Escolar Documentos
Profissional Documentos
Cultura Documentos
For private circulation to the Equity Shareholders of the Company only LETTER OF OFFER
GENERAL RISKS
Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to Risk Factors on page vii of this Letter of Offer before making an investment in this Issue.
LISTING
The existing Equity Shares of the Company are listed on The Stock Exchange, Mumbai (Designated Stock Exchange) (BSE) and The National Stock Exchange of India Limited (NSE). The Company has received in-principle approvals from BSE and the NSE for listing the Equity Shares arising from this Issue vide letters dated October 6, 2005 and October 11, 2005 respectively.
JM Morgan Stanley Private Limited 141 Maker Chambers III Nariman Point, Mumbai 400 021 Tel: (91 22) 5630 3030 Fax: (91 22) 2204 7185 Email: Hindalcorightsissue@ jmmorganstanley.com Website: www.jmmorganstanley.com Contact Person: Mr. Kushal Doshi
DSP Merrill Lynch Limited Mafatlal Centre, 10th Floor Nariman Point, Mumbai 400 021 Tel: (91 22) 5632 8000 Fax: (91 22) 2204 5818 Email:hindalco_rightsissue@ml.com Website: www. dspml.com Contact Person: Mr. Sumedh Jog
Karvy Computershare Private Limited Unit: Hindalco Rights Issue Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034 Tel: (91 40) 2343 1546 Fax: (91 40) 2343 1551 Email: hindalcorights@karvy.com Website: www.karvy.com Contact Person: Mr. Murali Krishna
ISSUE PROGRAMME LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS TUESDAY, JANUARY 3, 2006
ii
AS Auditor Board or Board of Directors BSE Capital or Share Capital CDSL DP Equity Share(s) or Share(s)
IT Act ITAT
Issue Closing Date Issue Opening Date Issue Price Karvy Letter of Offer
Promoters Record Date Registrar to the Issue or Registrar Renouncees Rights Entitlement
vi
We cannot assure you that we will have sufficient cash flows or will be able to obtain financing on favourable terms or at all. If adequate funding is not available, our ability to continue to grow our business could be adversely affected. Our copper smelters have experienced technical difficulties in the recent past, which has impacted the operational performance and profitability of our copper business. Our copper smelter I at Dahej with a capacity of 180,000 metric tpa experienced temporary shutdowns due to furnace related issues while our copper smelter II with a capacity of 70,000 metric tpa experienced lower utilization due to refractory life stabilisation issues which impacted production. Furthermore, our newly commissioned copper smelter III is in the process of being ramped up. The shortfall in production due to the shut downs in our copper smelters I and II resulted in revenue and contribution loss, which along with expenses relating to the ramp up phase of our smelter III and high backwardation prevailing throughout the period impacted our results adversely. We expect these issues to continue into the near short term and the ramping-up of our copper smelter III will also continue, which may affect our profitability in the short term. We cannot assure you that these technical difficulties will not recur in the future. A significant portion of our energy requirements are met by our own power plants and any disruption to these operations could increase our production costs. We require a substantial amount of electricity for our aluminium and copper production and energy costs represent a significant portion of the production costs for our operations. We source almost all the electricity requirements for our smelters at Renukoot, Hirakud and Dahej from our own power plants at competitive costs. If these power plants are not able to supply the requisite electricity for any reason, we would need to rely on the state electricity board as an alternative source. The state electricity board may not be able to consistently meet our requirements and, if for any reason such electricity is not available, we may need to shut down our plant until an adequate
viii
Certain of our subsidiaries and joint venture companies have incurred losses in the last three years. Certain of our subsidiaries and joint venture companies have incurred losses in recent years, as set forth in the tables below. Please refer to the chapter on Subsidiaries on page 106 and Our Joint Venture Companies on page 120 of this Letter of Offer: Company 2003 Birla Maroochydore Pty. Ltd. (in AUD) Birla Mineral Resources Pty. Ltd. (AUD in millions) Birla Mt. Gordon Pty. Ltd. (AUD in millions) Birla Nifty Pty. Ltd. (AUD in thousands) Indian Aluminium Company Ltd. (Rs. in millions) Indal Exports Ltd. (Rs. in thousands) Idea Cellular Ltd. (Rs. in millions)
* Profit before tax
1
September 2005 30, 2005 (51,738)* 0.14* (14.44)* 1.58* (6.17) (14) 210.29
xii
There are approximately 25 criminal cases filed against us, two of which have also been filed against our director Mr. S.S. Kothari as occupier of factory. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are about approximately 141 labour related cases filed against us for claims aggregating approximately Rs. 40.32 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are about approximately 57 civil cases filed against us for claims aggregating approximately Rs. 351.4 million. We have also received six demand notices for an amount aggregating to Rs. 32.1 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 30 income tax related appeals for claims aggregating approximately Rs. 8009.43 million against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 71 SCNs for claims aggregating Rs. 2354.19 million and 51 demands for amounts aggregating Rs. 2258.77 million in relation to central excise claims against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 4 SCNs for amounts aggregating Rs. 75.07 million and 6 demands for amounts aggregating Rs. 72.51 million in relation to customs claims against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 6 SCNs for amounts aggregating approximately Rs. 422.02 million and 24 demands aggregating approximately Rs. 125.24 million issued by the sales tax authorities. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 3 SCNs against us for claims aggregating approximately Rs. 10.93 million and 9 demands for amounts aggregating Rs. 8470.79 million in respect of other taxes, fees and cesses. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 4 service tax related SCNs issued to us for claims aggregating Rs. 62.4 million and 1 service tax related demand for an amount of approximately Rs. 15.13 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. We are involved in approximately 11 arbitration proceedings for claims aggregating approximately Rs. 386.03 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer.
xiii
Two cases have been filed in relation to transfer or transmission of our shares, where we have been named as a party. There are about 26 other cases filed against us for claims aggregating approximately Rs. 50.13 million.
B) Against the Promoters Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. C) Against the Directors Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. D) Against group companies Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. E) Against joint venture companies For more information regarding litigation involving us, our Directors, or us or our subsidiaries, our Promoters, our joint venture companies and group companies, see Outstanding Litigation and Defaults on page 208 of this Letter of Offer. Our indebtedness could adversely affect our financial condition and results of operations. We have entered into agreements with certain banks and financial institutions for short term loans and long term borrowings. Some of these agreements contain certain restrictive covenants, such as requiring consent of the lenders inter alia, for issuance of new shares, creating further encumbrances on our assets, disposing of our assets, declaring dividends or incurring capital expenditures beyond certain limits. Some of these borrowings also contain covenants which limit our ability to make any change or alteration in our capital structure, make investments, effect any scheme of amalgamation or restructuring. In addition, certain of these borrowings contain financial covenants, which require us to maintain, among other matters, specified net worth to assets ratio, debt service cover ratio, and maintenance of security coverage. There can be no assurance that we will be able to comply with these financial or other covenants or that we will be able to obtain the consents necessary to take the actions we believe are necessary to operate and grow our business. We have a number of contingent liabilities under Indian GAAP and our profitability could be adversely affected , if any of these contingent liabilities materialize. Our contingent liabilities as of March 31, 2005 and the six months ended September 30, 2005 not provided for include: (Rs. in millions) Half year ended September 30, 2005 (a) Claims/Disputed liabilities not acknowledged as debt: Following demands are disputed by the Company and are not provided for: i) Demand notice by Assistant. Collector, Central Excise Mirzapur for excise duty on power generated by companys captive power plant, Renusagar Power Co. Ltd. (Since amalgamated). Demand of interest on past dues of the Aluminium Regulation account upto 31.12.1987. Retrospective Revision of Water Rates by UP Jal Vidyut Nigam Limited (April 1989 to June 1993 & Jan 2000 to Jan 2001) Transit fees levied by Divisional Forest officer, Renukoot on coal and bauxite M.P Transit Fee on Coal demanded by Nonthern Coal Fields Limited
xiv
91.21
91.21
xiv) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax etc. each being for less than Rs. 10 millions b) i) ii) Bills discounted with Banks Guarantees outstanding (includes corporate guarantees of Rs.11,689.11 million (2004-05 Rs. 11,399.76 million) given on behalf of subsidiary companies) Letters of Credit Outstanding Bank Guarantees & Bonds
iii) iv) c)
The Company has received supplementary bills on account of revision in rate of power for Main Supply from the UPSEB for the period 15th May 1976 to 30th June 1980 and the same remains unprovided for as disputed by the Company In terms of the Scheme of Arrangement between the Company, the erstwhile Indo Gulf Corporation Ltd. (IGCL) and Indo Gulf Fertilisers Limited approved by the Honble High Courts at Allahabad and Mumbai vide their orders dated 18th November 2002 and 31st October 2002 respectively, the company may be liable to pay a portion of disputed demands of Income Tax of Rs.133.95 million pertaining to IGCL. 228,340,226 Equity Shares of Rs.10/- each fully paid up in IDEA Cellular Ltd. are held by the Company as investment. Out of the above 115,187,999 shares of Rs. 10/- each have been pledged for securing financial assistance granted by the lenders to that company.
d)
e)
If any of these contingent liabilities materialize, our profitability could be adversely affected. For more detailed descriptions of our contingent liabilities, see Auditors Report starting on page 126 of this Letter of Offer. We require certain registrations and permits from government and regulatory authorities in the ordinary course of business and the failure to obtain them in a timely manner or at all may adversely affect our operations. We require certain registrations and permits for operating our business, including factory license, approvals to store hazardous substances and environmental clearances, which we have applied for. For more information,
xv
xix
2.
3. 4. 5. 6.
Birla Group Holdings: Rs. 3.80 per Equity Share Dr. K.M. Birla: NIL (Acquired by way of gift)
7. 8.
For transactions in Equity Shares of the Company by the promoter group and Directors of the Company in the last six months, please refer to pages 22 and 89, respectively of this Letter of Offer. For interests of our directors and key managerial personnel, please refer to Management on page 84 of this Letter of Offer. For interests of our Promoters and promoter group please refer to Promoters and Promoter Group on page 96 of this Letter of Offer. We and the Lead Managers are obliged to keep this Letter of Offer updated and inform the public of any material change/development till the listing and trading commence.
9.
You may contact the Lead Managers for any complaints pertaining to the Issue including any clarification or information relating to the Issue. The Lead Managers are obliged to provide the same to you.
xx
Business Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a flagship company of the Aditya Birla Group, which is one of the largest business groups in India. We were incorporated in 1958 and have been listed on the Indian Stock Exchanges since 1968 and on the Socit de la Bourse de Luxembourg since 1993. The listing and trading of our GDRs have been transferred from the Bourse de Luxembourg (a market appearing on the list of regulated markets issued by the European Commission) to the EuroMTF (which is regulated by Luxembourg Stock Exchange) with effect from November 25, 2005. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU of July 2005, we are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines. We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. For fiscal 2005, our net sales and operating revenues were Rs.95,232.5 million out of which 55% was accounted for by our aluminium business and 45% by our copper business. For the same period, our profit before interest and tax (PBIT) was Rs.20,832.4 million, with 77% and 12% accounted for by our aluminium and copper businesses, respectively. The remaining 11% was unallocable in nature. Our aluminium revenues and profit before interest and tax have grown at a compounded annual growth rate of 48% and 55%, respectively, since fiscal 2003. We acquired our copper business at the end of fiscal 2003. Our aluminium operations are based in India, with access to abundant, good quality bauxite and coal, as well as proximity to key consumer markets. Our total alumina production capacity is currently 1,145,000 metric tpa and our total aluminium production capacity is currently 455,000 metric tpa. Our production facilities comprise alumina refineries, smelters and facilities for value-added products such as rolled products, extrusions, foils and wheels. Our facilities are supported by dedicated bauxite mines and our own power plants, which provide us with significant cost advantages. Our copper smelting facility is based at Dahej, with a current capacity of 250,000 metric tpa. We have recently completed the capacity expansion of our copper smelter to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. As part of our upstream integration efforts, we acquired two copper mines in Mt. Gordon in Queensland, Australia and Nifty in Western Australia in 2003 through our wholly owned subsidiary Birla Mineral Resources Pty Limited which, in turn, wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. Mt. Gordon commenced its supply of copper concentrate in August 2004 while Nifty is expected to commence its supply of copper concentrate in the second half of fiscal 2006. As part of our efforts to add value to the by-products of copper smelting, we also produce phosphatic fertilizers and precious metals like gold and silver. Our copper business is also supported by a dedicated, all-weather jetty located at Dahej and owned by our
1
Our Strategy
Aluminium Towards realizing our vision of attaining global size and further improve our cost competitiveness in the global aluminium industry, we are embarking on several expansions at our existing facilities and greenfield projects, both in alumina and aluminium. These include ongoing expansion of existing facilities, both in alumina and aluminium, a greenfield joint venture alumina project with Alcan Inc., under implementation, and a planned fully integrated greenfield project in Orissa with the capacity to produce alumina and aluminium. Our strategy is to support all of the above projects with low cost dedicated sources of key inputs, including bauxite and coal for dedicated power. Upon completion of our expansion plans, including the projects mentioned in the section Objects of the Issue on page 25 of this Letter of Offer, our aggregate alumina capacity is expected to increase from 1,145,000 metric tpa to 3,610,000 metric tpa. Aluminium smelting capacity is expected to increase from 455,000 metric tpa to 765,000 metric tpa. Our power generation capacity is also expected to increase from 987.2 megawatt to 1,637.2
3
Record Date Issue Price per Equity Share Equity Shares outstanding prior to the Issue Equity Shares outstanding after the Issue
Terms of Payment
Due Date On application Amount Rs. 24, which constitutes 25% of the Issue Price of Rs. 96, including share premium. Rs. 24, which constitutes a further 25% of the Issue Price of Rs. 96, including share premium Rs. 48, which constitutes the remaining 50% of the Issue Price of Rs. 96, including share premium.
Anytime between 9 and 12 months after the Allotment Date, at the option of the Company Anytime between 18 and 24 months after the Allotment Date, at the option of the Company
(Rs. in millions) For the six months ended 2005 September 30, 2005 50,211.2 2,220.8 52,432.0 1,257.1 4,821.2 58,510.3 24,782.7 35.2 2,695.0 14,172.2 2,998.1 1,339.5 3,589.6 49,612.4 8,897.9 2.5 8,895.4 2,304.7 374.3 47.0 (0.3) 6,169.8 87.2 6,082.5
2004
77,513.9 4,718.9 82,232.7 2,795.2 3,188.5 88,216.5 36,054.2 8.4 4,598.6 20,293.5 4,911.3 2,345.6 5,140.3 73,351.9 14,864.5 10.0 14,854.5 3,233.5 1,637.7 0.0 8.7 9,974.5 39.7 9,934.8
96,257.4 4,797.2 101,054.6 2,778.8 3,021.0 106,854.5 43,461.9 182.2 5,051.3 24,965.2 6,109.5 2,159.1 6,324.9 88,254.1 18,600.4 130.6 18,469.9 5,418.8 809.0 0.0 (715.9) 12,958.0 110.1 12,847.9
2003 Fixed Assets: (A) Gross Block Less : Depreciation Less : Impairment Net Block Less : Revaluation Reserve Net Block after adjustment of revaluation reserve Capital Work-in-progress Sub-total (A) Investments (B) Current Assets, Loans & Advances: (C) Inventories Sundry Debtors Cash & Bank Balances Loans & Advances and other current assets Sub-total (C) Liabilities and Provisions: (D) Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities and provisions Sub-total (D) Minority Interest (E) Net Worth (E) Represented by: (F) 1. Share Capital Advance against Equity Share Capital 2. Reserves Less : Revaluation Reserve Less : Miscellaneous Expenditure to the extent written-off or adjusted Reserves (Net of Revaluation Reserves & Miscellaneous expenditure) Net Worth 1,305.1 112.8 60,519.6 0.0 (77.0) 60,442.6 61,860.5
7
2004
2005
86,766.9 (24,945.1) 0.0 61,821.9 0.0 61,821.9 8,776.4 70,598.3 11,867.7 14,490.9 7,027.8 3,537.0 9,644.3 34,700.1 27,736.8 5,303.7 10,258.7 11,649.0 54,948.1 357.4 61,860.5
102,585.1 (30,412.8) 0.0 72,172.4 0.0 72,172.4 7,115.6 79,287.9 18,655.7 17,033.7 7,517.4 2,831.2 10,222.3 37,604.5 24,385.1 12,851.5 11,952.6 15,119.3 64,308.5 932.1 70,307.6 1,412.9 0.0 69,089.5 0.0 (194.9) 68,894.7 70,307.6
109,531.7 (38,065.6) (999.3) 70,466.8 0.0 70,466.8 16,386.9 86,853.7 29,558.5 26,970.4 8,404.4 4,730.5 9,415.9 49,521.2 32,310.2 16,998.0 11,342.5 27,910.8 88,561.4 857.7 76,514.3 1,415.9 0.0 75,233.5 0.0 (135.0) 75,098.4 76,514.3
122,742.3 (41,742.4) (999.3) 80,000.6 0.0 80,000.6 12,304.0 92,304.6 28,033.4 33,637.4 8,664.2 8,523.1 8,225.1 59,049.8 30,560.8 25,895.2 11,502.0 27,873.9 95,831.8 1,144.7 82,411.2 1,415.9 0.0 81,116.0 0.0 (120.7) 80,995.3 82,411.2
Board of Directors
Name and Designation Dr. K. M. Birla Chairman (Non-executive) Mrs. R. Birla Non-executive Director Mr. D. Bhattacharya Managing Director Mr. A.K. Agarwala Non-executive Director Mr. C.M.Maniar Independent Director Mr. E.B. Desai Non-executive Director Mr. S.S. Kothari Non-executive Director Mr. M.M.Bhagat Independent Director Mr. K. N. Bhandari Independent Director Age 38 60 57 72 69 74 83 72 63 Address 16-A, IL-Palazzo, Little Gibbs Road, Mumbai 400 006, Maharashtra 16-A, IL- Palazzo, Little Gibbs Road, Mumbai 400 006, Maharashtra 14/A,Woodlands, Peddar Road, Mumbai 400 026, Maharashtra Haveli, Flat No.3, L.D. Ruparel Marg, Mumbai 400 006, Maharashtra Garden House, 1st Floor, Dady Seth, 2nd Cross Lane, Chowpatty Band Stand, Mumbai 400 007, Maharashtra Sonarica, 81, 33A, Peddar Road, Mumbai - 400 026, Maharashtra 87-B, Gaurav Nagar, Civil Lines, Jaipur - 302 006, Rajasthan 13, Kabir Road, Kolkata 700 026, West Bengal 5, New Power House Road, Sector-7, Jodhpur 342 003, Rajasthan
For more details regarding our Directors please refer to Management on page 84 of this Letter of Offer.
2.
JMMS / DSPML
JMMS
10
4. 5.
DSPML JMMS
6.
JMMS / DSPML
DSPML
7.
JMMS / DSPML
DSPML
11
Monitoring Agency
Industrial Development Bank of India Limited (IDBI Bank) IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400 005 Tel: (91 22) 2218 9111 Fax: (91 22) 2218 1294 Website: www. idbi.com
Credit rating
This being an issue of Equity Shares, no credit rating is required. The details of the ratings received and outstanding by the Company for various securities/ instruments in the last three years are as follows: Borrowing Programs Short Term Debt/ Commercial Paper Short Term Debt Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Amount Rating Agency (In Rs. million) 2,500 Fitch Ratings India Pvt. Ltd. 250 CRISIL 1,500 CRISIL 500 CRISIL 2,000 CRISIL 500 CRISIL 5000 Fitch Ratings India Pvt. Ltd. 600 CRISIL 250 CRISIL 500 CRISIL 500 CRISIL 1050 CRISIL
12
Rating F1+(ind) P1+ AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA (ind) / Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable
Date of Rating Letter April 7, 2003 February 9, 2005 January 4, 2001 May 30, 2001 June 19, 2001 August 31, 2001 March 25, 2002 July 9, 2002 August 13, 2002 August 13, 2002 November 14, 2002 November 22, 2002
Impersonation
As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act which is reproduced below: Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years
Issue Schedule
The subscription will open upon the commencement of the banking hours and will close upon the close of banking hours on the dates mentioned below: Issue Opening Date : Monday, December 19, 2005 January 3, 2006 18, 2006
Last date for receiving requests for split forms : Tuesday, Issue Closing Date
: Wednesday, January
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than eight days after the Company becomes liable to repay the subscription amount, i.e. forty-two days after 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 Act. The Issue will become undersubscribed after considering the number of shares applied as per entitlement plus additional shares. The Promoters or promoter group will subscribe to such undersubscribed portion as per the relevant provisions of the law. The undersubscribed portion shall be applied for only after the close of the Issue. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to the Takeover Code, such allotment of the undersubscribed portion will be governed by the provisions of the Takeover Code. Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. For further details please refer to Basis of Allotment on page 305 of this Letter of Offer.
13
14
1,450.00 50.00
1,500.00
231.93(vi)
22,265.95
1,159.68(vii)
31,325.18 (viii)
(iii) 18,767,835 Equity Shares of Rs. 10/- each (including 3,099 partly paid up shares) were allotted to the shareholders of erstwhile Indo Gulf Corporation Ltd. (since amalgamated) pursuant to the Scheme of Arrangement without payment being received in cash. The 3,099 partly paid up shares were made fully paid on various dates upto July 22, 2005. (iv) 299,522 Equity Shares of Rs. 10/- each fully paid up were allotted to the shareholders of Indian Aluminium Company Limited pursuant to the Scheme of Arrangement without payment being received in cash. (v) On August 6, 2005 the shareholders of the Company approved the subdivision of Equity Shares of the Company from Rs. 10 per share to Re. 1 per share.
15
600,000
10
7,500,000 Consideration Issue to Kaiser Aluminium & other than Chemical Corporation and to Kaiser Aluminium Technical cash(1) Services Inc. 27,256,500 Cash 28,830,000 Cash 41,848,500 Cash 59,925,000 Cash 60,000,000 Cash 59,915,000 Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Reduction of Issued share capital pursuant to forfeiture of shares amounting to net Rs. 85,000. Annulment of shares forfeited Annulment of shares forfeited Annulment of shares forfeited Rights Issue Rights Issue Rights Issue Rights Issue
February 1, 1960 February 6, 1960 March 14, 1960 March 28, 1960 April 20, 1960 1963
10 10 10 10 10 10
10 10 10 10 10 10
1964 1965 1966 December 18, 1967 December 21, 1967 December 26, 1967 December 30 1967
10 10 10 10 10 10 10
10 10 10 10 10 10 10
59,932,000 Cash 59,938,500 Cash 59,939,500 Cash 60,788,840 Cash 61,274,170 Cash 62,328,410 Cash 76,705,100 Cash
16
USD 432,408,140(2) Cash 16.1 USD 454,773,140(2) Cash 16.1 USD 496,439,800(2) Cash 24 10 744,659,700 Bonus 737,074,400 Buy Back
18,767,835
10
299,522
10
927,747,970
927,747,970
927,747,970
5,807 Equity Shares of Rs. 10 each were bought back during fiscal 2002 and 752,723 Equity Shares of Rs. 10 each were bought back during
17
(2)
1b. Details of Share Premium Account prior to the Issue Financial Year 1990-1991 1993-1994 Particulars No. of Equity Shares 6,381,234 4,473,000 130,650* 4,166,666 467,900* 1,637,950* Premium Amount per share (Rs. in millions) 100.00 495.02 495.02 717.82 717.82 525.49 638.12 2,214.22 64.67 (108.33) 2,990.90 335.87 (105.71) 860.73 4,503.44 Cumulative Amount (Rs. in millions) 638.12 2,852.34 2,917.01 2,808.68 5,799.58 6,135.45 6,029.74 6,890.47 11,393.91
Conversion of 12.5% Partly Convertible Debentures Private Placement to Foreign Investors (GDR) Warrants exercised by above GDR holders. Less: Issue expenses
1994-1995
Private Placement to Foreign Investors (GDR) Warrants exercised by above GDR holders. Less: Issue expenses
1995-1996 2002-2003
Exercise of warrants Transferred on amalgamation of Indo Gulf Corporation Limited under Scheme of Arrangement of Hindalco / IGFL / IGCL Less: Adjusted as per Scheme of Arrangement relating to the de-merger of units of Indal
2004-2005
(2,102.74)
9,291.17
Warrants issued by the Company on July 26, 1993 and exercised in fiscal 1994, 1995 and 1996.
1c. Details of Equity Shares Bought Back (i) Buy-back on the BSE, of Equity Shares of the Company of face value Rs. 10 each. Time Period February 2002 April 2002 May 2002 No. of Shares 1,652 608,339 13,961 Average Price (In Rs.) 724.98 734.76 747.14 Total Amount (Rs. in millions) 1.20 446.98 10.43
18
Promoters Dr. K.M. Birla Birla Group Holdings Private Limited Promoter Group Relatives and HUF Turquoise Investments and Finance Pvt. Ltd. Trapti Trading and Investments Pvt. Ltd. Birla Institute of Technology and Science Pilani Investment and Industries Corporation Ltd. Grasim Industries Ltd. Aditya Birla Nuvo Ltd. (formerly Indian Rayon And Industries Limited) Trustee on behalf of Hindalco under Scheme of Arrangement of HIL/IGCL/IGFL Umang Commercial Company Ltd. Kamal Trading Company Limited Heritage Housing Finance Limited Mangalam Services Limited TGS Investment and Trade Pvt. Ltd. Global Holdings Pvt. Ltd. Total Promoters and promoter group shareholding 643,420 63,951,970 56,088,430 21,583,090 22,690,160 23,034,530 16,316,130 0.07 6.89 6.04 2.33 2.45 2.48 1.76 804,275 79,939,962 70,110,538 26,978,863 28,362,700 28,793,163 20,395,163 0.07 6.89 6.04 2.33 2.45 2.48 1.76 362,400 3,663,360 0.04 0.39 453,000 4,579,200 0.04 0.39
Public Other Directors and Relatives Banks, Financial Institutions & Insurance Companies UTI and Mutual Funds FII Corporates OCBs and NRIs Indian Public GDRs Transhold Total public shareholding Total 4. 701,810 109,275,737 46,433,968 185,037,936 37,647,022 40,438,508 115,221,720 150,950,670 2,004,119 687,711,490 927,747,970 0.08 11.78 5.01 19.94 4.06 4.36 12.42 16.27 0.22 74.13 877,263 136,594,671 58,042,460 231,297,420 47,058,778 50,548,135 144,027,150 188,688,338 2,505,149 859,639,363 0.08 11.78 5.01 19.94 4.06 4.36 12.42 16.27 0.22 74.13 100.00
100.00 1,159,684,963
Details of the shareholding of the Promoters, Promoter Group, directors of the promoter in the Company as on September 30, 2005 Name of entities (a) Promoters Dr. K.M. Birla Birla Group Holdings Private Limited Sub-total (a) Promoter Group (b) Relatives and HUF Mrs. R. Birla Mrs. V Bajaj Mrs. N Birla Aditya Vikram Kumar Mangalam Birla HUF Dr. K. M. Birla as father and natural guardian of his minor daughter Ms. Ananyashree Birla Dr. K M Birla Karta of AVKM Birla HUF Sub-total (b) 0.03 0.01 0.00 0.03 241,140 66,020 49,750 269,850 0.04 0.39 0.43 362,400 3,663,360 4,025,760 Percentage of shareholding No. of Shares
20
Aditya Birla Nuvo Ltd. (formerly Indian Rayon And Industries Limited)
Trustee on behalf of Hindalco under Scheme of Arrangement of HIL/IGCL/IGFL Umang Commercial Company Ltd. Kamal Trading Company Limited Heritage Housing Finance Limited Mangalam Services Limited TGS Investment & Trade Pvt. Ltd. Global Holdings Private Limited Sub-total (c) Total Promoter and Promoter Group shareholding 4a. Details of acquisition by our Promoters (i) Dr. K.M. Birla Date of acquisition Details of the transaction Gift Gift Bonus Gift Bonus Bonus
Quantity (Number of Equity Shares of Rs. 10 each) 7,800 3,150 3,650 500 9,060 12,080
April 11, 1988 July 9, 1988 July 26, 1988 March 1, 1990 October 9, 1990 October 27, 1996
21
110.0 NA NA
Details of the transactions in Equity Shares by the Promoters and the promoter group during the last six months Name Date of transaction May 26, 2005 Details of the transaction Purchased Quantity (Number of Equity Shares of Rs.10 each) 8,631 Price (in Rs.) 1,163.28
Top ten shareholders as on November 18, 2005 (face value of Rs. 10 per share) Name of the shareholders JP Morgan Chase Bank (formerly Morgan Guaranty Trust Co. of New York) as Depository of GDR holders Life Insurance Corporation of India Turquoise Investments and Finance Pvt. Ltd. Trapti Trading & Investments Pvt. Ltd. Grasim Industries Ltd. Pilani Investment and Industries Corporation Ltd Birla Institute of Technology and Science M and G Investment Management Ltd. A/c The Prudential Assurance Company Limited HSBC Global Investment Funds A/c HSBC Global Investment Funds Mauritius Limited Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited) Trustees holding shares under the scheme of Arrangement between HIL/IGCL/IGFL on behalf of Hindalco Total Total Shares Percentage of pre issue capital 15.85 7.11 6.89 6.05 2.48 2.45 2.33 2.08 1.85 1.76
147,083,292 65,930,080 63,951,970 56,088,430 23,034,530 22,690,160 21,583,090 19,327,244 17,202,910 16,316,130
16,316,130 469,523,966
1.76 50.609
22
Total Shares
Percentage of pre issue capital 15.31 7.06 6.92 6.07 3.81 3.51 2.49 2.45 2.33
1,631,613 47,834,889
1.76 51.73
Total Shares
Percentage of pre issue capital 15.87 7.11 6.89 6.04 2.48 2.45 2.33 1.99 1.88 1.76
147,227,977 65,932,480 63,951,970 56,088,430 23,034,530 22,690,160 21,583,090 18,459,075 17,452,910 16,316,130
16,316,130 469,052,882
1.76 50.56
10. The Promoters and Directors of the Company and Lead Managers of the Issue have not entered into any buy-back, standby or similar arrangements for any of the securities being issued through this Letter of Offer. 11. The terms of issue to Non-Resident Equity Shareholders/Applicants have been presented under the section Terms of the Issue on page 293 of this Letter of Offer. 12. At any given time, there shall be only one denomination of the Equity Shares of the Company and the Company shall comply with such disclosure and accounting norms specified by SEBI from time to time. The Equity Shareholders of the Company do not hold any warrant, option or convertible loan or debenture, which would entitle them to acquire further shares in the Company. 13. No further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner which will affect the equity capital of the Company, shall be made during the period commencing from the filing of the Letter of Offer with the SEBI and the date on which the Equity Shares issued under the Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue. Further, presently the Company does not have any intention to alter the equity capital structure by way of split/ consolidation of the denomination of the shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities within a period of six months from the date of opening of the Issue. 14. The Issue will remain open for 31 days. However, the Board will have the right to extend the Issue period as it may determine from time to time but not exceeding 60 days from the Issue Opening Date. 15. The Promoters have confirmed that along with relatives and the companies controlled by the Promoters (together hereinafter referred to as Promoter in this clause) intend to subscribe to the full extent of their entitlement in the Issue. The Promoter reserves the right to subscribe to their entitlement in the Issue either by themselves, their relatives or a combination of entities controlled by them, including by subscribing for renunciation if any made within the promoter group to another person forming part of the promoter group. The Promoter will also apply for additional Equity Shares in the Issue, such that at least 90% of the Issue is subscribed. As a result of this subscription and consequent allotment, the Promoter may acquire shares over and above their entitlement in the Issue, which may result in an increase of the shareholding being above the current shareholding with the entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by the Promoter, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the section on Objects of the Issue on page 25 of this Draft Letter of Offer), there is no other intention/purpose for this Issue, including any intention to delist the Company, even if, as a result of allotments to the Promoter, in this Issue, the Promoter shareholding in the Company exceeds their current shareholding. The Promoter intends to subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the Promoter of any unsubscribed portion, over and above their entitlement shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.
24
expanding the alumina capacity at Muri from 110,000 metric tpa to 450,000 metric tpa expanding the alumina capacity at Belgaum from 350,000 metric tpa to 650,000 metric tpa expanding the aluminium capacity at Hirakud from 65,000 metric tpa to 146,000 metric tpa
2.
Building-up of new alumina and aluminium capacities through following greenfield projects:
Aditya Alumina with capacity of 1,000,000 metric tpa expandable to 1,500,000 metric tpa Aditya Aluminium with capacity of 260,000 metric tpa expandable to 325,000 metric tpa
3.
Utkal Alumina with total project capacity of 1,000,000 metric tpa to 1,500,000 metric tpa
4.
The main objects and objects incidental or ancillary to the main objects set out in our Memorandum of Association enable us to undertake our existing activities and the activities for which funds are being raised by us through this Issue. The fund requirement and deployment is based on internal management estimates and has not been appraised by any bank or financial institution. The fund requirement below is based on our current business plan and would be monitored by the monitoring agency, Industrial Development Bank of India Limited (IDBI Bank). In view of the highly competitive and dynamic nature of the industry in which we operate, we may have to revise our business plan from time to time and consequently our fund requirement may also change. This may include rescheduling of our capital expenditure programmes and increase or decrease the capital expenditure for a particular purpose vis--vis current plans at the discretion of our Management. In case of any variations in the actual utilization of funds earmarked for the above activities, increased fund deployment for a particular activity will be met from internal accruals of the Company and debt. The details of the proceeds of the Issue are summarized below: Rs. in millions Gross proceeds of the Issue Issue related expenses Net proceeds of the Issue
Substantial part of the proceeds of the Issue would be used for creating tangible assets in form of plant and machinery. The projects for which the proceeds of the issue are proposed to be utilised may require use of inputs including cement for construction etc. While our group companies may be engaged in the business of supplying such inputs and may supply such inputs for the purpose of the proposed projects, all such contracts would be entered on an arms length basis.
25
Total (2)
700 320 -
3,760 3,250 -
1,130 1,070
3,860 5,070
8,580 8,250
34,730 17,320
48,300 31,710
2,435 20,595
3,750 27,430
6,115 60,825
13,190 119,970
The details of the project cost are as under: (Rs. in millions) Land and Land related Expansions Muri Alumina Hirakud Aluminium Belgaum Alumina Greenfield Projects Aditya Aluminium Aditya Alumina Joint Venture Utkal Alumina Total 10,840 77,895 7,540 10,505 13,190 119,970 3,735 4,855 35,870 21,145 3,900 2,260 4,795 3,450 48,300 31,710 360 1,250 640 6,520 7,930 6,430 660 270 450 420 930 910 7,960 10,380 8,430 Plant and Machinery IDC Contingency and Misc Total
The above fund requirement is based on our current business plan and projects that are in advanced stages. We may have to revise our business plan from time to time and consequently its funds requirement may also change. This may include rescheduling of capital expenditure programs, starting non-planned new projects, more actively develop projects that may currently be at a nascent stage, terminating projects currently planned and increase or decrease in the capital expenditure for a particular business unit vis--vis current plans at the discretion of the Management. Please refer to section on Risk Factors. Please refer to the section on Business Our Expansion Plans for further details of currently planned and proposed expansion projects.
26
07.04.05
223 FFE Minerals India Pvt.Ltd. 180 GEA Messo AG, Switzerland
23.06.05
21.03.05
23.06.05
07.04.05
By 16th Aug-06
27
138
By 17th Jun-06
111
31.03.05
No second-hand machinery has been bought or is proposed to be bought for this project. Orders remain to be placed for plant and machinery worth Rs. 2,340 million forming 36% of total cost of machinery for this project. Other significant contracts entered into for this project are as follows: Nature of Contract Civil, Structural & Architectural work for Alumina Refinery. Civil, Structural & Architectural work for Power House, Boiler Area Foundations, RCC Stock, Silo, Transformer Yard Foundation, Auxiliary Plant Building and Pump House, Pipe rake, Road, Drainage, underground facilities and associated work for 2x 15 MW CGP . Fabrication, erection and commissioning of Tanks/Silos/ Hoppers Services for Engineering, Project Management, Procurement, Construction, Supervision & Commissioning. Technical Fees Hirakud Aluminium We are in the process of increasing the capacity of our Hirakud smelter from its current capacity of 65,000 metric tpa to 146,000 metric tpa upon completion of our expansion plans. Our expansion plans involve a conversion from the Soderberg technology to pre-bake technology and also a transfer of idle pots from Belgaum to Hirakud. We have budgeted Rs.10,380 million, towards this project, which will be spent primarily on setting up the smelter, the power plant and coal mine development. The project is expected to be implemented over the next three years and is expected to be completed by fiscal 2008. As of October 31, 2005, we have spent approximately Rs.1,936 million on this project. The basic engineering package for the smelter expansion at Hirakud is expected to be completed by the chosen technology supplier in the next six months and the detailed engineering will be completed subsequently. The project team has commenced work on other areas such as civil work and fume treatment plant and the construction of the pot room column foundations is under progress.
