(Originally incorporated on June 29, 1993 under the Companies Act, 1956 as

Plot No. 40, Radhaswamy Colony, Sikh Road,Secunderabad-500 009, Andhra Pradesh, India.

Tel no.: 91-(40)-7843279/7818534; Fax no.: 91-(40)–7843279 E-mail: zentech@hd1.vsnl.net.in

This being the first issue of Zen Technologies Limited, there has been no formal market for the equity shares of Zen Technologies Limited. The Issue price should not be taken to be indicative of the market price of the equity shares after the shares are listed. No assurance can be given regarding an active or sustained trading in the equity shares of Zen Technologies Limited nor regarding the price at which the equity shares will be traded after listing. The present growth rates and valuation in the IT sector may not be sustained in future.

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 nor does the Securities and Exchange Board of India guarantee the accuracy or adequacy of this document. The attention of investors is drawn to the statement of Risk Factors appearing on Page No III of the Prospectus.

The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Prospectus 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 Prospectus 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.

The existing equity shares and equity shares being offered through this Prospectus are proposed to be listed on The Hyderabad Stock Exchange Limited (Regional Stock Exchange).

ISSUE OPENS ON: .......................,2000

ISSUE CLOSES ON:.........................,2000

Definitions and Abbreviations *

RISK FACTORS AND MANAGEMENT PERCEPTIONS THEREOF *

HIGHLIGHTS *

A. PART I *

B. PART - II *

PART III *

1. The company has availed of rupee term loan of Rs.100 lakhs from IDBI out of which an amount of Rs.47.08 lakhs is outstanding as on January 01, 2000. At the option of IDBI, the loan is convertible into equity shares at par during the currency of the loan. Conversion of loan into equity would result in dilution of equity capital.

Management Perception: This is a standard condition being stipulated by IDBI in all cases where assistance under Venture Capital Scheme is sanctioned. The above loan is likely to be fully repaid by January 01, 2002. The quantum of loan being small, conversion thereof is unlike to have any major dilution in the equity capital of the company.

2. For its proposed expansion project, the company has yet to

• identify the premises
• place orders for some of the items of plant & machinery
• recruit suitable personnel
• apply to APTRANSCO for power connection
• obtain NOC from Pollution Control Board ( PCB )
• identify the overseas marketing office

1. The company has yet to receive the grant of Rs 60 lakh from DSIR for the proposed project. Non receipt/delay in receipt of the grant is likely to impact the cost of the project and its timely implementation.

Management Perception : The company has already applied for the above grant and is confident of getting the same. In the unlikely event of non receipt of grant, the shortfall would be met from additional contribution from promoters by way of unsecured loans. In view of the low debt equity, company also has the option to borrow the amount.

2. The implementation of the original project of the company was delayed by about one year and commercial production commenced only in April 1998 as against April 1997 originally envisaged .

Management Perception: Implementation of the venture was delayed due to delay in obtaining orders for its products.

3. The company was granted reschedulement of principal, waiver of penal interest, liquidated damages, other charges, etc. by IDBI due to delay in implementation of the project.

Management Perception: There has been no change in the terminal date of repayment schedule of the principal installments. The company has no overdues to IDBI as on date.

4. The new products being developed by the company are still at preliminary stage and the commercial acceptability of the same is not known.

Management Perception: These products are being developed by the company based on the feedback received from the existing/prospective customers. The company is confident about the commercial acceptability of these products.

5. There is expected to be a delay of about 3 months in implementation of the proposed expansion project. Delay in implementation of the project might to result in cost overrun and since the promoters are first generation promoters, the company may have to resort to borrowings for meeting any major cost overrun.

Management Perception : Delay in implementation of the project is unlikely to have any major impact on the operations of the company since the product development work has already commenced at the existing premises. The company has comfortable debt equity ratio and can resort to borrowings, if required, for meeting the cost overrun.

6. As the company's products are based on high-end technology, very high rate of obsolescence due to technological changes is likely to affect company's operations.

Management Perception : The company is conscious of the above risk and intends to upgrade the technology on a continuous basis.

7. The highly technical nature of the work makes the company dependent on its key personnel.

Management Perception : The company has been promoted by qualified promoters. The company has well defined Human Resource Development policies laying emphasis on career planning/development of the key management personnel by providing market related perquisites, incentives etc. The company does not envisage any major difficulty on this account.

8. The project has been appraised by IDBI and IDBI has agreed to subscribe to the equity capital of the company to the extent of Rs.100 lakhs. However, the subscription amount is yet to be released.

Management Perception : The company is likely to enter into a subscription agreement shortly and does not envisage any difficulty in obtaining the subscription.

9. The Book Value of company's equity share of Rs.10 each stood at Rs.8.02 per share as on February 15, 2000.

Management Perception : This was mainly on account of Misc. expenses not written off to the extent of Rs.112.85 lakhs representing the R & D and market development expenses which the company proposes to write off over a period of 10 years.

10. The company has yet to receive approval from competent authority for patenting of its Zen SATS.

Management Perception :The company has already applied for the patents of its Zen SATS and is confident of getting the approval of competent authorities.

11. Company's original project, which involved more than the normal risk, was sanctioned assistance by IDBI under its Venture Capital Scheme.

Management Perception :The company has completed the project and the product viz. Zen SATS has been successfully developed.

12. Company has been supplying its products to Government departments/agencies. The receipt of orders/dues from these departments/agencies depends on the budgetary allocation/ availability of funds.

1. Competition from imports and future entrants into the software industry.

Management Perception: The Company has a track record of timely execution of the orders. The company proposes to upgrade its products by incorporating latest advancements in the technology to stay ahead of its competitors

2. The present growth rates in the software industry are high and are not sustainable.

Management Perception: The Company has a niche market with sufficient growth potential

3. Any adverse change in the Government Policies towards the Software industry may affect the financial performance of the Company.

1. Investors are advised to refer to the paragraph on "Basis of Issue Price" appearing later in this Prospectus before making an investment decision in respect of this issue.
2. Investors are advised to refer to "Notes to Accounts" appearing on Pages 40, 42-44 before making an investment decision in respect of this issue.
3. Investors may please note that in the event of over-subscription, allotment shall be made on a proportionate basis in consultation with The Hyderabad Stock Exchange Limited, i.e. the Regional Stock Exchange.
4. The promoter directors do not have any business interest in Zen Technologies Ltd. except to the extent of sitting fees and remuneration, if any, payable to them. The promoters will be interested to the extent of dividend paid on shares held by them and their relatives and friends and to the extent of allotment of shares, if any, to their friends and relatives in the public issue.

1. Existing profit making company engaged in manufacture of high-end multimedia weapons simulator used for training of police, paramilitary and armed forces.
2. Promoted by qualified and experienced professionals.
3. Company has satisfied client base of state police organisations and paramilitary organisations, some of which are placing repeat orders for the existing range of products.
4. Research & Development Center of the company recognised as in-house R & D unit by Department of Scientific & Industrial Research.
5. Project appraised by IDBI.
6. Equity participation to the extent of Rs.100 lakhs from IDBI for the proposed project.
7. Listing of equity shares proposed on Hyderabad Stock Exchange.

(Originally incorporated on June 29, 1993 under the Companies Act, 1956 as

Zen Technologies and Computers Limited and renamed as

Zen Technologies Limited with effect from February 22, 1995 )

Plot No. 40, Radhaswamy Colony, Sikh Road,Secunderabad-500 009, Andhra Pradesh, India.

Tel no.: 91-(40)-7843279/7818534; Fax no.: 91-(40)–7843279 E-mail: zentech@hd1.vsnl.net.in

Zen Technologies Limited is offering for subscription 19,10,000 equity shares of Rs.10/- each for cash at par aggregating Rs.1.91 crore.

Zen Technologies Limited was originally incorporated on June 29, 1993, in the name of Zen Technologies and Computers Limited. The name of the Company was subsequently changed to Zen Technologies Limited with effect from February 22, 1995 pursuant to Sections 21/22(1)(e)/22(1)(b) of the Act.

The present issue of equity shares is being made pursuant to the resolution of the Board of Directors of the Company passed at its meeting held on September 27, 1999. In terms of Section 81(1-A) of the Act, the present public issue of equity shares has also been authorized vide a Special Resolution passed at the Extra-ordinary General Body Meeting of the members of Zen Technologies Ltd held on October 20, 1999.

The company has already obtained SIA acknowledgement for manufacture of simulators vide letter No.4442/SIA/IMO/94 dated December 19, 1994 from Department of Industrial Development, Ministry of Industry, Govt. of India. It may be distinctly understood that by acknowledging the application of the company, Govt. of India does not certify the accuracy or completeness of this Prospectus and such acknowledgement should not be construed as endorsement by Govt of India about the viability of the project.

The company has yet to apply for NOC from Pollution Control Board as also apply for power connection from APTRANSCO. The Company does not require any other permission and / or approval from the Government of India and / or its various agencies and / or RBI for proceeding with the expansion project except from RBI, for setting up overseas branch / marketing office and from the local authorities of the concerned country / state. Except as otherwise stated in this Prospectus, no further approval from any Government Authority / RBI is required by the Company to undertake the project, save and except those approvals, which may be required to be taken in the normal course of business from time to time.

The filing of this Prospectus does not, however absolve Zen Technologies Limited from any liabilities under Section 63 of the Act, 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 Manager to the Issue, any irregularities or lapses in the Prospectus.

Note: The issuer accepts no responsibility for statements made otherwise than in the Prospectus or in the advertisements or any other material issued by or at the instance of the Issuer and that anyone placing reliance on any other source of information would be doing so at his/her risk.

Hyderabad Stock Exchange has vide its letter No REF/HSE/List/2000/1334 dated March 10, 2000, given permission to Zen Technologies Limited to use its name in this Prospectus as the stock exchange on which this Company's equity shares are proposed to be listed. The HSE has scrutinized this Prospectus for their limited internal purpose of deciding on the matter of granting the aforesaid permission to Zen Technologies Limited. HSE does not in any manner

1. warrant, certify or endorse the correctness or completeness of any of the contents of this Prospectus, or
2. warrant that Zen Technologies Limited’s equity shares will be listed or will continue to be listed on the Exchange, or
3. take any responsibility for the financial or other soundness of Zen Technologies Limited, its promoters, its management or any scheme or project of Zen Technologies Limited.

It should not, for any reason be deemed or construed that this Prospectus has been cleared or approved by the HSE. Every person who desires to apply for or otherwise acquires any equity shares of Zen Technologies Limited may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the HSE, 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 for any other reason whatsoever.

This offer is being made in India to persons resident in India and to NRIs on a non-repatriation basis. This Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to 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 Prospectus comes is required to inform himself about and to observe any such restrictions. Disputes arising out of this Issue shall be subject to the jurisdiction of appropriate Court(s) at Hyderabad.

It should be noted that the Company accepts no responsibility for statements made otherwise than in the Prospectus 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 own risk.

A copy of this Prospectus along with the documents required to be filed under Section 60 of the Act, has been delivered for registration to the Registrar of Companies, Andhra Pradesh at Hyderabad. A copy of the draft Prospectus has also been filed with the Madras Office of SEBI.

Initial Listing Application has been made by Zen Technologies Limited to the Stock Exchange at Hyderabad (regional stock exchange), for permission to list the equity shares and for an official quotation of the equity shares of Zen Technologies Limited.

Hyderabad Stock Exchange vide its letter dated January 17,2000 had advised the company to enhance its authorised capital which has since been complied with.

In case the permission to deal in and for an official quotation of the equity shares is not granted by the above mentioned stock exchange, the Issuer shall forthwith repay, without interest, all monies received from applicants in pursuance of this Prospectus and if such money is not repaid within eight days after the day from which the Issuer is liable to repay it, the Issuer shall pay interest as prescribed under Section 73 (2) of the Act.

Attention of the applicant is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act, which is reproduced below:

If the Company does not receive the minimum subscription of 90% of net offer to public on the date of closure of the issue or the subscription level falls below 90 % after closure of the issue on account of cheques having been returned unpaid or due to withdrawal of applications, the Company shall forthwith refund the entire amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the Company shall pay interest as per Section 73 of the Act.

The sum received in respect of the issue will be kept in a separate bank account and the Company will not have access to such funds unless allotment of equity shares has been made in consultation with the Hyderabad Stock Exchange and listing/trading approval has been received from Hyderabad Stock Exchange where listing has been sought.

