102 of theLetter of Offer.

ISSUER’S ABSOLUTE RESPONSIBILITY

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

LISTING

The existing equity shares of the Company are listed on The Stock Exchange, Mumbai [BSE] (Designated Stock Exchange),The Hyderabad Stock Exchange Limited [HSE] and The Ahmedabad Stock Exchange Limited [ASE]. The Company willmake applications to these Stock Exchanges for permission to deal in and for an official quotation in respect of the EquityShares arising out of the issue. The Company has received ‘in-principle’ approvals from BSE, HSE and ASE vide their letterno. DCS/SMG/SDM/RK/NS/05 dated August 11, 2005, letter no. REF: HSE:LIST:2005:172 dated August 12, 2005 andletter no. 1668/05 dated August 12, 2005 respectively.

LEAD MANAGERS TO THE OFFER REGISTRARS TO THE OFFER

Meghraj Financial Services (India) Private Limited IKON VISIONS PRIVATE LIMITEDSEBI Regn. No.MB/INM000001220 SEBI Regn. No. INR0000004523rd Floor, Khanna Construction House, 33, Sanali Heavens, 8-3-948, Ameerpet,44, Dr. R. G. Thadani Marg, Worli, Hyderabad - 500073Mumbai – 400 018.Tel: 91 (022) - 2493 1764 Tel: 040 – 2374 4138, 2374 4356, 5561 5699Fascimile : 91 (022) - 2493 1765 Fax: 040 – 5582 9559E-mail: [email protected] E-mail: [email protected]: www.meghrajindia.com Contact Person: D Vijay KumarContact Person: Mr. Rajesh U. Sonkusare

ISSUE OPENS ON : TUESDAY 27th DECEMBER, 2005

LAST DATE FOR RECEIPT OFREQUESTS FOR SPLIT FORMS : TUESDAY 10th JANUARY, 2006

ISSUE CLOSES ON : WEDNESDAY 25th JANUARY, 2006

M B

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TABLE OF CONTENTS

S.NO. TOPIC Page No.

GLOSSARYOF TERMS/ ABBREVIATIONS i

RISK FACTORS iii

I. GENERAL INFORMATION 1

II. CAPITAL STRUCTURE 11

III. TERMS OF THE PRESENT OFFER 15

IV. TAX BENEFITS 33

V. PARTICULARS OF THE OFFER 38

VI. COMPANY & MANAGEMENT 49

VII. INDUSTRY, MARKET AND COMPETITIVE ENVIRONMENT 71

VIII. FINANCIAL PERFORMANCE OF THE COMPANY 77

IX. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIALCONDITIONS & RESULTS OF OPERATIONS 91

X. OUTSTANDING LITIGATIONS & DEFAULTS 93

XI. PROMISES VS PERFORMANCE IN RESPECT OF PREVIOUS ISSUES 95

XII. BASIS OF OFFER PRICE 96

XIII. STOCK MARKET DATA 97

XIV. PARTICULARS REGARDING LISTED COMPANIES UNDER SAMEMANAGEMENT WHICH HAVE MADE CAPITAL ISSUES DURING THE LAST 3 YEARS 98

XV. DEFAULTS IN THE PAYMENT/REFUNDS OF DEBENTURES, FIXED DEPOSITS,INTEREST ON FIXED DEPOSITS, DEBENTURE INTEREST AND INSTITUTIONAL DUES 98

XVI. INFORMATION AS REQUIRED BY GOVERNMENT OF INDIA, MINISTRY OFFINANCE, CIRCULAR NO. F2/5/SE/76, DATED FEBRUARY 5, 1977 AS AMENDEDVIDE THEIR CIRCULAR OF EVEN NUMBER DATED MARCH 8, 1977 98

XVII. MECHANISM EVOLVED BY THE COMPANY FOR THE REDRESSAL OFINVESTOR GREIVANCES 100

XVIII. DETAILS OF ADVERSE EVENTS AFFECTING THE COMPANY SINCETHE LAST AUDITED FINANCIAL STATEMENTS 102

XIX. EXPERT OPINION 102

XX. OPTION TO SUBSCRIBE 102

XXI. STATUTORY AND OTHER INFORMATION 112

XXII. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS 115

XXIII. DECLARATION 117

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GLOSSARY OF TERMS & ABBREVIATIONS

Act/The Act The Companies Act, 1956 and subsequent amendments thereto Articles/ AOA Articles of Association of the Company AS Accounting Standard AY Assessment Year Board/BOD Board of Directors of DMSL BSE The Stock Exchange, Mumbai CAF Composite Application Form CDSL Central Depository Services (India) Limited CMP Current Market Price Demat Dematerialized (Electronic/Depository - as the context may be) Depositories NSDL and CDSL DP Depository Participant EGM Extra-ordinary General Meeting Employees Employees of the Company EPS Earnings Per Share Equity Shareholders Equity Shareholders whose names appear as

• beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and

• on the Register of Members of the Company in respect of the shares

held in physical form at the close of business hours on the Record Date ie., September 05, 2005 and to whom this issue is being made

Equity Shares 1,20,45,300 Equity Shares of Rs.10/- each at a premium of Rs 2/- offered through this Letter of Offer

FCNR Foreign Currency (Non-Resident) Account FEDAI Foreign Exchange Dealers Association of India FE MA Foreign Exchange Management Act, 1999 FII(s) Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board FY Financial Year Gol Government of India

Issue, Rights Issue Issue of 1,20,45,300 Equity Shares of Rs.10/- each for cash at a premium of Rs. 2/- per share on rights basis to existing Equity Shareholders of theCompany in the ratio of 3:1 held as on Record Date.

IT Act Income Tax Act, 1961 Lead Manager Meghraj Financial Services India Pvt. Limited LOO/Offer Document Letter of Offer circulated to the Equity Shareholders of the Company

Members/Shareholders

Holders of the equity shares of the Company whose names appear in the Register of Members or Register of Beneficial Shareholders as on the Record Date

Memorandum Memorandum & Articles of Association of the Company MOU Memorandum of Understanding MRTP Monopolies & Restrictive Trade Practices Mn Million MW Mega Watt

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NAV Net Asset Value NRE Nc. Non-Resident (External) Rupee Account NRI(s) Non-Resident Indian(s) NRO Non-Resident Ordinary Rupee Account NSDL National Securities Depository Limited OCBs Overseas Corporate Bodies PAN Permanent Account Number PAT Profit After Tax PBIT Profit Before Interest and Tax RBI Reserve Bank of India

Record Date The relevant date which is reckoned for determining the Rights entitlement to the Members which is September 05, 2005.

Registrars Registrars to the Issue Ikon Visions Private Ltd.

Repatriation

"Investment on repatriation basis" means an investment the sale proceeds ofwhich are, net of taxes, eligible to be repatriated out of India, and theexpression 'Investment on non- repatriation basis', shall be construed accordingly.

RONW Return on Net Worth SEBI / The Board Securities and Exchange Board of India Securities Equity Shares issued through this Letter of Offer The Company / Issuer / DMSL Dolphin Medical Services Limited

WDV Written Down Value In this Letter of Offer, all references to "Rs." refers to Rupees, the lawful currency of India, "USD" or "US$" refers to the United States Dollar, the lawful currency of the United States of America. References to the singular also refer to the plural and one gender also refers to any other gender wherever applicable.

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RISK FACTORS

An investment in Equity Shares involves a high degree of risk. The investor should carefully consider all of the information provided in this LOO, including the risks and uncertainties described below, before making an investment in the Company’s Equity Shares. If any of the following risks actually occur, Company’s business, results of operations and financial condition could suffer, the trading price of the Company’s Equity Shares could decline, and the investors may lose all or part of their investment. Any projections, forecasts and estimates contained herein are forward looking statements that involve risks and uncertainties. Such statements used forward looking terminologies like “may”, “believes”, “will”, “expect”, “anticipate”, “estimate”, “plan” or other similar words. The companies actual results could differ from those anticipated in these forward looking statements as a result of a number of factors including those, which are set forth in the “Risk Factors” as appearing on Page iii & 102. Note: Unless specified or quantified in the relevant risk factors below, the Company

is not in a position to quantify the financial or other implication of any risks mentioned herein under:

Internal Risk Factors 1. The proposed project has not been appraised by any bank or any financial

institution and the deployment of funds raised through the present rights issue will not be monitored by any financial institution.

Management Perception: The management of the Company has estimated the requirement of funds. The Management shall ensure that the funds raised for the intended purpose are judiciously utilized. 2. Shareholders of the company in their meeting held on 23rd March, 2005

approved the issue of 1.90 lacs share warrants to the promoters of the Company. This will reduce the EPS of the company.

Management Perception: The share warrants when exercised are likely to enhance the motivation level of the warrantholders and consequently improve the performance of the Company. 3. Promises vs. Performance In the past the company has made promises but the performance was far below the expected levels. The Company’s promises made in the initial public issue vis-à-vis the performance were as under:

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(Rs. In Lacs) Particulars 1993-94 1994-95 1995 -9 6

Expected Actual Variance Expected Actual Variance Expected Actual Variance

Revenue 301.73 1.83 -99.39% 452.42 80.03 -82.31% 522.55 141.68 -72.89%

Net Profit 084.82 -2.40 -102.83% 114.66 11.81 -89.70% 119.20 041.01 -65.60%

EPS 002.00 N.A. N.A. 002.71 00.29 -89.29% 002.82 001.02 -63.83%

Book Value 010.46 10.00 -4.4% 013.96 7.99 -42.77% 018.83 9.00 -52.20%

Management Perception: Since the implementation of the project was not completed in respect of ophthalmic cancer units, and the CT Scanner was installed during the month of September 1994 only beyond the scheduled time, for reasons beyond the control of the management, even though the CT Scanner was acquired in February 1994, has resulted a fall in the revenue. Due to delay in receiving the allotment money, getting the requisite various Government approvals, and also not obtaining the subsidy from the Government, it was proposed to keep the Cancer unit project in abeyance. The ophthalmology Centre that ought to have been established by March 1996 got delayed due to non-receipt of allotment money.

4. Possibility of conflict of interest. Promoters’ three companies, Meridian Projects Ltd., Cosmic Fortunes India Ltd. and Panacea International were incorporated with same objects as that of the issuer company. The company has made an investment of Rs.32 lakhs in Meridian Projects Ltd., which has not yet started commercial operations and an investment of Rs.9 lakhs in Cosmic Fortunes India Ltd. Cosmic Fortunes India Ltd. deals in development of dietary supplements and herbal health food formulations.

Management Perception: There is no conflict of interest. The company has identified its niche area of operations, which ensures no conflict of interest with any of the above companies. Meridian Projects Limited is yet to start operations effectively. 5. None of the other Companies promoted by Dr. G V Mohan Prasad has

commenced its commercial operations till 31st December 2004. Management Perception: The companies’ approach has been very cautious. These companies are venturing into an industry that is dominated by the research. Any new development in the industry may adversely affect the operations of the company. Hence, these companies are waiting for the proper opportunity to commence their operations.

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6. Outstanding Litigations

Sl. No.

Nature of litigation Dolphin/ Promoters involved with the litigation

Amount (Rs.)

Criminal Nil Nil Securities Nil Nil Statutory Nil Nil Civil: 1 For a Sub leased

Property The Company Nil

2 Payment of the Provident Fund.

The Company 1,03,030/-

3 Civil case against Oriental Bank of Commerce for Loan availed to purchase equipment

Dr. M. Lakshmi Sudha & Dr. G. V Mohan Prasad, Directors of the Company

3,82,400/-

Others Nil Nil

1 The company is carrying out its operations in sub-leased premises admeasuring 1539 Sq. Yards situated at Governorpet, Vijayawada. The Church of South India, 222, Cathedral Road, Chennai is the owner of the land, which was leased to M/s. Tilak Enterprises, opp. City Civil Courts, Vijayawada, who sub-leased it to Dolphin Medical Services Ltd. in the year 1992 for a period of 10 years A dispute between the Church of South India, the owner and M/s. Tilak Enterprises, the lessee due to non-payment of rents by M/s. Tilak Enterprises to the Church of South India. In view of the dispute in between the Tilak Enterprises and the Church of South India in respect of their lease, Dolphin Medical Services Limited is directed by the Hon’ble Court to deposit the monthly rents due and accrued till the final disposal of the said case. As a result Dolphin Medical Services Limited has been depositing the monthly rents before the Hon’ble Court as directed and consequently M/s Tilak Enterprises or the Church of South India shall withdraw the said rent as per the final judgment of the Hon’ble Court. The lease rentals paid in the Court for this Company is Rs.30,780/- per month. The litigation is pending in the court of Principal Senior Civil Judge, Vijayawada and is basically a tripartite one with the Church of South India and M/s. Tilak Enterprises claiming for the right and authority to accept the rents and Dolphin Medical Services Ltd. is involved as the tenant and has been depositing the rents in the court of law.

2. The Assistant Provident Fund Commissioner, office of the Regional Provident

Fund Commissioner Office, Guntur has made an demand of Rs. 2,06,060.80 alleged to be due from Dolphin Medical Services Ltd. towards the payment of the Provident Fund. Against the said demand raised by Asst. Provident Fund Commissioner, a writ petition is filed before the Honorable High Court of Judicature, Hyderabad and also before the EPF Appellate Tribunal, New Delhi, after depositing Rs. 1,03,030/- being half of the claim amount with honorable court.

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Civil Case involving Directors, Dr. M. Lakshmi Sudha & Dr. G. V Mohan Prasad:

3. Dr. M. Lakshmi Sudha, director of Dolphin Medical Services Ltd. has taken a loan of Rs. 4,87,000/- for the purchase of an equipment of value of Rs. 6,50,000/- in the year 1999. The loan was personally guaranteed by Dr. G. V. Mohan Prasad, Managing Director of Dolphin Medical Services Ltd. After regular payments for some time, some outstanding amount was due in her loan account. At that time, the bank transferred the amount from the Savings account of the guarantor Dr. G. V. Mohan Prasad to Dr. M. Lakshmi Sudha's loan account without taking his permission. As such Dr. G. V. Mohan Prasad objected to it and issued a legal notice to the bank, and consequently the conflict resulted in litigation in the court of the Principal Senior Civil Judge, Vijayawada for purpose of settling the claim to the tune of Rs. 3,82,400/-

7. The company is dependent on the full subscriptions of the rights issue.

Under-subscriptions to the issue may have an adverse material impact on the implementation of the project and consequently on the future performance of the company.

Management Perception: In the event of any under-subscription of the issue some of the promoters intend to subscribe to the issue beyond their entitlement. In such a case the acquisition of additional shares by promoters shall be exempt from making an open offer in terms of regulations 3(1) (b) (ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulation 1997. The acquisition will not result in a change in the control of the management of the Company. 8. The company has significant planned capital expenditures; its capital

expenditure plans may not yield the intended benefits. Management Perception: The Company’s operations require significant capital expenditure to be utilized for the purpose of establishing the diagnostic centres at Hyderabad and Mumbai. For details on our planned capital expenditure please refer to the section entitled "Objects of the offer" indicated on page 38 of this LOO. The figures in the Company’s capital expenditure plans are based on management estimates and have not been appraised by any bank, financial institution or other independent organisation. In addition, its capital expenditure plans are subject to a number of variables, including possible cost overruns; construction/development delays or defects; receipt of Municipal approvals; and changes in management's views of the desirability of current plans, among others. The actual amount and timing of its future capital requirements may differ from its estimates as a result of, among other things, unforeseen delays or cost overruns, unanticipated expenses, regulatory changes and technological changes. In view of the reasons stated above, The Company cannot assure you that it will be able to execute its capital expenditure plans as contemplated. If it experiences significant delays or mishaps in the implementation of its capital expenditure plans or if there are significant cost overruns, then the overall

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benefit of such plans to its revenues and profitability may decline. To the extent that completed capital expenditure does not produce anticipated or desired revenue or cost reduction outcomes, its profitability and financial condition will be negatively affected.

9. The Company has not entered into any definitive agreements to utilize the

proceeds of the issue. Management Perception: The company intends to use the proceeds of the Issue for capital expenditure described in the section "Objects of the Offer" indicated on page 38 of this LOO. The Company has not yet placed orders for major items of plant and machinery for the projects. It intends to rely on its internal systems and controls to monitor the use of such proceeds. Some of the equipment it intends to deploy are expected to be imported and must be paid for in foreign currency. Changes in foreign exchange rates adversely affecting the value of the Rupee may adversely affect the cost of the project.

10. Managing the centers at various locations may be a difficult function as the

directors may not be able to devote their complete time and attention to all the units simultaneously including the existing unit which has the inherent risk of loss of due attention and care in running the business of the company. Failure to manage the integration of business will affect the operation and performance of Company, which may negatively impact profitability of the Company.

Management Perception: The company has pursued setting up new centres as part of its growth strategy. It intends to continue this strategy. The company’s strategy may not contribute to its expected profitability in the short run. However, the long-term benefits of the strategy could not be sacrificed because of this threat. 11. The company is yet to take any concrete step to identify the locations for

the centers this would cause delay in the implementation of the project. At present only the cities at which the centres are to be set up have been identified.

Management Perception: The company is in process of identifying the locations at various cities where the centres are to be set up. As such since the construction industry is witnessing hectic activity, the company does not foresee any difficulty in acquiring the required space for setting up its centres. 12. The gestation period of the entire project may be long, as it requires

negotiations with various parties and that too at various places. Management Perception: The company has envisaged a big plan to expand its activities. However since the management of the company is familiar with the business they expect to complete the deployment of funds within one year’s time.

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13. Orders for the machineries required for setting up the project have not been placed till date.

Management Perception: The company wants to place orders for machineries, after due negotiations when the funds from issue proceeds are made available which may substantially reduce the cost of acquisitions of the machineries. Management Perception: 14. There may be price escalation in acquiring adequate machineries, as the

orders are not yet placed. Management Perception: In the era of change, the cost of already introduced technologies has been reducing day after day in order to cater to the needs of the masses. The company, therefore, does not foresee any cost escalation in acquiring the required machineries 15. The success of any product/technology in Health Care Industry largely

depends on any new invention or break through in technology. Any such similar or better development elsewhere in the world, may make the earlier invented products obsolete and ultimately have impact on the profitability of that company. The products developed by M/s Biomix Networks Ltd may become obsolete in view of the rapid changing technology. At present the products developed by M/s Biomix Networks Ltd are not available in the country.

Management Perception:

Management will evaluate the progress and the products of Biomix at every stage and will renegotiate the deal, if necessary, to the benefit of the company.

16.The company has been listed on the Stock exchanges for over a decade. However, during this period except in the year 1995-96 it has not paid any dividend to its shareholders.

MANAGEMENT PERCEPTION: The Company’s financial performance got affected due to the non-availability of sufficient funds due to substantial delay in getting the allotment money to complete the project on time and hence it could not generate adequate profits to pay dividends.

17. The Financial Ratios of the Company are well below the industry ratios. MANAGEMENT PERCEPTION: The Company could not timely complete the envisaged project last time due to the unavailability of adequate funds. This affected its plans and it could not meet projected profitability ultimately affecting its financial ratios.

18. The Company operates in Medical Industry where rapid innovations &

technological changes are commonplace. The Medical diagnostic Industry

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is dominated and threatened by innovations and technological changes. Therefore, any innovation or technological change in the process & procedures in the diagnostic industry may suddenly make the processes & procedures adopted by the Company outdated. This factor will have a major impact on the operations and profitability of the Company.

MANAGEMENT PERCEPTION: The Company has been adopting global standard process and procedures. Though the industry is dominated and threatened by innovations and technological changes, the Company has not faced such threats in the past. In future also, the company will adopt global standard process & procedures. Hence, it does not foresee any major threat of the technological obsolescence that will have a major impact on the operations and profitability of the Company. 19. Deployment/ utilization of funds may not be in productive assets, which

may not result in returns for the company in the short & medium term. MANAGEMENT PERCEPTION:

As per the project, almost 70% of the rights issue proceeds are deployed / utilized in purchasing the tangible assets. Hence the management is confident about the performance and returns post project implications will rise.

20. The company has not invested any funds for the proposed project. MANAGEMENT PERCEPTION: As the entire project cost would be met only through the proceeds of the rights issue. Negotiations are going on for finalisation of Centre sites. The company has entered into MOU with Biomix and Dr. Joshi’s organization as the first step towards implementation of the project. The company has not spent any amount on the proposed project and is yet to make any definitive agreements, as the project is totally dependent on proceeds from the right issue. 21. The company may not be able to hire and retain qualified technical and

managerial personnel

MANAGEMENT PERCEPTION: The company is in medical services business for over 12 years and enjoys large clientele and reputation in the surrounding areas. The specialty services provided by the medical centre are well positioned in the said area. The medical centre has become a direct business centre. The management is confident that the company will be able to maintain the quality and key personnel in future. Our ability to perform in the industry, which meets the customer’s expectations, depends largely on our ability to attract, train, motivate and retain qualified and experienced professionals. The average employee turnover ratio of the company is 20% which is considered normal for the industry.

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External Risk Factors 1. The company may face competition from the existing established companies

and future entrants into the industry 2. The performance of the Company may be affected by a number of factors

beyond its control including political and economic developments both in India and worldwide. Terrorist attacks and other acts of violence or war may negatively affect the market. These acts may result in a loss of business confidence, affect the Company’s business, and its financial conditions.

3. A change in the Government’s economic liberalization and deregulations policies

could affect business and economic conditions in India and the business of the Company in particular.

4. The Company operates in a globally competitive business environment.

Growing competition may force the Company to reduce the prices of its services which may reduce the revenues and margins which could have a materially adverse effect on the business, financial conditions and operations of the Company.

5. As some components of the project are thrust areas, the Government may come

forward with providing these facilities free of cost. This may affect the financial returns of the company.

6. Increasing employee compensation in India may erode some of our

competitive advantage and may reduce our profit margins. Employee compensation in India has historically been significantly lower than employee compensation in the United States and Western Europe for comparably skilled professionals, which has been one of our competitive strengths. However, compensation increases in India may erode some of this competitive advantage and may negatively affect our profit margins. Employee compensation in India is increasing at a faster rate than in the United States and Western Europe, which could result in increased costs relating to scientists and engineers, managers and other mid-level professionals. We may need to continue to increase the levels of our employee compensation to remain competitive and manage attrition. Compensation increases may have a material adverse effect on our business, results of operation and financial condition.

Notes to the Risk Factors Investors are advised to refer to “basis of offer price” on page 96 before investing

in this Issue. The Net Worth of the Company before the Issue as on 31st March 2005 was Rs.

311.72 lacs.

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Cost per share to promoters is Rs. 10/-. The book value per share of the Equity Shares of the Company as on 31st March 2005 was Rs. 7.76/-

There are no Equity Shares in transit account, as on the Record Date i.e.

September 5, 2005. None of the Promoter and director has undertaken any transactions in the Equity

Shares of the Company during the last six months. The transactions between DMSL and its subsidiaries / associate companies and

companies under common control for the last three years are as under:

The company has made the investments of Rs.32 lakhs in Meridian Projects Ltd. Rs.9 lakhs in Cosmic Fortunes India Ltd. Both these companies are promoted by Dr. G V Mohan Prasad.

There are no material events occurring after the balance sheet date of March 31, 2005, which have an impact on financial statements.

The notes to accounts and significant accounting policies have been furnished in

the auditors’ report. For details on the basis of allotment, investors may refer to the paragraph titled

“Basis of Allotment” on page no. 29 of this Letter of Offer. Investors are free to contact the Lead Manager for any clarification or information,

who will be obliged to attend to the same. The investors may contact the Lead Manager and/or the Issuer for any complaint

pertaining to the Issue.

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DOLPHIN MEDICAL SERVICES LIMITED (Incorporated on 21st September, 1992 as Dolphin Scanning Services Ltd. and

subsequently the name of the company was changed to Dolphin Medical Services Ltd. on 8th November 1993 under Section 21 of the Companies Act, 1956)

Registered & Corporate Office: Ramchandra Rao Road, Suryarao Pet,

Vijayawada- 520 002. Tel: (0866) – 2575555/4965, 5519955 Fax: (0866) 2578039.

Website: www.dolphinmedicalindia.com Email: [email protected]

Dear Equity Shareholders, Pursuant to the resolution passed by the Board of Directors at the meeting held 20th May 2005, it has been decided to make the following offer to the equity shareholders of the Company: ISSUE OF 1,20,45,300 EQUITY SHARES OF RS.10/- EACH FOR CASH AT A PREMIUM OF RS. 2/- PER EQUITY SHARE AGGREGATING RS 1445.43/- LACS ON RIGHTS BASIS TO THE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 3 EQUITY SHARES FOR EVERY 1 EQUITY SHARE HELD ON RECORD DATE I.E. SEPTEMBER 05, 2005. THE FACE VALUE OF THE EQUITY SHARE IS Rs.10/- PER SHARE AND THE ISSUE PRICE WHICH IS Rs.12/- PER SHARE IS 1.2 TIMES OF THE FACE VALUE.

I. GENERAL INFORMATION IMPORTANT 1. This offer is applicable only to those shareholders whose names appear as

beneficial owners in respect of the Equity Shares held in the electronic form and on the register of members of the Company in respect of the Equity Shares held in physical form as on September 05, 2005, i.e. the Record Date.

2. Your attention is drawn to RISK FACTORS appearing on Pages iii & 102 of this

LOO. 3. Please ensure that you have received CAF(S) with this LOO. 4. Please read this LOO and the instructions contained therein and in the

COMPOSITE APPLICATION FORM (CAF) carefully, before filling in the CAF. The instructions contained in the CAF are an integral part of this LOO and must be carefully followed. Application is liable to be rejected if it is not in conformity with the terms of the LOO and/or the CAF

5. All enquiries in connection with this LOO or CAF should be addressed to the

Registrars, IKON VISIONS PRIVATE LTD., 33, Sanali Heavens, 8-3-948,Ameerpet, Hyderabad-500073 quoting the registered folio number / DP

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ID/client ID number and the serial number of the CAF and his/her full name and address.

6. In case the original CAF is not received, lost or misplaced by the shareholder, the

Registrars/Company will issue a duplicate CAF on the request of the shareholder who should furnish the registered folio number/DP ID/client ID number and his/her full name and address to the Registrars/Company. Please note that those applicants who are making the application in the duplicate CAF should not utilize the original CAF for any purpose including renunciation, even if it is received/found subsequently. In case the original and the duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored.

7. The Rights Issue will be kept open for a minimum period of 30 days and for a

maximum period of 60 days. 8. The funds received against the Issue will be kept in separate bank account(s)

and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the Company has received the minimum subscription of 90% of the Issue. If the Company does not receive the minimum subscription of 90% of the issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is any delay in the refund of subscription amount by more than 8 days after the company becomes liable to pay it, the company will pay interest for the delayed period, at the rates prescribed under section 73 of the Act.

ELIGIBILITY FOR THE ISSUE Dolphin Medical Services Limited is an existing listed Company. It is eligible to offer this Issue in terms of clause 2.4.1 (iv) of the SEBI Guidelines. The Company, its promoters, its directors or any of the Company’s associate or group companies and companies in which the directors of the Company are associated as director(s) or promoter(s) have not been prohibited from accessing the capital market under any order or direction passed by SEBI or any other regulatory authority. Further the promoters, their relatives (as per Act), the Company, group companies, associate companies are not detained as willful defaulters by RBI / Government authorities. PROHIBITION BY SEBI The Company, its promoters, its Directors or any of the Company’s associates or group companies and companies with which the Directors of the company are associated as Directors or promoters, or Directors of the promoters or promoters group companies have not been prohibited from assessing the capital market under any order or direction passed by SEBI or any other regulatory authority. GOVERNMENT APPROVALS The Company is not proposing to enter into any new line of business and has all the requisite approvals for carrying on the existing activities of the Company.

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The company can undertake the activities proposed by it in view of the present approvals and no further approval from any government authority are required by the Company to undertake its proposed activities. CONSENT OF LENDERS The Company has no lender. Therefore NOC is not required to increase the capital of the Company by way of this proposed Rights Issue. FILING The draft LOO has been filed with the Securities and Exchange Board of India, Chennai. A copy of this LOO will also be filed with the Stock Exchanges. The Company undertakes to incorporate the comments given by SEBI before filing the final LOO with the Stock Exchanges. The filing of the letter of Offer does not, however, absolve the Company from any liabilities under Section 63 or 68 of the Companies Act, 1956 or from the requirement of obtaining such a statutory or other clearances as may be required for the purpose of the proposed issue. SEBI further reserves the right to take up, at any point of time, with the Lead Manager any irregularities or lapses in the LOO. DISCLAIMER CLAUSE IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE LOO TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LOO. LEAD MERCHANT BANKER, MEGHRAJ FINANCIAL SERVICES (INDIA) PVT. LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT LOO ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LOO, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER, MEGHRAJ FINANCIAL SERVICES INDIA PRIVATE LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED MAY 31, 2005 IN ACCORDANCE WITH SEBI (MERCHANT BANKERS) REGULATIONS 1992, WHICH READS AS FOLLOWS: 1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE

RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, DISPUTE WITH

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COLLABORATORS, ETC., AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT LOO PERTAINING TO THE SAID ISSUE;

2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH

THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.

WE CONFIRM THAT:

(A) THE DRAFT LOO FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

(B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID

ISSUE, AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

(C) THE DISCLOSURES MADE IN THE DRAFT LOO ARE TRUE, FAIR AND

ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE.

