Sep 7, 2011 ... of Companies, Madhya Pradesh and Chattisgarh. Subsequently ...... required
under the Madhya Pradesh Factories Rules, 1962. Accordingly ...
Draft Red Herring Prospectus Dated: September 07, 2011 Please read Section 60B of the Companies Act, 1956 100 % Book Built Issue
JIJI INDUSTRIES LIMITED (Formerly known as “Krishna Profiles Private Limited”) (Corporate Identification Number of our Company is U27203MP2003PLC015775) (Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a private limited company with the Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a public limited company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May 30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. For more details on the conversion from private limited company to public limited company, changes in the name and Registered Office of our Company, please see the Section “History and Certain Corporate Matters” on page 97 of this Draft Red Herring Prospectus) Registered and Corporate Office: 33-34, Rambali Nagar, Sangam Nagar Road, Indore - 452001, Madhya Pradesh Telefax: +91 731 4046002, Website: www.jijiindustries.net, Email:
[email protected] Contact Person: Ms. Ranjana Singh, Company Secretary & Compliance Officer PROMOTERS OF OUR COMPANY: MR. GAURAV MUNGAD, MR. VAIBHAV MUNGAD, MR. OMPRAKASH MAHESHWARI AND MUNGAD STRIPS AND ALLOYS PRIVATE LIMITED PUBLIC ISSUE OF 90,00,000 EQUITY SHARES OF ` 10 EACH OF JIJI INDUSTRIES LIMITED (“JIJI” OR “JIL” OR “THE COMPANY” OR “THE ISSUER”) FOR CASH AT A PRICE OF ` [•] PER EQUITY SHARE (“ISSUE PRICE”) INCLUDING SHARE PREMIUM OF ` [●] PER EQUITY SHARE AGGREGATING TO ` [●] LAKHS (THE “ISSUE”). THE ISSUE WILL CONSTITUTE 48.91% OF THE FULLY DILUTED POST ISSUE PAID UP CAPITAL OF OUR COMPANY THE FACE VALUE OF THE EQUITY SHARES IS ` 10 EACH THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY OUR COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGER AND WILL BE ADVERTISED AT LEAST TWO WORKING DAYS PRIOR TO THE BID / ISSUE OPENING DATE. In case of revision in the Price Band, the Bidding / Issue Period shall be extended for atleast three additional working days after such revision, subject to the Bidding / Issue Period not exceeding ten working days. Any revision in the Price Band, and the revised Bidding / Offer Period, if applicable, shall be widely disseminated by notification to the Self Certified Syndicate Banks (“SCSBs”), the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”), by issuing a press release and also by indicating the change on the websites of the Book Running Lead Manager and at the terminals of the Syndicate Members. The Issue is being made through a 100% Book Building Process wherein not more than 50% of the Issue shall be available for allocation on a proportionate basis to Qualified Institutional Buyers (the “QIB Portion”). Further, 5% of the QIB Portion shall be available for allocation on a proportionate basis to mutual funds, and the remaining QIB portion shall be available for allocation on a proportionate basis to all Qualified Institutional Buyers, including mutual funds, subject to valid bids being received at or above Issue Price. Further not less than 15% of the Issue shall be available for allocation on proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders subject to valid bids being received from them at or above the Issue Price. All QIB Bidders and Non Institutional Bidders shall compulsorily apply through Application Supported by Blocked Amount (“ASBA”) process. Retail Individual Bidders have an option to participate in this Issue through the ASBA process. Any Bidder participating in the Issue through the ASBA process should provide the details of their respective bank accounts in which the corresponding Bid amounts will be blocked by Self Certified Syndicate Banks. For details in this regard, specific attention is invited to "Issue Procedure" on page 191 of the Draft Red Herring Prospectus. RISK IN RELATION TO FIRST ISSUE This being the first issue of Equity Shares of the Issuer, there has been no formal market for the Equity Shares of the Issuer. The face value of the Equity Shares is ` 10 per Equity Share and the Issue Price is [●] times of the face value at the lower end of the Price Band and [●] times of face value at the higher end of Price Band. The Issue Price (has been determined and justified by the Book Running Lead Manager and the Issuer as stated under the paragraph on “Basis for Issue Price” given on Page 46 of the Draft Red Herring Prospectus) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/ or sustained trading in the Equity Shares of the Issuer or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Offering. For taking an investment decision, investors must rely on their own examination of the Issuer and the Offer including the risks involved. The Equity Shares offered in this Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors is invited to the section titled “Risk Factors” given on Page xi of the Draft Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY Our Company having made all reasonable inquiries, accepts responsibility for and confirms that this Offer Document contains all information with regard to our Company and the Issue, which is material in the context of the Issue, that the information contained in the Offer Document is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omissions of which makes this offer document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). In-principle approvals for the listing of the equity shares of our Company from BSE and NSE has been received vide their letters dated [●] and [●] respectively. For the purpose of this Issue, BSE shall be the Designated Stock Exchange. IPO GRADING This Issue has been graded by Credit Analysis and Research Limited and has been assigned [●] indicating [●]. The IPO Grading is assigned on a 5 point scale from 1 to 5 with a Grade 5/5 indicating strong fundamentals and 1/5 indicating poor fundamentals. For further details please see the chapter titled “General Information” on Page 14 and “Annexure” on Page [●] of Draft Red Herring Prospectus.
BOOK RUNNING LEAD MANAGER Hem Securities Limited 14/15 Khatau Building, 40, Bank Street, Mumbai - 400 001 Tel: +91 22 2267 1543 / 44 Fax: +91 22 2262 5991 E- Mail:
[email protected] Website: www.hemonline.com Contact Person: Mr. Rakesh Bhalla SEBI Regn. No. INM000010981 Bid / Issue Opens on : [●]
REGISTRAR TO THE ISSUE BIGSHARE SERVICES PRIVATE LIMITED E-2, Ansa Industrial Estate, Saki Vihar Road, Saki Naka, Andheri (East), Mumbai - 400 072 Tel.: +91 22 4043 0200 Fax: +91 22 2847 5207 E-Mail:
[email protected] Website: www.bigshareonline.com Contact Person: Mr. Mallah S. SEBI Regn. No.: INR 000001385
BID / ISSUE PROGRAMME Bid / Issue Closes on : [●]
TABLE OF CONTENTS
SECTION I 1.1 1.2 1.3 1.4 1.5 II 2.1 2.2 2.3 III 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 IV 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 V 5.1 5.2 VI 6.1 6.2 VII VIII 8.1 8.2 8.3 IX X XI
CONTENTS General Definitions Conventional / General Terms Issue Related Terms Company and Industry Related Terms Abbreviation Risk Factors Certain Conventions; Use Of Market Data And Currency Of Financial Presentation Forward Looking Statements Risk Factors Introduction Summary The Issue General Information Capital Structure Of Our Company Objects Of The Issue Basic Terms Of Issue Basis For Issue Price Statement Of Tax Benefits About The Company Industry Overview Our Business Regulations And Policies History And Certain Corporate Matters Our Management Our Promoters Our Promoter Group And Group Companies Dividend Policy Financial Information Of The Company Financial Statements Of The Company Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Legal And Other Information Outstanding Litigations And Material Developments Government Approvals Other Regulatory And Statutory Disclosures Issue Related Information Terms Of The Issue Issue Structure Issue Procedure Main Provisions Of Articles Of Association Of Our Company Material Contracts And Documents For Inspection Declaration
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PAGE NO. i i i Ii vi vii ix ix x xi 1 1 13 14 23 34 45 46 51 59 59 76 90 97 100 118 122 126 127 127 157 167 167 171 175 185 185 189 191 221 271 273
SECTION I ‐ GENERAL 1.1 ‐ DEFINITIONS
Term Description “Jiji Industries Limited” or Unless the context otherwise requires, refers to, Jiji Industries Limited, a public “JIL” or “ JIJI” or “the limited Company incorporated under the Companies Act, 1956 having its Company” or “our Company” registered office at 33‐34, Rambali Nagar, Sangam Nagar Road, Indore ‐ 452001, or “ Issuer” or “ We” or “ Our” Madhya Pradesh (formerly known as “Krishna Profiles Private Limited”) or “ Us “ 1.2 ‐ CONVENTIONAL / GENERAL TERMS Terms Description Articles / Articles of Articles of Association of Jiji Industries Limited, as amended from time to time. Association/AOA Act or Companies Act The Companies Act, 1956, as amended from time to time. Statutory Auditors / Auditors The Auditors of Jiji Industries Limited i.e. M/s Gandhi Dhakad Gupta & Company, Chartered Accountants having its office at 508, Chetak Centre, 12/2, R.N.T. Marg, Indore, Madhya Pradesh. Board of Directors / the Board The Board of Directors of Jiji Industries Limited, including all duly constituted / our Board Committees thereof. Directors / our Directors The Director(s) of Jiji Industries Limited, unless otherwise specified. Depositories Act The Depositories Act, 1996, as amended from time to time. Depository / Depositories A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time, in this case being NSDL and CDSL. Depository Participant / DP A depository participant as defined under the Depositories Act. Director(s) Director(s) of Jiji Industries Limited, unless otherwise specified. Equity Shares Equity Shares of our Company of Face Value of ` 10 each unless otherwise specified in the context thereof. GIR Number General Index Registry Number. Group Companies The companies, firms and ventures disclosed in “Our Promoter Group and Group Companies” on page 122 promoted by the Promoters, irrespective of whether such entities are covered under section 370(1)(B) of the Companies Act, 1956. MOA / Memorandum / Memorandum of Association of Jiji Industries Limited, as amended from time to Memorandum of Association time. Non Residents A person resident outside India, as defined under FEMA. NRIs / Non‐Resident Indians A person resident outside India, as defined under FEMA and who is a citizen of India or a Person of Indian Origin under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. Person or Persons Any individual, sole proprietorship, unincorporated association, unincorporated organization, body corporate, corporation, Company, partnership, limited liability Company, joint venture, or trust or any other entity or organization validly constituted and/or incorporated in the jurisdiction in which it exists and operates, as the context requires. Promoters Mr. Gaurav Mungad, Mr. Vaibhav Mungad, Mr. Omprakash Maheshwari and Mungad Strips and Alloys Private Limited.
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Terms Promoter Group
Description The persons and entities constituting the promoter group pursuant to regulation 2(1)(zb) of the ICDR Regulations and disclosed in “Our Promoter Group and Group Companies” on page 122. Registered and Corporate 33‐34, Rambali Nagar, Sangam Nagar Road, Indore, Madhya Pradesh‐452001, Office India. RoC Registrar of Companies, Madhya Pradesh and Chattisgarh, 3rd Floor, 'A' Block, Sanjay Complex, Jayendra Ganj, Gwalior, Madhya Pradesh. SEBI The Securities and Exchange Board of India constituted under the SEBI Act. SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to time. SEBI ICDR Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 issued by SEBI effective from August 26, 2009, as amended, including instructions and clarifications issued by SEBI from time to time. SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as amended. SICA Sick Industrial Companies (Special Provisions) Act, 1985. Stock Exchanges Bombay Stock Exchange Limited and National Stock Exchange of India Limited. 1.3 ‐ ISSUE RELATED TERMS Terms Description Allotment or Allot or Allotted The allotment of Equity Shares to successful Bidders pursuant to this Issue. Allottee A successful Bidder to whom Equity Shares are Allotted. Applicant Any prospective investor who makes an application for Equity Shares in terms of this Draft Red Herring Prospectus. Application Form The Form in terms of which the applicant shall apply for the Equity Shares of the Company. Application Supported by Means an application for subscribing to an issue containing an authorization to Block Amount (ASBA) block the application money in a bank account. ASBA Account Account maintained by an ASBA Bidder with an SCSB which will be blocked by such SCSB to the extent of the Bid Amount of the ASBA Bidder. ASBA Bid cum Application The form, whether physical or electronic, used by an ASBA Bidder to make a Bid, Form which will be considered as the application for Allotment for purposes of Red Herring Prospectus and the Prospectus. ASBA Bidder Any Bidder who intends to apply through ASBA. ASBA Revision Form The form used by the ASBA Bidders to modify the quantity of Equity Shares or the Bid Amount in any of their ASBA Bid cum Application Forms or any previous revision form(s). Banker(s) to the Company Bank of Baroda. Banker(s) to the Issue / Escrow The bank(s) which is/ are clearing members and registered with SEBI as Bankers Collection Bank(s) to the Issue with whom the Escrow Account will be opened, in this case being [●]. Basis of Allotment The basis on which the Equity Shares will be Allotted, described in “Issue Procedure ‐ Basis of Allotment” on page 212 of the Draft Red Herring Prospectus. Bid An indication to make an offer during the Bidding Period by a Bidder (including an ASBA Bidder), pursuant to submission of a Bid cum Application Form or ASBA Bid cum Application Form to subscribe to our Equity Shares at a price within the Price Band, including all revisions and modifications thereto . ii
Terms Bid Amount
Description The highest value of the optional Bids indicated in the Bid cum Application Form and payable by a Bidder on submission of a Bid in the Issue. Bid Closing Date The date after which the Syndicate and SCSBs will not accept any Bids, which shall be notified in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh. Bid cum Application Form The form in terms of which the Bidder shall make an offer to purchase Equity Shares and which shall be considered as the application for the issue of Equity Shares pursuant to the terms of this Draft Red Herring Prospectus, Red Herring Prospectus and the Prospectus including the ASBA Bid cum Application as may be applicable. Bid Opening Date The date on which the Syndicate and SCSBs shall start accepting Bids, which shall be notified in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh. Bidder Any prospective investor who makes a Bid pursuant to the terms of this Draft Red Herring Prospectus and the Bid cum Application Form, including an ASBA Bidder. Bidding Period The period between the Bid Opening Date and the Bid Closing Date, inclusive of both days during which prospective Bidders can submit their Bids, including any revisions thereof. Bid Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the Bid Price in any of the Bid options as per their Bid cum Application Forms or any previous Bid Revision Form(s). Book Building Process Book building process as provided in Schedule XI of the ICDR Regulations in terms of which this Issue is being made. BRLM / Book Running Lead The merchant banker appointed by our Company to undertake the Book Building Manager Process in respect of the Issue, in this case being Hem Securities Limited. CAN / Confirmation of The note or advice or intimation of allocation of Equity Shares sent to the Allocation Note successful Bidders who have been allocated Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, including any revisions thereof. Cap Price The higher end of the Price Band, above which the Issue Price will not be finalized and above which no Bids will be accepted, including any revisions thereof. Controlling Branches of the Such branches of the SCSBs which coordinate with the BRLM, the Registrar to the SCSBs Issue and the Stock Exchanges. Cut‐off Price Any price within the price band finalized by our Company, in consultation with the BRLM, at which only Retail Individual Bidders are entitled to bid for a bid amount not exceeding ` 2,00,000. Designated Branches Such branches of the SCSBs which shall collect the ASBA Bid cum Application Form used by ASBA Bidders and a list of which is available on http://www.sebi.gov.in/ Designated Date The date on which funds are transferred from the Escrow Account(s) to the Public Issue Account or the Refund Account, as appropriate, and the amounts blocked by the SCSBs are transferred from the bank accounts of the ASBA Bidders to the Public Issue Account, as the case may be, after the Prospectus is filed with the RoC, following which the Board of Directors shall Allot Equity Shares to the Allottees. iii
Terms Designated Stock Exchange DP ID Draft Red Herring Prospectus
Employees Eligible NRI
Equity Shares Escrow Account (s)
Escrow Agreement
First Bidder Floor Price Hem IPO Grading Agency Issue Issue Price
Mutual Fund Portion Mutual Fund(s) Non‐Institutional Bidders
Non‐Institutional Portion Pay‐in Date Pay‐in Period
Description BSE Depository Participant’s Identity. The Draft Red Herring Prospectus dated September 07, 2011, filed with the SEBI and issued in accordance with Section 60B of the Companies Act, which did not contain complete particulars of the price at which the Equity Shares are offered and the size (in terms of value) of the Issue. Permanent Employees of Jiji Industries Limited as on August 01, 2011 including both staff and workmen employees. A Non Resident Indian in a jurisdiction outside India where it is not unlawful to make an offer or invitation under the Issue and in relation to whom this Draft Red Herring Prospectus will constitute an invitation to subscribe for the Equity Shares. Equity Shares of our Company of face value of ` 10 each. Account(s) opened with the Escrow Collection Bank(s) for the Issue and in whose favour the Bidder (excluding ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount. Agreement dated [●] entered into among our Company, the Registrar, the BRLM, the Syndicate Members and the Escrow Collection Banks for collection of the Bid Amounts and remitting refunds, if any of the amounts to the Bidders (excluding ASBA Bidders) on the terms and conditions thereof. Bidder whose name appears first in the Bid cum Application Form or the Revision Form or the ASBA Bid cum Application Form. Lower end of the Price Band, at or above which the Issue Price will be finalized and below which no Bids will be accepted including any revisions thereof. Hem Securities Limited. Credit Analysis and Research Limited / CARE. This public issue of 90,00,000 Equity Shares of ` 10 each at the Issue Price, aggregating to ` [●] lakhs. The final price at which Equity Shares will be Allotted to the Bidders, in terms of this Draft Red Herring Prospectus and the Prospectus. The Issue Price will be decided by our Company in consultation with the BRLM on the Pricing Date. 5% of the QIB Portion available for allocation to Mutual Funds, on a proportionate basis i.e. 2,25,000 equity shares. Mutual fund registered with SEBI under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. All Bidders that are not QIBs (but not including NRIs other than eligible NRIs) or Retail Individual Bidders and who have Bid for Equity Shares for an amount over ` 2,00,000. The portion of the Issue being not less than 15% of the Issue i.e. 13,50,000 Equity Shares at the Issue Price, available for allocation to Non Institutional Bidders. The Bid Closing Date not later than two Working Days after the Bid Closing Date, as may be applicable. Except with respect to ASBA Bidders, the period commencing on the Bid Opening Date and extending until the Bid Closing Date.
iv
Terms
Description Price band of a minimum Floor Price of ` [●] and a maximum Cap Price of ` [●] respectively, including revisions thereof. The Price Band and the minimum Bid lot size for the Issue will be decided by our Company, in consultation with the BRLM and advertised in all editions of [●], an English national newspaper with nation‐ wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh, at least two Working Days prior to the Bid Opening Date. Pricing Date Date on which our Company in consultation with the BRLM will finalize the Issue Price. Prospectus Prospectus of our Company to be filed with the RoC in terms of Section 60 of the Companies Act, containing, inter alia, the Issue price that is determined at the end of the Book Building Process, the size of the Issue, including any addenda or corrigenda thereto. Public Issue Account Account opened with the Bankers to the Issue to receive monies from the Escrow Account(s) and from the SCSBs from the bank account of the ASBA Bidders, on the Designated Date. QIB Portion The portion of the Issue being not more than 50% of the Issue i.e. not more than 45,00,000 Equity Shares available for allocation to QIBs. Qualified Institutional Buyer or Public financial institutions as defined in Section 4A of the Companies Act, FIIs QIBs and sub‐accounts registered with the SEBI, other than a sub‐account which is a foreign corporate or foreign individual, scheduled commercial banks, Mutual Funds registered with the SEBI, multilateral and bilateral development financial institutions, venture capital funds registered with SEBI, state industrial development corporations, insurance companies registered with Insurance Regulatory and Development Authority, provident funds (subject to applicable law) with minimum corpus of ` 2,500 lakhs and pension funds with minimum corpus of ` 2,500 lakhs, the National Investment Fund set up by resolution F. No. 2/3/2005‐DD‐II dated November 23, 2005 of Government of India published in the Gazette of India, and insurance funds set up and managed by the army, navy or air force of the Union of India and insurance funds set up and managed by the Department of Posts, India. Red Herring Prospectus Red Herring Prospectus dated [●] to be filed with the RoC in terms of Section 60B of the Companies Act, which will not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue, and which will be filed with the RoC at least three days before the Bid Opening Date and will become a Prospectus after filing with the RoC after the Pricing Date. Refund Account(s) Account(s) opened with Escrow Collection Bank(s) from which refunds of the whole or part of the Bid Amount (excluding to the ASBA Bidders), if any, shall be made. Refund Bank(s) Bank(s) which is / are clearing member(s) and registered with the SEBI as Bankers to the Issue, at which the Refund Accounts will be opened, in this case being [●]. Registrar / Registrar to the Bigshare Services Private Limited. Issue Retail Individual Bidder(s) Individual Bidders (including HUFs and NRIs), who have Bid for Equity Shares for an amount less than or equal to ` 2,00,000 in any of the Bidding options in the Issue. Retail Portion The portion of the Issue being not less than 35% of the Issue i.e. 31,50,000 Equity Shares at the Issue Price available for allocation to Retail Bidder(s). Price Band
v
Terms Revision Form
Description Form used by the Bidders to modify the quantity of Equity Shares or the Bid Amount in any of their Bid cum Application Forms or any previous Revision Form(s) including the ASBA Revision Form as may be applicable. Self Certified Syndicate Banks which are registered with SEBI under the SEBI (Bankers to an Issue) Bank(s) / SCSB(s) Regulations, 1994 and offer services of ASBA, including blocking of bank account, a list of which is available on http://www.sebi.gov.in/ Stock Exchanges BSE and NSE. Syndicate Collectively, the BRLM and the Syndicate Members (including their Sub syndicate members). Syndicate Agreement Agreement dated [●], entered into among the Syndicate, our Company in relation to the collection of Bids (excluding Bids from the ASBA Bidders) in this Issue. Syndicate Members Intermediary appointed by the BRLM in respect of the Issue, which is registered with the SEBI or registered as a broker with the BSE or the NSE, and who is permitted to carry on activities as an underwriter, in this case being [●]. TRS / Transaction Registration Slip or document issued only on demand by the Syndicate or the SCSB to the Slip Bidder as proof of registration of the Bid. Underwriters The BRLM and the Syndicate Members. Underwriting Agreement Agreement between the Underwriters and our Company to be entered into on or after the Pricing Date. Working Day All days other than a Sunday or a public holiday (except during the Bidding Period where a working day means all days other than a Saturday, Sunday or a public holiday), on which commercial banks in India are open for business 1.4 ‐ COMPANY AND INDUSTRY RELATED TERMS
Terms AKVN Approx CAGR CARE CMIE CY DC ingots FDI FY GDP IIP IMF KGF Kgs KL p.m KM KW LME LOA LOP
Description M.P. Audhogik Kendra Vikas Nigam (Indore) Limited Approximate Compounded Annual Growth Rate Credit Analysis & Research Ltd Centre For Monitoring Indian Economy Calendar Year Direct Chill Semi‐Continuous Cast Ingots Foreign Direct Investments Financial Year Gross Domestic Product Index Of Industrial Production International Monetary Fund Kilogram‐force Kilograms Kilo Litres Per Month Kilo Meter Kilo Watt London Metal Exchange Letter of Allotment Letter of Permission vi
Terms Mm Mn Tonnes MPa MPSEB MT MT p.a. ºC OEM PE RoC SEZ Sq. ft. Sq. mtr UAE UNCTAD USGS Y‐O‐Y 1.5 – ABBREVIATIONS
Description Millimeter Million Tonnes Megapascals Madhya Pradesh State Electricity Board Million Tonnes Million Tonnes Per Annum Degree Celsius Original Equipment Manufacturers Private Equity Registrar of Companies, Madhya Pradesh and Chhattisgarh. Special Economic Zone Square Feet Square Metre United Arab Emirates United Nations Conference on Trade and Development United States Geological Survey Year on Year
Abbreviation AS A/c AGM ASBA AY BSE CARO CDSL CFO CIN CIT DIN DIPP DRHP ECS EPS EGM ESOP / ESOS ESPP / ESPS EXIM / EXIM Policy FCNR Account FEMA
Full Form Accounting Standards as issued by the Institute of Chartered Accountants of India Account Annual General Meeting Applications Supported by Blocked Amount Assessment Year Bombay Stock Exchange Limited Companies (Auditors’ Report) Order, 2003 Central Depository Services (India) Limited Chief Financial Officer Company Identification Number Commissioner of Income Tax Director Identification Number Department of Industrial Policy and Promotion, Ministry of Commerce, Government of India Draft Red Herring Prospectus Electronic Clearing System Earnings Per Equity Share Extraordinary General Meeting Employees Stock Option Plan / Employees Stock Option Scheme Employees Stock Purchase Plan / Employees Stock Purchase Scheme Export – Import Policy Foreign Currency Non Resident Account Foreign Exchange Management Act, 1999, as amended from time to time, and the regulations framed hereunder vii
Abbreviation FIs FIPB
Full Form Financial Institutions Foreign Investment Promotion Board Period of twelve months ended March 31 of that particular year, unless FY / Fiscal / Financial Year otherwise stated Foreign Institutional Investor / Foreign institutional investor (as defined under SEBI (Foreign Institutional FII Investors) Regulations, 1995) registered with SEBI under applicable laws in India GoI / Government Government of India HUF Hindu Undivided Family I.T. Act Income Tax Act, 1961, as amended from time to time MAPIN Market Participants and Investors’ Integrated Database MoF Ministry of Finance, Government of India MOU Memorandum of Understanding Merchant Banker Merchant Banker as defined under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 Indian GAAP Generally Accepted Accounting Principles in India IPO Initial public issue/ offering NA Not Applicable NAV Net Asset Value NPV Net Present Value NRE Account Non Resident External Account NRO Account Non Resident Ordinary Account NSDL National Securities Depository Limited NSE The National Stock Exchange of India Limited OCB Overseas Corporate Bodies p.a. per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PAT Profit After Tax RBI The Reserve Bank of India RONW Return on Net Worth RTGS Real Time Gross Settlement Rupees, the official currency of the Republic of India ` SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SCRA Securities Contract (Regulation) Act, 1956, as amended from time to time SSI Undertaking Small Scale Industrial Undertaking STT Securities Transaction Tax Sec. Section US/United States United States of America USD/ US$/ $ United States Dollar, the official currency of the Unites States of America Venture Capital Funds / VCF Venture Capital Funds as defined and registered with SEBI under the SEBI (Venture Capital Fund) Regulations, 1996, as amended from time to time
viii
SECTION II: RISK FACTORS 2.1 ‐ CERTAIN CONVENTIONS; USE OF MARKET DATA AND CURRENCY OF FINANCIAL PRESENTATION CURRENCY OF FINANCIAL PRESENTATION In this Draft Red Herring Prospectus, the terms “we”, “us”, “our”, the “Company”, “our Company”, “Jiji Industries Limited” “JIL” and “Jiji”, unless the context otherwise indicates or implies, refers to Jiji Industries Limited. In this Draft Red Herring Prospectus, unless the context otherwise requires, all references to one gender also refers to another gender and the word “Lac / Lakh” means “one hundred thousand”, the word “million (mn)” means “ten lac / lakh”, the word “Crore” means “ten million” and the word “billion (bn)” means “one hundred crore”. In this Draft Red Herring Prospectus, any discrepancies in any table between total and the sum of the amounts listed are due to rounding‐off. Throughout this Draft Red Herring Prospectus, all figures have been expressed in lakhs. Unless stated otherwise, the financial data in the Draft Red Herring Prospectus is derived from our financial statements prepared and restated for the financial year ended 2007, 2008, 2009, 2010 and 2011 accordance with Indian GAAP, the Companies Act and SEBI (ICDR) Regulations, 2009 included under Section titled “Financial Information of the Company” beginning on Page No. 127 of this Draft Red Herring Prospectus. Our Company does not have any subsidiary. Accordingly, financial information relating to us is presented on a non‐consolidated basis. Our fiscal year commences on April 1 of every year and ends on March 31st of every next year. There are significant differences between Indian GAAP and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practice and Indian GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. For additional definitions used in this Draft Red Herring Prospectus, see the section Definitions and Abbreviations on page i & vii of this Draft Red Herring Prospectus. In the section titled “Main Provisions of Articles of Association”, defined terms have the meaning given to such terms in the Articles of Association of our Company. USE OF MARKET DATA Unless stated otherwise, market data used throughout this Draft Red Herring Prospectus was obtained from internal Company reports, data, websites, industry publications and a report issued by CARE hereinafter referred as the CARE Report. Industry publication data and website data generally state that the information contained therein has been obtained from sources believed to be reliable, but that their accuracy and completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Although, we believe market data used in this Draft Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports and data, while believed by us to be reliable, have not been verified by any independent source.
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2.2 ‐ FORWARD‐LOOKING STATEMENTS We have included statements in the Draft Red Herring Prospectus which contain words or phrases such as “will”, “aim”, “is likely to result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward‐looking statements”. All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward‐looking statement. Important factors that could cause actual results to differ materially from our expectations include but are not limited to: • General economic and business conditions in the markets in which we operate and in the local, regional and national economies; • Changes in laws and regulations relating to the industries in which we operate; • Increased competition in these industries; • Our ability to successfully implement our growth strategy and expansion plans, and to successfully launch and implement various projects and business plans for which funds are being raised through this Issue; • Our ability to meet our capital expenditure requirements; • Fluctuations in operating costs; • Our ability to attract and retain qualified personnel; • Changes in technology; • Changes in political and social conditions in India or in countries that we may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; • The performance of the financial markets in India and globally; and • Any adverse outcome in the legal proceedings in which we are involved. For a further discussion of factors that could cause our actual results to differ, please refer to the sections titled “Risk Factors” “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of the Operations” on pages xi, 76 and 157, of the Draft Red Herring Prospectus respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither we, our Directors nor the members of the Syndicate, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company and the BRLM will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges.
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2.3 ‐ RISK FACTORS An investment in equity involves a high degree of risk. Investors should carefully consider all the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our equity shares. Any of the following risks as well as other risks and uncertainties discussed in this Draft Red Herring Prospectus could have a material adverse effect on our business, financial condition and results of operations and could cause the trading price of our Equity Shares to decline, which could result in the loss of all or part of your investment. In addition, the risks set out in this Draft Red Herring Prospectus may not be exhaustive and additional risks and uncertainties, not presently known to us, or which we currently deem immaterial, may arise or become material in the future. Unless otherwise stated in the relevant risk factors set forth below, we are not in a position to specify or quantify the financial or other risks mentioned herein. Materiality The Risk factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality. 1. Some events may not be material individually but may be found material collectively. 2. Some events may have material impact qualitatively instead of quantitatively. 3. Some events may not be material at present but may be having material impact in future. Note: The risk factors as envisaged by the management along with the proposals to address the risk if any. Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the financial implication of any of the risks described in this section. In this Draft Red Herring Prospectus, any discrepancies in any table between total and the sums of the amount listed are due to rounding off. Any percentage amounts, as set forth in "Risk Factors" on Page No. xi and "Management Discussion and Analysis of Financial Conditions and Operations" on Page No. 157 of this Draft Red Herring Prospectus unless otherwise indicated, has been calculated on the basis of the amount disclosed in the "Financial Statements" prepared in accordance with the Indian Accounting Standards. INTERNAL RISK FACTORS 1. There are legal proceedings currently outstanding involving the Company. Failure to defend these proceedings successfully may have an adverse effect on our business prospects, financial condition and results of operations. There are legal proceedings currently outstanding involving the Company. The Company is involved in claims incidental to our business and operations. The Company has received a Show Cause Notice from the Office of the Assistant Commissioner, Central Excise & Customs, Pithampur Dist.‐ Dhar (Madhya Pradesh). Also a petition has been filed a workman of the Company under Sections 4 and 10 of the Employees’ Compensation Act, 1923 with the Commissioner for Workmen Compensation, Dhar. The aforesaid cases are still pending with the relevant authorities. Any adverse decision may render us liable to penalties and may adversely affect our business, results of operations and financial condition. A summary of these legal and other proceedings involving the Company is given in the following table: xi
Nature of Litigation
2.
3.
4.
Number of Cases
Cases filed against the Company Show Cause Notice 1 Not Ascertainable Case filed by the workman 1 ` 10,00,000/‐ Cases filed against the Directors 2 Not Ascertainable Also, one of our Independent Directors, Mr. Vini Raj Modi, is involved in a criminal case which is still pending in the District Court, Moga, Punjab (Criminal Complaint filed under Sections 420/ 68/ 465/467/ 469/ 471/ 120‐B of Indian Penal Code, 1860). We cannot assure that the case will be decided in his favour. In the event of his being convicted, he may also be made subject to imprisonment, the term of which cannot be ascertained. An Order dated October 7, 2009 has been passed by the Motors Accident Claims Tribunal pursuant to which a penalty of ` 25,000 has been levied on Mr. Omprakash Maheshwari and Mr. Vaibhav Mungad, our Promoter/ Directors, which is yet to be settled. For further details, please see the section “Outstanding Litigations and Material Developments” on page 167 of this Draft Red Herring Prospectus. Our Company has paid `104,685 towards undisputed statutory dues that were outstanding as on March 31, 2011 for a period of more than 6 (Six) months from the date of same becoming payable, which may attract penalty/fines as prescribed under the relevant statutes/acts, which may adversely affect our cash flows. There were dues amounting to `104,685 towards undisputed statutory dues such as provident fund and professional tax, as on March 31, 2011 which were outstanding for a period of more than 6 (Six) months from the date of same becoming payable. The same has been paid by our Company subsequent to March 31, 2011. However, delay in payment of statutory dues may attract penalty/fines as prescribed under the relevant statutes/acts, which may adversely affect our cash flows. One of the terms and conditions for the sanction of working capital facilities by the Bank of Baroda (BOB), Banker to our Company, stipulates that for any expansion project/capital expenditure proposed to be incurred by our Company, we will require prior approval from BOB. Since our Company proposes to embark upon expansion project involving capital expenditure, BOB has so far given their in‐principal approval for the same and the final approval is yet to be obtained. In the event of failure or delay in obtaining the final approval, it may adversely affect implementation of the proposed project, and consequently our growth, revenues and profitability. Bank of Baroda (BOB), Banker to our Company, vide their letter no. Annapu/02/11‐12/84 dated September 6, 2011 has given their in‐principal approval for the proposed expansion plans involving capital expenditure and raising funds through the proposed Issue. However, the final approval is yet to be obtained from the said bank. In event of failure or delay in obtaining the final approval from the said bank, it may adversely affect implementation of the proposed project, and consequently our growth, revenues and profitability. Our Company has availed of working capital facilities from the Bank of Baroda (“BOB”), Banker to Our Company, which includes several restrictive covenants, for which prior approval of BOB is required. Failure to adhere to the said covenants or breach of some or any of them or delay in granting such approval may hinder us from taking advantage of a dynamic market environment or may even result in revocation of the
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Monetary Liability of the Company
5.
6.
said working capital facilities which in turn may adversely affect our business operations and financial condition. Our Company has availed of working capital facilities from the Bank of Baroda (“BOB”), Banker to Our Company, for which the principal working capital outstanding as on August 23, 2011 as per our Company’s Indebtedness Report is ` 2,191.75 Lacs. There are several restrictive covenants, for which prior approval of BOB is required, which inter‐alia include that no interest shall be paid on unsecured loans, no declaration of dividend without prior approval. Failure to adhere to the said covenants or breach of same may result in revocation of the said working capital facilities which in turn may adversely affect our business operations and financial condition. Also we cannot ascertain in future that BOB will grant such consents in a timely manner or atall. The time required to secure consents may hinder us from taking advantage of a dynamic market environment. Failure by the financial institutions to grant such consents may even compel the Company to repay such loans on a short notice. This may restrict the Company from availing of loans in the future which may in turn adversely affect the Company’s operations due to lack of funds. For further details on restrictive covenants of the said working capital facilities, please see the section “History and Certain Corporate Matters” on page 97 of this Draft Red Herring Prospectus. Our Company has availed of unsecured loans from Religare Finvest Limited and HDFC Bank Limited, who have restrained our Company from availing any additional financial facility from any other bank and/or financial institution without having obtained prior approval from them. In event of failure or delay to procure requisite prior consents from the above mentioned institutions, our business operations and proposed expansion plan, may be adversely affected and consequently weaken our financial condition. Our Company has availed of unsecured loans from Religare Finvest Limited and HDFC Bank Limited of ` 25,00,000/‐ and ` 20,00,000/‐ respectively as on August 23, 2011 as per our Company’s Indebtedness Report. The Loan Agreements entered into by our Company with both the said financial institutions contain a restrictive covenant restraining our Company from availing any additional financial facility from any other bank or financial institution without having obtained prior approval from them. In case our Company in future proposes to avail additional financial facilities from any bank/financial institution, we cannot assure you that if the said financial institutions will grant the consent in the first place or in a timely manner, if at all. The time required to secure consents may hinder us from taking advantage of a dynamic market environment. Failure by the financial institutions to grant such consents may even compel the Company to repay such loans on a short notice. This may restrict the Company from availing of loans in the future which may in turn adversely affect the Company’s operations due to lack of funds. The lease deed executed for the Registered Office of our Company is not duly stamped. Thus, continuing failure to get the said lease deed stamped as required by The Indian Stamp Act, 1899 and other statutes, makes it inadequate for all practical purposes and any future enforcement of the same may expose the Company to dangers comprised therein, which may adversely affect our business operations and financial conditions The lease deed executed for the Registered Office of our Company has been executed on ` 10 (Rupees Ten) stamp paper, which as per the applicable provisions of the Indian Stamp Act, 1899 (and amendments made thereto by the State of Madhya Pradesh) is insufficient. The instrument shall accordingly be subject to Section 35 of Indian Stamp Act, 1899, which inter alia provides that ‘No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped’. Our Company may accordingly be subject to the aforementioned consequences. xiii
7. The Lease deed executed for the Registered Office of our Company is not yet registered. Thus continuing failure to register the said deed as per Registration Act, 1908, makes it redundant for all practical purposes and any future enforcement of the same may expose the Company to dangers comprised therein, which may adversely affect our business operations and financial conditions. Our Company has executed a 15 (fifteen) year lease deed for its Registered Office located at 33‐34 Rambali Nagar, Sangam Nagar Road, Indore. The lease deed, as required by the Registration Act, 1908, has not been registered yet. According to Section 17 of the said Act, the effect of such non‐registration is that it (i) does not affect any immovable property comprised therein (ii) cannot be received as evidence of any transaction affecting such property. Thus continuing failure to register the said lease deed makes it redundant for all practical purposes and any future enforcement of the same may expose the Company to dangers comprised therein, which may adversely affect our business operations and financial conditions. 8. Our Corporate Promoter and one of our Group Companies is engaged in the lines of business similar to ours. There are no non‐compete agreements between our Company and Group Companies. We cannot assure that our Promoters will not favor the interests of the said Group Companies over our interest or that the said companies will not expand which may increase our competition, which may adversely affect business operations and financial condition of our Company. Our Corporate Promoter, Mungad Strips and Alloys Private Limited and one of our Group Companies, Omsu Industries Private Limited is engaged in the lines of business similar to ours. There are no non‐competing agreements between our Company and our Group Companies. We cannot assure that our Promoters will not favor the interests of the said companies over our interest or that the said companies will not expand which may increase our competition, which may adversely affect business operations and financial condition of our Company. 9. Our Promoters have pledged their shares for availing the financial facilities provided to us by our lenders. In the event there is any default on servicing of the debt obligations by our Company, the pledge may be invoked and the pledged shares of the Promoters may be taken over by the bank which in turn may further dilute their shareholding in our Company, which may adversely affect our business, prospects, financial condition and results of operations. For the purpose of availing financial facility from our lenders, our Promoters have pledged 6 (Six) Lacs shares with one of the lenders, which constitutes around 6.38% of our pre‐issue share capital as on the date of filing the DRHP. In the event of any default in servicing of the debt obligations incurred by our Company, the pledge may be invoked and the pledged shares of the Promoters may be taken over by the bank which in turn may further dilute their shareholding in our Company, which may adversely affect our business, prospects, financial condition and results of operations. 10. Our Company has entered into lease agreements for factory land and building as well as for the Registered Office of our Company with one of our Promoter and Group Companies. Any dispute arising from such lease agreements, may affect our business operations and consequently the financial condition of our Company. Our Company has entered into a lease agreement dated September 03, 2011 with Mr. Omprakash Maheshwari, one of the Core Promoters and Wholetime Director of our Company, for the land and a building owned by him situated at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh for existing business operations, while another lease agreement dated July 20, 2011 with Mungad Strips and Alloys Private Limited, one of our Group Companies, for the Registered Office premises at 33‐34 Rambali Nagar, Sangam Nagar Road, Indore. Both the Lessors may be deemed to be interested to the
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extent for the rent received / receivable against such premises. Thus, any dispute arising from such lease agreements may affect our business operations and consequently the financial condition of our Company. For details, please refer to Annexure XI on “Related Party Transactions” under Section titled “Financial Statements of the Company” beginning on Page No. 127 of this Draft Red Herring Prospectus. 11. Our existing manufacturing operations are carried out at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh, and a portion of our proposed expansion project would also be implemented at the same location. The land on which our existing building and the proposed building under the expansion plan would be situated, is not owned by our Company and the same has been taken on lease from Mr. Omprakash Maheshwari, who is a Promoter and a Whole Time Director of our Company. In the event of dispute arising from such lease agreement, it may adversely affect our business operations, revenues, profitability and financial condition of our Company Our Company’s existing manufacturing operations are carried out at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh, where portion of our proposed expansion project is also planned to be implemented. Our Company leased the said land from Mr. Omprakash Maheshwari, who is a Promoter and a Whole Time Director of our Company for a period of 25 (twenty five) years tenure vide lease agreement dated September 3, 2011. In the event of any dispute arising from such lease agreement, it may adversely affect our business operations and consequently the financial condition of our Company, which cannot be quantified. 12. Our Company is yet to receive the LOP/LOA allotment of plot at SEZ, Pithampur for our proposed expansion project. Any failure or delay in receiving the said allotment of plot, may adversely affect our proposed expansion plan and consequently the proposed business operations, revenues and profitability of our Company. A portion of the proposed expansion project has been envisaged by our Company at SEZ, Pithampur. Accordingly, M.P. Audyogik Kendra Vikas Nigam (Indore) Limited (A Government of M.P. Undertaking), vide their letter dated July 15, 2011 advised the Assistant Development Commissioner, Indore Special Zone to issue LOP/LOA in favour of our Company. Any failure or delay in receiving the said allotment, may adversely affect our proposed expansion plans, prospects, revenues, business operations and consequently the financial condition of our Company, which cannot be quantified. 13. Availability of adequate quantities of raw materials, which constitutes about 83.38% of the Total Income based on the Audited Financial Statements, as restated as at March 31, 2011, at competitive prices is key to our existing operations and may also be for our proposed activities. Our Company has not entered into specific agreements for supply of its major raw materials for its existing and proposed activities with the concerned suppliers. Any significant increase in prices of these major raw materials or any disruption in their supplies may adversely affect our business operations and consequently financials of our Company. Our raw materials cost constitutes about 83.38% of the Total Income based on the Audited Financial Statements, as restated as at March 31, 2011. We have not entered into any agreement with the suppliers of the raw materials. Any significant increase in the prices of these raw materials due to any reason whatsoever, and our inability to pass on additional costs to our customers due to market compulsions may adversely affect our operations and thereby financials of our Company. 14. We depend on our key customers who contribute significantly towards our total sales. Any discontinuation of business or placement of orders by our key customers may adversely affect our business operations and financial condition of our Company. xv
Our top 10 customers had contributed to around 96.86% of our total sales volume during the financial year 2010‐11. M/s. Mungad Strips and Alloys Private Limited, one of our Promoter, accounted for 36.27% of 2010‐ 11revenues, respectively. Details of our key customers are as of follows: Value (`in Lacs) As % of total Whether related to our Name of the Customer Purchases Company, our Promoters, our Promoter Group Overseas Metal Trading Co. 3,984.57 47.05 No Mungad Strips and Alloys Pvt.Ltd. 3,071.28 36.27 Yes Divine Aluminium 739.36 8.73 No Vani Export 162.06 1.91 No Al Medeah General Trading 102.86 1.21 No S.M.S. Metals Pvt.Ltd 55.48 0.66 No Shree Metal Works 41.82 0.49 No Mamta Metals Alloys 25.61 0.30 No Welcome Trading Co. 9.70 0.11 No Suresh Aluminum 9.23 0.11 No Our key customers continue to contribute significantly towards our total turnover. Any discontinuation of business or placement of orders by our key customers may adversely affect our business operations and financial condition of our Company. 15. Our exports for the financial year ended March 31, 2011 constituted around 50% of our total revenues implying significant dependence on international markets. Also, we do not have hedging arrangements for our earnings in foreign currencies. Our inability in future to sustain exports around the similar proportion of our total revenues, and inability to compensate the same from the domestic sales, and volatile exchange rate fluctuations may adversely affect our revenues, profitability, and cash flows. Our exports for the financial year ended March 31, 2011 constituted around 50% of our total revenues implying significant dependence on international markets. Also, we do not have hedging arrangements for our earnings in foreign currencies. Our inability in future to sustain exports around the similar proportion of our total revenues, and inability to compensate the same from the domestic sales, and volatile exchange rate fluctuations may adversely affect our revenues, profitability, and cash flows. 16. Our Company procures significant portion of raw materials from a few suppliers. Any discontinuation or disruption of supply of raw materials by these few suppliers would adversely impact business operations and financial condition of our Company. During the financial year ended March 31, 2011, top 5 raw material suppliers to our Company accounted for around 77.10% of our total purchases, as per the details given below: As % of total Whether related to our Name of the Supplier Value (`in Lacs) Purchases Company, our Promoters, our Promoter Group Mungad Strips and Alloys 2,362.16 44.10 Yes Pvt.Ltd. S.S. Enterprises 581.74 10.86 No Adinath Traders 521.10 9.73 No Ocean Impex 400.68 7.48 No S.K. Marketing 263.84 4.93 No xvi
Any discontinuation or disruption of supply of raw materials by any of the above suppliers would adversely impact business operations and financial condition of our Company. 17. Over dependence on Imported Raw Materials exposes our Company to exchange rate fluctuations for which we have not entered into any hedging arrangement. This may adversely affect our operations, revenues and profitability. Majority of our Raw Materials are imported from countries like USA, UAE, Europe etc. During the financial year ended March 31, 2011, total imported raw materials constituted around 50% of the total raw material requirement of the Company. This is done to maintain the quality standards as are demanded by our clients. Over dependence on imports and lack of back‐up arrangements from Indian Suppliers may adversely affect our profitability in case the trade relations of India with any of these countries get strained in the future or the suppliers face any sort of problems due to internal issues of their countries. Also significant Exchange rate fluctuations may affect the Company's business as it may alter the costs of the imports significantly. At present, the Company does not have any hedging arrangements to cover its exchange rate risk. 18. Our Company, during the financial year ended March 31, 2011, had entered into various transactions aggregating to `6284.74 Lacs with our Promoters, Directors, their friends and relatives, associates and group companies. Our Company in the past has entered into Related Party Transactions and may continue to do so In future also, which may adversely affect our competitive edge and better bargaining power had these transactions would have been entered with non‐related parties resulting into relatively more favourable terms and conditions and better margins. Our Company, during the financial year ended March 31, 2011, had entered into various transactions aggregating to `6284.74 Lacs with our promoters, directors, their friends and relatives, associates and group companies. These transaction, interalia, include purchase and sales transactions with M/s. Mungad Strips and Alloys Private Limited, Director’s remuneration, lease agreement entered between the Company and one of our Wholetime Director and Core Promoter, Mr. Omprakash Maheshwari, for the factory land and a building, while another lease agreement with one of our Group Companies, M/s. Mungad Strips and Alloys, for certain premises being used by our Company as Registered Office. The related party transactions also include a security deposit amounting to ` 154.30 Lacs given to Mr. Omprakash Maheshwari, towards the lease agreement Our Company entered into such transactions due to easy proximity and quick execution on an arm’s length basis. However, there can be no assurance that we could not have obtained better and more favorable terms had our Company not entered into such related party transactions. Our Company may enter into such transactions in future also and we cannot assure that in such that event there would be no adverse affect on results of our operations. For Details Please refer to Annexure XI on Related Party Transactions of the Auditor’s Report under Section titled “Financial Information of the Company” beginning on Page No. 127 of this Draft Red Herring Prospectus. 19. Our Promoters have given personal guarantees in relation to certain debt facilities provided to our Company by our lender. In event of default on the debt obligations, the personal guarantees may be invoked thereby adversely affecting our Promoters’ ability to manage the affairs of our Company and consequently the impact our business, prospects, financial condition and results of operations. Some of the debt facilities provided to our Company by our lenders stipulate that the facility shall be secured by a personal guarantee of our Promoters. In event of default on the debt obligations, the personal guarantees may be invoked thereby adversely affecting our Promoters’ ability to manage the affairs of our Company and consequently the impact our business, prospects, financial condition and results of operations. xvii
20.
21.
22.
23.
We have incurred a substantial amount of indebtedness, which may adversely affect our cash flows and profitability. As per our Company’s Indebtedness Report, as on August 23, 2011, we had total indebtedness of ` 3,823.58 lacs including unsecured Debt of `1,617.43 lacs. Also, ` 3809.18 lacs of the said total indebtedness is repayable on demand. Around 57.32% of the said total indebtedness is bearing floating rate interest. Our ability to meet our debt service obligations and to repay our outstanding borrowings will depend primarily upon the cash flows generated by our business. We cannot assure you that we will generate sufficient cash to enable us to service existing or proposed borrowings. Incurring significant indebtedness may limit our flexibility in planning for or reacting to changes in our business & industry and limit our ability to borrow additional funds. In the event that we fail to meet our debt servicing obligations under our financing documents, the relevant lenders could declare us to be in default, accelerate the maturity of our obligations or takeover our project. We cannot assure investors that in the event of any such acceleration we will have sufficient resources to repay these borrowings. Failure to meet obligations under debt financing agreements may have an adverse effect on our cash flows and profitability. Our Company has not placed orders for the machinery and equipments given under the section “Objects of the Issue”. Any delay in finalization and placement of order for machinery and equipments may have an adverse impact on our Company’s proposed expansion plans and consequently on the business operations and financial condition. Our Company has not yet placed orders for the machinery and equipments, which it proposes to fund from the proceeds of the Issue. Also out of the total cost of the plant and machinery, the management’s estimates to the extent of `500 Lacs are not based on quotations from vendors. Any delay in finalization and placement of order for machinery and equipments may have an adverse impact on our Company’s proposed expansion plans and consequently on the business operations and financial condition. The management of Our Company has estimated the cost of the land at SEZ, Pithampur for the proposed expansion project at around ` 60 Lacs. In event of the cost of the said land rising beyond the management’s estimate, may lead to escalation of the cost of the proposed expansion project and consequently may have an adverse impact on our Company’s proposed expansion plans, business operations and financial condition. The management of Our Company has estimated the cost of the land at SEZ, Pithampur for the proposed expansion project at around ` 60 Lacs. In the event of the cost of the said land rising beyond the management’s estimate, may lead to escalation of the cost of the proposed expansion project and consequently may have an adverse impact on our Company’s proposed expansion plans, business operations and financial condition. Our Company has through inadvertence not filed half yearly and annual returns since its inception as required under the Madhya Pradesh Factories Rules, 1962. Accordingly, the Director(s) of the Company and manager of the factory may be made liable to penalty prescribed under the Factories Act, 1948 for non‐ compliance of any rule made there under, which may adversely affect our business operations and consequently our financial condition. Our Company has not filed half yearly and annual returns since its inception as required under the Madhya Pradesh Factories Rules, 1962 as a result of which it may, on scrutiny, be made subject to penalty as prescribed under Section 92 of the Factories Act, 1948 which provides that the occupier an manager of the factory shall each be guilty of an offence and punishable with imprisonment for a term which may extend to 2 xviii
(two) years or with a fine extendable to ` 1,00,000/‐ (Rupees One Lakh) or with both. As per Section 2(n) of the Factories Act, 1948, in case of the Company, any one of its Directors shall be deemed to be the occupier. Thus, any one of the Company Directors and the manager of the factory may be made liable to punishment or penalty or both, which may adversely affect our business operations and consequently our financial condition. 24. Our Company is yet to apply and obtain Factory licenses under the M. P. Factories Act, 1962 in respect of the proposed expansion project sites at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh and SEZ, Pithampur, in the absence of which we cannot undertake the proposed expansion project. In event of failure or delay on the part of our Company to obtain such clearances may delay our planned implementation schedule thereby adversely affecting our business operations, revenues and profitability. Our Company is yet to apply and obtain Factory licenses under the M. P. Factories Act, 1962 in respect of the proposed expansion project sites at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh and SEZ, Pithampur. In event of failure or delay on the part of our Company to obtain such clearances may delay our planned implementation schedule thereby adversely affecting our business operations, revenues and profitability. 25. Our Company is yet to obtain “No Objection Certificate” from the M. P. Pollution Control Board in respect of the proposed expansion project sites at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh and SEZ, Pithampur, in the absence of which we cannot undertake the proposed expansion project. In event of failure or delay on the part of our Company to obtain such clearances may delay our planned implementation schedule thereby adversely affecting our business operations, revenues and profitability. Our Company is yet to obtain a No Objection Certificate (NOC) from the M. P. Pollution Control Board with regard to its proposed expansion project sites at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh and SEZ, Pithampur. In event of failure or delay on the part of our Company to obtain such clearances may delay our planned implementation schedule thereby adversely affecting our business operations, revenues and profitability. 26. We have certain contingent liabilities, which have not been provided for in the books of accounts. Materialization of any of these contingent liabilities could affect our financials. The Contingent liabilities of our Company not provided for, as per our audited statements of accounts, as restated are as under: (`in Lacs) Sr. No. Nature of Liability As at March 31, 2011 As at March 31, 2010 1 Workmen Compensation Suit* 10.00 10.00 2 Letter of Credit 493.00 ‐ * For details pertaining to pending cases please refer to section “Outstanding Litigations and Material Developments” on page no. 167 of the Draft Red Herring Prospectus. In the event any of these contingent liabilities gets crystallized, our business operations, revenues, profitability and cash flows may be adversely affected. For further information please see “Annexure XVII” under Section titled “Financial Statement of the Company” beginning on Page No. 127 of this Draft Red Herring Prospectus. xix
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Our Company has borrowed certain loans which are repayable on demand. In case of such demands being raised, our cash flows and business operations may be adversely affected. Our Company has borrowed certain loans worth ` 3809.18 lacs outstanding as on August 23, 2011 as per the indebtedness report, which is repayable on demand. In the event of demand for repayment of such loans is made by the lenders, our cash flows and business operations may be adversely affected. We have applied for registration of the name of our Company “Jiji Industries Limited” as well as the logo of our Company under the Trademarks Act, 1999. However, the same has not yet been registered. Our business could be adversely affected if we fail to protect and obtain our intellectual property rights. Our Company has made an application for registration of the logo appearing in this Draft Red Herring Prospectus under Class 6 of the Trade Marks Act, 1999 with the Trademark Registry and is currently pending for registration. We cannot assure you that we will continue to have the uninterrupted use and enjoyment of the name. Any delay or refusal to register the said trademark could adversely affect our image and reputation. Infringement of the intellectual property, for which we may not have any immediate recourse, may adversely affect our ability to conduct our business as well as affect our reputation, and consequently, our results of operations. For more details please refer to section titled “Government Approvals” beginning on page no. 171 of the Draft Red Herring Prospectus. We have high Working Capital requirements for our business operations. For our proposed expansion plans, we would require additional working capital facilities for implementation of the proposed project. In case of our inability to obtain the requisite additional working capital facilities from our bankers for our proposed projects a part of which is proposed to be met through the proposed IPO proceeds, our internal accruals/cash flows would be adversely affected, and consequently our operations, revenue and profitability. Our business requires a substantial amount of working capital for our business operations. We would require additional working capital facilities in the future to satisfy our working capital needs in respect of our proposed expansion project, a part of which is proposed to be met through the IPO proceeds. In case of our inability to obtain the requisite balance additional working capital finance from our bankers for our proposed projects, our internal accruals/cash flows would be adversely affected to that extent, and consequently affect our operations, revenue and profitability. We rely significantly on our dealers / distributors for sale of our products. If we do not succeed in maintaining the stability of our distribution and dealership network, or any disruption or discontinuation of our business by our aforesaid dealers / distributors would materially affect our results of operations and financial condition. We sell our products through a network of independent dealers and distributors. Our business growth depends on our ability to attract additional dealerships to our distribution network. While we believe that we have good relations with our independent distributors and dealers, there is no assurance that our current distributors and dealers will continue to do business with us or that we can continue to attract additional distributors and dealers. If we do not succeed in maintaining the stability of our distribution and dealership network, or any disruption or discontinuation of our business by our aforesaid dealers / distributors would materially affect our results of operations and financial condition.
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31. We are subject to restrictive loan covenants of Banks in respect of term loans / working capital facilities availed from them, due to which our business growth and execution of our proposed projects may be adversely affected. Our Company has entered into agreements for financial facilities with our banker and the covenants in such agreements which include but not limiting to, require us to obtain bank’s permission in writing in respect of effecting any change in the Company’s Capital Structure; change in unsecured loan, change in trading cycle, implementation of any scheme of expansion/ modification/ diversification/ renovation, entering into any borrowing arrangement with other banks, undertake guarantee, undertake obligations on behalf of any other Company, declare dividends with prior approval from the bank, pay guarantee commission to the guarantors whose guarantees have been stipulated, create an further charge/ lien/ encumbrance over assets & properties charged to the bank and sell/ assign or otherwise dispose off the fixed assets charged to the bank. Furthermore, our Company has created a charge in favor of our lender against the fixed assets of our Company. In case of default by our Company in repayment of the loans, our Banker may exercise their rights over the security, which may be detrimental to the interest of our Company, thereby adversely affecting our business, prospects, financial condition and results of operations and the same cannot be quantified. 32. If we are unable to obtain, maintain or renew our statutory and regulatory licenses, permits and approvals required to operate our business it may materially and adversely affect our business and operations. In order to operate our manufacturing facilities and offices, we are required to obtain certain licenses, registrations or approvals under the applicable laws of the Government. We have made applications for renewal of or for obtaining the following consent(s)/approval(s): • Registration for the registered office under the Madhya Pradesh Shops and Establishments Act, 1958; If we are unable to obtain the requisite licenses in a timely manner, or at all, our operations may be affected or their smooth functioning may be hindered. Moreover, we may be required to obtain, maintain and renew other statutory and regulatory licenses, permits and approvals in connection with the operation of our business, which licenses, permits and approvals may expire, pursuant to their terms, from time to time. We cannot assure you that we will be successful in our ability to procure and maintain each of these licenses, permits and approvals on a timely basis or at all. Any delay or absence of receipt of such licenses, permits or approvals may expose us to regulatory actions against us or significant costs and expenses or cause us to modify or cease our operations, which may materially and adversely affect our business, financial condition and results of operations and the same cannot be quantified. 33. The Objects of the Issue for which the funds are being raised has not been appraised by any Bank or Financial Institution. We intend to use the net proceeds of the issue for the objects as described in the section entitled “Objects of the Issue” of this Draft Red Herring Prospectus. The purposes for which the net proceeds of the issue are to be utilized have not been appraised by any independent entity and are based on estimates as approved by our Board of Directors and on third party quotations. In addition, our capital expenditure plans and working capital estimates are subject to a number of variables, including possible cost overruns and changes in management’s views of the desirability of current plans and many other factors. Pending utilization of proceeds out of issue for the purposes described in the Draft Red Herring Prospectus, we intend to temporarily invest the funds in high quality interest bearing liquid instruments including deposits with banks, investment in mutual funds etc as the Board of Directors may deem fit and proper. xxi
34.
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Further, as per Regulation 16(1) of the SEBI (ICDR) Regulations, 2009 the requirement of Monitoring Agency is not mandatory if the Issue size is below ` 500.00 Crores. Thus, as the issue size is less than Rs 500 Crores, there is no requirement for appointment of a monitoring agency. However, as per the Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges upon listing of the equity shares and the Corporate Governance Requirements, an Audit Committee of the Board shall monitor the utilization of the net proceeds of the issue which shall not be subject to any monitoring by any independent agency. We have not identified alternate sources of financing for the proposed expansion project and any disruption in this regard would impair implementation of our proposed growth plans which may adversely affect our business, result of operations and financial conditions. The total fund requirement for the planned Expansion project is proposed to be fully funded through net proceeds from the proposed public issue. We have not identified any alternate sources of financing for the Project cost. Any delay on our part to raise money through this Issue or arranging any alternative source of financing may delay the implementation of the proposed project thereby adversely affecting our business, result of operations and financial conditions. For details on cost of Project and means of Finance, please see the section titled “Objects of the Issue” beginning on Page No. 34 of this Draft Red Herring Prospectus. Our Company had negative cash flows during certain periods. Any negative cash flow in future could affect our operations and financial conditions. We had negative cash flow from various activities, details of which are as under: Particulars Financial Year ended March 31, 2007 (`in Lacs) Net Increase/ (Decrease) in Cash & Cash Equivalents (17.89) The net cash flow of a company is a key indicator to show the extent of cash generated from operations of the company to meet capital expenditure, pay dividends, repay loans and make new investments without raising finance from external resources. If we are not able to generate sufficient cash flows, it may adversely affect our business and financial operations. We have planned capital expenditure, which may not yield the benefits intended and may impede our business operations, revenues and profitability. We are embarking upon an expansion project as detailed in the section titled “Objects of the Issue” beginning on Page No. 34 of this Draft Red Herring Prospectus. In the past, we have not undertaken capital expenditure of such size and our inability to manage capital expenditure may adversely affect our operations. We cannot assure that we will be able to get the benefits of the generally growing demand in the existing sector and accordingly the benefits accruing to us from the planned expansion project may be less than what is anticipated. Our ability to effectively manage our expansion plans and successfully execute and implement our growth oriented project may be limited which could have an adverse effect on our business operations and financial conditions. In the past, we have achieved growth in revenues and profits as is evident from our Audited Financial Statements, as restated for past five years. We continue to pursue such development strategies which would enhance existing operations. Our Company’s future prospects predominately depend upon our managerial xxii
capabilities and capacities to undertake such growth oriented projects. This could only be achieved once we have improvised operating systems, sound organizational structures in place, existence of standardized procedures and effective internal control mechanisms, continuous upgradation of the infrastructure and managerial capabilities to take the most appropriate managerial decisions at right time as per need of the hour. In the unlikely event of our failure to install such systems, procedures and control mechanisms in our Company due to our limited managerial abilities, we may not be able to pursue our strategic expansion cum diversification plans effectively. This could adversely affect execution of future plans, results of operations and financial conditions. 38. Compliance with and changes in, safety, health and environmental laws and regulations may adversely affect our business, prospects, financial condition and results of our operations. Some of our operations are subject to risks generally associated with the storage and transportation of fuels and waste materials, including the discharge of toxic or hazardous substances, which can cause personal injury, loss of life, environmental damage and severe damage to property. We are subject to environmental laws and regulations, which govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from the operations of our business. These laws and regulations in India include the Environment Protection Act, 1986, the Air (Prevention and Control of Pollution) Act, 1981, the Water (Prevention and Control of Pollution) Act, 1974 and other regulations promulgated by the Ministry of Environment and the Pollution Control Boards of the relevant states. The scope and extent of new environmental regulations, including their effect on our operations, cannot be predicted or ascertained. The costs and management time required to comply with these requirements could be significant. The measures we implement in order to comply with these new laws and regulations may not be deemed sufficient by governmental authorities and our compliance costs may significantly exceed our estimates. If we fail to meet environmental requirements, we may also be subject to administrative, civil and criminal proceedings by governmental authorities, as well as civil proceedings by environmental groups and other individuals, which could result in substantial fines and penalties against us as well as orders that could limit or halt our operations and could include us being required to incur substantial cleanup costs. There can be no assurance that we will not become involved in future litigation or other proceedings or be held responsible in any such future litigation or proceedings relating to safety, health and environmental matters in the future, the costs of which could be material. Clean‐up and remediation costs, as well as damages, other liabilities and related litigation, may adversely affect our business, prospects, financial condition and results of operations and the same cannot be quantified. 39. Our Company’s operating results are difficult to predict and can vary from period to period. This could cause our share price to fluctuate. Our Company’s revenue and profits have varied in the past and may continue to vary significantly from period to period due to various reasons, including:
availability of raw material and the competitive pricing of raw material the size, timing and profitability of our projects in the past; delays in receipt of payment from customers or level of bad debts; unanticipated changes in regulatory policies in the jurisdictions in which we operate; our customer’s requirements, and their future plans; xxiii
unanticipated cancellations or deferrals of orders, or non‐renewal or termination of any contracts by our customers; and changes in pricing policies of our competitors; slow down in global economy 40. Our business depends on our manufacturing facility and the loss of or shutdown of operations of the manufacturing facility on any grounds could adversely affect our business or results of operations. Our manufacturing facilities are subject to operating risks, such as breakdown or failure of equipment, interruption in power supply or processes, shortage of raw materials, performance below expected levels of output or efficiency, natural disasters, obsolescence, labour disputes, strikes, lock‐outs, severe weather, industrial accidents, our inability to respond to technological advances and emerging industry standards and practices in the industry and the need to comply with the directives of relevant government authorities. The occurrence of any of these risks could significantly affect our operating results, and the loss or shutdown of operations at our manufacturing facility will have a material adverse affect on our business, financial condition and results of operations. 41. Our existing and proposed manufacturing facility are geographically located in Madhya Pradesh and therefore, any localized social unrest, natural disaster or breakdown of services or any other natural disaster could have material adverse effect on our business and financial condition. Our existing and proposed manufacturing facilities are based in the State of Madhya Pradesh. As a result, any localized social unrest, natural disaster or breakdown of services and utilities in and around Madhya Pradesh could have material adverse effect on our business, financial position and results of operations. Further, continuous addition of manufacturing facilities in Rajasthan without commensurate growth of its infrastructural facilities may put pressure on the existing infrastructure, which may also affect our business. 42. Our Company may continue to be controlled by its Promoters and Promoter Group following this Issue and our other shareholders may not be able to affect the outcome of shareholders’ voting. After the completion of this Issue, our Promoters and Promoter Group will collectively hold 51.09% of the fully diluted post‐Issue equity capital. Consequently, our Promoters may exercise substantial control over us and have the power to elect and remove a majority of our Directors and / or determine the outcome of proposals for corporate action requiring approval of our Board of Directors or shareholders, such as lending and investment policies, revenue budgets, capital expenditure, dividend policy and strategic acquisitions. Our Promoters will be able to influence our major policy decisions and any wrong decision on their part could adversely affect your investment in the Equity Shares. 43. One of our Group Companies has been stuck off by the Registrar of Companies, Madhya Pradesh and Chhattisgarh. The following Group Company has been struck off by the Registrar of Companies, Madhya Pradesh and Chhattisgarh: 1) M/s. Jiji Overseas Private Limited 44. We operate in a competitive industry, which could limit our ability to grow and which may adversely affect our business, result of operations and financial conditions. xxiv
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Most of the end‐users for some of our products are price conscious. Pricing is one of the factors that play an important role in selecting these products. Our competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster. Besides, we may face competition from players in the unorganized sector. Growing competition may result in a decline in our market share and force us to reduce our margins. We are focusing more on the higher end of the market by offering complete end to end solutions which have better returns and margins. The segment of the market requires a greater skill set to undertake these activities. This may adversely affect our business, result of operations and financial conditions. Any future equity offerings or issue of options under any employee stock option scheme may lead to dilution of your shareholding in our Company and which may result into dilution of earnings per share and dividend earnings, if any, and other Shareholder’s rights under relevant provisions of the Companies Act, 1956. Subscribers of Equity shares in this Issue may experience dilution of their shareholding to the extent of any future equity offerings and to the extent additional options that may be issued under our employee stock option scheme. This may result into dilution of earnings per share and dividend earnings, if any, and other Shareholder’s rights under relevant provisions of the Companies Act, 1956. Change in Interest rates and Banking policies resulting into increase in interest rates or other terms and conditions that may have an adverse effect on Company’s profitability. Our Company is dependent on bank(s) for working capital requirements/term loans. Any change in the extant Banking policies or increase in interest rates may have an adverse effect on Company’s profitability. Reduction / Termination of Tax benefits and / or change in the Tax structure applicable to Our Company may increase our tax liability and reduce our profit margins. Any reduction / termination of tax benefits and/or change in Tax structure by the relevant authorities which are currently applicable to the Company may adversely affect the results of our operations and profitability. Change / Up gradation in Technology is one of the key factors for the sustained growth of our business operations. Our inability to adapt to / incorporate required change/up gradation in technology may place our competitors at an advantage in terms of costs, efficiency and schedule delivery of products and consequently would have an adverse impact on our business operations and financial condition of our Company.
Technology plays an important role in our industry and any inability on our part to adapt to / incorporate required change/up gradation in technology may place our competitors at an advantage in terms of costs, efficiency and schedule delivery of products and consequently would have an adverse impact on our business operations and financial condition of our Company. 49. The heavy equipment we operate may be subject to operational hazards. Any significant accident caused by such equipment may affect/interrupt our operations and result in legal and regulatory liabilities. Insurance coverage related to accidents resulting from the proper or improper use of such equipment may be inadequate to offset losses arising from claims related to such accidents. Our production processes depend on heavy equipment/machinery which may be potentially hazardous. Any significant accident caused by such equipment may affect/interrupt our operations and result in legal and regulatory liabilities. Insurance coverage related to accidents resulting from the proper or improper use of such equipment may be inadequate to offset losses arising from claims related to such accidents. Moreover, xxv
any equipment involved in an accident or malfunction may be damaged or destroyed thereby adversely impacting our financial condition or results of operations. 50. We may be depend upon third‐party transportation providers for the supply of raw materials and delivery of products. Any disruption or discontinuation of our business by these third‐party transportation providers would materially affect our results of operations and financial condition. We normally use third‐party transportation providers for the supply of our raw materials and for deliveries of our finished products. Transportation strikes by members of various Indian Truckers’ Unions could have an adverse effect on our receipt of supplies and ability to deliver our finished products as per delivery schedule. In addition, transportation costs have been steadily increasing. Continuing increases in transportation costs may have an adverse effect on our business and results of operations. 51. Delay in raising funds from the IPO and/or delay in implementation schedule as originally planned/estimated by us, may adversely affect our growth plans, revenues and profitability. The expansion of our proposed project is to be funded from the proceeds of this IPO. Any shortfall in the Issue proceeds and/or delay in raising funds from IPO and/or delay in the implementation schedule as originally planned could delay execution of the proposed expansion project within the given time frame, or within the costs as originally estimated by us, leading to any time overrun or cost overrun may adversely affect our growth plans, revenues and profitability. 52. Our continued success depends upon availability of adequate labour on timely basis. Any work stoppages or other labour related problems could adversely affect our business. We require skilled and unskilled labour for successful running of our existing, as well as future operations. We maintain cordial relationship with the labour and have not encountered any work stoppages and other labour problems so far. Any shortage of adequate labour and stoppage due to any labour related issues may affect smooth running of our operations. 53. For our continued success, our senior management team and other key personnel are crucial and the loss of or inability to attract and retain such personnel in the future could have adverse effect on our business operations, revenues and profitability. Our success substantially depends on the continued service and performance of the members of our senior management team and other key management personnel in our business for the management, performing our daily operations and planning, organizing, controlling and execution of our business strategy. Our ability to implement our business strategy would predominately depend on our ability to attract, train, motivate and retain highly skilled manpower. There is stiff competition for experienced senior management and other key personnel with technical and industry expertise, and if we lose the services of any of these or other key individuals to our competitors at the same time fail to find suitable replacements in a timely manner, our ability to realize our strategic objectives could be impaired, thereby affecting our business operations, revenues and profitability. 54. There is no existing market for the Our Company’s Equity Shares, which may or may not develop or be sustained after the completion of Offer. Our stock price may be highly volatile after the Issue, and as a result, you could lose a significant portion or all of your investment. Prior to the Issue, there has not been a public market for the Equity Shares. We cannot predict the extent to which investor interest will lead to the development of an active trading market on the Stock Exchanges or xxvi
how liquid that market will become. If an active market does not develop, you may experience difficulty in selling the Equity Shares that you purchased. The IPO price is not indicative of prices that will prevail in the open market following the Issue. Consequently, you may not be able to sell your Equity Shares at prices equal to or greater than the price you paid in the Issue. 55. The market price of the Equity Shares may be adversely affected by any additional issuances of equity or sales of a large number of the Equity Shares by our Promoters. There is a risk that we may be required to finance our growth or strengthen our balance sheet through additional equity offerings. Any future issuance of Equity Shares will dilute the position of existing shareholders and could adversely affect the market price of the Equity Shares. 56. Our ability to pay dividends in the future will depend upon future earnings, financial conditions, cash flows, working capital requirements and capital expenditures. The amount of our future dividend payments, if any, will depend upon our future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors. There can be no assurance that we will be able to pay dividends. Additionally, we may be prohibited by the terms of our future debt financing agreements to make any dividend payments until a certain time period as may be agreed with lenders. External Risk Factors 1. Exchange Rate Fluctuations may have impact on the performance of Our Company. Our Company is exposed to exchange rate fluctuations. Uncertainties in the global financial market may have an adverse impact on the exchange rate between Rupee vis‐à‐vis other currencies. The exchange rate between the Rupee and other currencies is variable and may continue to fluctuate in the future. Such fluctuations can have a serious impact on the revenues from the export business. We intend to import equipment / machineries for the expansion of our integrated plant. Fluctuations in foreign exchange rates may adversely affect the cost of project. We have not entered into any hedging agreement for minimizing the exchange rate risk and in the event of rates changing adversely, the project cost may rise thereby adversely affecting our business operations, revenues and profitability. 2. Any slowdown in economic growth in India could cause our business to suffer, which may adversely affect our business operations, revenues and profitability. Our performance and growth are essentially dependent on the health of the overall Indian economy. A slowdown in the Indian economy could adversely affect our business. India’s economy could be adversely affected by a general rise in interest rates, weather conditions, adversely affecting agriculture, commodity and energy prices or various other factors. In addition, the Indian economy is in a state of transition. The share of the service sector of the economy is rising while that of the industrial, manufacturing, and agricultural sectors is declining. It is difficult to gauge the impact of these fundamental economic changes on our business. Any slowdown in the Indian economy or future volatility in global commodity prices could adversely affect our business operations, revenues and profitability. 3. Our business could be adversely affected by any economic, political and social developments in India and particularly in the regional markets where we operate. xxvii
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Our performance and growth could be adversely affected by various factors, such as political and regulatory action including adverse changes in liberalization policies, any adverse development in the World economy, introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. There can be no assurance that we will succeed to operate in or succeed in obtaining all requisite regulatory approvals in the future for our operations which could have an adverse impact on our business, financial condition and results of operations. Regulatory changes with regard to Direct/Indirect taxes may adversely affect our performance or financial conditions. Regulatory changes relating to business segments in which we operate in India can have a bearing on our business. Each State in India has different local taxes and levies which may include value added tax, sales tax and octroi. Changes in these local taxes and levies may impact our profits and profitability. Any negative changes in the regulatory conditions in India or our other geographic markets could adversely affect our business operations or financial conditions. Instability of economic policies and the political situation in India or elsewhere could adversely affect the fortunes of the industry.
There is no assurance that the liberalization policies of the government will continue in the future. Protests against privatization could slow down the pace of liberalization and deregulation. The Government of India plays an important role by regulating the policies and regulations governing the private sector over the past several years.
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Unstable internal and international political environment could impact the economic performance in both the short term and the long term. The Government has traditionally exercised and continues to exercise a significant influence over many aspects of the Indian economy. Our Company’s business, and the market price and liquidity of the Equity Shares, may be affected by changes in interest rates, changes in Government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. Force majeure events, terrorist attacks or natural disaster or any other acts of violence or war involving India, or other countries could adversely affect the financial markets, may result in loss of customer confidence and adversely affect our Company’s business, results of operations, financial conditions and cash flows.
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Certain force majeure events, being beyond our Company’s control, including natural disasters, terrorist attacks and other acts of violence or war which may involve India, or other countries, may adversely affect Indian or worldwide financial markets, and could lead to economic recession. These acts may also result in a loss of business confidence and have other consequences that could adversely affect business, results of operations and financial condition of our Company. More generally, any of these events could lower confidence in India. Any such event could adversely affect the financial performance or the market price of the Equity Shares of our Company. You will not be able to sell immediately any of the Equity Shares you purchase in this Issue on an Indian stock exchange. The Equity Shares are proposed to be listed on BSE and NSE. Pursuant to Indian regulations, certain actions must be completed before the Equity shares can be listed and trading may commence. Investors' book entry or demat accounts with depository participants in India are expected to be credited within two working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. Thereafter, upon xxviii
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9.
receipt of final approval of the stock exchanges, trading in the equity shares is expected to commence within twelve working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. There can be no assurance that the Equity Shares allocated earlier to investors will be credited to their demat accounts, or that trading will commence, within the time periods specified above. After this Issue, the price of our Equity Shares may be volatile, or an active trading market for our Equity Shares may not sustain. The prices of our Equity Shares may fluctuate after this Issue due to a wide variety of factors, including volatility in the Indian and global securities markets; our operational performance, financial results and capacity expansion, developments in India’s economic liberalization and deregulation policies, particularly in the telecommunication, and agricultural sector; and changes in India’s laws and regulations impacting our business. We cannot assure you that an active trading market for our equity shares will be sustained after this Issue or that the price at which our equity shares would be traded subsequent to this Issue will correspond to the current prices for our already existing equity shares. Fluctuations in prices and availability of energy, freight and other operating inputs may affect our margins. Energy usage in our production facilities represents one of our main production costs. In some cases, due to the basis for pricing in our sales contracts, or due to competitive markets, we may not be able to pass on to our customers the full amount of raw material price increases or higher energy, freight or other operating costs and this could reduce our profitability.
PROMINENT NOTES 1. Net Worth before the Issue as per Audited Financial Statements, as restated of the Company and the Issue Size Net worth before the Issue (Based on Audited Financial Statements, as ` 1421.69 Lacs restated as on March. 31,2011) Issue of 9,000,000 Equity Shares of ` 10/‐ each at ` [●] (including share premium of ` [●] per Equity Share) aggregating to ` [●] Lacs /‐(Rupees [●] lacs Issue Size only). The Issue would constitute 48.91% of the fully diluted post Issue paid‐up capital of our Company.` Book Value (Based on Audited Financial Statements, as restated as on March 31, 2011) ` 60.50 (Face Value of ` 10/‐ per share) Notes: a) The Net worth of the Company as at March 31, for financial years ended 2007, 2008, 2009, 2010 and 2011 have been computed in compliance with Regulation 2 (1) (v) of SEBI (ICDR) Regulations 2009. b) The Net worth of the Company as at March 31, 2007 had been computed excluding share application money pending allotment in compliance with Regulation 2 (1) (v) of SEBI (ICDR) Regulations 2009. xxix
2.
The average cost of acquisition of Equity shares of the Core Promoters is as per the details given below: Name of Promoter
3.
4.
5.
6.
7.
8.
Total No. of Equity Shares
Average cost of acquisition (`)
Mr. Om Prakash Maheshwari
11,20,000
` 2.50/‐ per share
Mr. Gaurav Mungad
11,20,000
` 8.53/‐ per share
Mr. Vaibhav Mungad
33,60,000
` 4.51/‐ per share
Mungad Strips and Alloys Private Limited
19,99,920
` 25.00/‐ per share
Public Issue of 90,00,000 Equity Shares of ` 10/‐ each for cash at a price of ` [●] per Equity Share, aggregating ` [●] lacs (The “Issue”). The Issue would constitute 48.91 % of the fully diluted post Issue paid‐up capital of our Company. Our Company its Promoters / Directors, Company’s Associates or Group companies have not been prohibited from accessing the Capital Market under any order or direction passed by SEBI. The Promoters, their relatives, Company, group companies, associate companies are not declared as willful defaulters by RBI / Government authorities and there are no violations of securities laws committed in the past or pending against them. As per Regulation 4 (2) (a) of SEBI (ICDR) Regulations, 2009, neither our Company nor any of our Promoters, Promoter Group, or Directors or Persons in Control of the Company has ever been debarred from accessing the capital market by the Board (SEBI). As per Regulation 4 (2) (b) of SEBI (ICDR) Regulations, 2009, neither of our Promoters, Promoter Group, Directors or Persons in Control of the Company is or has ever been part of Promoters, Promoter Group, Directors or Persons in Control of any other Company which is debarred from accessing the capital market under any order or directions made by the Board (SEBI). Any clarification or information relating to the Issue shall be made available by the BRLM, our Company and our Compliance Officer to the investors at large and no selective or additional information would be available for a section of investors in any matter whatsoever. Investor may contact the BRLM for any complaints pertaining to the Issue. The Investors are advised to refer to the Paragraph on “Basis for Issue Price” beginning on Page No. 46 of this Draft Red Herring Prospectus before making any investment in this Issue.
9.
