Southern Iron and Steel Company Limited
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DRAFT LETTER OF OFFER (Private and Confidential) For Equity Shareholders of the Company only SOUTHERN IRON AND STEEL COMPANY LIMITED (Incorporated on September 11, 1991 under the Companies Act, 1956) Registered Office: Pottaneri – M Kalipatti Village, Mecheri – 636 453, Mettur Taluk, Salem District, Tamil Nadu. Tel: (04298) 278400 ~ 403 Fax: (04298) 278618 E-mail: [email protected] DRAFT LETTER OF OFFER Issue of 17,37,41,655 Equity Shares of Rs. 10 each for cash at par on rights basis to the existing Equity Shareholders of the Company in the ratio of 23 (Twenty Three) Equity Shares for every 10 (Ten) Equity Shares held on Record Date _________, 2005 aggregating Rs. 173,74,16,550. The face value of the Equity Shares is Rs. 10 per share and the Issue Price is 1 time the face value. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. Attention of investors is drawn to the statement of Risk Factors appearing on Page iii of the Letter of Offer. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing equity shares of the Company are listed on The Stock Exchange, Mumbai (BSE) (“Designated Stock Exchange”), Madras Stock Exchange (MSE) and Coimbatore Stock Exchange (CSE). The Company proposes to list the equity shares arising out of this issue on BSE, MSE and CSE. The Company has received in principle approvals from BSE, MSE and CSE vide letters dated ________, 2005, _______, 2005 and ________, 2005 respectively. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Securities ICICI Securities Limited Sharepro Services (India) Private Limited ICICI Centre, H.T. Parekh Marg Satam Estate, 3rd Floor, Cardinal Gracious Road Chakala Churchgate, Mumbai – 400 020 Andheri (East), Mumbai – 400 099 Tel: (022) 2288 2460, Fax: (022) 2282 6580 Tel: (022) 2821 5168, Fax: (022) 2837 5646 E-mail: [email protected] E-mail: [email protected] ISSUE OPENS ON LAST DATE FOR RECEIVING ISSUE CLOSES ON REQUESTS FOR SPLIT APPLICATION FORMS TABLE OF CONTENTS RISK FACTORS ........................................................................................................................................ III I. GENERAL INFORMATION .......................................................................................................... 1 II. CAPITAL STRUCTURE................................................................................................................. 9 III. TERMS OF THE ISSUE................................................................................................................ 12 IV. TAX BENEFITS ............................................................................................................................. 23 V. PARTICULARS OF THE ISSUE ................................................................................................. 26 VI. THE COMPANY ............................................................................................................................ 30 VII. MANAGEMENT OF THE COMPANY....................................................................................... 31 VIII. IRON AND STEEL INDUSTRY................................................................................................... 35 IX. BUSINESS OF THE COMPANY ................................................................................................. 39 X. FINANCIAL PERFORMANCE OF THE COMPANY.............................................................. 52 XI. MANAGEMENT DISCUSSION AND ANALYSIS .................................................................... 64 XII. PROMOTERS / PROMOTER GROUP COMPANIES AND ASSOCIATED COMPANIES 67 XIII. STOCK MARKET DATA ............................................................................................................. 88 XIV. BASIS FOR ISSUE PRICE............................................................................................................ 89 XV. UNAUDITED WORKING RESULTS FOR THE LATEST PERIOD...................................... 90 XVI. PROMISE VERSUS PERFORMANCE....................................................................................... 91 XVII. OUTSTANDING LITIGATION, DEFAULTS AND MATERIAL DEVELOPMENTS ......... 95 XVIII. STATUTORY AND OTHER INFORMATION ........................................................................ 122 XIX. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS.................................... 123 XX. DECLARATION........................................................................................................................... 124 GLOSSARY OF TERMS/ ABBREVIATIONS Act The Companies Act, 1956 and amendments thereto AGM Annual General Meeting Articles/ AOA Articles of Association of the Company AS Accounting Standards as issued by the Institute of Chartered Accountants of India BF Blast Furnace Board Board of Directors of Southern Iron and Steel Company Limited BRM Bar and Rod Mill BSE The Stock Exchange, Mumbai CAF Composite Application Form CAGR Compounded Annual Growth Rate CC Continuous Caster CDR Corporate Debt Restructuring CDSL Central Depository Services (India) Limited CEO Chief Executive Officer CESTAT Central Excise and Service Tax Appellate Tribunal CIT Commissioner of Income Tax Committee of Directors Committee of the Board of Directors of Southern Iron and Steel Company Limited authorised to take decisions on matters related to / incidental to the Issue Company / SISCOL / Issuer Southern Iron and Steel Company Limited CSE Coimbatore Stock Exchange CY Calendar Year ending on December 31 Depositories CDSL and NSDL Designated Stock Exchange The Stock Exchange, Mumbai Directors Directors on the Board of the Company DP Depository Participant EAF Electric Arc Furnace EGM Extraordinary General Meeting EOF Energy Optimizing Furnace EOT Electric Overhead Traction EPS Earnings per share Equity Shareholders Equity shareholders of the Company whose names appear as ! Beneficial owners as per the list to be furnished by the depositories in respect of the equity shares held in the electronic form and ! Members in the Register of Members of the Company in respect of the equity shares held in physical form FCNR Account Foreign Currency Non-Resident Account FEMA Foreign Exchange Management Act, 1999 read with rules and regulations thereunder and amendments thereto FIIs Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board, Department of Economic Affairs, Ministry of Finance, Government of India FITL Funded Interest Term Loan FRN Floating Rate Note FY Financial year ending March 31 GDP Gross Domestic Product GIR Number General Index Registry Number GM General Meeting GoI/Government Government of India Group Mr. Sajjan Jindal and Vrindavan Services Private Limited HUF Hindu Undivided Family Issue / Rights Issue Present issue of 17,37,41,655 equity shares of Rs. 10 each for cash at par on rights basis to the existing Equity Shareholders of the Company in the ratio of 23 (Twenty Three) equity shares for every 10 (Ten) equity shares held on Record Date ________ 2005 aggregating Rs. 173,74,16,550. Issue Price Rs. 10 per equity share I-Sec ICICI Securities Limited IT Act The Income Tax Act, 1961 and amendments thereto ITAT Income Tax Appellate Tribunal JISCO Jindal Iron and Steel Company Limited JSWHL Jindal South West Holdings Limited JTPCL Jindal Thermal Power Company Limited JVSL Jindal Vijayanagar Steel Limited i KVA Kilo Volt Amperes kwh Kilo Watt Hour LC Letters of credit Lead Manager ICICI Securities Limited Letter of Offer/LoF/Offer This letter of offer circulated to the Equity Shareholders Document LMW Lakshmi Machine Works Ltd. ltr Litre Memorandum/MoA Memorandum of Association of the Company mgd Million gallons per day mtpa Million tonnes per annum Mumbai High Court High Court of Judicature at Mumbai MSE Madras Stock Exchange MW Mega Watt NA Not applicable NAV Net Asset Value NCD Non Convertible Debenture NR Non-Resident NRI (s) Non-Resident Indians NRE Account Non-Resident External Account NRO Account Non-Resident Ordinary Account NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited OCD Optionally Convertible Debenture P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PCI Pulverized Coal Injection Promoter(s) Promoters shall have the same meaning as ascribed to it under the SEBI Guidelines and which