3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES

NAMED IN THE LOO ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATION IS VALID;

THE FILING OF THE LOO WITH SEBI DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI, FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGERS (MERCHANT BANKERS), ANY IRREGULARITIES OR LAPSES IN THE LOO. CAUTION The Company and the Lead Managers accept no responsibility for any statements made otherwise than in this LOO or in the advertisement or any other material issued by or at the instance of the Company and that anyone placing reliance on any other source of information would be doing so at his/her/their own risk. The Lead Managers and the Issuer shall make all information available to the shareholders and no selective or additional information would be available to any section of the shareholders in any manner whatsoever.

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DISCLAIMER IN RESPECT OF JURISDICTION This Issue of Equity Shares is made in India to persons resident in India and NRIs/FIIs subject to requisite approvals. This LOO does not, however, constitute an offer to sell or an invitation to subscribe to Equity Shares offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this LOO comes is required to inform himself/herself about and to observe any such restrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Chennai, India only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this draft offer document has been filled with SEBI for its observations and SEBI has given its observations and that the final offer document has been filed with the Stock Exchange as per the provisions of the companies Act. Accordingly, the Equity Shares, represented thereby may not be issued or sold, directly or indirectly, and this Letter of Offer may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of offer document nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Dolphin Medical Services Limited since the date hereof or that the information contained herein is correct as of any time subsequent to this date. DISCLAIMER CLAUSE OF THE STOCK EXCHANGES Copies of the LOO will be forwarded to the Stock Exchanges where the Equity Shares of the Company are listed after the same has been filed with SEBI. Disclaimer Clause of The Stock Exchange, Mumbai (BSE) As required, a copy of this LOO has been submitted to the BSE (the Designated Stock Exchange). The Stock Exchange, Mumbai (“the Exchange”) has given vide its letter dated August 11, 2005 permission to this Company to use the Exchange's name in this LOO as one of the Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange has scrutinized this LOO for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. BSE does not in any manner- i. Warrant, certify or endorse the correctness or completeness of any of the

contents of this, LOO; or ii. Warrant that this Company's securities will be listed or will continue to be listed

on the Exchange; or iii. Take any responsibility for the financial or other soundness of this Company, its

promoters, its management or any scheme or project of this Company; And it should not for any reason be deemed or construed that this LOO has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by

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reason of anything stated or omitted to be stated herein or any other reason whatsoever. Disclaimer Clause of The Hyderabad Stock Exchange Limited The Hyderabad Stock Exchange has given vide its letter dated August 12, 2005 permission to this Company to use the Exchange's name in this LOO as one of the Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange has scrutinized this LOO for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The HSE does not in any manner- i. Warrant, certify or endorse the correctness or completeness of any of the

contents of this, LOO; or ii. Warrant that this Company's securities will be listed or will continue to be listed

on the Exchange; or iii. Take any responsibility for the financial or other soundness of this Company, its

promoters, its management or any scheme or project of this Company; And it should not for any reason be deemed or construed that this LOO has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever. Disclaimer Clause of The Ahmedabad Stock Exchange Limited The Ahmedabad Stock Exchange has given vide its letter dated August 12, 2005 permission to this Company to use the Exchange's name in this LOO as one of the Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange has scrutinized this LOO for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The ASE does not in any manner- i. Warrant, certify or endorse the correctness or completeness of any of the

contents of this, LOO; or ii. Warrant that this Company's securities will be listed or will continue to be listed

on the Exchange; or iii. Take any responsibility for the financial or other soundness of this Company, its

promoters, its management or any scheme or project of this Company; And it should not for any reason be deemed or construed that this LOO has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by

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reason of anything stated or omitted to be stated herein or any other reason whatsoever. IMPERSONATION Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act, which is reproduced below: “Any person who – (a) Makes in a fictitious name an application to a company for acquiring or

subscribing for, any shares therein, or (b) Otherwise induces a company to allot, or register any transfer of, shares

therein to him, or any other person in a fictitious name, Shall be punishable with imprisonment for a term which may extend to five years.” MINIMUM SUBSCRIPTION If the Company does not receive application money for atleast 90% of the Issued amount the entire subscription will be refunded to the applicants within 42 days from the date of closure of the Issue. If there is delay in the refund of application money by more than 8 days after the Company becomes liable to pay the amount (i.e. forty two days after the closure of the Issue), the Company will pay interest for the delayed period, at prescribed rates in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956. LISTING The Company’s Equity Shares are listed on the BSE, HSE and ASE. The Company has paid the current annual listing fees to BSE. In-principle approvals for listing has been obtained from the above-mentioned Stock Exchanges and also permission to deal in and for official quotation for Equity Shares being offered through this Issue. If the permission to deal in and for an official quotation of the Equity Shares is not granted by the Stock Exchanges, the Company shall forthwith repay, without interest, all monies received from the applicants in pursuance of this LOO. If such monies are not repaid within eight days after the Company becomes liable to repay it (i.e. 42 days after closure of the Issue), then the Company and every director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money, with interest as prescribed under Section 73 of the Act. COMPULSORY DEMATERIALISED DEALING The Equity Shares of the Company are under compulsory dematerialized trading for all class of investors with effect from 22nd February 2002. The Company has depository arrangements with NSDL and CDSL for issue and holding of the Equity Shares in dematerialized form. The existing equity shares bear ISIN No INE796B01013. Trading of securities upon listing shall only be in dematerialized form, although investors have an option to hold shares in the physical form or demat form.

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DENOMINATION OF SHARES The Company undertakes that at any given time, there shall be only one denomination for the Equity Shares of the Company and that the Company shall comply with such disclosures and accounting norms as may be specified by SEBI from time to time. ALLOTMENT AND REFUND The Company agrees that it will allot Equity Shares within 42 days from the date of closure of the Issue. The Company agrees that it shall pay interest for the delayed period at rates prescribed under Section 73 of the Act, if the allotment is not made and/or the refund orders are not dispatched to the investors within a further period of 8 days after the end of 42 days from the date of closure of the Issue for the period of delay beyond 42 days. In accordance with the extant postal rules the Company will ensure dispatch of refund orders of value up to Rs.1500/- under certificate of posting and refund orders of value above Rs.1500/- by registered post only. Refund, if any, shall be made by cheques or pay orders drawn on the bank(s) appointed by the Company as refund banker(s). The bank charges, if any, for encashing such cheques/pay orders will be borne by the applicants. Such cheques/pay orders will be payable at par at the places where the application money was originally accepted. The Company will provide adequate funds to the Registrars, for the purpose of dispatch of letter(s) of allotment/share certificate(s)/letter(s) of regret/refund order(s). ISSUE PROGRAMME The Issue will open at the commencement of banking hours and will close at the close of banking hours on the dates mentioned below.

ISSUE OPENS ON TUESDAY 27th DECEMBER, 2005

LAST DATE FOR RECEIPT OF REQUESTS FOR SPLIT FORMS

TUESDAY 10th JANUARY, 2006

ISSUE CLOSES ON WEDNESDAY 25th JANUARY, 2006

LEAD MANAGERS TO THE ISSUE Meghraj Financial Services India Pvt. Ltd. 3rd Floor, Khanna Construction House, 44, Dr. R G Thadani Marg, Worli, Mumbai – 400 018. Tel No: (022) 2493 1764 Fax No: (022) 2493 1765 Email: [email protected]

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REGISTRARS TO THE ISSUE IKON VISIONS PRIVATE LTD., 33, Sanali Heavens, 8-3-948,Ameerpet, Hyderabad-500073 Tel: 040-23744138, 23744356, 55615699 Fax: 040-55829559 E-mail: [email protected] COMPLIANCE OFFICER Dr. M. Lakshmi Sudha Dolphin Medical Services Ltd., Ramchandra Rao Road, Vijayawada 520 002. Tel: (0866) – 2575555, 5519955. Fax: (0866) – 2578039 LEGAL ADVISOR TO THE ISSUE Mr. S.M. Sultan Moosavi Santi Nagar, Mogalrajpuram, Vijayawada 520 010.. Tel: (0866) 2471047 Fax: (0866) 2487070 Email: [email protected] AUDITORS TO THE COMPANY PINNAMANENI & CO. CHARTERED ACCOUNTANTS 3 & 4 Ground Floor, Ram’s VSR Apartments Near P.B.Siddhartha Public School Moghulraj Puram VIJAYAWADA - 520 010 Tel. No: (0866) 2483735, 2481847 BANKERS TO THE COMPANY 1. The Federal Bank Ltd.

Prakasam Road, VIJAYAWADA – 520 002

2. ICICI Bank Ltd

45-1-52/5, Sai Nag Complex, Near Benz Circle VIJAYAWADA – 520 010

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3. The Hongkong and Shanghai Banking Corporation Ltd Banjara Hills HYDERABAD – 500 082

4. Canara Bank Venkateswarapuram VIJAYAWADA – 520 010. BANKERS TO THE ISSUE HDFC Bank Ltd. 6-1-73, Ground & Third Floor, Sayeed Plaza, lakdikapool, Hyderabad-500004. Tel: 040-23211586 Fax: 040-2323 0349 CREDIT RATING Since the present issue is of Equity Shares, credit rating is not required. TRUSTEES This being an issue of Equity Shares, appointment of Trustees is not required. STANDBY UNDERWRITING ARRANGEMENTS Underwriting being optional, the Company does not propose to underwrite the issue. UTILISATION OF ISSUE PROCEEDS The Company certifies that: 1. All monies received out of the Issue shall be transferred to a separate bank

account other than the bank account referred to in sub-section (3) of Section 73 of the Act;

2. Details of all monies utilized out of the Issue referred to in 1 above shall be disclosed under an appropriate separate head in the balance-sheet of the Company indicating the purpose for which such monies have been utilized; and

3. Details of all unutilized monies out of the Issue, if any, referred to in 1 above shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilized monies have been invested.

The funds received against rights Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the regional Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received.

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II. CAPITAL STRUCTURE OF THE COMPANY

Share Capital Nominal Value

Aggregate Amount

A. Authorised

2,50,00,000 Equity Shares of Rs.10/- each 25,00,00,000 B. Issued Capital

42,30,000 Equity Shares of Rs.10/- each 4,23,00,000 4,23,00,000Subscribed Capital

40,15,100 Equity Shares of Rs.10/- each 4,01,51,000 4,01,51,000

Paid up Capital

40,15,100 Equity Shares of Rs.10/- each 4,01,51,000 4,01,51,000 C. Now offered in terms of this Letter of Offer

1,20,45,300

Equity Shares of Rs. 10/- each for cash at a premium of Rs. 2/- each 12,04,53,000 14,45,43,600

D. Paid up Capital after the present offer

1,60,60,400 Equity Shares of Rs 10/- each 16,06,04,000 16,06,04,000

E. Share Premium 2,40,90,600

Before the Issue

0 After the Issue 2,40,90,600

NOTES TO CAPITAL STRUCTURE 1. Share Capital History

Date of Allotment

No. of Shares issued

Nominal Value (Rs.)

Issue Amount

Issue Price (Rs.)

Remarks

25/08/1993 56,500 10 565000 10 Private Placement To Promoters29/10/1993 3,63,500 10 3635000 10 Private Placement To Promoters 12/04/1994 6,40,000 10 6400000 10 Private Placement To Promoters 26/06/1994 29,55,100 10 29551000 10 Public Issue

TOTAL 40,15,100 4,01,51,000 2. All Equity Shares of the Company have been issued for cash and are now fully

paid up. 3. Shareholding Pattern as on 31st March, 2005

Sr. Particulars No. No. of shares Per cent to the

Capital 1 Promoter Group 5,93,246 14.77

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2. Friends and Relatives 3,77,963 9.41 3 Banks / Financial Institutions / Insurance

Companies 100 0

4 Mutual Funds 0 0 5 Private Corporate Bodies 2,64,638 6.60 6 Non Residents 6,292 0.16 7 Indian Public 27,62,871 68.81 8 Others 9,990 0.25

Total 40,15,100 100.00 4. The Promoter Group shareholding in Company as on 31st March, 2005: Sr. No.

Name Date of allotment

Shares Date

No. of shares

Face Value (Rs.)

Issue Price (Rs.)

% to the capital

Lock in period

1. M Lakshmi Sudha 5000 25.08.1993 26500 29.10.1993 101300 12.01.1999 51998 07.12.2000 15000 05.01.2004

1,99,798 10 10 4.97 31/03/06

2. G.V. Mohan Prasad 6970 25.08.1993 7030 29.10.1993 26048 12.04.1994 144400 12.01.1999 10000 07.12.2000

1,94,448 10 10 4.84 31/03/06

3. G Vimla Kumari 5000 25.08.1993 25000 12.04.1994 40000 07.12.2000

70,000 10 10 1.74 31/03/06

4. G Mallikharjuna Rao

5000 25.08.1993 26500 29.10.1993 32500 07.12.2000

64,000 10 10 1.59 31/03/06

5. G Eswar Chand 30000 12.04.1994 30,000 10 10 0.75 31/03/06 6. M Sesha Ratnam 30000 29.10.1993 30,000 10 10 0.75 NA 7. G Krishna Kumari 5000 12.04.1994 5,000 10 10 0.13 NA Total 5,93,246 14.77

5. The Promoter Group and Directors have not purchased or sold or financed,

directly or indirectly, any Equity Shares during a period of six months preceding the date on which the LOO is filed with SEBI.

6. As this is a rights issue, the provisions relating to promoters' contribution and

lock-in period are not applicable as per Clause 4.10.1(c) of SEBI (Disclosure & Investor Protection) Guidelines, 2000. The promoters/directors/associates intend to subscribe to their entitlement in this rights issue in full. In case of under subscription promoters/ directors / associates have undertaken to subscribe to unsubscribed portion, if any. Presuming no subscription is received from other shareholders and the promoters subscribe to the entire unsubscribed portion, the shareholding of promoter group and subscribers to the promoters contribution shall increase to 81.05% of the post rights issue equity capital of the Company. The allotment to the promoters/ directors, if they subscribe to unsubscribed portion as undertaken will result in public shareholding falling below the permissible minimum level as specified in the listing condition or listing

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agreement. In such case the promoter(s) of the company will make an offer for sale of their holdings in terms of clause 17.2 of SEBI (Delisting of Securities) Guidelines – 2003 so that the public shareholding is raised to the minimum level specified in the listing agreement or in the listing conditions within a period of 3 months.

7. Shareholding Pattern before and after the Issue is and will be as under:

Sr. Particulars Pre Issue (as on 31-03-2005)

Post Issue

No. No. of shares

Percent to the

Percent to the

Capital

Eligible Rights Shares

No. of Shares after Rights Issue Capital

1 Promoters Group 5,93,246 14.77 17,79,738 23,72,984 14.77 2 Friends and Relatives 3,77,963 9.41 11,33,889 15,11,852 9.41 3 Banks / Financial Institutions

/ Insurance Companies 100 0.00 300 400 0.00

4 Mutual Funds 0 0.00 00 00 0.00 5 Private Corporate Bodies 2,64,638 6.60 7,93,914 10,58,552 6.60 6 Non Residents 6,292 0.16 18,876 25,168 0.16 7 Indian Public 27,62,871 68.81 82,88,613 1,10,51,484 68.81 8 Others 9,990 0.25 29,970 39,960 0.25

TOTAL 40,15,100 100.00 1,20,45,300 1,60,60,400 100.00 Note: The post issue shareholding pattern indicated above is on the assumption that all the shareholders in respective categories will subscribe to their entitlement.

8. Top 10 shareholders of the Company and the number of Equity Shares held by

them:

A) As on the date of filing with Stock Exchange (09/12/05)

Sr. Name of the shareholder No. of Percent to the No. Shares Capital 1 Dr. M Lakshmi Sudha 1,99,798 4.98 2 Dr. G V Mohan Prasad 1,94,448 4.84 3 Mr. Sambasiva Rao Musunuru 75,100 1.87 4 Ms. G Vimal Kumari 70,000 1.74 5 Mr. Balamanmada Rao Musunuru 64,300 1.60 6 Mr. G Mallikarjuna Rao 64,000 1.59 7 Ms. P Nilima 59,300 1.48 8 Mr. V Venkateswara Rao. 57,700 1.44 9 Geeta Devi Dariya 56200 1.40 10 Zen Securities Ltd- BSE Clients A/C 43167 1.08 Total 884013 22.02

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B) As on 10 days prior to date of filing with Stock Exchange ( As on

02/12/05)

Sr. Name of the shareholder No. of Percent to the No. Shares Capital 1 Dr. M Lakshmi Sudha 1,99,798 4.98 2 Dr. G V Mohan Prasad 1,94,448 4.84 3 Mr. Sambasiva Rao Musunuru 75,100 1.87 4 Ms. G Vimal Kumari 70,000 1.74 5 Mr. Balamanmada Rao Musunuru 64,300 1.60 6 Mr. G Mallikarjuna Rao 64,000 1.59 7 Ms. P Nilima 59,300 1.48 8 Mr. V Venkateswara Rao. 57,700 1.44 9 Geeta Devi Dariya 56,200 1.40 10 Mr. Girdhari P Rohira 40,237 3.11 Total 881083 21.94

C) As on 2 years prior to the date of filing with Stock Exchange

Sr. Name of the shareholder No. of Percent to the No. Shares Capital 1. G V Mohan Prasad 1,94,448 4.84 2. M Lakshmi Sudha 1,84,798 4.60 3. V Seetha Mahalakshmi 83,800 2.09 4. M Vijayalakshmi 76,300 1.90 5. M Sambasiva Rao 75,100 1.87 6. G Vimala Kumari 70,000 1.74 7. M Bala Manmadha Rao 64,300 1.60 8. G Mallikharjuna Rao 64,000 1.59 9. V Venkateswara Rao 57,700 1.44 10. G Padmavathi 56,800 1.42

Total 9,27,246 23.09 10. The Company has not availed of any bridge loan or entered into any other similar

financial arrangement for incurring expenditure towards the objects of the Issue, the amount of which will be repaid out of the proceeds of this Issue.

11. There are no buyback, standby or similar arrangement for purchase of Equity

Shares offered through this LOO by the Promoter Group, directors and the Lead Managers.

12. The Equity Shares offered through this Rights Issue shall be made fully paid up

as the entire money (face value + premium) is being called on application.

The Promoter Group and subscribers to the promoters’ contribution hold 24.18 per cent of the paid up Equity Capital of the Company as on 31st March 2005. They will be entitled to 29,13,627 Equity Shares and have confirmed their in-principle intention to subscribe to the rights entitlement at a price of Rs. 12/- per share. They may subscribe to additional shares beyond their entitlement if required. However, only

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three equity shares are being offered for every one Equity Share held by the equity shareholders of the Company as on the Record Date.

In such a case the acquisition of additional shares by promoters shall be exempt from making an open offer in terms of regulations 3(1) (b) (ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulation 1997. The acquisition will not result in a change in the control of the management of the Company.

13. There would be no further issue of equity capital whether by way of issue of

bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of the LOO to SEBI until Equity Shares offered through this LOO have been listed or application monies refunded on account of non-listing or under-subscription, etc.

14. The Company presently does not have any intention or proposal to alter its

capital structure for a period of six months from the date of opening of the issue, by way of split/consolidation of the equity shares (including issue of securities convertible into exchangeable, directly or indirectly for equity shares) whether preferential or otherwise, or if the Company goes in for acquisitions and joint ventures the Company might consider raising additional capital to fund such activity or use shares as currency for acquisition and/or participation in such joint venture.

15. The Company has not issued any Equity Shares out of revaluation reserves in

the past. The Company does not have any revaluation reserves. 16. The Company shall comply with such disclosures and accounting norms as may

be specified by SEBI, from time to time. 17. The company has allotted 1,90,000 share warrants to the promoters of the

company on March 25, 2005 which are convertible into equity shares of equal numbers before the expiry of 18 months from the date of the issue of share warrants.

18. The Company had 3,748 shareholders as on 5th September 2005.

III TERMS OF THE PRESENT OFFER AUTHORITY FOR THE OFFER The Rights Issue has been authorized by the approval of the Board at its meeting held on 20th May 2005 under section 81 of the Companies Act, 1956. BASIS OF OFFER The Company has in consultation with the Designated Stock Exchange fixed the Record Date for determining the shareholders who are entitled to receive this offer for Equity Shares on a rights basis. The shareholders whose names appear as beneficial owners as per the list furnished by the depositories in respect of the Equity

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Shares held in electronic form and on the register of members of the Company in respect of the Equity Shares held in physical form on September 05, 2005 at the close of business hours shall be entitled to the Equity Shares on rights basis in the ratio of three Equity Shares for every one Equity Share held by them. PRINCIPAL TERMS OF THE ISSUE The Equity Shares now being offered are subject to the provisions of the Act and the terms and conditions of this LOO, the CAF, the MoA and AoA of the Company, the approvals from the Government of India, FIPB and RBI, if applicable, the provisions of the Act, FEMA, guidelines issued by SEBI, laws, guidelines, notifications and regulations for issue of capital and for listing of equity shares issued by SEBI, Government of India, RBI and/or other statutory authorities and bodies from time to time, listing agreements entered into by the Company with Stock Exchanges, terms and conditions as stipulated in the allotment advise or letters of allotment, rules as may be applicable and introduced from time to time. RIGHTS ENTITLEMENT As your name appears as beneficial owner in respect of the Equity Shares held in the electronic form or appears in the register of members as an equity shareholder of the Company on the Record Date, you are entitled to this Rights Issue. The number of Equity Shares to which you are entitled is shown in Block I of Part A of the enclosed CAF. FRACTIONAL ENTITLEMENT Since the ratio of entitlement of share is more than the shares held by the shareholders as on the record date, there will be no fractional entitlement. TERMS AND CONDITIONS FOR THE ISSUE OF EQUITY SHARES 1. Face Value Each Equity Share is of face value of Rs 10/-. 2. Issue Price Each Equity Share is being offered at Rs. 12/- including the premium of Rs. 2/- per Equity Share. 3. Entitlement Ratio The Equity Shares are being offered on rights basis to the Equity Shareholders of the company in the ratio of 3 Equity Shares for every 1 Equity Share held. 4. Market Lot The Equity Shares of the Company are tradable only in dematerialized form. The market lot for Equity Shares in demat form is one and that in physical form is

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hundred. In case of applications made by shareholders for receiving Equity Shares in physical form, the Company will issue to the allottees one certificate for the Equity Shares allotted ("consolidated certificate"). In respect of the consolidated certificate, the Company will, upon receipt of a request from the shareholder along with the consolidated certificate, split such certificates into market lot within 7 days time from the date of request. No fees would be charged by the Company for splitting such consolidated certificate. 5. Terms of Payment (a) Residents: Entire amount of Rs 12/- per Equity Share will be payable on

application. (b) Non-Residents: Entire amount of Rs. 12/- per Equity Share will be payable on

application. 6. Ranking of Equity Shares The Equity Shares allotted pursuant to this offer shall rank pari-passu in all respects with the existing Equity Shares of the Company including in respect of dividends. FORFEITURE Since the entire money (face value + premium) is payable on application itself, there will not be any forfeiture of shares in the proposed Rights Issue. NOMINATION The sole equity shareholder or first equity shareholder, along with other joint equity shareholders being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to all the rights in the Equity Shares. Person(s), being nominee(s), becoming entitled to the Equity Shares by reason of the death of the original equity shareholder(s), shall be entitled to the same rights to which he/she would be entitled if he/she were the registered holder of the Equity Shares. Where the nominee is a minor, the equity shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale/disposal of the Equity Share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When two or more persons hold Equity Share(s), the nominee shall become entitled to receive the Equity Shares only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the Registered Office of the Company located at Ramchandra Rao Road, Suryarao Pet, Vijayawada – 520 002 India or at such other place at such address as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion in the CAF. Only one nomination would be applicable for one folio. Hence, in case the shareholder(s) has (have) already registered the nomination with the Company, no

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further nomination needs to be made for Equity Shares to be allotted in the Issue under the same folio. In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separate nomination for the Equity Shares to be allotted in the Issue. Nominations registered with respective DP of the applicant would prevail. If such applicants require changing the nomination, they are requested to inform their respective DP. ACCEPTANCE OF OFFER The equity shareholder may accept and apply for the Equity Share(s) offered in whole or in part, by filling in Part "A" of the enclosed CAF and submitting the same along with payment of the application money to the Bankers to the Issue and its collection centres specified on the reverse of the CAF on or before the close of banking hours on or before the issue closing date or such extended time as may be specified by the Board or a committee thereof in this regard. Applicant at centres not covered by the branches of collecting banks can send their CAF(s) together with the cheque drawn on a local bank at Hyderabad/demand draft for the full application amount (net of demand draft and postal charges) payable at Hyderabad to the registrars to the issue by registered post. Such applications sent to anyone other than the registrar to the issue are liable to be rejected. ADDITIONAL EQUITY SHARES You are eligible to apply for additional shares provided you have applied for all the equity shares offered to you without renouncing them in full or in part. The application for additional equity shares shall be considered and allotment shall be made at the sole discretion of the Board and in consultation if necessary with the Designated Stock Exchange. This allotment of additional equity shares will be made on an equitable basis with reference to number of shares held by you on the record date. • Renouncees can apply for additional shares. RENUNCIATION As an equity shareholder on the Record Date, he/she has the right to renounce his/her entitlement of the Equity Shares in full or in part in favour of any other person(s) including individuals non resident Indians, limited companies, statutory corporations/institutions, trusts (registered under the Indian Trust Act, 1882), societies (registered under the Societies Registration Act, 1860 or other applicable laws), minors (through their legal guardians) provided that such trusts, societies or legal entities are authorized under their constitution/rules/bye-laws to hold Equity Shares in the Company. Renouncee(s) need not be existing members of the Company. However, renunciation in favour of partnership firms, HUFs, foreign nationals (unless approved by RBI or other relevant authorities) or any person located or having jurisdiction where the offering in terms of this LOO could be illegal or requires compliance with securities laws of such jurisdiction or any other persons

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not approved by the Board will not be accepted. Joint renunciation in favour of more than three individuals will not be accepted. Renunciation in favour of OCBs is not permissible. The Board reserves the right to reject the request for allotment to renouncees in its sole and absolute discretion without assigning any reasons therefor. Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting centres specified on the reverse of the CAF with the Form of Renunciation (Part B of the CAF) duly filled in shall be conclusive evidence in favour of the Company of the person(s) applying for Equity Shares in Part C to receive allotment of such Equity Shares. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part ‘A’ must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right to renounce any Equity Shares in favour of any other person. PROCEDURE FOR RENUNCIATION To renounce the offer in whole in favour of one renouncee:

If the equity shareholder wishes to renounce this offer in whole, then he/she has to complete Part B of the CAF. In case of joint holders, all joint holders must sign this part of the CAF in the same order as per the specimen signatures recorded with the Company. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of the CAF.

To renounce the offer in part: If the equity shareholder wishes to accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split by applying to the Registrars to the Issue. The equity shareholder should indicate his/her requirement for split forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrars to the Issue so as to reach them latest by the close of business hours on 10.01.2006. On receipt of the required number of split forms from the Registrars, the procedure as mentioned in the above para shall have to be followed.

Change and/or introduction of additional holders:

If the equity shareholder wishes to apply for Equity Shares jointly with any other person, or persons, not more than three, who is/are not already joint holders, it shall amount to renunciation and the procedure as stated above shall have to be followed. Even a change in the sequence of the joint holders shall amount to renunciation and the procedure for renunciation, as stated above shall have to be followed.

Renouncee(s):

The person in whose favour the Equity Shares are renounced should fill in and sign Part C and submit the entire CAF to the Bankers to the Issue or to the

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collection centres on or before the closing date of the Issue along with the application money.

In case the signature of the equity shareholder(s), who has/have renounced the Equity Shares, does not match with the specimen signature(s) as per the records of the Company, the application is liable to be rejected. However, any right of renunciation is subject to the express condition that the Board of the Company shall be entitled in its absolute discretion to reject the request for allotment from the renouncees without assigning any reasons therefor. SPLITTING OF COMPOSITE APPLICATION FORMS Split CAF cannot be re-split. Only the person to whom the offer is made and not the renouncee(s) shall be

entitled to obtain split CAF. Requests for split CAF should be sent to the Registrars to the Issue, Ikon

Visions Private Ltd., 33, Sanali Heavens, 8-3-948, Ameerpet, Hyderabad - 500073 not later than 10th January 2006 by filling in Part D of the CAF.

Requests for split CAF will be entertained only once. Split forms shall be sent by post to the applicant at the applicant’s risk.

HOW TO APPLY FOR EQUITY SHARES The equity shareholder may exercise any of the following options with regard to the Equity Shares offered to him/her, using the enclosed CAF:

OPTIONS AVAILABLE ACTION REQUIRED

1 Accept entitlement in full. Fill in and sign ‘Part A’ of the CAF. 2. Accept entitlement in full and apply for

additional Shares. Fill in and sign ‘Part A’ of the CAF after indicating in Block IV the number of additional Equity Shares applied for.

3. Accept entitlement in part without renouncing the balance.

Fill in and sign ‘Part A’ of the CAF, after indicating in column No. III the number of Equity Shares accepted.

4. Renounce the entitlement in full to one person (renouncee) (joint renouncees are considered as one renouncee) (joint renouncees cannot exceed more than three) without applying for any Equity Shares.

Fill in and sign ‘Part B’ of the CAF indicating the number of Equity Shares renounced and hand over the entire CAF to the renouncee. The renouncee must fill in and sign ‘Part C’ of the CAF.

5. Accept entitlement in part and then renounce the balance to one or more renouncees.

Fill in and sign ‘Part D’ of the CAF for split forms after indicating the required number of split forms and send the entire CAF to the Registrars so as to reach them on or before the last date for receiving requests for split forms indicated in the CAF. On receipt of the split forms take action as

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indicated below: i. For the Equity Shares, if any, which you

want to accept, fill in and sign ‘Part A’ of one Split CAF.

ii. For the Equity Shares you want to renounce, fill in and sign ‘Part B’ in the required number of CAFs indicating the number of Equity Shares renounced to each renouncee.

iii. Each of the renouncee should then fill in and sign ‘Part C’ of the respective split CAF for the Equity Shares accepted by each of the renouncee.