Trading in Equity Shares of our Company for all the investors shall be in dematerialized form only. 10. In the event of over‐subscription, allotment shall be made as set out in para titled “Basis of Allotment” beginning on Page No. 212 of this Draft Red Herring Prospectus and shall be made in consultation with the Designated Stock Exchange i.e. BSE. The Registrar to the Issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner as set out therein. 11. No part of the Issue proceeds will be paid as consideration to promoters, directors, key managerial personnel, associate or Promoter Group companies/ entities except in the usual course of business. 12. The Directors / Promoters of our Company have no interest in our Company except to the extent of remuneration and reimbursement of expenses (if applicable) and to the extent of any equity shares (of Jiji Industries Limited) held by them or their relatives and associates or held by the companies, firms and trusts in which they are interested as director, member, partner, and/or trustee, and to the extent of benefits arising xxx
out of such shareholding. However, there are various related party transactions which have been entered in the past by the Company wherein promoters, directors and their relatives/ associates are interested. Further one of our Promoter Director Mr. Omprakash Maheshwari has given the land situated at Ghatabillod on lease to our Company and the same is being used for factory works. By the virtue of his position as the lessor he is interested to the extent of rent paid/payable and the interest free security deposit kept with him in relation to the above said lease. For details, please refer to Annexure XI on “Related Party Transactions” under Section titled “Financial Statements of the Company”, “Interest of Promoters” and “Interest of Key Managerial Personnel” beginning on Page No. 127, 120 and 117 respectively of this Draft Red Herring Prospectus. 13. The aggregate amount of related party transactions entered into by our Company during the previous financial year (i.e. FY 2010‐11) is ` 6284.74 Lacs. For details, please refer to Annexure XI on “Related Party Transactions” under Section titled “Financial Statements of the Company” beginning on Page No. 145 of this Draft Red Herring Prospectus. 14. No loans and advances have been made to any person(s) / Companies in which the Director(s) of our Company are interested except as stated in the Auditors Report. For details of loans and advances, please refer to Annexure‐VII of Auditors Report as restated under section titled “Financial Statements of our Company” appearing on Page No. 140 of this Draft Red Herring Prospectus. 15. The following Group Companies has business interest or other interests in the Company. Details of transaction by our Company with group companies during the last year are disclosed under Annexure XI on “Related Party Transactions” under Section titled “Financial Statements of the Company” on Page No. 145 of this Draft Red Herring Prospectus. 16. Our Company has changed its name from M/s. Krishna Profiles Private Limited to M/s. Jiji Industries Limited upon conversion from private limited to public limited Company vide fresh certificates of incorporation dated May 26, 2011 and May 30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chhattisgarh. The Company has neither changed its Object Clause in the MoA nor has it changed its business activities upon said change of name. Our Company has changed its name due to sentimental reasons attached to the new name by our Promoters. For information on reasons for change of name, please refer “History and Certain Corporate Matters” on page 97. 17. There are no financing arrangements whereby the Promoter group, the Directors of the Company which our promoter, our Directors and their relatives have financed the purchase by any other person of securities of the issuer other than in the normal course of the business of the financing entity during the period of six months immediately preceding the date of filing Draft Red Herring Prospectus with the Board. 18. Our Company has entered into lease agreements with our Promoters and/or Promoter Company viz. lease agreement dated September 3, 2011 with Mr. Omprakash Maheshwari, one of the Core Promoters and Wholetime Director of our Company, for the land and a building at Plot No. 316/2/1 and 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar, Madhya Pradesh for existing business operations, while another lease agreement dated July 20, 2011 with M/s. Mungad Strips and Alloys Private Limited, a Promoter Company, for the registered office premises at 33‐34 Rambali Nagar, Sangam Nagar Road, Indore. Both the Lessors may be deemed to be interested to the extent for the rent received / receivable against such premises. For details, please refer to Annexure XI on “Related Party Transactions” under Section titled “Financial Statements of the Company” beginning on Page No. 145 of this Draft Red Herring Prospectus. 19. Our Company and the BRLM will update the Draft Red Herring Prospectus in accordance with the Companies Act and the SEBI (ICDR) Regulations and our Company and the BRLM will keep the public informed of any material changes relating to our Company till the listing of its Equity Shares on the Stock Exchanges. xxxi
SECTION III – INTRODUCTION 3.1 ‐ SUMMARY This is only a summary and does not contain all the information that you should consider before investing in our Equity Shares. You should read the entire Draft Red Herring Prospectus including the risk factors on page xi of the Draft Red Herring Prospectus and the more detailed information about Jiji Industries Limited and the financial statements & related notes included on page 127 in the Draft Red Herring Prospectus. Overview of the Indian Economy India is the fourth largest economy in the world after the United States of America, China and Japan in purchasing power parity terms. (Source: World Development Report, 2009). The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Advance Estimates was 8.5 per cent in 2010‐11, representing an increase from the revised growth of 8 per cent during 2009‐10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year‐on‐year (y‐o‐y), on back of manufacturing and within that, the capital goods sub‐segment. During April‐June 2011‐12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010‐11. The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011‐12. The Economic Scenario India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010‐12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009‐2012' by the United Nations Conference on Trade and Development (UNCTAD). India's FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January‐June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year. The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials. Source: www.ibef.com Overview of the global aluminium industry: The global aluminium industry had hit a rough path, with the global financial crisis, which began in the last quarter of 2008 severely impacting the demand for the industry. Industrial production growth of most of the major economies, slipped into the negative territory after several years of strong positive growth. The slowing economy severely affected the demand in the markets. The earlier years of strong growth inspired many manufacturers to increase their capacities, thus affecting the supply end as well. The double impact of a slowdown in demand and the expansion of capacities caused an unprecedented increase in inventory levels across the industry. This rise in the inventory levels induced the prices to tumble. 1
Classification of the Industry: The global aluminium industry has expanded its base from around a mere 1,000 tonnes in the year 1900 to around 32 million tonnes (primary aluminium) at the end of the 20th century. This makes aluminium the world’s second most widely used metal. Initially ALUMINIUM was considered a precious metal, ranked alongside of silver and gold. Today we relate the same to a light weight metal used in the manufacturing of beverage cans, which are of least value to man. Whatever our opinion, it is difficult to replace aluminium from its role in the modern world. The global aluminium industry can be classified based on its production process and can be further reclassified as per the end use product. Global aluminium industry structure (Based on latest publically available data): Integrated producers / Primary producers Secondary producers Semi‐fabricators Rolling Mills Extrusions Casting and Forgings Drawings Global demand‐supply balance: Primary Aluminium: Global demand for aluminium increased at a CAGR of 6.3% during CY03 to CY08. During the same period, global supply of metal also increased at a CAGR of 7.5 per cent. However, the demand for aluminium witnessed a rapid decline owing to the financial crises which began in mid CY 2008. The Y‐o‐Y demand for the metal, after having increased for six consecutive years, decreased for the first time in CY08. CY09 showed no respite for the global aluminium industry, as the demand for metal declined further by about 8 per cent. Despite the cuts in production, announced by most of the leading players in the second half of CY08, global primary aluminium production for the CY08 increased by 4.5% when compared with CY07. In alteration to the falling global demand, production of primary aluminium declined by about 7 per cent during CY09. Financial crisis severely impacted the American and European automobile and construction industry, leading to destruction of demand from these sectors. Since CY03, global aluminium industry was in a state of deficit. However, severe slowdown on the demand side, lead to a record increase in inventory levels during the second half of CY08. This turned the aluminium industry into a surplus state in CY08. Increase in the inventory levels of the metal further pressurised the aluminium prices to go southwards. Albeit on a lower base, global demand for aluminium recorded a robust Y‐o‐Y growth of about 12 per cent during CY10, largely backed by the improvement in the global economic indicators. While the recovery in demand was largely dominated by the emerging markets like China, Brazil and India, other Asian and developed countries also recorded a significant recovery. Secondary Aluminium: Global secondary aluminium industry largely follows the trend in the demand‐supply scenario for the global primary aluminium industry. However, as compared to the primary aluminium producers, secondary aluminium 2
producers are much more flexible in altering the supply of metal with respect to the changes in the demand‐supply gap. Globally, the share of secondary aluminium has increased over the last few decades. Today secondary aluminium producers account for about 35 per cent of the global aluminium production and consumption. Apart from a lower capital structure, energy savings in production of aluminium through scrap can reach as much as 95 per cent in comparison to the primary production. Apart from the prime reason of reduction in cost, the modern and systematic collection process of aluminium scrap has together lead to an increase in market share by the secondary producers. While in the developed countries, the share of secondary players is close to 50 per cent of the total production, the same is very low in the developing countries. Global primary aluminium end‐use consumption pattern: Globally, the automobile industry is the largest consumer of aluminium, closely followed by the construction and packaging industry. Together, these three industries constitute for more than 60% of the global end‐use aluminium consumption pattern. Changing dynamics of the country, along with an increase in the multiple uses of metal, changed the end use consumption pattern of aluminium for various countries over a period of time. As observed in the US, the use of aluminium in automobiles has increased dramatically to make the vehicles lighter and thus fuel efficient. This has increased the share of automobiles in the end use consumption pattern of the aluminium industry in USA from about 19% in CY1975 to about 37% in CY08. Domestic aluminium demand‐supply scenario: During the last two decades, domestic demand for aluminium increased four‐fold from about 0.4mn tonnes in FY91 to about 1.7mn tonnes in FY11. Production of the metal also increased from about 0.45mn tonnes to 1.6mn tonnes during the same period. Domestic Demand: Domestic demand for aluminium has been steadily growing. Consumption of aluminium in the country has grown at a CAGR of 5.6% during the period FY91 to FY09. Post FY00, demand for aluminium has grown at a CAGR of around 11.4%. Increased consumption of aluminium in the building & constructions sector and from the automobile sector has together lead to a robust growth in demand for aluminium in India. Historically, power sector has dominated the major share of end use consumption pattern. However, the share of power sector has reduced over a period of time, while that of building and construction and automobiles recorded an increase. Domestic Supply The Indian industry is been gearing up to accept the new role of supplying aluminium throughout the world. The domestic aluminium producers have been expanding their capacities to cope up with the robust domestic demand and to cash in on the opportunities thrown open by the anticipated global demand. CARE Research expects an investment to the tune of Rs1. lac crore during the next five years, which is likely to increase the domestic aluminium capacity from about 1.5 mn tonnes in FY09 to about 4 mn tonnes in FY14. Domestic outlook: During the last decade (FY01 to FY11), domestic aluminium consumption has tripled up growing at a CAGR of 11.4% from 0.5 mn tonnes to 1.7 mn tonnes. Electricals, automobiles and the construction sectors are the key end‐ 3
user sectors driving the demand for aluminium in India. The usage pattern for aluminium in these sectors is different in the domestic market when compared with the rest of the world. While globally, the automotive and the construction sectors are the major driver end‐users of aluminium, in India bulk of the demand is accounted by the power transmission sector followed by the automobile industry. CARE Research expects domestic aluminium demand to grow from 1.7 million tonnes in FY11 to 2.5 million tonnes in FY15, a compounded annual growth rate (CAGR) of 10.9 per cent. During the period FY11 to FY15, CARE Research expects, demand for aluminium from the automobile and the construction industry is likely to grow by 12 per cent and 10 per cent each. Replacement of steel and copper by aluminium in the automobiles and power transmission sectors respectively is likely to support the aluminium demand from these sectors. With the expectations of the economy growing at around 8%, demand for the metal from the power transmission segment is also likely to remain healthy at around 10% CAGR during the same period. Increasing urbanization and rise in disposable income is likely to increase the demand for packaged goods. Demand for the metal from the packaging industry which accounts for a share of around 11% in the end use consumption pattern, is also likely to grow in double digits. OUR BUSINESS OVERVIEW We are an ISO 9001:2008 certified Company engaged in manufacturing of Aluminum extruded sections & profiles, ingots and other related products. Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a Private Limited Company with Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a Public Limited Company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. Our Company has a factory unit established at Ghatabillod, Dist Dhar, Madhya Pradesh which is a well connected & developed industrial area having all infrastructure facilities. Our factory unit was established in the year 2003 in the name of M/s Krishna Profiles Private Limited. The unit was promoted by Mr. Gaurav Mungad and Mr. Rajesh Mundra. In May 2006, Mr. Rajesh Mundra left our company and Mr. Gaurav Mungad took over the charge of the entire unit along with the assistance of Mr. Vaibhav Mungad. In the year 2007‐08 our Company took its 1st major expansion and increased its manufacturing capacity from 300MT p.a. to 1200MT p.a.. Further, in the year 2008‐09, our unit took its 2nd major capacity expansion with modern machinery enhancing the capacity from 1200MT p.a. to 2100 MT p.a. Our company is currently engaged in the manufacture of Aluminum extruded sections & profiles, ingots and other related products of wide varieties. The leadership of Mr. Gaurav Mungad, Managing Director along with Mr. Omprakash Maheshwari, Whole‐time Director and Mr. Vaibhav Mungad, Whole‐time Director has made Jiji Industries Limited a successful and quality oriented Company. The Company has consistently registered growth in turnover and profitability over the previous years and now proposes to further expand its capacities and cater to the growing demand of the manufactured products. For details in relation to the aforesaid expansion, please refer to the section titled “Objects of the Issue” beginning on Page No. 34 of this Draft Red Herring Prospectus. In October 2008, our unit started exporting its products to gulf countries i.e. UAE. During 2008‐09 the total exports of our Company amounted to ` 961.83 lakhs (from October 2008 to March 2009), which increased to ` 2,575.00 lakhs in the year 2009‐10 and ` 4,087.44 lacs in the year 2010‐11. Our Company is proposing to expand its manufacturing capacity by 6,000MT p.a from its existing capacity of 2,100MT p.a. The above said expansion would comprise of a proposed expansion of 4,500MT p.a. at Ghatabillod and 1,500MT p.a. at Special Economic Zone, Pithampur. 4
Market base and customers The market is well represented by our Company in the respective manufactured segments in which our company operates. Our Company is selling the manufactured products through a network of traders spread across the country and abroad. Since the products offered by our Company have wide use, acceptability and applicability, the customer base of the same is quite wide. Our Major Customers Our top 5 major customers, interalia, include Overseas Metal Trading Company, Mungad Strips and Alloys Private Limited, Divine Aluminium Private Limited, Vani Exports, Al Medeah General Trading who collectively contributed around 95.17% of our total sales turnover for the financial year ended March 31, 2011. Our Quality Jiji’s indigenous production procedure is equipped with generous quality control measures. Our Company owns Spectro‐meter for checking alloys of melted material and Websters to check tensile strength of finished product. Each and every product is thoroughly checked with personal attention at all levels. Based on the quality controls measures adopted by our Company, our products qualify for both domestic and international market's quality standards. Quality Certifications Jiji has been certified by QA Certification Private Limited as an ISO 9001:2008 certificate for manufacturing of aluminium extruded products, profiles, ingots, billets etc. For further details refer to section titled “Government Approvals” on page no. 171 of the Draft Red Herring Prospectus. KEY BUSINESS STRENGTHS 1. Long term relationship with our customers Our continuous focus on providing quality products and services consistently to our customers has resulted in long term relationships with them. Our track record of delivering timely services and demonstrated industry expertise has helped in forging strong relationships with them. 2. Young and dynamic promoters Mr. Gaurav Mungad, aged 31 years is the Managing Director and Promoter of our Company. He has an experience of over 10 years in the same line of Industry. Mr Vaibhav Mungad, Whole time Director and promoter of our Company, aged 30 years, has been associated with our Company for over 5 years. Both the young Directors have spearheaded the operations of our Company and demonstrated their entrepreneurial skills as reflected by the consistent growth of our Company. 3. Experienced and strong management team We have an experienced management team with established and structured corporate processes. We believe that our management team has a long‐term vision. We also believe that their understanding of the market and flexibility in managing our operating and financial leverage has enabled us to adapt to the changing market conditions in a focused and constructive manner. We believe that the experience of our management team and its
5
understanding of the industry will enable us to continue to take advantage of both current and future market opportunities. 4. Strong marketing network We have a strong network of independent dealers & distributors across India and abroad. Our sales and marketing focus is on the identification of OEMs and other end‐users that helps us in achieving cost savings and increasing sales. Our marketing team includes experienced and qualified professionals with good reach and expertise. 5. Use of Modern Machineries Our company uses state of the art machineries for production viz Extrusion press, Extrusion lines. These machineries enhance the productivity and enable us to produce quality products as per specifications of domestic and international buyers. OUR BUSINESS STRATEGY 1. Enhancing our range of products Our focus is to cater to every consumer of aluminium extruded products. We have been continuously expanding and revamping the range of products and services. We intend to enhance the range of products enabling our customers to get all their requirements from a single source. 2. Aspirational developments We intend to create aspirational developments that as per our belief have distinctive features, designs and functionalities with quality output and finishing which enhances our reputation and enables us to sell our products quickly. 3. Tapping the new markets globally Aluminium extrusions are required in various applications around the world. Our presence is limited to few countries only. Moreover, due to capacity constraints, company is able to serve only limited number of clients. Further, getting product requests from various potential clients from the tapped markets have to be passed as the company has to restrict itself to current clients in terms of satisfying their requirements. The requirements from various international markets are increasing and are also getting more quality conscious. 4. Continue to strengthen relationships with key customers We believe that we constantly try to address customer needs around a variety of product offerings. Our existing client relationships help us to get repeat business from our customers. This has helped us to maintain a long term business relationship with our customers and improve our customer retention ability. This represents a competitive advantage in gaining new clients and increasing our business in future.
6
SUMMARY FINANCIAL AND OPERATING INFORMATION The following table sets forth the historical financial information of our Company derived from the restated and audited financial statements for the Fiscal years ended March 31; 2007, 2008, 2009, 2010 and 2011, all prepared in accordance with Indian GAAP and SEBI (ICDR) Regulations and included in the section titled “Financial Information of our Company” beginning on page No 127 of this Draft Red Herring Prospectus and should be read in conjunction with those Financial Statements and notes thereto and the section titled “Management’s Discussion and analysis of financial condition and results of operations” beginning on page No 157 of this Draft Red Herring Prospectus. ANNEXURE I SUMMARY STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED) (Rupees in lacs) Particulars As at 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 11 10 09 08 07 A Fixed Assets : Gross Block 504.62 470.82 341.77 340.85 145.17 Less: Depreciation 93.07 69.53 49.54 32.96 25.19 Net Block 411.56 401.29 292.23 307.88 119.98 Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00 Net Block 411.56 401.29 292.23 307.88 119.98 Capital Work In Progress 0.00 0.00 19.75 0.00 9.90 Total A 411.56 401.29 311.98 307.88 129.88 B Investments: B 0.00 0.00 0.00 0.00 0.00 C Current Assets, Loans & Advances: Inventories 1903.51 578.55 602.34 86.80 69.31 Sundry Debtors 1439.16 657.06 589.90 111.92 94.99 Cash & Bank Balances 129.41 41.36 40.72 16.43 7.26 Other Current assets, Loans & Advances 328.10 340.39 177.76 28.51 38.84 Total C 3800.19 1617.35 1410.71 243.66 210.40 Total Assets (I=A+B+C) 4211.75 2018.64 1722.69 551.55 340.28 D Loan Funds Secured Loans 888.07 1082.91 397.70 182.95 71.99 Unsecured Loans 0.00 27.67 86.49 134.33 137.35 Total Loan Funds D 888.07 1110.58 484.19 317.27 209.34 E Deferred Tax Liability E 49.94 41.12 29.40 16.56 10.18 F Current Liabilities & Provisions Current Liabilities 1675.96 533.97 1044.94 119.19 84.77 Provisions 176.08 35.80 12.28 1.80 1.46 Total Current Liabilities & Provisions F 1852.04 569.78 1057.21 120.99 86.24 G Share Application Money G ‐ ‐ ‐ ‐ 26.00 Total Liabilities (II=D+ E+F+G) 2790.05 1721.47 1570.80 454.82 331.75 H Net Worth (I‐ II): 1421.69 297.16 151.89 96.72 8.53 I Net Worth Represented by: Share Capital 235.00 150.00 75.00 75.00 10.00 7
‐1.27 0.00
Reserves & Surplus 1186.76 147.26 77.02 21.89 Less: Revaluation Reserves 0.00 0.00 0.00 0.00 Less: Miscellaneous Expenses not w/off 0.07 0.10 0.14 0.17 0.20 Net Worth 1421.69 297.16 151.89 96.72 8.53 Note: 1. The above statement should be read with the significant accounting policies and notes to the restated summary statement of assets and liabilities, profit and loss account and cash flows statement as appearing in Annexure A
8
ANNEXURE II STATEMENT OF PROFITS AND LOSSES (AS RESTATED) Particulars 31‐Mar‐ 11 INCOMES: Sales ‐ Manufacturing ‐ Trading ‐ Other (DEPB) Other Income Increase / (Decrease) in Inventories TOTAL INCOME EXPENDITURES: Purchases/ Consumption Direct Expenses Payments to & Provision for Employees Administrative Expenses Selling & Distribution Expenses Interest and other finance charges Depreciation TOTAL EXPENDITURE Net Profit before tax & extra‐ordinary items: Provision for Tax ‐ Current Tax ‐ Fringe Benefit Tax ‐ Deferred Tax Liability / (Asset) Net Profit before extra‐ordinary items & after tax: Short / (Excess) Provision of Income tax of earlier years Short/(Excess) Provision of Deferred Tax Liability of earlier years Prior period expenses Depreciation of earlier years Extraordinary Item ( net of tax) Net Profit after tax and extra‐ordinary items (as per audited financial) statements : Adjustments on account of restatements (for details see notes to account point no 1) Net Profit as restated (A+B): Surplus/(deficit) available for appropriation
2278.89 655.11 224.14 25.49 203.70 82.43 19.99
1410.04 0.00 46.98 23.59 492.32 1972.94 1470.00 215.59 76.61 7.01 72.57 43.16 16.58
270.37 51.88 12.90 0.72 335.86 201.17 60.40 8.96 2.63 1.10 21.60 8.97
8145.33
3489.75
1901.52
304.84
213.30
458.34
100.37 15.32 0.00 11.72
31.03 1.91 0.06 6.38
23.32
143.56 0.00 8.82
71.42 19.18 0.16 12.84
305.95
73.33
39.23
22.68
19.61
4.38
(7.94)
0.48
(0.87)
0.00
(1.28) 0.00 0.00
0.00 6.07 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
A
302.85
75.21
38.75
23.55
19.61
B
(28.31) 274.54
(4.97) 70.24
1.39 40.14
(0.39) 23.16
0.87 20.48
274.54
70.24
40.14
23.16
20.48
8050.44 7.00 410.72 73.14 62.36 8603.67
3741.74 0.00 144.51 1.88 (298.01) 3590.12
6143.15 1223.87 302.85 22.38 313.09 116.46 23.53
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(Rupees in lacs) Financial Year ended 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 10 09 08 07
236.23 0.00 0.45 (0.06) 236.62 163.16 27.23 3.75 1.74 0.00 9.46 7.96
2.33 1.37
Appropriations: ‐ Transferred to General Reserve 0.00 0.00 0.00 0.00 0.00 ‐ Transferred to Capital Account 0.00 0.00 0.00 0.00 0.00 ‐ Proposed Dividend 0.00 0.00 0.00 0.00 0.00 ‐ Tax on Dividend 0.00 0.00 0.00 0.00 0.00 Total Appropriations: 0.00 0.00 0.00 0.00 0.00 Balance Profit after Appropriation 274.54 70.24 40.14 23.16 20.48 Balance brought forward from previous year: 129.76 59.52 19.39 (3.77) (24.25) Accumulated Profit/ (Loss) carried to Balance Sheet 404.30 129.76 59.52 19.39 (3.77) Note: 1. The above statement should be read with the significant accounting policies and notes to the restated summary statement of assets and liabilities, profit and loss account and cash flows statement as appearing in Annexure III. Significant Accounting Policies and Notes on Accounts. Annexure A
10
ANNEXURE‐III STATEMENT OF CASH FLOW STATEMENT (AS RESTATED) (Rupees in lacs) Particulars 1.Cash Flow From Operating Activities: Net Profit before tax and extraordinary item Adjustments for: Depreciation Earlier year expenditure Preliminary expenses W/o (provided) Interest Paid (Profit)/Loss on sale of Fixed Assets Interest Received Operating Profit before Working Capital Changes Adjustments for: Inventories Debtors Loans & Advances Trade Payables Provision Cash Generated from Operation Taxes Paid Cash flow before Extra Ordinary item Extra ordinary items Net Cash from Operating Activities 2. Cash Flow From Investing Activities: Fixed Assets Purchased Sale of Fixed Assets Interest Received Capital work in Progress Deposit with MPSEB Net Cash from Investing Activities 3. Cash Flow From Financing Activities: Proceeds from Secured Loans Proceeds of Share Application Money/ Issue of Shares Proceeds from Unsecured loans Proceeds from securities premium Interest paid Capital Subsidy Net Cash from Financing Activities Net Increase/ (Decrease) in Cash & Cash Equivalents Cash & Cash Equivalents at the beginning of the year
31‐Mar‐11 458.34
100.37
23.53 1.27 0.03 116.46 ‐ (3.38)
19.99 ‐ 0.03 82.43 ‐ (1.68)
596.25
201.15
(1324.96) (782.11) 9.09 1126.91 128.24 (246.59) (147.94) (394.53) ‐ (394.53)
23.79 (67.16) (161.35) (489.65) (4.03) (497.25) (13.45) (510.70) ‐ (510.70)
(33.80) ‐ 3.38 ‐ 2.01 (28.41)
(129.06) ‐ 1.68 19.75 ‐ (107.63)
(194.83)
685.21
85.00 (27.67) 764.96 (116.46) ‐ 511.00
75.00 (58.82)
31‐Mar‐08 71.42 31.03 16.58 8.97 ‐ ‐ 0.03 0.03 43.16 21.60 ‐ (1.05) (2.51) (0.31)
128.69 (515.54) (477.98) (149.25) 920.22 17.38 (76.47) (19.83) (96.30) ‐ (96.30) (0.92) ‐ 2.51 (19.75) ‐ (18.16) 214.75
31‐Mar‐07 23.33 7.96 ‐ 0.03 9.45 ‐ ‐
60.28
40.77
(17.49) (16.92) 10.33 34.73 (0.36) 70.56 (1.10) 69.46 ‐ 69.46
(27.65) (56.34) 1.42 0.87 2.33 (38.60) (2.33) (40.94) ‐ (40.94)
(200.36) 4.53 0.31 9.90 ‐ (185.62)
(1.19) ‐ ‐ (2.05) ‐ (3.24)
110.96
(16.02)
39.00 (3.02)
6.00 45.76
(82.43) ‐ 618.96
‐ (47.84) (43.16) 15.00 138.75
(21.60) ‐ 125.34
(9.45) ‐ 26.29
88.05
0.64
24.29
9.17
(17.89)
41.36
40.72
16.43
7.26
25.14
11
31‐Mar‐10
Year ended 31‐Mar‐09
Cash & Cash Equivalents at the end of the year 129.41 41.36 40.72 16.43 7.26 Note: 1. The Cash Flow Statement has been prepared under the 'Indirect Method' as set out in Accounting Standard ‐ 3 on Cash Flow Statements issued by ICAI 2 Figures in Brackets represents outflow. 3 The above statement should be read with Significant Accounting Policies and Notes on Restatements as in Annexure‐ A
12
3.2 – THE ISSUE Particulars
Number of Equity Shares 90,00,000 equity shares of face value ` 10 each at a premium of `` [●] for cash aggregating to ` [●] lakhs Of which Qualified Institutional Buyers Portion Not more than 45,00,000 equity shares of face value 10 each at a premium of ` [●] for cash (allocation on proportionate basis), out of which 5% i.e. 2,25,000 equity shares shall be available for allocation on proportionate basis to Mutual Funds and the balance 42,75,000 equity shares shall be available for allocation to all QIBs including Mutual Funds. Non Institutional Portion Not less than 13,50,000 equity shares of face value `10/‐ each at a premium of ` [●] for cash. Retail Portion Not less than 31,50,000 equity shares of face value ` 10/‐ each at a premium of ` [●] for cash. Equity Shares outstanding prior to the 93,99,840 equity shares of face value ` 10/‐ each. Issue Equity Shares outstanding after the 1,83,99,840 equity shares of face value ` 10/‐ each. Issue Use of Issue proceeds Please see the chapter titled “Objects of the Issue” on page 34 of the Draft Red Herring Prospectus. Our Company is proposing the Initial Public Offering under Regulation 26(1) of SEBI (ICDR) Regulations 2009, as amended. Issue
13
3.3 ‐ GENERAL INFORMATION Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a Private Limited Company with Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a Public Limited Company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. The present authorised share capital of our Company is ` 2,000 lakhs divided into 20,000,000 equity shares of ` 10/‐ each. The brief information for our Company is given below: ‐ Registered Office
33‐34, Rambali Nagar, Sangam Nagar Road, Indore ‐ 452001, Madhya Pradesh Telefax: +91 731 4046002 Factory Existing Works Office Plot No. 316/2/1 & 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar – 454773, Madhya Pradesh. Date of Incorporation May 01, 2003 Company Identification No. (CIN) U27203MP2003PLC015775 Registrar of Companies, Madhya Pradesh and Chattisgarh, 3rd Floor, 'A' Address of Registrar of Companies Block, Sanjay Complex, Jayendra Ganj, Gwalior, Madhya Pradesh Bombay Stock Exchange Limited Name of the Stock Exchanges National Stock Exchange of India Limited Designated Stock Exchange Bombay Stock Exchange Limited Board of Directors of our Company The Board of Directors comprises the following: Name Age (yrs) DIN Designation Address Mr. Gaurav Mungad 31 01790847 Managing Director 7, Nagarchi Bakhal, Indore ‐452007, Madhya Pradesh Mr. Vaibhav Mungad 30 01790928 Whole‐Time 7, Nagarchi Bakhal, Indore ‐452007, Director Madhya Pradesh Mr. Omprakash 59 02812660 Whole‐Time 7, Nagarchi Bakhal, Indore ‐452007, Maheshwari Director Madhya Pradesh Mr. Viny Raj Modi 37 02294902 Independent 267, Rachna Nagar, Bhopal ‐462023, Director Madhya Pradesh Mr. Ajay Vikram Thakur 48 03584201 Independent 7 C Sangam Nagar, Indore ‐452001, Director Madhya Pradesh Mr. Manish Dawar 33 03584205 Independent G‐07, Asawa Chambers, Sapna Director Sangeeta Road, Indore ‐452001, Madhya Pradesh For further details of our Directors, please refer to page No. 100 under Section titles “Our Management” of this Draft Red Herring Prospectus
14
Company Secretary and Compliance Officer of our Company Ms. Ranjana Singh is the Company Secretary and the Compliance officer of our Company and her contact details are as follows: Ms. Ranjana Singh 33‐34, Rambali Nagar, Sangam Nagar Road, Indore, Madhya Pradesh ‐ 452001 Telefax: +91 731 4046002, Website: www.jijiindustries.net Email:
[email protected] Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre‐issue or post‐issue related problems such as non‐receipt of letters of allotment, credit of allotted shares in the respective beneficiary account and refund orders. All grievances relating to the ASBA process may be addressed to the Registrar to the Issue, with a copy to the concerned SCSB, giving full details such as name, address of the applicant, number of Equity Shares Bid for, amount blocked, ASBA Account number and the Designated Branch of the SCSB where the ASBA Bid cum Application Form was submitted by the ASBA Bidder. BOOK RUNNING LEAD MANAGER Hem Securities Limited 14/15 Khatau Building, 40, Bank Street, Mumbai ‐ 400 001 Tel: +91 22 2267 1543 / 44 Fax: +91 22 2262 5991 E‐ Mail:
[email protected] Website: www.hemonline.com Contact Person: Mr. Rakesh Bhalla SEBI Regn. No. INM000010981 LEGAL ADVISORS TO THE ISSUE M/s Kanga & Company (Advocates & Solicitors) Readymoney Mansion, 43, Veer Nariman Road, Mumbai‐400 001, Tel. No.: 91‐22‐66230000, 66332288 Fax No.: 91‐22‐66339656, 66339657 Email:
[email protected] Contact Person: Mr. Chetan S. Thakkar REGISTRAR TO THE ISSUE Bigshare Services Private Limited E‐2, Ansa Industrial Estate, Sakivihar Road, Saki Naka, Andheri (East), Mumbai 400 072 Tel.: +91 22 4043 0200 15
Fax: +91 22 2847 5207 E‐Mail:
[email protected] Website: www.bigshareonline.com Contact Person: Mr. Mallah S. SEBI Reg. No.: INR 000001385 SYNDICATE MEMBERS ESCROW COLLECTION BANKS/BANKERS TO THE ISSUE [●] REFUND BANKER [●] BANKERS TO THE COMPANY Bank of Baroda Plot No. 7 & 8, 53‐54, Prabhu Nagar, Annapurna Road, Indore 452009 Telefax.: +91 731 2483324 Email :
[email protected] Website: www.bankofbaroda.com Contact Person: Mr. S. K. Talreja ADVISOR TO THE COMPANY Pine Tree Consultants Private Limited 104, Raheja Centre, 214, Free Press Journal Marg Nariman Point, Mumbai – 400 021 Tel: +91 22 – 2283 7000/ 01 Fax: +91 22 – 2283 7002 Email:
[email protected] Contact Person: Mr. Ankur Somani SELF CERTIFIED SYNDICATE BANKS The list of banks who have been notified by SEBI to act as Self Certified Syndicate Banks (SCSBs) for ASBA process are provided at http://www.sebi.gov.in/ AUDITORS TO THE COMPANY M/s. Gandhi Dhakad Gupta and Co., Chartered Accountants 508, Chetak Centre, 12/2, R.N.T. Marg, Indore – 452001 Tel.: +91 731 2518518 Fax: +91 731 3043518 Email:
[email protected] Contact Person: Mr. Sunil Kumar Gandhi Firm Registration No.: 006768C 16
IPO GRADING AGENCY Credit Analysis and Research Limited, 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai ‐ 400022 Tel.: +91 22 6754 3456 Fax: +91 22 67543457 Email:
[email protected] Website: www.careratings.com Contact Person: Mr. Savita Iyer IPO Grading This issue being has been graded by Credit Analysis and Research Limited and has been assigned [●] indicating the fundamentals of the issue are [●]. The IPO Grading is assigned on a 5 point scale from 1 to 5 with [●] indicating strong fundamentals and [●] indicating poor fundamentals. For details in relation to report of grading agency please refer to “Grading Rationale” on page [●] of the Draft Red Herring Prospectus. MONITORING AGENCY The issue size is less than ` 500 crore and hence there is no requirement for appointment of monitoring agency in terms of Regulation 16(1) of the SEBI ICDR Regulations. However, as per the Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges upon listing of the equity shares and the Corporate Governance Requirements, the Audit Committee of our Company would monitor the utilization of the proceeds of the Issue. For details please refer to section titled ‘Objects of the Issue‐ Monitoring of Utilization of Funds’ on page 34 of this Draft Red Herring Prospectus. Apprising Agency The issue has not been appraised. Credit Rating This being an issue of equity shares, there is no requirement of credit rating of the issue. Expert Opinion Except for the report of CARE in respect of the IPO Grading of this Issue (a copy of which will annexed to the Red Herring Prospectus), furnishing the rationale for its grading and the reports of the Auditors of our Company, M/s. Gandhi Dhakad Gupta and Co., (the Statutory Auditors), in respect of the information contained in “Financial Information” and “Statement of Tax Benefit” on pages 127 and 51, respectively, our Company has not obtained any expert opinions. Trustees As the issue is of Equity Shares, the appointment of Trustees is not required. STATEMENT OF INTER SE ALLOCATION OF RESPONSIBILITIES 17
Since Hem Securities Limited is the sole BRLM to this Issue, statement of inter‐se allocation responsibilities among Lead Manager’s is not applicable. BOOK BUILDING PROCESS IN BRIEF Book Building refers to the process of collection of Bids, on the basis of the Red Herring Prospectus. The Issue Price is fixed after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are: • • •
Our Company Book Running Lead Manager Syndicate Member(s) who are intermediaries registered with SEBI or registered as brokers with BSE / NSE and eligible to act as underwriters Registrar to the Issue Escrow Collection Banks / Bankers to the Issue; and SCSBs.
• • • The primary responsibility of building the book shall be that of the BRLM. The Equity Shares are being offered to the public through the 100% Book Building Process in accordance with the SEBI ICDR Regulations wherein not more than 50% of the Issue i.e., 45,00,000 Equity Shares shall be allotted on a proportionate basis to QIBs. 5% of QIB Portion i.e. 2,25,000 Equity Shares shall be available for allocation on a proportionate basis to Mutual Funds. The remaining QIB Portion shall be available for allocation on a proportionate basis to all QIBs including Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue, i.e., 13,50,000 Equity Shares shall be available for allocation on a proportionate basis to Non‐Institutional Bidders and not less than 35% of the Issue, i.e., 31,50,000 Equity Shares shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Under subscription, if any, in any category would be met with spillover from other categories in accordance with applicable laws, regulations and guidelines. Investors may note that in case of over subscription in the Issue, allotment to QIB Bidders, Non‐Institutional Bidders and Retail Individual Bidders shall be made on a proportionate basis. Pursuant to SEBI circular no. CIR/CFD/DIL/1/2011 dated April 29, 2011 all non‐ retail Investors i.e. QIBs and Non Institutional Investors should compulsorily apply through ASBA Process in this Issue. Retail Individual Bidders have the option to participate in this Issue through the ASBA process. For further details please see the section titled “Issue Procedure” on page 191 of this Draft Red Herring Prospectus. Our Company shall comply with the SEBI ICDR Regulations and any other ancillary directions issued by SEBI for this Issue. In this regard, our Company has appointed Hem Securities Limited as the Book Running Lead Manager to manage the Issue and to procure the subscriptions to the Issue. Investors should note that Equity Shares would be allotted to all successful Bidders only in dematerialised form. Bidders will not have the option of getting allotment of the Equity Shares in physical form. The Equity Shares on Allotment shall be traded only in the dematerialised segment of the Stock Exchanges.
18
Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purpose of illustration and is not specific to the Issue) The Bidders can bid at any price within the price band. For instance, assume a price band of ` 20/‐ to ` . 24/‐ per Equity Share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the website of the BSE (www.bseindia.com), the NSE (www.nseindia.com), and at the bidding centers during the bidding period. The illustrative book as set forth below shows the demand for the Equity Shares of the Issuer Company at various prices and is collated from Bids received from various investors. Bid Quantity Bid Price (`.) Cumulative Quantity Subscription 500 24 500 16.67% 1,000 23 1,500 50.00% 1,500 22 3,000 100.00% 2,000 21 5,000 166.67% 2,500 20 7,500 250.00% The price discovery is a function of demand at various prices. The highest price at which our Company is able to issue the desired quantity of Equity Shares is the price at which the book cuts off, i.e., ` 22 in the above example. Our Company, in consultation with the BRLM will finalize the Issue Price at or below such cut off price, i.e., at or below `22. All Bids at or above this Issue Price and cut‐off Bids are valid Bids and are considered for allocation in the respective categories. Steps to be taken for bidding: 1.
Check eligibility for bidding (see the section titled “Issue Procedure ‐ Who Can Bid” on page 193 of the Draft Red Herring Prospectus);
2.
Ensure that the Bidder has a demat account and the demat account details are correctly mentioned in the Bid‐ cum‐Application Form and the ASBA Bid cum Application Form;
3.
Ensure that the Bid cum Application Form or ASBA Bid cum Application Form is duly completed as per instructions given in this Draft Red Herring Prospectus and in the Bid cum Application Form and the ASBA Bid Cum Application Form;
4.
Except for Bids on behalf of the Central or State Government, residents of Sikkim and the officials appointed by the courts, for Bids of all values ensure that you have mentioned your Permanent Account Number (“PAN”) allotted under the I.T. Act in the Bid cum Application Form and the ASBA Bid cum Application Form (see “Issue Procedure ‐ ‘PAN’ or ‘GIR’ Number” on page 206);
5.
The Bidder should ensure the correctness of his or her Demographic Details (as defined in the section “Issue Procedure – Bidder’s Depository Account and Bank Account Details” on page 202 i.e. those given in the Bid cum Application Form vis‐à‐vis with his or her Depository Participant);
6.
Bids by QIBs will have to be submitted to members of the Syndicate or their affiliates or SCSBs only;
7.
Bids by ASBA Bidders may be submitted either with the Syndicate or SCSBs. ASBA Bidders should ensure that their bank accounts have adequate credit balance in their bank account to ensure that their Bid cum ASBA Form is not rejected.
19
WITHDRAWAL OF THE ISSUE Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue any time after the Bid/Issue Opening Date but before Allotment of Equity Shares. In such an event, our Company would issue a public notice in the newspapers in which the pre‐Issue advertisements were published, within two Working Days of the Bid/Issue Closing Date, providing reasons for not proceeding with the Issue. The BRLM, through the Registrar to the Issue, shall notify the SCSBs to unblock the bank accounts of the ASBA Bidders within one Working Day from the day of receipt of such notification. Our Company shall also inform the Stock Exchanges on which the Equity Shares are proposed to be listed. Notwithstanding the foregoing, the Issue is also subject to obtaining (i) the final listing and trading approvals of the Stock Exchanges, which our Company shall apply for only after Allotment, and (ii) the final RoC approval of the Prospectus after it is filed with the RoC. In the event our Company in consultation with the BRLM withdraws the Issue after the Bid / Issue Closing Date, a fresh offer document will be filed with SEBI in the event our Company subsequently decides to proceed with the initial public offering. In the event of withdrawal of the Issue anytime after the Bid / Issue Opening Date but before the allotment of Equity Shares, our Company will forthwith repay, without interest, all monies received from the applicants in pursuance of the Draft Red Herring Prospectus. If such money is not repaid within 8 days after our Company become liable to repay it, i.e. from the date of withdrawal, then our Company, and every Director of our Company who is an officer in default shall, on and from such expiry of 8 days, be liable to repay the money, with interest at the rate of 15% per annum on application money. In terms of the ICDR Regulations, QIBs bidding in the QIB Portion shall not be allowed to withdraw their Bids after the Bid / Issue Closing Date. For further details, see “Issue Structure” on page 189 of the Draft Red Herring Prospectus. BID / ISSUE PROGRAMME Bid / Issue Opens on [●] Bid / Issue Closes on [●] Bids and any revision in Bids will be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard Time) during the Bid/Issue Period as mentioned above at the Bidding centers mentioned in the Bid cum Application Form except that on the Bid/Issue Closing Date will be accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) and uploaded until (i) 4.00 p.m. in case of Bids by QIB Bidders and Non‐Institutional Bidders; and (ii) 5.00 p.m. for Retail Individual Bidders which may be extended upto such time as deemed fit by the Stock Exchanges. Due to limitation of time available for uploading the Bids on the Bid/Issue Closing Date, the Bidders are advised to submit their Bids one Working Day prior to the Bid/Issue Closing Date and, in any case, no later than 3.00 p.m. (Indian Standard Time) on the Bid/Issue Closing Date. Bidders are cautioned that in the event a large number of Bids are received on the Bid/Issue Closing Date, as is typically experienced in IPOs, which may lead to some Bids not being uploaded due to lack of sufficient time to upload, such Bids that cannot be uploaded will not be considered for allocation in the Issue. If such Bids are not uploaded, our Company, the BRLM and the Syndicate Members shall not be responsible. Bids were accepted only between Monday and Friday (excluding any public holiday). On the Bid Closing Date, extension of time will be granted by the Stock Exchanges only for uploading the Bids received by Retail Individual Bidders, after taking into account the total number of Bids received upto the closure of timings for acceptance of Bid‐cum Application Forms and ASBA Forms as stated herein and reported by the BRLM to the Stock Exchanges within half an hour of such closure. In case of discrepancy in the data entered in the 20
electronic book vis‐à‐vis the data contained in the physical Bid form, for a particular bidder, the details as per the bid file received from may be taken as the final data the purpose of allotment. In case of discrepancy in the data entered in the electronic book vis‐à‐vis the data contained in the physical or electronic Bid Form, for a Bidder, the Registrar to the Issue shall ask for rectified data from the SCSBs. We will decide the Price Band in consultation with the BRLM. The Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the face value of Equity Shares. Subject to compliance with the immediately preceding sentence, the Floor Price can move up or down to the extent of 20% of the Floor Price as disclosed at least two working days prior to the Bid/Issue Opening Date and the Cap Price will be revised accordingly. The announcement on the Price Band shall also be made available on the websites of the BRLM and at the terminals of the Syndicate. In case of revision in the Price Band, the Bid/Issue Period will be extended for atleast three additional Working Days after revision of the Price Band subject to the total Bid/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a press release and also by indicating the change on the websites of the BRLM, and at the terminals of the members of the Syndicate. UNDERWRITERS TO THE ISSUE After the determination of the Issue Price and allocation of the Equity Shares but prior to filing of the Prospectus with the ROC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that their respective Syndicate Members do not fulfill their underwriting obligations save and except for underwriting obligations resulting from ASBA Bids. The underwriting shall be to the extent of the Bids uploaded by the Underwriters including through its Syndicate/Sub‐Syndicate. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain conditions specified therein. The Underwriters have indicated their intention to underwrite the following number of Equity Shares: Details of Underwriters Indicative Number of Equity Shares Amount Underwritten (`In lakh) to be Underwritten [•] [•] [•] [•] [•] [•] Total Î [•] [•] (This portion will be filled in before filing of the Prospectus with the ROC) The above‐mentioned amount is indicative underwriting and this would be finalized after pricing and actual allocation. The above Underwriting Agreement is dated [•]. Our Board of Directors at its meeting held on [●], has accepted and entered into the Underwriting Agreement mentioned above on behalf of our Company. In the opinion of the Board of Directors (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above‐mentioned Underwriters are registered with SEBI or registered as brokers with the Stock Exchange(s). Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with 21
respect to Equity Shares allocated to investors procured by them. In the event of any default, the respective Underwriter in addition to other obligations to be defined in the Underwriting Agreement will also be required to procure / subscribe to the extent of the defaulted amount. The underwriting arrangement mentioned above shall not apply to the subscriptions received through ASBA Bid cum application form and bidded by the Designated Branches of SCSBs in this Issue.
22
3.4 ‐ CAPITAL STRUCTURE OF OUR COMPANY The share capital of our Company as on the date of this Draft Red Herring Prospectus is set forth below: (` In Lakhs) Sr.No. Particulars Aggregate Value at Aggregate Value at Face Value (`) Issue Price (`) A Authorised Capital 2,00,00,000 Equity Shares of ` 10 each 2000.00 B Issued, Subscribed and Paid up capital 93,99,840 Equity shares of ` 10 each 939.98 C Present Issue in terms of this Draft Red Herring Prospectus 90,00,000 Equity shares of ` 10/‐ each at a premium of ` [●] per share. 900.00 [●] D Net offer to public 90,00,000 Equity shares of ` 10/‐ each at a premium of ` [●] per share. 900.00 [●] E Paid up Capital After the Issue 1,83,99,840 Equity shares of ` 10/‐ each. 1839.98 [●] F Share Premium Account Before the Issue 264.96 After the Issue [●] The present Issue of 90,00,000 Equity Shares in terms of the Draft Red Herring Prospectus has been authorized pursuant to a resolution of our Board of Directors dated August 09, 2011 and by Special Resolution passed under Section 81 & 81(1A) of the Companies Act, 1956 at the Extra‐ordinary General Meeting of the members held on August 12, 2011. NOTES TO CAPITAL STRUCTURE 1. Details of Increase in Authorized Share Capital of our Company (` In Lakhs) Date of Meeting Cumulative Face Authorised Particulars No. of Equity Value Share Capital Shares (`) (in ` lakhs) On Incorporation 1,00,000 10.00 10.00 ‐ 15/11/2007 3,60,000 10.00 36.00 Increased from ` 10 lakhs to ` 36 lakhs 20/03/2008 7,50,000 10.00 75.00 Increased from ` 36 lakhs to ` 75 lakhs 02/11/2009 9,00,000 10.00 90.00 Increased from ` 75 lakhs to ` 90 lakhs 31/03/2010 15,00,000 10.00 150.00 Increased from ` 90 lakhs to ` 150 lakhs 28/01/2011 50,00,000 10.00 500.00 Increased from ` 150 lakhs to ` 500 lakhs 29/06/2011 2,00,00,000 10.00 2,000.00 Increased from ` 500 lakhs to ` 2,000 lakhs 2. Equity Share Capital History of our Company Date of No. of Cumulati Face Issue Cumulative Cumulative Conside Nature of Issue and Allotment / Equity ve No. of Value Price Securities Paid‐up ration Category of Allottees Date of Fully Shares Equity Premium Capital (`) Paid Up allotted Shares Account ( `) 23
Date of Allotment / Date of Fully Paid Up
No. of Equity Shares allotted
Cumulati Face ve No. of Value Equity Shares
Issue Price
Cumulative Securities Premium Account ( `)
Cumulative Paid‐up Capital (`)
Conside ration
01/05/2003
10,000
10,000
10
10
Nil
1,00,000
Cash
02/07/2003
90,000
1,00,000
10
10
Nil
10,00,000
Cash
15/11/2007
2,60,000
3,60,000
10
10
Nil
36,00,000
Cash
31/03/2008
3,90,000
7,50,000
10
10
Nil
75,00,000
Cash
31/03/2010
7,50,000 15,00,000
10
10
Nil
1,50,00,000
Cash
31/03/2011 8,49,960 23,49,960 29/06/2011 70,49,880 93,99,840
10 10
100 Nil
7,64,96,400 2,64,96,400
2,34,99,600 9,39,98,400
Cash Bonus
3.
Subscribers to Memorandum1 Allotment to Promoters & Others Allotment to Promoters & Others Allotment to Promoters, Promoter Group & Others Allotment to Promoters, Promoter Group & Others Allotment to Promoters & Promoter Group Existing Shareholders2
1.
The Subscribers to the Memorandum of Association of our Company are Mr. Rajesh Mundra and Mr. Gaurav Mungad.
2.
Our Company had issued bonus shares to the members in the ratio of 3:1 (Three shares for every one share held on that date) by utilizing the amount lying to the credit of Securities Premium Account and General Reserve amounting to ` 5,00,00,000 and ` 2,04,98,800 respectively.
Capital Build Up in respect of shareholding of Promoters
Date of Consid Allotment/ eration Date of Fully Paid up
Mr. Gaurav Mungad 01/05/2003 Cash 02/07/2003 01/08/2003 15/11/2007 31/03/2008 31/03/2010 31/03/2011 20/04/2011
Cash Cash Cash Cash Cash Cash Cash
29/06/2011 ‐ Sub Total Mr. Vaibhav Mungad
Nature of Issue
Subscribers to Memorandum Allotment Sold to Mr. Ashish Jain Allotment Allotment Allotment Allotment Purchased from Mr. Ashish Jain Bonus
No. of Equity Shares
Face Issue % of Value Price / Pre‐ (`) Consid issue eration paid up (`) capital
5,000 25,000 (10) 30,000 50,000 95,000 75,000
10 10 10 10 10 10 10
10 10 10 10 10 10 100
0.05 0.27 0.00 0.32 0.53 1.01 0.80
10 8,40,000 11,20,000
10 10
100 Nil
0.00 8.94 11.92
24
Nature of Issue and Category of Allottees
% of Post‐ issue paid up capital
0.03 0.14 0.00 0.16 0.27 0.52 0.41
No. of Pledged shares
% of Pledged shares to Total Pre issue Holding
‐ ‐ ‐ ‐ 50,000 50,000 ‐
‐ ‐ ‐ ‐ 0.53 0.53 ‐
0.00 ‐ 4.57 ‐ 6.09 1,00,000
‐ ‐ 1.06
25/05/2006
Cash
Purchased from Mrs. Chandra Mundra & Mr. Rajesh Mundra Allotment Allotment Allotment Allotment Bonus
30,000 10 10 0.32 0.16 ‐ ‐ 15/11/2007 Cash 1,00,000 10 10 1.06 0.54 ‐ ‐ 31/03/2008 Cash 50,000 10 10 0.53 0.27 ‐ ‐ 31/03/2010 Cash 5,85,000 10 10 6.22 3.18 2,50,000 2.66 31/03/2011 Cash 75,000 10 100 0.80 0.41 ‐ ‐ 29/06/2011 ‐ 25,20,000 10 Nil 26.81 13.70 ‐ ‐ Sub Total 33,60,000 35.74 18.26 2,50,000 2.66 Mr. Omprakash Maheshwari Purchased from 25/05/2006 Cash Mrs. Chandra Mundra 10,000 10 10 0.11 0.05 ‐ ‐ 15/11/2007 Cash Allotment 1,00,000 10 10 1.06 0.54 1,00,000 1.06 31/03/2008 Cash Allotment 1,50,000 10 10 1.60 0.82 1,50,000 1.60 31/03/2010 Cash Allotment 20,000 10 10 0.21 0.11 ‐ ‐ 29/06/2011 ‐ Bonus 8,40,000 10 Nil 8.94 4.57 ‐ ‐ Sub Total 11,20,000 11.92 6.09 2,50,000 2.66 Mungad Strips and Alloys Private Limited 31/03/2011 Cash Allotment 4,99,980 10 100 5.32 2.72 ‐ ‐ 29/06/2011 ‐ Bonus 14,99,940 10 Nil 15.96 8.15 ‐ ‐ Sub Total 19,99,920 21.28 10.87 6,00,000 6.38 Total 75,99,920 80.86 41.30 6,00,000 6.38 4. Details of the aggregate shareholding of our Promoter Group and of the Directors of our Corporate Promoter is as below: Particulars No. of Shares % of Pre‐issue paid up capital Promoter Group Mrs. Sushila Mungad 3,40,000 3.62 Mrs. Nidhi Mungad 38,000 0.40 Mrs. Jaya Mungad 38,000 0.40 Omsu Industries Private Limited 7,99,920 8.51 Sub Total 12,15,920 12.93 Director of our Corporate Promoter Mr. Aabhas Mungad 2,00,000 2.13 Sub Total 2,00,000 2.13 Total 14,15,920 15.06 5. Details of the aggregate number of Equity Shares purchased/acquired or sold by our Promoters, Promoter Group and/or the Directors of the Company which is our Promoter and/or by our Directors and their immediate relatives within six months immediately preceding the date of filing of this Draft Red Herring Prospectus with SEBI. Name Date of Nature of No. of Face Allotment/ Consideration Allotment/ Allotment/ Shares Value Acquisition Acquisition Acquisition Price Mr. Omprakash Maheshwari 29/06/2011 Bonus Issue 8,40,000 10 Nil N.A.
25
Name
Date of Allotment/ Acquisition 31/03/2011 20/04/2011 29/06/2011
Nature of Allotment/ Acquisition Allotment Purchased Bonus Issue
75,000 10 8,40,000
10 10 10
Allotment/ Acquisition Price 100 100 Nil
Mr. Vaibhav Mungad
31/03/2011 29/06/2011
Allotment Bonus Issue
75,000 25,20,000
10 10
100 Nil
Cash N.A.
Mungad Strips and Alloys Private Limited
31/03/2011 29/06/2011
Allotment Bonus Issue
4,99,980 14,99,940
10 10
100 Nil
Cash N.A.
Omsu Industries Limited
31/03/2011 29/06/2011
Allotment Bonus Issue
1,99,980 5,99,940
10 10
100 Nil
Cash N.A.
Mrs. Sushila Mungad Mrs. Nidhi Mungad
29/06/2011 29/06/2011
Bonus Issue
2,55,000
Nil
N.A.
Bonus Issue
28,500
10 10
Nil
N.A.
Mrs. Jaya Mungad
29/06/2011
Bonus Issue
28,500
10
Nil
N.A.
Mr. Gaurav Mungad
Private
No. of Shares
Face Value
Consideration
Cash Cash N.A.
Mr. Aabhas Mungad 29/06/2011 Bonus Issue 1,50,000 10 Nil N.A. The maximum and minimum price at which the aforesaid purchases/acquisition was made was ` 100 and ` Nil respectively per equity share. 6. Promoter’s Contribution and Lock‐in The following shares held by Promoters are locked‐in as Promoter’s Contribution: Date of Nature of Issue Allotment/ Date of Fully Paid up Mr. Gaurav Mungad 01/05/2003 Subscribers to Memorandum 02/07/2003 Allotment 15/11/2007 Allotment 31/03/2010 Allotment 31/03/2011 Allotment 20/04/2011 Purchased from Mr. Ashish Jain 29/06/2011 Bonus Sub Total Mr. Vaibhav Mungad 25/05/2006 Purchased from Mrs. Chandra Mundra & Mr. Rajesh Mundra 15/11/2007 Allotment 31/03/2008 Allotment
No. of Equity Shares
Issue Price / Consideration (`)
% of Pre‐ issue paid up capital
% of Post‐ issue paid up capital
5,000 24,990 30,000 45,000 75,000 10 5,40,000 7,20,000
10 10 10 10 100 100 Nil
0.05 0.27 0.32 0.48 0.80 0.00 5.74 7.66
0.03 0.14 0.16 0.24 0.41 0.00 2.93 3.91
30,000 1,00,000 50,000
10 10 10
0.32 1.06 0.53
0.16 0.54 0.27
26
Lock in period
3 years
3 years
Lock in period
Date of Nature of Issue No. of Issue Price / % of Pre‐ % of Allotment/ Equity Consideration issue paid Post‐ Date of Shares (`) up capital issue Fully Paid paid up up capital 31/03/2010 Allotment 3,35,000 10 3.56 1.82 31/03/2011 Allotment 75,000 100 0.80 0.41 29/06/2011 Bonus 17,70,000 Nil 18.83 9.62 Sub Total 23,60,000 25.11 12.83 Mr. Omprakash Maheshwari 25/05/2006 Purchased from Mrs. Chandra Mundra 10,000 10 0.11 0.05 3 years 31/03/2010 Allotment 20,000 10 0.21 0.11 29/06/2011 Bonus 90,000 Nil 0.96 0.49 Sub Total 1,20,000 1.28 0.65 Mungad Strips and Alloys Private Limited 31/03/2011 Allotment 4,99,980 100 5.32 2.72 29/06/2011 Bonus 1,59,988 Nil 1.70 0.87 3 years Sub Total 6,59,968 7.02 3.59 Total 38,59,968 41.07 20.98 All Equity Shares, which are being locked in are not ineligible for computation of Promoters contribution as per Regulation 33 of the SEBI ICDR Regulations and are being locked for 3 years in under Regulation 36(a) of the SEBI ICDR Regulations. No equity shares proposed to be locked‐in as Promoters Contribution have been issued out of revaluation reserve or for non cash consideration. Our Promoters have, by a written undertaking, consented to have 38,59,968 equity shares held by them to be locked in as Promoters contribution for a period of three years from the date of allotment in this Issue and will not be disposed / sold / transferred by the promoters during the period starting from the date of filing the Draft Red Herring Prospectus with SEBI till the date of commencement of lock‐in period as stated in the Draft Red Herring Prospectus. The equity shares under the Promoters contribution will constitute 20.98% of our post‐issue paid up share capital. Our Promoters have also consented that the Promoters contribution under Regulation 33 of the SEBI ICDR Regulations will not be less than 20% of the post issue paid up capital of our Company. The entire pre‐issue shareholding of the Promoters, other than the Promoters contribution which is locked in for three years, shall be locked in for a period of one year from the date of allotment in this Issue. Details of share capital locked in for one year In terms of Regulation 36(b) and 37 of the SEBI ICDR Regulations, in addition to the Promoters contribution which is locked in for three years, as specified above, the entire pre‐issue equity share capital constituting 55,39,872 equity shares shall be locked in for a period of one year from the date of allotment of Equity shares in this Issue. The securities which are subject to lock‐in shall carry inscription ‘nontransferable’ along with the duration of specified non‐transferable period mentioned in the face of the security certificate. The shares which are in dematerialized form shall be locked‐in by the respective depositories.
27
Other requirements in respect of lock‐in: a)
In terms of Regulation 39 of the SEBI ICDR Regulations, the locked in Equity Shares held by the Promoters, as specified above, can be pledged with any scheduled commercial bank or public financial institution as collateral security for loan granted by such bank or institution provided that the pledge of Equity Shares is one of the terms of the sanction of the loan. Provided that securities locked in as minimum promoter contribution may be pledged only if, in addition to fulfilling the above requirements, the loan has been granted by such bank or institution, for the purpose of financing one or more of the objects of the Issue.
b) In terms of Regulation 40 of the SEBI ICDR Regulations, the Equity Shares held by persons other than the Promoters prior to the Issue may be transferred to any other person holding the Equity Shares which are locked in as per Regulation 36 or 37 of the SEBI ICDR Regulations, subject to continuation of the lock‐in in the hands of the transferees for the remaining period and compliance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable. c)
Further in terms of Regulation 40 of the SEBI ICDR Regulations, the Equity Shares held by the Promoters may be transferred to and amongst the Promoter Group or to new promoters or persons in control of the Issuer subject to continuation of the lock‐in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable.
7. Our Shareholding Pattern The table below presents our shareholding pattern before the proposed Issue and as adjusted for the Issue: Cate Category of Shareholder No. of Total no. Total shareholding Total Post issue Shares Pledged or gory Sharehol of shares as a % of total Shareholding otherwise code ders number of shares encumbered (Pre Issue) As a % As a % of No. As a % No. of As a % of (A+B) (A+B+C) of shares of shares (A+B+C) (A+B+C) (A) Shareholding of Promoter and Promoter Group 1 Indian (a) Individuals/ Hindu Undivided Family 6 60,16,000 64.00 64.00 60,16,000 32.70 6,00,000 9.97 (b) Central Government/ State Government(s) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (c) Bodies Corporate 2 27,99,840 29.79 29.79 27,99,840 15.22 ‐ ‐ (d) Financial Institutions/ Banks ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (e) Any Others(Specify) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Sub Total(A)(1) 8 88,15,840 93.79 93.79 88,15,840 47.91 6,00,000 6.81 2 Foreign A Individuals (Non‐ Residents Individuals/ Foreign Individuals) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ B Bodies Corporate ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ C Institutions ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ D Any Others(Specify) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 28
Cate Category of Shareholder No. of gory Sharehol code ders
Total no. of shares
Total shareholding as a % of total number of shares As a % As a % of of (A+B) (A+B+C)
(B) 1 (a) (b) (c) (d) (e) (f) (g) (h) B 2 (a) (b)
I II
(c) (B) (C)
Sub Total(A)(2) Total Shareholding of Promoter and Promoter Group (A)= (A)(1)+(A)(2) Public shareholding Institutions Mutual Funds/ UTI Financial Institutions / Banks Central Government/ State Government(s) Venture Capital Funds Insurance Companies Foreign Institutional Investors Foreign Venture Capital Investors Any Other (specify) Sub‐Total (B)(1) Non‐institutions Bodies Corporate Individuals Individuals ‐i. Individual shareholders holding nominal share capital up to ` 1 lakh ii. Individual shareholders holding nominal share capital in excess of ` 1 lakh. Any Other (specify) Sub‐Total (B)(2) Total Public Shareholding (B)= (B)(1)+(B)(2) TOTAL (A)+(B) Shares held by Custodians and against which Depository Receipts have been issued
‐
‐
‐
‐
8 ‐
88,15,840
93.79
93.79
‐
‐
‐
‐
‐ ‐ ‐
No. of shares
As a % of (A+B+C) ‐ ‐
‐
‐
6,00,000
6.81
‐
‐
‐
‐
‐
‐
‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐
‐
‐
‐
‐
‐
‐ ‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
4
5,84,000 ‐ 5,84,000
6.21 ‐ 6.21
6.21 ‐ 6.21
‐ ‐ ‐
‐ ‐ ‐
4 12
5,84,000 93,99,840
6.21 100.00
6.21 100.00
95,84,000 1,83,99,840
52.09 100.00
‐ ‐
‐ ‐
4 ‐
29
Total Post issue Shareholding
Shares Pledged or otherwise encumbered (Pre Issue) No. of As a % shares (A+B+C)
88,15,840
95,84,000
47.91
52.09
Cate Category of Shareholder No. of gory Sharehol code ders
Total no. of shares
Total shareholding as a % of total number of shares As a % As a % of of (A+B) (A+B+C)
1
Promoter and Promoter Group Public Sub‐Total (C ) GRAND TOTAL (A)+(B)+(C)
2
‐ ‐ ‐ 12
Total Post issue Shareholding
No. of shares
As a % of (A+B+C)
Shares Pledged or otherwise encumbered (Pre Issue) No. of As a % shares (A+B+C)
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
93,99,840
‐
100.00
1,83,99,840
100.00
6,00,000
6.38
The entire shareholding of our Company is in physical form. 8. Equity Shares held by Top Ten Shareholders a. Details of Top ten shareholders of our Company as on the date of filing of this Draft Red Herring Prospectus with SEBI are as follows: Sr.No Name of Shareholder Number of % of shares to Pre‐ Equity Shares Issue Share capital 1 Mr. Vaibhav Mungad 33,60,000 35.75 2 Mungad Strips and Alloys Pvt. Limited 19,99,920 21.28 3 Mr. Omprakash Maheshwari 11,20,000 11.92 4 Mr. Gaurav Mungad 11,20,000 11.92 5 Omsu Industries Private Limited 7,99,920 8.51 6 Mrs. Sushila Mungad 3,40,000 3.62 7 Mr. Nilesh Maheshwari 2,40,000 2.55 8 Mr. Aabhas Mungad 2,00,000 2.13 9 Mrs. Madhu Maheshwari 92,000 0.98 10 Mrs. Krishna Maheshwari 52,000 0.55 Total 93,23,800 99.21 b. Details of Top ten shareholders of our Company as on ten days prior to the date of filing of this Draft Red Herring Prospectus with SEBI are as follows: Sr.No Name of Shareholder Number of % of shares to Pre‐ Equity Shares Issue Share capital 1 Mr. Vaibhav Mungad 33,60,000 35.75 2 Mungad Strips and Alloys Pvt. Limited 19,99,920 21.28 3 Mr. Omprakash Maheshwari 11,20,000 11.92 4 Mr. Gaurav Mungad 11,20,000 11.92 5 Omsu Industries Private Limited 7,99,920 8.51 6 Mrs. Sushila Mungad 3,40,000 3.62 7 Mr. Nilesh Maheshwari 2,40,000 2.55 8 Mr. Aabhas Mungad 2,00,000 2.13 9 Mrs. Madhu Maheshwari 92,000 0.98 10 Mrs. Krishna Maheshwari 52,000 0.55 30
99.21
Total 93,23,800 c. Details of Top ten shareholders of our Company as on two years prior to the date of filing of this Draft Red Herring Prospectus with SEBI are as follows: Sr.No Name of Shareholder Number of % of shares to Equity Shares 7,50,000 outstanding Paid up Share as on September 06, 2009 1 Mr. Omprakash Maheshwari 2,60,000 34.67 2 Mr. Vaibhav Mungad 1,80,000 24.00 3 Mr. Gaurav Mungad 1,09,990 14.67 4 Mrs. Sushila Mungad 80,000 10.67 5 Mr. Nilesh Maheshwari 60,000 8.00 6 Mrs. Madhu Maheshwari 18,000 2.40 7 Mrs. Krishna Maheshwari 13,000 1.73 8 Mr. Aabhas Mungad 10,000 1.33 9 Mrs. Jaya Mungad 9,500 1.27 10 Mrs. Nidhi Mungad 9,500 1.27 Total 7,49,990 100.00 Our Promoters, Promoter Group, the Directors of the Company which is our Promoter, Directors and their relatives have not financed the purchase by any other person of the equity shares of our Company during the period of six months immediately preceding the date of filing of Draft Red Herring Prospectus with SEBI. 10. As on the date of filing of the Draft Red Herring Prospectus, there are no outstanding warrants, options or rights to convert debentures, loans or other instruments which would entitle Promoters or any shareholders or any other person any option to acquire our Equity Shares after the Initial Public Offer. 11. We have not made any issue of equity shares at a price lower than the Issue price during the preceding one year except the bonus shares issued as under: Name of entity Date of No. of Equity Face Value Issue Price Consideration Allotment Shares (`) (`) All the Existing 29/06/2011 70,49,880 10 Nil Not Applicable since Shareholders shares were issued as bonus issue 12. As on the date of the Draft Red Herring Prospectus, the issued share capital of our Company is fully paid up. 13. Except 6,00,000 equity shares which are pledged with Bank of Baroda for availing working capital facilities, no other equity shares held by our Promoters are subject to any pledge. 14. Neither we nor our Promoters, Directors and the BRLM to the Issue have entered into any buyback and / or standby arrangements and / or similar arrangements for the purchase of our Equity Shares from any person. 15. The BRLM and their associates are not holding any equity shares in our Company as on the date of filing of Draft Red Herring Prospectus with the SEBI. 9.
31
16. This issue is being made through 100% Book Building process wherein not more than 50% of the Issue i.e., 45,00,000 Equity Shares shall be allotted on a proportionate basis to QIBs. 5% of QIB Portion i.e. 2,25,000 Equity Shares shall be available for allocation on a proportionate basis to Mutual Funds. The remaining QIB Portion shall be available for allocation on a proportionate basis to all QIBs including Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue, i.e., 13,50,000 Equity Shares shall be available for allocation on a proportionate basis to Non‐Institutional Bidders and not less than 35% of the Issue i.e., 31,50,000 Equity Shares shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Under subscription, if any, in any category would be met with spillover from other categories in accordance with applicable laws, regulations and guidelines. Investors may note that in case of over subscription in the Issue, allotment to QIB Bidders, Non‐Institutional Bidders and Retail Individual Bidders shall be made on a proportionate basis. 17. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue and not exceeding the maximum limit of investment prescribed under relevant laws applicable to each category of bidder. 18. Our Company has not raised any bridge loan against the proceeds of the Issue. 19. There will be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from the date of the Draft Red Herring Prospectus until the Equity Shares offered through this Draft Red Herring Prospectus have been listed. 20. Our Company does not presently intend or propose to alter its capital structure for a period of six months from the Bid / Issue opening date, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise. This is except if we enter into acquisition or joint ventures or make investments, in which case we may consider raising additional capital to fund such activity or use Equity Shares as a currency for acquisition or participation in such joint ventures or investments. 21. Except the following, our Company has not issued any shares for consideration other than cash: Date of No. of Equity Nature of Particulars Benefits Allotment Shares allotment accrued to our allotted Company 29/06/2011 70,49,880 Bonus Issued to existing shareholders by utilizing Nil the amount lying to the credit of Securities Premium Account and General Reserve amounting to ` 5,00,00,000 and ` 2,04,98,800 respectively 22. Our Company has not made any revaluation of its assets and no equity share has been issued out of any revaluation reserve. 23. An over‐subscription to the extent of 10% of the Issue shall be retained for purpose of rounding off to the nearer multiple of minimum allotment lot while finalizing the basis of allotment. Consequently, the actual allotment may go up by a maximum of 10% of the Issue, as a result of which, the post Issue paid up capital after the Issue would also increase by the excess amount of allotment so made. In such an event, the Equity 32
Shares held by our Promoters and subject to lock‐in shall be suitably increased, so as to ensure that 20% of the post Issue paid‐up capital is locked in. 24. Since the entire issue price per share is being called up on application, all the successful applicants will be allotted fully paid‐up shares. 25. At any given point of time there shall be only one denomination of the Equity Shares, unless otherwise permitted by law. Our company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time. 26. We do not have any Employees Stock Option Scheme / Employees Stock Purchase Scheme. 27. We have 12 shareholders on the date of filing of the Draft Red Herring Prospectus. 28. There has been no allotment of shares in terms of any scheme approved under Section 391‐394 of the Companies Act, 1956. 29. Investors may note that in case of over‐subscription, allotment will be on proportionate basis as detailed in Para on “Basis of Allotment” appearing on Page No. 212 of this Draft Red Herring Prospectus.
33
3.5 ‐ OBJECTS OF THE ISSUE The Objects of the Issue are to: 1.
Expand the manufacturing capacities at our existing manufacturing units at Ghatabillod,
2.
Fund the capital expenditure for setting up new manufacturing facility at Special Economic Zone, Pithampur, Madhya Pradesh.
3.
Augmenting long term working capital
4.
Fund General corporate purposes, and
5. Fund expenses of the Issue Additionally, the Object of the Issue is to achieve the benefits of listing on the Stock Exchanges and create a public market for the Equity Shares of our Company. The main object clause and objects incidental or ancillary to the main object clause of the Memorandum of Association of our Company enables our Company to undertake the existing activities and the activities for which the funds are being raised through the present issue. The fund requirement below is based on our current business plan. In view of nature of the industry in which we operate, we have to revise our business plan from time to time and consequently our fund requirement and consequent utilization of proceeds from the issue may also change. We, further confirm that the activities of our Company carried out until now are in accordance with the object of the Memorandum of Association of our Company. Requirements of Funds Sr. Particulars No. Amount (` in lakhs) 1 Expand the manufacturing capacities at our existing manufacturing units at Ghatabillod 1912.05 2 Fund the capital expenditure for setting up new manufacturing facility at Special 977.95 Economic Zone, Pithampur, Madhya Pradesh 3 Augmenting long term working capital 435.00 4 General corporate purposes [●] 5 Expenses of the Issue [●] Total [●] Means of Finance The details of the means of finance are provided below: Sr. Particulars Amount (` in Lakhs) No. 1 Proceeds of the Issue (IPO) [●] The fund requirement and deployment of issue proceeds has not been appraised by any Bank / Financial Institutions. These are based on the estimates of our Management. In case of variations in the actual utilization of funds earmarked for the purposes mentioned above, increased fund requirements for a particular purpose may be financed by surplus funds, if any, available in respect of the other purposes for which funds are being raised in this Issue. 34
Details of use of Issue Proceeds 1. Expand the manufacturing capacities at our existing manufacturing units at Ghatabillod We are proposing to expand our capacity at our existing manufacturing plant situated at Ghatabillod from 2100MT to 6600MT for Aluminum extruded sections & profiles. Further we also propose to manufacture other products like value added products like Aluminium Slugs & Aluminium Rivets. Proposed Plant Capacity Activity Existing Capacity Proposed Capacity after expansion expansion Aluminum extruded sections & 2100 MT 4500MT 6600MT profiles Cost of Project (` In Lakhs) Particulars Total Cost Land & Site Development 100.00 Buildings and Other Civil Construction 233.35 Plant and Machinery 1390.00 Pre operative Expenses 94.35 Contingencies 94.35 Total 1912.05 Status of the Project A. Land & site development We proposed to set up the expansion project at our existing lease hold land located at Ghatabillod. The unit at Ghatabillod is on free hold land taken on lease rental basis alongwith an interest free security deposit of Rs. 154.30 lakhs, from one of our Promoter Director Mr. Omprakash Maheshwari, having total land area of 1.69 hectare (approx. 16,930 sq. mtr) out of which we are already occupying 0.85hecater (approx 8,500 sq mtr). The total land required for the expansion is 0.80 hectare (approx 8,000 sq mtr). Our Company is already in possession of this land and hence there will be no extra cost for acquisition of this land except the rental that our Company is already paying to the Lessor. The cost of site development has been estimated to be ` 100.00 lakhs as per the certificate dated August 01, 2011 of M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. The details of the cost of site development are detailed below: Sr. Key site development activities Quantity / Unit Amount (` in lakhs) No. 1 Compound & Retaining wall 2200 ft 50.00 2 Leveling & filling 2,40,000 cu ft 10.00 3 Gate & Pillar 2 gate 20 ft each 2.00 4 External drainage & water drains 1000 ft each 2.00 5 Septic Tanks 3000 cu ft 4.00 6 Approach road 1000 ft 2.00 7 Internal link road 80 ft wide – 400 ft long – 2 no. 1.00 8 Scrap yard covered 10, 000 sq ft 20.00 9 Drainage ‐ 1.00 35
10 11 12
Water Tank Plantation Tube Well TOTAL
5000 cu ft ‐ ‐
4.00 1.00 1.00 100.00
B. Buildings and Other Civil Construction The total build up/ construction area is estimated at 35,000 sq. ft over existing land at Ghatabillod. The estimated cost of building including cost of electrification is estimated at Rs 233.35 lakhs as per the certificate dated August 01, 2011 of the M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. All the manufacturing activities will be undertaken in a permanent building / shed. The plant area shall comprise of 1650MT extrusion press and extrusion line. The detailed cost is construction is as follows: Sr. Amount Particulars Area Rate/unit No. (In `) 1 Extrusion Shed 100*20 Mtrs 2,000 Sq mtrs 3,500 70,00,000 2 Stores 200 Sq mtrs 4,500 9,00,000 3 Security Check post 40 sq mtrs 3,500 1,40,000 4 HT Yard 180 sq mtrs 1,000 1,80,000 5 Electric Room 600 sq mtrs 4,000 24,00,000 6 Plant office 200 sq mtrs 5,000 10,00,000 7 Cooling tower tank 10 cubic mtrs 10,500 1,05,000 8 Flooring 2,000 sq mtrs 1,000 20,00,000 9 Electrification ‐ ‐ 15,00,000 10 Elevation & Renovation 500 sq mtrs ‐ 81,10,000 TOTAL 2,33,35,000 C. Plant and Machinery The total cost of plant & machinery is estimated at ` 1390.00 lakhs based on the quotations received from supplier. No plant and machinery is second hand. We have not yet placed the orders for Plant and Machinery. The said machineries will be installed on Turnkey basis and the supplier will be supplying full set of machinery with overall support of erection, installation and commercial production. The details of plant and machineries are as under Sr. Description of the Vendor Quantity Total Cost Total Cost (in Date of No. machinery (USD) `) (1 USD = ` Quotation* 45) 1. Turnkey Basis ‐ 1650 MT of Gulf Gate 1 set $ 8,40,000 3,78,00,000 August 01, Aluminium Extrusion Press General 2011 (Forged main Cylinder) Trading L.L.C P.O. Box 120558‐ Dubai‐ U.A.E. Tel:‐ +971 4 33914. Fax:‐ +971 4 3391432.
36
2
3
4.
Turnkey Basis ‐ 1650 MT of Gulf Gate Press Extrusion Line General Trading L.L.C P.O. Box 120558‐ Dubai‐ U.A.E. Tel:‐ +971 4 33914. Fax:‐ +971 4 3391432. Dies & Moulds Management Estimate
Others Miscellaneous
Management Estimate
1 set
$ 13,56,500
6,10,42,500
August 01, 2011
2,000 units @ `20,000 each ‐
‐
4,00,00,000
‐
‐
15,7500
‐
Total $ 2196500 13,90,00,000 * Vaild upto 9 months from the date of issue D. Pre operative Expenses and Contingencies It is assumed that consultant’s fees, salary staff involved in implementation of the project and other day to day expenses would be approx. ` 94.35 lakhs. A flat provision of ` 94.35 lakhs for contingencies has been made in the project cost. Infrastructure Facilities Water and Electric Power As our Company already has the existing plant in the industrial area, the availability of water is already there. The total requirement of water is 15KL p.m. which is met by our Company with its own tube well. For manufacturing process the additional requirement of water would be met with the tube well. Apart from the existing 150KW of current power requirement our Company will require additional power of 200KW for the said expansion and our Company will apply to Madhya Pradesh State Electricity Board at the time of implementation of the said project. Raw material The raw materials required for manufacturing of products can be imported under Open General License or can be locally purchased from the existing suppliers. Other infrastructure facilities Since the project is near to city and developed industrial area, it is expected that skilled as well as unskilled manpower shall be available. Road connection including telecommunication facilities is also available which would ensure smooth functioning of the unit. Implementation Schedule Sr. Activities Estimated No. Commencement (Month, Completion (Month, Year) 37
Year) 1. 2. 3. 4. 5.
6. 6. 7. 8.
Acquisition of Land Site Development Civil Work - Construction of Factory Building - Machine Foundation Placement of orders for Plant & machinery Arrangement of Power & Water
Receipt of Machinery Erection of Equipment Trial Run Commencement of Commercial production
Already in possession October 2011 December 2011 January 2012 March 2012 March 2012 March 2012 January 2012 March 2012 Water – already available. Power to be applied in December 2011 February 2012 March 2012 April 2012 April 2012
2.
December 2011
March 2012 March 2012 April 2012 April 2012
Fund the capital expenditure for setting up new manufacturing facility at Special Economic Zone, Pithampur We intend to utilize ` 977.95 lakhs of the proceeds of the issue for setting up a new project for manufacturing Aluminum extruded sections & profiles with an installed capacity of 1500MT at Special Economic Zone, Pithampur. The detailed cost of the New SEZ Project is as below: (` Lakhs) Particulars Amount Land & site development 60.00 Buildings and Other Civil Construction 146.65 Plant and Machinery 660.00 Pre operative Expenses 55.65 Contingencies 55.65 Total 977.95 Status of the Project A. Land & site development Our Company has already applied for 3,720 sq mtrs. (approx 40,000 sq. ft.) of land at Special Economic Zone, Pithampur vide its letter dated June 06, 2011 to M.P. Audhogik Kendra Vikas Nigam (Indore) Limited (“AKVN”). The authority “AKVN” has vide its letter dated July 15, 2011 has directed the local authority i.e. “Assistant Development Commissioner, Indore Special Zone” to issue LOP/LOA in favour of Jiji Industries Limited. The local authority is in the process of allocating the land to our Company. The cost of land as per management estimates is ` 60 lakhs (40000 sq. ft. * ` 150/‐ per sq. ft). As per the management, the site development will be undertaken by the local authority and our Company will not have to incur any extra cost for the same. B. Buildings and Other Civil Construction The total build up/ construction area is estimated at 33000 sq. ft. The estimated cost of building including cost of electrification is estimated at Rs 146.65 lakhs as per the certificate dated August 01, 2011 of the M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. All the manufacturing activities will be undertaken in a permanent building / shed. The plant area shall comprise of 1000MT extrusion press and extrusion line and 8MT melting furnace & casting machine. The detailed cost is construction is as follows: 38
Sr. No. Particulars Area Rate/unit Amount (in `) 1 Foundry Shed 30*30 mtrs 900 Sq Mtrs 3,500 31,50,000 2 Stores 200 Sq mtrs 4,500 9,00,000 3 Plant Office 200 Sq mtrs 5,000 10,00,000 4 Extrusion Shed 20*65 1,300 Sq mtrs 3,500 45,50,000 5 Security Check post 40 sq mtrs 3,500 1,40,000 6 HT Yard 180 sq mtrs 1,000 1,80,000 7 Electric Room 60 sq mtrs 4,000 2,40,000 8 Plant office 200 Sq mtrs 5,000 10,00,000 9 Cooling tower tank 10 cubic mtrs 10,500 1,05,000 10 Flooring 900 sq mtrs 1,000 9,00,000 11 Electrification ‐ 25,00,000 TOTAL (B) 1,46,65,000 C. Plant and Machinery The total cost of plant & machinery is estimated at ` 660.00 lakhs based on the quotations received from supplier. No plant and machinery is second hand. We have not yet placed the orders for Plant and Machinery. The said machineries will be installed on Turnkey basis and the supplier will be supplying full set of machinery with overall support of erection, installation and commercial production. The details of plant and machineries are as under: Sr. Description of the machinery Vendor Quantity Total Cost Total Cost Date of No. (USD) (in `) (1 Quotation* USD = ` 45) 1. Extrusion Production Line - Extrusion Press 1000MT, 1 set $ 4,63,100 2,08,39,500 German Rexroth Pumps, Allen Bradley Plc - Single puller, Frequency 1 set $ 97,300 43,78,500 control, 120KGF for 1000MT Gulf Gate extrusion press, steel wire General Trading rope drive L.L.C P.O. Box - Handling Table, Belt Type, 120558‐ Dubai‐ 1 set $ 52,900 23,80,500 August 01, Include finisg Saw and U.A.E. 2011 stretcher (30T), 36m*6.5m Tel:‐ +971 4 33914. Fax:‐ - Die Oven, Induction Type 1 set $ 45,500 20,47,500 - Multi Log heating furnance +971 4 3391432. 1 set $ 1,55,600 70,02,000 with hot log shear, 127mm*6000mm, fully automatic - Aging oven, 5T double doors 1 set $ 91,900 41,35,500 Sub Total $ 9,06,300 4,07,83,500 2. 5MT Aluminium Melting & Casting Furnance - Aluminium melting furnance Gulf 1 Gate (5 Tons) General Trading August 01, $ 3,38,000 1,52,10,000 - Casting Machine 1 L.L.C P.O. Box 2011 120558‐ Dubai‐ - Well (1400*1400) 1 39
3.
4.