28
Name of Supplier Gannon Dunkerley & Co. Ltd. Gannon Dunkerley & Co.Ltd.
232
185 184
300 256
ABB Ltd Demag Delaval Industrial Turbomachinery Pvt Ltd DDIT Industrieturbinen GmbH Alstom Projects India Ltd China Aluminium International Engg. Corporation Ltd ABB Power Technologies S.p.A Brush Electrical Machines Limited Siemens Ltd Alstom Norway AS
05.09.05 18.08.04
87.9 MVA , 73kv Rectifier Transformer - 2 Nos 100 MW Generator 132 KV Switchyard & BOP-Electrical FTP -3
104 100
31.08.05 28.07.04
97 77
05.09.05 05.09.05
No second-hand machinery has been bought or is proposed to be bought for this project. Orders remain to be placed for plant and machinery worth Rs. 4,324 million forming 55% of total cost of machinery for this project. Other significant contracts entered into for this project are as follows: Nature of Contract Technology, Engineering , Technical Service & Training Fees Civil & Structural Work Civil & Structural Work Belgaum Alumina We plan to increase the capacity at our Belgaum operations from its current capacity of 350,000 metric tpa to 650,000 metric tpa. We have estimated a capital expenditure of Rs.8,430 million for this expansion project, to be spent on the costs of the alumina refinery, the co-generation plant, the railway system and port facility for finished goods movements. We plan to use appropriate technology for improving recovery and reducing energy consumption, in turn with the objective of reducing cash cost of our operations. We have received environmental
29
Cost Name of Supplier (Rs. in millions) 139 China Aluminium International Engg. Corporation Ltd 110 Gannon Dunkerley & Company Ltd 109 Gannon Dunkerley & Co. Ltd
30
Note 1: Muri Alumina, Hirakud Aluminium, Belgaum Alumina being expansions at the existing facilities do not involve significant land acquisition
Issue Expenses
The expenses for this Issue include issue management fees, underwriting commission, printing and distribution expenses, legal fees, advertisement expenses, depository charges, trustee fee and listing fees to the Stock Exchanges, among others. The total expenses for this Issue are estimated not to exceed 1.80% of the Offering.
Means of Funding
We have made firm arrangements of finance in excess of 75% of the total fund requirements, excluding proceeds of the Issue, through syndicated debt, as indicated in the following table: Means of Funding Tied-up Debt comprising: Debt with executed loan agreements Rs.49,500 Debt for which sanction received Rs.21,000 Amount (Rs. in millions) 70,500
Net Cash and Cash equivalent(1) (A) (B) (C) Cash and bank balances Investments in Mutual Funds Less Investments made from loans drawn down not yet invested in project
Net Cash and Cash equivalent (A)+(B)-(C) Net Issue Proceeds Total Funds Available Amount spent upto October 31, 2005 Further Amount to be Spent Total Fund Requirements
(1) Net Cash Balance as on September 30, 2005
31
We have also received sanction letters from 13 banks and financial institutions for additional Rs. 21,000 million, for which we are currently in the process of finalising the loan documentation. In case of any shortfall/cost overrun for the above projects or for any other development opportunities, we intend meeting the fund requirements through our current cash surplus as well as our future internal accruals.
32
Amount spent upto October 31, 2005 1,092 1,936 5 652 79 3,763
We have sourced a major portion of the above amount from our internal accruals and specific tie-ups of funds were firmed up in March, 2005.
Working Capital
As regards working capital in respect of the projects we have existing banking relationships with two consortiums of banks for our aluminium business with sanctioned fund based limit of Rs.5,500 million and with 14 banks for our copper business with drawals not exceeding Rs. 25,800 million as approved by the Board, which is adequate to meet our existing requirements. In the normal course of operations, we submit and would continue to submit a detailed assessment of working capital on an annual basis to these banks. We believe this would be sufficient to meet the annual requirement, including the enhanced needs of working capital arising out of the implementation of the Projects. We do not foresee any difficulty whatsoever in doing so.
33
We are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. We are amongst the lowest cost producers of aluminium in the world with our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, being amongst the top 15% of the lowest cost producers globally. We are a fully integrated aluminium producer with cost effective access to quality bauxite, low cost power from our power plants, significant control over supplies of other key raw materials such as caustic soda and aluminium fluoride from subsidiaries and a comprehensive range of value-added products with proximity to end-use markets. Our existing refineries are located close to our bauxite reserves which are of good quality and provide significant cost advantages in the production of alumina and aluminium. We have located our facilities close to coal deposits giving us access to low cost power, thereby giving us an advantage in our power costs the largest cost component in our production of aluminium. We are a leader in the domestic market with a 33% market share in the primary metals segment, a 63% market share in the rolled products segment and a 21% market share in the extrusions segment.
We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. We believe that we are a low cost copper smelter and are partially integrated with upstream copper mines. We add value to the by-products generated through copper smelting and produce and market value-added products such as phosphatic fertilizers and precious metals like gold and silver. We benefit from significant freight advantage in catering to growth markets in Asia and also gain from a jetty in Dahej, owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited that can handle vessels up to 70,000 DWT and has a cargo handling capacity of approximately 3 million metric tons per annum depending upon jetty occupancy.
Other Factors
We believe that our extensive knowledge of the aluminium and copper industries and project management expertise positions us well to leverage emerging opportunities in the aluminium and copper industries. Our management team includes some of the most experienced managers in the Indian aluminium and copper industries and is well placed to provide strategic leadership and direction to explore new emerging opportunities in these sectors as well as constantly improve our current operations. We have had a consistent profitability track record with our net profit after tax increasing at a compounded annual growth rate of 18% between fiscal 2001 and fiscal 2005.
34
Weight 1 2 3
EPS for the six months ended September 30, 2005: Rs. 6.48 2. Price Earnings Ratio (P/E Ratio) a. b. P/E based on the year ended March 31, 2005: 6.7 times Peer group(1) P/E(2) (i) (ii) Highest: 35.7 times Lowest: 8.5 times
3.
Weighted average return on net worth # Financial Period Year ended March 31, 2003 Year ended March 31, 2004 Year ended March 31, 2005 Weighted Average
# As per restated accounts adjusted for share split
Weight 1 2 3
4.
Minimum Return on Increased Net Worth Required to Maintain Pre-Issue EPS. The minimum return on increased net worth required to maintain pre-Issue EPS of Rs. 14.43 as on March 31, 2005 is 15.96%.
Note: Assuming that the Equity Shares offered on a rights basis are fully subscribed and all calls are paid-up
5.
Net Asset Value (NAV) @ a. b. c. NAV per Equity Share at March 31, 2005 is Rs. 82.54; NAV per Equity Share at September 30, 2005 is Rs. 89.03. NAV per Equity Share after the Issue is Rs.90.42 $. Issue Price per Equity Share is Rs.96.
35
Net Asset Value per Equity Share (Rs.) 66.9 74.2 82.5 77.1
Weight 1 2 3
6.
Comparison of Accounting Ratios for the year ended March 31, 2005 with other listed companies EPS (Rs.) P/E (times) Return on Net Worth (%) 17.5% 30.3% 29.2% 8.8% 21.4% 14.2% Net Asset Value per Equity Share (Rs.) 82.5 68.1 72.9 320.4 136.0 39.4
Hindalco Industries Limited Madras Aluminium Company Limited National Aluminium Company Limited Sterlite Industries Group Average Industry Average Aluminium & Aluminium Products *
Source: Our EPS, P/E, Return on Net Worth and Net Asset Value per Equity Share is as per our audited restated financial statements adjusted for the stock split, where applicable; Source for other information is Capital Market Volume XX/ 17 dated October 24, 2005 to November 6, 2005. * Excluding Hindalco Industries Limited; Segment as per Capital Market Volume XX/ 17 dated October 24, 2005 to November 6, 2005.
The Lead Managers believe that the Issue Price of Rs. 96 per Equity Share is justified in view of the above qualitative and quantitative parameters. See the section titled Risk Factors on page vii of this Letter of Offer and the financials of the Company including important profitability and return ratios, as set out in the Auditors Report on page 126 of this Letter of Offer to have a more informed view.
36
c)
d)
e)
(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and (v) Small Industries Development Bank of India established under Section 3(1) of the Small Industries Development Bank of India Act, 1989. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition. f) Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed
37
h)
i)
2.2 Return of Income not to be filed in certain cases Under provisions of Section 115-G of the Act, it shall not be necessary for a non-resident Indian to furnish his return of income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from. 2.3 Other Provisions of the Act a) Under Section 115-I of the Act, a non-resident Indian may elect not to be governed by the provisions of Chapter XII-A of the Act for any assessment year by furnishing his return of income under Section 139 of the Act declaring therein that the provisions of the Chapter shall not apply to him for that assessment year and if he does so the provisions of this Chapter shall not apply to him. In such a case the tax on investment income and long term capital gains would computed as per normal provisions of the Act. Under the first proviso to Section 48 of the Act, in case of a non-resident, in computing the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange (as per exchange control regulations), protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets [other than those exempt u/s 10(38)] shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds issued by (i) (ii) National Bank for Agriculture and Rural Development established under Section 3 of the National Bank for Agriculture and Rural Development Act, 1981; National Highways Authority of India constituted under Section 3 of National Highways Authority of India Act, 1988;
b)
c)
(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and
38
e)
f)
g)
2.4 Foreign Institutional Investors (FIIs) a) By virtue of Section 10(34) of the Act, income earned by way of dividend income from another domestic company referred to in Section 115-O of the Act, are exempt from tax in the hands of the institutional investor. Under Section 115AD capital gain arising on transfer of short term capital assets, being shares and debentures in a company, are taxed as follows: (i) Short term capital gain on transfer of shares/debentures entered in a recognized stock exchange which is subject to securities transaction tax shall be taxed @ 10% (plus applicable surcharge and educational cess); and Short term capital gains on transfer of shares/debentures other than those mentioned above would be taxable @ 30% (plus applicable surcharge and educational cess).
b)
(ii) c)
Under Section 115AD capital gain arising on transfer of long term capital assets, being shares and debentures in a company, are taxed @ 10% (plus applicable surcharge and educational cess). Such capital gains would be computed without giving effect to the first and second proviso to Section 48. In other words, the benefit of indexation, direct or indirect, as mentioned under the two provisos would not be allowed while computing the capital gains. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets [other than those exempt u/s 10(38)] shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds issued by (i) National Bank for Agriculture and Rural Development established under Section 3 of the National
39
d)
(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and (v) Small Industries Development Bank of India established under Section 3(1) of the Small Industries Development Bank of India Act, 1989. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition. e) Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed securities or units [other than those exempt u/s 10(38)], shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain is invested in public issue of equity shares issued by an Indian Public Company within a period of six months from the date of such transfer. If only a part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new equity shares are transferred or converted into money within one year from the date of their acquisition.
2.5 Venture Capital Companies/ Funds As per the provisions of Section 10(23FB) of the Act, income of
Venture Capital Company which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 and notified as such in the Official Gazette; and Venture Capital Fund, operating under a registered trust deed or a venture capital scheme made by Unit Trust of India, which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 and notified as such in the Official Gazette set up for raising funds for investment in a Venture Capital Undertaking is exempt from income tax.
2.6 Infrastructure Capital Companies/ Funds or Co-operative Bank As per the provisions of Section 10(23G) of the Act, income by way of dividends, interest or long term capital gains of
from investment made in share or long term finance in undertakings specified therein shall be exempt from tax. However, such income earned by an Infrastructure Capital Company shall not be exempt for the purpose of computing tax on book profits u/s 115JB of the Act.
c)
41
(In thousands of metric tons, except percentages) North America Western Europe China Rest of Asia (2) Latin America Middle East 6,465 6,431 5,130 5,420 941 949 23.5% 23.3% 18.6% 19.7% 3.4% 3.4% 7,205 6,677 6,006 5,918 1,077 1,027 23.8% 22.0% 19.8% 19.5% 3.6% 3.4% 7,374 6,753 6,763 6,095 1,155 1,087 23.2% 21.3% 21.3% 19.2% 3.6% 3.4% 7,907 7,313 9,689 7,123 1,383 1,276 20.9% 19.4% 25.7% 18.9% 3.7% 3.4%
42
37,751 100.0%
In the 2004, North America, Western Europe and China together accounted for approximately 66% of global primary aluminium consumption. North American demand has been led by the United States, which in 2004 accounted for 21% of global demand. Asia has shown the largest annual increases in consumption of primary aluminium over the last five years, driven largely by increased demand from China and Japan, which have emerged as the second and third largest aluminium consuming nations, accounting for 20% and 8%, respectively, of global primary aluminium demand in 2004. Increasing Deficit in Asian market According to the International Aluminium Institute, primary aluminium production has grown at a compounded annual growth rate of 4.7% per annum between 1999 to 2004. Historically, industrialized nations accounted for a large share of global production. However, changing dynamics in energy availability and the rising cost of alumina have resulted in a shift in aluminium production to countries with access to greater bauxite supplies and affordable sources of power. One region which is emerging as an attractive destination for aluminium smelting is Asia. From 1997 to 2004, the proportion of global primary aluminium production carried out in Asia (excluding the Middle East) increased from 13% to 26%, while the proportion of global primary aluminium production carried out in North America and Western Europe in aggregate declined from 43% to 33%. Notwithstanding the rise in aluminium production and capacities in the region, aluminium supplies in Asia have lagged behind demand, resulting in a supply deficit of 4.2 million metric tons during 2004. During this period, China witnessed a marginal surplus and the rest of Asia witnessed a deficit of 4.8 million metric tons. Given expectations of continued strong growth in China and other Asian markets, the demand-supply gap is likely to widen and is estimated to reach a high of 5.5 million metric tons by 2009. The following table sets forth the regional aluminium demand-supply balance from 2003 to 2009. Region 2003 Global Aluminium Surplus/Deficit Year ended December 31, 2004 2005(1) 2009(1)
Volume (In thousands of metric tons) North America Latin America Western Europe Eastern Europe (951) 1,316 (1,986) (327)
43
According to Metal Bulletin Research, the global deficit of alumina in 2004 was 338,000 metric tons, which was approximately 0.6% of global alumina consumption for the same period. However, the overall deficit was larger in Asia primarily due to the demand and supply dynamics in China. While Asia accounted for 26% of global primary aluminium production in 2004, it accounted for only 16.5% of global metallurgical grade alumina production during the same period, according to Metal Bulletin Research. This indicates a sharp rise in aluminium smelting capacity in Asia without a commensurate increase in alumina refining capacities. More significantly, alumina imports accounted for approximately 45% of total metallurgical grade alumina consumption in China in 2004, with approximately 56% of the total imports being sourced from Australia. Going forward, China will remain the key driver of demand growth in the region with a projected demand of approximately 18.0 million metric tons for metallurgical grade alumina in 2007, growing at a compounded annual growth rate of 10.9%. Furthermore, China will continue to be dependent on imports to meet its domestic alumina consumption.
Pricing
Aluminium is traded on the LME. While prices are determined by LME price movements, producers also charge a regional premium that generally reflects the cost of obtaining the metal from an alternative source. The following table sets forth the movement in the average aluminium price from 1995 to 2004. Aluminium Prices Year ended December 31, 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
(in US$ per metric ton) LME Cash Price % Change 1,805 22.0 1,504 (16.7) 1,598 6.3 1,357 (15.1) 1,362 0.4 1,549 13.7 1,444 (6.8) 1,349 (6.6) 1,431 1,716 6.1 19.9
Alumina, however, is priced on the basis of negotiations, but usually determined with reference to the LME price for aluminium. Negotiated agreements generally take the form of long-term contracts, but fixed prices can be negotiated for shorter periods and a relatively small spot market also exists.
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Copper mining which uses mined ore to produce copper concentrates, usually containing 25% to 40% copper; Copper custom smelting which smelts and refines copper from the concentrates obtained from copper mines; and Integrated copper producers, who undertake mining, smelting, and refining or leaching to produce copper. Integrated copper producers account for a large part of the copper capacity in the world.
Copper Consumption Global consumption of refined copper has grown consistently at a compounded annual growth rate of 3.8% between 1994 and 2004. The consumption of 16.8 million metric tons in 2004 reflects an increase of 8.8% over 2003. The key growth drivers are the continuing demand from the construction and power sectors. Global demand for refined copper is expected to reach 17.0 million metric tons in 2005, and to increase gradually to an estimated 19.6 million metric tons by 2009. Western Europe, China, North America and the rest of Asia (including Japan and the Middle East) together accounted for nearly 88% of global refined copper consumption. Europe and North America accounted for over 50% of refined copper consumption during the 1980s, but robust growth in Asia, led by China and Japan, has resulted in a significant change in global consumption patterns during the last decade. With a compounded annual growth rate of 6.6% between 1994 and 2004, Asia has been amongst the fastest growing copper market in the world. Driven by continuing growth in China and other regional markets, Asia is likely to witness continued strong growth over the next five years with regional consumption of refined copper estimated to reach 10.1 million metric tons by 2009.
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(In thousands of metric tons, except percentages) Western Europe China North America Rest of Asia Japan CIS
(3) (2)
3,579 3,056 2,862 2,973 1,202 511 493 353 203 164 15,396
23.2% 19.8% 18.6% 19.3% 7.8% 3.3% 3.2% 2.3% 1.3% 1.1% 100.0%
3,710 3,468 3,164 3,157 1,279 669 542 381 215 169 16,754
22.1% 20.7% 18.9% 18.8% 7.6% 4.0% 3.2% 2.3% 1.3% 1.0% 100.0%
3,608 3,815 3,092 3,215 1,240 693 554 397 215 171 17,000
21.2% 22.4% 18.2% 18.9% 7.3% 4.1% 3.3% 2.3% 1.3% 1.0% 100.0%
3,831 5,170 3,378 3,703 1,220 758 665 475 241 181
19.5% 26.3% 17.2% 18.9% 6.2% 3.9% 3.4% 2.4% 1.2% 0.9%
19,622 100.0%
Copper Supply Global mine production is the principal source of copper, with scrap recycling accounting for only 11% to 13% of aggregate supplies. The five largest copper mining countries are Chile, USA, Peru, Australia and Indonesia, which together accounted for 64% of global copper mine production in 2004. Nearly one-third of global mine production is sold in the custom smelting market, with the rest being used for integrated production. Integrated copper production is concentrated in countries such as Chile, Peru, Canada and Australia, which together account for 25% of global smelter copper production and 29% of global refined copper production. The major custom smelting locations include China, Japan, South Korea, India, and Western Europe, which together accounted for 42% of global smelter production in 2004 and thus are major importers of copper concentrate. Refined copper production has grown at a compounded annual growth rate of 3.5% between 1995 and 2004. Global production currently stands at 15.9 million metric tons, reflecting a growth of 4.5% in 2004. Traditionally, the Americas and Western Europe accounted for a majority of copper production, though their share has been on the decline in recent years. Asian markets have witnessed strong growth in capacities during this period. In 2004, China and the rest of Asia (including Japan and the Middle East) accounted for 13% and 19%, respectively, of global refined copper production while the Americas and Western Europe accounted for 37% and 12%, respectively. In spite of strong production growth, Asian markets witnessed a supply deficit of 2.3 million metric tons in 2004. Of this, the supply deficit in China was 1.4 million metric tons.
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2005(1)
2009(1)
(955) 3,175 (1,888) 268 758 104 (1,387) (1,563) 348 289
(706) 3,321 (1,711) 186 747 335 (1,404) (1,208) 333 368
Pricing Copper is traded on the LME. Although prices are determined by LME price movements, producers normally charge a regional premium that is market driven. The following table sets forth the movement in copper prices from 1995 to 2004. Copper Prices Year ended December 31, 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
(in US$ per metric ton) LME Cash Price % Change 2,937 27.3 2,296 (21.8) 2,279 (0.7) 1,654 (27.4) 1,572 (5.0) 1,814 15.4 1,578 (13.0) 1,558 (1.3) 1,779 2,866 14.2 61.1
For custom smelters, TcRc has a significant impact on profitability as prices for copper concentrate and prices of finished products are LME price net of TcRc or plus a premium, respectively. A significant proportion of concentrates are sold under frame contracts and TcRc is negotiated annually. The TcRc rates are influenced by the demandsupply situation in the concentrate market, prevailing and forecasted LME prices and mining and freight costs.
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Business Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a flagship company of the Aditya Birla Group, which is one of the largest business groups in India. We were incorporated in 1958 and have been listed on the Indian Stock Exchanges since 1968 and on the Socit de la Bourse de Luxembourg since 1993. The listing and trading of our GDRs have been transferred from the Bourse de Luxembourg (a market appearing on the list of regulated markets issued by the European Commission) to the EuroMTF (which is regulated by Luxembourg Stock Exchange) with effect from November 25, 2005. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU of July 2005, we are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines. We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. For fiscal 2005, our net sales and operating revenues were Rs.95,232.5 million out of which 55% was accounted for by our aluminium business and 45% by our copper business. For the same period, our profit before interest and tax (PBIT) was Rs.20,832.4 million, with 77% and 12% accounted for by our aluminium and copper businesses, respectively. The remaining 11% was unallocable in nature. Our aluminium revenues and profit before interest and tax have grown at a compounded annual growth rate of 48% and 55%, respectively, since fiscal 2003. We acquired our copper business at the end of fiscal 2003. Our aluminium operations are based in India, with access to abundant, good quality bauxite and coal, as well as proximity to key consumer markets. Our total alumina production capacity is currently 1,145,000 metric tpa and our total aluminium production capacity is currently 455,000 metric tpa. Our production facilities comprise alumina refineries, smelters and facilities for value-added products such as rolled products, extrusions, foils and wheels. Our facilities are supported by dedicated bauxite mines and our own power plants, which provide us with significant cost advantages. Our copper smelting facility is based at Dahej, with a current capacity of 250,000 metric tpa. We have recently completed the capacity expansion of our copper smelter to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. As part of our upstream integration efforts, we acquired two copper mines in Mt. Gordon in Queensland, Australia and Nifty in Western Australia in 2003 through our wholly owned subsidiary Birla Mineral Resources Pty Limited which, in turn, wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. Mt. Gordon commenced its supply of copper concentrate in August 2004 while Nifty is expected to commence its supply of copper concentrate in the second half of fiscal 2006. As part of our efforts to add value to the by-products of copper smelting, we also produce phosphatic fertilizers and precious metals like gold and silver. Our copper business is also supported by a dedicated, all-weather jetty located at Dahej and owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited. We are currently embarking on a growth plan designed to make us a global-sized, globally-competitive metals producer. We plan to achieve this through a combination of expansion of existing facilities and greenfield projects, in both alumina and aluminium, backed by dedicated power plants. We also plan to make further investments in
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(Rs. in millions, except percentages) Aluminium Copper Net Sales & Operating Revenues 23,920.4 26,202.1 50,122.5 48% 52% 100% 29,957.8 32,125.8 62,083.5 48% 52% 100% 52,520.9 42,711.6 95,232.5 55% 45% 100%
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Our Strategy
Aluminium Towards realizing our vision of attaining global size and further improve our cost competitiveness in the global aluminium industry, we are embarking on several expansions at our existing facilities and greenfield projects, both in alumina and aluminium. These include: 1. 2. 3. Ongoing expansion of existing facilities, both in alumina and aluminium. A greenfield joint venture alumina project with Alcan Inc., under implementation. A planned fully integrated greenfield project in Orissa with the capacity to produce alumina and aluminium.
Our strategy is to support all of the above projects with low cost dedicated sources of key inputs, including bauxite and coal for dedicated power. Upon completion of our expansion plans, including the projects mentioned in the section Objects of the Issue on page 25 of this Letter of Offer, our aggregate alumina capacity is expected to increase from 1,145,000 metric tpa to 3,610,000 metric tpa. Aluminium smelting capacity is expected to increase from 455,000 metric tpa to 765,000 metric tpa. Our power generation capacity is also expected to increase from 987.2 megawatt to 1,637.2 megawatt. These projects together with other greenfield projects under evaluation are expected to significantly reduce our costs and move us into the ranks of the top 10 global producers of alumina and aluminium, by volume. Copper In the copper business, our strategy is to reduce costs through optimal utilization of expanded smelting capacity, currently under commissioning trials, and increase the extent of copper concentrate supply from the mines owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, own copper mines in Australia. We will also consider opportunities to acquire copper mines so as to satisfy our copper concentrate requirements.
Wheels
54
Our Alumina Refining Process We use the Bayer process to refine alumina from bauxite. The Bayer process is used in nearly all commercial refineries and is considered the industry standard for production of metallurgical grade alumina because of its proven application and efficient use of energy. In the Bayer process, caustic soda is used to extract the alumina content from ground bauxite, at temperatures suitable for the particular mineralogy of bauxite, after which the resultant sodium aluminate solution is separated from the undissolved residue called red mud. The solution is then subjected to seeded precipitation to produce alumina hydrate, which is then calcined into alumina. Our Primary Aluminium Production Process There are two types of electrolytic cells commonly used to produce primary aluminium, pre-baked and selfbaking cells. The two types of cells differ primarily in the fabrication and connection of the carbon anode. Most modern smelters rely on pre-baked reduction cells because primary aluminium can be smelted at lower production costs and hazardous gases formed in the production process can be more effectively treated and contained. We use pre-baked reduction cells at the Renukoot smelter and are in the process of expanding the Hirakud smelter by converting it from self-baking to pre-baked technology. Alumina is converted into primary aluminium through a smelting process using electrolytic reduction. The reduction process takes place in a reduction cell, referred to as the pot, where alumina is reduced to molten aluminium. From the pot-line, the molten metal is tapped to the casting unit, where the metal is cast into required forms such as ingots, billets, rolling slabs and wire rods, depending on the requirements of our value-added product operations.
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(Mtpa)
Renukoot Belgaum Muri Hirakud Alupuram Belur Taloja Kalwa Silvassa Total
(1) (2) (3)
Uttar Pradesh Karnataka Jharkhand Orissa Kerala West Bengal Maharashtra Maharashtra Dadra & Nagar Haveli
345,000 31,000
(1)
40,000 10,000 -
6,000
78 78
50,000 170,000
Operations suspended since August 1992 due to an increase in power tariff because of which the operations became unviable. Operations suspended since August 2003 due to an increase in power tariff because of which the operations became unviable. Recently expanded by 100 MW
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2005
Production Utilization 1,159,664 471,460 175,734 28,551 26,177 107,279 6,936 101% 93% 103% 132% 238% 36%
Our Key Raw Materials and Manufacturing and Operating Expenses Our key cost drivers are power and fuel, bauxite, carbon and caustic soda, which in aggregate accounted for approximately 76% of our raw materials and manufacturing and operating expenses for alumina, aluminium and value-added products in fiscal 2005. The following table sets forth a breakdown of our key cost drivers for fiscal 2003, 2004 and 2005: Aluminium Business: Raw Material and Manufacturing & Operating Expenses Year ended March 31, 2003 (in metric tons) Power and Fuel Raw Materials: Bauxite Carbon Caustic soda Other Raw Materials Other Manufacturing & Operating Expenses Total Raw Material and Manufacturing & Operating Expenses
(1) Includes Cogeneration - Power consumed in MU
4,668 (1)
12,629.7
15,052.9
26,687.2
57
59
60
(Rs. in millions)
Includes conversion charges, trade sales and miscellaneous items, but excludes Net Export Incentives & Miscellaneous Receipts & Claims
We sell alumina in excess of our own aluminium production requirements, in both the domestic and export markets and have a broad customer base. The quality and reliability of our supplies are our key strengths in retaining these customers. The export price of metallurgical alumina is determined with reference to prevailing and predicted international alumina prices. The majority of our contracts are short term, though we also supply under long term contracts. Domestic sales are normally conducted on the basis of a fixed price, determined from time to time. The domestic price of alumina is normally higher than the export price due to smaller order sizes and other associated costs. We do not grant any credit period for alumina exports. All payments by our domestic customers are in Indian Rupees and by overseas customers in U.S. Dollars. For exports, deliveries are made through sea and materials are moved by road to the port. For domestic sales, our customers are responsible for arranging and paying for transportation from our alumina refinery. We sell primary aluminium in the form of ingots, billets and wire rods, in both the domestic and export markets. The domestic markets, where we service a large and fragmented customer base, accounted for over 96% of our primary aluminium sales in fiscal 2005. Our exports are usually to large commodity traders, who accept delivery in Singapore, before shipping to primary aluminium consumers in other countries. We have a broad customer base for primary aluminium products in India. We do not enter into any long-term contracts for domestic sale of primary aluminium. Our domestic pricing is based on various factors, including average LME prices, exchange rates, domestic demand-supply outlook, inventory levels and prices offered by competitors. The terms of our domestic sales are governed by an approved credit policy that may allow credit/secured credit/ cash payment terms to different customers based on credit appraisal of customer accounts from time to time. All payments by our domestic customers are in Indian Rupees and exports are priced in U.S. Dollars, backed by an irrevocable letter of credit issued prior to shipment. We sell value-added aluminium products in the form of rolled products, extrusions, foils and packaging materials and wheels, in both the domestic and export markets. In the domestic markets, we sell value-added products to manufacturers of consumer durables, bus/truck body building, industrial machinery, building and construction, packaging, and auto ancillary products. In addition, we sell products directly to end-consumers and have established brands such as Everlast roofing sheets, house foils such as Freshwrap, Superwrap and Freshpack and Aura alloy wheels. We have a broad and diversified customer base for our value-added aluminium products.
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Key Technology Arrangements Our aluminium business uses process and technologies that are used in nearly all commercial refineries and are considered industry standards for production. We entered into a license agreement dated April 13, 2005 with China Aluminium International Engineering Corporation Limited (CAIECL) to convert our existing potlines at Hirakud from Soderberg smelter into prebaked smelter, add 14 pots in those lines, and set-up an additional potline. The agreement covered the provision of technical services for implementation, licensed use of technology, basic engineering, detailed engineering and software for the new pot controllers including training to our personnel. Some of these were routed through Gauiyang Aluminium Magnesium Design & Research Institute (GAMI) of China which is a subsidiary company of CAIECL. In addition to the above, the erstwhile Indal entered into an agreement dated January 17, 2005 with Alcan International Limited of Montreal, Canada for the transfer of Alcan Alumina Technology and grant of license to use certain processes in the Muri plant. The agreement also covered the provision of technical information and engineering services. Our Expansion Projects We believe that our ongoing and planned capacity expansions will allow us to enhance our competitiveness by reducing our production costs and also improve our revenues and profitability. We are in the process of expanding our alumina capacity at our Muri facilities and our aluminium capacity at our Hirakud smelter. We have also identified several other expansion projects to substantially increase our production capacities for alumina and aluminium, which, if completed, will significantly reduce our unit production costs for these products. However, we have not received all the necessary approvals to carry out these projects and cannot assure you that these projects will be undertaken or, if undertaken, will not be altered or completed beyond current time and cost expectations. We believe that our substantial experience with improving our capacity at our various facilities will enable us to undertake and complete our expansion projects efficiently and successfully. Expansions at Existing Facilities Our expansion of existing facilities includes the following key projects:
expanding the alumina capacity at Muri from 110,000 metric tpa to 450,000 metric tpa. expanding the alumina capacity at Belgaum from 350,000 metric tpa to 650,000 metric tpa. expanding the aluminium capacity at Hirakud from 65,000 metric tpa to 146,000 metric tpa.
Muri Alumina We plan to increase the capacity at our Muri operations from 110,000 metric tpa in fiscal 2005 to 450,000 metric tpa upon completion of the expansion. This would include alumina refinery, the co-generation plant, the railway system and a port facility for evacuation. We plan to use technology obtained from Alcan, which is expected to improve recovery and reduce raw material and energy consumptions. Consequently, we expect cash cost of alumina production at this facility to decline sharply upon stabilization of expanded capacity. Belgaum Alumina We plan to increase the capacity at our Belgaum operations from its current capacity of 350,000 metric tpa to 650,000 metric tpa. This would include alumina refinery, the co-generation plant, the railway system and port facility for finished goods movements. We plan to use appropriate technology for improving recovery and reducing energy consumption with the objective of reducing cash cost of our operations. Hirakud Aluminium We are in the process of increasing the capacity of our Hirakud smelter from its current capacity of 65,000 metric
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Aditya Alumina with capacity of 1,000,000 metric tpa which is expandable to 1,500,000 metric tpa. Aditya Aluminium with capacity of 260,000 metric tpa which is expandable to 325,000 metric tpa.
Aditya Alumina and Aluminium We have plans to set up an integrated greenfield aluminium project in Orissa, with a capacity to produce 1,000,000 metric tpa of alumina, which is expandable to 1,500,000 metric tpa. This project will also have a capacity to produce 260,000 metric tpa of aluminum, which is expandable to 325,000 metric tpa upon completion. This will be supported by a 650 megawatt dedicated power plant, backed by dedicated coal mines. Further, we are working towards acquiring a dedicated coal deposit within the proximity of the proposed smelter and power plant in Lapanga, Orissa. Rajbar Aluminium We are also evaluating implementation of a greenfield smelter with a capacity to produce 325,000 metric tons of aluminium backed by dedicated power and coal mines in the State of Jharkhand. We have signed a Memorandum of Understanding with the state government of Jharkhand and are in the process of obtaining the necessary government and regulatory approvals for the project. Joint Ventures Utkal Alumina Our 55% Joint Venture with Alcan Inc. We are setting up a global-sized greenfield alumina project in Orissa as a joint venture with Alcan Inc. with a total project capacity of 1,000,000 metric tpa to1,500,000 metric tpa. We own 55% of the equity in the joint venture with the rest being held by Alcan and we are entitled to 55% of the output. Apart from the projects described above we may acquire additional copper mines as and when we identify appropriate ones. We have not currently identified a suitable mine for acquisition. For more details on our planned expansion projects which are under various stages of implementation, please see Objects of the Issue.
Cu concent at r e O X Y G EN PLA N T
SM ELTER
CopperSl ag
SU LPH U RI C A CI PLAN T D
A ci d s es al A m m oni a
CopperA node
A node Scr ap
REFI ERY N
Rock Phos phat e A node Slm e i G yps um PH O SPH O RI C A CI PLAN T D Phos A ci . d PH O SPH A TI C FERTI ZER PLA N T LI CO N TI U O U S CA ST N CO PPER RO D S PRECI U S M ETA L O RECO V ERY PLA N T
Copperr ods
65
In addition to the above, we own two copper mines located in East Pilbara and Queensland in Australia through our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, owns and operates these mines. As on March 31, 2005 the Nifty mine had proven and probable copper ore reserves of 34.59 million metric tons of 2.4% grade, while the Mt. Gordon mine had proven and probable copper ore reserves of 2.30 million metric tons of 3.0% grade. The following table sets forth, for the periods indicated, information relating to the production volumes of our smelter, refinery, phosphatic fertilizer plant and power plants: Copper Business: Production volumes & Capacity utilization(1) Year ended March 31, 2003 2004 (in metric tons, except where noted) Production Copper cathode
(2)
2005
Production Utilization 128,923 88,298 286,264 5 37 261,882 410 52% 91% 72% 69% 49% 36%
Continuous cast rods Phosphatic fertilizers Gold Silver Sulphuric Acid(2) Power(3)
(1) (2)
Installed capacity has been used for calculation of Capacity utilization Production of copper cathode, sulphuric acid and phosphotic acid are net of 88,215 metric tons, 401,434 metric tons and 133,735 metric tons in fiscal 2005/ 85,431 metric tons, 323,969 metric tons and 100,476 metric tons in fiscal 2004/ 79,843 metric tons, 319,362 metric tons and 104,641 metric tons in fiscal 2003 respectively, which had been captively consumed. Measured in MU.
(3)
Our Smelter We own and operate a 250,000 metric tpa copper smelter in Dahej. The construction of the greenfield Dahej copper smelting and refining complex with a capacity of 100,000 metric tpa was completed in 1998. Thereafter, cost effective expansions in two phases have increased the capacity to 250,000 metric tpa. Our smelter consists of various plants divided into two production lines.
