± CMB ± CMB ± CMB ± CMB LETTER OF OFFER (For Private Circulation to Equity Shareholders / Beneficial Owners of the Company only) SHREE BHAWANI PAPER MILLS LIMITED (Incorporated on 6 th July, 1979 as a Public Limited Company with Registration No. 20-4783 of 1979 in the State of Uttar Pradesh under the Companies Act, 1956 and obtained the Certificate of Commencement of Business on 9 th August, 1979) Registered & Corporate Office : 33, Dayanand Marg, Allahabad - 211002. Tel. No.: 0532-2607958/59/60 Fax No.: 0532-2607957 Mills / Factory : Industrial Area, No.1, Sultanpur Road, Rae-Bareli - 229 010. Tel. No. : 0535-2702155-56 Fax. No. : 0535-2702159 E-mail : sbpmills1@sanchar net.in; Website: www.shbhawani.com Contact Person : Mrs. Babita Jain - Company Secretary Issue of 1,23,18,000 Equity Shares of Rs.10/- each for cash at a Premium of Rs. 2.50/- each (Issue Price Rs. 12.50 per share) on Rights basis to the existing Equity Shareholders of the Company whose names appear in the Register of Members on the Record Date i.e 10.03.2006, in the Ratio of Three Equity Shares for every One Equity Share held [i.e. 3:1] aggregating to Rs. 1539.75 Lacs. The face value of the Equity Shares is Rs. 10 per share and the Issue Price is 1.25 times 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. The Attention of investors is drawn to the statement of Risk Factors appearing on page (4) 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 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 The Bombay Stock Exchange Ltd. (BSE) (Designated Stock Exchange) and the BSE for permission to deal in and for an official quotation in respect of the equity shares of the Company being offered in terms of this Letter of Offer. The Company has received ‘in-principle’ approval from BSE for listing of the Equity shares being offered through this Rights Issue vide their letter no. DCS/SMG/ SDM/RK/NS/05, dated: October 21, 2005. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Issue Opens on Last Date for receiving requests for split forms Issue Closes on 12.04.2006 (Wednesday) 26.04.2006 (Wednesday) 11.05.2006 (Thursday) BOB CAPITAL MARKETS LIMITED (Wholly owned Subsidiary of Bank of Baroda) Meher Chambers, Ground & First Floor, Dr. Sundarlal Behl Marg, Off R. Kamani Marg, Ballard Estate, Mumbai – 400038. Tel. :022-56372301 - 4 Fax : 022-56372312/11 Email: [email protected]SKYLINE FINANCIAL SERVICES PVT. LTD. #123, Vinoba Puri, Lajpat Nagar - II, New Delhi– 110024 Tel : 011 - 29833777/29847136 Fax : 011 - 29848352 E-mail:[email protected]
Transcript
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LETTER OF OFFER(For Private Circulation to Equity Shareholders /
Beneficial Owners of the Company only)
SHREE BHAWANI PAPER MILLS LIMITED(Incorporated on 6th July, 1979 as a Public Limited Company with Registration No. 20-4783 of 1979 in the State of Uttar
Pradesh under the Companies Act, 1956 and obtained the Certificate of Commencement of Business on 9th August, 1979)
Issue of 1,23,18,000 Equity Shares of Rs.10/- each for cash at a Premium of Rs. 2.50/- each (Issue Price Rs.12.50 per share) on Rights basis to the existing Equity Shareholders of the Company whose names appearin the Register of Members on the Record Date i.e 10.03.2006, in the Ratio of Three Equity Shares for everyOne Equity Share held [i.e. 3:1] aggregating to Rs. 1539.75 Lacs. The face value of the Equity Shares is Rs.10 per share and the Issue Price is 1.25 times the face value.
GENERAL RISKS
Investment in equity and equity related securities involve a degree of risk and investors should not invest any fundsin this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the RiskFactors carefully before taking an investment decision in this Issue. For taking an investment decision, investorsmust rely on their own examination of the Issuer and the Issue including the risks involved. The securities have notbeen recommended or approved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee theaccuracy or adequacy of this document. The Attention of investors is drawn to the statement of Risk Factorsappearing on page (4) 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 Offercontains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, thatthe information contained in this Letter of Offer is true and correct in all material respects and is not misleading inany material respect, that the opinions and intentions expressed herein are honestly held and that there are noother facts, the omission of which makes this document as a whole or any of such information or the expressionof any such opinions or intentions misleading in any material respect.
LISTING
The existing equity shares of the Company are listed on The Bombay Stock Exchange Ltd. (BSE) (DesignatedStock Exchange) and the BSE for permission to deal in and for an official quotation in respect of the equity sharesof the Company being offered in terms of this Letter of Offer. The Company has received ‘in-principle’ approvalfrom BSE for listing of the Equity shares being offered through this Rights Issue vide their letter no. DCS/SMG/SDM/RK/NS/05, dated: October 21, 2005.
LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
Issue Opens on Last Date for receiving requests for split forms Issue Closes on
BOB CAPITAL MARKETS LIMITED(Wholly owned Subsidiary of Bank of Baroda)Meher Chambers, Ground & First Floor,Dr. Sundarlal Behl Marg, Off R. Kamani Marg,Ballard Estate, Mumbai – 400038.Tel. :022-56372301 - 4Fax : 022-56372312/11Email: [email protected]
SKYLINE FINANCIAL SERVICES PVT. LTD.#123, Vinoba Puri,Lajpat Nagar - II,
1. Forward-Looking Statements, Certain Conventions and Market Data 4
2. Risk Factors, including proposals to address them and Notes to Risk Factors 4
I. INTRODUCTION :
1. Summary of the industry and business of the issuer Company 12
2. General Information 15
3. Capital Structure of the Company 19
4. Objects of the Offering 25
5. Basic terms of the issue 39
6. Basis of the issue price 40
7. Tax Benefits 41
II. ABOUT THE ISSUER COMPANY :
1. Industry Overview 46
2. Business Overview 47
3. History and Business of the Issuer Company 48
4. Management 53
5. Promoters and their Background 61
6. Exchange Rates 63
7. Currency of Presentation 63
8. Dividend Policy 63
III. FINANCIAL STATEMENTS :
1. Auditors’ Report: Financial Statements of the Issuer Company 64
2. Management’s discussion and analysis of Financial Condition and Results of 82Operations as reflected in the Financial Statements
3. Financial information of Companies Promoted by the Promoters 88
IV. LEGAL AND OTHER INFORMATION :
1. Outstanding Litigations and Material Developments 93
2. Government Approvals/Licensing Arrangements 97
V. 1. Other Regulatory and Statutory Disclosures. 98
2. Stock Market Data 102
VI. OFFERING INFORMATION : 104
VII. MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION : 119
VIII. OTHER INFORMATION :
1. List of material contracts and documents for inspection 128
2. Declaration 130
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DEFINITIONS / ABBREVIATIONSAct The Companies Act, 1956 as amended from time to time
Articles Articles of Association of the Company
Board Board of Directors of Shree Bhawani Paper Mills Limited
BSE The Bombay Stock Exchange Limited, Mumbai
CAF(s) Composite Application Form
CDSL Central Depository Services (India) Limited
CREP Corporate Responsibility for Environmental Protection
CRISIL The Credit Rating Information Services of India Limited
SBPML/Shree Bhawani Shree Bhawani Paper Mills Limited/ Company/ Issuer
Committee of Directors Committee of Board of Directors of Shree Bhawani Paper Mills Limited authorised to takedecisions on matters related and/or incidental to the issue
CDM Clean Development Mechanism
Depository A Depository registered with SEBI under the SEBI (Depositories and Participants) Regulations,1996, as amended from time to time.
Designated Stock Exchange The Bombay Stock Exchange Limited, Mumbai
DP A Depository Participant as defined under the Depositories Act.
EPS Earnings Per Share
EGM Extra-Ordinary General Meeting
Equity Shareholders Equity shareholders whose names appear as beneficial owners as per the list to be furnishedby the depositories in respect of the shares held in electronic form and on the Register ofMembers of the Company in respect of the shares held in physical form at the close ofbusiness hours on the Record Date i.e 10.03.2006 and to whom this Issue is being made.
FEMA Foreign Exchange Management Act, 1999, as amended from time to time, and rules andregulations framed there under
FII(s) Foreign Institutional Investors registered with SEBI under applicable laws
Guidelines/SEBI Guidelines Guidelines issued by the Securities and Exchange Board of India under Section 11 of the Securitiesand Exchange Board of India Act, 1992 called the Securities and Exchange Board of India(Disclosure and Investor Protection) Guidelines, 2000 and its amendments thereof.
Issue / Rights Issue Issue of 1,23,18,000 Equity Shares of Rs.10/- each for cash at a premium of Rs. 2.50/- eachon Rights basis to the existing Equity Shareholders of the Company in the Ratio of threeEquity Shares for every one Equity Share held [i.e.3:1.] on Record Date i.e 10.03.2006aggregating to Rs. 1539.75 Lacs
Lead Manager / BOB/ BCML BOB Capital Markets Limited, Mumbai
Letter of Offer/ Offer Document This Letter of Offer circulated to the Equity Shareholders of the Company
Memorandum Memorandum of Association of the Company
NAV Net Asset Value
NRI(s) Non-Resident Indians
NSDL National Securities Depository Limited
OCB(s) Overseas Corporate Body (ies)
RBI Reserve Bank of India
Record date Record Date i.e 10.03.2006
Registrars to the Issue Skyline Financial Services Pvt. Ltd. – New Delhi
Rights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to under this Letter of Offer inproportion to his/ her/ its existing shareholding in the Company as on the Record Date.
SEBI Securities and Exchange Board of India
UNFCCC United Nations Framework Convention on Climate Change
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FORWARD-LOOKING STATEMENTS, CERTAIN CONVENTIONS AND MARKET DATA
In this Offer document, the terms “we”, “us”, “our Company”, “the Company”, “SBPML”, “Shree Bhawani”, unless thecontext otherwise implies, refer Shree Bhawani Paper Mills Limited.
This Letter of Offer contains certain forward-looking statements. These forward-looking statements generally can beidentified by words or phrases like “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”,estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” andsimilar expressions or variations of such expressions, that are “forward looking statements”. Similarly, the statementsthat describe our objectives, plans or goals are also forward-looking statements.
Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertaintiesassociated with the Company’s expectations with respect to, but not limited to, the Company’s ability to successfullyimplement its strategy, its growth and expansion, technological changes, its exposure to market risks, general economicand political conditions in India which have an impact on its business activities or investments, the monetary andinterest rate policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates,equity prices or other rates or prices, the performance of the financial markets in India and globally, changes indomestic and foreign laws, regulations and taxes and changes in competition in the industry.
For further discussion of factors that could cause the Company’s actual results to differ, see the section entitled “RiskFactors” beginning on page no. 4 of this Letter of Offer. By their nature, certain market risk disclosures are onlyestimates and could be materially different from what actually occurs in the future. As a result, actual future gains orlosses could materially differ from those that have been estimated. In accordance with SEBI requirements, theCompany will ensure that investors are informed of material developments till such time as the grant of listing andtrading permission by the Stock Exchange.
Market data used throughout this Letter of Offer was obtained from various sources available on the public domainand also internal reports of the issuer company. The information contained in this Letter of Offer has been obtainedfrom sources believed to be reliable, but that their accuracy and completeness and underlying assumptions are notguaranteed and their reliability cannot be assured. Although, the Company believes that the market data used in thisLetter of Offer is reliable, it has not been independently verified. Similarly, internal Company reports and data, whilebelieved to be reliable, have not been verified by any independent source.
RISKS ENVISAGED BY MANAGEMENT AND MANAGEMENT PERCEPTION
The investors should consider the following risk factors together with all other information included in this Letter ofOffer carefully, in evaluating the Company and its business before making any investment decision. Any projections,forecasts and estimates contained herein are forward looking statements that involve risks and uncertainties. Suchstatements use forward looking terminology like “may”, “believes”, “will”, “expect”, “anticipate”, “estimate”, “plan” orother similar words. The Company’s actual results could differ from those anticipated in these forward-lookingstatements as a result of certain factors including those, which are set forth in the “Risk factors”.
INTERNAL TO THE ISSUER COMPANY
1. The availability of chief raw material namely, bagasse, wheat straw, paddy straw and paddy husk fuelare mainly seasonal and dependent upon the crop. Paper companies using these raw materials could beadversely affected by lower agricultural production.
The plant is located near the sugar manufacturing and agricultural belt of Eastern / Central Uttar Pradesh andtherefore, has adequate availability of Raw Materials. Bagasse, Wheat and Rice Straw are alternate raw materialsand can be used in substitution of each other. Bagasse is procured for annual requirement during November-April period, when the sugar mills are operational. Wheat and Rice Straw is purchased from in and around RaeBareli throughout the year. Similarly, Paddy Husk is available locally in abundance and adequate buffer stocksare kept to mitigate the uncertainties of the season. Hence, no difficulties are envisaged for sourcing the requiredraw material and fuel.
2. The Company is selling its products mainly in Uttar Pradesh and Delhi region, only small quantity is soldin the western part of the Country and has no reach in South India. The Company has yet to builddealership network for the proposed enhanced capacity.The Company’s present level of production does not allow us to offer our products to all parts of the Country. Inthe Western region, the Company has stepped up its sales in Nagpur, Jabalpur, Raipur, Jaipur, Ajmer, Ahmedabadand Mumbai and further initiatives are being taken to strengthen the sales network. The company is also sellingits products in parts of Eastern India. Ground work for establishing dealer network in South India has beenstarted and it will be in place before production on the new paper machine begins.
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3. Any delay in Implementation Schedule of the project could lead to time and cost overruns.
Paper Mill is a capital-intensive project and involves items of long gestation periods. However, as per themanagement estimates, there should be no delays in project implementation.
4. Mishaps or accidents at the Company’s facilities could lead to property damages, property loss andaccident claims.
The Company has adequate insurance coverage to take care of such contingencies.
5. There are some companies promoted by the promoters, which have reported losses in the last threeyears.
Name of the Group Company 2003 2004 2005
Alankar Udyog Pvt. Ltd. (0.04) 1.77 (0.17)
Bachchaji Holdings Pvt. Ltd. 0.36 0.18 (0.48)
6. The Company is subject to increase in labour costs, slowdowns, work stoppages
There have never been any disruptions in work or any labour related problems since, 1987. As such we do notanticipate any labour related work disruptions or slowdowns. The normal increases in wages and other benefitsto workers will be taken care of in the normal course of business as is being done presently.
7. Contingent Liabilities as on 31.12.2005
� Estimated amount of capital contracts remaining to be executed and not provided forRs.2061Lacs.
� LC/Guarantees given by bank Rs.122.15 lacs.
� Customers Cheques/Bills discounted Rs. NIL
8. Pending Litigations
A. Litigation against Shree Bhawani Paper Mills Limited (SBPML)
D. Details of cases in which the Directors of the Company have been made party by virtue of theirdirectorship.
NIL
9. There has been a sudden spurt in the price and trading interest in the scrip of SBPML since January2005. The share price of the company has shown an unusual increase from a low of Rs. 6.50 on January25, 2005 to a high of Rs. 42/- on September 16, 2005. The Price Movement is being looked into by SEBI.
There has been increase in the share price as also trading interest in the scrip of the company since January2005 and the share price had increased from Rs. 6.50 in January, 2005 to Rs. 42/- during September, 2005.The stock market indices of the Country themselves have been on an unprecedented growth trajectory for thepast one year and market prices of most of the paper companies have also increased during the period. Thecompany, its promoters and Directors have not directly or indirectly been involved in any manner in the movementof the share price.
10. Institutional Investors – viz. IDBI and ICICI Bank sold their holdings in the company between Februaryand April 2005. The reasons behind the divestment of the holding could not be ascertained.
Both the above institutions together have been holding approximately 22.4% of the shares of the companyacquired from Public issue in 1983, Rights issue in 1993 and part conversion of loan in 1996. We presume theannouncement of the company regarding the modernization and expansion plans in January 2005 gave somemomentum to the share price as well as interest in the scrip and the institutions sold their holdings in the market.The promoters or the company have neither directly nor indirectly been a partly to the selling of the shares bythe institutions in the market.
11. The Company is yet to place firm orders for 34.88% of the total Plant and Machinery. The value of ordersyet to be placed amounts to Rs. 1844.95 Lacs
Orders for plant and machinery which have long delivery periods have already been placed. Orders for theremaining items will be placed at the appropriate time based on the requirements during the implementation ofthe project. The implementation of the project is progressing as per schedule given on page no: 34 in the Letterof Offer.
12. The shares of the company were trading below the face value of Rs.10 upto February 2005 and thetrading volumes were also not significant.
13. The shares issued through the present issue shall remain partly paid up till such time it is made fullypaid up and until the shares are fully paid up the trading of the shares will take place separately as partlypaid up on the Exchange.
As per terms of this issue, call notice will be issued within six months of the allotment of the partly paid upshares. On receiving the call amount, the shares will be made fully paid up
14. The Company has paid dividend in only two of the last five financial years.
The Company has been making profits during all the past five financial years. The Board of Directors, however,considered it prudent to retain the surpluses in the financial years 2000-01, 2002-03 and 2003-04 to strengthenthe financial position of the company and as such dividends were not distributed in these financial years.
15. In December 1992, the Company had made a Rights Issue of 12,60,000 Equity shares of Rs.10/- each atpar, aggregating Rs.126 Lacs. The actual performance achieved by the Company was below theprojections specified, as is shown in the table below :-
Promises versus performance : (Rs in lacs)
For the financial year ended 31.03.1993
Particulars Promise Actual Deviation
Net Sales/Other Income 1950 2105.86 155.86
Profit before tax 29.23 -33.34 - 62.57
NP after Tax 29.23 -33.34 - 62.57
Cash Profit 79.23 35.97 -43.26
Equity Capital 378 378 -
EPS 1.06 -1.27 -2.33
Book Value 4.44 2.68 -1.76
For the financial year ended 31.03.1994
Particulars Promise Actual Deviation
Net Sales/Other Income 2047.5 2436.79 389.29
Profit before tax 65.89 4.65 -61.24
NP after Tax 65.89 4.65 -61.24
Cash Profit 115.89 47.08 -68.81
Equity Capital 378 378 -
EPS 1.71 0.09 1.62
Book Value 6.14 2.78 3.36
For the financial year ended 31.03.1995
Particulars Promise Actual Deviation
Net Sales/Other Income 2047.5 2708.93 661.43
Profit before tax 83.89 59.56 -24.33
NP after Tax 83.89 59.56 -24.33
Cash Profit 133.89 133.81 -0.08
Equity Capital 378 378 -
EPS 2.18 1.54 -0.64
Book Value 8.33 12.33 4.00
In all the Three years viz. 1992-93 to 1994-95 the company had surpassed the sales targets projected, howeverthe profitability projections could not be achieved due to unforeseen rise in input costs. The cost of LiquidChlorine went up from Rs.1976 per ton in 1991-92 to Rs. 6377/- per ton in 1994-95. Similarly, the cost of CausticSoda went up from Rs.10871 to Rs.12430/- per ton during the same period and the Power tariff per unit increasedfrom Rs.1.48 to Rs. 2.76. Additionally there was also a 33% hike in salary and wages in 1992-93 due toimplementation of the Minimum Wages Act in Uttar Pradesh.
16. The Debt Equity Ratio of the company shall increase to 1.93 post issue and the increase in interestexpenses arising out of the proposed term loan of Rs 48 crores for expansion project shall have anadverse impact on the company’s profit till revenues begin to get generated from the additional capacity.
The expenditure plan has been appraised by BOB Capital Markets Ltd as well as by Bank of Baroda and IndianBank. The interest outgo has been duly taken into account while finalizing the plan. The profits will not beaffected during the project implementation period as preoperative expenses will be capitalized.
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EXTERNAL TO THE ISSUER COMPANY
1. General economic conditions may adversely affect the sales and results of the Company.
The growth in demand for paper & paperboard is directly linked to the GDP growth. The positive and reasonablygood growth being achieved in GDP and the focus on literacy and education will drive the demand upwards.The Company does not expect any reversal in economic growth. However, if the general economic outlookturns negative due to unforeseen factors it may have a bearing on the business and results of the Company.
2. Increased competition in the Paper Industry may adversely affect the business of the Company.
After implementation of the project, the product mix of the Company moves up significantly in value additionyielding higher margins. The incremental fixed cost for achieving enhanced production will also be low. Thus,the Company will be better positioned to face any increase in competition.
3. Compliance with stringent safety and emission standards relating to the Company’s manufacturingfacilities or other environmental regulations may adversely affect the business and results of theCompany.
The technology, Equipment & process selected by the Company address the effluent emission standardsadequately. The environmental concerns planned to be addressed by the company are keeping in view theproposed implementation of standards by regulating agencies under the Corporate Responsibility forEnvironmental Protection (CREP). As such we do not envisage any adverse impact on the business and resultsof the company.
4. Increase in taxes and other levies imposed by the Central or State Governments on the acquisition ofcapital goods/components, purchase of raw materials or finished goods may have an adverse effect onthe profitability of the Company.
Customs duty on raw material, consumables and machinery alongwith excise duty on finished goods withcentral sales tax and state entry tax and other levies affect the company. These taxes and levies affect the costof production and sales price of the Company’s products and hence the demand for its products. Any increasein any of these taxes or levies or the imposition of new taxes or levies in the future may have an adverse impacton the Company’s business and financial condition.
5. A decrease in the level of tariffs imposed on paper imported into India, in accordance with WTOrequirements, could make imported paper less expensive and hence more competitive, which may havea significant adverse effect on the Company’s business.
The company has one of the widest ranges of products among paper manufacturing units of similar capacitiesand is catering to a wide market. The changes in import tariff will affect the industry in general and not thecompany in an isolated manner. With tariff regulation under the WTO for paper and paper board in place thecompany does not apprehend any serious threat on account of reduction in import tariff.
6. The Company faces competition from cheap imports from Russia, Indonesia, and South East EuropeanCountries.
Cheap imports from these countries affect the industry in general and not the company only. The Company hasbeen able to face such competition with diversified product mix. The modernisation of the production andrelated processes proposed in this Letter of Offer will reduce the cost of production and make the Companymore competitive.
7. Any other unfavorable Government policies
Paper industry’s healthy growth is dependent on the government policies relating to education and promotion ofliteracy levels of the Country’s population. Literacy being an important parameter of social progress and thereforeof great concern for successive governments, we do not anticipate any such policy which will threaten industry’sexistence and growth.
8. Weaknesses and Threats contained in the Project Appraisal Report :
• The Availability of chief raw material namely, bagasse, wheat straw, paddy straw and paddy husk fuel aremainly seasonal and dependent upon the crop.
• The Company is selling its products mainly in Uttar Pradesh and Delhi region, only small quantity is sold inwest and no reach in south.
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• The Company has yet to build dealership network for enhanced capacity.
• Any delay in implementation schedule of the project could lead to time and cost overruns.
• Any reduction in customs duty of paper will affect the domestic paper industry.
• The Company faces competition from cheap imports from Russia, Indonesia, and South East EuropeanCountries.
• Any other unfavorable Government policies.
NOTES TO RISK FACTORS :
a. Networth before the Issue (as on 31.12.2005) is Rs.1375.54 Lacs and the Issue size is Rs. 1539.75 Lacs.
b. The Book Value of the equity shares of the Company as on 31.12.2005 is Rs. 33.50/- per share.
c. The Book Value of the equity shares of the Company after the present Rights Issue will be Rs. 17.75 per share.
d. During the last six months, none of the members of the promoter group have entered into any transactions inequity shares of the Company.
e. All legal requirements applicable till the filing of the Letter of Offer with the Stock Exchange have been compliedwith.
f. Financials of issuer/subsidiaries/ group companies have been disclosed as per the SEBI (DIP) Guidelines,2000.
g. All information shall be made available by the Lead Manager and the Issuer to the public and investors at largeand no selective or additional information will be made available for a section of investors in any mannerwhatsoever.
Related Party Disclosures as per Accounting Standard 18
List of related parties and relationships :
Key Management Personnel :
1. Shri Sudhir Tandon - Managing Director
2. Shri Girish Tandon - Joint Managing Director
Relative of Key Management Personnel :
The following are the relatives of Key Managerial Persons.
Note : The Company is accepting deposits from the public and the shareholders including Promoter shareholderson the same terms and conditions and as such the details of such deposits or the interest paid thereon have notbeen disclosed separately.
• Promoters are qualified technocrats with more than 2 decades of experience in paper industry
• Plant located in area with abundant raw material and fuel availability
• Profit making company.
• Manufacturing both industrial and writing/printing paper
• Diversified Product mix
• Assured Quality standards ensured under ISI certification
• Utilizes biomass for cogeneration of power reducing use of fossil fuels and resultant emissions of green housegases.
• Expansion/modernisation project has been appraised by BOB Capital Markets Ltd (a wholly owned subsidiaryof Bank of Baroda) and total term loans representing about 70% of the project cost of Rs.69 crore alreadysanctioned by Bank of Baroda and Indian Bank.
• The Clean Development Mechanism (CDM) project of the company got registered with United Nations FrameworkConvention on Climate Change (UNFCCC) for carbon credit trading.
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INTRODUCTION
1. SUMMARY
Industry Scenario and Business Overview :
The paper industry globally is dependent on two parameters :
1. The literacy level (which is dependent on government expenditure on education).
2. The GDP growth rates & levels of computerisation.
India has witnessed phenomenal development in the field of education– both in quantitative and qualitative terms,since independence. However, the national goals of universal elementary education and total eradication of illiteracystill remain elusive. The Government is committed to achieving these national goals and has been steadily increasingthe budgetary allocation for education. The Country has also made significant strides in higher and technicaleducation. India spent 3.94% of its GDP on education during 2004-05 but about 40% of its adult population is stillilliterate.(Source: Economic Survey February 2006).
Global Industry scenario
The paper industry’s performance depends on macro-economic factors and the demand-supply situation. The industryis highly diverse, technology and capital intensive. Further, norms such as in chlorine free operations and tightereffluent treatment/discharge parameters have restricted expansion of capacities.
The production of paper is a key economic activity accounting in value terms for about 2.5% of the world’s industrialproduction and 2% of world trade. Paper products are important for education, communications, packaging andhealth care. Worldwide, pulp and paper is the fifth largest industrial consumer of energy, accounting for four percentof the world’s energy use.
Indian scenario
The Indian paper industry is highly fragmented with nearly 1200 mills producing about 5.5mtpa. Only about 15 millshave 60,000 tonnes or larger annual capacities. India’s per capita paper consumption is about 5kgs which comparesvery poorly even to countries such as Philippines (11), Indonesia (22), and is nowhere near the ASEAN average of29 kgs and global average of 54kgs.
Indian paper industry needs the following to be globally more competitive :
• Sustained availability of good quality of raw materials (forest based) and bulk import of waste paper to supplementthe raw materials supplies.
• Adequate modernisation of the manufacturing facilities.
• Improvement of infrastructure.
• Quality improvements and reduction in cost of production
• Import policy conducive for import of material, equipment, instruments, raw materials & technologies.
In India, paper demand has been growing at around 5% CAGR in the past five years. Paper demand is inextricablylinked to economic growth, industrial production, advertisement expenditure, expenditure on education etc. Whileindustrial paper demand is driven by industrial output, packaging industry growth etc, printing and writing paperdemand is driven by public spending on education, publicity and literacy and education.
Production of paper grew at 1.1% during the current financial year up-to September 2005. With rise in demand andno matching rise in capacity the demand-supply gap in the industry is widening. The situation is therefore ripe forcapacity expansion.
During April-September 2005, the prices of writing paper went up in the international market in dollar terms. In Indiaprices are expected to sustain high levels, as capacity utilisation has peaked and proposed expansions will not keeppace with demand growth in the short term.
Some of the key players in the industry are BILT, ITC, Sirpur Paper Mills, West Coast Paper Mills, J K Paper, CenturyPaper Mills, TNPL, etc. The major varieties of writing & printing paper are cream wove and maplitho. Cream Wove isused in note books and text books, office stationery including computer stationery, share application forms, magazines,envelopes, labels, tickets, publishing and publicity materials. (Source: CMIE Quarterly Industry Review December2005)
13
SHREE BHAWANI PAPER MILLS LIMITED
Business of the Issuer Company - Shree Bhawani Paper Mills Ltd.
Shree Bhawani Paper Mills Limited (SBPML or the issuer Company), was incorporated on 6th July, 1979 as a PublicLimited Company. The Company set up a Paper Mill at Rae Bareli (U.P.) with an installed capacity of 9400 TPA formanufacturing Printing, Writing & Wrapping Paper. There are two paper machines namely MG (Machine Glaze)Yankee Machine & MF (Machine Finish) Fourdriner Machine. The commercial production started in April, 1983. Inthe years, 1989-90, 1990-91, modification in MF paper machine was undertaken enabling substantial increase inproduction & installation of new Fluidized Bed Combustion (FBC) husk fired boiler. In the year 1995-96, Companysuccessfully commissioned Diesel Generating sets to take care of its entire requirement of power and the UPSEBpower supply was surrendered w.e.f. 1st April 1996. In 1996-97, Company undertook a capital expenditure scheme of4.23 Crores for up gradation of Pulp Mill, installation of new FBC husk fired boiler and improvement in the quality ofpaper.