The Board of Directors of the Company confirms and certifies that:

1. all monies received out of this Issue shall be transferred to a separate bank account other than the bank account referred to in sub-section (3) of the Section 73 of the Act.
2. details of all the monies utilised out of the proceeds of the Public Issue shall be disclosed under an appropriate separate head in the Annual Report of the Issuer indicating the purpose for which such monies had been utilised, for all the financial years till all the monies are fully utilised ; and
3. details of all unutilised monies out of the issue, if any, referred to in sub-item (i) shall be disclosed in the Annual Reports of the Issuer indicating the form in which such unutilised monies have been invested.

Letters of Allotment / Share Certificates /Letters of Regret / cancelled Stockinvests and / or Refund Orders, if any, will be despatched at the applicant's sole risk to the sole/first applicant within 10 weeks from the date of closure of the Issue. The Issuer shall despatch refund orders, if any, of value upto Rs. 1,500/- Under Certificate of Posting (UCP) and Refund Orders above Rs. 1,500/- and Letters of Allotment/Share Certificates by Registered Post, within 10 weeks from the date of closure of the Issue, in accordance with the Act, stock exchange requirements and SEBI guidelines. The issuer, as far as possible, will allot the equity shares within 30 days from the date of closure of the Issue and shall pay interest at the rate of 15% per annum (except to the applicants applying through Stockinvest), if the allotment has not been made and refund orders are not despatched to the investors within 30 days from closure of the Issue for the period of delay beyond 30 days. The Issuers would also make available adequate funds to the Registrars to the Issue (hereinafter also referred to as "the Registrars") for this purpose.

THIS ISSUE WILL OPEN AT THE COMMENCEMENT OF BANKING HOURS AND WILL CLOSE AT THE CLOSE OF BANKING HOURS ON THE DAYS AS MENTIONED BELOW:

Opening date: ,2000

Closing date: ,2000

Mr. V.S. Raju,

The Company is presently availing the services of a practicing company secretary on a retainership basis. However, the company is in the process of recruiting a qualified company secretary on full time basis. The company undertakes to appoint a company secretary before filing the prospectus with ROC.

This being an issue of equity shares, no credit rating or appointment of Trustees is required.

The proposed issue of 19,10,000 equity shares of Rs. 10/- each for cash at par aggregating Rs. 1,91,00,000/- offered through this Prospectus is not to be underwritten.

The company undertakes that :

1. the complaints received in respect of the Issue would be attended to by the company expeditiously and satisfactorily
2. the company shall take necessary steps for the purpose of getting the shares, now being offered, listed on Hyderabad Stock Exchange within the specified time
3. the funds required for despatch of refund orders/allotment letters/share certificates by registered post shall be made available to Karvy Consultants Ltd., the Registrar to the Issue
4. that the promoters’ contribution in full shall be brought in advance before the Issue opens for public subscription
5. that the share certificates/ refund orders to the applicants shall be despatched within the specified time.
6. no further issue of securities shall be made till the shares offered through this Prospectus are listed or till the application moneys are refunded on account of non-listing/under subscription etc.

IDBI has agreed to subscribe to the equity shares of the company to the extent of Rs 100 lakhs out of which subscription upto Rs 70 lakhs would be ensured before filing of Prospectus with ROC. The balance amount would be received at least one day before the issue opens for subscription. Necessary amendments would be carried out in the Capital Structure upon receipt of subscription from IDBI.

2. The capital history of Zen Technologies Limited is as follows:

3. As on date, there are no pending warrants, options, rights to convert any debenture or bond or loan or any other instrument entitling the existing shareholder to acquire any equity shares or voting rights. The company has availed of a rupee term loan of Rs.100 lakhs from IDBI out of which an amount of Rs.47.08 lakhs is outstanding as on January 01, 2000. At the option of IDBI, the loan is convertible into equity shares at par during the currency of the loan. Further, for part financing the original project, IDBI had agreed to subscribe to the equity capital of the company to the extent of Rs 55 lakhs, out of which subscription upto Rs 50 lakhs has already been received. The company has applied for cancellation of the balance amount of Rs 5 lakhs. Formal approval from IDBI is awaited.
4. The Company has 133 shareholders as on March 30,2000.

(a) The details of the ten largest shareholders as on 30-03-2000, the date of filing the Prospectus with SEBI are as under:

(b)The details of the ten largest shareholders as on 20-03-2000, ten days prior to the date of filing the Prospectus with SEBI are as under:

(c) The details of the ten largest shareholders as on 30-03-1998, two years prior to the date of filing the Prospectus with SEBI are as under:

3. The Shareholding Pattern of the company as on March 30,2000 as well as after the public issue is as follows:

Sr No	Category of the shareholders	Existing (as on 30/3/2000)		After the Issue
		No of equity shares	%	No of equity shares	%
1	Promoters/Directors, their friends, relatives and associates	2945600	85.49	4220000	55.31
2	Industrial Development Bank of India(IDBI)	500000	14.51	1500000	19.66
3	Public	-	-	1910000	25.03
	Total	3445600	100.00	7630000	100.00

4. The details of shares held by the promoters as on 30-03-2000 is as under:

Sr No	Name of the Shareholder	No of shares held ****
1	Ashok Atluri	1364500
2	Satish Atluri	164500
3	Ravi Kumar M	27600

**** To be updated before ROC filing

5. Equity shares representing 20% of the post-issue capital of Zen Technologies Ltd will be locked-in as under:

1. The above shares will be locked-in for a period of 3 years from the date of allotment of equity shares in the present issue.
2. The shares locked-in by the Promoters are not pledged to any party.
3. The equity shares held by the promoters under lock-in period shall not be sold/hypothecated/transferred during the lock-in-period.
4. All the shares subscribed/ to be subscribed to by the promoters are also subject to non-disposal undertaking furnished by the promoters to IDBI in terms of the provisions of Loan Agreement/Subscription Agreement executed by the company. Prior approval of IDBI would hence be required for disposal of shares by the promoters during currency of IDBI loan/till IDBI holds equity shares in terms of the Subscription Agreement.
5. The share application money with respect to item C(i) and C(ii) above shall be brought in by the promoters and IDBI at least one day prior to the date of opening of the public issue. In case the entire amount of subscription from firm allottee viz. IDBI is not received one day prior to the date of opening of the issue, the promoters shall subscribe to the equity shares to the extent of shortfall in subscription from the firm allottee viz IDBI. However, subscription to the extent of at least Rs 70 lakhs shall be ensured before filing the Prospectus with ROC.

3. In terms of the Subscription Agreement entered into with IDBI on January 18,1996 for Direct Subscription to Equity (DSE) of Rs 55 lakhs, the promoters have furnished an undertaking to buyback the shares subscribed to by IDBI, at any time on the terms & conditions contained in the Subscription Agreement . Further, as per IDBI's sanction letter dated March 2,2000 for DSE of Rs 100 lakhs, the promoters are also required to buyback the shares from IDBI, if so required by IDBI, the equity shares subscribed to by IDBI .This option is exercisable by IDBI on or before April 1,2004 . Except for these , there is no other buy back or standby arrangement for the purchase of equity shares offered through this Prospectus by the promoters, Directors or Merchant Bankers.
4. The company has not raised any bridge loan against the proceeds of this public issue.
5. The company has not issued any shares for consideration other than cash. The company has not revalued any of its assets so far and it does not have any revaluation reserve.
6. The allotment of equity shares, in case of over-subscription, will be on a proportionate basis as follows:

1. A minimum of 50% of the net offer of equity shares to the public shall initially be made available for allotment to individual applicants who have applied for less than or equal to 1,000 equity shares.
2. The balance 50% of the net offer of equity shares to the public shall initially be made available for allotment to investors, including bodies corporate / institutions and individual applicants who have applied for more than 1,000 equity shares.
3. Any un-subscribed portion of the net offer to the public in any one of the above categories shall be made available for allotment to applicants in the other category and the allotment shall be made on proportionate basis in terms of extant SEBI guidelines.

3. The allotment shall be made in market lot of 100 equity shares and in multiple of 100 equity shares. The allotment shall be on proportionate basis and in the event of oversubscription, the basis of allotment shall be finalised in consultation with the HSE within the overall size of the issue.
4. No single applicant can make an application for number of securities, which exceeds the securities offered. Firm allottees are not eligible to apply for equity shares being offered to the public.
5. None of the promoters or directors of the company have directly or indirectly purchased any shares of the company during last 6 months.

The equity shares now being issued are subject to the provisions of the Act, the Memorandum and Articles of Association of the Company, terms of this Prospectus, the Application Form, the guidelines for listing of securities issued by the Stock Exchange and Government of India and/or other statutory bodies and the guidelines for Disclosure and Investor Protection issued by the Securities and Exchange Board of India (hereinafter also referred to as "SEBI Guidelines"), and the Depositories Act, 1996, to the extent applicable.

The present issue of equity shares is being made pursuant to the resolution of the Board of Directors of the Company passed at its meeting held on September 27, 1999. In terms of Section 81(1-A) of the Act, the present public issue of equity shares has also been authorized vide a Special Resolution passed at the Extra-ordinary General Body Meeting of the members of Zen Technologies Ltd held on October 20, 1999.

Equity shares of face value of Rs 10/- each are being offered at par i.e at a price of Rs 10/- each.

Application must be made for a minimum of 200 equity shares and in multiples of 100 equity shares thereafter. The equity shares are being offered at a price of Rs 10/- per share and the entire amount is payable on application.

The company agrees that :

1. as far as possible, allotment of securities offered to public shall be made within 30 days of the closure of the issue.
2. it shall pay interest @ 15 % p.a (except to the applicants applying through Stockinvest), if the allotment is not made and/or the allotment letters/refund orders are not despatched within 30 days from the date of closure of the issue.

The equity shares now being offered, shall rank pari-passu with the existing equity shares of the Company in all respects save and except that the holders of the equity shares now being offered will be entitled to dividend, if any, which may be declared or paid on the equity shares from the respective date of allotment and in proportion to the amount paid up thereon for the period during which such capital is paid up. The holders of equity shares now being offered will not be entitled to dividend, if any, declared or paid prior to the date of allotment.

1. Right to receive dividend, if declared and paid.
2. Right to attend general meetings and exercise voting rights, unless prohibited by law.
3. Right to vote either personally or by proxy.
4. Right to receive offer for rights issue and be allotted bonus shares, if declared.
5. Right to receive surplus on liquidation, if any.
6. Other rights available under the Act and amendments thereto from time to time.

The Prospectus and the Application Form (including the Abridged Prospectus containing the salient features of the Prospectus ) may be obtained from the Registered Office of Zen Technologies Limited, the Lead Managers to the Issue and at the collection centres of the Bankers to the Issue, as mentioned on the reverse of the Application Form. Copies of Application Forms and Prospectus can also be obtained from the members of the recognised Stock Exchanges.

1. Applications must be :

• Made in prescribed Application Form.
• Made by

1. Indian Nationals resident in India who are adult individuals, in single or joint names (not more than three)
2. Hindu Un-divided Families (HUFs) in the individual name of the Karta of HUF
3. Companies, Corporate Bodies and societies registered under the applicable law in India and authorized to invest in the equity shares
4. Indian Mutual Funds registered with SEBI
5. Scientific and/or Industrial Research Organisations, which are authorised to invest in equity shares
6. Indian Financial Institutions, Commercial Banks, Regional Rural Banks and Co-operative Banks (subject to permission from RBI)
7. Trusts which are registered under the Societies Registration Act, 1860 or any other applicable Trust Law and which are authorized under their constitution to hold and invest in equity shares of a Company
8. Non-resident Individuals of Indian Origin / Nationality (NRIs) only on a non-repatriable basis.

• Completed in full, in BLOCK LETTERS, in ENGLISH as per the instructions contained herein and in the Application Form and are liable to be rejected if not so made.
• For a minimum of 200 equity shares and in multiples of 100 equity shares thereafter.
• In single or joint names (not more than three).
• Thumb impressions and signatures other than in the languages specified in the Eighth Schedule of the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under his or her official seal.

