Solar Explosives Limited (“The Company” Or “The Issuer”)
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CMYK RED HERRING PROSPECTUS Dated February 24, 2006 Please read Section 60B of the SOLAR Companies Act, 1956 EXPLOSIVES 100% Book Built Issue LIMITED (Incorporated on February 24, 1995 under the Companies Act, 1956 as a limited liability company. The registered office of our company was changed from Dhakate Building, Fawara Chowk, Gandhi Bagh, Nagpur- 440 002, to its current address 11, Zade Layout, Bharat Nagar, Nagpur – 440 033 with effect from June 10, 2004) Registered and Corporate Office: 11, Zade Layout, Bharat Nagar, Nagpur – 440 033, Maharashtra, India Tel: (+91 712) 256 1000 Fax: (+91 712) 256 0202; e-mail: [email protected], Website: www.solarexplosives.com Compliance Officer: Mr. Nilesh Panpaliya, e-mail: [email protected] PUBLIC ISSUE OF 44,00,000 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PRICE OF RS. [] PER EQUITY SHARE AGGREGATING TO RS. [] LAKHS (HEREINAFTER REFERRED TO AS “THE ISSUE”) BY SOLAR EXPLOSIVES LIMITED (“THE COMPANY” OR “THE ISSUER”). THE FACE VALUE OF THE EQUITY SHARES IS RS. 10 EACH. THE ISSUE INCLUDES A RESERVATION OF 60,000 EQUITY SHARES FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES OF THE COMPANY. THE NET ISSUE TO THE PUBLIC SHALL BE 43,40,000 EQUITY SHARES. THE NET ISSUE WOULD CONSTITUTE 25.05% OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF THE COMPANY. PRICE BAND: RS. 170/- TO RS. 190/- PER EQUITY SHARE OF FACE VALUE RS. 10/- EACH. ISSUE PRICE IS 17 TIMES THE FACE VALUE AT THE LOWER END OF PRICE BAND AND 19 TIMES THE FACE VALUE AT THE UPPER END OF PRICE BAND The Issue is being made through the 100% Book Building process wherein up to 50% of the Issue shall be allocated to Qualified Institutional Buyers (“QIBs”) on a proportionate basis. Out of the portion available for allocation to the QIBs, 5% will be available for allocation to Mutual Funds registered with Securities and Exchange Board of India (SEBI). Mutual Fund applicants shall also be eligible for proportionate allocation under the balance available for the QIBs. Further, not less than 15% of the Issue shall be available for allocation on a 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 at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The Face Value of the Equity Shares is Rs. 10/- and the Floor Price is 17 times and Cap Price is 19 times of the Face Value. The Price band (as determined by the Company in consultation with the Book Running Lead Manager (“BRLM”) on the basis of assessment of market demand for the Equity Shares by the way of Book Building) 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 Company or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISK 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 Company and the Issue including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does the SEBI guarantee the accuracy or adequacy of this Red Herring Prospectus. Specific attention of the investors is invited to the statement of Risk Factors on Page No. xiv to xxii of the Red Herring Prospectus. THE COMPANY HAS NOT OPTED FOR THE IPO GRADING ISSUER’S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to the Company and the Issue, which is material in the context of the Issue; that the information contained in this Red Herring Prospectus is true and correct in all material respects and is not misleading in any material respect; that the opinions and intentions expressed herein are honestly held and that there are no other facts the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offered through this Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). The in-principle approvals of the Stock Exchanges for listing the Equity Shares have been received pursuant to letter no. DCS/SMG/sm/dm/2006 dated February 1 ,2006 and letter no. NSE/LIST/20143 dated February 3, 2006 respectively. BSE will be the Designated Stock Exchange. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE SBI CAPITAL MARKETS LIMITED INTIME SPECTRUM REGISTRY LIMITED 202, Maker Tower “E”, C-13, Pannalal Silk Mills Compound Cuffe Parade, LBS Marg, Bhandup (W) Mumbai – 400005 Mumbai – 400 078 Tel: (+91-22) 2218 9166, Tel: (+91-22) 5555 5491, Fax: (+91-22) 2218 8332 Fax: (+91-22) 5555 5499 Website: www.sbicaps.com Website: www.intimespectrum.com Email: [email protected] Email : [email protected] BID / ISSUE PROGRAMME BID / ISSUE OPENS ON : 9TH MARCH, 2006 BID / ISSUE CLOSES ON : 13TH MARCH, 2006 CMYK TABLE OF CONTENTS SECTION I: DEFINITIONS AND ABBREVIATIONS .................................................................................................. i I. Definitions ...........................................................................................................................................................i II. Conventional / General Terms ............................................................................................................................i III. Issue Related Terms ........................................................................................................................................ iii IV. Glossary of Technical and Industry Terms ..................................................................................................... viii V. Abbreviations of General Terms ....................................................................................................................... xi SECTION II: RISK FACTORS ................................................................................................................................ xii I. Certain Conventions; Use of Market Data ....................................................................................................... xii II. Risk Factors ................................................................................................................................................... xiv SECTION III: INTRODUCTION ................................................................................................................................. 1 I. SUMMARY ....................................................................................................................................................... 1 II. THE ISSUE ...................................................................................................................................................... 3 III. CAPITAL STRUCTURE ..................................................................................................................................15 III. OBJECTS OF THE ISSUE ..............................................................................................................................26 IV. TAX BENEFITS STATEMENT ........................................................................................................................39 SECTION IV: ABOUT THE ISSUER COMPANY ....................................................................................................46 I. INDUSTRY OVERVIEW ..................................................................................................................................46 II. BUSINESS OVERVIEW ..................................................................................................................................54 III. KEY INDUSTRY REGULATIONS ...................................................................................................................77 IV. HISTORY AND CORPORATE STRUCTURE OF OUR GROUP .....................................................................78 V. MANAGEMENT ...............................................................................................................................................83 VI. PROMOTERS .................................................................................................................................................93 SECTION V: AUDITOR’S REPORT ........................................................................................................................97 I. FINANCIAL INFORMATION OF GROUP COMPANIES ............................................................................... 141 II. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION .........................................149 SECTION VI: LEGAL AND OTHER INFORMATION ............................................................................................