The Prospects of paper industry appear positive with the existing demand-supply gap and the Government’s focuson universal education. The 2% education cess introduced by the Government is expected to further fuel the demandfor note books and text books. However, capacity expansion commensurate with the burgeoning demand is difficultdue to high capital costs and environmental constraints.
Offering Details :
Equity Shares Issued by the Company 1,23,18,000 Equity Shares of the face value of Rs.10/- each.
Rights Entitlement Three Equity Shares for every one Equity Share held.
Record Date Record Date i.e 10.03.2006
Issue Price per Equity Share Rs.12.50 per Share (including a premium of Rs.2.50 per
share).
Equity Shares outstanding prior to the Issue 41,06,000 Equity Shares of the face value of Rs.10/- each.
Equity Shares outstanding after the Issue 1,64,24,000 Equity Shares of the face value of Rs.10/- each.
Deferred Income Tax (26.68) (18.81) 11.35 41.48 16.69 -
Net Profit after Taxand exceptional items 170.43 96.94 17.78 62.40 184.48 79.39
15
SHREE BHAWANI PAPER MILLS LIMITED
2. GENERAL INFORMATION
SHREE BHAWANI PAPER MILLS LIMITED
(Incorporated on 6th July, 1979 as a Public Limited Company with Registration No. 20-4783 of 1979 in the State ofUttar Pradesh under the Companies Act, 1956 and obtained the certificate of commencement of business on 9th
Registration Number: 20-4783 of 1979Registrar of Companies (RoC): West Cott Building, The Mall, Kanpur – 208001, Uttar Pradesh
The Equity shares offered are proposed to be listed at : Bombay Stock Exchange Ltd (Designated Stock Exchange).The Company has received ‘in-principle’ approval from BSE for listing of the equity shares being offered through thisRights Issue vide their letter no. DCS/SMG/SDM/RK/NS/05, dated: October 21, 2005.
Dear Equity Shareholder(s),
Pursuant to the Resolution passed on 11.9.2005 by the Board of Directors of the Company (hereinafter referred to as“The Board”), it has been decided to offer Equity Shares of Rs.10/- each for cash at a Premium of Rs. 2.50 per share(Issue Price of Rs.12.50 per share) on Rights basis to the existing Equity Shareholders of the Company in the ratioof Three Equity Shares for every One Equity Share held [3:1] as on i.e 10.03.2006 i.e. Record Date.
Important :
a) This issue is open to the existing Shareholders of the Company whose names would appear as Beneficialowners as per the list to be furnished by the depositories in respect of the shares held in the electronic form andon the Register of Members of the Company in respect of the Shares held in physical form at the close ofbusiness hours on the Record Date i.e 10.03.2006.
b) Please ensure that the Composite Application Form (hereinafter referred to as ‘CAF’) is received with this Letterof Offer.
c) Please read this Letter of Offer and the instructions contained in the accompanying CAF carefully before makingany investment in the issue.
d) The instructions contained in the enclosed CAF are an integral part of this Letter of Offer and must be carefullyfollowed. Applications not conforming to the instructions are liable to be rejected.
e) All enquiries in connection with this Letter of Offer or the accompanying CAF and requests for split forms mustbe Addressed (quoting the Registered Folio Number, the CAF Number and the name of the first shareholder asmentioned on the CAF and superscribed “Shree Bhawani -Rights Issue” on the envelope) to the Registrars tothe Issue at the following address :
Under no circumstances should any request be sent to the Lead Manager to the Offer.
f) The Company undertakes to provide adequate funds to the Registrars to the Offer for posting of the RefundOrders/Intimations of Allotment/Share Certificates by registered post wherever applicable.
g) In case, the original CAF is not received, or is misplaced by the applicant, the Registrars will issue a duplicateCAF on the request of the applicant who should furnish the Registered Folio Number and his/her full name andaddress to the Registrars to the Issue. Please note that those who are making the application in the duplicateform should not utilise the original CAF for any purpose including renunciation, even if it is received subsequently.If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications.
16
SHREE BHAWANI PAPER MILLS LIMITED
h) It is to be specifically noted that the issue of equity shares is subject to Risk Factors appearing in this Letter ofOffer.
i) The Issuer and the Lead Manager are obliged to update the Letter of Offer and keep the investors / Publicinformed of any material changes till the commencement of trading.
Issue Schedule :
Board of Directors of Company :
For more details please refer to the para under “Board of Directors” mentioned in this Letter of Offer on page no 54
Note : The Registrars to the Issue is not an Associate of the Issuer Company. The investors are advised tocontact the Registrar / Compliance Officer to the Issue/ Company in case of any Pre-Issue/ Post-Issue relatedproblems such as non-receipt of Letter of Offer/ Intimation of Allotment/ share certificates/ refund orders, etc.Mrs. Babita Jain - Company Secretary of the Company has been appointed as the Compliance Officer for thecaptioned Rights Issue and will be in charge of handling all investors’ grievances and Redressal of complaints,if any, consequent upon the issue of securities of Shree Bhawani Paper Mills Limited being offered through theRights Issue and thereby listed at the Bombay Stock Exchange Limited, Mumbai.
Inter-se allocation of responsibilities among Lead Managers
Not applicable, as there is only one Lead Manager
Credit Rating
This being an issue of Equity Shares on Rights basis, no credit rating is required.
Minimum Subscription
If the Company does not receive application money for at least 90% of the issued amount, the entire subscription willbe refunded to the applicants within forty-two days from the Date of Closure of the Issue. If there is delay in the refundof application money by more than 8 days after the Company becomes liable to pay the amount (i.e. forty two daysafter Closure of the Issue), the Company will pay interest for the delayed period, at the rates prescribed in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
MONITORING AGENCY
There is no outside Independent Monitoring Agency. However, Audit Committee of Directors will monitor thedeployment of funds. The Banks who have sanctioned term loans for the project shall also be monitoring the utilizationof funds raised for the project.
The present Rights Issue is not underwritten, however, the Promoters have confirmed vide their letter of intent dated,17th September 2005 that they intend to subscribe to the full extent of their entitlement in the Issue. Promoters intendto apply for additional Equity Shares in the Issue such that at least 90% of the Issue Size is subscribed.
10,000 13.5% Cumulative Redeemable Preference Shares of Rs.100/- each were issued on 29th December, 1982to PICUP and UPSIDC redeemable either in whole or part thereof at any time after twelve years from the date ofallotment but in any event not later than fifteen years from date of allotment. These shares were redeemed at par on1.04.1997 accordingly.
The Promoters/Directors/Associates vide their letter dated 17th September, 2005 confirmed that they intend tosubscribe to the full extent of the rights entitlements in the Issue either directly or by renouncing the entitlementsin favour of other members of Promoters/Promoter Group. The Promoters and promoter group also intend toapply for additional shares to the extent of shortfall, if any, in the subscription to the Issue.
The Promoters/Directors/Associates vide their letter dated 17th September, 2005 have also confirmed that, thissubscription and acquisition of additional shares by them or by any of them (i.e. their entitlement as well asadditional shares beyond their entitlements), if any, will not result in change of control of the management of theCompany and shall be exempt in terms of provisions to Regulation 3(1) (b)(ii) of the SEBI (SAST) Regulations,1997. As such, other than meeting the requirements indicated under “Objects of the Issue” in Letter of Offer,there is no other intention/purpose for this Issue, including any intention to delist the Company, even if, as aresult of allotment to the Promoter, in this Issue, the Promoter shareholding in the Company exceeds thepercentage of the current shareholding.
However in case such allotment results in the percentage of public shareholding coming down to less than 25%,the company shall take suitable steps to increase the public holding to the required levels within the time limitsprescribed by SEBI. However, that in case the Rights Issue of the Company is completed with the promoterssubscribing to equity shares over and above their entitlement and as a result, if the public shareholding in theCompany after the Rights Issue falls below the “permissible minimum level” as specified in the listing conditionsor listing agreement, the promoters, either individually or jointly with other promoters either will:
(a) buy out the remaining shareholders at the price of the Issue and shall take steps to de-list the Company asper the requirements of sub-clause 17.1 and 17.2 of SEBI (Delisting of Securities) Guidelines, 2003 or asper any amendment thereto or within such period as may be directed by SEBI or any appropriate authority;or
(b) make an offer for sale of their holdings so that the public shareholding is raised to the “permissible minimumlevel” within a period of 3 months from the date of allotment in the present Rights Issue
4. The Present issue being a Rights Issue, provisions of Promoters’ Contribution are not applicable. As aconsequence, none of the Equity Shares are locked in.
5. The Promoters, Directors and Lead Managers to the Issue have not entered into any buy-back, standby orsimilar arrangements for any of the securities being issued through this Letter of Offer.
6. Top ten shareholders as on 10th March, 2006 (Face value of Rs.10/- per share) :
S. No. Name of the Shareholder No. of Shares % of Issued Capital
1. Sudhir Tandon 225150 5.48
2. Badri Vishal Tandon 224500 5.47
3. Satish Tandon 182800 4.45
4. Girish Tandon 171050 4.17
5. Puneet Tandon 163800 3.99
6. Alankar Tandon 132800 3.23
7. Akshat Tandon 122700 2.99
8. Neera Tandon 116375 2.83
9. Gaurav Tandon 110200 2.68
10. Alankar Udyog Private Limited 95900 2.34
23
SHREE BHAWANI PAPER MILLS LIMITED
7. Top Ten shareholders as on 3rd March, 2006 (Face value of Rs.10/- per share) :
S. No. Name of the Shareholder No. of Shares % of Issued Capital
1. Sudhir Tandon 225150 5.48
2. Badri Vishal Tandon 224500 5.47
3. Satish Tandon 182800 4.45
4. Girish Tandon 171050 4.17
5. Puneet Tandon 163800 3.99
6. Alankar Tandon 132800 3.23
7. Akshat Tandon 122700 2.99
8. Neera Tandon 116375 2.83
9. Gaurav Tandon 110200 2.68
10. Alankar Udyog Private Limited 95900 2.34
8. The Top ten shareholders as on 10th March, 2004 (Face value of Rs.10/- per share) :
S. No. Name of the Shareholder No. of Shares % of Issued Capital
1. Industrial Development Bank of India 577750 14.07
2. ICICI Ltd. 416638 10.15
3. Sudhir Tandon 225150 5.48
4. Alankar Tandon 240800 5.86
5. Badri Vishal Tandon 224500 5.47
6. Satish Tandon 182800 4.45
7. Girish Tandon 171050 4.17
8. Akshat Tandon 122700 2.99
9. Neera Tandon 116375 2.83
10. Gaurav Tandon 110200 2.68
9. The total no. of members of the Company as on Record Date i.e 10.03.2006 is 3330.
10. The Directors, Promoters and Promoter Group of the Company have not entered into any purchase or saletransactions of the Company’s shares in the last six months.
11. The Company has not availed of “Bridge loans” to be repaid from the proceeds of the Issue, for incurringexpenditure on the Objects of the Issue.
12. The Equity Shareholders of the Company do not hold any warrant, option or convertible loan or any debenture,which would entitle them to acquire further shares in the Company.
13. The Promoters, Directors and Lead Managers to the Issue have not paid any amount, whether directly orindirectly in cash or kind, in the nature of discount, commission, allowance or otherwise to any person forsubscribing to this issue.
14. The securities offered through this issue will be made fully paid up within a period of 12 months from the date ofallotment. In case of unpaid calls, the shares allotted shall be liable for forfeiture in accordance with the articlesof association of the company.
15. There would be no further issue of capital whether by way of issue of Bonus Shares, Preferential Allotment,Rights Issue or Public Issue in any other manner during the period commencing from submission of the Letterof Offer to SEBI until equity shares offered through this Letter of Offer have been listed or application moniesrefunded on account of non-listing or under subscription, etc.
16. The Equity shares offered through this Letter of Offer will be listed or application monies refunded on account ofnon-listing or under-subscription, etc.
24
SHREE BHAWANI PAPER MILLS LIMITED
17. The Company shall comply with disclosures and accounting norms as may be specified by SEBI from time totime. As per Clause 3.7.1 of the Guidelines, an eligible company shall be free to make public or rights issue ofequity shares of any denomination determined by it in accordance with sub-section (4) of section 13 of theCompanies Act, 1956 and compliance with the norms as specified by SEBI in circular no. SMDRP/POLICY/CIR-16/99 dated June 14, 1999 and other norms as may be specified by SEBI from time to time. At any given time,there shall be only one denomination of the equity shares of the Company.
18. At present, the Company does not have any proposal, intention, negotiation or consideration to alter the capitalstructure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basisor issue of bonus or rights or public issue of Equity Shares or any other securities within a period of six monthsfrom the date of opening of the present Issue. However, if business needs of the Company so require, theCompany may alter the capital structure by way of split/ consolidation of the denomination of the shares/ issueof shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities afterthe period of six months from the date of listing of the Equity Shares issued under this Letter of Offer (LoF) orfrom the date the application moneys are refunded on account of failure of the Issue, after seeking and obtainingall the approvals which may be required for such alteration.
19. At any given time, there shall be only one denomination of the Equity Shares. The Company shall comply withsuch disclosure and accounting norms as may be specified by SEBI from time to time.
20. The Lead Manager and the Issuer shall make all information available to the public and investors at large andno selective or additional information would be available for a section of investors in any manner whateverincluding at road shows, presentations, research or sales reports etc.
25
SHREE BHAWANI PAPER MILLS LIMITED
4. OBJECTS OF THE ISSUE
The Company has drawn up a plan for expansion of its production capacity and undertake up-gradation of theproduction technology and also put in place systems for environmental safety. The details of the plan are as follows:
� Increase the installed capacity of the pulp and paper mill by 23000 Tons per annum, i.e., increase annualproduction capacity from 21000 tons to 44000 tons and to produce higher value added products such as paperused in computer stationery in a environment friendly way.
� Installation of a 3 MW cogeneration plant to meet power requirements.
Scope of Appraisal by BOB Capital Markets Ltd.
• To carry out a Financial Appraisal and Techno Economic Feasibility study of the expansion project of theCompany and provide Appraisal Report for raising of Term Loan as may be determined and balance throughinternal generation and augmentation of capital.
As per the Appraisal Report of BOB Capital Markets Ltd {a Subsidiary of Bank of Baroda} dated 11th April2005, the total cost of the proposed Capital Expenditure Scheme has been worked out at Rs.6900 lacs asdetailed below :
Particulars Rs. In Lacs
Expansion of capacity - Paper Machine 2000.00
Expansion of capacity - Pulp Mill & Pollution Control 2220.00
Electrical & Fittings 320.00
Utilities – Deep Bore Wells 80.00
- Low Pressure Boiler 80.00
Power Plant 3 MW 1200.00
Interest during construction period - @ 10% of Rs. 48 Crores 480.00
Preliminary & Pre-operative Expenses 120.00
Margin for Working Capital 400.00
TOTAL 6900.00
Sources & Utilization of Funds
a) The Project is proposed to be funded as follows :-
Source of Finance Rs. In Lacs
Equity Share Capital (Rights Issue) * 1500.00
Internal Cash Accruals (Net of repayment of loan installments) 2005-06; 2006-07 400.00
Term Loan & Dealer Deposits (Unsecured) 5000.00
Total 6900.00
* The Company proposes to mobilize Rs. 1539.75 Lacs through this Rights Issue
The Company confirms that firm arrangements of finance through verifiable means toward 91% of the stated meansof finance excluding the amount to be raised through the proposed Rights issue have been made.
The Detailed Breakup of Cost of the Project is as under :
The entire Capital Scheme will be completed in a single phase. The amount of orders for Plant & Machinery includingElectricals that have already been placed is Rs.3445.05 Lacs out of total estimated cost of Rs.5290.0 Lacs. Theorders placed accounts for 65.12% of the total Plant & Machinery including Electricals. The details of the cost ofproject and status of placement of order are as under:
• Out of total estimated cost of Rs.5290 Lacs in respect of Plant & Machinery & Electricals, orders have beenplaced for value of Rs.3445.05 Lacs, which is 65.12% of the total Plant & Machinery and Electricals.
• The civil works for Paper Machine Section and Power Plant have started.
The Broad terms and conditions with names of lenders are as under :
*- The Company has to pay interest @ 10.5% till the successful raising of share capital.
Restrictive covenants as stated in loan agreement for which permission from the banks are required.
• The Company will not go for further diversification/expansion without the consent of the Bank
• The Company will not declare dividend without the written consent of the Bank
• The Company to strengthen its capital base by way of ploughing back of profits/retention of interest oncapital.
Break up of Year wise expenditure shall be as follows :-
(Rs. in Lacs)
Break up of Year wise Means of finance shall be as follows :-
(Rs. in Lacs)
Actual expenditure incurred
The Actual expenditure incurred on the Project upto 28.2.2006 together with Means of Finance duly certified by theStatutory Auditors is given below.
(Rs. in Lacs)
Note: The Promoters have brought in Unsecured Loans to the tune of Rs. 3.00 Cr (Rs. Three Crore only)towards proposed increase in Equity Share capital upto 07.03.2006 as per the Auditors Certificate datedMarch 10, 2006.
Availability of Materials, Fuel & Chemicals and Raw Materials :
The various raw materials used are sourced from unorganized sector, as all basic raw materials are agriculturebased. The details of same are as follows:
(a) Short Fibre
1. Bagasse is obtained from Sugar Mills (through agents) operating within a range of 150-200 KMs, as alsoin Rae Bareily & Sultanpur.
2. Paddy Straw, Wheat straw & Sarakanda are available locally.
(b) Long Fibre
1. Waste Paper is procured from Allahabad, Lucknow & Varanasi
3. Cotton Linter procured from Rajasthan, Punjab, Haryana & Guntur.
4. Jute Cutting is procured from Bangladesh, West Bengal & Bahraich (UP).
As regards availability of straw & bagasse is concerned, it is available locally in abundance. For example, SBPML isgetting good flow of wheat straw in August – March although it is off-season. Presently, there are no competing papermills in a radius of more than 100 KMs. Transportation cost for the above mentioned raw material to distant locationis an expensive proposition.
The main strength of the Issuer Company lies in its flexibility to use different raw materials, i.e. choice can be madebetween various options depending upon their availability and price.
Fuel
The main fuel is paddy husk which is available locally in abundance. There are many a small rice mills established inalmost every large village and there are over 100 shellers in Rae Bareily District alone. In fact surplus husk of thisarea is being supplied to neighboring districts also.
Chemicals
Caustic Soda Lye and Chlorine are major chemicals required and they are being supplied by M/s Kanoria Chemicals &Industries Ltd., M/s Bihar Caustic & Chemicals Ltd., M/s HJI Gemmco Ltd etc. Rosin is purchased from Himachal Pradesh.Alum is purchased from Bareily & Unnao. Lime and Soapstone Powder is procured from Katni, Satna & Rajasthan.
Diesel
The Company’s power requirement is being met by a captive power plant fired by paddy husk for generation of steamwhich is used for generating electricity. Diesel Generating Sets are kept as standby arrangement to take care ofunforeseen eventualities or for maintenance related shutdowns of the power plant. Hence, the requirement of dieselis very minimal and the same is met by the IOC Depot of Lucknow or Kanpur.
Details of Other Requirements and arrangements made
Utilities & Power
In 2001-02, Company successfully commissioned a 3 MW Extraction cum Condensing Turbo Generation plant for meetingthe power requirements. Five DG sets of 1000 KVA each are kept as standby to take care of unforeseen eventualities orregular maintenance related shutdowns of the power plant. With the proposed expansion, the power requirement willincrease by 2.5 MW. Hence, the capital expenditure scheme includes an additional 3 MW captive co-generation powerplant. The company has taken a conscious decision not to use diesel or other fossil fuels regularly and to make use ofbiomass such as rice husk for generation of power. The company has also retained M/s. Ernst & Young Pvt. Ltd, to act asAdvisors for Climate Change Advisory Services for getting the potential benefits of Green House Gases (GHG) Abatementunder the Clean Development Mechanism (CDM) of the Kyoto Protocol.
Water
The total consumption of water in the plant is about 250 M3/Hr. which is met by tube wells of 150 feet depth. There arefive submersible pumps each of 5" delivery and 3" delivery, spread over the area of the factory.
After the proposed expansion, the additional water requirement is estimated to increase by 200 M³/hr. The increasedquantity shall be met by two deep Bore Wells of 300 Mtrs. depth.
Steam
At present, the total steam requirement is 16 Tons per Hour (TPH). The steam requirement in paper machine section(9 TPH) is met by the extraction steam of Cogeneration plant having 24 TPH high pressure boilers (44 Kg/cm²). Thesteam requirement in Pulp Mill of 7 TPH is met by 8 TPH, 10.5 Kg. /cm² boiler. There is a standby boiler of 8 TPHcapacity at 10.5 Kg/sq cm pressure.
After the proposed expansion, the steam requirement will increase by 15 TPH. The steam supply will be augmentedby 9 TPH extraction steams of the proposed 3 MW captive cogeneration plant and a new 8 TPH low pressure boiler.All the boilers run on paddy husk fuel. Currently, the husk consumption is about 140 TPD, which shall double after theimplementation of the proposed scheme. The Company does not foresee any problem in procuring this quantity asalready explained. Additionally, the company is endeavoring to avail the potential benefits of Green House Gases(GHG) Abatement under the Clean Development Mechanism (CDM) of the Kyoto Protocol.
37
SHREE BHAWANI PAPER MILLS LIMITED
Manpower
Presently 443 workers and staff are employed in the Company on a regular basis. The Company has its own electrical,mechanical & civil engineering departments with competent technical personnel and skilled labor. For the proposedexpansion manpower requirement will not increase substantially as the existing manpower would be utilized for thenew unit. There will be hardly any increase at managerial level and administrative staff. The increase in manpowerstrength is envisaged as below :-
The Company shall employ unskilled labor on contractual basis. The skilled and semi skilled labor is availablelocally. The Company has to appoint only 15 Nos. of Shift In charges for which no significant cost is envisaged assuch.
Effluent Disposal
The Company has received consent letter from the Uttar Pradesh Pollution Control Board for period up to December2006. The proposed scheme includes Chemical Recovery Plant (CRP) which will substantially reduce the effluentout-flow. It consists of Fluid Bed Low Temperature Incinerator System, consisting of Multiple Effect Evaporator andLow Temperature Incinerator. The detail of proposed suppliers and the total cost is mentioned in the Cost of theProject. The recovered chemical will be reused in the process. This will reduce the production cost substantially, inaddition to taking care of the environment protection issues on a long term basis. For flue gas emanating from theboiler, Electrostatic Precipitator (ESP) has been installed. Provision for additional ESP has also been made in theproposed 3 MW cogeneration plant.
Preliminary and Pre Operative Expenses :
The total amount of Technical Consultancy Fee to be paid is applicable to the following engagements as detailedbelow :-
Marketing ArrangementsAmongst the Paper Mills having capacity up to 60 Tons per day in the Country, SBPML has the widest product range.SBPML has two paper machines, of which one (MF Machine) is manufacturing cultural varieties (Printing, Writing) ofpaper and the other (MG Machine) industrial variety of paper.
Indian Paper Industry – Production, Imports and Export of paper in Tons :
Source: Indian Industry, Monthly Review March, 2006, Centre for Monitoring Indian Economy (CMIE) – News Print & Paper
Production of paper by Shree Bhawani Paper Mills Ltd.
Year Production (Tonnes)
2002-03 18062
2003-04 19611
2004-05 19973
The Company faces competition from the following companies:
a) Shreyans Industries Ltd. – Present Capacity: 170 TPD
b) Mohit Paper Mills Ltd. – Present Capacity: 90 TPD
c) Chadha Paper Ltd. – Present Capacity: 150 TPD
The company has been able to face competition through a diversified product mix, assured quality and a wide dealernetwork. The Company is manufacturing both white and colored varieties of paper on both these machines. The productsof the Company are well established in the market.
The Sales function is managed on a day to day basis by the General Manager (Sales) under the guidance of JointManaging Director. SBPML has a wide network of dealers covering the main centers of Northern & Eastern parts of theCountry. Presently, Uttar Pradesh and Delhi account for about 50% of the sales. In Western India areas covered includeAhmedabad, Jaipur and Mumbai while on the Eastern side Bihar, Calcutta and Guwahati are covered.
The Company is also accepting Government orders particularly in the off-season, which helps in inventory management.The Company has taken security deposits from all the dealers. Presently, dealership has been created in about 25cities across the Country. Recently, the Company has received ISI Certification, which will further provide edge inGovernment Supplies.
The proposed Printing & Writing Machine shall produce higher value added products compatible with modern daysophisticated printing machines, computer stationery etc. The demand for such quality paper is quite encouraging. Theincreased production shall be sold through existing dealers, as also a network of dealers shall be created in theuntapped areas of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Haryana as well as in South India. Ground workfor appointing new dealers has been started. It will be in place before commencement of production on the new PaperMachine.
Dealerships have been stable and almost all the dealers have had business relationship with the Company for morethan ten years. The Company is supplying machine glazed (MG) paper to M/s Asahi India Ltd. for float glass packingwhich demands strict quality parameters, for example pH should be between 4 to 5 and the size of sheets should meetexact specifications.
Dealer Deposits:
An on 31st December 2005, the company has collected an amount of Rs. 192.64 lacs towards Deposits from existingDealers and these deposits attract simple interest of 7% per annum. Dealers will be appointed in all major cities in Indiaand Security Deposit ranging between Rs.3 to 15 lacs will be mobilized from each dealer depending upon the salespotential of the territory and will be non refundable during the tenure of the dealership. The above terms and conditionswill be governed by a written dealership agreement that will be executed in due course.
Interim Use of funds
The Management, in accordance with the policies set up by the Board, will have flexibility in deploying the net proceedsreceived by us from the Issue. Pending utilization for the purposes described above, we intend to temporarily invest thefunds in high quality interest / dividend bearing liquid instruments including money market mutual funds, deposit withbanks for necessary duration. We also intend to deploy part of the proceeds of the Issue, pending utilization for thepurposes described above, to temporarily reduce our working capital borrowings from banks and financial institutions.
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39
SHREE BHAWANI PAPER MILLS LIMITED
5 . BASIC TERMS OF THE ISSUE
Basis of the Offer:
The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose namesappear on the Register of Members of the Company and the names of the beneficial Equity Owners as provided by theDepositories at the close of business hours on Record Date i.e 10.03.2006 being the Record Date fixed in consultationwith The Bombay Stock Exchange Ltd., Mumbai (The Designated Stock Exchange). The equity shares are beingoffered for subscription in the ratio of Three Equity Shares for every One Equity Share held.
Rights Entitlement
As your name appears on the Register of Members of the Company as an Equity Shareholder on Date i.e 10.03.2006,being the Record Date, you are being offered equity shares of the Company in the ratio of Three Equity Shares forevery One Equity Share held as shown in Part A of the enclosed Composite Application Form.
Face Value
The Equity Shares of the issuer Company is of face value of Rs 10/- and is being offered at a Premium of Rs. 2.50 pershare.
Issue Price
As per Clause 3.1.1 of the SEBI (DIP) Guidelines a listed Company whose equity shares are listed on a stockexchange, may freely price its equity shares and any security convertible into equity at a later date, offered througha public or rights issue. Each Ordinary Share is of face value of Rs.10/- and is being offered at a premium of Rs. 2.50per Ordinary Share.
Terms of Payment
The amount shall be payable as under:
On Application: An amount of Rs. 6.25 per Share, consisting of Rs. 5/- towards face value and Rs.1.25 towardspremium.
The Balance Rs. 6.25 per Share, consisting of Rs. 5/- towards face value and Rs.1.25 towards premium shall bepayable on one call to be made by the Board of Directors within six months from the date of allotment of the shares.
The Ordinary shares allotted in this Rights issue will be initially listed as partly paid up shares. For thepayment of call money, the Company will fix a Record Date after obtaining the necessary permissions fromthe Stock Exchange, Mumbai and issue call notices to all the members holding partly paid up shares as onthe record date, in accordance with the provisions of the Act. The aforesaid members are required to makethe payment of call money within 30 days of date of issuance of Call Notices. Further, no trading in partly paidup shares will be allowed after the aforesaid Record Date.
The shares offered through this Right Issue shall be made fully paid up or may be forfeited on failure of payment ofcall as the case may be within 6 months from the date of allotment of shares.
Non-Payment of Call Money
Failure to pay the amount due on call on or before the appointed date for payment thereon will render the allotteesliable to pay interest not exceeding 18% per annum or such other lower rate as the Board of Directors may determineon the amount outstanding from the date so appointed for payment thereof to the time of actual payment and will alsorender the Equity Shares including the amount already paid thereon liable for forfeiture in terms of the Articles ofAssociation of the Company.
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6. BASIS FOR ISSUE PRICE
Qualitative Factors :
• Promoters are qualified technocrats with more than 2 decades of experience in paper industry
• Profit making Company.
• Plant located in area with abundant raw material and fuel availability
• Manufacturing both industrial and writing/printing paper - Diversified product mix
• Assured quality standards ensured under ISI certification
• Utilizes biomass for cogeneration of power reducing use of fossil fuels and resultant emissions of green housegases.
• Expansion/modernization project has been appraised by BOB Capital Markets Ltd (a wholly owned subsidiaryof Bank of Baroda) and total term loans representing about 70% of the project cost of Rs.69 Crore alreadysanctioned by Bank of Baroda and Indian Bank.
• The Clean Development Mechanism project of the company got registered with United Nations FrameworkConvention on Climate Change (UNFCCC) for carbon credit trading.