• Payments may be made by way of cash, cheque, Stockinvest or demand draft drawn on any bank, including a co-operative bank which is situated at and is a member or sub-member of the Bankers’ clearing house located at the center ( indicated in the application form) where the Application Form is submitted. Money orders, postal orders, outstation cheques or demand drafts , cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied with such instruments are liable to be rejected. Applicants residing at places where no collection centres have been opened may submit/mail their applications at their sole risk along with application money due thereon by way of a Demand Draft payable at Hyderabad alongwith the application form by Registered Post to the Registrars to the Issue , superscribing the envelope " ZTL - Public Issue" so as to reach the Registrars to the Issue on or before the closure of the Issue. The charges, if any, for purchases of demand drafts will have to be borne by the applicant.
• All cheques/ demand drafts should be crossed "Account Payee Only" and must be made payable to any of the Bankers to the Issue and marked " ZTL-Public Issue"
• A separate cheque / bank draft / Stockinvest must accompany each Application Form. Applicants are advised to mention the Serial Number of Application Form on the reverse of the instruments to avoid misuse.
• All applications duly completed in all respects must be submitted before the closure of the subscription list to any of the designated branches of the Bankers to the Issue, accompanied by cash /cheque / bank draft / stockinvest drawn on any bank located at and which is a member of the Bankers' Clearing House at the place where the Application Form is submitted. Applications should NOT be sent to the registered office of Zen Technologies Limited or the Lead Manager to the Issue or to the Registrars to the Issue ( except as stated above ) .
• No separate receipt will be issued for the application money. However, the Bankers to the Issue or any of their authorised / approved collecting branches receiving the duly completed Application Forms will acknowledge receipt of the application by stamping and returning to the applicant, the acknowledgement slip attached at the bottom of the Application Form.
• In terms of the provisions of Section 269SS of the I.T. Act, payment of application money of Rs. 20,000/- and above should not be effected in cash and must be effected by a crossed account payee cheque / bank draft / Stockinvest.
• Where an application for equity shares is for the total value of Rs.50000/- or more, i.e. for 5000 equity shares or more, the sole applicant, or each of the applicants in case the application is made in joint names, should mention his/ her Permanent Account Number (PAN) allotted under the Income Tax Act, 1961 or where the same has not been allotted, please mention
• the GIR number and the Income Tax Circle/ Ward/ District. In case, neither the PAN nor the GIR number has been allotted, the applicant must mention "Not Allotted" in the appropriate column in the Application Form. Application Forms without this information will be considered incomplete and are liable to be rejected.
• To Prevent fraudulent encashment of refund orders by third party, the applicants are advised to indicate the name of the bank branch and the savings / current account number in the application form. In case of refund, the refund order will indicate these details after the name of the payee and the refund orders will be despatched directly to the payee’s address. Application without this information would be considered incomplete and is liable to be rejected. Also, the applicants should write the application number and name of the sole / first applicant on the reverse of the cheque / Demand Draft / Stock Invest.
• Non-resident Indians ( NRIs) applicants wishing to apply for shares on non-repatriable basis may use the form meant for Resident Indian Public. The remittance of application money must be made out of Non-resident Ordinary ( NRO )Account.

• The applicant has the option to use Stockinvest for applying for equity shares offered in terms of this Prospectus. Stockinvest can be obtained from any bank issuing such instruments, by making the necessary application and depositing the amount with the bank. The applicant using stockinvest should submit the Application Form alongwith the Stockinvest to any of the designated branches of the Bankers to the Issue mentioned on the reverse of the Application Form, before closing of the subscription list. Stockinvest is payable at par at all the branches of the issuing bank and as such should be made payable in favour of " Zen Technologies Limited ".
• Only individuals and Mutual Funds have the option to use Stockinvest. A ceiling of Rs.50,000/- per individual per stockinvest has been imposed by the Banks and hence individual investors can use stockinvest upto Rs.50,000/- only. However, there is no such ceiling on Mutual Funds. The above ceiling is subject to change from time to time.
• Applicants using Stockinvest must note the following:

1. The prospective investor at the time of request for issue of Stockinvest of the issuing bank, may have to:

1. indicate that he/she agrees to abide by the terms of the Issue and encashment of Stockinvest;
2. give irrevocable authority to his/her bank to mark a lien for the value of Stockinvest against the balance held in his/her savings/current/other deposit account;
3. agree to lifting of the bankers lien on expiry of the currency of the Stockinvest or in case of intimation of partial / non allotment of equity shares; and
4. agree that the issuing bank will not be liable for any damages or other consequences arising out of the loss of these instruments;
5. The service charges, if any, for procuring Stockinvest shall be borne by the applicant.

2. Stockinvests issued by any scheduled commercial bank including co-operative bank (even where the issuing bank is not a collecting bank) will be accepted. Stockinvest are to be used by the purchaser(s) within 10 days of its purchase. The last day for the use of Stockinvest for submitting Application Form to the Bankers to the Issue should be indicated on the face of the Stockinvest with a notation "To be used on/or before ______"
3. Stockinvest should be marked "Account Payee" and payable only to the Issuer i.e. " Zen Technologies Limited ". The applicant shall provide necessary details such as payee's name, amount and number of equity shares applied for, Application Form number etc., in the left hand side portion of the Stockinvest and his/her address in the box on the reverse of the Stockinvest before depositing it with the Bankers to the Issue.
4. Stockinvest is valid for a period of 4 months from the date of issue.
5. Stockinvest will be issued to the applicant in blank format after authentication of the date of issue by the designated branch. Stockinvest duly completed should be submitted along with the Application Form to the bank branch handling the issue.
6. Stockinvest should be signed and dated by the appropriate authority of the issuing bank. Applicants have to fill in the Stockinvest the following:

1. Name of the company
2. Amount
3. Number of equity shares applied for

2. Separate Stockinvest of suitable and appropriate denomination (wherever available) should be submitted with each Application Form for the total number of equity shares applied for. In case of Stockinvest of fixed denomination, the applicant can fill an amount less than the denomination depending upon the amount required to be paid on application for the equity shares applied for.
3. The applicant should not hand over Stockinvest taken against his or her own account to any third party. Stockinvest should be utilised by the purchaser(s) and the purchaser's name / name of one of the purchasers should invariably be indicated as the first applicant in the Application Form. Thus, if the signature of the purchaser on the Stockinvest and the signature of the first applicant on the Application Form do not tally, the application would be treated as having been accompanied by a third party Stockinvest and shall be rejected.

Applicants should use only one Stockinvest along with each application form for subscribing to the issue.

4. In the interest of the investors, to avoid rejection of application on technical grounds, it is suggested that the applicant should ensure that:

1. the date of issue of the Stockinvest by the Issuing Bank is clearly mentioned on the instrument.
2. the instrument is duly signed by the authorised officer of the Bank, giving his code number.
3. any correction / alteration in the date of issue, amount, name of the Company (i.e. Zen Technologies Limited) etc. should be attested by an authorised officer of the Issuing Bank.
4. the applicant has clearly written the name of the Company, the amount and signed the instrument. The signature on the instrument should tally with the specimen signature of the first named applicant as appearing on the Application Form.
5. in case the Stockinvest is purchased in joint account, the names of both the account holders should be mentioned in the Stockinvest instrument at the place mentioned for writing the name of the investor.
6. the amount written in the Application Form to be deposited and the amount of the Stockinvest instrument accompanying the Application Form should be the same.
7. the Stockinvest is to be utilised by the purchaser(s) and the purchaser's name or name of one of the purchasers is invariably indicated as the first applicant in the share Application Form. Thus, if the signature of the purchaser on the Stockinvest and the signature of the first applicant on the Application Form does not tally, the application would be treated as having been accompanied by a third party Stockinvest and is liable to be rejected.
8. applications accompanied by Stockinvest, which are not payable at Hyderabad, are liable to be rejected.

The above information is given for the benefit of investors and the Issuer is not liable for any modification of terms of Stockinvest or procedure thereof by issuing banks.

In case of non-allotment, the Registrars to the Issue shall directly send back the cancelled Stockinvest to the applicant(s) along with the relative advice. The stockinvest would bear stamps such as "CANCELLED" and "NOT ALLOTTED" across the face of the instrument. The issuing bank will lift the lien on the account on surrender of the same by the investor.

On allotment/partial allotment, the Registrars to the Issue shall fill in the amount (which will be equal to or less than the amount filled in by the investor) before presenting the Stockinvest to the respective issuing banker for payment to the extent of allotment. The bank will lift the lien on the balance amount if any, of the deposit.

Inquiries relating to applications submitted with Stockinvest may be addressed only to the Registrars to the Issue and not to the issuing bank.

Registrars to the Issue have been authorised by "Zen Technologies Limited" to sign on behalf of the Issuer for realising the proceeds of the Stockinvest of the successful applicants or to affix non-allotment advice on the Stockinvest or to cancel the Stockinvest of the unsuccessful applicants or applicants whose applications are accompanied by more than one stockinvest instrument . The cancelled instrument shall be sent back by the Registrars to the applicants directly within 30 days of the closure of this Issue. All conditions mentioned earlier for making an application through cheque(s) / demand draft(s) will also, mutatis mutandis, apply to applications made with Stockinvest.

An application may be made in single or in joint names (not more than three). In the case of joint applications, refund orders, if any and dividend warrants will be made out in favour of the first applicant. All communications will be addressed to the applicant, whose name appears first in the Application Form and will be despatched to his/her address, as stated in the Application Form.

An applicant should submit only one application (and not more than one) for the total number of equity shares required. An application may be made in single or in joint names (not more than three). Two or more applications in single and/ or joint names will be deemed to be multiple applications, if the sole and/ or the first applicant is one and the same. The Issuer reserves the right to accept or reject in its absolute discretion any or all such multiple applications.

In case of application by Mutual Funds, a separate application must be made in respect of each scheme of an Indian Mutual Fund registered with SEBI and that such applications will not be treated as multiple applications provided that the applications made by the Asset Management Company / Trustees / Custodian clearly indicate their intention as to the scheme for which the application has been made.

The company has entered into agreement both with NSDL and CSDL for offering the shares in dematerialised form. The investor has the option to receive allotment of securities in dematerialised form through either of the depositories i.e. NSDL/CSDL.

In case of applications under Power of Attorney or by companies or corporate bodies, the relevant Power of Attorney or the relevant authority as the case may be, or a duly certified copy thereof and a certified copy of the Memorandum and Articles of Association and/or bye laws, wherever applicable, must be despatched by registered post with acknowledgment due separately to the Registrars to this Issue so as to reach them at Hyderabad not later than seven days from the closure of the issue, simultaneously with the submission of the Application Form mentioning the Serial Number of the Application Form and the name of the bank branch where the application has been submitted failing which the issuer reserves full, unqualified and absolute right to accept or reject any application in whole or in part and in either case without assigning any reason thereof.

The Issuer reserves full, unqualified and absolute right to accept or reject any application, subject to guidelines of SEBI and Stock Exchanges, in whole or in part and in either case without assigning any reason thereof. In case, an application is rejected in full, the whole of the application money received will be refunded and where an application is rejected in part, the excess application money received will be refunded to the applicant within 30 days of the closure of the issue. If such money is not repaid within 8 days from the day the company becomes liable to pay, the company and every director of the company who is an officer in default shall on and from the expiry of the 8^th day be jointly and severally liable to repay that money with interest @15% p.a. except in respect of applications accompanied with Stockinvest.

The issuer, as far as possible, will allot equity shares within 30 days from the closure of the issue and shall pay interest @ 15% p.a. (except to the applicants applying through stockinvest) if the allotment is not made and the refund orders are not despatched to the investors within 30 days from the closure of the issue, for the period of delay beyond 30 days.The issuer would also make available funds to the Registrars to the issue for the purpose of despatch of refund orders. Refund will be made by cheque(s) / pay order(s) / demand draft(s) (only in case of applications not accompanied by Stockinvest) and will be despatched at the applicant's risk to the first/sole applicant's address. Such cheques or pay order(s) or demand draft(s) will be payable at par at all the centres where the applications were accepted (subject to RBI regulations issued from time to time in this regard). In case of joint applications, Refund Orders, if any, will be made out in the first applicant's name and all communications will be addressed to the person whose name appears first in the Application Form.