- Billet Cooling System U.A.E. - Cooling water pool and Tel:‐ +971 4 33914. Fax:‐ water recycle system +971 4 3391432. Sub Total Dies and Moulds Management Estimate Others Miscellaneous
Management Estimate
1 1
500 @ ` 20000 each ‐
$ 3,38,000 ‐
1,52,10,000 1,00,00,000
‐
‐
6,500
‐
Total $ 12,44,300 6,60,00,000 * Vaild upto 9 months from the date of issue D. Pre operative Expenses and Contingencies It is assumed that consultant’s fees, salary staff involved in implementation of the project and other day to day expenses would be approx. ` 55.65 lakhs. A flat provision of ` 55.65 lakhs for contingencies has been made in the project cost. Advantages / Incentives Available Since, the unit is coming up in an approved SEZ, it will be entitled for exemption in the form of waiver of excise duty and sales tax. There will also be a 100% tax holiday for the first five years and another 50% for the next five years to the unit after commencement of production as an additional advantage for the unit. However, Minimum Alternate Tax (MAT) will be applicable for the said unit. The site is well connected with major roads & ports. Implementation Schedule Sr. Activities Estimated No. Commencement (Month, Year) Completion (Month, Year) 1. Acquisition of Land Applied for land in July 2011 Allotment expected in January 2012 2. Site Development Not Required 3. Civil Work - Construction of Factory Building January 2012 March 2012 - Machine Foundation March 2012 March 2012 4. Placement of orders for Plant & January 2012 January 2012 machinery 5. Arrangement of Power & Water Water – already available. March 2012 Power to be applied in February 2012 6. Receipt of Machinery March 2012 March 2012 7. Erection of Equipment March 2012 March 2012 8. Trial Run March 2012 March 2012 9. Commencement of Commercial April 2012 April 2012 production Utilities
40
The power requirement of approx 150KW will be required for the new project. Our Company will apply to Madhya Pradesh State Electricity Board for the power requirement. The water requirement of approx 15KL pm and will be made available by SEZ authorities. Raw Materials The raw materials required for manufacturing of products can be imported under Open General License or can be locally purchased from the existing suppliers Technical Know How Since our Company will undertake the same line of business activity, no other special technical “Know How” is required. Manufacturing Process Since our Company will undertake the same line of business activity, the manufacturing process will be same. 3. Augmenting Working Capital Resources The total working capital requirements for financial year 2012‐13, has been assessed by us at ` 435.00 Lakhs. The additional working capital requirement of our Company in consonance with its growth plans and expansion of its business. The working capital requirement is estimated as under: The working capital requirement is estimated as under: (` In Lakhs) Particulars 2010‐11 2012‐13 Current Assets Cash and Bank Balance 55.43 28.42 Sundry Debtors 1439.16 3277.46 Inventory 1903.51 3655.44 Other Current Assets 242.04 1400.00 Total Current Assets 3640.14 8361.32 Current Liabilities and Provisions Sundry Creditors 1119.21 485.89 Provisions and other current liabilities 701.31 245.00 Long Term Liability (due within one year) 140.73 ‐ Total Current Liability 1961.25 730.89 Total Working Capital Gap 1678.89 7630.43 Working Capital facilities from Banks 747.34 4000.00 Requirement of Working Capital 931.55 3630.43 Less: Existing Margin for Working Capital 136.49 1577.16 Requirement of Additional Working Capital 795.06 2053.27 * Internal Accruals 1618.26 795.06 Proceeds from the Issue ‐ 435.00 * This includes Internal Accruals in the form of Profits & fresh infusion of equity share capital 41
The Working capital assessment is made on the basis of following assumptions: Particulars Existing Period (in months) Existing Estimated Raw Material Month's consumption 3.21 1.50 Work in Process Month's cost of production 0.30 0.50 Finished Goods Month's cost of production 0.45 0.50 Sundry Debtors Month's sales 2.04 1.50 Sundry Creditors Month's consumption 2.19 0.35 The Working capital assessment is made on the basis of following assumptions: 1. The company will be able to avail the proposed Bank limits of ` 4000.00 lakhs for the proposed expansion. 2. The existing margin as on 31.03.2012 has been taken from the estimates furnished by the company incorporating the expansion plan and internal accruals as per estimated profitability statements. The above said details has been are based upon the certificate dated August 30, 2011 provided by the Statutory Auditors of our Company. 4. General Corporate Purposes The Proceeds of the Issue will be first utilized towards the Objects. The balance of ` [●] is proposed to be utilized for general corporate purposes, including strategic initiatives, acquisitions and strengthening of our marketing capabilities, subject to compliance with the necessary provisions of the Companies Act. Our management, in accordance with the policies of the Board, will have flexibility in utilizing any surplus amounts. 5. Expenses for the Issue The expenses of the Issue include, among others, underwriting fees, selling commission, fees payable to the BRLM to the issue, Legal counsel, Escrow collection Banks and Registrar to the Issue stationery printing and distribution expenses, legal fees, statutory advertisement expenses, NSDL / CDSL connectivity charges, charges for book building platform for bidding, fees payable to SEBI and listing fees etc. The total expenses of the Issue are estimated to be approximately ` [●] Lakhs. Particulars Amount % of Issue Size* % of Issue ` Lakhs* Expenses* BRLM / Syndicate member fee [●] [●] [●] Underwriting & Selling Commission [●] [●] [●] Advertising & Marketing expenses [●] [●] [●] Registrar fee [●] [●] [●] Printing, Stationary, Dispatch [●] [●] [●] Other expenses (including listing fee, SEBI filing fee, IPO [●] [●] [●] Grading expenses, Legal Counsel fee, Depository charges, Auditor’s fee, etc.) Total [●] [●] [●] * will be incorporated at the time of filing of the prospectus. Estimated Schedule of Deployment of Funds As estimated by our management, the entire proceeds received from the issue would be utilized a under: (` in lakhs) Particulars Funds already 2011‐12 2012‐13 Total 42
deployed (till August 31, 2011) Expand the manufacturing capacities at our 12.00* 1900.05 ‐ 1912.05 existing manufacturing units at Ghatabillod Fund the capital expenditure for setting up new Nil 977.95 ‐ 977.95 manufacturing facility at Special Economic Zone, Pithampur Augmenting long term working capital Nil ‐ 435.00 435.00 General corporate purposes Nil [●] [●] [●] Expenses of the Issue 23.85 [●] [●] [●] * Pre‐Operative Expenses Deployment of Funds in the Project We have incurred ` 35.85 Lakhs upto August 31, 2011 towards objects of the issue which has been certified by Mr. Sunil Kumar Gandhi, Chartered Accountant (Mem. No. 072000), Partner, Gandhi Dhakad Gupta and Company, Statutory Auditors, vide their certificate dated August 31, 2011. The details about the deployment of funds is as under (` In lakhs) Sr. No. Application of Funds Budgeted Incurred upto August 31, 2011 1 Land & Site Development 160.00 Nil 2 Building & Electrification 380.00 Nil 3 Plant and machinery 2050.00 Nil 4 Augmented Long term Working Capital 435.00 Nil 5 Pre‐Operative Expenses 150.00 12.00 6 Contingencies 150.00 Nil 7 Public Issue Expenses [●] 23.85 8 General corporate expenses [●] Nil Total [●] 35.85 Source of Funds 1 Share Capital (Public Issue) [●] 0.00 2 Internal Accruals 0.00 35.85 The said amount has been financed through internal accruals of the Company which would otherwise be meant for the usual operation of the Company. Accordingly, internal accruals amounting to ` 35.85 lakhs as shown above are proposed to be ploughed back into the Company’s usual operations out of the proposed IPO proceeds. It is further stated that the above certification has been done based on the independent examination of Books of Accounts and other documents of the Company and further explanations and information provided by the management of the Company to us, which we believe to be true and correct to the best of our information and belief. Appraisal The funds requirement and funding plans are our own estimates and have not been appraised by any Bank / Financial Institution. Interim Use of Proceeds 43
The management of our Company, in accordance with the policies established by our Board from time to time, will have flexibility in deploying the Net Proceeds. Pending utilization for the purposes described above, our Company intends to invest the funds in high quality interest bearing liquid instruments including money market Mutual Funds, deposits with banks for the necessary duration or for reducing overdrafts. Such investments would be in accordance with investment policies approved by our Board from time to time. Our Company confirms that, pending utilization of the Net Proceeds, it shall not use the funds for any investments in the equity markets. Monitoring of Utilization of Funds The Issue Size is less than ` 500 crore and hence there is no requirement for appointment of an independent monitoring agency in terms of Regulation 16(1) of the SEBI ICDR Regulations. Pursuant to Clause 49 of the listing agreement, the Audit Committee of our Board will monitor the utilization of the proceeds of the Issue. We shall, on a quarterly basis disclose to the Audit Committee the uses and application of the proceeds of the Issue and further disclose the same a part of the quarterly declaration of financial results. We will disclose the utilization of the proceeds of the Issue under a separate head in our balance sheet till such time the proceeds of the Issue have been utilised, clearly specifying the purpose for which such proceeds have been utilized. We will also, in our balance sheet till such time the proceeds of the Issue have been utilised, provide details, if any, in relation to all such proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue. The said annual disclosure shall also be certified by the Statutory Auditors of the Company. No part of the proceeds from the Issue will be paid by us as consideration to our Promoters, our Directors, Key Management Personnel or Promoter Group Entities.
44
3.6 ‐ BASIC TERMS OF ISSUE The Equity Shares, now being offered, are subject to the terms and conditions of this Draft Red Herring Prospectus, Red Herring Prospectus, Prospectus, Bid cum Application form, Confirmation of Allocation Note (“CAN”), the Memorandum and Articles of Association of our Company, the guidelines for listing of securities issued by the Government of India and SEBI (ICDR) Regulations, 2009, the Depositories Act, Stock Exchanges, RBI, ROC and/or other authorities as in force on the date of the Issue and to the extent applicable. In addition, the Equity Shares shall also be subject to such other conditions as may be incorporated in the Share Certificates, as per the SEBI (ICDR) Regulations, 2009 notifications and other regulations for the issue of capital and listing of securities laid down from time to time by the Government of India and/or other authorities and other documents that may be executed in respect of the Equity Shares. Pursuant to the resolution passed by the Board of Directors of our Company at its meeting held on August 09, 2011and the shareholders approval obtained at its Extra Ordinary General Meeting dated August 12, 2011 it has been decided to make the following offer to the public. Face Value Each Equity Share shall have the face value of ` 10/‐ each. Issue Price Each Equity Share is being offered at a price of ` [●]/‐ each. Market Lot and The Market lot and Trading lot for the Equity Share is 1 (One) and the multiple of 1; subject to a minimum allotment of [●] Equity Shares to the successful applicants. Trading Lot Terms of Payment 100% of the issue price of Rs [●] shall be payable on Application. For details, refer Section titled “Terms of the Issue” on Page No. 185 of this Draft Red Herring Prospectus. Ranking of the The Equity Shares shall be subject to the Memorandum and Articles of Association of the Equity Shares Company and shall rank pari‐passu in all respects including dividends with the existing Equity Shares of the Company. MINIMUM SUBSCRIPTION If we do not receive the minimum subscription of 90% of the Issue including devolvement of Underwriters, if any, within 60 days from the Bid / Issue Closing Date, we shall refund the entire subscription amount received. If there is a delay beyond 8 days after we become liable to pay the amount, we shall repay the money with interest at the rate of 15% per annum prescribed under Section 73 of the Companies Act, 1956. Further in terms of Regulation 26(4) of the ICDR Regulations, our Company shall ensure that the number of prospective allottees to whom Equity Shares will be allotted will not be less than 1,000.
45
3.7 ‐ BASIS FOR ISSUE PRICE The Issue Price will be determined by our Company in consultation with the BRLM on the basis of the assessment of market demand for the Equity Shares offered by the Book Building Process and on the basis of the following qualitative and quantitative factors. The face value of the Equity Shares is ` 10 and Issue Price is [●] times the face value at the lower end of the Price Band and [●] times the face value at the higher end of the Price Band. Investors should read the following summary with the risk factors beginning from Page No. xi of this Draft Red Herring Prospectus, Section titled “About the Company” on Page No. 59 and “Financial information of the Company” on Page No. 127 of this Draft Red Herring Prospectus. The trading price of the Equity Shares of our Company could decline due to these risk factors and you may lose all or part of your investments. QUALITATIVE FACTORS We believe that we have the following business strengths allow us to compete successfully; •
Long term relationship with our customers
•
Young and dynamic promoters
•
Experienced and strong management team
•
Strong marketing network
•
Use of Modern Machineries
• ISO 9001 : 2008 For details in respect of our qualitative factors, please refer to paragraph “Key Business Strengths” appearing on Page No. 85 of this Draft Red Herring Prospectus. QUANTITATIVE FACTORS On Standalone Basis: 1. Basic Earnings Per Equity Share Financial Year
Basic EPS (`) 5.35
Weight Used
2009‐10
9.36
2.00
2010‐11
18.30
3.00
Weighted Average
13.16
2008‐09
1.00
Source: Audited Financial Statements, as restated 2. Diluted Earnings Per Equity Share Financial Year
Weight Used
2008‐09
Basic EPS (`) 5.35
2009‐10
9.36
2.00
46
1.00
2010‐11
18.30
Weighted Average
13.16
3.00
Source: Audited Financial Statements, as restated On Consolidated basis: Not Applicable Note: 1. The weighted average EPS for these financial years has been computed by giving weights of 1, 2 and 3 for the financial years ending March 31 2009, 2010 and 2011 respectively. 2. Earnings per share calculations are done in accordance with Accounting Standard 20 ‘Earning per Share’ issued by the Institute of Chartered Accountants of India. 3. The above statement should be read with Significant Accounting Policies and the Notes to the Restated Financial Statements as appearing in the chapter “Financial Information of the Company” beginning on Page no. 127 of this Draft Red Herring Prospectus. 4. The face value of each equity shares is ` 10/‐ Price / Earning Ratio (P/E) in relation to the Issue price of ` [●] per share Particulars Basic EPS Diluted EPS P/E ratio Based on Basic and Diluted EPS for the Year ended March 31, 2011 at the Floor Price # P/E ratio Based on Basic and Diluted EPS for the Year ended March 31, 2011 at the Cap Price # P/E ratio Based on Basic and Diluted EPS for the Year ended March 31, 2011 at the Issue Price # Industry P/E •
Highest – Century Extrusions*
•
Lowest – Maan Aluminium*
•
Average
[●]
[●]
[●]
[●]
[●]
[●]
40.10 20.35
29.40
# Source: Audited Financial Statements, as restated Note: * Based on Audited results as on March 31, 2011 and on standalone basis as sourced from Bombay Stock website as on September 7, 2011. Return on Net Worth (RoNW), On Standalone Basis 1.
The Net worth of the Company as at March 31, for Financial Years 2009, 2010 and 2011 has been computed in compliance with Regulation 2 (1) (v) of SEBI (ICDR) Regulations 2009.
2.
The Net worth of the Company as at March 31, 2007 had been computed after excluding share application money pending allotment in compliance with Regulation 2 (1) (v) of SEBI (ICDR) Regulations 2009.
47
Financial Year
Weight Used
2008‐09
Return on Net Worth (%) 26.42
2009‐10
23.64
2.00
2010‐11
19.31
3.00
1.00
Weighted Average 21.90 Note: Networth Calculated is based on Audited Financial Statements, as restated Note: The weighted average return on net worth has been computed on the basis of the Audited Financial Statements, as restated, of the respective years drawn after considering the impact of accounting policy changes and material adjustments/ regroupings pertaining to earlier years. Return on Net Worth (RoNW), On Consolidated Basis: Not Applicable Minimum Return on Post Issue Net Worth to maintain Pre‐Issue EPS (` In Lacs) Amount Amount Particulars (Based on Basic EPS) (Based on Diluted EPS) 1,421.69 Pre ‐ Issue Net worth as on 31.3.2011 # 1,421.69 Size of the Issue – At the Floor Price (Including Premium) Size of the Issue – At the Cap Price (Including Premium) Size of the Issue – At the Issue Price (Including Premium)
[●] [●] [●]
[●] [●] [●]
Post Issue Net worth – At the Floor Price Post Issue Net worth – At the Cap Price Post Issue Net worth – At the Issue Price
[●] [●] [●]
[●] [●] [●]
Required Basic & Diluted EPS (As on 31.3.2011) # No. of Equity Shares (Post Issue, in Lacs) Required PAT
18.30
18.30 183.9984* 274.55
Required Return on Net Worth – At the Floor Price (Post Issue) Required Return on Net Worth – At the Cap Price (Post Issue) Required Return on Net Worth – At the Issue Price (Post Issue)
274.55 [●]%
[●]%
[●]%
[●]%
[●]%
[●]%
# Source: Audited Financial Statements, as restated Note: 1.
The return on net worth has been computed on the basis of the Audited Financial Statements, as restated, of the respective years drawn after considering the impact of accounting policy changes and material adjustments/ regroupings pertaining to earlier years.
48
2.
3.
On June 29, 2011, the Company has issued 7049880 bonus shares issued in the ratio of 3 new equity shares of `10/‐ each fully paid up for 1 equity shares of `10/‐ each fully paid up held in the company, by capitalizing securities premium account and general reserves. Since the same was issued after March 31, 2011, the same has not been considered in calculation of accounting ratios. Therefore, the accounting ratios for all the previous years will be readjusted accordingly. *Includes the bonus shares issued as on June 29, 2011 as mentioned in point 2 above as well as shares offered as per this public Issue
Net Asset Value per Share and comparison thereof with Post Issue NAV along with the Issue price NAV
(`)
As at March 31,2011 (based on Shares outstanding at the end of the year for F.Y. 2010‐11)
60.50
After Issue #
[●]
Issue Price
[●]
Note: # On June 29, 2011, the Company has issued 7049880 bonus shares issued in the ratio of 3 new equity shares of `10/‐ each fully paid up for 1 equity shares of `10/‐ each fully paid up held in the company, by capitalizing securities premium account and general reserves. Since the same was issued after March 31, 2011, the same has not been considered in calculation of accounting ratios. Therefore, the accounting ratios for all the previous years will be readjusted accordingly. Comparison with Industry Peers The comparable ratios of companies, who are in similar line of business and similar size of operations in terms of total income, are given below: Face Value Return on Net Equity Company Name NAV (` ) EPS (` ) P/E Ratio (` ) Worth (%) (` In Cr.) Maan Aluminium Ltd* Bhoruka Aluminium Ltd* Century Extrusions Ltd* Jiji Industries Ltd**
10.00
3.26
3.38
76.62
2.49
20.35
10.00
1.75
26.18
31.19
0.55
27.75
1.00
1.81
8.00
4.05
0.07
40.10
10.00
19.31
2.35
60.50 #
18.30
[●]##
Source: Bombay Stock Exchange website as on September 7, 2011 . Note: •
* Audited results as on March 31, 2011 and on standalone basis
•
**Calculated as on March 31, 2011, based on the Audited Financial Statements, as restated.
•
The restated financial information of the industry peers is not ascertainable, the ratios disclosed in the Draft Red Herring Prospectus for the purpose of comparison with the accounting ratios of our Company is not based on Audited Financial Statements, as restated, of the industry peers. The comparison of financial ratios of our Company vis‐à‐vis our peer group is on a standalone basis
•
# Net Asset Value per Equity Share represents Networth, as restated, divided by shares outstanding at the end of the year for F.Y. ended March 31, 2011. 49
• ## P/E Ratio based on Issue Price The face value of the shares of our Company is ` 10/‐ per share and the Issue Price of ` [●] per share is [●] times of the face value of the Shares of our Company. The BRLM believes that the Issue price of ` [●] is justified in view of the above qualitative and quantitative factors. See the section titled “Risk Factors” and “Financial Statement of the Company” beginning on Page No. xi and 127 of this Draft Red Herring Prospectus, including important profitability and return ratios, as set out in the Auditors Report beginning on Page No. 149 of this Draft Red Herring Prospectus.
50
3.8 ‐ STATEMENT OF TAX BENEFITS To, The Board of Directors, Jiji Industries Limited, 33‐34 Rambali Nagar, Sangam Nagar Road, Indore. We hereby report that the enclosed annexure state the possible tax benefits available to M/s Jiji Industries Limited (the Company) and its shareholders under the current tax laws presently in force in India. Several of these benefits are dependent on the Company and/or its shareholders upon fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company and its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which is based on business imperatives the Company faces in future, the Company may or may not choose to fulfill. The benefits discussed below are not exhaustive. The statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences, the changing tax laws and the fact that the Company will not distinguish between the shares offered for subscription and the shares offered for sale by the selling shareholders, each shareholder is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: i) ii)
the Company or its shareholders will continue to obtain these benefits in future; or the conditions prescribed for availing the benefits have been/would be met with. The contents of this annexure are based on information, explanations and representations obtained from the company and on the basis of our understanding of the business activities and operations of the Company.
For Gandhi Dhakad Gupta and Company Chartered Accountants (CA. Sunil Kumar Gandhi) Partner M. No. – 072000 Firm Registration No. ‐ 006768C Date: 30/08/2011 Place: Indore
51
Annexure Statement of possible tax benefits available to Jiji Industries Limited, and to its Shareholders: • As per the existing provisions of the Income Tax Act, 1961 (the Act) and other laws as applicable for the time being in force, the following tax benefits and deductions are and will, inter‐alia be available to the Company and its shareholders. •
This Statement sets out below the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of equity shares. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for a professional tax advice. In view of the individual nature of tax consequences and changing tax laws, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the issue;
•
In respect of non‐residents, the tax rates and the consequent taxation, mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any, between India and the country in which the non‐resident has fiscal domicile
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS UNDER THE INCOME TAX ACT, 1961 AND OTHER DIRECT TAX LAWS PRESENTLY IN FORCE IN INDIA I. TAX BENEFIT ARISING OUT OF THE PRESENT ISSUE – NIL II. SPECIAL TAX BENEFITS TO THE COMPANY ‐ NIL III. GENERAL KEY BENEFITS AVAILABLE TO THE COMPANY: A. Dividend Income: As per section 10(34) of the Act, any income by way of dividends (both interim and final) referred to in Section 115‐O of the Act received by the Company on its investment in the shares of any domestic company shall be exempt from tax. Income received in respect of units of a Mutual Fund specified under Section 10(23D) of the Act shall be exempt from tax under Section 10(35) of the Act. B. Capital Gains: Capital Assets are to be categorized into short‐term capital assets and long‐term capital assets based on the period of holding. All capital assets except shares held in a company or any other security listed in a recognized stock exchange in India or units of Unit Trust of India (‘UTI’) or Mutual Fund units specified under section 10(23D) of the IT Act or zero coupon bonds are considered to be long‐term capital assets, if they are held for a period exceeding thirty‐six months. Shares held in a company or any other security listed in a recognized stock exchange in India or UTI or Mutual Fund units specified under section 10(23D) of the IT Act or zero coupon bonds are considered as long‐term capital assets, if these are held for a period exceeding twelve months. As per the provisions of section 10(38) of the IT Act, long term capital gain arising to the company from transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to Securities Transaction Tax (STT). As per the provisions of section 112 of the IT Act, long‐term capital gains other than those covered under section 10(38) of the IT Act are subject to tax at a rate of 20% (plus applicable surcharge and cess).However, proviso to section 112(1) specifies that if the long‐term capital gains other than those covered under section 10(38) of the IT Act arising on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20% with indexation benefit exceeds the capital gains computed at the rate of 10% without indexation benefit, then such 52
capital gains are chargeable to tax at the rate of 10% without indexation benefit (plus applicable surcharge and education cess). However, from Assessment Year 2007‐2008, such long‐term capital gains will be included while computing book profits for the purpose of payment of Minimum Alternate Tax (“MAT”) under the provisions of section 115JB of the IT Act and will be required to pay Minimum Alternate Tax (“MAT”) at the rate of eighteen percent (plus applicable surcharge and education cess) of the book profits determined (if the income‐tax payable as per normal provisions of the Act is less than eighteen percent of the book profits) As per provisions of section 111A of the IT Act, short term capital gains arising from transfer of short term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be taxable at the rate of 15% (plus applicable surcharge and education cess), if such sale is entered into on or after October 1, 2004 and the transaction is chargeable to STT. Short‐term capital loss suffered during the year is allowed to be set‐off against short‐term as well as long term capital gains of the said year. Residual loss, if any, can be carried forward for eight years for claiming set‐off against subsequent years’ short‐term as well as long‐term capital gains. Long‐term capital loss suffered during the year is allowed to be set‐off against long‐term capital gains only. Residual loss, if any, can be carried forward for eight years for claiming set‐off against subsequent years’ long‐term capital gains. As per section 54EC of the Act and subject to the conditions and limit specified therein, long‐term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long‐term capital asset will be exempt from capital gains tax if the capital gains are invested in a “long term specified asset” within a period of 6 months after the date of such transfer. If only part of such capital gain is invested, the exemption shall be proportionately reduced. However, if the assessee transfers or converts the long term specified asset into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long‐term capital gains in the year in which the long term specified asset is transferred or converted into money. The bonds presently specified under this Section are bonds issued by National Highway Authority of India (NHAI) and Rural Electrification Corporation Ltd. (REC). Investment in these bonds cannot exceed ` 50 Lacs during any financial year. C. Depreciation / Business Loss: i. The Company shall be entitled to claim depreciation on tangible owned by it and used for the purposes of its business as provided in Section 32 of the Act. ii. In case of any new plant and machinery (other than ships and aircrafts) that will be acquired and installed by the Company in the business of manufacture or production of any article or thing, the Company will be entitled to additional depreciation equal to 20% of the actual cost of such machinery or plant subject to conditions specified in section 32 of the Act. iii. Unabsorbed depreciation can be carried forward to future years for set off against subsequent year’s income. iv. Business losses can be carried forward for eight succeeding assessment years for set off against subsequent business profits. D. Preliminary Expenses: The Company shall be eligible for amortization of preliminary expenditure as specified in section 35D of the Act being expenditure on public issue of shares, subject to meeting the conditions and limits specified in that section. E. Security Transaction Tax (STT) allowed as deductible expenditure: In computing the business income, an amount equal to STT paid in respect of taxable securities transactions entered into in the course of business will be allowed as a deductible expense, if the income arising from such
53
taxable securities’ transactions is included in the income computed under the head “Profits and Gains of Business or Profession” as per the provisions of section 36(xv) of the Act. F. Minimum Alternate Tax: Under Section 115 JAA of the Act, tax credit shall be allowed of any tax paid (MAT) under Section 115 JB of the Act. Credit eligible for carry forward is the difference between MAT paid and the tax computed as per the normal provisions of the Act Further, in accordance with section 115JAA, MAT credit will be available to the Company for next succeeding ten years subject to fulfillment of certain conditions prescribed in the said section. IV. SPECIAL TAX BENEFITS AVALIABLE TO THE SHAREHOLDERS OF THE COMPANY – NIL V. GENEREAL KEY BENEFITS AVAILABLE TO THE RESIDENT SHAREHOLDERS OF THE COMPANY: A. Dividend Income: As per section 10(34) of the Act, any income by way of dividends (both interim and final) referred to in Section 115‐O of the Act, received on the shares of the Company shall be exempt from tax. Section 94(7) of the Act provides that losses arising from sale/transfer of shares purchased up to three months prior to the record date and sold within three months after such date will be disallowed to the extent dividend on such shares claimed as tax exempt by the shareholder. B. Capital Gains: Benefits outlined in paragraph I‐(B) above, mutatis mutandis are also available to resident shareholders, except that MAT is applicable only in case of Company, in respect of capital gains derived from sale of shares of the company. In addition to the same, the following benefits are also available to the resident shareholders: As per section 54F of the Act, long‐term capital gains (in cases not covered under section 10(38) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the Company will be exempt from capital gains tax subject to certain conditions, if the net sales consideration from such shares is used for purchase of a residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of a residential house property within a period of three years after the date of transfer, provided that the individual / HUF should not own more than one residential house other than the new residential house on the date of transfer. If residential house in which the investment has been made is transferred within a period of three years from the date of its purchase or construction, the amount of capital gain exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred. Similarly, if the shareholder purchases within a period of two years or constructs within a period of three years after the date of transfer of capital asset, another residential house, then the original exemption will be taxed as capital gains in the year in which the additional residential house is acquired. C. Security Transaction Tax (STT) allowed as deductible expenditure In computing the business income, an amount equal to STT paid in respect of taxable securities transactions entered into in the course of business will be allowed as a deductible expense, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and Gains of Business or Profession” as per the provisions of section 36(xv) of the Act. D. Minimum Alternate Tax As per the section 115JB, the Corporate investor will not be able to reduce the income to which the provisions of section 10(38) of the Act apply while calculating “book profits” under the provisions of section 115JB of the Act 54
and will be required to pay Minimum Alternate Tax (“MAT”) at the rate of eighteen percent (plus applicable surcharge and education cess) of the book profits determined (if the income‐tax payable as per normal provisions of the Act is less than eighteen percent of the book profits). Further, in accordance with section 115JAA, MAT credit will be available to the Company for next succeeding ten years subject to fulfillment of certain conditions prescribed in the said section. VI. GENERAL KEY BENEFITS AVAILABLE TO NON‐RESIDENT INDIANS / NON RESIDENT SHAREHOLDERS (OTHER THAN FIIS AND FOREIGN VENTURE CAPITAL INVESTORS): A. Dividend Income: As per section 10(34) of the Act, any income by way of dividends (both interim and final) referred to in Section 115‐O of the Act received on the shares of the Company shall be exempt from tax. B. Capital Gains: Benefits outlined in paragraph II(B) above, mutatis mutandis are also available to a non‐residents / non‐resident Indian shareholder except that under first proviso to Section 48 of the Act, the capital gains arising on transfer of capital assets being shares of an Indian Company need to be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer into the same foreign currency in which the shares were originally purchased. The resultant gains thereafter need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates prevailing on dates stipulated. Further, the benefit of indexation is not available to non‐resident shareholders. C. Special Provisions relating to Certain Income of Non‐ Resident Indians: As per Section 115C (e) of the Act, a ‘Non‐Resident Indian’ means an individual, being a citizen of India or a person of Indian origin who is not a ‘resident’. As per the Explanation to the said section, a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India. Under section 115‐I of the Act, the Non‐Resident Indian shareholder has an option to be governed by the provisions of Chapter XIIA of the Act viz. “Special Provisions Relating to Certain Incomes of Non‐Residents” which are as follows: a. As per 115E of the Act, where shares in the Company are acquired or subscribed to in convertible foreign exchange by a Non‐Resident Indian, capital gains arising to the nonresident on transfer of shares held for a period exceeding 12 months, shall (in cases not covered under section 10(38) of the Act) be taxed at the flat rate of ten percent (plus applicable surcharge and education cess) (without indexation benefit but with protection against foreign exchange fluctuation). b. As per section 115F of the Act, long‐term capital gains (in cases not covered under section 10(38) of the Act) arising to a Non‐Resident Indian from the transfer of shares of the Company subscribed to in convertible foreign exchange shall be exempt from income tax, if the net consideration is reinvested in specified assets or savings certificates referred to in section 10(4B) of the Act, within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted into money within three years from the date of their acquisition. c. As per section 115G of the Act, Non‐Resident Indians are not obliged to file a return of income under section 139(1) of the Act, if their only source of income is income from specified investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII‐B of the Act.
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d. As per section 115H of the Act, where the Non‐Resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income, for the assessment year in which he is first assessable as a Resident, under section 139 of the Act to the effect that the provisions of the Chapter XIIA shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money. D. Tax Treaty benefits: An investor has an option to be governed by the provisions of the Act or the provisions of a Tax Treaty that India has entered into with another country of which the investor is a tax resident, whichever is more beneficial.
E. Security Transaction Tax (STT) allowed as deductible expenditure: In computing the business income, an amount equal to STT paid in respect of taxable securities transactions entered into in the course of business will be allowed as a deductible expense, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and Gains of Business or Profession” as per the provisions of section 36(xv) of the Act. F. Minimum Alternate Tax: As per the section 115JB, the Corporate Investor will not be able to reduce the income to which the provisions of section 10(38) of the Act apply while calculating “book profits” under the provisions of section 115JB of the Act and will be required to pay Minimum Alternate Tax (“MAT”) at the rate of eighteen percent (plus applicable surcharge and education cess) of the book profits determined (if the income tax payable as per normal provisions of the Act is less than eighteen percent of the book profits). Further, in accordance with section 115JAA, MAT credit will be available to the Corporate Investor for next ten years subject to fulfillment of certain conditions prescribed in the said section VII. GENERAL KEY BENEFITS AVAILABLE TO FOREIGN INSTITUTIONAL INVESTORS (FIIS): A. Dividend Income: As per section 10(34) of the Act, any income by way of dividends referred to in section 115‐O of the Act received on the shares of the Company shall be exempt from tax. B. Capital Gains: As per section 10(38) of the Act, long term capital gains arising to the FIIs from the transfer of a long term capital asset being an equity share in the Company where such transaction is chargeable to securities transaction tax would not be liable to tax in the hands of the FIIs. As per section 115AD of the Act, FIIs will be taxed on the capital gains that are not exempt under the section 10(38) of the Act at the following rates: Nature of income Rate of tax (%) Long term capital gains Short term capital gains (other than referred to in section 111A) Short term capital gains covered in section 111A
10 30 15
The above tax rates will have to be increased by the applicable surcharge and education cess. In case of long term capital gains, (in cases not covered under section 10(38) of the Act), the tax is levied on the capital gains computed without considering the cost indexation and without considering foreign exchange fluctuation. As per section 54EC 56
of the Act and subject to the conditions and limit specified therein, long‐term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long‐term capital asset will be exempt from capital gains tax if the capital gains are invested in a “long term specified asset” within a period of 6 months after the date of such transfer. However, if the assessee transfers or converts the long term specified asset into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long‐term capital gains in the year in which the long term specified asset is transferred or converted into money. The bonds presently specified under this Section are bonds issued by National Highway Authority of India (NHAI) and Rural Electrification Corporation Ltd. (REC). Investment in these bonds cannot exceed ` 50 Lacs during any financial year. C. Security Transaction Tax (STT) allowed as deductible expenditure: In computing the business income, an amount equal to STT paid in respect of taxable securities transactions entered into in the course of business will be allowed as a deductible expense, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and Gains of Business or Profession” as per the provisions of section 36(xv) of the Act. D. Tax Treaty benefits: An investor has an option to be governed by the provisions of the Act or the provisions of a Tax Treaty that India has entered into with another country of which the investor is a tax resident, whichever is more beneficial. VIII. GENERAL BENEFITS TO THE VENTURE CAPITAL COMPANIES / FUNDS 1. Dividends exempt under section 10(34) of the Act: Dividend (whether interim or final) received by a Venture Capital Company (‘VCC’)/ Venture Capital Funds (‘VCF’) from its investment in shares of another domestic company would be exempt in the hands of the VCC/VCF as per the provisions of section 10(34) read with section 115‐O of the Act. 2.
In case of a shareholder being a Venture Capital Company/ Fund, as per the provisions of Section 10(23FB) of the Income Tax Act 1961, any income of Venture Capital Companies/ Funds registered with the SEBI, would be exempt from Income Tax, subject to the conditions specified in the said subsection. GENERAL KEY BENEFITS AVAILABLE TO MUTUAL FUNDS: IX. As per section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorized by the Reserve Bank of India would be exempt from income tax, subject to such conditions as the Central Government may by notification in the Official Gazette specify in this behalf. X. Benefits to shareholders of the Company under the Wealth Tax and Gift Tax Acts: a. Shares of the Company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of Wealth Tax Act, 1957. Hence the shares are not liable to Wealth Tax. b.
Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of shares of the company is not liable to gift tax. However, as per the provisions of section 56 of the Act, any gift received in money, the aggregate value of which exceeds ` 50,000/‐ is received without consideration, the whole of the aggregate value of such sum will be chargeable to tax the same will be treated as income in the hands of the donee unless the gift is from a relative as defined in section 56 (2) (vi) of the Act as per conditions mentioned therein. Further, as per section 56(2)(vii), value of sum of money / immovable property / movable property
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received without consideration or for inadequate consideration is in exceed of ` 50,000/‐ than the whole of the aggregate value of such sum will be chargeable to tax with effect from 01.10.2009. Notes: 1.
All the above benefits are as per the current tax laws as amended by the Finance Act, 2011
2.
All the above benefits are as per the current tax law and will be available only to the sole / first named holder in case the shares are held by joint holders.
3.
In respect of non‐residents, the tax rates and the consequent taxation mentioned above shall be further subject to any benefits available under the double taxation avoidance agreements, if any, between India and the country in which the non‐resident has financial domicile.
4.
In view of the individual nature of tax consequences, each investor is advised to consult his / her own tax advisor with respect to specific tax consequences of his / her participation in the scheme.
5.
A shareholder is advised to consider in his / her / its own case the tax implications of an investment in the Equity Shares, particularly in view of the fact that certain recently enacted legislations may not have direct legal precedent or may have a different interpretation on the benefits which an investor can avail.
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SECTION IV ‐ ABOUT THE COMPANY 4.1 – INDUSTRY OVERVIEW The information in this section is derived from industry sources, government publications and CARE Report dated September 2011. The consent dated September 07, 2011 from CARE to use their report has been received. None of the Company, the BRLM and any other person associated with the Issue has independently verified this information. Industry sources and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Industry sources and publications are also prepared based on information as of specific dates and may no longer be current or reflect current trends. Industry sources and publications may also base their information on estimates, projections, forecasts and assumptions that may prove to be incorrect. Accordingly, Investors should not place undue reliance on this information. Overview of the Indian Economy India is the fourth largest economy in the world after the United States of America, China and Japan in purchasing power parity terms. (Source: World Development Report, 2009). The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Advance Estimates was 8.5 per cent in 2010‐11, representing an increase from the revised growth of 8 per cent during 2009‐10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year‐on‐year (y‐o‐y), on back of manufacturing and within that, the capital goods sub‐segment. During April‐June 2011‐12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010‐11. The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011‐12. The Economic Scenario India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010‐12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009‐2012' by the United Nations Conference on Trade and Development (UNCTAD). India's FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January‐June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year. The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials. Source: www.ibef.com Overview of the global aluminium industry: The global aluminium industry had hit a rough path, with the global financial crisis, which began in the last quarter of 2008 severely impacting the demand for the industry. Industrial production growth of most of the major 59
economies, slipped into the negative territory after several years of strong positive growth. The slowing economy severely affected the demand in the markets. The earlier years of strong growth inspired many manufacturers to increase their capacities, thus affecting the supply end as well. The double impact of a slowdown in demand and the expansion of capacities caused an unprecedented increase in inventory levels across the industry. This rise in the inventory levels induced the prices to tumble. Inverse correlation between LME prices and inventory: 5,000
Rising LME Inventories
3,000
4,500
(US$/ Tonne)
3,500
2,000
3,000 2,500
1,500
2,000
(000' Tonnes)
2,500
4,000
1,000
1,500 1,000
500
500 0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LME Inventory
$/Tonne (RHS)
Source: LME, CARE Research Aluminium being a commodity is cyclical in nature, subjected to the ups and downs in the economy. The average aluminium prices, which were around US$1,700 per tonne in the CY04, increased to US$2640 per tonne in the CY07, before falling back to US$1658 per tonne during CY09. In the short run, the volatility in aluminium prices was even more evident with the prices falling from the record high levels of around US$3,200 per tonne in July08 to around US$1,300 per tonne in February09. However, on account of the various stimulus packages announced by most of the governments, global demand for aluminium recorded a robust growth of about 12 per cent during CY10, when compared with the previous year. With an improvement in demand, global prices of the metal also witnessed an improvement of about 30 per cent to US$2174 per tonne during the same period. Classification of the Industry: The global aluminium industry has expanded its base from around a mere 1,000 tonnes in the year 1900 to around 32 million tonnes (primary aluminium) at the end of the 20th century. This makes aluminium the world’s second most widely used metal. Initially ALUMINIUM was considered a precious metal, ranked alongside of silver and gold. Today we relate the same to a light weight metal used in the manufacturing of beverage cans, which are of least value to man. Whatever our opinion, it is difficult to replace aluminium from its role in the modern world. The global aluminium industry can be classified based on its production process and can be further reclassified as per the end use product.
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Global aluminium industry structure (Based on latest publically available data): Aluminium Industry: 2009
Primary Producers (37 Mill Tonnes)
Companies which manuf acture aluminium f rom bauxite ore's or f rom alumina.
Secondary Producers (19.4 Mill Tonnes)
Aluminium ingots (56.4 Mill Tonnes)
Companies which manuf acture aluminium f rom aluminium scrap through recyling.
Semi Fabrication & Finished products
Finished products output
Rolling
Extrusions
Castings & Forging
Drawing
Source: Industry, CARE Research Note: Latest publically available data. Integrated producers / Primary producers: Producers with backward integration i.e. access to captive bauxite mines are referred to as primary or the integrated producers. However, players with only smelting capacities also come under this category. These players produce aluminium by buying alumina from the open market. Many of the primary players have forward integrated themselves to manufacture the downstream value added, which enables them to enjoy higher profit margins. Secondary producers: Companies, which produce aluminium from aluminium scrap (new scrap and old scrap), are classified under this category. The secondary players are typically small in size and are highly unorganized. While in the developed countries, the share of secondary players is close to 50 per cent of the total production, the same is very low in the developing countries. Globally these players account for around 35 per cent of the overall aluminium markets. Semi‐fabricators: As visible in the above flowchart, semi‐fabricated products (ingots or any other form) are produced by processing the aluminium ingots. These ingots are again reprocessed as per the requirement of the end use consumption needs. Most of the aluminium is largely consumed in the semi‐fabricated form. Rolling Mills: Aluminium can be rolled into plate, sheets, or wafer thin foils. The rolling process changes the characteristics of the metal, making it either less brittle or more ductile. The input for most rolled products is the DC (Direct Chill semi‐continuous cast) ingot. The DC ingot or slab is cooled to room temperature after the casting process. It is then re‐heated to around 500ºC, before passing through a hot rolling mill where it is reduced to a thickness in the range of about 4 ‐ 6 mm. The strip from the hot rolling mill is transported to the cold mill where alloys may be cold rolled to a thickness of as low as around 0.05 mm.
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Extrusions: Aluminium can be extruded to form intricate shapes and sections. It is heated to around 500ºC and pushed through a die at high pressure. A heated billet cut from the DC cast log is located in a heated container, usually around 450ºC‐500ºC. At these temperatures the flow stress of the aluminium alloys is very low and by applying pressure by means of a ram on one end of the billet, the metal can flow through the steel die, located at the other end of the container, to produce a section. The cross sectional shape is defined by the shape of the die. Casting and Forgings: Casting: The aluminium casting process is classified either as Ingot casting or Mould casting. In Ingot casting, the primary or secondary aluminium is cast into rolling ingot (slab), extrusion ingot (billet) and wire bar ingot, which are subsequently transformed in semi‐ finished and finished products. Forging: In the forging process, the metal is heated and is shaped by plastic deformation by suitably applying a compressive force/pressure. Usually the compressive force is in the form of hammer blows using a power hammer or a press. Forging refines the grain structure and improves the physical properties of the metal. Drawings: The process in which the hot metal is pulled through a die, resulting in a reduction in outside dimensions, is called a drawing. This process deals only with bars, wire drawing and tube drawing. Global demand‐supply balance: Primary Aluminium: Global demand for aluminium increased at a CAGR of 6.3% during CY03 to CY08. During the same period, global supply of metal also increased at a CAGR of 7.5 per cent. However, the demand for aluminium witnessed a rapid decline owing to the financial crises which began in mid CY 2008. The Y‐o‐Y demand for the metal, after having increased for six consecutive years, decreased for the first time in CY08. CY09 showed no respite for the global aluminium industry, as the demand for metal declined further by about 8 per cent. Despite the cuts in production, announced by most of the leading players in the second half of CY08, global primary aluminium production for the CY08 increased by 4.5% when compared with CY07. In alteration to the falling global demand, production of primary aluminium declined by about 7 per cent during CY09. Financial crisis severely impacted the American and European automobile and construction industry, leading to destruction of demand from these sectors. Since CY03, global aluminium industry was in a state of deficit. However, severe slowdown on the demand side, lead to a record increase in inventory levels during the second half of CY08. This turned the aluminium industry into a surplus state in CY08. Increase in the inventory levels of the metal further pressurised the aluminium prices to go southwards. Albeit on a lower base, global demand for aluminium recorded a robust Y‐o‐Y growth of about 12 per cent during CY10, largely backed by the improvement in the global economic indicators. While the recovery in demand was largely dominated by the emerging markets like China, Brazil and India, other Asian and developed countries also recorded a significant recovery. 62
Global primary aluminium demand‐supply balance:
Source: Industry, CARE Research Secondary Aluminium: Global secondary aluminium industry largely follows the trend in the demand‐supply scenario for the global primary aluminium industry. However, as compared to the primary aluminium producers, secondary aluminium producers are much more flexible in altering the supply of metal with respect to the changes in the demand‐supply gap. Globally, the share of secondary aluminium has increased over the last few decades. Today secondary aluminium producers account for about 35 per cent of the global aluminium production and consumption. Apart from a lower capital structure, energy savings in production of aluminium through scrap can reach as much as 95 per cent in comparison to the primary production. Apart from the prime reason of reduction in cost, the modern and systematic collection process of aluminium scrap has together lead to an increase in market share by the secondary producers. While in the developed countries, the share of secondary players is close to 50 per cent of the total production, the same is very low in the developing countries. Global primary and secondary aluminium production share: (000' Tonnes)
(Per cent) 40
60,000 33
34
35
50,000 40,000
30
25
25
30,000
20 15
20,000
10 10,000
5
0
0 CY97 Secondary
CY03 CY09 Primary Secondary Players (%) (RHS)
Source: Industry, CARE Research
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Global primary aluminium end‐use consumption pattern: Globally, the automobile industry is the largest consumer of aluminium, closely followed by the construction and packaging industry. Together, these three industries constitute for more than 60% of the global end‐use aluminium consumption pattern. Changing dynamics of the country, along with an increase in the multiple uses of metal, changed the end use consumption pattern of aluminium for various countries over a period of time. As observed in the US, the use of aluminium in automobiles has increased dramatically to make the vehicles lighter and thus fuel efficient. This has increased the share of automobiles in the end use consumption pattern of the aluminium industry in USA from about 19% in CY1975 to about 37% in CY08. 2008‐World consumption pattern:
Source: Industry During CY05, China replaced USA, by becoming the world’s largest consumer of aluminium. Japan and Germany are the other two developed economies after the USA, which have a major share in the consumption of aluminium. However, apart from India and China, a Y‐o‐Y growth in consumption of all the major aluminium consuming nations has declined significantly over the past two to three years.
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Global primary aluminium consumption Share (Based on latest publically available data):
Source: CARE Research Global primary aluminium capacity utilization:
Source: CARE Research China continues to drive the global demand Chinese demand for aluminium has increased at a CAGR of around 19 per cent during CY02‐09. China’s share in the global consumption pattern of primary aluminium has increased from about 16% in CY02 to about 39% in CY09, making it the largest consumer globally. While the aluminium consumption in most of the Asian economies has increased significantly, the consumption of aluminium in developed countries like USA, Japan and other Western European countries have fallen significantly. Increase in demand for Chinese products across the globe, along with the robust internal demand, has lead to a huge increase in industrial activity in China. Rise in the demand has lead to a substantial growth in the Chinese economy over the last few years, which has brought in a good opportunity for the Chinese construction industry. Formation of new cities and the increase in urbanization, as the per capita income was on a rise, together lead to the stupendous growth in construction activities in China. Building and construction industry, along with the power industry, account for the major share in the aluminium end use consumption pattern of China. 65
2008‐China consumption pattern:
Source: Industry Global supply: While most of the countries consume aluminium in its different forms, production of aluminium is restricted to a very few countries. Top six countries which mine bauxite contribute to around 80% of the world bauxite production and top five countries with respect to smelter capacity (aluminium production) contribute to more than 60% of the global smelter production. Global primary aluminium capacity trend:
Source: USGS Australia alone accounts for more than 30% of the global bauxite production. China continues to dominate the consumption and production of refined metal. China produces around one third of the global refined aluminium production and consumes an equal quantity.
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Country wise share of major primary aluminium producers: (Percent)
2005
USA
2009 7.8
4
6
6
9.1
8
China
24.5
35
India
2.8
4
Russia
11.5
10
Australia Canada
Other Countries 38.3 33 Source: Industry, CARE Research Domestic aluminium demand‐supply scenario: During the last two decades, domestic demand for aluminium increased four‐fold from about 0.4mn tonnes in FY91 to about 1.7mn tonnes in FY11. Production of the metal also increased from about 0.45mn tonnes to 1.6mn tonnes during the same period. Domestic demand‐supply situation: (000' Tonnes) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 E
0
Production
Consumption
Source: CMIE, CARE Research Domestic Demand: Domestic demand for aluminium has been steadily growing. Consumption of aluminium in the country has grown at a CAGR of 5.6% during the period FY91 to FY09. Post FY00, demand for aluminium has grown at a CAGR of around 11.4%. Increased consumption of aluminium in the building & constructions sector and from the automobile sector has together lead to a robust growth in demand for aluminium in India. Historically, power sector has dominated the major share of end use consumption pattern. However, the share of power sector has reduced over a period of time, while that of building and construction and automobiles recorded an increase.
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India: End‐use consumption pattern:
Source: Industry, CARE Research Power Sector: Aluminium widely replacing copper: For the same weights, aluminium is twice as good as copper with respect to electrical conductivity. Prices of aluminium are also almost half the prices of copper. Being an excellent conductor of heat and electricity and with the cost advantages, aluminium is widely replacing copper in the power transmission segment. Production of aluminium wire rods has seen a continuous increase over a period of time. In the last two decades, aluminium wire rods production has increased at a CAGR of 3.2%, while in the last decade it grew at a CAGR of 9.6%. Production of aluminium wire rods in the last five years (FY06 to FY11), has increased at a CAGR of 8.04%. Aluminium Wire‐rods production:
Source: CMIE. CARE Research Share of power sector in the aluminium end use consumption pattern has decreased from around 45% in FY 1971 to around 30% in FY08. However, the decline in the share of power segment is mainly on account of extensive use of aluminium in other sectors in multiple applications as against the limited use in the past. Automobile sector: Solution for a better change 68
Aluminium is playing a pivotal role helping the Original Equipment Manufacturers (OEM) to challenge the problems faced with respect to the environmental and fuel efficiency norms. Aluminium usage helps the OEM’s to lower the weight of the vehicle thus increasing its fuel efficiency. Increase in fuel efficiency then helps in reducing the emissions from the vehicles. Use of aluminium also helps support the ecological balance as it can be completely recycled. Aluminium is used in all modes of transport from aircrafts to ships and from road vehicles to railways. Of the total weight of the aircraft, more than 70% is accounted by aluminium and aluminium alloys. Globally, percentage of aluminium in automobiles (both 2‐wheelers and 4‐wheelers) is also on an increasing trend. While the developed countries lead the way, most of the developing countries are also rapidly adopting to the changes. North ‐America light vehicle aluminium content:
Source: Industry Use of aluminium in India is also on an increasing trend. Currently in the passenger vehicles segments, aluminium accounts for around 2% of the overall curb weight of the vehicle. Share of aluminium in 2‐wheelers accounts for around 15‐20% of the total curb weight of the vehicle. India: Aluminium Share in 2‐wheeler segment: Motorcycle Type 100‐110 cc 150 cc 150 cc + Curb Weight (kgs) 110‐120 145‐155 180‐200 Average Curb Weight (kgs) 120 150 190 Aluminium (kgs) 20 30 30 Aluminium (%) 16.7 20.0 15.8 Source: Industry, CARE Research Machinery and Equipments: Aluminium with its basic properties is used extensively in the manufacturing of different types of machinery and equipments. However, properties of aluminium can be easily adjusted according to the required usage by alloying the metal. Most of the machining operations such as turning, milling, boring, tapping, sawing etc. are easily performed on aluminium and its alloys allowing the users utmost flexibility. Machinery and equipments production accounts for a weight of 9.6% in India’s Index of Industrial Production (IIP). The graph below depicts the trend of production of machinery and equipments for the last five years. 69
Index of Industrial Production:
Source: CMIE Packaging: Packaging plays a vital role in the selling and distribution process of an industry. With the changing standard of living, packaging reflects the consumer demand for choice and convenience. Aluminium is highly corrosion resistant. Being a metal it protects the product from light, ultra‐violet rays, water vapour and micro‐organisms etc. When used to package any sensitive products such as pharmaceuticals or food, aluminium is very hygienic and non‐toxic. Also the metal does not react with the chemical components of the drugs which are packaged. It also helps the product to increase its shelf life by keeping its contents fresh and protecting them from external influences. Aluminium is also one of the lightest packing material which is been used. Building and Construction: Aluminium is weather resistant and ensures optimum performance over a longer period of time. Being malleable, it can take a number of forms allowing designers enough flexibility during its usage. This property further allows the metal to be used in for a wide range of applications demanding varied surface finishes. Its high strength to weight ratio allows it to be used for windows and curtain wall frames. Aluminium is highly light reflective and hence aluminium solar collectors can be installed to lower energy consumption for artificial lighting and heating in winters. Aluminium shading devices are also used to reduce the need of air conditioning during summer seasons. Aluminium is also non‐combustible material hence providing additional fire safety in its use. India’s growth in GDP is significantly contributed by the increase in the construction activities throughout the years.
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Growth in Real GDP at Factor cost:
Source: CMIE Outlook: Average prices to improve further: CARE Research expects average global aluminium prices to hover around US$2,300‐2,400 per tonne during CY11 and is likely to improve further around US$2,400‐2,500 per tonne during CY12. While the historical peak price of US$3,200 per tonne is unlikely to be repeated soon, improvement in global demand and the global cost curve provides support to the price levels at about US$2,100‐2,200 per tonne. Global aluminium price forecast: (000' Tonnes)
(000' Tonnes) (US$ / Tonne)
50,000 45,000
2,680
2,700
2,571
2,500
2,400 40,000
2,000
1,665
30,000
1,600
25,000
1,200
20,000
800
15,000
400
10,000
0
5,000
‐400
0
‐800 CY06
CY07 Production
CY08 Demand
CY09
CY10
Surplus/Deficit (RHS)
CY11 F
CY12 F
Price (RHS)
Source: CARE Research
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2,800 2,400
2,174
35,000
3,200
Global demand‐supply gap to narrow down: CARE Research foresees global demand for primary aluminium to increase at a Compounded Annual Growth Rate (CAGR) of 5.4% from about 39mn tonnes in CY10 to 48.7 mn tonnes in CY14. China dominates the global aluminium industry accounting for more than one third of both the global demand as well as primary aluminium production. Moreover China is also growing at a faster rate when compared with the European and other Asian countries, and as such is the main driver of global aluminium demand along with the other emerging markets such as India, Brazil and Russia. According to International Monetary Fund (IMF), Chinese GDP is likely to grow at an average rate of about 9.5% until CY15, while the global GDP is likely to grow at about 4.1% during the same period. As against the CAGR in global aluminium demand of about 5.4% from CY10‐CY14, CARE Research expects the Chinese demand to grow in double digits during the same period. Global primary aluminium demand‐supply balance: 60
(Million Tonnes)
(Million Tonnes)
2.5
50
2.0
40
1.5
30
1.0
20
0.5
10
0.0
0
‐0.5 CY07
CY08
CY09 Production
CY10 Consumption
CY11 F
CY12 F
CY13 F
Surplus/Deficit (RHS)
CY 14 F
Source: CARE Research Global primary aluminium capacity is likely to increase at a CAGR of about 3.8% to 54.5 mn tonnes in CY14 from about 47 mn tonnes in CY10. Most of these capacities are likely to be located majorly in China, India and the Middle East countries. Demand of the metal is likely to increase at a CAGR of about 5.4%; production during the same period is likely to increase at a CAGR of about 4.8%. Despite the growth in demand exceeding the growth in supply, CARE Research expects the global aluminium industry to remain in the surplus state. The huge inventory overhang and the possibility of unwinding of most of the idle capacities are likely to increase the global supply of the metal keeping it in the oversupply zone. However, the electricity crisis in China will restrict many of the smaller players in the industry to re‐enter the markets. Domestic outlook: During the last decade (FY01 to FY11), domestic aluminium consumption has tripled up growing at a CAGR of 11.4% from 0.5 mn tonnes to 1.7 mn tonnes. Electricals, automobiles and the construction sectors are the key end‐ user sectors driving the demand for aluminium in India. The usage pattern for aluminium in these sectors is different in the domestic market when compared with the rest of the world. While globally, the automotive and the construction sectors are the major driver end‐users of aluminium, in India bulk of the demand is accounted by the power transmission sector followed by the automobile industry. 72
CARE Research expects domestic aluminium demand to grow from 1.7 million tonnes in FY11 to 2.5 million tonnes in FY15, a compounded annual growth rate (CAGR) of 10.9 per cent. During the period FY11 to FY15, CARE Research expects, demand for aluminium from the automobile and the construction industry is likely to grow by 12 per cent and 10 per cent each. Replacement of steel and copper by aluminium in the automobiles and power transmission sectors respectively is likely to support the aluminium demand from these sectors. With the expectations of the economy growing at around 8%, demand for the metal from the power transmission segment is also likely to remain healthy at around 10% CAGR during the same period. Increasing urbanization and rise in disposable income is likely to increase the demand for packaged goods. Demand for the metal from the packaging industry which accounts for a share of around 11% in the end use consumption pattern, is also likely to grow in double digits. Domestic demand break‐up: Sectors Growth Rate End‐use Consumption Share (FY11‐FY15) FY09 FY10 FY11 F FY12 F FY13 F FY14 F FY15 F Power 7 31 31 30 31 30 30 30 Automobiles 10 18 18 18 18 19 19 19 Machinery 10 6 6 6 6 6 6 6 Packaging 12 11 11 11 11 11 11 12 Building/Constr 10 13 13 13 13 13 13 12 White goods 15 7 7 7 8 8 8 8 Others 8 14 14 14 14 13 13 13 Source: CARE Research Domestic Supply The Indian industry is been gearing up to accept the new role of supplying aluminium throughout the world. The domestic aluminium producers have been expanding their capacities to cope up with the robust domestic demand and to cash in on the opportunities thrown open by the anticipated global demand. CARE Research expects an investment to the tune of Rs1. lac crore during the next five years, which is likely to increase the domestic aluminium capacity from about 1.5 mn tonnes in FY09 to about 4 mn tonnes in FY14. Any surplus to be exported: High quality bauxite ore, low labour and power costs establishes India as one of the least cost producers of primary aluminium across the globe. Indian companies lie in the least quartile of the global primary aluminium cost curve. As against the domestic demand of about 2 mn tonnes per annum, India is likely to produce around 3.5 to 4 mn tonnes of aluminium annually. Increased capacities are likely to turn India into a net exporter of about 1.5 to 2 mn tonnes of aluminium annually.
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Statistics:
Domestic Aluminium smelter capacities: (Tonnes) FY07 FY08 FY09
FY11 F
FY12 F
4,71,000 40,000 3,45,000 3,56,500
4,88,000 40,000 4,02,500 3,56,500 2,50,000
5,26,000 40,000 4,60,000 3,56,500 2,50,000
5,26,000 40,000 4,60,000 3,56,500 5,00,000
7,50,000 40,000 4,60,000 3,56,500 7,50,000
12,02,500 12,12,500 Source: Industry, CARE Research Domestic Alumina Capacities:
15,37,000
16,32,500
18,82,500
23,56,500
Hindalco Malco Nalco Balco Vedanta
4,61,000 40,000 3,45,000 3,56,500
FY10
FY13 F
FY14 F
FY15 F
1145000 11,45,000 40,000 40,000 4,60,000 4,60,000 5,00,000 6,80,000 10,00,000 15,00,000
1145000 40,000 4,60,000 6,80,000 17,50,000
31,45,000
40,75,000
38,25,000
2007-08 2008-09 2009-10 2010-11 E 2011-12 E 2012-13 E 2013-14 E Company 15,75,000 15,75,000 15,75,000 21,00,000 21,00,000 21,00,000 21,00,000 NALCO INDAL 15,00,000 15,00,000 15,00,000 15,00,000 15,00,000 15,00,000 15,00,000 HINDALCO 15,00,000 15,00,000 15,00,000 Utkal 15,00,000 15,00,000 Aditya 7,00,000 10,00,000 14,00,000 20,00,000 20,00,000 31,00,000 46,00,000 Vedanta 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 BALCO 85,000 85,000 85,000 85,000 85,000 85,000 85,000 MALCO 5,60,000 5,60,000 5,60,000 Ashapura JSW Aluminium Total 40,60,000 43,60,000 47,60,000 58,85,000 79,45,000 1,05,45,000 1,20,45,000
Note: Colours refer to companies coming under the same group Source: CARE Research Aluminium: Company wise production: (Tonnes) FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 3,05,703 3,17,977 3,92,719 4,09,068 4,29,140 4,42,685 4,77,776 5,23,450 5,55,000 Hindalco 34,599 31,072 33,027 36,062 36,868 37,652 37,635 23,224 23,224 Malco 2,31,674 2,44,708 2,98,207 3,38,483 3,58,954 3,58,734 3,60,460 3,61,260 3,87,000 Nalco 70,353 95,430 97,269 1,00,277 1,73,743 3,11,000 3,58,671 3,56,781 2,68,000 Balco 82,000 2,64,000 Vedanta 6,42,329 6,89,187 8,21,222 8,83,890 9,98,705 11,50,071 12,34,542 13,46,715 14,97,224 Source: Industry, CARE Research Aluminium: product‐wise Statistics: Domestic Production (Tonnes) FY07 FY08 FY09 FY10 FY11 Aluminium extrusions production 131988 142583 128317 133287 143747 Aluminium foils production 44260 46037 35336 31114 32497 Aluminium wire rods production 218471 246915 280983 323757 336185 Source: CMIE 74
Global Trade (Exports / Imports) (Tonnes) FY07 FY08 FY09 FY10 Aluminium wires Exports From World 701.26 3624.11 2098.74 2202.77 Aluminium wires Imports From World 8452987 2892378 3677531 3623212 Source: CMIE Global Trade (Exports / Imports) (Tonnes) FY07 FY08 FY09 FY10 Aluminium plates, sheets and strips Exports From World 38791 45866 47685 34854 Aluminium plates, sheets and strips Imports From World 29719722 39788772 39327295 46591432 Source: CMIE Global Trade (Exports / Imports) (Tonnes) FY07 FY08 FY09 FY10 Aluminium tubes and pipes Exports From World 2289 734 1129 864 Aluminium tubes and pipes Imports From World 3520725 4202506 3629174 4522054 Source: CMIE
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4.2 ‐ OUR BUSINESS We are an ISO 9001:2008 certified Company engaged in manufacturing of Aluminum extruded sections & profiles, ingots and other related products. Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a Private Limited Company with Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a Public Limited Company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. Our Company has a factory unit established at Ghatabillod, Dist Dhar, Madhya Pradesh which is a well connected & developed industrial area having all infrastructure facilities. Our factory unit was established in the year 2003 in the name of M/s Krishna Profiles Private Limited. The unit was promoted by Mr. Gaurav Mungad and Mr. Rajesh Mundra. In May 2006, Mr. Rajesh Mundra left our company and Mr. Gaurav Mungad took over the charge of the entire unit along with the assistance of Mr. Vaibhav Mungad. In the year 2007‐08 our Company took its 1st major expansion and increased its manufacturing capacity from 300MT p.a. to 1200MT p.a.. Further, in the year 2008‐09, our unit took its 2nd major capacity expansion with modern machinery enhancing the capacity from 1200MT p.a. to 2100 MT p.a. Our company is currently engaged in the manufacture of Aluminum extruded sections & profiles, ingots and other related products of wide varieties. The leadership of Mr. Gaurav Mungad, Managing Director along with Mr. Omprakash Maheshwari, Whole‐time Director and Mr. Vaibhav Mungad, Whole‐time Director has made Jiji Industries Limited a successful and quality oriented Company. The Company has consistently registered growth in turnover and profitability over the previous years and now proposes to further expand its capacities and cater to the growing demand of the manufactured products. For details in relation to the aforesaid expansion, please refer to the section titled “Objects of the Issue” beginning on Page No. 34 of this Draft Red Herring Prospectus. In October 2008, our unit started exporting its products to gulf countries i.e. UAE. During 2008‐09 the total exports of our Company amounted to ` 961.83 lakhs (from October 2008 to March 2009), which increased to ` 2,575.00 lakhs in the year 2009‐10 and ` 4,087.44 lacs in the year 2010‐11. Our Company is proposing to expand its manufacturing capacity by 6,000MT p.a from its existing capacity of 2,100MT p.a. The above said expansion would comprise of a proposed expansion of 4,500MT p.a. at Ghatabillod and 1,500MT p.a. at Special Economic Zone, Pithampur. Market base and customers The market is well represented by our Company in the respective manufactured segments in which our company operates. Our Company is selling the manufactured products through a network of traders spread across the country and abroad. Since the products offered by our Company have wide use, acceptability and applicability, the customer base of the same is quite wide. Our Major Customers Our top 5 major customers, interalia, include Overseas Metal Trading Company, Mungad Strips and Alloys Private Limited, Divine Aluminium Private Limited, Vani Exports, Al Medeah General Trading who collectively contributed around 95.17% of our total sales turnover for the financial year ended March 31, 2011. Our Quality Jiji’s indigenous production procedure is equipped with generous quality control measures. Our Company owns Spectro‐meter for checking alloys of melted material and Websters to check tensile strength of finished product. Each and every product is thoroughly checked with personal attention at all levels. Based on the quality controls
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measures adopted by our Company, our products qualify for both domestic and international market's quality standards. Quality Certifications Jiji has been certified by QA Certification Private Limited as an ISO 9001:2008 certificate for manufacturing of aluminium extruded products, profiles, ingots, billets etc. For further details refer to section titled “Government Approvals” on page no. 171 of the Draft Red Herring Prospectus. Installed Capacity & Production The following is the detail of installed capacity and production in respect of Aluminum Profiles / sections for the respective years: (MT per annum) 2010‐11 2009‐10 2008‐09 Particulars Installed Utilised Installed Utilised Installed Utilised Capacity Capacity Capacity Capacity Capacity Capacity Aluminum Profiles / sections 2100 1896.39 2100 748.93 1350 316.35 Locations Existing Works Plot No. 316/2/1 & 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, Dist. Dhar Madhya Pradesh Proposed Works (Additional) Our Company is proposing to expand its manufacturing capacity at the existing works and as well has applied for additional land for setting up a new manufacturing unit at Special Economic Zone, Pithampur, Dist Dhar, Madhya Pradesh. List of Existing Major Plant and Machineries Sr. Name of Major Machinery Machine Name/ Date of Vendor Cost (`) No. Model No. Purchase 1 Melting Furnace 2 MT 11/01/2003 Sumitsu Enterprises 9,00,000 2 Melting Shop 4 MT 02/10/2010 Sumitsu Enterprises 6,50,000 3 Extrusion Press 425MT 18/03/2007 Mongia Tool Tech 30,00,000 4 Extrusion Press 1000MT 28/07/2009 SPM Belgaum 65,32,544 Proposed Expansion of our Company The following is the detail of the proposed expansion of our Company at existing works at Ghatabillod and proposed works at SEZ Pithampur. 1. Land and Site Development Ghatabillod : We proposed to set up the expansion project at our existing lease hold land located at Ghatabillod. The unit at Ghatabillod is on free hold land taken on lease rental basis having total land area of 1.69 hectare (approx. 16,930 sq. mtr) out of which we are already occupying 0.85 hecater (approx 8,500 sq mtr). The total land required for the expansion is 0.80 hectare (approx 8,000 sq mtr). Our Company is already in possession of this land 77
and hence there will be no extra cost for acquisition of this land except the rental that our Company is already paying to the Lessor. The cost of site development has been estimated to be ` 100.00 lakhs as per the certificate dated August 01, 2011 of M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. SEZ Pithampur: Our Company has already applied for 3,720 sq mtrs. (approx 40,000 sq. ft.) of land at Special Economic Zone, Pithampur vide its letter dated June 06, 2011 to M.P. Audhogik Kendra Vikas Nigam (Indore) Limited (“AKVN”). The authority “AKVN” has vide its letter dated July 15, 2011 has directed the local authority i.e. “Assistant Development Commissioner, Indore Special Zone” to issue LOP/LOA in favour of Jiji Industries Limited. The local authority is in the process of allocating the land to our Company. The cost of land as per management estimates is ` 60 lakhs (40000 sq. ft. * ` 150/‐ per sq. ft). As per the management, the site development will be undertaken by the local authority and our Company will not have to incur any extra cost for the same. 2. Buildings and Other Civil Construction Ghatabillod: The total build up/ construction area is estimated at 35,000 sq. ft over existing land at Ghatabillod. The estimated cost of building including cost of electrification is estimated at Rs 233.35 lakhs as per the certificate dated August 01, 2011 of the M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. The plant area shall comprise of 1650MT extrusion press and extrusion line. SEZ Pithampur: The total build up/ construction area is estimated at 33000 sq. ft. The estimated cost of building including cost of electrification is estimated at Rs 146.65 lakhs as per the certificate dated August 01, 2011 of the M/s Raj Bhargava & Associates, Chartered Engineer, Valuer & Contractor, Indore. The plant area shall comprise of 1000MT extrusion press and extrusion line and 8MT melting furnace & casting machine. 3. Plant and Machinery Ghatabillod: The total cost of plant & machinery is estimated at ` 1390.00 lakhs based on the quotations received from supplier. We have not yet placed the orders for Plant and Machinery. The said machineries will be installed on Turnkey basis and the supplier will be supplying full set of machinery with overall support of erection, installation and commercial production. The details of plant and machineries are as under Sr. No. Description of the machinery Imported / Quantity Indigenous 1. Turnkey Basis ‐ 1650 MT of Aluminium Extrusion Press Imported 1 set (Forged main Cylinder) 2 Turnkey Basis ‐ 1650 MT of Press Extrusion Line Imported 1 set 3 Dies & Moulds In house 2000 units 4. Other Miscellaneous ‐ ‐ SEZ Pithampur: The total cost of plant & machinery is estimated at ` 660.00 lakhs based on the quotations received from supplier. We have not yet placed the orders for Plant and Machinery. The said machineries will be installed on Turnkey basis and the supplier will be supplying full set of machinery with overall support of erection, installation and commercial production. The details of plant and machineries are as under: Sr. No. Description of the machinery Imported / Quantity Indigenous 1. Extrusion Production Line - Extrusion Press 1000MT, German Rexroth Pumps, Imported 1 set Allen Bradley Plc
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2. 3. 4.
- Single puller, Frequency control, 120KGF for 1000MT extrusion press, steel wire rope drive - Handling Table, Belt Type, Include finishing Saw and stretcher (30T), 36m*6.5m - Die Oven, Induction Type - Multi Log heating furnace with hot log shear, 127mm*6000mm, fully automatic - Aging oven, 5T double doors 5MT Aluminium Melting & Casting Furnace - Aluminium melting furnace (5 Tons) - Casting Machine - Well (1400*1400) - Billet Cooling System - Cooling water pool and water recycle system Dies and Moulds Other Miscellaneous
1 set 1 set 1 set 1 set 1 set Imported
In house ‐
1 1 1 1 1 1000 ‐
Raw Material: The raw material of our products is Aluminum scrap/ingots which is available indigenously in the market and can also be imported under Open General License. The major suppliers of Ingots are Hindalco, Nalco, Balco etc. The company is at present importing approx 90% of scrap from UAE, USA and some European countries etc. The raw material is being purchased on cash on delivery basis or against Letter of Credit. Infrastructure Facilities Power: Existing plant Currently the power requirement is 150KW and the same is being arranged from MPSEB. Proposed plant The total power requirement for the proposed expansion is 350KW (150KW for SEZ, Pithampur and 200KW for Ghatabillod). For the additional requirement the company will be apply to MPSEB at the time of implementation of the respective projects. Water Requirement: Existing plant The total requirement of water is 15KL p.m. which is being met by our Company with its own tube well. For manufacturing process water is also met with the existing tube well. Proposed plant The water requirement for proposed expansion at Ghatabillod will be met from the existing facility of tube well and for the SEZ, Pithampur the requirement of water is 15 KL p.m. and the same will be made available by SEZ authorities. 79
Environmental Aspects: The company is having clearance for the existing capacity. For additional capacity the company will be applying at the time of implementation of project. Manpower Existing As on the August 01, 2011, besides the top management our Company has 303 employees, details of which are as under:‐ Category
No of employees
Skilled Labour
40
Semi skilled Labour
40 9
Administrative staff
12
Factory staff Unskilled Labour (Casual)
202
Total Proposed
303
Category
No of employees
Skilled Labour
15
Semi skilled Labour
25
Administrative staff
4
Factory Staff
6 100
Unskilled Labour
150 Total MANUFACTURING PROCESS Manufacturing process is mainly consist of melting of ingots, Billets making, heating and cutting of Billets, extrusion, stretching, cutting, inspection, ageing and packing. The technology is Hydraulic Extrusion process. The following flow chart depicts our manufacturing process
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Flow Chart of Manufacturing Process COMPOSITION OF BATCH ACCORDING TO SPECIFICATION RAW MATERIAL CHARGING MELTING AT 7000C‐800oC FLUXING AT 680oC‐7000C DEGASING N2 GAS AT 680oC‐7000C BATCH CORRECTION
SAMPLE TESTING FOR CHEMICAL ANALYSIS
SPECTRO METER
CASTING
Logs Ingots Dross Sell Sell Billet cutting Chips 0 Log Heating AT 400 C‐420oC Extrusion through different dyes Process scrap Profiles Re use Sell Intermediate use Aluminium conductor Transfer to slugs m/c Transfer to rivet M/c Sell Sell Sell 81
An Aluminium extrusion plant is divided into three sections:‐ a) Melting Aluminium Ingots and scrap are the basic raw materials required for manufacturing of our products. This is processed in Reverberatory type oil fired furnance where the melting is done. Melting is done at a temperature of 700C to 800C b) Extrusion, Sizing and Heat treatment The molten metal is cast into logs in a semi continuous casting machine. These cast logs are cut to smaller length as per requirements by log cutting saw. These pieces are heated in induction heating furnace at a temperature of 400C to 420C depending upon the alloys and sections to be extruded. These preheated billets are then transferred in an electrically heated container with an internal heating arrangement so as to maintain the temperature of the heated billets within the required range. These preheated billets are then pressed in a hydraulically operated extrusion press against a pre‐heated die assembly. The heated billets are pressed through the die block by a hydraulic ram. The aluminium which is in semi molten stage is extruded through the die block due to tremendous pressure. The shape of the extrusion will be that of the die. The extruded sections are quenched to get the desired temper depending upon the grade of aluminium extruded and the end uses. The extruded sections after quenching are transferred to the cooling bed where they are stretched in a stretching machine to rectify and bends or twists within tolerances. The sections are then cut by a circular saw to the desired finished lengths. c) Inspection and packing After the above process the output are then inspected and later passed through an aging furnace. After aging these sections are finally inspected, weighed packed and kept ready for dispatch. CERTAIN TERMS IN REFERENCE TO OUR MANUFACTURING PROCESS EXTRUSION Extrusion is a manufacturing process used to create long objects of a fixed cross‐sectional profile. A material, often in the form of a billet, is pushed and/or drawn through a die of the desired profile shape. Hollow sections are usually extruded by placing a pin or piercing mandrel inside of the die, and in some cases positive pressure is applied to the internal cavities through the pin. Extrusion may be continuous (producing indefinitely long material) or semi‐continuous (producing many short pieces). Some materials are hot drawn whilst others may be cold drawn. ALUMINIUM EXTRUSION Aluminium Extrusions are made from solid aluminium cylinders called billets, which are continuously cast from molten aluminium. Billets are available in a wide variety of alloys, pretreatments and dimensions, depending upon the requirements of the manufacturer. The extrusion process involves Aluminium metal being forced through a die with a shaped opening. This is made possible by preheating the billet to 400‐420°C and then applying a pressure of between 200 and 220 bars. The 82
heated and softened metal is forced against the container walls and the die by a hydraulic ram, the only exit is the geometric cross‐section of the die opening, and the metal is squeezed out. The extrusion leaves the die at a temperature of around 600°C and the exit temperature is carefully controlled in order to achieve specified mechanical properties, a high quality surface finish and good productivity. INGOT A method of producing blooms, billets and slabs in long lengths using water cooled moulds. The castings are continuously withdrawn through the bottom of the caster whilst the teeming of the metal is proceeding. The need for primary and intermediate mills and the storage and use of large numbers of ingot moulds is eliminated. The continuous casting process is also used in the production of Aluminium.
ALUMINIUM LOG The starting stock for extrusion billet. Extrusion log is usually produced in lengths from which shorter extrusion billets are cut.
BILLETS Billet is a term used in manufacturing to refer to a cast product. A cast product is defined as either as ingot or a billet, depending on whether the cross‐sectional diameter is greater than, or less than approximately 200 mm, respectively. A billet is typically cast to a geometry compatible with secondary processing, e.g. forging. An ingot is typically cast to a convenient geometry for further primary processing, e.g. heat treatment Ingots and billets are collectively known as bar stock. Billets may be solid or hollow in form, commonly cylindrical, used as the final length of material charged into the extrusion press cylinder. It is usually a cast product, but may be a wrought product or sintered from powder compact
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HOMOGENIZING It is a process whereby ingots are raised to temperatures near the solidus temperature and held at that temperature for varying lengths of time. The purpose of this process is to reduce micro segregation by promoting diffusion of solute atoms within the grains of aluminum and improve workability ALUMINIUM HOMOGENIZING FURNACES
DIE In extrusion a tool with an opening through which heated aluminum is forced by pressure, taking on that cross‐ sectional shape. The term DIE is most commonly used in tooling, i.e. press tools "punch and die" but there are many other types of die, e.g. thread cutting dies, forming dies, forging dies, die‐casting dies, etc. The term when applied to steel often refers to drawing dies through which hot rolled wire and bar are drawn to produce the finish and dimensional accuracy that is required for bright steel. HOLLOW DIE SOLID DIE
PRESS MACHINE The press supplies the force necessary to squeeze the billet through the extrusion die. It consists of: The container where the billet is put under pressure. The main cylinder with the ram for pushing the billet into the container and through the die. The front platen giving counter support to the die package. The main columns fixing the front platen and the cylinder together. The die is supported by a series of back dies or backers and bolsters for transferring the main press load to the front platen. 84
STRETCHING In the process of extrusion, a tool with an opening through which heated aluminum is forced by pressure, taking on that cross‐sectional shape constitutes the process of stretching which depends on the length of the material but on an average stretching amounts to increase in length from 2% and upto 5%. AGEING Precipitation from solid solution resulting in a change in properties of an alloy, Ageing usually requires a minimum treatment for 6 hours at an approximate temperature of 180°C to 220°C. KEY BUSINESS STRENGTHS 1. Long term relationship with our customers Our continuous focus on providing quality products and services consistently to our customers has resulted in long term relationships with them. Our track record of delivering timely services and demonstrated industry expertise has helped in forging strong relationships with them. 2. Young and dynamic promoters Mr. Gaurav Mungad, aged 31 years is the Managing Director and Promoter of our Company. He has an experience of over 10 years in the same line of Industry. Mr Vaibhav Mungad, Whole time Director and promoter of our Company, aged 30 years, has been associated with our Company for over 5 years. Both the young Directors have spearheaded the operations of our Company and demonstrated their entrepreneurial skills as reflected by the consistent growth of our Company. 3. Experienced and strong management team We have an experienced management team with established and structured corporate processes. We believe that our management team has a long‐term vision. We also believe that their understanding of the market and flexibility in managing our operating and financial leverage has enabled us to adapt to the changing market conditions in a focused and constructive manner. We believe that the experience of our management team and its understanding of the industry will enable us to continue to take advantage of both current and future market opportunities. 4. Strong marketing network We have a strong network of independent dealers & distributors across India and abroad. Our sales and marketing focus is on the identification of OEMs and other end‐users that helps us in achieving cost savings and increasing sales. Our marketing team includes experienced and qualified professionals with good reach and expertise. 85
5. Use of Modern Machineries Our company uses state of the art machineries for production viz Extrusion press, Extrusion lines. These machineries enhance the productivity and enable us to produce quality products as per specifications of domestic and international buyers. OUR BUSINESS STRATEGY 1. Enhancing our range of products Our focus is to cater to every consumer of aluminium extruded products. We have been continuously expanding and revamping the range of products and services. We intend to enhance the range of products enabling our customers to get all their requirements from a single source. 2. Aspirational developments We intend to create aspirational developments that as per our belief have distinctive features, designs and functionalities with quality output and finishing which enhances our reputation and enables us to sell our products quickly. 3. Tapping the new markets globally Aluminium extrusions are required in various applications around the world. Our presence is limited to few countries only. Moreover, due to capacity constraints, company is able to serve only limited number of clients. Further, getting product requests from various potential clients from the tapped markets have to be passed as the company has to restrict itself to current clients in terms of satisfying their requirements. The requirements from various international markets are increasing and are also getting more quality conscious. 4. Continue to strengthen relationships with key customers We believe that we constantly try to address customer needs around a variety of product offerings. Our existing client relationships help us to get repeat business from our customers. This has helped us to maintain a long term business relationship with our customers and improve our customer retention ability. This represents a competitive advantage in gaining new clients and increasing our business in future. STRENGTH, WEAKNESS, OPPORTUNITY & THREATS STRENGTH: ¾ The promoter of our Company comprises of young & enthusiastic personnel having vast knowledge & experience in aluminium business activities and have successful track record over the years. ¾ Our Company is an ISO 9001:2008 certified organisation with strong quality commitments ¾ Our presence in the international market gives us an opportunity to address a large market. ¾ The demand of our product will increase with the increasing consumption in automobile, construction and infrastructure sectors. ¾ A versatile commodity suitable for wide varieties of applications ¾ Our Company is already a profit making unit having sound financials over the past years
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WEAKNESS: ¾ The company is subject to normal market fluctuations in keeping with the trends. ¾ Volatility in Aluminium prices may impact demand. ¾ Regular Changes in the Country‐Specific Government Policies OPPORTUNITIES: ¾ The project has been designed and planned in the manner to deliver good quality at economical price which would provide us a competitive edge. ¾ Well acceptance of our products in the international market gives us an opportunity to address a large market. ¾ With the booming construction industry the demand for our products is expected to move in a positive correlation. ¾ Alumnium profiles fast substituting the use of wood in the construction and infrastructure industry. ¾ Aluminium profiles also finding application in industrial uses. THREATS: ¾ Changes in government policy may adversely affect the performance of our company. ¾ Threat from similar industries operating in the vicinity. ¾ An export generally carries risk of currency fluctuations. APPLICATIONS Aluminium extrusions are used throughout the construction industry, particularly in window and door frame systems, prefabricated houses/building structures, roofing and exterior cladding and curtain walling. Aluminium Extrusions are also used in road vehicles and rail wagons, airframes and marine applications. EXISTING PRODUCT RANGE The company is manufacturing Aluminum Profiles of various varieties used in construction, transport, power & industrial applications. The company is also engaged in manufacturing of intermediatery product, ingot and billets which can also be sold to industries engaged in the extrusion activity. The company is having capacity to manufacture over 900 varieties of aluminium profiles. The company is targeting its present capacity in manufacturing the sections used in the construction, transport, power & industrial applications. Selling arrangements: The company’s products are well established and recognized in the Domestic & International markets. In the Domestic market our company sells its products to independent dealers & distributors throughout the country. With the increase in capacity our company plans to cater to end users as well. The company is having regular orders and enquiries from Middle East & Asian countries. The management has good and cordial relations with various large trading houses across such international markets, which is advantageous for our exports business. With the expansion in capacity the company plans to tap other newer overseas markets as well.
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Major Customers during last financial year Name of the Customer Value (` in Lacs) Overseas Metal Trading Co. 3,984.57 Mungad Strips and Alloys Pvt.Ltd. 3,071.28 Divine Aluminium 739.36 Vani Export 162.06 Al Medeah General Trading 102.86 Installed Capacity & Production: Aluminum Profiles / sections Existing1 Year 2008‐09 2009‐10 2010‐11 Installed Capacity 1350 2100 2100 Utilised Capacity 316.35 748.93 1896.39 % Capacity 23.40% 35.61% 90.00%
As % of total Purchases 47.05 36.27 8.73 1.91 1.21
2011‐12 2100 1995 95.00%
Projected2 2012‐13 8100 5340 66%
2013‐14 8100 5865 72%
1
Since 2008‐09, 2009‐10 & 2010‐11 the Company received enhancement of working capital facilities and at the same time Company started catering to the export market also, resulting into greater demand of company’s products. This has collectively resulted into higher capacity utilisation in 2010‐11. 2 Our Company has planned for a further expansion in capacity with the proceeds from this IPO and the new capacity is expected to get commissioned by April 2012. Further the demand for aluminium profiles is higher and the management is confident to sell the products with enhanced capacity. EXPORT OBLIGATIONS The company has to fulfill the following export obligations as on August 25, 2011. i. Excess DEPB received by us amounting to ` 1,25,401/‐. ii. Material imported against advance licence duty to be paid, amounting to ` 2,02,802/‐. INSURANCE Our operations are subject to inherent hazards such as risk of equipment failure, work accidents, fire or explosion, including hazards that may cause injury and loss of life, severe damage to and destruction of property and equipment. We are insured for a variety of risks through “standard fire and special perils policy” which covers plant & machinery, furniture’s & fixtures, stock in progress and finished goods. Our Company has taken risk cover for a cumulative sum of ` 2,595 lakhs as on date of this Draft Red Herring Prospectus. Further, our Company has taken vehicle insurance policies for a sum of ` 7.85 lakhs. PROJECT DESIGN CONSULTANTS Our Company has used its in house capabilities to plan and design proposed expansion at Ghatabillod and SEZ, Pithampur. Our Company has availed a detailed quotation from M/s Raj Bhargava and Associates, Chartered Engineer, Valuer and Contractor, Indore for estimated expenses on the proposed expansion at Ghatabillod and SEZ, Pithampur of Building & Site Development dated August 01, 2011.