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Precious Metal Refinery Our precious metals refinery, with technology from Wenmec, Finland, has a capacity to produce 7.5 metric tpa of gold and 75 metric tpa of silver of 99.9% purity. During fiscal 2005, we produced 5,156 kg of gold and 36,595 kg of silver. Phosphatic Fertilizers Our phosphatic fertilizer plant, located at Dahej, started commercial production in September 2000. Our phosphatic fertilizer plant has the capability of producing both dia-ammonium phosphate and NPK. As of March 31, 2005, the capacity at our phosphatic fertilizer plant was 400,000 metric tpa. Our phosphoric acid plant, also located in Dahej, started commercial production in 1999. The plant has an installed capacity of approximately 180,000 metric tpa of phosphoric acid and 735,000 metric tpa of sulphuric acid. The plant also has a fluorine recovery section, which produces hydro fluosilic acid. The phosphoric acid produced is entirely captively consumed for production of phosphatic fertilizers. Hydro fluosilic acid is sold to approved users. Our Power Plants Electricity is an important cost element for producing copper. A reliable and inexpensive supply of electricity is therefore important. Since the commencement of our operations, the power tariff from the Gujarat state grid has been high. As a result, we decided to build our own power plants. Our power plants are able to provide almost all of the electricity requirements of our smelter and a substantial portion of the electricity requirements of our refinery. The power plants operate on imported coal as well as indigenous coal. Steam from the waste heat boiler is also utilized by the steam turbine to generate power.
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336 (1)
19,731.3
27,944.4
39,650.0
Copper Concentrate Copper concentrate is the principal raw material for our copper smelter. In fiscal 2005, we sourced approximately 10% of our concentrate requirement from two mines in Australia, owned through our wholly owned subsidiary Birla Mineral Resources Pty Limited. The balance is procured from various other sources. Our Copper Mines Birla Mineral Resources Pty Limited, our wholly owned subsidiary, currently owns two copper mines in Australia through its wholly owned subsidiaries Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. The Nifty mine, located in the Great Sandy Desert region of East Pilbara in Western Australia, was acquired in March 2003 and the Mt. Gordon mine, in Queensland, Australia, was acquired in November 2003. The Nifty mine consists of an open-pit mine, heap leach pads and a solvent extraction and electrowinning, or SXEW processing plant which produces copper cathode. In fiscal 2005, the Nifty mine produced 15,826 metric tons of copper cathode. A copper sulphide deposit is located at the lower levels of the Nifty mine and we are currently developing an underground mine and concentrator to mine and process copper ore from this deposit. This project is now in an advanced stage and production of concentrate is expected to commence in the second half of fiscal 2006.
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(Rs. in millions)
105,316 77,134
9,051.8 8,166.7
101,033 91,537
10,486.8 11,265.9
126,451 87,924
17,965.5 14,773.6
6 31 346,013
7 32 260,022
5 35 302,436
176,341
194,559
268,592
Includes trade sales and miscellaneous items, but excludes Net Export Incentives & Miscellaneous Receipts & Claims.
Sales of Our Copper Products Our copper sales and marketing head office is located in Mumbai. Continuous cast rod sales at Rs.14,773.6 million amounted to approximately 45% of our total copper sales for fiscal 2005 compared to 52% in fiscal 2004 with the remaining being accounted for by copper cathodes. During fiscal 2005, we sold approximately 82,304 metric tons of copper in India. Domestic sales are normally conducted on the basis of a fixed price for a given month that we determine from time to time on the basis of average LME price for the month, as well as domestic supply and demand conditions. The price for copper we sell in India is normally higher than the price we charge in the export markets due to the tariff structure on costs, smaller order sizes that domestic customers place and the packaging, storing and truck loading expenses that we incur when supplying domestic customers. For domestic sales of copper, contracts are finalized for monthly quantities, monthly optional quantities, quotational period, premium and pricing methodology. Our export sales of copper are made on the basis of both long-term sales agreements and spot sales. The sales price of our copper exports includes the LME price plus the producers premium. We do not enter into fixed price long-term copper sales agreements with our customers. Rather, the price is based on LME price for the agreed quotational period plus an agreed premium. Typically, during the last three months of each year, we negotiate with our long-term customers a schedule for shipments with quantity for each period, the premium and the quotational period. Each year we set aside a certain portion of our copper production for sales in the spot market as a precautionary measure. This allows us to fulfill delivery obligations under our long-term sales agreements in the event of a disruption in our production, as well as to take advantage of sudden and unpredicted price surges in the global copper market. We believe that this practice is consistent with the standards adopted by other established exporters of copper. When not otherwise
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3)
We entered into a license agreement with MIM Technology Marketing Limited of Australia dated December 20, 1994 through Outokumpu Engineering Contractors OY for the use of the ISA process which is used in the conversion of copper anode into copper cathode. The agreement covered supply of the entire engineering
71
Expansion Projects We have recently completed the capacity expansion of our copper smelters to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. We may acquire additional copper mines as and when we identify appropriate ones. We have not currently identified a suitable mine for acquisition.
Quality Assurance
We believe that the quality of our products and processes are integral to our position as one of the leading metals and mining companies in Asia and to our ability to retain and attract customers. We utilize modern systems to achieve this level of quality in our processes, as well as to monitor and maintain peak performance throughout the life of our operations. As a part of on-going efforts to attain continuous quality improvement, we employ several on the job quality improvement initiatives. All our aluminium plants are ISO 9001 and 14001 certified, and several have attained the OHSAS 18001 the occupational health and safety certification. On the export front, our aluminium business has been accorded a Trading House status by the Indian government. Effective January 30, 2003, the London Metal Exchange listed our copper business as a Grade A copper brand. Our copper business has also been accredited with ISO 9001, ISO 14001 and OSHAS 18001 certifications. We have received several awards and recognitions for our best practices including the Best Safety Performing Plant award given by the International Aluminium Institute in 2004, the Rajiv Gandhi National Quality Award 2003 in Large-Scale Manufacturing category, award by the Bureau of Indian Standards and the IMC Ramakrishna Bajaj National Quality Award 2004 in the manufacturing category.
Patent No. 186716 dated January 12, 1992: A process for preparing cryolite by extracting flourine from spent pot filters. The patent is due to expire on January 16, 2012.
We have also invested significant resources to establish and develop brands for our value-added products aimed at consumer markets: With the exception of Superwrap, which is a registered trademark, we have filed the brands for registration and approval with the relevant Indian authorities.
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2.
Birla Balwaan
3.
Freshwrapp
Pending: Application has been accepted and correspondence number allotted but no examination report has been filed. Pending: Applications have been accepted For: (i) Correspondence number is allotted but no examination report has been received. (ii) Letter of acceptance before advertisement has been issued (iii) Examination report and reply by the Company have been filed Registered (in the name of Indal) : Registration No. 418944 issued on August 11, 1990; The registration is renewed till March 12, 2015 Registered (in the name of Indal) : Registration No. 529859B issued on May 17, 1990; The registration is renewed till March 17, 2014
4.
Aura
5.
Superwrap
6.
MaxLoader
Employees
We believe that our success is significantly dependent on our ability to attract, develop and retain a superior workforce. We had a total of 13,752 employees at the end of fiscal 2003, 13,675 employees at the end of fiscal 2004 and 19,687 employees as of March 31, 2005. We expect that the number of our employees will increase as we complete our expansion projects. We believe that our relationship with our employees is good. In addition to our full-time employees, we retain contract workers to assist us in various aspects of our business. The terms of engagement for our contract workers are different than that of our full time employees. Recruitment. Our recruitment focuses on attracting and retaining high caliber individuals who are motivated to advance within the organization and meet our evolving needs. We follow all modes in the recruitment approach i.e. press advertisement, campus recruitment, search through consultants, special recruitment drives and headhunting agencies. The qualifications depend upon the job profile and vary from BTech / BE, MSc (pure sciences), MCS, MCA, MTech & PhD for technical grades to MBA and degrees with specific specializations for administrative grades. Primary consideration is given to qualifications, knowledge, skills and personal qualities, including the capacity to adapt and evolve over the longer term and the demands of the role to determine suitability. The selection of candidates is generally conducted by an interview panel, which evaluates the qualifications and suitability of candidates.
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salary, which is increased in line with the performance of our business; bonus tied to our performance, the specific business unit in which the employee reports and individual performance; various allowances and welfare benefits, including medical care, housing subsidies, child care and education, retirement and other social security benefits; and provident fund, pension fund and gratuity.
Annual compensation reviews are based on external factors, such as economic growth, sectoral growth and demand and supply of skills and competencies, and internal factors, such as business performance, capacity of the business to pay as well as a performance grid for employees. We have a variable pay scheme for our managerial staff to recognize and reward superior performance. We do not have an employee stock option plan. Community development. We actively participate in the operation of schools and hospitals at our various locations and all our employees at those locations are entitled to access these facilities. We are also at the forefront of various community development activities. At certain locations, our employees are also involved in facilitating and nurturing self-help organizations in remote villages located close to our manufacturing facilities.
Environmental Matters
We are committed to the protection of the environment and have a well-drawn out environmental management strategy in place. All our installations are ISO 14001 certified and most are also OHSAS 18001 certified. We have installed state-of-the-art pollution control equipment to ensure cleaner operations at all our units. Similarly, in order to reduce effluent discharge, we have set-up effluent treatment systems in all our units. We have also undertaken several unique projects on an experimental basis jointly with local entrepreneurs for converting hazardous waste into useful products. A well equipped environment management cell has been established with qualified personnel to oversee our environmental activities and projects. This cell is supported by sophisticated control laboratories set up to constantly monitor the quality of air emissions and water effluents at our facilities. We have received several awards and recognitions for our contribution to environmental conservation and safety including the CII National Award for Excellence in Energy Management - 2004, National Energy Conservation Award - 2004 in the Aluminium Sector and Green Tech Gold Award 2003-04. We are subject to national and provincial environmental regulations which control waste discharge, land repair, emissions disposal and mining control. We believe that our operations are in compliance with the present regulatory requirements. We spent approximately Rs.1,771 million on pollution control equipment during fiscal 2005 and plan to spend an additional Rs.2,924 million within a span of 3 years. The Government of India, however, may impose stricter regulations or increase its enforcement activities which could require us to spend additional amounts on
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Insurance
We currently maintain insurance coverage on our property and plants, our fixed assets, our transportation vehicles and various assets that we consider to be subject to significant operating risks. The risk coverage is decided in a scientific manner taking help of experts from the Insurance and Risk Advisory Services industry. We paid Rs. 365.0 million in fiscal 2005 towards insurance charges compared to Rs.335.3 million in fiscal 2004. The employees at all our locations are covered against the risks of accident in the work place as per the laws of the land. Further, the company maintains hospitals at some locations to extend medical facilities to its employees and in other locations, the employees are covered by suitable health insurance schemes. See Risk Factors Our insurance does not cover all of the risks we face, and the occurrence of events that are not covered by our insurance could cause us losses, which if significant, could adversely affect our financial condition.
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79
HINDALCO INDUSTRIES LIMITED HISTORY OF OUR COMPANY AND OTHER CORPORATE MATTERS
Our Company is a flagship company of the Aditya Birla Group and was incorporated on December 15, 1958 as Hindustan Aluminium Corporation Limited under the provisions of the Act with its registered office at Industry House, 6th floor, 159 Churchgate Reclamation, Mumbai 400 020, India. We moved our registered office to Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025, India effective from September 1, 1970.We changed our name from Hindustan Aluminium Corporation Limited to Hindalco Industries Limited on October 9, 1989, as we had expanded our line of products and also proposed to diversify into other allied fields including aluminium foils, steel plant etc. The Equity Shares of our Company with face value of Rs. 10 each were first listed on BSE. The listing agreement was signed with BSE on January 28, 1960. Thereafter, the Equity Shares with face value of Rs. 10 each were listed on the NSE. In 1962 we set up collaboration with Kaiser Aluminium & Chemicals Corporation, USA when our integrated complex at Renukoot came on stream with a smelter capacity of 20,000 MTPA. It has since grown to become the largest integrated aluminium producer in India with a smelter capacity of 345,000 MTPA. Our equity shareholders and the equity shareholders of Renusagar Power Company Ltd. (Renusagar) approved a Scheme of Amalgamation of Renusagar into our Company, wherein all the assets of Renusagar were merged into our Company. The Scheme was sanctioned by the High Court of Judicature at Bombay on April 22, 1993 and by the High Court of Allahabad. Our Company has undergone in-house expansions and modernization and set up a Foil & Wheel plant at Silvassa, near Mumbai, in 1997-98. In the year 2000-01, our Company acquired a 74.6% stake in the Indian Aluminium Company Limited (Indal). Established in 1938, Indal started with Indias first aluminium sheet rolling mill at Belur, near Kolkata, West Bengal. Indal had a nationwide spread of plants and mines, operating through all stages of the aluminium value chain from bauxite mining, alumina refining, aluminium smelting with captive power to downstream sheet and foil rolling and extrusions. The countrys first scrap recycling facility was commissioned by Indal and reflected its commitment to promoting aluminium as the eco-friendly metal that can be recycled over and over again, consuming less power and conserving natural resources. After increasing our stake in Indal from 95.9% to 96.5% at an additional cost of Rs. 49.9 million, through an open offer made in accordance with regulatory requirements, on August 23, 2004, our Board and the Board of Directors of Indal approved a Scheme of Arrangement wherein all the assets of Indal other than the foil unit at Kollur in Andhra Pradesh were to be demerged from Indal and merged into our Company. The Scheme has already been approved by the requisite majority of the shareholders and creditors of both the companies and also sanctioned by the High Court of Judicature at Bombay and the High Court at Calcutta on January 14, 2005 and December 23, 2004 respectively. Simultaneously the capital reduction of the equity shares of Indal from Rs. 10 to Rs. 2 for per equity share was also approved by the High Court at Calcutta on December 23, 2004. Pursuant to the Scheme, Hindalco issued shares to the minority shareholders of Indal in the ratio of one share of Rs. 10 each in Hindalco, credited as fully paid up for every seven equity shares of Rs. 2 each held by the minority shareholder in Indal. The Indal shareholders will continue to hold their shares in Indal. Hindalcos current share in the remaining Indal is 96.98%. The Scheme was made effective from March 7, 2005, and the appointed date was April 1, 2004. Indals strength in downstream operations supplements our operations and as a consequence, we now enjoy a 33% market share in primary aluminium metals and 63% market share in the value-added rolled product segment. Meanwhile, our equity shareholders and the equity shareholders of Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) approved a Scheme of Arrangement between IGCL, IGFL and our Company in fiscal 2003, wherein the fertilizer business of IGCL was demerged and migrated to IGFL and the remaining business of IGCL (including its copper business) was merged with our Company. The scheme was sanctioned by the High Court of Judicature at Bombay and by the High Court of Lucknow. Pursuant to the Scheme, the Company issued shares to the minority shareholders of IGCL in the ratio of one share of Rs. 10 each in the Company, credited as fully paid up for every twelve equity shares of Rs. 10 each held by the minority shareholder in IGCL. The Scheme was made effective from February 12, 2003 and the appointed date being April 1, 2002. Subsequently, with a strategic intent to achieve vertical integration, the copper business of Hindalco acquired two captive copper mines in Australia Nifty mine located in the Great Sandy Desert region of East Pilbara in Western Australia, and Mount Gordon mine, in Queensland. The Nifty mine was purchased through acquisition of Straits Nifty Pty Ltd. (Later renamed to Birla Nifty Pty Ltd. with effect from March 10, 2003) from Straits
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2.
August 6, 2005
The details of the capital raised by our Company are given in the section entitled Capital Structure on page 15 of this Letter of Offer.
Our Joint Ventures 1. The Company, entered into an agreement with the Tamil Nadu Industrial Development Corporation (TIDCO) on October 4, 1980 to establish a joint venture company for the manufacture of aluminium fluoride. Pursuant to this agreement, the Company and other companies in the Aditya Birla Group have made investments in Tanfac Industries Limited (formerly Tamil Nadu Flourine and Allied Chemicals Limited). The Company is a party to the shareholders agreement dated December 15, 2000 entered into between the AT&T Wireless Group, the Aditya Birla Group and the Tata Group. Subsequently, the Cingular Wireless Inc. has acquired the AT&T Group. This agreement records the rights and obligations of the parties in relation to the joint venture company formed pursuant to the agreement viz., Idea Cellular Limited.
2.
82
Dividend per Equity Share of Rs. 10 each (Amount in Rs.) 12.00 13.50 13.50 16.50 20.00
83
84
85
Nationality Indian
Age (years) 74
Other Directorships in Indian companies Indian Public Limited Companies: 1. Birla Global Finance Ltd. 2. Century Textiles & Industries Ltd. 3. Hercules Hoists Ltd.(Alternate Director) 4. Panasonic Battery India Company Ltd. 5. Prudential ICICI Trust Ltd. 6. Kennametal Widia (India) Ltd. 7. Supreme Industries Ltd. Indian Private Limited Companies: 1. Bekaert Industries Pvt. Ltd. 2. Dolphin Fisheries & Trading Pvt. Ltd.
7.
Indian
83
8.
Indian
72
Indian Public Limited Companies: 1. Zenith Exports Ltd. 2. VCK Share & Stock Broking Services Ltd. 3. Birla Insurance Advisory Services Ltd. 4. VCK Capital Market Services Ltd.
9.
Indian
63
Indian Public Limited Companies: 1. Agriculture Insurance Company Ltd. 2. Andhra Cements Ltd. 3. Srei Venture Capital Ltd. 4. Suraj Diamond & Jewellery Ltd
Sitting Fees Meetings Attended 5 5 6 5 1 5 6 6 6 Amount (Rs.) 25,000 25,000 90,000 25,000 10,000 80,000 60,000 30,000 60,000
Total Rs. in millions 11.20 0.40 0.85 0.40 0.12 0.73 0.66 0.48(1) 0.57
(1) Paid to General Insurance Corporation of India, which has nominated Mr. Bhandari. Only the sitting fees were paid to Mr. Bhandari B. Executive Director Name of Director All elements of remuneration package Rs. in millions Mr. D. Bhattacharya 25.82 Performance bonus Rs. in millions 4.87 Total Rs. in millions 30.69
The appointment is subject to termination by three months notice in writing on either side. The appointment is for a period of five years with effect from October 2, 2003. No severance is payable to the Managing Director.
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Number of Equity Shares (Pre-Issue as on November 18, 2005) 362,400 241,140 64,160 30,760 2,500 173,470 2,700 44,080 N.A (Nominee Director)
Number of Equity Shares (Post-Issue)* 453,000 301,425 80,200 38,450 3,125 216,838 3,375 55,100 -
The number of shares for the column entitled number of Equity Shares (Post-Issue) has been calculated assuming full subscription to rights entitlement in this Issue
Details of the transactions in Equity Shares by our Directors and their relatives during the last six months
Name of Director/Relative of Director Date of Transaction June 10, 2005 June 25, 2005 June 7, 2005 June 9, 2005 Details of Transaction Sale Sale Purchase Sold No. of Equity Shares of Rs. 10 each 2,000 700 600 663 Price per share (in Rs.) 1,120 1,177 1,096 1,130.12
Mr. A.K. Agarwala Mr. A.K. Agarwala Ms. R. Agarwala Mr. Shailendra. S. Kothari
Except for the above, none of our Directors have undertaken transactions in the Equity Shares of our Company during the last six months.
Corporate Governance
There are two Board Level Committees in our Company, which have been constituted and function in accordance with the relevant provisions of the Act and the Listing Agreement. These are the (i) Audit Committee, and (ii) Investor Grievance Committee. A brief on each Committee, its scope, composition and meetings for the current year is given below:
(i)
Audit Committee
Members
G G
89
Mr. Anil Malik, Company Secretary, acted as Secretary of the Audit Committee in terms of Clause 49 of the Listing Agreement. The Audit Committee is comprised of two Independent Directors and one Non-Executive Director. The Audit Committee met five times during the course of this fiscal year, on April 30, 2005, June 6, 2005, July 29, 2005 September 20, 2005 and October 29, 2005. Scope and terms of reference The scope of the Audit Committee in companies is defined under Clause 49 of the Listing Agreement dealing with Corporate Governance and the provisions of the Act. The Audit Committee acts as a link between the management, the statutory, cost and internal auditors and the Board of Directors and oversees the financial reporting process.
The Investor Grievances Committee is comprised of one Independent and one Non-Executive Director. The Investors Grievances Committee did not meet during the course of this fiscal year. Scope and Terms of Reference The committee was constituted in terms of the mandatory requirement of Clause 49 of the Listing Agreement to look into the redressal of grievances of investors like non receipt of share certificates, non-receipt of balance sheet, non-receipt of dividend warrants etc. During this fiscal year, our Company received 16 complaints from shareholders, all of which stand resolved as on November 18, 2005. We have one pending complaint from the last fiscal year, which is unresolved due to non receipt of required documents from the shareholder. Remuneration Committee The Company does not have a Remuneration Committee as it has only one Whole Time Director and his remuneration is determined by the Board. The Company has complied with SEBI guidelines in respect of corporate governance, specially with respect to broad basing of the Board and constitution of Committees.
90
Mr.R.K. Kasliwal
60
B.Com, F.C.A.
6.52
Mr. S. Talukdar
53 Deputy Chief Financial Officer 51 Chief Officer Operations (Aluminium & Power- Renukoot)
26
2.59
Mr. R.K.Shah
G G
G G G G
Grasim Industries Ltd Thai Carbon Black Thailand Vikram Cement, M.P ., Aditya Cement Rajashree Cement Vikram Ispat, Maharashtra -
27
5.18
58
Executive President B.Tech. and Chief (Chem. Engg.) Manufacturing Officer Chief Marketing Officer B.Tech. (Chem. Engg.), P Diploma .G. (Marketing & Finance)
G G
34
3.21
51
G G
Asian Paints (I) Ltd. Hindustan CibaGeigy Ltd. Arvind Mills Ltd. Ceat Ltd. Hindustan Motors Limited, Chennai Kirloskar Electric Co. Ltd.
26
4.89
Mr. P Balakrishnan 56 .
Executive President B.E. (Mech), P .G.Diploma in Business Management Chief Operating Officer (Mining Operations) B.Sc (Engg.) Dalhousie University, Halifax, Nova Scotia, Canada; B.Engg.(Mining) , Technical University of Nova Scotia, Halifax, Canada
34
5.34
Mr. K. Freeman
52
Falconbridge Ltd, 30 Canada SouthernEra Resources Ltd. Anglo American Corp. South Africa De Beers Consolidated Mines Ltd. Debswana Diamond Co. Pty Ltd.
April 1, 2005
7.04**
Mr. P Roy .
52
Chief People Officer B.Sc, St Francis Desales College; Master in Personnel Management and Industrial Reln, TISS, Mumbai
G G G
Novartis India Searle (India) Ltd. General Electric India Air Freight Ltd Cadbury India Ltd.
27
December 21 , 2004
1.41***
91
Mr. S. M. Bhatia
51
Chief Operating Officer (Demerged Indal units) Head, Foils and Wheels Head, Chemicals and International Trade Head, Risk Management and Business Development
B.Sc. Engg. (Mech.) B.Tech (Hons) (Mech Engg), IIT Kharagpur B.Tech (Chem), IIT Kanpur, PGDM, IIM Kolkata BA, University of London, School of Oriental and African Studies
2.42***
Mr. S. Banerjee
49
25
1.93
Mr. S.Ray
51
28
2.25
Mr. B. Marshall
52
G G G G
Hunter Douglas Group 32 Hydro Aluminium Metal Trading Aluminium and Tin, Amalgamated Metal Corporation Vishakapatanam Steel 35 Plant, Bokaro Steel Plant Hindustan Steel Limited at Bhilai Steel Plant Neelachal Ispat Nigam Ltd 10
May 2, 2005
6.24**
56
Chief Executive B.E. (Elect.), Officer (Aditya P Diploma .G. Aluminium Project) in Management
0.39***
G G
Mr. A. Malik
43
October 4, 1995
0.54
Gross Salary as on March 31, 2005 is computed in accordance with Section 217(2A) of the Companies Act, 1956 except if indicated otherwise. Since the Key Managerial Personnel joined after March 31, 2005, the details of Gross Salary is from April 1, 2005/ date of joining up to August 31, 2005 and in accordance with Section 217(2A) of the Companies Act, 1956
**
*** Gross Salary as on March 31, 2005 from the date of joining in accordance with Section 217(2A) of the Companies Act, 1956
All the abovementioned key managerial personnel are permanent employees of our Company. The remuneration of each of our key personnel is as per the statement pursuant to Section 217(2A) of the Act and the Companies (Particulars of Employees) Rules, 1975.
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Dr. K. M. Birla N onExecutve Chaim an i r Board ofD i ors rect 40% I ndependent 50% N on , Executve i
Audit Committee
75% Independent; 75% Independent; 25% Non-Executive
Finance Committee
25% Independent; 25% Independent; 50% Non-Executive 50% Non-Executive
Investor Grievance 50% Independent; C itt 50% Independent 50% Non-Executive 50% Non-Executive
Managing Director
Chief Financial Officer Chief People Officer
CMO Mumbai
COO Renukoot
COO Kolkata
EFO Mumbai
Company Secretary
Shareholding of key managerial personnel in our Company as on November 18, 2005 Name of Key Managerial Personnel Mr. R.K. Kasliwal Mr. R.K. Shah Shareholding of persons related to our key managerial personnel in our Company Name of Key Managerial Personnel Name of Equity Shareholder related to Key Managerial Personnel Ms. M. Kasliwal Mr. B.L. Shah Ms. R.K.Shah No. of Equity Shares held (Pre-Issue) 15,440 5,000 2,250 No. of Equity Shares held (Pre-Issue) 57,220 12,800
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Mr. R.K. Kasliwal Mr. S. Talukdar Mr. R.K. Shah Mr. R.P Shah . Mr. S.K. Maudgal Mr. P Balakrishnan . Mr. K. Freeman Mr. P Roy . Mr. S. M. Bhatia Mr. S. Banerjee Mr. S. Ray Mr. B. Marshall Mr. S.N. Bontha Mr. A. Malik
0.80
Nil Nil
0.90 1.5
Nil Nil Nil Nil Nil Nil Nil Nil Nil
Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreement or arrangement during the preceding two years from the date of this Letter of Offer in which our Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them. Our Directors and our key managerial personnel have not taken any loan from our Company other than those mentioned above.
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Chief Executive Officer Aditya Aluminium Project Deputy Chief Financial Officer
Mr. P Roy . For the Year 2005-2006 Mr. K. Freeman Mr. B. Marshall
Chief Operating Officer (Mining Operations) Head, Risk Management & Business Development
Appointed Appointed
95
Dr. K.M. Birlas bank account number, PAN No. and passport number have been provided to BSE and NSE.
Board of Directors
1. 2. 3. 4. 5. Dr. Kumar Mangalam Birla Mrs. Rajashree Birla Mr. Suresh Tapuriah Mr. L.K. Daga Mr. P Jajodia .K.
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Total Income Profit after Tax Equity Share Capital (Par value Rs. 10/- per Share) Reserves Earnings Per Share ( Rs. ) Net Asset Value
The Company being a private limited company, its shares are not listed on any stock exchange. BGHPLs PAN No. has been submitted to BSE and NSE. Companies with which the Promoters have disassociated in the last three years: The Promoters have not disassociated themselves from any company in the last three years.
Promoter Group
Relatives of the Promoter that are part of the promoter group The following relatives form part of our promoter group: Sl. No. 1. 2. 3. 4. 5. 6. Name Relationship No. of shares as of September 30, 2005 241,140 66,020 49,750 15,000 Nil Nil Percentage of holding 0.03 0.01 0.01 0.00 0.00 0.00
Mrs. Rajashree Birla Mrs. Vasavadatta Bajaj Mrs. Neerja Birla Ms. Ananyashree Birla Master Aryaman Vikram Birla Ms. Advaitesha Birla
Mother of Dr. Kumar Mangalam Birla Sister of Dr. Kumar Mangalam Birla Wife of Dr. Kumar Mangalam Birla Minor daughter of Dr. Kumar Mangalam Birla Minor son of Dr. Kumar Mangalam Birla Minor daughter of Dr. Kumar Mangalam Birla
97
For details of shareholding of our Promoters and promoter group, refer to the section Capital Structure on page 15 of this Letter of Offer. Interests of Promoters and Promoter Group in the Company Except as stated hereinbefore and in Related Party Transactions on page 123 of this Letter of Offer, and to the extent of shareholding in our Company, our Promoters and promoter group do not have any other interest in our business.
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I.
Grasim Industries Limited (Grasim), was incorporated on August 25, 1947 under the Gwalior Companies Act in the name of Gwalior Rayon Silk Mfg (Wvg) Company Limited. The company changed its name to Grasim Industries Limited on July 22, 1986. Grasim ranks among Indias largest private sector companies, with a net turnover of Rs. 62,292.6 million in 2004-05. Starting as a textiles manufacturer in 1948, Grasims businesses today comprise Viscose Staple Fibre (VSF), cement, sponge iron, chemicals and textiles. The company holds a dominant position in its businesses. On July 6, 2004, Larsen & Toubro Limited (L&T) and Grasim announced completion of the implementation process of the demerger of the cement division of L&T. On successful completion of its open offer, Grasim acquired controlling stake in the newly formed company, UltraTech Cement Limited (UltraTech), the demerged cement business of L&T. Shareholding as of September 30, 2005 S. Name of the Shareholder No 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Fund & UTI Banks and FIs FIIs GDRs and others Corporates NRIs/OCBs Individual shareholding Total Board of Directors 1. 2. 3. 4. 5. Dr. K.M. Birla Mrs. R. Birla Mr. M.L. Apte Mr. B.V. Bhargava Mr. R.C. Bhargava No. of shares 22,897,134 7,869,230 13,184,487 18,341,338 10,364,638 2,831,443 3,568,659 12,616,509 91,673,438 Percentage of holding 24.98 8.58 14.38 20.01 11.31 3.09 3.89 13.76 100.0
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10. Mr. S.K. Jain 11. Mr. D.D. Rathi Financial Performance The operating results of Grasim for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for the year ended March 31, 2003 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 916.7 28,793.5 46,062.0 3,675.8 40.1 324 As at and for the year ended March 31,2004 916.7 35,138.3 52,132.1 7,792.6 85.0 393
As at and for As at and for the year ended the period ended March 31, 2005 September 30, 2005(i)
916.7 42,319.6 62,292.6 8,857.1 96.6 472
NA
(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.
Share - Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg
1,410 1,415
There has been no change in capital structure in the last six months.
II.
UltraTech Cement Limited (UCL) is a member of the Aditya Birla Group and a subsidiary of Grasim Industries Limited. ULC was incorporated on August 24, 2000 under the Act, in the name of L&T Cement Limited and the name was changed to UltraTech Cemco Limited with effect from November 19, 2003. The company changed its name to UltraTech Cement Limited on October 14, 2004. Its cement capacity is 17 million tonnes per annum. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. It has five integrated plants, five grinding units and three terminals two in India and one in Sri Lanka. It is the countries largest exporter of cement and clinker.
100
10. Mr. S. Rajgopal 11. Mr. D.D. Rathi Financial Performance The operating results of UCL for fiscal 2004, 2005 and for the period ended September 30, 2005 are as hereunder. UCL was not part of the promoter group as on March 31, 2003: (Rs. in millions except per share data) As at and for the year ended March 31,2004 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 1,244.0 9,505.4 22,511.3 388.3 3.12 85.20 As at and for the year ended March 31, 2005 1,244.0 9,427.3 26,810.5 28.5 0.23 85.78
As at and for the period ended September 30, 2005(i) 1,244.0 NA 14,224.0 601.0 4.83 NA
(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.
101
495 498
There has been no change in capital structure in the last six months.
III.
Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited)
Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) was incorporated on September 26, 1956 under the name of Indian Rayon Corporation Limited. The company changed its name to Indian Rayon And Industries Limited on January 23, 1987 and subsequently to Aditya Birla Nuvo Limited on October 27, 2005. ABNL is the Aditya Birla Groups most diversified conglomerate, with a turnover in excess of Rs. 18,606 million in 2004-2005. It is a leading player in its key business segments, including viscose filament yarn (VFY), carbon black, branded garments, textiles and insulators. Over the past three years, ABNL through its subsidiaries has made successful forays into insurance, IT services and Business Process Outsourcing (BPO), striking a balance between manufacturing, brands and services. Shareholding as of September 30, 2005 S . Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Funds & UTI Banks and FIs FIIs Corporates NRIs/OCBs Individuals Others Total Board of Directors 1. 2. 3. 4. 5. 6. 7. 8. Dr. K.M. Birla Mrs. R. Birla Mr. H.J. Vaidya Mr. B.L. Shah Mr. P Murari . Mr. B.R. Gupta Ms. T. Vakil Mr. V. Rao No. of shares 17,150,514 5,550,536 9,444,928 8,879,102 1,831,671 887,920 12,935,175 3,209,406 59,889,252 Percentage of holding 28.63 9.27 15.76 14.82 3.06 1.48 21.62 5.36 100.00
9. Mr. S.C. Bhargava 10. Mr. G.P Gupta . 11. Mr. A. Gupta 12. Mr. S. Aga
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2005(i)
598.8 12,941.8 18,606.2 1,137.2 18.98 226
(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.
Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg
650 675
There has been no change in capital structure in the last six months.
IV.
Indo Gulf Fertilisers Limited (IGFL), was incorporated on March 10, 1998 in the name of Kamal Syn Paper (India) Pvt. Ltd. The company changed its name to Rajashree Fertilisers Limited and subsequently to Indo Gulf Fertilisers Limited on July 29, 2002. IGFL is among the largest private sector fertiliser companies in India. Located at Jagdishpur, near Lucknow, in the agriculture intensive Indo-Gangetic plain in Uttar Pradesh, IGFL manufactures and markets urea, a nitrogenous fertiliser. The move to demerge the fertiliser business of erstwhile Indo Gulf Corporation Limited into an independent entity and amalgamate the remaining copper business with Hindalco was a strategic initiative, aimed at enhancing shareholder value. As a result of the exercise, IGFL has emerged fully focused on fertilisers. Shareholding as of September 30, 2005 S. Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Funds & UTI Banks, FIs and Insurance Companies FIIs GDRs and others Corporates NRIs/OCBs Individuals Total
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No. of shares 26,252,248 4,464,265 3,355,840 1,682,647 725,112 1,653,594 1,367,445 5,591,652 45,092,803
Percentage of holding 58.22 9.9 7.44 3.73 1.61 3.67 3.03 12.4 100.00
Financial Performance The operating results of IGFL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for the year ended March 31, 2003 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 450.9 4,390.4 6,752.1 1,728.0 38.3 107.4 As at and for the year ended March 31,2004 450.9 5,150.6 5,785.2 902.7 20.0 124.2 As at and for As at and for the the year ended period ended March 31, 2005 September 30,
2005(i)
450.9 5,575.6 6,783.5 569.3 12.63 133.7
(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.
Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg
208 209
There has been no change in capital structure in the last six months.
V.
Birla Growth Fund Limited was incorporated on June 26, 1986 in the name of Birla Growth Fund Limited. The company was renamed as Birla Global Finance Ltd (BGFL) on December 13, 1994. Today BGFL is the flagship of the Groups financial services, responsible for the promotion and development of the joint venture, with Sun Life of Canada Birla Sun Life Asset Management Co. Ltd. Headquartered in Mumbai, the company has a network of branches across the country and marketing associates covering 130 centers. It is listed on the BSE and NSE.
104
Financial Performance The operating results of BGFL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Equity Capital Reserves (excl. revaluation reserves) Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 157.5 442.4 319.7 15.3 (1.06) 38 157.5 431.6 537.5 31.2 0.44 37 As at and for As at and for the the year ended period ended March 31, 2005 September 30,
2005(i)
257.5 619.7 681.1 309.8 14.26 34
(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.
Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg
Lowest (Rs.) 80 78
206 206
There has been no change in capital structure in the last six months.
105
I.
Bihar Caustic & Chemicals Limited (BCCL) was incorporated under the Act on July 20, 1976, as a joint venture between Bihar State Industrial Development Corporation (BSIDC) and Birla Group and its registered office is at Garhwa Road, P Rehla - 822 124 Dist. Palamau. The company made a rights issue in 2003. For more details please refer to Statutory .O. and Other Information on page of 283 of this Letter of Offer. The main business of Bihar Caustic & Chemicals Limited is manufacturing Caustic Soda, Liquid Chlorine and Hydrochloric Acid
Board of Directors
1. 2. 3. 4. 5. 6. 7. 8. Mr. A.K. Agarwala Mr. S.V. Haribhakti Mr. A.N. Jha Mr. K.K. Maheshwari Mr. V. Prakash Mr. B. Choudhuri Mr. P . Sharma .P Mr. P Ojha .N.
106
As at and for As at and for the the year ended period ended March 31, 2005 September 30,
2005
912.01 75.12 78.0 302.34 8.37 47.26 952.87 86.26 233.7 375.84 4.84 24.21*
Share Quotation The shares are listed on BSE. The details of the highest and lowest price on BSE during the preceding six months are as follows: Highest (Rs.) BSE
Source: Bloomberg
Date 5-Sept-2005
Date 30-June-2005
85.7
II.
