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Definition of 'Cost Of Acquisition'A business sales term referring to the expense required to attain a customer or a sale. In settinga marketing and sales strategy, a company must decide what the maximum cost of acquisitionwill be, which effectively determines the highest amount the company is willing to spend to

attain each customer.

Investopedia explains 'Cost Of Acquisition'This cost is tied to marketing and sales campaigns because the more streamlined thosecampaigns become, the lower the customer cost of acquisition will be. Conversely, in a high-budget marketing and sales campaign, the acquisition cost may be relatively high depending onhow many sales or customers the campaign draws in

Read more: http://www.investopedia.com/terms/c/costofacquisition.asp#ixzz1rGfBw68l

Amortization of Telecommunications Spectrum Licenses

We own the rights to use and operate specified spectrums in some jurisdictions over a certain period

of time, through annual minimum fees plus a variable portion depending on the future revenues from the

services. License fees payments, the discounted value of the fixed annual fees to be paid over the license

period, and certain other direct costs incurred prior to the date the asset is ready for its intended use are

capitalized. Capitalized license fees are amortized from the date the asset is ready for its intended use until

the expiration of the license.

Interest is accreted on the fixed annual fees and charged to interest expense. Variable license fees are

recognized as period costs.This excerpt taken from theHTX 20-Ffiled May 9, 2008.

Amortization of Telecommunications Spectrum Licenses

We own the rights to use and operate specified spectrums in some jurisdictions over a certain period

of time, through annual minimum fees plus a variable portion depending on the future revenues from the

services. License fees payments, the discounted value of the fixed annual fees to be paid over the license

period, and certain other direct costs incurred prior to the date the asset is ready for its intended use are

capitalized. Capitalized license fees are amortized from the date the asset is ready for its intended use until

the expiration of the license.

http://www.investopedia.com/terms/c/costofacquisition.asp#ixzz1rGfBw68lhttp://www.wikinvest.com/stock/Hutchison_Telecommunications_International_(HTX)/Filing/20-F/2008/F2620298http://www.wikinvest.com/stock/Hutchison_Telecommunications_International_(HTX)/Filing/20-F/2008/F2620298http://www.wikinvest.com/stock/Hutchison_Telecommunications_International_(HTX)/Filing/20-F/2008/F2620298http://www.investopedia.com/terms/c/costofacquisition.asp#ixzz1rGfBw68lhttp://www.wikinvest.com/stock/Hutchison_Telecommunications_International_(HTX)/Filing/20-F/2008/F2620298

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GROWTH CAPITAL AND EQUITY ASSISTANCE FOR MSMES (GEMS)

One of the major factors inhibiting the growth of Micro, Small and

Medium Enterprises (MSMEs) is the non availability of adequate owners

capital i.e margin. External equity i.e the PE/ VC investment is also rare

due to various issues in MSMEs viz small ticket size, high transaction

cost, difficulty in understanding equity related complexities in MSME

promoters, valuation and exit issues, lack of preparedness/ willingness

in promoters in diluting ownership/ control, etc.

Due to shortfall in meeting margin requirements, MSMEs often languish

to get adequate working capital, which is the life and blood of their

business. MSMEs also find it difficult to raise loan assistance for other

growth requirements viz investments in marketing, brand building,

creating distribution network, technical know-how, software purchase,

investment in energy efficiency and quality improvement equipments,

R&D, etc., mainly as these investments by nature are non-asset

creating (i.e. intangible assets) and hence do not provide security

comfort to the lenders.

To obviate the aforesaid problems of MSMEs, SIDBI has come out with a

scheme Growth Capital and Equity assistance for MSMEs (GEMs).

Under the scheme, assistance in the form of equity/ quasi-equity is

provided to deserving MSMEs.

In India, more than 90% of the MSMEs are constituted as partnership/

proprietorship concerns, where investment in pure equity form is

difficult. Further, SIDBI also understands that most of MSME businesses

in India are family owned with value built over generations. Due to

these reasons, Indian MSMEs find it difficult to dilute large part of

ownership and control in favour of an external entity. Looking to this,

SIDBI, based on best global practices, has come out with various

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innovative financial instruments for MSMEs of different sizes and

constitutions, including Subordinated debt (SD)/ Optionally Convertible

Subordinated Debt (OCSD), which is treated as quasi-equity by SIDBI.