The applicant must fill in the relevant column in the Application Form, giving particulars of savings bank/current account number and name of the bank with whom such account is held, to enable the Registrars to the Issue to print the said details in the Refund Order after the name of the payee. This is to ensure that the Refund Orders are credited to the correct account and obviate any scope for fraudulent encashment of the Refund Orders. It may be noted that provision of bank account details in the space provided for in the Application Form has now been made mandatory. Application Forms without the above details are liable to be rejected.

The applicants should write the application number and name of the sole/first applicant on the reverse of the cheque / demand draft / Stockinvest.

As per the provisions of Depositories Act,1996 the shares of a company can be acquired in dematerialized form i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through Electronic mode. Many companies and their investors are now opting for dematerialization of their securities. The company is also extending this facility to all those investors, who wish to avail the same in this context-

1. A tripartite agreement dated _________ has been signed between Zen Technologies Limited, Karvy Consultants Limited and National Securities Depository Limited (NSDL) for offering the depository option to the investors. Another tripartite agreement dated ________ has also been signed between Zen Technologies Limited, Karvy Consultants Limited and Central Depository Services India Limited (CDSL) for offering the depository option to the investors.
2. The investor has an option to seek allotment of equity shares in electronic and/or physical mode.
3. Such an option, if exercised, should be indicated in the relevant blocks in the Application Form itself.
4. Separate applications for dematerialized / electronic and physical equity shares by the same applicant shall be considered as multiple applications and are liable to be rejected. The applicants must indicate in the Application Form itself, the number of shares required in dematerialised and physical form out of the total number of shares applied for. In case of partial allotment, shares will first be allotted in dematerialised form and balance shares, if any, will be allotted in physical form subject to allotment of market lot of shares in physical form.
5. Investors who wish to apply for equity shares in electronic form need to have at least one Beneficiary Account with a Depository Participant prior to the allotment.
6. The applicant's name in the Application Form should be the same as that appearing in his/her Beneficiary account. In case of joint applicants, in addition to the name, the sequence of the names in the application form and the beneficiary account should be the same.
7. Letter(s) of Allotment / Refund Order(s) will be directly sent to the investors by the Registrars.
8. If incomplete / incorrect investor depository account details are given in the application Form, physical equity shares will be allotted to the investor.
9. Responsibility for correctness of applicant’s demographic details given in the Application Form vis-à-vis those with his/her Depository Participant, would rest with the investor.
10. Equity Shares in electronic form can be traded only on Stock Exchanges having electronic connectivity with NSDL/CDSL.
11. Trading in equity shares shall be in dematerialised form only for all the investors.

Applicants must indicate in the Application Form the number of equity shares they wish to receive in dematerialised / electronic form and physical form out of the total number of equity shares applied for. After allotment, all investors who have opted for shares in the electronic mode will receive credit for these shares directly in their depository accounts and all investors who have opted for physical delivery of shares will receive the Share Certificates from the Registrars to the issue.

The basis of allotment will be finalised in consultation with the Regional Stock Exchange. Investors may note that in the event of oversubscription, allotment will be on a proportionate basis. (For further details on basis of allotment please refer to Part II of Prospectus).

M/s. Prayaga & Company, Chartered Accountants, have advised Zen Technologies Ltd vide their letter dated March 1,2000 that as per the current provisions of the Income Tax Act, 1961 (hereinafter referred to as "the Act") and the existing applicable tax laws for the time being in force, the following tax benefits, inter-alia, will be available to Zen Technologies Limited and to the members of the Company as given below:

1. Should the company be liable to Income Tax on its profits, the following concessions/ benefits will be available.

1. The company, in accordance with and subject to the condition laid down in Section 10A of the Income Tax Act, 1961 shall be exempt from Income Tax for 10 consecutive assessment years as stated in the said provision in respect of the Profits and Gains derived from 100% Export Oriented Undertaking(EOU) registered with Software Technology Parks of India (STPI).
2. Under section 80 HHC of the Income Tax Act, 1961 the company shall be entitled to deduction in respect of profits derived from export of goods in accordance with and subject to the conditions specified therein.
3. Under Section 80 HHE of the Income Tax Act, 1961 the company shall be entitled to deduction in respect of profits derived from export of software in accordance with and subject to the conditions specified therein.
4. The company will be entitled under section 35 D of the Income Tax Act,1961 to amortise certain specified preliminary expenses (including expenses incurred for the issue of shares) over a period of 5 successive years beginning with the previous year in which the company commences business, subject to compliance with the conditions specified in the section.
5. In terms of and subject to the provisions of the section 35(2AB) of the Income Tax Act, 1961, the company will be entitled to a deduction of an amount equal to 125% in respect of expenditure on in-house research and development(other than the acquisition of land) incurred in connection with the Company in the year in which such expenditure is incurred in accordance with and subject to the conditions specified therein.

1. Dividend income has been made exempt in the hands of share holders u/s. 10(33) of the Income Tax Act 1961.
2. By virtue of provisions of section 2(42A) and section 48 of the Income Tax Act, 1961 the gains arising to the investors from sale of shares of the company, if held for more than 12 months, shall be considered as long term capital gains, and consequently be computed after indexation of cost and be liable for taxation at the rate of 20% alternatively i.e without indexation, at the rate of 10 % which ever is lower.
3. In accordance with and subject to the conditions and to the extent specified in sections 54 EA/54EB of the Act, the share holders would be entitled to exemption from long term capital gains.
4. In case of a shareholder being an individual or a Hindu Undivided Family with in accordance with and subject to the conditions and to the extent specified in section 54 F of the Act, the shareholders would be entitled to exemption from long term capital gains.

The present Issue of equity shares is being made to :

1. finance company’s Expansion project envisaging development of two more simulators
2. meet software development and operating expenses including cost of hardware/software for two prototypes of iSATS and Tacsim and marketing expenses including travel and business development expenses.
3. meet cost of setting up overseas office
4. augment the long-term working capital resources of the Company
5. list the equity shares of the Company on the recognised stock exchange in India
6. To meet the expenses of the Issue.

The objects clause of the Memorandum of Association enables the Company to undertake the activities for which the funds are being raised through the Public Issue.

The cost of the project, as appraised by IDBI in February 2000, is given hereunder:

*includes cost to be incurred for setting up overseas office.

The cost of the project estimated at Rs.668 lakh is proposed to be financed as under:

(Rs.lakh)

Notes:

The above expenditure has been financed from the subscription towards share capital received from the promoters.

Pending utilisation of Issue proceeds for the proposed project, the company proposes to deploy the same profitably keeping the best interest of the shareholders in mind. The funds are proposed to be deployed in bank deposits, marketable securities etc.

1. Out of the sanctioned DSE of Rs 55 lakh, IDBI has subscribed to Rs 50 lakh as on date and the company has submitted a request for the cancellation of the balance amount; the approval of which is awaited. The venture for which DSE was sanctioned has been completed and the promoters have increased their stake to the extent of unsubscribed DSE of Rs 5 lakhs.
2. Outstanding amount of loan sanctioned by IDBI stood at Rs.47.08 lakh as on January 1, 2000.
3. As on date ,there are no overdues to IDBI.
4. Repayment of loan is guaranteed by the four original promoters viz. S/Shri Ashok Atluri, Ravi Kumar, Selwyn Samuel and A.V.Rao. Out of the original promoters Shri A.V. Rao and Shri Selwyn Samuel stepped down from the Board of the company due to their pre-occupation and they have divested their shareholding in favour of their friends and relatives.
5. At the option of IDBI, the loan amount is convertible into equity shares at par any time during the currency of the loan.

The company is not having a working capital account with any banker. The working capital requirement for the initial period form part of the project cost appraised by IDBI. The working capital requirement for the subsequent period is proposed to be met out of internal accruals and no bank borrowings are envisaged for working capital requirements.

ZEN TECHNOLOGIES LIMITED (ZTL), incorporated in 1993, as a public limited company, is engaged in the manufacture and marketing of high-end multimedia weapon simulators viz. small arms training simulator (SATS) used for training of police, paramilitary and armed forces. The manufacturing process involves adaptation of latest hardware and software technologies. The company has so far supplied 22 SATS to various police and para military organisations, notably The National Police Academy ,Hyderabad and all the SATS are working satisfactorily. The company was sanctioned assistance of Rs.155 lakh under Venture Capital Fund (VCF) Scheme of IDBI in April 1995 comprising convertible rupee term loan (RTL) of Rs.100 lakh and DSE of Rs.55 lakh for setting up the facilities for the manufacture of weapon training simulators at Hyderabad at an estimated cost of Rs.260 lakh. Implementation of the venture was delayed due to delay in obtaining orders for its products. Although the product development work was completed earlier, the commercial production commenced in April 1998 as against April 1997 originally envisaged. The company is presently operating from 2 premises in Hyderabad admeasuring about 4000 sft which the company has taken on lease basis. The 2 Lease Agreements effective from April 6,1995 and May 15, 1995 are for a duration of 3 years and are renewable after every 3 years upon mutual agreement of both parties. To ensure integrated operations and for smooth functioning, the company proposes to acquire new premises in Hyderabad, whereupon the company proposes to vacate the leased premises. However, the company has yet to identify the location of the proposed premises.

The company proposes to expand its existing activities by setting up facilities for the manufacture of advanced weapons training simulators viz. Tactical Engagement Simulators (TacSim) and Interactive Small Arms Training Simulator (iSATS) at Hyderabad. The above simulators have been developed as a result of extensive discussions with end users, who have expressed desire to have such advanced training simulators for comprehensive and effective training of their personnel. The company feels that the addition of the proposed two products would offer its customers a complete range of weapons training simulators and improve the overall profitability of the unit.

ZTL has entered into a Memorandum of Understanding (MOU) with Bharat Dynamics Ltd. (BDL), a public sector undertaking (under the Department of Defence Production & Supplies, Ministry of Defence, Govt of India). BDL manufactures defence equipment and small arms to meet the needs of the Indian Armed Forces and Paramilitary Forces. BDL also makes Trainer Simulators for the defence equipment. BDL would market the products of ZTL to Indian Army (IA), paramilitary organisations, police establishments and other Government organisations. BDL and ZTL have already undertaken several visits and demonstrated the products to various Govt. and police establishments and are hopeful of getting orders. The implementation of the proposed expansion scheme will enable the company to widen its product mix as also its client base.

The main objects of the Company, as stated in the Memorandum of Association, are as under:

2. To carry on the business of management consultancy services, market research and surveys, liaison with statutory bodies and organize or co-ordinate training programmes such as workshops, seminars, symposiums and conferences to the Educational institutions, Professional Association, Voluntary Organisations, Business Organisations and Industrial Establishments.
3. To act as commission agents, stockists, representatives, distributors and clearing & forwarding agents of all computers, electronic items process control equipment, and other allied products.To develop, construct, fabricate, transfer and sell Simulators, Training simulators, and Allied Products including Weapons Training Simulators for use of Armed Forces, Security Agencies, Police and other similar bodies within and outside the Country.

The Company has no subsidiary.

The company was originally promoted by S/Shri Ashok Atluri, Ravi Kumar, Selwyn Samuel and A.V.Rao. Subsequently, Mr Selwyn Samuel and Mr A.V.Rao stepped down from the Board due to their pre-occupation and they have divested their shareholding in favour of their friends and relatives. Later in November 1999, Shri Satish Atluri was inducted as promoter of the company and acquired equity shares from the company. He was also inducted on the Board of Directors of the company on November 20,1999. The company presently has 3 promoters viz. S/Shri Ashok Atluri, Satish Atluri and M. Ravi Kumar.

Mr Ashok Atluri aged 35, is a commerce graduate with postgraduate diploma in applied computer science from CMC Ltd. He received ‘Small Scale Entrepreneur of the Year’ award from Hyderabad Management Association for the year 1998. He is the Managing Director (MD) of the company.

Mr Satish Atluri aged 31, brother of Shri Ashok Atluri is a post-graduate in computer science from North Carolina A & T State University. He is having about 7 years of experience in Information Technology (IT) industry in USA. He worked in SAS Institute as developer (1993-94), Automated Analysis Corp. as project manager (1994-96), Object Design as senior consultant (1996-97). At present he is working as senior consultant for Mercury Interactive Corp.,USA, a leading consultant for global companies viz. IBM, Dell, Ernst & Young, Anderson, Price Waterhouse Cooper, Texas Instruments, KPMG, etc. He is one of the Directors of Zen Technologies Limited.