6. Introduce a joint holder or change the sequence of joint holders.

This will be treated as a renunciation. Fill in and sign Part B and the renouncees must fill in and sign Part C.

Application for Equity Shares should be made only on the CAFs, which are provided by the Company. The CAF should be completed in all respects as explained under the head “INSTRUCTIONS” indicated on the reverse of the CAF before submission to the Bankers to the Issue at its collecting centres on or before the last day of the closure of the Issue. Non-resident shareholders/renouncee(s) should forward their applications to the Bankers to the Issue at the specified collection centre indicated on the reverse of the CAF for non-resident applicants. No part of the CAF should be detached under any circumstances. Applicants residing at places other than designated collection centers. Applicants residing at places other than the cities where the bank collection centers have been opened should send their completed CAF by registered post to the Registrars along with bank drafts payable at Hyderabad in favour of “DMSL - Rights Issue” crossed “A/c Payee only” so that the same are received on or before closure of the Issue (i.e. 25.01.2006). In such cases the applicants can make payment net of Demand Draft charges and postal charges. The Company shall not be liable for any postal delays and applications received through mail after the closure of the Issue are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned above. All CAFs duly completed together with cash/cheque/demand draft must be submitted before the closure of the Issue to the Bankers to the Issue named herein or to any of its collection centers mentioned on the reverse of the CAF. The CAF along with application money must not be sent to the Company or the Lead Managers to the Issue except as mentioned above. The applicants are requested to strictly adhere to these instructions. Failure to do so could result in the applications being liable to be rejected, with the Company, the Lead Managers and the Registrar not having any liability to such applicants.

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In case the original CAF is not received by the shareholder or is lost, misplaced, he/she may request the Registrars for issue of a duplicate CAF by furnishing the registered folio number/DP ID/Client ID number and their full name and address. In case the original and duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored. APPLICATIONS UNDER POWER OF ATTORNEY In case of applications made under a power of attorney or by limited companies or bodies corporate or registered societies or mutual funds or trusts, certified true copy of the relevant power of attorney or relevant resolution or authority to make the investment and sign the application, as the case may be, along with a copy of the memorandum and articles of association and/or bye-laws must be lodged with the Registrar giving reference of the serial number of the CAF after submission of the CAF to the Bankers to the Issue or any of their collection centres, failing which the applications are liable to be rejected. In case the above-referred documents are already registered with the Company, the same need not be furnished again. However, the serial number of registration or reference of the letter, vide which these papers were lodged with the Company/R&T Agents must be mentioned just below the signature(s) on the CAF. In no case should these papers be attached to the application and submitted to the Bankers to the Issue or at its collection centers. APPLICATION ON PLAIN PAPER Shareholders who have neither received the original CAF(s) nor are in a position to obtain the duplicate CAF(s) may make an application to subscribe to the Rights Issue on plain paper, along with an account payee cheque /demand draft payable at Hyderabad to be drawn in favour of “DMSL - Rights Issue’ and marked “A/c Payee only” and sent by registered post directly to the Registrars at Ikon Visions Private Ltd., 33, Sanali Heavens, 8-3-948, Ameerpet, Hyderabad - 500073so as to reach them on or before the closure of the Issue. The envelope should be superscribed “DMSL – Rights Issue”. The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with the Company should contain the following particulars: Name of Issuer Name of the shareholder including joint-holders Address of sole / first holder Folio number/DP ID / client ID number Number of Equity Shares held as on September 05, 2005 (Record Date) Certificate numbers and distinctive numbers, if held in physical form Number of Equity Shares to which entitled Number of Equity Shares accepted out of entitlement Number of additional Equity Shares applied for, if any Total number of Equity Shares applied for Amount paid on application Particulars of cheque / draft enclosed

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Savings/current account number and name and address of the bank where the shareholder will be depositing the refund order.

PAN/GIR number and income tax circle/ward/district of the sole/all the joint applicants where the application is for Equity Shares of a value of Rs.50,000 or more

In case of non-resident shareholders, NRE/FCNR/NRO account number, name and address of the bank and branch

If the payment is made by a draft purchased from an NRO account, an account debit certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account.

If the payment is made by drafts purchased from NRE/FCNR accounts as the case may be, an account debit certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/FCNR account.

Signature of shareholders in the same order as appearing in Company’s records. Please note that shareholders who are making the application on plain paper shall not be entitled to renounce their rights and should not utilize the CAF for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications. The Company shall refund such application amount to the applicant without any interest thereon. MODE OF PAYMENT For resident shareholders Payment should be made in cash (not more than Rs.20,000) or by cheque/bank draft drawn on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the bankers clearing house located at the centre where the CAF is submitted and which is participating in the clearing at the time of submission of the application. Outstation cheques/money orders/postal orders/ post dated cheques will not be accepted and CAFs accompanied by such cheques/money orders/postal orders/post dated cheques are liable to be rejected. For non-resident shareholders on non-repatriation basis For NRIs holding Equity Shares on non-repatriation basis, payment may be made by way of cheque drawn on NRO account maintained in Mumbai or rupee draft purchased out of NRO account maintained elsewhere in India but payable at Mumbai. In such cases, the allotment of Equity Shares will be on non-repatriation basis. If the payment is made by a draft purchased from an NRO account, an account debit certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account, should be enclosed with the CAF. In the absence of the above, the application shall be considered incomplete and is liable to be rejected. All cheques/bank drafts accompanying the CAFs should be crossed “A/c Payee only” and made payable to “DMSL– Rights Issue NR”. The CAF duly completed together with the cheques/drafts for the total amount payable should be deposited with the Bankers to the Issue at the specified collection centre indicated on the reverse of the CAF, on or before the close of banking hours on the date of closure of the Issue. A

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separate cheque or bank draft must accompany each CAF. Reference number of CAF should be mentioned on the reverse of the cheque/draft. New demat account shall be opened for holders who have had a change of status from resident Indian to NRI. For Non-Resident shareholders on repatriation basis Payment by NRIs / FIIs / foreign investors must be made by demand draft/cheque payable at Mumbai or funds remitted from abroad in any of the following manner: By Indian rupee drafts purchased from abroad and payable at Mumbai or funds

remitted from abroad; OR By cheque/draft on a NRE account or FCNR account maintained in Mumbai; OR Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in

India and payable in Mumbai; OR FIIs registered with SEBI must remit funds from special non-resident rupee

deposit accounts. All cheques/drafts submitted by NRIs / FIIs / foreign shareholders should be drawn in favour of “DMSL – Rights Issue NR”. The CAF for non-residents applying on repatriation basis duly completed together with the amount payable on application must be delivered to the Bankers to the Issue on or before the close of banking hours on the date of closure of the Issue. A separate cheque or bank draft must accompany each CAF. Applicants may note that where payment is made by drafts purchased from NRE/FCNR accounts as the case may be, an account debit certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/FCNR account should be enclosed with the CAF. In the absence of the above the application shall be considered incomplete and is liable to be rejected. In the case of Non-Residents who remit their application monies from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account, details for which should be furnished in the appropriate columns in the CAF. In the case of NRIs who remit their application money through Indian Rupee drafts from abroad, refunds and other disbursements, if any will be made in US dollars at the rate of exchange prevailing at such time. The Company will not be liable for any loss on account of exchange rate fluctuation for converting the rupee amount into US dollars or for collection charges charged by the applicant’s bankers. Applications received from NRs, NRIs, persons of Indian origin resident abroad, for allotment of Equity Shares shall be inter-alia, subject to the conditions imposed from time to time by the RBI under FEMA in the matter of refund of application monies, allotment of Equity Shares, issue of letters of allotment / export of share certificates, dividends, interest, etc. STOCKINVESTS Investors will not have the facility of applying through stock invest instrument in the issue as Reserve Bank of India has withdrawn the stock invest scheme vide notification No. DBOD.NO.FSC.BC.42/24.47.001/2033-04 dated 05th November 2003.

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GENERAL “TERMS OF PAYMENT”: Please read the instructions printed on the enclosed CAF carefully. 1. Application should be made on the printed CAF, provided by the Company

except as mentioned under the head‚ application on plain paper in the LOO and should be complete in all respects.

2. A CAF found incomplete with regard to any of the particulars required to be given therein, and/or which is not completed in conformity with the terms of this LOO is liable to be rejected and the amount paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any.

3. The CAF must be filled in English and the names of all the applicants, details of occupation, address, father’s/husband’s name, etc. must be filled in block letters.

4. Signatures should be either in English or Hindi or the languages specified in the Eighth Schedule to the Constitution of India. Signatures other than in the aforesaid languages or thumb impression must be attested by a notary public or a special executive magistrate under his/her official seal.

5. The CAF together with cheque/demand draft should be sent to the Bankers to the Issue or their collection centres and not to the Company or Lead Managers. Applicants making applications on plain paper and those residing at places other than cities where the collection centres of the Bankers to the Issue have been authorized by the Company for collecting applications, will have to make payment by Demand Draft payable at Hyderabad and send their application forms to the Registrars to the Issue by REGISTERED POST. If any portion of the CAF is/are detached or separated, such application is liable to be rejected.

6. The shareholders must sign the CAF as per the specimen signature recorded with the Company. In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three.

7. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant at the address given in the CAF.

8. Bank Account Details: It is mandatory for the applicant to mention the applicant’s savings bank/current account number and the name of the bank with whom such account is held in the space provided in the CAF, to enable the Registrars to the Issue, to print the said details in the refund orders after the name of the payees. Applications not containing above details are liable to be rejected.

9. PAN/GIR Number: Where an application for allotment of Equity Shares individually is for a total value of Rs. 50,000/- or more i.e. the total number of Equity Shares applied for multiplied by the issue price per share is Rs. 50,000/- or more, the applicant or in case of applications in joint names, each of the applicants, should mention their PAN allotted under the Income-Tax Act, 1961 or where the same has not been allotted, the GIR number under the Income-Tax Act, 1961 along with the circle/ward/district. In case where neither the PAN nor the GIR number has been allotted, the fact of non-allotment should be mentioned in the CAF. CAF without this information will be considered incomplete and shall be liable to be rejected.

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10. Payment by cash: The payment against the share application should not be effected in cash if the amount to be paid is more than Rs. 20,000/-. In case payment is effected in contravention of this, the application will be deemed invalid and the application money will be refunded and no interest will be paid thereon.

11. All communication in connection with application for the Equity Shares, including any change in address of the shareholders should be addressed to the Registrars to the Issue quoting the name of the first/sole applicant shareholder, folio number and CAF number.

12. Split CAF cannot be re-split. 13. Only the person or persons to whom Equity Shares have been offered and not

renouncee(s) shall be entitled to obtain split CAF. 14. As per section 109A of the Act, the sole applicant / joint applicants being

individuals may nominate, in the prescribed manner, a person to whom his/her/their share in the Company shall vest in the event of his/her death. Only one nomination would be applicable per folio. Hence, in case the shareholder(s) has/have already registered the nomination with the Company, no further nomination need to be made for their holdings. In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires changing the nomination, he/she is requested to inform their respective DP.

15. Applicants must write CAF number on the reverse of the cheque/demand draft. 16. Only one mode of payment per application should be used. 17. A separate cheque/draft must accompany each CAF. 18. Payment should be made in cash / or by cheque / demand draft/ drawn on any

bank (including a co-operative bank) which is situated at and is a member or sub-member of the banker’s clearing house located at the center where application is accepted. A separate cheque/ draft must accompany each application form. Outstation cheques / drafts will not be accepted and application(s) accompanied by such cheques/ drafts will be rejected.

19. The issue shall be kept open for a minimum of 30 days and for maximum of 60 days.

PRINTING OF BANK PARTICULARS ON REFUND ORDERS As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the applicant’s bank account are mandatorily required to be provided for printing on the refund orders. Bank account particulars will be printed on the refund orders, which can then be deposited only in the account specified. The Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud. OFFER TO NON-RESIDENT EQUITY SHAREHOLDERS/APPLICANTS Vide notification dated 18th June, 2003, bearing number FEMA 94/2003, RBI has granted general permission to Indian companies to issue rights/bonus equity shares to existing non-resident shareholders. The existing non-resident shareholders may apply for issue of additional Equity Shares and the Company may allot the same subject to the condition that the overall issue of Equity Shares to non-residents in the total paid up capital does not exceed the sectoral cap. In other words, non-residents may subscribe for additional Equity Shares over and above Equity Shares offered on

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rights basis by the Company and renounce the Equity Shares offered in full or part thereof in favour of a person named by them. However, this facility would not be available to investors who have been allotted such Equity Shares as OCBs. JOINT-HOLDERS Where two or more persons are registered as the holders of Equity Shares, they shall be deemed (so far as the Company is concerned) to hold the same as joint-tenants with benefits of survivorship subject to provisions contained in the AoA. NOTICES All notices to the equity shareholder(s) required to be given by the Company in connection with the Issue shall be published in one English national daily with wide circulation, one regional national daily with wide circulation and/or will be sent by ordinary post to the registered holders of the Equity Share(s) from time to time. ISSUE OF DUPLICATE EQUITY SHARE CERTIFICATE If any Equity Share certificate(s) is/are mutilated or defaced or the cages for recording transfers of Equity Shares are fully utilized, the Company against the surrender of such certificate(s) may replace the same, provided that the same will be replaced as aforesaid only if the certificate numbers and the distinctive numbers are legible. If any Equity Share certificate(s) is/are destroyed, stolen, lost or misplaced, then upon production of proof thereof to the satisfaction of the Company and upon furnishing such indemnity/surety and/or such other documents as the Company may deem adequate, duplicate Equity Share certificate(s) shall be issued. OPTIONS AVAILABLE TO THE EQUITY SHAREHOLDER The CAF clearly indicates the number of Equity Shares, which the equity shareholder is entitled to. If the equity shareholder applies for an investment in Equity Shares, then he/she can: Apply for his/her entitlement in full Apply for his/her entitlement in full and apply for additional Equity Shares Apply for his/her entitlement in part Apply for his/her entitlement in part and renounce the other part Renounce the entire entitlement (or part of entitlement).

OPTION TO RECEIVE THE RIGHT EQUITY SHARES IN DEMATERIALISED FORM The Equity Shares of the Company have been under compulsory dematerialized trading for all class of investors, with effect from 22nd February 2002. Hence, the equity shareholders who wish to trade on the Stock Exchanges are advised to opt for receiving these Equity Shares in dematerialized form. The Company has depository arrangements with NSDL and CDSL for issue and holding of the Equity Shares in dematerialized form. In this context:

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(i) Tripartite agreements have been entered into on November 15, 2001between

the Company, Registrars and NSDL and on May 11, 2001 between the Company, Registrars and CDSL for offering depository facility to the investors. The Company will apply to NSDL and CDSL, for approval to admit the Equity Shares offered in terms of this LOO into their depository system for trading and for completion of other formalities.

(ii) Applicants opting to receive allotment in Demat form must have a beneficiary account with any of the DPs of NSDL or CDSL prior to making the application and in the same order of names in case of a joint application.

(iii) Shareholders, who do not hold beneficiary account, may open a beneficiary account with any DP (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with the Company). In case of investors having various folios in the Company with different joint holders, the investors will have to open separate accounts for such holdings.

(iv) For shareholders already holding Equity Shares of the Company in dematerialized form as on Record Date, the beneficiary account number will be printed on the CAF. For those shareholders/applicants who open accounts later or those who change their accounts and wish to receive their rights entitlement by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of Equity Shares arising out of the Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized.

(v) Equity Shares allotted to an applicant in the electronic form will be credited directly to the applicant’s respective beneficiary account with DP.

(vi) The allotment advice / refund orders will be directly sent to the applicant by the Registrars to the Issue.

(vii) If incomplete/incorrect details are given under the heading ‘Request for Shares in Electronic Form’ in the CAF, resulting in rejection by the depositories, such applicant will be issued physical share certificates.

(viii) The applicant is responsible for the correctness of their beneficiary account details given in the CAF vis-à-vis those with their DP. In case the information is incorrect or insufficient, the Issuer would not be liable for losses, if any.

(ix) Renouncees can also exercise the option to receive Equity Shares in demat form by indicating the same in the relevant block and providing the necessary details about their beneficiary account.

(x) It may be noted that Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic connectivity with NSDL or CDSL.

(xi) Dividend or other benefits with respect to the Equity Shares held in dematerialized form would be paid to those shareholders whose names appear in the list of beneficial owners given by the depositories to the Company as on book closure/ record dates.

(xii) The application form shall contain space for indicating number of shares subscribed for in demat and physical shares or both.

(xiii) No separate applications for demat and physical is to be made. If such applications are made, the applications for physical shares will be treated as multiple application and rejected accordingly.

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(xiv) In case of partial allotment, allotment will be done in demat option fort the shares sought in demat and balance, if any, will be allotted in physical shares.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON THE STOCK EXCHANGES IN DEMATERIALIZED FORM ONLY. LAST DATE FOR SUBMISSION OF COMPOSITE APPLICATION FORM The last date for receipt of the CAF, by the Bankers to the Issue and its collection centres, together with the amount payable, is on or before the close of banking hours, on 25.01.2006. If the CAF together with the amount payable is not received by the Bankers to the Issue at its collection centres on or before the close of banking hours on 25.01.2006, the offer contained in this LOO shall be deemed to have been declined, and the Board shall utilize this entitlement for allotting the Equity Shares as mentioned below under the heading “Basis of Allotment”. BASIS OF ALLOTMENT The basis of allotment shall be finalised in consultation with the Designated Stock Exchange in the following order of priority: 1. Full allotment to the shareholders who have applied for their rights entitlement

either in full or in part and also to the renouncees who have applied for the Shares renounced in their favour either in full or in part.

2. Preferential allotment of one additional shares each to shareholders whose fractional rights have been ignored and have applied for additional shares.

3. Allotment to the shareholders who having applied for all the shares offered to them as rights have also applied for additional Shares. The allotment of such additional Shares will be made as far as possible on equitable basis with reference to number of Equity Shares held on the record date in consultation with the Designated Stock Exchange.

4. Allotment to renouncees who having applied for all the Equity Shares renounced in their favour have applied for additional Equity Shares, provided there is a surplus remaining after 1, 2 and 3 above.

5. Allotment to any other person as the board may in its absolute discretion deems fit provided there is a surplus available after making full allotment under 1, 2, 3 and 4 above.

The Company expects to complete the allotment of Equity Shares within a period of 42 days from the date of closure of the Issue in accordance with the listing agreements with the Stock Exchanges. The Company shall retain no over-subscription. The issue will become under-subscribed after considering the number of shares applied as per entitlement plus additional shares, the under-subscribed portion shall be applied for only after the closure of the issue. The promoters shall subscribe to such under-subscribed portion as per relevant provisions of the law. If the promoters of the company desires to subscribe to such under subscribed portion and if disclosure is made pursuant to SEBI (Substantial Acquisition of shares and

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Takeover) Regulations, 1997, such allotment of the under-subscribed portion will be governed by the provisions of SEBI (SAST) Regulations, 1997. The under-subscribed portion, if any of the equity shares offered to the shareholders, after considering the applications for rights/renunciation and additional equity shares, as above, shall be disposed off by the Board or committee of Directors of the company authorized in this behalf by the Board of Directors of the company, in such manner as they think most beneficial to the company and the decision of the Board or committee of Directors of the Company in this regard shall be final and binding. In the event of over-subscription, allotment will be made only within the overall size of the Rights Issue. The allotment to the promoters of any under-subscribed portion over and above their entitlement, would be done in compliance with the Clause 40 A of the Listing Agreement. DISPOSAL OF APPLICATIONS AND APPLICATION MONIES The Board, reserves its full, unqualified and absolute right to accept or reject any application in whole or in part in consultation with the Designated Stock Exchange without assigning any reason therefore, in case the application is not made in terms of this LOO. In case an application is rejected in full, the application money received will be refunded to the first named applicant within 42 days from the date of closure of the Issue in accordance with Section 73 of the Act. If there is delay of refund of application money by more than 8 days after the Company becomes liable to pay (i.e. forty two days after the closure of Issue), the Company will pay interest for the delayed period at the rate prescribed under sub-section (2) and (2A) of Section 73 of the Act. No acknowledgment will be issued for the application monies received by the Company. However, the Bankers to the Issue / Registrars to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. ALLOTMENT / REFUND Where an applicant has applied for additional Equity Shares and is allotted lesser number of Equity Shares than applied for, the excess application money paid shall be adjusted first towards allotment money and balance, if any will be refunded to the applicant. Share certificate / letter of allotment or letter of regret together with refund order exceeding Rs. 1,500/- if any, will be dispatched by registered post at the sole/first named applicant’s address within 42 days from the date of the closing of the Issue. Refund orders upto Rs. 1,500/- will be dispatched under certificate of posting. Adequate funds will be made available to the Registrars for this purpose. In case of those shareholders who have opted to receive their Equity Shares in dematerialized form through electronic credit under the depository system, an advice regarding the credit will be sent separately.

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If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. Refunds will be made by cheques or pay orders drawn on the bank(s) appointed by the Company as refund bankers. Such instruments will be payable at par at the places where applications were accepted. Bank charges, if any, for enchasing such cheques or pay orders will be borne by the applicants. For non-resident applicants, refunds, if any, will be made as under: Where applications are accompanied by Indian rupee drafts purchased abroad and payable at Mumbai, India, refunds will be made in convertible foreign exchange equivalent to Indian rupees to be refunded. Indian rupees will be converted into foreign exchange at the rate of exchange, which is prevailing on the date of refund. The exchange rate risk on such refunds shall be borne by the concerned applicant and the Company shall not bear any part of the risk. Where the applications made are accompanied by NRE / FCNR / NRO cheques, refunds will be credited to NRE / FCNR / NRO accounts respectively, on which such cheques were drawn and details of which were provided in the CAF. LETTERS OF ALLOTMENT / SHARE CERTIFICATES Share certificate, letter of allotment or letter of regret along with refund orders as the case may be will be dispatched to the registered address of the first named applicant and/or the respective beneficiary accounts will be credited within 42 days, from the date of closure of the Issue. In case the allotment is made in physical form, and if letter of allotment is issued, the relevant share certificate will be dispatched within three months from the date of allotment in exchange for the letter of allotment. Allottees are requested to preserve such letter of allotment (if any) to be exchanged later for share certificates. UTILISATION OF ISSUE PROCEEDS The Company certifies that: 1. All monies received out of the Issue shall be transferred to a separate bank

account other than the bank account referred to in sub-section (3) of Section 73 of the Act;

2. Details of all monies utilized out of the Issue referred to in 1 above shall be disclosed under an appropriate separate head in the balance-sheet of the Company indicating the purpose for which such monies have been utilized; and

3. Details of all unutilized monies out of the Issue, if any, referred to in 1 above shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilized monies have been invested.

The funds received against rights Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the regional

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Stock Exchange with suitable documentary evidence that the minimum subscription of 90 per cent of the Issue has been received. UNDERTAKINGS BY THE COMPANY The Company undertakes that:

a) The complaints received in respect of the Issue shall be attended to by the

Company expeditiously and satisfactorily; b) All steps for completion of the necessary formalities for listing and

commencement of trading at all Stock Exchanges where the Equity Shares are to be listed are taken within seven working days of finalization of basis of allotment;

c) Funds required for dispatch of refund orders/allotment letters/certificates by registered post shall be made available to the Registrars by the Company;

d) Share certificates / refund orders to the non-resident Indians shall be dispatched within the specified time;

e) No further issue of shares shall be made till the shares offered through this LOO are listed or till the application moneys are refunded on account of non-listing, under subscription, etc.

All the legal requirements as applicable till the filing of the LOO with the Designated Stock Exchange have been complied with.

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IV TAX BENEFITS

The Board of Directors of the Company has been advised by M/s Pinnamaneni & Co., Chartered Accountants vide their letter dated 09th December 2005 that under the Income Tax Act, 1961 and other applicable tax laws for the time being in force, the following tax benefits and concessions will inter-alia, be available to the Company and the members. A) TAX BENEFITS AVAILABLE TO THE COMPANY UNDER THE INCOME-TAX

ACT, 1961 (THE ACT): 1. Under section 32 of the Act, the company is entitled to depreciation on (i)

tangible fixed assets, being building, machinery, plant and furniture and (ii) intangible assets, being know-how, patents, copy rights, mark, licensees, franchises of other business and rights of similar nature acquired on or after the 1st day of April, 1998 for the use thereof in the company's business.

2. Under section 35 of the Act and subject to the provision therein, the company

would be entitled to deduction in respect of expenditure laid our or expended on scientific research relating to the business.

3. Under section 10(34) of the Act, dividend incomes referred to in section 115-O

are exempt from tax in the hands of the company. 4. Under section 112 and other relevant provisions of the Act, the long term capital

gains (not being exempt gain) arising on transfer of long term capital assets shall be taxed at the rate of 20% (plus applicable surcharge) after indexation as provided in the second proviso to section 48. However, in case of listed securities, the long-term capital gain can be taxed at 10% (plus surcharge) without indexation, at the option of shareholder.

4. Under section 10(38) of the act long term capital gain on sale of shares where the

transaction of sale is entered on a recognized stock exchange in India on or after 1st October 2004 shall be exempt from tax.

5. Under section 111A of the act short term capital gain on sale of shares where the

transaction of sale is entered on a recognized stock exchange in India on or after 1st October 2004 shall be subject to tax at the rate of 10% (Plus applicable surcharge and education cess)

UNDER THE WEALTH ACT, 1957 The company is eligible to pay wealth tax as per the provisions of Wealth tax Act,

1957 at the rate 1% in respect of certain assets owned by the company subject to the basic exemption of Rs.15 lacs.

(B) TAX BENEFITS AVAILABLE TO THE MEMBERS UNDER THE INCOME- TAX ACT, 1961 (THE ACT):

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TO RESIDENT MEMBERS: 1. Under section 10(34) of the Act, dividend income referred to in section 115-O of

the Act, are exempt from tax in the hands of the shareholders. 2. Under section 10(23D) of the Act, all Mutual Funds set up by Public Sector Banks

or Public Financial Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized by the Reserve Bank of India, subject to the conditions specified therein, are eligible for exemption from income-tax on all their income, including income from investment in the shares of the company.

3. Under section 112 and other relevant provisions of the Act, the long term capital

gains (not being exempt gain) rising on transfer of long term capital assets shall be taxed at the rate of 20% (plus applicable surcharge) after indexation as provided in the second proviso to section 48. However, in case of listed securities, the long-term capital gain can be taxed at 10% (plus surcharge) without indexation, at the option of shareholder.

4. In accordance with section 54EC of the act and subject to the conditions

specified therein, long term capital gains arising on the transfer of shares of the company will be exempt from capital gains tax if the entire capital gains are invested within a period of six months after the date of such transfer for a period of 3 years in specified bonds mentioned under the section.

5. Under section 10(38) of the act long term capital gain on sale of shares where the

transaction of sale is entered on a recognized stock exchange in India on or after 1st October 2004 shall be exempt from tax.

6. Under section 111A of the act short term capital gain on sale of shares where the

transaction of sale is entered on a recognized stock exchange in India on or after 1st October 2004 shall be subject to tax at the rate of 10% (Plus applicable surcharge and education cess)

7. In accordance with section 54ED of the Act and subject to the conditions

specified therein, long term capital gains arising on transfer of the shares of the company shall be exempt from tax of the entire capital gains are invested within six months from the date of transfer, in the acquisition of specified equity shares mentioned under the section.

8. In accordance with section 54F of the act and subject to the conditions therein,

long term capital gains arising on transfer of shares of the company held by an individual or HUF shall be exempt from tax if the net sale consideration is utilized within a period of one year before or two years after the date of transfer for purchase of a new residential house, or for constructions of a residential house within a period of three years from the date of transfer.

9. In terms of Section 10(32) of the IT Act, any income of minor children clubbed in

the total income of the parent under section 64(1A0, shall be exempt to the extent such income does not exceed Rs.1,500/- in respect of each such child, in accordance with, and subject to the provision of the respective sections.

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TO NON-RESIDENTS MEMBERS: 1. Under section 10(34) of the Act, dividend income referred to in section 115-O of

the Act is exempt from tax in the hands of the shareholders. 2. As per the provisions of section 115A of the Act, in the case of a non resident or

a foreign company, the tax payable on dividends other than dividends referred to in section 115-O shall be 20% (plus surcharge as applicable) of such income. It shall not be necessary for such assessee to furnish the Return of Income if their only source of income is investment income and tax has been deducted at source from such income under the provisions of chapter XVII B of the Act.

3. Under the first proviso to section 48 of the Act, in case of a non-resident, in

computing the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange (as per exchange control regulations) protection is provided from fluctuation in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case. However, the capital gain will be taxed at the rate of 10% under section 112 of the Act.

4. In accordance with section 54EC of the Act and subject to the conditions

specified therein, long term capital gains arising on the transfer of shares of the company will be exempt from capital gains tax if the entire capital gains are invested within a period of six months after the date of such transfer for a period of 3 years in specified bonds mentioned under the section.

5. In accordance with section 54ED of the Act and subject to the conditions

specified therein, long term capital gains arising on transfer of the shares of the company shall be exempt from tax if the entire capital gains are invested within six months from the date of transfer, in the acquisition of specified equity shares mentioned under the section.