Birla Maroochydore Pty. Limited. was incorporated on February 24, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. Hindalco forayed into Australia by acquiring Straits (Nifty) Pty Ltd., which owned the Nifty Copper mines in Australia. The Nifty mine, located in the Great Sandy Desert region of East Pilbara in Western Australia, was acquired in March 2003. Nifty mine consists of an open-pit mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant which produces copper cathode. In fiscal 2005, Nifty mine produced 15,826 tons of copper cathode. An agreement was entered with Straits Resources Ltd., a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. The company owns 51% stake in Maroochydore Property. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka
Shareholding as on September 30, 2005 S. No. 1. Name of the Shareholder Hindalco Total
107
As at the year ended March 31, 2005 1,068 (126,282) 10,000,001 (197,196) 0.98
* Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources
III.
Birla Mineral Resources Pty Ltd. (BMRL) was incorporated on January 28, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005 Australia. The company forayed into Australia by acquiring Straits (Nifty) Pty Ltd, which owned the Nifty Copper mines in Australia. An agreement was entered with Straits Resources Ltd, a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. BMRL issued 16 million equity shares to the Company in the six months ended September 30, 2005. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 159,820,001 159,820,001 Percentage of holding 100 100
108
As at the year ended March 31, 2005(i) 0.61 3.54 143.82 (13.20) 0.91
0.14* 159.82 NA NA NA
IV.
Birla Mt Gordon Pty. Ltd. was incorporated on September 19, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. The Mt. Gordon mine, in Queensland, Australia, was acquired in November 2003. Mt. Gordon mine consists of an underground and open-pit mine, a copper concentrate plant and ferric leach plant. Until recently, the operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at our operations in Dahej, Gujarat. For fiscal 2005, Mt. Gordon mine produced 35,126 tons of copper in cathode/concentrate. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Mr. P Balakrishnan . Mr. S. Loyalka
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 24,000,001 24,000,001 Percentage of holding 100 100
109
NA
Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources
V.
Birla Nifty Pty. Limited was incorporated on May 27, 1996 under the Corporations Law of New South Wales in the name of Straits (Whim Creek Operations) Pty Ltd, by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. The company changed its name to Birla (Nifty) Pty Ltd. on March 10, 2003 and subsequently to Birla Nifty Pty Ltd. on June 26, 2003. Hindalco forayed into Australia by acquiring Straits (Nifty) Pty Ltd., which owned the Nifty Copper mines in Australia. An agreement was entered with Straits Resources Ltd., a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 87,413,924 87,413,924 Percentage of holding 100 100
110
As at the year ended March 31, 2005 50.43 (20.70) 71.41 17.00 1.24
Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources Pty Ltd, the holding company in Australia. Profit before tax.
(i)
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 650,000 650,000 Percentage of holding 100 100
111
As at and for As at and for the the year ended period ended March 31, 2005 September 30,
2005*
783,673.57 1,640.80 650,000 314.60 1 (1,957.12) 1,698.16 650,000 2,012.76 1 30,317.81 7.87 650,000 2,020.63 1
113,333.03 0.0
650,000 2,020.63 1
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 50,000,000 50,000,000 Percentage of holding 100 100
112
2005
564.24 257.75 500.0 621.36 5.16 22.43
113
No. of shares 69,103,902 940 1,025 100 1,270 15,460 203,325 1,874,375 56,734 71,257,131
Percentage of holding 96.98* 0.0 0.0 0.0 0.00 0.02 0.29 2.63 0.08 100.00
The difference in the shareholding of Hindalco as reflected in the shareholding pattern of Indal and the Investment of Hindalco in Indal is due to pending transfers/escrow account.
Financial performance The operating results of Indal for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for As at and for As at and for the the year ended the year ended the year ended period ended March 31, 2003 March 31, 2004 March 31, 2005 September 30,
2005
Total Income Profit after tax/Loss before tax Equity capital (par value Rs. 10 per share in 2003 & 2004 and Rs. 2 per share in 2005) Reserves Earnings per share Book value per Share (of Rs. 10 each in 2003 & 2004 and Rs. 2 per share in 2005) 14,202.88 1,186.30 712.57 8,126.48 16.65 123 16,354.00 1,321.53 712.57 9,416.59 18.55 141.01 664.97 (15.45) 142.51 26.29 (0.22) 2.32
114
X.
Lucknow Finance Company Limited was incorporated under the Act on May 31, 1989 and its registered office is at 14-A/5, Park Road, Lucknow 226 001. Lucknow Finance Company Limited is registered with the RBI as a NBFC. Board of Directors 1. 2. 3. 4. Mr. P Balakrishnan . Mr. R.K. Kasliwal Mr. N.L. Jain Mr. R.A. Patodia
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 12,002,500 12,002,500 Percentage of holding 100 100
115
Shareholding as on September 30, 2005 S . Name of the Shareholder No. 1. Hindalco Total No. of shares 50,000 50,000 Percentage of holding 100 100
116
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total Financial performance The operating results of RIFL for fiscal 2003, 2004, 2005 and for period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each) 26.99 7.90 92.5 11.85 0.85 11.28
117
As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 65.78 61.07 92.5 186.61 6.60 30.18
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total Financial performance The operating results of Renukeshwar Investments & Finance Limited for fiscal 2003, 2004, 2005 and for period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Earnings per share Book value per Share (of Rs. 10 each) 16.47 1.09 47.96 0.97 0.22 10.20 150.79 127.04 47.96 128.00 26.49 36.70 As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 19.46 19.02 47.96 147.03 3.97 40.67 No. of shares 4,795,000 4,795,000 Percentage of holding 100 100
118
Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. 2. Hindalco Alcan Inc. Total Financial performance The current paid-up capital of the company is Rs. 1,475,159,200. The paid-up equity capital of the company was Rs. 1,029,792,960 as on March 31, 2005, Rs. 663,835,300 as on March 31, 2004 and Rs. 663,835,300 on March 31, 2003. The company is in pre-operative stage and has not commenced business. No. of shares 81,133,756 66,382,164 147,515,920 Percentage of holding 55.00 45.00 100.00
119
Shareholding as of September 30, 2005 S. Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoter and persons acting in concert Mutual Funds & UTI Banks, FIs and Insurance Companies FIIs Corporates NRIs/OCBs Individuals Others Total No. of shares 5,085,302 3,900 77,700 650 960,619 39,770 3,805,009 2,050 9,975,000 Percentage of holding 50.99 0.04 0.78 0.01 9.62 0.40 38.14 0.02 100
120
As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 881.28 3.50 99.75 263.49 0.35 36.41
Date 5-Aug-2005
Lowest (Rs.) 28
Date 11-May-2005
75.5
II.
Idea Cellular Limited is a joint venture with the Company. As on March 31, 2005 we hold 10.11% of the equity share capital. Idea Cellular Limited was incorporated on March 14, 1995 and has its registered office at Suman Towers, Plot number 18, Sector 11, Gandhi Nagar. The company is a joint venture between the Aditya Birla Group, the Tata Group and AT&T Wirless Inc. of USA (now Cingular Wireless Inc). On September 28, 2005, ABNL acquired 371.8 million equity shares in the company at an aggregate price of Rs. 6,607.3 million from AT&T Cellular Pvt. Ltd, Mauritius, raising its equity holding in the company from 4.28% to 20.74% and that of the Aditya Birla Group from 33.7% to 50.15%. The main objects of Idea Cellular Limited is to provide cellular mobile telephone services in eight telecom circles viz., Maharashtra (including Goa and excluding Mumbai), Gujarat, Andhra Pradesh, Delhi, Madhya Pradesh, Kerala, Harayana and Uttar Pradesh (West). Board of Directors 1. 2. 3. 4. 5. 6. 7. Mr. D.D. Rathi Mr. I. Hussain Mr. K. Chaukar Mr. M.R. Prasanna Mr. R. Gopalakrishnan Mr. S. Aga Mr. T Graham
121
No. of shares
Percentage of holding
As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 16,417.15 260.53 22,595.27 (16,996.01) (0.12) 2.48
122
2. 3.
4.
Details of Transactions with Subsidiary Companies are as below: Transactions with Subsidiary Companies Year ended March 31, 2003 2004 2005 (Rs. in millions) Sales and Conversion Services rendered Interest and dividend received Interest paid Purchase of materials Services received Investments, Deposits, loans and advances made during the year Investments, Deposits, loans and advances as at year end Guarantees and Collateral securities given 747.2 45.6 317.9 11.1 45.8 312.3 4,419.9 15,738.2 1,114.0 17.8 78.8 22.4 371.1 318.4 1,111.2 16,462.3 5,110.9 327.7 24.7 48.5 21.5 4,146.7 278.6 1,117.7 5,877.9 11,400.0
206.7 43.1
24.4 -
2,472.4
145.3
123
Details of Transactions with Joint Venture Companies are as below: Transactions with Subsidiary Companies Year ended March 31, 2003 2004 2005 (Rs. in millions) Sales and Conversion Services rendered Interest and dividend received Interest paid Purchase of materials Services received Investments, Deposits, loans and advances made during the year Investments, Deposits, loans and advances as at year end Guarantees and Collateral securities given Licence and Lease arrangements a) Licence Fees b) Deposits Outstanding balances at year end - Debit Balances - Credit Balances 0.0 7.9 0.4 0.9 13.1 5.5 0.2 0.1 65.2 766.7 1.2 1,541.5 2,732.9 2,131.4 0.6 0.2 48.7 633.6 0.8 700.0 2,293.4 850.0 108.4 0.0 0.9 181.7 0.4 2,293.4 875.0
84.9 0.5
-
0.1 22.8
124
Details of Transactions with Key Management Personnel are as below: Transactions with Key Management Personnel Year ended March 31, 2003 2004 2005 (Rs. in millions) Managerial Remuneration (including perquisites) 12.2 16.5 25.8 9.4
125
The Company
We have examined the Statement of Profit and Loss Restated (Annexure-1) of the Company for six months ended on September 30, 2005 and each of the years ended on March 31, 2001, 2002, 2003, 2004 and 2005 and the Statement of Assets and Liabilities Restated as on those dates (Annexure - 2), the Statement of Cash Flows Restated for the period / years ended on those dates (Annexure - 3), and the related financial statements schedules (Annexure 4 to 10) as extracted from the audited financial statements each of the financial years ended on March 31, 2001, 2002, 2003, 2004 and 2005, and adopted by the members of the Company and for the six-month period ended on September 30, 2005, approved by Board of Directors of the Company and after making the necessary and relevant disclosures and adjustments as appropriate and required to be made, in our opinion in accordance with the provisions of Part II and Schedule II of the Companies Act, 1956 and SEBI Guidelines: We have examined the following financial information relating to the Company proposed to be included in the Letter of Offer, approved by the Board of Directors and annexed to this report. a. b. c. d. e. Details of Dividends paid by the Company (Annexure 11) Summary of accounting ratios based on the adjusted profits relating the earning per share, net asset value and return on net worth. (Annexure 12) Capitalization statement of the Company. (Annexure 13) Details of other Income and Operating Revenues (Annexure - 14) Tax shelter statement. (Annexure 15)
Consolidated Group
We have examined the Statement of Consolidated Profits and Losses Restated (Annexure 16) for six months ended on September 30, 2005 and each of the financial years ended on March 31, 2002, 2003, 2004 and 2005, the Statement of Consolidated Assets and Liabilities Restated (Annexure 17) as on those dates, the Statement of Consolidated Cash Flow - Restated (Annexure 18) for the period / years ended as on those dates and the related financial statements schedules (Annexure 19 to 21) as extracted from the Audited Consolidated Financial Statements for six months ended on September 30, 2005 and each of the Financial years ended on March 31, 2002, 2003, 2004 and 2005 and approved by the Board of Directors of the Company and after making the necessary and relevant disclosures and adjustments as appropriate and required to be made in our opinion in accordance with the provisions of Part II of Schedule II of the Companies Act, 1956 and the SEBI Guidelines. As stated in note No. B (3) of Annexure 4, the Company has not restated the financial information for the periods prior to which, the Accounting Standards 11 (revised). The effect of changes is Foreign Exchange Rates; Accounting Standard 22 - Accounting for Taxes on income; and Accounting Standard 28 - Impairment of Assets; became applicable as required by clause (b) of paragraph 6.10.2.7 of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 because of non applicability of these accounting standards in those years. In our opinion, the financial information of the Company and Consolidated Group read with notes to accounts
126
127
53,969.71 100,489.44
6,564.16
400.00 14,243.57
9,542.98
7,409.99 7,330.79
129
(30,693.37) (19,182.79) (16,069.88) (999.27) 56,035.29 56,035.29 13,229.81 69,265.10 37,021.45 47,402.15 47,402.15 4,676.66 52,078.81 33,772.05 40,609.89 40,609.89 8,024.14 48,634.03 26,484.20
(11,358.08) (12,867.46) 20,509.84 6,441.35 26,951.19 19,852.50 18,737.17 2,782.46 21,519.63 19,174.57
Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances and other current assets Total 29,640.11 8,284.93 7,504.13 7,912.49 53,341.66 23,745.18 7,873.67 4,009.69 9,135.71 44,764.25 11,913.43 5,611.13 2,279.02 9,058.99 28,862.57 10,022.22 5,607.41 3,031.42 9,112.46 27,773.51 3,771.75 2,731.79 3,870.28 6,199.13 16,572.95 3,473.54 2,055.05 2,658.08 4,899.00 13,085.67
D.
Liabilities and Provisions: Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities and provisions 27,676.72 15,544.94 11,708.69 23,730.26 29,523.38 8,476.59 11,296.98 25,181.93 17,259.35 8,386.55 9,951.35 10,537.18 20,492.70 3,457.48 8,490.35 8,540.29 9,280.03 297.33 4,443.15 3,540.50 6,940.36 206.83 2,844.47
78,660.61 82,593.92
40,980.82 61,910.92
17,561.01
9,991.66
45,815.63 43,788.21
130
ANNEXURE 2
STATEMENT OF ASSETS AND LIABILITIES RESTATED (Contd.)
As at Sep 30, 2005 2005 2004 As at March 31st 2003 2002 2001
F.
Represented by: 1. Share Capital 2. Reserves Less : Revaluation Reserve Less : Miscellaneous Expenditure to the extent not written-off or adjusted Reserves (Net of Revaluation Reserves & Miscellaneous expenditure) Networth 927.78 81,752.17 927.77 924.77 924.64 60,986.28 744.63 744.69
75,738.01 67,654.23 -
56,429.08 55,910.98
- (11,358.08) (12,867.46)
(86.03)
(93.86)
81,666.14 82,593.92
60,986.28 61,910.92
131
(Rs. in million)
2005 $
2004
2003 #
2002
2001
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax and extraordinary items Adjustment for : Depreciation Investment activities Lease Rent Paid Foreign Exchange Loss Provisions / Misc w/off Interest charged Operating profit before working capital changes Changes in working Capital: Trade and other receivables Inventories Trade payable Cash generated from operation Direct taxes paid Payment of compensation under voluntary retirement scheme NET CASH GENERATED FROM OPERATIONS 4,852.81 17,609.33 11,128.73 8,825.72 7,303.30 6,872.36 1,031.47 (5,894.92) (1,273.82) 5,004.40 (125.21) (26.38) (1,774.76) (9,377.40) 5,273.79 17,049.89 636.01 (76.57) (2,462.76) (1,891.21) 1,920.23 12,717.96 (1,589.23) (720.97) (1,861.82) 1,830.07 12,005.70 (3,179.98) (731.01) (298.21) 551.76 (499.98) (190.26) 184.92 2,453.79 (1,136.72) 13.30 79.18 1,000.17 11,141.68 4,632.57 (2,706.71) 41.51 95.18 1,732.85 22,928.26 1,514.52 15,151.70 1,200.97 12,758.42 455.95 618.78 3,174.52 (2,091.28) 97.25 2,642.24 (1,874.61) 162.78 1,543.34 1,423.86 8,731.96 19,132.86 12,456.69 10,627.04 10,049.99 9,800.79
10,091.94 10,666.92
132
(Rs. in million)
Sep 30, 2005 B. CASH FLOW FROM INVESTMENT ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of shares of Subsidiaries Acquisition of Business* Purchase of Investments(net) Loan repayment received from Subsidiaries (Net) Interest received Dividend received Lease rent received Cash flow before extraordinary items Sale of investments (Shares of MRPL to ONGC) NET CASH USED IN INVESTMENT ACTIVITIES C. CASH FLOW FROM FINANCING ACTIVITIES FINANCING ACTIVITIES Buy Back of Equity Share Capital Share call money received Proceeds from long term borrowings (net) Proceeds from short term borrowings (net) Interest paid Lease Rent Paid Dividend paid NET CASH FROM FINANCING ACTIVITIES 0.01 (1,677.32) 6,899.52 (1,181.46) (2,115.72) 1,925.03
2005 $
2004
2003 #
2002
2001
1,832.37 (10,357.22) (130.96) 362.55 524.12 5.70 280.96 1,255.79 794.27 10.82
(3,296.37) (20,089.50)
(5,784.24) (9,590.22) -
(3,296.37) (20,089.50)
(11,659.79) (12,976.55)
(5,784.24) (9,590.22)
133
(Rs. in million)
Sep 30, 2005 NET INCREASE IN CASH AND CASH EQUIVALENTS CASH & CASH EQUIVALENTSOPENING BALANCE CASH & CASH EQUIVALENTSCLOSING BALANCE * $ # 3,481.47 4,397.80 7,879.27
2002
2001
Expense incurred on merger of Demerged business of INDAL in 2004-05 and amalgamating business in 2002-03, net of its opening cash & cash equivalent has been shown as Acquisition of Business. Refer Note No. 2 of Notes to Accounts (Annexure - 4) Refer Note No. 3 of Notes to Accounts (Annexure - 4)
Notes: 1 2 Cash and cash equivalent includes cash and bank balances and Deposits with Companies and interest accrued thereon. Interest charged excludes and Purchase of Fixed Assets includes interest capitalised Rs.191.23 million in six months ended Sep 30, 2005, Rs 342.35 million in 2004-05, Rs. 212.35 million in 2003-04, Rs.584.90 millions in 2002-03 & Rs.436.48 millions in 2001-02
ANNEXURE - 4
134
HINDALCO INDUSTRIES LIMITED ANNEXURE - 4 SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS
A)
1.
2.
INTANGIBLE ASSETS Intangible assets are stated at cost. Cost includes any directly attributable expenditure on making the asset ready for its intended use.
3.
DEPRECIATION AND AMORTISATION (a) Depreciation on Fixed Assets has been provided for on Straight Line Method at the rates and manner prescribed under Schedule XIV to the Companies Act, 1956, as amended.
(b) Leasehold land / mining rights are amortised over the period of lease. (c) Assets where ownership vests with the Government Authorities are amortised at the rates of depreciation specified in Schedule XIV to the Companies Act, 1956.
(d) Intangible assets are amortised over their estimated useful life. 4. IMPAIRMENT Impairment loss is recognized wherever the carrying amount of an asset is in excess of its recoverable amount and the same is recognized as an expense in the statement of profit and loss and carrying amount of the asset is reduced to its recoverable amount. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased. 5. LEASES (a) Assets taken on finance lease (including that prior to 1st April 2001) are capitalised and finance charges are charged to statement of profit and loss on accrual basis.
(b) Lease payments under an operating lease recognized as expense in the statement of profit and loss as per terms of lease agreement. 6. INVESTMENTS (a) Long term Investments are carried at cost after deducting provision, in cases where the fall in market value has been considered of permanent nature.
(b) Current investments are stated at lower of cost and fair value. 7. INVENTORIES (a) Inventories of stores and spare parts are valued at or below cost after providing for cost of obsolescence and other anticipated losses, wherever considered necessary.
(b) Machinery spares which can be used only in connection with an item of Fixed Asset and whose use is not of regular nature are written off over the estimated useful life of the relevant asset. (c) Inventories of items other than those stated above are valued At cost or Net Realizable Value, whichever is lower. Cost is generally determined on weighted average cost basis and wherever required, appropriate overheads are taken into account. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale.
135
(b)
(c)
9.
RETIREMENT BENEFITS (a) (b) (c) Year-end liability for Superannuation benefits to the eligible employees are provided and funded to approved funds. Year-end liability on account of Gratuity is provided for on actuarial valuation basis. In respect of the aluminium business such amount is funded with an approved fund. Leave Encashment benefits are provided for on actuarial basis.
10. RECOGNITION OF INCOME AND EXPENDITURE Income & Expenditure are recognized on accrual basis and provision is made for all known expenses. 11. BORROWING COSTS Borrowing cost directly attributable to the acquisition or construction of qualifying assets are capitalised. Other borrowing costs are recognized as expenses in the period in which they are incurred. 12. TAXATION Provision for current income tax is made in accordance with the Income Tax Act, 1961. Deferred tax liabilities and assets are recognized at substantively enacted tax rates, subject to the consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. 13. MANAGEMENT OF METAL PRICE RISK In respect of copper division the company has adopted a policy to minimize the risks associated with fluctuations in the price of copper and other precious metals by hedging mismatch on futures market. However, the company does not conduct speculative operations in the futures market. The results of metal hedging contracts /transactions are recorded at their settlement as part of raw material cost or sales as the case may be. The settlement of these transactions generally coincides with the accounting of the underlying transactions. 14. PROVISION A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 15. CONTINGENT LIABILITY Contingent liabilities are not provided for in the accounts and are disclosed by way of Notes.
136
NOTES TO ACCOUNTS
Pursuant to a Scheme of Arrangement u/s. 391 to 394 of the Companies Act, 1956 (the Scheme) which has been approved by Honble Bombay High Court and Kolkata High Court on 14th January, 2004 and 23rd December 2004, respectively, all the business undertakings (other than the aluminium foil business at Kollur, Andhra Pradesh), hereinafter referred to as demerged undertaking, of Indian Aluminium Company, Ltd. (Indal) has been transferred to the Company with effect from the appointed date i.e. 1st April, 2004 on going concern basis. Demerged undertaking is engaged inter alia in conducting and carrying on the business of mining, manufacture and sale of hydrate and alumina, alumina chemicals, aluminium, aluminium products including aluminium sheets, extrusions and foil and generation of electricity.
2.
A Scheme of Arrangement (the Scheme) between the Company, Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) and their respective shareholders and creditors which envisages the demerger of the fertiliser business of IGCL to IGFL, and the subsequent amalgamation of the Remaining Business of IGCL with the Company, has been approved by the Honble High Courts at Allahabad and Mumbai vide their Orders dated 18th November, 2002 and dated 31st October, 2002 respectively. In terms of the scheme, the remaining business (hereinafter referred to as amalgamating company) comprising of manufacturing of copper and certain precious metals, the processing, producing, manufacturing and marketing of certain types of chemicals (including diammonium phosphates) and rendering assistance and services in relation to the same has been amalgamated and transferred and vested in the Company, on a going concern basis with effect from the appointed date, i.e. from opening of business on 1st April, 2002. Accounts are not restated for the periods prior to which the Accounting Standards, as stated under, became effective : Accounting Standard Accounting Standard 11 (revised) - The Effects of Changes in Foreign Exchange Rates Accounting Standard 22 - Accounting for Taxes on Income Accounting Standard 28 - Impairment of Assets Effective Date Periods commencing on or after 1-4-2004 Periods commencing on or after 1-4-2001 Periods commencing on or after 1-4-2004 (Rs. in millions) Rs. in millions Half Year ended Sep 30, 2005 2004-05 9,654.80
4 5
Capital Commitments outstanding [Advance/Deposit paid Rs.3,445.49 million (Rs. 3097.48 million in 2004-05)] Rs.3,097.48 (I) Contingent Liabilities not provided for in respect of: (a) Claims/Disputed liabilities not acknowledged as debt: Following demands are disputed by the Company and are not provided for: i) Demand notice by Asstt. Collector Central Excise Mirzapur for excise duty on power generated by companys captive power plant, Renusagar Power Co. Ltd (Since amalgamated). * Writ petition pending with Delhi High Court, Delhi. Earlier demand raised was quashed by Delhi High Court. The amount has been sequestered in the Aluminium Regulation account. According to the terms of settlement dated 5.12.83 between the Central Govt.
137
10,986.09
91.21
91.21
40.80
40.80
iv)
Transit fees levied by Divisional Forest Officer, Renukoot on coal and bauxite * Appeal pending with Allahabad High Court and payment of transit fee has been stayed. According to legal opinion received by the Company, the forest department has no authority to levy such fee.
v)
M.P Transit Fee on Coal demanded by Northern Coal Fields Limited * Writ petition pending with Jabalpur High Court. The Company has paid Rs 105.90 million to NCL under protest subject to the final conclusion of the writ petition
124.90
112.48
vi)
Withholding Tax on payment of fees on GDR issue. * Appeal pending before Income Tax Appellate Tribunal, Mumbai. Demand adjusted against refund due to the Company Imposition of Cess on Coal by Shaktinagar Special Area Development Authority. * Appeal pending before Allahabad High Court, Allahabad. Demand and levy stayed. According to legal opinion received by the Company, the state has no power to tax the mineral since this field is covered under Mines and Minerals Development and Regulation Act
91.56
91.56
vii)
35.36
31.40
138
ix)
Demand from District Mining office, Lohardaga & Gumla towards payment of increased surface rent on Mining * The notices have been replied by the company refuting the demand on the grounds that Surface Rent has already been paid upto Dec04 at the rates specified by the State Government
x)
The demand of Excise Duty on gold * Appeal pending with Customs, Excise and Service tax Appellate Tribunal, West Zone, Mumbai
1,557.70
1,557.70
xi)
Demand for non-payment of sales tax on leased assets. * Writ petition admitted and stay granted by High Court, Ahmedabad
260.50
212.26
xii)
Demand raised for reversal of difference between duty paid and Cenvat credit taken in returned material. * Appeal to be filed with CESTAT
13.00
xiii) Claim by KSEB for difference between the actual demand and contract demand * Company has submitted its representation to KSEB
26.73
xiv) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax etc. each being for less than Rs. 10 millions * * b) i) ii) The demands are in dispute at various legal forums Status indicating uncertainties
98.63
84.85
Bills discounted with Banks Guarantees outstanding (includes corporate guarantees of Rs.11,689.11 million (2004-05 Rs. 11399.76 million) given on behalf of subsidiary companies) Letters of Credit Outstanding Bank Guarantees & Bonds
385.53
468.14
iii) iv) c)
The Company has received supplementary bills on account of revision in rate of power for Main Supply from the UPSEB for the period 15th May 1976 to 30th June 1980 and the same remains unprovided for as disputed by the Company
50.10
50.10
139
e)
II)
Provisions: For Excise duty on electricity (Additions and Deductions during the year Nil) 54.73 54.73
III)
The Company has given undertakings to various Financial Institutions for non-disposal of shares held in Bihar Caustic & Chemicals Ltd., Tanfac Industries Ltd. and 57,085,060 shares of Rs 10/ each of IDEA Cellular Ltd. till the Institutional loans are repaid in full. The Company has export obligations of Rs.7534.43 million Rs.7,534.43 million (USD 169.54 million) [2004-05 Rs 7,501.33 million (USD 171.46 million)] Rs 7501.33 million against the Import Licences taken for import of capital goods under Export Promotion Capital Goods Scheme. The Company has export obligation of Rs.5,373.66 millions (USD 122.15 millions) [2004-05 Rs 2,592.25 millions (USD 59.25 million)] Rs 2592.25 millions against the Advance Licence.
a)
b)
140
Certain assets of Foil units Certain assets of Wheel Unit Certain assets of Smelters Certain assets of Other Units B) Copper Nature of Asset
Low return on Investments due to severe competition in the market place Inadequate return on Investment due to low demand Inadequate return on Investment mainly due to high cost of operation Erosion in value
Events/Circumstances
For arriving at Value in Use discount rate of 9.5% has been used. Net Selling Price has been determined based on valuation report from external agencies. As at Sep 30, 2005, the Company made an assessment to ascertain whether there is any indication that an asset may be impaired and found no such indication. However, a detailed assessment will be carried at the close of financial year. 2004-05 8 Loan and Advances includes I) a) Due from a firm of Solicitors & Advocates in which one of the Directors is a partner. (Maximum balance during the year Rs.0.13 million) b) c) Due from Officers (Maximum balance during the year Rs.0.07 million) Payments made to Rosa Power Supply Co. Ltd. Rs. 20.99 million (maximum balance Rs. 20.99 million) [2004-05 Rs. 20.99 million (maximum balance Rs. 20.99 million)], Bina Power Supply Co. Ltd. Rs. 391.44 million (maximum balance Rs. 491.44 million) [2004-05 Rs. 391.44 million (maximum balance Rs.391.44 million)] and Birla Telecom Ltd. Rs.1.47 million (maximum balance Rs 1.47 million) [2004-05 Rs.1.47 million (maximum balance Rs 1.47 million)] to be adjusted against the value of the Equity Shares to be issued by such companies in the event the relative projects are implemented after receipt of all regulatory approvals. 0.07 -
141
Renukeshwar Investments & Finance Limited Renuka Investments & Finance Limited Bihar Caustic & Chemicals Ltd. Lucknow Finance Company Limited (without interest) Utkal Alumina International Limited Dahej Harbour and Infrastructure Limited Indal Export Ltd. * III) with no repayment schedule
Inter Corporate Deposits : a) Inter Corporate Deposit aggregating to Rs.160.76 million (maximum balance Rs.160.76 million) [2004-05 Rs.160.76 million (maximum balance Rs.160.76 million)] made to Aditya Birla Power Company Ltd. (formally Birla Project Development Corporation Ltd) on interest pursuant to MOU entered into with the company for development of new projects. Inter Corporate Deposit aggregating to Rs.218.48 million (maximum balance Rs.218.48 million) [2004-05 Rs.200.71 million (maximum balance Rs.200.71 million)] made to Aditya Birla Management Corporation Ltd. (ABMCL) bearing interest. The company is one of the promoter member of ABMCL, a company limited by guarantee which has been formed to provide a common pool of facilities and resources to its members, with a view to optimise the benefits of specialisation and minimise cost for each member. The company has participated in the common pool and has shared the expenses incurred by ABMCL and accounted for these under appropriate heads.
b)
c)
IV)
Balances with Trident Trust representing 16,316,130 equity shares of the Company issued pursuant to the Scheme of Arrangement approved by the Honble High Courts at Mumbai and Allahabad vide their Order dated 31st October, 2002 and 18th November, 2002, respectively, to the Trident Trust, which is created wholly for the benefit of the Company and is being managed by trustees appointed by it. Future obligations towards lease rentals under the lease agreements taken prior to 1st April 2001 (Rs. in millions) Period Lease Payment HY Ended 2004-05 Sep 05 80.41 68.05 21.60 Present Value HY Ended 2004-05 Sep 05 76.73 64.92 20.09
a)
Not later than one year Later than one year and not Later than five years b)
Future obligations towards lease rentals under the lease agreements taken on or after 1st April 2001 (Rs. in millions) Period Lease Payment HY Ended 2004-05 Sep 05 0.29 0.10 0.29 0.24 Present Value HY Ended 2004-05 Sep 05 0.27 0.09 0.27 0.21
Not later than one year Later than one year and not Later than five years
142
d)
The above amounts are exclusive of taxes and duties. During the year the company has charged Rs. 2.00 million (Previous year - Rs. 4.00 million) as rent in respect of this lease. 10 Disclosure in respect of jointly controlled entities in which the company is a joint venturer, in compliance with AS-27 on Financial Reporting of Interest in Joint Ventures : (Rs. in millions) Rs in millions HY Ended Sep-05 Particulars Tanfac IDEA Industries Cellular Limited Ltd (Unaudited) (Unaudited) India 9.98% 91.39 56.95 52.35 53.96 India 10.11% 5,313.41 4,306.96 1,398.41 1,323.93 321.16 144.58 2004-05 Tanfac IDEA Industries Cellular Ltd Ltd (Unaudited) (Unaudited) India 9.98% 97.83 62.73 87.92 87.87 0.04 16.46 India 10.11% 4,234.85 3,180.91 1,659.06 1,632.73 102.18 238.40 2003-04 Tanfac Industries Limited (Unaudited) India 9.98% IDEA Tanfac Cellular Industries Ltd Limited 2002-03 IDEA Cellular Ltd Bihar Caustic & Chemicals Ltd. India 20.00% 333.37 259.65 182.40 167.38 2.40 150.01
Country of incorporation Percentage of Share in Joint Venture Assets Liabilities Income Expenditure Capital Commitments (net of advance) Contingent Liabilities 11 Deferred Tax
India 10.11%
96.90 3,784.28 51.64 2,756.53 75.37 1,193.17 71.99 1,402.15 4.43 27.64 133.51 105.73
Major components of Deferred Tax arising on account of temporary timing differences along with their movement as at balance sheet date are : (Rs. in millions) Particulars Deferred Tax Assets (A) Brought forward long term Capital Losses Deferred Tax Liability (B) Depreciation Others 10,919.67 789.02 11,708.69
143
HY Sep-05 -
2002-03 100.52
2001-02 163.51
14
15
144
Copper
Total Aluminium
Copper
Total Aluminium
Copper
Total
21,141.48 48,686.21 -
52,520.90 42,711.61 -
29,957.76 32,125.76 -
SECONDARY SEGMENT REPORTING : Secondary segment is based on geographical demarcation i.e. India and rest of the world: HY Sep-05 India Rest of the world 33,669.61 15,019.05 2004-05 68,773.21 26,459.30 2003-04 49,132.55 12,950.97 2002-03 39,839.90 10,282.64
145
146
886.04
1,117.69
1,111.15
281.92 1,414.32
16,462.25 5,110.90
9 10
Outstanding balances at year end 1 2 (b) Debit Balances Credit Balances 107.09 156.97 0.08 22.75 5.57 350.23 13.11 5.49 11.43 141.93 0.41 0.89 4.86 144.52 0.02 7.86 142.85 5.8 11.1 10.86
Trident Trust Beneficiary Interest in the Trust Interest Received from Trust 344.52 32.63 344.52 344.52 344.52
( c)
Key Managerial Personnel: Managerial Remuneration (including perquisites) 9.43 25.82 16.51 12.19 12.07
147
750.0
250.0 750.0
6.95% 7.20%
600.0
600.0
12.75%
2,000.0 1,000.0 500.0 500.0 2,500.0 Term loans from Government of Uttar Pradesh under subsidised Housing Scheme for Industrial Workers Cash Credit and Export Credit Accounts 0.7
Rs. 26.50 crore each on 4th December, 2005 and 4th December, 2006 and Rs. 3.50 crore each on 12th December, 2005 & 12th December, 2006 Redeemable on 23rd April, 2007 Redeemable on 19th July, 2009 Redeemable on 8th January, 2008 Redeemable on 14th January, 2008 Redeemable on 6th September, 2009 2005-06 Rs.0.19 Million and balance in 2006-07 to 2010-11
1019.99 1,019.99
1,775.7
As As per the nature negotiated of facility from time to time with refrence to various facilities
Secured by hypothecation of stocks of Raw Materials, Consumable Stores, Spares, Work-in-Progress and Finished Products of other than its Copper Division, movable assets and book debts of its Copper Division, both present and future. Further secured/to be secured by way of joint equitable mortgage of the immovable assets, on second charge basis, of the Copper Division, ranking pari-passu with other Lenders/Institutions.
148
Rupee term Loan from UTI Bank Rupee term Loan from UTI
6.69
13.4
15.17%
2.2
4.4
15.17%
In 2005-06
Rupee Term loans from Financial Institutions are secured by joint and equitable mortgage / hypothecation of all properties (save & except book debts) of the Copper Division of the Company, both present & future, ranking pari-passu inter-se, subject to prior charges created in favour of the Companys Bankers on specified movables assets for securing the borrowings for the working capital facilities and Hirakud Power assets
75.4
105.8
11.00%
2005-06 Rs.60.8 millions & 2006-07 Rs.45 millions 2005-06 Rs.1.8 millions & 2006-07 - Rs.1.3 millions In 2005-06 Foreign Currency Loan of USD 48 million from Banks, ranking pari-passu and are secured by hypothecation on Unit No.8 of power plant at Renusagar. USD 40 million loan is secured by first charge on specific assets and USD 12.5 million loan is secured by tangible movable properties including movable plant & machinery and or equipments both present and future located at factories, godowns and premises at Taloja and Kalwa. and JPY loan equivalent to USD 100 million are secured by first charge on immovable properties of the Copper division situate at Dahej ranking pari-passu and hypothecation of fixed assets both present and future of Copper division at Dahej ranking pari-passu
Rupee term Loan from IIBI Ltd Foreign Currency Term Loans - HSBC
2.2
3.1
15.30%
351.9
700.0
Libor + 55 bps
Foreign Currency Term Loans - SCB & BOA Foreign Currency Term Loans - HSBC Foreign Currency Term Loans - HSBC Foreign Currency Term Loans - BNP Paribas Foreign Currency Term Loans - BNP Paribas Foreign Currency Term Loans from Financial institutions
6M Libor In 2005-06 +77.5 bps 6M Libor + 90bps 6M Libor + 33 bps 6M Libor + 60bps 6M Libor + 60bps 5.95% In 2006-07 In 2008-09 In 2010-11 In 2010-11 Three equal half yearly installments of Rs.98.1 millions Foreign Currency loan from a Financial Institution is guaranteed by a bank guarantee and such guarantee is secured by hypothecation of all plant & machinery both present & future pertaining to the Copper Division. This is further secured by joint equitable mortgage, on first charge basis, of all immovable properties of the Copper Division at Dahej both present & future.