Quantitative Factors :
(1) Earnings per Share (EPS) for the last 3 Years :
(2) Price/Earnings Ratio (P/E) in relation to Issue price of Rs. 12.50 per share :
(6) Comparison with other companies in the Peer Set :
Comparison of the accounting Ratios of the Issuer Company as mentioned above with the accounting ratios ofthe peer group (i.e. companies of comparable size in the same industry) for the period ended 31st March 2005is as follows. Information for industry peers has been taken from Capital Market [Source: Capital Market (volumeXX/26, dated Feb27-March 12, 2006) Sector: Paper]. The following companies are in similar line of business;however they have been classified in different segments as per the aforesaid source.
Taking into account the above Qualitative and Quantitative factors, the Issue Price of Rs. 12.50/- per share is justified.The face value of the Equity Shares is Rs. 10 per share and the Issue Price is 1.25 times the face value.
7. Tax Benefits available to the Company and its ShareholdersThe Company has been advised by its statutory auditor, M/s. P.L. Gupta & Co vide their certificate dated 18th
March 2006 that under the current provisions of the Income Tax Act, 1961 and the existing laws for the timebeing in force, the following benefits, inter-alia, will be available to the Company and the Members. However, aninvestor is advised to consider in his own case the tax implications of an investment in the shares from time totime. The statement of tax benefits certificate from the tax auditors of the Company is reproduced below :
The Board of DirectorsShree Bhawani Paper Mills Limited33, Dayanand MargAllahabadSub: Statement of Possible Tax Benefits available to the Company and its ShareholdersDear Sirs:We hereby certify that the enclosed statement states the possible tax benefits available to the Company under theIncome-tax Act, 1961, presently in force in India and to the shareholders of the Company under the Income-tax Act,1961, Wealth Tax Act, 1957 and the Gift Tax Act, 1958, presently in force in India. Several of these benefits aredependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions ofthe statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent uponfulfilling such conditions, which based on business imperatives the Company faces in the future, the Company mayor may not choose to fulfill.
The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to providegeneral information to the investors and is neither designed nor intended to be a substitute for professional taxadvice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advisedto consult his or her own tax consultant with respect to the specific tax implications arising out of their participation inthe issue.We do not express any opinion or provide any assurance as to whether:• the Company or its shareholders will continue to obtain these benefits in future; or
• the conditions prescribed for availing the benefits have been/would be met with.The contents of the enclosed statement are based on information, explanations and representations obtained fromthe Company and on the basis of our understanding of the business activities and operations of the Company.
Statement of Possible tax benefits available to the Company and its Shareholders
(A) Benefits to the Company Under Income-Tax Act, 1961 (the Act)/Finance Act, 2005 :
1. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.edividends declared, distributed or paid on or after 1st April, 2003 by domestic companies) received on theshares of any company is exempted from the tax.
2. In terms of section 10(38) of the Act, any long-term capital gains arising to a shareholder from transfer oflong-term capital asset being equity shares in a company would not be liable to tax in the hands of theshareholder if the following conditions are satisfied.
a) The transaction of sale of such equity share is entered into on or after 1st October, 2004;
b) The transaction is chargeable to such securities transaction tax as explained below :
In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act,2004,transactions for purchase and sale of the securities in the recognized stock exchange by theshareholder, shall be chargeable to securities transaction tax. As per the said provisions, any deliverybased purchase and sale of equity share in a company through the recognized stock exchange isliable to securities transaction tax @ 0.075% of the value payable by both buyer and seller (0.1% witheffect from 1st June, 2005 as per the Finance Act, 2005). The non-delivery based sale transactionsare liable to tax @ 0.015% of the value payable by the seller (0.02% with effect from 1st June 2005 asper the Finance Act, 2005).
3. Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelvemonths, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long-termcapital gains and the gains shall be calculated by deducting from the gross consideration, the indexed costof acquisition.
4. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-termcapital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-termcapital asset will be exempt from capital gains tax if the capital gain are invested in certain notified bondswithin a period of 6 months after the date of such transfer for a period of at least 3 years. However, if theassessee transfers or converts the notified bonds into money with in a period of three years from the dateof their acquisition, the amount of capital gains exempted earlier would be chargeable to tax as long-termcapital gains in the year in which the bonds are transferred or converted into money.
5. Under section 54ED of the Act and subject to the conditions and to the extent specified there in, long-termcapital gains (in cases not covered under section 10(38) of the Act) on the transfer of investment in shareswill be exempt from capital gains tax if the capital gains are invested in shares of an Indian Companyforming part of an eligible public issue, within a period of 6 months after the date of such transfer and heldfor a period of at least one year. Eligible public issue means issue of equity shares which satisfied thefollowing conditions, namely-
(a) the issue is made by a public company formed and registered in India;
(b) the shares forming part of the issue are offered for subscription to the public.
There is a legal uncertainty over whether the benefit under this section can be extended to shares formingpart of the offer for sale by the selling shareholders.
6. Under section 112 of the Act and other relevant provisions of the Act, long-term capital gains, (i.e., if theshares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act),arising on transfer of investment in shares, shall be taxed at a rate of 20% (plus applicable surcharge andcess) after indexation as provided in the second proviso to section 48.
The tax payable in respect of any income arising from the transfer of a long-term capital assets being listedsecurities, exceeds 10% of the amount of capital gain before giving effect to the provisions of Section 48(i.e. indexation provisions), then such excess shall be ignored for computing capital gain tax.
7. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if theshares are held for a period not exceeding 12 months), arising on transfer of investment in shares listed ona recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge and cess) incases where securities transaction tax has been paid.
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8. Under section 32 of the Act, the Company is entitled to claim depreciation on tangible and intangibleassets as explained in the said section.
9. Subject to compliance of certain conditions laid down in section 32(iia) of the Act, the Company is entitledto additional depreciation on new machinery or plant and installed after 31st March, 2005.
10. Under section 35D of the Act, the Company will be entitled to a deduction equal to 1/5th of the expenditureof the nature specified in the said section, including the expenditure on the proposed issue and also for thepurpose of preparation of project appraisal report by way of amortization over a period of five years,subject to the stipulated limits.
11. The Company will be eligible for tax holiday as per the provisions of section 80 IA of the Income Tax Act,1961, in respect of its income from new power generating units generating power in the form of steam andelectricity for a period of 10 years. The Company will also be eligible to claim deduction under section80JJA in respect of its income from generation of power using bio-degradable waste for a period of 5years.
12. The company can carry forward the excess of tax paid under MAT (Section 115 JB) over and above thenormal tax payable on its Total Income. The same can be carried forward and set-off against normal taxpayable in subsequent five years, subject to the stipulated limits.
13. Under section 36(1)(iii) of the Act, the Company is entitled to claim deduction of Banking Cash TransactionTax paid on Taxable Banking Transactions entered into by it.
(B) Benefits to the Shareholders of the company under the Income Tax Act, 1961 :
Resident Shareholders
1. In terms of section 10(32) of the Income-tax Act, any income of minor children, included in the total income ofthe parent under section 64(1A) of the IT Act will be exempt from tax to the extent of Rs.1500 per minor child.
2. In terms of section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e., dividendsdeclared, distributed or paid on or after 1st April 2003) received on the shares of the company is exempted fromthe tax.
3 In terms of section 10(38) of the act, any long-term capital gains arising to a shareholder from transfer of longterm capital asset being an equity share in a company would not be liable to tax in the hands of the shareholderif the following conditions are satisfied:
• the transaction of sale of such equity share is entered into on or after 1st October, 2004;
• the transaction is chargeable to such securities transaction tax as explained below :
In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,transactionsfor purchase and sale of the securities in the recognized stock exchange by the shareholder, shall be chargeableto securities transaction tax. As per the said provisions, any delivery based purchase and sale of equity share ina company through the recognized stock exchange is liable to securities transaction tax @ 0.075% of the valuepayable by both buyer and seller (0.1% with effect from 1st June, 2005 as per the Finance Act, 2005). The non-delivery based sale transactions are liable to tax @ 0.015% of the value payable by the seller (0.02% with effectfrom 1st June 2005 as per the Finance Act, 2005).
4. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of thesecurities transactions entered into in the course of his business would be eligible for rebate from the amount ofincome-tax on the income chargeable under the head “Profit and gains of business or professions” arising fromtaxable securities transactions. As such, no deduction in respect of amount paid on account of securitiestransaction tax will be allowed in computing the income chargeable to tax as capital gains.
5. Under section 48 of the Act, if the company’s shares are sold after being held for not less than twelve months,the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long term capital gainsand the gains shall be calculated by deducting from the gross consideration, the indexed cost of acquisition.
6. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-termcapital gains (incases not covered under section 10(38) of the Act) arising on the transfer of investment inshares will be exempt from capital gains tax if the capital gain are invested in certain notified bonds within aperiod of 6 months after the date of such transfer for a period of at least 3 years. However, if the assesseetransfers or converts the notified bonds into money with in a period of three years from the date of their acquisition,
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the amount of capital gains exempted earlier would become chargeable to tax as long-term capital gains in theyear in which the bonds are transferred or converted into money.
7. Under section 54ED of the Act, and subject to the conditions and to the extent specified therein, long-term capitalgains (in cases not covered under section 10(38) of the Act) on the transfer of listed shares of the Company will beexempt from capital gains tax if the capital gains are invested in shares forming part of an eligible public issue ofan Indian Company within a period of six months after the date of such transfer and such shares are held for aperiod of at least one year. Eligible public issue means issue of equity shares which satisfies the following conditions,namely -
(a) issue is made by a public company formed and registered in India;
(b) shares forming part of the issue are offered for subscription to the public.
There is a legal uncertainty over whether the benefit under this section can be extended to shares formingpart of the offer for sale by the selling shareholders.
8. Under section 54F of the Act, long-term capital gains (in cases not covered under section 10(38) of the Act)arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the Company will be exemptfrom capital gain tax subject to certain conditions, if the net consideration from such shares are used for purchasesof residential house property within a period of one year before and two years after the date on which thetransfer took place or for construction of residential house property within a period of three years after the dateof transfer.
9. Under section 112 of the Act and other relevant provisions of the Act, long-term capital gains, (i.e., if shares areheld for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising ontransfer of shares in the Company shall be taxed at a rate of 20% (plus applicable surcharges & cess) afterindexation as provided in the second proviso to section 48.
The tax payable in respect of any income arising from the transfer of a long term capital assets being listedsecurities, exceeds 10% of the amount of capital gain before giving effect to the provisions of Section 48 (i.e.,indexation provisions), then such excess shall be ignored for computing capital gain tax.
10. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if theshares are held for a period not exceeding 12 months), arising on transfer of shares listed on a recognized stockexchange, shall be taxed at a rate of 10% (plus applicable surcharge and cess) in cases where securitiestransaction tax has been paid.
(C) Additional Benefits Available to Non-Resident Indians :
1. Under section 115-I of the Act, the non-resident Indian shareholder has an option to be governed by the provisionsof Chapter XIIA of the Income Tax Act, 1961 viz. “Special Provisions Relating to Certain Incomes of Non-Residents” which are as follows :
a. Under section 115E of the Act, where shares in the company are acquired or subscribed to in convertibleForeign Exchange by a Non-Resident Indian, capital gains arising to the non-resident on transfer of sharesheld for a period exceeding, 12 months shall (in cases not covered under section 10(38) of the Act) beconcessionally taxed at the flat rate of 10% (plus applicable surcharge and cess) (within indexation benefitbut without protection against foreign exchange fluctuation).
b. Under provisions of section 115F of the Act, long-term capital gains (in cases not covered under section10(38) of the Act) arising to a non-resident Indian from the transfer of shares of the company subscribed toin convertible Foreign Exchange shall be exempt from Income tax, if the net consideration is reinvested inspecified assets within six months of the date of transfer. If only part of the net consideration is so reinvested,the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to taxsubsequently, if the specified assets are transferred or converted into money within three years from thedate of their acquisition.
c. Under provisions of section 115G of the Act, Non-Resident Indians are not required to file a return ofincome under section 139(1) of the Act, if their only income is income from forex asset investments or long-term capital gains in respect of those assets or both, provided tax has been deducted at source from suchincome as per the provisions of Chapter XVII-B of the Act.
d. Under section 115H of the Act, where the Non-Resident Indian becomes assessable as a resident in India,he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year
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under section 139 of the Act to the effect that the provisions of the Chapter XIIA shall continue to apply tohim in relation to such investment income derived from the specified assets for that year and subsequentassessment years until such assets are converted into money.
2. Provisions of the Act vis-à-vis provisions of the tax treaty: In terms of Section 90(2) of the Act, the provisions ofthe Act would prevail over the provisions of the tax treaty to the extent they are more beneficial to non-resident.
Mutual Funds
In terms of section 10(23D) of the Act, all Mutual Funds set up by Public Sector Banks or Public Financial Institutionsor Mutual Funds registered under the Securities and Exchange Board of India Act/regulation there under or MutualFunds authorized by the Reserve Bank of India, subject to the conditions specified, are eligible for exemption fromincome tax on all their income, including income from investment in the shares of the company.
Benefits to Shareholders of the Company under the Wealth Tax Act, 1957
Shares of company held by the shareholder will not be treated as an asset within the meaning of Section 2(ea) ofWealth Tax Act, 1957. Hence shares are not liable to Wealth Tax.
Benefits to Shareholders of the Company under the Gift Tax Act, 1958.
Gift made after 1st October 1998 is not liable for any gift tax, and hence, gift of shares of the company would not beliable for any gift tax.
Note:
1. All the above benefits are as per the current tax law as amended by the Finance Act, 2005.
2. The stated benefits will be available only to the sole/first named holder in case the shares are held by jointholders.
3. In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subjectto any benefits available under the Double Taxation Avoidance Agreements, if any, between India and theCountry in which the non-resident has fiscal domicile.
4. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisorwith respect to specific tax consequences of his/her participation in the scheme.
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II. ABOUT THE ISSUER COMPANY
1. INDUSTRY OVERVIEW
This section includes statistical data regarding the paper Industry. This data has been obtained from various industrypublications, reports and other sources that the Company and the Lead Manager believe to be reliable. Neither theCompany nor the Lead Manager has independently verified such data.
Global Scenario
The development of paper industry and paper consumption levels are related to the GDP growth and literacy levels.The industry is highly diverse, technical and capital intensive. Further, norms relating to environmental pollution suchas in chlorine free operations and tighter effluent treatment/discharge parameters etc have restricted rapid expansionof paper industry’s capacity. Consumption of paper in Asia and Africa has been witnessing strong growth, whileEurope, Latin America and Australia remained flat and North America saw a decline in consumption. Comparativelythis shows an increase in the share of consumption in the Asian region.
(Source: CRIS-INFAC Annual Paper Review dated July 2005, Indian Industry Monthly Review by CMIE, December2005)
In the writing and printing segment, global demand is expected to grow by around 4-5% CAGR over the next fiveyears due to higher advertisement expenditure and strong economic growth. Capacity growth is estimated to be justaround 3%. Capacity utilization was estimated to be around 94% during 2004-05. Capacity utilization may dropgradually to 90% by 2007 largely as fresh capacities of 4mn tonnes announced in China comes on stream over thenext two years.
Emerging markets are expected to lead the growth pick-up with China’s demand for paper & board set to doublebetween 2000-15E (per capita consumption rising from 29.8kg to 51.4kg), with Russia following the same patternand Brazil expanding 30% over the period. In India too, with rising literacy levels (the 15-35 age group is at 75%versus only 65% for entire population) and favorable demographics (about 45% of population is in 0-19 age group)per capita consumption is set to accelerate from present anemic levels of 5 kg.
(Source: I-Sec Research Report on JK Paper dated December 23, 2004 Indian Industry Monthly Review by CMIE,December 2005)
Indian scenario
Paper demand has grown 9% during 2004-05 as compared to 2003-04. In India the current year 2005-06 uptoSeptember 2005 saw investments for additional capacities being made to cater to the increasing demand. Thegovernment is giving a major push to elementary education under the National Policy Education 1992 and has morethan doubled the budgetary outlay in 2005-06 as compared to 2004-05. The government has earmarked more thanRs. 25,000 crores for education and related activities in the budget proposals for 2006-07. India has witnessedphenomenal development in the field of education– both in quantitative and qualitative terms, since independence.However, the national goals of universal elementary education and total eradication of illiteracy remain elusive. Indiahad spent 3.49% of its GDP on education during 2004-05 but still a large percentage of the adult population is stillilliterate. India Plans to improve to literacy levels to 75% by 2007 from the present 65%. (Economic survey 2005-2006).
The Indian paper industry is highly fragmented with nearly 1200 mills producing about 5.5mtpa. Only about 15 millshave 60,000 tons or larger annual capacities. India’s per capita paper consumption was around 6 kgs which comparespoorly even when compared to countries such as Philippines (11kg), Indonesia (22kg) etc and is far behind theASEAN average per capita consumption of 29kgs and global average of 54kgs.
Government has completely delicensed the paper industry with effect from 17th July, 1997. The entrepreneurs arenow required to file an Industrial Entrepreneur Memorandum with the Secretariat for Industrial Assistance for settingup a new paper mill or substantial expansion of the existing mill in permissible locations.
The industry is categorized as priority sector for the purpose of foreign collaboration. Foreign equity participation up-to 100% is allowed under the automatic approval guidelines. Several fiscal incentives have also been provided to thepaper industry, particularly to units using non-conventional raw material.
In India, paper demand has been increasing by about 5% compounded annual growth rate (CAGR) in the past fiveyears. Paper demand is inextricably linked to economic growth, industrial production, advertisement expenditure,expenditure on education etc. While industrial paper demand is driven by industrial output and packaging industry
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SHREE BHAWANI PAPER MILLS LIMITED
growth etc, printing and writing paper demand is determined by public spending on education, expenditure on publicityand general literacy levels. We expect Indian paper demand to continue to grow at around 5.5-6% in the coming years.
Indian demand-supply scenario
(´000 tonnes)
Source: Bank Of Baroda Risk Management research reports
While, demand has grown at the rate of 6%, supply has grown at a lower rate of 3.6% which has encouraged a gradualimprovement in capacity utilizations. Stringent pollution control norms will act as a deterrent to smaller players fromadding capacities as it would require significant investment to upgrade the existing facility to meet these norms. Thoughthere is no law in force currently, we expect in the next few years the Indian paper industry will be compelled to eliminatethe use of chlorine for bleaching. At an average estimated investment of Rs. 11,000-12,000 per ton of output, this wouldrequire an investment of approx Rs. 450,000 Lacs by the industry for adopting Elementary Chlorine Free technology.Limited availability of wood is also expected to prevent any rapid expansion of capacities.
Current Raw material scenario
There are three kinds of raw materials used in India to manufacture paper – wood/bamboo and wood pulp, agri-residues like bagasse and waste paper. Pulp demand growth is expected to be higher than capacity expansion andtherefore pulp prices are not likely to decline in the interim period. However with new capacities already announcedin South America, China and Europe, pulp prices may weaken in the near term. Hard wood/bamboo are likely towitness a lower price increase, especially from non Government sources such as co-operative farms. Paper companiesusing agricultural wastes such as bagasse could be affected due to lower sugar cane production in the Country.Managing raw material costs, therefore, would be a key factor in determining the profitability of paper companies.
The Price Factor
Paper prices are expected to increase in the US, driven by a revival in the economy. In Asia, demand is mainlyfuelled by China. Domestic demand for paper, too, is expected to continue. With sustained demand domestic paperprices are expected to remain stable. Given the kind of demand growth, paper companies will gain by growth involumes.
Source: Business Standard 14 February 2005.
2. Business of the Company
The Company manufactures writing, printing and packaging paper including bleached and colored varieties. TheCompany’s products are used by book publishers, copy manufacturers, printers of hand bills. They also find use inwrapping and general packaging.
The Company has an integrated pulp and paper mill on a plot of land measuring 40 acres at Rae Bareily on Lucknow-Allahabad Highway. The plant is located within a radius of 125 km from Kanpur, Lucknow and Allahabad, three majorcities in Uttar Pradesh. The central location of the project facilitates the procurement of raw material and also helpsin marketing paper throughout Uttar Pradesh.
The commercial production of Company started in 1983 with an installed capacity of 9400 MT per annum. Over theyears through de-bottlenecking and modernization it has reached an installed capacity of 21000 MT per annum andis currently operating at about 95% capacity utilization. The Company is self sufficient in power with 3 MW TurboGenerator set and 5 DG Sets of 1000 KVA (4 MW) as standby arrangement.
Shree Bhawani Paper Mills Ltd. (SBPML or the Company) was incorporated on 6th July, 1979 as a Public LimitedCompany and obtained the certificate of commencement of business on 9th August, 1979. The Company has set up apaper mill at Rae Bareily, in the state of Uttar Pradesh with an installed capacity of 9400 MTPA of printing, writing andwrapping papers. Presently, the equity shares of Company are listed on the Bombay Stock Exchange Ltd., Mumbai.The Company commenced commercial production in April, 1983 and gradually increased its installed capacity at21000 MTPA. The Company has two Paper machines namely MG (Machine Glaze) Yankee machine & MF (MachineFinish) Fourdriner machine.
In the year 1981-82, the Company established the project with the total project outlay of Rs. 600 Lacs with Rs. 400 Lacsfunded in the form of term loan. For the balance Rs. 200 Lacs, the Company came out with their first public issue withthe issue size of Rs. 116 Lacs and balance was brought in by promoters and associates amounting to Rs. 84 Lacs.
During the period 1983-86, the operations of the Company were not profitable due to recession in paper industry, poorpower supply in Uttar Pradesh (U.P.) and other initial teething troubles . Consequently, the Company became potentiallysick in the year, 1986. However there have been no cash losses since 1987. In the financial years, 1989-90 and 1990-91, modification in MF paper machine was undertaken through internal accruals enabling substantial increase inproduction & installation of new Fluidized Bed Combustion (FBC) husk fired boiler. In the year 1992-1993, the Companycame out with Rights Issue of Rs. 126 Lacs to meet working capital and capital expenditure requirement.
In the year 1995-96, Company successfully commissioned Diesel Generating sets (4 Nos. x 1000 KVA) for its entirerequirement of power & UPSEB power supply was surrendered w.e.f. 1st April 1996. In 1996-97, Company undertooka capital expenditure scheme of Rs. 4.23 Crores for up-gradation of Pulp Mill, installation of new FBC husk fired boilerand improvement in quality of paper. In November, 2001, a 3 MW Cogeneration project was successfully commissioned,about 4 months ahead of schedule, resulting in significant reduction in power cost. Over the years, Company has beenmaking efforts to reduce its power consumption. From 1474 units/MT of paper in 1991-92, it has gone down to 1137units/MT of paper in 2004-05, a decrease of 23%. Similarly production capacity has increased from 9400 MTPA in 1983to 21000 MTPA currently. In 2004-05 production of 19973 MT was achieved, i.e., a capacity utilization of 95.1%. Overthe years, the Company took Term Loans of about Rs.22.87 crores out of which only Rs. 6.15 crores is outstanding ason 31/03/2005.
Main Object
The main object of the Company is to carry on the following business activities:
• Business of Manufacture, Buyers, sellers importers and exporters of and dealers in all kinds and classes of paperboard, cardboard and pulp in all branches, including mechanical or chemical pulp rayon, pulp wood, straw wood,bamboo pulp, fibrous pulp of all descriptions and calloused pulp;
• All other varieties whatsoever including without any limitation, and writing paper, printing paper, absorbent paper,newsprint paper, wrapping paper, tissue paper, over paper, blotting paper, filter paper, art paper, bank of bondpaper manifold paper antique paper, ivory-finish paper coated paper, badami, brown of buff paper, bible paper,cartridge paper, clothing paper, azure-laid and wove paper, cream laid and wove paper, drawing paper, Kraftpaper, manila paper, envelope paper tracing paper, sack paper, crepe paper, vellum paper, water proof paper,carbon paper, sensitized paper, chemically treated paper, litmus paper photographic paper, glossy paper, emerypaper;
• Soda pulp, mechanical pulp, sulphite pulp, sulphate pulp, semi chemical Pulp and
• All kinds of articles in the manufacture make and deal in all kinds of materials soda that can be produced andrecovered by products during the process of production of pulp paper, board and other materials manufactured,processed or a dealt in and also to deal in or manufacture and other articles or things or a charter similar or theforegoing or any of them or connected therewith.
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Location
The Company has an integrated pulp and paper mills on a plot of land measuring 40 acres at Rae Bareily onLucknow-Allahabad Highway. The plant is located within a radius of 125 km from Kanpur, Lucknow and Allahabad,three major cities in Uttar Pradesh. The central location of the project facilitates the procurement of raw material andalso helps in marketing paper throughout Uttar Pradesh.
Manufacturing Process:
In an integrated paper mill, papermaking can be broadly classified into two major steps viz. pulping and papermaking.
Pulping
Paper is made from cellulose fiber and pulping is done to extract the cellulose fibers from plants by suitable means.There are various pulping processes ranging from mechanical, thermo mechanical, chemi - thermo mechanical tochemical pulping. Majority of the pulp production are by the chemical processes & there are acidic pulping & alkalinepulping processes. Soda pulping is one of the most widely used alkaline processes for agricultural residues formaking high strength & cultural grades of paper. The Company currently uses this process.
Paper Making
Stock preparation includes treatment of the pulp, addition of various additives, chemicals & dyes to impart differentproperties. Paper is finally made in rolls on the paper machine. Sheeting of reels is done on a cutter and reel ordersare executed on slitter rewinder. Rigid quality controls are exercised to maintain various properties like breakinglength, tear factor, burst factor, cobb value, porosity and brightness etc. as per the required specifications for specificvarieties.
Raw Material
The plant is mainly based on indigenous raw materials and is not dependent upon imported pulp or waste paper orother raw material. The main raw materials used in the manufacturing process are bagasse, paddy straw, wheatstraw, waste hemp, cotton waste and chemicals.
The above-mentioned raw materials are available in and around Rae Bareily. For example bagasse from sugar millsin the Terai, Sultanpur and Rae Bareily areas, wheat straw from nearby areas of Rae Bareily and Lucknow, , wastehemp from Varanasi and cotton waste from Kanpur. The Company also uses cotton linter and procures it fromPunjab and Haryana. Caustic soda and liquid chlorine are the major chemicals used and are procured mainly fromM/s Kanoria Chemicals and M/S Bihar Caustic & Chemicals. Other chemicals are procured from local sources.
Water
The total consumption of water in the factory is 250 M3/hr which is met by shallow tube wells of 150 feet depth. Thereare five submersible pumps of 5" delivery and five submersible pumps of 3" delivery, spread over the area of thefactory.
Power
Till 1995, the Company was totally dependent on UPSEB for its power supply. Hike in tariff and irregular powersupply used to affect the production of the Company. Power was supplied to the factory by the adjoining substationof UPSEB at 11 KV. This voltage was stepped down to 440 V at the Company substation by three transformers of1250 KVA each. The sanctioned load for the plant was 3000 KVA against which the maximum demand was normally2250 KVA. Due to the problem of irregular power supply and high tariff, the Company, in the year 1995-96, successfullycommissioned Diesel Generating sets for its entire requirement of power & UPSEB power supply was surrenderedw.e.f. 1st April 1996. In November, 2001, a 3 MW co-generation project was successfully commissioned, about fourmonths ahead of schedule, resulting in significant reduction in power cost. This cogeneration power plant usespaddy husk as fuel for steam generation, which in turn is used in steam turbine for power generation. Over the years,Company has been making efforts to reduce its power consumption. From 1474 units/MT of paper in 1991-92, it hasgone down to 1137 units/MT of paper in 2004-05, a decrease of 23%.
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SHREE BHAWANI PAPER MILLS LIMITED
The details of Power consumption during the last three financial years are given below :
Fuel
Paddy Husk is the main fuel used by the Company and it offers high economy vis-à-vis coal, and is available locallyin abundance. A new Husk Fired High Pressure, high temperature FBC Boiler was commissioned for steam requirementof Turbo Generator Set. Also, it has helped SBPML in further containing the air pollution problem as it has electrostaticprecipitators.
The company has also taken a conscious decision to reduce the use of fossil fuels and to make use of locally availablebiomass such as rice husk as fuel for generation of power.
The company has also retained M/s. Ernst & Young Pvt. Ltd, to act as Advisors for Climate Change Advisory Servicesfor getting the potential benefits of Green House Gases (GHG) Abatement under the Clean Development Mechanism(CDM) of the Kyoto Protocol.
Effluent Treatment & Pollution Control processes
The plant has adequate capacity for effluent treatment. The Company has obtained the NOC from Uttar PradeshPollution Control Board (UPPCB) and has the consent that is valid till 31st December 2006 for both water and air.
Air Pollution: For flue gas emanating from Boiler, the Company has installed Electro Static Precipitator (ESP).
Water Pollution: The Effluent Treatment Plant Consists of the following :-
1. Pucca Anaerobic Lagoon
2. Pucca Aerobic Lagoon
3. Equalization Tank
4. Primary Clarifier
5. Secondary Clarifier
6. Polishing Tank
7. Reaction Tank
8. Sludge Drying Bed Pits
9. Pump Sumps
Effluent Treatment Process
Black liquor of Brown stock washer is being collected into a M.S Rectangular shape tank near washing plant. Fromthis tank the black liquor is being transferred to a sump tank (near E.T.P) through a drain by gravity. From the sump,the black liquor is being pumped to the diagonal end into the anaerobic lagoon. The overflow of anaerobic lagoon isbeing transferred to the equalization tank.