While SIDBI provides Equity/ equity linked assistance for deserving

corporatised MSMEs, SD provides quasi equity support to all

constitutions of MSMEs. Subordinated capital is a highly popular

instrument among MSMEs globally, with minimal equity complexities

and simpler documentation and hence quick to deliver and less costly

for MSMEs. It is provided on the strength of business/ backing of cash

flows rather than asset cover/ collateral security. The initial longer

moratorium on principal installments ensures greater chances of success

of the ventures.

Apart from direct funding, SIDBI, in order to reach out to a wider

segment of MSMEs, will use various delivery channels like VC Funds /

NBFCs etc as Channel Partners, Credit Delivery Arrangements with

select NBFCs for providing growth capital to MSMEs for their margin and

other bonafide growth requirements.

Growth Capital and Equity Assistance Scheme

for MSMEs (GEMs)What is Growth

Capital and Equity

Assistance for

MSMEs (GEMs)

o GEMs is given on the strength of business

model/management strength & is not dependent on assetcover/collateral.

o It could be used to bridge the gap between the two chief

sources of finance viz. bank loans (senior debt) andpromoters capital.

o SIDBI offers this assistance in form of mezzanine/

convertible instruments, subordinated debt and equity (indeserving cases). This quasiassistance is collateral free,has higher moratorium on repayment and a flexiblestructuring.

In view of the above, the expected rate of return to SIDBI is

higher than that on secured loan assistance.o

Need for GEMs for

MSMEs

o Promoters financial resources are generally limited and

might not meet the growth aspirations of the business.o Hence the need for equity/quasi equity type of assistance

to enable them to leverage it for conventional bank/debtfunding.

o MajorityMSMEs are generally not able to raise external

equity from Venture Capitalists / PE investors due to

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various issues viz. valuation complexities, lack of clearexit options, small ticket/deal size, expensive duediligence etc.

o Assistance for non asset creating investments is generally

difficult under normal debt schemes.Large number of MSMEs have a non-corporate constitution and

hence cannot raise equity capital.o

Uses of GEMso Bridging the gap in means of finance for scaling up/

expansion/ modernization projects.o For intangible investment viz. Marketing/R&D/product

development/IPR filing etco Working capital margin requirements.

Normal Working capital requirements are not eligible under thescheme.

o

Products o Subordinate debt(with/without conversion options)

o Mezzanine/ Convertible instruments viz Optionally

Convertible Debt/ Debentures, Redeemable PreferenceShares.Equity (on a selective basis) where business model/exit optionsclearly support such investment.

o

Eligibilityo an MSME as per the definition of Government of India

(MSMED Act) And

o SIDBIs existing customers (meeting internal rating

criteria)

or

Units with past 3 years of profitability and 2 years

of satisfactory banking credit track record(meeting internal credit rating criteria)

o Acceptable external rating from CRISIL, ICRA, D&B,

SMERA etc would be desirable.

Security (in case of debtbased investments)

o No collaterals

o Residual charge on available assets of the beneficiary unit

and assets created out of the assistanceSIDBI assistanceo Personal guarantee of the promoters

Rate of returno Please see Interest rate structure chart

Others termso Tenure of assistance could be upto 7 years (with upto 3

years moratorium on principal repayments)

o Subordinated Debt restricted to 1/3rd of Post project

tangible net-worth@ of the unit.

o DER/ DSCR norms as per internal guidelines of the bank.

Advantages too MSMEs can access long term structured assistance

especially for investments in intangible assetso MSMEs can leverage sub debt assistance for raising higher

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MSMEsdebt funds from SIDBI

o As most of the structures are self liquidating in nature,

MSMEs do not face various complexities viz. enterprisevaluation, equon exit issues, etc.

How to approach

SIDBI for Risk

capital

o Customers desirous of availing assistance under GEMs

may send brief information about their business as perAnnexure enclosed.

o The duly filled, signed copy may be mailed/ sent to nearby

SIDBI office. A copy may also be mailed to

sfrc@sidbi.infor preliminary approval of SIDBI.o Once, the proposal is found in-principally eligible by

SIDBI, the detailed application would be issued by SIDBIto the customer.

@ Post project Tangible net worth' would mean Tangible net worth as

on date of last audited balance sheet + capital (including share

premium) infused after the date of last audited balance sheet till the

date of present proposal for assistance + additional capital (including

share premium) proposed in the project.

Tangible net worth means Capital + preference shares (excluding that

part which is redeemable within 3 years) + Share premium + Reserves

and Surplus Accumulated losses Revaluation reserves - Misc. exp.

not written off Intangible/ Fictitious assets + capital inducted after

date of last audited balance sheet.

mailto:sfrc@sidbi.inmailto:sfrc@sidbi.inmailto:sfrc@sidbi.in