27,676.7
29,523.4
149
Total Loans
150
2004-05
2003-04
2002-03
2001-02
2000-01
24,778.68 36,166.38
26,468.72 37,021.45
152
HINDALCO INDUSTRIES LIMITED ANNEXURE - 10 LOANS AND ADVANCES AND OTHER CURRENT ASSETS:
(Rs. in Millions) As at Sep Particulars Advance and Loan to Subsidiary Companies Receivable from Promoter /Promoter Group Co. Loan to Employees Inter Corporate Deposits Advances recoverable in cash or in kind or for value to be receivedand/or to be adjusted Prepaid Expenses Advance Income Tax Paid (Net) Balance with Customs, Port Trusts, Excise etc. Security and other Deposits Excise, Customs and other Claims Receivable Accrued Interest Accrued Export Incentives TOTAL 30, 2005 344.72 421.63 205.78 599.24 2,538.31 289.47 14.66 735.70 2,212.41 134.17 416.40 7,912.49 2005 212.27 400.08 201.77 631.47 2,597.96 214.67 11.51 729.09 3,714.67 44.45 377.77 9,135.71 As at 31st March 2004 555.65 515.46 13.86 726.16 2,006.95 1,270.09 0.02 403.62 3,330.76 82.45 153.97 9,058.99 2003 928.27 386.80 1,815.11 1,292.89 1,008.75 1,236.89 403.70 2,017.79 22.26 9,112.46 2002 385.25 42.36 3,425.82 996.90 183.59 493.97 199.09 398.15 74.00 6,199.13 2001 207.27 113.10 2,026.17 1,051.87 146.35 752.79 142.99 382.78 75.68 4,899.00
153
154
2.
Weighted average number of Equity Shares outstanding during the year / period (Nos. in millions)
927.75
92.77
92.48
92.50
74.46
74.46
3. 4.
Number of equity shares outstanding at the end of the year / period (Nos. in millions) Networth
927.75 82,593.92
92.77 76,571.92
92.48
92.48
74.46
74.47
Before Share Split Accounting ratios Earning per Share Basic and diluted (1) / (2) Net Asset Value per share (4) / (3) Return on Networth (1) / (4) After Share Split 5. Weighted average number of Equity Shares outstanding during the year / period (Nos. in millions) 6. Number of equity shares outstanding at the end of the year / period (Nos. in millions) Accounting ratios Earning per Share Basic and diluted (1) / (5) Net Asset Value per share (4) / (6) Return on Networth (1) / (4) * Not annualised * 6.48 89.03 14.56% 14.43 82.54 17.48% 9.07 74.16 12.23% 8.06 66.95 12.04% 9.21 61.53 14.97% 9.11 58.80 15.49% 927.75 927.75 924.75 924.75 744.60 744.66 927.75 927.75 924.75 925.03 744.59 744.60 144.27 825.35 17.48% 90.72 741.59 12.23% 80.59 669.49 12.04% 92.13 615.30 14.97% 91.07 588.03 15.49%
155
Note: Short term borrowings include installment of long term borrowings repayable within one year
156
2005
2004
2001
Nature of item
157
158
64,009.41 35,651.76 304.64 93.55 64,314.05 35,745.31 2,102.04 2,290.08 418.76 377.64 66,834.85 38,413.03 27,384.98 9,618.99 0.56 3,797.39 2,864.67 13,213.39 8,373.00 5,010.47 3,167.55 1,901.72 808.01 3,711.31 2,175.10 55,019.82 27,007.32 11,815.03 11,405.71 1,613.17 71.77 10,201.86 11,333.94 2,669.49 2,843.91 827.88 704.80 (0.03) 6,704.52 47.93 6,656.59 1,372.62 3,288.22 10.16 11,327.59 462.42 7.53 0.63 1,248.42 160.07 7,077.21 2,371.31 11,327.59
4,897.01
0.49
* Figures for the financial year 2001-02 do not include proportionate share in Joint Ventures.
159
*Figures for the financial year 2001-02 does not include proportionate share in Joint Ventures.
160
2005 18,600.42 6,223.14 101.79 (2,797.46) 41.51 696.04 127.73 2,208.47 25,201.64 (1,973.29) (9,925.91) 5,541.14 18,843.58 580.04 (80.66) 19,342.96 (9.01) 19,333.95 (739.98) (17,801.74) 685.14 (91.03) (10,369.51) 1,234.43 833.47 10.82 (26,238.40) (39.52) (26,277.92)
2004 14,864.52 5,028.03 112.31 (2,535.62) (120.21) 85.89 112.74 2,185.87 19,733.53 (2,981.94) (2,501.81) 2,915.37 17,165.15 (2,025.32) 15,139.83 (10.04) (70.84) 15,058.95 (12,210.71) 91.54 (49.86) (35.86) (6,123.90) 984.58 636.52 (16,707.69) (16,707.69)
2003 # 11,815.03 3,711.31 (2,041.38) (8.96) 27.53 36.75 1,900.56 15,440.84 (758.86) (3,736.91) 2,568.70 13,513.77 (3,325.68) 10,188.09 (13.38) 10,174.71 (15,797.19) 125.57 (1,848.67) (78.46) 6.90 858.38 212.74 17.83 (16,502.90) 211.52 (16,291.38)
2002 11,405.71 2,175.10 (2,057.56) 45.24 10.62 4.09 808.01 12,391.21 (663.34) (608.80) 431.16 11,550.23 (2,549.23) 9,001.00 (19.78) 8,981.22 (7,665.36) 31.67 1.54 (9.45) (445.16) 1,074.30 250.93 (6,761.53) (6,761.53)
Notes : 1 2 3 Cash and cash equivalent includes cash and bank balances and Deposits with Companies and interest accrued thereon. Figures for the previous year have been regrouped / rearranged wherever found necessary. Interest charged excludes and Purchase of Fixed Assets includes interest capitalised Rs.315.28 million in HY Sep-05,Rs 464.30 million in 2004-05, Rs. 254.05 million in 2003-04, Rs.626.98 million in 2002-2003 and Rs.452.81 million in 2001-02 Figures of 2001-02 do not included proportionate share in Joint Ventures. Cash and cash equivalent for 2002-03 have been adjusted to remove Inter Corporate Deposits placed by the Company in Joint Ventures. For F 2001-02 ,extraordinary items include Refund of Interest from DOT and new brand launch expenses .Y For F 2002-03 ,extraordinary items from investment activities represents proceeds from sale of shares of .Y MRPL to ONGC
4 5 6
162
HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 19 NOTES TO ACCOUNTS - CONSOLIDATED
1. PRINCIPLES OF CONSOLIDATION a) The financial statements have been prepared to comply in all material aspects with applicable accounting principles in India, and the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI). CONSOLIDATED FINANCIAL STATEMENTS relates to Hindalco Industries Limited, the Company and its Subsidiaries and Joint ventures (the Group).The Consolidated Financial Statements are in conformity with the AS -21 and AS - 27 issued by ICAI and are prepared on the following: i) The financial statements of the Company and its Subsidiaries and interest in Joint ventures have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating inter-company balances and transactions including profits in year end inventories. The consolidated financial statements are prepared by adopting uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Companys separate financial statements except otherwise stated elsewhere in this schedule. The excess of cost to the Company of its investments in the subsidiaries over its portion of equity of subsidiaries at the dates they become subsidiaries is recognised in the financial statements as goodwill. The excess of Companys portion of equity of the subsidiaries over the cost to the Company of its investments at the dates they become subsidiaries is recognised in the financial statements as capital reserve. Minority Interests in the consolidated financial statements is identified and recognised after taking into consideration : The amount of equity attributable to minorities at The date on which investments in a subsidiary is made. The minorities share of movement in equity since the date parent- subsidiary relationship came into existence. The losses attributable to the minorities are adjusted against the minority interest in the equity of the subsidiary.
b)
ii)
iii)
iv)
v)
The excess of loss over the minority interest in the equity, is adjusted against General Reserve of the Company. c) Accounting Policies and Notes on Accounts of the Company and all the subsidiaries are set out in their respective financial statements.
163
b)
For the purpose of consolidation, the Consolidated Financial Statements of Birla Mineral Resources Pty Limited which reflects the consolidation of Birla (Nifty) Pty Limited, Birla Mt Gordon Pty Limited and Birla Maroochydore Pty Limited has been prepared. In order to consolidate the audited consolidated financial statements of Birla Mineral Resources Pty Limited, where considered material, been restated to comply with Generally Accepted Accounting Principles in India.
164
The resultant translation exchange difference has been transferred to foreign currency translation reserve. Upto year 2003-04 In accordance with the requirement of Accounting Standard 11 The effects of changes in foreign exchange rates, financial statements of foreign subsidiaries have been converted in Indian Rupees at the following exchange rates: (i) (ii) (iii) Revenue and Expenses: At the average exchange rate during the period. Current Assets and Current Liabilities: Exchange rate prevailing at the end of the period. Fixed Assets: Exchange Rate at the date of acquisition.
The resultant translation exchange difference has been transferred to profit & loss account. 3. Accounts are not restated for the periods prior to which the Accounting Standards, as stated under, became effective : Accounting Standard Accounting Standard 11 (revised) -The Effects of Changes in Foreign Exchange Rates Accounting Standard 22 - Accounting for Taxes on Income Accounting Standard 28 - Impairment of Assets Effective Date Periods commencing on or after 1-4-2004 Periods commencing on or after 1-4-2001 Periods commencing on or after 1-4-2004 (Rs. in million) HY Sep-05 4. Capital Commitments outstanding [Advance/Deposit paid Rs.3,446.79 millions (2004-05 Rs 3,201.96 millions)] Joint Ventures (net of advances) 5. (I) Contingent Liabilities not provided for in respect of : a) Claims/Disputed liabilities not acknowledged as debt The Company and Subsidiaries : Income Tax Excise/Custom/Sales Tax Others Joint Ventures : Income Tax Excise/Custom/Sales Tax Others
165
11,480.01 144.61
d)
In terms of the Schemes of Arrangement between the Company, the erstwhile Indo Gulf Corporation Ltd (IGCL) and Indo Gulf Fertilisers Limited approved by the Honble High Courts at Allahabad and Mumbai vide their orders dated 18th November 2002 and 31st October 2002 respectively and between the Company and Indian Aluminium Company, Ltd (Indal) approved by the Honble High Courts at Kolkata and Mumbai vide their orders dated 23rd December 2004 and 14th January 2005 respectively, the company may be liable to pay a portion of disputed demands of Income Tax pertaining to IGCL & Indal. 228,340,226 Equity Shares of Rs.10/- each fully paid up in IDEA Cellular Ltd. are held by the Company as investment. Out of the above 115,187,999 shares of Rs. 10/- each have been pledged for securing financial assistance granted by the lenders to that company. The Company has given undertakings to various Financial Institutions for non-disposal of shares held in Tanfac Industries Ltd. and 57,085,060 shares of Rs 10/- each of IDEA Cellular Ltd. till the Institutional loans are repaid in full.
II)
III)
6.
a)
The company and its subsidiaries and joint ventures has export obligations of Rs 7,534.43 million (USD 169.54 million) [2004-05 Rs.7,501.33 million (USD 171.46 million)] and Rs.1.19 millions, respectively, against the Import Licences taken for import of capital goods under Export Promotion Capital Goods Scheme. The company has export obligation of Rs 5,373.66 millions (USD 122.15 million) [2004-05 Rs 2,592.25 millions (USD 59.25 million)] against the Advance Licence.
b) 7.
Pursuant to a Scheme of Arrangement u/s. 391 to 394 of the Companies Act, 1956 (the Scheme) which has been approved by Honble Bombay High Court and Kolkata High Court on 14th January, 2004 and 23rd December 2004, respectively, all the business undertakings (other than the aluminium foil business at Kollur, Andhra Pradesh), herein after referred to as demerged undertaking, of Indian Aluminium Company, Ltd (Indal) has been transferred to the Company with effect from the appointed date i.e. 1st April, 2004 on going concern basis. Demerged undertaking is engaged inter alia in conducting and carrying on the business of mining, manufacture and sale of hydrate and alumina, alumina chemicals, aluminium, aluminium products including aluminium sheets, extrusions and foil and generation of electricity.
8.
A Scheme of Arrangement (the Scheme) between the Company, Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) and their respective shareholders and creditors which envisages the demerger of the fertiliser business of IGCL to IGFL, and the subsequent amalgamation of the Remaining Business of IGCL with the Company, has been approved by the Honble High Courts at Allahabad and Mumbai vide their Orders dated 18th November, 2002 and dated 31st October, 2002 respectively. In terms of the scheme, the remaining business (hereinafter referred to as amalgamating company) comprising of manufacturing of copper and certain precious metals, the processing, producing, manufacturing and marketing of certain types of chemicals (including diammonium phosphates) and rendering assistance and services in relation to the same has been amalgamated and transferred and vested in the Company, on a going concern basis with effect from the appointed date, i.e. from opening of business on 1st April, 2002.
166
Certain assets of Foil units Certain assets of Wheel Unit Certain assets of Smelters Certain assets of Other Units B) Copper Nature of Asset
Low return on Investments due to severe competition in the market place Inadequate return on Investment due to low demand Inadequate return on Investment mainly due to high cost of operation Erosion in value
Events/Circumstances
For arriving at Value in Use discount rate of 9.5% has been used. Net Selling Price has been determined based on valuation report from external agencies As at Sep 30, 2005, the Company made an assessment to ascertain whether there is any indication that an asset may be impaired and found no such indication. However, a detailed assessment will be carried at the close of financial year. 10. a) Future obligations towards lease rentals under the lease agreements taken prior to 1st April 2001 Period Not later than one year Later than one year and not later than five years b) (Rs. in millions) Lease Payment Present Value HY Sep-05 2004-05 HY Sep-05 2004-05 80.41 68.05 21.60 76.73 64.92 20.09
Future obligations towards lease rentals under the lease agreements taken on or after 1st April 2001 (Rs. in millions) Period Not later than one year Later than one year and not later than five years Later than five years Lease Payment Present HY Sep-05 2004-05 HY Sep-05 3.22 23.13 3.50 21.02 3.82 3.17 14.47 Value 2004-05 3.32 15.15 2.23
167
d)
Future minimum lease payment commitments for operating lease under the lease agreements for the following period: Period Not later than one year Later than one year and not Later than five years HY Sep-05 10.85 13.62 2004-05 8.52 11.08
11. Purchase of copper concentrate is accounted for provisionally pending finalisation of content in the concentrate, price, and custom duty. Variations are accounted for in the year of settlement. 12. A part of electricity supplied by the company, which has been treated by UPPCL as sale, has been accounted for on the basis of provisional rates. The effect of variation in the rate will be accounted for in the year in which rates are finalised by UPPCL. 13. Sale of Di-Ammonium Phosphate (DAP) and other complex fertilisers are covered under the concessional schemes for decontrolled fertilisers of the Government of India. Pending declaration of final rate of concession for the quarter ended Sep 30, 2005 the claim for concession under the scheme for that period has been accounted for provisionally based on final rates declared for the preceding quarter. 14. Exceptional items in 2004-05 represents expenses of Rs.91.03 million incurred on demerger as per note no.6 and disputed claim of Rs.39.52 million of earlier years accounted by one of the subsidiary. 15. Deferred Tax Major components of Deferred Tax arising on account of temporary timing differences along with their movement are: (Rs. in millions) Particulars Deferred Tax Assets (A) Brought forward long term Capital Losses Others Deferred Tax Liability (B) Depreciation Others 11,419.27 384.17 11,501.98 10,875.13 771.30 11,342.46 10,982.67 1,006.65 11,952.61 9,275.91 6,021.28 1,083.58 121.75 0.01 301.45 0.01 303.96 36.71 100.82 163.51 HY Sep-05 2004-05 2003-04 2002-03 2001-02
10,258.67 5,979.52
16. In view of different sets of environment in which subsidiaries namely Birla Mineral Resources Pty Limited, Birla (Nifty) Pty Limited, Birla Mt. Gordon Pty Limited, Birla Resources Pty Limited and Birla Maroochydore Pty Limited are operating, Accounting policies followed in respect of following items by them are different from the accounting policies mentioned in Schedule 23 of the Financial statements of the Company.
168
Assetstakenon Inrespectofassetstaken FinanceLease onfinanceleasepriorto 1stApril2001,theelement ofleaserentalapplicableto thecostofassetshasbeen chargedtotheprofitand lossaccountoverthe estimatedlifeoftheassets andfinancingcosthasbeen allocatedoverthelifeofthe leaseonanappropriatebasis. Depreciation & Amortisation Depreciationischargedonthe basisofratesandmanner specifiedforeachclassof assetsinScheduleXIVofthe CompaniesAct,1956,as amended.
Depreciationratesused (rangingfrom10%-50%) foreachclassofassetsare determinedbytheremaining expectedlifeofmine.The carryingcostofthemine propertiesitselfisamortisedon thebasisofproductionoutputbasis. Exchangedifferencesrelatingto amountspayableandreceivable inforeigncurrenciesareaccounted forasexchangegainsorlossesin thestatementoffinancial performance.
794.68
1,049.26
785.20
NIL
22.13%
16.59%
15.28%
NIL
Exchangedifferencesrelatingto amountspayableandreceivablein foreigncurrenciesareaccountedfor asexchangegainsorlossesinthe profitandlossaccount,exceptfor amountrelatingtoliabilitiesincurred forpurchaseoffixedassets,the differencethereofisadjustedinthe carryingamountofthefixedassets. TheCostofreclamationofmined outland,Afforestationetc.is treatedaspartofrawmaterials cost.
Nil
Nil
22.57
NIL
Nil
Nil
21.61%
NIL
Aprovisionforenvironmentaland rehabilitationcostsaremadeforthe totalestimatedfuturecostsof environmentalandrehabilitation workrequiredtobeperformedfor eachoperationandareaofinterest andacorrespondingamountis capitalisedtomineproperties, whichisamortisedoverthelife oftheoperation. Expensesrelatingtominingand processingexceptpower&fuel, ratesandtaxes,insurance, travelingexpenses,royalty,freight andforwardingarenotclassified functionallyandareshownunder conversion,fabricationandother operatingexpenses Investmentsincontrolledentities arecarriedinthefinancial statementsatthelowerof costandrecoverableamount. Dividendsanddistributionsare broughttoaccountintheprofit andlossaccountwhentheyare declaredbythecontrolledentities. Forwardrateagreementand optionsaremarkedtospotatyearend andthesameisrecognizedasdeferred gain/lossinfinancialstatements.
549.71
265.19
246.24
68.63
100%
100%
100%
100%
Expenses
1,916.98
2,911.70
1,837.60
67.00%
65.16%
65.88%
Investments
503.32
539.79
Nil
100%
100%
NIL
169
170
Copper
Others
Total Aluminium
Copper
Others
Total
27,965.97 23,034.87 1,431.12 52,431.96 53,209.56 45,469.72 2,375.36 101,054.64 45,014.04 35,846.29
1,372.38 82,232.71
RESULTS Segment/OperatingResults Operating Results Un-allocable Income (Net of Expenses) Expenses) Expenses InterestExpenses Non Recurring Expenses Provision for Tax (including Deferred Tax) Net Profit OTHER INFORMATION 69,090.02 68,765.87 5,951.86 143,807.75 35,700.65 179,508.40 6,849.57 11,110.73 857.14 18,817.44 5,253.76 11,633.03 778.20 63,100.43 61,408.49 6,116.48 130,625.40 35,443.10 166,068.50 17,664.99 5,230.89 6,797.67 596.28 60,751.21 42,524.55 4,439.28 107,715.04 28,027.97 135,743.01 12,624.84 8,984.49 (189.42) 277.64 9,072.71 16,192.69 1,741.30 481.21 18,415.20 10,921.27 3,667.37 357.90 14,946.54
(2,725.65) 6,169.76
(5,511.91) 12,957.96
(4,879.94) 9,974.54
SegmentAssets Assets Un-allocableAssets Total Assets Liabilities SegmentLiabilities Unallocable Liabilities Un-allocable Liabilities &Provisions Total Liabilities Depreciation Un-allocable Depreciation Total Depreciation
9,056.41 27,873.85 1,836.07 1,502.46 244.69 3,583.22 6.40 3,589.62 3,599.96 2,260.58 452.73
3,896.46
5,178.17
237.22
9,311.85
5,327.95
9,714.12
604.74
15,646.81
5,545.65
5,822.11
402.03
11,769.79
171
SegmentAssets Un-allocableAssets Total Assets SegmentLiabilities Liabilities Un-allocableLiabilities & Provisions Unallocable Liabilities & Provisions Total Liabilities Depreciation Un-allocable Depreciation Total Depreciation
Note : During the year 2004-05, the Company re-identified primary business segment to reflect more appropriate presentation in line with reorganisation of some subsidiaries and accordingly figures of 2003-04 were also regrouped to make them comparable.
172
The following transactions were carried out with the Related parties in the ordinary course of business (a) Joint Ventures / Associates :
S. No. Transactionsduringtheyear Transaction during the year SalesandConversion Conversion Services Rendered Interest and Dividendreceived received Interest Purchase ofmaterials Purchase materials Services Received Investmet, Deposits, loans && Investments,Deposits,loans advances made during the year advancesmadeduringtheyear Guarantees Collateral securiteis given GuaranteesandCollateralsecuritiesgiven Transactions HYSep-05 Joint Ventures 84.86 0.50 91.59 2004-05 Joint Ventures 97.54 0.02 0.81 163.57 2003-04 Joint Ventures 77.63 0.33 42.69 433.55 Joint Ventures 87.44 0.09 57.43 675.71 2002-2003* Associate Joint Ventures 56.10 9.18 123.29 2001-2002** Associate
1 2 3 4
26.26 132.89 -
5 6 7
0.17 875.00
173
0.35 875.00
4.30 -
1 2 3 (b )
0.08 22.75 -
11.80 4.94 -
15.01 0.80 -
11.10 10.86
47.57
5,311.54
1.92
Trident Trust Beneficiary Interest in the trust BeneficiaryInterestin Interestreceived Interest received from Trust 344.52 32.63 344.52 344.52 344.51
( c)
Key Managerial Personnel : (including perquisites) ManagerialRemuneration(includingperquisites) Net of eliminations Netofeliminations 19.28 25.82 26.61 20.46 27.00
**
Gross
174
Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August30,2005 to November21,2005 165.00 September19, 2005 1,061,481 112.60 October 31, 2005 1,271,773 138.80
NSE
Yearending March31 High (Rs.) Dateof High Volumeon date of high(no. ofshares) 8,403 108,977 220,283 105,837 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 29,100 28,487 265,525 109,811 Average pricefor theyear (Rs.) 622.50 1,065.53 1,109.85 1,263.20
2003 2004 2005 April 1, 2005 to August 29, 2005 August 30, 2005 to November 21, 2005
460.00 October 30, 2002 532.05 April 1, 2003 720 May 17, 2004 1,067 June 2, 2005
Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each 164.45 September20, 2005 4,734,026 112.65 October 31, 2005 3,804,158 138.55
175
138.30
November18,2005
114.95
November1,2005
154.75
October 4, 2005
884,406
112.60
1,271,773
133.68
165.00
September19,2005
1,061,481
140.00
August31,2005
311,223
152.50
Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August 1, 2005 to August29,2005 July,2005 June,2005 May,2005 April,2005 1,460 1,299.95 1,265.00 1,250.00 1,430.00 August18,2005 July 29, 2005 June 30, 2005 May26,2005 April 11, 2005 42,584 57,127 40,829 34,997 12,500 1,250.5 1,179 1,066 1,127 1,180 August 1, 2005 July 4, 2005 July 2, 2005 May31,2005 April 29, 2005 14,566 58,925 91,013 28,831 22,538 1,355.25 1,239.48 1,165.50 1,188.50 1,305.00
NSE
Month Year High (Rs.) Dateof High Volumeon date of high(no. ofshares) 4,741,243 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 844,794 Average pricefor theyear (Rs.) 127.13
November1,2005 to November21,2005 October 1, 2005 to October 31, 2005 August30,2005 to September30,2005 August 1, 2005 to August29,2005 July,2005 June,2005 May,2005 April,2005
138.00
November18,2005
116.25
November1,2005
154.70
October 4, 2005
1,944,357
112.65
3,804,158
133.68
164.45
September20,2005
4,734,026
140.05
August31,2005
1,004,383
152.25
1,459.40
Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August18,2005 105,837 1,241.55 August 2, 2005
70,712
1,350.48
July 29, 2005 June 30, 2005 May 3, 2005 April 7, 2005
The market price was Rs. 130.65 on BSE on November 11, 2005, the trading day immediately preceding the day on which the committee of the Board met to finalize the offer price for the Issue. The market price was Rs. 130.8 on NSE on November 11, 2005, the trading day immediately preceding the day on which the committee of the Board met to finalize the offer price for the Issue.
176
HINDALCO INDUSTRIES LIMITED MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our selected financial and other operating data and our financial statements under Indian GAAP and the related notes, appearing elsewhere in this Letter of Offer and the related notes to accounts and significant accounting policies that have been incorporated in the section titled Auditors Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. A description of what constitutes a forward-looking statement is provided in Forward-Looking Statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Risk Factors and elsewhere in this Letter of Offer. Unless otherwise stated, the financial information used in this section is derived from our standalone audited financial statements under Indian GAAP as restated. , Our fiscal year ends on March 31 of each year, hence all references to a particular fiscal year are to the 12-month period ended March 31 of that year. In this section, any reference to we, us or our refers only to Hindalco Industries Limited. Bracketed numbers indicate losses/ negative figures. In this section, any conversion from US Dollars to Indian Rupees has been done based on the 12 PM Noon Exchange rate of 1US Dollar = 45.690 Indian Rupees on November 10, 2005 as given by the Federal Reserve Bank of New York Such conversions are for convenience purposes. Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. As a result, the financial statements for fiscal 2005 include the full year financial results of the aluminium business of Indal and may not be comparable with those of fiscal 2004. For details on the Scheme of Arrangement and its financial implications, please see Our Business on page 50 of this Letter of [-] Offer.
Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU, as of July 2005, we are the fourth largest aluminium producer in Asia and the fourteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines, which are owned and operated by Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, are owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited. As a custom smelter, we buy copper concentrate at LME-linked prices for smelting and refining copper and we sell refined copper at LME-linked prices in the domestic and export markets. According to CRU, we are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005.
100%
100%
100%
100%
2004
US$1,431
Rs. 65,382.4
US$1,716
Rs. 78,404.0
2004
181
(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.
182
(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.
183
0.0 18,643.6 10,538.5 775.6 29,957.8 0% 21,752.7 4,040.1 3,492.5 277.3 2,563.2 32,125.8 62,083.5
Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric acid Others
(1)
(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items
Aluminium: Revenues from our aluminium business increased from Rs.29,957.8 million in fiscal 2004 to Rs.52,520.9 million in fiscal 2005. Revenues rose by 15% on a comparable basis over fiscal 2004 even after excluding results of the newly merged Indal. We recorded the highest production across all aluminium product segments in fiscal 2005. Our sales volumes crossed previous highs, except in sales of aluminium ingots and billets as more metal was used in-house for value-added products. Realisations too registered an increase in all the product categories. The highlight of the years performance was the contribution of value-added products to sales. At 198,615 metric tons, excluding wheels tonnage, the value-added products segment constituted 47% of metal sales tonnage and 54% of metal revenues. Our alumina production stood at 1,159,664 metric tons while sales aggregated to 322,828 metric tons with balance captively consumed for metal production. Revenues from third party sale of our alumina were Rs.5,695.5 million reflecting an average realisation of Rs.17,642.6 per metric ton. Our primary metal production, consisting of aluminium ingots and billets, was at 409,068 metric tons, pegging
184
186
2004 (in (Rs. in Rs. million) millions) As a percentage of Net Sales & Operating Revenues 0% 30% 17% 1% 48%
Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric Acid Others
(1)
(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items
187
189
(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.
190
The following table presents details of our outstanding debt as of September 30, 2005 with corresponding maturities in the fiscal years indicated: S.No. Fiscal 2006 Fiscal 2007 Maturities of Outstanding Debt Fiscal 2008 Fiscal 2009 Fiscal 2010 Beyond Fiscal 2010
(Rs. in millions) (in million Rs.) 1. 2. Secured Debt Unsecured Debt 3,659.3 15,544.9 4,038.6 0.0 7,059.3 0.0 2436.2 2,436.2 0.0 3722.8 3,722.8 0.0 6760.5 6,760.5 0.0
For further detail on our indebtedness, see the section titled Description of Certain Indebtedness in this Letter of Offer. Capital Expenditures The following table sets forth our capital expenditures by segments for the years ended March 31, 2003, 2004 and 2005 and the capital expenditures in each segment as a percentage of our total capital expenditures in such years : Historical Capital Expenditure in each Segment Year ended March 31, 2003 Rs. Percent 2004 Rs. Percent 2005 Rs. Percent Total
(in million Rs., except percentages) (Rs. in millions except percentages) Aluminium Copper Total 7,699.5 2,673.6 10,373.1 74% 26% 100% 3,486.9 3,203.4 6,690.3 52% 48% 100% 4,980.5 5,990.1 10,970.6 45% 55% 100% 16,166.8 11,867.2 28,034.0
We expect to spend approximately Rs.58,125.0 million in capital expenditures during fiscal 2006, 2007 and 2008 and Rs. 60,825.0 million beyond fiscal 2008 on the following projects, which are covered under Objects of the Issue: increase the capacity of our alumina refinery in Muri from 110,000 metric tpa to 450,000 metric tpa, which we expect to complete in fiscal 2007; increase the capacity of our aluminium smelter in Hirakud, Orissa, from 65,000 metric tpa to 146,000 metric tpa, which we expect to complete in fiscal 2008;
193
2007 Rs.
(1)
2008 Rs.
(1)
Percent
Percent
Percent
99% 1% 100%
30,220 20 30,240
100% 0% 100%
Actual capital expenditures may differ materially from these planned amounts. We may adjust the amount of our capital expenditures based on our cash flow from operations, the progress of our expansion plans and market conditions. Our anticipated cash flows from operations are dependent on a number of factors beyond our control, such as aluminium and copper prices quoted on the LME, TcRc prices, prevailing economic conditions in the industries which consume aluminium and copper and the costs of our principal inputs. We may, therefore, need to raise additional capital. If so, we may not be able to raise additional capital on terms acceptable to us or at all. Further, any sale of our equity or equity-linked securities may result in dilution to our shareholders. We may also have to revise our business plan from time to time and consequently its funds requirement may also change. This may include rescheduling of capital expenditure programs, starting non-planned new projects, more actively developing projects that may currently be at a nascent stage, terminating projects currently planned and increase or decrease in the capital expenditure for a particular business unit vis--vis current plans at the discretion of the Management. For more details on our planned expansion projects, please see Objects of the Issue, Our Business Our Aluminium Business Our Expansion Projects and Our Business Our Copper Business Expansion Projects.
194
The following table sets out selected financial information on our aluminium and copper business segments for the periods indicated: Selected Results of Operations Six Months Ended September 30, 2004 2005 (Rs. million Rs.) (in in millions) Aluminium Business Segment Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed Return on Capital Employed (%) PBIT Margin (%) Copper Business Segment Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed Return on Capital Employed (%) PBIT Margin (%) Unallocables Unallocable Income (Net of Expenses) Total Operating Revenues Profit Before Interest & Tax (PBIT) PBIT Margin (%)
(1) Annualised
24,509.8 54% 6,904.4 73% 53,089.1 26% 28% 20,665.6 46% 1,102.0 12% 33,774.1 7% 5% 1,447.2 45,175.4 9,453.6 21%
27,544.7 57% 8,729.0 90% 58,877.8 30% 32% 21,141.5 43% (163.0) -2% 43,932.5 -1% -1% 1,166.2 48,686.2 9,732.1 20%
195
Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric acid Others
(1)
(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items
Aluminium: Revenues from our aluminium business increased by 12% from Rs. 24,509.8 million for the six months ended September 30, 2004 to Rs.27,544.7 million for the six months ended September 30, 2005. Enlarged volumes, improved realisations assisted by buoyancy in the LME prices and a richer product mix, were the key drivers for growth. Average LME prices increased by approximately 7% compared to the previous period and were at US$ 1,822 (Rs. 83,247.2) per metric ton for the six months ended September 30, 2005. Aluminium production increased considerably, driven by de-bottlenecking of our expanded capacities at Renukoot and synergies from integrated Hindalco-Indal operations. However, our aluminium business faced cost pressures due to unilateral reduction in coal linkages by the Ministry of Coal necessitating purchases from e-auctions at higher prices, significantly higher caustic soda prices compared to the previous period, a steep rise in furnace oil prices mirroring the upward trend in global oil prices and appreciation in the value of the Indian Rupee against the US Dollar. Inspite of these cost pressures, the PBIT for our aluminium segment increased by 26% from Rs.6,904.4 million for the six months ended September 30, 2004 to Rs.8,729.0 million for the six months ended September 30, 2005 primarily due to better operating efficiencies and focused cost control measures. The PBIT margin increased from 28% for the six months ended September 30, 2004 to 32% for the six months ended September
196
198
199
Save as stated elsewhere in the Letter of Offer, there are no material changes and commitments, which are likely to affect the financial position of the Company since September 30, 2005 (i.e. last date up to which audited information is incorporated in the Draft Letter of Offer) a) Week end prices of Equity Shares of the Company for the last four weeks on the BSE and NSE are as below: Week ended on October 28, 2005 November 4, 2005 November 11, 2005 November 18, 2005 b) Closing Rate BSE (Rs) 118.05 120.70 130.65 136.50 Closing Rate NSE (Rs) 118.00 120.70 130.80 136.55
3.
As per the notice no. 20051114-18, issued by the BSE, the transactions in the equity shares of the Company would be done on an ex-right basis with effect from November 21, 2005. The closing Price of the Equity Shares of the Company on the BSE and NSE on November 21, 2005 was Rs. 125.20 per equity share and Rs. 125.30 per equity shares (ex-rights Price) respectively. Highest and Lowest Price of the Equity Share of the Company on BSE and NSE during the period November 22, 2004 to November 21, 2005 (for the last year): BSE Market Price High Low NSE Market Price High Low Rs. 164.45 Rs. 106.70 Date September 20, 2005 June 2, 2005 Rs. 165.00 Rs. 106.60 Date September 19, 2005 June 2, 2005
c)
Note : Market Prices have been adjusted for stock split where applicable.
Defaults in the payment/refunds of debentures, fixed deposits, interest on fixed deposits, debenture interest and institutional dues There are no defaults, non-payment/ overdues of statutory dues, institutional/Company dues and dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, etc, other than unclaimed liabilities of the Company, its subsidiaries, its other ventures, promoters, Group companies and companies promoted by the promoter.
201
202
203
204
205
206
Secured Redeemable Non-Convertible Debentures (In in million) (Rs. Rs. millions) S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Particulars 11.20 % NCD 9.75 % NCD 9.00 % NCD 7.95 % NCD 7.20 % NCD 7.20 % NCD 6.40 % NCD 9.95% NCD 6.6% NCD 6.39% NCD 12.75% NCD 8.70% NCD 8.10% NCD 6.20% NCD 5.95% NCD 6.5% NCD Subtotal Amount Outstanding as of September 30, 2005 1,500.0 2,000.0 500.0 600.0 250.0 500.0 1,050.0 500.0 486.8 1,000.0 600.0 2,000.0 1,000.0 500.0 500.0 2,500.0 15,486.8 Interest 11.20% 9.75% 9.00% 7.95% 7.20% 7.20% 6.40% 9.95% 6.6% 6.39% 12.75% 8.70% 8.10% 6.20% 5.95% 6.50%
207
I. A.
(a) 1.
2.
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4.
5. 6.
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8.