The backwater of washing plant and paper machine are being transferred to equalization tank through a separatedrain. The black liquor & other backwaters collected at equalization tank is being pumped to reaction tank wheredosing of milk of lime, Alum solution and de-foamer are being done. After proper agitation through an agitator theeffluent is being transferred to Primary clarifier. The pH norm & sedimentation are being maintained in the primaryclarifier. At the outlet of primary clarifier, the dozing of urea and DAP are being done. The effluent after dozing withnutrients transferred to aerobic lagoon. In the Aerobic lagoon, three numbers of aerators (50 HP each) are beingoperated. The Aerators are of portable floated type. After proper aeration, the effluent transferred to secondaryclarifier by overflow method. After proper sedimentation of sludge, the effluent overflows to its launder and thentransferred to polishing tank. After retaining in the polishing tank, the effluent discharges to the drain through ‘V’Notch (90º)
The sludge of primary clarifier transferred to the sludge of secondary clarifier also transferred to the sludge beds. Theactivated sludge of secondary clarifier is being re-circulated to the aerobic lagoon.
Operational Efficiency
Over the past years, the Company has taken several measures to improve its operational efficiency, reduce its costof production and improve the quality & marketability of the product. The same is highlighted below along with theCompany’s relative strength.
• The Chlorine consumption has reduced over the period and now it is only 8.5% of the virgin pulp as comparedto industry norm of about 12-13% and above.
• The Rosin consumption is only 0.8% as against industry norms of 1%.
• The power consumption , which is normally 25% of the total cost is only about 14% of the total cost (excludinginterest) as compared to other paper units of the same size. With the installation of imported Vacuum Pumps,Stock Pumps, Imported Centri-cleaner System and Disc Refiners in place of old equipments, efficiency hasincreased resulting in reduction in Power consumption. In 2001-02, the Company commissioned Turbo GeneratorPower Plant within the approved outlay and about four months earlier than the scheduled time frame.
Due to better efficiencies and lower chemical consumption fibre strength has improved. This has enabled the Companyto reduce the wood pulp consumption from 293 (MT) in 1998-99 to 14 (MT) in 2004-05.Despite increase in the pricesof Wire & Felt, Company has been able to reduce cost under this head from Rs. 278/- per ton of paper in 1998-99 toRs 235/- per ton in 2004-05.
Capacity utilization
During the year 2004-2005, the Company achieved a capacity utilization of 95.1%. The production of MG and MFvarieties of paper during the year 2004-05 is 19973 MT as compared 19611 MT during the previous year. It couldoccur because of the benefits of modification in 3rd press section of MF machine undertaken in past year and thefavorable product mix. The Company procured large orders for MF paper from the Governments departments also.Details of capacity utilization during the last three years are tabulated below :
Range of Company’s products
Amongst the Paper Mills having capacity up to 60 Tons per day in the Country SBPML has the widest product range.The production & sales for the year 2004-05 of the various varieties produced by the Company are as follows :-
The production process for all the products is more or less similar except for the dosage of dyes and variation inmachine speed.
The Company has a diversified product-mix. It produces high value added 25 gsm MG Poster & Tissue Paper. Its MFColor Printing & Duplicating Paper is well accepted in the market and even fetches a premium.
The Company has a wide network of dealers covering about 25 cities in North and East India. Presently, about 50% ofthe sales are made in Uttar Pradesh followed by Bihar, Calcutta and Delhi. Sales are also affected in cities like Jaipur,Indore, Mumbai and Ahmedabad. The Company has a wide product mix and its quality is well established. The GeneralManager - Sales manages sales on daily basis under the guidance of the Joint Managing Director. They are alsoassisted by a number of sales officers and sales assistants
SWOT ANALYSIS
Strengths
• The main strength of the Company lies in its ability to sustain in the off season due to its diversified product mix.Through innovation & continuous upgradation in efficiency and improvement in the health of the plant, theCompany has been able to increase its production substantially over the years.
• In January 1999, a new “Suction Press Roll Shell” with Blind Drilling was commissioned successfully. Due to this,“shadow marking” earlier appearing in the paper being manufactured on MF Machine has been completely removed.Formation and appearance of the paper has improved to a large extent, thereby increasing the marketability of theproduct. The Company has been able to achieve about 9800 tons of Reel Production during 2004 -2005 ascompared to 5027 tons during 1998-99, thus shifting its product –mix as per market demand.
• The Company has a diversified product-mix. It produces high value added 25 gsm MG Poster & Tissue Paper. ItsMF Color Printing & Ledger Paper is well accepted in the market.
• The bad debts have been very minimal over the last ten years, due to high focus on recovery and qualitative creditpolicy.
• Finished goods inventory levels which SBPML carry in their Godown have remained under control and as on31.03.05 it was less than two days of production. In 2004-05, the Company achieved highest production (95.10%of capacity utilization) mainly on account of benefits accruing from modification in MF paper machine.
• Reduction in cost of production since, being an existing unit, incremental cost of overheads would be quite lesson the additional increase in production capacity.
• The Company has the flexibility to use wheat and paddy straw as alternate raw materials. Hence , if there is anyshortage of bagasse SBPML would not face the problem of raw material.
• The unit is self sufficient in power due to its biomass based cogeneration power plant which has given it competitiveedge over other units in terms of power cost.
Financial:
• Credit worthiness of the Company has remained high not only with Financial Institution and Banks, but also withthe suppliers and there have been no defaults. Hence, SBPML is able to procure their inputs at competitiverates.
• Even during lean periods, the Company has been able to maintain its liquidity and did not face any problem inprocurement, especially seasonal raw materials & fuel namely, straw, bagasse, cotton, paddy husk, etc.
Human Resources
• The Company has had perfectly harmonious labor relationships and has been able to retain its workforce andeven at officers and managerial levels there is little employee turnover.
• Labor relations are quite cordial with no disruption in the company’s working since 1987.
Weakness
• The availability of chief raw material namely, bagasse, wheat straw, paddy straw and paddy husk fuel aremainly seasonal and dependent upon the crop.
• The Company is selling its products mainly in Uttar Pradesh and Delhi region, only small quantity is sold in west& no reach in south.
• The Company has yet to build dealership network for enhanced capacity.
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SHREE BHAWANI PAPER MILLS LIMITED
Opportunities
• The Company is an early entrant in expanding capacities, so it is likely to gain market share, if proper effortsmade.
• In India, the per capita consumption of paper is about 6 Kg against the ASEAN average of 29 Kg and worldaverage of 54 Kg. Hence, there is a potential demand for paper.
• Recently the Company has received ISI Certification, which will further provide edge in Government Supplies.
• There has been steep increase in the allocation of funds to the educational sector in the recent Union Budget inthe form of education cess which will increase consumption of paper.
Threats
• Any delay in implementation schedule of the project could lead to time and cost overrun.
• Any reduction in customs duty of paper will affect the domestic paper industry.
• The Company faces competition from cheap imports from Russia, Indonesia, and South East European Countries.
• Any other unfavorable Government policies.
Collaborators
The Company has not entered into any collaboration.
The complete erection & commissioning shall be carried out by in-house engineers in consultation with equipmentsuppliers. One of the Directors, Shri K.A. Pai who is a renowned Pulp & Paper Technologist, will be actively involvedin addition to the assistance of Company’s Managing Director, who is a B. Tech in Mechanical Engineering from IIT,Kanpur.
4. Management and Organization
Shri Sudhir Tandon, Managing Director and Shri Girish Tandon, Joint Managing Director look after the day-to-daymanagement of the Company under the supervision and control of the Board of Directors.
These executives have been in office as Managing Director and Joint Managing Director respectively since 2ndOctober, 1979 thus completing a period of more than 25 years. During their tenure, the Company has madeconsiderable progress and has earned a good name and reputation in business.
The Company’s Board comprises of the following experts from paper industry to look after the Company’s activities:
� Shri. K. A. Pai is an active member of Indian Pulp & Paper Technical Association apart from being advisor tovarious paper mills using rice, straw, bagasse, Hessian – the non-conventional raw materials.
� Shri J.S. Matharu retired as an Industrial Adviser to the Ministry of Industries. He has a long association with thepulp and paper industry in this Country.
The shareholders of the Company passed a resolution at its Extra ordinary General Meeting held on 6th August, 2005under the provisions of Section 293(1) (d) of the Companies Act, 1956 according their consent to the Board of Directorsto borrow from time to time any sum or sums of money so that the total amounts of monies so borrowed at any timeshall not exceed the sum of Rs.100.00 Crore (Rupees One hundred Crore Only).
Details of Payment made to the Whole-Time Directors/ persons holding place of profit of the Company:
The Whole time Directors viz. Shri Sudhir Tandon as Managing Director and Shri Girish Tandon as Joint ManagingDirector are receiving remuneration by way of salary and perquisites from the Company and none of the Director isholding office or place of profit and is not being paid any remuneration towards the same except for payment of sittingfees. The details are as under:
Shri Sudhir Tandon and Shri Girish Tandon were appointed as Managing Director and Joint Managing Director of theCompany respectively for a period of five years with effect from 1st April, 2000 at a remuneration of Rs. 40,000/-(Rupees forty thousand only) per month in the scale of Rs. 40,000/- -5,000/- -60,000/- along with other benefits asapproved by the shareholders at the Annual General Meeting held on 29th September, 2000 and the term expired on31st March, 2005.
The Re-appointment of Shri Sudhir Tandon as Managing Director and Shri Girish Tandon as Joint Managing Director,for a further period of five years with effect from 1st April, 2005 has been approved by the Members of the Company atthe Annual General Meeting held on 24th June, 2005 on the following revised terms and conditions:
1. Salary: Rs. 70,000/- (Rupees seventy thousand only) per month with the authority to the Board of Directors toincrease it from time to time up to an amount not exceeding Rs. 1,50,000/- per month.
2. Commission: Commission @ 1% be paid in addition to the above salary and other perquisites calculated withreference to the net profits of the Company at the end of each financial year subject to overall ceiling stipulatedunder Section 198 & 309 of the Companies Act, 1956.
i) House Rent Allowance @ 50% of the Basic Salary per month.
ii) Medical Benefits for self and family: Reimbursement of the expenses actually incurred for self and family,subject to ceiling of one month’s salary in a year or three months salary in a block of three years.
iii) Fees not exceeding for two clubs/all commercial and industrial associates, membership of which is neededfor the purpose of the Company, provided that no life membership fee is paid.
iv) Personal Mediclaim/Accidental Insurance-Annual Premium for coverage of personal mediclaim and accidentalinsurance be paid by the Company and premium thereof not to exceed Rs. 25,000/- per annum.
v) Gratuity payable at the rate not exceeding half month’s salary for each completed year of service as per theCompany’s Rules.
vi) Encashment of leave at the end of the tenure as per the Rules of the Company.
vii) Provision of car for use of Company’s business and Telephone at residence will not be considered as perquisite.Personal long distant calls and use of car for private purpose to be borne by them.
viii) No sitting fee shall be paid for attending the Meeting of Board of Directors or Committee thereof.
ix) Any other benefits, facilities, allowance and expenses as may be allowed under Company’s rules/ schemes.
Corporate Governance :
The Company has complied with SEBI Guidelines in respect to Corporate Governance especially with respect to broadbasing its Board of Directors and setting up of necessary committees such as Audit Committee, Remuneration Committeeand Shareholders/ Investor Grievance Committee. The Code of Corporate Governance as prescribed under amendedClause 49 applicable with effect from 01.01.2006 of the Listing Agreement is applicable to the Company has been dulycomplied with.
Board of Directors :
The Board of Directors of the Company have an optimum combination of Executive and Non Executive Directors. TheNon Executive Directors constitute more than half of the total numbers of Directors and the number of independentDirectors is also more than half of the total strength. The Board of Directors comprises of 8 (Eight) Directors of which 6(Six) are Non-Executive Directors except for Mr. Sudhir Tandon and Mr. Girish Tandon who are Promoters and ExecutiveDirectors.
Audit Committee
The Audit Committee of the Company presently comprises of the following four non executive Directors :
Name of Director Designation
Shri J S Matharu Chairman – Non-executive
Prof. Sushil Khanna Non Executive-Member
Shri Badri Vishal Tandon Non Executive-Member
Shri C M Krishna Non Executive-Member
The Audit Committee has been mandated with the same terms of reference as specified in Clause 49 of the ListingAgreement with the Bombay Stock Exchange Ltd., Mumbai. The Committee reviews various areas of Audit and Accounts,All important financial statements such as periodical un-audited/audited results, operating statements are reviewed/approved by the committee before submission to the Board. It lays down internal audit schedules, reviews internal auditreports and follows up actions thereon.
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SHREE BHAWANI PAPER MILLS LIMITED
Brief terms of reference of the Audit Committee are as follows :
1. Overseeing the Company’s financial reporting processes and the disclosure of financial information to ensurethat the financial statements are correct, sufficient and credible.
2. Appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees.
3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
4. Reviewing, with the management, the annual financial statements before submission to the Board for approval,with particular reference to :
a. Matters required to be included in the Directors’ Responsibility Statement as part of the Directors’ Report interms of Clause (2AA) of Section 217 of the Companies Act, 1956.
b. Changes, if any, in accounting policies and practices and reasons for the same.
c. Major accounting entries involving estimates based on the exercise of judgment by management.
d. Significant adjustments made in the financial statements arising out of audit findings.
e. Compliance with listing and other legal requirements relating to financial statements.
f. Disclosure of any related party transactions.
g. Qualifications in the draft audit report.
5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.
6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal controlsystems.
7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department,staffing and seniority of the official heading the department, reporting structure coverage and frequency of internalaudit.
8. Discussion with internal auditors any significant findings and follow up thereon.
9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspectedfraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to theboard.
10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well aspost-audit discussion to ascertain any area of concern.
11. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders(in case of non payment of declared dividends) and creditors, if any.
12. To review the functioning of the Whistle Blower mechanism, in case the same is existing.
13. Carrying out any other function relating to internal control and review systems as referred by the Board from timeto time.
14. The Chairman of the Audit Committee attends the Annual General Meetings of the Company to provide anyclarification on matters relating to audit sought by the members of the Company.
15. The Audit Committee mandatory reviews the following information:
a. Management discussion and analysis of financial condition and results of operations;
b. Statement of significant related party transactions submitted by management;
c. Management letters/letters of internal control weaknesses issued by the statutory auditors;
d. Internal audit reports relating to internal control weaknesses; and
e. The appointment, removal and terms of remuneration of the Internal Auditor shall be subject to review bythe Audit Committee.
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SHREE BHAWANI PAPER MILLS LIMITED
REMUNERATION COMMITTEE
The Remuneration Committee of the Company presently comprises of three independent Directors. The compositionof the Remuneration Committee is given below :
Name of Director Designation
Shri J S Matharu Chairman
Shri K A Pai Non Executive-Member
Prof. Sushil Khanna Non Executive-Member
The broad terms of reference of the Committee are to determine and recommend to the Board, remuneration/compensation payable to Managing and Joint Managing Directors within the limits laid down under the CompaniesAct, 1956 subject to approval of Members, in General Meeting, including pension etc,, appraisal of performance ofManaging and Joint Managing Directors and advise on the annual commissions/compensation, if any, payable tothem.
At present, no remuneration is paid to non-Executive Directors except sitting fees for attending meetings of the Boardor Committee(s) thereof.
DETAILS OF REMUNERATION PAID TO EXECUTIVE DIRECTORS
The aggregate value of salary and perquisites paid during the period up to 31.12.2005 to Shri Sudhir Tandon, ManagingDirector was Rs. 9,63,356/- and Shri Girish Tandon, Joint Managing Director Rs. 10,04,891/-.
SITTING FEE PAID TO NON EXECUTIVE DIRECTORS
Remuneration by way of sitting fee for attending Meetings of the Board and/or Committees thereof during the financialperiod up to 31.12.2005 is given below :
Sr. No Name of Director Amount (Rs.)
1. Shri Badri Vishal Tandon 35,000
2. Shri J. S. Matharu 24,500
3. Shri C. M. Krishna 21,000
4. Shri Om Nath Kapoor 14,000
5. Shri K A Pai 10,500
6. Prof. Sushil Khanna 24,500
SHAREHOLDERS/INVESTORS’ GRIEVANCE COMMITTEE
The Investor’s Grievance Committee of the Company comprises of following three Directors :
Name of Director Designation
Shri Badri Vishal Tandon Chairman
Shri Sudhir Tandon Member
Shri Girish Tandon Member
The Committee monitors the performance of the share transfer work and recommends measures to improve investorrelations and services. The Committee looks into the redressel of investor’s complaints relating to share transfer, nonreceipt of Annual Report and dividend payment, issue of duplicate shares, transmission of shares and other alliedmatters. The Company Secretary and Compliance Officer and M/s. Skyline Financial Services Pvt. Ltd., Registrarsand Share Transfer Agents of the Company are assigned the tasks relating to the processes of share transfer andtransmission, etc. They meet regularly to expedite all the matters relating to transfer of shares etc.
Outstanding complaints as on 17th March 2006 - NIL
The number of share transfers pending as on 17th March 2006 - NIL
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SHREE BHAWANI PAPER MILLS LIMITED
Details of Guarantees by Directors:
All the term loans and working capital facilities of SBPML are guaranteed by the Managing Director & Joint ManagingDirector of the Company.
Changes in the Board of Directors in the last three years:
There are no Changes in the Board of Directors during the last three years.
There are 443 employees (including workers) employed in the company on payroll and 190 are employed by contractorswho have taken up various assignments. The labour is available locally and there is no scarcity of labour in theregion.
Details of non-salary related payment or benefit to officers :
• Residential accommodation to some officers have been provided in the housing colony situated adjacent toMills.
• Subsidized transportation facility from residential colony to school for staff/officer’s children.
• Reimbursement of medical expenses, telephone expenses, vehicle fuel as per Company’s norms.
• Free electricity upto certain units as per Company’s norms to officers in residential colony.
However, TDS is deducted on above perquisites as per Income Tax Rules.
Notes:
• None of Key Managerial Personnel is related to any of the Director(s).
• No Director or Member of Senior Management has been selected pursuant to any arrangement/understandingwith customers/suppliers or any person referred to under the Heads “The Board of Directors of the Company”and “Key Managerial Personnel”.
• All the above-mentioned personnel are in the regular employment of the Company.
• There is no understanding with the major shareholders, customers, suppliers or any other person pursuant towhich any of the above mentioned personnel have been recruited.
• There is no change in the key managerial personnel in the last one year prior to the date of filing the Letter of Offer.
The Breakup of the total Manpower requirement of the Company for the expansion project is as under :
The Company shall employ unskilled labor on contractual basis. The skilled and semi skilled labor is availablelocally. The Company has to appoint only 15 Nos. of Shift In charges for which no significant cost is envisaged assuch.
Changes in Key Managerial Personnel in the last three years
There have been no changes in the Key Managerial Personnel in the last three years.
5. PROMOTERS AND THEIR BACK GROUND
Shri Sudhir Tandon, Shri Girish Tandon and Pradeshiya Industrial Corporation of Uttar Pradesh promoted the Companyin the assisted sector. Both Shri Sudhir Tandon and Shri Girish Tandon belong to a very renowned family of Allahabad,which has been involved in the business of textile trading and banking. The family was also associated with theerstwhile Allahabad Bank Ltd. since its inception from 1865 to 1971 as treasurers of the Bank.
Shri. Sudhir Tandon aged about 54 years is a B.Tech in Mechanical Engineering from IIT Kanpur and MBA fromMcMaster University, Canada. He has worked with erstwhile ICICI Ltd. for about 3 years and then promoted ShreeBhawani Paper Mills Limited in 1979 . He is mainly responsible for Production & Procurements.
Permanent Account Number, Bank Account Number and Passport Number of Shri. Sudhir Tandon has been intimatedto the Bombay Stock Exchange Ltd, Mumbai. The details are as under :-
Shri Girish Tandon: is MBA from Allahabad University. He started his career in publication business and promotedShree Bhawani Paper Mills Limited in 1979, Mr. Girish Tandon is mainly responsible for Marketing & Finance.
Permanent Account Number, Bank Account Number and Passport Number of Shri Girish Tandon has been intimatedto the Bombay Stock Exchange Ltd, Mumbai. The details are as under: -
Common Pursuits
There is no common pursuit between the company and Group/Associate Companies.
Interest of Promoters/Directors
All the Promoters/Directors may be deemed to be interested to the extent of the sitting fees and other remunerationfor the services rendered and the reimbursement of expenses, if any, payable to them under the articles. The Directorsmay also be deemed to be interested to the extent of:
• The shares, if any, held by them or by the relatives or by firms or companies of which any of them is a partnerand a Director/ Member, as the case may be.
• The shares if any, out of the present Offer that may be subscribed for and allotted to them or their relatives orany Company in which they are Directors / members or firms in which they are partners.
Related Party Disclosure as per Accounting Standard 18 :
List of related parties and relationships :
Key Management Personnel
1. Shri Sudhir Tandon - Managing Director
2. Shri Girish Tandon - Joint Managing Director
Relative of Key Management Personnel
The following are the relatives of Key Managerial Persons. Shri Hari Mohan Das Tandon, Smt. Sulochani DeviTandon, Shri Badri Vishal Tandon, Shri Satish Tandon, Smt. Savita Seth, Smt. Indu Mehrotra, Smt. Shail Tandon,Smt. Neera Tandon, Smt. Surabhi Mehra, Shri Manas Tandon, Smt. Paridhi Tandon, Shri Akshat Tandon
Transactions with Related Parties :
Note: The Company is accepting deposits from the public and the shareholders including Promoter shareholders onthe same terms and conditions and as such the details of such deposits or the interest paid thereon have not beendisclosed separately.
The details of Foreign Exchange Earnings and Outgo is as under :
The Company is exporting paper to Nepal in Rupee terms only.
7. CURRENCY OF PRESENTATION
In this Letter of Offer, all references to “Rs.” refer to Rupees, the lawful currency of India. References to thesingular also refer to the plural and one gender also refers to any other gender wherever applicable.
8. DIVIDEND POLICY
The declaration and payment of dividend is recommended by the Board of Directors and approved by theshareholders of the Company, at their discretion, and depend on a number of factors, including but not limited toearnings, capital requirements and overall financial position of the Company. For the Financial year 2004-05, theCompany has paid a dividend @10% to the equity shareholders amounting to Rs. 41,06,000/-.
PUBLIC DEPOSIT UNDER SECTION 58 - A
During the financial year 2004-05, the Company has accepted fixed deposits from public and shareholders and as on31st March, 2005, such fixed deposits from the public and shareholders aggregated to Rs. 322.01 Lacs. There havebeen no unpaid/unclaimed/ overdue deposits as on date.
The details of Public Deposits accepted by the Company during the last 3 financial year is as under :
AUDITORS’ REPORTThe Board of DirectorsShree Bhawani Paper Mills Limited33, Dayanand Marg,Allahabad 211 002
Dear Sirs,
1. We have examined and found correct the annexed financial information of Shree Bhawani Paper Mills Limitedfor the financial years ended 31st March, 2001, 31st March, 2002, 31st March, 2003, 31st March, 2004, audited byanother firm of Chartered Accountants, and for the year ended 31st March, 2005, and further for a period of ninemonths ended on 31st December, 2005 being the last date to which the accounts of the Company have beenmade up and audited by us.
2. The said financial information has been drawn up by the Company in accordance with the requirements ofparagraph B (1) of Part II of Schedule II to the Companies Act, 1956 and the Securities and Exchange Board ofIndia (Disclosure and Investor Protections) Guidelines, 2000, as amended from time to time and in accordancewith the instructions dated 28th February, 2006 and 3rd March, 2006 received from the Company requesting usto carry out work for the purpose of disclosure in the offer document being issued by the Company in connectionwith its Rights Issue of Equity Shares.
3. We report that :-
a) The restated profits of the Company for the financial years ended 31st March, 2001, 2002, 2003, 2004, 2005and nine months period ended on 31st December, 2005 are as set out in Annexure I to this report. Theseprofits have been arrived at after charging all expenses including depreciation and after making suchadjustment and regroupings as in our opinion are appropriate and more fully described in the SignificantAccounting Policies and Notes on Accounts appearing in Annexure III to this report.
b) The restated assets and liabilities of the Company as at 31st March, 2001, 2002, 2003, 2004, 2005 and 31st
December, 2005 are as set out in Annexure II to this report after making such adjustments and regroupingsas in our opinion are appropriate and more fully described in the Significant Accounting Policies and Noteson Accounts appearing in Annexure III to this report.
c) We have also examined the restated cash flow statement relating to the Company for the years ended 31st
March, 2001, 2002, 2003, 2004, 2005 and for nine months period ended on 31st December, 2005 as appearingin Annexure IV to this report.
d) The rates of dividends paid by the Company in respect of the financial years ended 31st March, 2001, 2002,2003, 2004, 2005 and for nine months period ended on 31st December, 2005 are as shown in Annexure V tothis report.
4. We have also examined the following financial information relating to the Company prepared by the Managementfor the purpose of inclusion in the offer document.
i) Capitalization Statement as at 31st December, 2005 as appearing in Annexure VI to this report.
ii) Statement of Accounting Ratios as appearing in Annexure VII to this report.
iii) Statement of Other Income as appearing in Annexure VIII to this report.
iv) Statement of Sundry Debtors as appearing in Annexure IX to this report.
v) Statement of Loans and Advances as appearing in Annexure X to this report.
vi) Statement of Unsecured Loans as appearing in Annexure XI to this report.
vii) Statement of Secured Loans as appearing in Annexure XII to this report.
viii) Statement of Tax Shelters as appearing in Annexure XIII to this report.
ix) Statement of Related Party Disclosure as appearing in XIV to this report.
65
SHREE BHAWANI PAPER MILLS LIMITED
x) Statement of Qualification appearing in the Auditors’ Reports as given in Annexure XV to this report.
xi) Changes in Significant Accounting Policies as appearing in Annexure XVI to this report.
xii) Statement of Expenditure incurred and Source of Finance on the proposed project upto 28th February, 2006as appearing in Annexure XVII to this report.
This Report is intended solely for your information and for inclusion in the offer document in connection withRights Issue of the Company and is not to be used, referred to or distributed for any other purpose without ourwritten consent.
The financial statements are prepared under the historical cost convention in accordance with thenormally accepted accounting principles and the provisions of the Companies Act, 1956.
B. Recognition of Income and Expenditure:
All income and expenditure items having a material bearing on the financial statements are recognized onthe accrual basis.
C. Sales:
Sales are accounted for inclusive of excise duty. The sale value is net of discounts, returns and sales tax.
D. Excise Duty:
Excise Duty on finished goods has been accounted on the basis of both payments made in respect of goodscleared as also provision made for goods lying in bonded ware-houses.
E. Depreciation:
I.Depreciation on Buildings, Plant & Machinery is provided on straight line method and on other assets onwritten down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956.
II.Lease hold land is amortized over the duration of lease.
F. Retirement Benefits:
Company’s contribution to Provident Fund and other funds are charged to the Profit & Loss Account. The leaveencashment benefit payable to employees is provided for in the accounts on the basis of actuarial valuation.
The Company has created an approved gratuity fund and has taken a Group Gratuity Insurance Policy with LifeInsurance Corporation of India for future payment of gratuity to employees. The Company accounts for gratuityliability equivalent to the premium amount payable to Life Insurance Corporation of India every year.
G. Fixed Assets:
Fixed assets are stated at cost net of modvat/cenvat less accumulated depreciation. The expenditures incurredduring the period of construction are charged to capital work-in-progress and on completion, the costs areallocated to the respective fixed assets.
H. Borrowing Cost:
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalized, asa part of the cost of such assets till the assets are ready for its use. A qualifying asset is one that necessarilytakes substantial period of time to get ready for its intended use. All other borrowing costs are charged torevenue.
I. Provision and Contingencies:
The Company creates a provision when there is present obligation as a result of past event and it is probablethat an outflow of resources will be required to settle the obligation in respect of which a reliable estimation canbe made.
69
SHREE BHAWANI PAPER MILLS LIMITED
Liabilities which are material and whose future outcome can not be ascertained with reasonable certainty,are treated as contingent and disclosed by way of Notes to the Accounts.
J. Impairment of Assets:
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairmentloss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired.
K. Inventories
Raw materials, work-in-progress and finished goods are valued at lower of cost and net realizable value. However,materials held for use in the production of finished product are not written down below cost, if the finishedproducts in which they will be incorporated are expected to be sold at or above cost. Finished goods and work-in-progress include costs of conversion and other costs incurred in-bringing the inventories to their presentlocation and condition. Chemicals and Stores and Spare parts are valued at or below cost. Cost of inventoriesis generally computed on weighted average/ FIFO basis.
L. Taxation:
Current tax is determined as the amount of Tax Payable in respect of taxable income for the year. Tax on Fringebenefits is measured at the specified rate on the value of fringe benefits in accordance with the provisions ofsection 115WC of the Income Tax Act, 1961.
The deferred tax for timing difference between the book and tax - Profit for the year is accounted using tax ratesand tax laws that have been enacted or substantially enacted at the - Balance Sheet date. Deferred Tax assetsarising from the timing difference are recognized to the extent that there is reasonable certainty that sufficientfuture taxable income will be available.