6. In accordance with section 54F of the Act and subject to the conditions therein,

long term capital gains arising on transfer of shares of the company held by an individual or HUF shall be exempt from tax if the net sale consideration is utilised within a period of one year before or two years after the date of transfer for purchase of a new residential house, or for constructions of a residential house within a period of three years from the date of transfer.

7. SPECIAL PROVISIONS FOR NON-RESIDENT INDIAN MEMBERS: A Non-Resident Indian (i.e. individual being a citizen of India or person of

Indian origin) has the option to be governed by the special provisions of chapter XII-A of the Act, according to which:

7.1 Under section 115E of the Act, where shares in a company are acquired in

convertible foreign exchange by a non-resident Indian then income from long term capital gains on transfer of shares shall be charged to tax at the rate 10% (plus surcharge as applicable) without aggregating any other income earned in India which is taxed separately.

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7.2 Under section 115F of the Act, the long-term capital gains arising from the transfer of shares, where these are acquired in convertible foreign exchange, shall be exempt from tax entirely/proportionately, provided that the net consideration is invested in any specified asset within six months from the date of transfer of the asset. The amount so exempt from tax shall, however, be chargeable to tax, if the new asset is transferred or converted into money within three years from the date of acquisition of the specified new asset.

7.3 Under section 115G of the Act, non-resident Indian is not obliged to file a Return

of Income under section 139(1) of the Act, if his total income consists only of income from investments and/or long term capital gains earned on transfer of such investments and tax has been deducted at source from such income under the provisions of chapter XVII B of the Act.

7.4 Under section 115H of the Act, where a non-resident Indian becomes

assessable to tax in India in relation to any previous year, as a resident in India in respect of his total income of any subsequent year, he may furnish to the assessing officer a declaration in writing along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that the provisions of chapter XII-A shall continue to apply to him in relation to the investment income derived from any foreign exchange asset, being an asset of the nature referred to in sub clause (ii) to sub clause (v) of clause (f) of section 115C of the Act, in which case the provisions of chapter XII-A shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets.

7.5 Under section 115I of the Act, a non-resident Indian has the option of not

being governed by the provisions of chapter XII-A for any assessment year by furnishing his return of income under section 139 of the Act declaring therein that the provision of this chapter shall not apply to him for that assessment year.

8. SPECIAL PROVISIONS FOR FOREIGN INSTITUTIONAL INVESTORS: Under section 115AD of the Act Foreign Institutional Investors (FIIs) will

be charged to tax at 20% (plus surcharge as applicable) on income other than income by way of dividend referred to in section 115-O from shares (other than units referred to in section 115AB of the Act); at 10% (plus surcharge as applicable) on the long term capital gains arising from transfer of such shares and at 30% (plus surcharge as applicable) on the short term capital gains arising from the transfer of such shares, such income being computed in the manner set out in the said section.

TO VENTURE CAPITAL COMPANIES/FUNDS: In terms of section 10(23FB) of the IT Act, all Venture capital

companies/funds registered with Securities and Exchange Board of India, subject to the conditions specified are eligible for exemption from income tax on all their income, including income from sale of shares of the company.

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UNDER WEALTH TAX ACT, 1957 AND GIFT TAX: 1. Shares are outside the scope of the word 'Assets' defined under section 2(ea)

of the Wealth Tax Act, 1957 and accordingly are not liable to wealth tax. 2. Gift tax is not leviable in respect of any gift made on or after first day of

October, 1998. Therefore any gift of the shares will not attract gift tax. Notes: 1. All the above benefits are as per the current tax law as amended by the Finance

Act, 2005 and will be available only to the sole/first named holder in case the shares are held by joint holders.

2. In respect of non-resident, the tax rate and the consequent taxation mentioned

above shall be further subject to any benefits available under the double taxation avoidance agreement, if any , between India and the country in which the non-resident has fiscal domicile.

3. In view of the individual nature of tax consequences, each investor is advised

to consult his/her own tax advisor with respect to specific tax consequences of his/her participation in the scheme.

This is a summary only and not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of convertible debentures or ordinary shares. The statements made above are based on the laws in force and as interpreted by the relevant taxation authorities as of date. Investors are advised to consult their tax advisors with respect to the tax consequences of their holdings based on their residential status and the relevant double taxation conventions.

However, all shareholders are advised to consult their own tax advisors as to the tax implications on investments in their individual cases.

for PINNAMANENI & CO., Chartered Accountants Place : Vijayawada Date : 09/12/2005

P.V.V.SATYANARAYANA Proprietor

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V. PARTICULARS OF THE OFFER

OBJECTS OF THE OFFER 1. To set up new diagnostic centres at Hyderabad and Mumbai, 2. To upgrade the existing diagnostic centre at Vijayawada, 3. To fund the activities of distribution of diagnostic equipments, 4. To fund the acquisition of exclusive Indian marketing rights of “Lab on chip” - a

unique diagnostic tool of excellence and other products, 5. Meet issue expenses. The main objects clause of the MOA enables the Company to undertake its existing activities and the activities for which the funds are being raised through the Issue. THE BUSINESS PLAN OF DOLPHIN MEDICAL SERVICES LTD 1. Establishment of sophisticated and modern diagnostic centers – which in addition

to the regular and well known diagnostic equipment – have a revolutionizing and very new – (yet to be introduced in India)- diagnostic tool exclusive to DMSL centers in India.

2. The establishment of the planned diagnostic centres in bigger cities which still have a lot of demand supply gap, will benefit DMSL in many ways – in addition to greatly enhancing the operations of the company. They are :

Better Corporate image Enhanced Market Share Ability to provide better services The presence of DMSL in big cities and the existing infrastructure may thereby be used for the distribution and the other proposed add on activities of the company.

3. With the availability of sophisticated infrastructure in big cities skilled manpower

with expertise, DMSL will be positioned as the preferred partner for “Knowledge Process Outsourcing” (KPO) for research institutes, academic labs and industrial partners in the field of medicine and medical biotechnology.

4. The presence of sophisticated laboratory services in big cities in India will enable to fulfill the company’s plan of expanding to ‘Drug Development Services’ (Clinical Trails). DMSL to focus on Medical services of two types:

“Early Development Lab Services” (EDLS) that will leverage on existing

infrastructure to be the preferred hub for pathology and radiology services.

“Clinical Development Services(CDS) or Clinical Trails” : that will use Dolphin and its affiliates as a preferred partner for phase ! to phase IV clinical testing of new chemical entities and drugs for clinical trails.

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The Company will focus on a variety of therapeutic categories such as Oncology, metabolic disorders and infective diseases.

The plan of expanding to more places in the country will greatly help in conducting the much preferred multisite, multicentric clinical trails for domestic and foreign pharmaceutical companies.

5. The Company has acquired the sole and exclusive distribution rights of a latest and most recent innovative diagnostic medical equipment for the whole territory of India. The functioning of this equipment is based on a totally different concept to that of the existing technologies and is called - “Molecular Resonance Imaging technology”. It is basically an immediate non-invasive, screening technique based on Quantum medicine, and is useful to identify the malfunctioning of various body systems and organs, based on which, we could further carryout specialized investigation of that particular part and thus be able to pin point the exact disease. This next generation linear machine may revolutionize the medical industry.

6. DMSL has entered in to an agreement with a nanotechnology company M/s. Biomix Network (P) Ltd. Which has its operational base in Mumbai and also offices in USA. Biomix is working on an innovative range of products in the diagnostic and pharmaceutical, health care, sectors. The following are the products being developed by Biomix.

“Lab on Chip” a Revolutionising innovative discovery by M/s Biomix Network Pvt. Ltd. (BNPL) BNPL has developed innovative, cost effective & simple to use diagnostic kits based on micro cantilever diagnostics for infectious diseases vix. Hepatitis B as a model and then the same approach will be extended to other diseases viz. AIDS, Malaria, TB, Typhoid and other tropical diseases.

Developing rapid diagnostic tools particularly in the area of infectious diseases is the need of the hour. Rapid, cost-effective and point-of-care sensing devises render medical care effective.

Conventional methods take long time and need highly skilled manpower to carry out these tests. A simple and inexpensive device which requires very low skilled levels will be of use at the primary Healthcare centres providing health for all Globally. Biomix has also developed ‘Hospital on Chip’ – Virtual Speciality Hospital (VSH) – Tele-Medicine Platform and ‘AIKAT’– software platform for web based clinical trials and Telemedicine.

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These products will eventually become World Standard & universal operating System for Pharma R&D (US$80 Billion) & e health delivery (US$ 38 Billion) for healthcare industry.

Dolphin has entered into an agreement with Biomix to invest as a strategic investor. Dolphin will be bestowed the sole marketing and distribution rights of its ‘Lab on Chip’ and other next generation products for the whole territory of India, in addition to the implied benefits of investment.

The company has entered into MoU with M/S Biomix Network Ltd. On 22/12/2004. The terms and conditions, salient features of the arrangement, etc of the agreement are- a) The party receiving disclosure of any confidential information of the other

party in written and oral will preserve the confidentiality of such confidential information.

b) Biomix agrees to license its diagnostics and clinical trial software and activities to Dolphin at mutually agreeable terms.

c) Dolphin agrees to bring in upto Rs. 9 crores from Jan1, 2005 onwards from their internal accruals, first funds raised by placing its shares within a period of 60 days and not beyond end Feb,2005 for the purpose of first Rs. 4.5 crores investment in Biomix and for the balance Rs. 4.5 crores till end May, 2005. Any funds brought after end May by Dolphin will be at the revised offer from Biomix based on its perception.

d) Biomix agrees to give upto 26% stake to M/S Dolphin for a cash investment in Biomix for upto Rs. 9 crores as listed above in clause 2 via Bank Transaction in Biomix Corporate account held with Union Bank of India.

e) In case Dolphin fails to bring in cash upto 4.5 crores by end Feb and any other investor brings the funds in Biomix from March 16,2004 onwards at a higher valuation of Biomix, Dolphin will be given the corresponding revised valuation stake in Biomix and it will be at the sole discretion of the Biomix Management of which Dr. G. V. Mohan Prasad, Managing Director , Dolphin will be a part of the Board. Biomix will issue number of shares (corresponding to 26% of equity including share application money held with the company on Jan 1, 2005 as per the records of the company on Jan1,2005) to dolphin for a total value of upto Rs. 9 crores. However, the agreement is valid for a period of one year from then.

f) This agreement will be valid for an initial period of one year from the date of signing for the purpose of investment and is valid for a period of 5 years for the purpose of confidentiality disclosure.

g) Each party’s obligation to maintain confidentiality of the disclosing party’s confidential information shall survive the termination of this agreement.

h) This agreement will be governed by the laws of the High courts in Mumbai, Maharashtra, India.

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i) This agreement constitutes the entire understanding between the parties with respect to its subject matter, superseding any prior oral or written agreement or understanding relating hereto.

7. Dolphin Medical Services has entered in to an MOU with Dr. Joshi’s organization for the sole distributing rights in India of a natural remedy product for curing / controlling a, disease, called ‘Psoriasis’ which they acquired from its original investors. There is presently no recorded total cure for Psoriasis in Allopathic Medicine, however the above said product of herbal and other ingredients) not only easily controls the exacerbations of the disease but also achieves the ‘near cure’ target. This product is also expected to take a major market share of the psoriatic remedial in India. Dolphin Medical Services has in turn acquired the rights of marketing and distribution of the product from Dr. Joshi’s organization.

(Source - M/S Joshi Research Institute, Mumbai )

Dolphin Medical Services has also entered in to an MOU with Dr. Joshi’s organization for the sole distributing rights in India of a naturally grown product which is controlling hypertension remarkably in a short time of less than a fortnight. To its credit, this product has the Clinical studies done and scientific proof of functioning. The company has entered into MoU with M/S Joshi Research Institute on 13/01/2005. The terms and conditions, salient features of the arrangement, etc of the agreement are- 1. Joshi Research Institute will transfer their exclusive distribution rights for their

products for India, U.S.A., or any other countries for which the rights may be awarded later on.

2. To begin with the rights for India are awarded on an exclusive basis to Dolphin Medical Services Limited, even if some distributors have already been identified will be under this Agreement and function under the master Distribution, viz, Dolphin.

3. Dr. Joshi and Dr. Mohan Prasad will make all appropriate introductions and be the major communication point between interested Parties and existing distributors, while licensing and entering into marketing & commercialization agreements with those parties before being discussed.

This Agreement for the territorial exclusivity between M/S Joshi Research Institute and Dolphin Medical Services Limited will remain in force for a period of ten years. There is no financial commitment by Dolphin to Dr.Joshi’s Institutue inspite of getting the marketing rights.

UNIQUE SELLING POINT (USP) / CORE COMPETENCE

Dolphin Medical Services Ltd. is already running a diagnostic center for last 11 years. The Company is Debt Free and making profit for the last three years. It is competent to ensure the smooth implementation of the proposed project.

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All the products mentioned above are complimentary to each other and support each other.

The Promoters are well experienced in running diagnostic centers.

The company has obtained exclusive distribution rights for the whole territory of India, to market a next Generation linear diagnostic machine, which may revolutionize the diagnostic industry.

The Indian public, especially the urban elite has become aware of importance of medical diagnosis in their health.

MEANS OF FINANCE AND DEPLOYMENT OF FUNDS The funds Rs. 1445.43 lacs proposed to be raised by the Company through the Rights Issue will be deployed in a year’s time in the following manner

SUMMARY OF THE COST OF THE PROJECT

Sr. No PARTICULARS COST IN RS. LAKHS

1 Mumbai Centre 462.55 2 Hyderabad Centre 434.55 3 Vijay Wada Centre upgradation - Magnetic Resource

Imaging Scanner (MRI) (Permanent Magnet Model) 290.00

4 Purchase of MRIT (Orion) equipment for commencing the distribution activities

89.30

5 Obtaining the exclusive Indian marketing rights for lab on chip - a unique diagnostic tool of excellence and other products.

100.00

6 Issue expenditure & POP 69.00 TOTAL COST 1445.40 (Issue size = Rs. 14,45,43,600/-)

1. No working capital is shown as part of the project as company is in the

business of running a diagnostic center for last 11 years. The Company is Debt Free and making profit for the last three years. All the working capital expenses, present and future, are proposed to be met from the internal accruals of the company.

2. In case of under subscription promoters/ directors / associates have undertaken to subscribe to unsubscribed portion, if any. Hence there will be no shortfall. The entire proceeds of the rights issue would be utilized towards funding the proposed project only, hence there will be no excess mobilization through this rights issue.

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LOCATION WISE INVESTMENT AND % OF THE INVESTMENT OF PROJECT COST IN TANGIBLE ASSETS AND INTANGIBLE ASSETS.

Investment to Project Cost

Tangible Assets Intangible assets Sr.No.

Location/ Activity

Amount % Amount % Amount % 1 Mumbai 462.55 32.00 387.55 83.78 75.00 16.222 Hyderabad 434.55 30.06 387.55 89.18 47.00 10.823 Vijayawada 379.30 26.24 379.30

100.00 - -

4 Distribution/ Marketing

169.00 11.70 - 169.00 100.00

Total 1445.40 100.00 1154.40 291.00

OUT OF THE TOTAL PROJECT COST OF RS. 1445.40 LAKHS TANGIBLE ASSETS WOULD CONSTITUTE RS. 1154.40 LAKHS (79.84%) AND INTANGIBLE ASSETS WOULD CONSTITUTE RS. 291.00 LAKHS (20.16%). PERIOD WISEBREK-UP OF EXPENDITURE PROPOSED TO BE INCURRED ON THE PROJECT Sr. No PERIOD Amount in Lacs1 Feb’ 06- March ‘06 298.502 April’ 06- Feb’ 07 1146.90Total 13 Months 1445.40 MUMBAI CENTRE

SR. NO. PARTICULARS COST IN RS.

LAKHS 1. CT Scan- Spiral (Computerised Tomography

scanner) 200.00

2. MRIT – Molecular Resonance Imaging Technology Equipment

89.30

3. Ultrasound Scanner 48.50 4. X-Ray 18.50 5. Laboratory Equipment 31.25 6 Interior, remodelling works & Miscellaneous 50.00 7 Deposit 25.00 TOTAL 462.55

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HYDERABAD CENTRE

SR. NO. PARTICULARS COST IN RS. LAKHS

1. CT Scan- Spiral (Computerised Tomography scanner) 200.00

2. MRIT – Molecular Resonance Imaging Technology Equipment

89.30

3. Ultrasound Scanner 48.504. X-Ray 18.505. Laboratory Equipment 31.256 Interior, remodeling works & Miscellaneous 32.00 7 Deposit 15.00 TOTAL 434.55

CENTRE-WISE DISTRIBUTION OF EQUIPMENTS

Sr. No. Name of the Equipments Vijayawada Hyderabad Mumbai

1. MRI Scanner (Magnetic Resource Imaging) -- --

2. Computerised Tomography Scanner (Spiral)

--

3. Ultrasound Scanner -- 4. X-Rays -- 5. MRIT ( Molecular

Imaging Technology) --

6. Laboratory Equipment --

EQUIPMENT DETAILS SR. NO.

NAME OF EQUIPMENT

NAME OF SUPPLIER AND PLACE

DATE RS. IN LAKHS

1. Magnetic Resonance Imaging MRI Scanner

Siemens Ltd., Hyderabad 26.11.04 290.00

2. CT Scan – Spiral Siemens Ltd., Hyderabad 26.11.04 200.003. Ultrasound Siemens Ltd., Hyderabad 26.11.04 48.504. X-Ray Siemens Ltd., Hyderabad 01.06.05 18.505. Molecular

Resonance Imaging Technology

Piscean Enterprises, Hyderabad 20.05.05 89.30

6. Laboratory Equipment

1. Fully Automated Random access Biochemistry

CPC Pharmaceuticals Pvt. Ltd., Chennai

19.01.05 14.00

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Analyzer (Chemwell plus)

2. Immunoassay Chemi-luminescence System (ACS)

Bayer Healthcare Diagnostics division, Baroda, Gujarat

9.02.05 8.50

3. Hematology Analyzer (Swelab – AC920)

Nicholas Piramal India Limited, Vijayawada

19.01.05 5.25

4. Automated Coagulation Analyzer

CPC Pharmaceuticals Pvt Ltd., chennai

19.01.05 0.80

5. ECG Machine (non-digital)

Bharat Medi Systems, Vijayawada 27.01.05 0.65

6. Automated ESR analyser

CPC Pharmaceuticals Pvt. Ltd., Chennai

19.01.05 0.55

7. Binocular Microscope (Olympus)

Anil Scientific Company 22.03.05 0.31

8. Laboratory Glassware

- 0.29

9. Miscellaneous - 0.90The firms/ suppliers of the equipments are in no way related/ connected to the promoters/directors of the company.

SCHEDULE OF IMPLEMENTATION

Sr. No.

Activity Commencement Completion

VIJAYWADA CENTRE 1. Ordering the Equipment Feb 2006 March 2006 2. Remodelling Works March 2006 April 2006 3. Recruitment of additional staff May 2006 May 2006 4. Installation of the equipment June 2006 June 2006 5. Trial runs of the equipment July 2006 July 2006 6. Commencement of commercial

diagonistic operations Aug 2006 Aug 2006

HYDERABAD CENTRE 1. Finalisation of the premises

Feb 2006 March 2006

2. Entering into Agreement with the owner of the premises.

March 2006 April 2006

3. Planning the remodelling of the premises to suit the needs & Applying for the Electricity load required etc.

April 2006 May 2006

4. Ordering the equipment Feb 2006 Apr 2006 5. Remodelling works March 2006 April 2006 6. Recruitment May 2006 June 2006 7. Installation of the equipment June 2006 July 2006 8. Trial runs of the equipment July 2006 Aug 2006

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9. Commencement of commercial diagonistic operations

Sep 2006 Sep 2006

MUMBAI CENTRE

1. Finalisation of the premises March 2006 April 2006 2. Entering into Agreement with the

owner of the premises. April 2006 May 2006

3. Planning the remodelling of the premises to suit the needs & Applying for the Electricity load required etc.

May 2006 July 2006

4. Ordering the equipment March 2006 May 2006 5. Remodelling works Aug 2006 Sep 2006 6. Recruitment of staff Oct 2006 Nov 2006 7. Installation of the equipment Nov 2006 Dec 2006 8. Trial runs of the equipment Dec 2006 Jan 2007 9. Commencement of commercial

diagnostic operations Jan 2007 Jan 2007

STRATEGIC TIE UP WITH A

NANOTECHNOLOGY COMPANY

1. Final agreement with Biomix Nanotechnology Company

Feb 2006 Feb 2006

2. Strategic investment in the Nano Technology company

Feb 2006 April 2006

ADD-ON ACTIVITIES

KPO, CLINICAL TRIALS & TELE RADIOLOGY

1. Identifying consultants for the KPO & radiology services

March 2006 June 2006

2. Engaging the necessary consultants for launching and organising the EDLS and SMO activity

May 2006 July 2006

3. Entering into agreements with different consultants for these activities

June 2006 October 2006

4. Strategic tie ups for knowledge process outsourcing (KPO)

Nov 2006 Jan 2007

5. Strategic tie ups for Radiology Services outsourcing

Nov 2006 Jan 2007

6. Establishing the infrastructure and the preparatory arrangement needed for conducting EDLS and SMO activity and Teleradiology Services

June 2006 Jan 2007

7. Obtaining the necessary approvals for conducting the EDLS and SMO activity

Nov 2006 Feb 2007

8. Signing the final Contracts for conducting EDLS & SMO activity

Nov 2006 Feb 2007

9. Starting of Tele Radiology Services Feb 2007 Feb 2007

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10. Commencing the EDLS & SMO activity March 2007 April 2007 11. Enhancing /updating the infrastructure

for conducting the clinical trials activity in DMSL in addition to EDLS and SMO activity

May 2007 July 2007

12. Obtaining Contracts for clinical trials April 2007 August 2007 13. Commencement of clinical trials

activity Sept 2007 Sept 2007

DISTRIBUTION ACTIVITY

1. Finalisation of exclusive distribution rights of unique medical equipment (MRIT) with the foreign firm

Feb 2006 March 2006

2. Finalising the contract for distribution of Dr. Joshi’s products in the Country

March 2006 April 2006

3. Engaging the necessary consultancy for distribution of various products/equipment of different nature in India

May 2006 July 2006

4. Finalising the model of distribution of different products

Aug 2006 Oct 2006

5. Establishing the distribution network in different places in the Country and engaging the required spersonnel for this purpose

Oct 2006 Dec 2006

6. Commencement of distribution activity Jan 2007 Jan 2007 PROGRESS, INITIATION AND REASON FOR SELECTION OF THE SPECIFIC LOCATION OF THE CENTRES IN HYDERABAD AND MUMBAI. THEIR PLANNING AND MANAGEMENT AS ONLY TWO DIRECTORS OVERSEEING THE PRESENT OPERATIONS.

HYDERABAD UNIT:

In Hyderabad, the unit is proposed to be located at Bowenpalli Main Road, which is a very rich catchment area with lot of industries coming up in and around that place. Already the area is becoming crowded and is connecting the Nagpur – Bombay Highway. There are plenty of nursing homes in and around the area but there is not even a single sophisticated diagnostic centre similar the one to be established by the Company. In addition, lot of pharmaceutical units are located in the region and it will be within their reach to send their volunteers/study subjects for conducting the proposed Early Development Lab Services (EDLS) including Bio equivalence studies and other clinical trail activities. A sophisticated diagnostic centre has become the need of the hour in that area. The Company has held preliminary discussions with the owners of some premises. Company proposes to go ahead with the agreement once the finances are available for clinching the deal.

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BOMBAY UNIT:

In Bombay, the company is negotiating with the promoters of two premises, which are located in Sion and other one in Panvel, New Bombay (Navi Mumbai). Both the places selected are strategically located for establishing the proposed diagnostic units. Sion is a junction connecting the western suburb and central suburbs and the harbour line. The rickshaw zone ends there. The place is very strategically located and is equidistant from Vashi and New Mumbai. Sion has many clinics and nursing homes surrounding it and it is fortunate that the proposed premises are on the main road of the Sion Circle. The Company is negotiating with a charitable trust, which has expressed its desire to offer a part of their premises to the company for establishing a diagnostic unit on a very reasonable lease consideration. One of the above locations will be selected and agreement entered into by paying the necessary amounts required clinching the deal after the issue proceeds are available. The Hyderabad centre is in close proximity to Vijayawada centre therefore the management is confident of comfortably managing the Hyderabad centre. The company is planning to get associated with leading Medical Professionals to efficiently run its proposed diagnostic centre at Mumbai. The proposed units will be run by professionals, who are to be recruited at the time of commencement of the operations, based on their expertise in running the diagnostic centres successfully. The existing directors on a day-to-day basis will over see these operations. In addition, the company will also expand its Board of Directors, by involving new reputed directors who can devote their time for the company for its progress. The Company also envisages constituting an advisory board with each advisor excelling in the respective area of activity proposed in the expansion plan of the company. The company has not invested any funds for the proposed project as the entire project cost would be met only through the proceeds of the rights issue. Negotiations are going on for finalisation of Centre sites. The company has entered into MOU with Biomix and Dr. Joshi’s organization as the first step towards implementation of the project.

DEPLOYMENT OF FUNDS PENDING UTILISATION Issue proceeds, pending utilization, shall be invested in debt schemes of mutual funds and/or fixed deposits with banks.

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VI COMPANY AND MANAGEMENT

HISTORY, BACKGROUND AND PRESENT ACTIVITIES OF THE COMPANY The company was originally incorporated as Dolphin Scanning Services Ltd. on 21st September 1992 and obtained Certificate of Commencement of Business on 7th October 1992. The name was subsequently changed to Dolphin Medical Services Ltd. and fresh Certificate of incorporation was obtained consequent upon the change of name on 8th November 1993. MAIN OBJECTS OF THE COMPANY The main objects of the company as set out in the Memorandum and Articles of Association of the company inter-alia include the following: 1. To establish, provide and maintain Diagnostic Laboratories and equipments and to

conduct all necessary tests and investigation scanning of human beings and to carry on the profession of imaging for and on behalf of individuals, institutions, Government and Semi-Government Bodies.

2. To provide, to encourage, initiate or promote facilities for the discovery,

improvement or development of new methods of Diagnosis understanding and treatment of diseases in a better way.

3. To provide medical relief to the Public in all the branches of Medical Sciences by

all available means. To acquire, establish and maintain one or more Hospital/Hospitals for the reception and treatment of persons suffering from illness or mental defects or for the reception and treatment of persons during convalescence or of Persons requiring medical attention or rehabilitation for Philanthropic purposes to the poor and the rural folk especially from remote and Backward areas of Andhra Pradesh and not solely for purposes of profit.

4. To set up laboratories, purchase and acquire any equipment and instruments

required for carrying out medical investigation and to educate and train medical students, nurses, midwives and hospital administrators and to grant such certificates or recognitions as the company may prescribe or deem fit from time to time and to grant stipends, scholarships or any other assistance monetary or otherwise to whomsoever to further the course medicine and/or medical research.

5. To carry in–house medical research by engaging in the research and

development in all fields, systems of medical sciences and in diagnostics & medical treatments and to develop new technologies so as to afford medical relief in a better way. Further, to collect primary and secondary data and make statistical analysis and apply the findings for furthering medical research and maintain, generate and upkeep intellectual rights, properties and previlleges in medical sciences, research, development and innovations and to patent the same and/or register and trade mark(s) and to make use of the same by sale/export/let on hire either for commercial or other purpose.

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6. To provide, encourage, initiate or promote facilites for the discovering, improvement or development of new methods of diagnosis, understanding and prevention and treatments of diseases by adopting commercialized imported technology, by development and commercialization of a new product/process/application through indigenous technology and by significant improvements in existing product/process/application and to intiate development of technology and to apply this technology in the medical field and also in areas of telemedicine etc., using computer applications to meet the medical standards and also benefit the public by these applications.

DIAGNOSTIC FACILITIES PRESENT BUSINESS ORIGIN : Dolphin Medical Services Ltd., is an organization promoted by the doctors of the region. The promoter was Dr. M. S. S. Koteswara Rao, an eminent physician and former Minister for Health in Andhra Pradesh. Dr. Kakarla Subba Rao, an eminent Radiologist of international repute, was the Chief Advisor to the project. Dr. G. V. Mohan Prasad, a Radiologist cum ENT specialist is the Main promoter and Managing Director of the Company. Dolphin Medical Services Ltd., started a comprehensive diagnostic centre in September,1994 in the heart of Vijayawada City in close proximity to the doctors in Suryaraopet Area. The Company is providing comprehensive Health Care to the people. At present, Dolphin Medical Services Ltd. is having two comprehensive divisions as follows: 1) Diagnostic Centre providing all the services under one roof which has

already been commissioned. 2) Ophthalmic Laser Care Centre providing total laser eye treatment. This

centre has already been launched as “ Dolphin Nethralaya”. DIAGNOSTIC CENTRE : The following are some of the equipments in our diagnostic division :- 1. The centre is equipped with a total body CT Scanner of Siemens Germany.

All special investigations like CT guided interventional procedures can be carried out with a high degree of accuracy.

2. The Ultra Sound Scanner with 2D-Echo of Aloka, Japan is having the

features of 3.5 mhz curvilinear probe, 5 mhz Transvaginal probe, 7.5 mhz high frequency probe especially for pediatric use and 3.5 mhz Micro convex probe. The unit is coupled to an automatic multi-image camera where findings can be documented on X-Ray film for permanent record. It is also linked to a Sony thermal printer for thermal images.

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3. 500 MA X-Ray with IITV from Siemens Germany with a spot film device and mortorised table.