10. Ram Lal Rajbhar has filed a Crl. Misc. Petition No. 4301/2001 against the State of Uttar Pradesh and the Company in the Allahabad High Court challenging the order of the Additional Sessions Judge, Allahabad in criminal revision no. 1801/2001 which went against the Petitioner. The petitioner, formerly a workman in the Company, was the accused in Crl. Complaint No. 2360/99 filed in the Court of Spl. CJM Allahabad under Section 630 of the Companies Act by the Company on the grounds that the concerned workman encroached upon the Companys land after his dismissal. He challenged the summoning order dated September 25, 1999 and the maintainability of the same in criminal revision 1801/2001 before Addl. Session Judge Allahabad on the ground that the land in question has been purchased by his wife and she is in possession over the land as owner. The said revision was rejected by the Court vide order dated July 25, 1999. Aggrieved by the order of Addl. Session Judge Allahabad, the petitioner has filed the instant case. The wife of Ram Lal Rajbhar has also filed a civil suit No. 25/93 before Civil Judge (Senior Division) Sonbhadra, which is pending. The High Court vide its interim order dated August 16, 2001 stayed the proceedings before the magistrate. A counter affidavit has been filed in this regard, but no rejoinder has been filed. The matter is pending. 11. The State of Uttar Pradesh has filed Criminal Case No. 569/90 before the Munsif-Magistrate, Dudhi against I.N Kapoor, who is the Factory Manager of the Renusagar Power Division on the grounds of non-compliance of standing orders of the Company in respect of classification of workmen, termination of service and notification on notice board of the name of officers appointed for granting leave of absence to workmen. The said I.N. Kapoor has filed Cri. Misc. App. No. 14722/92 in the Allahabad High Court. The High Court has issued a stay order staying the proceedings in 569/90 vide order dated November 18, 1992. The matter has not been listed for further hearing. 12. The State of Uttar Pradesh has filed Criminal Case No. 1834/91 before the Munsif-Magistrate, Dudhi against the Mr. I.N. Kapoor and Mr. S.S. Kothari as Occupier of the Renusagar Power Division for non-compliance rules relating to methods of work as prescribed and causing the fatal accident of Late Prabhat Chander Sharma on April 10, 1990. Mr. Kothari and factory manager of the Company have filed Cri. Misc. App. No. 14721/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1834/91 vide order dated November 18, 1992. The matter was not listed for further hearing. 13. The State of Uttar Pradesh has filed Criminal Case No. 1866/91 against Mr. I.N. Kapoor and Mr. S.S. Kothari for non-compliance of Sections 7 (A) and 36 of Factories Act and U.P Rules 1950 leading to the fatal accident of Late . Shankar Dayal Sharma on December 13, 1990. Mr. Kothari and factory manager of the Company have filed, Cri. Misc. App. No. 14736/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1866/91 vide order dated November 18, 1992. The matter has not been listed for further hearing. 14. The State of Uttar Pradesh has filed case No. 3658/2003 in the Court of the CJM, Sonbhadra at Robertsganj against Colonel Pushpendra Singh and others on the grounds that on May 24, 2003, the accused, who are security guards in the Company attacked some miscreants who were attempting to hinder the task of repairing the boundary wall of the Company. Cross FIRs were filed by both sides. A charge sheet against the Company Security Officers was filed under Sections 147, 148, 149, 307, 504, 506 and 427 of the I.PC. The CJM, vide order dated August 5, 2003 issued summons to the said security officers. Against this order, the Company Security Officials filed Criminal Revision No. 3194/2003 before the Allahabad High Court, which vide its order dated November 5, 2003 stayed the operation of order dated August 5, 2003 passed by CJM. Against this order, the Company Security Officials filed writ petition No. 3057 of 2003, which vide its order dated June 5, 2003 stayed the operation of order dated August 5, 2003 passed by CJM. By order dated July 12, 2004 the matter before the High Court is to be listed in next cause list. The stay order issued in criminal revision has been extended till the
209
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10. The Company has filed four cases No. 2809/2002, 3859/2002, 1865/2003, and 412/2005 against former employees of the Company under Section 630 of the Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate houses allotted to them despite being dismissed from service. In 2809/2002 and 3859/2002, summons have been served on the accused. In 412/2005, the Companys statement under Section 200 of the CrPC and summons have been issued to the accused. In case No. 2809/2002 and Case No. 3859/2002 the matter is pending
212
B.
(a) 1.
Labour suits
Labour cases filed against the Company Thirty-six contract workers at the Taloja plant canteen filed ULP No. 637 of 1998 in the Industrial Tribunal, Thane claiming permanence of employment. The Industrial Court passed an order dated February 16, 2004 rejecting their complaint and the contact labourers moved Bombay High Court vide appeal No. 2999 of 2004. The High Court has granted a stay against the order of the Industrial Tribunal. The case is pending final hearing at the Bombay High Court. The Company meanwhile, has filed Writ Petition No. 573/04 challenging the notification dated October 10, 2003 issued by the Government of Maharashtra due to which engagement of contract labour in the canteen of Taloja plant had to be abolished. The matters are pending in the Bombay High Court along with the above matter.
215
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217
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C.
Tax proceedings
2.
4.
5.
6.
7.
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10. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1995-96 aggregating tax impact of Rs. 127.56 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT. 11. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1996-97 aggregating tax impact of Rs. 165.32 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT. 12. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1997-98 aggregating Rs. 22.30 million, inter alia on the issue of disallowance of deduction under Section 80 O in respect of royalty received and the issue on disallowance of depreciation and expenses. The matter is pending before the ITAT. 13. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1998-99 aggregating tax impact of Rs. 25.08 million, inter alia on the issue deduction under Section 80 HHC of the IT Act and issue of disallowance of deduction under Section 80 O in respect of royalty received. The matter is pending before the ITAT. 14. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1999-2000 aggregating tax impact of Rs. 32.48 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT. 15. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2000-2001 aggregating tax impact of Rs. 10.14 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT. 16. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2001-2002 aggregating tax impact of Rs. 453 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT.
221
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4.
5.
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10. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the reassessment year 1990-91 aggregating tax impact of Rs. 31.64 million, inter alia on commission paid to stockists, deduction under Section 80 M and on the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 11. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1991-92 aggregating tax impact of Rs. 9.18 million, inter alia on issues of deletion of addition on account of Modvat credit. The matter is pending before the ITAT. 12. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1992-93 aggregating tax impact of Rs. 9.04 million, inter alia on issues of deletion of addition on account of Modvat credit and depreciation. The matter is pending before the ITAT. 13. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1992-93 aggregating tax impact of Rs. 138.08 million, inter alia on issues of deductions under Section 80 I of the IT Act, deduction under Section 80 M of the IT Act and on the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 14. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1993-94 aggregating tax impact of Rs. 158.35 million, inter alia on issues of deletion of addition on account of Modvat credit and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 15. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1994-95 aggregating tax impact of Rs. 133.07 million, inter alia on issues of commission paid to stockists and issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 16. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1995-96 aggregating tax impact of Rs. 141.90 million, inter alia on issues of deletion of addition on account of Modvat credit and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 17. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1996-97 aggregating tax impact of Rs. 121.83 million, inter alia on issues of deletion of addition on account of Modvat credit commission paid to stockists, deductions under Section 80 M of the IT Act and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 18. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1997-98 aggregating tax impact of Rs. 169.36 million, inter alia on issues of deletion of addition on account of Modvat credit commission paid to stockists, deductions under Section 80 M of the IT Act and interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 19. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1998-99 aggregating tax impact of Rs. 140.39 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. 20. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1999-2000, aggregating tax impact of Rs. 993.74 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. 21. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2000-2001, aggregating tax impact of Rs. 1543.64 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act.
223
2.
3.
4.
(b)
Appeal filed with the ITAT The Company has filed an appeal with the ITAT for assessment year 1995-96 against an order passed by the Commissioner of Income Tax under Section 263 of the IT Act for an amount of Rs. 8.5 million on account of alleged excess deduction allowed under Section 80M of the IT Act. The matter is pending before the ITAT.
(c)
Appeals filed with the Commissioner of Income Tax (Appeals) Six appeals have been filed with the Commissioner of Income-tax (Appeals), details of which are given below: 1. 2. 3. 4. For assessment year 1996-97, the assessing officer disallowed Rs. 26.7million towards excise duty under Section 147 of the IT Act. The matter is pending before the Commissioner of Income Tax (Appeals). For assessment year 1997-98 the assessing officer disallowed Rs. 32.04 million towards excise duty under Section 147 of the IT Act. The matter is pending before the Commissioner of Income Tax (Appeals). For assessment year 1998-99 the assessing officer disallowed Rs. 24.6 million towards excise duty under Section 147 of the Income-tax Act. The matter is pending before the Commissioner of Income Tax (Appeals). The Company has filed an appeal against the regular assessment order of the assessing officer for assessment year 2000-01 aggregating to Rs. 231 million on various grounds including disallowance for current repairs, VRS expenses, bad debts written off, etc. The matter is pending before the Commissioner
224
6.
(b)
Wealth Tax
There are wealth tax appeals in respect of the Company for claims of less than Rs. 1 million. (c) 1. Central Excise The Commissioner of Central Excise & Customs, Vadodora II has issued a Show Cause Notice (SCN) to the Company for the amount of Rs. 1.64 million that is sought to be recovered from the Company under Section 11A of the Central Excise Act, 1944. The Commissioner has also sought to impose penalty under Section 11AC and charge interest at the rate as fixed by the Board under Section 11AB of the Central Excise Act, 1944. The Company had allegedly not reversed the credit amounting to Rs. 0.82 million, which it had originally availed, and which was in excess of the correctly admissible credit of duty. The Commissioner determined that an amount of Rs. 0.82 million in terms of Section 11A of the Central Excise Act, 1944, imposed a penalty of Rs. 0.82 million were payable and ordered payment of interest. The Additional Commissioner confirmed the order of the Commissioner vide Order-in-Original No. 48/Demand/ADC/D-BRH/03 dated August 26, 2003. The Commissioner (Appeals), Central Excise and Customs, Vadodara, vide Order-in-Appeal Commr.(A)/31/VDR-II/2004 dated January 30, 2004 allowed the appeal and set aside the order of the Additional Commissioner. The Commissioner, Central Excise & Customs, Vadodara II has now filed a Memorandum of Appeal before the Customs Excise and Sales Tax Appellate Tribunal (CESTAT), against this Order-in-Appeal. The Company has filed cross-objections against this appeal on May 17, 2004. The matter is pending before the CESTAT. The Deputy Commissioner of Central Excise (Rebate), Mumbai I, has issued deficiency memo-cum-SCN-cumcall for personal hearing F No. V(15)/Reb/Ch.-74/2004/3072 dated November 10, 2004 on 37 rebate claims for . the months of July and August 2004 on the grounds that the Company has not submitted final assessment certificate issued by the Assistant Commissioner, Bharuch as well as duty payment certificate and duplicate ARE-1 was not submitted in the tamper proof sealed covers. Personal hearing was held on December 22, 2004. The Company has submitted a letter to the Deputy Commissioner requesting him to settle the rebate claims keeping in abeyance the cess amount, till appropriate clarifications issued by the Central Board of Excise & Customs, New Delhi. The rebate claim on the cess amount will be allowed thereafter. The Deputy Commissioner, Central Excise, Raigad has issued two Order-in-Original Nos. 419/05-06/D.C.(R)/RAIGAD and 420/05-06/D.C.(R) / RAIGAD both dated June 16, 2005 settling thereby the rebate claims for the period July, 2004 to November, 2004 amounting to Rs. 945.9 million without education cess amounting to Rs. 8.13 million, stating that education cess paid during July 10, 2004 to September 6, 2004 cannot be allowed as rebate. The Company has filed appeals before the Commissioner of Excise (Appeals), Mumbai and presentation for issuing clarification is pending before the Central Board of Excise & Customs, New Delhi. The Commissioner, Central Excise & Customs, Vadodara II, has confirmed the demand of Excise Duty of Rs. 1.09 billion being the duty payable on the clearances of the gold bars for the period from May 2000 to February 2003. The Commissioner ordered the appropriation of the amount of Rs. 634.34 million already paid by the Company and ordered the Company to pay the differential amount of Rs. 459.35 million and imposed a penalty of Rs. 1.09 billion as well as interest. The Company filed an appeal along with an application for a stay and a request for early hearing with CESTAT, Mumbai on July 21, 2003. Personal hearing on the stay application was held on July 31, 2003 and an unconditional stay was granted. Personal hearing was held on October 19, 2004 and October 20, 2004 at CESTAT, Mumbai and written arguments have been submitted on November 24, 2004. An order has since been delivered in June 2005, wherein one member of CESTAT has not confirmed the demand whereas the other member has confirmed the demand of duty but set aside the penalty. In view of the difference of opinion, the matter will be referred to a third member.
225
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23. The Joint Commissioner, Central Excise passed an order dated March 29, 2004 against the Company and imposed a penalty of Rs. 1.9 million in respect of the alleged short receipt of inputs and raw materials during the period from April 1996 to March 2000. The Company filed an appeal before the Commissioner (Appeals), Central Excise, Allahabad who passed an order dated August 17, 2004 upheld the order of the Joint Commissioner. The Company filed an appeal dated November 17, 2004 before the CESTAT which granted a stay on December 12, 2004. 24. A SCN has been issued to the Company dated February 28, 2005 to the Company demanding an aggregate sum of Rs. 12.8 million in respect of the notional interest alleged to have been earned for the period 2003-04 on the credit balances of the buyers. The reply to this notice is yet to be filed. 25. The Central Excise department issued SCNs Nos. 1211/91 dated August 6, 1991, 2303/91 dated November 20, 2001, 868/92 dated April 20, 1992, 1277/92 dated July 10, 1992, 1768/92 dated October 22, 1992, 103/93 dated January 12, 1993,1/93-94 dated June 16, 1993 and 7/93-94 dated November 15, 1993 against the Company demanding a sum of Rs. 2.158 million after disallowing Modvat credit claimed by the Company on inputs used in the manufacture of aluminium by electrolysis during the assessment years 1991-92, 1992-93 and 1993-94. The
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6.
Custom Cases under Rs.1 million Apart from the cases described hereinabove there are 3 cases filed against the Company. The approximate amounts in these cases aggregate to Rs. 1.33 million. (e) 1. Sales Tax The Commercial Taxes Department has issued SCNs No. NBZ/07/02/01-02, NBZ/07/02/02-03 and NBZ/07/02/0304 dated August 11, 2004 to the Company for an amount aggregating Rs. 14.22 million in respect of the denial of set-off of taxes paid on inter-state purchases of various inputs used in the manufacturing of aluminium foils which are subject to the interstate sales tax and set off as provided GO 667 dated October 11, 2001 for the assessment years 2001-02, 02-03 and 03-04 respectively. The department also issued subsequent notices dated November 2, 2004 and November 10, 2004 The Company has filed Writ Petition no. 21775/2004 before the High Court of Andhra Pradesh against the notices. The petition has been admitted by the Court. Vide an order dated February 17, 2005, the High Court admitted the petition and directed the Department not to take any action with respect to the assessment years 2001-02 and 02-03 pending disposal of the petition, with a specific direction to the Company to file its objections to the SCN in relation to the assessment year 2003-04. The writ petition is pending disposal. With respect to the assessment year 2004-05, the Company has written to the department disputed that the matter is sub-judice and will be addressed after the decision in the writ petition. The Flying Squad Unit, Ahmedabad has issued a demand notice in provisional assessment dated September 11, 2001 for an aggregate amount of Rs. 218.9 million for non-payment of sales tax on leased assets. The Company has filed a writ petition before the Gujarat High Court at Ahmedabad against this provisional assessment. The
233
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5.
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(a) 1.
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10. The Director General of Foreign Trade has issued a SCN to the Company in respect of non-submission of export obligation against EPCG License. The reply is under preparation. A personal hearing was held on February 15, 2005. 11. The Dy. Commissioner, Trade, Tax, Sonbhadra has issued SCN dated July 20, 2005 to the Company levying Entry Tax amounting to Rs. 2.5 million for the months of April, May and June 2005 on coal, cement and petroleum products on the ground that Industrial Township is included in the definition of Local Area by virtue of the amendment dated March 24, 2005 made to Section 2 of the Uttar Pradesh Trade Tax Act, 1948. The Company has filed its reply. The Company has deposited an amount of Rs. 5.6 million under protest on August 31, 2005. The Company has sought a legal opinion on the matter, which is pending.
D.
(a) 1.
Civil cases
Cases filed against the Company Bombay Environmental Action Group and Shyam Chainani have filed Writ Petition No. 959 of 1998 on March 16, 1998 before the High Court of Judicature at Bombay seeking to restrain Indal from carrying any mining activity or any other activity of any nature whatsoever in the Iderganj area of Radhanagari Taluka, Kolhapur District on the alleged ground that the mine is within the Radhanagari Sanctuary and the mining activity is carried out by Indal without obtaining the necessary permissions for the same from the relevant authorities and that grave and irreparable harm, loss and injury would be caused to the environment and topography of the Radhanagari Reserve Sanctuary. The High Court has granted a stay order dated April 1, 1998 restraining Indal from carrying on any mining activity in the Iderganj area of Radhanagari, Kolhapur, till further orders. The stay order is still in force. Bombay Environmental Action Group and Shyam Chainani have filed Writ Petition No. 2244 of 98 before the High Court of Judicature at Bombay seeking cancellation of the renewal of mining lease granted to Indal in the Iderganj area allegedly within the Radhanagari Sanctuary in Kolhapur. Stay on the renewal of the lease is in force. The total value of the mining rights which have been affected through these cases was Rs. 22.05 million. The Estate Officer, Air India Limited issued an Eviction Notice dated April 19, 1999 to the Company purporting to act under Section 4 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 claiming that the Company was in unauthorized occupation of an area of 10496.80 sq. ft. on the 15th floor of the Air India Building,
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10. Ram Shankar Singh, Shital Shiv Nandan and Abhay Lal have filed Civil Miscellaneous Writ Petition No. 5241 of 2002 dated January 25, 2002 before the Allahabad High Court inter alia against the Government of India and the Company seeking to restrain them from interfering with the possession of the petitioners over certain plots of land in District Sonebhadra. The petitioners have alleged that compensation has not been paid to them in respect of the acquisition of these plots of land by the Government of India under the provisions of the Coal Bearing Areas (Acquisition & Development) Act, 1957. After acquisition, the Government handed over the land to Northern Coalfields Ltd. The Company has taken permission and possession from Northern Coalfields Ltd. for laying of a pipeline. The petitioners have challenged the acquisition of the land as well as the subsequent grant of permission to the Company from Northern Coalfields Ltd. On an interim application filed in March, 2005 the Court ordered that in case the possession of the land is still with the petitioners, they should not be dispossessed. The matter is yet to be listed for hearing. 11. Agnorpeth Shri Sarveshwari Samooh filed Civil Misc. Writ Petition No. 3800 of 2001 dated November 21, 2001 against the State of UP the Company and others before Allahabad High Court alleging that peaceful possession , of the land occupied by the Ashram managed by the Petitioner society, is being disturbed by officials of the Company, who dispute the Petitioners ownership and possession of the Ashram premises. The petitioner also filed a stay application No. 3800 of 2001 asking the Court to direct the Respondents not to interfere in the peaceful possession and functioning of the Petitioner society and further direct them to permit the free flow of
240
243
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3.
4.
5.
6.
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8.
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E.
(a) 1.
Miscellaneous Cases
Cases filed against the Company Three cases have been filed under Section 5 and 26 of the Indian Forest Act, 1927 (Forest Act) before the Magistrates Court by the Divisional Forest Officer, Renukoot alleging encroachment upon forest land by the Company through incorrect construction of boundary wall. In each of these cases, the Investigating Officer has recommended that an application for invocation of Section 63 of Forest Act be made. Eight cases have been filed before the Judicial Magistrate at Lohardaga for breach of Sections 25, 26 and 33 of the Forest Act by the Company. It is alleged in these cases that the Company has engaged in activities not permitted in the forest area such as mining, construction of road and transportation of bauxite. In three of these cases, the High Court has admitted a petition for quashing the proceedings and has stayed the proceeding in the lower court. In three other cases, the lower court is hearing the case. In two of the cases, the sanction of the Deputy Forest Officer for continuing the proceedings is awaited. Two cases have been filed against the Company under Section 52 of the Forest Act before the Divisional Forest Officer for the confiscation of materials illegally collected from the forest. One of these cases is pending hearing before the Divisional Forest Officer. In the other case, an adverse order was passed by the Officer on March 3, 2005. Against this order, Writ Petition (Cr) No.146 of 2005 was filed at Jharkhand High Court, Ranchi on April 19, 2005 and the order of the lower court was stayed vide order dated May 12, 2005. Two certificate cases 01 (RL) 2001-2002 & 11 (RL) 2001-2002 were filed before the Ranchi Certificate Office by the District Mining Officer, Lohardaga claiming royalty on Vanadium Sludge. The first case involves royalty amounting to Rs. 6 million for the period 1990 2000 and second case involves royalty amounting to Rs. 2.9 million including interest for substantially the same period. In the first case, the Certificate Office has ruled against the Company. The Company has preferred an Appeal No. 18 of 2001 on August 25, 2001 before the District Court, Lohardaga and has deposited 40 per cent of the amount. In the second case, the Company has filed an objection before the Certificate Officer stating that the manner of calculation of royalty is wrong. No date for hearing has yet been fixed. The Assistant Mining Officer, Gumla filed certificate case No. 07/GR/2003-04 dated August 19, 2003 in the court of Certificate Officer, South Chhotanagpur Anchal, Ranchi for realization of Rs. 6.01 million against cost of mineral bauxite allegedly illegally mined and despatched from out of the lease area of Jalim and Sanai Mines by the Company. The Company has filed denial petition under Section 9 of Bihar and Orissa Public Demands Recovery
247
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4.
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8.
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Miscellaneous cases under Rs. 1 million Apart from the cases described hereinabove there are 6 other cases filed against the Company. The approximate amounts in these cases are an aggregate of Rs. 1.87 million. (b) 1. Cases filed by the Company The Company has filed a Writ Petition No 2530 (MB) of 1994 on May 18, 1994 in the Allahabad High Court against the order of the Uttar Pradesh State Electricity Board (UPSEB) dated July 8, 1993 claiming an additional Rs. 35.7 million as water rates for the withdrawal of water from the Rihand Reservoir on account of retrospective revision of water charges for the period from 1989-90 to 1992-93. An order staying recovery has been passed on May 18, 1994. This case has been tagged with writ petition no. 2219 of 2001 below and has not been listed for hearing after July 2001. The Company has filed a Writ Petition No 2219 of 2001 in Allahabad High Court on May 9, 2001 against the claim of Rs. 5.1 million in arrears by the Uttar Pradesh Jal Vidyut Nigam Ltd. due to retrospective revision of water charges for water drawn from upstream and down stream of Rihand Reservoir from January 14, 2000 to January 31, 2001. Stay was granted for arrears on May 11, 2001.The case has been tagged with Writ Petition No. 2530(MB) of 1994 and has not been listed after July 2001. The Deputy Officer, Mines Department, Sonbhadra, vide citation to appear dated February 12, 2000 has demanded a royalty of Rs. 9.1 million on minor mineral illegally mined and utilized by the Company on its factory premises. The Company has challenged the said levy vide Suit No 19/2000 dated before Civil Judge (Sr. Div.), Sonbhadra. The demand has been stayed vide conditional stay order dated May 9, 2000 which required deposit of the demand amount by way of fixed deposit in a nationalized bank for period specified in the order. The Company has paid the said amount. The case is fixed for disposal of preliminary issues on maintainability of the suit. The date of hearing is yet to be fixed.
2.
3.
248
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6.
7.
8.
F.
1.
Arbitration Proceedings
The Company initiated arbitration proceedings for failure of Uttar Pradesh State Electricity Board (UPSEB) to supply electrical energy in terms of Agreement dated October 29, 1959. For the period 1971 to 1973, the amount claimed was Rs. 20.5 million and for 1973 to 1975, the amount claimed was Rs. 69.1 million. UPSEB moved the lower Court challenging the reference to Arbitration, which was rejected. Hence UPSEB has filed Revision Nos. 6 &7 of 1980 dated January 1, 1980. Stay was granted on January 18, 1980 The Company has filed an application for vacation of stay. The matter was last listed on May 20, 2005 when the court directed the cases to be listed before the appropriate regular court. The Company has been involved in arbitration proceedings with IFFCO. The Presiding Arbitrator endorsed the awards of IFFCOs Arbitrator against the Company. An amount of Rs. 71.9 million along with interest at 10.25 per cent from January 15, 2001 was awarded to IFFCO. The Company has filed an appeal in the Delhi High Court on October 10, 2004 against this arbitration award. A hearing was held on December 1, 2004 and notices were issued. The next date for hearing is on September 10, 2005. Court directed both parties to file synopses and listed the matter for hearing on November 22, 2005. The Company initiated arbitration proceedings for Rs. 15.3 million and Rs. 11.7 million on the grounds of failure of UPSEB to supply electrical energy in terms of agreement dated November 30, 1976. UPSEB filed miscellaneous cases before the Civil Judge, Lucknow, which were dismissed for default. The application for restoration and condonation of delay were also dismissed by order dated February 5, 1993, UPSEB filed FAFO Nos. 105 of 1993 and 107 of 1993 was filed by UPSEB. Arbitration proceedings were stayed by High Court vide order dated May 20, 1993. The next date of hearing is yet to be fixed.
249
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6.
7.
G.
1.
Notice
The Company was allotted 64 acres, 30 guntas extent of land in Kangrali Industrial Area by the Karnataka Industrial Areas Development Board (KIADB) vide an allotment letter dated April 4, 1973. The Assistant Secretary, KIADB, Belgaum passed an order dated January 18, 2000 terminating the allotment letter and resuming the land on account of the alleged non-compliance with the conditions contained in the allotment letter. The Company, by a letter dated January 18, 2000, requested the KIADB to withdraw its letter dated January 18, 2000 and consider its proposals submitted in an earlier letter dated August 6, 2000. The KIADB, by its letters dated January 28, 2000 and January 31, 2000 revoked the order dated January 18, 2000 and kept the same in abeyance. By its letter dated February 1, 2000, the KIADB withdrew the order. The Company made an exchange proposal to the KIADB. The exchange proposal was accepted by KIADB. However, the same would not be implemented due to various practical problems such as stamp duty and surrender of our own land. Matter is pending with KIADB.
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Group Companies
Material litigation involving our top five Group Companies is as provided below: Grasim Industries Limited A show cause notice for an amount of Rs.104.0 million was issued stating that the spinning and weaving units of Bhiwani Unit is not a composite mill. The matter is pending in CEGAT. A notice was issued disallowing Modvat credit of Rs.70.6 million. There are 107 other minor cases aggregating Rs.663.1 million of excise duty which are pending at different levels of appeals. Demand of Rs.108.1 million has been raised towards custom duty on import technical know-how and other services against which a bank guarantee of Rs.56.8 million has been furnished. The matter is pending in appeal with the Bombay High Court. Penalty of Rs.75.0 million has been imposed by the customs authorities for nonsubmission of bill of entry, against which an appeal is being filed in the Delhi High Court. Demand of Rs.86.8 million has been raised towards stamp duty and lease transfer charges on the transfer of Gwalior property. There are 3 other minor cases aggregating Rs.45.2 million at different levels of appeals. Madhya Pradesh State Electricity Board (MPSEB) has raised a demand of Rs.392.8 million on the basis of an order of the Madhya Pradesh Electricity Regulatory Commission imposing a condition to use boards minimum power to the extent of 50% of requirement and surcharge thereon, against which a stay has been obtained from Madhya Pradesh High Court. A demand of Rs.75.3 million has been raised by MPSEB towards minimum tariff charges. The matter is pending before the Madhya Pradesh High Court. An appeal against a demand of electricity tax of Rs.72.3 million made by CEIG is pending with Energy Secretary for disposal. There are two other minor cases amounting to a sum of Rs.56.4 million pending before different levels of appeals. Two cases aggregating to Rs.35.4 million with regard to Mineral Area Development Cess & Royalty, 61 cases aggregating to Rs.234.3 million with regard to sales tax and entry tax, six cases aggregating to Rs.61.5 million with regard to land compensation, 69 cases aggregating to Rs.29.9 million with regard to labour disputes, eight cases aggregating to Rs.35.5 million with regard to freight disputes, one case for Rs.5.7 million with regard to betterment fees, two cases aggregating to Rs. 2.1 million with regard to service tax matters, four cases aggregating to Rs.9.0 million with regard to property & road tax matters, four cases aggregating to Rs.9.3 million with regard to water cess, four cases aggregating to Rs.24.3 million with regard to price difference due to weight loss, 35 cases of claims from parties aggregating to Rs.23.3 million and 17 miscellaneous cases aggregating to Rs.80.3 million are pending before the appropriate authorities. Ultra Tech Cement Limited There is one case pending in civil court against the company for recovery of an amount of Rs.38.0 million for alleged breach of contract for supply of clay. There is one arbitration matter pending in the Bombay High Court, claiming demurrage amount of Rs. 12.0 million arising out of contract for supply of coal. There are eight cases pending against the Company in consumer courts. These are mainly against alleged quality of cement supplied. The amount of contingent liability in these cases is around Rs. 7.55 million. Commissioner of Sales Tax, Orissa has challenged the Assessment Order passed by the first Appellate Authority. The aggregate amount involved is Rs. 89.3 million. The matter is pending appeal. Indo Gulf Fertilisers Limited The state has filed a complaint under Section 7 of the Essential Commodities Act, 1955 read with the Fertilizer (Control) Order, 1985 against the company and Mr. B.N. Puranmalka, a former managing director and other officers, in the court of special judge, Moga. The complaint was filed on the ground that a sample of fertilizer drawn by the compost inspector on analysis was found to be substandard fertilizer in violation of Clause 19 of the Fertilizer (Control ) Order, 1985. Taxes and other dues aggregating to an amount of Rs. 6.8 million have been claimed on sale of urea, trading materials and on secondary freight under the West Bengal Sales Tax Act, 1994.
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3. 4.
5.
(b) 1. 2. 3. 4. (c) 1.
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4. 5. 6. (d) 1.
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3. 4.
5. 6. 7. 8.
9. (e) 1.
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3. 4.
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Subsidiaries
Bihar Caustic and Chemicals Limited 1. Mr. Dilip Kumar Sharma filed criminal complaint against a contractor of the company and the managing director of the company. Mr. Kumar had rented a machine to the contractor for carrying out work in the companys premises. The full amount of rent was not paid by the contractor and Mr. Kumar filed the criminal complaint. The court took cognizance of the complaint and issued a bailable warrant against the contractor and the managing director of the company. The company filed a criminal miscellaneous application to quash the order before the Jharkhand High Court at Ranchi, and the High Court has issued a stay against the proceedings of the trial court. The criminal miscellaneous application is pending for final disposal. The Jharkhand State Electricity Board (JSEB) raised an annual minimum guarantee bill of Rs. 21.4 million, which was challenged by the company before the High Court. The High Court directed the JSEB to issue a revised bill, which was issued for an amount aggregating Rs. 158.9 million. The revised bill included fuel surcharge and other charges. The matter is sub-judice before the High Court. The amount in dispute aggregates approximately Rs. 615 million. A fuel surcharge bill of Rs. 378.2 million was raised by the JSEB and challenged by the company on the ground of wrong calculation. The disputed amount involved is approximately Rs. 12.82 million and is pending before the Supreme Court of India. The company filed a writ petition in the High Court in respect of the companys entitlement to an interest free sales tax loan of Rs. 100 million under the industrial policy of the Bihar Government. The company was however only reimbursed Rs. 10 million and aggrieved by the same has filed the instant writ petition. The company has made an insurance claim for Rs. 2.2 million, which has been allowed by the single judge of the Calcutta High Court. The insurance company has filed an appeal challenging the order of the single judge. The company filed an appeal before CEGAT, Kolkata against adjudication order No. 122-178/Ran/C.E/Appeal/ 2004 dated August 31, 2004 relating to levy of excise on excess charges realised from transporters amounting to Rs. 7 million. The case was heard on July 21, 2005 and the CESTAT has granted full stay. The case is fixed for final hearing on September 27, 2005. The State Bank of India has filed a suit before the debt recovery tribunal for recovery of Rs. 39.5 million. The case is pending before the tribunal.
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5.
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7. B.
Indian Aluminium Company, Limited 1. 2. Sales tax related claims in respect of set off on purchases under G.O 667 are pending before the High Court of Andhra Pradesh writ petition no 21775 of 2005, for amounts aggregating Rs. 14.22 million. The Income Tax Department has raised a demand for Rs. 4.57 million in respect of assessment year 200203 on account of disallowance of depreciation and minimum alternate tax. The company is in appeal before CIT(A) against the order of the department.
C.
Minerals and Minerals Limited 1. District Forest Officer, Ranchi West Division, Lohardaga filed complaint case against the former general manager of the Company and other officers in the court of CJM, Lohardaga for illegal mining and loading of illegally mined bauxite from expired lease in Manduapat mine. The CJM, Lohardaga by an order dated July 16, 1999 had been taken cognizance for the offence under Sections 26 and 63 of the Indian Forest Act, 1927 and Section 2, 3(a), 3(b) of the Forest Conservation Act, 1980. An application under Section 482 of the Code of Criminal Procedure was heard and allowed by the High Court at Ranchi and the proceedings have been stayed against the officers of the company. The case is pending final hearing at the High Court of Ranchi. Mr. Arbind Bhai Patel, Director of the Mahuamilan Karanpura Coal Mines Ltd. (Mahuamilan) filed a title suit No. 28/92 in the Civil Court, Gumla on August 10, 1992 for a declaration that Mahuamilan is the statutory lessee under Bihar State and the lease of Mahuamilan granted in the year 1948 by the maharaja of Chhotanagpur was subsisting at the time of vesting of estate and that State Government be restrained from
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4. 5.
6.
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D.
Lucknow Finance Company Limited 1. The Income Tax Department has imposed a penalty of Rs. 5.1 million and Rs. 4.6 million under Section. 271(1)(c) of the IT Act, 1961 on March 31, 2005 and March 30, 2005 in respect of assessment years 2000-01 and 2002-03. The Company is in appeal before CIT(A) against the impositions of this penalty
E.
Renuka Investments & Finance Limited 1. The State of Uttar Pradesh filed case against the Company in respect of land purchased from M/s Gwalior Properties and Estates Limited in village Kharpatar, Dudhi, on the ground that the land had been purchased for commercial purposes and as no commercial rates have been notified for the area therefore the duty should have been paid at the price reserved for residential plots. The Collector after inspecting the plot on November 28, 2002 imposed stamp duty of Rs. 0.18 million and a penalty of equal amount. The Company has filed appeal No. 33600/2003 before the Commissioner, Mirzapur and has deposited one third of the total amount demanded. Mr. S. K. Mitra has filed O.S. No 21 of 2001-02 in the Court of SDM Dudhi, against the Company alleging that an area of 0.1265 hectares in plot no. 392 (405 old) situated in village Murdhawa Pargana & Tehsil Dudhi, belonging to him has wrongly been recorded in the name of the company and requested the Court to declare him the Bhumidhar of the plot and that records be accordingly rectified by deleting the name of the Company. The matter is fixed for disposal of objections on the report of the lekhpal with respect to the location and area of the plot. Declaratory suit O.S. No. 16 of 2002 in the Court of SDM, Dudhi has been initiated by State of Uttar Pradesh through Collector Sonebhadra against the company, alleging that the transfer of certain plots in favour of the Company has taken place beyond the provisions of U.P .Z.A. Act, and therefore have prayed that the court declare the State as owner of the plots in question. Matter is pending before the court for framing of issues.
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3.
G.
Indal Exports Limited 1. The Commercial Taxes Officer has raised demands under the West Bengal (Sales Tax) Act, 1994 for the assessment year 1995-1996 for tax, interest and penalty amounting to Rs. 0.22 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998. The Commercial Taxes Officer has raised demands under the Central Sales Tax Act, 1956 for the assessment year 1995-1996 for tax and penalty amounting to Rs. 0.17 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998. The Commercial Taxes Officer has raised demands under the West Bengal (Sales Tax) Act, 1994 for the assessment year 1996-1997 for tax, interest and penalty amounting to Rs. 0.22 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998.
2.
3.
H.