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INTELLECTUAL PROPERTY RIGHTS Our Company has applied for registration of trade mark of our Company on August 27, 2011 under The Trade Marks Act, 1999 for our logo and on September 02, 2011 for registration of its name. Our application for registration is pending with the office of the Registrar of Trademarks LAND & BUILDING: The gist of the areas of land presently owned by the Company, alongwith the areas being utilized by the Company for its production, are as under: S.No Address of Property Owned/Rented Remarks Area of Land 1. Land at Plot No. 316/2/1 & Leased Factory land taken on lease 1.693 hectare 316/2/2, Gram – Sejwaya, from Mr. Omprakash (approx 16930 sq. Ghatabillod ‐ (M.P.) Maheshwari for a period of 25 mtr.) years from 01/04/2011 till 31/03/36 2. Factory Building at Plot No. Leased Building taken on lease from Mr. 20000 sq. ft. 316/2/1 & 316/2/2, Gram – Omprakash Maheshwari for a Sejwaya, Ghatabillod ‐ (M.P.) period of 25 years from 01/04/2011 till 31/03/36 3. Factory Building at Plot No. Owned Constructed in the year 2007 18200 sq. ft. 316/2/1 & 316/2/2, Gram – Sejwaya, Ghatabillod ‐ (M.P.) 4. 33‐34, Rambali Nagar, Sangam Leased Registered Office 800 sq. ft. Nagar Road, Indore, Madhya Pradesh ‐ 452001 Proposed Project Land Ghatabillod : We proposed to set up the expansion project at our existing lease hold land located at Ghatabilod. The unit at Ghatabillod is on free hold land taken on lease rental basis having total land area of 1.69 hectare (approx. 16,930 sq. mtr) out of which we are already occupying 0.85 hecater (approx 8,500 sq mtr). The total land required for the expansion is 0.80 hectare (approx 8,000 sq mtr). Our Company is already in possession of this land. SEZ Pithampur: Our Company has already applied for 3,720 sq mtrs. (approx 40,000 sq. ft.) of land at Special Economic Zone, Pithampur vide its letter dated June 06, 2011 to M.P. Audhogik Kendra Vikas Nigam (Indore) Limited (“AKVN”). The authority “AKVN” has vide its letter dated July 15, 2011 has directed the local authority i.e. “Assistant Development Commissioner, Indore Special Zone” to issue LOP/LOA in favour of Jiji Industries Limited. The local authority is in the process of allocating the land to our Company. The cost of land as per management estimates is ` 60 lakhs (40000 sq. ft. * ` 150/‐ per sq. ft).
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4.3 ‐ REGULATION AND POLICIES In carrying on our business as described in the section titled “Our Business” on page 76 of this Draft Red Herring Prospectus, our Company is regulated by the following legislations in India. Further, for the purposes of executing the work undertaken by our Company, we are required to obtain licenses and approvals under the prevailing laws and regulations applicable in the relevant state and depending upon the type of project. For details of such approvals, please see the section titled “Government Approvals” on page 171 of this Draft Red Herring Prospectus. The information detailed in this chapter has been obtained from publications available in the public domain. The regulations set out below are not exhaustive, and is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional legal advice. Introduction The Company is engaged in the business of manufacturing of aluminum profiles and sections. Set forth below are certain significant legislations and regulations that generally govern this industry in India: A. Regulations governing Manufacturing Sector The primary central legislation governing the manufacturing sector is the Factories Act, 1948. In addition, compliance of various labour related legislations, including the Payment of Wages Act, 1956, The Minimum Wages Act, 1948, Equal Remuneration Act, Employees’ Compensation Act, 1923, Industrial Disputes Act, 1948, Payment of Gratuity Act, 1972, Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, Payment of Bonus Act, 1965 and the Shops and Establishment Rules framed under the Factories Act, 1948 as may be applicable in the relevant State. The Factories Act, 1948 The Factories Act, 1948 (the ''Factories Act'') seeks to regulate labour employed in factories and makes provisions for the safety, health and welfare of the workers. An occupier of a factory under the Factories Act, means the person who has ultimate control over the affairs of the factory. The occupier or manager of the factory is required to obtain a registration for the factory. The Factories Act also requires inter alia the maintenance of various registers dealing with safety, labour standards, holidays and extent of child labour including their conditions. Further, notice of accident or dangerous occurrence in the factory is to be provided to the inspector by the manager of the factory. Madhya Pradesh Factories Rules, 1962 The Madhya Pradesh Factories Rules, 1962 (the “Rules'') seeks to regulate labour employed in factories in the state of Madhya Pradesh and makes provisions for the safety, health and welfare of the workers. The Rules also mandate maintenance of certain statutory registers in the factory. The Industrial Disputes Act, 1948 The Industrial Disputes Act, 1947 (the “IDA”) was enacted to make provision for investigation and settlement of industrial disputes and for other purposes specified therein. Workmen under the IDA have been provided with several benefits and are protected under various labour legislations, whilst those persons who have been classified as managerial employees and earning salary beyond a prescribed amount may not generally be afforded statutory benefits or protection, except in certain cases. Employees may also be subject to the terms of their employment 90
contracts with their employer, which contracts are regulated by the provisions of the Indian Contract Act, 1872. The IDA also sets out certain requirements in relation to the termination of the services of the workman’s services. This includes detailed procedure prescribed for resolution of disputes with labour, removal and certain financial obligations up on retrenchment. The Employees’ Compensation Act, 1923 The Employees’ Compensation Act, 1923 (the “ECA”) has been enacted with the objective to provide for the payment of compensation to workmen by employers for injuries caused by accident(s) arising out of and in the course of employment, and for occupational diseases resulting in death or disablement. The ECA makes every employer liable to pay compensation in accordance with the ECA if a personal injury/disablement/ loss of life is caused to a workman by accident arising out of and in the course of his employment. In case the employer fails to pay compensation due under the ECA within 1 (one) month from the date it falls due, the commissioner appointed under the ECA may direct the employer to pay the compensation amount along with interest and may also impose a penalty. The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 The Employees Provident Funds and Miscellaneous Provisions Act, 1952 (the "EPFA") was introduced with the object to institute compulsory provident fund for the benefit of employees in factories and other establishments. The EPFA provides for the institution of provident funds and pension funds for employees in establishments where more than 20 (twenty) persons are employed and factories specified in Schedule I of the EPFA. Under the EPFA, the Central Government has framed the "Employees Provident Fund Scheme", "Employees Deposit‐linked Insurance Scheme" and the "Employees Family Pension Scheme". Liability is imposed on the employer and the employee to contribute to the funds mentioned above, in the manner specified in the statute. There is also a requirement to maintain prescribed records and registers and filing of forms with the concerned authorities. The EPFA also prescribes penalties for avoiding payments required to be made under the abovementioned schemes. Equal Remuneration Act, 1979 Equal Remuneration Act, 1979 provides for payment of equal remuneration to men and women workers and for prevention discrimination, on the ground of sex, against female employees in the matters of employment and for matters connected therewith. Maternity Benefit Act, 1961 The purpose of Maternity Benefit Act, 1961 is to regulate the employment of pregnant women and to ensure that the get paid leave for a specified period during and after their pregnancy. It provides, inter‐alia, for payment of maternity benefits, medical bonus and enacts prohibitions on dismissal, reduction of wages paid to pregnant women, etc. The Payment of Bonus Act, 1965 The Payment of Bonus Act, 1965 (the “PBA”) is applicable to every factory and every other establishment employing 20 (twenty) or more persons. According to the provisions of the PBA, every employer shall be bound to pay to every employee in respect of the accounting year a minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or ` 100 (Rupees Hundred), whichever is higher, whether or not the employer has any allocable surplus in the accounting year. If the allocable surplus exceeds minimum bonus payable, then the employer must pay bonus proportionate to the salary or wage earned during that period, subject to maximum of 20% of such salary or wage. ‘Allocable surplus’ is defined as 67% of available 91
surplus in the financial year, before making arrangements for the payment of dividend out of profit of the Company. The Minimum Wages Act, 1948 The Minimum Wages Act, 1948 (the “MWA”) came in to force with the objective to provide for the fixation of a minimum wage payable by the employer to the employee. Under the MWA, the appropriate government is authorised to fix the minimum wages to be paid to the persons employed in scheduled or non scheduled employment. Every employer is required to pay not less than the minimum wages to all employees engaged to do any work whether skilled, unskilled, and manual or clerical (including out‐workers) in any employment listed in the schedule to the MWA, in respect of which minimum rates of wages have been fixed or revised under the MWA. The Payment of Gratuity Act, 1972 The Payment of Gratuity Act, 1972 (the “PGA”) applies to every factory and shop or establishment in which ten or more employees are employed. Gratuity is payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 (five) years: a) On his/her superannuation; b) On his/her retirement or resignation; c) On his/her death or disablement due to accident or disease (in this case the minimum requirement of 5 (five) years does not apply) Gratuity is payable to the employee at the rate of 15 (fifteen) days’ wages for every completed year of service or part thereof in excess of 6 (six) months. The Payment of Wages Act, 1936 The Payment of Wages Act, 1936 (“PWA”) is applicable to the payment of wages to persons in factories and other establishments. PWA ensures that wages that are payable to the employee are disbursed by the employer within the prescribed time limit and no deductions other than those prescribed by the law are made by the employer. Madhya Pradesh Shops and Establishment Act, 1958 The main objectives of the Shops and Establishments Act are to:
regulate the working & employment conditions of the workers employed in shops & establishments, including, commercial establishments.
fix the number of working hours, rest intervals, overtime, holidays, leave and termination of service.
The Company has its registered office at Indore, Madhya Pradesh and accordingly the provisions of Madhya Pradesh Shops and Establishment Act, 1958 are applicable to our Company. Our Company has made an application for registration of its registered office under this Act. The Petroleum Act, 1934 The Petroleum Act, 1934 was passed to consolidate and amend the law relating to the import, transport, storage, production, refining and blending of petroleum. Under the Petroleum Rules, 2002, any person intending to store furnace oil/petroleum Class C, in quantity exceeding 5000 Litres otherwise than under a license shall take the approval of the Chief Controller before commencing storage. 92
B. Environmental Regulations We have to comply with the provisions of the Environment Protection Act, 1986, Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008. Entrepreneurs are required to obtain statutory clearances relating to pollution control and environment for setting up and operation of an industrial project. Water Legislations to control water pollution are listed below: The Water (Prevention and Control of Pollution) Act, 1974 prohibits the discharge of pollutants into water bodies beyond a given standard, and lays down penalties for non‐compliance. The Water Act also provides that the consent of the State Pollution Control Board must be obtained prior to opening of any new outlets or discharges, which is likely to discharge sewage or effluent. Air Legislations to control air pollution are listed below: The Air (Prevention and Control of Pollution) Act, 1981 requires that any individual or institution responsible for emitting smoke or gases by way of use as fuel or chemical reactions must apply in a prescribed form and obtain consent from the state pollution control board prior to commencing any activity. National Ambient Air Quality Standards (NAAQS) for major pollutants were notified by the Central Pollution Control Board in April 1994. The NAAQS has also developed industry specific standards for the aluminium industry. Hazardous Wastes There are several legislations that directly or indirectly deal with hazardous wastes. The relevant legislations are: The Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008 The Public Liability Insurance Act, 1991 The National Environment Tribunal Act, 1995 and some notifications under the Environmental Protection Act of 1986. Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008 These rules require that the occupier and the operator of the facility, that treats hazardous wastes, must properly collect, treat, store or dispose the hazardous wastes without adverse effects on the environment. Schedule I of the said Rules lists out the primary and secondary production of aluminium as a process that generates hazardous waste and therefore requires compliance under these Rules. C. Tax Related Legislations The Central Sales Tax Act, 1956 Central Sales tax (“CST”) is levied on the sale of movable goods in the course of inter‐state trade or commerce. In India, sales tax is levied both at the union level under the Central Sales Tax Act, 1956 as well as the state level under the respective state legislation. Goods sold within the jurisdiction of the state are charged to Value Added Tax (“VAT”) in accordance with the VAT statute of that state. CST is payable by a dealer (i.e. a person who carries on the business of buying, selling, supplying or distributing goods) on his sales turnover at the rate prescribed in the VAT statute of the State from where the movement of 93
the goods originate. However, a dealer is entitled to a concessional rate of 2% CST on goods which are sold to another registered dealer who intends to further re‐sell them or use them in the manufacture or processing for further sale or for certain other specified purposes, subject to the condition that purchasing dealer issues a statutory Form C to the selling dealer. Madhya Pradesh Value Added Tax, 2002 All the states have in force a separate VAT statute which prescribes the rates at which VAT will be levied on taxable goods sold within that state. VAT is charged on sale of goods in the States under the law enacted by each State in respect thereof. VAT is a multi‐point levy on each of the entities in the supply chain with the facility of setoff of input tax that is the tax paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value addition in the hands of each of the entities is subject such to tax. Under the Madhya Pradesh Value Added Tax Act, 2002 the dealer, who becomes liable to pay tax has to obtain registration with Commercial Tax Department. Such dealer shall be liable to pay tax to the Government according to the rates specified for various commodities. Income‐tax Act, 1961 Income‐tax Act, 1961 (“IT Act”) is applicable to every company, whether domestic or foreign whose income is taxable under the provisions of this Act or Rules made there under depending upon its ‘Residential Status’ and ‘Type of Income’ involved. Every assesse, under the IT Act, which includes a company, is required to comply with the provisions thereof, including those relating to tax deduction at source, advance tax, minimum alternative tax and like. Finance Act, 1994 Service tax is levied on ‘taxable services’ under Chapter V of the Finance Act, 1994, as amended from time to time, wherein tax is levied on certain identified services rendered in India by specified service providers. Currently, for the financial year 2011‐12, the service tax is levied at the rate 10.30% (an education cess of 2% and a secondary and higher education cess at the rate 1%). Therefore, the effective rate is 10.3% on gross value of taxable services. With respect to upstream activities, relevant taxable services include site formation and clearance, and excavation, earth moving and demolition services, survey and exploration of mineral services and mining services. The Customs Act, 1962 The provisions of the Customs Act, 1962 and Rules made there under are applicable at the time of import of goods into India from a place outside India or at the time of export of goods out of India to a place outside India. Any company requiring to import or export any goods is required to get itself registered under this Act and obtain an Importer Exporter Code (IEC) number. The Central Excise & Tarrif Act, 1985 and Rules made there under The provisions of the Central Excise & Tarrif Act, 1985 (the “CETA”) provides for tarrif rates for excise duties payable. Excise duty is imposed on goods produced or manufactured in India under the provisions of CETA. Madhya Pradesh Professional Tax Act, 1995 The professional tax slabs in India are applicable to those citizens of India who are either involved in any profession or trade. The State Government of each State is bestowed upon with the responsibility of structuring as well as formulating the respective professional tax criteria and is also required to collect funds through professional tax. 94
The professional taxes are charged on the incomes of individuals, profits of business or gains in vocations. The professional taxes are classified under various tax slabs in India. The State of Madhya Pradesh has its own professional tax structure and tax is levied on every person who exercises any profession or calling or is engaged in any trade or holds any appointment, public or private, or is employed in any manner in state. Madhya Pradesh Commercial Tax Act, 1994 Madhya Pradesh Commercial Tax Act, 1994 levies tax on commercial activities in the State of Madhya Pradesh. Every dealer whose turnover exceeds the limits specified in the Section 5 (5) of the aforesaid act shall get himself registered under the said act. D. Other Legislations The Registration Act, 1908 The Registration Act, 1908 was passed to consolidate the enactments relating to the registration of documents. The main purpose for which the Act was designed was to ensure information about all deals concerning land so that correct land records could be maintained. The Act is used for proper recording of transactions relating to other immovable property also. The Act provides for registration of other documents also, which can give these documents more authenticity. Registering authorities have been provided in all the districts for this purpose. The Indian Stamp Act, 1899 The Indian Stamp Act, 1899 prescribes the rates for the stamping of documents and instruments by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. Under this Act, an instrument not ‘duly stamped’ cannot be accepted as evidence by civil court, an arbitrator or any other authority authorised to receive evidence. However, the document can be accepted as evidence in criminal court. The Special Economic Zone Act, 2005 Our Company proposes as a part of the expansion plan, to set up a factory in a Special Economic Zone (“SEZ”) in Pithampur, Madhya Pradesh. The provisions of the said Act shall be accordingly applicable. An SEZ is a specifically delineated duty free enclave, deemed to be a foreign territory for the purposes of trade operations as well as duties and tariffs. Any private or public company or State Government or its agencies may set up an SEZ in India. Each SEZ unit functions on a self‐certification basis. An SEZ is notified by the Ministry of Commerce and Industry, Department of Commerce, Government of India. By establishing our operations in an SEZ, we are eligible for the following benefits: As per provisions of the IT Act, the Company is entitled to deduction of 100% of the profits and gains derived from export of goods manufactured or produced from its unit set up in Special Economic Zone for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the unit begins such manufacture and 50% of such profits and gains for further five consecutive assessment years. Further, for the next five consecutive assessment years, the Company is entitled to deduction of such amount not exceeding 50% of the profit as is debited to Profit & Loss Account of the previous year in respect of which the deduction is to be allowed and credited to a special reserve viz. “Special Economic Zone Reinvestment Reserve Account” to be created and utilised for the purpose of the business in the manner laid down in the IT Act.
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No custom duty will be levied for any goods imported into, or service provided in, the SEZ for the purposes of its authorised operations. No custom duty is applicable to any export of goods or services from the Company to any place outside India and no excise duty is applicable to goods brought from within India’s domestic tariff area to the SEZ to enable the Company to carry on its authorised operations. Additionally, there is an exemption from service tax on taxable services provided to the Company to carry on its authorised operations in the SEZ and there is an exemption from the levy of taxes on the sale or purchase of goods, as long as the goods are needed to carry on the Company’s authorised operations.
The Indian Contract Act, 1872 The Indian Contract Act, 1872 (“Contract Act”) codifies the way in which a contract may be entered into, executed, implementation of the provisions of a contract and effects of breach of a contract. A person is free to contract on any terms he chooses. The Contract Act consists of limiting factors subject to which contract may be entered into, executed and the breach enforced. It provides a framework of rules and regulations that govern formation and performance of contract. The contracting parties themselves decide the rights and duties of parties and terms of agreement. The Specific Relief Act, 1963 The Specific Relief Act is complimentary to the provisions of the Contract Act and the Transfer of Property Act, as the Act applies both to movable property and immovable property. The Act applies in cases where the Court can order specific performance of a contract. Specific relief can be granted only for purpose of enforcing individual civil rights and not for the mere purpose of enforcing a civil law. ‘Specific performance’ means Court will order the party to perform his part of agreement, instead of imposing on him any monetary liability to pay damages to other party.
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4.4 ‐ HISTORY AND CERTAIN CORPORATE MATTERS Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a Private Limited Company with Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a Public Limited Company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. The name of our Company has been changed due to sentimental reasons attached to the new name with our Promoters. The Corporate Identification Number of our Company is U27203MP2003PLC015775. Changes in the Registered Office Our Registered office is situated at 33‐34, Rambali Nagar, Sangam Nagar Road, Indore, Madhya Pradesh ‐ 452001. The changes in the registered office of our Company since incorporation are as under: Date of Change From To Reason For Change July 15, 2008 Plot No. 316/2/1 & 316/2/2, 24, Rambali Nagar, Sangam Administrative Sejwaya Digtan Road, Ghatabillod, Nagar Road, Indore ‐452001, Convenience District: Dhar ‐454001, Madhya Madhya Pradesh Pradesh May 1, 2011 24, Rambali Nagar, Sangam Nagar 33‐34, Rambali Nagar, Sangam Administrative Road, Indore ‐452001, Madhya Nagar Road, Indore ‐ 452001, Convenience Pradesh Madhya Pradesh Apart from the Registered Office our Company’s operations are also conducted at its factory/works office located at Plot No. 316/2/1 & 316/2/2, Sejwaya Digtan Road, Ghatabillod, District Dhar ‐ 454001, Madhya Pradesh. Key Events and Mile Stones Year Key Events / Milestone / Achievements 2003 Incorporation of our Company under the Companies Act, 1956 2007 First expansion of the Company from 300MT to 1200MT 2008 First export order of 50MT 2009 Second expansion of our Company from 1200MT to 2100MT 2010 Our Company was awarded with ISO 9001:2008 certification for our unit at Ghatabillod by QA Certification Services vide certificate no: QACS‐A‐0647 Our Company was recognised as an Export House by the Government of India. 2011 Our Company was converted into a public limited company Main Objects of our Company The main object of our Company as set forth in the Memorandum of Association of our Company is as follows: To carry on the business in India or elsewhere to manufacture, fabricate, assemble, alter, convert, extruded profiles, design, develop, research, export, import, handle, jobwork, modify, machine, prepare, produce, finish, annodise, purchase, sell, resell, project, mould, remould, melt and to act as stockiest, distributor, agent, broker, representative, consultant, advisor, supplier, contractor, subcontractor, or otherwise to deal in all shapes, sizes, gauges, thickness, dimensions and varieties of products of aluminium alloys, such as rods, squares, flats, hexagons, tubes, packing materials, springs, plates, circles, coils, aluminium powder, whether coated or plain, metal combination, aluminium billets, utensils, foils, furniture, rails, grills, doors, windows, ladders, their parts, 97
accessories, equipments, plants, machineries, tools, tackles, components, raw materials, stores, consumables and other ingredients thereof used in industrial, commercial, domestic, business, public utilities, transports, aviation, shipping, building, power, railways, agriculture and other areas and to do all such incidental acts and things necessary for the attainment of the foregoing objects. The objects of the Memorandum of Association of our Company enable us to undertake activities for which the funds are being raised through this Issue. The existing activities of our Company are in accordance with the Object Clause of our Memorandum of Association. Changes in Memorandum of Association Except as stated below there has been no change in the Memorandum of Association of our Company since Inception: Sr. No. 1
2
3
4
5
6
7
Nature of Alteration
Date of Alteration Change in Clause V of the Memorandum of Association for increase November in the Authorised Share Capital of the Company from ` 10 lakhs to ` 15, 2007 36 Lakhs. Change in Clause V of the Memorandum of Association Association March 20, for increase in the Authorised Share Capital of the Company from 2008 `36 lakhs to ` 75 Lakhs. Change in Clause V of the Memorandum of Association Association November for increase in the Authorised Share Capital of the Company from 02, 2009 `75 lakhs to ` 90 Lakhs. Change in Clause V of the Memorandum of Association Association March 31, for increase in the Authorised Share Capital of the Company from 2010 `90 lakhs to ` 150 Lakhs. Change in Clause V of the Memorandum of Association Association January 28, for increase in the Authorised Share Capital of the Company from ` 2011 150 lakhs to ` 500 Lakhs. Conversion of Company into a public limited company and change May 26, of name of our Company to Jiji Industries Limited vide fresh 2011 & May Certificates of Incorporation issued by Assistant Registrar of 30, 2011 Companies, Madhya Pradesh and Chattisgarh Change in Clause V of the Memorandum of Association Association June 29, for increase in the Authorised Share Capital of the Company from ` 2011 500 lakhs to ` 2000 Lakhs.
Type of Meeting of the Members Extra Ordinary general meeting Extra Ordinary general meeting Extra Ordinary general meeting Extra Ordinary general meeting Extra Ordinary general meeting Extra Ordinary general meeting
Extra Ordinary general meeting
Details of Subsidiary and Holding company of our Company Our Company does not have any Subsidiary and Holding company as on the date of filing of this Draft Red Herring Prospectus. Injunctions or Restraining Orders Our Company is not operating under any injunction or restraint order. Details regarding acquisition of business/undertakings, mergers, amalgamation, revaluation of assets etc: Nil 98
Number of Shareholders of our Company: Our Company has 12 (Twelve) shareholders as on the date of filing of this Draft Red Herring Prospectus. Changes in the activities of the Company, Jiji Industries Limited, during the last five years There has been no change in the business activities of our Company during the last five years from the date of this Draft Red Herring Prospectus. For details relating to the business and operations of our Company, please refer section “Our Business” on page 76 of the Draft Red Herring Prospectus. Shareholders Agreement There are no subsisting shareholders agreements among our shareholders in relation to our Company, to which our Company is a party or otherwise has notice of the same. Guarantee, if any, given to third parties by the Promoters offering their shares in the proposed offer for sale: Not Applicable OTHER AGREEMENTS Non Compete Agreement Our Company has not entered into any Non‐compete Agreement as on the date of filing this Draft Red Herring Prospectus. Joint Venture Our Company does not have any joint venture agreement as on the date of filing this Draft Red Herring Prospectus. Strategic Partners Our Company does not have any strategic partners as on the date of filing this Draft Red Herring Prospectus. Financial Partners Our Company does not have any financial partners as on the date of filing this Draft Red Herring Prospectus.
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4.5 ‐ OUR MANAGEMENT As per our Company’s Articles of Association, our Company shall not have less than 3 (three) Directors and more than 12 (twelve) Directors. The Board of Directors currently comprising of 6 (six) Directors manage the functions of our Company. Mr. Gaurav Mungad, the Managing Director of our Company, is suitably supported by professional and technically qualified team of executives who are involved in day to day affairs of the business of our Company under the supervision, direction and control of the Board of Directors. The following table sets forth the details regarding the Board of Directors as on the date of filing of this Draft Red Herring Prospectus: Sr. Name, Father’s name, Date of No. of Equity Date of Other No. Age, Designation, Appointment Shares held in expiration Directorships/Partnership Address, Experience our Company of current s Occupation, &percentage term of Qualifications, DIN of office shareholding 1 Mr. Gaurav Mungad July 31, 1. Mungad Strips and May 1, 2003 11,20,000 (S/o Mr. Omprakash Equity Shares 2014 Alloys Private Limited Maheshwari ) & (Corporate Promoter) 11.92% Age: 31 years Director not Appointed as Designation: Managing liable to Managing Director retire by Director with rotation. effect from Address: 7, Nagarchi August 01, Bakhal, Indore, Madhya 2011. Pradesh‐452007. Experience: 10 years Occupation: Business Educational Qualifications: B.Com DIN: 01790847 2 Mr. Vaibhav Mungad May 18, 2006 33,60,000 July 31, 1.Mungad Strips and (S/o Mr. OmPrakash Alloys Private Limited Equity Shares 2014 Maheshwari ) (Corporate Promoter) & 2. Field Irrigation Private 35.75% Age: 30 years Limited (Group Company) Designation: Whole‐time Director Appointed as Director not Whole‐time liable to Address: 7, Nagarchi Director with retire by 100
Sr. No.
3
4
Name, Father’s name, Age, Designation, Address, Experience Occupation, Qualifications, DIN
Date of Appointment
Bakhal, Indore, Madhya Pradesh‐452007. Experience: 8 years Occupation: Business Educational Qualifications: B.Com DIN: 01790928 Mr. Omprakash Maheshwari (S/o Late Mr. Chhaganlal Maheshwari ) Age: 59 years Designation: Whole‐time Director Address: 7, Nagarchi Bakhal, Indore, Madhya Pradesh‐452007. Experience: 35 years Occupation: Business Educational Qualifications:M.Com, LL.B DIN: 02812660 Mr. Viny Raj Modi (S/o Mr. Vijay Kumar Jain) Age: 37 Years Designation: Independent Director Address: 267, Rachna Nagar, Bhopal,
effect from August 01, 2011
No. of Equity Shares held in our Company &percentage of shareholding
Other Directorships/Partnership s
rotation.
August 09, 2011 Appointed as Whole‐time Director with effect from August 12, 2011
11,20,000 Equity Shares & 11.92%
August 11, 1. Omsu Industries Private 2014 Limited (Group Company) Director liable to retire by rotation.
August 18, 2011
Nil
Director 1. Gyan Ganga Academy liable to Private limited retire by rotation. 2. Shri Balaji Infrastructure (Partner) 3.Ekta Casting and Engineering (Partner)
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Date of expiration of current term of office
Sr. No.
5
6
Name, Father’s name, Age, Designation, Address, Experience Occupation, Qualifications, DIN
Date of Appointment
No. of Equity Shares held in our Company &percentage of shareholding
MadhyaPradesh‐462023 Experience: 5 years Occupation: Business Educational Qualifications: Advanced Diploma In Management. DIN: 02294902 Mr. Ajay Vikram Thakur July 28, 2011 (S/o Late Mr. Bajrang Singh Thakur) Age: 48 Years Designation: Independent Director Address: 7 C Sangam Nagar, Indore, Madhya Pradesh‐452001 Experience: 20 years Occupation: Business Educational Qualifications: Not Available DIN: 03584201 Mr. Manish Dawar July 28, 2011 (S/o Mr. Bhushan Pal Dawar) Age: 33 Years Designation: Independent Director Address: G‐07, Asawa Chambers, Sapna Sangeeta Road, Indore, Madhya Pradesh‐452001 102
Date of expiration of current term of office
Other Directorships/Partnership s
Nil
Director 1. Avis Mirror Industries liable to (Partner) retire by rotation.
Nil
Director 1. Network Automation liable to Solutions (Sole Proprietor) retire by rotation
Sr. No.
Name, Father’s name, Age, Designation, Address, Experience Occupation, Qualifications, DIN
Date of Appointment
No. of Equity Shares held in our Company &percentage of shareholding
Date of expiration of current term of office
Other Directorships/Partnership s
Experience: 12 years Occupation: Consultant Educational Qualifications: B.Sc DIN: 03584205 Brief Profiles of Our Directors Mr. Gaurav Mungad, aged 31 years, is a graduate in commerce having 10 (ten) years’ experience in the aluminium industry. He has worked as Chief Executive for three years in S. N. Industries, Indore and assisted in supervision of the production and procurement of the raw material required for making the aluminium utensils. He has also worked for over 3 years in an SSI unit named Mungad Aluminium Private Limited, Sanwer Road, Indore, engaged in production of utensils, buckets and other related aluminium items where he was looking after the production activities. Simultaneously Mr. Gaurav Munagad is also engaged in commissioning and brokerage of aluminium items. Currently he is looking after Sales & Distribution departments and Import & Export departments of our Company where he responsible for formulation of policies and their execution in respect of the above said department. Mr. Omprakash Maheshwari, Promoter and Whole‐time Director Mr. Omprakash Maheshwari, aged 59 years, holds a degree in Master in Commerce (M. Com.) and has also completed LL.B. from University of Indore. He has wide experience of over 30 years in the field of aluminium and allied industries. Currently he is serving our Company in the capacity of Whole time Director, looking after overall administration and functioning of the Company. Mr. Vaibhav Mungad, Promoter and Whole time Director Mr. Vaibhav Mungad, aged 30 years, is a young and dynamic entrepreneur. He is practically in the aluminium and related business since the past 8 years. He joined our Company (as a Director in May 2006. He has put his overall efforts in establishing the unit into a profitable venture. Currently he is looking after research & development departments of our organization. He also supervises the Finance & Accounting functioning in our Company. Mr. Viny Raj Modi, Independent Director Mr. Viny Raj Modi, aged 37 Years, holds an Advanced Diploma In Management from Devi Ahilya Vishwa Vidyalaya (DAVV),Indore. He has experience of about 5 years and is presently associated with Gyan Ganga Group of Institutions. He is also a partner in Shri Balaji Infrastructures, Bhopal & Jabalpur and Ekta Casting & Engineering, Jabalpur. Mr. Ajay Vikram Thakur, Independent Director 103
Mr. Ajay Vikram Thakur, aged 48 Years, Presently he is a partner in Avis Mirror Industries and has an experience of 20 years. Mr. Manish Dawar, Independent Director Mr. Manish Dawar, aged 33 years, holds a degree in B.Sc. (Electronics) from Devi Ahilya Vishwavidyalaya, Indore. He is Proprietor in Network Automation Solutions and has an experience of about 12 years. Nature of any family relationship between any of the Directors Mr. Gaurav Mungad, Managing Director and Mr. Vaibhav Mungad, Whole‐time Director are brothers and Mr. Omprakash Maheshwari, Whole‐time Director is the father of the above said Directors. We also confirm that: • We have not entered into any arrangement or understanding with our major shareholders, customers, suppliers or others, pursuant to which our Directors were selected as Directors or members of senior management. • The terms of agreements with our Managing Director/Whole Time Director(s) do not provide for any benefit upon termination of employment except the retirement benefits payable to them as Provident Fund, Superannuation and Gratuity as per the policies of our Company. • None of our Directors is / was a Director in any listed company, during the last five years from the date of filing of Draft Red Herring Prospectus, whose shares have been / were suspended from being traded on the Bombay Stock Exchange Limited and / or National Stock Exchange of India Limited. • Further, none of our Directors is / was a Director of any listed company which has been / was delisted from any Recognised Stock Exchange. Details of Borrowing Powers of Directors Our Company has passed the resolution in the Extra Ordinary General meeting of the members held on June 04, 2011 authorizing the Directors of the Company to borrow from time to time all such money as they may deem necessary for the purpose of business of our Company notwithstanding that money borrowed by the Company together with the monies already borrowed by our Company may exceed the aggregate of the paid up share capital and free reserves provided that the total amount borrowed by the Board of Directors shall not exceed the sum of ` 100.00 Crores (Rupees Hundred Crores only). Compensation of Managing Director / Wholetime Directors The compensation payable to the Managing Director/ Whole time Directors will be governed as per the terms of their appointment and shall be subject to the provisions of Sections 198, 269, 309 and 310 of the Companies Act, 1956. The following compensation has been approved for Managing Director and Whole time Directors: 1. Mr. Gaurav Mungad
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Mr. Gaurav Mungad was appointed as a Director on May 01, 2003. He was appointed as the Managing Director of our Company, in the Extra Ordinary General meeting of the members of our Company held on August 01, 2011 for a period of 3(three) years on following terms of remuneration: Salary ` 2,50,000/‐ (Rupees Two Lakh Fifty Thousand) per month Perquisites a) Housing: House Rent Allowance shall be allowed as per the rules of the Company within the overall limit specified above. b) Medial Reimbursement: Expenses incurred for the appointee and his family subject to a ceiling of three month’s salary in a year or fifteen month’s salary over a period of five years. c) Leave Travel Assistance: First Class Air Fare for self and his family once in a year to any destination. Family for the aforesaid purposes shall be defined as spouse and two dependent children. d) Club Fees: Fees and expenses incurred at the clubs shall be subject to a maximum of two clubs and upto the maximum amount as may be permissible as per the applicable law. This shall not include life membership fees. e) Personal accident insurance: As per the rules of the Company f) Employer’s contribution to Provident fund/superannuation fund: As per the rules of the Company g) Gratuity: Gratuity payable shall be at the rate of 15 days salary for each completed year of service in accordance with the rules of the Company. h) Car/Telephone: Car with the driver for use on the Company’s business and telephone/telefax facilities at the appointee’s residence. Personal long distance calls on telephone and use of car for any private purpose shall be billed separately by the Company to the appointee. Commission An amount not exceeding 3% of net profits of the Company in addition to the salary, perquisites and allowances, subject to the overall ceiling stipulated in Sections 198 and 309 of the Companies Act, 1956. Amount of compensation ` 26,00,000/‐ (Rupees Twenty Six Lakhs) paid during the financial year ended 2011 Benefits in kind granted Nil during the financial year ended 2011 Contingent or deferred Nil compensation accrued for the financial year ended 2011 105
Except as stated above, Mr. Gaurav Mungad is not getting any other benefit in cash or kind from our Company. 2. Mr. Vaibhav Mungad Mr. Vaibhav Mungad was appointed as a Director on May 18, 2006. He was appointed as the Whole‐time Director of our Company, in the Extra Ordinary General meeting of the members of our Company held on August 01, 2011 for a period of 3(three) years on following terms of remuneration: Salary ` 2,50,000/‐ (Rupees Two Lakh Fifty Thousand)per month Perquisites a) Housing: House Rent Allowance shall be allowed as per the rules of the Company within the overall limit specified above. b) Medial Reimbursement: Expenses incurred for the appointee and his family subject to a ceiling of three month’s salary in a year or fifteen month’s salary over a period of five years. c) Leave Travel Assistance: First Class Air Fare for self and his family once in a year to any destination. Family for the aforesaid purposes shall be defined as spouse and two dependent children. d) Club Fees: Fees and expenses incurred at the clubs shall be subject to a maximum of two clubs and upto the maximum amount as may be permissible as per the applicable law. This shall not include life membership fees. e) Personal accident insurance: As per the rules of the Company f) Employer’s contribution to Provident fund/superannuation fund: As per the rules of the Company g) Gratuity: Gratuity payable shall be at the rate of 15 days salary for each completed year of service in accordance with the rules of the Company. h) Car/Telephone: Car with the driver for use on the Company’s business and telephone/telefax facilities at the appointee’s residence. Personal long distance calls on telephone and use of car for any private purpose shall be billed separately by the Company to the appointee. Commission An amount not exceeding 3% of net profits of the Company in addition to the salary, perquisites and allowances, subject to the overall ceiling stipulated in Sections 198 and 309 of the Companies Act, 1956. Amount of compensation `26,00,000/‐ (Rupees Twenty Six Lakhs) paid during the financial year ended 2011 Benefits in kind granted Nil during the financial year ended 2011 106
Contingent or deferred Nil compensation accrued for the financial year ended 2011 Except as stated above, Mr. Vaibhav Mungad is not getting any other benefit in cash or kind from our Company. 3. Mr. Omprakash Maheshwari Mr. Omprakash Maheshwari was appointed as Whole time Director of our Company, in the Extra Ordinary General meeting of the members of our Company held on August 12, 2011 for a period of 3(three) years on following terms of remuneration: Salary ` 2,50,000/‐ (Rupees Two Lakh Fifty Thousand) per month Perquisites a) Housing: House Rent Allowance shall be allowed as per the rules of the Company within the overall limit specified above. b) Medial Reimbursement: Expenses incurred for the appointee and his family subject to a ceiling of three month’s salary in a year or fifteen month’s salary over a period of five years. c) Leave Travel Assistance: First Class Air Fare for self and his family once in a year to any destination. Family for the aforesaid purposes shall be defined as spouse and two dependent children. d) Club Fees: Fees and expenses incurred at the clubs shall be subject to a maximum of two clubs and upto the maximum amount as may be permissible as per the applicable law. This shall not include life membership fees. e) Personal accident insurance: As per the rules of the Company f) Employer’s contribution to Provident fund/superannuation fund: As per the rules of the Company g) Gratuity: Gratuity payable shall be at the rate of 15 days salary for each completed year of service in accordance with the rules of the Company. h) Car/Telephone: Car with the driver for use on the Company’s business and telephone/telefax facilities at the appointee’s residence. Personal long distance calls on telephone and use of car for any private purpose shall be billed separately by the Company to the appointee. Commission An amount not exceeding 3 % of net profits of the Company in addition to the salary, perquisites and allowances, subject to the overall ceiling stipulated in Sections 198 and 309 of the Companies Act, 1956. Amount of compensation Nil 107
paid during the financial year ended 2011 Benefits in kind granted Nil during the financial year ended 2011 Contingent or deferred Nil compensation accrued for the financial year ended 2011 Except as stated above, Mr. Omprakash Maheshwari is not getting any other benefit in cash or kind (in his capacity as the Director) from our Company. No portion of the compensation as mentioned above for Managing Director and Whole time Directors was paid pursuant to a bonus or profit sharing Plan. Sitting Fee The Articles of Association of our Company provides for payment of fees to its Directors other than Managing Director and Whole‐time Director for attending the meeting of the Board or Committee thereof, up to such amount not exceeding `500/‐ (Rupees Five Hundred). The Board of Directors have accorded their approval for payment of sitting fee, in their meeting held on July 28, 2011 whereby the Non Executive Directors of the company would be entitled to a sitting fee of Rs 500 (Rupees Five Hundred) for attending every meeting of Board or its Committee thereof. Compensation paid and benefits in kind granted to Directors during the financial year 2010‐11 Following is the detail of compensation paid and benefits in kind granted to the Board of Directors of the Company during the financial year 2010‐11. (` in lakhs) Particulars Salary Sitting Fees P.F. Others Total Mr. Gaurav Mungad 26.00 ‐ ‐ ‐ 26.00 Mr. Vaibhav Mungad 26.00 ‐ ‐ ‐ 26.00 Mr. Omprakash Maheshwari ‐ ‐ ‐ ‐ ‐ Mr. Viny Raj Modi ‐ ‐ ‐ ‐ ‐ Mr. Ajay Vikram Thakur ‐ ‐ ‐ ‐ ‐ Mr. Manish Dawar ‐ ‐ ‐ ‐ ‐ Interest of Directors All of our Directors of our Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or Committee thereof as well as to the extent of other managerial remuneration and/or reimbursement of expenses payable to them as per the applicable laws, and the Articles of Association and to the extent of remuneration paid to them for services rendered as an officer or employee of our Company. Further our Company has entered into a lease agreement with Mr. Omprakash Maheshwari – Whole‐ time Director viz. for leasing the factory premises owned by him, located at Ghatabillod dated September 03, 2011 for the purposes carrying out the business and manufacturing operations of our Company on the leased premises and to that extent may be deemed to be interested for the rent received/receivable by virtue of such lease and for refundable security deposit of Rs 154.30 lakhs given by our Company. 108
Our Directors may also be regarded as interested in the Equity Shares and dividend payable thereon, if any, held by them or that may be subscribed by and allotted/transferred to them or the companies, firms and trust, in which they are interested as Directors, Members, partners and/or trustees. All Directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be entered into by our Company with any Company in which they hold Directorships or any partnership firm in which they are partners as may be declared in their respective declarations. Except as stated in “Related Party Transactions” on page no 145 and to the extent of shareholding in our Company, our Directors do not have any other interest in our business. We have not entered into any contracts for service with our Directors. Our Directors and Promoters have no interest in any property acquired by our Company within 2 (two) years preceding the date of this Draft Red Herring Prospectus. Further, our Directors are also interested to the extent of Equity Shares, if any, already held by them or their relatives in our Company, or that may be subscribed for and allotted to them, out of the present Issue in terms of this Draft Red Herring Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. Except as stated otherwise in this Draft Red Herring Prospectus, our Company has not entered into any contract, agreements or arrangements during the preceding two years from the date of the Draft Red Herring Prospectus in which the Directors are interested directly or indirectly and no payments have been made to them in respect of the contracts, agreements or arrangements which are proposed to be entered into with them. Changes in Board of Directors in Last 3 Years Sr. No. Name & DIN Nature of Date of Reasons for Change Change Change 1 Mr. Omprakash Maheshwari Appointment April 29, 2011 Appointed as Director of the Company. 2 Mr. Ajay Vikram Thakur Appointment July 28, 2011 Appointed as Additional, Non‐ executive and Independent Director. 3 Mr. Manish Dawar Appointment July 28, 2011 Appointed as Additional, Non‐ executive and Independent Director. 4 Mr. Vishal Kalantri Appointment July 28, 2011 Appointed as Additional, Non‐ executive and Independent Director. 5 Mr. Omprakash Maheshwari Cessation August 06, 2011 Resignation from the Directorship of the Company 6 Mr. Omprakash Maheshwari Appointment August 09, 2011 Appointed as Additional Director of the Company. 7 Mr. Viny Raj Modi Appointment August 18, 2011 Appointed as Additional, Non‐ executive and Independent Director. 8 Mr. Vishal Kalantri Cessation August 18, 2011 Resignation from the Directorship of the company Compliance with Corporate Governance Requirements The provisions of the Equity Listing Agreement to be entered into with BSE and NSE with respect to corporate governance and the SEBI (ICDR) Regulations, 2009 in respect of corporate governance will be applicable to our Company immediately upon the listing of our Company’s Equity Shares on the Stock Exchange(s) and our Company shall comply with the same. 109
Our Company has taken necessary steps to implement the provisions of the Corporate Governance in the spirit of listing of its equity shares on the Stock Exchange. Our Company has complied with the requirements of Corporate Governance contained in the Equity Listing Agreement, particularly those relating to composition of Board of Directors and constitution of Committees. Currently, the Board of Directors comprises of six Directors and in compliance with Clause 49 of the equity listing agreement, the company has three executive Directors and three independent Directors, on its Board of Directors. Our Board of Directors in their meeting held on July 28, 2011 constituted the following committees: A. Audit Committee B. Shareholders/Investor Grievance Committee C. Remuneration Committee The aforementioned committees were reconstituted in the Board meeting held on August 18, 2011, the details of which are given below: A. Audit Committee Our Company has reconstituted the Audit Committee vide Board resolution dated August 18, 2011. The Audit Committee comprises of the following members and it shall hold meetings at least 4 (four) times a year and not more than 4 (four) months shall elapse between 2 (two) meetings: Name of the Director Designation in Committee Nature of Directorship Mr. Ajay Vikram Thakur Chairman Independent Director Mr. Manish Dawar Member Independent Director Mr. Viny Raj Modi Member Independent Director The Company Secretary of our Company shall act as a Secretary to the Audit Committee. The Chairman of the Audit Committee shall attend the Annual General Meeting of our Company to furnish clarifications to the queries of the shareholders. The scope and function of the Audit Committee are in accordance with Section 292A of the Companies Act and Clause 49 of the Listing Agreement and its terms of reference include the following: 1.Chairman: Mr. Ajay Vikram Thakur shall be the Chairman of the Committee. In absence of him in any of the meeting of the committee, the members present in the meeting shall elect a Chairman from amongst themselves. The Chairman of the Audit Committee shall attend the Annual General Meeting of the Company to provide any clarification on matters relating to audit sought by the members of the Company. 2.Tenure: The Audit Committee shall continue to be in function as a committee of the Board until otherwise resolved by the Board, to carry out the functions of the Audit Committee as approved by the Board. 3.Meetings of the Committee: The committee shall meet at least four times in a year and not more than four months shall elapse between any two meetings. The quorum for the meeting shall be either two members or one third of the members of the committee, whichever is higher but there shall be presence of minimum two members at each meeting. 110
4.Role and Powers The Role of Audit Committee together with its powers shall be as under: a) Reviewing with the management, the annual financial statements before submissions to the Board for approval, focusing primarily on‐ • Matters required being included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (2AA) of section 217 of the Companies Act, 1956. • Changes, if any, in accounting policies and practices and reasons for the same. • Qualifications in draft audit report. • Significant adjustments made in the financial statements arising out of audit findings. • The going concern assumption. • Compliance with accounting standards. • Compliance with listing and other legal requirements relating to financial statements. • Disclosure of any related party transactions. b) Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. c) Recommending to the Board, the appointment, re‐appointment and, if required, the replacement or removal of the statutory auditor, the fixation of audit fees and approval of payment for any other services rendered by them. d) Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems. e) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage, frequency of internal audit. f) Discussions with internal auditors any significant findings and follow up thereon. g) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. h) Discussions with statutory auditors before the audit commences, about the nature and scope of audit as well as post‐audit discussion to ascertain any area of concern. i) Reviewing, with the management, the quarterly, half‐yearly and annual financial statements before submissions to the Board for approval. j) Reviewing, with the management, the statement of uses/ application of funds raised through an issue, the statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice, the report submitted by the monitoring agency, and making appropriate recommendations to the Board to take up steps in this matter. k) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividend) and creditors. l) The Audit Committee shall mandatory review the following information: i. Management discussion and analysis of financial condition and results of operations. ii. Statement of significant related party transactions (as defined by the audit committee), submitted by management; iii. Management letters / letters of internal control weaknesses issued by the statutory auditors; iv. Internal audit reports relating to internal control weaknesses; and v. The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee. m) It shall have authority to investigate into any matter specified under section 292A of the Companies Act, 1956 or referred to it by the Board and for this purpose, shall have full access to information contained in the records of the Company and external professional advice, if necessary. n) It shall have authority to invite such of the executives, as it considers appropriate to be present at the meetings of the Committee. The CFO, head of internal audit and statutory auditor shall be the permanent 111
invitees for the meetings of the audit committee. o) Reviewing the company's financial and risk management policies. p) It shall ensure compliance of internal control systems. q) The recommendation of the Audit Committee shall be placed before the Board. However, where such recommendations are not accepted by the Board, the reasons for the same shall be recorded in the minutes of the Board meeting or communicated to the shareholders. r) It shall have power to seek information from any employee, obtain outside legal or other professional advice. It can also secure attendance of outsiders with relevant expertise, if it considers necessary. s) Approval of appointment of CFO or any other person heading the finance function after assessing the qualifications, experience and background etc. of the candidate, t) To review the functioning of the Whistle Blower Mechanism, in case the same is existing. B. Shareholders’ / Investors’ Grievance Committee Our Company has reconstituted the Shareholders’/ Investors’ Grievance Committee vide Board resolution dated August 18, 2011. It comprises of the following members: Name of the Director Designation in Committee Nature of Directorship Mr. Ajay Vikram Thakur Chairman Independent Director Mr. Manish Dawar Member Independent Director Mr. Viny Raj Modi Member Independent Director Role and Responsibilities of Shareholders’/ Investors’ Grievance Committee: 1. Chairman: Mr. Ajay Vikram Thakur shall be Chairman of the committee and in absence of him; the members present at the meeting shall elect a chairman from amongst themselves. 2. Tenure: The Investors Grievance Committee shall continue to be in function as a committee of the Board until otherwise resolved by the Board. 3. Meetings: The committee shall meet as and when the need arise for review of Investors Grievances. The quorum for the meeting shall be one third of the total strength of the committee or two members, whichever is higher. 4. Terms of Reference: The terms of reference of the Investors Grievance Committee are as follows: a. Review and approve transfer of shares including transmission, splitting of shares, changing joint holding into single holding and vice versa, issue of duplicate shares in lieu of those torn, destroyed, lost or defaced or where the cages in the reverse for recording transfers have been fully utilized. b. Review the process and mechanism of redressal of investor grievance and suggest measures of improving the system of redressal of investor grievances. c. Review and resolve the investors complaints about transfer of shares, non‐receipt of share certificate(s), non‐ receipt of interest dividend warrants, non‐receipt of annual report and any other grievance/complaints with Company or any officer of the Company arising out in discharge of his duties. d. Oversee the performance of the Registrar & Share Transfer Agent and also review and take note of complaints directly received and resolved them. e. Oversee the implementation and compliance of the Code of Conduct adopted by the Company for prevention of Insider Trading for Listed Companies as specified in the Securities & Exchange Board of India (Probation of insider Trading) Regulations, 1992 as amended from time to time. C. Remuneration Committee
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Our Company has reconstituted the Remuneration Committee vide Board resolution dated August 18, 2011. It comprises of the following members: Name of the Director Designation in Committee Nature of Directorship Mr. Ajay Vikram Thakur Chairman Independent Director Mr. Manish Dawar Member Independent Director Mr. Viny Raj Modi Member Independent Director 1.Chairman: Mr. Ajay Vikram Thakur shall be Chairman of the committee and in absence of him; the members present at the meeting shall elect a chairman from amongst themselves. 2.Tenure: The Remuneration Committee shall continue to be in function as a committee of the Board until otherwise resolved by the Board. 3. Meetings: The committee shall meet as and when the need arise for review of Managerial Remuneration. The quorum for the meeting shall be one third of the total strength of the committee or two members, whichever is higher. 4. Terms of Reference: The terms of reference of the Remuneration Committee are as follows: a. Determine the Company's policy on specific remuneration package for Managing Director / Whole‐time Directors including pension rights. b. Decide the salary, allowances, perquisites, bonuses, notice period, severance fees and increment of Whole‐ time Directors. c. Define and implement the Performance Linked Incentive Scheme (including ESOP of the Company) and evaluate the performance and determine the amount of incentive of the Whole‐time Directors for that purpose. . d. Decide the amount of Commission payable to the Whole time Directors. e. Review and suggest revision of the total remuneration package of the Whole‐time Directors keeping in view the performance of the Company, standards prevailing in the industry, statutory guidelines etc. f. To formulate and administer the Employee Stock Option Scheme.
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Organization Chart The following chart depicts our Management Organization Structure: Board of Directors Executive Director Non ‐ Executive Director Managing Director Mr. Vaibhav Mungad Mr. Ajay Vikram Thakur Mr. Gaurav Mungad Mr. Omprakash Maheshwari Mr. Manish Dawar Mr. Viny Raj Modi Company Secretary and Compliance Officer Ms. Ranjana Singh Departments Sales & Distribution Human Resource Finance Accounting Mr. Gaurav Mungad Mr. Tarun Singh Mr. Rahul Singh Parihar Mr. Vaibhav Mungad Sub Departments Import and Export Research & Development Quality Management Purchase and Stores Mr. Gaurav Mungad Mr. Vaibhav Mungad Quality Control Mr. Rajesh Parmar Mr. Vikram Raghuvanshi Production Mr. Toyaz Upadhaya Our Company is supported by a well‐laid team of experts and professionals having good exposure to various operational aspects of the industry. A brief about the key managerial personnel of the Company, consultants and other important external agencies associated with the proposed project of the Company is given below: 114
Name, Designation, Qualification Age (Years)
Date joining
Previous of Compensation Overall paid for the experience employment F.Y ended (in years) 2011.
Mr. Tarun Singh Verma Designation: Manager‐ Human Oriental Institute of June 22, Resource (Administration) 29 Nil 10 (Ten) Science & 2011 Technology Educational Qualification: Not Available Mr. Toyaz Upadhaya Designation: Manager‐ Factory January 04, 14 Ind Alloys Private 33 ` 2,16,000 2010 (Fourteen) Limited Educational Qualification: Not Available Mr. Vikram Raghuvanshi August 01, Manager‐ Production 25 Nil 1 (One) Tejas Marble 2011 Private Limited M.B.A, B.E. Mr. Rahul Singh Parihar Designation: Manager‐ Finance September 1.5 (One Tata Teleservices 26 ` 1,44,000 Educational Qualification: Post 01, 2009 and half) Limited Graduate Program in Finance & Marketing , B.Com Mr. Rajesh Parmar Designation: Manager‐ Purchase August 16, Decora Tubs India 42 ` 1,14,000 7 (Seven) & Stores 2010 Limited Educational Qualification:B.Com Ms. Ranjana Singh Designation: Company Secretary June 11, and Compliance Officer 25 Nil Nil Nil 2011 Educational Qualification: C.S , B.Com We confirm that: a. All the persons named as our Key Managerial Personnel above are the permanent employees of our Company. b. There is no understanding with major shareholders, customers, suppliers or any others pursuant to which any of the above mentioned Key Managerial Personnel have been recruited. c. None of the above mentioned Key Managerial Personnel are related to each other. d. In respect of all above mentioned Key Managerial Personnel there has been no contingent or deferred 115
e.
f. g.
compensation accrued for the year ended March 2011. Except for the terms set forth in the appointment letters, the Key Managerial Personnel have not entered into any other contractual arrangements or service contracts (including retirement and termination benefits) with the issuer. Our Company does not have any bonus/profit sharing plan for any of the Key Managerial Personnel. None of the Key Managerial Personnel in our Company hold any shares of our Company as on the date of filing of this Draft Red Herring Prospectus. Presently, we do not have ESOP/ESPS scheme for our employees
h. BRIEF PROFILE OF KEY MANAGERIAL PERSONNEL Mr. Rajesh Parmar, aged 42 years, is working as Manager‐ Purchase & Stores of our Company since August 16, 2010. He is a Bachelor of Commerce from Devi Ahilya Vishwavidyalaya, Indore. He has an overall experience of Seven years. Before joining our company he was working with Decora Tubs India Limited. His gross compensation during the financial year 2010‐11 was ` 1,14,000. Mr. Tarun Singh Verma, aged 29 years, is the Manager‐ Human Resource (Administration) of our company. He joined our Company on June 22, 2011. He has an overall experience of Ten years. Prior to joining our company he was working with Oriental Institute of Science & Technology, Indore as Office Superintendent (Administration). Mr. Toyaz Upadhaya, aged 33 years, is working as Manager‐Factory, of our company. He has an overall experience of Fourteen years. His gross compensation during the financial year 2010‐11 was ` 2,16,000. Mr. Vikram Raghuvanshi, aged 25 years, is working as Manager‐ Production of our company. He holds degree in Masters of Business Administration from Periyar University, Salem and Bachelor of Engineering (Computer Science and Engineering) from Rajiv Gandhi Proudyogiki Vishwavidyalaya, Bhopal. He has an overall experience of One year. He joined our Company on August 01, 2011.Prior to joining our company he was working with Tejas Marble Private Limited. Mr. Rahul Singh Parihar, aged 26 years, is working in our company as Manager‐ Finance. He joined our company on September 1, 2009. He has completed a Post Graduate Program in Finance & Marketing from Indore Indira School of Career Studies and is a Bachelor of Commerce from Devi Ahilya Vishwavidyalaya, Indore. He has an overall experience of One and a half years. Before joining our company he was working with Tata Teleservices Limited. His gross compensation during the financial year 2010‐11was ` 1,44,000. Ms Ranjana Singh, aged 25 years, is the Company Secretary and Compliance Officer of our Company. She joined our Company on June 11, 2011. She is an associate member of the Institute of Company Secretaries of India. She has an expert knowledge in the secretarial and legal areas. She has completed her management training at M/s Jain Gupta & Co. and Prestige Foods Limited. Changes in the Key Managerial Personnel in last three years There have been no changes in the Key Managerial Personnel of our Company during the last three year except as stated below: Name
Designation
Mr. Rahul Singh Parihar Mr. Toyaz Upadhaya Mr. Rajesh Parmar Ms Ranjana Singh
Manager‐ Finance Manager‐Factory Manager‐ Purchase & Stores Company Secretary 116
Date of Appointment/Cessation September 1, 2009 January 4, 2010 August 16, 2010 June 11, 2011
Reasons Appointment Appointment Appointment Appointment
Mr. Tarun Singh Verma
Manager‐ Human Resource (Administration) Manager‐ Production
June 22, 2011
Appointment
Mr. Vikram Raghuvanshi August 1, 2011 Appointment Interest of Key Managerial Personnel in Our Company The Key Managerial Personnel of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business. Except as stated otherwise in this Draft Red Herring Prospectus, we have not entered into any contract, agreement or arrangement during the preceding 2 (two) years from the date of this Draft Red Herring Prospectus in which the Key Managerial Personnel are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them. Other benefits to our Key Managerial Personnel Except as stated in this DRHP there are no other benefits payable to our Key Managerial Personnel.
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4.6 ‐ OUR PROMOTERS
Mr. Gaurav Mungad, Managing Director Qualification B. Com Age 31 years Address 7, Nagarchi Bakhal, Indore, Madhya Pradesh‐452007 Experience 10 years Occupation Business Permanent Account Number ACPPM3954N Passport Number F2329136 Name of Bank & Bank Account Punjab National Bank, Manorama Details Ganj, Indore. A/c no. 0699000100332276 Driving License Number Not Available Voter Identification Card Number LMR 2824944
Mr. Vaibhav Mungad, Whole‐Time Director Qualification B. Com Age 30 years Address 7, Nagarchi Bakhal, Indore, Madhya Pradesh‐452007 Experience 08 years Occupation Business Permanent Account Number AJSPM9981H Passport Number H8040757 Name of Bank & Bank Account Details Punjab National Bank, Manorama Ganj, Indore. A/c no. 0699000100332285 Driving License Number MP09/056480/03 Voter Identification Card Number Not Available
Mr. Omprakash Maheshwari, Whole‐Time Director Qualification M. Com; LLB Age 59 years Address 7, Nagarchi Bakhal, Indore, Madhya Pradesh‐452007 Experience 35 years Occupation Business Permanent Account Number ACVPM4784E Passport Number Not Available Name of Bank & Bank Account Details Punjab National Bank, Sitlamata Bazar, Indore. A/c no. 0212000101116762 Driving License Number MP09R2007‐8452493 Voter Identification Card Number LMR2824936
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Following is the Corporate Promoter of our Company: Mungad Strips and Alloys Private Limited (“Mungad Strips”) Date of Incorporation: February 06, 2009 CIN: U27205MP2009PTC021597 Registered Office: 7, NajarchiBakhal, Bartan Bazar, Indore, Madhya Pradesh – 452001 Permanent Account Number: AAFCM9363C Name of Bank & Bank Account Details: ING Vysya Bank, Indore A/c No. 556011014955 Main object of Mungad Strips as set forth in its Memorandum of Association is as follows: To carry on the business of trading, import, export, sell, purchase, manufacture, fabricate, assemble, alter, convert, design, develop, mould, remould, prepare, produce, melt, process and to act as broker, distributor, agent, consultant, advisor, supplier, contractor and to deal in all types of non – ferrous profiles, strips and alloys, artware, section and products. Board of Directors of Mungad Strips as on August 31, 2011: Name Designation DIN Mr. Gaurav Mungad Director 01790847 Mr. Vaibhav Mungad Director 01790928 Mr. Aabhas Mungad Director 02812621 Shareholding Pattern of Mungad Strips as on August 31, 2011: Name of the Shareholders No. of equity shares %age of Shareholding Mr. Gaurav Mungad 5000 50.00 Mr. Vaibhav Mungad 5000 50.00 Total 10000 100.00 Financial performance of Mungad Strips: The audited financial results of Mungad Strips for the financial year ended March 31, 2010 (since incorporation of the company) is set forth below: (` in Lakhs) Particulars March 31, 2010 Total Income 77.23 Profit after Tax 2.13 Equity share capital 1.00 Reserves & Surplus (net of miscellaneous expenditure) 2.06 Net Worth (including share application money) 3.06 Book Value per share of face value ` 10/‐ each 30.62 Earning per share of face value ` 10/‐ each 21.34 Declarations 119
We confirm that the Permanent Account Number, Bank Account Number of all the above Promoters and Passport Number for Individual Promoters have been submitted to Bombay Stock Exchange Limited and The National Stock Exchange of India Limited at the time of filing of this Draft Red Herring Prospectus with them. Common Pursuits Our Promoters have promoted our Corporate Promoter and one of our Group Companies which are engaged in the line of business similar to our Company. Details of the same are as follows: Sr. No Companies Promoted by: 1. Mungad Strips and Alloys Private Limited (Corporate Promoter) Mr. Gaurav Mungad Mr. Vaibhav Mungad 2. Omsu Industries Private Limited Mr. Omprakash Maheshwari As on the date of this Draft Red Herring Prospectus, Mungad Strips and Alloys Private Limited is engaged in trading of aluminium products and Omsu Industries Private Limited is not carrying on any business activity. Further there are no non‐compete agreements between our Company and any of the above Companies. We cannot assure that our Promoters will not favor the interests of the said Companies over our interest or that the said Companies will not expand their businesses which may increase our chances of facing competition. This may adversely affect our business operations and financial condition of our Company. For details of our Promoter Group and Group Companies refer to Section titled “Our Promoter Group and Group Companies” on page 122 of the Draft Red Herring Prospectus We shall adopt the necessary procedures and practices as permitted by law to address any conflicting situations, as and when they may arise. Interest of Promoters Our Promoters viz. Mr. Gaurav Mungad, Mr. Vaibhav Mungad, Mr. Omprakash Maheshwari and Mungad Strips and Alloys Private Limited are interested to the extent of their shareholding in our Company. Further, Mr. Gaurav Mungad, Mr. Vaibhav Mungad and Mr. Omprakash Maheshwari are also the Executive Directors of our Company and may be deemed to be interested to the extent of remuneration and reimbursement of expenses payable to them. Further, Mr. Omprakash Maheshwari, has entered into a lease agreement with our Company viz. for leasing the factory premises owned by him, located at Ghatabillod dated September 03, 2011 for the purposes carrying out the business and manufacturing operations of our Company on the leased premises and to that extent may be deemed to be interested for the rent received/receivable by virtue of such lease and for interest free refundable security deposit of Rs 154.30 lakhs given by our Company. Our Company has also entered into a lease agreement with our Corporate Promoter Mungad Strips and Alloys Private Limited for leasing its premises located at 33‐34, Rambali Nagar, Sangam Nagar Road, Indore, Madhya Pradesh – 452001 vide agreement dated July 20, 2011. This premise is used as the Registered Office of our Company. Further, details of our Promoters who are also Directors in the Group Companies are as follows: Sr. No Group Companies Directors 1. Omsu Industries Private Limited Mr. Omprakash Maheshwari 2. Field Irrigation Private Limited Mr. Vaibhav Mungad 120
The aforesaid Promoters may be deemed to be interested to the extent of payments made by our Company, if any, to such companies. For further details of the transactions with our Group Companies, please refer to section titled “Related Party Transactions” on Page No. 145 of this Draft Red Herring Prospectus. Interest in the property of our Company Except as mentioned hereinabove, our Promoters do not have any other interest in any property acquired by our Company in a period of 2 (two) years preceding the date of this Draft Red Herring Prospectus or proposed to be acquired by our Company. Related Party Transactions Except as stated in "Related Party Transactions" beginning on Page No. 145 of the Draft Red Herring Prospectus, and as stated therein, our Promoters or any of the Promoter Group entities do not have any other interest in our business. Payment or Benefit to Promoters of Our Company For details of payments or benefits paid to our Promoters, please refer to the paragraph “Compensation to Executive Director” in the chapter titled ‘Our Management’ on Page No. 100. Also refer Annexure xi on “Related Parties Transactions” on Page No. 145 forming part of “Financial Information of the Company” and Paragraph on “Interest of Promoters” on Page No. 120 of this Draft Red Herring Prospectus. Other ventures of our Promoters Save and except as disclosed in the section titled “Our Promoters” and “Our Promoter Group and Group Companies” beginning on page 118 & 122 respectively of this Draft Red Herring Prospectus, there are no ventures promoted by our Promoters in which they have any business interests/ other interests. Litigation details pertaining to our Promoters For details on litigations and disputes pending against the Promoters and defaults made by the Promoters please refer to the section titled “Outstanding Litigations, Defaults and Material Developments” beginning on page 167 of this Draft Red Herring Prospectus.
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4.7 ‐ OUR PROMOTER GROUP AND GROUP COMPANIES a. In addition to the Promoters named above, the following natural persons are part of our Promoter Group in terms of Regulation 2(1)(zb) of SEBI ICDR Regulations: Relationship Mr. Gaurav Mungad Mr. Vaibhav Mungad Mr. Omprakash Maheshwari Father Mr. Omprakash Maheshwari Mr. Omprakash Maheshwari ‐ Mother Mrs. Sushila Mungad Mrs. Sushila Mungad ‐ Spouse Mrs. Nidhi Mungad Mrs. Jaya Mungad Mrs. Sushila Mungad Brother Mr. Vaibhav Mungad Mr. Gaurav Mungad ‐ Sister ‐ ‐ Mrs. Manorama Maheshwari Mrs. Shanti Maheshwari Children Mr. Varshasva Mungad Mr. Keshav Mungad Mr. Gaurav Mungad Mr. Vaibhav Mungad Spouse’s Father Mr. Dinesh Ladha Mr. Kailash Laddha ‐ Spouse’s Mother Mrs. Chandrakanta Mrs. Bhagwati Laddha Mrs. Yashoda Kacholia Maheshwari Spouse’s Brother Mr. Nitin Maheshwari Mr. Ravi Laddha Mr. Ghanshyam Kacholia Mr. Nirmal Kacholia Spouse’s Sister ‐ Ms. Priya Laddha Mrs. Lalita Malpani Mrs. Sarla Mandhania. b. Our Promoter Group as defined under Regulation 2 (zb) of the SEBI (ICDR) Regulations, 2009 includes following entities: i. Omsu Industries Private Limited ii. Field Irrigation Private Limited iii. Maa Narmada Aadhyatmik Vihar Private Limited OUR GROUP COMPANIES 1. Omsu Industries Private Limited (“ Omsu Industries”) Date of Incorporation: January 13, 2011 Type of Organisation: Private Limited Company CIN: U27201MP2011PTC025178 Registered Office: 316, Gram Sejwaya, Dightan Road, Pithampur, Dhar, Madhya Pradesh‐ 454773. Main objects of Omsu Industries as set forth in its Memorandum of Association are as follows: 1. To carry on the business of manufactures, importers, exporters, processor, assembler, sale, purchase, distribute, agency of and dealers in metallurgical products aluminium, brass, copper, bronze, lead, Zinc, Iron and other metals and ferrous and non‐ferrous metal and founders, rolling mills and sheet, rods, wire, channel, frame and other products made from aluminium, coppers and alloy thereof and all kind of chemicals, solvent filters, alkalis, acids, dyes, industrial chemicals, paints, solvents, oils, lubricants and compound thereof. 2. To carry on the business as manufacture dealer, buyers, sellers, distributors, importers, exporter, traders agents and to deal in milk, milk products of all kinds and description i.e. condensed and powdered milk products, ghee, 122
yeast, basundi, milk powdered, curd, chakka, srikhand, mango pulp, ice cream, cream, butter, cheese, all kind dairy products, sausages, sweets, confectioneries and to acquire, utilize, grow, cultivate, produce and explore all kind of farming including commercial, farming, dairy farming, animal husbandry, goad farming, purpose and agro industrial projects, green house, poly houses, animal husbandary houses, and to act as reseller, importers, agent, consultants, dealers, store keepers, distributors and exporters, for specialized floricultural product and commodities and to development of agriculture techniques, infrastructure and facilities. Board of Directors of Omsu Industries as on August 31, 2011 Name Designation DIN Mr. Aabhas Mungad Director 02812621 Mr. Omprakash Maheshwari Director 02812660 Shareholding Pattern of Omsu Industries as on August 31, 2011 Name of the Shareholders No. of equity shares %age of Shareholding Mr. Aabhas Mungad 5,000 50.00 Mr. Omprakash Maheshwari 5,000 50.00 Total 10,000 100.00 Nature and extent of interest of our Promoters Name Number of Shares held in Omsu %age of Shareholding Industries Private Limited Mr. Omprakash Maheshwari 5,000 50.00 The Promoters of our Company are interested to the extent of the shareholding in Omsu Industries. Financial performance of Omsu Industries Since Omsu Industries is a newly incorporated company (during the financial year 2010‐11), the financial results have not been prepared. 2. Field Irrigation Private Limited (“ Field Irrigation”) Date of Incorporation: July 19, 2011 Type of Organisation: Private Limited Company CIN: U29210MP2011PTC026426 Registered Office: 33‐34, Rambali Nagar, Indore, Madhya Pradesh ‐ 452001 Main objects of Field Irrigation as set forth in its Memorandum of Association are as follows: 1. To carry on business of manufacture, import, export, buy, sell or otherwise deal in irrigation equipment, machines, pipes and fittings, pumps and all kinds of agriculture and irrigation tools and other devices. Board of Directors of Field Irrigation as on August 31, 2011: 123
Name Mr. Aabhas Mungad Mr. Vaibhav Mungad
Designation Director Director
DIN 02812621 01790928
Shareholding Pattern of Field Irrigation as on August 31, 2011: Name of the Shareholders No. of equity shares %age of Shareholding Mr. Aabhas Mungad 5000 50.00 Mr. Vaibhav Mungad 5000 50.00 Total 10,000 100.00 Nature and extent of interest of our Promoters: Name No. of Shares held in Field %age of Shareholding Irrigation Private Limited Mr. Vaibhav Mungad 5,000 50.00 The Promoters of our Company are interested to the extent of the shareholding in Field Irrigation. Financial performance of Field Irrigation Since Field Irrigation is a newly incorporated company (during the financial year 2011‐12), the financial results have not been prepared. Declarations None of the above mentioned Group Companies is restrained by any SEBI Order. Except as stated below, none of the Group Companies have ever become defunct. None of the above mentioned Group Companies are listed at any Stock Exchange and have not made any public issue or right issue in the preceding three years. None of the Group Company has become a sick company under the meaning of Sick Industrial Companies (Special Provisions) Act, 1985 and nor under winding up or liquidation. Litigations For details on litigations and disputes pending against the Group Companies please refer to the section titled “Outstanding Litigations and Material Developments” on page 167 of the Draft Red Herring Prospectus. Defunct Promoter Group Companies The name of the following Group Company has been struck off by the Registrar of Companies, Madhya Pradesh & Chattisgarh Name Reason Jiji Overseas Private Limited No ongoing activity since incorporation Companies / Ventures with which the Promoter have disassociated themselves in the last three years 124
Our Promoters have not disassociated themselves from any company / venture during the last three years. Undertaking / confirmations Our Promoters and Group Companies confirm that they have not been declared as a wilful defaulter by the RBI or any other governmental authority and there have been no violations of securities laws committed by them or any entities they are connected with in the past and no proceedings pertaining to such penalties are pending against them. None of the Promoters or Promoter Group or Group Companies or persons in control of the Promoters has been (i) prohibited from accessing the capital market under any order or direction passed by SEBI or any other authority or (ii) refused listing of any of the securities issued by such entity by any stock exchange, in India or abroad. None of the Promoters is or has ever been a promoter, director or person in control of any other company which is debarred from accesing the capital markets under any order or direction passed by the SEBI. Common Pursuits/Conflict of Interest One of our Group Companies viz. Omsu Industries Private Limited has principle business similar to our line of business. To this extent there may be a potential conflict of interest in the Group Companies. Except for this there are no common pursuits amongst the Group Companies. We shall adopt the necessary procedures and practices as permitted by law to address any conflicting situations, as and when they may arise. For details relating to sales or purchases between our Company and any of our Group entities exceeding 10% of the sales or purchases of our Company see the chapter titled “Financial Statements ‐ Related Party Disclosures” on page 145 of the Draft Red Herring Prospectus. Other Details of Group Companies: 1. There are no defaults in meeting any statutory/ bank/ institutional dues; 2. No proceedings have been initiated for economic offences against our Group Companies.
125
4.8 ‐ DIVIDEND POLICY The declaration and payment of dividends will be recommended by our Board of Directors and approved by our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial position. In addition, our ability to pay dividends may be impacted by a number of factors, including restrictive covenants under the loan or financing arrangements we may enter into, to finance our various projects and also the fund requirements for our projects. No dividend has been declared by our Company during the past years.
126
SECTION V – FINANCIAL INFORMATION OF THE COMPANY 5.1 – FINANCIAL STATEMENTS OF THE COMPANY A U D I T O R S’ R E P O R T To, The Board of Directors, JIJI INDUSTRIES LIMITED, INDORE Dear Sir, 1) We have examined the financial information of JIJI INDUSTRIES LIMITED (the Company) (formerly known as “Krishna Profiles Private Limited”) annexed to this report which has been prepared in accordance with the requirements of: a.
Paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 (the Act);
b.
The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (the Regulation) issued by the Securities and Exchange Board of India ( SEBI) and amendments made thereto from time to time in pursuance of section 11 of the Securities and Exchange Board of India Act, 1992; and
c.
The instructions received from the Company, requesting to examine the financial information referred to above and proposed to be included in the Offer Document of the Company in connection with its proposed initial public offer of equity shares.
2) The Restatement Summary Statements of the company have been extracted by the management from the Financial Statements of the company for the years ended 31st March, 2007, 2008, 2009, 2010 and 2011which have been approved by the Board of Directors. The audit of the accounts for the financial years ended 31st March, 2008, 2009. 2010 and 2011 was conducted by M/s Gandhi Dhakad Gupta and Company, Chartered Accountant (Registration No. 006768C) and the audit of the accounts for the financial years ended 31st March, 2007 was conducted by M/s S.N. Kabra & Company. 3) In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Regulations and the terms of our engagement agreed with you, we further report that: The Restated Summary Statements of the Company, including as at and for the years ended 31st March, 2007, based on the audited financial statements of the Company which were audited by other auditors as stated in Para 2 above and on which reliance has been placed by us and for the year 2008, 2009, 2010 and 2011 based on the financial statements of the Company audited by us, as set out in Annexures I, II & III to this report are after making such adjustments and regroupings as in our opinion were appropriate and more fully described in Statement of Adjustments and Significant Accounting Policies & Notes (Refer Annexures A) Financial Information of the Company: 1
We have examined the attached Statement of Restated Assets and Liabilities of the Company as at March 31, 2007, 2008, 2009, 2010 and 2011 (Annexure‐I) and the accompanying Statement of Restated Profit and Losses of the Company for the financial year(s) ended on March 31, 2007, 2008, 2009, 2010 and 2011 (Annexure‐II), the accompanying statement of Restated Cash Flow Statement of the Company for the financial year(s) ended on March 31 2007, 2008, 2009, 2010, 2011 (Annexure‐III) and the significant accounting policies and notes to accounts (Annexure‐A) together referred to as ‘Summary Statements’ as prepared by the Company and approved by the Board of Directors. These statements reflect the assets and liabilities and profit and losses for each of the relevant periods as extracted from the Audited Financial Statements audited by us, after making 127
therein the disclosures and adjustments (Annexure‐XV) required to be made in accordance with the provisions of Schedule VIII Part A (IX) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. 2.
Based on the examination of these Summary Statements, we confirm that the restated profits and losses have been arrived at after charging all expenses including depreciation and after making such adjustments and regrouping as in our opinion are appropriate
3.
We have examined the following regrouped/ rearranged financial information relating to the Company, proposed to be included in the Offer Document, as approved by the Board of Directors of the Company and attached to this report: i)
Statement of secured loans taken by the Company (Annexure‐IV);
ii)
Statement of unsecured loan taken by the company (Annexure‐V)
iii) Statement of principal terms and conditions of secured loans and assets charged as security (Annexure‐VI ); iv) Statement of Details of Current Assets and Loans & Advances including Sundry Debtors showing age‐wise analysis (Annexure‐VII); v)
Statement of Geographical segment (Annexure VIII);
vi) Statement of other income (Annexure‐IX); vii) Statement of Current liabilities and provisions (Annexure ‐X); viii) Related party’s disclosures under Accounting Standard‐18 (Annexure‐XI); ix) Statement of Share capital and reserves and surplus (Annexure XII); x)
Statement of Capitalization as at March 31, 2011 (pre‐issue) and as adjusted for this issue (post issue) subject to reliance being placed on management representation in respect of post issue figures contained in the Statement of Capitalization (Annexure‐XIII);
xi) Summary of accounting ratios based on Restated profits/losses, relating to earnings per share, net assets value per share and return on net worth (Annexure‐XIV); xii) Statement of adjustments / impact of prior period items (Annexure ‐XV); xiii) Statement of Deferred Tax Assets (Annexure ‐ XVI); xiv) Statement of contingent liability (Annexure ‐ XVII); xv) Statement of Dividend paid (Annexure‐ XVIII); xvi) Statement of Tax Shelter (Annexure‐XIX). 4.
This report is intended solely for your information and for the inclusion in the Offer Document in connection with the proposed initial public offer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.