Mr M Ravi Kumar aged 41,is having 20 years of experience in software industry. He worked in Bureau of Data Processing Services (BDPS) (1979-85), Nova Computers Pvt. Ltd. (1986-90) and Institute of Engineers as Director. Presently he is working as Whole Time Director of the company and is actively involved in the designing and development of proposed products of the company.

The share holding of the promoters in ZTL as on March 30,2000 is as follows:

**** To be updated before ROC filing

The promoters of the company were not associated with any other concern/companies in the past in any capacity.

There is no other company under the same management as per Section 370 (1B) of the Companies Act, 1956.

The promoter directors do not have any business interest in Zen Technologies Ltd. except to the extent of sitting fees and remuneration, if any, payable to them. The promoters will be interested to the extent of dividend paid on shares held by them and their relatives and friends and to the extent of allotment of shares, if any, to their friends and relatives in the public issue.

The Company is managed through the Board of Directors under the leadership of the Managing Director. The following is the Board of Direct of ZTL: 

IDBI has stipulated a condition for broad basing of the companies Board.

There has been no pending litigation/ disputes against/with the directors or proceedings initiated against them for economic offences etc.

The following are the changes that have taken place in the Board of Directors of the Company during the last three years:

**The company was originally promoted by S/Shri Ashok Atluri, Ravi Kumar, Selwyn Samuel and A.V.Rao. Subsequently, Mr Selwyn Samuel and Mr A.V.Rao stepped down from the Board due to their pre-occupation and they have divested their shareholding in favour of their friends and relatives.

The overall management of the company is vested with the Board of Directors. The Board is assisted by a team of experienced and qualified professional executives, who are on the permanent rolls of the company having considerable experience in their respective fields.

There has been no change in Key Managerial Personnel during last one year.

The company is presently manufacturing ZEN Small Arms Training Simulator (ZEN SATS). The product is used to develop and improve the firing skills of the security forces. The system is an indoor simulator, which replaces the range training with cost effectiveness and without going to range and need for ammunition. Weapons viz. 7.62 mm SLR, 9mm Pistol, AK-47, Revolver could be integrated with the system. The instructor could correct the mistakes of the trainees online or in record/playback mode. Practice could be done for static, snap or moving targets for 25 to 600 meters. Recoil and sound of the weapons are simulated. The activities are presently being carried out from two rented premises at Hyderabad. In order to have integrated operations, the company proposes to acquire its own premises at Hyderabad. The company has yet to identify the location of the same.

The company now proposes to expand its existing activities by setting up facilities for the manufacture of advanced weapons training simulators viz. Tactical Engagement Simulators (TacSim) and Interactive Small Arms Training Simulator (iSATS) at an estimated cost of Rs 668 lakh.

iSATS would be used for interactive and firing testing. This would be the large screen version of SATS. Life size video footage would be used to provide interactive and judgemental training to the trainees to hone their reflex skills. The video shots will be digitized and laser sensors would pick up the area of significance in real time. The analogue signals so sensed would be converted into digital coordinates, which would be passed to the scenario generator using messaging protocols. iSATS integrates other than the software modules the technologies of laser sensing, weapon dynamics and hardware interface cards for the trainees.

TacSim would be used for group training in close encounters and ambush situations. It is meant for providing training in low intensity conflicts between groups of up to seven members. Each member is provided with harness, weapon and control unit. This simulator provides training for close quarter battles and hand to hand combat situations as was encountered in the heights of Kargil. In TacSim, the technologies viz. real-time software analysis of each participant, micro-controller based control system and controlled collimation of laser sources.

The two simulators are being developed as a result of extensive discussions and interactions with the end-users, who have expressed their desire to have such advanced training simulators for comprehensive and effective training of their personnel. In effect, by commercializing the above two products, the company would be able to offer its customers a complete range of weapons training simulators.

1. TacSim

There are four modules in the TacSim viz. weapon module, harness, control module and the umpire module. Each personnel participating in the group training is fitted with the harness and the weapons module. About 14 personnel, 7 on each side are equipped with one set each. The umpire controlling the exercise has an umpire control module and initiates the training exercise by setting up the control module of each of the trainees. The terrain or place of training is decided by the user and is usually in the unit premises or the training school. During the course of the exercises, all activities such as number of rounds fired by a trainee, time of fire for each trainee, kill time for each trainee and identification of trainees making a kill are recorded in the control unit. At the end of a session, the umpire downloads the data from the control unit and processes the data in the required format.

The manufacturing of TacSim involves producing the above modules and integrating them and testing the final product. The manufacturing process for the modules consists of i) assembly of circuitry, ii) housing in cabinet or other weatherproof casing, iii) burning of programmable read only memory (PROMS), iv) fixing the PROMS, and v) aligning the lasers and sensors.

2. iSATS

iSATS comprise 5 modules viz. i) instructor console, ii) projection system, iii) pneumatic/recoil system, iv) sound subsystem and v) weapon subsystem.

All the sub modules are assembled and tested for proper operation. Different software test programmes are run to test the communication among the modules. Once the inter- module communication tests are completed the system is packed.

No technical collaboration is envisaged. The company has an in-house R & D unit recognised by Department of Science and Industrial Research (DSIR), Ministry of Science and Technology, Govt. of India (GOI). The company has developed technical know-how for the simulators through a team under the guidance of Shri Kishore A Dutt, Vice President. Qualitative requirements and specifications for the simulators are taken from end users. R&D team is in the process of perfecting the prototypes for TacSim and iSATS. The company has already completed design and specifications of the equipment required for the project.

The company has so far carried out R & D activities on pyrotechnics, opto-electronics for position sensing, using laser transmitter and receiver, software programming and hardware development (for developing interfaces to IBM compatible PCs and software drivers for the laser based position sensing system), software components for 3D Animation, Web Based Instrument Controls, PDA Wireless communications, terrain generators for driving simulators and mechanical designs.

The company is currently working on laser intensity measurement circuits, video based reaction analysis software, efficient software for real time event trapping and analysis, digitally coded FM transmitters, and 2.4 GHz wireless transmission protocols for personal operating space (POS).

The above R&D will help the company in improving the existing line of products and development of new products for the wireless world.

Raw materials and components required for the manufacture of simulators are available locally. The company has already identified the local suppliers for the raw materials during the course of development and would be sourcing its raw material requirements from them. No difficulty is envisaged in procurement of raw material as the company has been sourcing such raw materials for the manufacture of SATS for the past 2 years.

Some of the major suppliers of raw materials of Zen Technologies Ltd are indicated below:

The major components required for manufacture of TacSim are Weapon Modules and Harness supplied by Sri Bhagvan electronics, Control unit by Pragathi electronics, Umpire unit is built in house and all other computer components and readymade software will be supplied by Sree Systems, a dealer for reputed computer peripherals.

The main components required for manufacture of iSATS are Projector, Frame Grabber Card, Video Overlay Card , Kodak High Speed Camera 2000 fps and many other computer peripherals and ready made software to be procured from R S Components and Sree systems

The simulators manufactured by the company would be marketed to state police organisations, paramilitary organisations viz. Central Reserve Police Force (CRPF), etc. and defense service organizations viz. Army, Air Force and Navy.

SATS manufactured by ZTL have been marketed to various police and paramilitary organizations and some of the clients include organizations like Delhi Armed Police, New Delhi, the Inspector General of Police (Intelligence Security Wing), Hyderabad, the Inspector General of Police, Hyderabad, the Inspector General of Police (Training), Hyderabad, North Eastern Police Academy, Meghalaya, Police Training Colleges of Haryana, West Bengal and Bihar, The Commissioner of Police, Hyderabad, CRPF, Nanded, Maharashtra, Internal Security Academy, CRPF, Mount Abu, Rajasthan, the Director General of Police, Thiruvananthapuram, Kerala, Sardar Vallabhai Patel National Police Academy, Hyderabad, etc. These products have been installed at respective training organisations and have been appreciated by the authorities and participants for their utility in training personnel.

The company has demonstrated SATS in the International Defense Exhibition ’99 at Abu Dhabi. The response of the visitors was encouraging. Certain foreign buyers have evinced interest in procuring the products of the company. ZTL is planning to market the simulators in the West Asian and African continent by appointing agents.

Modern weapons and weapons systems have become so expensive that it is costly to use them for any form of training. On the other hand, defense/internal security funding is also becoming more constrained. In such situations, training is must with maximum efficiency and minimum costs. The security forces are establishing an economically viable pattern of effective simulators and training aids to assist field forces to maintain the desired efficiency but within a permissible cost limits. Hence, weapon-training simulators are expected to play an increasingly important role in training in future.

Due to its presence in India and closer to the end users of the products, the company feels that it has distinct advantage over other suppliers which are based outside India since the company is able to not only impart basic training to the end users but also provide quick after sales service to its clients.

1. Industry Capacity

ZTL is the only manufacturer which has been supplying the above products in the domestic market. The local demand is also being met through imports.

2) Competitive Environment

Competition for the company’s products would be only from imports. Ministry of Defence have sourced similar products viz. SATS and TacSim through imports. The suppliers are Spartanics, USA (Weaponeer), Oscamar, New Zealand (IWESS) and Fire Arm Training Simulator (FATS), USA.

The company has been marketing the products to the paramilitary forces and police forces for the last 2 years and has proven its credentials, both in terms of technology, technical support and unit price.

In terms of quality and price, the company’s products are comparable with imported products. However, the company is able to provide cost effective and quick service/maintenance at all locations. Moreover, the end users would be imparted training in some of the technical aspects, so that the company need not be contacted for routine type of maintenance problem. The company has distinct advantage over overseas supplier due to proximity to end users which enable the company to provide prompt after sales service.

 

3) Regulations & Policies

No special regulations are applicable.

4) Other Factors Affecting the Market

It may be mentioned that ZTL’s products are proprietary in nature and new to most of the buyers. As all the buyers are Government establishments ,they generally purchase through bidding tenders from number of suppliers and are generally reluctant to place orders to a single supplier as proprietary item. In some cases, the end users invite bids from overseas suppliers. Notwithstanding the above, the company has been able to procure orders and has so far supplied 24 Zen SATS.

C. Market Potential

1) Selling Prices

Comparison of ZTL’s products and corresponding imported simulators’ selling prices are tabled below :

Products	Selling price (Rs.lakh)
	ZTL	Import
SATS	12	16
iSATS	30	60
TacSim	30	40

2. Market Estimates

The company has estimated market potential for its two products as follows :(in nos.)

		Requirement
Users	No. of locations	TacSim	ISATS
Army
Training Centres	48	96	96
Static Military Stations	39	-	-
Divisions	46	50	50
Navy
Training Centres/ Divisions	8		8
Air Force
Training Centres	4		4
Air Force Stations	23		23
State Police
Training Centres	120	120	120
District Training Centres	436	436	436
Para Military
Training Centres	6	6	6
District Training Centres	300	300	300
Total		1008	1043

( Source : Company's in house marketing research reports)

The company has projected sale of 24 units each of TacSim and iSATS in the optimum year, which works out to 2.4% and 2.3% of the above estimated market potential.

3. Other Factors Affecting Market Potential

None

ZTL has entered into an MOU with Bharat Dynamics Ltd. ( BDL ), a public sector undertaking, through which it is marketing Zen SATS to Indian Army and other Govt. organisations. It would develop the mechanical modules for the products and ZTL would provide software integration and other modules. As per the MoU, BDL will market simulator as its own product. BDL and ZTL have already undertaken several visits and demonstrated the products to various Govt. and police establishments. It is expected that ZTL would not face any difficulty in selling the products to Govt. establishments, as BDL is a renowned PSU specialising in defense systems production.