Utkal Alumina International Limited 1. Ms. Badli Naik has filed MJC 2/2005 before the Civil Judge (Senior Division), Rayagada, claiming compensation as granddaughter of original khatadar in respect of land acquired for the Company. She has filed the case for her share of compensation and subsequent payment of ex gratia which is being paid by the company as per the award under the Land Acquisition Act. Ghenu Halwa has filed TS 6 of 2005 before the Civil Judge (Senior Division), Rayagada disputing the ownership of certain land acquired for the company. The petitioner is claiming a potion of ex gratia which is being paid by the company as per the award under the Land Acquisition Act. Ghasiram Dambo has filed OJC 4482 of 2000 in the Orissa High Court challenging the acquisition of land under Khata No. 368 in village Koral for the company. Mr. Dambo claims a share in the land acquired and has challenged the validity of the land acquisition proceedings and has prayed for reversal of the land in his favour. The President of the Village Development Committee, Koral representing the residents of Upper Sahi of Koral, has filed WP (2)-5971 of 2005 in the Orissa High Court. The writ has been filed on the grounds that though the Lower Sahi has been acquired for the Company, the upper sahi has not been acquired, thus discriminating between lower sahi and upper sahi. The petitioner claims that since the factory will be installed close to upper sahi, it poses a potential health hazard and further that the acquisition of agricultural land leaves the residents with no alternate means of livelihood. The petitioners have prayed for acquisition of homestead lands in upper sahi and provision of alternate housing. The High Court has ordered that the villagers of upper sahi shall not be obstructed from access to their land. A labourer of the contractors constructing the Companys factory, met with a fatal accident. The mother of the deceased labourer filed has made a claim in WCC 17 of 2005 before the Deputy Commissioner Workmens compensation cum Deputy Commissioner, Jeypore against the contractor and the Company. Mr. B. Naik has filed suit bearing No. T.S. 16/2005 before the Civil Judge (Senior Division), Rayagada claiming ex-gratia amount payable in respect of land bearing plot No. 616, under khata No. 76 of Dwimundi mouaza acquired for the Company. Ms. Goudo has filed suit bearing No. T.S. 9/2005 before the Civil Judge (Senior Division), Rayagada claiming ex-gratia amount payable in respect of land bearing plot Nos. 3, 15, 4, 84, 120 and 121 under khata No. 16 of Dwimundi mouza acquired for the Company.
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7.
Except as stated above there are no outstanding litigations, defaults, etc., in relation to our subsidiaries pertaining to matters likely to affect operations and finances of the Company, including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII to the Companies Act, 1956 (1 of 1956).
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Directors
The State of Uttar Pradesh has filed Criminal Case No. 1834/91 before the Munsif Magistrate, Dudhi against Mr. S.S. Kothari as Occupier of the Renusagar Power Division and others for non-compliance of rules relating to methods of work as prescribed and causing fatal accident of one Prabhat Chander Sharma, Rigger on April 10, 1990. Mr. Kothari and the factory manager of the Company have filed Cri. Misc. App. No. 14721/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1834/91 vide order dated November 18, 1992. The matter has not been listed for further hearing. The State of Uttar Pradesh has further filed Criminal Case No. 1866/91 against Mr. S.S. Kothari and others for non-compliance of Sections 7 (A) and 36 of Factories Act and U.P Rules, 1950 leading to the fatal accident of . Late Shankar Dayal Sharma on December 13, 1990. Mr. Kothari and the factory manager of the Company have filed, Cri. Misc. App. No. 14736/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1866/91 vide order dated November 18, 1992 . The matter has not been listed for further hearing. A criminal case of cheating has been filed against Dr. K.M. Birla, Mr. S.K. Mitra and Mr. Ashish Goel (Lucknow branch employee) in the Kanpur Court in relation to Birla Global Finance Limited, by one hirer Mr. Charanjeet Singh. The Allahabad High Court has issued a stay on the proceedings at the Kanpur Court. The stay is still in force and there are no further developments in the case. A proceeding under Section 138 of the Negotiable Instruments Act has been pending against Baroda Rayon Corporation Limited and its directors which included Mr. E.B. Desai. Mr. E.B. Desai is no longer serving on the board of Baroda Rayon Corporation. Certain proceedings under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques, have been pending against REPL Engineering Limited (REPL) and its directors which included Mr. C..M. Maniar. Mr. C..M. Maniar was a non-executive director of REPL and resigned from the Board of REPL on August 28, 1997. Some of these proceedings filed under Section 138 against Mr. C.M. Maniar in his capacity as a director of REPL have been quashed by the Bombay High Court and the Madhya Pradesh High Court, Indore Bench on review under Section 482 of the Criminal Procedure Code. However, certain proceedings under Section 138 against Mr. C.M. Maniar in his capacity as a director of REPL are still pending before various other lower courts. Some proceedings under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques, have been pending against Pharmaceutical Products of India Limited (PPIL) and its directors which included Mr. C. M. Maniar. Mr. C.M. Maniar was a non-executive director of PPIL and resigned from the Board of PPIL on April 24, 2001. These proceedings against Mr. C.M. Maniar in his capacity as a director of PPIL are still pending before various lower courts.
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3.
4.
5.
6.
Except for the criminal and civil cases stated above, where the Directors and Officers of the Company have been named as parties or respondents, there are no, outstanding litigation, disputes, overdues to banks/financial institutions, defaults against banks/financial institutions, proceedings initiated for any economic/civil/ any other offences, involving the Directors or Officers of our Company.
V.
Promoters
BGHPL has filed an appeal before ITAT on April 21, 2004 against the order passed by CIT(A) in relation to disallowance under Section 14A of the IT Act, in respect of net interest paid by the company and administrative and other expenses. Apart from what is stated above, there are no outstanding litigation, disputes, overdues to banks/financial institutions, defaults against banks/financial institutions, proceedings initiated for any economic/civil/ any other offences, involving our Promoter.
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5.
6. (b)
Idea Cellular Limited 1. 2. 3. 4. 5. 6. 7. There are six Income Tax cases pending against the Company across circles for amounts aggregating to Rs. 6.77 million on various grounds of assessment during various assessment years. There are ten SCNs and cases pending against the Company across circles on various grounds for claims aggregating to an amount of Rs. 360.93 million. These matters are pending before the relevant authorities. There is one excise case pending against the Company for a claim aggregating to an amount of Rs. 3.86 million. There are eighty consumer cases filed against the Company in various fora for claims amounting to an aggregate of Rs. 4.33 million. There are forty six civil cases pending against the Company on various grounds in various fora for amounts aggregating Rs. 2.96 million. There are six labour cases which have been filed against the Company and are pending in various fora for claims amounting to an aggregate of Rs. 13.98 million. The Department of Telecommunications has raised claims aggregating to an amount of Rs. 259.63 million against the Company on grounds including penalty and interest charged on short payment of licence fees, royalty etc. There is one criminal case filed against the Company in the High Court against the order of the lower Court, dismissing applications to drop proceedings. The aggregate value of the claim is Rs. 0.067 million. Ten other miscellaneous cases have been filed against the Company on various grounds including recovery of dues and stamp duty. These claims amount to an aggregate of Rs. 21.54 million.
8. 9.
10. There are approximately seven thousand one hundred and twenty one cases (7121) filed by the Company against subscriber defaulters under Section 138 of the Negotiable Instruments Act for sums amounting to an aggregate of Rs. 24.6 million.
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General
PAN Number AAACH1201R
RBI
1. Approval No. EC.CO.FID (I) 1467/252 (Euro-Equity) Hindalco-II 93/94 dated November 11, 1992 from RBI to the Company granting permission under Section 19 (1) (d) of the Foreign Exchange Regulation Act, 1973; i ) make an international offering of rupee denominated equity shares of the Company to be subscribed in US dollars upto USD 110 million through Global Depositary Receipts (GDRs); ii) list the GDRs on one or more stock exchanges including the stock exchange at Luxemburg. This permission was to be valid for three months from the date of issue. Approval No. FID(I)/4/48/252 (Euro-Equity) Hindaco-II 93/94 dated June 10, 1994 from RBI to the Company granting permission under Section 19 (1) (d) of the Foreign Exchange Regulation Act, 1973 i) for making an international offering of rupee denominated equity shares to be subscribed in US dollars upto USD 100 million through Global Depositary Receipts mechanism. ii) to list the GDRs on one or more stock exchanges including the stock exchange at Luxemburg. This permission was to be valid for three months from the date of issue. Approval No. BYWAZ200300054 (Ref No. EC. CO. OID/19.08.114/2002-03) dated February 20, 2003 from RBI to the Company approving: i) acquisition of a wholly owned foreign subsidiary in Australia, Straits Nifty Pty Ltd. which was a subsidiary of Straits Resources Pty Ltd. for a gross consideration of AUD 148.82 million; ii) incorporation of a wholly owned subsidiary in Australia of the Company named Birla Maroochydore Pty Ltd. and iii) the acquisition of 50% of stake in Straits Exploration Pty Ltd. through a remittance of AUD 89,820,000 and issue of a guarantee of AUD 69 million. Permission for these cash remittances was valid upto February 19, 2004. Approval (Ref. No. Mumbai. FID-II/04.02.10/2002-2003) dated March 21, 2003 from RBI to the Company granting general permission for allotment of shares pursuant to the scheme of arrangement between the Company and Indo Gulf Fertilisers Limited and Indo Gulf Corporation Limited.
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3.
4.
Factory Approvals
(A) Belgaum Factory Approvals relating to manufacture 1. 2. Factory license number MYS/BGM/404 issued by the Labour Department, Karnataka and amended in the name of the Company following the demerger of Indal. This application has been renewed till December 31, 2006. Central Excise Registration Certificate dated March 23, 2005 issued by the Office of the Assistant Commissioner of Central Excise, Belgaum under Rule 9 of the Central Excise Rules, 2002, registering the Belgaum factory for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks; the factory was allotted the Excise Registration No. AAACH1201RXM007. VAT allotment letter dated March 30, 2005 from the Office of the Deputy Commissioner of Commercial Taxes, Belgaum allotting the VAT No. 29950323033 to the Company which would be valid and subsisting from April 1, 2005. This VAT No. is subject to the formal permission given by the Commissioner of Commercial Taxes, Bangalore. Letter dated April 5, 2005 has been filed with the Asst. Labour Commissioner, Belgaum for a further update of the list in the Schedule to Certificate carrying Registration Number CLA/18/75-76 under Contract Labour (Regulation and Abolition) Act, 1970, issued on July 26, 1975 permitting contact labour to be employed in tasks of loading and unloading raw materials and finished products, cleaning of ducts and tanks, sweeping and cleaning of colony and plant. The Schedule specifying the contractor and the number of workers and nature of work has last been updated on August 4, 2003. The license has been updated and granted in the name of the Company on March 15, 2005.
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(b)
(c)
(d) (e)
6.
Certificates for Use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting Indal to use the following WT boilers: (a) (b) (c) Boiler Registry No. MYS 1149 for a period extending from December 20, 2004 to December 19, 2005 by a certificate dated December 20, 2004. Boiler Registry No. MYS 1296 valid from December 10, 2004 to December 9, 2005 by a certificate dated December 10, 2004. Boiler Registry No. MYS 1875 valid from January 18, 2005 to January 17, 2006 by a certificate dated January 18, 2005.
7.
Certificate dated April 16, 2005 for use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting the Company to use WT Boiler Registry No. MYS 1150 valid from April 16, 2005 to April 7, 2006. Certificate dated May 10, 2005 for use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting the Company to use WT Boiler Registry No. MYS 1151 valid from May 10, 2005 to May 4, 2006. Certificates for Use of an Economiser issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting Indal to use the following Economisers: (a) (b) (c) Economiser Registry No. KTK-E-75 by a certificate dated June 4, 2004 valid from June 4, 2004 to March 6, 2006. Economiser Registry No. KTK-E-80 by a certificate dated July 7, 2004 valid till July 6, 2007. Economiser Registry No. KTK-E-82 by a certificate dated July 11, 2005 valid till February 28, 2007.
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10. Letter dated December 3, 2004 from the Additional Director, Ministry of Environment and Forests issuing environmental clearance to the proposed expansion of Belgaum factory to 587 KTPA alumina plant, under Environmental Impact Assessment Notification dated January 27, 1994. 11. Authorisation No. KSPCB/HWMC/AEO-2/DEO-3/SEO1/2000-01/513 issued under Rule 5 of the Hazardous Wastes (Management and Handling) Rules 1989 and Amendment Rules, 2003 issued on July 18, 2001 with regard to the disposal of cathode residues and system oil. The authorization was renewed till June 30, 2008 vide letter dated August 19, 2005. 12. Consent granted under the Air (Prevention and Control of Pollution) Act, 1981, and Water (Prevention and Control of Pollution) Act, 1974, before the Environmental Officer of the Karnataka State Pollution Control Board bearing
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Certification
1. Certificate of ISO 14001: 1996 (No. 157270) awarded by Bureau Veritas Quality International for quality in environmental management system to the Company, Belgaum for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks on July 24, 2004 which is valid till May 15, 2006. Certificate No. 139597 awarded by Bureau Veritas Quality International to Hindalco Industries Limited, Belgaum on November 5, 2003 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 in the manufacture and supply of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks and research and development of all ores, intermediate products and final products of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks. This certificate is valid till November 4, 2006. Certificate No. 129897 awarded by Bureau Veritas Quality International on December 19, 1996 for quality management system to Hindalco Industries Limited, Belgaum of ISO 9001:2000 in manufacture and supply of alumina hydrate, calcined alumina, special alumina hydrates and special calcined aluminas, carbon blocks and paste which is renewed till May 10, 2006.
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Applications Pending
1. Application for renewal of consent order No. KSPCB/17-CAT/APC/INDAL/2003-04/172 dated September 22, 2003, for operation of the industrial plant in the air pollution control areas under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by Deputy Environmental Officer, Karnataka State Pollution Control Board filed on February 7, 2005. This consent was to be valid till June 30, 2004. Application for renewal of consent Order No. KSPCB/WPC/INDAL/17-CAT/2003-04/276 granted on December 15, 2003 by the Environmental Officer, Karnataka State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974, authorising the industrial plant to discharge effluents and sewage filed on February 7, 2005. Consent was to be valid till June 30, 2004. Application for renewal of consent Order No. KSPCB/WPC/INDAL/17-CAT/2003-04/97 granted on August 3, 2004 by the Environmental Officer, Karnataka State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising the industrial plant to discharge effluents and sewage filed on February 7, 2005. Consent was valid till June 30, 2005. Application for renewal of consent order No. KSPCB/17-CAT/APC/INDAL/2004-05/89 dated August 3, 2004 for operation of the industrial plant in the air pollution control areas under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by the Environmental Officer, Karnataka State Pollution Control Board filed on February 7, 2005. This consent was valid till June 30, 2005. Kalwa Factory
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(B)
Approvals to carry out manufacture 1. Letter dated October 14, 2004 to the Deputy Director, Industrial Safety and Health at Thane requesting renewal of the factory license No. 64459 for 2005. Under the Maharashtra Factories Rules, 1963, renewal is deemed to have been effected. Central Excise Registration Certificate issued under Rule 2 of the Central Excise Rules, 2002, by the Office of the Assistant Commissioner of Central Excise, Belapur registering the Kalwa factory for the manufacture of excisable goods on March 24, 2005. The factory was allotted the Excise Registration No. AAACH1201RXM008. Certificate of Registration issued under Section 22/22A of the Bombay Sales Tax Act, 1959 and Rule 8 of the Bombay Sales Tax Rules, 1959 by the Sales Tax Officer, Thane Division issued on March 28, 2005 bearing No. 400605/S/1798 and coming into effect since March 7, 2005 and recognizing the sale of aluminium, aluminium products and by-products and foil products.
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Applications Pending Letter dated March 30, 2005 to the Joint Director, Industrial Safety and Health at Thane requesting the transfer of the factory license in the name of the Company following the demerger of Indal. (C) Alupuram Factory
Approvals relating to manufacture 1. Registration and license to work a factory issued by the Joint Inspector of Factories, Ernakulum to the Company, Alupuram Smelter Metal and Carbon Divisions bearing Registration No. AWY/03/18/88 (NIC Code Number 27203) in the district of Ernakulum employing not more than 900 persons on any day of the year and using power not exceeding 32558.47 K.W for operating this factory. This license is valid till December 31, 2005. Registration and license to work a factory issued by the Joint Inspector of Factories, Ernakulum to the Company, Aluminium Extruded Section bearing License No. AWY/03/462/97 (NIC Code No. 27203) in the district of Ernakulum in favour of Hindalco Industries Limited. This license is valid till December 31, 2005. Central Excise Registration Certificate issued by the Office of the Deputy Commissioner of Central Excise, Ernakulum division under Rule 9 of the Central Excise Rules, 2002, registering the Kalamassery factory for the manufacture of excisable goods on March 17, 2005; the factory was allotted the Excise Registration No. AAACH1201RXM006. Central Excise Registration Certificate (form ST 2) issued by the Superintendent of Central Excise, Aluva West Range under Section 69 of the Finance Act, 1994 and Section 32 of the Finance Act, 1944, registering the Kalamassery factory for payment of service tax on services availed from goods transport agencies on April 12, 2005; the factory was allotted the Registration No. GTA/ALY-W/23/2005. Certificate of Registration issued under Rule 5 of the Kerala General Sales Tax Rules, 1963 by the Asst.
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10. Consent Order No. W/07/93 granted on September 6, 1993 by the Environmental Officer, Kerala State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising the industrial plant to discharge effluents and sewage. Consent is to be valid till December 31, 2007. 11. Consent Order No. W/07/354/99 granted on August 7, 1999 by the Environmental Officer, Kerala State Pollution Control Board under the Water (Prevention & Control of Pollution) Act, 1974. Consent is to be valid till December 31, 1995. This consent was extended to December 31, 2004. Consent is to be valid till December 31, 2007. 12. Permission for manufacturing activity given to the aluminium extruded section of the Alupuram unit by Secretary, Eloor Grama Panchayath bearing license No. H-43/2005-06. This license is valid up to March 31, 2006. 13. Certificate for Use of a Boiler issued by the the Inspector of Factories & Boilers Grade I, Aluva, Ernakulum District permitting Hindalco Industries Limited to use WT Boiler Registry No. K-608, FTB. 14. Licence for operating Radio Remote Control of EOT Cranes in the plant bearing No. EOT 48/1-4 issued under The Indian Telegraph Act 1885 by Ministry of Communications & IT on July 16, 2003 and renewed till March 31, 2006. 15. Exemption order granted by Government of Kerala under sub-section (3)(a) of Section 81 of Kerala Land Reforms Act, 1961 (1 of 1964) vide Noification No. 76751/N2/2000/RD dated May 15, 2002 exempting 37 acres of land from ceiling provisions of the Kerala Land Reforms Act. This exemption notification is valid till May 29, 2006. Certifications 1. Certificate awarded by Bureau Veritas Quality International No. 81299 to the Company (Alupuram Extrusion) on May 31, 2001 on being found to comply with the environmental management system standard ISO 14001:1996 for the manufacture and supply of aluminium extrusions. This certificate is valid till June 3, 2007.
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(D)
Approvals relating to manufacture 1. Certificate of Registration under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970, issued by the office of the Registering and Licensing Officer, Thane on October 17, 1973 permitting the use of certain number of contract labour updated till December 31, 2005. An application for renewal has been submitted. Certificate of Registration issued under Rule 5 of the Central Sales Tax (Registration and Turnover) Rules, 1957 by the Asst. Commissioner of Commercial Taxes at Ernakulum, on March 22, 2005 bearing No. 400025 C-112 permitting the manufacture, reselling and distribution of non-ferrous metal, aluminium, stainless sheets and hardware products. This certificate is valid from December 15, 1995 till cancelled. Certificate of Registration issued under Section 22/22A of the Bombay Sales Tax Act, 1959 and Rule 8 of the Bombay Sales Tax Rules, 1959 by the Sales Tax Officer, Thane Division on March 28, 2005 to the Company bearing No. 410208/S/1 and coming into effect since March 7, 2005 and recognizing dealing in aluminium sheets and foils. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise, Belapur under Rule 9 of the Central Excise Rules, 2002, registering the Companys Taloja factory for the manufacture of excisable goods; the factory was allotted the Excise Registration No. AAACH1201RXM005. Certificate of Registration issued by the Superintendent of Service Tax Division of Service Tax Commissionerate of Mumbai under Section 69 of the Finance Act, 1994, registering the Kalamassery factory for collecting service tax on goods transport agency, technical testing, analysis and inspection for the Companys factory at Taloja on March 23, 2005; the factory was allotted the Registration No. ST/GTA-TIC/BEL/3062/2004-05. The certificate is valid for as long as the holder carries on the specified activity on the mentioned premises. Letter of allotment of Tax Deduction Account Number (TAN) to the Companys unit at Taloja under the Income Tax Act, 1961 by the Income Tax Department dated March 28, 2005. The number allotted is PNEH04840D. Certificate of Registration dated April 1, 2005, under Section 5(2) of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 by the Profession Tax Officer of Navi Mumbai registering the Principal Officer of the Company as an employer under the abovementioned Act. License No. P-12(7)-4284/MR. Kol.52 to store petroleum in a Class C Storage tank issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on April 29, 1997, renewed till December 11, 2007. License No. P-12(7)-1876/MR/Kol/133 for bulk storage of 45 Kilolitres of petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on January 2, 1978, renewed till December 31, 2007.
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(E)
Approvals relating to manufacture 1. Registration and license to work a factory issued by the Chief Inspector of Factories (Govt of West Bengal) in favour of Hindalco Industries Limited with effect from March 7, 2005, bearing factory license No. 165, registration No. 229-HW/X which had been given in favour of Indal on July 18, 1941 under the Factories Act, 1948. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise under Rule 9 of the Central Excise Rules, 2002, registering the Companys Belur factory for the manufacture of excisable goods; the factory was allotted the Excise Registration No. AAACH1201RXM010. Registration Certificate issued by the Superintendent, Central Excise under Section 69 of the Finance Act, 1994, registering the Belur factory for collecting service tax on goods transport agency (consignee/consignor) for the Company on April 8, 2005; the factory was allotted the Registration No. 59/GTA/SB02/KEL/2005-06. The certificate is valid for as long as the holder carries on the specified activity on the mentioned premises. Letter dated March 11, 2005 from the Office of the Deputy Commissioner of Commercial Taxes, Commercial Division at Kolkata allotting to the Company, the VAT number 19200127039, the State Sales Tax Act No. 19200127136 and CST Act No. 19200127233, incorporating the name Hindalco Industries Limited which would
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10. Food License for the Indal (Canteen) from the Bally Municipality (Health Department) under the West Bengal PFA Rules, 1957 vide receipt dated June 23, 2004. 11. License dated September 6, 2005 issued by the Deputy Secretary and Collector, Fire Service License Section to the Company to store hazardous materials under the West Bengal Fire Services Act, 1950 which is valid till April 17, 2006. Certifications 1. Certificate awarded by Bureau Veritas Quality International No. 169168 to the Companys unit at Belur on April 18, 2002 on being found to comply with the environmental management system standard ISO 14001:1996 for the development, manufacture and supply of alloyed and unalloyed aluminium coils and sheets. This certificate is valid till May 15, 2006. Certificate of compliance with ISO 9001:2000 quality standards by Bureau Veritas Quality International to the Companys unit at Belur on December 16, 1995 for the manufacture and supply of aluminium foil, foil and nonfoil based plain, printed, coated, laminated and extruded substrates for packaging purposes. The certificate number is 169169 and is valid till March 11, 2006.
2.
Pending Applications 1. Letter dated March 15, 2005 to the West Bengal State Pollution Control Board requesting the transfer of name on Consent order No. CO19/10-PCB/HOW/65-97 dated October 31, 2002 from Indal to the Company following the merger of these companies. Certificate of compliance with ISO 9001:2000 quality standards by Bureau Veritas Quality International to the Companys unit at Belur on November 20, 2001 for the manufacture of I-20K aluminium ingots, rolling ingots, cast coils and carbon paste. The certificate number is 169169 and is valid till November 21, 2004. Application for renewal is pending. Hirakud Complex
2.
(F)
Approvals relating to manufacture 1. Certificate of Registration under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970, issued by the office of the Registering and Licensing Officer, Government of Orissa on February 18, 2004 specifying the maximum number of contract labour that may be employed from each contractor for specified services. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise, Belgaum under Rule 9 of the Central Excise Rules, 2002, registering the Hirakud complex for the manufacture of excisable goods on April 1,2005; the factory was allotted the Excise Registration No. AAACH1201RXM011.
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Certifications 1. Certificate awarded by Det Norske Veritas No. RIN350-AE-1042 to Indal (Hirakud Smelter) on December 27, 2000 on being found to comply with the environmental management system standard ISO 14001:1999 for aluminium smelting, production of aluminium pigs, rolling ingots, cast coils and carbon paste. This certificate was valid till December 27, 2003. Certificate awarded by Bureau Veritas Quality International of No. 149968 to the Companys unit at Belur on March 16, 2004 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 for the manufacture and supply of unalloyed and alloyed aluminium coils and sheets. This certificate was valid till March 16, 2007.
2.
Approvals Pending 1. Registration issued on May 31, 2002 to Indal to work a factory by the Chief Inspector of Factories, Orissa in the district of Hirakud employing not more than 2500 persons on any day of the year and using power not exceeding 1,20,000 K.W. The certificate was to expire on December 31, 2004. Application for change in the name of Company in whose favour the factory is registered is pending with the Directorate of Factories, Orissa. Consent Order No. 10920 SPCB/BBSR-I-IND(C0N)/32 dated March 31, 2005, under Section 25 and 26 of the Water (Prevention & Control of Pollution) Act, 1974 to Indal, Hirakud Smelter for the release of trade effluents, issued by the Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending. Consent Order No. 10922 SPCB/BBSR-I-IND(C0N)/32 dated March 31, 2005, under Section 21 of the Air (Prevention & Control of Pollution) Act, 1981 to Indal for the release of trade effluents, issued by the Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending.
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(G) Hirakud Power Approvals relating to manufacture 1. Registration and license to work a factory by the Chief Inspector of Factories, Orissa to Indal bearing registration No. SB-230 in the district of Hirakud employing not more than 2000 persons on any day of the year and using power not exceeding 18,000 K.W. for a factory for generating electrical power. This license is valid till December 31, 2005 License to store upto 6 Chlorine Tonners and 2 Chlorine cylinders under Rules 57 and 58 of the Indian Explosives Act, 1884, bearing No. GC(OG)3-130/OR/A issued by the Chief Controller of Explosives at Bombay permitting Indal, Hirakud Power issued on June 26, 1998 and renewed till March 31, 2007. License to store petroleum in two above ground Petroleum Class C Storage tanks issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal, Hirakud Power with License No. P-12(14)397/OR-1524 initially issued on March 2, 1993, to remain in force till December 31, 2005. License No. OR-1596 to store petroleum in a tank issued under the Petroleum Rules, 2002 by the Dy Chief Controller of Explosives, Rourkela to Indal, Hirakud issued on March 29, 1995, duly renewed till December 31, 2005 vide letter dated March 13, 2003. Authorisation for collection, treatment, storage, transport and disposal of hazardous waste bearing number IND/ IV/HW 050(23) 21386 issued by the Orissa State Pollution Control Board to Indal, Hirakud Power under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 and amendments thereof issued on November 13, 2000 with regard to the disposal of oily sludge, spent resin, used oil and batteries. The authorization is expiring on November 13, 2005.
2.
3.
4.
5.
Approvals Pending 1. Consent Order No. 20740/SPCB/BBSR-I-IND(CON)/1411 granted on June 25, 2004 by the Environmental Officer, Orissa State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising to Indal, Hirakud Power to discharge domestic effluents. Consent is to be valid till March 31, 2005. Application for renewal is pending. Consent order No. 20742/SPCB/BBSR-I-IND(CON)/1411 dated June 25, 2004 to Indal, Hirakud Power for operation in air pollution control area and specifying the nature of gaseous release permitted and the nature of chimneys that have to be utilised under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by Deputy Environmental Officer, Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending.
2.
(H) Renusagar Approvals relating to manufacture 1. 2. 3. License No. SBR -132 issued under Section 6 of Factories Act, 1948 by the Director of Factories, Uttar Pradesh. The license has been renewed for year ending December 31, 2005. Registration under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978. License bearing No. PV(NC)S- 88/UP69/PVS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 16 Te units of Ammonia to be stored on the premises. This license was renewed till March 31, 2007. License bearing No. UP- 302(L) to store compressed gas in cylinders under the Indian Explosives Act, 1884,
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7. 8.
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10. Consent Order No. F34506 dated July 16, 2004 from the Uttar Pradesh Pollution Control Board for obtaining consent to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is valid till December 31, 2005. 11. Consent Order No. F34505 dated July 16, 2004 from the Uttar Pradesh Pollution Control Board to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is valid till December 31, 2005. 12. Authorisation letter bearing No. 703/Auth/AB-16-1-2002 dated January 9, 2002 issued by the Uttar Pradesh Pollution Control Board under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 and Amendment Rules, 2003 with regard to the collection and storage of waste oil and used batteries. The authorization is valid till January 7, 2007. 13. Mobile Station License No. P-472/1-17 issued by the Ministry of Communications and IT dated December 22, 2004. The license is valid upto December 31, 2006. 14. Wireless Station License No. P-1173/1-39 issued by the Ministry of Communications and IT. The license is valid upto September 30, 2005. 15. Mobile Station License No. RP-52/1-124 issued by the Ministry of Communications and IT dated December 20, 2004. The license is valid upto December 31, 2005. 16. Mobile Station License No. P-4077/1-17 issued by the Ministry of Communications and IT. The license is valid upto September 30, 2005. 17. Registration Certificate No. CTV/MZP-124/03 issued by the Head Post Master, Mirzapur for running a cable television network. 18. Registration No. UP 38/5 issued under Rule 5 of the Uttar Pradesh Motor Transport Workers Rules, 1962. The registration is valid till December 31, 2007.
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Approvals relating to manufacture 1. Plant I factory license bearing No. SBR-86 issued under the Factories Act, 1948 by the Deputy Chief Inspector of Factories, Uttar Pradesh vide certificate dated November 29, 1997. The license has been renewed upto December 31, 2005. Plant II factory license bearing No. MPR-92 issued under the Factories Act, 1948 by the Deputy Chief Inspector of Factories, Uttar Pradesh vide certificate dated March 5, 2002. The license has been renewed upto December 31, 2005. Plant I registration certificate No. 4 under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978, being a one time registration. Plant II registration certificate No. 5 under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978 being a one time registration. Sales tax registration No. MI-10 issued under the Uttar Pradesh Trade Tax Act, 1948. Sales tax registration No. RG-5006130 issued under the Central Sales Tax Act, 1956. License No. UP-5799 to store upto 15 kiloliters of petroleum class A and class B under the Petroleum Act, 1934, issued by the Controller of Explosives, Agra This approval is valid till December 31, 2005. Central Excise registration No. AAACH1201RXM002 issued by the Central Excise Division, Mirzapur on December 18, 2001 under Rule 9 of the Central Excise Rules, 2002, registering the Renukoot factory for the manufacture of excisable goods. Service tax registration No. AAACH1201RST005 for service of cable operators. The Company has also applied to register itself for the services of Mandap Keeper, health and fitness, goods transport agency and consulting engineer services.
2.
3. 4. 5. 6. 7. 8.
9.
10. License No. P-12(17)2589/UP-3598 dated May 4, 1994 to store upto 1135.05 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Agra. The license has been renewed till December 31, 2005. 11. License No. UP 702/ CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting compressed gas to be stored on the premises. This license was renewed till March 31, 2006. 12. License No. UP 1357/ CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting carbon dioxide gas to be stored on the premises. This license was renewed till March 31, 2006. 13. License No. P/HQ/UP/15/1364(P8765) dated October 23, 2000 to store upto 92 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives. The license has been renewed till December 31, 2006. 14. License No. P/HQ/UP/15/4259(P53699) dated September 8, 2003 to store upto 50 kilo liters of petroleum class C
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(J) Dahej Approvals relating to manufacture 1. 2. Factory license issued under the Factories Act, 1948 by the Chief Inspector of Factories. The license has been renewed upto December 31, 2005. Certificates for use of a Boiler issued by the Gujarat Boiler Inspection Department, permitting the Company to use the following boilers: a. b. c. d. e. f. 3. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3962 for a period extending from May 17, 2005 to May 16, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 4063 for a period extending from June 7, 2005 to June 6, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3879 for a period extending from May 10, 2005 to May 9, 2007. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3880 for a period extending from May 10, 2005 to May 9, 2007. Certificate dated May 4, 2005 permitting the working of boiler registry No. MP 4059 for a period extending from February 26, 2005 to February 25, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 4429 for a period extending from May 10, 2005 to May 9, 2007.
Letter from the Employees Provident Fund Organisation, dated October 22, 2002 allotting separate code DL/ 7233 to Indo-Gulf Corporation Limited, Unit Birla Copper at Dahej. Letter requesting a change of name has been submitted.
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8.
9.
10. License No. P/HQ/GJ/15/1813(P12167) dated October 21, 1997 to store upto 659 kiloliters of petroleum class A and 452 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives. The license has been renewed till December 31, 2007. 11. License No. P-12(25)3272 dated October 21, 1997 to store upto 25 kilo liters of petroleum class B under the Petroleum Act, 1934, issued by the Deputy Chief Controller of Explosives, Baroda. The license has been renewed till December 31, 2007. 12. Licence No. S/HO/GJ/03/356(s1682) to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Joint Chief Controller of Explosives, Navi Mumbai permitting upto 350 cubic meters of liquefied petroleum gas to be stored on the premises. This license was renewed till March 31, 2008. 13. Consent Order No. 3565 dated August 9, 2004 from the Gujarat Pollution Control Board to operate under the Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981 and the Hazardous Wastes (Management and Handling) Rules, 1989. The consent is valid till February 19, 2009. 14. Mobile Station License No. P-4404/1-17 and 4405/1-17 issued by the Ministry of Communications and IT dated March 23, 2005. The licenses are valid till March 31, 2006. 15. Permission from the Gujarat Maritime Board vide its letter dated March 30, 2005 permitting Dahej Harbour and Infrastructure Limited to use its captive jetty for handling commercial cargo. The permission has been renewed till December 31, 2005. (K) Silvassa Approvals to carry out manufacturing 1. 2. 3. Factory license bearing No. 631 issued under the Factories Act, 1948 by the Chief Inspector of Factories, Silvassa vide certificate dated January 28, 1998. The license has been renewed upto December 31, 2005. Factory license bearing No. 1151 issued under the Factories Act, 1948 by the Chief Inspector of Factories, Silvassa vide certificate dated September 16, 1999. The license has been renewed upto December 31, 2005. Central Excise registration No. AAACH1201RXM001 issued by the Central Excise Division, Silvassa on January 19, 2003 under Rule 9 of the Central Excise Rules, 2002, registering the Silvassa factory for the manufacture of excisable goods. Service Tax Code No. AAACH1201RST006 for goods transport operators and business auxiliary services, issued by the Assistant Commissioner of Central Excise, Silvassa on February 9, 2005. Allotment of Tax Deduction Account No. SRTH0059F issued under Section 203A of the I.T. Act, by the Income Tax Officer - TDS, Surat on June 17, 2003. Sales Tax registration No. DNH/ST/2045 issued under the Dadra and Nagar Haveli Sales Tax Regulation, 1978.
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8.
9.
10. Consent No. PCC/DDD/O-607/HW/KU/96-97/525 dated December 16, 2004 issued by the Pollution Control Committee, Daman & Diu & Dadra and Nagar Haveli to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is valid till February 28, 2006. 11. Consent No. PCC/DDD/O-607/HW/KU/96-97/524 dated December 16, 2004 issued by the Pollution Control Committee, Daman & Diu & Dadra and Nagar Haveli for consent to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is valid till February 28, 2006. Certifications 1. Certificate Registration No. 04111 20053 issued by the Certification Body for QM-Systems of RWTUV Systems GmbH, certifying that the Wheel Division at Silvassa has established and applies a quality system for design, manufacture and supply of aluminium alloy wheel rims, that is compliant with ISO/TS 16949:2002. This certificate is valid till May 14, 2006. Membership No. WR/MH/05/588 of the Automotive Component Manufacturers Association of India, for the period 2004-2005. Certificate Registration No. 04104 2002 522-E3 dated January 14, 2002 issued by the Certification Body for QMSystems of RWTUV Systems GmbH, certifying that the environmental management systems of the unit are assessed and registered as meeting ISO 14001 standard. Certificate Registration No. 04100 2002 0053-E3 dated January 14, 2002 issued by the Certification Body for QMSystems of RWTUV Systems GmbH, certifying that the manufacturing systems of the unit are assessed and registered as meeting ISO 9001 standard.
2. 3.
4.
