Fineotex Chemical Limited

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Fineotex Chemical Limited C M Y K Red Herring Prospectus February 09, 2011 Please read Section 60B of the Companies Act, 1956 100% Book Building Issue FINEOTEX CHEMICAL LIMITED Our Company was incorporated as ”Fineotex Chemical Private Limited” under the provisions of the Companies Act, 1956 vide Certificate of Incorporation dated January 30, 2004. Our Company was converted into a public limited company vide a fresh Certificate of Incorporation dated October 19, 2007 and consequently the name of our Company was changed to “Fineotex Chemical Limited”. The Corporate Identification Number of our Company is U24100MH2004PLC144295. Registered and Corporate Office: 42-43, Manorama Chambers, S.V. Road, Bandra (West), Mumbai – 400 050. Tel. No: +91 22 2655 9174 / 75; Fax No: +91 22 2655 9178; Email: [email protected];Website: www.fineotex.com Contact Person: Mr. A.V. Nerurkar; Compliance Officer & Company Secretary PROMOTERS: MR. SURENDRA KUMAR TIBREWALA, MR. SANJAY TIBREWALA, MRS. KANAKLATA TIBREWALA, MS. RITU TIBREWALA, PROTON BIOCHEM PRIVATE LIMITED, KAMAL CHEMICALS PRIVATE LIMITED AND SURENDRA KUMAR TIBREWALA (HUF) PUBLIC ISSUE OF 42,11,160 EQUITY SHARES OF Rs. 10 EACH OF FINEOTEX CHEMICAL LIMITED (“FCL” OR THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF Rs. [•] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF Rs. [•] PER EQUITY SHARE) AGGREGATING Rs. [•] LAKHS (THE “ISSUE”). THE ISSUE WILL CONSTITUTE 37.50% OF THE POST ISSUE PAID UP CAPITAL OF THE COMPANY. PRICE BAND: Rs.60 TO Rs.72 PER EQUITY SHARE OF FACE VALUE OF RS. 10 EACH. THE FLOOR PRICE IS 6.00 TIMES OF THE FACE VALUE AND THE CAP PRICE IS 7.20 TIMES OF THE FACE VALUE. In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE), whose online IPO system will be available for bidding, by issuing a press release and by indicating the change on the websites of the Book Running Lead Manager (BRLM) and the terminals of the member(s) of the Syndicate. This Issue is being made through a 100% Book Building Process wherein not more than 50% of the Issue will be allocated to Qualified Institutional Buyers (QIBs) on a proportionate basis, subject to valid bids being received at or above the Issue Price. Out of the portion available for allocation to the QIBs, 5% will be available for allocation to Mutual Funds only. Mutual Fund Bidders 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. RISKS IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of our Company, there has been no formal market for our Equity Shares. The face value of the Equity Shares is Rs.10/- and the Floor Price is 6.00 times of the Face Value and the Cap Price is 7.20 times of the Face Value. The price band (has been determined and justified by the BRLM and the issuer as stated under the Chapter on “Basis for Issue Price” beginning on page 56 of the Red Herring Prospectus) should not be taken to be indicative of the market price of our Equity Shares after our Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares of our Company, nor regarding the price at which the Equity Shares will be traded after listing. GENERAL RISK Investments 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 risk involved. The Equity Shares 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 document. Specific attention of the investors is invited to the statement of ‘Risk Factors’ beginning on Page 11 of the Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable enquiries, accepts responsibility for, and confirms that the Red Herring Prospectus 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 Red Herring Prospectus 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 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. IPO GRADING The Issue has been graded by Credit Analysis & Research Limited and has been assigned a CARE IPO Grade 2 indicating below average fundamentals. The IPO Grading is assigned on a 5 point scale from 1 to 5 with an ‘IPO Grade 5’ indicating strong fundamentals and an ‘IPO Grade 1’ indicating poor fundamentals. For further details and grading rationale, please refer to page no 32 of the Red Herring Prospectus under the Chapter ‘General Information’. LISTING ARRANGEMENT The Equity Shares issued through the Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited (BSE), which is also the Designated Stock Exchange. In-principle approval has been received from BSE for the listing of the Equity Shares vide its letter no. DCS/IPO/RK/IPO-IP/1372/2010-11 dated January 12, 2011. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE INDBANK MERCHANT BANKING SERVCES LIMITED BIGSHARE SERVICES PRIVATE LIMITED SEBI Registration No: INM000001394 SEBI Registration No: INR000001385 11, Varma Chambers, Homji Street, E/2, Ansa Industrial Estate, Fort, Mumbai – 400 001. Saki Vihar Road, Sakinaka, Tel No: +91 22 2263 4601 Andheri (East), Mumbai - 400 072. Fax No: +91 22 2265 8270 Tel No: +91 22 2847 0652 Website: www.indbankonline.com Fax No: +91 22 2847 5207 Email: [email protected] Website: www.bigshareonline.com Investor Grievance Id: [email protected] Email: [email protected] Contact Person: M.Srinivas/Kishore Iyer Contact Person: Ashok Shetty ISSUE PROGRAMME BID / ISSUE OPENS ON : WEDNESDAY, FEBRUARY 23, 2011 BID / ISSUE CLOSES ON : FRIDAY, FEBRUARY 25, 2011 C M Y K TABLE OF CONTENTS CONTENTS PAGE Section I – Definitions and Abbreviations Conventional/General Terms 1 Issue Related Terms 1 Issuer Related Terms 5 Industry Related Terms 6 Abbreviations 7 Section II – General Presentation of Financial Information and Use of Market Data 9 Forward Looking Statements 10 Section III – Risk Factors 11 Section IV – Introduction Summary 22 Brief Details of the Issue 25 Summary of Financial Information 26 General Information 28 Capital Structure 37 Section V – Objects of the Issue Objects of the Issue 47 Basic Terms of the Issue 55 Basis for Issue Price 56 Statement of Tax Benefits 59 Section VI – About Us Industry Overview 69 Business Overview 74 Key Industry Regulations and Policies 97 History and Other Corporate Matters 98 Our Management 101 Our Promoters and their Background 115 Currency of Presentation 122 Dividend Policy 123 Section VII – Financial Information Auditors’ Report and Financial Information of Our Company 124 Financial Information of Group Companies 146 Management’s Discussion and Analysis of Financial Condition and Results of 149 Operations as Reflected in the Financial Statements Section VIII – Legal and other Regulatory Information Outstanding Litigations, Material Developments and Other Disclosures 157 Government and Other Statutory Approvals 160 Other Regulatory and Statutory Disclosures 163 Section IX –Issue Related Information Terms of the Issue 172 Issue Structure 175 Issue Procedure 178 Restrictions on Foreign Ownership of Indian Securities 210 Section X – Description of Equity Shares and Terms of the Articles of Association Main Provisions of Articles of Association 212 Section XI –Other Information Material Contracts and Documents for Inspection 241 Section XII – Declaration 243 SECTION I - DEFINITIONS AND ABBREVIATIONS CONVENTIONAL/GENERAL TERMS Term Description Act/ Companies Act The Companies Act, 1956, as amended Equity Shares The Equity Shares of face value of Rs. 10 each of Fineotex Chamical Limited Indian GAAP Generally Accepted Accounting Principles in India Non Resident A person who is not an NRI, FII and is not a person resident in India A person resident outside India, as defined under FEMA and who is a citizen of NRI/ Non-Resident India or a Person of Indian Origin as defined under FEMA (Transfer or Issue of Indian Security by a Person Resident Outside India) Regulations, 2000, as amended RBI Act The Reserve Bank of India Act, 1934 SEBI Securities and Exchange Board of India SEBI Act Securities and Exchange Board of India Act, 1992 as amended Means the regulations for Issue of Capital and Disclosure Requirements issued SEBI (ICDR) by
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