FOR GANDHI DHAKAD GUPTA AND COMPANY CHARTERED ACCOUNTANTS FRN – 006768C (CA. SUNIL KUMAR GANDHI) Partner M. NO. – 072000 Date: 27/08/2011 Place: Indore 128
ANNEXURE I SUMMARY STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED) (Rupees in lacs) A B C
Particulars Fixed Assets : Gross Block Less: Depreciation Net Block Less: Revaluation Reserves Net Block Capital Work In Progress
A B
31‐Mar‐ 11 504.62 93.07 411.56 0.00 411.56 0.00 411.56 0.00 1903.51 1439.16 129.41
31‐Mar‐ 10 470.82 69.53 401.29 0.00 401.29 0.00 401.29 0.00 578.55 657.06 41.36
As at 31‐Mar‐ 09 341.77 49.54 292.23 0.00 292.23 19.75 311.98 0.00 602.34 589.90 40.72
31‐Mar‐ 08 340.85 32.96 307.88 0.00 307.88 0.00 307.88 0.00 86.80 111.92 16.43
31‐Mar‐ 07 145.17 25.19 119.98 0.00 119.98 9.90 129.88 0.00 69.31 94.99 7.26
Total Investments: Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Other Current assets, Loans & Advances 328.10 340.39 177.76 28.51 38.84 Total C 3800.19 1617.35 1410.71 243.66 210.40 Total Assets (I=A+B+C) 4211.75 2018.64 1722.69 551.55 340.28 D Loan Funds Secured Loans 888.07 1082.91 397.70 182.95 71.99 Unsecured Loans 0.00 27.67 86.49 134.33 137.35 Total Loan Funds D 888.07 1110.58 484.19 317.27 209.34 E Deferred Tax Liability E 49.94 41.12 29.40 16.56 10.18 F Current Liabilities & Provisions Current Liabilities 1675.96 533.97 1044.94 119.19 84.77 Provisions 176.08 35.80 12.28 1.80 1.46 Total Current Liabilities & Provisions F 1852.04 569.78 1057.21 120.99 86.24 G Share Application Money G ‐ ‐ ‐ ‐ 26.00 Total Liabilities (II=D+ E+F+G) 2790.05 1721.47 1570.80 454.82 331.75 H Net Worth (I‐ II): 1421.69 297.16 151.89 96.72 8.53 I Net Worth Represented by: Share Capital 235.00 150.00 75.00 75.00 10.00 Reserves & Surplus 1186.76 147.26 77.02 21.89 ‐1.27 Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00 Less: Miscellaneous Expenses not w/off 0.07 0.10 0.14 0.17 0.20 Net Worth 1421.69 297.16 151.89 96.72 8.53 Note: 1. The above statement should be read with the significant accounting policies and notes to the restated summary statement of assets and liabilities, profit and loss account and cash flows statement as appearing in Annexure A 129
ANNEXURE II STATEMENT OF PROFITS AND LOSSES (AS RESTATED) Particulars 31‐Mar‐ 11 INCOMES: Sales ‐ Manufacturing ‐ Trading ‐ Other (DEPB) Other Income Increase / (Decrease) in Inventories TOTAL INCOME EXPENDITURES: Purchases/ Consumption Direct Expenses Payments to & Provision for Employees Administrative Expenses Selling & Distribution Expenses Interest and other finance charges Depreciation TOTAL EXPENDITURE Net Profit before tax & extra‐ordinary items: Provision for Tax ‐ Current Tax ‐ Fringe Benefit Tax ‐ Deferred Tax Liability / (Asset) Net Profit before extra‐ordinary items & after tax: Short / (Excess) Provision of Income tax of earlier years Short/(Excess) Provision of Deferred Tax Liability of earlier years Prior period expenses Depreciation of earlier years Extraordinary Item ( net of tax) Net Profit after tax and extra‐ordinary items (as per audited financial) statements : Adjustments on account of restatements (for details see notes to account point no 1) Net Profit as restated (A+B): Surplus/(deficit) available for appropriation Appropriations:
2278.89 655.11 224.14 25.49 203.70 82.43 19.99
1410.04 0.00 46.98 23.59 492.32 1972.94 1470.00 215.59 76.61 7.01 72.57 43.16 16.58
270.37 51.88 12.90 0.72 335.86 201.17 60.40 8.96 2.63 1.10 21.60 8.97
8145.33
3489.75
1901.52
304.84
213.30
458.34
100.37 15.32 0.00 11.72
31.03 1.91 0.06 6.38
23.32
143.56 0.00 8.82
71.42 19.18 0.16 12.84
305.95
73.33
39.23
22.68
19.61
4.38
(7.94)
0.48
(0.87)
0.00
(1.28) 0.00 0.00
0.00 6.07 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
A
302.85
75.21
38.75
23.55
19.61
B
(28.31) 274.54
(4.97) 70.24
1.39 40.14
(0.39) 23.16
0.87 20.48
274.54
70.24
40.14
23.16
20.48
8050.44 7.00 410.72 73.14 62.36 8603.67
3741.74 0.00 144.51 1.88 (298.01) 3590.12
6143.15 1223.87 302.85 22.38 313.09 116.46 23.53
130
(Rupees in lacs) Financial Year ended 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 31‐Mar‐ 10 09 08 07
236.23 0.00 0.45 (0.06) 236.62 163.16 27.23 3.75 1.74 0.00 9.46 7.96
2.33 1.37
0.00 0.00 0.00 0.00 0.00 20.48
‐ Transferred to General Reserve 0.00 0.00 0.00 0.00 ‐ Transferred to Capital Account 0.00 0.00 0.00 0.00 ‐ Proposed Dividend 0.00 0.00 0.00 0.00 ‐ Tax on Dividend 0.00 0.00 0.00 0.00 Total Appropriations: 0.00 0.00 0.00 0.00 Balance Profit after Appropriation 274.54 70.24 40.14 23.16 Balance brought forward from previous year: 129.76 59.52 19.39 (3.77) (24.25) Accumulated Profit/ (Loss) carried to Balance Sheet 404.30 129.76 59.52 19.39 (3.77) Note: 1. The above statement should be read with the significant accounting policies and notes to the restated summary statement of assets and liabilities, profit and loss account and cash flows statement as appearing in Annexure III. Significant Accounting Policies and Notes on Accounts. Annexure A
131
ANNEXURE‐III STATEMENT OF CASH FLOW STATEMENT (AS RESTATED) (Rupees in lacs) Particulars 1.Cash Flow From Operating Activities: Net Profit before tax and extraordinary item Adjustments for: Depreciation Earlier year expenditure Preliminary expenses W/o (provided) Interest Paid (Profit)/Loss on sale of Fixed Assets Interest Received Operating Profit before Working Capital Changes Adjustments for: Inventories Debtors Loans & Advances Trade Payables Provision Cash Generated from Operation Taxes Paid Cash flow before Extra Ordinary item Extra ordinary items Net Cash from Operating Activities 2. Cash Flow From Investing Activities: Fixed Assets Purchased Sale of Fixed Assets Interest Received Capital work in Progress Deposit with MPSEB Net Cash from Investing Activities 3. Cash Flow From Financing Activities: Proceeds from Secured Loans Proceeds of Share Application Money/ Issue of Shares Proceeds from Unsecured loans Proceeds from securities premium Interest paid Capital Subsidy Net Cash from Financing Activities Net Increase/ (Decrease) in Cash & Cash Equivalents Cash & Cash Equivalents at the beginning of the year
31‐Mar‐11 458.34
100.37
23.53 1.27 0.03 116.46 ‐ (3.38)
19.99 ‐ 0.03 82.43 ‐ (1.68)
596.25
201.15
(1324.96) (782.11) 9.09 1126.91 128.24 (246.59) (147.94) (394.53) ‐ (394.53)
23.79 (67.16) (161.35) (489.65) (4.03) (497.25) (13.45) (510.70) ‐ (510.70)
(33.80) ‐ 3.38 ‐ 2.01 (28.41)
(129.06) ‐ 1.68 19.75 ‐ (107.63)
(194.83)
685.21
85.00 (27.67) 764.96 (116.46) ‐ 511.00
75.00 (58.82)
31‐Mar‐08 71.42 31.03 16.58 8.97 ‐ ‐ 0.03 0.03 43.16 21.60 ‐ (1.05) (2.51) (0.31)
128.69 (515.54) (477.98) (149.25) 920.22 17.38 (76.47) (19.83) (96.30) ‐ (96.30) (0.92) ‐ 2.51 (19.75) ‐ (18.16) 214.75
31‐Mar‐07 23.33 7.96 ‐ 0.03 9.45 ‐ ‐
60.28
40.77
(17.49) (16.92) 10.33 34.73 (0.36) 70.56 (1.10) 69.46 ‐ 69.46
(27.65) (56.34) 1.42 0.87 2.33 (38.60) (2.33) (40.94) ‐ (40.94)
(200.36) 4.53 0.31 9.90 ‐ (185.62)
(1.19) ‐ ‐ (2.05) ‐ (3.24)
110.96
(16.02)
39.00 (3.02)
6.00 45.76
(82.43) ‐ 618.96
‐ (47.84) (43.16) 15.00 138.75
(21.60) ‐ 125.34
(9.45) ‐ 26.29
88.05
0.64
24.29
9.17
(17.89)
41.36
40.72
16.43
7.26
25.14
132
31‐Mar‐10
Year ended 31‐Mar‐09
Cash & Cash Equivalents at the end of the year 129.41 41.36 40.72 16.43 7.26 Note: 1. The Cash Flow Statement has been prepared under the 'Indirect Method' as set out in Accounting Standard ‐ 3 on Cash Flow Statements issued by ICAI 2 Figures in Brackets represents outflow. 3 The above statement should be read with Significant Accounting Policies and Notes on Restatements as in Annexure‐ A
133
SCHEDULE – A SIGNIFICANT ACCOUNTING POLICY 1. ACCOUNTING CONCEPT : a. The Financial Statements have been prepared under the Mercantile System of Accounting in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956. b. Accounting Policies not specifically referred to otherwise are consistent with generally accepted accounting principles followed by the Company. 2. FIXED ASSETS & DEPRECIATION : a. All the fixed assets are stated at cost less depreciation. For this purpose cost comprises of cost of acquisition (Net of Excise duty, Vat etc.) and all costs directly attributable to bringing the asset to the present condition for its intended use. b. Depreciation has been provided by straight line value method, as per schedule XIV of the Companies Act, 1956 on the assets which were put to use. 3. VALUATION OF INVENTORIES : The Stocks are valued at lower of cost or net realizable value as per AS‐2. 4. REVENUE RECOGNITION Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Turnover includes sale of goods, sales tax, VAT, Excise duty. Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable. Expenses are accounted for on accrual basis. 5. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS : Provision involving substantial review of estimation in measurement is recognised when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent assets are neither recognised nor disclosed in financial statements. Contingent liability are not recognised but disclosed as per annexure ‐ XVIII. 6. PRELIMINARY & PRE‐OPERATIVE EXPENSES : The preliminary expenses have been written off at 20%. 7. FOREIGN EXCHANGE TRANSACTIONS : The transactions relating to foreign exchange are recorded at the approximate exchange rate prevailing at the time of entering into the transactions. Any difference at the time of realization is entered by Exchange Rate Fluctuation Account. The effect of Foreign Exchange Transactions as per AS‐11 has been given in the accounts. 8. BORROWING COSTS: Borrowing cost that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such assets up to the date the assets are ready for its intended use. All other borrowing costs are recognized as expenses in the year in which they are incurred. 9. PROVISION FOR CURRENT AND DEFFERED TAX Provision for current tax is made after taking into consideration benefits admissible under the provisions of the income tax act, 1961. Deferred tax resulting from "timing difference" between taxable and accounting 134
income is accounted for using the tax rates and laws that are enacted or substantially enacted on the balance sheet date. Deferred tax assets is recognised and carried forward only to the extent that there is a virtual certainty that the asset will be realized in future.
1.
10. IMPAIREMENT OF ASSETS: There is no impairment of assets during the year. 11. PRIOR PERIOD ITEMS: Prior period items are income or/and expenses which arises in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. Prior period items arise during the year because of mathematical mistake in calculation of provision of Income tax and unrecognizing of Additional duty refund last years. Profit is decline due to prior period items is `310247. 12. EMPLOYEE BENEFITS: Employee’s benefits in the form of contribution towards Provident Fund, ESI are considered as defined contribution plan and the contributions to recognized funds are charged to the Profit and Loss Account of the year when the contributions are due, as per the provisions of respective statutes. The company does not have any leave encashment policy. Hence, no provision is required to be made. The Employee’s Gratuity fund scheme (Insurance Plan) managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on Actuarial Valuation from LIC. 13. EARNING PER SHARE (EPS) Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earning per shares, the net profit or loss for the period attributable to equity shareholders and annual number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares in accordance with Accounting Standard 20 “Earning per Share”. 14. Reportable segment of company is attached according to geographical segment. NOTES ON ACCOUNTS Notes on Adjustment for standalone Restated Financial Statement Reconciliation of Profit after tax as per audited results and the profit after tax as per restated accounts is presented below. This summarizes the result of restatements made in the audited accounts for the respective years and its impact on the profit and loss. (` In lacs) Financial Year ended 31‐Mar‐11 31‐Mar‐10 31‐Mar‐09 31‐Mar‐08 31‐Mar‐07 Particulars Net Profit after tax and extra‐ ordinary items (as per audited financial) statements : 302.85 75.21 38.75 23.55 19.62 Adjustments on account of restatements Short / (Excess) Provision of Income tax (4.38) 12.32 (7.46) 0.39 (0.87) 135
Prior period income 1.28 (1.28) ‐ Prior period expenses (0.05) (6.07) 6.07 Extraordinary Item ( net of tax) ‐ ‐ ‐ ‐ ‐ Provision for Gratuity (31.36) ‐ ‐ ‐ ‐ Net Profit as restated 274.55 70.24 40.14 23.16 20.49 The explanatory Notes for adjustments as discussed above: I. In the year 2010 company do not provide for additional duty refund. To make presentation in compliance with Accounting Standard 9 adjusted it from respective year profit. II. Adjustment of Electricity expenses, entry tax was prior period transaction not recorded in respective years. 2. The carrying amount of assets reviewed at Balance sheet date does not give any indication of impairment and hence no impairment loss has been booked. 3. The provision of Income tax is made after considering depreciation, deduction and allowances allowable under Income tax regulations and its shown net of taxes paid as liability. 4. In the opinion of the management, the balances shown under sundry debtors accrued value of work done and loan & advances have the same realizable value as shown in the accounts. 5. The company has not provided for gratuity in the previous financial year. As the provision for earlier years was not ascertainable, a sum of ` 31, 36,449/‐ has been accounted for in the restated accounts for financial year 2011, as per calculation made by Life Insurance Corporation of India. 6. The figures has been rearranged into Lakhs and minor differences has been rounded off accordingly
136
ANNEXURE IV DETAILS OF SECURED LOANS FUNDS (Rupees in lacs) PARTICULARS Secured Loans Loans from Bank : Cash Credit & EPC ‐ Punjab National Bank Term Loan ‐ Punjab National Bank
31‐Mar‐11
31‐Mar‐10
As at 31‐Mar‐09
31‐Mar‐08
747.34
905.58
282.08
140.73
177.32
115.28
31‐Mar‐07
53.65 125.90
49.01
22.98
Vehicle Loan ‐ ICICI Bank ‐ ‐ 0.33 3.40 ‐ TOTAL 888.07 1,082.91 397.70 182.95 71.99 Notes: The particular of Security given against each loan is given in Annexure ‐VI. 1. However, the Company has transferred its working capital facilities taken from Punjab National Bank to Bank of Baroda in April 27, 2011
137
ANNEXURE V DETAILS OF UNSECURED LOANS FUNDS
A Promoter/ Promoters Group Total (A)
31‐Mar‐11 ‐ ‐
31‐Mar‐10
As at 31‐Mar‐09
31‐Mar‐08
16.46 16.46
54.35 54.35
46.71 46.71
B Share Holders and Others ‐ 11.21 32.14 Total (B) ‐ 11.21 32.14 Total (A+B) ‐ 27.67 86.49 Notes: 1) Unsecured Loan are payable on demand. The interest is payable on demand.
138
87.62 87.62 134.33
(Rupees in lacs) Rate of Repayment 31‐Mar‐07 Interest Schedule Not 41.15 NIL Applicable 41.15 Not 96.20 NIL Applicable 96.20 137.35
1
Sl. No
Facility Granted & Loan Documentation
150.00 650.00
500.00
Letter of Credit
90.00
105.00
Amount Sanctioned
Cash Credit Export Packing Credit
Punjab National Bank, Manorama Ganj, Indore Term Loan‐ 1 Term Loan‐ 2
Name of Lender
139
BPLR + 0.50 % + 1.50%
Rate of Interest (%)
Repayment Schedule / Installment Amount
493.00
63.06
BPLR + 0.50 % + 1.50% On Demand 103.64 BPLR + 1.50% 643.70 BPLR ‐ 2.50%
77.68
Amount Outstanding as at March 31, 2011
DETAILS OF SECURITY AGAINST SECURED LOAN
EM of Factory Building admeasuring 20000 sq ft. at lease hold plot no. 316/2/1 and 316/2/2 village sejvaya, Ghatabillod. 1st charge on entire Current assets, present & furure including entire stocks, book debts, loans and advances etc. 1st charge on block of assets of the Company by way of hypothecation of machinery and equipment and other fixed assets. EM of Land and Building at plot no. 316/2/1 and 316/2/2 belonging to Shri Om Prakash Maheshwari and EM of land and building at 33‐34 Rambali Nagar Indore belonging to Mungad Strips and alloys Pvt. Ltd. And 6 Lac shares of Krishna Profiles Pvt. Ltd. pledged of promoters
Security
(Rupees in lacs)
ANNEXURE ‐ VI
ANNEXURE VII DETAILS OF CURRENT ASSETS AND LOANS AND ADVANCES (` In lacs) Particulars Inventories (Trading & Manufacturing Goods) [At lower of Cost or Net Realisable Value] (Valued and Certified by Management) Sub‐total (A) Sundry Debtors Unsecured considered good Other Exceeding six months Other Debts (Below six months) Promoters/ Promoter group Exceeding six months Other Debts (Below six months) Sub‐total (B) Cash and bank balances Cash in Hand (As Certified by the Management) Balance with scheduled banks in: ‐Current accounts ‐Cheque in Hand Fixed Deposit with Banks (Including Interest Accrued) Cumulative Deposit with Bank Sub‐total (C) Loans and advances ‐ Promoter/ Promoters group Advances (recoverable in cash or kind or value to be received thereof ) Deposits ‐ Others Advances (recoverable in cash or kind or value to be received thereof ) Duties & Taxes Prepaid Expenses Deposits Sub‐total (D) Total (A)+(B)+(C )+(D)
31‐Mar‐11 1,903.51
31‐Mar‐10 578.55
1,903.51
578.55
31‐Mar‐08 86.80
31‐Mar‐07 69.31
86.80
69.31
1.00 110.92
‐ 94.99
‐ ‐ 111.92
‐ ‐ 94.99
2.36
7.14
0.07 ‐
0.12 ‐
14.00 ‐ 16.43
‐ ‐ 7.26
‐ ‐
‐ ‐
14.98 1,423.33
40.25 69.17
‐ 0.86 1,439.16
‐ 547.64 657.06
33.11
30.61
22.31 ‐
0.60 ‐
73.98 ‐ 129.41
10.14 ‐ 41.36
‐ 154.30
2.58 70.00
21.75 146.46 ‐ 5.60 328.10
57.39 201.82 ‐ 8.59 340.39
3,800.19
140
As at 31‐Mar‐09 602.34 602.34
1,617.35
10.15 579.75 ‐ ‐ 589.90 15.00 0.09 ‐ 25.63 ‐ 40.72 ‐ ‐ 24.07 145.10 ‐ 8.59 177.76 1,410.71
27.78 0.74 ‐ ‐ 28.51 243.66
26.16 4.45 4.23 4.01 38.84 154.06
REVENUE Sale Other Income Unallocated Income Total Revenue RESULT Segment Result before Interest & Tax Unallocated Corporate expenses Operating Profit Interest Expenses Interest Income Current Tax Expenses Profit from ordinary activities Prior Period Losses Net Profit Other Information Segment Assets Unallocated Corporate Assets Total Assets Segment Liabilities Unallocated Corporate Liabilities Total Liabilities Capital Expenditure Depreciation
Particulars
‐ ‐ 43.56 6.75
‐ ‐ 180.22
‐ ‐ 457.43 ‐ ‐ 4211.66 1277.27 1286.57 2563.84 ‐ 194.71 ‐ 2758.56 17.20 33.80 47.37 93.07
552.45
1513.92 2240.31 3754.23
‐ ‐ 16.60 45.70
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
80.76
1311.24 ‐ ‐ 1311.24
‐ ‐ 85.50 13.25
‐ ‐ 353.76
1084.44
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
158.53
2575.00 ‐ ‐ 2575.00
‐ ‐ 0.31 5.64
‐ ‐ 355.28
504.72
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
47.42
495.20 ‐ ‐ 495.20
‐ ‐ 0.61 10.94
‐ ‐ 689.66
979.74
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
92.05
961.83 15.02 ‐ 976.85
12.28 1057.21 0.92 16.58
218.48 1702.94 1,044.94
1484.46
39.23 (0.48) 38.75
(27.39) 112.08 (43.16) 2.51 (32.19)
139.46
1457.03 15.02 8.57 1480.62
Financial Year ended 31/03/2009 Consolid Domesti Foreig ated c n Total
141
35.80 569.78 129.06 19.99
380.46 2017.36 533.97
1636.89
73.33 1.87 75.20
(58.17) 181.12 (82.43) 1.68 (27.04)
239.29
3886.25 0.00 1.88 3888.13
Financial Year ended 31/03/2010 Consolid Domesti Foreign ated c Total
305.95 (3.10) 302.85
‐ ‐ ‐
‐ ‐ ‐
641.25
‐ (69.84) ‐ 571.41 ‐ (116.46) ‐ 3.38 ‐ (152.38)
326.40
‐ ‐ ‐ ‐ ‐
314.86
4380.73 4087.44 8468.16 ‐ 69.68 69.68 ‐ ‐ 3.45 4380.73 4157.12 8541.30
Financial Year ended 31/03/2011 Consoli Domesti Foreign dated c Total
INFORMATION ABOUT GEOGRAPHICAL SEGMENT
‐ ‐ ‐
8.97
‐ ‐ ‐
‐
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
‐
‐ ‐ ‐ ‐
‐ ‐
‐ ‐ 454.82
551.55
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
52.32
322.25 12.90 ‐ 335.15
8.97
‐ 454.82
‐ 551.55 454.82
551.55
22.68 0.87 23.55
‐ 52.32 ‐21.60 0.31 ‐8.35
52.32
322.25 12.90 ‐ 335.15
Financial Year ended 31/03/2008 Consoli Domes Fore dated tic ign Total
7.96
‐ ‐
‐ ‐ 331.75
340.28
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
32.47
236.23 0.45 ‐ 236.68
‐
‐ ‐
‐ ‐ ‐
‐
‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
‐
‐ ‐ ‐ ‐
7.96
‐ 331.75
‐ 340.28 331.75
340.28
19.61 ‐ 19.61
‐ 32.47 ‐9.46 0.31 ‐3.70
32.47
236.23 0.45 ‐ 236.68
(Rupees In Lacs) Financial Year ended 31/03/2007 Consoli Domes Forei dated tic gn Total
Annexure VIII
Non cash expenses other than deprecation
0.03
‐
0.03
0.03
‐
142
0.03
0.03
‐
0.03
0.03
‐
0.03
0.03
‐
0.03
ANNEXURE ‐IX DETAILS OF OTHER INCOME (Rupees In Lacs) Particulars Recurring Income ‐ Job Receipts ‐ Freight received ‐ Exchange Fluctuations ‐ Interest on FDR ‐ Miscellaneous Receipts ‐ Interest on Sec. Dep. MPSEB Non Recurring Income ‐ Profit on sale of car ‐ Insurance Claim Recd Total
31‐Mar‐11
31‐Mar‐10
31‐Mar‐08
31‐Mar‐07
3.63 ‐ ‐ ‐ 7.91 0.31 1.05 ‐ 12.90
‐ ‐ ‐ ‐ 0.45 ‐
‐ ‐ 69.68 3.05 ‐ 0.33
‐ ‐ ‐ 1.23 0.20 0.45
4.15 1.91 15.02 2.13 ‐ 0.38
‐ 0.07 73.14
‐ ‐ 1.88
‐ ‐ 23.59
143
As at 31‐Mar‐09
‐ ‐ 0.45
ANNEXURE ‐ X DETAILS OF CURRENT LIABILITIES AND PROVISIONS (Rupees in lacs) Particulars A) Current Liabilities Sundry Creditors ‐for Expenses ‐for Goods Duties & Taxes Other Liabilities Sub‐total (A) Provisions : ‐ Income Tax / FBT ‐Other Provisions (PF/PT/Entry Tax) ‐ Provision for Gratuity Sub‐total (B) Total (A) + (B)
31‐Mar‐11
31‐Mar‐10
31‐Mar‐08
31‐Mar‐07
522.51 1,119.23 ‐ 34.22 1,675.96
355.60 159.21 ‐ 19.17 533.97
396.13 396.29 ‐ 252.51 1,044.94
10.16 76.72 ‐ 32.30 119.19
29.13 45.42 ‐ 10.23 84.77
143.56 1.16 31.36 176.08 1,852.04
19.70 16.10 ‐ 35.80 569.78
11.42 0.86 ‐ 12.28 1,057.21
1.49 0.31 ‐ 1.80 120.99
1.46 ‐ ‐ 1.46 86.24
144
As at 31‐Mar‐09
ANNEXURE‐XI STATEMENT OF RELATED PARTY TRANSACTION (a) Names of the related parties with whom transactions were carried out during the years and description of relationship: 1) ASSOCIATE CONCERNS Mungad Strips & Alloys Private Limited Directors are Interested Omsu Industries Pvt. Ltd Directors are Interested Field Irrigation Private Limited Directors are Interested JIJI Overseas Pvt. Ltd Directors are Interested Nidhi Mungad Relative of Key Managerial Person Jaya Mungad Relative of Key Managerial Person Sushila Mungad Relative of Key Managerial Person 2) KEY MANAGEMENT PERSONNELS Gaurav Mungad Director Om Prakash Maheshwari Director Vaibhav Mungad Director (` In lakhs) 1. Transactions with Associate Companies Sr. No Nature of Transactions Year ended 31st March 31st March 31st March 31st March 31st March 2011 2010 2009 2008 2007 A Transaction During the Year Purchases ‐ Mungad Strips & Alloys Pvt. 3,066.04 63.84 Ltd Sales ‐ Mungad Strips & Alloys Pvt. 3,071.28 569.44 Ltd B Closing Balance ‐ Mungad Strips & Alloys Pvt. 0.86 547.64 ‐ ‐ ‐ Ltd 2. Transactions with key management personnel & relatives Sr. No Nature of Transactions Year ended 31st March 31st March 31st March 31st March 31st March 2011 2010 2009 2008 2007 A Transaction During the Year Director’s remuneration 52.00 24.00 12.00 2.52 ‐ Rent Paid 3.30 1.92 1.92 0.96 0.96 Salary ‐ 4.80 3.60 1.92 ‐ Loans and Advances received ‐ 0.89 35.50 60.66 ‐ Advances Repay 3.32 20.00 27.39 27.54 ‐ Guarantee Deposit 9.40 70.00 ‐ ‐ ‐
145
B
Guarantee Deposit Repaid Interest Paid Closing Balance For Loan Liability/Advance (including interest, if any)
79.40 1.11 ‐
146
‐ 2.49
3.32
‐ 4.84
54.35
46.71
‐ ‐ 41.15
ANNEXURE ‐ XII Particulars Share Capital Authorised Share Capital
DETAILS OF SHARE CAPITAL, RESERVES AND SURPLUS As at 31‐Mar‐11 31‐Mar‐10 31‐Mar‐09
No. of Equity shares of `10 each (Nos) Share Capital (in ` Lacs) Issued Share Capital No of Equity Shares of ` 10 each fully paid up (Nos) Share Capital (Rupees in lacs) Subscribed and paid‐up Share Capital Equity Share Capital No of Equity Shares of ` 10 each fully paid up (Nos) Share Capital (Rupees in lacs) Total Reserves and Surplus Securities Premium (Rupees in lacs) General Reserve (Rupees in lacs) Profit and Loss account (Rupees in lacs) Capital Subsidy (Rupees in lacs) Total
31‐Mar‐07
5,000,000 500.00
1,500,000 150.00
750,000 75.00
750,000 75.00
100,000 10.00
2,349,960 235.00
1,500,000 150.00
750,000 75.00
750,000 75.00
100,000 10.00
2,349,960 235.00
1,500,000 150.00
750,000 75.00
750,000 75.00
100,000 10.00
235.00
150.00
75.00
75.00
10.00
764.96 ‐ 404.30 17.50 1,186.76
‐ ‐ 129.76 17.50 147.26
‐ ‐ 59.52 17.50 77.02
‐ ‐ 19.39 2.50 21.89
‐ ‐ (3.77) 2.50 (1.27)
147
31‐Mar‐08
ANNEXURE‐XIII CAPITALISATION STATEMENT Pre Issue
Particulars
(Rupees In Lacs) Post Issue*
Debt Short Term Debt 888.07 Long Term Debt ‐ Total Debt 888.07 Shareholders' Fund (Equity) Share Capital 235.00 Reserves & Surplus 1,186.76 Less: Miscellaneous Expenses not w/off 0.07 Total Shareholders' Fund (Equity) 1,421.69 Total Capitalisation Long Term Debt/Equity 0.00 Total Debt/Equity 0.62 Notes: 1. Short term Debts represent which are due within 12 months, Working Capital is treated as Short term Debt. 2. Long term Debts represent debts other than Short term Debts as defined above. The Term Loans O/s as on 31.03.2011 for ` 140.73 Lacs has been treated as Short Term as the company has repaid the loans in April 2011. 3. The figures disclosed above are based on re stated statement of Assets and Liabilities of the Company as at 31.03.11. 4. On June 29, 2011, the Company has issued 7049880 bonus shares issued in the ratio of 3 new equity shares of `10/‐ each fully paid up for 1 equity shares of `10/‐ each fully paid up held in the company, by capitalising securities premium account and general reserves. Since the same was issued after March 31, 2011, the same has not been considered in calculation of Debt ratios. Therefore, the Debt ratios will be readjusted accordingly. * The corresponding post issue figures are not determinable at this stage pending the completion of public issue. This figure will be updated at the time of filing of prospectus with ROC.
148
ANNEXURE‐ XIV Particulars Face Value per equity Share(`) Earnings/ (losses) Per Share (in `) ‐ Basic Earnings/ (losses) Per Share [a/b] ‐ Diluted Earnings/ (losses) Per Share [a/c] (ii) Return on Net Worth (in %) [a/e] (iii) Net Assets Value per Share (in `) [e/d] (a) Net profit available for appropriation (as restated) (b) Weighted average numbers of equity shares for calculating Basic EPS. (c) Weighted average numbers of shares for calculating Diluted EPS. (d) No. of equity shares outstanding at the end of the year/period.
MANDATORY ACCOUNTING RATIOS As at As at As at 31‐Mar‐11 31‐Mar‐10 31‐Mar‐09 10.00 10.00 10.00
As at 31‐Mar‐08 10.00
As at 31‐Mar‐07 10.00
18.30
9.36
5.35
11.72
20.48
18.30
9.36
5.35
11.72
20.48
19.31%
23.64%
26.42%
23.94%
240.24%
60.50
19.81
27,454,507.38
7,023,660.49
1,500,000
4,013,569.70
750,000
1,500,000
750,000
750,000
2,349,960
20.25
750,000
1,500,000
750,000
12.90 8.53 2,315,601.29 2,048,420.73 197,500 197,500
100,000
750,000
100,000
100,000
(e) Net Worth as at the end of the 142,169,049.5 period/year (in `) 3 29,715,590.15 15,188,598.66 9,671,641.96 852,653.67 Notes : 1. The above ratios are calculated as under: a) Earnings per share = Net Profit available for appropriation (as restated) Weighted average number of equity shares outstanding during the year b) Return on Net Worth(%) = Net Profit available for appropriation (as restated) Net worth as at the year end c) Net Asset Value Per Equity Share = Net Worth as at the end of the period/year Number of equity shares outstanding at the end of the Year 2. Net Worth means the aggregate of the paid up share capital, share premium account, and reserves and surplus (excluding revaluation reserve) as reduced by the aggregate of miscellaneous expenditure (to the extent not adjusted or written off) and the debit balance of the profit and loss account; 3.. Earnings Per Share (EPS) calculation are in accordance with the Accounting Standard 20 "Earnings Per Share" prescribed under the Companies (Accounting Standards) Rules, 2006. 4. The figures disclosed above are based on the restated financial information of the Company. 5. On June 29, 2011, the Company has issued 7049880 bonus shares issued in the ratio of 3 new equity shares of `10/‐ each fully paid up for 1 equity shares of `10/‐ each fully paid up held in the company, by capitalising securities premium account and general reserves. Since the same was issued after March 31, 2011, the same has not been considered in calculation of accounting ratios. Therefore, the accounting ratios for all the previous years will be readjusted accordingly. 6. During the financial year 2006‐2007, the return on net worth is exceptionally high because of exclusion of share application money of ` 26 lakhs from the net worth of the Company.
149
ANNEXURE‐ XV Statement of Adjustments / Impact of Prior period items/ Deferred Tax Assets & Liabilities in the Financial Statements (Rupees In Lacs) Particulars Mar‐11 Mar‐10 Mar‐09 Mar‐08 Mar‐07 Net Profits after tax and extraordinary items but A before Adjustments: 302.85 75.21 38.75 23.55 19.61 Adjustment on Account of : Less: Short Provision of Income Tax Asset ‐ 12.32 ‐ 0.39 ‐ Add: Excess Provision of Income Tax 4.38 ‐ 7.46 ‐ 0.87 Less: Excess Provision of Deferred Tax Asset ‐ ‐ ‐ ‐ ‐ Add: Prior Period Items (1.33) 1.28 ‐ ‐ ‐ Less: Excess/ (Short) Provision of expenses. ‐ 6.07 (6.07) ‐ ‐ Less : Provision for Gratuity 31.36 ‐ ‐ ‐ ‐ Total B (28.31) (4.97) 1.39 (0.39) 0.87 Net Profit as Restated (A+B) 274.55 70.24 40.14 23.16 20.48
150
Annexure ‐ XVI STATEMENT OF DEFERRED TAX ASSETS / (LIABILITIES) (` In lacs) For the year For the year For the year For the year For the year 31st ended 31st ended 31st ended 31st ended 31st ended March ,2011 March ,2010 March ,2009 March ,2008 March ,2007 Opening Balance of Deferred Tax (41.12) (29.40) (16.56) (10.18) (11.00) Asset / (Liability) DTA/ (DTL) onTiming Difference (8.82) (11.72) (12.84) (6.38) (1.37) in Depreciation as per Companies Act and Income Tax Act. Closing Balance of Deferred Tax (49.94) (41.12) (29.40) (16.56) (12.37) Asset / (Liability) Particulars
151
Annexure XVII Details of Contingent Liabilities (Rupees In Lacs) Particulars Contingent Liabilities not provided for in respect of: Workmen compensation Letter of Credit Total
31‐Mar‐11
10.00 493.00 503.00
152
31‐Mar‐10
10.00 ‐ 10.00
As at 31‐Mar‐09
31‐Mar‐08
31‐Mar‐07
‐ ‐ ‐
‐ ‐ ‐
‐ ‐ ‐
ANNEXURE ‐ XVIII STATEMENT OF DIVIDEND PAID No Dividend paid in any of the 5 Financial Years (From 2007 to 2011) to the shareholders.
153
ANNEXURE ‐ XIX Statement of Tax Shelter (` In lacs) Particulars Tax Provision as per normal rates FBT Provision Adjustments: Difference Depreciation between Companies Act and Income Tax Act Other adjustments Losses Set off during the year Tax Saving thereon DTA/DTL Added/(written) off during the year Total Taxation as calculated
31‐Mar‐11 143.56 ‐
31‐Mar‐07 1.32 0.14
(16.31)
(37.92)
(13.85)
(15.29)
(4.08)
(11.01)
(0.84)
6.36
9.74
1.43
‐ (9.29)
‐ (13.17)
(6.32) (4.69)
(25.48) (10.54)
(20.67) (7.85)
(8.82)
(11.72)
(12.84)
(6.38)
(1.37)
152.38
31.34
28.95
7.87
2.83
154
For the Year ended 31‐Mar‐10 31‐Mar‐09 31‐Mar‐08 19.62 15.95 1.43 ‐ 0.16 0.06
FINANCIAL INDEBTEDNESS The principal terms of loans and assets charged as security as on August 23, 2011 (` in lakhs) A. Working Capital / Loan from Banks Name of Purpose Sanction Rate of Lender Amount interest Secured Loans Bank Of Working 2250 Base Baroda Capital – Rate+3. Fund based 75% Cash Credit Working 1200 Base Capital – Rate + Fund based 1% EPC (Sub Limit)
Working Capital – Non Fund based (Sub Limit) Working Capital – Non Fund based
Re‐payment
On Demand EM of Factory Building admeasuring 20000 sq ft. at lease hold plot no. 316/2/1 and 316/2/2 village sejvaya, Ghatabillod. 1 st charge on entire Current assets, On realization present & future including entire of foreign stocks, book debts, loans and Bills advances etc. 1 st charge on block of assets of the Company by way of hypothecation of machinery and equipment and other fixed assets. EM of Land and Building at On due date plot no. 316/2/1 and 316/2/2 of Letter of belonging to Shri Omprakash undertaking Maheshwari and corporate guarantee of Mungad Strips and alloys Pvt. Ltd. And 6 Lac shares of Krishna Profiles Pvt. Ltd. pledged of promoters. FD of ` 71.62 Lacs pledged of the company.
1800
B. Equipment / Vehicle Loans Name of Purpose Sanction Rate of Lender Amount interest Sundaram Equipment 6.50 6.50% Finance Ltd. Loan 7.90 6.50%
Unsecured Loans Name of Purpose Lender HDFC Bank Business
Securities offered
Securities offered Hypothecation on the Hydra Crane
Hypothecation on the Tempo Traveler
Morat‐ orium
Outstanding amount
Nil
996.14
Nil
1117.61
Nil
78.00
Re‐payment
Morat‐ orium 42015/‐ in First Nil and 41960 in next 16 installment 27750/‐ in First Nil and 26950 in next 34 installments.
Outstanding amount 6.50
7.90
C.
Sanction Amount 20.00
Rate of interest 9.75%
Securities offered Nil
155
Re‐payment
Morat‐ orium 71804/‐ in 36 Nil installments
Outstanding amount 20.00
Religare Finvest Limited
Business
25.00
Omsu Industries Private Limited
Business
‐
10%
Nil
Nil
Nil
On Demand
156
116458/‐ in First Nil 12 installment, 92083/‐ in Next 12 installments and 62292/‐ in last 12 installments Nil
25.00
1572.43
5.2 ‐ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our restated summary statements as of and for the fiscal years ended March 31, 2007, 2008, 2009, 2010 and 2011, including the schedules and notes thereto and the reports thereon, which appear in the section titled “Financial Statements of the Company” on Page No. 127 of this Draft Red Herring Prospectus. The financial statements presented and discussed herein have been prepared to comply in all material respects with the notified accounting standards by Companies (Accounting Standards) Rules, 2006 (as amended), the relevant provisions of the Companies Act and SEBI (Issue of Capital and Disclosure Requirements) regulations. Our fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year are to the twelve‐month period ended on March 31 of that year. The forward‐looking statements contained in this discussion and analysis is subject to a variety of factors that could cause actual results to differ materially from those contemplated by such statements. Factors that may cause such a difference include, but are not limited to, those discussed in “Forward‐Looking Statements” and “Risk Factors”, beginning on Page No. x & xi respectively, of this Draft Red Herring Prospectus. Overview Overview of the Indian Economy India is the fourth largest economy in the world after the United States of America, China and Japan in purchasing power parity terms. (Source: World Development Report, 2009). The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Advance Estimates was 8.5 per cent in 2010‐11, representing an increase from the revised growth of 8 per cent during 2009‐10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year‐on‐year (y‐o‐y), on back of manufacturing and within that, the capital goods sub‐segment. During April‐June 2011‐12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010‐11. The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011‐12. Aluminium Industry Domestic aluminium demand‐supply scenario: During the last two decades, domestic demand for aluminium increased four‐fold from about 0.4mn tonnes in FY91 to about 1.7mn tonnes in FY11. Production of the metal also increased from about 0.45mn tonnes to 1.6mn tonnes during the same period. Domestic Demand: Domestic demand for aluminium has been steadily growing. Consumption of aluminium in the country has grown at a CAGR of 5.6% during the period FY91 to FY09. Post FY00, demand for aluminium has grown at a CAGR of around 11.4%. Increased consumption of aluminium in the building & constructions sector and from the automobile sector has together lead to a robust growth in demand for aluminium in India. Historically, power sector has dominated the major share of end use consumption pattern. However, the share of power sector has reduced over a period of time, while that of building and construction and automobiles recorded an increase. Domestic Supply: The Indian industry is been gearing up to accept the new role of supplying aluminium throughout the world. The domestic aluminium producers have been expanding their capacities to cope up with the robust domestic demand and to cash in
157
on the opportunities thrown open by the anticipated global demand. CARE Research expects an investment to the tune of Rs1. lac crore during the next five years, which is likely to increase the domestic aluminium capacity from about 1.5 mn tonnes in FY09 to about 4 mn tonnes in FY14. Domestic outlook: During the last decade (FY01 to FY11), domestic aluminium consumption has tripled up growing at a CAGR of 11.4% from 0.5 mn tonnes to 1.7 mn tonnes. Electricals, automobiles and the construction sectors are the key end‐user sectors driving the demand for aluminium in India. The usage pattern for aluminium in these sectors is different in the domestic market when compared with the rest of the world. While globally, the automotive and the construction sectors are the major driver end‐users of aluminium, in India bulk of the demand is accounted by the power transmission sector followed by the automobile industry. CARE Research expects domestic aluminium demand to grow from 1.7 million tonnes in FY11 to 2.5 million tonnes in FY15, a compounded annual growth rate (CAGR) of 10.9 per cent. During the period FY11 to FY15, CARE Research expects, demand for aluminium from the automobile and the construction industry is likely to grow by 12 per cent and 10 per cent each. Replacement of steel and copper by aluminium in the automobiles and power transmission sectors respectively is likely to support the aluminium demand from these sectors. With the expectations of the economy growing at around 8%, demand for the metal from the power transmission segment is also likely to remain healthy at around 10% CAGR during the same period. Increasing urbanization and rise in disposable income is likely to increase the demand for packaged goods. Demand for the metal from the packaging industry which accounts for a share of around 11% in the end use consumption pattern, is also likely to grow in double digits. OUR BUSINESS OVERVIEW We are an ISO 9001:2008 certified Company engaged in manufacturing of Aluminum extruded sections & profiles, ingots and other related products. Our Company was originally incorporated as Krishna Profiles Private Limited on May 01, 2003 under the Companies Act, 1956, as a Private Limited Company with Registrar of Companies, Madhya Pradesh and Chattisgarh. Subsequently, our Company was converted into a Public Limited Company and the name of our Company was changed to Jiji Industries Limited vide fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chattisgarh. Our Company has a factory unit established at Ghatabillod, Dist Dhar, Madhya Pradesh which is a well connected & developed industrial area having all infrastructure facilities. Our factory unit was established in the year 2003 in the name of M/s Krishna Profiles Private Limited. The unit was promoted by Mr. Gaurav Mungad and Mr. Rajesh Mundra. In May 2006, Mr. Rajesh Mundra left our company and Mr. Gaurav Mungad took over the charge of the entire unit along with the assistance of Mr. Vaibhav Mungad. In the year 2007‐08 our Company took its 1st major expansion and increased its manufacturing capacity from 300MT p.a. to 1200MT p.a.. Further, in the year 2008‐09, our unit took its 2nd major capacity expansion with modern machinery enhancing the capacity from 1200MT p.a. to 2100 MT p.a. Our company is currently engaged in the manufacture of Aluminum extruded sections & profiles, ingots and other related products of wide varieties. The leadership of Mr. Gaurav Mungad, Managing Director along with Mr. Omprakash Maheshwari, Whole‐time Director and Mr. Vaibhav Mungad, Whole‐time Director has made Jiji Industries Limited a successful and quality oriented Company. The Company has consistently registered growth in turnover and profitability over the previous years and now proposes to further expand its capacities and cater to the growing demand of the manufactured products. For details in relation to the aforesaid expansion, please refer to the section titled “Objects of the Issue” beginning on Page No. 34 of this Draft Red Herring Prospectus. In October 2008, our unit started exporting its products to gulf countries i.e. UAE. During 2008‐09 the total exports of our Company amounted to ` 961.83 lakhs (from October 2008 to March 2009), which increased to ` 2,575.00 lakhs in the year 2009‐10 and ` 4,087.44 lacs in the year 2010‐11.
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Our Company is proposing to expand its manufacturing capacity by 6,000MT p.a from its existing capacity of 2,100MT p.a. The above said expansion would comprise of a proposed expansion of 4,500MT p.a. at Ghatabillod and 1,500MT p.a. at Special Economic Zone, Pithampur. KEY BUSINESS STRENGTHS 1. Long term relationship with our customers Our continuous focus on providing quality products and services consistently to our customers has resulted in long term relationships with them. Our track record of delivering timely services and demonstrated industry expertise has helped in forging strong relationships with them. 2. Young and dynamic promoters Mr. Gaurav Mungad, aged 31 years is the Managing Director and Promoter of our Company. He has an experience of over 10 years in the same line of Industry. Mr Vaibhav Mungad, Whole time Director and promoter of our Company, aged 30 years, has been associated with our Company for over 5 years. Both the young Directors have spearheaded the operations of our Company and demonstrated their entrepreneurial skills as reflected by the consistent growth of our Company. 3. Experienced and strong management team We have an experienced management team with established and structured corporate processes. We believe that our management team has a long‐term vision. We also believe that their understanding of the market and flexibility in managing our operating and financial leverage has enabled us to adapt to the changing market conditions in a focused and constructive manner. We believe that the experience of our management team and its understanding of the industry will enable us to continue to take advantage of both current and future market opportunities. 4. Strong marketing network We have a strong network of independent dealers & distributors across India and abroad. Our sales and marketing focus is on the identification of OEMs and other end‐users that helps us in achieving cost savings and increasing sales. Our marketing team includes experienced and qualified professionals with good reach and expertise. 5. Use of Modern Machineries Our company uses state of the art machineries for production viz Extrusion press, Extrusion lines. These machineries enhance the productivity and enable us to produce quality products as per specifications of domestic and international buyers. OUR BUSINESS STRATEGY 1. Enhancing our range of products Our focus is to cater to every consumer of aluminium extruded products. We have been continuously expanding and revamping the range of products and services. We intend to enhance the range of products enabling our customers to get all their requirements from a single source. 2. Aspirational developments We intend to create aspirational developments that as per our belief have distinctive features, designs and functionalities with quality output and finishing which enhances our reputation and enables us to sell our products quickly. 3. Tapping the new markets globally Aluminium extrusions are required in various applications around the world. Our presence is limited to few countries only. Moreover, due to capacity constraints, company is able to serve only limited number of clients. Further, getting product requests from various potential clients from the tapped markets have to be passed as the company has to restrict
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itself to current clients in terms of satisfying their requirements. The requirements from various international markets are increasing and are also getting more quality conscious. 4. Continue to strengthen relationships with key customers We believe that we constantly try to address customer needs around a variety of product offerings. Our existing client relationships help us to get repeat business from our customers. This has helped us to maintain a long term business relationship with our customers and improve our customer retention ability. This represents a competitive advantage in gaining new clients and increasing our business in future. Significant Accounting Policies Our significant accounting policies are described in the section entitled “Auditor’s Report on Financial Information” on page 134 of this Draft Red Herring Prospectus. Factors that may affect the results of the operations Our business is subject to various risks and uncertainties, including those discussed in the section titled “Risk Factors” beginning on page xi of this Draft Red Herring Prospectus. Among various other factors that affect our financial results and operations for a given financial year, some key factors are as follows: •
General economic and business conditions;
•
Company’s inability to successfully implement its growth and expansion plans;
•
Increasing competition in the industry;
•
Changes in laws and regulations that apply to the industry;
•
Volatility in the prices of Raw Materials
• Dependence on few Customers SUMMARY OF THE RESULTS OF OPERATION The following table sets forth select financial data from standalone restated profit and loss accounts for Fiscal Year 2011, 2010, 2009 and 2008 and the components of which are also expressed as a percentage of total income for such periods. (In ` lakhs) For the year ended % of % of March % of total March % of total March total March total Particulars 31, 2011 income 31, 2010 income 31, 2009 income 31, 2008 income INCOMES: Sales ‐ Domestic 3963 46.06% 1166.74 32.50% 448.21 22.72% 270.37 80.50% ‐ Exports 4087.44 47.51% 2575 71.72% 961.83 48.75% 0 0.00% Total Manufacturing Sales 8050.44 93.57% 3741.74 104.22% 1410.04 71.47% 270.37 80.50% ‐ Trading 7.00 0.08% 0 0.00% 0 0.00% 51.88 15.45% ‐ Other (DEPB) 410.72 4.77% 144.51 4.03% 46.98 2.38% 0 0.00% Other Income 73.14 0.85% 1.88 0.05% 23.59 1.20% 12.9 3.84% Increase / (Decrease) in Inventories 62.36 0.72% ‐298.01 ‐8.30% 492.32 24.95% 0.72 0.21% TOTAL INCOME 8603.67 100.00% 3590.12 100.00% 1972.94 100.00% 335.86 100.00%
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For the year ended March % of total March 31, 2011 income 31, 2010 6143.15 71.40% 2278.89 1223.87 14.22% 655.11
% of total March income 31, 2009 63.48% 1470 18.25% 215.59
% of total March income 31, 2008 74.51% 201.17 10.93% 60.4
% of total income 59.90% 17.98%
Particulars Purchases/ Consumption Direct Expenses Payments to & Provision for Employees 302.85 3.52% 224.14 6.24% 76.61 3.88% 8.96 2.67% Administrative Expenses 22.38 0.26% 25.49 0.71% 7.01 0.36% 2.63 0.78% Selling & Distribution Expenses 313.09 3.64% 203.7 5.67% 72.57 3.68% 1.1 0.33% Interest and other finance charges 116.46 1.35% 82.43 2.30% 43.16 2.19% 21.6 6.43% Depreciation 23.53 0.27% 19.99 0.56% 16.58 0.84% 8.97 2.67% TOTAL EXPENDITURE 8145.33 94.67% 3489.75 97.20% 1901.52 96.38% 304.84 90.76% Net Profit before tax & extra‐ ordinary items: 458.34 5.33% 100.37 2.80% 71.42 3.62% 31.03 9.24% Provision for Tax 152.38 1.77% 27.04 0.75% 32.18 1.63% 8.35 2.49% Net Profit before extra‐ ordinary items & after tax: 305.95 3.56% 73.33 2.04% 39.23 1.99% 22.68 6.75% Short / (Excess) Provision of Income tax of earlier years 4.38 0.05% ‐7.94 ‐0.22% 0.48 0.02% ‐0.87 ‐0.26% Prior period expenses ‐1.28 ‐0.01% 6.07 0.17% 0.00% 0 0.00% Adjustments on account of restatements ‐28.31 ‐0.33% ‐4.97 ‐0.14% 1.39 0.07% ‐0.39 ‐0.12% Net Profit as restated 274.54 3.19% 70.24 1.96% 40.14 2.03% 23.16 6.90% COMPARISON OF THE FINANCIAL PERFORMANCE OF FISCAL 2011 WITH FISCAL 2010 1. INCOME : During the year 2010‐11 the total income of the company increased to ` 8603.67 lacs as against ` 3590.12 lacs of 2009‐ 10. The manufacturing Sales increased to ` 8050.44 lacs from ` 3741.74 lacs, an increase of 115%. This increase can be attributable to an increase in volume of business and capacity utilization to 90% in 2010‐11 from 35.61% in 2009‐10. During the year 2010‐11, the export of the company increased to ` 4087.44 lacs as against ` 2575 lacs in 2009‐10. The domestic Sales also increased from ` 1166.74 lacs to ` 3963.00 lacs. The income from DEPB licenses also increased to `410.72 lacs as against ` 144.51 lacs. The other income also increased from ` 1.88 lacs to ` 73.14 lacs mainly due to income from exchange fluctuations. 2. EXPENDITURE : The total expenditure for the year 2010‐11 increased to ` 8145.33 lacs from ` 3489.75 lacs, an increase of 233%. This was due to surge in volume of business, which resulted in increase in expenses viz. purchase in Raw Material, Direct expenses, employees provision and selling expenses. 3. RAW MATERIAL CONSUMPTION : Raw Material consumption for the year 2011 amounted to ` 6143.15 lacs as against ` 2278.89 lacs of previous year. In % terms it amounted to 71.40% of the total income. This was higher due to an increase in consumption of raw materials viz. Aluminium scrap, Silver scrap, Furnance Oil etc.
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4. DIRECT EXPENSES : The direct expenses amounted to ` 1223.87 lacs in 2010‐11 as against ` 655.11 lacs for previous year. The expenses amounted to 14.22% of the total income which is 4.03% lower than the previous year due to growth in volume of business. During the year our company utilised approx 90% of the installed capacity. Since the fixed overheads remain same, the direct fixed expenses declined in percentage terms. 5. SALARY/WAGES : The salary and wages did not increase in proportion to production. With the improved systems procedure in working the output per employee increased during the year 2010‐11. Further the fixed employee cost did not increase. Due to this the employee cost decreased to 3.52% from 6.24% of Total Income. 6. SELLING & ADMINISTRATIVE EXPENSE : The selling and Administrative expenses decreased to 3.90% from 6.38% amounting to ` 335.47 lacs. The reason for the decrease is significant growth in volume and fixed cost which did not increase with sales. 7. DEPRECIATION : The depreciation for the year 2010‐11 stood at ` 23.53 lacs calculated at SLM as per companies Act. For the year 2009‐10 the same was ` 19.99 lacs. The increase was due to addition to fixed assets during the fiscal year 2011. 8. FINANCE COST : Finance cost for the year 2010‐11 increased to ` 116.46 lacs as against ` 82.43 lacs of the previous year. The increase is due to the growth in business and working capital limits. 9. TAXATION : The total tax provision for the year 2010‐11 stood at ` 152.38 lacs, which includes ` 8.82 lacs for DTL. The tax has been provided as per Income Tax rules. 10. NET PROFIT AFTER TAX : The net profit after tax for the year 2010‐11 stood at ` 274.54 lacs as against ` 70.24 lacs of 2009‐10. The net profit margin increased to 3.19% from 1.96%. The major reason for increase is saving in direct expenses, selling expenses and administrative expenses. COMPARISON OF THE FINANCIAL PERFORMANCE OF FISCAL 2010 WITH FISCAL 2009 1. INCOME : During the year 2009‐10 the total income of the company increased to ` 3590.12 lacs as against ` 1972.94 lacs of 2008‐ 09. The manufacturing sales increased to ` 3741.74 lacs from ` 1410.04 lacs, an increase of 165%. During the year 2009‐ 10, the export of the company also increased to ` 2575 lacs as against ` 961.82 lacs of 2008‐09. The domestic Sales also increased from ` 448.21 lacs to `1166.74 lacs. This increase can be attributable to an increase in volume of business and capacity utilization to 36% in 2009‐10 from 23% in 2008‐09.The income from DEPB licenses also increased to ` 144.51 lacs as against ` 46.98 lacs.
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During the year 2008‐09 the company initiated exports and in a short period it contributed to 72% of sales revenue in 2009‐10 as against 49% of sales revenue in 2008‐09. With the enhanced focus on export market the company have recorded significant jump in revenue. 2. EXPENDITURE : The total expenditure for the year 2009‐10 increased to ` 3489.75 lacs from ` 1901.52 lacs, an increase of 84%. This was due to surge in volume of business and change in product mix, which resulted in an increase in expenses viz. Raw Material expenses, Direct expenses and Employee expenses. 3. RAW MATERIAL CONSUMPTION : Raw Material consumption for the year 2009‐10 amounted to ` 2278.89 lacs as against ` 1470.00 lacs of previous year. The raw material expenses are not exactly comparable as the exports were started in the later half, which resulted in the change in product mix and usage of imported of raw material. 4. DIRECT EXPENSES : In tune with Raw Material consumption, the other direct expenses are also increased. The direct expenses for the year 2009‐10 amounted to ` 655.11 lacs as against ` 215.59 lacs of previous year. 5. SALARY/WAGES : The salary and wages increased to ` 224.14 lacs in the year 2009‐10 as against ` 76.61 lacs of previous year. The increase is in line with the increase in business and considering the extra ordinary growth the increase in employees expenses are comparable. 6. SELLING & ADMINISTRATIVE EXPENSE : The selling and Administrative expenses increased from `79.58 lacs to `229.19 lacs. The increase is mainly due to export expenses and loss on account of exchange fluctuations. 7. DEPRECIATION : The depreciation for the year 2009‐10 stood at ` 19.99 lacs calculated at SLM as per companies Act. For the year 2008‐ 09 the same was ` 16.58 lacs. The increase was due to addition to fixed assets during the fiscal year 2010. 8. FINANCE COST : Finance cost for the year 2009‐10 increased to ` 82.43 lacs as against ` 43.16 lacs of the previous year. The increase is due to the growth in business and working capital limits. 9. TAXATION : The total tax provision for the year 2009‐10 stood at ` 27.04 lacs, which includes ` 11.72 lacs for DTL. The tax has been provided as per Income Tax rules. 10. NET PROFIT AFTER TAX :
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The net profit after tax for the year 2009‐10 stood at ` 70.24 lacs as against ` 40.14 lacs of 2008‐09. The net profit margin decreased nominally to 1.96% from 2.03%. COMPARISON OF THE FINANCIAL PERFORMANCE OF FISCAL 2009 WITH FISCAL 2008 1. INCOME : During the year 2008‐09 the total income of the company increased to `1972.94 lacs as against ` 335.86 lacs of 2007‐08. The manufacturing Sales increased to ` 1410.04 lacs from ` 270.37 lacs, an increase of 422%. Our Company has started exporting its products to overseas market, hence our Company has recorded significant jump in revenue. The company’s activities took final shape after implementation of expansion which gave our company recognition in the international markets. 2. EXPENDITURE: The total expenditure for the year 2008‐09 increased to `1901.52 lacs from ` 304.84 lacs, an increase of 524%. The expenditure is higher which was in line with the increase in the volume of business. 3. RAW MATERIAL CONSUMPTION: Raw Material consumption for the year 2009‐08 amounted to `1470.00 lacs as against ` 201.17 lacs for previous year. The raw material consumption is higher which is in line with the increase in the volume of business during the year. 4. DIRECT EXPENSES: In tune with consumption expenses, the other direct expenses are also increased. The direct expenses for the year 2008‐ 09 amounted to `215.59 lacs as against ` 60.40 lacs of previous year. 5. SALARY/WAGES : The salary and wages increased to ` 76.61 lacs in the year 2008‐09 as against `8.96 lacs for previous year. The increase is in line with the increase in volume of business and considering the extra ordinary growth the increase in employees expenses are comparable. 6. SELLING & ADMINISTRATIVE EXPENSE The selling and Administrative expenses increased from ` 79.58 lacs to ` 3.73 lacs. The increase is mainly due to export expenses and loss on account of exchange fluctuations. 7. DEPRECIATION : The depreciation for the year 2008‐09 stood at ` 16.58 lacs calculated at SLM as per companies Act. For the year 2007‐ 08 the same was ` 8.97 lacs. The increase was due to addition to fixed assets during the fiscal year 2008. 8. FINANCE COST Finance cost for the year 2008‐09 increased to ` 43.16 lacs as against ` 21.60 lacs of the previous year. The increase is due to the increase in working capital limits and term loan for expansion. 9. TAXATION :
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The total tax provision for the year 2008‐09 stood at `32.18 lacs, which includes `12.84 for DTL. The tax has been provided as per Income Tax rules. 10. NET PROFIT AFTER TAX : The net profit after tax for the year 2008‐09 stood at `40.14 lacs as against ` 23.16 lacs of 2007‐08. The net profit margin decreased to 2.03% from 5.88%. Information required as per Item (2) (IX) (E) (5) of Part A of Schedule VIII to the SEBI Regulations: An analysis of reasons for the changes in significant items of income and expenditure is given hereunder: Unusual or infrequent events or transactions There are no Unusual or infrequent events or transactions in our Company. The transactions are as per usual business operations. Significant economic changes that materially affected or are likely to affect income from continuing operations. There are no significant economic changes that may materially affect or likely to affect income from continuing operations. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations. Apart from the risks as disclosed under Section “Risk Factors” beginning on page xi in the Draft Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations. Future changes in relationship between costs and revenues Our Company’s future costs and revenues will be determined by demand/supply situation, government policies and prices quoted by raw material suppliers. Increases in net sales or revenue and Introduction of new products or services or increased sales prices Increases in revenues are by and large linked to increases in volume of business. Total turnover of each major industry segment in which Our Company operated For details on the total turnover of the industry please refer to Chapter “Industry Overview” beginning on page 59 of the Draft Red Herring Prospectus. Status of any publicly announced New Products or Business Segment The products manufactured and sold by our Company are aluminium profiles & sections. Our Company has not announced any new product or business segment. Seasonality of business Our Company’s business is not seasonal in nature.
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Dependence on a single or few suppliers or customers The % of contribution of our Company’s top 5 customers and suppliers’ vis‐à‐vis the total income and operating cost respectively, for the FY 2011 is as follows: Customers Name of the Customer Value (` in Lacs) As % of total Purchases Overseas Metal Trading Co. 3,984.57 47.05 Mungad Strips and Alloys Pvt.Ltd. 3,071.28 36.27 Divine Aluminium 739.36 8.73 Vani Export 162.06 1.91 Al Medeah General Trading 102.86 1.21 Suppliers Name of the Supplier Value (` in Lacs) As % of total Purchases Mungad Strips and Alloys Pvt.Ltd. 2,362.16 44.10 S.S. Enterprises 581.74 10.86 Adinath Traders 521.10 9.73 Ocean Impex 400.68 7.48 S.K. Marketing 263.84 4.93 Competitive conditions Competitive conditions are as described under the Chapters “Industry Overview” and “Our Business” beginning on pages 59 and 76, respectively of the Draft Red Herring Prospectus. Details of material developments after the date of last balance sheet In the opinion of the Board of our Company, there have not arisen, since the date of the last financial statements included in this Draft Red Herring Prospectus, any circumstance that materially and adversely affect or is likely to affect our business or profitability or the value of our assets or our ability to pay our liabilities within the next 12 months. There is no subsequent development after the date of the Auditor’s Report which we believe is expected to have a material impact on reserves, profits, earning per share and book value of our business.
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SECTION VI – LEGAL AND OTHER INFORMATION 6.1 ‐ OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS Except as described below, there are no outstanding litigations, suits, civil or criminal prosecutions, proceedings before any judicial, quasi‐judicial, arbitral or administrative tribunals, including pending proceedings for violation of statutory regulations or, alleging criminal or economic offences or tax liabilities or any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part 1 of Schedule XIII of the Companies Act) against our Company, our Directors, our Promoter and our Group Entities that would have a material adverse effect on our business. Further there are no defaults, non‐payments or overdue of statutory dues, institutional/bank dues and dues payable to holders of debentures or fixed deposits and arrears of cumulative preference shares that would have a material adverse effect on our business. CONTINGENT LIABILITIES OF OUR COMPANY As on August 31, 2011, the contingent liability of our Company in respect of outstanding litigations is as follows: Nature of Litigation Number of Cases Monetary Liability of the Company Cases filed against the Company Show Cause Notice 1 Not ascertainable Case filed by the workman 1 ` 10,00,000 Total 2 ` 10,00,000 Nature of Litigation Number of Monetary Liability of the Company Cases Cases filed against the Company Show Cause Notice 1 Not Ascertainable Case filed by the workman 1 ` 10,00,000/‐ Cases filed against the Directors 2 Not Ascertainable I. LITIGATION RELATING TO OUR COMPANY A. FILED AGAINST OUR COMPANY 1. Litigation Involving Civil Laws: NIL 2. Litigation Involving Criminal Laws: NIL 3. Litigation Involving Securities and Economic Laws: NIL 4. Litigation Involving Statutory Laws: a. Show Cause Notice by the Office of the Assistant Commissioner, Central Excise and Customs A Show Cause Notice (the “said Notice”) dated March 11, 2011, bearing No. C.No.IV(16)30‐664/10‐ 11/Adj/Pith/13166 was served upon the Company by the Office of the Assistant Commissioner, Central Excise
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and Customs (Pithampur, District – Dhar) whereby the Company was called upon to show cause within 30 (thirty) days of receipt for matter mentioned hereinafter. The Company is alleged of clearing aluminium dross valued at ` 3,50,484 (Rupees Three Lakh Fifty Thousand Four Hundred and Eighty Four) during the year 2007‐08 without payment of central excise duty, which was brought into notice during the course of audit. and which has been paid by the Company on December 14, 2010. The Assistant Commissioner, Central Excise & Customs however issued a show cause notice under Section 11A of the Central Excise act, 1944 requiring the Company to show cause as to why the Company should not pay: (i) penalty equivalent to the duty specified in the notice (under Section 11AC); and (ii) interest payable thereon on delayed payment of duty (under Section 11AA) The said notice also mentions that if the Company fails to show cause within the stipulated time, the case may be decided ex‐parte, on the basis of facts on records of the relevant authority. The Company has confirmed in this regard that they failed to appear before the relevant authority to show cause within the stipulated time However our Company as on date has not been informed / notified of any such Order having been passed and the case is thus pending with the Assistant Commissioner, Central Excise & Customs. 5. Litigation Involving Labour Laws: a. Petition filed by workman of the Company under the Employees’ Compensation Act, 1923 A petition dated October 21, 2009 has been filed by a Mr. Rahis Patel, a workman of the Company under Sections 4 and 10 of the Employees’ Compensation Act, 1923 with the Commissioner for Workmen Compensation, Dhar (“Commissioner”) claiming ` 10,00,000 (Rupees Ten Lakhs) from the Company as compensation for the alleged permanent disablement caused to him during the course of his employment with the Company. The Company filed a Written Statement to the Commissioner in which it was submitted by the Company that a ‘master‐servant’ relationship existed between the Company and the workman. Pursuant to this, an amendment to the Written Statement was filed by the Company to rectify their previous submission, submitting that a ‘master‐servant’ relationship does not exist between the Company and the workman. The Commissioner subsequently rejected such contradictory submission made by the Company. Thereafter the Company filed a Writ Petition in the Madhya Pradesh High Court, Indore Bench which dismissed the Writ Petition and upheld the decision given by the Commissioner. The above case is still pending with Commissioner for Workmen Compensation, Dhar. B. CASES FILED BY OUR COMPANY 1. Litigation Involving Civil Laws: NIL 2. Litigation Involving Criminal Laws: NIL 3. Litigation Involving Securities and Economic Laws: NIL 4. Litigation Involving Statutory Laws: NIL 5. Litigation Involving Labour Laws: NIL
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II.
LITIGATION AGAINST OUR DIRECTORS C. LITIGATION AGAINST OUR DIRECTORS
a.
Case filed for accident caused by Motor Vehicle The Directors Mr. Vaibhav Mungad and Mr. Omprakash Maheshwari have been convicted by the Motor Vehicle Claims Tribunal, Indore (“MACT”) in the Claim No. 159 of 2008 dated March 13, 2008 filed by Mr. Babulal Dubey (“Petitioner”) for alleged accident caused by the motor bike on which the aforementioned Directors were seated. The Petitioner alleged that the accident caused injuries to him including a bone fracture in his left hand. He has therefore claimed ` 15,000 (Rupees Fifteen Thousand) as notional loss caused to the Petitioner for not being able to attend to his business and ` 7,000 (Rupees Seven Thousand) for physical and mental trauma caused to the Petitioner during the course of recovery from the injury. Accordingly, the MACT vide an Order dated October 7, 2009 has directed the Directors Mr. Vaibhav Mungad and Mr. Omprakash Maheshwari to pay a sum of ` 25,000 (Rupees Twenty Five Thousand), [which includes the aforementioned claim along with interest on such claim to the Petitioner for loss caused to the Petitioner and for physical and mental trauma caused. The Directors have confirmed that they have not tendered the said amount b. Criminal Complaint filed under the Indian Penal Code, 1860 A Criminal Complaint bearing No. 111 of 2000 dated October 11, 2000 was filed under Sections 420/ 68/ 465/467/ 469/ 471/ 120‐B of Indian Penal Code, 1860 (“IPC”) in the District Court, Moga, Punjab by Mr. Vijay Kumar Dhir (“Complainant”). This was filed against Mr. Laxmi Narayan Shandiyal and others which includes Mr. Viny Raj Modi, one of our Independent Directors. Subsequently, a Petition dated October 11, 2010, (bearing Criminal Misc. No. M‐7885 of 2009), was filed under Section 482 of Criminal Procedure Code, 1973 in the High Court of Punjab and Haryana at Chandigarh by against the State of Punjab and the Complainant by Mr. Laxmi Narayan Shanilya, Mr. Vijay Kumar Jain, Mr. Ravindra Pal Singh, Mr. Sachin Sandilya and Mr. Viny Raj Modi (“Petitioners”) for quashing the aforementioned Criminal Complaint filed and Summon Order dated September 12, 2001 whereby the Petitioners were summoned under Section 420 of the IPC. It was also prayed by the Petitioners that during the pendency of this petition, further proceedings before the Trial Court may be stayed. However, subsequently the Petitioners submitted to the Hon’ble High Court that the said Petition be withdrawn so as to enable them to take up all the pleas available to them during the trial. Pursuant to the aforesaid submission, the Hon’ble High Court vide judgment dated August 17, 2011, dismissed the aforesaid petition as withdrawn. The said matter is pending before the District Court, Moga, Punjab. Mr. Vinyraj Modi has in this regard confirmed to us that he is, as on the date of this DRHP, unable to provide us with back up documents which include the Complaint filed and the Summon Order. He has however confirmed that he shall undertake best efforts to provide the same at the time of filing the Red Herring Prospectus of the Company. D. CASES FILED BY DIRECTORS OF THE COMPANY: NIL III. LITIGATION RELATING TO OUR PROMOTER AND GROUP COMPANIES a. Litigation against our Promoters same as disclosed in II (C)(a) b. Litigation filed by our Promoters NIL c. Litigation against our Group Companies NIL d. Litigation filed by our Group Companies NIL
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IV.
V.
AMOUNTS OWED TO SMALL SCALE UNDERTAKINGS AND OTHER CREDITORS There are no outstanding dues payable to Small scale industries and other creditors amounting to ` 1 lakh or more which are pending for more than 30 days from the due date. MATERIAL DEVELOPMENTS OCCURING AFTER LAST BALANCE SHEET DATE, i.e. MARCH 31, 2011 In the opinion of the Board of our Company, there have not arisen, since the date of the last financial statements included in this Draft Red Herring Prospectus, any circumstance that materially and adversely affect or is likely to affect our business or profitability or the value of our assets or our ability to pay our liabilities within the next 12 months. There is no subsequent development after the date of the Auditor’s Report which we believe is expected to have a material impact on reserves, profits, earning per share and book value of our business.
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6.2 ‐ GOVERNMENT APPROVALS We have received the necessary consents, licenses, permissions and approvals from the Government and various governmental agencies required for our present business (as applicable on date of this Draft Red Herring Prospectus) and except as mentioned below, no further approvals are required for carrying on our present business. In view of the approvals listed below, we can undertake this Issue and our current/proposed business activities and no further major approvals from any governmental or regulatory authority or any other entity are required to be undertaken in respect of the Issue or continue our business activities. It must be distinctly understood that, in granting these approvals, the Government of India does not take any responsibility for our financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf. Unless otherwise stated, these approvals are all valid as of the date of this Draft Red Herring Prospectus. The main objects clause of the Memorandum of Association and objects incidental to the main objects enable our Company to carry out its activities. The following statement sets out the details of licenses, permissions and approvals taken by us under various central and state laws for carrying out business. I. APPROVALS FOR THE ISSUE ‐ Corporate Approvals The following approvals have been obtained in connection with the Issue: a. Our Company has obtained in‐principle listing approvals dated [●] from the BSE. b. Our Company has obtained in‐principle listing approvals dated [●] from the NSE. c. The Board of Directors have, pursuant to Section 81 & 81(1A) of the Companies Act, by a resolution passed at its meeting held on August 09, 2011, authorized the Issue, subject to the approval of the shareholders and such other authorities as may be necessary. d. The shareholders of our Company have, pursuant Section 81 & 81(1A) of the Companies Act, by a special resolution passed in the extra ordinary general meeting held on August 12, 2011, authorized the Issue. e. Our Company has received letter bearing Ref. no. [●] dated [●] from NSDL informing that the Equity Shares of our Company have been admitted into NSDL vide [●]. f. Our Company has received letter bearing Ref. no. CDSL/OPS/HD/EQ/8663 dated August 26, 2011 from CDSL informing that the Equity Shares of our Company have been admitted into CDSL vide August 26, 2011. II. INCORPORATION AND OTHER DETAILS a. Certificate of Incorporation dated May 01, 2003 issued by the Registrar of Companies, Madhya Pradesh and Chattisgarh(“ROC”) in the name of “Krishna Profiles Private Limited” bearing Corporate Identity Number (CIN) U27203MP2003PTC15775. b. Fresh Certificates of Incorporation dated May 26, 2011 & May30, 2011 issued by the ROC on conversion into a Public Limited Company and change of name of our Company to Jiji Industries Limited bearing Corporate Identity Number (CIN) U27203MP2003PLC015775.
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III. BUSINESS AND OPERATIONS RELATED APPROVALS a. Our Company has obtained a ‘License to work a Factory’ in Form No. 3 under Rule 5 of Madhya Pradesh Factories Rules, 1962 for its factory located at 316/2/1 & 316/2/2 Sejwaya, GhataBillod, District Dhar, Madya Pradesh ‐ 454773 vide License Number 15/12385/ DHR/2M (i) dated June 3, 2011. b. Our Company had filed Industrial Entrepreneurs’ Memorandum (IEM) Number 23/025/11/00038 on August 28, 2010 from District Trade and Industries Centre (DIC), Dhar (Madhya Pradesh) for its Aluminum Section Enterprise (Manufacturing/Service) at 316/2/1 & 316/2/2, Village Sejwaya, GhataBillod, District Dhar ‐454 773 in name of M/s Krishna Profiles Private Limited. By virtue of change of name of the Company to Jiji Industries Limited, the Company has made an application dated May 27, 2011 to General Manager, DIC Dhar to issue a fresh certificate in the name of Jiji Industries Limited. c. Our Company has been allotted 150KVA of electricity by the Madhya Pradesh State Electricity Board vide its letter addressed to our Company. Our Company has however misplaced the copy of the same. Further, our Company has made an application dated May 27, 2011 to the Chief Engineer, Madhya Pradesh State Electricity Board to change its records pursuant to change in name of our Company to ‘Jiji Industries Limited’. Our Company has been informed in this regard, that the aforesaid authority shall make necessary corrections in its records which shall reflect in the monthly electricity bill issued by the aforesaid Authority. d. Our Company has been granted IEC Number 1103003712 vide Certificate of Importer – Exporter Code (IEC) dated November 4, 2003 in the name of M/s Krishna Profiles Private Limited. By virtue of change of name of the Company to Jiji Industries Limited, the Directorate General of Foreign Trade has accordingly changed the name of Company in its records to Jiji Industries Limited. e. Our Company has made an application dated May 27, 2011 to the Inspector, Labour Office, Dhar Board to update its records pursuant to change in name of the Company to Jiji Industries Limited. Our Company has been informed in this regard, that the aforesaid authority shall make necessary corrections in its records. f. Our Company has obtained Provident Fund Code – MP/IND/017144. It has made an application dated May 27, 2011 to the Inspector, Provident Fund, Dhar to change the name of the Company in its records to Jiji Industries Limited. Our Company has been informed in this regard, that the aforesaid authority shall make necessary changes in its records. g. Our Company has obtained approval from the Petroleum and Explosives Safety Organization (PESO) under Petroleum Rules, 2002 for storage of 16 KL of furnace oil at the factory premises. h. Our Company has obtained a general permission F. No. VIII (Cus) 48‐03/08/Dhannad from office of the Deputy Commissioner of Customs, Inland Container Depot, Dhannad, Indore dated August 8, 2010 for stuffing of Goods into the containers at factory premises. i. Our Company has obtained a general permission F. No. VIII (Cus) 48‐6/08/PITHAMPUR from office of the Deputy Commissioner of Customs, Inland Container Depot, Sector‐III, Pithampur, District Dhar, dated August 8, 2010 for stuffing of Goods into the containers at factory premises. IV. ENVIRONMENT RELATED APROVALS AND LICENSES
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a. Our Company had obtained consent dated July 4, 2010 in response to application made by the Company on January 6, 2010 to Regional Officer, Dhar, Madhya Pradesh Pollution Control Board for the manufacturing activities carried out by the Company in relation to products enumerated in the consent letter. This consent letter is granted in the name of Krishna Profiles Private Limited and has been granted under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981. The aforesaid consent is valid upto September 30, 2011. By virtue of change of name of the Company to Jiji Industries Limited, the Company has made an application dated May 27, 2011 to the Pollution Control Board, Indore to issue a fresh consent letter in the name of Jiji Industries Limited. b. Our Company had obtained consent dated October 10, 2010 in response to application made by the Company on September 14, 2010 to Regional Officer, Dhar, Madhya Pradesh Pollution Control Board for the manufacturing activities carried out by our Company in relation to products enumerated in the consent letter. This consent letter is granted in the name of Krishna Profiles Private Limited and has been granted under Section 25/26 of the Water (Prevention and Control of Pollution) Act, 1974.The aforesaid consent is valid upto September 30, 2011. By virtue of change of name of the Company to Jiji Industries Limited, the Company has made an application dated May 27, 2011 to the Pollution Control Board, Indore to issue a fresh consent letter in the name of Jiji Industries Limited. V. TAXATION RELATED APPROVALS AND LICENSES a. Our Company has obtained PAN AACCK1383M from the Income Tax Department, Government of India. b. Our Company has obtained TAN number BPLK01194E dated July 09, 2011 by Income Tax Authority in the name of Jiji Industries Limited. c. Our Company has obtained TIN 23681604020 dated July 17, 2003 under the Madhya Pradesh Value Added Tax Rules, 2006. By virtue of change of name of the Company to Jiji Industries Limited the Government of Madhya Pradesh, Commercial Tax Department issued a fresh certificate dated August 19, 2011. d. Our Company has obtained certificate of registration under the Central Sales Tax Act, 1956. However the Company has misplaced a copy of the same and will soon apply for a duplicate copy of the same. We have however verified the returns filed under the aforesaid Act and the same are in order. e. Our Company has obtained Commercial Tax Registration Number 23681604020 dated July 17, 2003 under Section 24 of the Madhya Pradesh Commercial Tax Act, 1994 in name of Krishna Profiles Private Limited. f. By virtue of change of name of the Company to Jiji Industries Limited, the Company has made an application dated May 27, 2011 to the Commercial Tax Officer to issue a fresh certificate in the name of Jiji Industries Limited. g. Our Company had obtained Central Excise Registration Certificate dated July 22, 2003 in Form RC under Rule 9 of Central Excise Rules, 2002 vide registration number AACCK1383MXM001 for manufacturing of excisable goods in name of Krishna Profiles Private Limited. h. By virtue of change of name of the Company to Jiji Industries Limited, the Company has made an application dated May 27, 2011 to the Assistant Commissioner, Customs & Central Excise Division II, Pithampura to issue a fresh certificate in the name of Jiji Industries Limited.
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i. Our Company has obtained Certificate of Registration under Section 69 of the Finance Act, 1994 in Form ST‐ 2 for its factory premises and has thus been registered with the Central Excise Department for payment of service tax on Good Transport Agency (GTA). j. Our Company has obtained certificate of registration under the Madhya Pradesh Professional Tax Act, 1995. Further our Company has confirmed that it has misplaced a copy of the same and will soon apply for a duplicate copy. We have however verified the returns filed under the aforesaid Act and the same are in order. VI. PENDING APPROVALS a. Our Company has made an application dated August 12, 2011 for registration of the registered office of the Company under Section 6 (2) of the Madhya Pradesh Shops and Establishments Act, 1958. b. Our Company has applied for registration of the logo of ‘Jiji Industries Limited’ under the Trademarks Act, 1999 on August 27, 2011 bearing application number 2196557. c. Our Company has applied for registration of the name of ‘JIJI INDUSTRIES LIMITED’ under the Trademarks Act, 1999 on September 02, 2011 bearing temporary application number 33244. APPROVALS RELATING TO PROPOSED EXPANSION Our Company proposes to expand its existing manufacturing capacities on our existing factory premises located at plot no. 316/2/1 & 316/2/2, Digthan Road, Gram Sejvaya, Ghatabillod, Dist. Dhar – 454773, Madya Pradesh as well land allotted at SEZ situated at Pithampur. For the said expansion our Company will require permissions and approvals from various authorities including but not limited to permission for additional power supply from the Madhya Pradesh State Electricity Board, additional water supply, environment clearances from the Madya Pradesh Pollution Control Board, etc. Our Company has not applied for such licenses as on the date of this Draft Red Herring Prospectus and the same would be applied for at the time of implementing the projects.
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SECTION VII ‐ OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the Issue This Issue has been authorised by the resolution passed by the Board of Directors in their meeting held on August 09, 2011 and special resolution passed pursuant to section 81 & 81(1A) of the Companies Act, at the extra ordinary general meeting of the shareholders of our Company held on August 12, 2011. Our Company has received in‐principle approvals from the BSE and NSE for the listing of Equity Shares pursuant to letters dated [●] and [●], respectively. BSE is the Designated Stock Exchange. Prohibition by SEBI, the RBI or Governmental Authorities Our Company, our Promoters, our Promoter Group, our Directors and companies with which our directors are associated as directors or Promoters, have not been prohibited from accessing or operating in the capital market or restrained from buying, selling or dealing in securities under any order or directions passed by SEBI or any other authority. The listing of any securities of our Company has never been refused at anytime by any of the stock exchanges in India. Further, our Company, our Promoters, our Promoter Group, their relatives, our Directors and companies with which our directors are associated as Directors or Promoter have not been declared as willful defaulters by RBI / government authorities and there are no violations of securities laws committed by them in the past and no proceedings are pending against them. Eligibility for the Issue We are an unlisted Company incorporated under the Companies Act, 1956 and are complying with the eligibility criteria as specified under Regulation 26(1) of SEBI ICDR Regulations. The conditions prescribed are as under: An issuer may make an initial public offer, if: a. it has net tangible assets of at least three crore rupees in each of the preceding three full years (of twelve months each), of which not more than fifty per cent. are held in monetary assets: Provided that if more than fifty per cent. of the net tangible assets are held in monetary assets, the issuer has made firm commitments to utilise such excess monetary assets in its business or project; b. it has a track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three out of the immediately preceding five years: Provided that extraordinary items shall not be considered for calculating distributable profits; c. it has a net worth of at least one crore rupees in each of the preceding three full years (of twelve months each); d. the aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size does not exceed five times its pre‐issue net worth as per the audited balance sheet of the preceding financial year; e. if it has changed its name within the last one year, at least fifty per cent. of the revenue for the preceding one full year has been earned by it from the activity indicated by the new name.
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In this regard, we submit that the above conditions have been complied with as follows a. The Net Tangible Assets of the Company is more than 3 Crore in each of the preceding three full years (of 12 Months each) of which not are more than 50% is held in Monetary Assets (i.e. Cash & Bank Balance) (` in crore) Particulars March 31, March 31, March 31, March 31, March 31, 2007 2008 2009 2010 2011 Net Tangible Assets 2.54 4.31 6.65 14.49 23.60 Distributable Profit ‐0.04 0.19 0.60 1.30 4.04 Net Worth 0.09 0.97 1.52 2.97 14.22 Monetary Assets 0.07 0.16 0.41 0.41 1.29 Monetary Assets/ Net Tangible Assets (%) 3% 4% 6% 3% 5% In this regard, Certificate dated September 06, 2011 has been issued by Independent Chartered Accountant, M/s. S. S. Rathi & Co., Chartered Accountants, which is as follows: b. The Company has not declared dividend in preceding three full yeas but have track record of distributable profit in terms of section 205 of The Companies Act, 1956 for at least three out of immediately preceding five years. c. The Net worth of the Company is more than ` 1 Crore in each of the preceding three full years (of 12 Months each). d. The Company shall ensure that the aggregate of the proposed Issue and all previous issues made in the same financial years in terms of the Issue size (i.e. public issue by way of this offer document + firm allotment+ promoters’ contribution through the offer document, if any) does not exceed five times the pre‐issue net worth of our Company as per the audited balance sheet of the last financial year. e. Our Company has changed its name during the last one year from M/s. Krishna Profiles Private Limited to M/s. Jiji Industries Limited upon conversion from private limited to public limited Company vide fresh certificates of incorporation dated May 26, 2011 and May 30, 2011 issued by the Assistant Registrar of Companies, Madhya Pradesh and Chhattisgarh. The Company has neither changed its Object Clause in the MoA nor has it changed its business activities upon said change of name. Accordingly there is a due compliance of Regulation 26(1)(e) of SEBI (ICDR) Regulations. In accordance with the Regulation 26(4) of SEBI ICDR Regulations, we ensure that the number of allottees in the proposed Issue shall be atleast 1,000; otherwise, we shall forthwith refund the entire subscription amount received. If such money is not repaid within eight days after our Company becomes liable to repay it (i.e. from the date of refusal or within 10 working Days from the Bid Closing date, whichever is earlier), our Company and every officer in default will, on and from expiry of eight days, be liable to repay such application money with interest rate of 15% per annum, as prescribed under Section 73 of the Companies Act. DISCLAIMER CLAUSE OF SEBI AS REQUIRED, A COPY OF THIS OFFER DOCUMENT HAS BEEN SUBMITTED TO SEBI. “IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE OFFER DOCUMENT. THE LEAD MERCHANT BANKER, HEM SECURITIES LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFER DOCUMENTARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS,
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2009 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT, WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER, HEM SECURITIES LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER 07, 2011 WHICH READS AS FOLLOWS: WE, THE BOOK RUNNING LEAD MANAGER TO THE ABOVE MENTIONED FORTHCOMING ISSUE, STATE AND CONFIRM AS FOLLOWS 1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE; 2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT: a. THE DRAFT RED HERRING PROSPECTUS FILED WITH THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; b. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE ISSUE AS ALSO THE REGULATIONS, GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND c. THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL‐INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE (AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS). 3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID. 4. WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITIY OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS. – NOTED FOR COMPLIANCE 5. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SPECIFIED SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK‐IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF THE PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK‐IN, WILL NOT BE DISPOSED/ SOLD/ TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK‐ IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS. 6. WE CERTIFY THAT REGULATION 33 OF THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE CLAUSE HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS. ‐NOTED FOR COMPLIANCE
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7.