1 Contingent Liability not provided for :
[Rs. in Lacs]
2. The Income Tax assessments of the Company have been completed upto Assessment Year 2002-03 TheIncome Tax authorities had disallowed certain concessions/ allowances available to the Company. The Companyhas filed appeals against such disallowances before appropriate authorities Pending decision, the provision forIncome Tax already made in the past has been considered to be adequate enough to meet the liabilities, if any.
3. Sundry creditors include Rs.1771085/- (Previous Year Rs.2327421/-) due to Small Scale Industrial (SSI)undertakings to the extent such parties have been identified from the information available. Names of SSIs towhom amounts payable are outstanding for more than 30 days as at 31st December, 2005 are; M/s Amar SulphaChem (P) Ltd; M/s Krishna Agro; M/s S N Pandey & Co, M/s Mayur Inorganics Limited, M/s Silverline Minerals& Chemicals, M/s Singhania Brothers and M/s True Light Minerals & Chemicals.
4. The Company has operating lease for one of its premises, which is renewable on expiry. Rental expenses foroperating lease charged to Profit & Loss Account for the nine months period is Rs.3.60 Lacs (Previous YearRs.4.80 Lacs).
As the employee-wise break-up of contribution to group gratuity scheme and leave encashment is notascertainable, the amount related to Managing and Joint Managing Director could not be included in the above.
6 The break-up of deferred tax assets and liabilities into major components at the year/period ended is asbelow:
[Rs. in Lacs]
7 Auditors Remuneration including service tax as applicable -
8 Earnings Per Share (EPS) - The numerators and denominators used to calculate Basic and Diluted
EarningsPer Share :
[Rs. in Lacs]
9 The Company operates only in one business segment, that is, Printing Writing & Wrapping Papers.
10 There are no amounts outstanding in respect of unpaid dividend/fixed deposits for more thanseven years to be transferred to Investor Education and Protection Fund.
11 Previous Year figures have been regrouped wherever necessary.
We confirm that all notes to accounts, significant accounting policies and auditors qualificationhave been incorporated.
12 Additional information as required under paragraphs 3, 4C and 4D of Part-II of Schedule-VI to the
Companies Act, 1956 are as under :
(a) Details for each class of goods manufactured, sold and stocks.
1. Maturity period and interest rate on fixed deposits outstanding as on 31.12.2005.
a. Fixed deposits have been issued at varied rate of interest of 15% to 10%.
b. Fixed deposits of Rs.20.33 Lacs, Rs.219.38 Lacs, Rs.65.19 Lacs and Rs.100.05 Lacs arerepayable during the period January 2006 – March, 2006, Financial Year 2006-07; 2007-08,2008-09 respectively.
c. Unclaimed fixed deposits as on 31st December 2005 was Rs.0.30 Lacs and interest thereonRs.0.03 Lacs (subsequently renewed in January 2006).
2 Term and conditions in respect of Fixed Deposits from promoter directors.
a. Fixed deposits have been issued at varied rate of interest of 15% to 10%.
b. There are no fixed deposits outstanding as at 31st December, 2005.
The Loans are secured by a ‘pari passu’ Joint Equitable Mortgage over the Company’s immovableproperties and a charge by way of hypothecation of movable assets of the Company both presentand future subject to prior charges created on specified movable assets in favor of Company’sBankers for Working Capital. Out of the Term Loans, Rs.180.00 Lacs from IFCI Ltd and Rs.112.50Lacs from Indian Bank are additionally secured by pledge of equity shares held by the Promotersin the Company.
(b) For Working Capital Loan:
Secured by hypothecation of Stock of Raw Materials, Stores, Stock in process, finished goods,book debts, both present & future and further secured by second mortgage and charge onimmovable properties of the Company as by way of Collateral Security.
All the above loans are guaranteed by the Managing Director & Joint Managing Director of theCompany.
(b ) Hire Purchase Finance
Secured by hypothecation of specific asset.
2. There is no re-schedulement/pre-payment in respect of loans outstanding as on 31.12.2005.
3. There is no amount in default in respect of principal and interest as on 31.12.2005. No penaltywas levied/paid in respect of defaults/pre-payments.
Statement of Transactions with related parties in preceding three years.
a. Key management personnel (Whole time Directors) and transactions with them Shri. Sudhir Tandon, Shri GirishTandon
(Rs. In Lacs)
b. Relatives of Key management personnel and transactions with them: Shri Hari Mohan Das Tandon, Mrs. SulochaniDevi Tandon, Shri Badri Vishal Tandon, Shri Satish Tandon, Mrs. Savita Seth, Mrs. Indu Mehrotra, Mrs. ShailTandon, Mrs. Neera Tandon, Mrs. Surabhi Mehra, Shri Manas Tandon, Mrs. Paridhi Tandon and Shri AkshatTandon.
ANNEXURE XV
Statement of Qualification in Auditors’ Report
On the Accounts of the Financial Year ended 31st March 2004 Para 4(iv), the Company has not complied AS-2‘Valuation of Inventories’ which requires the inventories to be valued at lower of cost and net realizable value.
The Company is complying with the requirements of AS-2 ‘Valuation of Inventories’. Inventories are valued atcost or net realizable value whichever is lower.
ANNEXURE XVI
Changes in Significant Accounting Policies:
There is no change in Significant Accounting policies during the past five years and a period of nine monthsended on 31.12.2005 except as and when Accounting Standards issued by the Institute of Chartered Accountantsof India were made applicable on the relevant date.
ANNEXURE XVII
[Rs. in Lacs]
2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS AS REFLECTED IN THE FINANCIAL STATEMENTS:
Investors should read the following discussion of the Company’s financial condition and results of operationstogether with notes to those statements included in this Letter of Offer. The following discussion is based on theCompany’s audited financial statements and on information available from other sources. The Company’s fiscalyear ends on 31st March of each year; so all references to a particular fiscal year are to the twelve-month periodended 31st March of that year.
Overview of the Business of the Company:
Shree Bhawani Paper Mills Ltd. was incorporated on 6th July, 1979 as a Public Limited Company. The Companyset up a Paper Mill at Rae Bareily (U.P.) with an installed capacity of 9400 TPA for manufacturing Printing,Writing & Wrapping Paper. There are two paper machines namely MG (Machine Glaze) Yankee machine & MF(Machine Finish) Fourdriner Machine. The commercial production started in April, 1983. In the years, 1989-90,1990-91, modification in MF paper machine was under taken enabling substantial increase in production &installation of new FBC husk fired boiler. In the year, 1995-96, Company successfully commissioned DieselGenerating sets for its entire requirement of power & UPSEB power supply was surrendered w.e.f. 1st April1996. In 1996-97, Company undertook a capital expenditure scheme of 4.23 Crores for up gradation of PulpMill, installation of new FBC husk fired boiler and improvement in quality of paper
The Company has a wide product mix, the largest variety in the Country amongst paper mills having capacityupto 60 TPD, based upon non-conventional raw material. The Company’s products are used by book publishers,Copy manufactures, printers of hand bills. They also find use in wrapping and general packaging.
The plant is located within a radius of 125 km from Kanpur, Lucknow and Allahabad the three major cities inUttar Pradesh. The central location of the mill facilitates procurement of raw materials and also helps inmarketing paper throughout Uttar Pradesh. The major raw materials, fuel being agri-residues are available inand around Rae Bareily, which has a good network of canals. The Company does not depend upon high costwood pulp.
Similarly it does not depend upon UPSEB supply for power, and it has its own Captive Power Generating unitwith adequate back-up arrangements.
Having regard to the ongoing process of modification and modernization of manufacturing facilities, betterenergy management, lower chemical consumption, wide product-mix, cordial labor/employee relationship, theCompany is optimistic about the future outlook in the long term.
Significant Developments Subsequent to the Last Financial year
The Directors of the Company confirm that in their opinion, no circumstances have arisen since the date of thelast financial statements as disclosed in the Letter of Offer which materially and adversely affect or is likely toaffect the trading or profitability of the Company, or the value of its assets or its ability to pay its liabilitieswithin the next twelve months.
Factors that may affect results of the Operations of the Company:
Except as otherwise stated in this Letter of Offer and the following important factors could cause actualresults to differ materially from the expectations,
(a) constraints in availability of raw materials and fuel i.e. bagasse, straw and paddy husk.
(b) the Company is in cyclical industry
(c) international prices of paper
(d) exchange fluctuations
(e) import tariffs
(f) domestic duties and taxes
(g) changes in brand preferences
(h) changes in Government policies
(i) changes in fiscal, economic or political conditions in India
(j) increases in labor costs, raw material prices and allied costs
The following discussion on the financial operations and performance should be read in conjunction with theaudited financial results of the Company for the year ended 31st March, 2003, 31st March, 2004, 31st March,2005 and nine months ended 31st December, 2005.
The Company achieved increase of about 8.6% in production, mainly on account of benefits accrued frommodification in MF Paper Machine undertaken in previous year. Despite increase in production, profit was loweras compared to previous year. The adverse impact of availability and higher cost of raw materials and husk fueldue to severe draught of 2002, effect of which was spread over two financial years, was the main cause forreduction in margins. Excise duty burden also increased due to withdrawal of nil levies earlier applicable oninitial dispatch of 3500 Ton of Paper. Paper market condition remained weak and the increased cost burdencould not be passed to the market.
2005 VS 2004
The Company operated at about 95% efficiency and achieved record production, thus increasing its pretaxprofit by about 169%. With encouraging prospects, the Company recommended a dividend of 10%.
Unusual or infrequent events or transactions:
• The Company had a fire accident in 1998-99 that affected finished goods. The losses wereadequately insured and the claim made was duly received.
• There was a severe drought in 2002 in this area causing steep increase in the price of agri-residue raw materials & fuel. Since agri-residues are seasonal products, its effect was spreadover two years.
Significant economic changes that materially effected or are likely to effect income fromcontinuing operations.
• The effective rate of excise duty on paper produced from unconventional raw materials for the first3500 MT is 8.2875% and thereafter 12.3675%. Customs duty on Paper & Paper board is 15%except Newsprint & Light Weight Coated (LWC) on which it is 5%. Any changes in the duty structurewill affect the profitability of the Company.
• The increasing trend in the price of diesel is resulting in increased cost of transportation.
Known trends or uncertainties that have had or are expected to have a material adverse impacton sales, revenue or income from continuing operations
• Amongst the Paper Mills having capacity upto 60 Tonnes per day in the Country, SBPML has thewidest product range. Hence the Company does not foresee any major adverse impact on salesexcept cyclical demand supply fluctuations.
• Captive consumption of one of the primary raw material Bagasse in the nearby sugar mills isincreasing, since sugar mills are going in for power generation. However, Company has reducedit dependency on Bagasse and developed use of alternative raw material ‘Straw’ in more quantity,which is locally available in abundance. Rae Bareily district is surplus straw area due to goodnetworking of canals.
The extent to which material increases in net sales or revenue are due to increased sales volume,introduction of new products or services or increased sales prices.
The increase in sales revenue is due to increase in volume and also better price realizations. The Company hasreceived ISI certification. It is also accepting Government orders particularly in the off-season which helps inkeeping inventory under control.
Status of any publicly announced new products or business segment.
Though no new products have been introduced, consistent efforts are being made to upgrade the quality of theexisting product. As already stated elsewhere in this report, the Company has the widest product mix in itspaper mill range.
The extent to which the business is seasonal, any significant dependence on a single or few suppliersor customers
Due to the wide product range as also the strategy to procure Government orders in the off-season, adverseimpact of seasonality is minimal. Reopening of schools, in the winter and summer creates additional demands.Further, the Company has a wide network of dealers covering about 25 cities across India and it is not dependenton a few customers.
Similarly, the Company has an established network of multiple suppliers for each of its seasonal raw materialsand hence is not dependent on a few suppliers.
Approach to Marketing and Proposed Marketing Set-up
The Indian Paper industry is expected to grow at a CAGR of 6%, which is in line with the expected GDP, whilethe capacity expansion by industry is only expected to be at a CAGR of 2.5%.
The proposed Printing & Writing Machine shall produce higher value added products compatible with modernday sophisticated printing machines, computer stationery etc. The demand for such quality paper is quiteencouraging. The increased production shall be sold through existing dealers, as also a network of dealersshall be created in the untapped areas of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Haryana as wellas in South India. Ground work for appointing new dealers has been started. It will be in place beforecommencement of production on the new Paper Machine.
EXPORT OBLIGATION
There are no export obligations and the Company will explore export possibilities once the production from thenew paper machine commences.
COMPETITIVE CONDITIONS
Though there has been some increase in the price of raw materials & chemicals since the last financial statementas disclosed in the Letter of Offer, sales price have also surged at a better pace thereby improving the bottomline.
Amongst the Paper Mills having capacity up to 60 Tonnes per day in the Country, SBPML has the widestproduct range. After implementation of the project, the product mix of the Company moves up significantly invalue addition yielding higher margins. The incremental fixed cost for achieving enhanced production will alsobe low. Thus, the Company will be better positioned to face any increase in competition.
86
SHREE BHAWANI PAPER MILLS LIMITED
COMPETITORS
The company faces competition from the following companies:
a) Shreyans Industries Ltd. – Present Capacity: 170 TPD
b) Mohit Paper Mills Ltd. – Present Capacity: 90 TPD
c) Chadha Paper Ltd. – Present Capacity: 150 TPD
BUSINESS STRATEGY
The company is operating in a highly competitive market and the strategy is to enhance revenues throughtaking advantage of its inherent strengths and business dynamics. The company has focused on the followingstrategies:
• The Company plans to increase the revenue in future through better realizations, quality controland increased volume of sale.
• The proposed Paper Machine shall produce higher value added products compatible with modernday sophisticated printing machines, computer stationery etc.
• Since paper manufacturing is a power intensive business, which also uses steam for drying thepaper, the setting up of 3 Mw rice husk based Captive Co-generation Plant will reduce the fuelcost of the unit.
• The incremental fixed cost for achieving enhanced production will also be low.
FUTURE PROSPECTS
The company looks at the future of the paper industry with optimism. Indian paper industry which was at thecrossroad is now recovering at a very fast pace. Use of paper is considered as an index of cultural growth. Keysocial objectives of the government like eradicating illiteracy, making primary education compulsory etc. arevery much positively co-related to the paper industry. Indian Paper Industry growth rate is 6-7% per annum,which is among the highest in the world. The domestic demand of paper, paperboard and newsprint has beenforecasted to be 7.5 million tonnes by 2010 and 10.9 Million tonnes by the years 2015-16 as per the expertsgroup. Based on these factors, the company believes a significant scope of appreciation in demand.
Capital Issues in the past and Promise Vs. Performance.
In December, 1992, the Company had made a Rights Issue of 12,60,000 Equity shares of Rs.10/- each at par,aggregating Rs.126 Lacs. The Actual performance achieved by the Company against the projections specified,is shown in the table below:-
The actual performance of the Company against the objects of the issued for the Last Rights Issue is shownbelow:
The other promises as made by the Company in the offer document of the Last Issue and performances are asbelow:
Note: The installed capacity in 1992-93 was 13200 MT, which increased to 16000 MT from 1993-94, due tomodifications/de-bottle necking taken up by the company.
Working Results:
Information relating to the Company sales, gross profit etc, as required by the Ministry of Finance Circular,No.F2/5/SE/76 dated February 05, 1977 read with the amendments of even No. dated March 08, 1977 is asunder:
The un-audited working results of the Company for the period from 1st April, 2005 to 28th February 2006 aregiven hereunder:
Alankar Udyog Pvt. Ltd was incorporated on 14th August 1974. The Company was incorporated to carry out thebusiness of investment, deal in shares, bonds and securities of such companies or any other companies andalso to carry on the business of hire purchase, of hiring, letting on hire, buying, selling, resulting, exchangingaltering, importing, exploring or distributing or dealing in all kinds of automobiles. The Equity Shares of theCompany are not listed on any Stock Exchange. The Registered Office of the Company is situated at #33,Dayanand Marg, Allahabad. The Present Directors of the Company are as under:
Shareholding Pattern as on 30.06.2005
Brief Financial Results of the Company is as under:
There are no pending litigations, disputes or suits against this Company and there is no default in meeting anyof the Statutory/ bank/institutional dues. No proceedings have been initiated for economic offences against itand it is not a sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985.
Notes forming part of the Accounts:
1. Significant Accounting Policies: Financial Statements are prepared under historical cost conventionand on the accrual basis.
2. Fixed Assets: Fixed assets are stated at cost including taxes, freight, duties etc related to purchaseand installation.
3. Depreciation: Depreciation on fixed assets is provided on Straight Line Method in accordancewith the rates specified under Schedule XIV of the Companies Act, 1956. Depreciation is chargedon pro rata basis on fixed assets purchased during the year.
4. Investments: Investments are stated at cost or market value which ever is lesser.
5. Previous year figures have been regrouped and rearranged wherever found necessary.
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89
SHREE BHAWANI PAPER MILLS LIMITED
ii) Bachchaji Holdings Pvt. Ltd.
Bachchaji Holdings Pvt. Ltd was incorporated on 20th October 1989. The Company is presently carrying on
the business of Investment and invests in and acquires and hold shares, Stock, debentures stocks, bonds
and invest money on securities in any Company, firm, association, Corporation. The Equity Shares of the
Company are not listed on any Stock Exchange. The Registered Office of the Company is situated at #28,
Hastings Road, Allahabad. The Present Board of Directors of the Company is as under:
Shareholding Pattern as on 30.06.2005
Brief Financial Results of the Company are as under:
There are no pending litigations, disputes or suits against this Company and there is no default in meeting any
of the Statutory/ bank/institutional dues. No proceedings have been initiated for economic offences against it
and it is not a sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985.
Notes forming part of the Accounts:
• Significant Accounting Policies: Financial Statements are prepared under historical cost convention
and on the accrual basis.
• Fixed Assets: Fixed assets are stated at cost including taxes, freight, duties etc related to purchase
and installation.
• Depreciation: Depreciation on fixed assets is provided on Straight Line Method in accordance
with the rates specified under Schedule XIV of the Companies Act, 1956. Depreciation is charged
on pro rata basis on fixed assets purchased during the year.
• Investments: Investments are stated at cost or market value which ever is lesser.
• Previous year figures have been regrouped and rearranged wherever found necessary.
iii) The Hindustan Industries Management Pvt. Ltd.
The Hindustan Industries Management Pvt. Ltd. was incorporated on 7th September 1947 with Registrar ofCompanies, Uttar Pradesh. The Company is presently carrying on the business of Investment Company andinvests in and acquires and hold shares, Stock, debentures stocks, bonds and invest money on securities inany Company, firm, association, Corporation. The Equity Shares of the Company are not listed on any StockExchange. The Registered Office of the Company is situated at #230/28, Hastings Road, Allahabad. The presentBoard of Directors of the Company is as under:
Shareholding Pattern as on 30.06.2005
Brief Financial Results of the Company are as under:
There are no pending litigations, disputes or suits against this Company and there is no default in meeting any
of the Statutory/ bank/institutional dues. No proceedings have been initiated for economic offences against it
and it is not a sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985.
Notes forming part of the Accounts:
• Significant Accounting Policies: Financial Statements are prepared under historical cost convention
and on the accrual basis.
• Fixed Assets: Fixed assets are stated at cost including taxes, freight, duties etc related to purchase
and installation.
• Depreciation: Depreciation on fixed assets is provided on Straight Line Method in accordance
with the rates specified under Schedule XIV of the Companies Act, 1956. Depreciation is charged
on pro rata basis on fixed assets purchased during the year.
• Investments: Investments are stated at cost or market value which ever is lesser.
• Previous year figures have been regrouped and rearranged wherever found necessary.
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(Rs. In Lacs)
91
SHREE BHAWANI PAPER MILLS LIMITED
iv). Sahitya Bhawan Pvt. Ltd.
Sahitya Bhawan Pvt. Ltd. was incorporated on 28th February, 1920 The Company is presently carrying on thebusiness of printers, lithographers and publishers of books, periodical news papers, journals, magazines,pamphlets, notices, circulars, handbills, placards and all other paper documents and writing also as generalprinters lithographers, engravers, the founders, book agents, book sellers, stationary manufacturers. The EquityShares of the Company are not listed on any Stock Exchange. The Registered Office of the Company is situatedat #93, KP Kakkar Road, Allahabad. The present Board of Directors of the Company is as under:
Shareholding Pattern as on 30.06.2005
Brief Financial Results of the Company are as under:
There are no pending litigations, disputes or suits against this Company and there is no default in meeting any
of the Statutory/ bank/institutional dues. No proceedings have been initiated for economic offences against it
and it is not a sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985.
Notes forming part of the Accounts:
• Significant Accounting Policies: Financial Statements are prepared under historical cost convention
and on the accrual basis.
• Fixed Assets: Fixed assets are stated at cost including taxes, freight, duties etc related to purchase
and installation.
• Depreciation: Depreciation on fixed assets is provided on Straight Line Method in accordance
with the rates specified under Schedule XIV of the Companies Act, 1956. Depreciation is charged
on pro rata basis on fixed assets purchased during the year.
• Investments: Investments are stated at cost or market value which ever is lesser.
• Previous year figures have been regrouped and rearranged wherever found necessary.
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92
SHREE BHAWANI PAPER MILLS LIMITED
V). Tandon Investments (P) Ltd.
Tandon Investments (P) Ltd was incorporated on 31st July 1984 with Registrar of Companies, Uttar PradeshKanpur. The Company is presently carrying on the business of an Investment Company and to under write,sub-underwrite invests in and acquires and hold shares, Stock, debentures stocks, bonds and invest money onsecurities in any Company, firm, association, Corporation. The Equity Shares of the Company are not listed onany Stock Exchange. The Registered Office of the Company is situated at #33, Dayanand Marg, Allahabad. Thepresent Board of Directors of the Company is as under:
Shareholding Pattern as on 30.06.2005
Brief Financial Results of the Company are as under:
There are no pending litigations, disputes or suits against this Company and there is no default in meeting anyof the Statutory/ bank/institutional dues. No proceedings have been initiated for economic offences against itand it is not a sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985.
Notes forming part of the Accounts:
• Significant Accounting Policies: Financial Statements are prepared under historical cost conventionand on the accrual basis.
• Fixed Assets: Fixed assets are stated at cost including taxes, freight, duties etc related to purchaseand installation.
• Depreciation: Depreciation on fixed assets is provided on Straight Line Method in accordancewith the rates specified under Schedule XIV of the Companies Act, 1956. Depreciation is chargedon pro rata basis on fixed assets purchased during the year.
• Investments: Investments are stated at cost or market value which ever is lesser.
• Previous year figures have been regrouped and rearranged wherever found necessary.
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93
SHREE BHAWANI PAPER MILLS LIMITED
IV. LEGAL AND OTHER INFORMATION
A. Litigation Against Shree Bhawani Paper Mills Limited (SBPML)
B. Litigation Filed by Shree Bhawani Paper Mills Limited (SBPML)
D. Details of cases in which the Directors of the Company has been made party by virtue of theirdirectorship.
NIL
Apart from as stated above:
1. There are no litigations against the Company or against any other Company whose outcome couldhave a materially adverse effect on the position of the Company.
2. There are no litigations against the directors or promoters involving violation of statutory regulationsor alleging criminal offence.
3. There are no cases of litigations pending against the Promoters/Directors in their personal capacitiesand also involving in statutory regulations or criminal offences.
4. There are no pending proceedings initiated for economic offences against the Company, Directors,its Promoters, Companies and Firms promoted by the Promoters;
5. Other than above there are no outstanding litigations, disputes pertaining to the matters likely toeffect the operations and financials of the Company including disputed tax liability, prosecutionunder any enactment in respect of Schedule XIII of the Companies Act,1956;
6. None of the Directors have any litigation towards tax liabilities or any criminal/civil prosecution againstthem for any offences (irrespective of whether “specified in paragraph (i) of Part I of Schedule XIII ofthe Act.);
7. There are no litigations outstanding against the Promoters/Directors in their personal capacity. TheCompany, its Promoters and other Companies with which promoters are associated have neithersuspended by SEBI nor has any disciplinary action been taken by SEBI. There are no prosecutionlaunched by Income Tax Authorities and no liability compounded by the Promoters/Company/OtherVentures with which the Promoters are associated is subsisting ;
8. There are no cases of pending litigations/defaults in respect of firms/Companies with which thePromoters are associated in the past but are no longer associated.
9. There are no overdues, defaults to the Financial Institutions/ Banks, Re-schedulement of Loans toBanks/FIs and dues towards instrument holders like debenture holders, fixed deposits and arrearson cumulative preference shares by the Promoters and the Companies/Firms promoted by thePromoters or by the Company. There are no pending offences of non- payment of statutory dues bythe Promoters of the Company.
10. No disciplinary action was taken by the SEBI/Stock Exchange or any other regulatory authorityagainst the Issuer Company, its Promoters or its Directors, associates and other ventures promotedby the promoters or the issuer’s directors.
11. There are no proceedings known to be contemplated by Governmental authorities.
12. There are no past cases in which penalties were imposed by the regulatory authorities on the Companyor its directors.
13. Promoters, their relatives (as per Companies Act, 1956) and the Company, Group Companies, associatecompanies are not detained as willful defaulters by RBI/Government authorities and there are noviolations of securities laws committed by them in the past and are pending against them.
The Company owes money to the following small-scale undertakings for more than 30 days as on December31st 2005:
Defaults
� The Company has not defaulted in meeting any statutory dues, institutional dues and dues towardsinstrument holders like debenture holders, fixed deposit holders.
� There are no proceedings launched or initiated against the promoters of the Company for any economicoffences.
CONTINGENT LIABILITY AS ON 31.12.2005:
� Estimated amount of capital contracts remaining to be executed and not provided for: Rs.2061Lacs.
� LC/Guarantees given by bank Rs.122.15 Lacs.
� Customers Cheques/Bills discounted Rs. NIL
MATERIAL DEVELOPMENTS
The Directors of the Company in their opinion hereby state that there is no material development after thedate of the last financial statements disclosed in the Letter of Offer which is likely to materially and adverselyaffect or is likely to affect the trading or profitability of the Company or the value of its assets, or its ability topay its liabilities within the next twelve months. However, the following material developments took placeafter filing the Draft Letter of Offer during the normal course of business.
(a) Resetting of interest rate by IFCI Ltd.
IFCI Ltd. vide their letter dated 4th January, 2006 has approved the resetting of Interest Rate on its term loanfrom existing rate of interest of 15.5% to 12.5% on payment of premium of Rs.2.45 Lacs with effect from 15th
February, 2006. As on date, the total amount outstanding to them is Rs.160 Lacs.
(b) Clean Development Mechanism (CDM) Project:
The project titled Rice Husk based Cogeneration project at Shree Bhawani Paper Mills Limited (SBPML),Rae Bareily, Uttar Pradesh, India has been registered with the Executive Board at the United Nations FrameworkConvention on Climate Change (UNFCCC) ( http://cdm.unfccc.int/Projects/TUEV-SUED1135237103.39/view.html ) on 3rd February 2006.This project pertains to the existing 3 Mw power plant which has been inoperation since 2001.The project has about 58,600 prompt start Certified Emissions Reduction (CERs) foractivity from 1st December 2001 to 31st December 2005 and future annual credits of 14,700 CERs fromDecember 2006 to December 2011. We have already submitted the monitoring report for initial verificationand it is available on the UNFCCC website (http://cdm.unfccc.int/Projects/TUEV-SUED1135237103.39/Monitoring/TUEV-SUED1139231079.9 ) .
Further, the Company has appointed Ernst & Young Private Limited for preparing a similar Project DesignDocument for Registration of another 3 Mw Power Plant that is part of the proposed expansion plan.
Excerpt from the notice recently given by SRF Ltd to the BSE indicates the prevailing price of CERs. “However,following early commissioning and registration, it now expects to realize approximately Rupees 850 million(based on the current market prices) this quarter by transfer of 1.4 million CERs during 2005-06.
The Company has received the following Government approvals/Licenses/Permissions to carry on the presentbusiness:
• The Importer-Exporter Code (IEC) from Government of India, Ministry of Commerce issued from thefile no: 06/04/130/00598/AM/98 dated 01.04.1988 and Number of the Company is “0688005985”.
• Consent granted by Uttar Pradesh Pollution Control Board authorizing to operate the Industrial plantto discharge the effluents and Air Emission. The consent order No. is 01/Raebareli dated 23rd
November 2004. The consent is valid upto 31.12.2006.
• The PAN No. is AADCS2286G.
• Service Tax Registration No.: 02/TGR/ST/RBL/05 issued under Service Tax Rules 1994.
• Secretariat for Industrial Assistance (SIA) acknowledgement no: 3591/SIA /IMO/2005
• The Registrations for both Boiler-2 (Regn.No.UP/4847) and Boiler –3 (Regn.No.UP/5440) have beenrenewed upto 10.11.2006
• Central Excise registration certificate No. AADCS2286GXM002 issued under the Central Excise Rule2002.
• Factories Act Registration No.RBY-22 and its license is valid upto 31.12.2006
The Company can undertake all the present and proposed activities in view of the present approvalsand on receipt of the approvals for the proposed activities. No further approvals from any Governmentauthorities/ RBI are required by the Company to undertake the present and proposed activities exceptthose approvals that may be required to be taken in the normal course of business from time to time.It must be specifically understood that in giving the above approvals, the concerned authority does nottake any responsibility for the financial soundness or correctness of the statements made by theCompany.
