Engro Corporation Limited (Formerly Engro Chemical Pakistan Limited)
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ADVICE FOR INVESTORS THE INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THE PROSPECTUS ESPECIALLY THE RISK FACTORS AT PARA 4.4 BEFORE MAKING ANY INVESTMENT DECISION. P R O S P E C T U S Public Offer of Rated, Listed and Secured Term Finance Certificates (Engro Rupiya Certificates) of PKR 4,000 Million Inclusive of Green Shoe Option of PKR 2,000 million ENGRO CORPORATION LIMITED (FORMERLY ENGRO CHEMICAL PAKISTAN LIMITED) 3-YEAR FIXED RATE INSTRUMENT PROFIT @ 14.5% PER ANNUM (FIXED) Instrument Rating “AA” (Double A) Entity Rating “AA” (Double A) By The Pakistan Credit Rating Agency Limited (“PACRA”) Public Subscription between October 15, 2010 – January 14, 2011 (Both Days Inclusive) During Banking Hours Date of Publication of this Prospectus is October 06, 2010 ENGRO CORPORATION LIMITED TFC PROSPECTUS GLOSSARY ECL or Company or Issuer or Engro Engro Corporation Limited BoD Board of Directors CDCPL Central Depository Company of Pakistan Limited CDS Central Depositary System CEO Chief Executive Officer CVT Capital Value Tax Date of Investment The date when investor‟s subscription money is received by any of the Company‟s Bankers to the Issue EPS Earnings per Share GoP Government of Pakistan Interim Period The period from the Date of Investment till the Issue Date IPO Initial Public Offering IPP Independent Power Producer Issue Date February 01, 2011 which will be the first day after the interim profit payment Issue Issue of TFCs through this Prospectus KSE Karachi Stock Exchange (Guarantee) Limited OUTSTANDING ISSUE PRICE Face value of the TFCs which is outstanding and payable to the TFC Holders at any point of time (excluding the TFC scrip for which payment of the redemption amount has been made) PACRA Pakistan Credit Rating Agency Put Option The option to redeem, in full or in part, the outstanding face value of the TFCs, which may be exercised by the TFC holders anytime after the Date of Investment provided that in case of partial call option the amount to be redeemed should either be PkR 5,000/- or in multiples thereof TFC Term Finance Certificate TFC Trustee IGI Investment Bank Ltd 2 ENGRO CORPORATION LIMITED TFC PROSPECTUS WHT Withholding Tax 3 ENGRO CORPORATION LIMITED TFC PROSPECTUS TABLE OF CONTENTS Page Number PART – I 1. APPROVALS, CONSENTS AND LISTING ON THE STOCK EXCHANGE 7 PART – II 2. TERM FINANCE CERTIFICATES AND RELATED MATTERS 9 PART – III 3. COMMISSIONS, BROKERAGE AND OTHER EXPENSES OF THE ISSUE 17 PART – IV 4. HISTORY AND PROSPECTS 18 PART – V 5. FINANCIAL INFORMATION & CREDIT RATING REPORT 23 PART – VI 6. TRUSTEE AND SECURITY 79 PART – VII 7. MANAGEMENT OF THE COMPANY 83 PART – VIII 8. MISCELLANEOUS INFORMATION 90 PART – IX 9. APPLICATION AND ALLOTMENT INSTRUCTIONS 93 PART – X 10. SIGNATORIES TO THE PROSPECTUS 97 PART – XI 11. MEMORANDUM OF ASSOCIATION 98 PART – XII 12. APPLICATION FORM 104 PART – XIII 13. REDEMPTION NOTICE 106 4 ENGRO CORPORATION LIMITED TFC PROSPECTUS Summary of the Issue Issuer Engro Corporation Limited (“Engro”) Purpose of the Issue The proceeds of the Issue will be utilized to finance the cash needs of Engro Corporation for investments in its subsidiaries (For details refer to para 2.11) Issue Amount Upto PkR 4,000 million (inclusive of a Green Shoe Option of PkR 2,000 million) Tenor 3 years from the Issue Date Profit Rate 14.5% p.a. Profit payment frequency Semi Annually Profit Accrual From the Date of Investment Minimum Investment Rs. 25,000/- Denomination of TFC Rs. 5,000/- or in multiples thereof Subscription Period 3 months TFC Schedule Date of opening of subscription period October 15, 2010 Date of closing of subscription period January 14, 2011 Date of Interim Profit Payment1 January 31, 2011 Issue Date February 01, 2011 First Profit Payment July 31, 2011 Second Profit Payment January 31, 2012 Third Profit Payment July 31, 2012 Fourth Profit Payment January 31, 2013 Fifth Profit Payment July 31, 2013 Sixth and Final Profit Payment January 31, 2014 Principal Repayment in full January 31, 2014 Maturity Date January 31, 2014 Allotment basis First come first served Holding of TFCs TFCs may be held either in physical form or in book entry (scrip- less) form through CDS of CDCPL Principal Redemption 0.1% of the principal amount in five equal semi-annual installments in the first thirty (30) months and the remaining 99.9% of the principal amount in the thirty-sixth (36th) month (For details refer to 1 Please refer to para 2.14.3 5 ENGRO CORPORATION LIMITED TFC PROSPECTUS para 2.14) Put Option (Early The investors/TFC holders may ask the Company for early Redemption) redemption at anytime from the Date of Investment subject to a service charge of 2% of the Outstanding Issue Price and 15 day prior notice (For details refer to para 