4. A fullfledged Histopathology Division with automatic tissue processor is a

matter of pride to the diagnostic centre. 5. A modern computerised laboratory for conducting Bio-chemical,

Microbiological and pathological tests is equipped with equipments like Semi Auto Analysers, Gamma Computers etc.

DOLPHIN NETHRALAYA : “Dolphin Nethralaya” is an ophthalmic care and Research Centre equipped with the most modern and sophisticated laser-care equipment. Dolphin Nethralaya is equipped with the following eye-care laser equipment :

EQUIPMENT LIST : 1. Frequency doubled Yag (Argon) Laser. (Nidek-Japan) 2. N D Yag Laser.(Nidek-Japan) 3. Fundus Camera with Flourescein angiography unit. (Topcon-Japan) 4. Computerised Perimeter. (Medmont-Australia) 5. “A” Scan (Nidek-Japan) 6. “B” Scan (Nidek-Japan) 7. Keratometer etc., (Nidek-Japan) HUMANE CONCERN : Dolphin Medical Services LTD., has developed a voluntary Blood donors list of 3000 people whose blood has been tested and grouped. The list developed by Dolphin Medical Services Ltd., is found to be of immense help to the needy patients. In collaboration with the Rotary Club of Vijayawada, Dolphin Medical Services Limited has organised HIV Detection Camps in various parts of the City. It is also extending a helping hand to the Family Planning Operation Camps in the City. FACULTY : The sophisticated machines are manned by experienced technical personnel and supervised and checked by full time doctors. The tests are monitored and reported by qualified doctors in that particular field. The centre is manned with the following specialist doctors and technicians 1. Dr.G.V.Mohan Prasad M.B.B.S.,D.L.O.,D.M.RD. - Radiologist& (Radiology) Wholetime Director 2. Dr.M.Lakshmi Sudha. - Director M.B.B.S.

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3. Dr. K N Murthy - Doctor In-charge of Nethralaya MD Opthalmology 4. Dr. G. Prasada Rao - Radiologist M.B.B.S. D.M.R.D., 5. Mrs. B.Padma Reddy - Bio-Chemist M.Sc (Biochem) TECHNICAL & OTHER EMPLOYEES: Other technical and non technical qualified and dedicated employees including trainees, part time employees, contract employees, consultants etc numbering approximately around 45 are working in the organization. The Expert Medical Personnel, Moderate Charges, Sophisticated Equipment and all Medical Services under one roof make DMSL unique and highly beneficial. OTHER FACILITIES : PROPERTY: The Company’s registered corporate office is based at Ramchandra Rao Road, Suryarao Pet, Vijayawada – 520 002 The following list sets out details relating to its principal establishments: Sr. No Location Area Leave and Licence/

Lease/Freehold

1. Registered office 8580 square Ft. Leasehold

Owner of the Land & Lessor: The Church of South India, 222, Cathedral Road,

Chennai Lessee & Sub Lessor: M/S Tilak Enterprises Sub-Lessee: Dolphin Medical Services Limited Lease rentals: Rs.30,780/- per month. Validity: 10 years from 1992 Present Status Continuing as lessee with the owner of the land and lessor i.e. the Church of South India – matter is in the court As per the agreement between Sub Lessor & Sub Lessee The lessor & Sub Lessor are in no way connected to the promoters of the company. * IDEAL LOCATION : Located in the heart of the city especially in Ramachandra Rao Road where almost 250 to 300 doctors practice.

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* SPACIOUS PREMISES : Well designed specious waiting hall & rooms for the equipment and for various academic activities. * LIBRARY : A whole and wide range of books pertaining to Medical & Paramedical subjects including the latest editions. * Supported by many other non-medical books including books for self development and management courses. * MUSEUM : A) Radiology: Almost 3000 imaging films with almost every pathology- totally

classified and on par with any other teaching institutions of high profile, X-Ray’s covering almost all lesions & pathologies.

B) Histopathology: A wide range of rare specimens perfectly preserved with the necessary chemicals for academic purposes. C) Multimedia: A reasonably good number of multimedia CD Rom diskettes

covering a wide range of topics including the latest avenues like PET/MRI, CT Ango, etc., and facilities to relay the pictures on to the screen for academic training sessions and continued medical education programmes.

The modern equipment, expert staff, corporate systems and need-catering facilities of the units of Dolphin Medical Services Ltd., have earned it a special place and recognition in the medical arena. Past Capital issues by the Company The details of the past capital issues by the company are as under:

Year Type of Capital Raised (Debt / Equity)

Nature of Issue (Public / Rights)

Issue Size Rs in Lacs

Date of Prospectus / Letter of Offer

1994 Equity IPO 317.00 3/3/1994

PROMOTERS AND THEIR BACKGROUND The company was incorporated on 21st September 1992 as Dolphin Scanning Services Ltd. and subsequently the name of the company has been changed to Dolphin Medical Services Ltd. on 8th November 1993 under Section 21 of the Companies Act, 1956 There are now three individual promoters namely Dr. G V Mohan Prasad, Dr. M Lakshmi Sudha and Mr. G Mallikarjuna Rao. Their details are as under

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Dr. G.V.MOHAN PRASAD

Passport no : Z132978 Driving License No. : DLR/AP016/39913/2000 Dr .G.V.MOHAN PRASAD is a medical graduate-with Post Graduation in E.N.T. and Radiology. He was well trained in various Radiological and imaging modalities and also Radio Physics in the Nizam Institute of Medical Sciences (NlMS) Hyderabad. He attended and participated in the scientific programmes, various conferences and continuing Medical Education programmes in Radiology and Imaging. Dr.G.V. Mohan Prasad has been associated with operations of medical, healthcare and diagnostic center for the past Twelve years. He got rich experience as a Managing Director in Dolphin Medical Services Ltd., Vijayawada. Promoter Group Relatives of the Promoter that are part of the promoter group The following relatives form part of our promoter group: Sr. No.

Name Relationship No. of shares

Percent to the capital

1 M Lakshmi Sudha Wife 1,99,798 4.97 2 G Mallikharjuna Rao Father 64,000 1.60 3 G Vimla Kumari Mother 70,000 1.74 4 G Eswar Chand Brother 30,000 0.75 5 M Sesha Ratnam Mother-in-Law 30,000 0.75 6 G Krishna Kumari Sister 5,000 0.13

DR. M.LAKSHMI SUDHA

Passport no : A5291817 Driving License No. : Not Available Dr. M.LAKSHMI SUDHA is a graduate in Medicine from J.S.S.Medical College, Mysore which is one of the reputable medical colleges in the state of Karnataka. After successfully completing M.B.B.S. in 1991, she did her internship as a house surgeon in the famous King George Hospital at Visakhapatnam. She has a thorough experience to Medical Technology & administration especially in diagnostic services. She has gained administrative experience as a Director in Dolphin Medical Services Ltd., Vijayawada.

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MR. G MALLIKARJUNA RAO

Voters ID No. : 3260 Driving License No. : Not Available Coming from an agricultural background, he is a reputable landlord in the western region of Krishna District. Mr. G. Mallikharjuna Rao is well versed with agricultural activities involved in the cultivation and marketing of various agricultural products. He has a passion for biological products, especially those useful for the maintenance and upkeep of the health of human beings. With that passion he joined as the director of Dolphin Medical Services Ltd. and is keenly following the activities of the company. MANAGEMENT The day-to-day affairs of the Company are being managed by Dr. G. V. Mohan Prasad, Managing Director and Dr M. Lakshmi Sudha, Director respectively and are assisted by a team of professionals under the guidance, supervision and control of the Board of Directors. BOARD OF DIRECTORS

Name, Address and Occupation Age (Years)

Other Directorship

Dr. G.V. MOHAN PRASAD Managing Director D.No. 54-20/9–8, Timmarasu Street Srinagar Colony , Vijayawada-520 008

44 1. Cosmic Fortunes India Limited, 2. Meridian Projects Limited

Dr. M. LAKSHMI SUDHA Director D.No. 54-20/9–8, Timmarasu Street Srinagar Colony , Vijayawada-520 008

37 1. Cosmic Fortunes India Limited, 2. Meridian Projects Limited

MR. G MALLIKHARJUNA RAO Director Kothapeta, Kanchikacherla via Krishna District.

75 NIL

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COMPENSATION OF MANAGING DIRECTOR Dr. G. V. Mohan Prasad has been reappointed as Managing Director of the Company for a period of 5 years from 11th September 2003 on the terms and conditions as specified below. Remuneration: 1. Salary: Rs.41,000/-(Rupees Forty One Thousand only) per month. 2. In addition to the above, the following perquisites shall be allowed and they shall

be restricted to an amount not exceeding Rs.16,000/- per month or Rs.1,92,000/- per annum.

A) Housing 1. The expenditure by the Company on hiring unfurnished

accommodation will be subject to the 50% of salary over and above 10% payable by him.

Housing 2: In case the accommodation is owned by the Company 10% of the

salary shall be deducted by the Company. Housing 3: In case no accommodation is provided by the Company he shall be

entitled to House Rent Allowance subject to the celings laid down in Housing 1. Explanation: The expenditure incurred by the Company on gas, electricity, water and furnishings shall be valued as per Income Tax Rules. However this shall be subject to a ceiling of 10% of the salary.

B) Medical Reimbursement: Expenses incurred for him and his family subject to a

ceiling of one month salary in a year or three months salary over a period of three years.

C) Leave Travel Concession: Once in a year to him and his family in accordance

with any rules specified by the Company. D) Club Fees: Fees of Clubs subject to a maximum of two Clubs. This will not

include admission and life membership fees. E) Personal Accident Insurance Premium not to exceed Rs.10,000/- per month. Explanation: For the above purpose family means spouse, dependant children

and dependant parents. F) Provision of car for use on Company’s Business and telephone at residence will

not be considered as perquisites. Personal long distance calls on telephones and the use of car for private purpose shall be billed by the company.

G) Consultancy Charges for the professional services rendered in the Company.

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COMPENSATION OF DIRECTOR Dr. M. Lakshmi Sudha has been reappointed as Director of the Company for a period of 5 years from 11th September 2003 on the terms and conditions as specified below. Remuneration: 1. Salary: Rs.36,000/-(Rupees Thirty Six Thousand only) per month. 2. In addition to the above, the following perquisites shall be allowed and they shall

be restricted to an amount not exceeding Rs.16,000/- per month or Rs.1,92,000/- per annum.

A) Housing 1: The expenditure by the Company on hiring unfurnished

accommodation will be subject to the 50% of salary over and above 10% payable by him.

Housing 2: In case the accommodation is owned by the Company 10% of the

salary shall be deducted by the Company. Housing 3: In case no accommodation is provided by the Company she shall be

entitled to House Rent Allowance subject to the ceilings laid down in Housing 1. Explanation: The expenditure incurred by the Company on gas, electricity, water and furnishings shall be valued as per Income Tax Rules. However this shall be subject to a ceiling of 10% of the salary.

B) Medical Reimbursement: Expenses incurred for her and her family subject to a

ceiling of one month salary in a year or three months salary over a period of three years.

C) Leave Travel Concession: Once in a year to her and her family in accordance

with any rules specified by the Company. D) Club Fees: Fees of Clubs subject to a maximum of two Clubs. This will not

include admission and life membership fees. E) Personal Accident Insurance Premium not to exceed Rs.10,000/- per month. Explanation: For the above purpose family means spouse, dependant children

and dependant parents. F) Provision of car for use on Company’s Business and telephone at residence will

not be considered as perquisites. Personal long distance calls on telephones and the use of car for private purpose shall be billed by the company.

G) Consultancy Charges for the professional services rendered in the Company.

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INTEREST OF THE PROMOTERS The company has made the investments of Rs.32 lakhs in Meridian Projects Ltd. Rs.9 lakhs in Cosmic Fortunes India Ltd. Both these companies are promoted by Dr. G V Mohan Prasad. All directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or any Committee thereof, commission payable to them as well as to the extent of other remuneration, reimbursement of expenses payable to them under Articles of Association by the Company. The Managing Director and Director Dr. M.Lakshmi Sudha are also interested to the extent of remuneration paid for services rendered by them. All Directors may also be deemed to be interested to the extent of equity shares, if any, already held by them or their relatives, companies, firms and trusts in which they are interested as directors, members, partners or trustees in the Company, or that may be subscribed for and allotted to them and also to the extent of any dividend payable thereon and other distributions in respect of the said Equity Shares of the Company. The Company has not made any service contracts with the Directors for providing any type of benefits upon termination of employment. VENTURES PROMOTED BY THE PROMOTERS: 1) BRIEF PROFILE OF MERIDIAN PROJECTS LIMITED

Meridian Projects Limited was established the year 1995 with multiple objects to accomplish various facets of business to start with. It has initiated to establish super specialty hospitals tied up with a funding agency to obtain foreign funds for the project. The process got delayed and is yet to materialize. Now, the company is venturing into new and innovative techniques not existing in the country for the purpose of transferring to other companies for profit. Year of incorporation 1995 Nature of Activity Establish super specialty Hospitals Financial Information (Rs. In Lakhs except per share data) For the Year ended 31/03/03 31/03/04 31/12/04 Total Income NA NA NA Profit/(Loss) After Tax NA NA NA Share Capital 148.68 171.17 186.18Reserves (excluding revaluation reserves)

NA NA NA

EPS NA NA NA Book Value per Share NA NA NA Share Price High/Low during last six months

Not applicable

Details of Public / Rights issues in past 3 years

Not Applicable

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2) BRIEF PROFILE OF PANACEA INTERNATIONAL Panacea International is a partnership company between Dr. G. V. Mohan Prasad and Dr. M. Lakshmi Sudha started in September 2004 and has obtained the marketing distribution rights for a unique healthcare range of products with clustered solution as a base. The Company is set to transfer part of full rights to other companies for profit.

Date of incorporation 2004 Nature of Activity Marketing of Healthcare Products Financial Information (Rs. In Lakhs except per share data) For the Year ended 31/12/04 Total income NA Profit/(Loss) After Tax NA Share Capital NA Reserves (excluding revaluation reserves) NA EPS NA Book Value per Share NA Share Price High/Low during last six months NA Details of Public / Rights issues in past 3 years

NA

3) BREIF PROFILE OF COSMIC FORTUNES INDIA LIMITED

1. BACK GROUND INFORMATION ON THE COMPANY PROMOTING THE PROJECT

Cosmic Fortunes India Ltd., was started in the year 1999. Its main focus from the inception has been on the development of dietary supplements and herbal health-food formulations. The Company has been carrying out product development and research work in association with M/s. Eden Hi-Agri Tech Pvt Ltd., Bangalore, the Company has undertaken the survey of Indian herbs and after extensive research succeeded in making very advanced herbal dietary supplements. A. DEVELOPMENT OF THE HERBAL HEALTH KIT

The Company has successfully associated itself in the development of a Herbal Health Kit based on a highly advanced formulation of herbs which is suitable for the amelioration and management of the six most dangerous diseases affecting huge populations to an epidemic proportion. They are Diabetes, Heart Diseases, High Blood Pressure & Strokes, Cancer, Arthritis & Osteoporosis, Allergies & Asthma

These kits were produced on an experimental basis. A limited market survey was conducted and it was found that an effective carrier medium for these herbs would enhance the effectiveness and their efficacy of action for the above mentioned degenerative diseases.

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B. WORLD WIDE SEARCH FOR AN EFFECTIVE CARRIER MEDIUM The Company has under taken a world wide search for identifying a suitable carrier medium for the herbal ingredients found in the Herbal Health Kit. A detailed search has helped the Company to “zero-in” on Clustered Solutions from Clustered Solution Inc. CA, USA. Detailed analysis has revealed that herbs made into a solution in Clustered Water forming high potency Clustered solutions were found to be the best form of absorbing the dietary supplements. Hence the Company decided to negotiate and enter into proper agreements with CSI, USA.

C. EXCLUSIVE LICENSE AND EXCLUSIVE MARKETING AGENCY FOR

CLUSTERED SOLUTIONS Dr. G.V.Mohan Prasad who is also the chief promoter of Cosmic Fortunes has been in negotiations with the US Company, Clustered Solutions Inc. and has succeeded in obtaining the Exclusive License and the Exclusive Marketing Agency for the entire Republic of India. CSI, USA has agreed to supply Clustered Solutions formulated with the herbal ingredients found in the Herbal Health Kit formulation. The Company is in the process of reconstituting the imported clustered solutions in a contracted private bottling plant in Bangalore and marketing them in India.

Year of incorporation 1999 Nature of Activity Development of dietary supplements and

herbal health-food formulations Financial Information (Rs. In lakhs except per share data) For the Year ended 31/03/03 31/03/04 31/12/04 Total income NA NA NA Profit/(Loss) After Tax NA NA NA Share Capital 136.25 172.25 189.75 Reserves (excluding revaluation reserves)

NA NA NA

EPS NA NA NA Book Value per Share NA NA NA Share Price High/Low during last six months

Not applicable

Details of Public / Rights issues in past 3 years

Not Applicable

None of the other ventures have business interests in the company. No business is being done/will be done through these companies with the company. The details of litigations involving the ventures promoted by promoters are as under: LITIGATIONS I DEFAULTS I DISPUTES/OVERDUES There are no pending litigations disputes, defaults, non payment statutory dues, over dues to the financial institutions, banks etc. and no proceedings have been initiated for economic offenses including the past cases against the promoters and the companies, firms promoted and managed by the promoters.

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Companies Belonging To The Promoters Group, Who’s Name Has Been Struck Off From The Registrar Of Companies There are no Companies belonging to the Promoter Group whose name has been struck off from the Registrar of Companies. Companies That The Promoter Group Has Disassociated In The Last Three Years. There are no companies with whom the promoter group has disassociated itself with in the past three years. COMMON PURSUITS There are no common pursuits between the above-mentioned group companies and DMSL except in case of Meridian Projects Ltd. and Panacea International and Cosmic Fortunes India Ltd. CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement, a Corporate Governance adopted by the Company is given below. 1) COMPANY'S PHILOSOPHY ON CODE OF GOVERNANCE

The company has complied with SEBI guidelines in respect of Corporate Governance specially with respect to broad basing of Board, Constituting the committees such as shareholding/ investor Grievance Committee, etc.

The Company's philosophy of Corporate Governance is aimed at assisting the top management of the company in the efficient conduct of its business and in meeting its obligations to shareholders.

2) BOARD OF DIRECTORS

COMPOSITION The present strength of the Board is three Directors. The Board comprises of Executive and Non-Executive directors. The Non-Executive Directors bring independent judgment in the Boards deliberations and decisions. Two Directors including Managing Director & Executive director are Whole-time Directors. There is one non-executive director.

Dolphin Medical Services Limited have certain rights enshrined in the Articles of Association pertaining to appointment of directors.

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Physical attendance of each director at the Board Meetings and the latest AGM.

Name of the Director

Category of Directorship

No. of Board Meetings attended

% of total Meetings attended

Attendance at the last

AGM Dr. G.V. Mohan Prasad Managing Director 9 100% Yes

Dr. M. Lakshmi Sudha Director 9 100% Yes

Mr. G. Mallikhauna Rao Director 9 100% Yes

Number of other Companies or committees the Director (being a director as on the date of Director's Report) is a Director/Chairman

Name of the Director(s)

No. of other Companies which Director

No.of Committees (other than DMSL in which Member)

Dr. G. V. Mohan Prasad 2 --

Dr. M. Lakshmi Sudha 2 --

Mr. G. Mallikharjuna Rao - --

Number of Board Meetings held and the dates of the Board Meetings. Nine Board Meetings were held during the year 2004-05, on the following dates: 30.04.2004, 31.07.2004, 30.10.2004, 20.12.2004, 31.01.2005, 04.02.2005, 18.02.2005, 23.03.2005, and 25.03.2005.

3) AUDIT COMMITTEE

TERMS OF REFERENCE OF COMPOSITION, NAME OF THE MEMBERS AND CHAIRMAN The Audit Committee comprises of Dr. M. Lakshmi Sudha, Chairman of the committee, Mr. G. Mallikharjuna Rao all being Directors. The Managing Director, along with Statutory Auditors and Accounts Officer are invitees to the meeting. The terms of Reference of this Committee are wide enough covering matters specified for Audit Committees under the Listing Agreement / Companies Act, 1956.

Meetings and the attendance during the year Meetings of the Audit Committee were held during the year 2004-05. The attendance of the each member of the Committee is given below:

Name of the Director No.of Meetings attended % of Total Meetings attendedDr. M. Lakshmi Sudha 4 100% Mr. G. Mallikharjuna Rao 4 100%

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4) REMUNERATION TO THE DIRECTORS a) The details of the remuneration paid to Whole-Time Directors during the year

2004-05 are given below:

Name& Designation All elements of remuneration packages i.e., Salary Benefits, Bonuses, Pension etc.

Dr. G.V. Mohan Prasad - Managing Director Rs.4,92,000/-

Dr. M. Lakshmi Sudha - Director Rs.4,32,000/- 5) INVESTORS /SHAREHOLDERS GRIEVANCE COMMITTEE

The Company has constituted an Investors I Shareholders Grievance Committee under the Chairmanship of Dr. M. Lakshmi Sudha. The other member of the Committee is Mr.G. Mallikharjuna Rao. The Committee looks into the shareholders and investorscomplaints. The number of shares pending for transfer were NIL as on 31 March 2005.

6) GENERAL BODY MEETINGS

Details of the locations of the past three AGM’s and the details of the resolutionspassed or to be passed by postal ballot.

a) All the Annual General Body Meetings of the company were held at the registered

office of the company, Ramachandra Rao Road, Vijayawada-520002. All the meetings commenced at 9 AM. Barring the 12th AGM which commenced at 11.00 AM. All the resolutions set out in the respective Notices were passed by theshareholders.

b) No resolutions requiring postal ballot as recommended under clause 49 of the listing

Agreement has been placed for shareholders approval at the Meeting. 7) DISCLOSURES

There is no materially significant related party transaction made by the companywith its promoters, Directors or the Management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company at large.

Details of non-compliance by the company, penalties, Strictures Imposed on thecompany by the Stock Exchanges or SEBI or any statutory authority, or any matterrelated to capital markets, during the last three years – NIL.

8) Means of Communication * Half yearly report sent to the No. as the results of the household of each shareholder company are published in

the newspapers * Quarterly Results -do- * Any website where displayed -do-

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* Whether it is also displayed in -No-

Official newspapers

* The presentations made to. Institutional Investors or to analysts -No-

* Newspapers in which results are 1) Indian Express Normally published in 2) Andhra Prabha

9) General Shareholder Information

Annual general Meeting Date Time Venue

29th September. 2005 11:00 A.M. Registered office of the Company at Ramachandra Rao Road VIJAYAWADA - 520 002.

Financial Calendar Quarter Period Publication of results First Apr-June Last week of July Second July-Sep Last week of Oct Third Oct-Dec Last week of Jan Fourth Jan-Mar Last week of April

Date of Book Closure 5th September 2005 Dividend Payment dates NIL Listing on Stock Exchanges The Hyderabad Stock Exchange Limited The Stock Exchange. Mumbai

The Ahmedabad Stock Exchange Stock Code – Physical 526504. The Stock Exchange, Mumbai ISIN Number for NSDL & CDSL INE 796 B 010113

Market Price Data: high & low during each month in the last financial year

As per Annexure I

% Change Stock Performance in comparison to broad-based indices such as BSE Sensex & Nifty as on 31.3.05 DMSL Share Price BSE Sensex

513.33 16.14 Nifty-not applicable as the shares were not traded in NSE

Registrar and Share Transfer Agents All transfers received are processed and approved by the Share transfer Committee, which normally meets once in a month, or at more frequency depending on the volume of transfers.

Distribution of shareholding and share holding pattern as on 31st March 2005

As per Annexure – II

Dematerialization of Shares and Liquidity

61.91% of the Equity Share Capital has been dematerialized as on 31.03.2005

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Outstanding GDRs/ADRs/Warrants or any convertible instruments conversion date and likely impact on Equity.

During the year the Company has issued 1,90,000 Convertible Share Warrants of Rs. 20/- each. Of which 20% of amount was initially received.

Plant Location VIJAYAWADA Address for Correspondence Shareholders correspondence should be

addressed to Ikon Visions Pvt. Ltd. 33, Sanali Heavens Apartments. 8-3-948, Ameerpet, HYDERABAD – 500073. Shareholders holding shares in Electronic mode should address all their correspondence to their respective Depository Participants.

NON-MANDATORY REQUIREMENTS a) Chairman of the Board:

Whether the Chairman of the Board is entitled to maintain a Chairman’s office at the company’s expense and also allowed reimbursement of expenses incurred in the performance of his duties.

The Chairman of the Board is the Managing Director

b) Remuneration Committee The Company has not yet set up a remuneration Committee

c) Shareholder Rights The half yearly declarations of financial performance including summary of the significant events in the last six months should be sent to each household of shareholders

As the company’s half-yearly results are published in English and Telugu newspapers, the same are not sent to the shareholders of the Company.

d) Postal Ballot The Company has not yet made use of the postal Ballot

ANNEXURE I High/Low of market price of the Company’s shares traded on The Stock Exchange, Mumbai during the financial year 2004-05

Month Highest Lowest Month Highest Lowest April 04 3.10 2.50 October 4.90 2.55 May 3.94 3.16 November 7.70 2.90 June 2.53 1.63 December 12.00 5.05 July 3.49 1.35 January 05 20.40 12.65 August 2.60 1.46 February 27.65 16.40 September 5.40 1.56 March 25.40 14.70

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ANNEXURE II The distribution of shareholding as on 31 March 2005

No. of Equity Shares held No. of Folios % No. of shares %

Up 500 2,688 74.44 5,94,285 14.80501- 1000 438 12.13 3,93,204 9.791001-2000 218 6.04 3,54,531 8 832001-3000 90 2.49 2,32,156 5.783001-4000 49 1.36 1,81,450 4.524001-5000 40 1.11 1,89,200 4.715001-10000 47 1.30 3,44,075 8 5710001 and above 41 1.14 17,26,199 42.99Grand Total 3,611 100.00 40,15,100 100.00No.of Shares in Physical Mode 15,29,343 38.09No of Shares in Electronic Mode 24,85,757 61.91 Shareholding Pattern as on 31 March 2005

Category No. of Shareholders No. of Shares %

Promoters 62 9,71,209 24.18 Foreign Collaborators - - - Mutual Funds - - - Fls/Banks 1 100 0.00 FlIs/NRls 5 6,292 0.16 Domestic Companies 90 2,64,638 6.60 Public 3,442 27,62,871 68.81 Others 11 9,990 0.25 Total 3,611 40,15, 100 100.00

COMPLIANCE CERTIFICATE ON CORPORATE GOVERNANCE To The Members of Dolphin Medical Services Limited We have examined the compliance of conditions of corporate governance by Dolphin Medical Services Limited. for the year ended on 31 March 2005, as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock Exchange(s). The compliance on conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us. we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

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We state that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/Investor Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For M/s.PINNAMANENI & CO. Chartered Accountants Sd/-

Pace : Vijayawada P. V.V. SATYANARAYANA Date : 16-5-2005 Partner REMUNERATION COMMITTEE The Company has not constituted Remuneration Committee. The Board may as and when it considers expedient will constitute Remuneration Committee. POLICY ON DISCLOSURES AND INTERNAL PROCEDURE FOR PREVENTION OF INSIDER TRADING The Company is in compliance with and will continue to comply with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 1992. In compliance with regulation 12(1) of the SEBI (Prohibition of Insider Trading) Regulations, 1992, Company has framed a code of internal procedures and conduct for prevention of insider trading. Dr. M Lakshmi Sudha, the Compliance Officer of the company is responsible for setting forth policies, procedures, monitoring and adherence to the rules for the preservation of price sensitive information and the implementation of the code of conduct under the overall supervision of the board. SHAREHOLDING OF THE DIRECTORS The shareholding of the directors of the Company as on 31st March, 2005 is as under:

Sr. No.

Name No. of shares

Percent to the capital

1 M Lakshmi Sudha 1,99,798 4.97 2 G.V. Mohan Prasad 1,94,448 4.84 3 G Mallikharjuna Rao 64,000 1.60

Total 4,58,246 11.41

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BORROWING POWERS OF THE BOARD The shareholders vide a resolution pursuant to section 293(1) (d) of the Act passed at the AGM of the Company held on 29th September 2005, had approved and delegated powers to the Board for borrowing up to a sum of Rs.200 crores. INTEREST OF THE DIRECTORS The company has made the investments of Rs.32 lakhs in Meridian Projects Ltd. Rs.9 lakhs in Cosmic Fortunes India Ltd. Both these companies are promoted by Dr. G V Mohan Prasad. All directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or any Committee thereof, commission payable to them as well as to the extent of other remuneration, reimbursement of expenses payable to them under Articles of Association by the Company. The Managing Director and Director Dr. M. Lakshmi Sudha are also interested to the extent of remuneration paid for services rendered by them. All Directors may also be deemed to be interested to the extent of equity shares, if any, already held by them or their relatives, companies, firms and trusts in which they are interested as directors, members, partners or trustees in the Company, or that may be subscribed for and allotted to them and also to the extent of any dividend payable thereon and other distributions in respect of the said Equity Shares of the Company. Payment to Directors for the year ended 31st March, 2005

(Amount in Rs.)

Name of Director Salaries / Perquisites

Commission Total

G.V. Mohan Prasad 41,000 -- 4,92,000 M Lakshmi Sudha 36,000 -- 4,32,000 G Mallikharjuna Rao -- -- --

Changes in Directors in the last three years

Sr. No.