Salient features of the MOU entered into with BDL on January 22,1999 are as under:

i) BDL will manufacture ZEN SATS in association with ZTL under the brand name of BDL-ZEN SATS with cost & benefit sharing and defined responsibilities, on mutually agreed terms and conditions.

ii) Final assembly/integration of all the component modules, will be carried out by BDL, duly assisted by ZTL.

iii) ZTL in association with BDL will be responsible for the installation, commissioning and after sales support of the system (warranty period/its extension). Maintenance contract after expiry of warranty, where desired by customer, shall be entered into by BDL and executed by ZTL as authorised agent of BDL.

iv) BDL will market the product BDL-ZEN SATS and procure the orders, assisted by ZTL where necessary.

v) The product BDL-ZEN SATS will be sold at the prices negotiated by BDL. During price negotiation with prospective customers, the reduction effected will be absorbed by ZTL and BDL in the ratio of 3:1.

vi)ZTL undertakes to indemnify BDL against patent infringement claims etc.

vii) BDL undertakes not to design/develop/manufacture/market any Small Arms Trainer Simulator (other than BDL-ZEN SATS) which may be perceived as competition to BDL-ZEN SATS till 5 years after the expiry of the MOU.

viii) The MOU will be valid till March 31,2001 and can be extended for further period by mutual consent.

The company would extend the MOU with BDL to include the new products being developed by ZTL .ZTL is also marketing the simulators directly to various organisations.

The company has demonstrated SATS in the International Defense Exhibition 1999 at Abu Dhabi. Many foreign buyers have evinced interest in procuring the products. Encouraged by the overwhelming response from abroad and export potential, the company is planning to export the simulators to West Asia and African countries through agents.

The company proposes to establish an overseas office to tap the overseas market. While the company has decided to open its overseas office in London, it has yet to identify the premises.

The marketing team of the company is planning to visit various cities in West Asia and Africa to give live demonstration to the customers so that they have a first hand experience about the product.

Weapon training simulators would play an increasingly important role in training of armed forces, police and para-military forces in future. In view of the above, the demand for the existing and proposed simulators in the domestic as well as international market is expected to grow.

The company has satisfied client base of state police organisations, and paramilitary organisations, some of which are placing repeat orders for the existing product. As the new products are being developed based on the inputs/requirements given by the clients, it is expected that they would place orders for the new products also.

The company’s products are sophisticated, simple, rugged and comparable with the imported ones.

The company has established marketing tie-up with BDL, which is expected to help the company in procuring orders from Army and other Govt. organisations.

The company now proposes to expand its existing activities by setting up facilities for the manufacture of advanced weapons training simulators viz. Tactical Engagement Simulators (TacSim) and Interactive Small Arms Training Simulator (iSATS).

The cost of the project, as appraised by IDBI, in February 2000 is given hereunder:

*includes cost to be incurred for setting up overseas office.

The company proposes to set up the manufacturing facilities near High Tech City, Hyderabad and proposes to acquire about 1000 yards of land. The cost of the land is estimated at around

Rs.4000/- per square yard. The total cost of the land and site development of Rs.48 lakh comprise cost of land – Rs.40.00 lakh, registration charges – Rs.5.60 lakh and site development – Rs.2.40 lakh. The company has yet to identify/finalise and acquire the land. The location will be such that all the requisite infrastructural facilities viz. approach roads, power and water are available.. Location of unit in Hyderabad would also facilitate procurement of raw materials. Suitable manpower, both skilled and semiskilled, is also available locally.

Cost of building and civil works, based on estimates of the architect is at Rs.25 lakh. The total building area is estimated to be around 600 sq.mts. spread on 3 floors. This includes cost of construction of the main building admeasuring 200 sq.mts. comprising electronic workshop, assembly and store room, software development centre (150 sq.mts), administrative and marketing area (180 sq.mts)., excise room (30 sq.mts), power room, servant’s quarters, etc. - (30 sq. mts). and security guard’s room (10 sq.mts). The average cost of construction works out to Rs.4000 per sq.mt. A provision of Rs.1 lakh is made towards the architect’s fee. The company has yet to appoint the architect.

The plant & machinery required for the project have been identified. The entire plant and machinery required for the project is being procured indigenously. Quotations have been obtained for most of the items on competitive basis and based on these quotations, cost has been arrived at Rs.180 lakh. The main machinery required for project comprise electronic equipment viz. contact tester, , computer hardware and software, signal generators, frequency counter, oscilloscopes, logic probe and pulsar, stabilizers, power supplies, soldering stations, multimeters, laser source module, lightwave converters, etc., and mechanical equipment viz. lathe machines, drilling machines, milling machines, sheet folding machine, shaping machine, shearing machine, grinder, die press, arbor press, power saw, compressor etc

Details of the plant and machinery already ordered are as follows :

The total estimated cost towards indigenous plant & machinery is Rs.180 lakhs (as appraised by IDBI), of which orders for Rs 80 lakhs have been placed. The cost of plant and machinery has been firmed up is on the basis of recent quotations obtained from suppliers.

The company proposes to establish an overseas office along with the related equipment, which will help it to tap the global market for each of the products manufactured by the company. Total cost towards overseas office is estimated at Rs 80 lakh which includes office equipment and systems for demonstration at overseas office including 2 sets each of ZEN SATS, TacSim and iSATS. The company proposes to take the premises on lease basis. The cost of Rs.80 lakhs includes the cost of furnishing of office and cost of production of above sets as estimated by the company.

Total cost towards miscellaneous fixed assets has been estimated at Rs.40 lakh. It comprises D. G. set (Rs.2.00 lakh), office furniture (Rs.5.00 lakh), office equipment (Rs.3.00 lakh), fire fighting equipment (Rs.2.00 lakh), vehicles (Rs.13.00 lakh), air conditioning (Rs.10 lakh) and electrical cabling (Rs.5.00 lakh). The cost of miscellaneous fixed assets is based on company's own estimates.

Software development and operating expenses include cost of software/hardware for two prototypes of iSATS and TacSim each – Rs.57 lakh, trial expenses – Rs.5 lakh and salaries for R&D division – Rs.28 lakh. The Company is likely to get Rs.60 lakh by way of grant from DSIR for funding the above prototypes. However, a formal sanction and release of the grant is awaited.

Marketing expenses estimated at Rs.70 lakh include inland travel expenses (Rs.20 lakh), overseas travel expenses (Rs.20 lakh), demonstration expenses (Rs.20 lakh) and business development expenses (Rs.10 lakh).

Preliminary and public issue expenses have been estimated at Rs.20 lakh. It includes preliminary expenses – Rs.3.50 lakh including ROC fees for increasing the authorised capital etc and public issue expenses - Rs.16.50 lakh. The public issue expenses include lead managers fee , Printing of stationery, issue conferencing , publicity, brokerage, registrars charges and other expenses.

The contingency provision has been taken @ 10% on non firm cost aggregating Rs.55 lakh

The additional working capital required has been estimated at Rs.60 lakh on the basis of the present operations. This being a non conventional area of activity, the total working capital requirements are proposed to be met from long term sources. The working capital assessment is based on 1 month’s stock of raw material, 1 month’s stock of consumables, one week’s work-in-progress, 3 week’s stock of finished goods and one and half month’s receivables. While the working capital requirement for the initial years is proposed to be financed out of issue proceeds, the working capital request for the subsequent period shall be met out of internal accruals.

The project is expected to be completed within 12 months from the date of first disbursement. It is expected to start its commercial production from April 1, 2001. Detailed implementation schedule, as per IDBI's appraisal, is as follows :

As per IDBI’s appraisal, the implementation of the project was to commence from January 2000 with the acquisition of land. However, the implementation of the project has been delayed by about 3 months, as estimated by the company. The product development work is in progress and the company is confident of completing the project by April 2001 by compressing the period for rest of the activities.

The peak power requirement for the unit would be 125 KVA, which will be sourced from Andhra Pradesh State Transmission Corporation (APTRANSCO). The company would apply to APTRANSCO for the required power at the appropriate time. The company also proposes to have a 75 KVA DG set as standby arrangement. Power supply arrangements are considered adequate and satisfactory.

The project does not require water for its process. The company would need water only for potable purposes, which would be met from municipal water supply.

The company requires diesel oil for the DG set. Diesel oil would be procured locally from nearby petrol bunks.

The project does not generate any pollutants. However, the company would be required to obtain clearance from State Pollution Control Board. The company is yet to apply to the State Pollution Control Board for obtaining NOC.

Besides the present strength of 17, the total additional manpower required for the proposed expansion scheme would be 70 comprising project leaders, system managers, programmers, skilled and semiskilled workers, marketing, administrative and other staff. Required manpower is available locally. The company would recruit the required manpower progressively during implementation of the Expansion Scheme based on its requirement.

The company commenced commercial operations from April 1,1998. The Auditors of the Company have examined and found correct the books of M/s. Zen Technologies Limited for the last five years ended on March 31,1995, March 31,1996, March 31,1997, March 31,1998 and March 31, 1999. The records for the period ended February 15, 2000 which is the last date upto which the accounts of the Company have been made up, have also been audited by them. The Auditors of the Company vide their certificate dated March 1,2000 have certified that the same have been prepared in accordance with the requirements of Clarification XIII & XIV issued by SEBI and in accordance with the requirements of Part II of Schedule II of the Companies Act, 1956 and they further certify that the same are true and correct.

1. PROFIT & LOSS ACCOUNT:

The profits of the company for the preceding financial year ended 31-3-99 and for the period ended on15-2-2000 after making such adjustments as are, in our opinion appropriate and subject to the notes appearing hereinafter were as follows: -

	Year ended 31-3-1999	Period 1-4-99 to 15-2-2000
	(Rs. in lakhs)	(Rs. in lakhs)
Income:
Sales	71.02	121.16
Other Income	5.28	3.78
Increase in Inventories	2.49	4.98
Total	78.79	129.92
Expenditure:
Raw Materials Consumed	18.31	25.83
Other Manufacturing Expenses Central Excise Duty	3.60 0.92	2.70 4.71
Sales Tax Administration & Selling Expenses Payments & Benefits to Employees Interest & Financial Charges	1.63 15.90 1.29 23.85	2.37 26.27 2.79 13.87
Depreciation Income Tax Miscellaneous Expenses Written off	4.43 0.11 8.09	1.47 0.02 7.10
Net Profit	0.66	42.79
Total	78.79	129.92

NOTE:

1. Other income includes Service charges and interest etc..

2. Since the Company has commenced the commercial operations of the simulators project from 1-04-1998,the Profit &Loss Account has been drawn up only for the year 31-03-1999 and up to 15-02-2000.
3. The company also has a trading turnover of Rs 11.80 lakhs for the year ended March 31,1995 with a Net Profit of Rs 0.61 lakhs and since 1995 the company has been concentrating on development of simulators, the commercial operations of which have commenced in April 1998.
4. The turnover indicated above represents the sale of products being manufactured by the company.

General

E. Deferred revenue expenditure :

6. Loans from Financial Institutions secured by first charge on immovable properties of the company, present and future, hypothecation of all the movable properties subject to any prior charges created/to be created by the banks for working capital purpose and personal guarantees from the directors of the Company.

7. a.)During the period the company has incurred the following expenditure on Research and Development on Tactical Engagement Simulator (TacSim) another project.

The project has been appraised by IDBI. The financial projections forming part of IDBI's appraisal are as under: (Rs lakhs)

MAJOR ASSUMPTIONS UNDERLYING PROJECTIONS

UNITS

1 NO.OF WORKING DAYS PER YEAR 300

2 INSTALLED CAPACITIES (Nos per annum)

ZEN SATS 200

TacSim 48

iSATS 48

3 CONSUMABLES & STORES (% Materials) 4.00

4 PACKING MATERIAL (% Materials) 2.00

5 REPAIRS AND MAINTAINANCE (% of fixed assets) 2.00

6 SELLING & DISB.EXP. (% of sales) 10.00

7 SALARIES* (Rs. lakh per month) 6.00

8 ADMN.EXPENSES (Rs. lakh per month) 1.00

9 POWER (Rs. lakh per month) 0.50

(*after project implementation)

10 SELLING PRICE PER UNIT (Rs.lakh)

ZEN SATS 12.00

TacSim 30.00

iSATS 30.00

11 MATERIAL COST PER UNIT

SATS 3.85

TacSim 10.32

iSATS 18.13

12 Depreciation has been provided on WDV basis.

13 Income Tax has been provided on book profits as per 115J of the IT Act for the next two years and at 38.5% thereafter.

14 The increase in cash accruals are invested in current assets.

ZTL is a designer, developer and manufacturer of weapons training simulators. ZTL has positioned itself as a conceiver and manufacturer of hi-tech simulators adopting the latest technologies with a combination of hardware and software. The aim and focus of ZTL always has been to cater to the needs of training simulators, from basic to advanced.