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SHREE BHAWANI PAPER MILLS LIMITED
V. OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Present Issue
The Board of Directors of the Company (hereinafter referred to as “The Board”) pursuant to the resolutionpassed at the Extra-Ordinary General Meeting held on 6th August 2005 have decided to offer 1,23,18,000Equity Shares of Rs. 10/-each for cash at a premium of Rs. 2.50/- on Rights basis to the existing EquityShareholders of the Company in the Ratio of Three Equity Shares for every one Equity Share held [3:1] onRecord Date i.e. 10.03.2006 aggregating to Rs . 1539.75 Lacs.
The present issue of Equity Shares is being made pursuant to the Board Resolution passed at the Board ofDirectors meeting held on 11th September 2005 for specific approval of the Rights Issue. The Draft Letter ofOffer was approved at the Board Meeting held on 18th September 2005 and the Final Letter of Offer wasapproved by the Board on 18th March 2006.
Prohibition by SEBI
The Company, its Promoters, Directors or any of the Company’s associates or group companies with which theDirectors of the Company are associated as Directors or Promoters have not been prohibited from accessingthe capital market under any order or direction passed by SEBI. The listing of any securities of the issuer hasnever been refused at any time by any of the Stock Exchange in India or abroad. Further the Promoters, theirrelatives (as per Act), the Company, Group companies, and Associate companies are not declared as willfuldefaulters by RBI / Government authorities.
Eligibility for the Issue
Shree Bhawani Paper Mills Limited (SBPML) is an existing Company under the Companies Act, whose equityshares are listed on BSE. The issuer Company is exempted from the eligibility norms in terms of Clause 2.4.1(iv)as defined under Chapter II of The SEBI (DIP) Guidelines, 2000.
DISCLAIMER CLAUSE
AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES ANDEXCHANGE BOARD OF INDIA (SEBI). IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSIONOF LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED/ CONSTRUED THAT THESAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITYEITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME FOR WHICH THE ISSUE IS PROPOSEDTO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSEDIN THE LETTER OF OFFER. THE LEAD MANAGER BOB CAPITAL MARKETS LIMITED HAS CERTIFIEDTHAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE INCONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCEFOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMEDDECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE.
IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILYRESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANTINFORMATION IN THE OFFER DOCUMENT, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUEDILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY INTHIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MANAGER BOB CAPITAL MARKETS LIMTIEDHAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 22ND SEPTEMBER 2005 INACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READ ASFOLLOWS:
WE, THE UNDER NOTED LEAD MERCHANT BANKER (S) TO THE ABOVE MENTIONED FORTHCOMINGISSUE STATE AS FOLLOWS:
(i) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATIONLIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC.AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETOIN CONNECTION WITH THE FINALISATION OF THE LETTER OF OFFER PERTAINING TO THESAID ISSUE;
99
SHREE BHAWANI PAPER MILLS LIMITED
(ii) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITSDIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OFTHE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY,PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THEANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY,
WE CONFIRM THAT:
(a) THE LETTER OF OFFER FORWARDED TO THE BOARD IS IN CONFORMITY WITH THEDOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;
(b) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THEGUIDELINES, INSTRUCTIONS, ETC. ISSUED BY THE BOARD, THE GOVERNMENT AND ANYOTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND
(c) THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TOENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENTIN THE PROPOSED ISSUE.
(iii) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE LETTEROF OFFER ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATIONIS VALID.
THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANYLIABILITIES UNDER SECTION 63 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OFOBTAINING SUCH STATUTORY OR OTHER CLEARANCE AS MAY BE REQUIRED FOR THE PURPOSEOF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OFTIME, WITH THE LEAD MANAGER (MERCHANT BANKER) ANY IRREGULARITIES OR LAPSES IN THELETTER OF OFFER.
Caution
The Company and the Lead Manager accept no responsibility for statements made otherwise than in the Letterof Offer or in the advertisement or any other material issued by or at the instance of the Company and thatany one placing reliance on any other source of information would be doing so at his/her/their own risk.
The Lead Manager and the Issuer shall make all information available to the Public and Investors at largeand no selective or additional information would be available for a section of investors in any manner whatsoeverincluding at road shows, presentations, in research or sales report etc, after filing of the Letter of Offer withSEBI. The Lead Managers and the Company shall update the Letter of Offer and keep the public informed ofany material changes till the listing and trading commences.
Disclaimer with respect to Jurisdiction
This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulationsthere under. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate Court(s)in Allahabad, India only.
Disclaimer Clause of The Bombay Stock Exchange Ltd, Mumbai
“The Bombay Stock Exchange Ltd., Mumbai (“the Exchange”’) has given, vide its letter no. DCS/SMG/SDM/RK/NS/05, dated: October 21, 2005, permission to this Company to use the Exchange’s name in this Letter ofOffer as one of the Stock Exchange on which Company’s securities are proposed to be listed. The Exchangehas scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting theaforesaid permission to the Company. The Exchange in any way manner:
i. Warrant, certify or endorse the correctness or completeness of any of the contents of this Letter ofOffer; or
ii. Warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or
iii. Take any responsibility for the financial or other soundness of this Company, its promoters, itsmanagement or any scheme or project of this Company.
100
SHREE BHAWANI PAPER MILLS LIMITED
and it should not for any reason be deemed or construed that this Letter of Offer has been cleared or approvedby the Exchange. Every person who desires to apply for or otherwise acquires any securities of the Companymay do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against theExchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connectionwith such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for anyother reason whatsoever”.
DISCLAIMER CLAUSE OF BOB CAPITAL MARKETS LIMITED (Appraiser):
• It is to be distinctly understood that BOB Capital Markets Ltd. is not responsible for the Companyachieving their projected level of production/sales, which have a bearing on the financial viability of theProject.
• The Appraisal report prepared by BOB Capital Markets Ltd. is based upon information provided by theCompany that is considered reliable.
• Neither BOB Capital Markets Ltd. nor any person connected accepts any liability arising from the useof the appraisal report.
• Opinions expressed in the report are as of the date of the appraisal report. Actual results may differmaterially from those set forth in the projections.
• The report includes historical and current information that are believed to be reliable although theiraccuracy and completeness cannot be guaranteed.
• BOB Capital Markets Ltd. has relied on the records, available with the Issuer Company.
Filing
The Letter of Offer has been filed with SEBI, Northern Regional Office (NRO), Built-up Space, Block No.1,Rajendra Bhavan, Rajendra Place, District. Centre, New Delhi - 110008.
A copy of this Letter of Offer has been filed with BSE having attached thereto the Material Contracts andDocuments. All the legal requirements applicable till the date of filing the Letter of Offer with the Stock Exchangeand SEBI has been complied with.
Listing
The existing Equity Shares of the Company are listed on The Bombay Stock Exchange Limited, Mumbai [BSE].The Company will make applications to this Stock Exchange for permission to deal in and for an official quotationin respect of the Equity Shares arising out of the issue. The Company has received ‘in-principle’ approvals fromBSE (Designated Stock Exchange), vide their letter no DCS/SMG/SDM/RK/NS/05, dated: October 21, 2005.
In case, the permission to deal in and for and official quotation of the Equity Shares is not granted by theStock Exchange where the listing application will be made, the issuer shall forth with repay without interest,all monies received from the applicants in pursuance of this Letter of Offer and if such money is not repaidwithin 8 days after the day from which the Issuer is liable to repay it, then the Company and every Director ofthe Company who is an officer in default shall, on and from the expiry of 8 days, be jointly and severally liableto repay that money with interest as prescribed under Section 73 of the Companies Act, 1956.
The Company has complied with the provisions of Listing Agreement more particularly Corporate Governance.
Impersonation
As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection(1) of Section 68A of the Companies Act, 1956 which is reproduced below:
“Any person who
a) makes in a fictitious name an application to a Company for acquiring, or subscribing for, anyshares therein, or
b) otherwise induces a Company to allot, or Register any transfer of shares therein to him, or anyother person in a fictitious name, shall be punishable with imprisonment for a term which mayextend to five years”
101
SHREE BHAWANI PAPER MILLS LIMITED
Consents
Consents in writing of the Directors, the Company Secretary and Compliance Officer, the Auditors, Bankersto the Issue, Bankers to the Company, Lead Managers to the Issue, Appraising Agency and Registrar to theIssue to act in their respective capacities, have been obtained and filed along with a copy of the Letter of Offerwith the Bombay Stock Exchange Limited, Mumbai as required under Sections 60 and 60B of the CompaniesAct, 1956 and such consents have not been withdrawn up to the time of delivery of this Letter of Offer forregistration with the Bombay Stock Exchange Limited, Mumbai.
M/s. P.L.Gupta & Co., Chartered Accountants, statutory auditors have given their written consent to theinclusion of their report in the form and context in which it appears in this Offer Document and such consentand report has not been withdrawn up to the time of delivery of this Offer Document for filing with the StockExchange.
M/s. P.L.Gupta & Co., Chartered Accountants, have given their written Consent to the tax benefits accruing tothe Company and its members in the form and context in which it appears in this Offer Document and has notwithdrawn such consent up to the time of delivery of this Offer Document for filing with the Stock Exchange.
Expert Opinion
Save and otherwise stated in this Letter of Offer, the Company has not obtained any expert opinions.
Issue Expenses:
Details of Previous Issue
The Company has not made any Public or Rights Issue in the past five years.
Issue of Shares otherwise than for Cash
The Company has not issued any Shares for consideration other than Cash.
Particulars of the Issuer Company and the Listed Companies under the same management as definedunder section 370 (1) (B) of the Companies Act 1956, that made any capital Issue during the last threeyears.
The Issuer Company has not made any Public Issue during the last three years.
Promise Vs Performance
• Shree Bhawani Paper Mills Limited came out with Initial Public Offering of 12,10,000 out of which50,000 shares were reserved for Promoters, Directors, Friends and Relatives and net offer to thePublic was 11,60,000 Equity Shares of Rs. 10/- each for cash at par and the issue opened for publicsubscription on 28th September 1981. The funds were raised for setting up of an integrated pulp andpaper plant for the manufacture of writing and printing paper as well as wrapping paper with anannual installed capacity of 9,400 tons of wide varieties of paper at Industrial Area, Rae Bareily.
• Shree Bhawani Paper Mills Limited came out with Rights Issue of 12,60,000 Equity Shares ofRs. 10/- each for cash at par and the issue opened for Public subscription on 24th December 1992.The main object of the issue to augment the long term working capital resources of the Company tothe extent of Rs. 84.00 Lacs and to finance import of essential spare amounting to Rs. 42. 00 Lacs.
Outstanding Debentures and other instruments issued by the Company
As on date, there are no outstanding debentures or any other instruments issued by the Company.
The Company’s shares are listed on BSE and these shares are actively traded on the Bombay Stock ExchangeLimited, Mumbai. The Company’s stock market data has been given for BSE. The high and low closing pricesrecorded on BSE for the preceding three years and the number of shares traded on the days the high and lowprices were recorded are stated below:
BSE
*Average calculated as mean of closing high and low prices.
(Source: Official website of The Bombay Stock Exchange Ltd, Mumbai: www.bseindia.com)
Monthly high and low prices for the preceding six months and volume of transactions on the respectivedates of high and low:
BSE
*Average calculated as mean of closing high and low prices.
(Source: Official website of The Bombay Stock Exchange Ltd, Mumbai: www.bseindia.com)
Week end price of equity shares of SBPML on BSE:
(Source: Official website of The Bombay Stock Exchange, Mumbai: www.bseindia.com)
Market price was Rs.30.05 (Closing price) on 12th September 2005, the trading day immediately following theday on which Board Meeting was held, 11th September 2005 to approve the present Rights Issue.
The Closing Market Price of the Equity Shares of the Company on 10.03.2006 at BSE was Rs. 15.70.
Investors’ Grievances and Redressal System
The Company has appointed M/s. Skyline Financial Services Pvt. Ltd. as Registrar cum Share Transfer Agents.All the complaints received up to 17.03.2006 were attended to and disposed off. There is no complaint pendingas on 18.03.2006.
All grievances relating to the issue may be addressed to the Registrars to the issue, giving full details such asfolio number, DP ID/ Client ID number, name and address of the first applicant, number of Equity Shares
applied for, CAF serial number, amount paid on application and the collection center where the applicationwas deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the samedetails of the renouncee should be furnished.
The average time taken by the Registrars for attending to routine grievances will be 10 days from the date ofreceipt of complaints. In case of non-routine grievances where verification with other agencies is involved, itwould be endeavor of the Registrars to attend to them as expeditiously as possible. The Company undertakesto resolve its investor grievances in a timely manner. Investors can also address their grievances to theCompliances, with the Registrars so that the same are resolved expeditiously.
Changes in the Auditors in the last Three Years
There has been a change in the Auditors of the Company in the last 3 Years, as M/s. B. Chhawchharia & Co.,Chartered Accountants, Kolkata have expressed their inability to continue as Statutory Auditor of the Companyvide their letter dated 7th July, 2004, M/s. P.L.Gupta & Co. Chartered Accountants – Kanpur, have been appointedon 27th September, 2004.
Capitalization of Reserves or Profits
There has been no capitalization of reserves or profits in the last five years.
Revaluation of Assets
There has been no revaluation of reserves or profits in the last five years.
Option to Subscribe
The Investors have an option to subscribe to the shares of the Company either in the physical form ordematerialized form. Applicants must indicate in the application form the number of shares they wish toreceive in dematerialized and physical form out of the total number of shares applied for. In case of partialallotment, shares will be first allotted in dematerialized form and the balance Equity Shares; in excess of theapplicant’s request for Equity Shares in dematerialized form will be allotted in physical form. Shareholdersopting to receive Equity shares in physical mode will be issued a consolidated Equity Share certificate for allthe Equity Shares allotted to them in this Offer.
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SHREE BHAWANI PAPER MILLS LIMITED
VI. OFFERING INFORMATION
TERMS OF THE PRESENT ISSUE
The Equity Shares now being offered are subject to the terms and conditions of this Letter of Offer, theenclosed Composite Application Form (“CAF”), the Memorandum and Articles of Association of the Company,Foreign Exchange Management Act, 1999 (FEMA) and the provisions of the Companies Act, 1956, guidelinesissued by Securities and Exchange Board of India, guidelines, notifications and regulations for issue of capitaland for listing of securities issued by Government of India and/ or other statutory authorities and bodies fromtime to time, terms and conditions as stipulated in the allotment advice or Intimation of Allotment or SecurityCertificate and rules as may be applicable and introduced from time to time.
AUTHORITY FOR THE PRESENT ISSUE
The Board of Directors of the Company (hereinafter referred to as “The Board”) pursuant to the Resolutionpassed at the Extra-Ordinary General Meeting held on 6th August 2005 have decided to offer 1, 23, 18,000Equity Shares on Rights basis to the existing Equity Shareholders of the Company at a price of Rs.12.50/- inthe Ratio of Three Equity Shares for every One Equity Share held [3:1] on Record Date i.e. 10.03.2006 aggregatingto Rs.1539.75 Lacs.
The present issue of Equity Shares is being made pursuant to the Board Resolution passed at the Board ofDirectors meeting held on 11th September 2005 for specific approval of the Rights Issue. This Letter of Offer hasbeen approved at the Board meeting held on 18th March 2006.
BASIS OF OFFER
The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whosenames appear on the Register of Members of the Company and the names of the beneficial Equity Owners asprovided by the Depositories at the close of business hours on Record Date i.e. 10.03.2006 fixed in consultationwith The Bombay Stock Exchange Ltd., Mumbai (The Designated Stock Exchange). The equity shares arebeing offered for subscription in the ratio of Three Equity Shares for every One Equity Share held by the EquityShareholders.
RIGHTS ENTITLEMENT
As your name appears on the Register of Members of the Company as an Equity Shareholder on 10.03.2006,being the Record Date, you are being offered in the ratio of Three Equity Shares for every One Equity Shareheld as shown in Part A of the enclosed Composite Application Form.
FACE VALUE
The Equity Shares of the Issuer Company is of face value of Rs 10/- and is being offered at a premium ofRs.2.50/- per share (Issue Price of Rs.12.50/-) .
ISSUE PRICE
As per Clause 3.1.1 of the SEBI (DIP) Guidelines a listed Company whose Equity Shares are listed on a StockExchange, may freely price its equity shares and any security convertible into equity at a later date, offeredthrough a Public or Rights issue.
Withdrawal of Rights Issue
The Company shall not withdraw rights issue after Announcement of record date in relation to such issue.
TERMS OF PAYMENT
The amount shall be payable as under:
On Application: An amount of Rs. 6.25 per Share, consisting of Rs. 5/- towards face value and Rs.1.25towards premium.
The Balance Rs. 6.25 per Share, consisting of Rs. 5/- towards face value and Rs.1.25 towards premiumshall be payable on one call to be made by the Board of Directors within six months from the date ofallotment of the shares.
The Ordinary shares allotted in this Rights issue will be initially listed as partly paid up shares. For thepayment of Call money, the Company will fix a Record Date after obtaining the necessary permissions
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from The Bombay Stock Exchange Ltd., Mumbai and issue call notices to all the members holdingpartly paid up shares as on the record date, in accordance with the provisions of the Act. The aforesaidmembers are required to make the payment of call money with in 30 days of date of issuance of CallNotices. Further, no trading in partly paid up shares will be allowed after Record Date.
The Shares offered through this Right issue shall be made fully paid up or may be forfeited on failure ofpayment of call as the case may be within 6 months from the date of allotment of shares.
Non-Payment of Call Money
Failure to pay the amount due on call on or before the appointed date for payment thereon will render theallottees liable to pay interest not exceeding 18% per annum or such other lower rate as the Board of Directorsmay determine on the amount outstanding from the date so appointed for payment thereof to the time of actualpayment and will also render the Equity Shares including the amount already paid thereon liable for forfeiture interms of the Articles of Association of the Company
MARKET LOT
Since the shares of the Company are tradable in compulsory demat segment the minimum trading lot is oneEquity Share.
ISSUE OF SHARE CERTIFICATE
In case of physical certificates, the Company would issue one Certificate for the Equity Shares allotted to oneperson (“Consolidated Certificate”). In respect of consolidated certificate, no fee would be charged by theCompany for splitting the consolidated certificate.
For shareholders seeking allotment in physical form, one single consolidated certificate shall be issued againsttheir entitlement unless otherwise desired by the shareholder(s). The Company shall split the shares and returnthe same to the shareholder, into lots as specified and specifically requested in writing by the shareholder (whoholds physical certificates) within 7 days from the date of receipt of such request by the Company.
RANKING OF EQUITY SHARES
The Equity Shares arising from this issue shall subject to the Memorandum and Articles of Association of theCompany rank pari-passu in all respects with the existing Equity Shares of the Company except dividend.Dividend on such shares shall be pro-rata on the amount standing paid up on each share on the date ofdeclaration of dividend or the record date as may be decided by the Board of Directors, subject to the conditionthat the partly paid shares shall not be entitled to any dividend declared, if any, for the financial year 2005-06.Company undertakes that at any given time there shall be only one denomination for the Equity Sharesrespectively of the Company issued under this Rights Issue and that it will comply with such disclosure andaccounting norms as specified by SEBI from time to time.
RIGHTS OF SHARE HOLDERS
Subject to applicable laws, the equity shareholders shall have the following rights :
� Right to receive dividend, if declared;
� Right to attend general meetings and exercise voting powers, unless prohibited by law;
� Right to vote on a poll either in person or by proxy;
� Right to receive offers for rights shares and be allotted bonus shares, if announced;
� Right to receive surplus on liquidation;
� Right to free transferability; and
� Such other rights, as may be available to a shareholder of a listed public company under the CompaniesAct and Memorandum and Articles of the Company.
ACCEPTANCE OF OFFER
You may accept this offer either in full or in part. Please fill up Part A of the CAF for the number of EquityShares you would like to subscribe and submit the same together with the application money in the prescribedmanner to the Bankers to the Issue mentioned on the reverse of the CAF or to the Registrars to the Issue, asthe case may be, before the close of banking hours on 11.05.2006.
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ADDITIONAL EQUITY SHARES
You are eligible to apply for additional equity shares provided you have applied for all the Equity sharesoffered to you without renouncing them in full or in part.
The Application for additional Equity shares shall be considered and allotment shall be made at the solediscretion of the Board and in consultation if necessary with the Designated Stock Exchange. This allotmentof additional equity shares will be made on an equitable basis with reference to the no. of shares held by youon the Record Date.
Renouncees can apply for additional shares.
OFFER TO NON RESIDENT/FIIs SHAREHOLDERS
As on Record date, 2185 Equity shares aggregating to 0.05% of the present issued capital are held by NRIs/FIIs. As per the notification no. FEMA/20/2000-RB dated May 05, 2000 issued by RBI general permission isgranted to FIIs/ NRIs to invest in Indian companies subject to certain conditions. In the case of FIIs, the totalholding of each FII/SEBI approved sub account shall not exceed 10% of the total paid up capital of the issuerCompany and the total holdings of all FIIs/sub-accounts of FIIs put together shall not exceed 24% of the paid-up capital. In the case of NRIs under Portfolio Investment Scheme (“PIS”) it is to be ensured that the paid-upvalue of shares purchased by an NRI under PIS route should not exceed 5% of the paid up capital. The aggregatepaid-up value of shares purchased by all NRIs should not exceed 10% of the paid-up capital of the Company.The Company is required to file the declaration in prescribed form to the concerned Regional Office of RBIwithin 30 days of allotment of equity shares to FIIs/NRIs on repatriation basis.
NOMINATION FACILITY
The applicant may indicate the name of the nominee in the CAF, in respect of the Equity Shares that may beallocated to him or for the existing shares. As per Section 109A of the Companies Act, a holder of sharesmay, at any time, nominate, in the prescribed manner, a person to whom his Equity Shares in the Companyshall vest, in the event of his death. Please ensure that the Bank account details in the application form arefilled in the space provided for the purpose. Applications without these details are liable to be rejected.
JOINT HOLDERS
Where two or more persons are registered as the holders of any Shares, they shall be deemed to hold thesame as joint tenants with benefits of survivorship subject to other provisions contained in the Articles.
NOTICES
All Notices to the Equity shareholder(s) required to be given by the Company in connection with the Issueshall be published in one English national daily with wide circulation, one Hindi national daily with widecirculation, one regional language daily in Allahabad being the place where the Registered Office of theCompany is situated and/or will be sent by ordinary post to the registered holders of the Equity Share(s) fromtime to time.
ISSUE OF DUPLICATE EQUITY SHARE CERTIFICATE
If any Equity Share is/are mutilated or defaced or the pages for recording transfers of Equity Share are fullyutilized, the Company against the surrender of such Certificate(s) may replace the same. Provided, where theEquity Share Certificate(s) are mutilated or defaced, the same will be replaced as aforesaid only if the Certificatenumbers and the Distinctive numbers are legible. If any Equity Shares Certificate is destroyed, stolen or lost, thenupon production of proof thereof to the satisfaction of the Company and upon furnishing such indemnity/ suretyand/or documents as the Company may deem adequate, duplicate Equity Share Certificate(s) shall be issued.
RENUNCIATION
You may renounce all or any of the equity shares you are entitled to in favor of any individual, limited Companies,or statutory corporations / institutions. However renunciation in favor of more than three persons as jointholders, trust or society (unless the same is registered under the Societies Registration Act, 1860 or anyother applicable trust laws and is authorized under its constitution to hold shares in a Company), minors(unless acting through natural or legal guardians), Partnership Firms, or their nominees, or any of them willnot be accepted.
Any renunciation from Resident(s) to Non- Resident(s), Non-Resident(s) to Non-Residents or from Non-Residents to Resident(s) subject to the renouncer(s) / renouncee(s) obtaining requisite approval(s) of theReserve Bank of India (RBI) under the provisions of the Foreign Exchange Management Act, 1999, and otherapplicable laws and such permission should be attached with the CAF.
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PROCEDURE FOR RENUNCIATION
(a) To Renounce in WHOLE If you wish to renounce this offer in whole, please complete PART ‘B’ of theComposite Application Form (CAF) enclosed with the Letter of Offer for the number of equity sharesrenounced and deliver the CAF duly signed to the person(s) in whose favor the equity shares are sorenounced. In case of joint holding, all joint holders must sign as per specimen signatures recordedwith the Company at the place provided for the purpose and in the same order. The person(s), inwhose favor the offer has been renounced (renounces) should complete and sign PART C of the CAF.In case of joint renounces, all joint renounces must sign.
(b) To Renounce in Part If you wish to accept this offer in part and renounce the balance of this offer theCAF must first be split into the requisite number of forms, by applying to the Registrar to the Issue.Please indicate your requirement of split forms in the space provided for this purpose in PART D of theCAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close ofbusiness hours on or before the last date for receiving requests for split forms, (i.e. 26.04.2006). Onreceipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraphabove shall have to be followed.
If you wish to apply for equity shares jointly with any person(s) who is/are not already joint holder(s)with you, then it would amount to renunciation and the procedure of renunciation as mentioned aboveshall have to be followed. Even a change in the sequence of the name of joint holders shall amount torenunciation and the procedure as stated above shall have to be followed.
Further, this right of renunciation is subject to the express condition that the Board shall be entitled inits absolute and unqualified discretion to reject any such request for allotment of equity shares fromrenouncee(s) without assigning any reason thereof save where the equity shares have been renouncedin favor of a person who is already a member of the Company.
In case the signature of the shareholder(s) who has renounced the Rights Equity Shares, does notmatch with the specimen registered with the Company, the application will be rejected.
(c) Renouncee(s)
The person in whose favor the instruments are renounced should fill in and sign Part C and submit theentire CAF to the Bankers to the Issue on or before 11.05.2006 along with the application money.Change and/or introduction of additional holders If you wish to apply for Equity Shares jointly withany other person or persons, not more than three, who is/are not already joint holders with you, it shallamount to renunciation and the procedure as stated above for renunciation shall have to be followed.Even a change in the sequence of the name of joint holders shall amount to renunciation and theprocedure, as stated above, shall have to be followed.
Please note that:
a. Part A of the CAF must not be used by any person(s) other than those in whose favor this offer hasbeen made. If used, this will render the application invalid.
b. Request for split forms, one for each of the renouncee(s) and one for the renouncer, should be madefor all the Equity Shares applied for.
c. Only the person to whom this Letter of Offer has been addressed shall be entitled to apply for splitforms. Forms once split cannot be split again.
d. Renouncee(s) cannot apply for split forms.
e. Split form(s) will be sent to the applicant(s) by post at the applicant’s risk.
REQUEST FOR SPILT FORMS:
• Request for Split Forms should be addressed to the Registrar to the Issue so as to reach them on orbefore the last date for receiving of request for split forms by filling in PART D of the CAF.
• Requests for Split Forms will be entertained only once.
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HOW TO APPLY
Applications should be made only on the enclosed CAF provided by the Company. The enclosed CAF shouldbe completed in all respects, as explained in the INSTRUCTIONS indicated in the CAF before submitting it tothe Bankers to the Issue or the Registrars to the Issue. Different parts of the CAF should not be detached underany circumstance. Detailed instructions as to how to apply have been given in the CAF.
All applications are to be made only on the printed CAF provided by the Company or on blank paper in case ofnon-receipt of CAF. You may exercise any of the following options with regard to the Equity Shares/offered toyou, using the enclosed CAF:
Availability of duplicate CAF
In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issuea duplicate CAF on the request of the applicant who should furnish the registered folio number/ DP and ClientID No. and his / her full name and address to the Registrar to the Issue. Please note that those who aremaking the application in the duplicate form should not utilise the original CAF for any purpose includingrenunciation, even if it is received/ found subsequently. If the applicant violates any of these requirements,he/ she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted alongwith the applications.
APPLICANTS RESIDING AT PLACES OTHER THAN DESIGNATED COLLECTION CENTRES.
Applicants residing at places other than the cities where the bank collection centres have been openedshould send their completed CAF by registered post to the Registrars to the Issue along with bank drafts netof demand draft and postal charges payable at New Delhi in favour of “SHREE BHAWANI-RIGHTS ISSUE”crossed “A/c Payee only” so that the same are received on or before closure of the Issue (i.e. 11.05.2006).
The Company shall not be liable for any postal delays and applications received through mail after theclosure of the Issue are liable to be rejected and returned to the applicants. Applications by mail should notbe sent in any other manner except as mentioned above.
All CAFs duly completed together with cash/cheque/demand draft must be submitted before the closure ofthe Issue to the Bankers to the Issue named herein or to any of its collection centres mentioned on thereverse of the CAF. The CAF along with application money must not be sent to the Company or the LeadManagers to the Issue or the Registrars to the Issue except as mentioned above.
The applicants are requested to strictly adhere to these instructions. Failure to do so could result in theapplications being liable to be rejected, and the Company, the Lead Managers and the Registrars to theIssue will not have any liability to such applicants.
In case the original CAF is not received by the shareholder or is lost, misplaced, he/she may request theRegistrars to the issue for a duplicate CAF by furnishing the registered folio number/DP ID/Client ID numberand their full name and address.
In case the original and duplicate CAFs are lodged for subscription, allotment will be made on the basis of theduplicate CAF and the original CAF will be ignored.