Name

Date of Appointment / Cessation

Reason

1. G.V. Mohan Prasad 11th September 2003

Reappointed as Managing Director

2. M Lakshmi Sudha 11th September 2003

Reappointment as Director

3. G Mallikharjuna Rao 29th Septembetr 2005

Reappointed as Director

Date of Expiration of the term of current Directors Sr. No

Name of the Director

Nature of Directorship

Date of expiration of term of office/due for re-appointment

1 G.V. Mohan Prasad Managing Director 10th September 2008

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2 M Lakshmi Sudha Director 10th September 2008 3 G Mallikharjuna Rao Director 29th September 2006 KEY MANAGERIAL PERSONNEL

Name Designation Age Qualification Date of Re Joining DD/MM/YY

Exp Yrs.

Previously Employed

Present Annual Compensation (Rs.)

Dr. G.V. Mohan Prasad

Managing Director

44 MBBS, DLO, DMRD

11/09/03 12 DOLPHIN MEDICAL SERVICES LTD.,

4,92,000

Dr. M Lakshmi Sudha

Director 37 MBBS 11/09/03 11 DOLPHIN MEDICAL SERVICES LTD.,

4,32,000

Note: 1. The relationship between Dr. G.V. Mohan Prasad & M Lakshmi Sudha is that of husband and wife. 2. Key management personnels Dr. G.V. Mohan Prasad and Dr. M. Lakshmi Sudha are also the promoters of the Company.

SHARE HOLDING OF KEY MANAGERIAL PERSONNEL

Name Number of Shares

G.V. Mohan Prasad 1,94,448 M Lakshmi Sudha 1,99,798

CHANGES IN THE KEY MANAGERIAL PERSONNEL IN THE LAST THREE YEARS There has been no change in the key managerial personnel of the company in the last three years. CHANGES IN AUDITORS IN THE LAST THREE YEARS There has been no change in the Statutory Auditors of the Company for the past 3 years.

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DOLPHIN MEDICAL SERVICES LIMITED

ORGANISATION CHART

Doctor’s In charge Dr.K.N.Murthy

Manager G.Kishore Kumar

Laboratory Consultant B.Padma Reddy

Radiology Consultant

Dr.G.Prasada Rao

Accounts Department A.B.R.Sarma

Administrative Department K.Saibabu

Managing DirectorDr.G.V.Mohan Prasad

DirectorDr.M.Lakshmi Sudha

Technicians 1. Ch.S.RamPrasad 2. G.NagaVardhini 3. A.Lakshmi

Technicians1. P.Vara Prasad 2. D.Pavan Kumar

Clerical Staff1. P.Vijaya Lakshmi 2. P.Suneela 3. Ch.Vinay Kumar

Clerical Staff1.L.Venkat Reddy 2.Ch.Chitti Babu

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VII. INDUSTRY, MARKET AND COMPETITIVE ENVIRONMENT

FUTURE PROSPECTS & OUTLOOK Healthcare is one of the most essential services in any growing society. Propelledby an affluent and health conscious growing middleclass, the healthcare industry inIndia grew by more than 13 per cent per annum in the last decade. The potential ofhealth services sector is immense in India as there are more than 140 million upperand middle class, growing at over four per cent per annum with combined annualincome of over Rs 820,000 crore. These people have confidence in healthcare products and services offered byprivate hospitals. The quality of healthcare has improved considerably with theavailability of world class high-tech medical equipment and information technology. However, the low penetration of health insurance is limiting the growth of theseworld-class services. Privatisation of insurance sector has led to spurt in health care services. Less than10 per cent of the Indian population is covered by some form of health insurance. Insurance is expected to be the main driver for raising quality consciousness andincreased demand for better standards, hospital accreditation and Patient /Management Information Systems. The voluntary health insurance market estimated at Rs 4 billion is expected to be Rs 130 billion by 2005. The healthcare business for IT services comprises ofplayers like government, insurance companies, consumer and corporate hospitalsis about Rs 500 crore which is a pittance compared to the contribution of healthcare industry to national GDP which is growing at a rate of about 10-15 percent annually. The MBPO (medical business process outsourcing) will be the next boom the Indianknowledge economy will witness as it has massive potential for outsourcing within the US healthcare industry. This time outsourcing won’t be the once fashionableand now dead medical transcription, but would be more for processes like medicalbilling, claim processing, disease coding and forms processing which easily gives returns of USD 16-18 per person per hour, much higher than the billing rates inother BPO verticals. According to a Frost and Sullivan Study, the Indian medical hardware market(equipment and devices) is estimated at Rs 65.32 billion in 2001, growing at 12 per cent per annum, which is almost double the market size in 1993. With India becoming a healthcare destination, Health Tourism Industry, stands atRs 1200-1500 crores, and growing at a rate of 30 per cent annually is bound togrow at a more faster rate. Lower production costs and skilled workforce hasattracted multinationals to set up R & D and production centres in India. In the longrun these R&D centres will help develop low-cost medicines for the Indian market.

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MARKET

India’s healthcare industry is estimated at Rs 1,500 billion or USD 34 billion. Thisworks out to USD 34 per capita which is 6 per cent of GDP. Of this 15 per cent ispublicly financed, four per cent is from social insurance, one per cent privateinsurance and the remaining 80 per cent being out of pocket as user fees (80 per cent of which goes to the private sector). Two thirds of the users are purely out-of pocket users and 90 per cent of them are from the poorest section.

INFRASTRUCTURE DEVELOPMENT In an effort to extend better healthcare services to people, the state government hasinvested around Rs 650 crore for infrastructure development of district and primaryhealthcare centres in the past few years. It is keen to set up at least one medicalcollege and one dental college in every district. More private healthcare centres arecoming up and the existing ones have been adding new and improved facilities tocater to the increasing healthcare needs of people. The city has become a hub for conducting important medical conferences, including international events. Periodic meetings/workshops and annual conferences areorganised in the city by the associations of various specialties. Some of the factorsthat favour Hyderabad in this regard include lower cost and the presence ofprestigious research institutions like the Centre for Cellular and Molecular Biology(CCMB) and the National Institute of Nutrition (NIN). Moreover the presence ofmajor pharmaceutical companies is another advantage as they sponsor thesemedical meetings. There are hundreds of small private hospitals providing specialised treatment forvarious diseases and ailments.

HEALTHCARE STATISTICS

India has 5,03,900 doctors, 7,37,000 nurses, 162 medical colleges, 143 pharmacycolleges and 3,50,000 chemists. There are 15,097 hospitals accounting for 8,70,161 hospital beds in India. There is an extensive three-tiered government healthcare infrastructure comprising 23,000 Primary Health Centres(PHC) and1,37,000 sub-centres serving the semi-urban and rural areas and 3000 (CHC) Community Health Centres-(Source: OPPI 2000 Estimates)

INDIA STANDS

• India’s health expenditure is 5.6 per cent of GDP, whereas most establishedmarket economies spend 7-10 per cent of GDP on health. USA spends over 14 per cent.

• US has 2,340 doctors as compared to India’s 143 doctors for very 10,000people

• On an average, 80 out of every 1,000 children die. This figure is just 9 in theUS and 30 for every 1,000 in Thailand.

• Life Expectancy in India is amongst the lowest at 55.5 years compared to USat 75.5 years and 66.5 years for Thailand.

• Compared to Brazil’s 4300 beds, India has only 1,600 beds.

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THE ROAD AHEAD In order to capitalise on all these opportunities, we have to create a conduciveenvironment by: Attracting investment

• Granting infrastructure status to the healthcare sector. • Create fiscal policies, like providing low interest rate loans, introducing tax

holidays for investment in low per capita income states, reducingimport/excise duty for medical equipment, et cetera, to promote investment in healthcare services.

• Facilitating various clearances and certification like medical registrationnumber, building number, anti-pollution certificate etc.

CHANGING THE LEGISLATION • Mandating the employers to buy group or individual medical insurance for

their employees to ensure a certain minimum financial coverage. • Mandating the private sector units, that take advantage of improved fiscal

policies, to commit resources to remote rural/under developed sectors. • Create an autonomous body to standardise on medical messaging, codes

and vocabulary, content and format, identification standards and security. • Mandate the healthcare service providers to transmit selected patient data to

the government for analysis. This data will be analysed to identify trends and evolve policies.

• Create a national database of health care providers, their facilities andservices. This will create awareness among the population towards qualityhealth care.

• Streamline the process of handling patient grievances. • Create a nation-wide agency to deal with patient requests like ambulance

hotline, emergency/first-aid consultation, trauma help-line etc.

IT INITIATIVES • Sharing of patient information between providers, with patient and payers. • Security and privacy services. • Need for standards for messaging, codes and vocabulary (CPT, ICD),

content and format standards (MR, lab report)

To witness a successful revolution in healthcare, we need to bring these arrays ofactivities together. If this works for India over the next decade, the vast population living in rural and urban areas will bear the fruit of success “If Information is Power, Health Information is Life.”

(SOURCE : www.expresshealthmanagement.com)

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INDUSTRY COMPETITION AND COMPARISON WITH THE PEER GROUP. Company Equity

Rs. Cr B.V. Rs.

RONW %

Sales Rs. Cr

Net Profit Rs. Cr

EPS Rs.

Price(Rs.) 05/09/05

P/E Ratio

Bayer Diagnostic

1.57 210.8 18.7 62.0 5.7 35.4 572 15.3

Casil HealthProd

10.94 5.9 - 29.0 2.1 1.9 59 33.4

Devaki Hospital

7.35 7.5 - 6.0 -0.2 - 31 -

Indrapr. Medical

91.67 11.8 14.9 177.9 16.4 1.6 49 29.0

Kovai Medical

10.94 11.9 8.7 40.6 1.7 1.6 46 21.6

Maestro Medi.

4.55 74.6 0.07 20.2 0.5 1.2 37 25.5

Malar Hospitals

13.96 -5.9 - 13.2 -1.0 - 21 -

Monozyme India

3.19 8.2 - 9.9 0.1 0.4 41 -

N G Inds. 3.35 14.7 26.6 6.3 1.2 3.1 67 8.3

Poly Medicure

5.40 40.6 29.5 64.5 6.1 11.3 118 10.3

Shree Pacetronix

3.47 10.3 - 4.2 0.2 0.6 25 -

Span Diagnostics

3.00 33.7 27.0 38.4 1.5 5.0 90 24.3

Transgene Biotek

15.02 70.6 - 2.4 0.5 0.3 133 -

Dolphin Medical Services

4.02 7.8 8.1 1.66 0.25 0.63 16.55 26.26

(Source: capital market Sep12-25, 2005) Dolphin Medical Services Ltd ’s high profile proposed entry into the healthcare business at Mumbai and Hyderabad, gives the impression that they are going to be one of the largest healthcare companies in India. The quality of infrastructure, staff training, documentation, and Information systems all these would be way ahead of present Indian standards. Dolphin Medical Services Ltd. has shown steady growth in terms of financial performance compared to its peer group companies. The company was able to withstand the tough competition in the market and maintain its profitability. The company has added a new dimension to its vision by venturing into the area of range diagnostic tools and equipment and other healthcare products. The company in order to sustain and enhance its Market share at the National level has adopted a new strategy by working towards expansion of its activities and starting operations at major Metros of the country. The first step in this direction is to open multipurpose Medical centers which in addition to catering to diagnostic requirements, also serves to do additional activities like Early development lab services, Clinical development services-clinical trials, Tele Radiology, Knowledge Process Outsourcing, etc. The opening of centers at two major cities will also extend an opportunity to company to effectively distribute the Diagnostic Tools and Equipments in a high

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potential market. This will enable the company to replicate its strategy in other major cities of country. In nutshell the focus of the company has been now shifted to the National and International Market. The company is confident of making its presence felt in the bigger market areas shortly with advanced Technologies and Equipments. EXISTING MARKETING SET-UP The company has no marketing set-up at present. It depends solely on the word-of-mouth strategy of marketing by serving and taking care of its patients to the best. The company has not entered into any marketing set-up with any institute for the proposed project. MARKETING STRATEGIES

1. Establishment of sophisticated and modern diagnostic centers, which in addition to the regular and well known diagnostic equipment, will have a new equipment which is yet to be introduced in India and will act as a good diagnostic tool exclusive to Dolphin Medical Services Ltd. centers in India.

2. The establishment of the planned diagnostic centers in bigger cities will

reduce the demand supply gap and will benefit Dolphin Medical Services Ltd. in many ways – in addition with enhancing the operations of the company.

They are :

Better Corporate image Enhanced Market Share Ability to provide better services The presence of Dolphin Medical Services Ltd. in big cities and the

existing infrastructure may thereby be used for the distribution and the other proposed add on activities of the company.

3. Positioning Dolphin Medical Services Ltd. as the preferred partner for

“Knowledge Process Outsourcing” (KPO) for research institutes, academic labs and industrial partners in the field of medicine and medical biotechnology by making availability of sophisticated infrastructure in big cities and skilled manpower with expertise,

4. The presence of sophisticated laboratory services in big cities in India will

enable to fulfill the company’s plan of expanding to ‘Drug Development Services’ (Clinical Trials). Dolphin Medical Services Ltd. to focus on Medical services of two types:

“Early Development Lab Services” (EDLS) that will leverage on existing

infrastructure to be the preferred hub for pathology and radiology services.

“Clinical Development Services (CDS) or Clinical Trials” : that will use Dolphin and its affiliates as a preferred partner for phase I to phase IV clinical testing of new chemical entities and drugs for clinical trails.

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The Company will focus on a variety of therapeutic categories such as Oncology, metabolic disorders and infective diseases which will help the company to target its services to wide market .

5. The Company has acquired the sole and exclusive distribution rights of a

latest and most recent innovative diagnostic medical equipment for the whole territory of India. The functioning of this equipment is based on a totally different concept to that of the existing technologies and is called - “Molecular Resonance Imaging technology”. It is basically an immediate non-invasive, screening technique based on Quantum medicine, and is useful to identify the malfunctioning of various body systems and organs, based on which, we could further carryout specialized investigation of that particular part and thus be able to pin point the exact disease.

This next generation linear machine may revolutionize the medical industry. 6. Dolphin Medical Services Ltd. has entered in to an agreement with a

nanotechnology company M/s. Biomix Network (P) Ltd. that has its operational base in Mumbai and also offices in USA. Biomix is working on an innovative range of products in the diagnostic and pharmaceutical, health care, sectors. Developing rapid diagnostic tools particularly in the area of infectious diseases is the need of the hour. Rapid, cost-effective and point-of-care sensing devises render medical care effective. This tie-up will help the company ahead of its competitors to serve its patients most effectively with all due care.

7. Dolphin Medical Services has entered in to an MOU with Dr. Joshi’s

organization for the sole distributing rights in India of a natural remedy product for curing / controlling a, disease, called ‘Psoriasis’. Dolphin Medical Services has in turn acquired the rights of marketing and distribution of the product from Dr. Joshi’s organization. This product will help the company to take a major market share of the psoriatic remedies in India.

8. In addition to the above strategies the health care industry mostly depends on

Word of Mouth, Marketing Strategy. Dolphin Medical Services Ltd. has always served its patients on first priority and made them feel comfortable at the center by providing homely atmosphere.

9. Since the company is opening two new centers at Hyderabad and Mumbai,

the services charged will be most effectively comparative to its competitors, which will be possible due to cost reduction in expenditure and increased volumes.

10. Besides above strategies Dolphin Medical Services Ltd. has plans to tie-up

with small clinics, Schools, Industries and Pharmacies to organize regularly health care camps, which it is already actively practicing.

11. There are various gaps in the Indian healthcare Market that also presents a

vast opportunity. Good health care is in extreme short supply in India and it is this gap that will help Dolphin Medical Services Ltd. to complete.

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VIII FINANCIAL PERFORMANCE OF THE COMPANY

AUDITORS REPORT

To The Board of Directors Dolphin Medical Services Limited Ramachandra Rao Road VIJAYAWADA – 520 002 Dear Sirs, Sub: Your proposed Rights Issue We have examined and found correct audited accounts of Dolphin Medical Services Limited for the past five financial years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and for the period ended 30th June, 2005 being the last date upto which the accounts of the company have been made up and audited by us from time to time.

In accordance with the requirements of Paragraph B(1) – Part II of Schedule II of the Companies Act, 1956 (‘the Act’), the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (SEBI Guidelines) and on the basis of the above said accounts.

a) The restated profits of the company for the financial years/period ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and for the period ended 30th June, 2005 are set out in Annexure I to this report. These profits have been arrived at after charging all expenses including depreciation and after making such adjustments and regroupings as in our opinion are appropriate and more fully described in the significant accounting policies and notes, where ever necessary which are attached to those financial statements.

b) The restated assets and liabilities of the Company as at 31st March, 2001, 31st

March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and 30th June, 2005 are as set out in an Annexure II this report after making such adjustments and regroupings as in our opinion are appropriate and more fully described in the significant accounting policies and notes.

c) The restated cash flow statement of the Company as at 31st March, 2001,

31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and 30th June, 2005 are as shown in Annexure III to this report

d) We have examined the following financial information relating to the Company

and as approved by the Board of Directors for the purpose of inclusion in the Offer Documents:

i. Accounting Ratios as appearing in annexure IV to this report. ii. Capitalization Statement as at 31st march, 2005 and 30th June, 2005 as

appearing in Annexure V to this report.

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iii. Information relating to Tax shelters (Deferred Tax Liability) is reflected in the Balance Sheet of respective years.

iv. Information relating to the following is covered in the respective Balance Sheets of each of the five years mentioned above:

1. Secured Loans 2. Related parties Transactions.

In our opinion the above financial information of the Company read with Significant Accounting policies and notes on accounts has been prepared in accordance with part II of Schedule II of the Act and the SEBI guidelines. This report is intended solely for your information and for inclusion in the offer document in connection with the specific proposed Offer of Equity shares of the Company and is not to be used, referred to for any other purpose without our written consent. Thanking you, Pinnamneni & Co Chartered Accountants P.V.V.Satyanarayana Proprietor Place : Vijayawada Date : 09/12/2005

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Annexure I: STATEMENT OF ADJUSTED PROFITS & LOSSES OF DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA

Rs.in Lacs Particulars

For the year ended March 31, 2001

For the year ended March 31, 2002

For the year ended March 31, 2003

For the year ended March 31, 2004

For the year ended March 31, 2005

Quarter Ended on 30.06.05

Income Income from Operation 139.21 112.93 117.76 123.78 155.72 52.60Other Income 0.74 0.19 40.00 8.92 10.26 0.05Total Income 139.95 113.12 157.76 132.70 165.98 52.65 Expenditure Operational Cost 58.00 37.11 38.05 26.52 34.25 10.20Staff Cost 22.01 19.74 14.89 9.49 10.08 3.05Admn. & General Expenses 67.42 57.75 60.80 52.95 70.22 19.44Finance Cost 14.01 10.71 3.21 0.00 0.00 0.00Total Expenditure 161.44 125.31 116.95 88.96 114.55 32.69Profit/(Loss) before Depreciation (21.49) (12.19) 40.81 43.74 51.43 19.96Depreciation 30.53 30.70 30.72 24.52 25.26 6.50Profit/(Loss) before tax but after Depreciation

(52.02) (42.89) 10.09 19.22 26.17 13.46

Add: Tax Provision Written Back (Net) 0.00 0.00 0.00 0.00 0.00 0.00Provision for taxation 0.00 0.00 0.79 1.39 2.06 1.14Provision for deffered tax 0.00 0.00 0.00 3.39 (1.09) 0.00Profit/(Loss) after depreciation & Tax (52.02) (42.89) 9.30 14.44 25.20 12.32Extra ordinary item (Net of tax) 15.92 22.80 0.00 1.08 0.00 0.0 Net Profit/(Loss) (67.94) (65.69) 9.30 13.36 25.20 12.32

Pinnamneni & Co Chartered Accountants P.V.V.Satyanarayana Proprietor Place : Vijayawada Date : 09/12/2005

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Annexure II : STATEMENT OF ADJUSTED ASSETS & LIABILITIES OF DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA.

(Rs. In Lacs)

Particulars

As atMarch

31, 2001

As atMarch

31, 2002

As atMarch

31, 2003

As atMarch

31, 2004

As at March

31, 2005

QuarterEnded on 30.06.05

A Fixed Assets Gross Block 476.18 440.83 441.66 450.92 461.58 461.58 Less:

Accumulated Depreciation 159.96 182.56 213.28 236.69 261.96 268.45

NET BLOCK TOTAL 316.22 258.27 228.38 214.23 199.62 193.13

B Investment 46.10 32.10 32.10 41.00 41.00 41.00

C Current assets, Loan

& Advance

Sundry Debtors - - - - - -

Cash & Bank Balance 2.09 2.37 0.37 3.70 24.59 3.38

Closing Stock 2.33 2.95 2.98 3.30 3.37 3.01

Other Current Assets 7.06 7.28 7.30 10.06 9.54 13.10

Loans & Advances 5.69 9.90 2.23 14.21 83.46 125.66

TOTAL 379.49 312.87 273.36 286.50 361.58 379.28

D Liabilities & Provisions

Loan 74.55 68.14 10.00 - - -

Deffered Tax Liability - - - 42.49 41.40 41.40

Current Liabilities & Provision 7.76 6.15 8.38 7.68 8.46 12.06

TOTAL 82.31 74.29 18.38 50.17 49.86 53.46E Net Worth 297.18 238.58 254.98 236.33 311.72 325.82

F Represented by

1. Share Capital 366.02 366.02 366.02 366.02 409.11 409.11

2. Reserves & Surplus - - - - - -

Less: 35.48 28.38 21.28 14.19 7.10 5.32

Preliminary Expenditure to the extent not w/off

Profit & Loss Debit Balance 33.36 99.06 89.76 115.50 90.29 77.97

Net Worth 297.18 238.58 254.98 236.33 311.72 325.82Pinnamneni & Co Chartered Accountants P.V.V.Satyanarayana Proprietor

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Annexure III: CASH FLOW STATEMENT OF DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA

Amount in rupees YEAR

ENDED 3/31/2001

YEAR ENDED

3/31/2002

YEAR ENDED

3/31/2003

YEAR ENDED

3/31/2004

YEAR ENDED

3/31/2005

Quarter Ended on 30.06.05

A.

CASH FLOW FROM OPERATING ACTIVITIES

Net Profit/(Loss) before tax and Extraordinary items

(6,794,367.15)

(6,569,050.23)

1,009,347.40

1,814,927.00

2,617,066.26

1,345,937.31

Add: Interest and Financial Charges booked

1,401,253.00

1,071,531.00

320,520.00

-

-

-

Adjustment for:

Depreciation 3,053,112.00 3,070,000.00 3,072,456.00 2,451,812.00 2,526,248.00 649,720.00

Interest Income - - - - - -

Foreign Exchange Adjustment

- - - - - -

Proposed Dividend - - - - - -

(Profit)/Loss on sale of asset

1,592,509.00 2,280,507.00 - 108,768.00 - -

Prel. Exp. W/o. 709,532.00 709,532.00 709,532.00 709,532.00 709,532.00 177,383.00

Operating Profit/(Loss) before working capital charges

(37,961.15) 562,519.77 5,111,855.40 5,085,039.00 5,852,846.26 2,173,040.31

Adjustment for:

(Increase)/decrease in inventory (108,300.00) (61,830.00) (3,311.00) (31,965.00) (7,404.00) 35,740.00

(Increase)/decrease in other current assets

346,259.00

(22,720.00)

(1,365.00)

(276,403.00)

52,158.00

(355,708.00)

(Increase)/decrease in loans and advances

728,375.00 (420,072.00) 766,588.00 (1,198,187.00) (6,924,770.00) (4,219,480.00)

Increase/(Decrease) in Trade payables (301,106.25) (317,820.92) 8,054.00 (14,140.00) 69,471.00 49,075.00

Increase/(Decrease) in provisions (998,029.60) 156,741.60 214,422.60 (55,435.40) 8,845.95 311,062.73

Income Tax Refund/(Paid)

- - (79,537.00) (139,386.00) (206,225.00) (113,388.00)

Financial Charges paid

(1,401,253.00) (1,071,531.00) (320,520.00) - - -

Cash generated from operations

(1,772,016.00) (1,174,712.55) 5,696,187.00 3,369,522.60 1,155,077.79 (2,120,135.96)

B

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets

(163,400.00) (182,300.00) (82,600.00) (1,190,900.00) (1,065,475.00) -

Sale of Fixed Assets 576,000.00 627,000.00 - 45,000.00 - -

Purchase of Investment

- - - (900,000.00) - -

Sale of Investment - 1,400,000.00 - 10,000.00 - -

Interest received - - - - - -

Dividend Received - - - - - -

Net Cash flow from investing activities

412,600.00

1,844,700.00

(82,600.00)

(2,035,900.00)

(1,065,475.00)

-

C

CASH FLOW FROM FINANCIAL ACTIVITIES

Proceeds from Allotment

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Money 607,000.00 - - - 4,309,000.00 -

Proceeds from borrowings - 1,000,000.00 - - - -

Payment of borrowings

(391,877.00) (1,641,764.00) (5,813,910.00) (1,000,000.00) - -

Dividend Paid - - - - - -

Net Cash used in Financing Activities

215,123.00 (641,764.00) (5,813,910.00) (1,000,000.00) 4,309,000.00 -

Net Increase/(Decrease) in Cash and Cash Equivalents (A+B+C)

(1,144,293.00) 28,223.45 (200,323.00) 333,622.60 2,088,447.21 (2,120,135.96)

Cash and cash equivalents as at previous year

1,353,160.44

208,867.44

237,090.89

36,767.89

370,390.49 2,458,837.70

Cash and cash equivalents as at current year

208,867.44 237,090.89 36,767.89

370,390.49

2,458,837.70 338,701.74

for PINNAMANENI & Co., Chartered Accountants (P V V Satyanarayana)

Proprietor.

Annexure IV: Accounting Ratios of Profit & Loss Accounts of DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA

(Rs. In Lacs)

Quarter Ended on 30.06.05

For the year ended March 31.2001

For the year ended March 31.2002

For the year ended March 31 2003

For the year ended March 31.2004

For the year ended March 31.2005

Net Profit/ (loss) before extra ordinary item

A (52.02) (42.89) 9.30 14.44 25.20 12.32

Net Profit/{loss) B (67.94) (65.69) 9.30 13.36 25.20 12.32

Number of equity C 4015100 4015100 4015100 4015100 4015100 4015100Shares Weighted D average number of equitv shares

4015100 4015100 4015100 4015100 4015100 4015100

Net Worth E 297.18 238.58 254.98 236.33 311.72 325.82 Key Accounting Ratios Earning per Shares BID 0.00 0.00 0.23 0.33 0.63 0.31

Net Assets Value per Share (Rs.) ElC 7.40 5.94 6.35 5.88 7.76 8.11

Return on AlE -17.51% -17.98% 3.65% 6.12% 8.08% 3.78%Networth (%)

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Annexure V: CAPITALIZATION STATEMENT OF DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA

(Rs. In Lacs) Pre-issue as on March31, 2005 Pre-issue as on 30.06.05

Short Term Debt 0.00 0.00 Long Term Debt 0.00 0.00

Shareholders Fund Share Capital 409.11 409.11

Reserves & Surplus 0.00 0.00 Total Shareholders Fund 409.11 409.11 Lone Tem Debt/ Equity 0.00 0.00

For PINNAMANENI & Co., Chartered Accountants

(P V V Satyanarayana) Proprietor. Annexure VI: STATEMENT OF TAX SHELTER OF DOLPHIN MEDICAL SERVICES LTD., VIJAYAWADA

(Rs.ln Lacs

Quarter Ended on

30.06.05

For the Year

Ended March

31.2001

For the year

ended March

31,2002

For the year

ended March

31.2003

For the year

ended March

31.2004

For the year

ended March

31.2005 Tax at Notional Rate with Surcharge 39.55% 35.70% 36.75% 35.88% 36.59% 33.83% Adjustments:

A) Permanent Difference Difference between profit On sale of shares as per 0.00 0.00 0.00 0.00 0.00 0.00 books and as per Income Tax Income from Dividend 0.00 0.00 0.00 0.00 0.00 0.00 Adjustments U/S 10(A) 0.00 0.00 0.00 0.00 0.00 0.00

B) Timing Difference Difference between Tax Depreciation and Book Depreciation 4.41 (3.90) (9.04) 9.46 (3.05) (2.41) Profit/(Loss) on sale of asset failing within the block of asset (15.92) (22.81) 0.00 (1.09) 0.00 0.00 Profit/(Loss) on sale of ASE Card 0.00 0.00 0.00 0.00 0.00 0.00 Other Adjustments (3.62) (4.88) (0.38) (0.03) 0.00 0.00

Net Adjustments (15.13) (31.59) (9.42) 8.34 (3.05)

(2.41)

Tax Saving (Deferred) thereon 0.31 (3.13) (3.46) 3.38 (1.12)

(0.82) Total Taxation 0.00 0.00 0.79 1.39 2.06 1.14 Taxation on extra-ordinary item 0.00 0.00 0.00 0.00 0.00 0.00 Tax on profits before

extra ordinary items 0.00 0.00 0.79 1.39 2.06 1.14

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Annexure VII: Details of Sundry Debtors Age-wise analysis of sundry debtors Amount (Rs. In Lacs) Age-wise Break-up

31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 30.06.05

Less than six months

Nil Nil Nil Nil Nil Nil

More than six months

Nil Nil Nil Nil Nil Nil

Total Nil Nil Nil Nil Nil Nil Annexure VIII: Details of Loans & Advances

(Rs. In Lacs) Particulars

31.03.0131.03.02 31.03.03 31.03.04 31.03.05 30.06.05

1. To Directors Nil Nil Nil Nil Nil Nil 2. To Others 5.69 9.90 2.23 14.21 83.46 125.66 Total 5.69 9.90 2.23 14.21 83.46 125.66 Annexure IX: DETAILS OF UNSECURED LOANS

(Rs. In Lacs) Particulars

31.03.0131.03.02 31.03.03 31.03.04 31.03.05 30.06.05

1. GPR Chits & Finance Pvt. Ltd.

14.63

Nil Nil Nil Nil Nil

2. Emeskay Financial Services Ltd.

7.57 1.07 Nil Nil Nil Nil

Total 22.20 1.07 Nil Nil Nil Nil Annexure X: DETAILS OF SECURED LOANS

(Rs. In Lacs) Particulars

31.03.0131.03.02 31.03.03 31.03.04 31.03.05 30.06.05

1.APSFC Term Loan 52.35

57.06 Nil Nil Nil Nil

2. Mayur Shanmukha Invsts&SecuritiesPvt.Ltd.

Nil 10.00 10.00 Nil Nil Nil

Total 52.35 67.06 10.00 Nil Nil Nil Annexure XI: DETAILS OF RELATED PARTY TRANSACTIONS This is to certify that based on the books of accounts maintained by M/s.Dolphin Medical Services Limited, Vijayawada for the period ended on, information furnished and explanations given to us, Related Party Transactions as per Accounting Standard (AS 18) issued by the Institute of Chartered Accountant of India are given below.