ZTL has the following advantages:

1. There is a reasonably good awareness about ZTL's simulators in the security forces within India.
2. Department of Science & Industrial Research (DSIR) has recognised ZTL as an inhouse R & D unit.
3. ZTL has developed a rapport with key customers to cater to their long term training needs by way of designing simulators based on their feedback and requirements.

A table indicating the comparative performance during the last 2 years is given below:

ZTL commenced commercial operations from April, 1998 and achieved an income of around Rs 79 lakhs with a marginal profit of less than Rs 1 lakh. However, during the second year of operations, within first 11 months , the company has achieved an income of Rs 130 lakh with a net profit of around Rs 43 lakhs.

The company’s products are well-established in the domestic market and the company is targeting to export the existing and proposed simulators. Going by the response received at the International Defence Exhibition held in Abu Dhabi , the company is confident of making a breakthrough in exports as well.

Working Capital Cycle:

The company has a normal working capital cycle and there has not been any difficulty in inventory and receivable management, to date. This being a high technology and software intensive product the company has been managing the working capital needs out of the long term sources rather than depending on bank credit. Even the future working capital resources are being mobilized from long-term sources.

There have been no unusual or infrequent transactions since the company commenced commercial operations.

There have been no significant economic changes that materially affected or likely to affect the income from continuing operations.

There are no known trends or uncertainties that have had or expected to have a material adverse impact on sales, income, or revenue, from continuing business.

Future variable cost as a percentage of sales are not likely to register any adverse trend. The company believes that overall margins may be stable or may reduce marginally due to competitive pressures in the company’s products.

There is no published data for the software simulation industry.

The company has introduced 1 product in the last 3 years as well as added new features to it. The company is planning to expand sales in the existing products and introduce 2 new products as mentioned elsewhere in the prospectus. There is an element of uncertainty about the market acceptance of the new products. However, since these products are being developed based on the feedback received from end users, no difficulty is envisaged in marketing the new products as well.

The business of the company is not seasonal in nature, and the sales are distributed throughout the year.

The company procures required components etc from various suppliers and supplies its products to various customers and is not dependent on few suppliers/customers.

Zen Technologies Ltd. is the only company which has indigenously designed and developed a Small Arms Training Simulator (SATS) and comparable competition is only from imported simulators. However, ZEN SATS is competitively priced in comparison to the landed cost of imported ones. The prompt after sales service being provided by the company would give a competitive edge to ZTL over imported sets.

9. BASIS OF ISSUE PRICE

The company is making the public issue of Equity Shares at par i.e at a price of Rs 10/- per share.

1. Existing profit making company engaged in manufacture of high-end multimedia weapons simulator used for training of police, paramilitary and armed forces.

2. Promoted by qualified and experienced professionals.

3. Company has satisfied client base of state police organisations and paramilitary organisations most of which are placing repeat orders for the existing range of products.

4. Research & Development Center of the company recognised as in-house R & D unit by Department of Scientific & Industrial Research.

1. Adjusted Earnings per share(EPS)

Year	EPS(Rs)	Weight
1998-99	0.05	1
1999-00	1.43*	2
Weighted average for last 2 years	0.97

* Annualised

2. Price Earnings Ratio(P/E) in relation to issue price of Rs 10/-

a) Based on the annualised EPS of the Financial Year 1999-00: 6.99

b) Based on weighted average EPS for last 2 years: 10.31

c) Industry P/E

i)Highest 329.3

ii)Lowest 23.4

iii)Average 150.5

(Source: Capital Markets dated March 6-19,2000; Category: COMPUTERS-Software-Medium/Small)

3. Return on Networth (RONW)

Year	RONW(%)Annualised)	Weight
1998-99	1.07	1
1999-00(upto 15-2-00)	18.59	2
Weighted average for last 2 years	12.75

4. Minimum return on post issue networth required to maintain EPS at Rs 1.43 is 15.71%

 

 

5. Net Asset Value per equity share (NAV)

There have been no issues made by companies under the same management in the last three years.

There is no outstanding litigation pending against the company pertaining to matters likely to affect the operations and finances of the company.

1. There is no default in meeting statutory dues .
2. No criminal proceedings have been launched against the company for any of the offences under the enactment specified in Paragraph I of Part I of Schedule XIII to the Act.

1. There is no outstanding litigation pending against the Promoters and Directors of the Company
2. There is no default in meeting statutory / bank / institutional dues and towards holders of any financial instrument.
3. No criminal proceedings have been launched against the promoters/directors for any of the offences (including past cases) under the enactment specified in Paragraph I of Part I of Schedule XIII to the Act or otherwise.

There are no Concerns / Ventures promoted by the Promoters of the Company

The Directors of the company undertake that in their opinion there are no circumstances, since the date of last financial statements disclosed in the prospectus, that would materially and adversely affect or is likely to affect the trading or profitability of the company or the value of its assets or its ability to pay its liability within the next 12 months.

The investor grievances against the company will be handled by the Registrars & Transfer Agents viz. Karvy Consultants Ltd in consultation with the company. To handle investor grievances, the company has appointed Mr Bheema Reddy as Compliance Officer. He will supervise redressal of complaints received from the investors at the office of the company as well as Registrars to the Issue and ensure timely redressal.

1. The company has availed of rupee term loan of Rs.100 lakhs from IDBI out of which an amount of Rs.47.08 lakhs is outstanding as on January 01, 2000. At the option of IDBI, the loan is convertible into equity shares at par during the currency of the loan. Conversion of loan into equity would result in dilution of equity capital.

2. For its proposed expansion project, the company has yet to

• identify the premises
• place orders for some of the items of plant & machinery
• recruit suitable personnel
• apply to APTRANSCO for power connection
• obtain NOC from Pollution Control Board ( PCB )
• identify the overseas marketing office

Management Perception: The company is presently operating from leased premises and the product development work is already in progress. The new premises are being acquired in order to have a well laid out integrated facility. The delay in acquisition of new premises is unlikely to have any significant impact on the product development work. The company has already placed orders for some of the items of plant & machinery and orders for the rest of the items are proposed to be placed shortly. The company shall recruit suitable personnel at the appropriate time. For product development, the company is using the services of existing personnel. The company shall take necessary steps for obtaining power connection and NOC from PCB at the appropriate time. As regards overseas office, the company has decided to open its marketing office at London and is taking suitable steps in this regard.

1. The company has yet to receive the grant of Rs 60 lakh from DSIR for the proposed project. Non receipt/delay in receipt of the grant is likely to impact the cost of the project and its timely implementation.

Management Perception : The company has already applied for the above grant and is confident of getting the same. In the unlikely event of non receipt of grant, the shortfall would be met from additional contribution from promoters by way of unsecured loans. In view of the low debt equity, company also has the option to borrow the amount.

1. The implementation of the original project of the company was delayed by about one year and commercial production commenced only in April 1998 as against April 1997 originally envisaged .

Management Perception: Implementation of the venture was delayed due to delay in obtaining orders for its products.

6. The company was granted reschedulement of principal, waiver of penal interest, liquidated damages, other charges, etc. by IDBI due to delay in implementation of the project.

Management Perception: There has been no change in the terminal date of repayment schedule of the principal installments. The company has no overdues to IDBI as on date.

6. The new products being developed by the company are still at preliminary stage and the commercial acceptability of the same is not known.

Management Perception: These products are being developed by the company based on the feedback received from the existing/prospective customers. The company is confident about the commercial acceptability of these products.

7. There is expected to be a delay of about 3 months in implementation of the proposed expansion project. Delay in implementation of the project might result in cost overrun and since the promoters are first generation promoters, the company may have to resort to borrowings for meeting any major cost overrun.

Management Perception : Delay in implementation of the project is unlikely to have any major impact on the operation of the company since the product development work is already commenced at the existing premises. The company has comfortable debt equity ratio and can resort to borrowings, if required, for meeting the cost overrun.

8. As the company's products are based on high-end technology, very high rate of obsolescence due to technological changes is likely to affect company's operations.

Management Perception : The company is conscious of the above risk and intends to upgrade the technology on a continuous basis.

9. The highly technical nature of the work makes the company dependent on its key personnel.

Management Perception : The company has been promoted by qualified promoters. The company has well defined Human Resource Development policies laying emphasis on career planning/development of the key management personnel by providing market related perquisites, incentives etc. The company does not envisage any major difficulty on this account.

10.The project has been appraised by IDBI and IDBI has agreed to subscribe to the equity capital of the company to the extent of Rs.100 lakhs. However, the subscription amount is yet to be released.

Management Perception : The company is likely to enter into a subscription agreement shortly and does not envisage any difficulty in obtaining the subscription.

11.The Book Value of company's equity share of Rs.10 each stood at Rs.8.02 per share as on February 15, 2000.

Management Perception : This was mainly on account of Misc. expenses not written off to the extent of Rs.112.85 lakhs representing the R & D and market development expenses which the company proposes to write off over a period of 10 years.

12. The company has yet to receive approval from competent authority for patenting of its Zen SATS.

Management Perception :The company has already applied for the patents of its Zen SATS and is confident of getting the approval of competent authorities.

13.Company's original project, which involved more than the normal risk, was sanctioned assistance by IDBI under its Venture Capital Scheme.

Management Perception :The company has completed the project and the product viz. Zen SATS has been successfully developed.

14.Company has been supplying its products to Government departments/agencies. The receipt of orders/dues from these departments/agencies depends on the budgetary allocation/ availability of funds.

Management Perception :The company has been able to procure orders and recover its dues. No difficulty is envisaged by the company in this regard.

1.Competition from imports and future entrants into the software industry.

Management Perception: The Company has a track record of timely execution of the orders. The company proposes to upgrade its products by incorporating latest advancements in the technology to stay ahead of its competitors

2.The present growth rates in the software industry are high and are not sustainable.

Management Perception: The Company has a niche market with sufficient growth potential

3.Any adverse change in the Government Policies towards the Software industry may affect the financial performance of the Company.

Management Perception: The company feels that govt. policies are unlikely to be detrimental to the interest of software industry.

1. Investors are advised to refer to the paragraph on "Basis of Issue Price" appearing later in this Prospectus before making an investment decision in respect of this issue.
2. Investors are advised to refer to "Notes to Accounts" appearing on Pages 40 and 42-44 before making an investment decision in respect of this issue.
3. Investors may please note that in the event of over-subscription, allotment shall be made on a proportionate basis in consultation with The Hyderabad Stock Exchange Limited, i.e. the Regional Stock Exchange.
4. The promoter directors do not have any business interest in Zen Technologies Ltd. except to the extent of sitting fees and remuneration, if any, payable to them. The promoters will be interested to the extent of dividend paid on shares held by them and their relatives and friends and to the extent of allotment of shares, if any, to their friends and relatives in the public issue.

Consents in writing of the Lead Manager, Directors, Auditors, Compliance Officer, Company Secretary, Bankers to the Issue, Legal Advisors and Registrars to act in their respective capacities have been obtained and filed along with a copy of this Prospectus with the Registrar of the Companies, Andhra Pradesh at Hyderabad, as required under Section 60 of the Act and none of them have withdrawn their consents upto the time of delivery of this Prospectus for registration.

M/s. Prayaga & Company, the Statutory Auditors of Zen Technologies Limited, have also given their written consent to their Report being included in the form and content in which it appears in this Prospectus, and also of the tax benefits accruing to the company and its members and all financial statements and ratios and such consent has not been withdrawn upto the time of filing of this Prospectus with the Registrar of Companies, Andhra Pradesh at Hyderabad.

Save as otherwise indicated elsewhere in the Prospectus, Zen Technologies Limited has sought no other expert opinion.

The following are the changes that have taken place in the Board of Directors of the Company during the last three years:

**The company was originally promoted by S/Shri Ashok Atluri, Ravi Kumar, Selwyn Samuel and A.V.Rao. Subsequently, Mr Selwyn Samuel and Mr A.V.Rao stepped down from the Board due to their pre-occupation and they have divested their shareholding in favour of their friends and relatives.

The present issue of equity shares is being made pursuant to the resolution of the Board of Directors of the Company passed at its meeting held on September 27, 1999. In terms of Section 81(1-A) of the Act, the present public issue of equity shares has also been authorized vide a Special Resolution passed at the Extra-ordinary General Body Meeting of the members of Zen Technologies Ltd held on October 20, 1999.

