LETTER OF OFFER (Private & Confidential) For Equity Shareholders of the Company Only CEAT LIMITED (Originally incorporated as CEAT Tyres of India Limited on 10/03/1958 under the Companies Act, 1956. The name of the Company was changed to CEAT Limited and the Company obtained a fresh certificate consequent to change of name on 10/01/1990 from Registrar of Companies, Maharashtra, Mumbai. The Registered Office of the Company was shifted from CEAT Limited, Village Road, Bhandup, Mumbai 400078 to CEAT Mahal, 463 Dr. Annie Besant Road, Worli, Mumbai - 400030 w.e.f. 4th September, 1974.) Registered Off : CEAT Mahal, 463, Dr. Annie Besant Road, Worli, Mumbai - 400030. Tel: (91-22) 24930621, Fax: (91-22) 56606039. E-mail: [email protected], Website: www.ceattyres.com; Contact Person : Mr. H.N.Singh Rajpoot, Company Secretary OFFER FOR 1,05,36,684 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT PREMIUM OF RS. 40/- PER SHARE (I.E. AT A PRICE OF RS. 50/- PER SHARE) AGGREGATING TO RS. 5268.34 LACS ON A RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 3 (THREE) EQUITY SHARES FOR EVERY 10 (TEN) EQUITY SHARES (I.E. 3:10) OF RS. 10/- EACH HELD ON 09/12/2005 (THE RECORD DATE). (THE ISSUE PRICE IS FIVE (5) TIMES THE FACE VALUE OF RS. 10/-) 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 the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or the adequacy of this document. The attention of investors is drawn to the statement of Risk Factors appearing on page nos. [iii] to [vii] of this 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 context of the 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 Bombay Stock Exchange Ltd. (BSE), (the Designated Stock Exchange) and The National Stock Exchange of India Ltd. (NSE). Applications will be made to BSE and NSE, for listing and trading permission for the Equity Shares being issued pursuant to this Letter of Offer. The Company has received in-principle approval from BSE & NSE vide their letter no. DCS/SMG/SDM/RK/NS/05 dated 08/11/2005 and letter no. NSE/ LIST/18390-A dated 16/11/2005 respectively. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Tata Share Registry Limited Army & Navy Building, 307, Regent Chambers, 148, Mahatma Gandhi Road, Fort, Nariman Point, Mumbai - 400 021. Mumbai - 400 001. Tel. : (022) 2202 5230 Fax : (022) 2283 5467 Tel: (022) 56568484 Fax: (022) 56568494 Website: www.keynoteindia.net Website: www.tatashare.com E-mail: [email protected] E-mail: [email protected] SEBI Regn. No.: INM 000003606 SEBI Regn.No.: INR 000000197 AMBI Regn No: AMBI/040 ISSUE OPENS ON LAST DATE FOR RECEIVING ISSUE CLOSES ON REQUESTS FOR SPLIT FORMS Thursday, 29/12/2005 Thursday, 12/01/2006 Friday, 27/01/2006 I. TABLE OF CONTENTS SECTION CONTENTS Page Nos. II DEFINITIONS AND ABBREVIATIONS ..................................................... i III RISK FACTORS .......................................................................................... iii IV INTRODUCTION Industry Summary ........................................................................................ 1 Business Summary ..................................................................................... 1 V GENERAL INFORMATION Board of Directors ....................................................................................... 3 Issue Management Team ........................................................................... 7 VI CAPITAL STRUCTURE OF THE COMPANY .......................................... 9 VII OBJECTS OF THE OFFERING Object of the Issue ..................................................................................... 15 Funds Requirement & Funding Plan ........................................................ 15 Basis for Issue Price .................................................................................. 19 Tax Benefits ................................................................................................. 21 VIII ABOUT THE ISSUER COMPANY Industry Overview ........................................................................................ 25 Business Overview ..................................................................................... 28 Details of the Business of the Company ................................................. 29 IX HISTORY OF THE COMPANY Brief History ................................................................................................. 34 Main Objects of the Company ................................................................... 34 Subsidiaries of the Company .................................................................... 35 X MANAGEMENT OF THE COMPANY Board of Directors ....................................................................................... 37 Corporate Governance ............................................................................... 41 Details of Key Managerial Personnel ....................................................... 44 XI PROMOTERS Details of Promoters ................................................................................... 45 Group Companies ....................................................................................... 46 XII FINANCIAL INFORMATION Auditors Report ........................................................................................... 54 Management's Discussion and Analysis of Financial Condition and Result of Operations ........................................................................... 81 XIII LEGAL AND OTHER INFORMATION Outstanding Litigations and Defaults ........................................................ 85 Government Approvals ............................................................................... 115 XIV OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the Issue ................................................................................ 116 Prohibition by SEBI ..................................................................................... 116 Disclaimer Clause ....................................................................................... 116 Listing ........................................................................................................... 117 Stock Market data for Shares of the Company ....................................... 121 XV OFFERING INFORMATION ........................................................................ 124 XVI MAIN PROVISIONS OF ARTICLES OF ASSOCIATION ......................... 136 XVII OTHER INFORMATION Material Contracts and Documents for Inspections ................................ 141 Declarations ................................................................................................. 142 II. DEFINITIONS/ABBREVIATIONS CONVENTIONAL / GENERAL TERMS Act : The Companies Act, 1956 and subsequent amendments thereto AGM : Annual General Meeting EPS : Earnings Per Share{EPS = Profit After Tax/No. of Equity Shares} MOU : Memorandum of Understanding NAV : Net Assets Value {NAV= Networth/ No. of Equity Shares} P/E Ratio : Price/Earnings Ratio PAN : Permanent Account Number PBDT : Profit Before Depreciation and Tax PBIDT : Profit Before Interest Depreciation and Tax PBT : Profit Before Tax PAT : Profit After Tax RONW : Return on Networth {RONW = Profit After Tax/Networth)*100} Security Certificate : Equity Share Certificate Security(ies) : Equity Share(s) OFFER RELATED TERMS Articles : Articles of Association of CEAT LIMITED Board : Board of Directors of CEAT LIMITED BSE/Designated Stock Exchange : Bombay Stock Exchange Ltd. CAF : Composite Application Form Issuer/Company/CEAT : CEAT LIMITED Directors : Directors on the Board of CEAT LIMITED Equity Shareholders : Equity Shareholders of the Company whose name appear as: 9 Beneficial Owners as per the list furnished by the depositories in respect of Equity Shares held in electronic form and 9 On the Register of Members of the Company in respect of the Equity Shares held in Physical form Equity Shares : Equity Shares of the Company of Rs.10/- each Lead Managers to the Issue : Keynote Corporate Services Ltd.(Keynote) and ICICI Securities Ltd.(Isec) Issue/ Rights Issue : Offer for 1,05,36,684 equity shares of Rs.10/- each for cash at premium of Rs.40/- per share (i.e. at a price of Rs. 50/- per share) aggregating to Rs.5268.34 lacs on a rights basis to the existing equity shareholders of the Company in the ratio of 3 (three) equity shares for every