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WE UNDERTAKE THAT SUB REGULATION (4) OF REGULATION (32) AND CLAUSE (C) AND (D) OF SUB REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS 2009 SHALL BE COMPLIED WITH. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. ‐ NOT APPLICABLE WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE COMPANY FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OF THE COMPANY AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB‐SECTION (3) OF SECTION 73 OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEY SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE PROSPECTUS. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER COMPANY SPECIFICALLY CONTAINS THIS CONDITION. ‐NOTED FOR COMPLIANCE WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE. a. NOT APPLICABLE. AS THE ISSUE SIZE IS MORE THAN RS 10 CRORES, AS PER SECTION 68B OF THE COMPANIES ACT, 1956, THE EQUITY SHARES ARE TO BE ISSUED IN DEMAT MODE ONLY. WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS :
13.
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a. AN UNDERTAKING FROM THE ISSUER COMPANY THAT AT ANY GIVEN TIME THERE SHALL BE ONLY ONE DENOMINATION FOR THE SHARES OF THE COMPANY; AND b. AN UNDERTAKING FROM THE COMPANY THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE. ‐NOTED FOR COMPLIANCE WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE ,ETC. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION‐WISE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF
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COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING PROSPECTUS WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY. THE FILING OF OFFER DOCUMENT DOES NOT, HOWEVER, ABSOLVE THE ISSUER FROM ANY LIABILITIES UNDER SECTION 63 OR 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MERCHANT BANKER ANY IRREGULARITIES OR LAPSES IN THE OFFER DOCUMENT.” Disclaimer from Our Company, our Directors and the BRLM Our Company, our Directors and the BRLM accept no responsibility for statements made otherwise than in the Draft Red Herring Prospectus or in the advertisements or any other material issued by or at instance of the above mentioned entities and that anyone placing reliance on any other source of information, including our website, www.jijiindustries.net, would be doing so at his or her own risk. Caution The BRLM accept no responsibility, save to the limited extent as provided in the Agreement dated [●] entered into between the BRLM and our Company and the Underwriting Agreement to be entered into between the Underwriters and our Company. All information shall be made available by us, the BRLM and the Underwriters to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in house research or sales reports, at bidding centres or elsewhere. Neither our Company nor any member of the syndicate would be liable to bidders for any failure in downloading the Bids due to default in any software / hardware system or otherwise. The BRLM and its associates and affiliates may engage in transactions with and perform services for our Company and associates of our Company in the ordinary course of business and have engaged, or may in future engage, in investment banking transaction with our Company and associates of our Company for which they have received and may in future receive, compensation. Investors / Bidders in the Issue will be required to confirm and will be deemed to have represented to our Company and the Underwriters and their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire our Equity Shares and will not offer, sell, pledge or transfer the Equity Shares of our Company to any person who is not eligible under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of our Company. Our Company, the Underwriters and their respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to acquire Equity Shares of our Company. Disclaimer In Respect of Jurisdiction This issue is being made in India to persons resident in India (including Indian nationals resident in India who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co‐ operative banks (subject to RBI permission if any), trust registered under the Societies Registration Act, 1860, as amended from time to time or any other trust law and who are authorised under their constitution to hold and invest in shares), permitted insurance companies, pension funds and to NRIs , FIIs, Venture Capital Funds and Foreign Venture Capital Investors registered with SEBI. The Draft Red Herring Prospectus does not, however, constitute an invitation to subscribe to Equity Shares issued hereby in any other jurisdiction to any person to whom it is unlawful to make an issue or invitation
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in such jurisdiction. Any person into whose possession the Draft Red Herring Prospectus comes is required to inform himself / herself about and to observe any such restrictions. Any disputes arising out of this issue will be subject to the jurisdiction of appropriate courts at Delhi, India only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that the Draft Red Herring Prospectus has been filed with the SEBI for its observations and SEBI has given its observation. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and the Draft Red Herring Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of the Draft Red Herring Prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the company since the date hereof or that the information contained herein is correct as of any time subsequent to this date. The Equity Shares have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold (i) in the United States to “qualified institutional buyers”, as defined in Rule 144A of the Securities Act in reliance on Rule 144A under 233 the Securities Act, and (ii) outside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act. The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction. Disclaimer Clause of BSE As required, a copy of the Draft Red Herring Prospectus has been submitted with Bombay Stock Exchange Limited (hereinafter referred to as BSE) The Disclaimer Clause as intimated by BSE to our Company, post scrutiny of the Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to filing with the RoC. Disclaimer Clause of NSE As required, a copy of the Draft Red Herring Prospectus has been submitted with National Stock Exchange of India Limited (hereinafter referred to as NSE). The Disclaimer Clause as intimated by NSE to our Company, post scrutiny of the Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to filing with the RoC. Filing A copy of the Red Herring Prospectus has been filed with the Corporate Finance Department of SEBI at Plot No. C4‐A, “G” Block, Bandra Kurla Complex, Bandra (East), Mumbai ‐ 400 051. A copy of the Draft Red Herring Prospectus, along with the documents required to be filed under section 60B of the Companies Act would be delivered for registration to the RoC and a copy of Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration to the Registrar of Companies, Madhya Pradesh and Chattisgarh Listing Applications have been made to the BSE and NSE for permission to deal in and for an official quotation of our Equity Shares. Our existing Equity shares are not listed on any stock exchange in India. BSE shall be the Designated Stock Exchange with which the basis of allotment will be finalized for the QIB, Non‐ Institutional portion and Retail portion.
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If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the Stock Exchanges mentioned above, our company shall forthwith repay, without interest all monies received from the applicants in pursuance of the Draft Red Herring Prospectus. If such money is not repaid within 8 days after our company becomes liable to repay it (i.e. from the Date of Refusal or within 10 working days from the date of Bid/Issue closing date whichever is earlier), then our Company, and every director of our Company who is an officer in default shall, on and from expiry of 8 days, will be jointly and severally liable to repay such application money with interest at the rate of 15% per annum on application money as prescribed under Section 73 of the Companies Act. Our Company together with the assistance of the BRLM shall ensure that all steps for the completion of the necessary requirements for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within 12 working days of the Bid Closing Date. Impersonation Attention of the applicants is specifically drawn to the provisions of sub‐section (1) of Section 68A of the Companies Act, which is reproduced below: “Any person who: (a) Makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or (b) Otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitious name shall be punishable with imprisonment for a term which may extend to five years.” Consents Consents in writing of (a) our Promoters, Directors, Company Secretary and Compliance Officer, (b) the Auditors, (c) Legal Advisor, (d) Bankers to our Company, (e) Book Running Lead Manager, (f) Registrar to the Issue, (g) Bankers to the Issue,(h) Syndicate Members and (i) IPO Grading Agency to act in their respective capacities, have been obtained and would be filed along with a copy of the Red Herring Prospectus with the RoC, Madhya Pradesh and Chattisgarh as required under Sections 60 and 60B of the Companies Act and such consents have not been withdrawn upto the time of delivery of the Red Herring Prospectus for registration with the RoC, Madhya Pradesh and Chattisgarh. Consents in writing of the underwriters will be obtained and filed along with the final prospectus and other relevant documents required to be filed under Section 60 of the Companies Act with RoC, Madhya Pradesh and Chattisgarh. M/s. Gandhi Dhakad Gupta and Co., Chartered Accountants, our Statutory Auditors have also given their written consent for inclusion of their report in the form and context in which it appears on page 127 in the Draft Red Herring Prospectus and such consent and report have not been withdrawn upto the time of delivery of a copy of the Red Herring Prospectus for registration with the Registrar of Companies, Madhya Pradesh and Chattisgarh. Expert Opinion Except as stated (a) in the section titled “Financial Statements of the Company” on page 127, (b) the “Statement of Tax Benefits” appearing on page 51, (c) the report provided by CARE, IPO Grading Agency and given in annexure on page [●] furnishing the rationale for its IPO Grading, we have not obtained any other expert opinion. Further such opinions / report have not been withdrawn till the date of filing of the Red Herring Prospectus with the Registrar of Companies. Undertakings from the Promoters and Directors
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The Company accepts full responsibility for the accuracy of the information given in this Draft Red Herring Prospectus and confirms that to the best of its knowledge and belief, there are no other facts, their omission of which make any statement in this Draft Red Herring Prospectus misleading and the Promoters / Directors of the Company further confirm that they have made all reasonable inquiries to ascertain such facts. The Company further declares that the Stock Exchanges to which an application for official quotation is proposed to be made does not take any responsibility for the financial soundness of the Issue or for the price at which the Equity Shares are offered or for the correctness of the statement made or opinions expressed in this Draft Red Herring Prospectus. The Promoters / Directors of the Company declare and confirm that no information / material likely to have a bearing on the decision of investors in respect of the Equity Shares offered in terms of this Draft Red Herring Prospectus has been suppressed, withheld and / or incorporated in the manner that would amount to misstatement, misrepresentation and in the event of its transpiring at any point of time till allotment / refund, as the case may be, that any information / material has been suppressed / withheld and / or amounts to a misstatement / misrepresentation, the Promoters / Directors of the Company undertake to refund the entire application monies to all the subscribers within eight (8) days thereafter without prejudice to the provisions of Section 63 of the Companies Act. Expenses of the Issue The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertising expenses and listing fees. The estimated Issue expenses are as follows: (` in lakhs) Particulars Amount % of Issue Size* % of Issue ` Lakhs* Expenses* BRLM / Syndicate member fee [●] [●] [●] Underwriting & Selling Commission [●] [●] [●] Advertising & Marketing expenses [●] [●] [●] Registrar fee [●] [●] [●] Printing, Stationary, Dispatch [●] [●] [●] Other expenses (including listing fee, SEBI filing fee, IPO [●] [●] [●] Grading expenses, Legal Counsel fee, Depository charges, Auditor’s fee, etc.) Total [●] [●] [●] * Will be incorporated after finalisation of the issue price at the time of the Prospectus. Fees Payable to the BRLM The fees payable to the BRLM (including underwriting commission and selling commission) for the Issue will be as per the engagement letter from our Company to the BRLM and the Agreement dated August 26, 2011 executed between us and BRLM, copy of which are available for inspection at our registered office. Fees Payable to the Syndicate Members The fees payable to the Syndicate Members (including underwriting commission and selling commission) for the Issue will be as per the engagement letter dated [●] from our Company to the Syndicate Members copy of which is available for inspection at our registered office. Fees Payable to the Registrar to the Issue The fees payable to the Registrar to the Issue will be as per the Agreement between Registrar to the Issue and our company dated June 21, 2011, a copy of which is available for inspection at our Registered Office. Adequate funds will be provided to the Registrar to the Issue by our Company to enable them to send refund orders or Allotment advice by registered post / under certificate of posting.
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Fees Payable to Others The total fees payable to the Legal Advisor, Auditor, IPO Grading Agency, Advertising Agency, etc., will be as per the terms of their respective engagement letters. Previous Public / Rights Issues Our Company has not made any public or rights issue of Equity Shares/Debentures since incorporation. Issue of Shares otherwise than for Cash Except as per details given below, our Company has not issued any Equity Shares for consideration other than cash since incorporation. Date of No. of Equity Nature of Particulars Benefits accrued Allotment Shares allotment to the Company allotted 29/06/2011 70,49,880 Bonus Issued to existing shareholders by utilizing the Nil amount lying to the credit of Securities Premium Account and General Reserve Commission and Brokerage on Previous Equity Issues Since this is the Initial Public Issue of our Equity Shares, no sum has been paid or is payable as commission and brokerage for subscribing to or procuring or agreeing to procure subscription for any of our Equity Shares since our incorporation. Promises v/s Performance Neither we nor any of Promoter Group Companies have made any public issue in past. Hence Promise v/s Performance is not applicable. Listed Ventures of Promoter Our promoters do not have any listed ventures. Outstanding Debenture or Bond Issues As on the date of filing of the Draft Red Herring Prospectus with SEBI, our Company does not have any outstanding Debentures or Bonds. Outstanding Preference Shares As on the date of filing of the Draft Red Herring Prospectus with SEBI, our Company does not have outstanding Preference Shares. Option to Subscribe Equity Shares being offered through this Draft Red Herring Prospectus can be applied for in dematerialized form only. Stock Market Data for Our Equity Shares This being an initial public offering of the Equity Shares of our Company, the Equity Shares are not listed on any stock exchange and hence no stock market data is available. Mechanism for Redressal of Investor Grievances The Agreement between the Registrar to the Issue and our Company provides for retention of records with the Registrar to the Issue for a period of atleast one year from the date of closing of this Issue.
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All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details including name, address of the applicant, application number, number of shares applied for, amount paid on application, depository participant, demat account number and the bank branch or collection centre where the application was submitted. All grievances relating to the ASBA process may be addressed to the SCSB, giving full details such as name, address of the applicant, number of Equity Shares applied for, amount paid on application and the Designated Branch or the collection centre of the SCSB where the Bid cum Application Form was submitted by the ASBA Bidders. Our Company has constituted “Corporate Governance and Investor Grievances Committee” to look into the redressal of shareholder / investor complaints such as Issue of duplicate / split / consolidated share certificates, allotment and listing of shares and review of cases for refusal of transfer / transmission of shares and debentures, complaints for non receipt of dividends etc. For further details on this committee, please refer under the head ‘Our Management ‐ Corporate Governance’ on page 109 of the Draft Red Herring Prospectus. As on the date of filing of the Draft Red Herring Prospectus with SEBI, no investor complaints are pending with us. Disposal of Investor Grievances We estimate that the average time required by us or the Registrar to the Issue or the SCSBs in case of ASBA Bidders for the redressal of routine investor grievances shall be 10 working days from the date of receipt of the complaint. In case of non‐routine complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible. We have appointed Ms. Ranjana Singh, Company Secretary as the Compliance Officer and he may be contacted at the following address in case of any pre‐Issue or post‐Issue‐related problems: Company Secretary and Compliance Officer Ms. Ranjana Singh Company Secretary & Compliance Officer 33‐34, Rambali Nagar, Sangam Nagar Road, Indore, Madhya Pradesh ‐ 452001 Telefax: +91 731 4046002, Website: www.jijiindustries.net, Email:
[email protected] Changes in Auditors during the last five years Following are the details of change in our Auditors during the last five years. Sr Name of the Auditor Firm Date of Date of Reason No. Appointment Resignation / Change 1 S.N. Kabra & Co., Chartered Accountants; 207 “C” Block, ‐ 29/09/2007 Appointment Silver Mall, R.N.T. Marg, Indore & Resignation 2 Gandhi Dhakad Gupta & Co., Chartered Accountants; 29/09/2007 ‐ Appointment 508, Chetak Centre, 12/2, R.N.T. Marg, Indore Capitalisation of Reserves or Profits We have issued bonus shares on June 29, 2011, details of which are mentioned under ‘Notes to Capital structure’ appearing on page 23 of the Draft Red Herring Prospectus. Revaluation of Assets The Company has not revalued its assets in the last five years.
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SECTION VIII – ISSUE RELATED INFORMATION 8.1 ‐ TERMS OF THE ISSUE The Equity Shares being issued through this Issue are subject to the provisions of the Companies Act, SEBI ICDR Regulations, our Memorandum and Articles of Association, the terms of the Draft Red Herring Prospectus, the Red Herring Prospectus, the Prospectus, the Bid cum Application Form, the Revision Form, the Confirmation of Allocation Note and other terms and conditions as may be incorporated in the allotment advices and other documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, the Government of India, the Stock Exchanges, Registrar of Companies, Reserve Bank of India, FIPB and / or other authorities, as in force on the date of the Issue and to the extent applicable. Authority for the Issue See “Other Regulatory and Statutory Disclosures” on Page 175 of this Draft Red Herring Prospectus. Ranking of Equity Shares The Equity Shares being issued shall be subject to the provisions of the Companies Act, our Memorandum and Articles of Association and shall rank pari passu in all respects with the other existing Equity Shares of the Company including rights in respect of dividend. The Allottees in receipt of Allotment of Equity Shares under this Issue will be entitled to dividend, voting rights or any other corporate benefits, if any, declared by our Company after the date of allotment. For further details, see “Main Provisions of the Articles of Association” on page 221 of this Draft Red Herring Prospectus. Mode of Payment of Dividend The declaration and payment of dividend will be as per the provisions of the Companies Act. Compliance with SEBI ICDR Regulations Our Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time. Face Value and Issue Price The face value of the Equity Shares is ` 10/‐ each. The Equity Shares are being issued in terms of this Draft Red Herring Prospectus at the price band of ` [●] to ` [●] and Floor Price is [●] times of the face value and the Cap Price is [●] times of the face value. The Issue Price of ` [●] is [●] times the face value. The issue price will be determined by the Board of Directors of our Company in consultation with the BRLM on the basis of assessment of market demand for the equity shares issued by way of book building. At any given point of time there shall be only one denomination of the Equity Shares of our Company, subject to applicable laws. Rights of the Equity Shareholder Subject to applicable laws, regulations, rules and guidelines and the Memorandum and Articles of Association, the equity shareholders shall have the following rights: •
Right to receive dividend, if declared;
•
Right to attend general meetings and exercise voting powers, unless prohibited by law;
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•
Right to vote on a show of hands in person or a poll either in person or by proxy;
•
Right to receive annual reports and notices to members;
•
Right to receive offers for rights shares and / or be allotted bonus shares, if announced and / or any other similar offers;
•
Right to receive surplus, if any, on liquidation;
•
Subject to applicable law including and RBI rules and regulations, right of free transferability of Equity Shares; and
•
Such other rights, as may be available to a shareholder of a listed public company under the Companies Act, the terms of the listing agreement executed with the Stock Exchanges, and the Memorandum and Articles of Association of our Company.
For a detailed description of the main provisions of the Articles of Association of our Company relating to among other things, voting rights, dividend, forfeiture and lien, cessation, transfer and transmission and/or consolidation / splitting, see section titled “Main Provisions of the Articles of Association” of our Company” on page 221 of this Draft Red Herring Prospectus. Market Lot and Trading Lot In terms of Section 68B of the Companies Act, the Equity Shares of the Company shall be allotted only in dematerialized form. In terms of existing SEBI ICDR Regulations, the trading of the Equity Shares of the Company shall only be in dematerialized form for all investors. Since trading of the Equity Shares of the Company is in dematerialized form, the tradable lot is one Equity Share. Allocation and allotment of Equity Shares to the successful Bidders subject to minimum Allotment of [●] Equity Shares. For details of Allocation and Allotment, see “Issue Procedure ‐ Basis of Allotment” on page 212 of this Draft Red Herring Prospectus. The Price Band and the minimum Bid Lot size for the Issue will be decided by the Company in consultation with the BRLM, and advertised newspapers in English, Hindi and a newspaper of Regional language of the State of Madhya Pradesh at least two working days prior to the Bid / Issue Opening Date. Jurisdiction Exclusive jurisdiction for the purpose of this Issue is with the competent courts in Indore, Madhya Pradesh. Joint Holders Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint‐tenants with benefits of survivorship. Nomination Facility to Investor In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidder(s), may nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidder(s), death of all the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder, shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share. Where the nominee is a minor, the holder may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale / transfer / alienation of Equity Share by the person nominating. A buyer will be entitled to make a
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fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at our Registered Office or to the Registrar and Transfer Agents of our Company. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by our Board, elect either: a) to register himself or herself as the holder of the equity shares; or b) to make such transfer of the equity shares, as the deceased holder could have made. Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the equity shares, and if the notice is not complied with within a period of 90 days, our Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the equity shares, until the requirements of the notice have been complied with. Since the allotment of Equity Shares in the Issue will be made only in dematerialised mode there is no need to make a separate nomination with our Company. Nominations registered with respective depository participant of the applicant would prevail. If the investors require to change their nomination, they are requested to inform their respective depository participant. Application by Eligible NRIs, FIIs registered with the SEBI and FVCIs registered with the SEBI It is to distinctly understood that there is no reservation for NRIs and FIIs registered with the SEBI or FVCIs registered with the SEBI. Bid / Issue Period Bidders may submit their Bids only in Bid / Issue Period. The Bid / Issue Opening Date is [●] and the Bid / Issue Closing date is [●]. Minimum Subscription If we do not receive the minimum subscription of 90% of the Issue including devolvement of Underwriters, if any, within 60 days from the Bid / Issue Closing Date, we shall refund the entire subscription amount received. If there is a delay beyond 8 days after we become liable to pay the amount, we shall repay the money with interest at the rate of 15% per annum prescribed under Section 73 of the Companies Act, 1956. Further in terms of Regulation 26(4) of the ICDR Regulations, our Company shall ensure that the number of prospective allottees to whom Equity Shares will be allotted will not be less than 1,000. Arrangement for Disposal of Odd Lots: Since, our Equity Shares will be traded in dematerialized form only and therefore the tradable lot is one share. Therefore there are no arrangements for disposal of odd lots. Restriction, If Any on Transfer and Transmission of Equity Shares/ Debentures and on their Consolidation/ Splitting Except for the lock‐in of the Equity Shares held by the Promoter as detailed in “Capital Structure”, there are no restrictions on transfers and transmission of shares/debentures and on their consolidation/splitting except as provided in the Articles of Association of our Company. For details, see “Capital Structure” and “Main Provisions of the Articles of Association” on pages 23 and 221 respectively, of this Draft Red Herring Prospectus, respectively.
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Option to receive Equity Shares in Dematerialised Form Investors should note that Allotment of Equity Shares to all successful Bidders will only be in the dematerialized form. Bidders will not have the option of getting Allotment of the Equity Shares in physical form. The Equity Shares on Allotment shall be traded only in the dematerialised segment of the Stock Exchanges. Withdrawal of Issue Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue any time after the Bid Opening Date but before Allotment. In such an event, our Company would issue a public notice in the newspapers in which the pre‐Issue advertisements were published, within two Working Days of the Bid Closing Date, providing reasons for not proceeding with the Issue. The BRLM, through the Registrar to the Issue, shall notify the SCSBs to unblock the bank accounts of the ASBA Bidders within one Working Day from the day of receipt of such notification. Our Company shall also inform the Stock Exchanges on which the Equity Shares are proposed to be listed. Notwithstanding the foregoing, the Issue is also subject to obtaining (i) the final listing and trading approvals of the Stock Exchanges, which our Company shall apply for only after Allotment, and (ii) the final RoC approval of the Prospectus after it is filed with the RoC. Period of Subscription The subscription list for public issue shall remain open for atleast 3 working days and not more than 10 working days.
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8.2 ISSUE STRUCTURE The present Issue of 90,00,000 Equity Shares, at a price of ` [●] for cash aggregating ` [●] lakhs, is being made through the 100% Book Building Process. Particulars QIBs Non‐Institutional Bidders Retail Individual Bidders Number of Equity Not more than 45,00,000 equity Not less than 13,50,000 Not less than 31,50,000 Shares* shares or Issue less allocation to equity shares or Issue less equity shares or Issue Non‐Institutional Bidders and Retail allocation to QIB Bidders less allocation to QIB and Non‐ Bidders and Retail Individual Bidders Bidders Institutional Bidders Percentage of Issue Not more than 50% of the Issue (of Not less than 15% of the Not less than 35% of the Size available for which 5% shall be available for Issue or Issue less allocation Issue or Issue less allocation allocation for Mutual Funds) or Issue to QIB Bidders and Retail allocation to QIB Bidders and Non‐Institutional less allocation to Non‐Institutional Individual Bidders Bidders Bidders and Retail Bidders. Mutual Funds participating in the 5% reservation in the QIB Portion will also be eligible for allocation in the remaining QIB Portion. The unsubscribed portion, if any, in the Mutual Fund portion will be available to remaining QIBs. Basis of Allocation if Proportionate as follows: Proportionate Proportionate respective category is (a) 2,25,000 Equity Shares shall be oversubscribed allocated on a proportionate basis to Mutual Funds in the Mutual Funds Portion; (b) Balance 42,75,000 Equity Shares shall be allocated on a proportionate basis to all QIBs including Mutual Funds receiving allocation as per (a) above. Minimum Bid / Bid lot Such number of Equity Shares that Such number of Equity [●] Equity Shares and in the Bid Amount exceeds `2,00,000 Shares that the Bid Amount multiples of [●] Equity and in multiples of [●] Equity Shares exceeds `2,00,000 and in Shares thereafter. thereafter. multiples of [●] Equity Shares thereafter. Maximum Bid / Bid Such number of equity shares not Such number of equity Such number of Equity lot exceeding the Issue, subject to shares not exceeding the Shares so as to ensure regulations as applicable to the Issue subject to regulations that the Bid Amount does not exceed Bidder. as applicable to the Bidder. `2,00,000 Mode of Allotment Compulsorily in dematerialised form Compulsorily in Compulsorily in dematerialised form dematerialised form Allotment lot [●] equity shares and in multiple of 1 [●] equity shares and in [●] equity shares and in equity share thereafter multiple of 1 equity share multiple of 1 equity thereafter share thereafter Trading Lot One Equity Share One Equity Share One Equity Share
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Particulars Who can Apply**
Terms of Payment ***
Margin Amount
QIBs
Non‐Institutional Bidders
Public financial institutions, as specified in Section 4A of the Companies Act, scheduled commercial banks, mutual funds, foreign institutional investor registered with SEBI, multilateral & bilateral development financial institutions, Venture Capital Funds registered with SEBI, foreign Venture capital investors registered with SEBI, State Industrial Development Corporations, Insurance Companies registered with the Insurance Regulatory and Development Authority, Provident Funds with minimum corpus of `250 million and Pension Funds with minimum corpus of ` 250 million, National Investment Fund set up by Resolution No. F. No. 2/3/2005‐DDII dated November 23, 2005 of Government of India published in the Gazette of India and insurance funds set up and managed by army, navy or air force of the Union of India and insurance funds set up and managed by the Department of Posts, India, eligible for bidding in this Issue. 100% of the Bid Amount shall be payable at the time of submission of Bid cum Application Form to the Members of the syndicate.
Resident Indian individuals, HUF (in the name of Karta), companies, corporate bodies, NRIs, societies , trusts and eligible/permitted Sub‐ Accounts which are foreign corporates or foreign individuals
100% of the bid amount on bidding
Retail Individual Bidders Individuals (including NRIs and HUFs in the name of Karta) applying for Equity Shares such that the Bid Amount does not exceed ` 2,00,000 in value.
100% of the Bid Amount shall be payable at the time of submission of Bid cum Application Form to the Members of the syndicate. 100% of the bid amount on 100% of the bid amount bidding on bidding
100% of the Bid Amount shall be payable at the time of submission of Bid cum Application Form to the Members of the syndicate.
* Subject to valid bids being received at or above the Issue Price. Under subscription, if any, in any category would be met with spillover from other categories in accordance with applicable laws, regulations and guidelines. Investors may note that in case of over subscription in the Issue, allotment to QIB Bidders, Non‐Institutional Bidders and Retail Individual Bidders shall be made on a proportionate basis. ** In case the Bid‐cum‐Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the same joint names and in the same sequence in which they appear in the Bid‐cum‐Application Form. *** In case of ASBA Bidders, the SCSB shall be authorized to block such funds in the bank account of the ASBA Bidder that are specified in the ASBA Bid cum Application Form.
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8.3 ‐ ISSUE PROCEDURE This section applies to all Bidders. All QIB Bidders and Non Institutional Bidders shall compulsorily apply through ASBA process. Retail Individual Bidders have the option to participate in this Issue through the ASBA process. ASBA Bidders should note that the ASBA process involves application procedures that are different from the procedure applicable to Bidders other than the ASBA Bidders. Bidders applying through the ASBA process should carefully read the provisions applicable to such applications before making their application through the ASBA process. Please note that all Bidders have to pay the full Bid Amount or instruct the relevant SCSBs to block the full Bid Amount along with the application. Pursuant to SEBI Circular bearing number CIR/CFD/DIL/2/2011 dated May 16, 2011 Retail Individual Bidders can Bid at a price net of the Retail Discount (if any) and will be required to indicate the Bid price before adjustments for such Retail Discount, if any. Book Building Procedure Our Company is eligible for the Issue in accordance with Regulation 26 (1) of the SEBI ICDR Regulations. The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall be available for allocation to QIBs on a proportionate basis (of which 5 % shall be available for allocation on a proportionate basis to the Mutual Funds). Further, not less than 15% and 35% of the Issue will be available for allocation on a proportionate basis to Non‐ Institutional Bidders and Retail Individual Bidders, respectively, subject to valid Bids being received at or above the Issue Price. Under‐subscription, if any, in any category, would be allowed to be met with spill‐over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLM and the Designated Stock Exchange. All QIB Bidders and Non Institutional Bidders shall compulsorily apply through ASBA process. Retail Individual Bidders have the option to participate in this Issue through the ASBA process. Any Bidder participating in this Issue through the ASBA process should provide the details of their respective bank accounts in which the corresponding Bid amounts will be blocked by SCSBs. Bidders / Investors can bid under this Issue in the following manner: Category of Bidder / Investor Mode of application ASBA process Non ASBA process QIB Bidders Non Institutional Bidders Retail Individual Bidders All Bidders, other than ASBA Bidders are required to submit their Bids through the members of Syndicate or their sub‐ syndicate members. ASBA Bidders may submit their Bids through the members of Syndicate or their sub‐syndicate members or directly to the SCSBs. Bidding of ASBA Forms by Syndicate / Sub syndicate members SEBI vide its Circular bearing no. CIR/CFD/DIL/8/2010 dated October 12, 2010 has permitted Syndicate / Sub syndicate members to procure ASBA Bid cum application forms from the investors, upload the bid and other relevant details of such ASBA forms in the biding platform of the Stock Exchange(s) and thereafter forward the ASBA Bid cum application form to the SCSBs. SCSBs shall carry out further action for the ASBA bid cum application forms such as signature verification, blocking of funds and forward the forms to the Registrar to the Issue.
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In 12 cities specified below, the Bidders can submit their bids through the Syndicate / Sub syndicate members (hereinafter referred to as “Syndicate”). All bidding centre of the members of the Syndicate in the following cities (hereinafter termed as “specified cities”) can accept and bid ASBA Bid cum application forms: Mumbai Chennai Kolkata Delhi Ahmedabad Rajkot Jaipur Bangalore Hyderabad Pune Baroda Surat The SCSBs shall specify at least one Branch in above cities where the Syndicate can submit the ASBA Bid cum application forms after Bidding. The list of such branch is available on the website of SEBI (www.sebi.gov.in). AT ALL OTHER PLACES (EXCEPT CITIES SPECIFIED AS ABOVE), ASBA BID CUM APPLICATION FORMS SHOULD BE SUBMITTED WITH THE DESIGNATED BRANCHES OF SCSBs ONLY. In respect of ASBA Bid cum application forms accepted by Syndicate / Sub‐syndicate members and submitted with the specified Branches of SCSBs, the Company will pay an amount of ` [●] per ASBA Bid cum application form to SCSBs as processing fees for such application. Investors should note that Allotment of Equity Shares to all successful Bidders will be only in the dematerialised form. The Bid cum Application Forms which do not have the details of the Bidders’ depository accounts shall be treated as incomplete and rejected. Bidders will not have the option of being Allotted Equity Shares in physical form. The Equity Shares on Allotment shall be traded only on the dematerialised segment of the Stock Exchanges. Bid cum Application Form and ASBA Bid cum Application Forms Bidders shall use only the specified Bid cum Application Form (except in the case of ASBA Bidders) bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of the Draft Red Herring Prospectus. Before being issued to Bidders, the Bid cum Application Form (except in relation to ASBA Bidders) shall be serially numbered and the date and time shall be stamped at the Bidding centres and such form shall be signed by the Bidder and countersigned by the relevant member of the Syndicate. ASBA Bidders shall submit the ASBA Bid cum Application Form either in physical or electronic form (through the internet banking facility available with the SCSBs or such other electronically enabled mechanism for Bidding) to the members of Syndicate or their sub‐syndicate members (in specified cities) or the SCSB authorizing blocking funds that are available in the bank account specified in the ASBA Bid cum Application Form used by ASBA Bidders. The Bid cum Application Form shall contain information about the Bidder and the price and number of Equity Shares that the Bidder wishes to Bid for. Bidders shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered multiple Bids. On the allocation of Equity Shares, dispatch of the CAN, and filing of the Prospectus with the RoC, the Bid cum Application Form shall be treated as a valid application form. Upon completion and submission of the Bid cum Application Form to a member of the Syndicate (in specified cities) or SCSB, as the case may be, the Bidder shall be deemed to have authorised the Company to make the necessary changes in the Draft Red Herring Prospectus and the Bid cum Application Form as would be required under the ICDR Regulations and other applicable laws, for filing the Prospectus with the RoC and as would be required by SEBI and/or the RoC after such filing, without prior or subsequent notice of such changes to the Bidder. To supplement the foregoing, the mode and manner of Bidding is illustrated in the following chart: Category of
Mode of
Application form to be used for
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To whom the application form has to be
bidder Bidding Bidding Retail Individual Either (i) ASBA (i) If Bidding through ASBA, ASBA Bidders or Form (physical or electronic); or (ii) (ii) non‐ASBA If Bidding through non‐ASBA, Bid cum Application Form.
Non‐Institutional Bidders and QIBs
ASBA (Kindly ASBA Form (physical or electronic) note that ASBA is mandatory and no other mode of Bidding is permitted)
submitted (i) If using physical ASBA Form, to the members of the Syndicate only at Syndicate ASBA Centres; or (ii) If using physical ASBA Form, to the Designated Branches of the SCSBs where the SCSB account is maintained; or (iii) If using electronic ASBA Form, to the SCSBs, electronically through internet banking facility, where the SCSB account is maintained; or (iv) If using Bid cum Application Form, to the members of the Syndicate at the Bidding Centres. (i) If using physical ASBA Form, to the members of the Syndicate only at Syndicate ASBA Centre; or (ii) If using physical ASBA Form, to the Designated Branches of the SCSBs where the SCSB account is maintained; or (iii) If using electronic ASBA Form, to the SCSBs, electronically through internet banking facility, where the SCSB account is maintained.
The prescribed colour of the Bid cum Application Form for the various categories is as follows: Category Resident Bidders including Eligible NRIs applying on a non‐repatriation basis Non‐Resident Bidders including Eligible NRIs, FVCIs and FIIs applying on a repatriation basis
Colour of Bid cum Application Form White Blue
Who can Bid? (a) Indian nationals resident in India who are not minors in single or joint names (not more than three); (b) Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First Bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals; (c) Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in equity shares; (d) Mutual Funds registered with SEBI; (e) Eligible NRIs on a repatriation basis or on a non repatriation basis subject to applicable laws. NRIs other than eligible
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NRIs are not eligible to participate in this Issue; (f) Indian financial institutions, commercial banks (excluding foreign banks), regional rural banks, co‐operative banks (subject to RBI regulations and the ICDR Regulations and other laws, as applicable); (g) FIIs and sub‐accounts registered with SEBI, other than a sub‐account which is a foreign corporate or foreign individual, under the QIB Portion; (h) Sub‐accounts of FIIs registered with SEBI, which are foreign corporates or foreign individuals only under the Non‐ Institutional Bidders category. (i) Limited Liability Partnerships; (j) Venture capital funds registered with SEBI; (k) Foreign Venture Capital Investors registered with SEBI; (l) State Industrial Development Corporations; (m) Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts/societies and who are authorised under their respective constitutions to hold and invest in equity shares; (n) Scientific and/or industrial research organisations authorised to invest in equity shares; (o) Insurance Companies registered with Insurance Regulatory and Development Authority; (p) Provident Funds with a minimum corpus of ` 2,500 lakhs and who are authorised under their constitution to hold and invest in equity shares; (q) Pension Funds with a minimum corpus of ` 2,500 lakhs and who are authorised under their constitution to hold and invest in equity shares; (r) National Investment Fund; (s) Insurance funds set up and managed by army, navy or air force of the Union of India; (t) Insurance funds set up and managed by the Department of Posts, India. (u) Multilateral and Bilateral Development Financial Institutions; and Note: As per existing regulations, OCBs cannot participate in the Issue. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law. Participation by associates of the BRLM and the Syndicate Members The BRLM and the Syndicate Members shall not be entitled to subscribe to this Issue in any manner except towards fulfilling their underwriting obligations. However, associates and affiliates of the BRLM and the Syndicate Members are entitled to subscribe for Equity Shares in the Issue, including in the QIB Portion and Non‐Institutional Portion where the allocation is on a proportionate basis. Such Bidding and subscription may be on their own account or on behalf of their clients. Bids by Mutual Funds As per the ICDR Regulations, 5% of the QIB Portion, has been specifically reserved for Mutual Funds on a proportionate basis. An eligible Bid by a Mutual Fund in the Mutual Fund Portion shall first be considered for allocation proportionately in the Mutual Fund Portion. In the event demand in the Mutual Fund Portion is greater than 2,25,000 Equity Shares, allocation shall be made to Mutual Funds proportionately, to the extent of the Mutual Fund Portion. The remaining
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demand by Mutual Funds, as part of the aggregate demand by QIBs, shall be available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual Fund Portion. As per the current regulations, the following restrictions are applicable for investments by mutual funds: No Mutual Fund scheme shall invest more than 10% of its net asset value in equity shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes should own over 10% of any company’s paid‐up share capital carrying voting rights. The Bids made by asset management companies or custodians of Mutual Funds shall clearly indicate the name of the concerned scheme for which application is being made. Multiple applications In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. Bids by Non Residents including Eligible NRIs and FIIs on a repatriation basis There is no reservation for Eligible NRIs or FIIs or FVCIs registered with SEBI. Such Eligible NRIs, FIIs and FVCIs registered with SEBI will be treated on the same basis as other categories for the purpose of allocation. Bids by Eligible NRIs Bid cum Application Forms for Eligible NRIs applying on non‐ repatriation basis (blue in colour) will be available at our Registered Office, with the members of the Syndicate. Only such applications as are accompanied by payment in freely convertible foreign exchange shall be considered for Allotment. Eligible NRIs who intend to make payment through Non Resident Ordinary (“NRO”) accounts or by debits to their Non‐Resident External (“NRE”) or Foreign Currency Non‐Resident (“FCNR”) accounts should use the application form meant for Resident Indians (white in color). Bids by Eligible NRIs for a Bid Amount of upto ` 2,00,000 would be considered under the Retail Portion for the purposes of allocation and Bids for a Bid Amount of more than ` 2,00,000 would be considered under Non‐Institutional Portion for the purposes of allocation. Bids by FIIs As per the current regulations, the following restrictions are applicable for investments by FIIs: The Issue of Equity Shares to a single FII should not exceed 10% of our post‐Issue issued capital (i.e. 10% of 90,00,000 Equity Shares). In respect of an FII investing in our Equity Shares on behalf of its sub‐accounts, the investment on behalf of each sub‐account shall not exceed 10% of our total issued capital or 5% of our total issued capital in case such sub‐ account is a foreign corporate or an individual. As of now, the aggregate FII holding in our Company cannot exceed 24% of the post issue paid‐up Equity Share capital of our Company. But with the approval of the board and the shareholders by way of a special resolution, the aggregate FII holding in our Company can go upto 100%. Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of regulation 15A(1) of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations 1995, as amended (the “SEBI FII Regulations”), an FII, as defined in the SEBI FII Regulations, may issue, deal or hold, off shore derivative instruments (defined under the SEBI FII Regulations as any instrument, by whatever name called, which is issued overseas
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by a FII against securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its underlying) directly or indirectly, only in the event (i) such offshore derivative instruments are issued only to persons who are regulated by an appropriate regulatory authority; and (ii) such offshore derivative instruments are issued after compliance with ‘know your client’ norms. The FII is also required to ensure that no further issue or transfer of any Offshore Derivative Instrument issued by it is made to any persons that are not regulated by an appropriate foreign regulatory authority as defined under the ICDR Regulations. Associates and affiliates of the Underwriters, including the BRLM and the Syndicate Members that are FIIs may issue offshore derivative instruments against Equity Shares Allotted to them in the Issue. Any such offshore derivative instrument does not constitute any obligation of, claim on or an interest in, our Company. Bids by SEBI registered Venture Capital Funds and Foreign Venture Capital Investors As per the current regulations, the following restrictions are applicable for SEBI registered Venture Capital Funds and Foreign Venture Capital Investors: The SEBI (Venture Capital Funds) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulations, 2000, each, as amended, prescribe investment restrictions on Venture Capital Funds and FVCIs respectively registered with the SEBI. Accordingly, the holding in any company by any individual venture capital fund or FVCI registered with the SEBI should not exceed 25% of the corpus of the Venture Capital Fund or FVCI. However, venture capital funds or FVCIs may invest not over 33.33% of their respective investible funds in various prescribed instruments, including in initial public offers. Bids under Power of Attorney In case of Bids made pursuant to a power of attorney by limited companies, corporate bodies, registered societies, FIIs, Mutual Funds, insurance companies and provident funds with minimum corpus of ` 2,500 lakhs (subject to applicable law),pension funds with a minimum corpus of ` 2,500 lakhs and insurance funds set up and managed by the Department of Posts, India a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum of association and articles of association and/or bye laws must be lodged with the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In addition to the above, certain additional documents are required to be submitted by the following entities: a)
With respect to Bids by FVCIs, FIIs and Mutual Funds, a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form.
b) With respect to Bids by insurance companies registered with the Insurance Regulatory and Development Authority, in addition to the above, a certified copy of the certificate of registration issued by the Insurance Regulatory and Development Authority must be lodged with the Bid cum Application Form. c)
With respect to Bids made by provident funds with minimum corpus of ` 2,500 lakhs (subject to applicable law) and pension funds with a minimum corpus of ` 2,500 lakhs, a certified copy of a certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the Bid cum Application Form.
d) With respect to Bids by the limited liability partnerships registered under the Limited Liability Partnership Act, 2008 (“LLP Act”), a certified copy of certificate of registration issued under the LLP Act must be lodged along with the Bid‐ cum‐Application Form. Our Company, in its absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the power of attorney along with the Bid cum Application form, subject to such terms and conditions that our Company and the BRLM may deem fit.
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The above information is given for the benefit of the Bidders. Our Company and the BRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in the Draft Red Herring Prospectus. Our Company, the BRLM do not accept any responsibility for the completeness and accuracy of the information stated above. Maximum and Minimum Bid Size (a) For Retail Individual Bidders: The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Share thereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed ` 200,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed ` 200,000. If the Bid Amount is over ` 200,000 due to revision of the Bid or revision of the Price Band or on exercise of the option to be Bid at the Cut‐Off Price, the Bid would be considered for allocation under the Non‐Institutional Portion. The option to Bid at the Cut‐Off Price is given only to the Retail Individual Bidders, indicating their agreement to Bid and purchase at the final Issue Price as determined at the end of the Book Building Process. (b) For Other Bidders (Non‐Institutional Bidders and QIBs): The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount exceeds ` 200,000 and in multiples of [•] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. In case of revision in Bids, Non‐Institutional Bidders who are individuals have to ensure that the Bid Amount is greater than ` 200,000 for being considered for allocation in the Non‐Institutional Portion. If the Bid Amount reduces to `200,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non‐Institutional Bidders who are eligible for allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non‐ Institutional Bidders and QIBs are not allowed to Bid at the Cut‐Off Price. A QIB Bidder cannot withdraw its Bid after the Bid / Issue Closing Date. Information for the Bidders: a) The Red Herring Prospectus will be filed by our Company with the RoC at least three days before the Bid / Issue Opening Date. b) Copies of the Bid cum Application Form and the Red Herring Prospectus will be available with the Syndicate and our Registered Office. ASBA Bid cum Application Forms can be obtained by Bidders from the members of the Syndicate (in specified cities) or SCSBs and electronic ASBA Bid cum Application Forms shall be available on the websites of SCSBs. Furthermore, the SCSBs shall ensure that the abridged prospectus is made available on their websites. c) Copies of ASBA Bid cum Application Forms will also be available for downloading and printing, from websites of the Stock Exchanges (which provide electronic interface for ASBA facility) (www.bseindia.com and www.nseindia.com). The BRLM and the SCSBs will provide the hyperlink to BSE or NSE on their websites. A unique application number will be generated for every ASBA Bid cum Application Form downloaded and printed from the websites of the Stock Exchanges. d) The Syndicate and the Designated Branches of the SCSBs shall accept Bids from the Bidder during the Bidding Period in accordance with the terms of the Syndicate Agreement. e) Eligible Bidders who are interested in subscribing for the Equity Shares should approach any of the BRLM or the Syndicate Members or their authorized agents to register their Bids. Eligible Bidders can approach the members of the Syndicate (in specified cities) or Designated Branches of the SCSBs to register their Bids under the ASBA process.
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f)
The Bids should be submitted on the prescribed Bid cum Application Form only. Bids by ASBA Bidders shall be accepted by the members of the Syndicate (in specified cities) or Designated Branches of the SCSBs in accordance with the ICDR Regulations and any other circulars issued by SEBI in this regard. Bid cum Application Forms (other than ASBA Bid cum Application Forms) should bear the stamp of the members of the Syndicate. Bid cum Application Forms (other than ASBA Bid cum Application Forms), which do not bear the stamp of a member of the Syndicate, will be rejected. ASBA Bid cum Application Form bidded by the Syndicate member or their sub‐syndicate member (in specified cities), which do not bear the stamp of the member of the Syndicate, will be rejected.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM Bids and revisions of Bids must be: a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable. b) Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained here, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected. Bidders should note that the Syndicate and/or the SCSBs (as appropriate) will not be liable for errors in data entry due to incomplete or illegible Bid cum Application Forms or Revision Forms. c) Information provided by the Bidders will be uploaded in the online IPO system by the Syndicate and the SCSBs, as the case may be, and the electronic data will be used to make allocation/Allotment. Bidders are advised to ensure that the details are correct and legible. d) For Retail Individual Bidders (including Eligible NRIs), the Bid must be for a minimum of [●] Equity Shares and in multiples of [●] thereafter subject to a maximum Bid Amount of ` 2,00,000. In case the Bid Amount is over `2,00,000 due to revision of the Bid or revision of the Price Band or on exercise of Cut‐off option, the Bid would be considered for allocation under the Non‐Institutional Bidders portion. The option to Bid at Cut‐off Price is an option given only to the Retail Individual Bidders indicating their agreement to Bid and purchase at the final Issue Price as determined at the end of the Book Building Process. e) For Non‐Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds ` 200,000 and in multiples of [ ] Equity Shares thereafter. f) Bids by Eligible NRIs, FVCIs and FIIs on a repatriation basis shall be in the names of individuals, or in the names of such FIIs, respectively, but not in the names of minors, OCBs, firms or partnerships, foreign nationals (excluding NRIs) or their nominees. g) In a single name or in joint names (not more than three, and in the same order as their Depository Participant details). h) Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal. i) If the ASBA Account holder is different from the ASBA Bidder, the ASBA Bid cum Application Form should be signed by the account holder as provided in the ASBA Bid cum Application Form. Submission of Bid cum Application Form •
All Bid cum Application Forms or Revision Forms (other than with respect to ASBA Bidders) duly completed and accompanied by account payee cheques or drafts shall be submitted to the Syndicate at the time of submission of the Bid.
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•
With respect to ASBA Bidders who have submitted their bids to the members of the Syndicate (in specified cities), the ASBA Bid cum Application Form or the ASBA Revision Form shall be submitted to the respective member of the Syndicate.
•
With respect to ASBA Bidders who have submitted their bids to the Designated Branches of SCSBs, ASBA Bid cum application form or the ASBA Revision form shall be submitted to the respective Designated Branch of the SCSBs.
No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the Syndicate will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder. GENERAL INSTRUCTIONS Dos: (a) Check if you are eligible to apply as per the terms of the Red Herring Prospectus under applicable laws, rules and regulations; (b) Ensure that you have Bid within the Price Band; (c) Read all the instructions carefully and complete the Resident Bid cum Application Form (white in colour), the Non‐ Resident Bid cum Application Form (blue in colour) as the case may be; (d) Ensure that the details about Depository Participant and Beneficiary Account are correct, and the Beneficiary Account is activated, as Allotment of Equity Shares will be in the dematerialized form only; (e) Ensure that the Bids are submitted at the Bidding centres only on forms bearing the stamp of a member of the Syndicate (other than with respect to ASBA Bidders); (f) With respect to ASBA Bidders ensure that (i) your Bid is submitted at a Designated Branch of the SCSB where the ASBA Bidder or the person whose bank account will be utilised by the ASBA Bidder for Bidding has a bank account, or (ii) your bid is submitted with the member of the syndicate who will upload the bid and submit the form with the SCSB who in turn will block the bid amount in the account mentioned in the ASBA Bid cum application form. Further, ensure that the ASBA Bid cum Application Form is signed by the account holder if the Bidder is not the account holder; (g) Ensure that the full Bid Amount is paid for Bids submitted to the members of the Syndicate and funds equivalent to the Bid Amount are blocked by the SCSBs in case of Bids submitted through the ASBA process; (h) With respect to ASBA Bidders, ensure that you have funds equal to the Bid Amount in your bank account of the respective Designated Branch of the SCSB; (i) With respect to ASBA Bidders, instruct your respective banks to not release the funds blocked in the bank account under the ASBA process; (j) Ensure that you request for and receive a TRS for all your Bid options; (k) Submit revised Bids to the same member of the Syndicate or Designated Branch of the SCSB through whom the original Bid was placed and obtain a revised TRS;
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(l)
(m)
Except for Bids (i) on behalf of the Central or State Government and the officials appointed by the courts, and (ii) (subject to SEBI circular dated April 3, 2008) from the residents of the state of Sikkim, each of the Bidders should mention their PAN allotted under the I.T. Act. Bid cum Application Forms in which the PAN is not mentioned are liable to be rejected; Ensure that the name(s) given in the Bid cum Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. If the Bid cum Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Bid cum Application Form.
(n)
Ensure that the QIB Bidders and Non Institutional Bidders bid only through the ASBA process. Don’ts: (a) Do not Bid for lower than the minimum Bid size; (b) Do not submit a Bid without payment of the entire Bid Amount; (c) Do not Bid/revise the Bid to less than the Floor Price or higher than the Cap Price; (d) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the Syndicate or the Designated Branch of an SCSB; (e) Do not pay the Bid Amount in cash, by money order or by postal order or by stockinvest and in relation to ABSA Bidders in any other mode other than blocked amounts in the bank accounts maintained by SCSBs; (f) Do not send Bid cum Application Forms by post; instead submit the same to the Syndicate or a Designated Branch of an SCSB, as applicable; (g) Do not Bid at the Cut‐off Price (for QIB Bidders and Non‐Institutional Bidders); (h) Do not fill up the Bid cum Application Form such that the Equity Shares Bid for exceed the Issue size and/or investment limit or maximum number of Equity Shares that can be held under applicable laws or regulations or the maximum amount permissible under applicable regulations; (i) Do not submit more than five ASBA Bid cum Application Forms per bank account; (j) Do not Bid for amount exceeding ` 200,000 in case of a Bid by Retail Individual Bidders (k) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground. Method and Process of Bidding a) Our Company and the BRLM shall declare the Bid Opening Date and Bid Closing Date at the time of filing the Red Herring Prospectus with the RoC and shall also publish it in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh at least two Working Days prior to the Bid Opening Date. This advertisement, subject to the provisions of section 66 of the Companies Act shall be in the format prescribed in Schedule XIII of the SEBI Regulations. b) The Price Band and the minimum Bid lot size for the Issue will be decided by our Company, in consultation with the BRLM, and advertised in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national
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newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh at least two Working Days prior to the Bid Opening Date. c) Bidders who are interested in subscribing to the Equity Shares should approach any of the members of the Syndicate, their authorized agents or SCSBs to register their Bids, during the Bidding Period. The members of the Syndicate shall accept Bids from the all Bidders and shall have the right to vet the Bids, during the Bidding Period in accordance with the terms of the Syndicate Agreement and this Draft Red Herring Prospectus. Bidders who wish to use the ASBA process should approach the members of the syndicate (in specified cities) or Designated Branches of the SCSBs to register their Bids. d) The Bidding Period shall be for a minimum of three Working Days and not exceeding 10 Working Days (including the days for which the Issue is open in case of revision in Price Band). If the Price Band is revised, the revised Price Band and the Bidding Period will be published in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh, together with an indication of such change on the websites of the BRLM and SCSBs and at the terminals of the Syndicate Members. e) Each Bid cum Application Form will give the Bidder the choice to Bid for up to three optional prices (for details see “Bids at Different Price Levels” below) within the Price Band and specify the demand (i.e., the number of Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation/Allotment and the rest of the Bid(s), irrespective of the Bid Amount, will become automatically invalid. f) The Syndicate or the SCSBs will enter each Bid option into the electronic Bidding system as a separate Bid and generate a Transaction Registration Slip (“TRS”), for each price and demand option and shall, on demand, give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form. g) With respect to ASBA Bidders, on receipt of the ASBA Bid cum Application Form, submitted whether in physical or electronic mode (whether through member of the syndicate (in specified cities) or directly from the bidder), the Designated Branch of the SCSB shall verify if sufficient funds equal to the Bid Amount are available in the ASBA Account, as mentioned in the ASBA Bid cum Application Form. If sufficient funds are available in the ASBA Account, the SCSB shall block an amount equivalent to the Bid Amount mentioned in the ASBA Bid cum Application Form and will enter each Bid option into the electronic bidding system as a separate Bid. Where the bidder has submitted the bid directly with the Designated Branch of SCSBs and if sufficient funds are not available in the ASBA Account, the Designated Branch of the SCSBs shall reject such Bid and shall not upload such Bid with the Stock Exchanges. Where the bid has been uploaded by the member of the syndicate (in specified cities) and ASBA Bid cum application form is submitted with the specified Branch of SCSBs in specified cities and if sufficient funds are not available in the ASBA Account, the bid will be treated as invalid and will not be considered for the purpose of allotment under the Issue. h) Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the paragraph titled “Issue Procedure ‐ Payment Instructions” on page 203 of this Draft Red Herring Prospectus. Bids at Different Price Levels and Revision of Bids a)
The Price Band and the minimum Bid lot size shall be decided by our Company in consultation with the BRLM and advertised at least two Working Days prior to the Bid Opening Date, in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh at least two Working Days prior to the Bid Opening Date.
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b) Our Company, in consultation with the BRLM, reserves the right to revise the Price Band during the Bidding Period in accordance with the ICDR Regulations. The Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the face value of the Equity Shares. The revision in Price Band shall not exceed 20% on either side i.e. the floor price can move upward or downward to the extent of 20% of the floor price disclosed at least two Working Days prior to the Bid Opening Date and the Cap Price will be revised accordingly. c)
In case of revision in the Price Band, the Bidding Period will be extended for at least three additional Working Days after revision of Price Band subject to a maximum of 10 Working Days. Any revision in the Price Band and the revised Bidding Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a public notice in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh and also by indicating the change on the websites of the BRLM, the SCSBs and at the terminals of the Syndicate Members.
d) Our Company in consultation with the BRLM can finalize the Issue Price within the Price Band in accordance with this section, without the prior approval of or intimation to the Bidders. e) The Bidder can Bid at any price within the Price Band. The Bidder has to Bid for the desired number of Equity Shares at a specific price. Retail Individual Bidders may Bid at Cut‐off Price. However, Bidding at Cut‐off Price is prohibited for QIB or Non‐Institutional Bidders and such Bids from QIBs and Non‐Institutional Bidders shall be rejected. f)
Retail Individual Bidders who Bid at the Cut‐off Price agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders bidding at Cut‐off Price shall deposit the Bid Amount based on the Cap Price with the members of the Syndicate. In case of ASBA Bidders Bidding at Cut‐off Price (other than QIBs and Non‐ Institutional Bidders), the ASBA Bidders shall instruct the SCSBs to block an amount based on the Cap Price. In the event the Bid Amount is higher than the subscription amount payable by the Retail Individual Bidders who Bid at Cut‐ off Price (i.e., the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail Individual Bidders who Bid at Cut‐off Price shall receive the refund of the excess amounts from the Escrow Account(s) or the excess funds shall be unblocked from their ASBA Accounts, as the case may be.
g)
In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had Bid at Cut‐off Price could either (i) revise their Bid or (ii) make additional payment based on the revised Cap Price (such that the total amount i.e., original Bid Amount plus additional payment does not exceed ` 2,00,000 for Retail Individual Bidders, if the Bidder wants to continue to Bid at Cut‐off Price), with the member of the Syndicate to whom the original Bid was submitted. In case the total amount (i.e., original Bid Amount plus additional payment) exceeds `2,00,000 for Retail Individual Bidders Bidding at the Cut‐off Price the Bid will be considered for allocation under the Non‐Institutional Portion in terms of this Draft Red Herring Prospectus. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the Cap Price prior to revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of Allotment, such that no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut‐off Price.
h) In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders who have Bid at Cut‐ off Price could either revise their Bid or the excess amount paid at the time of Bidding would be refunded from the Escrow Account(s) or the excess funds shall be unblocked from their ASBA Accounts, as the case may be. i)
In any event our Company, in consultation with the Book Running Lead Manager shall decide the minimum number of Equity Shares for each Bid to ensure that the minimum application value is within the range of [●] to [●].
Bidder’s Depository Account and Bank Account Details Bidders should note that on the basis of Bidder’s PAN, Depository Participant’s name, DP ID number and beneficiary account number provided by them in the Bid cum Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate and the SCSBs, as the case may be, the Registrar to the Issue will obtain from the Depository the demographic details including the Bidder’s address, occupation and bank account details including the nine‐digit Magnetic Ink Character Recognition (“MICR”) code as appearing on a cheque leaf (‘Demographic Details’).
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These Demographic Details would be used for giving refunds (including through physical refund warrants, direct credit, ECS, NEFT and RTGS) to the Bidders, CANs and allocation advice. Hence, Bidders are advised to immediately update their bank account details and Demographic Details as appearing on the records of the Depository Participant and ensure that they are true and correct. Failure to do so could result in delays in dispatch/credit of refunds to Bidders at the Bidders sole risk and neither the Syndicate nor the Registrar to the Issue or the Escrow Collection Banks or the SCSBs nor our Company shall have any responsibility and undertake any liability for the same. IT IS MANDATORY FOR ALL THE BIDDERS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR PAN, DP ID NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE PAN GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS PROVIDED TO THE DEPOSITORY. IF THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM. The applicants may note that in case the DP ID & Client ID and PAN mentioned in the application form and entered into the electronic bidding system of the stock exchanges by the syndicate members do not match with the DP ID & Client ID and PAN available in the depository database, the application is liable to be rejected. By signing the Bid cum Application Form, the Bidder would be deemed to have authorised the Depositories to provide, on request, to the Registrar to the Issue, the required Demographic Details as available on its records. Refund Orders (where refunds are not being made electronically)/Allocation Advice/CANs would be mailed at the address of the Bidder as per the Demographic Details received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure dispatch of refund orders. Any such delay shall be at the Bidders sole risk and neither our Company nor Escrow Collection Banks nor the Syndicate shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay. In case of refunds through electronic modes as detailed in this Draft Red Herring Prospectus, Bidders may note that refunds may be delayed if bank particulars obtained from the Depository Participant are incorrect. In case no corresponding record is available with the Depositories, which matches the three parameters, namely, Bidders PAN (in case of joint Bids, PAN of first applicant), the DP ID and the beneficiary’s identity, such Bids are liable to be rejected. PAYMENT INSTRUCTIONS Escrow Mechanism for Bidders other than ASBA Bidders Our Company and the Syndicate shall open Escrow Accounts with the Escrow Collection Bank(s) in whose favour the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a certain category would be deposited in the Escrow Account. The Escrow Collection Banks will act in terms of this Draft Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Banks for and on behalf of the Bidders shall maintain the monies in the Escrow Account(s) until the Designated Date. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the funds represented by allocation of Equity Shares (other than ASBA funds with the SCSBs) from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue Account with the Bankers to the Issue. The balance amount after transfer to the Public Issue Account shall be transferred to the Refund Account. Payments of refund to the Bidders
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shall also be made from the Refund Account as per the terms of the Escrow Agreement and this Draft Red Herring Prospectus. INVESTORS ARE ADVISED NOT TO SUBMIT THE BID CUM APPLICATION FORMS TO THE ESCROW COLLECTION BANKS. BIDS SUBMITTED TO THE ESCROW COLLECTION BANKS SHALL BE REJECTED AND THE COMPANY AND THE SYNDICATE MEMBERS WILL NOT BE LIABLE. Bidders should note that the escrow mechanism is not prescribed by the SEBI and has been established as an arrangement by and among our Company, the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Issue to facilitate collections from the Bidders. Bids by QIB Bidders and Non Institutional Bidders will not be accepted through any mode other than ASBA. Payment into Escrow Account(s) for Bidders other than ASBA Bidders Each Bidder (other than ASBA Bidders) shall draw a cheque or demand draft or remit the funds electronically through the RTGS mechanism for the entire Bid Amount as per the following terms: (a) The Bidders shall, with the submission of the Bid cum Application Form, draw a payment instrument for the entire Bid Amount in favour of the Escrow Account(s) and submit the same to the member of the Syndicate. Bid cum Application Forms accompanied by cash, stockinvest, money order or postal order shall not be accepted. (b) The payment instruments for payment into the Escrow Account(s) should be drawn in favour of: In case of Resident Retail Individual Bidders: “Escrow Account – [●] Public Issue ‐ R” In case of Non‐Resident Retail Individual Bidders: “Escrow Account – [●] Public Issue ‐ NR” (c) In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in NRE Accounts or FCNR Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of NRO Account of Non‐Resident Bidder bidding on a repatriation basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE Account or FCNR Account. (d) In case of Bids by NRIs applying on non‐repatriation basis, the payments must be made through Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in NRE Accounts or FCNR Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance or out of an NRO Account of a Non‐Resident Bidder bidding on a non‐repatriation basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting an NRE or FCNR or NRO Account. (e) In case of Bids by FIIs or FVCIs the payment should be made out of funds held in a Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting the Special Rupee Account. (f) The monies deposited in the Escrow Account(s) will be held for the benefit of the Bidders until the Designated Date. (g) On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account(s) as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to the Issue.
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(h) On the Designated Date and no later than 10 Working Days from the Bid Closing Date, the Registrar to the Issue shall dispatch all refund amounts payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for allocation/Allotment to the Bidders. (i) Payments should be made by cheque, or a demand draft drawn on any bank (including a cooperative Bank), which is situated at, and is a member of or sub‐member of the bankers’ clearing house located at the centre where the Bid cum Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash, stockinvest, money orders or postal orders will not be accepted. (j) In case clear funds are not available in the Escrow Accounts as per final certificates from the Escrow Collection Banks, such Bids are liable to be rejected. (k) Except in case of ASBA Bids, Bidders are advised to mention the number of the Bid cum Application Form on the reverse of the cheque/demand draft to avoid misuse of instruments submitted along with the Bid cum Application Form. Payment mechanism for ASBA Bidders All QIB Bidders and Non Institutional Bidders shall make application under this Issue only through the ASBA process. Retail Individual Bidders have an option to place their bid in the Issue through the ASBA process. The ASBA Bidders shall specify the bank account number in the ASBA Bid cum Application Form. The ASBA Bidder may submit the ASBA Bid cum application form either with the Syndicate (in specified cities) or Designated Branches of SCSBs for uploading of bid. Where the ASBA Bid cum application form is submitted with the Syndicate, it will upload the bid and submit the form with the specified branch of SCSBs (in specified cities) and the SCSBs shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Bid cum Application Form. If the ASBA Bid cum application form is submitted with any Designated Branch of SCSBs, the Designated Branch shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Bid cum Application Form. The SCSB shall keep the Bid Amount in the relevant bank account blocked until withdrawal/rejection of the ASBA Bid or receipt of instructions from the Registrar to the Issue to unblock the Bid Amount. In the event of withdrawal or rejection of the ASBA Bid cum Application Form, failure of the Issue or for unsuccessful ASBA Bid cum Application Forms, the Registrar to the Issue shall give instructions to the SCSBs to unblock the Bid Amount in the relevant bank account within eight Working Days from the Bid Closing Date and the SCSBs shall unblock the Bid Amount within one Working Day of receipt of such instruction. The Bid Amount shall remain blocked in the ASBA Account until finalisation of the Basis of Allotment and consequent transfer of the Bid Amount to the Public Issue Account, or until withdrawal/failure of the Issue or until rejection of the ASBA Bid, as the case may be. Other Instructions Joint Bids in case of Individuals Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communications will be addressed to the First Bidder and will be dispatched to his or her address as per the Demographic Details received from the Depository. Multiple Bids A Bidder should submit only one Bid cum Application Form (and not more than one) for the total number of Equity Shares required. Two or more Bid cum Application Forms will be deemed to be multiple Bids if the sole or first Bidder is one and the same. It is clarified, however, that Bidders shall have the option to make a maximum of three Bids in the Bid cum
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Application Form and such options shall not be considered multiple Bids. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. After Bidding on an ASBA Bid cum Application Form either in physical or electronic mode, where such ASBA Bid has been submitted to the member of the Syndicate (in specified cities) or any Designated Branches of SCSBs and uploaded with the Stock Exchanges, an ASBA Bidder cannot Bid, either in physical or electronic mode, on another ASBA Bid cum Application Form or a non‐ASBA Bid cum Application Form. Submission of a second Bid cum Application Form, whether an ASBA Bid cum Application Form, to either the same or to another Designated Branch of the SCSB, or a Non‐ASBA Bid cum Application Form, will be treated as multiple Bids and will be liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue. However, the ASBA Bidder can revise the Bid through the Revision Form, the procedure for which is detailed in “—Build up of the Book and Revision of Bids” above. More than one ASBA Bidder may Bid for Equity Shares using the same ASBA Account, provided that the SCSBs shall not accept a total of more than five ASBA Bid cum Application Forms from such ASBA Bidders with respect to any single ASBA Account. Our Company reserves the right to reject, in their absolute discretion, all or any multiple Bids in any or all categories. In this regard, the procedures which would be followed by the Registrar to the Issue to detect multiple Bids are provided below: a)
A check will be carried out for the same PAN. In cases where the PAN is same, such Bids will be treated as multiple Bids.
b) Further, in the case of Mutual Fund Bidders and FII sub‐accounts, Bids which use the same PAN, the Bid cum Application Forms will be scrutinised for DP ID and Beneficiary Account Numbers. In case such Bid cum Application Forms bear the same DP ID and Beneficiary Account Numbers, these will be treated as multiple applications. ‘PAN’ or ‘GIR’ Number Except for Bids on behalf of the Central or State Government, residents of Sikkim and the officials appointed by the courts, the Bidders, or in the case of a Bid in joint names, each of the Bidders, should mention his/her PAN allotted under the I.T. Act. In accordance with the ICDR Regulations, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of transaction. Any Bid cum Application Form without the PAN is liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground. Right to Reject Bids In case of Non‐Institutional Bidders and Retail Individual Bidders, the Company has the right to reject Bids based only on technical grounds and/or as specified in this Draft Red Herring Prospectus. In case of QIB Bidders Bidding in the QIB Portion, the Company, in consultation with the members of the Syndicate, may reject Bids provided that such rejection shall be made at the time of acceptance of the Bid and the reasons for rejecting the same shall be provided to such Bidder in writing. Consequent refunds shall be made through any of the modes described in this Draft Red Herring Prospectus and will be sent to the Bidder’s address at the Bidder’s risk.
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With respect to ASBA Bids, where the ASBA Bid cum application form is submitted with any Designated Branches of SCSBs, such Designated Branch shall have the right to reject ASBA Bids if at the time of blocking the Bid Amount in the Bidder’s bank account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not available in the Bidder’s bank account maintained with the SCSB. With respect to ASBA Bids, where ASBA Bid cum application form is bidded by the Syndicate (in specified cities) and submitted with specified branch of SCSBs, and if sufficient funds are not available in the ASBA Account, the bid will be treated as invalid and will not be considered for the purpose of allotment under the Issue. Subsequent to the acceptance of the ASBA Bid by the SCSB, the Company would have a right to reject the ASBA Bids only on technical grounds and/or as specified in this Draft Red Herring Prospectus. The Bidders may note that in case the DP ID, Beneficiary Account Number and PAN mentioned in the Bid cum Application Form and entered into the electronic Bidding system of the Stock Exchanges by the Syndicate and the SCSBs, as the case may be, do not match with the DP ID, Beneficiary Account Number and PAN available in the depository database, the Bid is liable to be rejected. Grounds for Technical Rejection Bidders are advised to note that Bids are liable to be rejected among other things, on the following technical grounds: 1.
Amount paid or, with respect to ASBA Bids, the amounts mentioned in the ASBA Bid cum Application Form does not tally with the amount payable for the highest value of the Equity Shares Bid for;
2.
Age of First Bidder not given;
3.
In case of partnership firms, Equity Shares may be registered in the names of the individual partners and no firm as such shall be entitled to apply;
4.
Bid by persons not competent to contract under the Indian Contract Act, 1872, as amended, including minors, insane persons;
5.
PAN not stated (except for Bids on behalf of the Central or State Government, residents of Sikkim and the officials appointed by the courts);
6.
Bids for lower number of Equity Shares than specified for that category of investors;
7.
Bids at a price less than the Floor Price;
8.
Bids at a price over the Cap Price;
9.
Bids at Cut off Price by Non‐Institutional Bidders and QIB Bidders;
10. Submission of more than five ASBA Bid cum Application Forms per ASBA Account; 11. Bids for number of Equity Shares which are not in multiples of [●]; 12. Category not ticked; 13. Multiple Bids as described in this Draft Red Herring Prospectus; 14. In case of Bids under power of attorney or by limited companies, corporate, trust etc., relevant documents not being submitted; 15. Bids accompanied by cash, stockinvest, money order or postal order; 16. Signature of sole and/or joint Bidders missing. In addition, with respect to ASBA Bids, the Bid cum Application form not being signed by the account holders, if the account holder is different from the Bidder; 17. Bid cum Application Form does not have the stamp of the BRLM the Syndicate Members or Designated Branches of the SCSBs; 18. Bid cum Application Form does not have Bidder’s depository account details or the details given are incomplete;
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19. Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid cum Application Form, Bid Opening Date advertisement and this Draft Red Herring Prospectus and as per the instructions in this Draft Red Herring Prospectus and the Bid cum Application Forms; 20. In case no corresponding record is available with the Depositories that matches three parameters namely, PAN (in case of joint Bids, PAN of the first applicant), the DP ID and the beneficiary’s account number; Bidders may note that in case the DP ID and Client ID and PAN mentioned in the Bid cum Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate or the SCSBs, as the case may be, do not match with the DP ID and Client ID and PAN available in the depository database, the Bid is liable to be rejected. 21. With respect to ASBA Bids, inadequate funds in the bank account to block the Bid Amount specified in the ASBA Bid cum Application Form at the time of blocking such Bid Amount in the bank account; 22. Bids for amounts greater than the maximum permissible amounts prescribed by applicable law; 23. Bids by QIB Bidders and Non Institutional Bidders not made through the ASBA process; 24. Bids by OCBs; 25. Bids by persons in the United States; 26. Bids where clear funds are not available in the Escrow Accounts as per the final certificate from the Escrow Collection Banks; 27. Bids not uploaded on the terminals of the BSE and the NSE; 28. Bids or revision thereof by QIB Bidders and Non‐Institutional Bidders uploaded after 4.00 P.M. on the Bid Closing Date; 29. Bids by persons prohibited from buying, selling or dealing in the shares directly or indirectly by SEBI or any other regulatory authority; 30. Bids by persons who are not eligible to acquire Equity Shares in terms of all applicable laws, rules, regulations, guidelines and approvals; and 31. Bids that do not comply with the securities laws of the Bidders’ respective jurisdictions. Electronic Registration of Bids (a) The members of the Syndicate and the SCSBs will register the Bids received using the online facilities of the Stock Exchanges. There will be at least one online connectivity in each city, where the Stock Exchanges are located in India and where such Bids are being accepted. The BRLM, our Company and the Registrar to the Issue are not responsible for any acts, mistakes or errors or omission and commissions in relation to (i) the Bids accepted by the Syndicate Members and the SCSBs, (ii) the Bids uploaded by the Syndicate Members and the SCSBs, (iii) the Bids accepted but not uploaded by the Syndicate Members and the SCSBs or (iv) with respect to ASBA Bids, Bids accepted and uploaded without blocking funds in the ASBA Accounts. However, the members of the Syndicate and / or the SCSBs shall be responsible for any errors in the Bid details uploaded by them. It shall be presumed that for the Bids uploaded by the SCSBs, the Bid Amount has been blocked in the relevant ASBA Account. (b) The Stock Exchanges will offer a screen‐based facility for registering such Bids for the Issue. This facility will be available on the terminals of the members of the Syndicate and their authorized agents and the SCSBs during the Bidding Period. The Syndicate Members and the Designated Branches of the SCSBs can also set up facilities for off‐ line electronic registration of Bids subject to the condition that it will subsequently upload the off‐line data file into the on‐line facilities for book building on a regular basis.
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(c)
On the Bid Closing Date, the members of the Syndicate and the Designated Branches of the SCSBs shall upload the Bids until such time as may be permitted by the Stock Exchanges. This information will be available with the BRLM on a regular basis. Bidders are cautioned that a high inflow of Bids typically experienced on the last day of the Bidding may lead to some Bids received on the last day not being uploaded due to lack of sufficient uploading time, and such Bids that could not uploaded will not be considered for allocation. Bids will only be accepted on Monday to Friday (excluding any public holiday).
(d) Based on the aggregate demand and price for Bids registered on the electronic facilities of the Stock Exchanges a graphical representation of consolidated demand and price would be made available at the bidding centres and at the websites of each of the Stock Exchanges during the Bidding Period. (e) At the time of registering each Bid, the members of the Syndicate or the Designated Branches of the SCSBs in case of ASBA Bids shall enter the following details of the Bidder in the electronic system: •
Name.
•
Bid cum Application number.
•
Investor Category – Individual, Corporate, non‐institutional, qualified institutional buyer or Mutual Fund etc.
•
Numbers of Equity Shares Bid for.
•
Bid Amount and the price option.
•
Depository Participant Identity (“DP ID”) and Client Identification Number of the beneficiary account of the Bidder.
•
PAN.
• Cheque amount and cheque number. (f) A system generated TRS will, on demand, be given to the Bidder as a proof of the registration of each of the Bidding options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate or Designated Branches of the SCSBs. The registration of the Bid by the member of the Syndicate or the Designated Branches of the SCSBs does not guarantee that the Equity Shares shall be allocated/Allotted. (g) Such TRS will be non‐negotiable and by itself will not create any obligation of any kind. (h) In case of QIB Bidders (other than QIB bids uploaded by the SCSBs), the Syndicate have a right to accept the Bid or reject it. However, such rejection shall be made at the time of receiving the Bid and only after assigning a reason for such rejection in writing. In case of Non‐Institutional Bidders and Retail Individual Bidders, Bids may not be rejected except on technical grounds. Further, the SCSBs shall have no right to reject Bids except on technical grounds. (i) The permission given by the Stock Exchanges to use their network and software of the online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by our Company and/or the BRLM are cleared or approved by the Stock Exchanges; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, our Promoter, our management or any scheme or project of our Company nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of the Draft Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges.
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(j)
Only Bids that are uploaded on the online IPO system of the Stock Exchanges shall be considered for allocation/Allotment. The members of the Syndicate shall be given one additional day after the Bid Closing Date to verify the information uploaded on the online IPO system during the Bidding Period after which the data will be sent to the Registrar to the Issue for reconciliation and Allotment of Equity Shares. In case of discrepancy of data between the BSE or the NSE and the Syndicate or the SCSBs, the decision of the BRLM based on the physical records of Bid Application Forms shall be final and binding on all concerned. If a member of the Syndicate finds any discrepancy in the PAN, DP ID and the Beneficiary Account Number, it will correct the same and the send the data to the Registrar to the Issue for reconciliation and Allotment of Equity Shares. Build up of the book and revision of Bids (a) Bids received from various Bidders through the members of the Syndicate and the SCSBs shall be electronically uploaded to the Stock Exchanges’ mainframe on a regular basis. (b) The book gets built up at various price levels. This information will be available with the BRLM at the end of the Bidding Period. (c) During the Bidding Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the Price Band using the printed Revision Form, which is a part of the Bid cum Application Form. (d) Revisions can be made in both the desired number of Equity Shares and the Bid Amount by using the Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum Application Form and such Bidder is changing only one of the options in the Revision Form, he must still fill the details of the other two options that are not being revised, in the Revision Form. The members of the Syndicate and the SCSBs will not accept incomplete or inaccurate Revision Forms. (e) The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate or the Designated Branch of the SCSB through whom such Bidder had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof. (f) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this Draft Red Herring Prospectus. With respect to ASBA Bids, if revision of the Bids results in an incremental amount, the relevant SCSB shall block the additional Bid amount. In case of Bids other than ASBA Bids, the members of the Syndicate shall collect the payment in the form of cheque or demand draft if any, to be paid on account of the upward revision of the Bid at the time of one or more revisions. In such cases the members of the Syndicate will revise the earlier Bid details with the revised Bid and provide the cheque or demand draft number of the new payment instrument in the electronic book. The Registrar to the Issue will reconcile the Bid data and consider the revised Bid data for preparing the basis of Allotment. When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and will, on demand, receive revised TRS from the Syndicate or SCSBs, as applicable. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised the previous Bid. Price Discovery and Allocation
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a)
Based on the demand generated at various price levels, our Company, in consultation with the BRLM, shall finalize the Issue Price.
b) Under‐subscription, if any, in any category would be allowed to be met with spill‐over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLM and the Designated Stock Exchange. However, if the aggregate demand by Mutual Funds in the Mutual Fund Portion is less than 2,25,000 Equity Shares, the balance Equity Shares available for allocation in the Mutual Fund Portion will be added to the QIB Portion and be allocated proportionately to the QIB Bidders. Further, not less than 15% and 35% of the Issue will be available for allocation on a proportionate basis to Non‐Institutional Bidders and Retail Individual Bidders, respectively, subject to valid Bids being received at or above the Issue Price. c) Allocation to Non‐Residents, including Eligible NRIs, FIIs and foreign venture capital funds registered with SEBI, applying on repatriation basis will be subject to applicable law. d) Our Company reserves the right to cancel the Issue any time after the Bid Opening Date, but before the Allotment. In terms of the ICDR Regulations, QIB Bidders Bidding in the QIB Portion shall not be allowed to withdraw their Bid after the Bid Closing Date. e) The Basis of Allotment details, which the Stock Exchanges shall approve within eight Working Days of the Bid Closing Date, shall be posted on the website of the Registrar to the Issue. Signing of Underwriting Agreement and RoC Filing a) Our Company, the BRLM and the Syndicate Members shall enter into an Underwriting Agreement on or immediately after the finalisation of the Issue Price. b) After signing the Underwriting Agreement, our Company will update and file the updated Red Herring Prospectus with the RoC in terms of Section 56, 60 and 60B of the Companies Act, which then would be termed the ‘Prospectus’. The Prospectus will contain details of the Issue Price, Issue size, underwriting arrangements and will be complete in all material respects. Pre‐ Issue Advertisement Subject to Section 66 of the Companies Act, our Company shall, after registering the Red Herring Prospectus with the RoC, publish a pre‐Issue advertisement, in the form prescribed by the ICDR Regulations, in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh. Advertisement regarding Issue Price and Prospectus Our Company will issue a statutory advertisement after the filing of the Prospectus with the RoC in [●], an English national newspaper with nation‐wide circulation, [●], a Hindi national newspaper with nation‐wide circulation and [●], a Regional newspaper circulated in the State of Madhya Pradesh. This advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the Issue Price. Any material updates between the date of this Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement. Issuance of Confirmation of Allocation Note (“CAN”) (a) On approval of the basis of Allotment by the Designated Stock Exchange, the Registrar to the Issue shall send to the members of the Syndicate and SCSBs a list of their Bidders who have been allocated/allotted Equity Shares in the Issue. The approval of the basis of Allotment by the Designated Stock Exchange for QIB Bidders may be done
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simultaneously with or prior to the approval of the basis of allocation for the Retail and Non‐Institutional Bidders. However, our Company shall ensure that instructions for the demat credit of the Equity Shares to all Bidders in this Issue shall be delivered on the date of Allotment (which shall be the same date for all Bidders in this Issue). (b) The Registrar to the Issue will then dispatch a CAN to the Bidders who have been allocated Equity Shares in this Issue. (c) Bidders who have been allocated Equity Shares shall receive the CAN from the Registrar to the Issue subject, however, to realisation of his or her cheque or demand draft paid into the Escrow Account. Notice to QIBs: CANs After the Bid Closing Date, an electronic book will be prepared by the Registrar to the Issue on the basis of Bids uploaded on the Stock Exchange systems. This shall be followed by a physical book prepared by the Registrar to the Issue on the basis of the Bid cum Application Forms received. Designated Date and Allotment of Equity Shares • Our Company will ensure that (i) Allotment of Equity Shares; (ii) credit to successful Bidder’s depository account will be completed within 11 Working Days of the Bid Closing Date. • In accordance with the ICDR Regulations, Equity Shares will be issued and Allotment shall be made only in the dematerialised form to the Allottees. Allottees will have the option to re‐materialise the Equity Shares so allotted as per the provisions of the Companies Act and the Depositories Act. Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated / Allotted to them pursuant to this Issue. Basis of Allotment A. For Retail Individual Bidders •
• •
Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all the successful Retail Individual Bidders will be made at the Issue Price. The Issue size less Allotment to Non‐Institutional and QIB Bidders shall be available for Allotment to Retail Individual Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. If the aggregate demand in this category is less than or equal to 31,50,000 Equity Shares at or above the Issue Price, full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.
•
If the aggregate demand in this category is greater than 31,50,000 Equity Shares at or above the Issue Price, the Allotment shall be made on a proportionate basis upto a minimum of [●] Equity Shares. For the method of proportionate basis of Allotment, refer below. B. For Non‐Institutional Bidders • Bids received from Non‐Institutional Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all successful Non‐Institutional Bidders will be made at the Issue Price.
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• • •
The Issue Size less Allotment to QIBs and Retail Portion shall be available for Allotment to Non‐Institutional Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. If the aggregate demand in this category is less than or equal to 13,50,000 Equity Shares at or above the Issue Price, full Allotment shall be made to Non‐Institutional Bidders to the extent of their demand. In case the aggregate demand in this category is greater than 13,50,000 Equity Shares at or above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of [●] Equity Shares. For the method of proportionate basis of Allotment refer below.