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Key Management Personnel:

1. Dr.G.V. Mohan Prasad – Managing Director 2. Dr. M. Lakshmi Sudha – Director

Enterprises having common Key Management Personnel (Group Companies):

1. Meridian Projects Limited 2. Cosmic Fortunes India Limited 3. Panacea International 4. Advanced Technologies International

Relatives of Key Management Personnel:

1. Mr. G. Mallikharjuna Rao 2. Mrs. G. Vimala Kumari 3. Mr. G. Eswar Chand

In respect of transactions with related parties which have taken place during the period ended 30th June 2005 as per the related financial statements are given below: Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 2,31,000 Nil

2 Consultation Charges Nil 9,000 Nil3 Investments Nil Nil Nil

In respect of transactions with related parties which have taken place during the year ended 31st March 2005 as per the related financial statements are given below: Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 9,24,000 Nil

2 Consultation Charges Nil 36,000 Nil3 Investments Nil Nil Nil4 Allottment of Share

Warrants Nil 10,00,000 28,00,000

In respect of transactions with related parties which have taken place during the year ended 31st March 2004 as per the related financial statements are given below:

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Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 9,24,000 Nil

2 Consultation Charges Nil 36,000 Nil3 Investments Nil Nil 9,00,000

In respect of transactions with related parties which have taken place during the year ended 31st March 2003 as per the related financial statements are given below: Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 9,24,000 Nil

2 Consultation Charges Nil 36,000 Nil3 Investments Nil Nil Nil

In respect of transactions with related parties which have taken place during the year ended 31st March 2002 as per the related financial statements are given below: Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 9,24,000 Nil

2 Consultation Charges Nil Nil Nil3 Investments Nil Nil Nil

In respect of transactions with related parties which have taken place during the year ended 31st March 2001 as per the related financial statements are given below: Amount in Rupees Sl.No Nature of transaction Group

CompaniesKey

Management Personnel

Relatives of Key

Management Personnel

1 Managerial Remuneration

Nil 9,24,000 Nil

2 Consultation Charges Nil Nil Nil3 Investments Nil Nil Nil

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Annexure XII: ANNUAL GROWTH RATE OF DOLPHIN MEDICAL SERVICES LIMITED, VIJAYAWADA

(Rs. In lacs

2000-01 2001-02 2002-03 2003-04 2004-05 Quarter Ended on30.06.05

Income Total Income 139.21 112.93 117.76 123.78 155.72 52.60

Annual growth Rate (%) -2% -19% 4% 5% 26% 35% Compounded Annual

Growth Rate (%) -2% -19% 4% 5% 26% 35% Net Profit/(Loss) After Tax (67.94) (65.69) 9.30 13.36 25.20 12.32 Annual growth Rate (%) -229% 3% 114% 44% 89% 96%

Compounded Annual Growth Rate (%) -229% 3% 114% 44% 89% 96%

For PINNAMANENI & Co., Chartered Accountants

(P V V Satyanarayana) Proprietor. ANNEXURE TO THE AUDITORS’ REPORT The Annexure referred to in the Auditor’s Report to the Members of Dolphin Medical Services Limited for the period ended 31.03.01, 31.03.02, 31.03.03, 31.03.04, 31.03.05 and for quarter ended 30.06.05. We report that: 01.(a) The Company has maintained proper records showing full particulars

including quantitative details and situation of fixed assets.

(b) According to the information and explanations furnished to us, the Company has physically verified all its fixed assets during the year. However, the Company has adopted a phased programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed during the year on such verification.

(c) Fixed assets disposed off during the year were not substantial and therefore

do not affect the going concern status of the Company. 02 (a) According to the information and explanations furnished to us, the Company

has physically verified its inventories during the year. In our opinion, the frequency of verification is reasonable.

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(b) In our opinion, the procedures of physical verification of inventories followed

by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) According to the information furnished to us, the Company is maintaining

proper records of inventory and the discrepancies, if any noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of account.

03. According to the information and explanations furnished to us, the Company

has neither granted nor taken any loans, secured/unsecured to or from companies, firms or other parties whose particulars are recorded in the register maintained under Section 301 of the Companies Act, 1956. Accord-ingly the provisions of clauses 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order, is not applicable.

04. In our opinion and according to the information and explanations given to us,

there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. Further during the course of our audit, we have not come across any instances of major weaknesses in internal control that in our opinion, require correction but have so continued without correction.

05. (a) Based on the information and explanation given to us, the Company do not

have any transactions made in pursuance of contracts or arrangements to be entered in the register in pursuance of section 301 of the Companies Act, 1956.

(b) As explained to above, the Company do not have the transactions made in

pursuance of contracts or arrangements to be entered in the register maintained under Section 301 of the Companies Act, 1956, as such the question of reasonable prices does not arise.

06. The Company has not accepted any deposits from public, as such the

provisions of sections 58A and 58AA of the Companies Act, and the rules framed there under are not applicable.

07. In our opinion, the Company has an internal audit system commensurate with

the size and nature of its business. 08. The Company was not prescribed by the Central Government to maintain cost

records U/s.209(1)(d) of the Companies Act, 1956. 09. (a) According to the information furnished to us, the Company is regular in

depositing undisputed statutory dues viz. Provident Fund, Income Tax etc. with the appropriate authorities and there exists no statutory dues outstanding as at the last day of the financial year for a period exceeding six months.

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(b) According to the information furnished to us, there exists no disputed statutory dues of Sales Tax/Income Tax/Customs Tax/Excise Duty/Cess against the Company.

10. The Company which has been registered for a period not less than Five

years, its accumulated losses at the end of the financial year are less than fifty percent of its net worth. Further the Company has not incurred any cash losses during the financial year and in the immediately preceeding financial year.

11. In our opinion and according to the information and explanations furnished to

us by the Company, there were no defaults in repayment of its dues to financial institution during the year. The Company has not issued any debentures.

12. According to the information and explanation given to us, the Company has

not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a chit fund, nidhi, mutual benefit fund or society.

Accordingly, the provisions of clause 4(xiii) of the Order are not applicable. 14. According to the information and explanation given to us, the Company is not

dealing in or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the Order, is not applicable.

15. According to the information and explanation given to us, the Company has not given any guarantees for loans taken by others from banks or financial institutions.

16. The Company has not obtained any term loans during the financial year, as

such the provisions of clause 4(xvi) of the order are not applicable. 17. The Company has neither raised any funds on short term basis nor on long

term basis during the year, as such the application of the same for the other investment does not arise.

18. The Company has not made any preferential allotment of shares during the

year, accordingly, the provisions of clause 4(xviii) of the order are not applicable.

19. The Company has not issued any debentures during the year, accordingly,

the provisions of clause 4(xix) of the order are not applicable. 20. The Company has not raised any money through public issues during the

year. Accordingly, the provisions of clause 4(xx) of the order are not applicable.

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21. During the course of our examination of the accounts of the Company in

accordance with generally accepted auditing practices, we have not come across any instances of fraud on or by the Company, nor have we been informed by the management, of any such instance being noticed or reported during the year.

for PINNAMANENI & CO., Chartered Accountants Place : Vijayawada Date : 09/12/2005

P.V.V.SATYANARAYANA

Proprietor NOTES ON ACCOUNTS 1. Assets and liabilities are recorded at Historic Cost to the Company. 2. Depreciation was provided on Straight Line Method basis at the rates prescribed

as per the Schedule XIV of the Companies Act,1956 and also as per the revised guidelines.

3. The stocks are valued at cost or market value whichever is less. 4. All receipts and payments are recorded on accrual basis. 5. Contingent liabilities not provided for : NIL 6. Figures have been re-grouped wherever necessary. 7. Further the Company has allotted 1,90,000 zero percent convertible Share

Warrants at Rs.20/- per warrant.

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8. Confirmation of balances are not obtained for sundry creditors and advances made.

As per our report of even date For DOLPHIN MEDICAL SERVICES LIMITED For PINNAMANENI & CO.

CHARTERED ACCOUNTANTS Dr.G.V.MOHAN PRASAD P.V.V.SATYANARAYANA Managing Director Partner Dr.M.LAKSHMI SUDHA Executive Director Place : Vijayawada Date : 09/12/2005

IX. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SELECTED FINANCIAL INFORMATION The following selected financial data have been prepared in accordance with Indian Accounting Standards, in conjunction with its financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The audited financial statements have been prepared in Indian Rupees and have been prepared in accordance with Indian Accounting Standards for the fiscal years ended 2003, 2004 and 2005. For detailed financial statements, prepared in accordance with Indian Accounting Standards, as required by Guidelines, please refer “Auditor’s Report” of this draft LOO. Statement of Profit and Loss for the fiscals ended March 31, 2003, 2004 and 2005.

Rs in Lacs (except per share data) Particulars For the year

ended March 31,

2003

For the year ended

March 31, 2004

For the year ended

March 31, 2005

Income Income from Operations 117.76 123.78 155.72 Other Income 40.00 8.92 10.26 Total Income 157.76 132.70 165.98 Expenditure Operational Cost 38.05 26.52 34.25

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Staff Cost 14.89 9.49 10.08 Admn. & General Expenses 60.80 52.95 70.22 Finance Cost 3.21 0.00 0.00 Total Expenditure 116.95 88.96 114.55 Profit/(Loss) before Depreciation 40.81 43.74 51.43 Depreciation 30.72 24.52 25.26 Profit/(Loss) before tax but after Depreciation

10.09 19.22 26.17

Add: Tax Provision Written Back (Net)

0.00 0.00 0.00

Provision for taxation 0.79 1.39 2.06 Provision for deferred tax 0.00 3.39 (1.09) Profit/(Loss) after depreciation& Tax

9.30 14.44 25.20

Extra ordinary item (Net of tax) 0.00 1.08 0.00 Net Profit/(Loss) 9.30 13.36 25.20

Earning per share (Rs.) 0.23 0.33 0.63 Return on Net Worth (%) 3.6 5.7 8.1 Net Asset Value per share 6.35 5.89 7.76

The following discussion of its financial condition and results of operations should be read together with the audited financial statements The audited financial statements are prepared in accordance with Indian Accounting Standards. FOR THE YEAR ENDED 31/03/05 During the year the Company has received Gross Receipts of Rs. 165.98 lakhs resulting to a Net Profit of Rs. 25.20 Lakhs. The company was able to withstand the tough competition in the market and still enhance the profitability of the company. The company has added a new dimension to its vision by venturing into the area of range diagnostic tools and equipment and other healthcare products. The company in order to sustain and enhance its Market shares at the National level has adopted a new strategy by working towards expansion of its activities and starting operations at major Metros of the country. The first step in this direction is to open multipurpose Medical centers which in addition to catering to diagnostic requirements, also serves to do additional activities like Early development lab services, Clinical development services-clinical trials, Tele Radiology, Knowledge Process Outsourcing, etc. The opening of centers at two major cities will also extend an opportunity to company to effectively distribute the Diagnostic Tools and Equipments in a high potential market. This will enable the company to replicate its strategy in other major cities of country. In nutshell the focus of the company has been now shifted to the National and International Market. The company is confident of making its presence felt in the bigger market areas shortly with advanced Technologies and Equipments. FOR THE YEAR ENDED 31/03/04 During the year the Company has received Gross Receipts of Rs.132.70 lakhs resulting to a Gross Profit of Rs.49.76 Lakhs and Profit after Income Tax of Rs.16.76

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lakhs. In view of the compliance of the Accounting Standard ‘AS – 22 – Accounting for taxes on Income’ issued by the Institute of Chartered Accountants of India, a further provision of Rs.3.39 lakhs was needed for the deferred tax, which is not an ascertained liability, thus reducing the profit to Rs.13.36 lakhs. Though the CT Scan Equipment suffered a break down and did not function for a few months in the year, other diagnostic services received extraordinary patronage from the doctors and the public. In addition, during the period of functioning, the CT Scan services also performed extraordinarily well. This has resulted in a compensatory and proportionate increase in the income obtained through the diagnostic services of the company. This is evident from the increase in the profit margin of the Company. The other units of the company like biotech and herbal unit and software unit have also performed better than the previous year. This is more evident in the case of biotech and herbal unit. Keeping in view the excellent patronage being received from the doctors and public of this region, the Directors propose to increase the scope and operations of the Company by way of expansion in this sector. The Board of Directors propose to establish new and sophisticated equipment like MRI and PET Scan in suitable places in the country while updating the existing equipment. This will enhance the profitability of the Company further, much to the benefit of the share holders of the Company. To achieve this vision, the Directors propose to raise the required funds by way of borrowing from National/International funding organizations and also explore any other possibilities to meet this requirement. FOR THE YEAR ENDED 31/03/03 During the year the Company has received Gross Receipts of Rs.157.76 lakhs resulting to a Gross Profit of Rs.51.12 Lakhs. Since there are frequent and heavy breakdowns of CT Scan Equipment and general increase in competition, there is fall in the Revenue on account of CT Scan services and no profit was received from CT Scan services. In view of the effective steps your management has taken in marketing the services, the growth in gross collection (due to services other than CT Scan) is encouraging. And further due to the good monsoon conditions at present, we expect the revival of the economy and spending power of the people, which helps your Company in attaining good results in the ensuing year also. Even though the income received from CT Scan Services is lower than the expected and incurs heavy expenditure on breakdown of the equipment, your company is continuing the free services to the required poor and needy patients as a matter of social concern and also obligation to the Government of India.

X OUTSTANDING LITIGATIONS & DEFAULTS There is no outstanding or pending litigation, suit, criminal or civil prosecution, proceeding initiated for offence (irrespective of whether specified in paragraph (I) of Part 1 of Schedule XIII of the Companies Act) or litigation for tax liabilities against the Company, its Subsidiary, Promoters, Promoter group of companies or Directors and there are no defaults, non payment or overdues of statutory dues, institutional or bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, other than unclaimed liabilities of the Company or its

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Subsidiaries and no disciplinary action has been taken by SEBI or any stock exchanges against the Company, its Subsidiaries, Promoters, Group Companies or Directors except the following: Against the company a) The company is carrying out its operations in sub-leased premises

admeasuring 1539 Sq. Yards situated at Governorpet, Vijayawada. The Church of South India, 222, Cathedral Road, Chennai is the owner of the land, which was leased to M/s. Tilak Enterprises, opp. City Civil Courts, Vijayawada, who constructed a basic skeleton building and sub-leased it to Dolphin Medical Services Ltd. in the year 1992 for a period of 10 years. Dolphin Medical Services Ltd. has completed the necessary construction of the premises and spent more than Rs. 80 lakhs on the premises itself. In the year 2000 there arose a dispute between the Church of South India, the owner and M/s. Tilak Enterprises, the lessee due to non-payment of rents by M/s. Tilak Enterprises to the Church of South India.

Dolphin Medical Services Limited is a lessee of M/s Tilak Enterprises and a sub lessee of the Church of South India. In view of the dispute in between the Tilak Enterprises and the Church of South India in respect of their lease, Dolphin Medical Services Limited is directed by the Hon’ble Court to deposit the monthly rents due and accrued till the final disposal of the said case. As a result Dolphin Medical Services Limited has been depositing the monthly rents before the Hon’ble Court as directed and consequently M/s Tilak Enterprises or the Church of South India shall withdraw the said rent as per the final judgment of the Hon’ble Court. The lease rentals paid in the Court for this by the Company is Rs.30,780/- per month.

As such the Church of South India has by way of legal notice terminated the lease of M/s. Tilak Enterprises and asked Dolphin Medical Services Ltd. not to pay rents to M/s. Tilak Enterprises as the lease was terminated. The Church of South India has also directed Dolphin Medical Services Ltd. to pay the rents to the Church of South India only and not to M/s. Tilak Enterprises, the lessee. After obtaining the legal clarifications, Dolphin Medical Services Ltd. has complied with the demand of the owners of premises, the Church of South India and started paying the rents to Church of South India. After some time this was objected by M/s. Tilak Enterprises and on the directions of the Court, Dolphin Medical Services Ltd. has been depositing the accepted rents in the respective court.

The litigation is pending in the court of Principal Senior Civil Judge, Vijayawada and is basically a tripartite one with the Church of South India and M/s. Tilak Enterprises claiming for the right and authority to accept the rents and Dolphin Medical Services Ltd. is involved as the tenant and has been depositing the rents in the court of law.

b) The Assistant Provident Fund Commissioner, office of the Regional Provident

Fund Commissioner Office, Guntur has made a demand of Rs. 2,06,060.80

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alleged to be due from Dolphin Medical Services Ltd. towards the payment of the Provident Fund. Against the said demand raised by Asst. Provident Fund Commissioner, a writ petition is filed before the Honorable High Court of Judicature, Hyderabad and also before the EPF Appellate Tribunal, New Delhi.

The Hon’ble Court has directed the Dolphin Medical Services Limited to deposit half of the demand amount raised by the Provident Fund Commissioner and as a result, a sum of Rs. 1,03,031/- is already deposited by Dolphin Medical Services Limited. As on date, the dispute is pending for balance Rs. 1,03,030/- since the Provident Fund Commissioner has made a demand of Rs. 2,06,060.80 in total. As such the financial implication of Dolphin Medical Services Limited shall remain to the tune of Rs. 1,03,030/- in the event of the negative order of the Provident Fund Commissioner against Dolphin Medical Services Limited.

The said issue is pending for adjudication before the Honorable Court and the Tribunal.

c) Dolphin Medical Services Ltd., has imported a CT scanner in the year 1994 by

giving an undertaking to the government of India that it will do a stipulated number of free cases to the people below the poverty line. Due to the non-compliance of the undertaking by a few organizations in the country, frequent inspections of the records to check the compliance of all the organization has taken place and same inspections were being conducted in Dolphin Medical Services Ltd., also.

Civil Case involving Directors, Dr. M. Lakshmi Sudha & Dr. G. V Mohan Prasad: Dr. M. Lakshmi Sudha, director of Dolphin Medical Services Ltd. has taken a loan of Rs. 4,87,000/- for the purchase of an equipment of value of Rs. 6,50,000/- in the year 1999. The loan was personally guaranteed by Dr. G. V. Mohan Prasad, Managing Director of Dolphin Medical Services Ltd. After regular payments for some time, some outstanding amount was due in her loan account. At that time, the bank transferred the amount from the Savings account of the guarantor Dr. G. V. Mohan Prasad to Dr. M. Lakshmi Sudha's loan account without taking his permission. As such Dr. G. V. Mohan Prasad objected to it and issued a legal notice to the bank, and consequently the conflict resulted in litigation in the court of the Principal Senior Civil Judge, Vijayawada for purpose of settling the claim to the tune of Rs. 3,82,400/- There are no claims against the company not acknowledged as debt by the company.

XI PROMISE VS PERFORMANCE IN RESPECT OF PREVIOUS ISSUES The Company had made a public issue of 31,70,000 Equity Shares of Rs. 10/- each for cash at par aggregating Rs. 3,17,00,000 in the year 1994. The promise made in the prospectus at the time of the IPO and the actual performance of the Company are given below:

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(Rs. In Lacs)

Particulars 1993-94 1994-95 1995 -9 6 Expect

ed Actual Variance Expect

ed Actual

Variance Expected

Actual Variance

Revenue 301.73 1.83 -99.39% 452.42 80.03 -82.31% 522.55 141.68 -72.89% Net Profit 084.82 -2.40 -102.83% 114.66 11.81 -89.70% 119.20 041.01 -65.60% EPS 002.00 N.A. N.A. 002.71 00.29 -89.29% 002.82 001.02 -63.83% Book Value 010.46 10.00 -4.4% 013.96 7.99 -42.77% 018.83 9.00 -52.20%

XII BASIS OF OFFER PRICE I. QUANTITATIVE FACTORS 1) Adjusted Earnings per Share

YEAR EPS WEIGHT USED PRODUCT

2002-03 0.23 1 0.23 2003-04 0.33 2 0.66 2004-05 0.63 3 1.89

Weighted Average EPS 0.46

2) Price Earnings Ratio (P/E) in relation to the Offer Price

The P/E of the company at the offer price of Rs. 12/- based on the EPS for the year 2004-05, Weighted EPS and comparative industry P/E available for the line of business, the company is engaged into is given below: a P/E ratio based on the EPS of 2004-05 28.71 P/E ratio based on the Weighted average EPS 39.32 b Industry P/E Highest 26.30 Lowest 6.60 Average 16.45 * Source: Capital Market, Dec 05 – 18, 2005.

3) Return on Net Worth (RONW)

YEAR RONW % WEIGHT USED PRODUCT % 2002-03 3.6 1 3.6 2003-04 5.7 2 11.4 2004-05 8.1 3 24.3

Weighted Average RONW

6.55

A. Minimum return on total net worth after offer needed to maintain Pre-

offer EPS of Rs.0.63 is 5.76%

B. Net Asset Value (NAV)

1. NAV per Share as on 31/03/05 -- Rs. 7.76 2. NAV per share post offer -- Rs. 10.94 3. Offer Price: -- Rs. 12/-

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Please refer to page 77 under ‘Auditor’s Report’ of the Draft Letter of Offer for detailed workings of the abovementioned accounting ratios. II. QUALITATIVE FACTORS Comparison of accounting ratios of the peer group companies are as under:

Company Name P/E EPS BV per Share Dolphin Medical Services Ltd. 24.32 0.63 7.76 Apollo Hospitals Enterprise Ltd. 29.77 11.83 83.42 Dr. Agarwal'S Eye Hospital Ltd. 17.42 1.42 15.11 Indraprastha Medical Corpn. Ltd. 17.19 1.78 13.94 Kovai Medical Center & Hospital Ltd. 16.38 1.59 13.69 N G Industries Ltd. 8.83 3.31 16.62

1. Profit making company. 2. Company is into providing comprehensive health care services. Also its

ophthalmic Laser care division provides total laser treatment to the eyes. 3. The company is aggressively positioning itself for providing premium

quality medical services and health care to Public.

XIII STOCK MARKET DATA (i) The following is the movement in the share price of the Company on the BSE:

High* Low* Calendar

Year Date

(Rs.) Volume Date

(Rs.) Volume

Average price (Rs.)

2005.......... 28.02.05 27.65 229524 24.10.05 7.39 36430 17.52 2004.......... 16.12.04 12.00 56600 02.07.04 1.35 200 6.68 2003.......... 05.09.03 6.5 2250 16.10.03 1.26 700 3.88 * High/Low prices based on closing quotations on the BSE (ii) The closing Share price on 23rd May, 2005 on the stock exchange Mumbai being

the first day of trading after board meeting, approving the rights issue was Rs.19.71/-.

(iii) The Equity Shares of the Company are actively traded on BSE. (iv) The total volume of equity shares traded in each month, monthly high and low

prices for equity shares for the preceding six months on the BSE are as follows:

Period

High Price (Rs.)

Date of High Price quotation

Shares Traded on the day of High Price

Low Price (Rs.)

Date of Low Price quotation

Shares Traded on the

day of Low Price

Average Price

June 05 21.80 16.06.05 36627 14.80 28.06.05 9600 18.30 July 05 17.50 19.07.05 13550 15.25 14.07.05 10950 16.40 Aug 05 24.75 26.08.05 210149 15.50 29.08.05 100239 20.13 Sep 05 18.50 16.09.05 85705 11.65 29.09.05 25380 15.10 Oct 05 13.00 05.10.05 22582 7.39 24.10.05 36430 10.20 Nov 05 12.41 28.11.05 61407 8.30 22.11.05 3740 10.36 (Source: www.bseindia.com)

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(v) The closing Price of the Equity Shares of the Company on the BSE was Rs. 16.55 per equity Share (ex-rights price) respectively.

XIV PARTICULARS REGARDING LISTED COMPANIES UNDER THE SAME

MANAGEMENT WHICH HAVE MADE ANY CAPITAL ISSUES DURING THE LAST 3 YEARS

There are no listed Companies under the same management within the meaning of Section 370(1B) of the Act.

XV DEFAULTS IN THE PAYMENT/REFUNDS OF DEBENTURES, FIXED DEPOSITS, INTEREST ON FIXED DEPOSITS, DEBENTURE INTEREST AND

INSTITUTIONAL DUES

There are no defaults, non-payment/over dues of statutory dues, institutional/company dues and dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, other than unclaimed liabilities of the Company, except as stated in the paragraph ‘Outstanding Litigations’ in this Letter of Offer. XVI INFORMATION AS REQUIRED BY GOVERNMENT OF INDIA, MINISTRY OF

FINANCE, CIRCULAR NO. F2/5/SE/76, DATED FEBRUARY 5, 1977 AS AMENDED VIDE THEIR CIRCULAR OF EVEN NUMBER DATED MARCH 8, 1977

IS GIVEN BELOW: PROVISIONAL WORKING RESULTS FOR 7 MONTHS ENDED 31.10.2005 As per Clause 6.48 of SEBI (DIP) guidelines, the information for the period between the last date of the balance sheet and profit and loss account sent to the shareholders and up to the end of the last but one month preceding the date of the letter of offer is as under: (Amount Rs. In lakhs) Particulars Amount Income from Operations 125.42 Other Income 0.10 Total Income 125.52 Estimated Gross Profit 49.41 Provision for Depreciation 17.83 Public & Prel. Exps. Written off 4.13 Provision for Taxation 2.32 Estimated Net Profit 25.13

2. Material Changes and commitments, if any affecting financial position of the Company.

Following changes and commitments have been resolved in the Thirteenth Annual General Meeting of DOLPHIN MEDICAL SERVICES LIMITED held on Thursday the

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29th September 2005 at 11.00 A.M. at the Registered Office of the Company at Ramachandra Rao Road, Suryarao pet, Vijayawada - 520 002, A.P., INDIA to transact the following business: 1. To appoint director in place of Mr. G. Mallikharjuna Rao, who retires by rotation

and being eligible offers himself for re-appointment. 2. “RESOVED THAT, pursuant to the provisions of Section 293(1)(d) and other

applicable provisions, if any, of the Companies Act, 1956, subject to the regulations, if any, of the Reserve Bank of India, consent of the Company be and is hereby accorded to the Board of Directors, to borrow from time to time such sum or sums of money from the Company’s Bankers and/or from any one or more persons, Companies, bodies Corporate or Financial Institutions/Banks, whether by way of Cash Credit, advance or loans or by issue of debentures or otherwise and whether unsecured or secured by mortgage, charge, hypothecation, lien, or pledge of all or any assets or properties of the Company, whether movable or immovable whether existing or future, not with standing that the moneys borrowed together with the money already borrowed by the company, apart from the temporary Loans obtained from company’s Bankers or other lender(s) in the ordinary course of business, may exceed the aggregate of paid Up Capital and Free Reserves of the Company, that is to say reserves not set apart for any specific purpose, provided that the total amount to be borrowed by the board of Directors shall not exceed Rs.200 Crores (Rupees Two hundred Crores Only).”

3. “RESOLVED THAT the consent of the Company be and is hereby accorded

under Section 293(1)(a), and other applicable provisions, if any, of the Companies Act, 1956, subject to the regulations, if any of the Reserve Bank of India, to the Board of Directors of the Company to mortgage/ charge/hypothecate/pledge, from time to time on such terms and conditions as it may deem fit, the assets and properties of the Company, whether movable or immovable and both present and future, in favour of Banks, financial institutions and others under loan agreement(s) and/or hypothecation deed(s) to be executed by the Company in their favors towards loans already availed or to be availed from them or offer corporate guarantee to Banks, Financial Institutions and others for the Asset Management/other purposes subject, however that the aggregate value of such loans outstanding at any one time shall not exceed a sum of Rs.200 Crores (Rupees Two hundred Crores Only)”.

4. "RESOLVED THAT pursuant to the provisions of Section 198, 309, 310 and Schedule XIII(as amended) and other applicable provisions, if any of the Companies Act, 1956, the consent of the Company be and is hereby accorded to increase the remuneration of Dr.G.V. Mohan Prasad, Managing Director of the Company from Rs.41,000/- per month to Rs.1,00,000/- per month by way of salary and the perquisites shall be allowed and they shall be restricted to an amount not exceeding Rs.50,000/- per month or Rs.6,00,000/- per annum. with effect from 01.10.2005, other terms and conditions contained in the Resolution passed at the 11th Annual General Meeting held on 11.09.2003 remain unchanged."