2.14.2) Security The TFC has been secured by way of first ranking floating charge over all the present and future movable properties (including investments) of Engro Corporation Limited but excluding present and future trade marks and copyrights of ECL and excluding its shares in Engro Energy Limited and Engro Polymer & Chemicals Limited (“Charged Assets”) at 125% of the outstanding principal amount. These charges have been created in favor of IGI Investment Bank Limited (“Security Trustee”) for safeguarding interest of the TFC holders. The Company may, with prior written consent of the Trustee, create further first ranking pari passu charges over the Charged Assets (For details refer to para 6.1) Bankers to the Issue MCB Bank Limited, Standard Chartered Bank (Pakistan) Limited, Bank Alfalah Limited, NIB Bank Limited, Bank Al Habib Limited, Allied Bank Limited, Habib Bank Limited, United Bank Limited, JS Bank Limited, Askari Bank Limited, Citibank N.A. Pakistan Trustee IGI Investment Bank Limited (“IGI”) Registrar & Transfer Agent Central Depository Company of Pakistan Limited (“CDCPLRATING”) Entity Rating “AA” (Double A) by PACRA (For details refer to para 5.5) Instrument Rating “AA” (Double A) by PACRA (For details refer to para 5.5) Risk Factors For details refer to para 4.4 Listing Karachi Stock Exchange (“KSE”) Pre-IPO None Underwriting None 6 ENGRO CORPORATION LIMITED TFC PROSPECTUS PART I 1. APPROVALS, CONSENTS AND LISTING ON THE STOCK EXCHANGE 1.1. APPROVAL OF THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Approval of the Securities and Exchange Commission of Pakistan as required under section 57(1) of the Companies Ordinance, 1984 (“the Ordinance”) has been obtained for the issue, circulation and publication of this Prospectus. It must be distinctly understood that in giving this approval, the Securities and Exchange Commission of Pakistan does not take any responsibility for the financial soundness of any scheme or for the correctness of any of the statements made or opinions expressed by Engro Corporation Limited (“ECL” or „the Company‟ or “the Issuer”) in this Prospectus. 1.2. CLEARANCE OF THE PROSPECTUS BY THE KARACHI STOCK EXCHANGE This Prospectus for the issue of rated, listed and secured Term Finance Certificates (“TFCs”) has been cleared by the Karachi Stock Exchange (Guarantee) Limited (“KSE”) in accordance with the requirements under its Listing Regulations. While clearing the Prospectus, the KSE neither guarantees the correctness of the Prospectus nor the ability of ECL to redeem the TFCs. 1.3. FILING OF PROSPECTUS AND OTHER DOCUMENTS WITH THE REGISTRAR OF COMPANIES The Company has delivered to the Registrar of Companies, Karachi as required under section 57 (3) and (4) of the Companies Ordinance 1984, a copy of this Prospectus signed by all the Directors of the Company together with the following documents attached thereto: a) A Letter No. D 070 dated August 2, 2010 from A.F.FERGUSON & CO. consenting to the issue of the Prospectus, which contains in Part V certain statements and reports issued by them as experts (which consent has not been withdrawn) b) Copies of contracts mentioned in Part VIII of the Prospectus c) Written confirmations of the Auditors and Bankers to the Issue mentioned in the Prospectus consenting to act in their respective capacities, as required under section 57(5) of the Ordinance d) Consent of Directors and Chief Executive of the Company to their respective appointments being made and their having been named or described as such Directors and Chief Executive in this Prospectus. The Company has filed written confirmations of such consents, as required under section 184 of the Ordinance 1.4. LISTING ON KARACHI STOCK EXCHANGE Application has been made to KSE for permission to deal in and for quotation of TFCs of the Company. If, for any reason, the application for listing is not accepted by KSE, the Company undertakes to publish immediately in the press a notice to that effect and thereafter to refund the subscription money with markup at 14.5% per annum and if any such money is not refunded within eight days after the Company becomes liable to refund it, the directors of the Company shall be liable to 7 ENGRO CORPORATION LIMITED TFC PROSPECTUS refund the money from the expiration of the said eight day together with surcharge at the rate of 1.5% per month as required under the provisions of Section 72 of the Ordinance. 8 ENGRO CORPORATION LIMITED TFC PROSPECTUS PART II 2. TERM FINANCE CERTIFICATES AND RELATED MATTERS 2.1. 1st ISSUE OF LISTED TFCS TO THE GENERAL PUBLIC The Issue consists of PKR 4,000 million (inclusive of green shoe option of PKR 2,000 million) to be issued in the form of rated, listed and secured Term Finance Certificates (“TFCs”) being the instrument of Redeemable Capital under section 120 of the Ordinance for a tenor of three (3) years.