For QIBs in the QIB Portion • Bids received from the QIB Bidders at or above the Issue Price, shall be grouped together to determine the total demand under this portion. The Allotment to all successful QIB Bidders will be made at the Issue Price. • The QIB Portion shall be available for Allotment to QIB Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. • Allotment shall be undertaken in the following manner: a. In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be determined as follows: (i) In the event Mutual Fund Bids exceed 5% of the QIB Portion, allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion. (ii) In the event the aggregate demand from Mutual Funds is less than 5% of the QIB Portion, then all Mutual Funds shall get full Allotment to the extent of valid Bids received at or above the Issue Price. (iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be available for Allotment to all QIB Bidders as set out in (b) below. b. In the second instance Allotment to all QIBs shall be determined as follows: (i) In the event of oversubscription in the QIB Portion, all QIB Bidders who have submitted Bids above the Issue Price shall be allotted Equity Shares on a proportionate basis for up to 95% of the QIB Portion. (ii) Mutual Funds which have received allocation as per (a) above, for less than the number of Equity Shares Bid for by them, are eligible to receive Equity Shares on a proportionate basis along with other QIB Bidders. (iii) Under‐subscription below 5% of the QIB Portion, if any, from Mutual Funds, would be included for allocation to the remaining QIB Bidders on a proportionate basis. Illustration regarding allotment to QIBs and Mutual Funds (1) Issue Details Sr. No. Particulars Issue details 1 Issue size 20,000 lakhs equity shares 2 Portion available to QIBs* 10,000 lakhs equity shares Of which
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a. Reservation to MF (5%) 350 lakhs equity shares b. Balance for all QIBs including MFs 6,650 lakhs equity shares 5 No. of QIB applicants 10 6 No. of shares applied for 50,000 lakhs equity shares * Where not more than 50% of the Issue Size is required to be allotted to QIBs. (2) Details Of QIB Bids Sr. No. Type of QIB bidders No. of shares bid for (in lakhs) 1 A1 5,000 2 A2 2,000 3 A3 13,000 4 A4 5,000 5 A5 5,000 6 MF1 4,000 7 MF2 4,000 8 MF3 8,000 9 MF4 2,000 10 MF5 2,000 TOTAL 50,000 A1‐A5 (QIB bidders other than MFs) MF1‐MF5 (QIB bidders which are MFs) (3) Details of Allotment to QIB Bidders (No. of equity shares in lakhs) Type of Equity Allocation of 350 lakhs equity Allocation of balance 6,650 lakhs Aggregate QIB shares shares to MFs proportionately equity shares to QIBs proportionately allocation to MFs bidders bid for (See Note 2) (See Note 4) A1 5000 0 665.00 0 A2 2000 0 266.00 0 A3 13000 0 1,729.00 0 A4 5000 0 665.00 0 A5 5000 0 665.00 0 MF1 4000 70 532.00 602.00 MF2 4000 70 532.00 602.00 MF3 8000 140 1,064.00 1,204.00 MF4 2000 35.00 266.00 301.00 MF5 2000 35.00 266.00 301.00 50000 350.00 6650.00 3010.00 Notes: 1) The illustration presumes compliance with the provisions of Regulation 50(1) pertaining to minimum allotment. 2) Out of 7,000 lakhs equity shares allocated to QIBs, 350 lakhs (i.e. 5%) will be allocated on proportionate basis among 5 mutual fund applicants who applied for 20,000 lakhs equity shares in QIB category. 3) The balance 6,650 lakhs equity shares [i.e. 7000 – 350 (available for MFs)] will be allocated on proportionate basis among 10 QIB applicants who applied for 50,000 lakhs equity shares (including 5 MF applicants who applied for 20,000 lakhs equity shares).
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4) The figures at Col. No. IV are arrived as under : For QIBs other than mutual funds (A1 to A5) = No. of shares bid for (i.e. Col II) X 66.5 / 496.5 For mutual funds (MF1 to MF5) = {(No. of shares bid for (i.e. Col II) less shares allotted (i.e., col. III)} X 665 / 4,965 The numerator and denominator for arriving at allocation of 6,650 lakhs shares to the 10 QIBs are reduced by 350 lakhs shares, which have already been allotted to mutual funds at Col. No. (III). Method of Proportionate Basis of Allotment in the Issue In the event of the Issue being over‐subscribed, our Company shall finalise the basis of Allotment in consultation with the Designated Stock Exchange. The Executive Director (or any other senior official nominated by them) of the Designated Stock Exchange along with the BRLM and the Registrar to the Issue shall be responsible for ensuring that the basis of Allotment is finalised in a fair and proper manner. The Allotment shall be made in marketable lots, on a proportionate basis as explained below: a) Bidders will be categorized 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, which is the total number of Equity Shares applied for in that category (number of Bidders in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over‐subscription ratio. c) Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a proportionate basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the over‐ subscription ratio. d) In all Bids where the proportionate Allotment is less than [●] Equity Shares per Bidder, the allotment shall be made as follows: • The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of Equity Shares Allotted in that category is equal to the number of Equity Shares calculated in accordance with (b) above; and • Each successful Bidder shall be Allotted a minimum of [●] Equity Shares. e) If the proportionate Allotment to a Bidder is a number that is more than [●] but is not a multiple of one (which is the marketable lot), the decimal would be rounded off to the higher whole number if that number is 0.50 or higher. If that number is lower than 0.50, it would be rounded off to the lower whole number. Allotment to all in such categories would be arrived at after such rounding off. f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares allotted to the Bidders in that category, the remaining Equity Shares available for Allotment shall be first adjusted against any other category, where the allotted shares are not sufficient for proportionate Allotment to the successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of Equity Shares. Equity Shares in Dematerialised Form with NSDL or CDSL As per the provisions of Section 68B of the Companies Act, the Allotment of Equity Shares in this Issue shall be only in a dematerialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode).
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In this context, two agreements have been signed among our Company, the respective Depositories and the Registrar to the Issue: • Agreement [●] between NSDL, our Company and the Registrar to the Issue; • Agreement dated August 26, 2011 between CDSL, our Company and the Registrar to the Issue. a)
Bids from any Bidder without relevant details of his or her depository account are liable to be rejected. A Bidder applying for Equity Shares must have at least one beneficiary account with either of the Depository Participants of either NSDL or CDSL prior to making the Bid.
b) The Bidder must necessarily fill in the details (including the PAN, Beneficiary Account Number and Depository Participant’s identification number) appearing in the Bid cum Application Form or Revision Form. c)
Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.
d) Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the Depository. e) If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the Bid cum Application Form or Revision Form, it is liable to be rejected. f)
The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum Application Form vis‐à‐vis those with his or her Depository Participant.
g)
Equity Shares in electronic form can be traded only on stock exchanges having electronic connectivity with NSDL and CDSL. The Stock Exchanges where the Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.
h) Trading in the Equity Shares would be in dematerialised form only, on the demat segment of the respective Stock Exchanges. Communications All future communications in connection with Non ASBA Bids made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, PAN, Bidders depository account details, number of Equity Shares applied for, date of Bid cum Application Form, name and address of the member of the Syndicate where the Bid was submitted and cheque or draft number and issuing bank thereof and with respect to ASBA Bids, the Registrar to the Issue or SCSB in which an amount equivalent to the Bid Amount was blocked. Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre‐ Issue or post‐ Issue related problems such as non‐receipt of letters of allotment, credit of allotted shares in the respective beneficiary accounts, refund orders etc. In case of ASBA Bids submitted with the Designated Branches of the SCSBs, Bidders can contact the Designated Branch of the SCSB. Impersonation Attention of the Bidders is specifically drawn to the provisions of sub‐section (1) of Section 68 A of the Companies Act, reproduced below: “Any person who: (a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or (b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitious name,
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shall be punishable with imprisonment for a term which may extend to five years.” PAYMENT OF REFUND Bidders other than ASBA Bidders must note that on the basis of the names of the Bidders, PAN, DP ID, Beneficiary Account number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain, from the Depositories, the Bidders’ bank account details, including the MICR code. Hence Bidders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Failure to do so could result in delays in dispatch of refund order or refunds through electronic transfer of funds, as applicable, and any such delay shall be at the Bidders’ sole risk and neither our Company, the Registrar to the Issue, Escrow Collection Bank(s), Bankers to the Issue nor the BRLM shall be liable to compensate the Bidders for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay. In the case of Bids from Eligible NRIs and FIIs, refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and/or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency. Mode of making Refunds for Bidders other than ASBA Bidders The payment of refund, if any, for Bidders other than ASBA Bidders would be done through various modes in the following order of preference: 1. ECS – Payment of refund would be done through ECS for Bidders having an account at any of the centres specified by the RBI. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code from the Depositories. The payment of refunds is mandatory for Bidders having a bank account at any of the abovementioned centres, except where the Bidder, being eligible, opts to receive refund through direct credit or RTGS. 2. Direct Credit – Bidders having bank accounts with the Refund Bank(s), as mentioned in the Bid cum Application Form shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Company. 3. RTGS – Bidders having a bank account with a bank branch which is RTGS enabled as per the information available on the website of RBI and whose refund amount exceeds ` 10 lakhs, have the option to receive refund through RTGS. Such eligible Bidders who indicate their preference to receive refund through RTGS are required to provide the Indian Financial System Code (“IFSC”) code in the Bid cum Application Form. In the event the same is not provided, refund shall be made through ECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Company. Charges, if any, levied by the Bidder’s bank receiving the credit would be borne by the Bidder. 4. National Electronic Fund Transfer (“NEFT”) – Payment of refund shall be undertaken through NEFT wherever the Bidders’ bank branch is NEFT enabled and has been assigned the IFSC, which can be linked to an MICR code of that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date prior to the date of payment of refund, duly mapped with an MICR code. Wherever the Bidders have registered their MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the Bidders through this method. The process flow in respect of refunds by way of NEFT is at an evolving stage and hence use of NEFT is subject to operational feasibility, cost and process efficiency and the past experience of the Registrars to the Issue. In the event
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NEFT is not operationally feasible, the payment of refunds would be made through any one of the other modes as discussed in this section. 5.
For all other Bidders, including those who have not updated their bank particulars with the MICR code, the refund orders will be dispatched through registered post. Such refunds will be made by cheques, pay orders or demand drafts drawn on the Refund Banks and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centers will be payable by the Bidders.
Mode of making refunds for ASBA Bidders In case of ASBA Bidders, the Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within eight Working Days of the Bid Closing Date. Disposal of Applications and Application Moneys and Interest in Case of Delay With respect to Bidders other than ASBA Bidders, our Company shall ensure dispatch of Allotment advice; refund orders (except for Bidders who receive refunds through electronic transfer of funds) and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the Allotment to the Stock Exchanges after the Allotment of Equity Shares. In case of Bidders who receive refunds through ECS, NEFT, direct credit or RTGS, the refund instructions will be given to the clearing system within 10 Working Days from the Bid Closing Date. A suitable communication shall be sent to the Bidders receiving refunds through this mode within 10 Working Days of the Bid Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund. Our Company shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed are taken within 12 Working Days of the Bid Closing Date. In accordance with the Companies Act, the requirements of the Stock Exchanges and the ICDR Regulations, our Company further undertakes that: • Allotment of Equity Shares shall be made only in dematerialised form, including the credit of Allotted Equity Shares to the beneficiary accounts of the Depository Participants, within 10 Working Days of the Bid Closing Date; • With respect to Bidders other than ASBA Bidders, dispatch of refund orders or in a case where the refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing system within 10 Working Days of the Bid Closing Date would be ensured. With respect to the ASBA Bidders’ instructions for unblocking of the ASBA Bidder’s bank account shall be made within eight days from the Bid Closing Date; and Our Company shall pay interest at 15% p.a. for any delay beyond the 10 Working Days’ time period as mentioned above, if Allotment is not made and refund orders are not dispatched or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the clearing system in the disclosed manner and/or demat credits are not made to investors. • In case listing permission is not granted to our Company, our Company shall repay the money within eight days from the date of refusal by the Stock Exchange(s). If such money is not repaid within eight days from the day our Company becomes liable to repay it, our Company and every officer in default shall, on and from expiry of eight days, be liable to repay the money with interest at the rate of 15% as prescribed under Section 73 of the Companies Act, 1956.
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Letters of Allotment or Refund Orders or instructions to the SCSBs Bidders residing at the centres where clearing houses are managed by the RBI will get refunds through ECS only, except where the Bidder is otherwise disclosed as eligible to get refunds through direct credit and RTGS. Our Company shall ensure that dispatch of refund orders, if any, are sent by registered post at the sole or first Bidder’s sole risk within 10 Working Days of the Bid Closing Date. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post, intimating them of the mode of credit of refund within 10 Working Days of the Bid Closing Date. In case of ASBA Bidders, the Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within eight Working Days of the Bid Closing Date, which shall be completed within one Working Day after the receipt of such instruction from the Registrar to the Issue. Interest in case of delay in dispatch of Allotment Letters or Refund Orders/instruction to SCSBs by the Registrar to the Issue Allotment of Equity Shares in the Issue, including the credit of Allotted Equity Shares to the beneficiary accounts of the Depository Participants, shall be made not later than 10 Working Days of the Bid Closing Date. Our Company further agrees that it shall pay interest at the rate of 15% p.a. if the allotment letters or refund orders have not been dispatched to the Bidders or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given in the disclosed manner within eight days from the day our Company becomes liable to repay (i.e. 10 Working Days after the Bid Closing Date). In case listing permission is not granted to our Company, our Company shall repay the money within eight days from the date of refusal by the Stock Exchange(s). If such money is not repaid within eight days from the day our Company becomes liable to repay it, our Company and every officer in default shall, on and from expiry of eight days, be liable to repay the money with interest at the rate of 15% as prescribed under Section 73 of the Companies Act, 1956. Refunds will be made by cheques, pay‐orders or demand drafts drawn on a bank appointed by our Company as a Refund Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders. Undertakings by Our Company Our Company undertakes that: •
No further issue of Equity Shares shall be made until the Equity Shares offered through the Draft Red Herring Prospectus are listed or until the Bid monies are refunded on account of non‐listing, under‐subscription etc;
•
All steps will be taken for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed within 12 Working Days of the Bid Closing Date;
•
The complaints received in respect of this Issue shall be attended to expeditiously and satisfactorily. Our Company has authorized our Company Secretary as the Compliance Officer to redress all complaints, if any, of the investors participating in this Issue;
•
The funds required for making refunds or dispatch of Allotment advice by registered post or speed post shall be made available to the Registrar to the Issue;
The certificates of the securities/ refund orders to the eligible NRIs or FIIs shall be dispatched within the specified time;
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•
The refund instruction shall be given or Allotment advice to the successful Bidders shall be dispatched within 10 working days from the Bid Closing Date;
•
Where the refunds are made through electronic transfer of funds, suitable communication shall be sent to the applicants within 10 Working Days of the Bid Closing Date giving details of the bank where refunds shall be credited along with the amount and expected date of electronic credit of the refund;
•
Adequate arrangements shall be made to collect all ASBA and to consider them similar to non‐ASBA applications while finalizing the Basis of Allotment;
•
Our Company shall not have recourse to the proceeds of the Fresh Issue until the approval for final listing and trading of the Equity Shares from all the Stock Exchanges where listing is sought has been received.
•
That our Company agrees that it shall pay interest @ 15% p.a. if the allotment is not made and / or the refund orders are not dispatched to the investors within 10 working days from the Bid Closure Date for the period of delay beyond 10 working days.
Withdrawal of the Issue Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue any time after the Bid Opening Date but before Allotment. In such an event, our Company would issue a public notice in the newspapers in which the pre‐Issue advertisements were published, within two Working Days of the Bid Closing Date, providing reasons for not proceeding with the Issue. The BRLM, through the Registrar to the Issue, shall notify the SCSBs to unblock the bank accounts of the ASBA Bidders within one Working Day from the day of receipt of such notification. Our Company shall also inform the Stock Exchanges on which the Equity Shares are proposed to be listed. Notwithstanding the foregoing, the Issue is also subject to obtaining (i) the final listing and trading approvals of the Stock Exchanges, which our Company shall apply for only after Allotment, and (ii) the final RoC approval of the Prospectus after it is filed with the RoC. In the event our Company, in consultation with the BRLM, withdraws the Issue after the Bid Closing Date, a fresh offer document will be filed with SEBI in the event we subsequently decide to proceed with the initial public offering. Utilisation of Issue Proceeds The Board of Directors certifies that: • All monies received in the Issue shall be credited/transferred to a separate bank account other than the bank account referred to in sub‐section (3) of Section 73 of the Companies Act; • Details of all monies utilised out of Issue shall be disclosed, and continue to be disclosed until the time any part of the Issue proceeds remains unutilised, under an appropriate head in our balance sheet indicating the purpose for which such monies have been utilised; and Details of all unutilised monies out of the Issue, if any shall be disclosed under an appropriate separate head in the balance sheet indicating the form in which such unutilised monies have been invested.
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SECTION IX: MAIN PROVISION OF ARTICLES OF ASSOCIATION OF OUR COMPANY SHARE CAPITAL 3.
SHARE CAPITAL AND VARIATION OF RIGHTS: The Authorized Share Capital of the Company is ` 20,00,00,000/‐ (Rupees Twenty Crores) divided in to 2,00,00,000/‐ (Two crores) Equity Shares of `10/‐ (Rupees Ten) each, with power to increase, reduce, consolidate, sub‐divide or to modify the Capital from time to time being into several classes and attach thereto respectively such preferential deferred, special or qualified rights privileges or conditions as may be determined by or in accordance with the Articles of Association of Company and to vary, modify, abrogate such rights, privileges or conditions in such manner as may be permitted by the Act or by these Articles of the Company for the time being.
4.
5.
POWER OF THE COMPANY Wherever in the said Act it has been provided that Company shall have any right, privilege or authority or the Company could carry out the transaction only, if the Company is so authorized by its Articles then and in that case, this Regulation here by authorizes and empowers the Company to have such right, privilege, authority and to carry such transaction as has been permitted by the Act without there being any specific regulation in that behalf herein provided. An Illustration of such right, authorities and transaction are set out as follows: Section 76: To pay commission on issue of shares and debentures. Section 80 A: to issue redeemable preference shares. Section 92: to accept unpaid share capital although not called up. Section 94: to alter the share capital of the Company. Section 100: to reduce the share Capital of the Company Section 106: to alter the rights of holders of special class of shares. Article 4 shall be deemed to affect the power of the Company to enforce repayment of loans to the Members or to exercise a lien conferred by these Articles.
COMPANY NOT TO PURCHASE ITS SHARES 6.
Save as provided by Section 77 of the Act, the funds of the Company shall not be applied in the purchase of any shares of the Company nor shall it provide any financial assistance for or in connection with the purchase or subscription of any shares in the Company or in its holding Company.
7.
OFFICE OF THE COMPANY The office of the Company shall be at such place as the Board of Directors shall determine subject to the provisions of the Act.
8.
REDEEMABLE PREFERENCE SHARES Subject to provisions of the Section 80 and other provisions of the Act and these Articles, the Company shall have power to issue preference shares carrying a rights to redeem out of the profits of which would be otherwise available for dividend or out of the proceeds of the fresh issue of shares made for the purpose of such redemption liable to be redeemed at the option of the Company, and the Board may, subject to the provisions of Section 80 and 80‐A, of the Act, exercise such powers in such manner as it may think fit.
9.
ISSUE OF SHARES WITH DIFFERENTIAL RIGHTS Notwithstanding anything contained in the Articles of Association of the Company and subject to and to the extent permissible in accordance with the applicable provisions of the Act (including any statutory modifications and/or amendments or reenactment thereof) or Companies (Issue of Share Capital with Differential Voting Rights) Rules, 2001 or Guidelines issued by any statutory authority like Department of Company Affairs (DCA), Securities and
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Exchange Board of India (SEBI), Reserve Bank of India (RBI), Company Law Board (CLB), etc. the Company may issue shares with differential rights as to dividend, voting or otherwise. FURTHER ISSUE OF SHARES OR WARRANTS 10. Subject to provisions of Section 81 any shares or warrants (whether forming part of the original capital or of any increased capital of the Company may be issued either with the sanction of the Company in General Meeting or by the Board with such rights and privileges annexed there to and upon such terms and conditions as by the General Meeting sanctioning the issue of such shares or warrants be directed, and if no such direction be given and in all other cases, as the Board shall determine and in particular such shares or warrants may be issued with a Preferential or qualitied right to dividends and in distribution of assets of Company , without prejudice, however, to any rights and privileges already conferred on the holders of any shares of class of shares for the time being issued by the Company. SHARES OR WARRANTS UNDER THE CONTROL OF DIRECTORS 11. Subject to the provisions of these Articles and Section 81 of the Act, the Shares or warrants shall be under the control of the Board who may allot or otherwise dispose of the same to such person of such terms and conditions at par or at premium and for such consideration as the Board thinks fit. PROVIDED THAT where at any time after a period of two years from the formation of the Company or at any time after the expiry of one year from the allotment of shares or warrants in the Company made for the first time after formation whichever is earlier, it is proposed to increase the subscribed capital of the Company, the provisions of Section 81 of the Act shall be complied with The Directors with sanction of the Company in General Meeting as provided for in Section 81 (1A) of the Act, hall have full power to give any person the right to call for, or be allotted shares of any class of the Company either at par or at a premium or subject to the provisions of the Act at discount, such option being exercisable at such times and for such consideration as the Directors think fit. Provided that the said option or right to call of shares shall not be given to any person(s) except with the sanction of the Company in General Meeting. POWERES OF GENERAL MEETING TO OFFER SHARES TO SHAREHOLDERS ETC 12. In addition to and without derogating from the powers for that purpose conderred on the Directors under Articles 10 and 11 on the Company and subject to the provisions of the Act and these Articles, the Company in General Meeting, may determine that any shares (whether forming part of the original capital or of any increased capital of the Company) shall be offered to such persons (whether members of the Company or not) the option to call for or be allotted shares of any class of the Company either at a premium or at a discount such option exercisable at such times and for such consideration and on such terms and conditions as may be directed by such General Meeting or the Company in General Meeting, which may make any other provisions whatsoever for the issue of allotments or disposal of any other provisions for the issue of allotments or disposal of any shares. DIRECTORS MAY ALLOT ANY SHARES AS FULLY PAID‐UP , 13. Subject to the provisions of the Act and these Articles the Directors may allot and issue shares in the capital of the Company as payment or part payment for any property or assets of any kind whatsoever sold or transferred goods or machinery supplied or for services rendered to the Company, either in or about the formation or promotion of the Company, or the conduct of its business and any shares which may be so allotted, may be issued as fully paid up or partly paid up Share as aforesaid allotted, may be issued as fully paid up or partly paid up Shares as aforesaid.. BUY BACK OF SHARES 14. Notwithstanding anything contained in these articles, but subject to the provisions of the Act and all other applicable provisions of the Law, as may be in force at any time and from time to time, the Company may acquire or purchase any of its fully paid or redeemable shares and may make payment out of funds at its disposal for and in respect of such acquisition / purchase on such terms and conditions at such times as the Board may in its discretion and deem fit and such acquisition / purchase shall not be construed as reduction of share capital of the Company. ISSUE OF SWEAT EQUITY SHARES OR SHARES UNDER EMPLOYEES STOCK OPTION SCHEME.
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15. Subject to the terms and conditions prescribed in Section 79A of the Act and the rules and regulations prescribed in this connection, the Board of Directors, issue and allot shares in the Capital of the Company as sweat equity shares or shares under the employees stock option scheme / employees stock option plan / employee stock purchase scheme and such other plans by whatever name called. CONSIDERATION FOR ALLOTMENT 16. The Board of Directors may allot and issue shares of the Company as payment or part payment for any property purchased by the Company or in respect of goods sold or transferred or machinery or appliances supplied or for services rendered to the Company or any acquisition and or in the conduct of its business; and any shares which may be so allotted may be issued as fully/partly paid up shares and, if so issued, shall be deemed as fully / partly paid up shares. RIGHTS TO CONVERT LOANS INTO CAPITAL 17. Notwithstanding anything contained in clauses(s) above, but subject to the provisions of Section 81(3) of the Act, the Company may increase its subscribed capital on exercise of an option attached to the debentures or loans raised by the Company to convert such debentures or loans into shares or to subscribe for shares in the Company. RETURN OF ALLOTMENT 18. As regards all allotments made from time to time, the Company shall duly comply with Section 75 of the Act. RESTRICTION ON ALLOTMENT 19. The Company shall observe the restrictions as per allotment of Shares to the public. Contained in Sections 69 and 70 of the Act. POWER TO CONVERT AND/OR ISSUE OF SHARES 20. The Directors shall have power at their discretion to convert the unissued equity shares into Redeemable Preference Shares and vice versa and the Company, may, subject to. Sanction of three‐fourth majority of the existing shareholders, issue any part or parts of unissued shares (either equity of preference carrying a right to redemption out of the profits or liable to be so redeemed at the option of the Company) upon such terms and conditions and with rights and privileges annexed thereto as the Derectors at their discretion may think fit and proper but subject to the provisions of Section 86,87 and 88 of the Act and in particular, the Directors may issue such shares with such preferential , qualifying right to dividends and for the distribution of the assets of the Company the Directors may , subject to the aforesaid Sections determine from time to time. COMMISSION AND BROKERAGE 21. The Company may exercise the power of paying commission conferred by Section 76 of the Act and in such case shall comply with the requirements of the Section. Such commission may be by the payment of cash The Company may also on any issue of shares or debentures, pay brokerage as may be lawful. SHARES AT A DISCOUNT 22. With the previous authority of the Company in General Meeting and sanction of the Company Law Board as may be required by the Act and upon otherwise complying with Section 79 of the Act, the Board may issue at a discount shares of a class already issued. DEPOSIT AND CALLS ETC TO BE A DEBT PAYABLE IMMEDIATELY 23. The money (if any) which the Directors shall, on the allotment of any shares being made by them, require or direct to be paid by way of deposit, call or otherwise in respect of any shares allotted by them shall immediately on the insertion of the name of the allottee in the Register of members as the holder of such shares, become a debt due to and recoverable by the Company from the allottee thereof, and shall be paid by him accordingly. INSTALLMENT ON SHARES TO BE DULY PAID
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24. If by the conditions, of allotment of any share, the whole or part of the amount or issue price thereof shall be payable by installments, every such installment shall when due be paid to the Company by the person who for the time being shall be the registered holder of the share or by his executor, administrator or legal representative. LIABILITY OF MEMBERS 25. Every Member or his heirs, executors or administrators, shall pay to the Company the portion of the capital represented by his shares or shares which may for the time being, remain unpaid thereon, in such amounts, at such time or times and in such manner, as the Board from time to accordance with the Company’s regulations require or fixed for the payment thereof. COMPANY NOT BOUND TO RECOGNISE ANY INTEREST IN SHARE OTHER THAN THAT OF THE REGISTERED HOLDER. 26. Except as required by law and these Articles, no person shall be recognized by the Company as holding any share upon any trust and the Company shall not be bound by, or be compelled in any way to recognizes (even when having notice thereof), any equitable contingent future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Articles or under or order of a Court of Court of competent jurisdiction or by law otherwise provided) any other right in respect of any shares except an absolute right to the entirely thereof in registered holders. TRUST NOT RECONISED 27. Save as hereinafter provided, the Company shall be entitled to treat the registered holder of any share as the absolute owner there of and accordingly shall not, except as ordered by a Court of Competent Jurisdiction or as by the statute so required, be bound to recognise any equitable or other claim to or interest in such share on the part of any other person. SHARE WARRANTS RIGHTS TO ISSUE SHARE WARRANTS 28. a. The Company may issue share warrants subject to, and in accordance with provisions of Section 114 and 115 of the Act. b. The Board may, in its discretion, with respect to any share which is fully paid up on application in writing signed by the person registered as holder of the share, and authenticated by such evidence, if any as the Board may from time to time require as to the identity of the person signing the application, and the amount of the stamp duty on the warrant and such fee as the Board may from time to time require having been paid, issue a warrant. RIGHTS OF WARRANT HOLDERS 29. a. The bearer of the share warrant may at any time deposit the warrant at the office of the Company, and so long as the warrant remains so deposited, the depositor shall have the same right to signing a requisition, for calling a meeting of the Company, and of attending, and voting and exercising other privileges of a Member at any meeting held after the expiry of two clear days from time of the deposit, as if his name were inserted in the Register or Members as the holder of the shares included in the deposited warrant. b. Not more than one person shall be recognized as the depositor of the share warrant. c. The Company shall, on two days written notice, return the deposited share warrant to the depositor. 30.a.Subject as herein otherwise expressly provided, no person shall, as bearer of a share warrant, sign a requisition for calling a meeting of the Company, or attend, or vote or exercise any other privileges of a Member at a meeting of the Company, or be entitled to receive any notice from the Company. b. The bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the Register of Members as the holder of the shares included in the warrant, and he shall be Member of the Company. 31. BOARD TO MAKE RULES
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The Board may, from time to time, make rules as to the terms on which it shall think fit, a new share warrant or coupon may be issued by way of renewal in case of defacement, loss or destruction.
SHARE CERTIFICATES WHO MAY BE REGISTERD 30. Shares may be registered in the name of any person or persons, Company or other Body Corporate Not more than three persons shall be registered as joint‐holders of any share. SHARES TO BE NUMBERED PROGRESSIVELY 31. The shares in the Capital of the Company shall be numbered progressively according to their several denominations and except in the manner hereinafter mentioned. Every forfeited or surrendered share shall continue to bear the number by which the same was originally distinguished. 32. The Company shall cause to be kept a Register and Index of Members in accordance with the provisions of Section 150 and 151 of the Act. 33. RESPONSIBILITIES TO MAINTAIN RECORDS The Managing Director of the Company for the time being or if the Company has no Managing Director, every Director of the Company shall be responsible for maintenance, preservation and safe custody of all books and documents relating to the issue of share certificates. ACCEPTANCE OF SHARE 34. An application signed by on behalf of an applicant for shares in the Company followed by an acceptance of shares within the meaning of these Articles and every person who thus or otherwise accepts any shares and whose name is on the Register shall for the purpose of these articles be a Member. CERTIFICATE OF SHARES, WARRANTS AND DEBENTURES 35. Subject to the provisions of Section 113 of the Act and the Companies (Issue Of Share Certificates) Rules, 1960 and Depository Act, 1996 or any statutory modification or re‐enactment thereof, share or warrants or debenture may be issued in demat or physical form as per the requirement, as follows: i. The certificate of title to shares and duplicate thereof when necessary, shall be signed in the presence of (i) two Directors and a person acting on behalf of another Director under a duly registered power of attorney or two Directors present or their attorney as aforesaid for two Directors; and (ii) the Secretary or some other person appointed by the Board for the purpose; all of whom shall sign such share certificate; PROVIDED THAT if the composition of the Board permits of it, atleast one of the aforesaid two Directors shall be person other than the Managing or Whole‐time Directors. ii. Every Member shall be entitled to free of charges to one certificate for all the shares of each class registered in his name, or if the Board so approves, to several certificates each for one or more such shares. Unless the conditions of issue otherwise provides, the Company shall, either within three months after the date of allotment or its fractional coupons of requisite valve (save in the case of bonus shares) or within two months of receipt of application or registration of the transfer, sub‐division, consolidation or renewal of any of its shares, as the case many be, deliver in accordance with the procedure laid down under, Section 53 of the Act, the certificate of such shares. In respect of any shares held jointly by several person, these Company shall not be bound to issue more than one certificate and delivery to all such holders. ISSUE OF NEW CERTIFICATE IN PLACE OF ONE DEFACED, LOST OR DESTROYED OR RENEWAL OF CERTIFICATES 36. A. If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back thereof for endorsement of transfer, then upon production and surrender thereof to the Company, a new certificate may be issued in lieu thereof, and if any certificate lost or destroyed then upon proof thereof to the satisfaction of the
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Company and on execution of such indemnity as the Company deem adequate, being given, a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed Certificate. Every certificate under the article shall be issued without payment of fees if the Directors so decide or on payment of such fees (not exceeding ` 2/‐ for each certificate) as the Directors shall prescribe. Provided that no fee shall be charged for issue of new certificates in replacement of those which are old, defaced or worn out or where there is no further space on the back thereof for endorsement of transfer. Provided that notwithstanding what is stated above the Directors shall comply with such rules or regulations or requirements of any Stock Exchange or the rules made under the Act or rules made under Securities Contracts (Regulation) Act, 1956 or any other Act, or rules applicable thereof in this behalf.
The provisions of this Article shall apply mutatis mutandis to the Debentures of the Company. B. RENEWAL OF SHARE CERTIFICATE When a new share certificate has been issued in pursuance of clause (A) of this Article, it shall state on the face of it and against the stub or counterfoil to the effect that it is issued in lieu of share certificate No…………. sub‐divided / replaced on consolidation of shares. C. When a new certificate has been issued in pursuance of clause (A) of this Article, it shall state on the face of it against the stub or counterfoil to the effect that it is duplicate issued in lieu of share certificate No……. The word ‘Duplicate’ shall be stamped or punched in bold letters across the face of the share certificate and when a new certificate has been issued in pursuance of clauses (A), (B) and (C) of this Article, particulars of every such share certificate shall be entered in a Register of Renewed and Duplicate Certificates indicating against it, the names of the persons to whom the certificate is issued, the number and the necessary changes indicated in the Register of Members by suitable cross references in the “remarks” column. D. All blank forms, share certificates shall be printed only on the authority of a resolution duly passed by the Board. 37. Subject to Section 84 of the Act and the rules made there under and subject to all other applicable provisions, guidelines on the subject and the listing agreement that the Company may enter into with one or more stock exchange or stock exchanges, where any share / debenture under the powers of the Company in that behalf herein contained is sold by the Board and the certificate in respect thereof has not been delivered up to the Company by the former holder of such share / debenture, the Board may issue a new certificate for such share / debenture distinguishing it in such manner as it may think fit from the certificate not so delivered up. CALLS CALL BY THE BOARD 38. The Board may, from time to time, subject to the terms on which any shares may have been issued and subject to the provisions of Section 91 of the Act, by a resolution passed at a meeting of the Board (and not by circular resolution), make such calls as the Board thinks fit upon the Members in respect of all moneys unpaid on the shares helped by them respectively, and not by conditions of allotment thereof made payable at fixed times and each Member shall pay the amount of every call so made on him to the person and at the times and places appointed by the Board A call may be payable b installment and shall be deemed to have been made when the resolution of the Board authorizing such call was passed. Joint holder of shares shall be jointly and severally liable to pay calls in respect thereof. CALLS ON SHARES OF SAME CLASS TO BE MADE ON UNIFORM BASIS: 39. Where any calls for shares capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same class. For the purpose of this Article, shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class. WHEN CALLS DEEMED TO HAVE BEEN MADE & NOTICES TO CALL 40. Any sum, which as per the terms of issue of a share becomes payable on allotment or at a fixed date whether on account of the nominal value of the share or by way of premium, shall for the purposes of the Articles be deemed to be a call duly made and payable on the date on which by the terms of issue the same may become payable and in case of non payment all the relevant provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. A call shall be
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deemed to have been made at the time when the resolution of the directors authorizing such call was passed. Not less than 14 days notice of any call shall be given specifying the time and place of payment and to whom such call be paid. RESTRICTION ON POWER TO MAKE CALL AND NOTICE 41. No call shall exceed one fourth of the nominal amount of share or be made payable within on month after the last preceding call was payable. 42. Not less than fourteen days notice of any call shall be given specifying the time and place of payments of the amount called on his shares. CALLS TO DATE FROM RESOLUTION 43. A call shall be deemed to have been made at the time when the resolution of the Board authorizing such call was passed and may be made payable by the Members whose names appear on the Register of Members on such date or at the discretion of the Board on such subsequent date as shall be fixed the Board. BOARD MAY EXTEND TIME 44. The Board may from time to time at their discretion extend the time fixed for the payment of any call, and may extend such time as to all or any of the Members who on account of residence at a distance or other cause, may be deem entitled to such extension, but no Member shall be entitled to such extension save as a matter of grave and favour. CALLS TO CARRY INTEREST 45. If any Member fails to pay any call due from him on the day appointed for the payment thereof or any such extension thereof as aforesaid, he shall be liable to pay interest on the same from the day appointed for the payment thereof to the time of actual payment at such rate as shall from time to time be fixed by the Board, but nothing in this Article shall render it obligatory for the Board to demand or recover any interest from any such Member and the Board shall be at liberty to waive payment of such interest either wholly or in part. AMOUNT PAYABLE AT FIXED TIME OR PAYABLE INSTALLMENT ON CALLS 46. If by the term of issue or otherwise, any amount is made payable at any fixed time or by installment any fixed whether on account of the amount of the share or by way of premium, every such amount or installment shall be payable as if it were a call duly made by the Board and of which due notice has been given and all the provisions herein contained in respect of call shall relate to such amount or installment accordingly. WHEN INTERST ON CALL OR INSTALLMENT PAYABLE 47. If the sum payable in respect of any call or installment be not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call shall have been made or the installment shall have become due, shall pay interest for the same at rate of 5 percent per annum (5% p.a) from the day appointed for the payment thereof to the time of actual payment or at such other lower rate (if any) as the Board may determine. WAIVER OF INTERST 48. The Board shall be at liberty to waive payment of any such interest either wholly or in part. EVIDENCE IN ACTION BY COMPANY AGINST SHAREHOLDERS 49. On a trial or hearing of any action or suit brought by the Company against any shareholder or his representative to recover any debt or money claimed to be due to the Company in respect of his shares, it shall be sufficient to prove that the name of the defendant is or was, when the claim arose on the Register of the Company as a holder, or one of the holders of number of shares in respect of which such claim is made, and the amount claimed is not entered as paid in the books of Company and it shall not be necessary to prove the appointment of the Board who made any
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call, not that a quorum was present at a Board meeting at which any call was made was duly convened or constituted, nor any other matter whatsoever, but the proof of the matter aforesaid shall be conclusive evidence of debt. PAYMENT OF CALL IN ADVANCE 50. The Board may, if it thinks fit, subject to the provisions of Section 92 of the Act receives from any Member willing to advance the same, all or any part of the money due upon the shares held by him beyond the sums actually called for, and upon the money so paid or satisfied in advance or so much thereof as from time to time exceed the amount of calls then made upon the shares in respect of which such advance has been made, the Company may pay interest at such rates not exceeding 6 percent per annum as the Member paying such in advance and the Board agree upon. Money so paid in excess of the amount of calls shall not rank for dividends or confer right on the Member to participate in profits. The Board may at any time repay the amount so advanced upon giving to such Member not less than three months notice in writing. The Members shall not be entitled to any voting rights in respect of the moneys so paid by him until the same would but for such payment, become presently payable. REVOCATION OF CALLS 51. A call many be revoked or postponed as the discretion of the Board. 52. The provisions of these Articles shall mutatis mutandis apply to call on debentures of the Company. JOINT HOLDERS JOINT HOLDERS 53. In the absence of a nomination recorded in accordance with Section 109A of the Act, which shall in any event have precedence, where two or more persons are registered as holders of any shares they shall be deemed to hold the same as joint tenants with benefits of survivorship subject to the provisions contained in this Articles. TO WHICH OF JOINT HOLDER CERTIFICATE TO BE ISSUED 54. Share may be registered in the names of any person, Company or other body corporate, but not more than three persons shall be registered jointly as Members in respect of any shares. The certificate of shares registered in the names of two or more persons shall be delivered to the person first named on the Register. SEVERAL LIABLITIES OF JOINT HOLDERS 55. The joint holders of a share shall be jointly and severally liable to pay all calls or installments in respect thereof. RIGHT OF JOINT HOLDERS 56. If any share stands in the names of two or more persons the first named in the Register shall as regards receipt of share certificates, dividends or bonus or service of notices and all or any other matter connected with the Company, except voting at meeting, and the transfer of the shares be deemed the sole holder thereof. DEATH OF ONE OR MORE JOINT HOLDERS OF SHARE 57. In the case of the death of any one or more of the persons named in the Register of Members as the joint holders of any share, the survivors shall be the only persons recognized by he Company as having any title to or interest in such shares, but nothing herein contained shall be taken to release the estate of deceased joint holder from any liability on shares help by him jointly with any other person. VOTES OF JOINT MEMBERS 58. If there be joint registered holders of any shares, any one of such persons may vote at any meeting either personally or by proxy in respect of such shares, as if he were solely entitled thereto, provided that if more than one of such joint holders be present at any meeting either personally or by proxy; then one of the said persons so present whose name stand higher on the Register of Members shall alone be entitled to vote in respect of shares but the others or others of the joint holder shall be entitled to be present at the meeting Several executors or administrators of a
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deceased Member in whose name shares stand shall for the purpose of these Articles be deemed joint holders thereof ANY OF JOINT HOLDERS DEEMED TO BE JOINT HOLDERS 59. Subject to the provisions contained in this and other Articles any one of the joint holder of a shares shall, except as regards transfer of shares, be deemed the sole holder thereof matters connected with the Company. LIEN COMPANY’S LIEN ON SHARES 60. The Company shall have a first and paramount lien upon all the shares (other than fully paid shares ) in the name of such Member (whether solely or jointly with others) and upon the proceeds of sale thereof for the amount of calls, interest, expenses or any other moneys payable to the Company at a fixed time in respect of any shares held by him, whether solely or jointly with other; and such lien shall extend to all dividends and bonus from time to time declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the Company’s lien, if any, on such shares. ENFORCING LIEN BY SALE 61. For the purpose of enforcing such lien the Directors may sell the shares in such manner as they shall think fit, but no sale shall be made until such time as aforesaid shall have arrived and until notice in writing of the intention to sell shall have been served on such Member or his legal representatives and default shall have been made by him or them in payment of moneys called or payable at fixed time in respect of such shares for fourteen days after such notice. To give effect to any such sale the Board may authorize some person to transfer the shares sold to the purchaser thereof. APPLICATION OF SALE PROCEEDS 62. The net proceeds of any such sale shall be received by the Company and applied in or towards payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. FOREITURE AND SURRENDER IF CALLS INSTALLMENT NOT PAID, NOTICE MAY BE GIVEN 63. If any Member fails to pay the whole or any part of any call or any installment of a call on or before the day appointed for the payment of the same or any such extension thereof, the Board may, any time thereafter, during such time as the call or such installment remains unpaid, give notice to the Member requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non payment. FORM AND TERMS OF NOTICE 64. The notice shall name a day (not being less than fourteen days from the date of notice) and place or places on and at which such calls or installments and such interest thereon at such rate not exceeding eighteen percent per annum as the Directors shall determine from the day on which such calls or installment ought to have been paid and the expenses as aforesaid are to be paid. The notice shall also state that in the event of nonpayment at or before the time and at the place appointed, that shares in respect of which the call was made or installment is to be payable, will be liable to be forfeited. INDEFAULT OF PAYMENT & ON NONCOMPLIANCE OF NOTICE, SHARES MAY BE FORFEITED 65. If the requirements of any such notice as aforesaid are not complied with, any share (s) in respect of which such notice has been given may at any time thereafter, before payment of all calls or installments, interest and expenses
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due in respect thereof be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared or any other moneys payable in respect of forfeited shares and not actually paid before the forfeiture. NOTICE AFTER FORFEITURE 66. When any such share has been so forfeited, notice of forfeiture shall be given to the Member in whose name it stood immediately prior to the forfeiture and an entry of forfeiture with the date thereof shall forth with be made in the Register of Members but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make any such entry as aforesaid. FORFEITED SHARE TO BECOME PROPERTY OF THE COMPANY 67. Any share so forfeited shall be deemed to be the property of the Company and may be sold, re‐allotted of otherwise disposed off, either to the original holder or any of other person, upon such terms and in such manner as the Board shall think it. MEMBER’S LIABILITY ON FORFEITURE 68. Any Member whose shares have been forfeited shall cease to be a Member in respect of the forfeited share but shall not with standing the forfeiture, be liable to pay and shall forth with pay to the Company, on demand, all calls, installments, interest and expenses owing upon or in respect of such shares at the time of forfeiture together with interest there on from the time of forfeiture until payment, at such rate not exceeding eighteen percent per annum as the Board may determine and the Board may enforce the payment of such moneys or any part thereof if its thinks fit, but shall not be under obligation to do so. ENTINCTION OF RIGHT ON FORFEITURE 69. The forfeiture of a share shall involve extinction at the time of forfeiture of all interest in and all claims and demands against the Company in respect of the share and all other rights incidental to the share except only such of those right as by these Articles are expressly saved. EVIDENCE OF FORFEITURE 70. A declaration in writing that the declarant is a Director or Secretary of the Company and that a share in the Company has been duly forfeited in accordance with these Articles on a date stated in the declaration shall be the conclusive evidence of the facts stated there in as against all persons claiming to be entitled to the share. VALIDITY OF SALES IN EXERCISE OF LIEN AND AFTER FOREITURE 71. Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers here‐in‐before given, the Board may appoint some person to execute an instrument of transfer of the shares sold and cause the Purchaser’s name to be entered in the Register in respect of the shares sold and after its name has been entered in the Register in respect of such shares, the validity of shares or his title shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. SURRENDER OF SHARES 72. The Directors may, subject to the provisions of the Act, accept a surrender of any share from or by any Member desirous of surrendering on such terms as the Director may think fit. POWER TO ANNUAL FORFEITURE 73. The Board may, any time before any share of forfeited shall have been sold, re‐allotted or otherwise dispose off, annual the forfeiture there of upon such conditions as it thinks fit. FORFEITED PROVISIONS TO APPLY 74. The provision of these Articles as to forfeiture shall apply in the case of nonpayment of any sum which by the terms of issue of a share becomes payable at a fixed time, whether on account of the nominal value of a share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
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DIRECTORS POWER TO CANCEL FORFEITED SHARE CERTIFICATE 75. Upon the sale after the forfeiture or surrender or for enforcing a lien purported to have been exercised by virtue of the powers here in before given, the Directors may cause the purchaser’s name to be entered in the Register in respect of the shares sold, and the person to whom the share sold or disposed of, shall be bound to see the regularity of the proceedings, or to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. The validity of sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. CANCELLATION OF FORFEITED SHARE CERTIFICATE & ISSUE FRESH CERFITIFICATE 76. Upon the sale, allotment or other disposal by the Directors under the provisions of the Articles, the Certificate (s) originally issued in respect of the relative shares shall (unless the same shall on demand by the Company have been previously surrendered to it by the defaulting Member) stands cancelled and become null and void and of no effect, and the Directors shall be entitled to issue a duplicate certificate (s) in respect of the said shares to the person (s) entitled thereto distinguishing it on them in such manner as they think fit from the certificate (s) not so delivered. 77. The purchaser shall not be bound to see the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to sale. PARTIAL PAYMENT NOT TO PRECLUDE FORFEITURE 78. Neither the receipt by the Company of a portion of any money, which shall from time to time be due from any Member to the Company in the respect of its shares, either by way of principal or interest, nor any indulgence granted by the Company in respect of the payment of any such money shall preclude the Company from thereafter proceeding to enforce forfeiture of such shares as aforesaid above. DEBENTURE TERMS OF ISSUE OF DEBENTURE 79. Any debentures, debenture stock or other securities may be issued at a discount, premium or otherwise and may be issued on condition that they shall be convertible into shares of any denomination, and with any privileges and conditions as to redemption, surrender, drawing, allotment of share and attending (but not voting) at General Meeting, appointment of Directors and otherwise, Debentures with the right to Conversion into or allotment of shares shall be issued only with the consent of the Company in General Meeting accorded by a Special Resolution. ASSIGNMENT OF DEBENTURES 80. Such debentures, debenture‐stock, bonds or other securities may be assignable free from any equities between the Company and the person to whom the same may be issued. DEBENTURE DIRECTORS 81. Any Trust Deed for securing debentures or debenture stock may if so arranged provide for the appointment from time to time by the trustee thereof or by the holders of debentures or debenture stock of some person to be a Director of the Company and may empower such trustee or holders of debentures or debenture stock from time to time to remove any Directors so appointed. A Director appointed under this Article is herein referred to as a “Debenture Director” and the Debenture Director means a Director for the time being in office under this Article. A Debenture Director shall not be bound to hold any qualification shares, shall not be liable to retire by rotation or be removed by the Company. The Trust Deed may contain such ancillary provisions as may be arranged between the Company and the Trustees and all such provision shall have effect notwithstanding any of the other provisions herein contained.
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82. The provisions herein contained relating to transfer and transmission shall also apply to debentures in the same manner as they apply to shares. 83. REGISTER OF CHARGES The Directors shall cause a proper Register to be kept, in accordance with the Act, of all mortgages and charges specifically affecting the property of the Company and shall duly comply with the requirements of the Act in regard to the registration of mortgages and charges therein specified. 84. SUBSEQUENT ASSIGNS OF UNCALLED CAPITAL Where any uncalled capital of the Company is charged, all persons taking any subsequent charge thereon shall take the same, subject to such prior charges and shall not be entitled to obtain priority over such prior charge. TRANSFER AND TRANSMISSION OF SHARES REGISTER OF TRANSFER 85. The Company shall keep a “Register of Transfer” and therein shall be fairly and distinctly entered particulars every transfer or transmission of any share. NO TRANSFER TO MINOR 86. The Board shall not register transfer of any share in favour of a minor (except in case when they are fully paid) or insolvent or person of unsound mind. FORM AND INSTRUMENT OF TRANSFER 87. The instrument of transfer of any share shall be in writing and in the prescribed from under the Companies (Central Government) General Rules and Forms, 1956 and in accordance with the requirement of Section 108 of the Act, and the Company, the transferee of shares to comply with provisions of the Act. ENDORSEMENT OF TRANSFER 88. In respect of any transfer of shares registered in accordance with the provisions of these Articles, the Board may, at their discretion, direct an endorsement of the transfer and the name of the transferee and other particulars on the existing share certificate and authorize any Director or officer of the Company to authenticate such endorsement on behalf of the Company or direct the issue of a fresh share certificate, in lieu of and in cancellation of the existing certificate in the name of the transferee. APPLICATION FOR TRANSFER 89. An application for registration of a transfer of share in the Company may be either by the transferor or the transferee. 90. Where the application in made by the transferor and related to partly paid shares, the transfer shall not be registered unless the Company give notice of the application to transferee and the transferee makes no objection to the transfer within two weeks from the receipt of notice. 91. For the purpose of these Articles notice to the transferee shall be deemed to have been duly give if it is dispatched by prepaid registered by post to the transferee at the address given in the instrument of transfer and shall be deemed to have been duly delivered at the time at which it would have been delivered in the ordinary course of post. TRANSFER OF SHARES AND DEBENTURES BOOK WHEN CLOSED 92. The Board shall have power on giving not less than seven days previous notice by advertisement in a newspaper circulating in the district in which the Registered office of the Company is situated to close the transfer books, the Register of Members of Register of Debenture Holders at such time or times and for such period or periods, not
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exceeding thirty days at a time and exceeding not in the aggregate forty five days in each year, as it may seem expedient. STAMPING OF THE INSTRUMENT OF TRANSFER 93. The instrument of transfer of any share shall be duly stamped for registration and executed by or on behalf of both transferor and the transferee and shall be attested. TRANSFER NOT TO BE REGISTERED EXCEPT ON PRODUCTION OF INSTRUMENTS OF TRANSFER 94. The Company shall not register transfer of shares in the Company unless a proper instruments of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee the name, father’s / husband’s name, address and occupation, if any of the transferee has been delivered to the Company along with the certificate relating to the shares, or if no such share certificate is in existence on an application in writing made to the Company by the transferee and bearing the stamp required for and instrument of transfer, it is proved to the satisfaction of the Board of Directors that instrument signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the Company may register transfer on such terms as to indemnity as the Board may think fit, provided further that nothing in this Article shall prejudice any power of the Company to register as share holder any person to whom the right to any share has been transmitted by Operation of law. TRANSFEROR TO REMAIN HOLDER UNTIL TRANSFER EFFECTED IN THE REGISTER 95. The transfer or shall be deemed to remain the holder of such share until the name of the transferee shall have been entered in the Register of Members in respect thereof. TRANSFEROR LEGAL REPRESENTATIVE VALID 96. A Transfer of share in the Company of deceased Member thereof made by his legal representative shall, although the legal representative is not himself a Member be as valid as if he had been a Member at the time of the execution of the instrument of transfer. BOARD’S POWER TO REFUSE TO REGISTER TRANSFER: 97. Subject to the provisions of Section 111 and 111A of the Act, the Board may at any time in their own absolute discretion decline to register or acknowledge a transfer of any shares or interest of a Member in shares of debentures of the Company giving reasons therefore and in particular may so decline in any case in which the Company has a lien upon the share desired to be transferred or any call or any call or installments regarding any of them remain unpaid or unless the transferee is not approved by the Board and such refusal shall not be affected by the fact that the proposed transferee is already a Member, the registration of transfer shall be conclusive evidence of the approval of the Board of the transferee PROVIDED THAT registration of a transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person (s) indebted to the Company of any account whatsoever except the Company has a lien on shares. TRANSFER IN LOTS 98. Subject to the powers of the Board as stated in Articles 61 above and the provisions of this clause, transfer of shares/debenture in whatever lots shall not be refused. That Company may, however, refuse to split a share/ debenture certificate into several scrip of every small denominations or to consider a proposal for transfer of shares/debentures comprised in a share/ debenture certificate to several parties involving such splitting if on the face of its such splitting/transfer appears to be unreasonable or with a genuine need of a marketable lot. COMPANY TO COMMUNICATE REFUSAL 99. If the Company refuses to register the transfer of share or debentures or transmission of any rights therein, the Company shall, within one month from the date on which the instrument of transfer or intimation of transmission was delivered with the Company send notice of refusal to the transferee and the transferor or to the person giving the intimation of the transmission as the case may be giving reason for such refusal and thereupon the provision s
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the intimation of the transmission as the case may be giving reasons for such refusal and thereupon the provisions of Section 11 of the Act and statutory modification or re‐enactment thereof for the time being in force shall apply. CUSTODY OF TRANSFER DEED 100.Every instrument of transfer shall be presented to the Company duly stamped for registration accompanied by such evidence as the Board may require to prove the title of the transferor or, his right to transfer the shares and generally under and subject to such conditions and regulations as the Board may, from time to time prescribe and every registered instrument of transfer shall remain in the custody of the Company until destroyed by the order of the Board but any instrument of transfer which the Board may refuse to register, shall be returned to the person depositing the same. TITLE TO SHARE OF DECEASED HOLDER 101.In the case of shares registered in the name of one person, the executor or administrator of deceased Member or holder of a Succession Certificate (whether European, Hindu, Mohammedan, Parsi or otherwise) shall be the only person recognized by the Company as having any title to his shares registered in the name of such Member and the Company shall not be bound to recognize such executors or administrators or holders of a Succession Certificate unless such executor or administrator or holder, shall have first obtained probate or Letters of Administrations, or their legal representation as the case may be, from a duly constituted Court in India or from any authority empowered by any law to grant such other legal representation. PROVIDED that in case, where the Board in their absolute discretion think fit, the Board may dispense with the production of Probate or Letters of Administration or other legal representation and under the next article, register the name of any person who claims to be absolutely entitled to the share standing in the name of a deceased Member as a Member, upon such terms as to indemnity or otherwise as the Director may deem fit. JOINT HOLDERS ONLY RECOGNIZED UPON DEATH 102.In case of death of any one or more of the persons named in the Register of Member as the joint holders of any share, the survivor or survivors shall be the only persons recognized by the Company as having any title or interest in such shares, but nothing herein contained shall be taken to release the estate of a deceased joint holder from any liability on shares held by him with any other person. BOARD MAY REQUIRE EVIDENCE OF TRANSMISSION 103.Every transmission of share shall be verified in such manner as the Directors require and the Company may refuse to register any such transmission until the same be so verified or until or unless indemnity is given to the Company with regard to such registration which the Board at their discretion shall consider sufficient PROVIDED never the less that there shall not be any obligation on the Company or the Board to accept any indemnity. REGISTRATION OF PERSON ENTITLED TO OTHERWISE THAN ON TRANSFER 104.Subject to the provisions of the Act and these Articles any person becoming entitled to share in consequence of death, bankruptcy or insolvency of any Member or by any lawful means other than by a transfer in accordance with these presents may with the consent of the Directors (which they shall not be under any obligation to give). Upon producing such evidence that he sustains the character in respect of which he proposes to act under the Article, or of his title, as the Board may think sufficient may required either be required himself as the holder of the share or elect to have some person nominated by him, and approved by the Board, registered as such holder provided nevertheless, that if such person shall elect to have his nominee registered, he shall testify the election by executing to his nominee as instrument of transfer of the share in accordance with the provisions here in contained and, until he does so, he shall not be free from any liability in respect of the share, This Article in herein referred to as the “Transmission Article”. BOARD’S POWER TO REFUSE ON TRANSMISSION
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105.Subject to the provisions of the Act and these Articles, the Directors shall have the same rights to refuse to register a person entitled by transmission to any shares of his nominee as if he were the transferee named in an ordinary transfer presented for registration. NO FEE ON TRANSFER AND TRANSMISSION 106.No fee shall be changed for registration on transfer, probate Succession Certificate and letters of administration, certificate of death or marriage, power, of attorney or similar other documents. CLAIMANT TO BE DENTITLED TO SAME ADVANTAGE 107.The person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to the same dividends and other advantages to which he would be entitled as he were the registered as Member in respect of share he entitled in respect of it, to exercise any right conferred by membership in relation to the meeting of the Company provided that the Board may at any time give notice requiring any such persons to elect either to registered himself or to transfer shares and if notice is not complied with within sixty days, the Board may thereafter withhold the payment of all dividends, bonus or other moneys payable in respect of the share until the requirements of the notice have been complied with. Subject to the provisions of these presents, any person becoming entitled to shares in consequence of the death, lunacy, bankruptcy or insolvency of any Members, or by any lawful means other than by a transfer in accordance with these Articles may, with the consent of the Board (which it shall not be under any obligation to give), upon producing such evidence as the Board thinks sufficient, that he sustains the character in respect of which he proposes to act under this Articles, or of his title, either be registering himself as the holder of the shares or elect to have some person nominated by him and approved by the Board, registered as such holder, provided, nevertheless, if such person shall elect to have his nominee registered, he shall testify that election by executing in favour of his nominee an instrument of transfer in accordance with the provision herein contained and until he does so he shall not be freed from any liability in respect of the shares. COMPANY NOT LIABLE ON REGISTRATION OF TRANSFER ETC. 108.The Company shall incur no liability or responsibility whatsoever in consequence of its registering or giving effect to any transfer of share made or purporting to be made by an apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of persons having or claiming any equitable, rights, title or interest to or in the said shares, notwithstanding that the Company may have had notice of such equitable rights, title or interest to or in such notice prohibiting registration of such transfer, and may have entered such notice or referred there to in any book of the Company and the effect to any notice which may be given to it of any equitable rights, title or interest or be under any liability whatsoever for refusing or neglecting to do so, though it may have been entered or referred to in some books of the Company , but the Company shall nevertheless be at liberty to regard and attend to any such notice to give effect thereto if the Board shall so think fit. PROVISION APPLICABLE TO DEBENTURLS/WARRANTS 109.The provisions of these Articles shall mutates mutandis apply to the transfer or transmission by operation of law of debentures and/or warrants of the Company . INCREASE AND REDUCTION OF CAPITAL POWER TO INCREASE CAPITAL BY ORDINARY RESOLUTION 110.Subject to provisions of Section 94 of the Act, the Company may, from time to time by ordinary Resolution increase, sub‐divide or consolidate the shares of such sum, to be divided into shares of such amount as may be specified in the resolution. INCREASE OF CAPITAL 111.The Company at its General Meeting may, from time to time, by an Ordinary Resolution increase the capital by the
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creation of new shares, such increase to be of such aggregate amount and to be divided into shares of such respective amounts as the resolution shall prescribe. The new shares shall be issued on such terms and conditions and with such rights and privileges annexed thereto as the resolution shall prescribe, and in particular, such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the Company and with a right of voting at General Meeting of the Company in conformity with Section 87 of the Companies Act, 1956. Whenever the capital of the Company has been increased under the provisions of the Articles, the Directors shall comply with the provisions of Section 97 of the Act. SAME AS ORIGINAL CAPITAL 112.Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares shall be considered part of the original equity capital and shall be subject to the provisions herein contained with reference to the payment of calls & installments, transfer & transmission, forfeiture, lien, surrender, voting and otherwise. REDUCTION OF CAPITAL 113.Subject to the provisions of Section 78, 80, 100 to 105 of the Act the Company may from time to time by Special Resolution, and subject to the confirmation by the court reduce its Capital and any Capital Redemption Reserve Account or Share Premium Account in any manner for the time being authorized by law and in particular, capital may be paid off on the footing that it may be called up again or otherwise. This Article is not to derogate from any power the Company would have if it were omitted. ON WHAT CONDITIONS NEW SHARES MAY BE ISSUED 114.Subject to any rights or privileges for the time being attached to any shares in the capital of the Company then issued where the share capital is divided into different classes of shares, the new shares may be issued upon such terms and conditions and with such rights and privileges attached thereto subject to the provisions of Section 106 and Section 107 of the Act in a General Meeting PROVISIONS RELATING TO ISSUE 115.Before the issue of new shares, the Company in General Meeting may make provisions as to the allotment and issue of the share and in particular may determine to whom the same shall be offered inn the first instance and whether at par or at premium or subject to the provisions of Section 79 of the Act, at a discount. In default of any such provisions or so far as the same shall not extend, the new shares may be issued in conformity with the provisions of Article 12. HOW FAR NEW SHARES TO RANK WITH EXISTING SHARES 116.Except in so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of shares shall be considered part of the existing capital of the Company and shall be subject to the provisions herein contained with reference to the payments of dividends, call and installments, transfer and transmission, forfeiture, lien, surrender and otherwise. INEQUILITY IN NUMBER OR NEW SHARES 117.If, owing to any inequality in the number of new shares to be issued and the number of shares held by the Member entitled to have such new shares, any difficulty arising in apportionment of such new shares or any of them among the Members shall, in the absence of any direction in resolution creating the shares by the Company in General Meeting, be determined by the Board. SHARES NOT TO EFFECT THE RIGHT OF SHARES ALREADY ISSUED 118.The rights conferred upon the holders of the shares of any class issued with reference toor other rights shall not, unless otherwise expressly provided by the terms of the issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith, but in no respect in priority thereto. ADR/GDR
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119.Subject to rules and regulation issued by SEBI, FEMA, Companies Act’1956 and Listing Agreement and other applicable laws the Company may issue ADRs and or GDRs from time to time. ALTERATION OF CAPITAL POWER TO SUB‐DIVIDE AND CONSOLIDATE SHARES 120.The Company may, subject to the provisions of Section 94 of the Act in General Meeting by Ordinary Resolution may from time to time: i. consolidate and divide all or any of its share capital into like shares of larger amount than its existing shares; ii. Sub‐divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum, HOWEVER that in the sub‐division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the shares from which the reduced share is derived; iii. Cancel any shares which, at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish by its share capital by the amount of its shares so cancelled. SURRENDER OF SHARES 121.Subject to the provisions of Section 100 and 105 inclusive of the Act, the Board may accept from and Member the surrender on such terms and conditions as shall be agreed of all or any of his shares. CONVERSION OF SHARES INTO STOCK CONVERSION OF SHARES INTO STOCK & RECONVERSION 122.The Company may, by ordinary resolution of the Company in General Meeting: i. Convert any paid‐up shares into stock ; and ii. Reconvert any stock into paid‐up shares of any denomination. TRANSFER OF STOCK 123.The holders of stock may transfer the same or any part thereof in the same manner as, and subject to the regulations under which, the shares from which the stock arose might, before the conversion, have been transferred or as near thereto as circumstances admit, provided that, the Board may from time to time fix the minimum amount of stock transferable, so that such minimum shall not exceed the nominal amount of shares from which the stock arose. RIGHTS OF STOCK HOLDERS 124.The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the Company and other matters, as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the profit of the dividends and Company and in the assets on winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage. REGULATIONS 125.Such of the regulations of the Company (other than those relating to share warrants) as are applicable to paid‐up shall apply to stock, and the words “Share” and “Shareholder” in those regulations shall include “ Stock” and Stockholder” respectively. POWER TO MODIFY RIGHTS 126.Whenever the capital (by reason of the issue of preference shares or otherwise) is divided into different classes of shares, all or any of the rights and privileges attached to each class may, subject to the provisions of Section 106 and 107 of the Act, be modified, commuted affected, abrogated, varied or dealt with by agreement between the Company and any persons purporting to contract on behalf of the class PROVIDED such agreement is (a) consented to in writing by the holders of at least three‐fourth of the issued shares of that class ; (b) sanctioned by a resolution passed at a separate General Meeting of that class in accordance with Section 106 of the Act and all the provisions
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here in after contained as to a General Meeting shall apply, mutatis mutandis to every such meeting, except that the quorum shall be Members holding or representing by proxy, on‐fifth of the nominal amount of the issued share of the class. The Article is not by implication to curtail the power of modification, which the Company would have if this Article were omitted. The Company shall comply with the provisions of Section 192 of the Act as to forwarding a copy of any such agreement or resolution to the Registrar of Companies. GENERAL MEETING WHEN ANNUAL GENERAL MEETINGS TO BE CALLED 127.In addition to any other meetings, Annual General Meetings of the Company shall be held within such intervals as are specified in Section 166 (I) of the Act and subject to the provisions of Section 166 (2) of the Act at such times and places as may be determined by the Board. Every such General Meeting shall be called Annual General Meeting and shall be specified as such in the notice convening the meeting. DISTINCTION BETWEEN ORDINARY AND EXTRA‐ORDINARY MEETING 128.All other meetings other than Annual General Meeting of the Company shall be called an Extra‐Ordinary General Meeting. WHEN EXTRA‐ORDINARY GENERAL MEETINGS HELD 129.The Board may, whenever it deems fit, or on the requisition of Members received in accordance with Section 169 of the Act proceed to call an Extra Ordinary General Meeting. When a requisition of Members is received and the Board commits a default in convening an Extra Ordinary General Meeting in pursuance thereof, then the requisitionist may convene such meeting as provided under Section 169. DIRECTOR ENTITLED TO SPEAK AT GENERAL MEETINGS 130.Each Director shall be entitled to attend and speak at any General Meeting. CIRCULATION OF MEMBERS RESOLUTION 131.The Company shall comply with provision of Section 188 of the Act as to giving notice of resolution and circulating Statements at the requisition of the Members NOTICE OF MEETING 132.Save as provided in Section 171 (2) of the Act, not less than twenty one day’s notice in writing at least of every General Meeting, Annual of Extra Ordinary and by whomsoever called, specifying the day, place and hour of meeting and the general nature of business to be transacted there at shall be given in the manner provided in Section 172 (1) of the Act to such persons as are under these Articles or the Act, entitled to received notice from the Company provided that in the case of an Annual General Meeting with consent in writing of all the Members entitled to vote thereat and in the case of any other meeting with consent of the Members holding not less than 95 percent (95%) of such part of the paid up capital of the Company as gives a right to vote at the meeting, a meeting may be convened by a shorter notice. As provided under Secion173, in the case of an Annual General Meeting in any business other than (i) the consideration of the accounts, balance sheets and reports of the Board and Auditors (ii) the declaration of dividend, (iii) the appointment of Directors in place of those retiring, (iv) the appointment of and fixing of the remuneration of the Auditors, is to be transacted and in the case of any other meeting in any event, there shall be annexed to the notice of the meeting a statement setting out all the material facts concerning each such item of business, including in particular the nature and extent of the interest, if any, there in of every Director and the Manager (if any) where any such item of business relates to or affects any other Company the extent of shareholding interest in that other Company of every Director and Manager if any, of the Company shall also be set out in the statement if the extent of such shareholding and interest is not less than twenty percent of the paid up share capital of that other Company . Where any item of business consists of the according of approval to any documents by the meeting, the time and place where the document can be inspected shall be specified in the statement aforesaid. There shall appear with reasonable prominence in every such notice a statement that a Member entitled to attend
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and vote is entitled to appoint a proxy and to attend and vote instead of him and that a proxy need not be a Member of the Company ; where any such business consists of special business as herein after defined there shall be annexed to the notice a statement complying with Section 173(2) and ( 3) of the Act. PERSONS ENTITLED TO NOTICE AND MANNER OF SERVICE OF NOTICE 133.Notice of every meeting of the Company shall be given to every Member of the Company , to the Auditors of the Company and to the person (s) entitled to share in consequence of the death or insolvency of a Member in any manner hereinafter authorized for giving notices to such persons provided that where a notice of a General Meeting is given by advertising the same in a newspaper circulating the neighborhoods of the office under Section 53 (3) of the Act, need not be annexed in the notice as required by that Section but it shall be mentioned in the advertisement that the statement has been forwarded to the Members of the Company . ACCIDENTAL OMISSION NOT TO INVALIDATE THE PROCEEDINGS OF THE MEETING 134.The accidental omission to give any such notice to or its non receipt by any Member or the person to whom it should be given shall not invalidate the proceeding of the Meeting. BUSINESS AND PROCEEDINGS OF THE MEETING 135.The ordinary business of an Annual General Meeting shall be to receive and consider the Profit and Loss Account, the Balance Sheet and the report of the Directors and the Auditors, to appoint Auditors and fix their remuneration and to declare dividends. All other business transacted at any other General Meeting shall be deemed special business. QUORUM FOR THE MEETING AT THE TIME OF COMMENCEMENT 136.No business shall be transacted at any General Meeting unless a quorum of Members is present at the time when the meeting proceeds with the business. Save as herein otherwise provided, five Members personally present shall be the quorum. IF QUORUM NOT PRESENT. WHEN MEETING OT BE DISSOLVED AND WHEN ADJOURNED 137.If within half an hour from the time appointed for the meeting a quorum be not present the meeting if convened upon the requisition of Members as aforesaid shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week, at the same time and place or such other day at such time and place as the Board may, b y notice determine. 138.If at such adjourned meeting a quorum is not present within half an hour form the time appointed for holding the meeting, those Members who are present and not being less than two shall be a quorum and may transact the business for which the meeting was called. RESOLUTION TO BE PASSED BY THE COMPANY IN GENERAL MEETING 139.Any act or resolution which under the provision of these Articles or of the Act, is permitted or required to be done or passed by the Company in General Meeting shall be sufficiently so done or passed if effected by an Ordinary Resolution as defined in Section 189 (1) of the Act unless either the Act or these Articles specifically requires such act to done or resolution passed by a Special Resolution as defined in Section 189 (2) of the Act. CHAIRMAN OF THE GENERAL MEETING 140.The Chairman of the Board of Directors shall be the Chairman at every General Meeting if there be no such Chairman or if at any meeting the Chairman is not present within fifteen minutes after the time appointed for holding such meeting or is not willing to act, the Members presents shall choose and of the Directors as Chairman and if no Director be present or if all the Directors present decline to take the chair, the Members present shall, on show of hands, or on a poll if property demanded elect one of their Members being entitled to vote to be the Chairman for that particular meeting, IN CASE OF THEIR ABSENCE OR REFUSAL, A MEMBER MAY ACT
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141.If at any meeting a quorum of Members shall be present, and the chair shall not be taken by the Chairman of the Board or by the Vice Chairman or by a Director at the expiration of half an hour from the time appointed for holding the meeting of it before expiration of that time all the Directors shall decline to take the Chair, the Members present shall choose one their Members to be Chairman of the meeting. BUSINESS CONFINED TO ELECTION OF CHAIRMAN WHILST CHAIR VACANT 142.1. No business shall be discussed at any General Meeting except the election of a Chairman, whilst the chair is vacant. 2. If a poll is demanded on the election of the chairman, it shall be taken forth with in accordance with the provisions of the Act and these Articles, the Chairman so elected on a show of hands exercising all the powers of the Chairman under the Act and these Articles. 3. If some other person is elected Chairman as a result of the poll he shall be Chairman for the rest of the meeting. CHAIRMAN WITH CONSENT MAY ADJOURN MEETING 143.The Chairman may with the consent of the Members present at any meeting at which quorum is present, shall, if so directed by the meting adjourn any meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meting from which the adjournment took place. POWER TO ADJOURN THE GENRAL MEETING 144.The Chairman of a General Meeting may adjourn the same form time to time and from place to place but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. FRESH NOTICE NOT NECESSARY IN CASE OF ADJOURNED MEETING 145.When a meeting is adjourned, it shall not be necessary to give any notice of adjournment or of the business to be transacted at an adjourned meeting. NOTICE TO BE GIVEN WHERE A MEETING ADJOURNED FOR 30 DAYS OR MORE 146.When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. HOW QUESTIONS TO BE DECIDED AT THE MEETING AND CHAIRMAN’S CASTING VOTE 147.Every question submitted to a meeting shall be decided in the first instance by a show of hands unless a poll is (on or before the declaration of the result of the show of hands) and in case of any quality. Of votes, the Chairman shall on both, on show of hands and on a poll have a casting vote in addition to the vote or votes to which he may be entitled as a Member. DEMAND FOR POLL 148.At any General Meeting unless a poll is (on or before the declaration of the result of the show of hands) in accordance with the provisions of Section 179 of the Act demanded either by the Chairman on his own motion or by any Member or Members present in person or by proxy and holding shares in the Company (i) which confer a power to vote on the resolution not being less than one tenth of the total voting power in respect of the resolution or (ii) which an aggregate sum of `50, 000 has been paid‐up, a declaration by the Chairman that the resolution be or has not been carried either unanimously, or by a particular majority, and an entry to the effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact, without proof of the number of the proportion of the votes cast in favour of or against the Resolution. POLL
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149.(a) If a poll be demanded as aforesaid, it shall be taken forthwith on a question of adjournment or election of the Chairman or in any other case, in such manner and at such time not being later than forty eight hours from the time, when the demand was made and at such place as the Chairman of the meeting directs and subject as aforesaid; (b) The demand of poll may be withdrawn at any time; (c) Where a poll is to be taken, the Chairman of the meeting shall appoint two scrutinizers, one at least of whom shall be Member (not being an officer or employee of the Company) present at the meeting provided such a Member is available and willing to be appointed to scrutinize the votes given on the poll and report to him thereon. (d) On a poll, a Member entitled to more than one vote, or his proxy or other person entitled to vote for him, as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses. (e) The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business the question on which a poll has be commended. SCRUTINEERS AT THE POLL 150.Where a poll is to taken, the Chairman of the meeting shall appoint two scrutinizers toscrutinize the votes given on the poll and to report thereon to him. One of the scrutinizers so appointed shall always be a Member (not being an officer or employee of the Company) present at the meeting, provided such a Member is available and willing to be appointed. The Chairman shall have power at any time before the result of the poll is declared to remove a scrutinizer from the office any fill vacancies in the office of scrutinizer arising from such removal or from any other cause. PASSING RESOLUTIONS BY POSTAL BALLOT 151.(a) Notwithstanding any of the provisions of these Articles the Company may, and in the case of resolutions relating to such business as notified under the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 to be passed by postal ballot, shall get any resolution passed by means of a postal ballot, instead of transacting the business in the General Meeting of the Company. (b) Where the Company decides to pass any resolution by resorting to postal ballot, it shall follow the procedures as prescribed under Section 192A of the Act and the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001, as amended from time. MINUTES OF GENERAL MEETINGS 152.The Company shall cause minutes of all proceedings of every General Meeting, and of all proceedings of every meeting of its Board of Directors or of every Committee of the Board, to be kept by making within thirty days of the conclusion of every such meeting concerned the abstracts of the proceeding of such meeting thereof in books kept for that purpose with their pages consecutively numbered. Each page the record of proceedings of each meeting in such books shall be signed and the last page of the record of proceedings shall be dated and signed in the case of Minutes of Proceedings of a meeting of the Board or of a Committee thereof, by the Chairman of the said meeting or the Chairman of the next succeeding meeting, and in the case of Minutes of proceedings of a General Meeting, by the Chairman of the same meeting within the aforesaid period or in the event of the death or inability of the Chairman within that, period, by a Director duly authorized by the Board for that purpose, in no case the minutes of the aforesaid by passing or otherwise. INSPECTION OF MINUTES BOOKS OF GENERAL MEETINGS. 153. The book containing the minutes of the proceedings of any General Meeting of the Company shall be kept at the registered office of the Company and be open during the hours of 11.00 A.M. to 1.30 P.M. on each working day in week excluding Saturdays, to the inspection of any Member without charge subject to such other reasonable restrictions as the Company may be these Articles or in General Meeting impose in accordance with provisions of the Act, Any Member shall be entitled to be furnished within the period prescribed by the Act, after he has made are request in that behalf to the Company, with a copy of the minutes referred to on payment of such sum as may be prescribed under the Act. VOTES OF MEMBERS
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VOTES MAY BE GIVEN BY PROXY OR ATTORNEY 154.Subject to the provisions of the Act and these Articles votes may be given either personally or by an attorney or by proxy or in the case of a body corporate also by a representative duly authorized. VOTE ON SHOW OF HANDS 155.Save as hereinafter provided, on a show of hands, every Member present in person and being a holder of an equity share shall have one vote and every person present either as a proxy on behalf of a holder of an equity share or as a representative of a body corporate in accordance with these Articles, being a holder of an equity share if he is not entitled to vote in his own right, shall have one vote. VOTE ON POLL 156.Save as hereinafter provided on a poll, the voting rights of the holder of equity shares shall be specified in Section 87 of the Act. VOTING PREFERENCE SHARES 157.The voting of Preference Shares, if any, have a right to vote a resolution placed before the Company which directly affects the right attached to such preference shares and subject to as aforesaid, the holders of preference shares shall in respect of such capital be entitled to vote on every resolution placed before the Company at a meeting if dividend is remained unpaid in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting and the holders of any preference shares have a right to vote as aforesaid on any resolution. Every such Member personally present shall have one vote and on poll his voting right in respect of such preference shares shall be proportion to the total of the capital paid up on such shares. PROCEDURE WHERE A COMPANY OR A BODY CORPORATES IS A MEMBER 158.Where a Company or a Body Corporate (hereinafter called Member Company) is a Member of the Company, a person duly appointed by resolution in accordance with the provisions of Section 187 of the Act to represent such Member Company at a meeting of the Company shall not, by reason of such appointment by deemed to be a proxy and a lodging at the office or production at the meeting of a copy of such resolution duly signed by one Director of such Member Company and certified by him as being true copy of the resolution shall, on production at the meeting be accepted by the Company as sufficient evidence of the validity of his appointment. Such a person shall be entitled to exercise the same rights and powers including the rights to vote by the proxy on behalf on the Members Company which he represent could exercise if it were an individual Member. VOTES IN RESPECT OF DECEASED OR INSOLVENT MEMBER 159.Any person entitled under the Transmission Article to transfer the share may vote at any General Meeting in respect thereof in the same manner as if he were registered holder of such shares provided that forty eight hours at least before the time of holding the meeting of adjourned meeting as the case may be, at which he proposes to vote he shall satisfy the Board or his right to transfer such shares, unless the Board shall have previously admitted his right to vote at such meeting in respect thereof. VOTE OF JOINT HOLDERS 160.Where there are joint registered holders of any share, any one of such person may at vote any meeting either personally or by proxy in respect of such share if he were solely entitled there to and if more than one of such joint‐ holders be present at any meeting either personally or by proxy then the person so present whose names stands first on the Register of Members shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased Member in whose name any share stands shall for the purposes of the Articles be deemed joint holders thereof. HOW MEMBERS NON COMPOSMENTS AND MINOR MAY VOTE 161.A Member of unsound mind, or in respect whom an order has been made by Court having jurisdiction in lunacy, may vote whether on a show of hand or hands, or on a poll, by his committee or other legal guardian, and any such
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committee or guardian may on a poll, vote by Proxy. If any Member be a minor, the vote in respect of his shares shall be by his guardian or any one of his guardians if more than one, to be selected in case of dispute by the Chairman of the meeting. INSTRUMENT OF PROXY TO BE IN WRITING 162.Instrument appointing a proxy shall be in writing under the hand of the appointer or his Attorney duly authorized in writing if such appointer is a body corporate, be under its common seal of the hand of its officer or attorney duly authorized. VALIDITY OF PROXY 163.A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death of or insanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed or the shares in respect of revocation or transfer shall have been received by the Company at its office before the commencement of the meeting or adjourned meeting at which the proxy is used. SPECIAL AND GENERL PROXY 164.A proxy duly appointed for specified meeting only called a Special proxy. Any other proxy shall be called a general proxy. INSTRUMENT APPOINTING APROXY TO BE DEPOSITED AT THE OFFICE 165.The instrument appointing a proxy and the power of Attorney or other authority (if any) under which it is signed, or a notarily certified copy of that power of Attorney or Authority as the case may be shall be deposited at the registered office not less than forty eight hours before the time for holding the meeting at which the person named in the instrument purports to vote in respect thereof and in default the instrument of proxy shall not be treated as valid. WHEN VOTE BY PROXY VALID THROUGH AUTHORITY REVOKED 166.A vote given in accordance with the terms of an instrument appointing a proxy shall be valid not with standing the previous death or insanity of the principal or revocation of the instrument of transfer of share in respect of which the vote is given provided no intimation in writing of the death, insanity, revocation or transfer of the share shall have been received by the Company at the office before the proxy is given PROVIDED NEVERTHELESS THAT the Chairman of any meeting think fit of due execution of an instrument of proxy and the same has not been revoked. FORM OF INSTRUMENT APPOINTING A PROXY 167.Every instrument appointing a proxy shall be retained by the Company and shall as nearly as circumstances admit be in any form set out in Schedule IX to the Act. RESTRICTION ON VOTING 168.No Member shall he entitled to exercise any voting rights either personally or by proxy at any meeting of the Company in respect of shares registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the Company has exercised any rights of lien. But the Directors may by a resolution passed at the meeting of the Board waive the operation of the Article. ADMISSION OR REJECTION OF VOTES 169.Any objection as to the admission or rejection of a vote, either on a show of hand or a poll made in due time shall be referred to the Chairman who shall forthwith determine the same and such determination made in good faith shall be final and conclusive. 170. No objection shall be raised to the qualification of any vote except the meeting or adjourned meeting at which the vote objected to is given or tendered and every hot disallowed at such meeting shall be valid for all the purposes. DEMATERIALISATION OF SECURITIES 171.1. For the purpose of this Article:
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(a) “SEBI” means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992. (b) “Depositories Act” means the Depositories Act, 1996, including any statutory modifications or reenactment thereof for the time being in force. (c) “Depository” means a company formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration under sub‐section (1A) of Section 12 of the Securities and Exchange Board of India Act, 1992. (d) “Bye‐laws” means bye‐laws made by a Depository under Section 26 of the Depositories Act. (e) “Beneficial Owner” means a person whose name is recorded as such with a Depository. (f) “Member” means the duly registered holder from time to time of the shares of, the Company and includes every person whose name is entered as a Beneficial Owner in the records of the Depository. (g) “Participant” means a person registered as such under section 12 (lA) of the Securities and Exchange Board of India Act, 1992. (h) “Record” includes the records maintained in the form of books or stored in Computer or in such other form as may be determined by regulations made by SEBI in relation to the Depositories Act. (i) “Regulations” means the regulations made by SEBI. (j) “Security” means such security as may be specified by SEBI. (k) Words imparting the singular number only include the plural number and vice versa. (l) Words imparting persons include corporations. (m) Words and expressions used and not defined in the Act but defined in the Depositories Act, shall, have the same meanings respectively assigned to them in that Act. 2.
Either the company or the investor may exercise an option to issue, deal in, hold the securities (including shares) with a Depository in electronic form and the certificates in respect thereof shall be dematerialised, in which event the rights and obligations of the parties concerned and matters connected therewith or incidental thereto, shall be governed by the provisions of the Depositories Act, as amended from time to time or any statutory modification thereto or re‐enactment thereof.
3.
Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize its existing securities, dematerialize its securities held in the Depositories and/or offer its fresh securities in a dematerialised form pursuant to the Depositories Act, and the rules framed thereunder, if any.
4.
Every person subscribing to or holding securities of the Company shall have the option to receive security certificates or to bold the securities with a Depository.
5.
If a person opts to hold his security with Depository, the company shall intimate such Depository the details of allotment of the security, and on receipt of the information, the Depository shall enter in its records the name of the allottees as the Beneficial Owner of the security.
6.
All securities held by a Depository shall be dematerialized and be in fungible form. Nothing contained in Sections 153, 153A, 153B, 187B, 187C and 372A of the Act, shall apply to a Depository in respect of the securities held by it on behalf of the Beneficial Owner.
7.
(a) Notwithstanding anything to the contrary contained in the Act, or these Articles, a Depository shall be deemed to be registered owner, for the purpose of effecting transfer of ownership of security on behalf of the Beneficial Owner.
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(b) Save as otherwise provided in (a) above, the Depository as the registered owner of the securities shall not have any voting rights or any other rights in respect of the security held by it. (c) Every person holding securities of the Company and whose name is entered as the Beneficial Owner in the records of the Depository shall be deemed to be a member of the Company. The Beneficial Owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a Depository. 8.