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5. "RESOLVED THAT pursuant to the provisions of Section 198, 309, 310 and Schedule XIII(as amended) and other applicable provisions, if any of the Companies Act, 1956, the consent of the Company be and is hereby accorded to increase the remuneration of Dr.M.Lakshmi Sudha, Director of the Company from Rs.36,000/- per month to Rs.75,000/- per month by way of salary and the perquisites shall be allowed and they shall be restricted to an amount not exceeding Rs.37,500/- per month or Rs.4,50,000/- per annum. with effect from 01.10.2005, other terms and conditions contained in the Resolution passed at the 11th Annual General Meeting held on 11.09.2003 remain unchanged."

3. Weekend Prices for the last four weeks as per clause no. 6.48.3 of SEBI DIP

Week ended on

Closing Price on that day

High

Low

Date Price Date Price 15.12.05 12.04 15.12.05 12.17 15.12.05 11.11 9.12.05 13.03 9.12.05 13.03 6.12.05 9.53 2.12.05 9.94 28.11.05 12.41 01.12.05 9.5 26.11.05 11.29 26.11.05 11.29 22.11.05 8.3 18.11.05 8.94 14.11.05 9.39 17.11.05 8.56

XVII MECHANISM INVOLVED FOR REDRESSAL OF INVESTORS GRIEVANCES

STATUS OF COMPLAINTS RECEIVED FROM SEBI As of the date of this draft Letter of Offer, no complaints were pending with SEBI. REDRESSAL OF INVESTOR GRIEVANCES Redressal Mechanism: The Company has appointed the registrar to the issue, to handle the investor grievances in coordination with the Compliance Officer of the Company. All grievances relating to the present issue may be addressed to the Registrar with a copy to the Compliance Officer, giving full details such as name, address of the applicant, number of equity shares applied for, amount paid on application and bank and branch. The Company would monitor the work of the registrar to ensure that the investor grievances are settled expeditiously and satisfactorily. The Registrar to the issue, namely, Ikon Visions Pvt. Ltd. will handle investors’ grievances pertaining to the issue. The Company would also be co-ordinating with the registrar to the issue in attending to the grievances of the investors. The Company assures through the Board of Directors in respect of the complaints to be received, if any, shall adhere to the following schedules:

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Sr. No.

Nature of Complaint Time Table

1 Non-receipt of refund Within 7 days of receipt of complaint subject to production of satisfactory evidence

2 Non Receipt of Share Certificate Within 7 days of receipt of complaint subject to production of satisfactory evidence

3 Transfer of Shares Within 30 days 4 Change of Address Notification Within 7 days of receipt of information 5 Any other complaint in relation

to Rights issue Within 7 days of receipt of complaint with all relevant details

Redressal of investors’ grievance is given top priority by the Company. The Committee oversees redressal of complaints of shareholders/investors and other important investor related matters. The Company has adequate arrangements for redressal of investor complaints as indicated below: Share transfer / dematerialsation/ rematerialisation are handled by well equipped professionally managed Registrar and Transfer Agent appointed by the Company in terms of SEBI’s direction for appointment of Common Agency for physical as well as demat shares. The Registrars are constantly monitored and supported by qualified and experienced personnel of the Company. STATUS OF COMPLAINTS: (From 01.04.04 to 31.03.05) Nature of Complaint Received Attended Pending Non-Receipt of certificate/ Allotment letter/ Refund Order

12 12 Nil

Change of Address 6 6 Nil Correction of Name RPO/Share Certificate

2 2 Nil

Bank Mandates Registration/Correction

Nil Nil Nil

Receipt of wrong certificate with allotment advice/refund

Nil Nil Nil

Investor Complaints through Stock Exchange

Nil Nil Nil

Investor Complaints through SEBI 1 1 Nil Issue of duplicate refund order/ revalidation of Warrants

Nil Nil Nil

Registration of Power of attorney Nil Nil Nil Request for Transfer of Shares Nil Request for Dematerialisation Nil Request for Rematerialisation 1 1 Nil Others 6 6 Nil Total 28 28 Nil

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Company’s secretarial department located at the Registered office of the Company at Ramchandra Rao Road, Suryarao Pet, Vijaywada- 520002 closely monitors and co-ordinates with the R&T Agents, for attending to and resolving the complaints of its shareholders. The average time taken by the Registrars for attending to routine grievances is 7-8 days from the date of receipt of complaints. In case of non-routine grievances where verification with other agencies is involved, it would be the endeavor of the Registrars to attend to them as expeditiously as possible. Company received 28 complaints relating to investor grievance during the quarter ended 31st March, 2005 and all were replied satisfactorily to the concerned investors and no investor complaint was pending as on date. Ikon Visions Pvt. Ltd., Registrars to the Issue, will handle the Company’s investor grievances arising out of the Issue. All grievances relating to the Issue may be addressed to the Registrars to the Issue giving full details such as folio number, DP ID / client ID number, name and address of the first applicant, number of Equity Shares applied for, CAF serial number, amount paid on application and the collection centre where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the renouncee should be furnished. After the receipt of complaint the Registrar inwards the complaint in the inward register then locates the investors name in the Master files. Thereafter the appropriate reason for complaint is found out and accordingly the investor’s complaints are resolved The Company has appointed a Compliance Officer who may be contacted for any pre-issue/post-issue related problems. XVIII DETAILS OF ADVERSE EVENTS AFFECTING THE COMPANY SINCE THE

LAST AUDITED FINANCIAL STATEMENTS No circumstances have arisen since the date of the last financial statement that materially adversely affects / likely to affect the trading or profitability of the Company or the value of its assets or its ability to pay its liabilities within the next twelve months.

XIX EXPERT OPINION The Company has not obtained any expert opinions, except that of M/s S. M Sultan Moosavi , as Legal Advisors to the issue and M/s Pinnamaneni & Co., Chartered Accountants who have given the Tax Benefits Certificate.

XX OPTION TO SUBSCRIBE Save as otherwise stated elsewhere in this Letter of Offer, the Company has not given any option to subscribe for any Equity Shares of the Company. RISK FACTORS ENVISAGED BY THE MANAGEMENT An investment in Equity Shares involves a high degree of risk. The investor should carefully consider all of the information provided in this LOO, including the risks and

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uncertainties described below, before making an investment in the Company’s Equity Shares. If any of the following risks actually occur, Company’s business, results of operations and financial condition could suffer, the trading price of the Company’s Equity Shares could decline, and the investors may lose all or part of their investment. Any projections, forecasts and estimates contained herein are forward looking statements that involve risks and uncertainties. Such statements used forward looking terminologies like “may”, “believes”, “will”, “expect”, “anticipate”, “estimate”, “plan” or other similar words. The companies actual results could differ from those anticipated in these forward looking statements as a result of a number of factors including those, which are set forth in the “Risk Factors” as appearing on Page iii & 102. Note: Unless specified or quantified in the relevant risk factors below, the Company

is not in a position to quantify the financial or other implication of any risks mentioned herein under:

Internal Risk Factors 1. The proposed project has not been appraised by any bank or any

financial institution and the deployment of funds raised through the present rights issue will not be monitored by any financial institution.

Management Perception: The management of the Company has estimated the requirement of funds. The Management shall ensure that the funds raised for the intended purpose are judiciously utilized. 2. Shareholders of the company in their meeting held on 23rd March, 2005

approved the issue of 1.90 lacs share warrants to the promoters of the Company. This will reduce the EPS of the company.

Management Perception: The share warrants when exercised are likely to enhance the motivation level of the warrantholders and consequently improve the performance of the Company. 3. Promises vs. Performance In the past the company has made promises but the performance was far below the expected levels. The Company’s promises made in the initial public issue vis-à-vis the performance were as under:

(Rs. In Lacs) Particulars 1993-94 1994-95 1995 -9 6 Expected Actual Variance Expected Actual Variance Expected Actual Variance Revenue 301.73 1.83 -99.39% 452.42 80.03 -82.31% 522.55 141.68 -72.89% Net Profit 084.82 -2.40 -102.83% 114.66 11.81 -89.70% 119.20 041.01 -65.60% EPS 002.00 N.A. N.A. 002.71 00.29 -89.29% 002.82 001.02 -63.83% Book Value 010.46 10.00 -4.4% 013.96 7.99 -42.77% 018.83 9.00 -52.20%

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Management Perception: Since the implementation of the project was not completed in respect of ophthalmic cancer units, and the CT Scanner was installed during the month of September 1994 only beyond the scheduled time, for reasons beyond the control of the management, even though the CT Scanner was acquired in February 1994, has resulted a fall in the revenue. Due to delay in receiving the allotment money, getting the requisite various Government approvals, and also not obtaining the subsidy from the Government, it was proposed to keep the Cancer unit project in abeyance. The ophthalmology Centre that ought to have been established by March 1996 got delayed due to non-receipt of allotment money.

4. Possibility of conflict of interest. Promoters’ three companies, Meridian Projects Ltd., Cosmic Fortunes India Ltd. and Panacea International were incorporated with same objects as that of the issuer company. The company has made an investment of Rs.32 lakhs in Meridian Projects Ltd., which has not yet started commercial operations and an investment of Rs.9 lakhs in Cosmic Fortunes India Ltd. Cosmic Fortunes India Ltd. deals in development of dietary supplements and herbal health food formulations.

Management Perception: There is no conflict of interest. The company has identified its niche area of operations, which ensures no conflict of interest with any of the above companies. Meridian Projects Limited is yet to start operations effectively. 5. None of the other Companies promoted by Dr. G V Mohan Prasad has

commenced its commercial operations till 31st December 2004. Management Perception: The companies’ approach has been very cautious. These companies are venturing into an industry that is dominated by the research. Any new development in the industry may adversely affect the operations of the company. Hence, these companies are waiting for the proper opportunity to commence their operations. 6. Outstanding Litigations

Sl. No.

Nature of litigation Dolphin/ Promoters involved with the litigation

Amount (Rs.)

Criminal Nil Nil Securities Nil Nil Statutory Nil Nil Civil: 1 For a Sub leased

Property The Company Nil

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2 Payment of the Provident Fund.

The Company 1,03,030/-

3 Civil case against Oriental Bank of Commerce for Loan availed to purchase equipment

Dr. M. Lakshmi Sudha & Dr. G. V Mohan Prasad, Directors of the Company

3,82,400/-

Others Nil Nil

1 The company is carrying out its operations in sub-leased premises admeasuring 1539 Sq. Yards situated at Governorpet, Vijayawada. The Church of South India, 222, Cathedral Road, Chennai is the owner of the land, which was leased to M/s. Tilak Enterprises, opp. City Civil Courts, Vijayawada, who sub-leased it to Dolphin Medical Services Ltd. in the year 1992 for a period of 10 years A dispute between the Church of South India, the owner and M/s. Tilak Enterprises, the lessee due to non-payment of rents by M/s. Tilak Enterprises to the Church of South India. In view of the dispute in between the Tilak Enterprises and the Church of South India in respect of their lease, Dolphin Medical Services Limited is directed by the Hon’ble Court to deposit the monthly rents due and accrued till the final disposal of the said case. As a result Dolphin Medical Services Limited has been depositing the monthly rents before the Hon’ble Court as directed and consequently M/s Tilak Enterprises or the Church of South India shall withdraw the said rent as per the final judgment of the Hon’ble Court. The lease rentals paid in the Court for this Company is Rs.30,780/- per month. The litigation is pending in the court of Principal Senior Civil Judge, Vijayawada and is basically a tripartite one with the Church of South India and M/s. Tilak Enterprises claiming for the right and authority to accept the rents and Dolphin Medical Services Ltd. is involved as the tenant and has been depositing the rents in the court of law.

2. The Assistant Provident Fund Commissioner, office of the Regional

Provident Fund Commissioner Office, Guntur has made an demand of Rs. 2,06,060.80 alleged to be due from Dolphin Medical Services Ltd. towards the payment of the Provident Fund. Against the said demand raised by Asst. Provident Fund Commissioner, a writ petition is filed before the Honorable High Court of Judicature, Hyderabad and also before the EPF Appellate Tribunal, New Delhi, after depositing Rs. 1,03,030/- being half of the claim amount with honorable court.

Civil Case involving Directors, Dr. M. Lakshmi Sudha & Dr. G. V Mohan Prasad:

3. Dr. M. Lakshmi Sudha, director of Dolphin Medical Services Ltd. has taken a loan of Rs. 4,87,000/- for the purchase of an equipment of value of Rs. 6,50,000/- in the year 1999. The loan was personally guaranteed by Dr. G. V. Mohan Prasad, Managing Director of Dolphin Medical Services Ltd. After regular payments for some time, some outstanding amount was due in her loan account. At that time, the bank transferred the amount from the Savings account of the guarantor Dr. G. V. Mohan Prasad to Dr. M. Lakshmi Sudha's loan account without taking his permission. As such Dr. G. V. Mohan Prasad

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objected to it and issued a legal notice to the bank, and consequently the conflict resulted in litigation in the court of the Principal Senior Civil Judge, Vijayawada for purpose of settling the claim to the tune of Rs. 3,82,400/-

7. The company is dependent on the full subscriptions of the rights issue.

Under-subscriptions to the issue may have an adverse material impact on the implementation of the project and consequently on the future performance of the company.

Management Perception: In the event of any under-subscription of the issue some of the promoters intend to subscribe to the issue beyond their entitlement. In such a case the acquisition of additional shares by promoters shall be exempt from making an open offer in terms of regulations 3(1) (b) (ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulation 1997. The acquisition will not result in a change in the control of the management of the Company. 8. The company has significant planned capital expenditures; its capital

expenditure plans may not yield the intended benefits. Management Perception: The Company’s operations require significant capital expenditure to be utilized for the purpose of establishing the diagnostic centres at Hyderabad and Mumbai. For details on our planned capital expenditure please refer to the section entitled "Objects of the offer" indicated on page 38 of this LOO. The figures in the Company’s capital expenditure plans are based on management estimates and have not been appraised by any bank, financial institution or other independent organisation. In addition, its capital expenditure plans are subject to a number of variables, including possible cost overruns; construction/development delays or defects; receipt of Municipal approvals; and changes in management's views of the desirability of current plans, among others. The actual amount and timing of its future capital requirements may differ from its estimates as a result of, among other things, unforeseen delays or cost overruns, unanticipated expenses, regulatory changes and technological changes. In view of the reasons stated above, The Company cannot assure you that it will be able to execute its capital expenditure plans as contemplated. If it experiences significant delays or mishaps in the implementation of its capital expenditure plans or if there are significant cost overruns, then the overall benefit of such plans to its revenues and profitability may decline. To the extent that completed capital expenditure does not produce anticipated or desired revenue or cost reduction outcomes, its profitability and financial condition will be negatively affected. 9. The Company has not entered into any definitive agreements to utilize the

proceeds of the issue. Management Perception:

The company intends to use the proceeds of the Issue for capital expenditure

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described in the section "Objects of the Offer" indicated on page 38 of this LOO. The Company has not yet placed orders for major items of plant and machinery for the projects. It intends to rely on its internal systems and controls to monitor the use of such proceeds. Some of the equipment it intends to deploy are expected to be imported and must be paid for in foreign currency. Changes in foreign exchange rates adversely affecting the value of the Rupee may adversely affect the cost of the project.

10. Managing the centers at various locations may be a difficult function as the

directors may not be able to devote their complete time and attention to all the units simultaneously including the existing unit which has the inherent risk of loss of due attention and care in running the business of the company. Failure to manage the integration of business will affect the operation and performance of Company, which may negatively impact profitability of the Company.

Management Perception: The company has pursued setting up new centres as part of its growth strategy. It intends to continue this strategy. The company’s strategy may not contribute to its expected profitability in the short run. However, the long-term benefits of the strategy could not be sacrificed because of this threat. 11. The company is yet to take any concrete step to identify the locations for

the centers this would cause delay in the implementation of the project. At present only the cities at which the centres are to be set up have been identified.

Management Perception: The company is in process of identifying the locations at various cities where the centres are to be set up. As such since the construction industry is witnessing hectic activity, the company does not foresee any difficulty in acquiring the required space for setting up its centres. 12. The gestation period of the entire project may be long, as it requires

negotiations with various parties and that too at various places. Management Perception: The company has envisaged a big plan to expand its activities. However since the management of the company is familiar with the business they expect to complete the deployment of funds within one year’s time. 13. Orders for the machineries required for setting up the project have not been

placed till date. Management Perception: The company wants to place orders for machineries, after due negotiations when the funds from issue proceeds are made available which may substantially reduce the cost of acquisitions of the machineries.

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14. There may be price escalation in acquiring adequate machineries, as the

orders are not yet placed. Management Perception: In the era of change, the cost of already introduced technologies has been reducing day after day in order to cater to the needs of the masses. The company, therefore, does not foresee any cost escalation in acquiring the required machineries 15. The success of any product/technology in Health Care Industry largely

depends on any new invention or break through in technology. Any such similar or better development elsewhere in the world, may make the earlier invented products obsolete and ultimately have impact on the profitability of that company. The products developed by M/s Biomix Networks Ltd may become obsolete in view of the rapid changing technology. At present the products developed by M/s Biomix Networks Ltd are not available in the country.

Management Perception:

Management will evaluate the progress and the products of Biomix at every stage and will renegotiate the deal, if necessary, to the benefit of the company.

16.The company has been listed on the Stock exchanges for over a decade. However, during this period except in the year 1995-96 it has not paid any dividend to its shareholders.

MANAGEMENT PERCEPTION: The Company’s financial performance got affected due to the non-availability of sufficient funds due to substantial delay in getting the allotment money to complete the project on time and hence it could not generate adequate profits to pay dividends.

17. The Financial Ratios of the Company are well below the industry ratios. MANAGEMENT PERCEPTION: The Company could not timely complete the envisaged project last time due to the unavailability of adequate funds. This affected its plans and it could not meet projected profitability ultimately affecting its financial ratios.

18. The Company operates in Medical Industry where rapid innovations &

technological changes are commonplace. The Medical diagnostic Industry is dominated and threatened by innovations and technological changes. Therefore, any innovation or technological change in the process & procedures in the diagnostic industry may suddenly make the processes & procedures adopted by the Company outdated. This factor will have a major impact on the operations and profitability of the Company.

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MANAGEMENT PERCEPTION: The Company has been adopting global standard process and procedures. Though the industry is dominated and threatened by innovations and technological changes, the Company has not faced such threats in the past. In future also, the company will adopt global standard process & procedures. Hence, it does not foresee any major threat of the technological obsolescence that will have a major impact on the operations and profitability of the Company. 19. Deployment/ utilization of funds may not be in productive assets, which

may not result in returns for the company in the short & medium term. MANAGEMENT PERCEPTION:

As per the project, almost 70% of the rights issue proceeds are deployed / utilized in purchasing the tangible assets. Hence the management is confident about the performance and returns post project implications will rise.

20. The company has not invested any funds for the proposed project. MANAGEMENT PERCEPTION: As the entire project cost would be met only through the proceeds of the rights issue. Negotiations are going on for finalisation of Centre sites. The company has entered into MOU with Biomix and Dr. Joshi’s organization as the first step towards implementation of the project. The company has not spent any amount on the proposed project and is yet to make any definitive agreements, as the project is totally dependent on proceeds from the right issue. 21. The company may not be able to hire and retain qualified technical and

managerial personnel

MANAGEMENT PERCEPTION: The company is in medical services business for over 12 years and enjoys large clientele and reputation in the surrounding areas. The specialty services provided by the medical centre are well positioned in the said area. The medical centre has become a direct business centre. The management is confident that the company will be able to maintain the quality and key personnel in future. Our ability to perform in the industry, which meets the customer’s expectations, depends largely on our ability to attract, train, motivate and retain qualified and experienced professionals. The average employee turnover ratio of the company is 20% which is considered normal for the industry. External Risk Factors 1. The company may face competition from the existing established companies

and future entrants into the industry

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2. The performance of the Company may be affected by a number of factors beyond its control including political and economic developments both in India and worldwide. Terrorist attacks and other acts of violence or war may negatively affect the market. These acts may result in a loss of business confidence, affect the Company’s business, and its financial conditions.

3. A change in the Government’s economic liberalization and deregulations

policies could affect business and economic conditions in India and the business of the Company in particular.

4. The Company operates in a globally competitive business environment.

Growing competition may force the Company to reduce the prices of its services which may reduce the revenues and margins which could have a materially adverse effect on the business, financial conditions and operations of the Company.

5. As some components of the project are thrust areas, the Government may

come forward with providing these facilities free of cost. This may affect the financial returns of the company.

6. Increasing employee compensation in India may erode some of our

competitive advantage and may reduce our profit margins. Employee compensation in India has historically been significantly lower than employee compensation in the United States and Western Europe for comparably skilled professionals, which has been one of our competitive strengths. However, compensation increases in India may erode some of this competitive advantage and may negatively affect our profit margins. Employee compensation in India is increasing at a faster rate than in the United States and Western Europe, which could result in increased costs relating to scientists and engineers, managers and other mid-level professionals. We may need to continue to increase the levels of our employee compensation to remain competitive and manage attrition. Compensation increases may have a material adverse effect on our business, results of operation and financial condition.

Notes to the Risk Factors Investors are advised to refer to “basis of offer price” on page 96 before investing

in this Issue. The Net Worth of the Company before the Issue as on 31st March 2005 was Rs.

311.72 lacs. Cost per share to promoters is Rs. 10/-. The book value per share of the Equity

Shares of the Company as on 31st March 2005 was Rs. 7.76/- There are no Equity Shares in transit account, as on the Record Date i.e.

September 5, 2005. None of the Promoter and director has undertaken any transactions in the Equity

Shares of the Company during the last six months.

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The transactions between DMSL and its subsidiaries / associate companies and

companies under common control for the last three years are as under:

The company has made the investments of Rs.32 lakhs in Meridian Projects Ltd. Rs.9 lakhs in Cosmic Fortunes India Ltd. Both these companies are promoted by Dr. G V Mohan Prasad.

There are no material events occurring after the balance sheet date of March 31, 2005, which have an impact on financial statements.

The notes to accounts and significant accounting policies have been furnished in

the auditors’ report. For details on the basis of allotment, investors may refer to the paragraph titled

“Basis of Allotment” on page no. 29 of this Letter of Offer. Investors are free to contact the Lead Manager for any clarification or information,

who will be obliged to attend to the same. The investors may contact the Lead Manager and/or the Issuer for any complaint

pertaining to the Issue.

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XXI STATUTORY AND OTHER INFORMATION MINIMUM SUBSCRIPTION If the Company does not receive application money for atleast 90 per cent of the Issued amount the entire subscription will be refunded to the applicants within 42 days from the date of closure of the Issue. If there is delay in the refund of application money by more than 8 days after the Company becomes liable to pay the amount (i.e. forty two days after the closure of the Issue), the Company will pay interest for the delayed period, at prescribed rates in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956. ISSUE EXPENSES The expenses of the Issue including fees and reimbursement to the Lead Managers, Registrars, printing and distribution expenses, publicity, listing fees, stamp duty and other expenses are estimated at around Rs. 69 lacs and will be met out of the proceeds of the Issue. The following table gives a break-up of the estimated issue expenses and contingencies Particulars Rs. LacsFees to Lead Managers to the Issue 10,00,000Fees to Registrars to the Issue 3,00,000Fees to Legal Advisors to the Issue 50,000Fees to Auditors 50,000Stock Exchange Fees 1,30,000Statutory Advertisement Expenses 20,00,000Printing / Postage/ stationary 7,00,000Marketing of the issue 10,00,000Other expenses 16,70,000Total 69,00,000 UNDERWRITING Since the issue is not underwritten, no underwriting commission is payable. PREVIOUS ISSUES FOR CASH For details of all previous issues for cash, investors may refer to share capital history of the company appearing on page no. 11 of the Letter of Offer PREVIOUS PUBLIC/RIGHTS ISSUES BY THE COMPANY The company has not made any public or rights issue during the last five years.

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COMMISSION OR BROKERAGE ON PREVIOUS ISSUE As the Company has not made any public or rights issue, no commission or brokerage was paid. ISSUES FOR CONSIDERATION OTHER THAN CASH The company had not made any issue for consideration other than cash or out of revaluation reserves. ANY OTHER INSTRUMENT ISSUED BY THE COMPANY OUTSTANDING There are no outstanding instruments issued by the company except 1,90,000 share warrants issued to the promoters of the company on March 25, 2005 which are convertible into equity shares of equal numbers before the expiry of 18 months from the date of the issue of share warrants. PURCHASE OF PROPERTY There is no property which the Company has purchased or acquired or proposes to acquire, which is to be paid for, wholly or partly, out of the proceeds of the present issue or the purchase or acquisition of which has not been completed on the date of issue of this offer document, other than : a) The contract for the purchase or acquisition whereof were entered into, in

the ordinary course of the company’s business, such contracts not being made in contemplatation of the issue or in consequence of the contract; or

b) Property in respect of which the amount of purchase consideration is not

material The company has not purchased any property in which any of its directors had or have any direct or indirect interest or in respect of any payment thereof. The company has no plans, at present, to acquire any running business out of the proceeds of the issue. TERMS OF APPOINTMENT OF MANAGING DIRECTOR The Company has appointed Dr. G. V. Mohan Prasad as Managing Director of the Company for a period of 5 years from 11th September 2003 in accordance with the provisions of the Companies Act, 1956. The details of his compensation are given on page 56 & 95 of the Letter of Offer.

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PAYMENT OR BENEFIT TO THE DIRECTORS AND THE OFFICERS OF THE COMPANY No amount or benefit has been paid or given or is intended to be given to any Director or officer of the company except to Dr. M Lakshmi Sudha as indicated on page 57 & 95 of the Letter of Offer as per the provisions of the Companies Act in accordance with the law. RIGHTS OF THE EQUITY SHAREHOLDERS a) Right to receive dividend, if declared b) Right to attend general meetings and exercise voting powers, unless

prohibited by law c) Right to vote personally or by proxy The details regarding lien on shares, process of modification of rights, forfeiture of shares and transfer of shares are contained in the Memorandum and Articles of Association a copy of which is included in material documents to open for inspection. CAPITALISATION OF RESERVES OR PROFITS The company has not capitalized the reserves or profits since its inception REVALUATION OF ASSETS The company has not revalued its assets since inception

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XXII MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company or entered into more than two years before the date of this Letter of Offer), which are or may be deemed material have been entered or are to be entered into by the Company. These contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company situated at Ramchandra Rao Road, Suryarao Pet, Vijaywada- 520002 from the date of this Letter of Offer until the date of closure of the Issue from Monday through Friday from 11.00 am to 03.00 pm. A. MATERIAL CONTRACTS 1. Memorandum of Understanding dated May 29, 2005, entered into with the

Meghraj Financial Services India Pvt. Ltd., Lead Manager to the Issue. 2. Memorandum of Understanding dated May 09, 2005 entered into with M/s

Ikon Visions Private Limited, Registrars to the Issue. B. DOCUMENTS 1. Memorandum and Articles of Association of the Company. 2. Certificate of Incorporation of the Company. 3. Certificate of change of name of the Company. 4. Copy of the resolution passed at the meeting of the Board of Directors held

on May 20, 2005, approving this Issue. 5. Tripartite Agreement dated November 15, 2001 between Dolphin Medical

Services Limited, Ikon Visions Private Limited and NSDL for offering depository option to the investors.

6. Tripartite Agreement dated May 11, 2001 between Dolphin Medical Services

Limited, Ikon Visions Private Limited and CDSL for offering depository option to the investors.

7. Consents of the Directors, Auditors, Lead Managers to the Issue, Legal

Advisor to the Issue, Bankers to the company, Bankers to the Issue and Registrars to the Issue, to include their names in the Letter of Offer to act in their respective capacities.

8. Letter dated 09th December 2005 from M/s. Pinnamaneni & Co., Chartered

Accountants confirming Tax Benefits as mentioned in this Letter of Offer. 9. The report of the Auditors.

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10. Annual Reports of the Company for the last five Financial Years. 11. Copies of the Initial listing application made to the Stock Exchanges. 12. Copies of the in-principle approvals letter no. DCS/SMG/SDM/RK/NS/05

dated august 11, 2005, letter no. REF: HSE:LIST:2005:172 dated August 12, 2005 and letter no. 1668/05 dated August 12, 2005 received from BSE, HSE and ASE respectively.

13. Letter No. SRO/PMD/IMID/EIF/2005/5/5551 dated June 23,2005, Letter No.

SRO/PMD/IMID/EIF/2005/5/5702 dated July 25, 2005, Letter No. SRO/PMD/IMID/EIF/2005/5/5955 dated September 15, 2005 Letter No. SRO/PMD/IMID/EIF/2005/5/6264 dated November 10, 2005 and Letter No. SRO/PMD/IMID/EIF/2005/5/6320 dated November 23, 2005 issued by The Securities and Exchange Board of India for the Issue.

14. Copy of the MoU with M/S Biomix Network Ltd. on 22/12/2004. 15. Copy of the MoU with M/S Joshi Research Institute on 13/01/2005. 16. Due Diligence Certificate dated May 31, 2005 from Meghraj Financial

Services India Pvt. Limited. 17. Letter of intent from promoters for subscribing to rights entitlement.

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XXIII DECLARATION

NO STATEMENT MADE IN THIS LETTER OF OFFER SHALL CONTRAVENE ANY OF THE PROVISIONS OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC., ISSUED BY SEBI, BY GOVERNMENT OR ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH. YOURS FAITHFULLY, By the order of the Board of Directors of DOLPHIN MEDICAL SERVICES LTD. DR. G V. MOHAN PRASAD MANAGING DIRECTOR DR. M. LAKSHMI SUDHA DIRECTOR MR. G. MALLIKHARJUNA RAO DIRECTOR Place – Vijayawada Date - 15/12/05