APPLICATION ON PLAIN PAPER
An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAFmay make an application to subscribe to the Rights Issue on plain paper, along with an Account Payee Cheque/ Demand Draft payable at New Delhi which should be drawn in favor of “SHREE BHAWANI-RIGHTS ISSUE“and send the same by registered post directly to the Registrar to the Issue. The application on plain paper, dulysigned by the applicants including joint holders, in the same order as per specimen recorded with the Companyshould contain the following particulars:
1. Name of the shareholder including joint-holders
2. Address of sole / first holder
3. Folio No./DP ID Number and Client ID Number
4. Number of shares held as on 10.03.2006 (Record Date)
5. Certificate numbers and Distinctive numbers, if held in physical form
6. Number of shares to which entitled
7. Number of shares applied for, out of entitlement
8. Number of additional shares applied for, if any
9. Total number of shares applied for
10. Amount payable on application
11. Particulars of Cheque/Draft enclosed
12. Savings/Current Account Number and Name and Address of the Bank
13. PAN/GIR number and Income tax Circle/Ward/District of the sole/all the joint applicants where theapplication is for shares of a value of Rs.50,000/- or more
14. In case of Non-Resident shareholders, NRE/FCNR/NRO Account No., name and address of the bankand branch.
15. Signature of shareholders in the same order as appearing in the records of the Company.
Please note that those who are making the application on plain paper shall not be entitled to renouncetheir rights and should not utilise the CAF for any purpose including renunciation even if it is receivedsubsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejectionof both the applications. The Company shall refund such application amount to the applicant withoutany interest thereon.
GENERAL INSTRUCTION FOR Applicants
(a) Please read the instructions printed on the enclosed CAF carefully.
(b) Application should be made on the printed CAF, provided by the Company except as mentionedunder the head ‘Application on Plain Paper’ in the Letter of Offer and should be complete in allrespects. The CAF found incomplete with regards to any of the particulars required to be giventherein, and/or which is not completed in conformity with the terms of this Letter of Offer is liable tobe rejected and the money paid, if any, in respect thereof will be refunded without interest (if refundedwithin stipulated time). The CAF must be filled in English and the names of all the applicants, detailsof occupation, address, father’s/husband’s name must be filled in block letters.
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(c) Signatures should be either in English or Hindi or the languages specified in the Eighth Schedule tothe Constitution of India. A Notary Public or a Special Executive Magistrate under his/her official sealmust attest signatures other than in the aforesaid languages or thumb impression.
(d) In case of an application under Power of Attorney or by a body corporate or by a society, a certifiedtrue copy of the relevant Power of Attorney or relevant resolution or authority to make investment andsign the application along with the copy of the memorandum and articles of association and/or byelaws must be lodged with the Registrars to the Issue giving reference of the serial number of the CAF.In case the above-referred documents are already registered with the Company, the same need notbe furnished again. However, the serial number of registration or reference of the letter, vide whichthese papers were lodged with the Company/Registrar must be mentioned just below the signature(s)on the application. In no case should these papers be attached to the application submitted to theBankers to the Issue.
(e) The shareholders must sign the CAF as per the specimen signature recorded with the Company. Incase of joint holders, all joint holders must sign the relevant part of the CAF in the same order and asper the specimen signature(s) recorded with the Company. Further, in case of joint applicants who arerenouncees, the number of applicants should not exceed three.
(f) In case of joint applicants, reference, if any, will be made in the first applicant’s name and allcommunication will be addressed to the first applicant at the address given in the CAF.
(g) In case a Non-Resident or NRI shareholder has specific approval from the RBI in connection with hisshareholding, he should enclose a copy of such approval with the CAF. Application(s) received fromNon-Resident, NRIs, or persons of Indian origin residing abroad for allotment of Equity Shares shall,inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in thematter of refund of application money, allotment of Equity Shares, subsequent issue and allotment ofEquity Shares, dividend, export of Equity Shares certificates, etc. In case a Non-Resident or NRIshareholder has specific approval from the RBI, in connection with his shareholding, he should enclosea copy of such approval with the CAF.
(h) Bank Account Details: It is mandatory for the applicant to mention the applicant’s savings bank/current account number and the name of the bank with whom such account is held in the spaceprovided in the CAF, to enable the Registrars to the Issue, to print the said details in the refund ordersafter the name of the payees. Such applications not containing the above details are liable to berejected.
(i) PAN/GIR Number: Where an application for allotment of shares individually is for a total valueof Rs. 50,000/- or more i.e. the total number of shares applied for multiplied by the issue price isRs. 50,000/- or more, the applicant or in case of applications in joint names, each of theapplicant(s) should mention their Permanent Account Number (PAN) allotted under the Income-tax Act, 1961 or where the same has not been allotted, the GIR number under the Income taxCircle/Ward/District. In case where neither the PAN nor the GIR number has been allotted, thefact of non-allotment should be mentioned in the CAF. CAF without this information will beconsidered incomplete and will be liable to be rejected.
(j) Payment by cash: The payment against the share application should not be effected in cash if theamount to be paid is Rs. 20,000/- or more. In case payment is effected in contravention of this, theapplication will be deemed invalid and the application money will be refunded and no interest will bepaid thereon (if refunded within stipulated time) .
(k) All communication in connection with application for the shares, including any change in address ofthe shareholders should be addressed to the Registrars to the Issue quoting the name of the first/sole applicant shareholder, folio number and CAF number.
(l) Split Forms cannot be re-split.
(m) Only the person or persons to whom equity shares have been offered and not renouncee(s) shall beentitled to obtain Split Forms.
(n) Nomination: The sole Shareholder or first Shareholder, along with other joint Shareholder (beingindividual(s)) may nominate any person(s) who, in the event of the death of the sole holder or all thejoint-holders, as the case may be, shall become entitled to the Equity Shares. Person(s), being a
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nominee, becoming entitled to the Equity Shares by reason of the death of the original Shareholder,shall be entitled to the same advantages to which he would be entitled if he were the registeredholder of the Shares. Where the nominee is a minor, the Shareholder(s) may also make a nominationto appoint, in the prescribed manner, any person to become entitled to the Shareholder(s), in theevent of death of the said holder, during the minority of the nominee. A nomination shall standrescinded upon the sale of the Equity Shares by the person nominating. A buyer will be entitled tomake a fresh nomination in the manner prescribed. When two or more persons hold the EquityShare, the nominee shall become entitled to receive the Equity Shares only on the demise of all theholders. Fresh nominations can be made only in the prescribed form available on request at theRegistered Office of the Company or Company’s share transfer agents or such other person at suchaddresses as may be notified by the Company. Applicant can make the nomination by filling in therelevant portion in the CAF.
(o) In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separatenomination for the Equity Shares to be allotted in this Issue. Nominations registered with respectivedepository participant of the Applicant would prevail. If the Applicant requires changing the nomination,they are requested to inform their respective depository participant.
(p) All inquiries in connection with this Letter of Offer or accompanying Composite Application Form andrequests for split application forms must be addressed (quoting the Registered Folio Number/DP andClient ID Number, the CAF(s) number and the name of the first equity shareholder as mentioned onthe CAF(s) and superscribed “SHREE BHAWANI-RIGHTS ISSUE” on the envelope) to the Registrarsto the Issue at the following address:
Skyline Financial Services Pvt. Ltd.
#123, Vinoba Puri, Lajpat Nagar - II, New Delhi– 110024
The issue of shares are subject to the Risk factors appearing on the page no. 4 of this offer letter.
(q) The Rights issue will not be kept open for more than 30 days unless extended in which case it will bekept open for a maximum of 60 days
MODE OF PAYMENT
For Resident Shareholders
Only one mode of payment per application should be used. The payment must be either in cash or by cheque/demand draft drawn on any of the banks, which is situated at, and is a member or a sub member of the BankersClearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted.A separate cheque/ draft must accompany each CAF. Outstation/post-dated cheques or and postal/ moneyorders will not be accepted and applications accompanied by any such instruments will be rejected. The Registrarsto the Issue will not accept cash along with the CAF.
All cheques/ drafts accompanying the CAF should be drawn in favor of the Bankers to the Issue (specified onthe reverse of the CAF) crossed “A/C Payee only” and marked “SHREE BHAWANI-RIGHTS ISSUE”. No receiptwill be issued for application money received. Please note that applicants should not deduct any bank chargesor postal charges while remitting the application money.
Applicants residing at places other than places where the bank collection centers have been opened by theCompany for collecting applications, are requested to send their applications together with Demand Draft (netof DD and postal charges) drawn in favor of “SHREE BHAWANI-RIGHTS ISSUE” and marked “A/c payeeonly” payable at New Delhi, directly to the Registrars to the Issue by REGISTERED POST so as to reachthem on or before the closure of the Issue.
No receipt will be issued for the application money received. However, the Collection Centre receiving theapplication will acknowledge receipt of the application by stamping and returning the acknowledgement slipat the bottom of each CAF. The Company or the Registrars to the Issue is not responsible for any postaldelay/ loss in transit on this account, if any.
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For Non-Resident Applicants/FIIs
As regards the application by Non-Resident shareholders, the further conditions as given below shall apply.As per notification No. FEMA 20/2000-RB dated May 3, 2000 of the RBI, the RBI has given general permissionto Indian companies to issue shares on Rights/Bonus shares to Non-Resident Indians. Hence the Companydoes not need in-principle permission from RBI for Issue of shares to Non-Resident Indians, on a repatriablebasis, up to their entitlement.
Payment by NRIs/FIIs must be made by Demand Draft/Cheque payable at New Delhi in any of the following ways:
Applications with Repatriation benefits
a. By Indian Rupee drafts purchased abroad and payable at New Delhi; OR
b. By cheque/draft on a Non-Resident External Account (NRE) or FCNR Account maintained in NewDelhi; OR
c. Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in India and payable inNew Delhi;
d. FIIs registered with SEBI must remit funds from special Non-Resident Rupee deposit account.
Application without Repatriation Benefits
As far as NRIs holding shares on non-repatriation basis is concerned, in addition to the ways specified above,payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account maintained in NewDelhi or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at New Delhi.In such cases, the allotment of Equity Shares will be on non-repatriation basis.
All cheques/drafts submitted by NRIs/FIIs should be drawn in favour of “SHREE BHAWANI-RIGHTS ISSUE-NRI” payable at New Delhi and must be crossed “A/c Payee only” for the amount payable. The CAF dulycompleted together with the amount payable on application must be deposited with the collecting bank indicatedon the reverse of the CAF before the close of banking hours on the issue closing date. A separate cheque orbank draft must accompany each CAF.
Applicants may note that where payment is made by drafts purchased from NRE/FCNR/NRO accounts as thecase may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has beenissued by debiting the NRE/FCNR/NRO account should be enclosed with the CAF. Otherwise the applicationshall be considered incomplete and will be liable to be rejected.
Note: In case where repatriation benefit is available, dividend and sales proceeds derived from the investmentin shares can be remitted outside India, subject to tax, as applicable according to Income-tax Act, 1961. In caseEquity Shares are allotted on non-repatriation basis, the dividend/sale proceeds of the Equity Shares cannot beremitted outside India.
In case of applications received from Non-Residents, refunds and other distribution, if any, will be made inaccordance with the guidelines/rules prescribed by RBI as applicable at the time of making such remittanceand subject to necessary approvals.
Application will not be accepted by the Lead Manager or by the Company.
LAST DATE FOR APPLICATION
The last date for submission of CAF is 11.05.2006 (Thursday). The Board will have the right to extend the saiddate for such period as it may determine from time to time but not exceeding sixty days from the date the issueopens.
If the CAF together with the amount payable is not received by the Bankers to the Issue/Registrars to theIssue on or before the close of banking hours on the aforesaid last date or such date as may be extended bythe Board, the offer contained in this Letter of Offer shall be deemed to have been declined and the Boardshall be at liberty to dispose off the Equity Shares hereby offered, as provided under the heading “Basis ofAllotment”.
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DISPOSAL OF APPLICATIONS AND APPLICATION MONEY
No acknowledgment will be issued for the application moneys received by the Company. However, the Bankersto the Issue/Registrars to the Issue receiving the CAF will acknowledge its receipt by stamping and returningthe acknowledgement slip at the bottom of each CAF.
The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or inpart, and in either case, without assigning any reason.
In case an application is rejected in full, the whole of the application money received will be refunded withoutinterest and after deducting bank charges.
Wherever an application is rejected in part, will be refunded without interest and after deduction of bankcharges to the applicant within six weeks from the closure of the Issue.
SHAREHOLDER ELIGIBILITY
Vide Notification dated 18th June 2003, bearing number FEMA 94/2003, RBI has granted general permissionto Indian companies to issue shares on rights/bonus Equity Shares to existing Non-Resident shareholders.OCBs vide A.P (DIR Series) Circular No. 44, dated December 8, 2003 shall not be ineligible to apply / renouncein the issue. Further, any renunciations by Non-Resident(s) are may be subject to the renouncer(s) /renouncee(s) obtaining the necessary approval of the RBI under the provisions of the Foreign ExchangeManagement Act, 1999, and other applicable laws and such permission should be attached with the CAF.
In view of the above Non-Resident Shareholders of the Company would be entitled to apply for Equity Sharesto the extent of their entitlement as detailed in Part A of the attached CAF. The Non-Resident shareholdersand other Non-Resident entities can also apply for Equity Shares renounced in their favor by any other Non-Resident shareholder.
Further, resident shareholders would be entitled to apply for Equity Shares to the extent of their entitlementas detailed in Part A and can apply for additional Equity Shares as well as for Equity Shares renounced intheir favor by any other shareholder. They can renounce the Equity Shares offered either in full or partthereof.
Investors are advised to ensure that any application from them shall not exceed the investment limits ormaximum number of Equity Shares that can be held by them under the relevant regulations or statutoryguidelines.
PROCEDURE FOR APPLICATION
Please read the instructions printed overleaf on the enclosed CAF carefully.
Application should be made on the printed CAF, provided by the Company and should be completed in allrespects.
The CAF found incomplete with regard to any of the particulars required to be given therein, and/or which arenot completed in conformity with the terms of this Letter of Offer are liable to be rejected and the money paid,if any, in respect thereof will be refunded without interest (if refunded within stipulated period) and afterdeduction of bank commission and other charges, if any. The CAF must be filled in English and the names ofall the applicants, details of occupation, address, father’s/husband’s name, Bank Account Details must befilled in block letters.
The CAF together with cheque/demand draft should be sent to the Bankers to the Issue or to the Registrarsto the Issue and not to the Lead Managers to the Issue. Applicants residing at places other than cities wherethe branches of the Bankers to the Issue have been authorized by the Company for collecting applications,will have to make payment by Demand Draft payable at New Delhi and send their application forms to theRegistrars to the Issue BY REGISTERED POST after deducting DD and Postal Charges. If any portion(s) ofthe CAF is/are detached or separated, such application is liable to be rejected.
The payment against the application should not be effected in cash if the amount to be paid is Rs 20,000/- ormore. In case payment is effected in contravention of this, the application may be deemed invalid and theapplication money will be refunded and no interest will be paid thereon (if refunded within stipulated period).Payment against the application if made in cash, subject to conditions as mentioned above, should be madeonly to the bankers to the Issue or the Registrars to the Issue as mentioned above.
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Quoting of PAN/GIR No. in the application forms
Where an application is for allotment of securities in response to a rights issue, for a total value of Rs. 50,000/- or more, i.e. the total number of securities applied for multiplied by the issue price, is Rs. 50,000/- or morethe applicant or in the case of applications in joint names, each of the applicants, should mention his/herpermanent account number (PAN) allotted under the Income-Tax Act, 1961 or where the same has not beenallotted, the GIR number and the Income-Tax Circle/Ward/District. In case neither the PAN nor the GIRnumber has been allotted, the fact of non-allotment should be mentioned in the application forms. Applicationforms without this information will be considered incomplete and are liable to be rejected.
Thumb impressions and signatures other than in English, Hindi, Marathi or any other language specified inthe 8th Schedule to the Constitution of India, must be attested by a Magistrate or a Notary Public or a SpecialExecutive Magistrate under his/her official seal.
In case of an application under Power of Attorney or by a Body Corporate or by a Society, a certified true copyof the relevant Power of Attorney or relevant resolution or authority to make investment and sign the applicationalong with the copy of the Memorandum & Articles of Association and/or bye laws must be lodged with theRegistrars to the Issue giving reference of the serial number of the CAF within 7 days of closure of the Issue.In case the above referred documents are already registered with the Company, the same need not befurnished again; however, the serial number of registration or reference of the letter, vide which these paperswere lodged with the Company must be mentioned just below the signature(s) on the application. In no caseshould these papers be attached to the application submitted to the Bankers to the Issue.
APPLICATION BY MUTUAL FUNDS
A separate application can be made in respect of each scheme of an Indian Mutual Fund registered with theBoard and that such application shall not be treated as multiple applications. The applications made by theAMCs or Custodians of a Mutual Fund shall clearly indicate the name of the concerned scheme for whichApplication is being made.
In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as perthe specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees,the number of applicants should not exceed three.
In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communicationwill be addressed to the first applicant.
The shareholders must sign the CAF as per the specimen signatures recorded with the Company.
Application(s) received from Non-Residents, or persons of Indian origin residing abroad for allotment ofEquity Shares shall, inter-alia, be subject to conditions, as may be imposed from time to time by the RBIunder FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent issue andallotment of Equity Shares, dividend, export of share certificates, etc. In case a Non-Resident shareholderhas specific approval from the RBI, in connection with his/ her shareholding, the person should enclose acopy of such approval with the CAF.
All communication in connection with application for the Equity Shares, including any change in address ofthe shareholders should be addressed to the Registrars to the Issue quoting the name of the first/sole applicantshareholder, folio numbers and CAF number.
Split forms cannot be re-split.
Only the person or persons to whom Equity Shares have been offered shall be entitled to obtain split forms.
Renouncee(s) shall not be entitled to obtain split forms.
BASIS OF ALLOTMENT
The Basis of Allotment shall be finalized in consultation with the Designated Stock Exchange in the followingorder of priority:
(a) Full allotment to the Equity shareholders who have applied for their rights entitlement either in full orin part and also to the renouncees who have applied for shares renounced in their favor either in fullor in part.
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(b) Where in fractional entitlement is ignored, Preferential allotment of one additional share each to shareholders whose fractional rights have been ignored and have applied for additional shares.
(c) Allotment to the shareholders who having applied for all the shares offered to them as rights have alsobeen applied for additional Equity Shares. The Allotment of such additional shares will be made as faras possible on equitable basis with reference to number of Equity Shares held on 10.03.2006, i.e.Record Date, in consultation with the Designated Stock Exchange.
(d) Allotment to renouncees who having applied for all the Equity Shares renounced in their favor haveapplied for additional Equity Shares, provided there is a surplus remaining after ‘a’ ‘b’ and ‘c’ above.
(e) Allotment to any other person as the board may in its absolute discretion deems fit provided there is asurplus available after making allotment under (a), (b), (c) and (d) above.
The Company expects to complete the allotment of Equity Share within a period of 30 days from thedate of closure of the subscription list in accordance with the listing agreement.
PROCEDURE FOR REFUND/ALLOCATION
1. The Issuer Company reserves, at its sole, absolute and uncontrolled discretion and without assigningany reason therefor, the right to accept or reject any application in whole or in part. If any applicationis rejected in full, the whole of the application money received will be refunded to the applicant. If anapplication is accepted in part, the excess application money received, if any, will be refunded to theapplicant in terms of section 73 of the Act (within six weeks from the date of closure of the subscriptionlist).
2. Letters of allocation / letters of regret along with refund cheques or pay orders of valueover Rs.1500/- if any will be dispatched by registered post at the applicants’ risk, within sixweeks from the closure of subscription list and if such money is not repaid within 8 daysfrom the day the Company becomes liable to pay it, the Company and every Director of theCompany who is an Officer in default, shall, on and from the expiry of the 8th day be jointly andseverally liable to repay that money with interest as prescribed under Section 73 of the Act.
3. Refunds will be made by refund orders or pay orders drawn on the Company’s Bankers and BankCharges, if any, for en cashing such refund orders or pay orders will be borne by the applicant. Suchrefund orders or pay orders will however be payable at par at all centers where applications areaccepted. In case of Joint Applications, refund pay Orders, if any will be made out to the first nameapplicant and all communications will be addressed to the applicant whose name appears first at his/her address as stated in the application form. All Cheques, pay orders of value over Rs.1500/-, lettersof allocation and share certificates (as the case may be) will be dispatched to the applicant at his/herregistered address and at the risk of the applicant by registered post. Refund Orders of value not overRs.1500/- will be dispatched under Certificate of Posting.
4. The funds received against this rights issue to be kept in a separate bank account and the Companywill not have any access to such funds unless it satisfies BSE (Designated Stock Exchange) withsuitable documentary evidence that the minimum subscription of 90% of the issue has been receivedby the Company.
5. The Issuer Company undertakes to make available to the Registrars to the Offer, adequate funds forthe purpose of dispatch of refund orders/allocation letters by registered post.
“INTIMATION OF ALLOTMENT AND REFUND ORDERS
The Company will issue and dispatch Intimations of allotment/ Security Certificates and/ or letters of regretalong with refund order or credit the allotted securities to the respective beneficiary accounts, if any within aperiod of 42 Days from the date of closure of the Issue. If such money is not repaid within 8 days from the daythe Company becomes liable to pay it, the Company shall pay that money with interest as stipulated underSection 73 of the Act.”
The Ordinary shares allotted in this Rights issue will be initially listed as partly paid up shares. For thepayment of Call money, the Company will fix a Record Date after obtaining the necessary permissionsfrom the Stock Exchange, Mumbai and issue call notices to all the members holding partly paid upshares as on the record date, in accordance with the provisions of the Act. The aforesaid members
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are required to make the payment of call money with in 30 days of date of issuance of Call Notices.Further, no trading in partly paid up shares will be allowed after Record Date.
For Non-Resident applicants, refunds, if any, will be made as under :
Where applications are accompanied by Indian rupee drafts purchased abroad and payable at New Delhi,India, refunds will be made in convertible foreign exchange equivalent to Indian rupees to be refunded. Indianrupees will be converted into foreign exchange at the rate of exchange, which is prevailing on the date of refund.The exchange rate risk on such refunds shall be borne by the concerned applicant and the Company shall notbear any part of the risk.
Where the applications made are accompanied by NRE/FCNR/NRO cheques, refunds will be credited to NRE/FCNR/NRO accounts respectively, on which such cheques were drawn and details of which were provided inthe CAF.
PRINTING OF BANK PARTICULARS ON REFUND ORDERS
As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement,the particulars of the applicant’s bank account are mandatory and are to be provided for printing on the refundorders. Bank account particulars will be printed on the refund orders, which can then be deposited only in theaccount specified. The Company will in no way be responsible if any loss occurs through these instrumentsfalling into improper hands either through forgery or fraud.
DESPATCH OF ALLOTMENT/SHARE CERTIFICATES/ REFUND ORDERS
Share Certificates for the Equity Shares or Letters of Regret, as the case may be, together with Refund Ordersif any, will be dispatched within 6 weeks from the date of closure of the issue. The Company shall ensuredispatch of the refund orders of value up to Rs. 1500 under Certificate of Posting and those over Rs. 1500 andshare certificates by Registered Post only. Adequate funds for the purpose will be available to the Registrars tothe Issue for mailing the share certificates by Registered Post. Particulars of the applicant’s Savings/CurrentBank Account may be given in the space provided thereof in the application form so as to enable the Registrarsto the Issue to print the same on the refund order, if any.
As regards allotment/refund to Non-Residents, the following further conditions shall apply: In case of NRIs, whoremit their application monies from funds held in NRE/FCNR accounts, refunds and/or payment of dividend andother disbursement, if any, shall be credited to such accounts, details of which should be furnished in the CAF.Subject to the approval of the RBI, in case of NRIs/Non Residents, who remit their application monies throughIndian Rupee draft purchased from abroad, refund and/or payment of dividend and any other disbursement,shall be credited to such accounts, details of which should be furnished in the CAF. Subject to the approval ofRBI, in case of NRIs/Non Residents, who remit their application monies through Indian Rupee draft purchasedfrom abroad, refund and/or payment of dividend and any other disbursements will be made net of bank charges/commission in U.S Dollars, at the rate of exchange prevailing at such time.
The Company will not be responsible for any loss on account of exchange fluctuations for converting the IndianRupee amount into U.S Dollars. The share certificates for the Equity Shares will be sent by registered post atthe address of the NRI / Non-Resident applicant.
INTEREST IN CASE OF DELAY IN DESPATCH OF ALLOTMENT / REFUND ORDERS
The Company agrees that:
(i) Allotment of securities hereby offered shall be made within a period of 30 days of the date of closureof the issue.
(ii) If Allotment is not made and /or Share certificate / Intimation of Allotment or letter of regret togetherwith refund order are not dispatched within 8 days from the day the Company becomes liable to payit, the Company shall, as stipulated under sections 73(2)/73 (2A) of the Companies Act, 1956, paythat money with interest.
UNDERTAKINGS BY THE COMPANY
The Company has given undertakings that:
i. the complaints received in respect of the Issue shall be attended to by the Company expeditiouslyand satisfactorily;
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ii. the Company shall take necessary steps for the purpose of getting the securities listed in the concernedstock exchange within the specified time;
iii. the funds required for dispatch of refund orders/allotment letters/certificates by Registered Postshall be made available to the Registrars to the Issue by the Company;
iv. the dispatch of share certificates/refund orders and demat credit shall be completed and allotmentand listing documents will be submitted to the Stock Exchange within the specified time limit.
v. the certificates of the securities/refund orders to the Non-Residents shall be dispatched within specifiedtime;
vi. no further issue of securities shall be made till the securities offered through this Offer Letter are listedor till the application moneys are refunded on account of non-listing, under-subscription etc.
UTILISATION OF ISSUE PROCEEDS
The Board of Directors undertake that:
(a) all monies received out of this Rights Issue shall be transferred to a separate bank account other thanthe bank account referred to in sub-section (3) of section 73;
(b) Details of all monies utilized out of this Rights Issue referred to in sub-item (a) shall be disclosedunder an appropriate separate head in the balance-sheet of the Company indicating the purpose forwhich such monies had been utilized; and
(c) Details of all unutilized monies out of this Rights Issue, if any, referred to in sub item (a) shall bedisclosed under an appropriate separate head in the balance-sheet of the Company indicating theform in which such unutilized monies have been invested.
The sum received against the rights issue to be kept in a separate bank account and the Company willnot have any access to such funds unless it satisfies BSE (Designated Stock Exchange) with suitabledocumentary evidence that the minimum subscription of 90% of the issue has been received by theCompany.
OPTION TO INVESTORS TO APPLY FOR EQUITY SHARES IN DEMATERIALISED FORM
As per the provisions of the Depositories Act, 1996, the shares of a body corporate may be held in dematerializedform i.e. not in the form of physical certificates but be fungible and be represented by the statement issuedthrough electronic mode. The equity shares of SBPML are traded in the demat segment. The Company hasentered into a tripartite agreement dated 13.12.2000 with the National Securities Depository Ltd. (NSDL) andSkyline Financial Services Pvt. Limited (Registrar and Transfer Agent) for dematerialization of the equity sharesof the Company. The Company has also entered into a tripartite agreement dated 21.12.2000 with the CentralDepository Services Limited (CDSL) and Skyline Financial Services Pvt. Limited for dematerialization of theequity shares of the Company.
The ISIN No. granted to the equity shares of the Company is INE 688 C01010.
In this Rights Issue, the allottees who have opted for Equity Shares in dematerialized form will receive theirEquity Shares in the form of an electronic credit to their beneficiary account with a depository participant.Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications,which do not accurately contain this information, will be given the securities in physical form. No separateapplications for securities in physical and dematerialized form should be made. If such applications are made,the application for physical securities will be treated as multiple applications and is liable to be rejected. In caseof partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any,will be allotted in physical shares.
Procedure for opting for this facility for allotment of Equity Shares arising out of this Issue in electronic form isas under:
1. Open a Beneficiary Account with any Depository Participant (care should be taken that the BeneficiaryAccount should carry the name of the holder in the same manner as is exhibited in the records of theCompany. In case of joint holding, the Beneficiary Account should be opened carrying the names ofthe holders in the same order as with the Company). In case of Investors having various folios in theCompany with different joint holders, the investors will have to open separate accounts for such holdings.
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This step need not be adhered to by those shareholders who have already opened such BeneficiaryAccount(s).
2. For shareholders holding shares in dematerialized form as on Record Date, the beneficial accountnumber shall be printed on the CAF. For those who open accounts later or those who change theiraccounts and wish to receive their Rights Equity Shares by way of credit to such account the necessarydetails of their beneficiary account should be filled in the space provided in the CAF. It may be notedthat the allotment of Equity Shares arising out of this Issue can be received in a dematerialized formeven if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should beensured that the Depository Account is in the name(s) of the shareholders and the names are in thesame order as in the records of the Company.
3. Responsibility for correctness of applicant’s age and other details given in the CAF vis-à-vis those withthe applicant’s Depository Participant would rest with the applicant. Applicants should ensure that thenames of the applicants and the order in which they appear in CAF should be same as registered withthe applicant’s Depository Participant.
4. If incomplete/incorrect Beneficiary Account details are given in the CAF or where the investor does notopt to receive the Rights Equity Shares in dematerialized form, the Company will issue Equity Sharesin the form of physical certificate(s).