Except as ordered by a Court of competent jurisdiction or as required by law, the Company shall be entitled to treat the person whose name appears on the Register of Members as the holder of any share or where the name appears as the Beneficial Owner of shares in the records of the Depository as the absolute owner thereof and accordingly shall not be bound to recognize any benami trust or equitable, contingent, future or partial interest in any share, or (except only as is by these Articles otherwise expressly provided) any right in respect of a share other than absolute right thereto in‘ accordance with these Articles, on the part of any other person whether or not it has express or implied notice thereof, but the Board shall be entitled at their sole iscretion to register any share in the joint names of any two or more persons or the survivors of them.
9.
Every Depository shall furnish to the Company information about the transfer of securities in the, name of the Beneficial Owner at such intervals and in such manner as may be specified by the bye‐laws and the Company in that behalf.
10. Upon receipt of certificate of securities on surrender by a person who has entered into an agreement with the Depository through a Participant, the Company shall cancel such a person certificate and substitute in its records the name of Depository as the registered owner in respect of the said securities and shall also inform the Depository accordingly. 11. If a Beneficial Owner seeks to opt out of a Depository in respect of any security,the Beneficial Owner shall inform the Depository accordingly. 12. The Depository shall on receipt of information as above make appropriate entries in its records and shall inform the Company. 13. The Company shall within thirty (30) days of the receipt of intimation from the Depository and on fulfillment of such conditions and on payment of such fees as may be specified by the regulations, issue the certificate of securities to the Beneficial Owner or, the transferee, as the case may be. 14. Notwithstanding anything in the Act, or these Articles to the contrary, where securities are held in a Depository, the records of the beneficial ownership may be served by such Depository on the Company by means of electronic mode or by delivery of floppies or discs. 15. Except as specifically provided in these Articles, the provisions relating to joint holders of shares, calls, lien or shares, forfeiture of shares and transfer and transmission of shares shall be applicable to shares held in Depository so far as they apply to shares in physical form subject to the provisions of the Depository Act. 16. Notwithstanding anything in the Act, or these Articles where securities are dealt with by a Depository, the Company shall intimate the details thereof to the Depository immediately on allotment of such securities 17. The shares in the capital shall be numbered progressively according to their several denominations provided, however, that the provision relating to progressive numbering shall not apply to the shares of the Company which are dematerialized or may be dematerialized in future or issued in future in dematerialized form. Except in the manner hereinbefore mentioned, no share shall be sub‐divided. Every forfeited or surrendered share held in material form shall continue to bear the number by which the same was originally distinguished. 18. The Company shall cause to keep a Register and index of Members and a Register and index of Debenture holders in accordance with Sections 151 and 152 of the Act respectively, and the depositories Act, with details of shares and debentures held in material and dematerialised forms in any media as may be permitted by law including in any form of electronic media. The Register and index of Beneficial Owners maintained by a Depository under Section 11 of the
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Depositories Act, shall be deemed to be Register and index of Members and Register and index of Debenture holders, as the case may be, for the purpose of the Act. The Company shall have the power to keep in any state or country outside India a branch Register of Members resident in that state or country. 19. The Company shall keep a Register of Transfers and shall have recorded therein fairly and distinctly particulars of every transfer or transmission of any share held in material form. BOARD OF DIRECTORS NUMBERS OF DIRECTORS 172.The number of Directors (excluding Debenture, ex‐officio and alternate Directors) shall not be less than three and not more than twelve However, subject to the provisions of the Act and these Article the Company may be Ordinary Resolution from time to time increase or reduce the number of Directors within the limits fixed by these Articles. 173.First Director of the Company shall be; 1. SHRI RAJESH MUNDRA 2. SHRI GAURAV MUNGAD EX‐OFFICIO NOMINEE DIRECTORS 174.Not withstanding any things to the contrary contained in these Articles, so long as any moneys remain owing by the Company to the Public Financial Institution as defined in Section 4A of the Act, and any Financial Institution owned or controlled by Central Government or State Government of Reserve Bank of India (RBI) or by two or more of them or by Central Government or State Government by themselves (each of the above is hereinafter in this Article referred to as “the Corporation”) out of any loans/debentures assistance granted by them to the Company or so long as the Corporation holds or continues to hold debenture shares in the Company as a result of underwriting or by private placement, or so long as any liability of the |Company arising out of any guarantee furnished by the Corporation on behalf of the Company remains outstanding, the corporation shall have a right to appoint from the time to time, any person or persons as a Director or Directors, whole‐time or non‐whole time (which director(s) is/are hereinafter referred to as Nominee Director(s)” ) on the Board of the Company and to remove from such office any person (s) in his or their place (s). The Board of Directors of the Company shall have no power to remove the Nominee Directors of the Company from the office, Also at the option of the Corporation such Nominee Director (s) shall not be liable to retire by rotation of Directors, Subject as aforesaid, the Nominee Director(s) shall be entitled to the same rights and privileges and be subject to the same obligations as of any other Direction of the Company. The Nominee Director (s) so appointed shall hold the said office only so long as the Corporation holds or continues to hold Debentures/Shares in the liability of the Company underwriting or by private placement or the liability of the Company arising out of guarantee is outstanding and the Nominee Director (s) so appointed in exercise of the said power shall ipso facts vacate such office immediately once the moneys owned by the Company to the Corporation are paid off or on the Corporation ceasing to hold Debentures/Shares in the Company or on the satisfaction of the liability of the Company arising out of the guarantee furnished by the Corporation. The Nominee Director (s) appointed under this Article shall be entitled to receive all notices to attend all General Meetings, Board Meetings, and of the Meetings of the Committee of which the Nominee Director (s) is/are Member (s) as also the minutes of such notices. The Company shall pay the Nominee Directors (s) sittings fees and expenses to which the other Directors of the Company are entitled but if any other fees, commission, moneys and remuneration, if any, is payable to the Directors of the Company the fee commission moneys and remuneration in relation to such Nominee Directors (s) shall accrue to the Corporation and the same shall accordingly be paid by the Company directly to the Corporation PROVIDED ALSO THAT in the event of the Nominee Director (s), being appointed as the whole time Directors (s), such Nominee Director (s) shall exercise such powers and duties as may be approved by the Corporation and have such rights as are usually exercised or available to a whole‐time Director in the management of the affairs of the Company such whole‐time Directors shall be entitled to receive such remuneration, fees, commission and moneys as may be approved by the Corporation. ALTERNATE DIRECTORS 175.The Board may appoint an Alternate Director to act for the Director (hereinafter called “the Original Director”) during his absence for a period of not less than three months from the State in which the meetings of the Board are
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ordinarily held, An Alternate Director appointed under this Article shall not hold office for a period longer than that permissible to the Original Director in whose place he has been appointed and shall vacate the office if and when the Original Director returns to that State. If the term of the Original Director is determined before he returns to that State any provisions in the Act or in these Articles for the automatic re‐appointment shall apply to the Original Director and not the Alternate Director. DIRECTORS MAY ACT NOTWITHSTANDING VACANCY ETC. 176.The continuing Directors may act notwithstanding any vacancy in their body, but so that, subject to the provisions of the Act, if the number falls below the minimum above fixed, then not with standing the absence of a quorum the Directors may act for the purpose of filling up vacancies or for summoning a General Meeting of the Company. CASUAL VACANCY 177.Subject to the provisions of Sections 262, 264 and 284 (6) of the Act the Board shall have power at any time and from time to time to appoint any qualified person upon to be a Director to fill such casual vacancy. Any person so appointed shall hold office up to the date which the Director in whose place he is appointed would have held office if it had not been vacated by him PROVIDED THAT the Board may out fill such a vacancy by appointing thereto any person who has been removed from the office of Director under Articles. ADDITIONAL DIRECTORS 178.Subject to the provisions of Section 260 and 264 of the Act, the Board shall have power at any time and from time to time to appoint any qualified person to be an Additional Director but so that the total number of Directors shall not at anytime exceed the maximum fixed under Article 154, Any such Additional Director shall hold office only up to the date of the next Annual General Meeting. DEBENTURE DIRECTORS 179.Any Trust Deed for securing or otherwise in connection with any issue of debentures of the Company provide for the appointment from time to time by the trustees thereof or by the holders of the debentures or debenture‐stock and may empower such trustees or holders of debentures or debenture‐ stock from time to time to remove any Director so appointed A Director appointed under this Article is herein referred to as a |”Debenture Director” and the term “Debenture Director “ means a Director for the time being in office under this Article. A Debenture Director shall not be bound to hold any qualification shares and shall not be liable to retire by rotation. A Debenture Director may be removed from office at any time by person or persons, who, for the time being, is vested with the power . The trust deed may contain such ancillary provisions as may be arranged between the Company & the trustees and all such provisions shall have effect not with standing any of the other provisions herein contained. VACATION OF OFFICE OF THE DIRECTOR 180.The office of the Director shall fall vacant if at any time be commits any of the acts set out in Section 283 of the Act, which disqualifies him. 181.Notwithstanding any matter or thing in sub‐clauses (d), (e) and (j) of sub Section (1) of Section 283, the disqualification referred to in those sub‐clauses shall not take effect for thirty days from the date of adjudication, sentence or order; or (b) where an appeal or petition is preferred within thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or (c) where within seven days aforesaid any further appeal or petition is preferred in respect of the adjudication, sentence, conviction or order, the appeal or petition, if allowed, would result in the removal of the disqualification until such further appeal, or petition is disposed off. SHARE QUALIFICATION 182.No share qualification will be necessary for holding the post of Director of the Company. REMUNERATION TO THE DIRECTORS 183.Subject to the provisions of the Act, a Managing and/or Whole time Director of the Company may be paid remuneration either by way of monthly payment or a percentage of net profits of the Company or partly by the
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former and partly by the latter. Subject to the provision s of the Act a Director who is neither a Managing nor a Whole‐time Director may be paid remuneration either (a) by way of a monthly, quarterly or yearly payment with the approval of the Central Government; or (b) by way of Commission if the Company by Special Resolution authorizes such payment. The fee payable to each Director other than Managing Director and or Whole‐time Director for attending the meeting of the Board or Committee thereof shall be such amount not exceeding `500/‐ (Rupees Five Hundred Only). The Board may allow and pay to any Director attending a meeting of the Board or any committee thereof such sum as the Board may consider fair compensation for traveling, Boarding, lodging and other expenses, in addition to his fee for attending such meeting as above specified. If any Director is, being willing, shall be called up on to perform extra services or make special exertions for any of the purposes of the Company or as Member of a Committee of the Board, then subject to Sections 198, 309 and 314 of the Act, the Board may remunerate the Directors so doing either by a fixed sum or by a percentage of profits or otherwise and such remuneration be in addition to or in substitution of any other remuneration to which he may be entitled. HOLDING OF OFFICE OR PLACE OF PROFIT 184.Any Director other than person referred to in Section 314 of the Act may be appointed to or hold any office or place of profit under the Company or under any subsidiary of the Company in accordance with the provisions of Section 314 of the Act. DISCLOSURE OF HOLDINGS 185.A Director or Manger of the Company shall give notice in the writing to the Company of his holding of shares and debenture of the Company or its subsidiary, together with such particulars as may be necessary to enable the Company to comply with provisions of the Act. If such notice be not given, at a meeting of the Board the Director or Manager shall take all responsible steps, to secure that it is brought up and read at the meeting of the Board next after it is given. The Company shall enter the particulars of Directors and Manager’s holding of shares and debentures as aforesaid in register for that purpose in conformity with the provisions of the Act. CONDITION UNDER WHICH DIRECTORS MAY CONTRACT WITH THE COMPANY 186.Subject to the provisions of Section 297, 299, 300, 302 and 314 of the Act a Director shall not be disqualified from contracting with the Company either as vendor, purchaser or otherwise for goods, material or service or for underwriting the subscription of any shares or debenture of the Company nor shall such contract or arrangement entered into by or on behalf of the Company with a relative of such Director or relative is a partner or with any other partner in such firm or within a private Company of which such Director is a Member of Director be avoided nor shall any Director contracting or being such or so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason of such Director holding office or of the fiduciary relationship there by established but the nature of the interest must be disclosed by him or them at the meeting of Directors at which the contract or arrangement is determined if the interest then exists or in any other case at the 1st Meeting of Directors after the acquisition of interest. BOARD’S SANCTION FOR CONTRACTS IN WHICH DIRECTORS ARE INTERESTED 187.(a) A Director or his relative, a firm in which such Director or relative is a partner, or any other partner in such firm or a private Company of which Director is a Member may enter into any contract with the Company for the sale, purchase or supply of any goods, materials, or services or for underwriting the subscription of any shares in, or debentures, of the Company, provided that the sanction of the Board is obtained before or within three months of the date on which the contract is entered into in accordance with Section 297 of the Act. (b)No sanction shall, however be necessary for: (a) any purchase of goods and materials from the Company , or the sale of the goods or materials to the Company , by any such director relative, firm, partner or private Company as aforesaid for cash at prevailing market prices; or (c) any contract or contracts between the Company on one side and any such director, relative, firm, partner or Company on the other for sale, purchase or supply of any goods, materials and services in which either the Company or the Director, relative, firm, partner or private Company , as the case may be, regularly trades or does business,
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where the value of the goods and materials or cost of such services does not exceed ` 5,000/‐ in the aggregate in any year comprised in the period of the contract or contracts. (d) Provided that in circumstances of urgent necessity, a director, relative, firm, partner or private Company as aforesaid may without obtaining the consent of the Board enter into any such contract with the Company for the sale, purchase or supply of any goods, materials or service even if the value of such goods or the cost of such services exceeds ` 5,000/‐ in the aggregate in any year comprised in the period of the contract or contracts at a meeting within three months of the date on which the contract was entered into. DISCLOSURE OF A DIRECTORS INTEREST & APPOINTMENT 188.Every Director who is in any way, whether directly or indirectly concerned or interested in a contract or arrangement, entered into or to be entered into, by or on behalf of the Company, not being a contract or agreement entered into or to be entered into between the Company and any other Company , where any of the Director of the Company are two or more of them together holds or hold not more than two percent of the paid‐up share capital in the other Company , where any of the Director of the Company are two or more of them together holds or hold not more than two percent of the paid‐up share capital in the other Company shall disclose the nature of his concern or interest at a meeting of the Board as required by Section 299 of the Act. Annual General Notice renewable in the last month of each financial year of the Company, that a Director is a Director or a Member of any specified Body Corporate or is it a Member of any specified firm and is to be regarded as concerned or interested in any subsequent contract or arrangement with the Body Corporate or firm shall be sufficient disclosure of concern of interest in relation to any contact or arrangement so made and, after such general notice, if shall not be necessary to give special notice relating to any particular contract or arrangement with such Body, Corporate of Firm, PROVIDED such general notice is given at a meeting of the Board that a Director concerned takes reasonable steps to secure that it is brought up at the first meeting of the Board after it is given. Every Director shall be bound to give and from time to time, renew a general notice as aforesaid in respect of all bodies Corporate of which he is a Director or Member and of all firms of which he is a partner. 189.The Company shall keep a register in accordance with Section 301 (1) and shall within the time specified in the Section enter therein such of the particulars as may be relevant having regard to the application there to of Section 297 of Section 299 of the Act as the case may be. The register aforesaid shall also specify, in relation to each Director of the Company the names of the bodies corporate and firms of which notice has been given by him under Article 188. The register shall be kept at the office of the Company and shall, be open to inspection at such office, and extracts may be taken therefrom and copies thereof in same manner, and on payment of the same fee as in the case of the Register of Members of the Company and the provisions of Section 163 of the Act shall apply accordingly. RETENTION OF BENFIT FROM ASSOCIATED COMPANY 190.A Director of a Company may be or become a Director of any Company promoted by the Company or in which he may be interested as vendor, Member or otherwise and subject to provisions of the Act and these Articles, no such Director may be accountable for any benefit received as Director or Member of such company except in so far as Section 309(6) or Section 314 of the Act may be applicable. RIGHTS OF DIRECTORS 191.Except as otherwise provided by these Articles all the Directors of the Company shall have in all matters equal rights and privileges and be subject to equal obligations and duties in respect of the affairs of the Company. DISCUSSION AND VOTING BY A DIRECTOR INTERESTED 192.No Director shall, as a Director take any part in the discussion of, vote on any contract or arrangement in which he is in any way whether directly or indirectly interested, nor shall his presence count for the purpose of forming a quorum at a time of such discussion or vote. The prohibition shall not apply to: (a) Any contract of indemnity against any loss which the Directors or any of them may suffer by reason of becoming or being sureties or surety of the Company; or
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(b) Any contract or arrangement entered into or to be entered into by the Company with a public company, or with a private company which is a subsidiary of public company in which the interest of the Director consists solely in his being a Director of such company and the holder of shares not exceeding a number of value as is requisite to qualify him for appointment as a Director thereof, he having been nominated as such Director by the company or in his being member of the company holding not more than two percent of the paid‐up share capital of that company. ROTATION OF DIRECTORS ROTATION AND RETIREMENT OF DIRECTORS 193.At each Annual General Meeting of the Company, one‐third of total number of directors are liable to retire by rotation or if their number is not three or a multiple of three, then the number nearest to one third shall retire from office. The Chairman cum Managing Directors shall not be liable to retire by rotation within the meaning of this article. WHICH DIRECTORS TO RETIRE/ELIGIBILITY FOR ROTATION 194.A. Subject to Section 256(2) of the Act, the Directors to retire by rotation at every Annual General Meeting shall be those who have been the longest in the office since their last appointment but as between persons who become Directors on the same day and those to retire shall, in default of and subject to any agreement among themselves be determined by lot. B. The retiring Director shall be eligible for re‐election. C. Subject to Section 258 of the Act, the Company at the General Meeting of which a Director retires in manner aforesaid, may fill up vacated office by electing a person thereto. APPOINTMENT OF DIRECTORS TO BE VOTED INDIVIDUALLY 195.Save as permitted by Section 263 of the Act, every resolution of a General Meeting for appointment of Director shall relate to one individual only. POWER TO REMOVE DIRECTOR BY ORIDNARY RESOLUTION ON SPECIAL NOTICE 196.The Company may remove any Director before the expiration of his period of office in accordance with provisions of Section 284 of the Act, and may subject to the provisions of Section 262 of the Act appoint another person in his place if the Director so removed was appointed by the Company in General Meeting or by the Board under these Articles. ELIGIBILITY AND APPOINTMENT OF A PERSON OTHER THAN RETIRING DIRECTOR 197.The eligibility and appointment of a person other than retiring Director to the office of a Director shall be governed by the provisions of Section 257 of the Act. 198. PROVISION IN DEFAULT OF APPOINTMENT 199.If the place of the retiring Director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday at the same time and place. If at the adjourned meeting also, the place of the retiring director is not filled up and the meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re‐appointed at the adjourned meeting unless: a. At that meeting or at the previous meeting a resolution for the re‐appointment of such Director has been put to the meeting and lost; or b. The retiring Director has, by a notice in writing addressed to the Company or the Board, expressed his unwillingness to be so re‐appointed; or c. He is not qualified or is disqualified for appointment; or
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d. e.
A resolution whether special or ordinary is required for the appointment or re‐appointment by virtue of any provisions of the act; or The provision to Sub‐section (2) of Section 263 of the Act is applicable to the case. Subject to the provision of Sections 252, 258, 259 of the Act, the Company may, by ordinary resolution, from time to time increase or reduce the number of Directors and may alter their qualifications and the Company may (subject to the provisions of Section 284 of the Act) remove any Director before the expiration of his period of office and appoint another qualified person in his stead. The person so appointed shall hold office during such time as the director in whose place he is appointed would have held the same if he had not been so removed.
NOTICE OF CANDIDATURE FOR OFFICE OF DIRECTOR EXCEPT IN CERTAIN CASES 200.A. No person not being a retiring director shall be eligible for election to the office of Director at any General Meeting unless he has , left at the office a notice in writing not less than fourteen days before the meeting under his hand signifying his candidature for the office of Director or the intention of any Member to propose him as a candidate for the office of Director. B. Every person (other than a director retiring by rotation or otherwise or a person. who has left at the office of the Company a notice under Section 257 of the Act signifying his candidature for the office of a Director) proposed as candidate for the office of a Director shall sign and file with the Company, the consent in writing to act as a Director if appointed. C. On the receipt of the notice referred to in clause (a) of this Article, the Company shall inform its Members of the candidature of a person for the office of Director or the intention of a Member to propose such person as a candidate for that office, by serving individual notice on the Members not less than seven days before the meeting provided that it shall not be necessary for the Company to serve individual notice upon the Members if the Company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the district in which the Registered Office of the Company is situated of which one is published in the English Language and the other in the regional language. 201.The Company shall keep at its office Register containing the particulars of its Directors, Managers, Secretaries and other person mentioned in Section 303 of the Act, and shall otherwise comply with the provisions of the said Section in all respects. The Company shall in respect of each of its Directors also keep at its office a Register, as required by Section 307 of the Act, and shall otherwise duly comply with the provisions of the said Section in all respect. DISCLOSURE BY DIRECTOR OF APPOINTMENT TO ANY OTHER BODY CORPORATE 202.(a) Every Director (including a person deemed to be a Director by virtue of the explanation to Sub section (1) of Section 303 of the Act), Managing Director, Manager or Secretary of the Company shall within twenty days of his appointment to or relinquishment of any of the above office in any other body corporate, disclose to the Company the particulars relating to his office in the other body corporate which are required to be specified under Sub‐section (1) of Section 303 of the Act. (b) Every Director and every person deemed to be a Director of the Company by virtue of Sub‐section (10) of the Section 307 of the Act, and every Manager, shall give notice to the Company of such matters relating to himself as may be necessary for the purpose of enabling the Company to comply with provisions of that Section. EX‐ OFFICIO DIRECTOR NOT LIABLE FOR RETIREMENT 203.The Company in General Meeting may when appointing a person as a Director declare that his continued presence on the Board of directors is of advantage to the Company and that his office as Director shall not be liable to be determined by retirement by rotation for such period or until the happening of such event or contingency as the Board may specify and thereupon such Director shall not be liable for retirement by rotation but shall hold office for the period or until the happening of any event or contingency set out in the said resolution. Such Director shall hereinafter be referred to as Ex‐offico Director. TECHNICAL DIRECTORS
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204.The Board of Directors may at any time appoint any qualified technical person as a Director of the Company for such period and on such terms and conditions as it may in the interest of the Company deem fit. A Director appointed under this Article is hereinafter‐referred to as “Technical Director”. Such Technical director shall not be liable to retire by rotation. The number of such Technical Directors shall not exceed two at any time. PROCEEDING OF THE BOARD MEETING OF THE BOARD & NOTICE 205.(1)The Board shall meet together at least once in every three months for the dispatch of business and may adjourn and otherwise regulate its meeting and proceedings as it thinks fit and at least four such meetings shall be held in each calendar year. Notice in writing of every meeting of the Board shall be given to every Director for the time being in India and at his usual address in India to every other Director. (2) The Members of the Board or any Committee of the Board may participate in any Board Meeting or Committee Meeting by means of a tele‐conference or video‐conference facilities or any other modern communication equipment, by means of which all persons participating in the meeting can hear each other at the same time and participation by such means, subject to the provisions of the Act, shall constitute presence in person at such meeting and hence shall also count for the purpose of quorum. WHEN MEETING TO BE CONVENED 206.The Chairman, if any, or the Managing director of his own motion or the Secretary of the Company shall upon the request in writing of two Directors of the Company or if directed by the Managing Director or Chairman, if any, convene a meeting of the Board by giving a notice in writing to every Director for the time being in India and at his usual address in India to every other Director. CHAIRMAN 207.The Directors may from time to time elect one of their Members to be the Chairman of the Board of Directors and determine the period for which he is to hold office. The Directors may likewise appoint a Vice Chairman of the Board of Directors to preside over the meeting of the Directors at which the Chairman is not present. If the Chairman & Vice Chairman, both are not present for the Board Meeting within fifteen minutes of the time appointed for the meeting, the Directors present may elect one amongst them to be the Chairman for that meeting. QUORUM 208.The quorum for the meeting of the Board shall be one third of its total strength (excluding Directors whose place may be vacant at the time) or two Directors whichever is higher. CHAIRMAN TO DECIDE IN CASE OF ADJOURMENT 209.If quorum is not present within fifteen minutes of the time appointed for holding the meeting of the Board, it shall be adjourned until such date and time, as the Chairman of the Board shall decide. POWER OF QUORUM 210.A meeting of the Board at which the quorum is present shall be competent to exercise all or any of the authorities, powers and discretions which by or under these Articles or the Act are for the time being vested in or exercisable by the Board generally. HOW QUESTION TO BE DECIDED 211.Subject to the provision of Sections 316, 372 (5) and 386 of the Act, all questions arising at any time in a meeting shall be decided by a majority of votes and, in case of equality of votes, the Chairman shall have a second or casting vote. POWER TO APPOINT COMMITTEE AND TO DELEGATE 212.Subject to the provisions of the Act and the restrictions contained in Section 292 of the Act, the Board may delegate any of their powers to a Committee of Directors Managing Directors, the Manager or any other principal officer of
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the Company or in the case of a branch office of the Company, a principal officer of the branch office or to one or more of them together and it may from time to time revoke and discharge any such Committee of the Board either wholly or in part and either as to persons or purpose; but every committee of the Board shall , in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed on it by the Board. All acts done by any such Committee of the Board in conformity with such regulations and in fulfillment of the purposes of their appointment but not otherwise, shall have the like force and effect as if done by the Board provided that such delegation in respect of matters enumerated in sub clauses (c), (d) or (e) of Clause (1) Section 292 is subject to the restrictions and limitations contained in Sub‐sections (2), (3) and (4) respectively of Section 292 of the Act. PROCEEDINGS OF COMMITTEE 213.The meetings and proceeding of the Committee shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far as the same are applicable thereto and are not superseded by any regulations expressly or otherwise made by the Board under the last preceding Article. DIRECTORS MAY ACT NOTWITHSTANING ANY VACANY 214.The Continuing Directors may act notwithstanding any vacancy in their body but if and so long as their number is reduced below the minimum number fixed by these Articles and the continuing Directors not being less than two may act for the purpose of increasing the number of Directors to that number or of summoning a General Meeting, but for no other purpose. CIRCULAR RESLOUTIONS WITHOUT BOARD MEETINGS 215. (Save in those cases where a resolution is required by Section 262, 292, 297, 316, 372 (5) and 386 of the Act) to be passed at the meeting of the Board, a resolution shall be valid and effectual as if it had been passed at a meeting of the Board or the Committee of the Board as the case may be, duly called and constituted, if a draft thereof in writing is circulated together with the necessary papers to all the Directors and to all the Members of the Committee of the Board as the case may be then (not being less in number than the quorum fixed for the meeting of the Board or Committee as the case may be) and to all other Directors or the Members of the Committee at their usual address in India, and has been approved by a majority of such of them as are then in India, or by a majority of such of them, as are entitled to vote in the resolution. MINUTES OF PROCEDDING OF DIRECTORS AND COMMITTEES TO BE KEPT 216.(a) The Company shall cause minutes to be duly entered in a book or books kept for that purpose within thirty days of the conclusion of every such meeting; (b) The Minutes shall contain: (i) of the name of the Directors present at such meetings of the Board and of any Committee of the Board; (ii) of all order made by the Board and Committees of the Board; (iii) of all resolutions and proceedings of Board and Committees of the Board ;and (iv) In the case of each resolution passed at a meeting of the Board, or Committees of the Board the name of those Directors, if any, dissenting from, or not concurring in the resolution. (c) Every such book shall be maintained and the minutes shall be entered therein and signed in the manner laid down under Section 193 of the Act. The minutes so entered and signed shall be conclusive evidence of the proceedings recorded therein. MINUTES TO BE MADE 217.Any such minutes of the meeting of the Board or any committee thereof or of the Company’s General Meeting if kept in accordance with the provisions of Section 193 of the Act shall be evidence of the matters stated in such meeting. POWERS OF THE BOARD 218.The Board may exercise all such power of the Company and do all such things and acts as are not by the Act or any other Act or Memorandum or by the Articles of the Company required to be executed by the Company in General Meetings but subject nevertheless to these Articles, to the provisions of the Act, or any other Act and to such
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(a)
(b)
(c)
(d)
regulations being not inconsistent with the aforesaid regulations or provisions as may be prescribed by the Company in General Meeting, but no regulation made by the General Meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. Provided that the Board shall not except with the consent of the Company in General Meeting: TO SELL OR DISPOSE COMPANY PROPERTY sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the Company, or where the Company own more than one undertaking, the whole or substantially the whole of any such undertaking; TO GIVE TIME IN REMITTANCE OF DEBTS remit or give time for the payment of any debt due by a Director; TO INVEST IN SECURITIES, PROPERTIES & UNDERTAKINGS invest otherwise than in trust securities the amount of compensation received by the Company in respect of the compulsory acquisition of any such undertaking as is referred to in sub‐clause (a) or of any premises or properties used for any such undertakings and without which it cannot e carried on or can be carried only with difficulty or only after a considerable time; TO BORROW LONG TERM LOANS AND ON ISSUE OF DEBENTURES borrow money from time to time where moneys to be borrowed together with the moneys already borrowed by Company (apart from temporary loans obtained from the Company’s bankers in the ordinary course of the business) will exceed the aggregate of the paid‐up capital of the Company and its free reserves, that is to say, reserves not apart for any specific purpose
TO SUBSCRIBE TO CHARITABLE AND OTHER FUNDS (e) contribute to charitable and other funds not directly related to the business of the Company or the welfare of the employees, any amount the aggregate of which will, in any financial year exceed fifty thousand rupees or five percent of its average net profit as determined in accordance with the provisions of Section 349 and 350 of the Act during the three financial year immediately preceding, whichever is greater.Without prejudice to the general powers conferred by the last preceding Article and so as not in any way limit or restrict those persons conferred by these Articles but subject to the restrictions contained in the last preceding Article it is hereby declared that the Board shall have following powers, that is to say power: TO SIGN RECEIPT FOR REMITTANCES TO THE COMPANY (f) a receipt signed by the Managing or Whole‐time Director or by a person authorized by a resolution of the Board to give receipt for any moneys, funds or property lent or payable or belonging to the Company, shall be an effectual discharge on behalf of and against the Company, for the moneys, funds or properties which in such receipt shall be acknowledged to be received;.. TO OPERATE BANK ACCOUNTS (g) to open and operate upon and overdraw Bank accounts to sign, make, issue, negotiate, discount, endorse, accept or otherwise deal in all types of negotiable instruments including cheques, promissory notes, hundies, bills of exchange and bearer bonds, arrange for credits in cash or kind, specifying the bank or Banks with whom the cash credit account and any other account in whatever names called is to be opened and the limit of such accounts; TO MAKE CAPITAL EXPENDITURE (h) subject to the provisions of the Act and powers conferred thereunder as also provisions of the Articles to incur from time to time such expenses and lay out sum or sums of money as Directors may deem expedient for the purpose of working the workshop(s) or factory(ies) or for improving the business of the Company from time to time, to erect and fix new machinery or plant, on or in any of lands, building and premises for the time being in the possession of the Company , and time to time removal of all or any of the machinery plant and stores of the Company being in or upon any land buildings and premises of the Company, to other lands, buildings, or premises wherever situate of the Company.
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TO INSURE COMPANY’S PROPERTY AND INTEREST (i) subject to the provisions of the Act and powers conferred thereunder as also provisions of the Articles to effect all types of insurance which in the opinion of the Directors ought to be effected for the benefit of the Company and in particular to insure the property of the Company against loss or damage by fire or otherwise and also to ensure against any standing charges and to ensure any anticipated profits of the Company or of any transaction (s) entered into by the Company, and to sell, assign, surrender or discontinue any policies of insurance effected in pursuance of this power. TO PAY TRADE COMMISSION ON TRANSACTIONS (j) subject to the provisions of the Act and powers conferred thereunder as also provisions of the Articles to give any person employed by Company a commission on the profits of any particular business or transaction and such commission shall be treated as part of the working expenses of the Company. PROVIDED FURHTER THAT the powers specified in Section 293 of the Act subject the these Articles be exercised only at meetings of the Board, unless the same be delegated to the extent stated therein. TO PAY PRELIMINARY EXPENSES (k) to pay the cost, charges and expenses preliminary and incidental to the promotion, formation, establishment and registration of the Company. TO PAY COMMISSION AND INTEREST (l) to pay charges to the capital account of the Company any commission or interest lawfully payable thereof under the provisions of Sections 76 and 208 of the Act. TO MAKE PAYMENT ON ACQUISTION OF PROPERTY (m) at their discretion and subject to the provisions of the Act, to pay for any property, rights or privileges acquired by or services rendered to the Company, either wholly or partially, in cash or in shares, bonds, debentures, mortgages or other securities of the Company which may be either specifically charged upon all or any part of the property of the Company and its uncalled capital or not so charged. TO PURCHASE LANDS, BUILDINGS ETC. (n) subject to the provisions of the Act, to purchase, or take on lease for any term or terms of years, or otherwise acquire any factories or any land or lands, with or without buildings and outhouses thereon, suitable in any part of India at such price or rent under and subject to such terms and conditions as the Directors may think fit; and in any such purchase lease or other acquisition, to accept such title as the Directors may deliver, or may be advised to be reasonably satisfactory. TO ACQUISITION OF PROPERTY (o) subject to Section, 292 and 297 of the Act to purchase or otherwise acquire for the Company any property, rights under and subject to such terms and conditions as they may think fit, and in any such purchase, or other acquisition to accept such title as the Directors may deliver or may be advised to be reasonably satisfactory. TO SECURE CONTRACTS BY MORTGAGE (p) to secure fulfillment of any contract or engagement entered into by the Company by mortgage or charge of all or any of property of the Company and its uncalled capital for the time being or in such manner as they may think fit. TO ACCEPT SURRENDER OF SHARES (q) to accept from any Member as far as may be permissible by law, surrender of his shares or any part thereof, on such terms and conditions as shall be agreed upon. TO APPOINT TRUSTEE
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(r) to appoint any person to accept and hold in trust for the Company any property belonging to the Company in which it is interested or for any other purpose and to execute and do all such deeds and things as may be required in relation to any such trust and to provide for the remuneration of such trustee (s). TO BRING AND DEFEND LEGAL ACTION (s) to institute, conduct, defend, compound or abandon any legal proceedings by or against the Company or its officers or otherwise concerning the affairs of the Company and also to compound and allow time for payment or satisfaction of any debts, dues and of any claim or demands by or against the Company and to refer any differences to arbitration and observe and perform any award made thereon. TO ACT ON BANKRUPTCY & INSOLVANCY (t) to act on behalf of the Company in all matters relating to bankrupts and insolvents. TO GIVE RECEIPT IN CLAIMS OR DEMANDS (u) to make and give receipts, releases and other discharges for money payable to the Company and for the claims and demands of the Company. TO MINVEST COMPANY FUNDS (v) subjects to the provisions of Sections 292, 295370, 372, 372A and 373 of the Act, to invest and deal with any moneys of the Company not immediately required for the purpose thereof upon such security (not being shares of this Company) or without security and in such manner as they may think fit and from time to time vary or realize such investments, save as provided in Section 49 of the Act, all investments shall be made and held in the Company’s own name. TO EXECUTE MORTGAGE (w) to execute in the name and on behalf of the Company in favour of any Director or other person who may incur or be about to incur any personal liability whether as principal or surety for the benefit of the Company, such mortgage of the Company’s property (present and future) as they think fit, and any such mortgage may contain a power of sale and such other powers, provisions, convenants and agreements as shall be agreed upon. TO APPOINT AUTHORISED SIGNATORY (x) to determine from time to time who shall be entitled to sign on behalf of the Company, the bills, notes, receipts, acceptances, endorsements, cheques, dividend, warrants, releases, contracts, documents and to give necessary authority for such purpose. TO DISTRIBUTE BONUS (y) to distribute by way of bonus amongst the staff of the Company a share or shares in the profits of the Company and to give to any officer or other person employed by the Company, a commission on the profits of any particular business or transaction and to charge such bonus or commission as part of the working expense of the Company . TO CONTRIBUTE TOWARDS WELFARE (z) to provide for the welfare of the Directors or ex‐Directors or employees or ex‐employees of the Company and their wives, widows and families or the dependents by building or contributing to the building of house, dwelling or chawls or by grants of money, pension, gratuities, allowances, bonus or other payments; or by creating and from time to time subscribing or contributing to provident and other associations, institutions funds or trusts and by providing or subscribing or contributing towards place of recreation, hospital, dispensaries, medical and other attendance and other assistance as the Board shall think fit and subject to Section 293 (1) (e) to subscribe or contribute or otherwise assist or guarantee money to charitable, benevolent, religious, scientific, national or other institutions or objects which shall have any moral or other claim to support or aid by the Company either by reason of locality or operation, or of public & general utility or otherwise. TO CREAT DEPRECIATION AND OTHER FUNDS
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(aa) before recommending any dividend, to set aside out of the profits of the Company , such sums as they may think proper for depreciation to depreciation fund or to an insurance , reserve, sinking or special fund to meet any contingencies or to pay debenture or debenture stock or for special dividends or for equalizing dividends or for repairing, improving, extending or maintaining any of the property of the Company and for such other purpose (including the purpose referred to in the preceding clauses) as the Board may in their absolute discretion, think conducive to the interest of the Company , and subject to the provisions of Sections 292, 295, 370 and 372 of the Act, to invest the several sums so set aside or so much thereof as required to be invested and disposed of, apply and expend all or part thereof for the benefit of the Company in such manner or for such purposes as the Board in their absolute discretion think conducive to the interest of the Company notwithstanding that the matters to which the Board apply or upon which they expend the same or any part thereof may be matters to or upon which the capital money of the Company be rightly applied or expended and to divide the reserve fund into such special funds as the Board may think fit, with full power to transfer the whole or any portion of the Reserve Fund or diversion thereof to another Reserve Fund with full powers to employ the assets constituting all or any of the above fund in the business of the Company or in the purchase or repayment of Debenture or Debenture stock and without being bound to keep the same separate from the other assets and without being bound to pay interest on the same with power, however, to the Board at their discretion to pay or allow to the credit of such funds, interest at such rate(s) as the Board may think proper from time to time. TO APPOINT & SUSPEND EMPLYEES ETC (bb) to appoint and at their discretion remove or suspend subject to the relevant laws being in force such managerial, executive, supervisory, and assistants staff as they may from time to time think fit, on permanent, temporary or special services and to determine their powers and duties, and to fix their salaries, emoluments for remuneration and perks as may be applicable and to require security in such instances and to such amount as they may think fit and also from time to time to provide for the management and transaction of the affairs of the Company in any specified locality in India or elsewhere in such manner as they think fit; and the provisions contained in the next four sub‐ clauses shall be without prejudice to the general powers conferred by the sub‐clause. TO COMPLY LOCAL LAWS (cc) to comply with the requirements of any local law which in their opinion it shall in the interest of the Company be necessary or expedient to comply with. TO APPOINT LOCAL BORADS (dd) from time to time and at any time to establish any Local Board for managing any of the affairs of the Company in any specified locality in India or elsewhere and to appoint any person to be Members of such Local Boards and to fix their remuneration. TO DELEGATE POWERS (ee) subject to Section 292 of the Act, from time to time and at any time to delegate to any person so appointed any of the powers, authorities and discretions for the time being vested in the Board, other than their power to make calls or to make loans or borrow moneys, and to authorise the Members for the time being of any such Local Board or any of them to fill up any vacancies therein and to act notwithstanding vacancies, and any such appointment or delegation may be made on such terms and conditions as the Board may think fit and the Board may at any time remove any person so appointed and may annul or vary any such delegation. TO GIVE POWER OF ATTORNEY (ff) at any time and from time to time by Power of Attorney under the Seal of the Company , to appoint person(s) to be the Attorney(s) of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these presents and excluding the power to make calls and excluding also the power to exceed their limits authorized by the Board regarding the power to make loans and borrow moneys) and for such period and subject to such conditions as the Board may from time to time think fit; and any such appointment may (if the Board thinks fit) be made in favour of Member(s) of any Local Board established as
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aforesaid or in favour of shareholders, Directors or managers of the Company or any other person (s) the Board may decide and any such power of attorney may contain such powers for the protection or conveniences of persons dealing with such attorneys as the Board may think fit, and may contain powers enabling any such delegates or attorneys as aforesaid to sub‐delegate all or any of the powers, authorities and discretion for the time being vested in them. TO ENTER INTO CONTRACT (gg) subject to Sections 294, 297 and 300 of the Act for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company to enter into all such negotiations contracts and rescind or vary all such contracts and execute and do all such acts, deeds and things in the name and on behalf of the Company as they may consider expedient. AND GENERALLY subject to the provisions of the Act and these Articles, to delegate the powers, authorities and discretions vested in the Directors to any person, firm, Company or Body of persons as may be decided from time to time. TO ENTRE INTO PARTNERSHIP (hh) upon the Company entering into a Partnership with any other person or Company for the purpose of carrying on the business as per the object clause of the Memorandum and Articles of Association of the Company the Directors may obtain, possess, have or retain all such powers as are available to partners under the Indian Partnership Act, 1932 or under any other law which may for the time being be in force and may perform, execute and or do all such acts and things that a partner is required to or can or may perform, execute and/or do. For this purpose, the Board of Directors may authorise and/or appoint such one or more of Directors, Officers or other representatives from time to time to do such acts, deeds or things as may be necessary for the purpose of obtaining, holding, exercising or enforcing the rights and powers of a partner and performing the duties and obligations of a partner. The above provisions will apply mutatis mutandis where a Company becomes a Member of an association of persons or a body of individuals, including representing the Company at a meeting of the partners. TO ACCEPT POWER OF ATTORNEY (ii) The Board of Directors may authorize from time to time except to act as constituted attorney for any person or persons, resident or non resident in India or Company whether belonging to resident or non resident in India, and exercise through any Director or Directors or any person authorized by a resolution of the Board all powers obtained in Company by the document of Power of Attorney. TO REPEAL BY‐LAWS (jj) From time to time, make vary and repeal byelaws for the regulation of the business of the Company and its employees. BORROWING POWERS 219.Subject to the provisions of Section 58A, 292, 293 of the Act and of the Companies (Acceptance of Deposit) Rules, 1975 and of these Article or any statutory modification thereof for the time being in force, the Board may, from time to time at is discretion by a Resolution passed at a meeting of the Board, accept deposits from the Directors (including their relatives), employees and from Members either in advance or calls or otherwise and generally raise or borrow or secure the payment of any sum or sums of money for the purpose of the Company . PROVIDED HOWEVER that where the moneys to be borrowed together with moneys already borrowed (apart from temporary loans to be obtained from the Company’s Bankers in the ordinary course of business) exceed the aggregate of the paid up capital of the Company and its free reserves (not being reserves set apart for any specific purpose), the Board of directors shall not borrow such money without the sanction of the Company in General Meeting. CONDITIONS ON WHICH MONEY MAY BE BORROWED 220.The Board may raise or secure the repayment of such sum or sums in such manner and upon such terms and conditions in all respect it thinks fit and particular, by the issue of bonds, perpetual or redeemable, debentures or debenture stock or any mortgage or other security on the undertaking of the whole or part of the property of the
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Company (both present and future) but shall not create a charge on its uncalled capital for the time being without the sanction of the Company in General Meeting. DEBTS INCURRED BY THE COMPANY WHEN INVAILD 221.No debt incurred by the Company in excess of the limit imposed by this Article shall be valid or effectual unless the lender proves that he had advanced the loan in good faith and without knowledge that the limit imposed by this Article has been exceeded. MANAGING AND WHOLE‐TIME DIRECTOR APPOINTMENT AND REMUNERATION OF THE MANAGING DIRECOR 222.Subject to the provision of Sections 269, 198, 309, 311 of the Act and of these Articles, the Board shall have the power to appoint and re‐appoint and will appoint from time to time Managing Director of the Company out of the directors being on the Board only for a fixed time not exceeding five year upon such terms and conditions as the Board thinks fit upon such remuneration as may be determined by the Board subject to the provisions of the Act and may from time to time remove or dismiss him from office and appoint another in his place. POWERS OF THE MANAGING DIRECTOR 223.The Board may also vest in the Managing Director either by way of resolution or an agreement to this effect such of the powers, authorities and functions hereby vested in the Board generally as it thinks fit and such powers may be exercisable for such period and upon such conditions and subject to such restrictions as may be determined or specified by the Board. RESTRICTIONS ON THE POWER OF THE MANAGING DIRECTOR 224.The Managing Director shall not, in any event, exercise the following powers: (a) Make calls on shareholders in respect of money unpaid on the shares in the Company ; (b) Issue debentures; And except to the extent mentioned in a resolution passed at the Board Meeting under Section 292 of the Act, shall also not exercise powers to: (i) Borrow money, otherwise than on debenture; (ii) Invest the funds of the Company ; and (iii) Make loans. DISQUALIFICATION OF THE MANAGING AND WHOLE‐TIME DIRECTOR 225.The Company shall not appoint or employ or continue the appointment or employment of any person its Managing or whole‐time Director who: (a) is an undischarged insolvent, or has at any time been adjudged as insolvent; (b) suspends or has at any time suspended payment of his creditors, or makes or has at any time made composition with them; or (c) is or has at any time been convicted by a Court of an offence involving moral turpitude. MANAGING DIRECTOR NOT TO RETIRE BY ROTATION 226. A Managing Director shall not, while he continues to hold that office be subject to retirement by rotation. If he ceases to hold office of Director he shall ipso facto and immediately cease to be a Managing Director. APPOINTMENT ANDD REMUNERATION OF WHOLE TIME DIRECTOR 227.Subject to the provisions of the Act and of these Articles the Board may from time to time with the sanction of the Central Government as may be required by law appoint and/or re‐appoint one of more of the Directors to be the whole‐time Director(s) of the Company out of the Director for the time being on the Board either for a fixed term or permanently upon such terms and conditions as the Board thinks fit and on such remuneration as may be determined by the Board subject to the provisions of the Act.
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POWERS OF THE WHOLE TIME DIRECTOR 228.The Whole‐time Directors shall, subject to the supervision, control and discretion of the Board, be responsible for the management of the whole of the business of the Company and of all its affairs. Subject to the provisions of the Act and in particular to the prohibitions and restrictions in Section 292 of the Act. The Board may also vest in the whole‐ time Director (s) either by way of a resolution or an agreement to this effect such of the powers, authorities and functions hereby vested in the Board generally as it thinks fit and such powers may be made exercisable for such period and upon conditions and subject to such restrictions as may be determined or specified by the Board. The Board also has the power to revoke, withdraw alter or vary all such powers and / or remove or dismiss him or them and appoint another or other in his/ their place (s) again out of the Directors for the time being in the Board. WHOLE TIME DIRECTOR NOT TO RETIRE BY ROTATION 229.Subject to provisions of Section 255 of the Act, Whole‐time Director (s) shall not, while he/they continue (s) to hold that office be liable to retirement by rotation (Subject to the provisions of any contract between him/they and the Company ) but he/they shall be subject to the same provision as to resignation and removal as the other Directors and if he/they cease(s) to hold the office of Directors(s), he/ they shall ipso facto cease to be the whole‐time Director(s). DETERMINATION OF RETIREMENT 230.If any time the total number of Managing Director and the Whole time Director (s) is more than one third, then retirement shall be determined by and in accordance with their seniority. For the purpose of this Article ,the Seniority of the Managing and the Whole‐time Director(s) shall be determined by their date of joining in their respective appointment. THE SEAL CUSTODY OF SEAL 231.The Board shall provide a seal for the purposes of the Company , and shall have the power from time to time to destroy the same and substitute a new seal in lieu thereof and the Board shall provide safe custody of the seal for the time being and it shall never be used except by the specific and previous authority by the Board or a Committee of the Board authorised by the Board in that behalf and save as provided in these Articles at least two Directors and the Secretary of the Company , if any, or any person authorized by the Board in this behalf shall sign every instrument to which the seal of the Company is affixed. PROVIDED NEVERTHELESS THAT any instrument bearing the seal of the Company and issued for valuable consideration shall be binding on the Company notwithstanding any irregularity touching the authority of the Board to issue the same. SEAL FOR USE ABROAD 232. The Company may exercise the power conferred by Section 50 of the Act with regard to having an Official Seal for use abroad and such powers shall be vested in the Board, and the Company may cause to be kept in any state of country outside India, as may be permitted by the Act a foreign Register of Members or debenture holders resident in any such state or country and the Board may, from time to time make such regulations not being inconsistent with the provisions of Sections 157 and 158 of the Act, an the Board may from time to time make such provisions as it may think fit relating thereto and may comply with the requirement of any local law . SECRETARY POWER TO APPOINT SECRETARY 233.Subject to Section 383A of the Act, the Board may appoint Secretary of the Company on such terms and condition as it may think fit and may remove any Secretary so appointed and may fill up vacancy in the office of the Secretary. The Secretary shall exercise such powers and carry out such duties as the Board may from time to time determine. A Director may be appointed as secretary subject to provision of Section 383A (1) of the Act. POWER TO AUTHENTICATE THE DOCUEMNTS
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234.Any Director or the Secretary or any officer appointed by the Board for the purpose shall have the power to authenticate any documents affecting the constitution of the Company and any books, records documents and accounts relating to the business of the Company and to certify copies or extracts thereof and where any books, records, documents or accounts are kept elsewhere than at the office, the local manager of other office of the Company having the custody thereof shall be deemed to be person appointed by the Board as aforesaid. CERTIFIED COPIES OF RESOLUTION OF THE BOARD 235.A document purporting to a be copy of the Resolution of the Board or an extract from the minutes of the meeting of the Board which is certified as such in accordance with the provision of the last preceding Articles shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed or as the case may be the extract is true and accurate record of a duly constituted meeting of the Directors. ANNUAL RETURNS 236.The Company shall comply with the provisions of Sections 159 and 161 of the Act as to the making and filing of Annual Return. DIVIDENDS COMPANY IN ANNUAL GENERAL MEETING MAY DECLARE A DIVIDENDS 237.The Company in Annual General Meeting may declare a dividend to be paid to the Members according to their respective rights and interest in the profits, but no dividends shall exceed the amount recommended by the Board, but the Company in General Meeting may declare a smaller dividend.. The Company may, subject to the provisions of the Act, fix the time for payment. DIVIDENDS ONLY TO BE PAID OUT OF PROFITS 238.Subject to the provisions of section 205 of the Act and the rules made there under, the profits of the Company subject to any special rights relating thereto created or authorized to be created by these Articles and subject to the provisions of these Articles shall be divisible among the Members in proportion to the amount of capital paid up on the shares held by them respectively and subject to the provisions of the Act may fix the time for payment, when a dividend has been so declared. UNPAID DIVIDEND TO BE TRANSFERRED TO SPECIAL DIVIDEND ACCOUNT 239.Subject to the provisions of Section 205 A of the Act, when a dividend is declared but not paid or claimed as the case may be, within thirty days from the date of declaration, the total amount of unpaid or unclaimed dividend shall be transferred to a special account to be opened by the Company in that behalf in any Scheduled Bank within seven days from the date of expiry of said period of thirty days. DIVIDEND PAYABLE AFTER PROVIDING FOR DEPRECIATION 240.No dividend shall be declared or paid by the Company for any financial year except out of the profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of Section 205 of the Act or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with these provisions and remaining undistributed or out of both provided that: (a) If the Company has not provided for depreciation in previous financial year(s) it shall before declaring or paying a dividend for any financial year, provide for such depreciation out of the profits of that financial year or any other previous financial year or years. (b) If the Company has incurred any loss in any previous financial year or years the amount of loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less shall be set off against the profits of the for the year for which the dividend is proposed to be decalared or paid or against the profits of the Company for any previous financial year or years arrived at in both cases after providing for depreciation in accordance with provisions of Section 205 (2) of the Act or against both. PROVIDED FURTHER that no dividend shall be declared or paid for any financial year out of the profit of the Company for that year arrived at after providing for depreciation as above except after that transfer to the reserves of the Company of such percentage of its profits for
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that year as may be prescribed in accordance with Section 205 of the Act or such higher percentage of its profits as may be allowed in accordance with the Section. BOARD TO PAY INTERIM DIVIDEND 241.The board may from time to time, pay to the Members interim dividend, which in their judgment the position of the company justifies. Such interim dividend shall be deposited in a separate bank account within five days from the date of declaration of dividend. WHAT ARE TO BE DEEMED PROFITS 242.The declaration of the Board as to the amount of the net profit of the Company shall be conclusive, subject to the provisions of the Act. ASCERTAINMENT OF AMOUNT AVAILABLE FOR DIVIDEND 243.Where any asset, business or property is bought by Company as from a past date upon the terms that the company shall as from that date take the profits and bear the losses thereof such profits and losses as the case may be shall at the discretion of Directors, be so credited or debited whole or in part to the profit and loss account and in that case the amount so credited or debited shall for the purpose of ascertaining the funds available for dividends be treated as profit or loss arising from the business of the company and available for dividend accordingly, if any shares or securities are purchased with dividend or interest such dividend or interest such dividend or interest when paid may at the discretion of the Directors be treated as revenues and it shall not be obligatory to capitalize the same or any part thereof. CALLS IN ADVANCE NOT TO QUALIFY FOR DIVIDEND 244.Where capital is paid in advance of calls such capital may carry interest but shall not in respect thereof confer a right to dividend or participation in profits. DIVIDEND PAID PROPORTIONATE TO PAID‐UP CAPITAL 245.All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date such share shall rank for dividend accordingly. PAYMENT OF DIVIDEND PENDING TRANSFER OF SHARES 246.Subject to the provisions of the Act, where any instrument of transfer of shares has been delivered to the Company for registration and the transfer of such shares has not been registered by the Company, notwithstanding anything contained in any other provisions of the Act, the company shall Company with the provisions of Sections 205 A of the Act in respect of unpaid dividend. EFFECT OF TRANSFER 247.A transfer of share shall not pass the rights to any dividend declared thereon before the registration of the transfer by the Company. The Company shall comply with the provisions of Section 206 A of the Act in regard to rights as to dividend, right, shares and bonus shares pending registration of transfer of shares. POWER TO RETAIN DIVIDEND UNTIL TRANSMISSION IS EFFECTED 248.Subject to the provision of Act, the Board may retain the dividends payable upon shares in respect of which any share falls within transmission clause of these articles, until such shares are transferred and the concerned transferee becomes Member in respect of such shares. 249.No Members shall be entitled to receive payments of any interest or dividend in respect of his shares whilst any money may be due or owing from him to the Company in respect of such shares otherwise on any other account whatsoever, either along or jointly with any other person(s); and the Board may deduct from the interest or the dividend payable to any Member all sums of money so due from him to the Company. DIVIDEND NOT TO BE FORFEITED
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250.The Company shall not forfeit an unpaid or unclaimed dividends an such dividends shall be dealt with in accordance with the provisions of Sections 205A,205B and 206A of the Act. UNPAID DIVIDEND NOT TO CARRY INTEREST 251.Subject to the provisions of Section 205A of the Act, no unpaid dividend shall bear interest against the Company. DIVIDEND TO BE SET OFF AGAINST CALLS 252.Any General Meeting declaring a dividend may,on the recommendation of the Directors make a call on the Members of such amount as the meeting fixes ,but so that the cal on each Member shall not exceed the dividend payable to him and so that the call be made payable at the same time as the dividend; and the dividend may if so arranged between the Company and the Member be set off against the calls. PAYMENT OF DIVIDEND TO REGISTERED SHAREHOLDERS OR TO THEIR ORDER OR TO THEIR BANKERS 253.No dividend shall be paid in respect of any share except to the registered holder of such share or to his order or to his bankers, but nothing contained in this article shall be deemed to require the bankers of a registered shareholder to make a separate application to the Company for the payment of dividend. NOTICE OF DECLARATION OF DIVIDEND 254.Notice of any dividend, whether interim or otherwise shall be given to the persons entitled to share(s) thereto in the manner provided in the Act. PAYMENT OF DIVIDEND 255.All dividends and other dues to Members shall be deemed to be payable at the Registered Office of the Company. Unless otherwise directed any dividend, interest or other money payable in cash in respect of a share may be paid by cheque or warrants sent through the post to the registered address of the holder or in the case of joint holders, to the registered address of that one of the joint holders who is the first named on the Register of Members, or to such person and to such address as the holder or joint holders, may in writing direct. Every cheque or warrant shall be made payable to the order of the persons to whom it is sent. 256. The Company shall not be liable or responsible for any cheque or warrant lost in transit or for any dividend lost by the Member or person entitled thereto by the forged endorsement of any cheque or warrant or the fraudulent or improper recovery thereof by any other means. BONUS SHARES 257.Company may by capitalization of/or out of accumulated profits or reserves or distributable profits, issue and allot fully paid up bonus shares to the Members of the Company. CREATION OF RESERVE 258.The Board shall, subject to Section 205(2A) of the Act from to time before recommending any dividend, set apart any and such portion of the profits of the Company as it thinks fit as Reserves to meet contingencies or for the liquidation of any debentures, debts or other liabilities of the Company for equalization of dividends, repairing, improving or maintaining any of the property of the Company and for such other purpose of the Company , as the Board in its absolute discretion thinks conducive in the interest of the Company , and may , subject to the provisions of Section 372 of the Act, invest in shares of other body corporate ( other than shares of the Company) as it may think fit, and from time to time deal with it such investments in accordance with the provisions of the Act. DEPRECIATION FUND 259.The Directors may, from time to time before recommending any dividend, set apart any and such portion of the profits of the Company , as they think fit , as a depreciation fund applicable at the discretion of the Directors, for providing against any depreciation in the investments of the Company or for re‐building, restoring , replacing or for altering any part of the building, work , plant , machinery or other property of the Company destroyed or damaged
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by fire , flood , storm , tempest earthquake, accident, riot, wear and tear or any other means whatsoever and for repairing , altering and keeping in good condition the property of the Company or for extending and enlarging the building, machinery and property of the Company with full power to employ the assets constituting such depreciation fund in the business of the Company and that without being bound to keep the same separate from the other assets. INVESTMENT OF MONEY 260.All moneys carried to reserve shall nevertheless remain and be profits of the Company applicable, subject to due provisions being made for actual loss, depreciation, payment of dividends and such moneys and all the other moneys of the Company not immediately required for the purposes of the Company , say, subject to the provisions of Sections 370 and 372 of the Act, be invested by the Board in or upon such investment of securities as it may select or may be used as working capital or may be kept at any bank deposit or otherwise as the or be deployed in the form of a loan or guarantee to any body corporate subject to limits prescribed by the Act and may be dealt with by Board from time to time as it may deem proper . CAPITALISATION OF RESERVES RESERVES FOR CAPITALISATION 261.The Company in General Meeting may resolve that any part of the amount for the time being standing to the credit of the reserves or any Capital Redemption Reserve Fund or surplus in the hands of the Company and available for distribution be capitalized and distributed amongst such of the shareholders as would be entitled thereto to receive the same if distributed by way of dividend and in the same proportions. All or any part of such capitalized fund be applied in paying up in full any unissued shares of the Company to be allotted and distributed, as fully paid‐up to and amongst such Members in the proportion aforesaid or towards payment of the uncalled liability on any issued shares and that such distribution or payment shall be accepted by such shareholders in full satisfaction of their interest on the said capital sum PROVIDED THAT any sum standing to the credit of a Share Premium Account or a Capital Redemption Reserve Fund may , for the purpose of this Article , only be applied in paying up unissued shares to be issued to the shareholders of the Company as fully paid bonus shares. SURPLUS MONEY 262.A General Meeting may resolve that any surplus money arising from the realization of any capital assets of the Company or any investments representing the same or any other undistributed profits of the Company not subject to charge of income tax. be distributed among the Members on the footing that they receive the same as capital. FRACTIONAL CERTIFICATES 263.For the purpose of giving effect to any resolution under the last two preceding Articles, the Board may settle any difficulty which may arise in regard to the distribution as it thinks expedient in particular may issue fractional certificates and may fix the value for distribution of any specific assets and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest such case of specific assets in trustees upon such trusts for the person entitled to the dividend or capitalized fund as may deem expedient by the Board. When required, a proper contract shall be filled in accordance with Section 75 of the Act, and the Board may appoint any person to sign such contract on behalf of the person entitled to the dividend or capitalized fund and such appointment shall be effective. CAPITALIZATION WHERE SOME SHARES FULLY PAID AND OTHERS PARTLY PAID 264.Subject to the provisions of the Act and these Articles in case where some of the shares of the Company are fully paid and others are partly paid, the capitalization may be effected by crediting the partly paid shares with the whole or the part of unpaid liability thereon, but so that as between the holders of the fully paid shares and the partly paid shares the sum so applied in the payment of such further shares and in the extinguishments and diminution of the liability on the partly paid share shall be in proportion to the amount then already paid or credited as paid on the existing fully paid and partly paid shares respectively.
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INTEREST OUT OF CAPITAL PAYMENT OF INTEREST OF CAPITAL 265.Where any shares are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provisions of any plant, which cannot be made profitable for a lengthy period of time, the Company may pay interest on so much of that share capital as is for the time being paid up, for the period and subject to restrictions contained in Section 208 of the Act, and may charge to same to capital as part of the cost of construction of the work or building or provision of the plant. BOOKS AND DOCUMENTS BOOKS OF ACCOUNTS TO BE KEPT 266.Company shall maintain proper Books of Accounts and documents as required to be kept in accordance with Section 209 of the Act and these Articles. REGISTER OF FOREIGN MEMBERS 267.The Company may keep a register of foreign Members in accordance with provisions of the Act Subject to the provisions of the Act, the directors may from time to time make such provisions as they may think fit in respect of the keeping of such foreign Registers of Members and/or Debenture holders. WHERE TO BE KEPT 268.The Books of Accounts shall be kept at the Registered Office or at such other place in India as the Board may decide and when the Board so decides, the Company shall, within seven days of the decision file with the Registrar a notice in writing giving the full address of that other place. BOOKS OF ACCOUNTS TO BE KEPT FOR 269. (1) The Company shall keep such Books of Accounts with respect to: (a) all sums for money received and expended by the Company and the matters in respect of which the receipt and expenditure take place; (b) all sales and purchase of goods by the Company and; (c) the assets and liabilities of the Company. INSPECTION BY DIRECTORS 270.The Books of Accounts shall be open to inspection by any Director during business hours. INSPECTION BY MEMBER 271.The Board shall from time to time, determine whether and to what extent and at what times and places and under what conditions or regulations, the books of accounts, books and documents of the Company shall be open to inspection of the Members (not being a Director) and they shall not have any right of inspecting any books of accounts or books or documents of the Company except as conferred by law or authorized by the Board or by the Company in General Meeting. ACCOUNTS STATEMENT OF ACCOUNTS 272. At every Annual General Meeting the Board shall lay before the Company, a Balance Sheet and Profit and Loss Account made up in accordance with the provisions of Section 210 of the Act and such Balance Sheet and Profit and Loss Account shall also comply with the requirement of Sections 210, 211,212,215, \ 216, 217 and Schedule VI to the Act so far as they are applicable to the Company but save as aforesaid, the Board shall not be bound to disclose greater details of the result of extent of the trading and transactions of the Company than it may deem expedient. BOOKS OF BRANCH ACCOUNTS 273.If the Company shall have a branch office, whether in or outside India, proper books of account relating to the transaction effected at the branch office shall be kept at that office, and proper summarized returns made upto date
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at intervals of not more than three months, shall be sent by the branch office, to the Company at its office or other place in India, as Board thinks fit, where the main books of the Company are kept. BOOKS OF ACCOUNT TO GIVE FAIR AND TRUE VIEW 274.All the aforesaid books shall give fair and true view of the affairs of the Company or of its branch office, as the case may be, with respect to the matters aforesaid. BOARD’S REPORT 275.There shall be attached to every Balance Sheet laid before the Company in a General Meeting, a report by the Board complying with provisions of Section 217 of the Act. COPIES TO BE SENT TO THE MEMBERS AND OTHERS 276.A copy of every balance sheet (including the profit and loss account, the Auditor’s Report and every other document required by law to be attached to the Balance Sheet) shall as provided by the Section 219 of the Act, not less than twenty one days before the meeting be sent to every Member of the Company, to every holder of debentures, , trustees for the holders of any debentures and any other person as are entitled under the Act COPIES OF BALANCE SHEETS ETC TO BE FILED 277.The Company in accordance with the provisions of Section 220 of the Act file copies of the balance sheet and profit and loss account along with other and documents required to be attached thereto with the Registrar once they have been laid before the Company at the Annual General Meeting. AUDIT AND AUDITOR ACCOUNTS TO BE AUDITED ANNUALLY 278.The Books of Accounts of the Company, shall be audited by the Auditors appointed as per the provisions of the Act. The accounts, when audited and approved at the Annual General Meeting shall be conclusive. APPOINTMENT OF AUDITORS 279.The Auditors of the Company shall be appointed and their rights and duties be regulated in accordance with Sections 224 to 233 of the Act. (1) The first Auditor or Auditors of the Company shall be appointed by the Board within one month of the date of registration of the Company and the Auditor or Auditors so appointed shall hold office until the conclusion of the first Annual General Meeting provided that the Company may, at a General Meeting remove any such Auditor or all such Auditors and appoint in his or their place any other person or persons who have been nominated for appointment by any Member of the Company and of whose nomination notice has been given to the Members of the Company not less than fourteen days before the date of the meeting provided further that if the Board fails to exercise its powers under this Article, the Company in General Meeting may appoint the first Auditor or Auditors. (2) The Company in the Annual General Meeting in each year shall appoint an Auditor or Auditors to hold office from the conclusion of that meeting until the conclusion of the next Annual General meeting and shall within seven days of the appointment, give intimation thereof to every Auditor(s) but where such vacancy is caused by the resignation of an Auditor, the vacancy shall only be filled by the Company in General Meeting. AUDIT OF THE BRANCH OFFICE 280.The Company shall comply with the provisions of Section 228 of the Act in relation to the audit of the accounts of branch office of the Company, except to the extent to which any exemption(s) may be granted by the Central Government in that behalf. REMUNERATION OF AUDITORS
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281.The remuneration of the Auditors shall be fixed by the Company in General Meeting except that the remuneration of any Auditor(s) appointed to fill any casual vacancy may be fixed by the Directors. NOTICE TO AUDITORS TO ATTEND GENERAL MEETING 282.The Auditors of the Company shall be entitled to receive a notice and to attend any General Meeting of the Company at which any accounts which have been examined by them are to be laid before the Company and may make any statement or explanation they desire with respect to the Accounts. AUDITED ACCOUNTS TO BE CONCLUSIVE 283.Every accounts of the Company, when audited and approved by an Annual General Meeting shall be conclusive, except as regards any error discovered therein within three months next after the approval thereof. When any such error is discovered within that period the accounts shall forthwith be corrected and thenceforth be conclusive. SERVICE OF NOTICE AND OTHER DOCUMENTS SERVICE NOTICE TO MEMBERS 284.A notice or other documents may be served by the Company to its Members thereof, in accordance with Section 53 and 172 of the Act, either personally or by sending it by post to him at his registered address, supplied by him to the Company for serving documents or notices on him. SERVICE OF NOTICE BY POST 285.Where a document or notice is sent by post, service of the document or notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document or notice, provided that where a Member has intimated to the Company in advance that documents or notices should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the Company a sum sufficient to defray the expenses of doing so, service of the document or notice shall not be deemed to be effected unless it is sent in the manner intimated by the Member and such service shall be deemed to have been effected in the case of a notice of a meeting at the expiration of forty eight hours after the letter containing the document or notice is posted and in any other case, at the time at which the letter would be delivered in the ordinary course of post. BY ADVERTISEMENT 286.Document or notice advertised in a newspaper circulating in the neighborhood of the Registered Office shall be deemed to be duly served or sent on the day on which the advertisement appears on every Member who has no registered address in India and has not supplied to the Company can address within India for the service of documents on him or the sending of notice to him. MEMBER BOUND BY DOCUMENT GIVEN TO PREVIOUS HOLDER 287.Every person who by operation of law, transfer or other means whatsoever, shall become entitled to any share, shall be bound by every notice in respect of such share which prior to his name and address being entered on the Register of Members shall have been duly served on or given to the person from whom he has derived his, title to his share. 288. Document or notice advertised in a newspaper circulating in the neighborhood of the Registered Office shall be deemed to be duly served or sent on the day on which the advertisement appears on every Member who has no registered address in India and has not supplied to the Company can address within India for the service of documents on him or the sending of notice to him. SERVICE ON PERSONS ACQUIRING SHARES ON DEATH OR INSOLVENCY OF MEMBERS 289.A document may be served by the Company on the persons entitled to a share in consequence of the death or insolvency of a Member by sending it through the post in a prepaid letter addressed to them by name or by the title or representatives of the deceased, assignees of the insolvent by any like description at the address (if any) in India supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by
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serving the document in any manner in which the same might have been served as if the death or insolvency had not occurred TO WHOM DOCUMENTS OR NOTICES MUST BE SERVED OR GIVEN 290.Documents or notice of every General Meeting shall be served or given in same manner hereinbefore authorized on or to (a) every Member, (b) every person entitled to a share in consequence of the death or insolvency of a Member and (c) the Auditor(s) for the time being of the Company. DOCUMENTS OR NOTICE BY COMPANY AND SIGNATURE THERETO 291.Any document or notice to be served or given by the Company may be signed by a Director or some person duly authorized by Board for such purpose and the signature may be written, printed or lithographed. SERVICE VALID THOUGH IN WINDING UP 292.Subject to the provisions of Sections 497 and 509 of the Act, in the event of winding up of the Company every Member of the Company who is not for the time being in the place where the Company is situated, shall be bound within eight weeks after the passing of the effective resolution to wind up the Company voluntarily, or the making of an order for winding up of the Company to serve notice in writing on the Company appointing some house holder residing in the neighborhood of the office, upon whom all the summons, notice, processes, orders and judgments in relation to or under the winding up of the Company may be served , and in default of such nomination, the liquidator of the Company shall be at liberty on behalf of such Members to appoint a person and the appointee, whether appointed by the Members or the liquidator shall be deemed to be a good personal service on such Member for all purposes and where the liquidator makes any such appointment, he shall with all convenient speed give notice thereof to such appointee by advertisement in some daily newspapers circulating in the neighborhood of the office or by a registered letter sent by post and addressed to such Members at the address as registered with the Registrar and such notice shall be deemed to be served on the day on which the advertisement appears, or the letter would be delivered in the ordinary course of post. The provisions of this Article do not prejudice the rights of the liquidators of the Company to serve notice or other document in any other manner prescribed by these Articles. SERVICE OF DOCUMENT OR NOITICE BY MEMBER 293.All documents or notices to be served or given on or to the Company or an officer thereof shall be served or given by sending them to the Company or officer at the Registered Office of the Company by post under certificate of posting or by registered post or by leaving it at the Registered Office. REGISTERS AND INSPECTION REGISTER TO BE MAINTAINED BY THE COMPANY 294.The Company shall duly keep and maintain at the Registered Office, Registers in accordance with Section 49 (7), 58A, 143, 150(1),301, 303(1), 307, 370, 372 and 372A of the Act and Rule 7 (2) of the Companies (Issue of Share Certificates Rules, 1960). SUPPLY OF COPIES OF REGISTER 295.The Company shall comply with provisions of the Act as to the supplying of copies of the Registers, deeds, documents, instruments, returns, certificates and books herein mentioned to the persons therein specified when so required by such persons on payment of charges, if any prescribed by the said Sections. INSPECTION OF REGISTERS 296.Where under the provisions of the Act, any person whether a Member of the Company or not, is entitled to inspect any register, return, certificate, deed , instrument or document required to be kept or maintained by the Company , then he be permitted to inspect the same between 10.00 AM to 4.00 PM on such business days as the Act requires them to open for inspection. CLOSURE OF REGISTER OF MEMBERS AND DEBENTURE HOLDER
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297.The Company, after giving less than seven days prior notice by advertisement in some newspaper circulating in the district, in which the Registered Office of the Company is situated, may close the Register of Members and Debenture Holders for any period or periods not exceeding in aggregate forty five days in each year, but not exceeding 30 days at any one time. AUTHECATION OF DOCUMENTS AND PROCEEDINGS AUTHENTICATION OF DOCUMENTS AND PROCEEDINGS 298.Save as otherwise expressly provided in the Act or these Articles or documents or proceedings requiring authentication by the Company may be signed by a Director or an authorized officer of the Company and need not be under its seal. RECONSTRUCTION 299. On any sale or transfer of the undertaking of the Company , the Board or the liquidators on a winding up may, if authorized by a special resolution, accept fully paid or partly paid up shares, debentures or securities of any other Company whether incorporated in India or not, either then existing or to be formed, for the purpose in whole or in part of the property of the Company and the Board (if the profits of the Company permit) of the liquidators (in a winding up) may distribute such shares or securities or any property of the Company amongst the Members without realization or vest the same in the trustee for them and any special resolution may provide for the distribution or appropriation of the cash, shares or other securities, benefit or property otherwise than in accordance with the strict legal right of the Members or contributories of the Company and for the valuation of any such securities or property at such price and in such manner as the meeting any approve and all the holders of shares shall subject to the provisions of Section 395 of the Act be bound to accept and shall be bound by any valuation or distribution so authorised and waive all rights in relation thereto, save only in case the Company is proposed to be or is in the course of being wound up, such statutory right (if any) under Section 494 of the Act, and are incapable of being varied or excluded by these Articles. WINDING UP DISTRIBUTION OF ASSETS 300.Upon the winding‐up of the Company, the holders of preference shares, if any shall be entitled to be paid all arrears of preferential Dividend to the commencement of winding‐up and also to be repaid the amount of capital paid‐up or credited as paid upon such Preference Shares held by them respectively in priority to the Equity Shares but shall not be entitled to any other further rights to participate in profits or assets; subject to aforesaid and to the rights of any other holders of shares entitled to receive preferential payment over the Equity Shares DISTRIBUTION OF ASSETS IN SPEICIE OR KIND 301.If the Company, shall be wound up whether, voluntarily or otherwise, the liquidators may, with the sanction of special resolution of the Company, but subject to the rights attached to any preference share capital, divide among the contributories in specie or kind the whole or any part of the assets of the Company in trustees upon such trusts for the benefits of the contributories or any kind of them as the Liquidator with the like sanction shall think fit. SECRECY DECLARTION OF SECRECY 302.Every Director, manager, Secretary, Auditor, Treasurer(if any), Trustee for the Company , its Members or debenture holders, members of committee, officer, staffs agent or any person employed or about to be employed in or about the business of the Company shall, if so required by the Board before entering upon his duties sign a declaration pledging himself to observe a strict secrecy in respect of all transactions of the Company with its customers and the state of accounts with individual and in matters relating thereto and shall by such declaration pledge himself not to reveal any of the matters which may come to his knowledge in discharge of his duties except when required to do so by the Board or any General Meeting or by Court of Law and except so far as may be necessary in order to comply with any of the provisions of the Articles contained.
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NO MEMBER TO ENTER THE PREMISES OF THE COMPANY WITHOUT PERMISSION 303.No shareholder or person (not being a Director) shall be entitled to enter upon the premises or property of the Company to inspect or examine the same without the permission of the Board in this regard or details regarding the trading of the Company or any matter which is or may be in the nature of the trade secrecy, or secret process, or any of the matter whatsoever which may relate to the conduct of the business of the Company and which in the opinion of the Board will be inexpedient in the interest of the Company to communicate. INDEMNITY AND RESPONSIBILITY INDEMNITY 304.Subject to the provision of Section 201 of the Act every Director, Manager, Secretary and other officer or servant of the Company or any person , employed by the Company as Auditor shall be indemnified out of the funds of the Company against all claims and it shall be the duty of Directors to pay all costs, charges, losses and damages out of the funds of the Company which any such person may incur or become liable to, by reason of any contract entered into or act or thing done with regard to the execution or discharge of his duty or supposed duties except such losses or damages , as he shall incur or sustain through or by his willful act, including expenses and in particular and so as not to limit the generality of the forgoing provisions against all liabilities incurred by him as such Director, manager, officer, or Auditor in defending any proceedings whether civil or criminal in which judgment is given in his favor and in which he is acquitted or in connection with any application under Section 633 of the Act, in which relief is granted to him by the Court. INDIVIDUAL RESPONSIBILITY 305.Subject to the provision of the Act, no Director, Auditor or other officer of the Company shall be liable for the act, receipt, neglect or defaults of any other Director or officer or for joining in any receipt or act or conformity or for any loss or expenses happening or to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon, in which any of the moneys of the Company shall be invested, or for any loss or damages arising from the bankruptcy, insolvency or tortuous act of any person, firm or company to or with whom any moneys, securities or effect shall be entrusted or deposited or for any loss occasioned by any error of judgment, omission, default or oversight on his part, or for any other loss, damage or misfortune which ever shall happen in relation to the execution of the duties of his office or his relation thereto unless the same shall happen through his own dishonesty. SOCIAL RESPONSIBILITY SOCIAL RESPONSIBILITY OF THE COMPANY 306.The Company shall endeavor to promote the objective of social and economic development consistent with the need of efficiency and productivity harmonizing the interests of the consumers, shareholders, employees and the management and try to ameliorate hardship and promote the welfare of the community, specially in areas where it is carrying on its activities.
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SECTION X – MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The following contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of the Draft Red Herring Prospectus) which are or may be deemed material have been entered or to be entered into by our Company. These contracts, copies of which will be attached to the copy of the Draft Red Herring Prospectus, delivered to the RoC for registration and also the documents for inspection referred to hereunder, may be inspected, on all working days i.e. from Monday to Friday from 11.00 A.M. to 4.00 P.M.at the Registered Office of Our Company situated at 33‐34, Rambali Nagar, Sangam Nagar Road, Indore from the date of the Draft Red Herring Prospectus until the Issue/Bid Closing Date. I. MATERIAL CONTRACTS 1. Memorandum of Understanding dated August 26, 2011 entered into by our Company with the BRLM. 2. Memorandum of Understanding dated June 21, 2011 entered into by our Company with Bigshare Services Private Limited, to act as the Registrar to the Issue. 3. Escrow Agreement dated [●] between our Company, Escrow Collection Bank, the Book Running Lead Manager and the Registrar to the Issue. 4. Tripartite Agreement dated [●] between our Company, NSDL and the Registrar to the Issue. 5. Tripartite Agreement dated August 26, 2011 between our Company, CDSL and the Registrar to the Issue. 6. Shareholders’ Resolution dated August 01, 2011 passed in the Extra Ordinary General Meeting of our Company for the appointment and fixation of remuneration of Mr. Gaurav Mungad as the Managing Director of our Company. 7. Shareholders’ Resolution dated August 01, 2011 passed in the Extra Ordinary General Meeting of our Company for the appointment and fixation of remuneration of Mr. Vaibhav Mungad as the Whole time Director of our Company. 8. Shareholders’ Resolution dated August 12, 2011 passed in the Extra Ordinary General Meeting of our Company for the appointment and fixation of remuneration of Mr. Omprakash Maheshwari as the Whole time Director of our Company. 9. Syndicate Agreement dated [●] between our Company, the BRLM and the Syndicate Members. 10. Underwriting Agreement dated [●] between our Company, the BRLM and the Syndicate Members. II. DOCUMENTS 1. Memorandum and Articles of Association of our Company as amended from time to time. 2. Original Certificate of Incorporation dated May 01, 2003, issued to our Company in the name of Krishna Profiles Private Limited, by the Registrar of Companies, Madhya Pradesh and Chattisgarh. 3. Fresh Certificates of Incorporation dated May 26, 2011 and May 30, 2011, issued by the Asst. Registrar of Companies, Madhya Pradesh and Chattisgarh, to our Company consequent to the conversion into a Public Limited Company and the change of name to Jiji Industries Limited.
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4. Copy of the Resolution passed at the Meeting of the Board of Directors held on August 09, 2011 and copy of the Special Resolution passed at the Extra Ordinary General Meeting of our Company held on August 12, 2011 under Section 81 & 81(1A) of the Companies Act, 1956 for authorizing the Fresh Issue. 5. Copies of the Annual Reports of our Company for the Financial Years ended March 31, 2007; March 31, 2008, March 31, 2009, March 31, 2010 and March 31, 2011. 6. Consents of the Promoters, Directors, Company Secretary and Compliance Officer, Auditors, Book Running Lead Manager to the Issue, Legal Advisor to the Issue, Banker to the Company, IPO Grading Agency, and Registrar to the Issue, to include their names in this Draft Red Herring Prospectus, to act in their respective capacities. 7. Copy of the Tax Benefits Certificate dated August 30, 2011 by M/s Gandhi Dhakad Gupta & Co., Chartered Accountants. 8. Copy of the Chartered Accountant’s Certificate dated August 31, 2011 by M/s. Gandhi Dhakad Gupta & Co, Chartered Accountants, regarding the sources and deployment of funds. 9. Copy of Auditor’s Report dated August 27, 2011 by M/s. Gandhi Dhakad Gupta & Co, Chartered Accountants on Financial Statements as restated, of the Issuer Company. 10. Shareholders’ Resolution for the Appointment of the Statutory Auditor, M/s. Gandhi Dhakad Gupta & Co, Chartered Accountants for the Financial Year 2010‐2011. 11. Copy of Resolutions passed at the Meeting of the Board of Directors held on August 18, 2011 for the re‐constitution of the Audit Committee, Shareholders/Investor Grievance Committee, and Remuneration committee. 12. Lease Agreement dated July 20, 2011 entered between Our Company and Mungad Strips and Alloys Private Limited for space situated at Registered Office at 33‐34, Rambali Nagar, Sangam Nagar road, Indore. 13. Lease Agreement dated September 03, 2011 entered between our Company and Mr. Omprakash Maheshwari for space situated at Factory Works at Plot No. 316/2/1 & 316/2/2, Digthan Road, Gram Sejwaya, Ghatabillod, District‐ Dhar, Indore. 14. Due Diligence Certificate dated on September 07, 2011 from BRLM – Hem Securities Limited, Mumbai. 15. Due Diligence Certificate and Report dated September 07, 2011 from Legal Advisors to the Company‐ Kanga & Co., Mumbai. 16. In‐principle Listing Approval dated [●] received from BSE. 17. In‐principle Listing Approval dated [●] received from NSE. 18. IPO Grading Report dated [●] by CARE. Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at any time if so required in the interest of the Company or if required by the other parties, without reference to the Shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.
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SECTION XI – DECLARATION We hereby declare that all relevant provisions of the Companies Act, 1956, and the guidelines issued by the Government of India or the Regulations issued by the Securities and Exchange Board of India, established under Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992, each as amended or the rules made there under or guidelines / regulations issued, as the case may be. We further certify that all the statements in this Draft Red Herring Prospectus are true and correct. SIGNED BY THE DIRECTORS OF THE COMPANY: Mr. Gaurav Mungad, Managing Director Sd/‐ Sd/ Mr. Vaibhav Mungad, Whole‐Time Director Sd/ Mr. Omprakash Maheshwari, Whole‐Time Director Sd/ Mr. Viny Raj Modi, Independent Director Sd/ Mr. Ajay Vikram Thakur, Independent Director Sd/ Mr. Manish Dawar, Independent Director SIGNED BY THE WHOLE‐TIME DIRECTOR, in his capacity as Finance Head of the Company Mr. Vaibhav Mungad, Whole‐Time Director Sd/‐ Ms. Ranjana Singh, Company Secretary & Compliance Officer Sd/‐ Place : Indore Date : September 07, 2011
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