The Issuer reserves the right to accept or reject any application in whole or in part at its sole, absolute and uncontrolled discretion. In case any application is rejected in full , the whole of the application money, will be refunded to the applicant. In case an application is rejected in part, the excess application money received, after adjustment of the allotment amount, will be refunded to the applicant. Such Cheques or Demand Drafts will be payable at par at all centres where applications are accepted, subject to RBI guidelines issued in this regard from time to time, and bank charges, if any, for encashment will be payable by the applicant. Letters of Allotment/Share Certificates/Refund Orders, as the case may be, will be despatched by Registered Post , at the sole risk of the applicant, to the first named /sole applicant's address within 10 weeks from the date of closure of the Issue. As per the Listing Guidelines, the company will pay interest @15% per annum (to all applicants except applications made through stockinvests), if there is delay in refund beyond 30 days from closure of the issue. In case of joint applications, refunds/pay orders, if any, will be made out in the first applicant's name and all communication will be addressed to the first applicant.

The company has given an undertaking to make available the requisite funds to the Registrars to the Issue to despatch Refund Orders/ Allotment Letters/ Certificates by Registered Post.

The Issuer will inform the applicants in respect of allotments made or applications rejected by despatch of Acceptance Letters/Share Certificates/Letters of Regret together with refund cheques or pay orders or stockinvests, as indicated below, at the applicant's sole risk to the first named /sole applicant within 70 days of the closure of this Issue, provided the Issuer as far as possible, will allot the equity shares within 30 days from the date of closure of the Issue and shall pay interest, except for stockinvest, @15% p.a. for the delayed period if the allotment is not made and/or the refund orders are not despatched within 30 days from closure of the Issue.

The Issuer will ensure despatch of Refund Orders , if any, of the value upto Rs 1500 Under Certificate of Posting(UCP) and refund orders above Rs 1500, and Share Certificates by Registered Post only. The issuer would also make available adequate funds to the Registrars to the issue for the purpose of despatch of refund orders. The Issuer reserves full, unqualified and absolute right to accept or reject an application either in whole or in part and in either case without assigning reasons.

Refunds will be made by cheques or pay orders or demand drafts, drawn on the bank(s) as appointed by the company as Refund Bankers(s). Bank charges, if any, for encashing such cheques or pay orders or demand drafts at other centres will be payable by the applicants. Such cheque or pay order or demand draft will however be payable at par at places where the applications are received, subject to RBI guidelines in this regard.

No receipt will be issued for Application Money. However, the Bankers to the Issue receiving the applications will acknowledge receipt by stamping and returning the detachable acknowledgement slip at the bottom of each Application Form.

The procedure for applications made by cash/cheque/bank drafts will apply mutatis mutandis to applications accompanied by stockinvest except the following:

1. In case of non-allotment, the Registrars to the Issue shall directly return the Stockinvest to the applicant(s) along with the stamp "CANCELLED" and/or "NOT ALLOTTED" across the face of the instrument within 70 days from the closure of the issue.

2. On allotment / partial allotment, the Registrars to the Issue shall fill in the amount (which will be equal to or less than the amount filled by the investor) before presenting the Stockinvest to the respective issuing bank for payment to the extent of allotment. The issuing bank will lift the lien on the balance amount, if any, of the deposit.

3. Inquiries relating to applications submitted with Stockinvest may be addressed only to the Registrars to the Issue and not to the issuing bank.

ISSUE OF SHARE CERTIFICATES

The equity share certificates will be despatched through Registered Post within two months from the date of allotment in accordance of section 73/113 of the Companies Act, 1956 or within such further time as may be allowed by the Stock Exchanges at Hyderabad, and / or such other authority (ies) as may be necessary.

SCHEDULE AND BASIS OF ALLOTMENT

In the event of this Issue of equity shares being oversubscribed, the basis of allotment will be finalised by the Board of Directors in consultation with Hyderabad Stock Exchange. Investors may note that in case of over subscription, allotment will be on a proportionate basis in marketable lots .

The basis of allotment for the net public offer will be made in the following manner:

1. A minimum of 50% of the Issue of equity shares to the public shall be initially made available for allotment to individual applicants who have applied for 1000 equity shares or less.

2. The balance 50% of the Issue of equity shares to the public, shall be made available for allotment to applicants, including bodies corporate / institutions and individual applicants who have applied for more than 1000 equity shares.

3. The undersubscribed portion of the Issue, if any, in any/ either of the categories specified in (1) or (2) above shall be made available for allotment to applicants in the other category, if so required.

The allotment will be in marketable lots of 100 equity shares on a proportionate basis as explained below:

a) Applicants will be categorised according to the number of equity shares applied for.

b) The total number of equity shares to be allotted to each category as a whole shall be arrived at on a proportionate basis, i.e. the total number of equity shares applied for in that category (number of applicants in the category x number of equity shares applied for) multiplied by the inverse of the oversubscription ratio.

c) Number of the equity shares to be allotted to the successful applicants will be arrived at on a proportionate basis, i.e. total number of equity shares applied for by each applicant in that category multiplied by the inverse of the oversubscription ratio of that category.

d) In all the applications where the proportionate allotment works out to less than 100 equity shares per applicant, the allotment shall be made as follows:

i) Each successful applicant shall be allotted a minimum of 100 equity shares; and

ii) The successful applicants out of the total applicants for that category shall be determined by draw of lots in such manner that the total number of equity shares allotted in that category is equal to the number of equity shares worked out as per (b) above.

e) If the proportionate allotment to an applicant works out to a number that is more than 100 but is not a multiple of 100 (which is the marketable lot), the number in excess of the multiple of 100 would be rounded off to the higher multiple of 100, if that number is 50 or higher. If that number is lower than 50, it would be rounded off to the lower multiple of 100. All applicants in such categories would be allotted equity shares arrived at after such rounding off.

f) If the equity shares allotted on a proportionate basis to any category is more than the equity shares allotted to the applicants in that category, the balance available equity shares for allotment shall be first adjusted against any other category, where the allotted equity shares are not sufficient for proportionate allotment to the successful applicants in the category. The balance equity shares, if any, remaining after such adjustment will be added to the category comprising applicants applying for minimum number of equity shares.

g) The allotment will be made in the market lot of 100 equity shares and in multiples thereof. The allotment shall be made in market lot within the size of the issue.

The Company agrees that there will be at least 5 public shareholders for every Rs. 1,00,000/- of net capital offer made to the public out of the Public Issue.

Explanation: For the purpose of this clause a public shareholder shall mean a person who is neither a promoter nor employee nor holds more than 1% equity capital of Zen Technologies Limited.

UTILISATION OF ISSUE PROCEEDS

The monies received in respect of the Issue will be kept in a separate bank account and the Issuer will not have access to such funds unless allotment of equity shares is made in consultation with the Hyderabad Stock Exchange Limited and listing approval is obtained from Hyderabad Stock Exchange, where listing of equity shares is sought.

The Board of Directors of the Issuer confirms and certifies that:

a All monies received in this Issue shall be transferred to a separate bank account referred to in sub-section (3) of the Section 73 of the Act.

b Details of all the monies utilised out of the proceeds of the Public Issue shall be disclosed under an appropriate separate head in the Annual Report of the Issuer indicating the purpose for which such monies had been utilised, for all the financial years till all the monies are fully utilised and

c Details of all unutilised monies out of the proceeds of the Public Issue, if any, shall be disclosed under an appropriate separate head in the Annual Reports of the Issuer indicating the form in which such unutilised monies have been invested.

COMPANY INFORMATION

Registered Office

Zen Technologies Limited

40, Radhaswamy Colony, Sikh Road

Secunderabad – 500 009

Andhra Pradesh, India.

Telephone no.: 91 - (040) 7818534, 7843279

Fax no.: 91 - (040) 7843279

E-mail: zentech@hd1.vsnl.net.in

LEAD MANAGERS TO THE ISSUE

Industrial Development Bank of India

IDBI Tower, WTC Complex,

Cuffe Parade, Mumbai 400 005

Telephone no.: (022) - 2189111

Fax no.: (022) -2181195

REGISTRARS TO THE ISSUE

Karvy Consultants Limited

Karvy House, 46, Avenue 4,

Street No 1, Banjara Hills

Hyderabad-500 034

Tel:040-3312454,3320251/751/752

Fax-040-3311968

e mail:karvy.hyd@karvy.sprintrpg.ems.vsnl.net.in

AUDITORS TO THE COMPANY

M/s. Prayaga & Company

Chartered Accountants

Hyderbasti

Secunderabad – 500 003

Andhra Pradesh, India.

Telephone no.: (040) – 7543008, 7542721

LEGAL ADVISORS TO THE ISSUE

Mr. V.S. Raju,

High Court-Advocate,

103,Dhanunjaya Apartments,

Banjara Hills,

Hyderabad

COMPANY SECRETARY

The Company is presently availing the services of a practicing company secretary on a retainership basis. However, the company is in the process of recruiting a qualified company secretary on full time basis.The company undertakes to appoint a company secretary before filing the prospectus with ROC.

BANKERS TO THE COMPANY

Global Trust Bank Limited

SMR Sartaz Complex, Sikh Road

Secunderabad – 500 009

Andhra Pradesh, India.

Telephone no. : (040) 7810151

Fax no. : (040) 7810184

BANKERS TO THE ISSUE

 

COMPLIANCE OFFICER

Mr. P.Bheema Reddy

Finance Manager

Zen Technologies Limited

Plot No. 40, Radhaswamy Colony, Sikh Road

Secunderabad – 500 009

Andhra Pradesh, India.

Telephone no.: (040) 7843279, 7818534

Fax no.: (040) 7843279

E-mail: zentech@hd1.vsnl.net.in

All the investors / applicants may please note that in case of any pre-issue / post-issue queries or difficulties, they should contact the Compliance Officer.

BROKERS TO THE ISSUE

All members of recognised Stock Exchanges in India can act as Brokers to the Issue.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B. FINANCIAL INFORMATION

AUDITORS REPORT

To,

The Board of Directors

Zen Technologies Limited

40, Radhaswamy Colony, Sikh Road

Secunderabad – 500 009

Dear Sirs,

We have examined the following statements, as attached herewith and stamped by us for purposes, with the audited financial statements, books of account and other relevant records maintained by ZEN TECHNOLOGIES LIMITED (the company) as produced to us and according to the information and explanations given to us by the Company, have found them to be in accordance therewith:

On the basis of our verification of the above mentioned statements and particulars and as per the information and explanations given to us by the Company, we certify that the same have been prepared in accordance with the requirements of Clarification XIII & XIV issued by SEBI and in accordance with the requirements of Part II of Schedule II of the Companies Act, 1956 and we further certify that the same are true and correct.

1.PROFIT & LOSS ACCOUNT:

The profits of the company for the preceding financial year ended 31-3-99 and for the period ended on15-2-2000 after making such adjustments as are, in our opinion appropriate and subject to the notes appearing hereinafter were as follows: -

	Year ended 31-3-1999	Period 1-4-99 to 15-2-2000
	(Rs. in lakhs)	(Rs. in lakhs)
Income:
Sales	71.02	121.16
Other Income	5.28	3.78
Increase in Inventories	2.49	4.98
Total	78.79	129.92
Expenditure:
Raw Materials Consumed	18.31	25.83
Other Manufacturing Expenses Central Excise Duty	3.60 0.92	2.70 4.71
Sales Tax Administration & Selling Expenses Payments & Benefits to Employees Interest & Financial Charges	1.63 15.90 1.29 23.85	2.37 26.27 2.79 13.87
Depreciation Income Tax Miscellaneous Expenses Written off	4.43 0.11 8.09	1.47 0.02 7.10
Net Profit	0.66	42.79
Total	78.79	129.92

NOTE:

1. Other income includes Service charges and interest etc..

2. Since the Company has commenced the commercial operations of the simulators project from 1-04-1998,the Profit &Loss Account has been drawn up only for the year 31-03-1999 and up to 15-02-2000.
3. The company also has a trading turnover of Rs 11.80 lakhs for the year ended March 31,1995 with a Net Profit of Rs 0.61 lakhs and since 1995 the company has been concentrating on development of simulators, the commercial operations of which have commenced in April 1998.