5. The Rights Equity Shares allotted to investors opting for dematerialized form, would be directly creditedto the Beneficiary Account as given in the CAF after verification. Allotment advice, refund order (ifany) would be sent directly to the applicant by the Registrars to the Issue but the confirmation of thecredit of the Rights Equity Shares to the applicant’s Depository Account will be provided to theapplicant by the applicant’s Depository Participant.
6. Renouncees can also exercise this option to receive Equity Shares in the dematerialized form byindicating in the relevant block and providing the necessary details about their Beneficiary Account.
Investors may please note that the trading of securities upon listing shall only be in demat form,although investors have an option to hold shares in the physical form or demat form.
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VII. MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION
SHARE CAPITAL
3. The Share Capital of the Company is Rs. 35,25,00,000/- divided into 3,50,00,000 Equity Shares ofRs. 10/- each and 2,50,000 Preference Shares of Rs. 10/- each.
LIEN
12. The Company shall have first and paramount lien upon all the shares (other than fully paid-up shares)registered in the name of each member (whether solely or jointly with others) and upon the proceedsof sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time inrespect of such shares and no equitable interest in any shares shall be created except upon thefooting and condition that Articles 8 hereof will have full effect. And such lien shall extend to all dividendsand bonuses from time to time declared in respect of such shares. Unless otherwise agreed registrationof a transfer of shares shall operate as a waiver of the Company’s lien, if any, on such shares, theDirectors may at any time declare any shares wholly or in part to be exempt from the provisions of thisclause.
13. The Company’s lien, if any, on a share shall extend to all dividend payable thereon.
14. The Company may sell, in such manner as the Board thinks fit, any shares on which the Company hasexercised its lien :
Provided that no sale shall be made :
(a) Unless a sum in respect of which the lien exists is presently payable; or
(b) Until the expiration of thirty days after a notice in writing stating and demanding payment of suchpart of the amount in respect of which the lien exists as is presently payable, has been given to theregistered holder for the time being of the share or the person entitle thereto by reason of hisdeath or insolvency.
15. (1) To give effect to any such sale, the Board may authorize any person to transfer the shares sold tothe purchaser thereof.
(2) The purchaser shall be registered as the holder of the shares comprised in any such transfer.
(3) The purchaser shall not be bound to see to the application of the purchase money nor shall histitle to the shares be affected by any irregularity or invalidity in the proceedings in reference to thesale.
16. (1) The proceeds of the sale shall be received by the Company and applied in payment of such partof the amount in respect of which the lien exists as is presently payable.
(2) The residue, if any, shall, subject to a like lien for sums not presently payable as existed upon theshares before the sale, be paid to the person entitled to the shares at the date of the sale.
CALLS ON SHARES
17. The Board may, from time to time, make calls upon the members in respect of any moneys unpaid ontheir shares (whether on account of the nominal value of the shares or by way of premium) and not bythe conditions of allotment thereof made payable at fixed times.
18. Each member shall, subject to receiving at least thirty days notice specifying the time or times andplace of payment, pay to the Company, at the time or times and place so specified, the amountcalled on his shares.
19. A calls may be revoked or postponed at the discretion of the Board.
20. A call shall be deemed to have been made at the time when the resolution of the Board authorizingthe call was passed and may be required to be paid by installments. A call when made shall becomeat debt due to and recoverable by the Company.
21. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.
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22. (1) If a sum called in respect of a share is not paid before or on the day appointed for paymentthereof, the person from whom the sum is due shall be liable to pay interest thereon from theday appointed for payment thereof to the time of actual payment at such rate as the Board maydetermine from time to time.
(2) The liability to pay interest due on the calls shall continue even after forfeiture of the shares.
(3) The Board shall be at liberty to waive payment of any such interest wholly or in part.
(4) Any sum which by the terms of issue of a share becomes payable on allotment or at any fixeddate, whether on account of the nominal value of the shares or by way of premium shall for thepurposes of these Articles, be deemed to be a call duly made and payable on the date on whichby the terms of issue such sum becomes payable.
(5) In case of non-payment of such sum, all the relevant provisions of these articles as to payment ofinterest and expenses, forfeiture or otherwise shall apply as if such sum had become payable byvirtue of a call duly made and notified.
23. Subject to the provisions of the Act and these Articles, on the trial or hearing of any action or suitbrought by the Company against any member or his legal representative for the recovery of any call orother money claimed to be due to the Company in respect of any shares, it shall be sufficient to provethat the name of the member in respect of whose shares the money is sought to be recovered appearsentered on the Register of Members as the holder of the shares in respect of which such money issought to be recovered that the resolution making the call is duly recorded in the minute book, and thatnotice of such call was duly given in pursuance of these presents; and it shall not be necessary toprove the appointment of the Directors who made such call nor any other matter whatsoever, but theproof of the matters aforesaid shall be conclusive evidence of debt.
24.The Board -
(a) may if thinks fit, receive from any member willing to advance the same, all or any part of themoney uncalled and unpaid upon any shares held by him; and
(b) upon all or any of the moneys so advanced, may (until the same would, but for such advance,become presently payable) pay interest at such rates as may be agreed upon between the Boardand the member paying the sum in advance. Moneys so paid in advance for calls shall not inrespect thereof confer a right to dividend or participate in the profit of the Company.
TRANSFER OF SHARES
25. (1) The instrument of transfer of any share in the Company shall be in the form prescribed under theAct and shall be executed by or on behalf of both the transfer or and the transferee, subject toSection 108 of the Act.
(2) The transferor shall be deemed to remain a holder of the share until the name of the transferee isentered in the Register of Members in respect thereof.
(3) the Company shall not be required to preserve transfer deeds beyond the period of eight yearsfrom the date of registration of transfer in the books of the Company.
26. The Board may, subject to the right of appeal conferred by Section 111 of the Act, decline to register -
(a) the transfer of a share to a person whom they do not approve, or
(b) any transfer of shares on which the Company has a lien. Provided that registration of a transfershall not be refused on the ground of the transferor being either alone or jointly with any otherperson or persons indebted to the Company on any account whatsoever except a lien on share.
27. The Board may also decline to recognize any instrument of transfer unless -
(a) the instrument of transfer is accompanied by the certificate of the shares to which it relates, andsuch other evidence as the Board may reasonable require to show the right of the transferor tomake the transfer; and
(b) instrument of transfer is in respect of one class of shares.
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27A. Notwithstanding anything contained hereinbefore in Articles 26 and 27 of the existing Articles ofAssociation of the Company, transfer of shares made by Uttar Pradesh State Industrial DevelopmentCorporation Limited (UPSIDC), in pursuance of the agreement to be executed between S/S SudhirTandon and Girish Tandon and the Uttar Pradesh State Industrial Development Corporation Limitedshall be allowed and registered by the Board of Directors and any instrument of transfer in respectthereof shall be recorded.
28. The Board shall have power to register transfer of shares in the name of a minor through his naturalguardian or through a trustee if the shares for the benefit of the minor are held in trust.
TRANSMISSION OF SHARES
29. (1) On the death of a member, the survivors where the member was a joint holder, and his legalrepresentatives where he was a sole holder, shall be the only persons recognized by the Companyas having any title to his interest in the shares.
(2) Nothing in clause (1) shall release the estate of a deceased joint holder from any liability in respectof any share which had been jointly held by him with other persons.
30. (1) Any person becoming entitled to a share in consequence of the death or insolvency of a membermay, upon such evidence being produced as may, from time to time, properly be required by theBoard and subject to as hereinafter provided, elect either -
(a) to be registered himself as holder of share, or
(b) to make such transfer of the share as the deceased or insolvent member could have made.
(2) The Board shall, in either case, have the same right of decline or suspend registration as it wouldhave had if the deceased or insolvent member had transferred the share before his death orinsolvency.
31. (1) If the person so becoming entitled shall elect to be registered as holder of the share himself, heshall deliver or send to the Company a notice in writing signed by him stating that he so elects.
(2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing atransfer of the share.
(3) All the limitations, restrictions and provisions of these Articles relating to the right to transfer andthe registration of transfers of shares shall be applicable to any such notice or transfer as aforesaidas if the death or insolvency of the member had not occurred and the notice or transfer were atransfer signed by that member.
32. A person becoming entitled to a share by person of the death or insolvency of the holder shall beentitled to the same dividends and other advantages to which he would be entitled if he was theregistered holder of the share, except that he shall not, before being registered as a member inrespect of the share be entitled in respect of it to exercise any right conferred by membership inrelation to meetings of the Company.
Provided that the Board may, at any time, give notice requiring any such person to elect either tobe registered himself or to transfer the share, and if the notice is not complied with within ninetydays, the Board may thereafter, withhold payment of all dividends, bonuses or other moneyspayable in respect of the share, until the requirements of the notice have been complied with.
FORFEITURE OF SHARES
33. If a member fails to pay any call, or installment of a call, on the day appointed for payment thereof,the Board may, at any time thereafter during such time as any part of the call or installmentremains unpaid, serve a notice on him requiring payment of so much of the call or installment asis unpaid, together with any interest which may have accrued.
34. The notice aforesaid shall :
(a) name a further day (not being earlier than the expiry of thirty days from the date of service of thenotice) on or before which the payment required by the notice is to be made; and
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(b) state that, in the event of non-payment on or before the day so named, the shares in respect ofwhich the call was made will be liable to be forfeited.
35. If the requirements of any such notice as aforesaid are not complied with, any share in respect ofwhich the notice has been given may, at any time thereafter, before the payment required by thenotice has been made, be forfeited by a resolution of the Board to that effect.
36. When any share is so declared to be forfeited, notice of forfeiture shall be given to the memberin whose name it stood immediately prior to forfeiture and an entry of the forfeiture with the datethereof, shall forthwith be made in the Register of Members but no forfeiture shall be in anymanner invalidated by any omission or neglect to give such notice or to make any such entry asaforesaid.
37. (1) A forfeited share may be sold, reissued or otherwise disposed off at such price, on such termsand in such manner as the Board thinks fit.
(2) At any time before a sale or disposal as aforesaid, the Board may cancel the forfeiture on suchterms as it thinks fit.
38. (1) A person whose shares have been forfeited shall cease to be a member in respect of the forfeitedshares, but shall, notwithstanding the forfeiture, remain liable to pay to the Company all moneyswhich, at the date of forfeiture, were presently payable by him to the Company in respect of theshares.
(2) The liability of such person shall cease if and when the Company shall have received payments infull of all such moneys in respect of the shares.
39. The forfeiture of a share shall involve the extinction of all interest in and also of all claims anddemands against the Company in respect of the share, and all other rights incidental to the share,except only such of those rights as by these Articles are expressly saved.
40. Neither a judgment nor a decree in favor of the Company for calls or other moneys due inrespect of any shares not any part payment or satisfaction thereunder not the receipt by theCompany of a portion of any money which shall from time to time, be due from any member inrespect of any shares, either by way of principal or interest, nor any indulgence granted by theCompany in respect of the payment of any moneys, shall preclude the forfeiture of such sharesas therein provided.
41. (1) A duly verified declaration in writing that the declarant is a Director, the Manager or the Secretaryof the Company or an officer authorized in that behalf by the Board and that a share in the Companyhas been duly forfeited on a date stated in the declaration shall be conclusive evidence of the facttherein stated as against all person claiming to be entitled to the share.
(2) The Company may receive the consideration, if any, given for the share on any sale or disposalthereof and may execute a transfer of the share in favor of the person to whom the share is sold ordisposed off.
(3) The transferee shall thereupon be registered as the holder of the share.
(4) The transferee shall not be bound to see to the application of the purchase money, if any, nor shallhis title to the share be affected by any irregularity or invalidity in the proceedings in reference tothe forfeiture, sale or disposal of the share.
42. Upon any sale, reallotment or other disposal under the provisions of the preceding Articles, thecertificate or certificates originally issued in respect of the relative shares shall (Unless the sameshall, on demand by the Company, have been previously surrendered to it by the defaulting member)stand cancelled and become null and void and of no effect, and the board shall be entitled to issuea new certificate or certificates in respect of the said shares to the person or persons entitledthereto.
43. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of anysum which, by the terms of issue of a share, becomes payable at a fixed time, whether onaccount of the nominal value of the share or by way of premium, as if the same had beenpayable by virtue of call duly made and notified.
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SHREE BHAWANI PAPER MILLS LIMITED44. The Board may accept from any member, on such terms and conditions as be agreed, a surrender
of his shares or stock or any part thereof, subject to Sections 100 to 104 of the Companies Act.
54. The provisions herein contained relating to transfer and transmission shall also apply to debenturesin the same manner as they apply to shares
DEMATERIALISATION OF SECURITIES
54.A (1) For the purpose of this Article :
‘Beneficial Owner’ means a person who opts to hold his securities with a Depository, and whosename is recorded as such with a Depository;
‘SEBI’ means the Securities and Exchange Board of India;
‘Depository’ means a Company formed and registered under the Companies Act, 1956 and whichhas been granted a certificate of registration to act as a depository under the Securities andExchange Board of India Act, 1992; and
‘Security’ means such security as may be specified by SEBI from time to time.
(2) Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerializeits existing shares, debentures and other securities, rematerialize its shares, debentures andother securities held in the Depository and/or offer its fresh shares and debentures and othersecurities in a dematerialized form pursuant to the Depositories Act, 1996 and the rules framedthereunder, if any.
(3) Every person subscribing to securities offered by the Company, and every Member or Debentureholder shall have the option to either hold the securities in the form of security certificates or tohold the securities with a Depository when permitted. Where any holder of securities surrendershis Certificate of securities held in the Company in accordance with Section 6 of the DepositoriesAct, 1996 and the Securities and Exchange Board of India (Depositories and Participants)Regulations, 1996, the Company shall cancel the certificate and substitute in its records the nameof the relevant Depository and inform the Depository, accordingly. The Company shall maintain arecord of certificates of securities that have been so dematerialized and destroyed. Such personswho hold their securities with a Depository can at any time opt out of the Depository, if permittedby law, and the Company shall in such manner and within such time as prescribed by law, issue tosuch persons the requisite certificates of securities.
If a person opts to hold his security with a depository, the Company shall intimate such depositorythe details of allotment of the Security, and on receipt of the information, the depository shall enterin its record the name of the allottee as the beneficial owner of the security.
(4) All securities held by a depository shall be dematerialized and shall be in a fungible form. Nothingcontained in Sections 153, 153 A, 153 B, 187 B, 187 C and 372 A of the Act shall apply to adepository in respect of the securities held by it on behalf of the beneficial owners.
(5) (a) Notwithstanding anything to the contrary contained in the Act or this Article, a depository shallbe deemed to be the registered owner for the purpose of effecting transfer of ownership of securityon behalf of the beneficial owners.
(b) Save as otherwise provided in (a) above, the depository as the registered owner of the securitiesshall not have any voting rights or any other rights in respect of the securities held by it.
(c) The beneficial owner of securities shall be entitled to all the rights and benefits and be subjectto all the liabilities in respect of his securities which are held by a depository.
(6) Notwithstanding anything in the Act of this Article to the contrary, where securities are held in adepository, the records of the beneficial ownership may be served by such depository on theCompany by means of electronic mode or by delivery of floppies or discs.
(7) For the purpose of this Article, the Registers and Index of Members and Debenture holdersshall be deemed to include the Registers and Index of beneficial owners maintained under theDepositories Act, 1996 by every Depository in respect of securities issued by the Company.
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NOMINATION
54B. Notwithstanding anything contained herein, a shareholder/debenture holder has a right tonominate one or more persons as his/her nominee(s) to be entitled to the rights and privilegesas may be permitted under the law in the event of death of the said member(s) subject to theprovisions of the Companies Act, 1956, and other applicable laws.
BUY BACK OF ITS OWN SECURITIES
54C. Notwithstanding anything contained in these Articles, but subject to and in accordance withprovisions of Section 77A and 77B of the Act and Rules, if any, prescribed by the CentralGovernment, the Company may purchase its own shares or other specified securities (hereinafterreferred to ‘buy back’) out of its free reserves or the securities premium account or the proceedsof any shares or other specified securities.
ALTERATION OF CAPITAL
55. The Company may, from time to time, by ordinary resolution increase the authorized sharecapital by such sum, to be divided into shares of such amount, as may be specified in theresolution.
56. The Company may, by ordinary resolution :
(a) consolidate and divide all or any of its share capital into shares of larger amount than its existingshares.
(b) sub-divide its existing shares or any of them into shares of smaller amount than is fixed by theMemorandum of Association, subject, nevertheless to the provisions of clause (d) of sub-section(1) of Section 94 of the Act :
(c) cancel any shares which, at the date of the passing of the resolution, have not been taken oragreed to be taken by any person.
57. The Company may reduce in any manner :
(a) its Share Capital subject to the provisions of Section 100 of the Act; or
(b) share premium account subject to the provisions of Section 78 (1) of the Act.
GENERAL MEETINGS
58. All general meetings other than Annual General Meetings shall be called Extra Ordinary Generalmeetings.
PROCEEDINGS AT GENERAL MEETINGS
59. (1) No business shall be transacted at any general meeting unless a quorum of members is presentat the time when the meeting proceeds to business. Five members present in person shall constitutea quorum.
(2) If within half an hour from the time appointed for holding a meeting of the Company a quorum isnot present, the meeting if called upon the requisition of members shall stand dissolved, but inany other case the meeting shall stand adjourned to the same day in the next week at the sametime and place unless otherwise determined by the members present at the original meeting orfailing them, by the Board and if at such adjourned meeting also a quorum is not present withinhalf an hour from the time appointed for holding the meeting, the members present shall be thequorum.
60. The Chairman, if any, of the Board shall preside as Chairman at every general meeting of theCompany.
61. If there is no such Chairman, or if he be not present or has notified to the Company of hisabsence earlier, or is unwilling to act as Chairman of the meeting, the Directors present shallelect one of their number to be the Chairman of the meeting.
62. If at any meeting no Director is willing to act as Chairman or if no Director is present or informationis available with the Company about none of the Directors attending the meeting, the memberspresent shall forthwith choose one of their numbers to be the Chairman of the meeting.
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63. (1) The Chairman may, and if so directed by the meeting, shall adjourn the meeting from time totime and from place to place.
(2) No business shall be transacted at any adjourned meeting other than the business left unfinishedat the meeting from which the adjourned took place.
(3) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall begiven as in the case of an original meeting.
(4) Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of thebusiness to be transacted at an adjourned meeting.
64. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of themeeting shall be entitled to a second casting vote.
65. Any business other than upon which a poll has been demanded may be proceeded with, pendingthe taking of the poll.
VOTES OF MEMBERS
66. A Society registered under the Societies Registration Act, if it is a member of the Company, bya resolution of its governing body (by whatever name called), may authorize such person as itthinks fit to act as its representative at any meeting of the Company or at any meeting of anyclass of members of the Company, A person authorized by resolution as aforesaid shall beentitled to exercise the same rights and powers on behalf of the society which he represents asthat society could exercise if it were an individual member.
67. In the case of the joint holders, the vote of the senior who tenders a vote, whether in person orby proxy, shall be accepted in the exclusion of the votes of the other joint holders.
For this purpose, seniority shall be determined by the order in which the names stand in theRegister of Members.
68. A member of unsound mind, or in respect of whom an order has been made by any Court havingjurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or otherlegal guardian, and any such committee or guardian may, on a poll, vote by proxy.
69. No member shall be entitled to vote at any general meeting in respect of any shares in the Companyunless all calls or other sums presently payable by him have been paid thereon.
70. (1) No objection shall be raised to the qualification of any voter except at the meeting or adjournedmeeting at which the vote objected to is given or tendered, and every vote not disallowed at suchmeeting shall be valid for all purposes.
(2) Any such objection made in due time shall be referred to the Chairman of the meeting, whosedecision shall be final and conclusive.
71. The instrument appointing a proxy and the power-of-attorney or other authority, if any underwhich it is signed or a notarially certified copy of that power or authority, shall be deposited at theregistered office of the Company not less than 48 hours before the time for holding the meeting oradjourned meeting at which the person named in the instrument proposes to vote, or in the caseof a poll, not less than 24 hours before the time appointed for the taking of the poll and in defaultthe instrument of proxy shall not be treated as valid.
72. A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstandingthe previous death or insanity of the principal or the revocation of the proxy or of the authorityunder which the proxy was executed, or the transfer of the shares in respect of which the proxyis given.
Provided that no intimation in writing of such death, insanity, revocation or transfer shall havebeen received by the Company at its registered office before the commencement of the meetingor adjourned meeting at which the proxy is used.
PROFIT
99. The declaration of the Board as to the amount of net profits of the Company shall be conclusive.
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DIVIDENDS
100. The Company in General Meeting may declare dividends, but no dividend shall exceed theamount recommended by the Board.
101. The Board may, from time to time, pay to the members such interim dividends as appear to it tobe justified by the profits of the Company.
102. (1) The Board may, before recommending any dividend set aside, out of the profits of the Company,such sums as it thinks proper as a reserve or reserves which shall, at the discretion of the Boardbe applicable for any purpose to which the profits of the Company may, be properly applied,including provision for meetings contingencies or for equalizing dividends, and pending suchapplication may at the like discretion, either be employed in the business of the Company or beinvested in such investment (other than shares in the Company) as the Board may, from time totime, thinks fit.
(2) The Board may also carry forward any profits which it may think expedient not to divide withoutsetting them aside as a reserve.
103. (1) Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, alldividends shall be declared and paid according to the amounts paid or credited as paid on theshares in respect whereof the dividend is paid, subject to Sections 205, 206 and 207 of the Act.
(2) No amount paid or credited as paid on a share in advance of calls shall be treated for thepurposes of this Article as paid on the share.
(3) All dividends shall be apportioned and paid proportionate to the amounts paid or credited aspaid on the shares during any portion or portions of the period in respect of which the dividendis paid; but if any share is issued on terms providing that it shall rank for dividend as from aparticular date such share shall rank for dividend accordingly.
104. The Company in General Meeting may decide that any dividend payable to the members maybe set off against any call payable by the members or any call in arrear by that member.
105. Notwithstanding the provisions of Article 104, the Board may deduct from any dividend payableto any member all sums of the money, if any, presently payable by him to the Company onaccount of calls or otherwise in relation to the shares in the Company.
106. (1) Any dividend, interest or other moneys payable in respect of shares may be paid in cash or bycheque, warrant or postal order sent through the post or by money order direct to the registeredaddress of the holder or, in the case of joint holders, to the registered address of that one of thejoint holders who is first named on the Register of Members, or to such person and to suchaddress as the holder of joint holders may in writing direct.
(2) Every such cheque or warrant shall be made payable to the person to whom it is sent and markedaccount payee only.
(3) The Company shall not be responsible for the loss of any cheque, warrant or postal order sentby post or by money order in respect of dividends, whether by request or otherwise, at theregistered address or the address communicated to the Company beforehand by the memberor for any dividend lost to the member or person entitled thereto by the forged endorsement ofany cheque or warrant or the fraudulent recovery thereof by any other means.
107. Anyone of two or more joint holders of a share may give effectual receipts for any dividends,bonuses or other moneys payable in respect of such share.
108. No dividend shall bear interest against the Company.
109. No unclaimed dividend shall be forfeited by the Board unless the claim thereto becomes barred bylaw and the Company shall comply with all the provisions of Section 205-A of the Act in respect ofany unclaimed or unpaid dividend.
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WINDING UP
114. (1) If the Company shall be windup, the liquidator may, with the sanction of a special resolution ofthe Company and any other sanction required by the Act, divide among the members, in specieor kind, the whole or any part of the assets of the Company, whether they shall consist ofproperty of same kind or not.
(2) The liquidator may, with the like sanction, vest the whole or any part of such assets in trusteesupon such trusts for the benefit of the contributories as the liquidator shall think fit, but so that nomember shall be compelled to accept any shares or other whereon there in any liability.
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VIII. OTHER INFORMATION
1. MATERIAL CONTRACTS AND DOCUMENTS
The Contracts referred to in para (A) below (not being contracts entered into in the ordinary course ofthe business carried on by the Company or entered into more than two years before the date of thisLetter of Offer) which are or may be deemed material, have been entered into by the Company. Thecontracts together with the documents referred to in paragraph (B) below, copies of all of which havebeen attached to the copy of this Letter of Offer may be inspected at the Registered Office of theCompany between 11.00 a.m. to 1.00 p.m. on any working day from the date of this Letter of Offer untilthe closing of the subscription list.
A. MATERIAL CONTRACTS
1. Memorandum of Understanding dated 09.09.2005 with BOB Capital Markets Limited, appointing them asLead Managers to the issue.
2. Memorandum of Understanding entered into between the Company and Skyline Financial Services Pvt.Ltd. Registrar to the Issue dated 16.09.2005.
3. Tripartite agreement entered between the Company, Registrar and National Securities Depository Limiteddated 13.12.2000
4. Tripartite agreement entered between the Company, Registrar and Central Depository Services (India)Limited dated 21.12.2000
B. MATERIAL DOCUMENTS
1. Copy of Memorandum and Articles of Association of the Company.
2. Annual Reports of Shree Bhawani Paper Mills Limited for the last five years.
3. Copies of Memorandum and Articles of Association and Annual Reports of Group Companies for therelevant Years.
4. Bank of Baroda, Allahabad sanction letter No.BR/25/ADV/94 dated 05.08.2005 sanctioning Term Loan ofRs.24 Crore for the expansion project.
5. Indian Bank, Lucknow letter No.COC:NPS:32:3739:05-06 dated 09.08.2005 and sanction No.533 dated08.08.2005 sanctioning Term Loan of Rs.24 Crore for the project
6. SEBI Observation letter No. 5/1416/DIL/-NRO/2005/25842; dated February 20, 2006
7. In-principle approval vide DCS/SMG/SDM/RK/NS/05, dated: October 21, 2005 from BSE for listing of thesecurities offered in this Issue.
8. Copy of the Board Resolution passed on 11th September 2005 for the proposed Rights Issue.
9. Copy of the Shareholders Resolution passed in the EGM held on 6th August 2005 for the proposed RightsIssue.
10. Copy of the Board Resolution passed on 18th September 2005 for the approval of the Draft Letter of Offer(LOO) and 18th March 2006 for the approval of the Final Letter of Offer (LOO) for the proposed RightsIssue.
11. Consents from Directors, Auditors, Bankers to the Issue, Bankers to the Company, Appraising Agency,Lead Manager to the Issue and the Registrar to the Issue, Company Secretary cum Compliance Officer.
12. Auditors’ Report dated 18th March 2006 giving the financial information of SBPML.
13. Auditors’ Report dated 18th March 2006 regarding Tax Benefits.
14. Auditors’ Certificate regarding utilization of funds dated 3rd March 2006.
16. Letters of intent, received from the Promoters dated 17th September 2005, for the subscription to Rightsentitlement and unsubscribed portion.
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17. Copy of Importer and Exporter Code
18. Appointment letter of Managing Director and Joint Managing Director
19. Consent granted by Uttar Pradesh Pollution Control Board authorizing to operate the Industrial plant todischarge the effluents and Air Emission.
20. A Copy of the Permanent Account No.
21. A Copy of Service Tax Registration issued under service tax rules 1994.
22. A Copy of Secretariat for Industrial Assistance (SIA) acknowledgement card
23. A Copy of Factories Registration No under Factories Act.
24. Registration copy of Boiler -1, Boiler -2 and Boiler -3
25. Central Excise registration certificate issued under the Central Excise Rule 2002.
26. Copies of Power of Attorney executed by other Directors in favour of Mrs. Babita Jain with respect to the
present Rights Issue.
27. A copy of the Appraisal Report dated 11th April 2005 given by BOB Capital Markets Limited.
28. Copy of MOU dated 23rd August 2005 signed by the company with Ernst & Young Pvt.Ltd. for ClimateChange Advisory Services
29. Copy of Agreement / order dated 16.09.2005 signed by the company with TUV Suddetschland India for
Validation of Rice Husk based Co-generation Projects of the Company.
Any of the contracts or documents mentioned in this Letter of Offer may be amended or modified at anytime if so required in the interest of the Company or if required by the other parties, without reference tothe shareholders subject to compliance of the applicable laws.
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DECLARATION
No Statement made in this Form shall contravene any of the provisions of the Companies Act, 1956 and therules made there under. All the legal requirements connected with the said issue as also the guidelines, instructionsetc. issued by SEBI, Government and any other competent authority in this behalf have been duly compliedwith.
The Company accepts no responsibility for statements made otherwise than in the Letter of Offer or in theadvertisement or any other material issued by or at the instance of the Company and that any one placingreliance on any other source of information would be doing so at their own risk.
The Directors of the Issuer Company certify that all the disclosures made in the Letter of Offer are true andcorrect.
Yours faithfully
For Shree Bhawani Paper Mills Limited
Shri Sudhir Tandon - Managing Director …………………………
Shri Girish Tandon - Joint Managing Director …………………………
Shri. Badri Vishal Tandon - Director *
Shri. C. M. Krishna – Director *
Shri. K. A. Pai - Director *
Shri. OM Nath Kapoor – Director *
Prof. Sushil Khanna - Director *
Shri J.S. Matharu – Director * ……………………….
(*Signed on behalf of the directors by their constituted attorney Mrs. Babita Jain)
Mrs. Babita Jain - Company Secretary ……………………….
Mr Kamal Srivastava – Finance Manager ……………………….
Place: Allahabad
Date: 18.03.2006
Encl: Composite Application Form (CAF)
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