(L) Muri Approvals to carry our manufacturing 1. 2. Certificate of registration No. 9 issued under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970 to Indal, Chotamuri on December 19, 1973 for the employment of 1001 persons as contract labour. Central Excise registration No. AAACH1201RXM009 issued to the Company by the Central Excise Division, Ranchi on March 24, 2005 under Rule 9 of the Central Excise Rules, 2002, registering the Dahej factory for the manufacture of excisable goods. State sales tax registration No. RN(S) 2437(R) issued to the Company, under Section 14 of the Bihar Finance Act, 1981. The certificate is renewed up till May 31, 2008. Registration No. Jharkhand (S) 2173 (C) issued to the Company, under the Central Sales (Registration and Turnover) Rules, 1957. License No. P-12(6)891/Bi-3048 dated February 18, 2004 issued under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Hazariba. The license is valid till December 31, 2005. Provisional orders under Section 9 of the Indian Boilers Act, 1923 issued by the Inspectorate of Boilers, Ranchi
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Discharge Consent Order No. RA/0139/W/C-1190 dated October 16, 2004 from the Jharkhand State Pollution Control Board issued to Indal, to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is deemed as renewed till December 31, 2005. Emission Consent Order No. RA/0027/A/C-1191 dated October 16, 2004 from the Jharkhand State Pollution Control Board issued to Indal, to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is deemed as renewed till December 31, 2005.
8.
Certifications 1. Certificate awarded by Det Norske Veritas no. 00002-2003-AS-DNV to Indal (Chota Muri unit) on August 8, 2003 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks. This certificate was valid till August 8, 2006. Certificate awarded by Bureau Veritas Quality International for quality management system to the Companys unit at Chota Muri of ISO 9001:2000 (No 145393) for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks on May 29, 1997 which is valid till January 27, 2007. Certificate awarded by Det Norske Veritas No. 00162-2004-AE-BOM-RaV to Indal (Chota Muri unit) on April 5, 2001 on being found to comply with the environmental management system standard ISO 14001:1999 for the manufacture of Alumina Hydrate, Calcined Alumina, special alumina hydrates and special calcined aluminas. This certificate was valid till April 5, 2007.
2.
3.
Applications Pending 1. Factory license registration No. 1612/RCH issued to Indal under the Factories Act, 1948 by the Inspector of Factories, Ranchi vide certificate dated August 24, 2004. The license was valid till December 31, 2004. An application for renewal of factory licence was made on December 30, and is 2004, still pending with the authorities. License for storing explosive substances bearing No. BI-3534 dated September 16, 1993 issued under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Hazaribag. Payment for renewal of this license till December 31, 2005 has been made. The confirmation of the extension is awaited.
2.
(M) Aditya Aluminium 1. 2. Memorandum of Manufacturer has been acknowledged by Ministry of Industry on August 8, 1997 for manufacture of 500,000 MT of calcined alumina at Kansariguda, Rayagada, Orissa. Memorandum of manufacturer has been acknowledged by Ministry of Industry on August 8, 1997 for the manufacture at the facility of aluminium with captive base power plant for capacity of 250,000 MT which includes 60,000 MT aluminium wire. Registration certificate has been issued by the Assistant Labour Officer for the Aditya Aluminium Project under Shops and Establishments Act on December 31, 1997 and this registration is valid up to December 31, 2005. No Objection Certificate has been accorded by the State Pollution Control Board Orissa for establishment of 1.0 Mln.T capacity Alumina Refinery at Kansariguda Rayagada, 260,000 T capacity Aluminium Smelter Plant at Lapanga and 5 X 130 MW Captive Power Plant at Lapanga, Sambalpur and have been revalidated vide order No.17817 dt.27.05.2004. State Govt. in Water Resources Department has accorded permission to draw 52.73 cusec water in favour of Aditya Aluminium Project provisionally and advised to sign the agreement for the same. Approval for drawal of construction power from SOUTHCO has been obtained for Bauxite Mines & Alumina Refinery site (Kansariguda) and approval for drawal of construction power from WESCO has been obtained for Aluminium Smelter and Power Plant Project site (Lapanga).
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3. 4.
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Applications Pending 1. Applications for environment clearance has been made to the Ministry of Environment and Forest for alumina refinery and aluminium smelter dated July 28, 2004 and for captive power plant dated March 3, 2005 and the Expert Committee Meetings already held. The final clearance is awaited from the Ministry of Environment and Forest.
(N) Utkal Alumina International Limited Utkal Alumina was incorporated on September 29, 1993 and subsequently became a subsidiary of Indal. Pursuant to the Scheme of Arrangement inter alia the entire shareholding interest of Indal in Utkal Alumina was transferred to the Company. Approvals in respect of this project of Utkal Alumina in Orissa, were initially applied for in the name of Indal or through its subsidiary, Utkal Alumina. Approvals in respect of the project 1. Permission granted to Utkal Alumina under Section 44(1) of the Indian Electricity Supply Act, 1948 for installation of a coal based co-generation power plant of 80 MW capacity by the Orissa Electricity Regulatory Commission on June 11, 1997. Permission to widen road to Utkal Alumina from Tikri Junction to Koral Junction from the Works Department, Government of Orissa, dated May 22, 2001. In principle approval granted to Indal by the Department of Irrigation, Government of Orissa for drawing water from the Indravati Reservoir vide letter dated May 1, 1993. Administrative clearance granted to Utkal Alumina by the Department of Water Resources, Government of Orissa for the drawing of water from the Indravati Reservoir vide letter dated November 18, 2002. The Collectors of Rayagada and Kalahandi district have granted surface rights over land in Kashipur and Rampur vide letters dated May 25, 2004 and October 5, 2004. These surface rights are valid till December 17, 2028. In-principle approval granted for the proposed mining site for Utkal Alumina at Baphlimali, District Rayagada, subject to certain conditions, by the Ministry of Environment and Forest on July 4, 1994. In-principle approval granted for the establishment of an aluminium plant producing I million tonne of aluminium at Rayagada by the Orissa State Pollution Control Board vide letter dated June 19, 1995 subject to certain conditions. Environmental clearance was granted for the Baphalimali bauxite mine of Utkal Alumina subject to certain conditions by the Ministry of Environment and Forest on September 25, 1995. Environmental clearance was granted to the proposed alumina plant and the captive power plant of Utkal Alumina subject to certain conditions by the Ministry of Environment and Forest on September 27, 1995.
2. 3. 4. 5. 6. 7.
8. 9.
Approvals Pending 1. The approval for the project was granted by the Ministry of Industry Department of Industrial Development, SIA under SIA registration No. E.O. 294(91)-IL, (MRTP) vide letter dated July 18 1991 to Indal. The approval was renewed from time to time initially by Indal and subsequently by Utkal Alumina. The last renewal sought for the establishment of the new undertaking in Kashipur for the manufacture of alumina (annual capacity of 1 million tonnes) which was obtained vide letter dated September 30, 1992 with a validity of a period of 3 years from its date of issue.Subject to certain conditions, the permission had been granted with all the facilities and privileges admissible under the 100% Export Oriented Scheme. The validity of this letter of intent had been extended till September 30, 2002, in favour of Utkal Alumina, by the Ministry of Commerce & Industry, Department of Industrial Policy and Promotion, vide letter dated September 26, 2000. In the year 2002, renewal application was again made by Utkal Alumina. The application for renewal is being processed.
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(b)
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2.
(B)
1. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. KE II/011019 dated February 14, 2000 for an office located at Ahura Complex, 1st Floor, MIDC, Mahakali Caves Road, Andheri East, Mumbai 400093. The registration has been renewed till 2005. 2. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. A-II/005707 dated for an office located at 15th Floor, Air India Building, Nariman Point, Mumbai 400021. The registration has been renewed for the year, 2006 on January 7, 2004. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. G18-II-361 dated March 23, 2000 for an office located at Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400025. The registration has been renewed till 2005. Bhubaneshwar Registration Certificate Number II-478 issued under the Orissa Shops and Establishments Act, 1956 in favour of Indian Aluminium Company Limited dated January 24, 2005 for an office located at J-6 Jaydev Vihar, Bhubaneshwar - 751013. By letter dated May 2, 2005 to the District Labour Officer, the Company has requested a transfer in the registration certificate in favour of Hindalco Industries Limited. Registration certificate dated December 31, 1997 from the Assistant Labour Officer, Bhubaneshwar in favour of Aditya Aluminium Project bearing number II-733 permitting the use of contract labour on the premises.
3.
(C) 1.
2.
276
2.
(E) 1.
2.
(F) 1.
2.
(G) Kolkata 1. Certificate of registration bearing registration No. Cal/Park/P-II/439 issued under the West Bengal Shops and Establishments Act, 1963 to the office of I Middleton Street, Kolkata 700071, to operate as a commercial establishment. The registration was granted on May 31, 1994 and was last updated on January 25, 2005. Certificate of registration bearing registration No. CAL/Hare/P-II/37387/01 issued under the West Bengal Shops and Establishments Act, 1963 to the office of Hindalco Industries Limited at 9/1 R.N. Mukherjee Road, Kolkata 700001. The certificate of enlistment with the Kolkata Municipal Corporation has been renewed for 2005-2006.
2.
(H) Lucknow 1. Registration certificate issued for the office of the Company located at 23 Vidhan Sabha Marg, Lucknow. An application has been made to renew the registration for a period of 5 years starting from 2005-2066.
2.
277
4.
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B. 1.
2.
C.
2.
Consents and Approvals Pending A. 1. 2. 3. Dhangarwadi The Company has applied for forest clearance from the Ministry of Environment and Forests (MoEF) This application is pending before the concerned authority. In relation to obtaining an NOC from the Maharashtra Pollution Control Board (MPCB), a public hearing was conducted on August 18, 2005 and the report of the same has been forwarded to the MPCB. The Udyog, Energy and Labour Department, has written a letter to the Company on October 16, 2003 stating that the Company would be granted permission to work in the forest land upon receipt of NOC from the Forest Department for 74.91 hectares of forest land. Mogalgad The forest clearance in relation to diversion of forest land for which the Government had earlier granted approval, has since been withheld on the basis of recommendation of Dy.Conservator of Forests (Wildlife) (DCF), Principal Chief Conservator of Forests (Wildlife) and the Nodal Officer. The new Conservator and the DCF visited the aforesaid site on September 16, 2005 and have taken the opinion of the surrounding villagers. The report is expected to be forwarded by September 24, 2005
B. 1.
278
2.
3. B. 1.
2.
3. C. 1.
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3. D. 1.
2.
3.
279
3.
G. 1.
2. H. 1.
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3. I.
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280
2. M. 1.
2.
Pending Approvals A. 1. Bagru, Bhusar, Hisri New and Hisri Old The Company has made an application for renewal of Consent Orders for Emission and Discharge (combined for Bagru, Bhusar, Hisri New and Hisri Old) to the JSPCB on May 25, 2005. The JSPCB has carried out a site inspection on August 3, 2005 and found everything in order. The renewal is awaited. Bagru The Company has submitted a deforestation proposal for the forest land in Bagru on 2, 2005 and has applied for temporary working permission on June 27, 2005). It must be noted that the proposal and application have been submitted in relation to land on which permanent structures have been constructed before the Forest Conservation Act, 1980 came into force. The Company has submitted an EIA/EMP along with an application for NOC to the JSPCB on July 9, 2005 in order to comply with the MoEF notification dated October 28, 2004. The Company has applied for temporary working permission for environment related clearances to the MoEF on July 25, 2005 as per MoEF notification dated July 7, 2005. Bhusar The Company has submitted an EIA/EMP and an application for NOC on July 9, 2005 to the JSPCB in order to comply with the the MoEF notification dated October 28, 2004, The Company has applied for temporary working permission in relation to the environment to the MoEF on July 25, 2005 as per MoEF notification dated July 4, 2005. Hisri (Old) The Company has submitted an application for the renewal of Consent Orders for emission and discharge for Bagru Hill Bauxite Mines (combined for Bagru, Bhusar, Hisri New and Hisri Old) submitted to JSPCB on May 25, 2005. The JSPCB officials have carried out an inspection of the site on August 3, 2005 and found everything in order. The Company has made an application for second renewal on August 11, 2005 and has further made an application relating to the deforestation proposal over 10.29 Ha. of forest land on August 12, 2005.
281
B. 1.
2. 3. C. 1. 2. D. 1.
2.
E. 1.
2. F . 1. 2. G. 1. H. 1. I. 1. J. 1.
(III) Chattisgarh A. 1. Tatijharia, Kudag and Samri Letter no. J-11015/304/94-1A II (M) issued by the MoEF on January 1, 1996 granting clearance for Samri, Kudag and Tatijharia leases.
Pending Approvals and Consents A. 1. Tatijharia, Kudag and Samri An application for clearance from the MoEF for enhanced capacity has been made. The said approval for enhancement is awaited.
(IV) Orissa Consents and Approvals Pending 1. 2. 3. MoEF clearance with respect to mines at Talabira for which an application for a temporary work permit has been filed with the Ministry of Environment and Forest on July 4, 2005. An application has been filed with the State Pollution Control, Orissa for public hearing and consent to establish a unit with higher capacity. A revised mine plan has been submitted to the Ministry of Coal, New Delhi.
282
Consent of Lenders
The agreements in respect of some of the debt taken by us contain certain covenants inter-alia for altering our share capital and for our expansions and diversifications plans, including the expansion proposed to be funded out of the proceeds of this Issue. We have obtained these consents from our lenders, where required.
Prohibition by SEBI
Neither we, nor our Directors or the Promoter Group Companies, or companies with which our Directors are associated with as directors or promoters, have been prohibited from accessing or operating in the capital markets under any order or direction passed by SEBI. Further, none of the directors or person(s) in control of the Promoters (as applicable) have been prohibited from accessing the capital market under any order or direction passed by SEBI.
Disclaimer Clause
AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THIS LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED/ CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THIS LETTER OF OFFER. THE LEAD MANAGERS JM MORGAN STANLEY PRIVATE LIMITED AND DSP MERRILL LYNCH LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THIS LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER, THE LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGERS JM MORGAN STANLEY PRIVATE LIMITED AND DSP MERRILL LYNCH LIMITED HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER 22, 2005 WHICH READS AS FOLLOWS: 1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE; ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY;
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283
The filing of this Letter of Offer does not, however, absolve the Company from any liabilities under Section 63 or Section 68 of the Act or from the requirement of obtaining such statutory or other clearance as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up, at any point of time, with the Lead Managers any irregularities or lapses in this Letter of Offer.
Caution
The Company and the Lead Managers accept no responsibility for statements made otherwise than in this Letter of Offer or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk. The Lead Managers and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of Offer with SEBI.
Dematerialised Dealing
The Company has agreements with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and its Equity Shares bear the ISIN No. INE038A01020.
Listing
The existing Equity Shares are listed on the BSE and NSE. The Company has made applications to the BSE and NSE for permission to deal in and for an official quotation in respect of the Equity Shares being offered in terms of this Letter of Offer. The Company has received in-principle approvals from BSE and NSE by letters dated October 6, 2005 and October 11, 2005 respectively. The Company will apply to the BSE and NSE for listing of the Equity Shares to be issued pursuant to this Issue. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above, within 42 days from the Issue Closing Date, the Company shall forthwith repay, without interest, all monies received from applicants in pursuance of this Letter of Offer. If such money is not paid within 8 days after the Company becomes liable to repay it, then the Company and every Director of the Company who is an officer in default shall, on and from expiry of 8 days, be jointly and severally liable to repay the money with interest as prescribed under the Section 73 of the Act.
Consents
Consents in writing of the Auditors, Lead Managers, Legal Advisors, Registrar to the Issue, Monitoring Agency and Banker to the Issue to act in their respective capacities have been obtained and filed with SEBI, along with a copy of the Letter of Offer and such consents have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. The Auditors of the Company have given their written consent for the inclusion of their Report in the form and content as appearing in this Letter of Offer and such consents and reports have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. Singhi & Co., auditors have given their written consent for inclusion of income tax benefits in the form and content as appearing in this Letter of Offer, accruing to the Company and its members. To the best of our knowledge there are no other consents required for making this Issue. However, should the need arise, necessary consents shall be obtained by us.
286
The Company
Initial public issue in 1960 Issue Open date Issue Close date February 8, 1960 February 18, 1960 Objects of the Issue (a) To raise capital for land, buildings, cost of engineering and construction of plant and facilities; Actual Performance achieved Integrated aluminium production facility at Renukoot was set up in 1962.
(b) To meet working capital needs; Working capital needs and pre(c) To meet pre-incorporation incorporation expenses partly met expenses of the company. from the issue proceeds. (b) Rights issue in 1967, of 2,037,943 equity shares of Rs. 10 each for cash at par. Issue Open date Issue Close date Objects of the Issue Actual Performance achieved The issue proceeds were used to fund the Companys expansion and for setting up a fabrication plant at Renukoot. December 26, 1967 To fund Companys expansion programme as well as for setting up a fabrication plant.
(c)
Rights issue in 1990 of 5,636,415 - 12.5% secured redeemable convertible debentures of Rs. 250 each. Issue Open date Issue Close date January 22, 1990 February 22, 1990 Objects of the Issue To finance in part: (a) the capital expenditure The expansion had been programme relating to completed well within the time. expansion of present installed There were no cost overruns. capacity for the manufacture of aluminium from 124,000 to 150,000 tonnes per annum; (b) the cost of modernization scheme; and (c) to augment the long term resources for working capital requirement.
287
Group Companies
Grasim Grasim Industries Limited made a rights issue of 10,416,666 12.5% secured redeemable partly convertible debentures (II series) of face value Rs. 120 aggregating to a value of Rs. 125 crores to its equity shareholders in 1989.
Issue Open date Issue Close date September 27, 1989 October 26, 1989
Objects of the Issue To partly finance a gas based sponge iron project with a licensed capacity of six lakh TPA and if in line with Governments licensing policy, to expand capacity upto seven and a half lakh TPA. The project was to be located at Salav District, Raigad (Maharashtra) and estimated to cost Rs. 400 crores.
Actual Performance achieved The Company s sponge iron facility at Salav District, Raigad (Maharashtra) - Vikram Ispat Division, having an annual capacity of 750,000 tonnes was commissioned in March, 1993, within the scheduled time period. The current capacity is 900,000 TPA.
(b)
Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited)
Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) made a rights issue in 1993 to its shareholders of 5,447,400 zero interest secured fully convertible debentures of Rs. 170 each and 1,620,000 zero interest secured fully convertible debentures of Rs. 200 each, both for cash at par, aggregating Rs. 125.01 crores and 7,227,400 number 16.5% fifteenth series secured redeemable non-convertible debentures of Rs. 300 each with detachable warrants for cash at par aggregating Rs. 216.82 crores.
Issue Open date Issue Close date September 14, 1993 October 11, 1993 Objects of the Issue a. To set up a 50,000 tons per annum sea water magnesia project at an estimated cost of Rs. 240.40 crore; To expand the capacity of the companys carbon black division from 20,000 tons p.a. to 40,000 tons p.a. at an estimated cost of Rs. 72.0 crores; Normal capital expenditure for modernization estimated at about Rs. 83 crore. Actual Performance achieved The sea water magnesia plant (known as Birla Periclase) with an installed capacity of 50,000 ton per annum, was commissioned and the commercial product started towards the end of February 1998. Due to adverse market conditions, the plant was written off in the year 2000. The expansion of the capacity of the company s carbon black division was completed well within the promised time period. There were no cost overruns. The current capacity is 170,000 TPA.
b.
c.
(c)
IGFL Indo Gulf Fertilisers Limited (formerly known as Indo Gulf Fertilisers and Chemicals Corporation Limited) (erstwhile Indo Gulf Corporation Limited) made a public issue of 80,850,000 equity shares of Rs. 10 each at par in 1986. Issue Open date Issue Close date November 19, 1986 Objects of the Issue Actual Performance achieved The Urea manufacturing facility of the company was completed in October 1988 with no cost
December 3, 1986 To set up a gas fertilizer complex for the manufacture of 7.26 lac tonnes per annum of urea
288
Previous Issues by the Company and other companies under same management
The Company has not undertaken any previous public or rights issue during the last five years. In 2003, our subsidiary, Bihar Caustic and Chemicals Limited made a rights issue of 15,600,000 equity shares of Rs. 10 each for cash at par aggregating Rs. 156,000,000 to its equity shareholders in the ratio of two equity shares for every equity share held on January 29, 2003. The issue opened on February 18, 2003 and closed on April 18, 2003. The object of the issue was to part finance a coal based captive power plant. The cost of the captive power plant has been met from proceeds of the issue and money raised through project finance. Further, no other listed company under the same management within the meaning of Section 370 (1) (B) of the Act, has made any capital issue during the last three years.
Defaults in the payment/refunds of debentures, fixed deposits, interest on fixed deposits, debenture interest and institutional dues
There are no defaults, non-payment/overdues of statutory dues, institutional/Company dues and dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, etc, other than unclaimed liabilities of the Company, its subsidiaries, its other ventures, promoters, Group companies and companies promoted by the promoter.
Details of adverse events affecting the company since the last financial year
No circumstances have arisen since the date of the last financial statement that materially adversely affects / likely to affect the trading or profitability of the Company or the value of its assets or its ability to pay its liabilities within the next twelve months.
289
Issue Schedule
Issue Opening Date Last date for receiving requests for split forms Issue Closing Date : Monday, December 19, 2005 : Tuesday, January 3, 2006 : Wednesday, January 18, 2006
Option to Subscribe
Other than the present rights Issue, the Company has not given any person any option to subscribe to the shares of the Company.
Status of Complaints
No. of shareholders complaints as of March 31, 2005: 1 Total number of complaints received during last financial year (2004-05): 31 Total number of complaints received during last financial year (2005-06): 16 (as of November 18, 2005) Status of the complaints: All complaints received during this financial year have been resolved Time normally taken by it for disposal of various types of Investor grievances:15 days
1. 2.
2001-2002 2002-2003
Utilised for premium on buy back of 5,807 Shares. Utilised for premium on buy back of 752,723 Shares.
291
Government Approvals
Our Company was incorporated on December 15, 1958 under the Act. We have obtained all necessary approvals to undertake our activities and we do not propose to enter into any new activities through this Issue, for which further approvals may be required to be obtained, except as may be required to be obtained in the normal course of our business and for intended use of Objects of the Issue. For further details, please refer to the section on Government Approvals on page 258 of this Letter of Offer.
Important
G
This Issue is pursuant to the resolution passed by the Board of Directors at its meetings held on September 20, 2005 and the resolution passed by the Committee of Directors on November 12, 2005. This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company at the close of business hours on the Record Date i.e. November 28, 2005. The Company will arrange to dispatch the Letter of Offer and Composite Application Form (CAF) by registered/ speed post to such Equity Shareholders in India. Your attention is drawn to the section entitled Risk Factors appearing on Page vii of this Letter of Offer. Please ensure that you have received the Composite Application Form (CAF) with this Letter of Offer. Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. An application is liable to be rejected for any non-compliance of the provisions contained in the Letter of Offer or the CAF . All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAF . All information shall be made available to the Investors by the Lead Managers and the Issuer, and no selective or additional information would be available by them for any section of the Investors in any manner whatsoever including at road shows, presentations, in research or sales reports, etc. The Lead Managers and the Company shall update this Letter of Offer and keep the public informed of any material changes till the listing and trading commences.
G G G
Purchase of Property
The Company in the ordinary course of expansion may start marketing and sales at new centres for which it may lease or buy properties at such places. The present Issue is not being made with the specific objective to buy such properties. None of the Directors are interested in any property acquired by the Company during the last three years.
292
If there is a failure to pay any call or installment of a call on or before the day appointed for the payment of the same, in accordance with the provisions of the articles of association of the Company, the Board may, at any time during which any part of the call or installment remains unpaid, serve a notice on such member of the Company requiring him to pay the same together with any interest that may have accrued. The present Articles of Association of the Company provide for a rate of interest at 9%. The notice shall fix a date and a place or places on and at which such call or installment and such interest as aforesaid are to be paid. The notice shall also state that in the event of nonpayment at or before the time and at the place or places appointed, the shares in respect of which such call was made or installment is payable and to which the notice relates will be liable to be forfeited. If the requisites of such notice are not complied with, any shares in respect of which such notice has been given may, at any time thereafter before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. Neither the receipt by the Company of a portion of any money which shall from time to time be due from any Member to the Company in respect of his shares, either by way of principle or interest, nor any indulgence granted by the Company in respect of the payment of any such money, shall preclude the Company from thereafter proceeding to enforce a forfeiture of such shares. Any share so forfeited shall be deemed to be the
293
Only upon receipt of the aforesaid details, rights entitlement of the claimants shall be determined.
Fractional entitlements
If the shareholding of any of the Equity Shareholders is not in multiples of four, then the fractional entitlement of such holders shall be ignored. Equity Shareholders whose fractional entitlements are being ignored would be given preferential allotment of ONE additional Equity Share each if they apply for additional shares.
Joint-holders
Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint-tenants with benefits of survivorship subject to provisions contained in the Articles of Association of the Company
The allotment of 25% paid up shares will be made within 30 days from the closure of Issue and the same will be listed within 10 days thereafter. The listing of 50% paid-up shares will be done within approximately 15 days from the last date fixed for payment of first call money. The fully paid up shares will be listed within approximately 15 days from the last date fixed for payment of second call money.
The process of corporate action for crediting 50% paid up and fully paid up shares to the Demat Account may take about two weeks time from the last date of payment of the account under the call money notice. During this period the partly paid up shares would not be tradeable. Payment Period for each call As per the article 29 of Articles of Association of the Company, the shareholders would be given not less than 21 days time for the payment of the call money for each call.
295
Y + 35 days Y+ 40 days X + (12 to 24) months time (Day Z) Z Z Z- 5 trading days Z+2 days Z+ 23 days Z + 35 days Z+ 40 days
Notices
All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language daily newspaper in Mumbai with wide circulation and/or, will be sent by ordinary post/ to the registered holders of the Equity Share from time to time.
296
Nomination facility
In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose. A sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. A Person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Equity Share by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Share is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the registered office of the Company or such other person at such addresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion of the CAF . Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder(s) has already registered the nomination with the Company, no further nomination needs to be made for Equity Shares to be allotted in this Issue under the same folio. In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective DP .
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than eight days after the Company becomes liable to repay the subscription amount, i.e. forty-two days after 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 Act. The Issue will become undersubscribed after considering the number of shares applied as per entitlement plus additional shares. The Promoters or promoter group will subscribe to such undersubscribed portion as per the relevant provisions of the law. The undersubscribed portion shall be applied for only after the close of the Issue. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to Takeover Code, such allotment of the undersubscribed portion will be governed by the provisions of the Takeover Code. Allotment to promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. The above is subject to the terms mentioned under the section entitled Basis of Allotment on page 305 of this Letter of Offer.
298
Apply for his entitlement in part; Apply for his entitlement in part and renounce the other part; Apply for his entitlement in full; Apply for his entitlement in full and apply for additional Equity Shares.
Renouncees for Equity Shares can apply for the Equity Shares renounced to them and also apply for additional Equity Shares.
Renunciation
This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favour of any other person or persons subject to the approval of the Board. Such renouncees can only be Indian Nationals (including minor through their natural/legal guardian)/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (registered under the Indian Trust Act), societies (registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold equity shares in a company and cannot be a partnership firm, foreign nationals or nominees of any of them (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of this Letter of Offer could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board. Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to other Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the approval of the FIPB and/ or necessary permission of the RBI
299
More than three persons including joint holders Partnership firm(s) or their nominee(s) Minors Hindu Undivided Family Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable Trust laws and is authorized under its Constitutions to hold Equity Shares of a Company)
The right of renunciation is subject to the express condition that the Board/ Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof. Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part B of the CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Equity Shares in Part C to receive allotment of such Equity Shares. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part A must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will also have no further right to renounce any shares in favour of any other person.
Procedure for renunciation To renounce the whole offer in favour of one renouncee
If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF In case of joint . holding, all joint holders must sign Part B of the CAF The person in whose favor renunciation has been made should . complete and sign Part C of the CAF In case of joint renouncees, all joint renouncees must sign this part of the CAF . .
Renouncee(s)
The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the Application Form and submit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money.
Part A of the CAF must not be used by any person(s) other than those in whose favour this Issue has been made. If used, this will render the application invalid. Request by the applicant for the Split Application Form should reach the Company on or before January 3, 2006. Only the person to whom this Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. Split form(s) will be sent to the applicant(s) by post at the applicants risk.
G G
Accept your entitlement in full and apply for additional Equity Shares.
C.
Accept only a part of your entitlement of the Equity Shares offered to you (without renouncing the balance). Renounce your entitlement in full to one person (Joint renouncees not exceeding three are considered as one renouncee).
D.
Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand over the entire CAF to the renouncee. The renouncees must fill in and sign Part C of the CAF (All joint renouncees must sign).
301
Applications for Equity Share should be made only on the CAF which are provided by the Company. The CAF should , be completed in all respects as explained under the head INSTRUCTIONS indicated on the reverse of the CAF before submission to the Banker to the Issue at its collecting branches mentioned on the reverse of the CAF on or before the closure of the subscription list. Non Resident Shareholders/Renouncee should forward their applications to Banker to the Issue as mentioned in the CAF for Non-Resident Equity Shareholders. No part of the CAF should be detached under any circumstances. Applicants must provide information in the CAF as to their savings / current / NRE / NRO / FCNR bank account and the name of the bank with whom such account is held to enable the Registrar to print the said details in the refund orders after the name of the payees.
For applicants residing at places other than designated Bank Collecting branches.
Applicants residing at places other than the cities where the Bank collection centres have been opened should send their completed CAF by registered post/speed post to the Registrars to the Issue, Karvy Computershare Private Limited, alongwith demand drafts, net of bank and postal charges, payable in favour of Hindalco Industries Limited - Rights Issue in case of Resident shareholders and Non Resident shareholders applying on Non-repatriable basis and in favour of Hindalco Industries Limited - Rights Issue - NR in case of non-resident shareholders applying on a repatriable basis and crossed A/c Payee only so that the same are received on or before closure of the Issue (i.e. January 18, 2006). In such case the demand draft in case of Resident shareholders, should be payable at Hyderabad and in case of Non-resident shareholders, should be payable at Mumbai or New Delhi. The Company will not be liable for any postal delays and applications received through mail after the closure of the Issue, are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned below: All application forms duly completed together with cash/ cheque/demand draft for the application money must be submitted before the close of the subscription list to the Bankers to the Issue named herein or to any of its branches mentioned on the reverse of the CAF. The CAF alongwith application money must not be sent to the Company or the Lead Managers 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 the application being liable to be rejected with the Company, the Lead Managers and the Registrars not having any liabilities to such applicants.
302
Name of Issuer, being Hindalco Industries Limited. Name and address of the Equity Shareholder including joint holders. Registered Folio No./ DP ID No. and Client ID No. Number of shares held as on Record Date. Certificate numbers and distinctive Nos., if held in physical form. Number of Rights Equity Shares entitled. Number of Rights Equity Shares applied for. Number of additional Equity Shares applied for, if any. Total number of Equity Shares applied for. Total amount paid on application at the rate of Rs. 24 (application amount only) per Equity Share. Particulars of cheque/draft. Savings/Current Account Number and name and address of the bank where the Equity Shareholder will be depositing the refund order. PAN/GIR number, Income Tax Circle/Ward/District, photocopy of the PAN card/ PAN communication / Form 60 / Form 61 declaration where the application is for Equity Shares of a total value of Rs.50,000 or more for the applicant and for each applicant in case of joint names. Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company.
Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize 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. The Company shall refund such application amount to the applicant without any interest thereon.
303
All cheques / drafts accompanying the CAF should be drawn in favour of Hindalco Industries Limited- Rights Issue and marked A/c Payee only. Applicants residing at places other than places where the bank collection centres have been opened by the Company for collecting applications, are requested to send their applications together with Demand Draft of amount net of bank and postal charges, for the full application amount favouring Hindalco Industries Limited Rights Issue and marked A/c Payee only payable at Hyderabad directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. The Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.
By Indian Rupee drafts purchased from abroad and payable at Mumbai or New Delhi or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in Mumbai or New Delhi; or By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable in Mumbai or New Delhi; or FIIs registered with SEBI must remit funds from special non-resident rupee deposit account. All cheques/drafts submitted by non-residents applying on repatriable basis should be drawn in favour of Hindalco Industries Limited - Rights Issue - NR payable at Mumbai or New Delhi and crossed A/c Payee only for the amount payable.
G G
A separate cheque or bank draft must accompany each application form. Applicants may note that where payment is made by drafts purchased from NRE/FCNR accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/FCNR account should be enclosed with the CAF In the absence of the above the application shall be considered incomplete and is liable to be rejected. . In the case of NR who remit their application money from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, . refunds and other disbursements, if any will be made in US Dollars at the rate of exchange prevailing at such time subject to the permission of RBI. The Company will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into US Dollars or for collection charges charged by the applicants Bankers.
304
In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961. In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF . In case of an application received from non-residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.
Payment by Stockinvest
In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in this Issue
Basis of Allotment
Subject to the provisions contained in this Letter of Offer, the Articles of Association of the Company and the approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority: (a) (b) Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part. If the shareholding of any of the Equity Shareholders is less than four or is not in multiples of four, then the fractional entitlement of such holders for Equity Shares shall be ignored. Equity Shareholders whose fractional entitlements are being ignored would be given preferential allotment of ONE additional Equity Share each if they apply for additional shares. (For further details please see the section Terms of the Issue Fractional Entitlements on page 294 of this Letter of Offer) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as part of the Issue and have also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after making full allotment in (a) above. The allotment of such Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and not preferential allotment. Allotment to the renouncees who having applied for the Equity Shares renounced in their favour have also applied for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in
305
(c)
(d)
After taking into account allotment to be made under (a) and (b) above, if there is any unsubscribed portion, the same shall be deemed to be unsubscribed for the purpose of regulation 3(1)(b) of the Takeover Code which would be available for allocation under (c), (d) and (e) above. The Promoter and the promoter group will subscribe to unsubscribed portion if the Issue does not have subscription to the extent of 90% of the Issue size, after considering the above allotment, to ensure that the Issue is successful. This acquisition of additional Equity Shares, if allotted to the Promoter shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of regulation 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1)(b) of the Takeover Code. Further this acquisition will not result in change of control of management of the Company. After such allotments as above and to the Promoters and the promoter group, including the application for rights/ renunciation and additional equity shares, any additional Equity Shares shall be disposed off by the Board or committee of the Board authorised in this behalf by the Board of the Company, in such manner as they think most beneficial to the Company and the decision of the Board or committee of the Board of the Company in this regard shall be final and binding. In the event of oversubscription, allotment will be made within the overall size of the issue. Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement and the other applicable laws prevailing at that time.
Underwriting
The present Issue is not underwritten.
Allotment / Refund
The Company will issue and dispatch letters of allotment/ share certificates/ demat credit and/ or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of six weeks from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. In case of those shareholders who have opted to receive their Right Entitlement Shares in dematerialised form by using electronic credit under the depository system, an advice regarding the credit of the Equity Shares shall be given separately. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companys Law Board under Section 113 of the Act or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment, which would be exchanged later for the share certificates. For more information, please refer to the section entitled Letters of Allotment / Share Certificates / Demat Credit on page no. 307 of this Letter of Offer. Letters of allotment/ share certificates/ demat credit/ refund orders above the value of Rs. 1,500 will be dispatched by registered post/ speed post to the sole/ first applicants registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants by way of certificate of posting. Such cheques or pay orders will be payable at par at all the centres where the applications were originally accepted and will be marked A/c payee and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for the dispatch of such letters of allotment/ share certificates/ demat credit and refund orders. The Company shall ensure that at par facility is provided for encashment of refund orders/ pay orders at the places where applications are accepted. As regards allotment/ refund to non-residents, the following further conditions shall apply: In case of non-residents, who remit their application monies from funds held in NRE/ FCNR accounts, refunds and/ or payment of interest/ dividend and other 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 non-residents, who remit their application . monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any
306
Open a beneficiary account with any depository participant (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the Investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need not adhere to this step. For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on the Record Date, the beneficial account number shall be printed on the CAF For those who open accounts later or those who . change their accounts and wish to receive their Equity Shares pursuant to this Issue by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF It . may be noted that the allotment of Equity Shares arising out of this Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of the Company.
Responsibility for correctness of information (including applicants age and other details) filled in the CAF vis--vis such information with the applicants depository participant, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicants depository participant. If incomplete / incorrect beneficiary account details are given in the CAF the applicant will get Equity Shares in physical form. The Equity Shares pursuant to this Issue allotted to investors opting for dematerialized form, would be directly credited to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicants depository participant will provide to him the
307
Utilisation of Proceeds
Subscription received against this Issue will be kept in a separate bank account(s) and the Company would not have access to such funds unless it has received minimum subscription of 90%, of the Issue and the necessary approvals of the Designated Stock Exchange, to use the amount of subscription.
(c)
(d)
(e)
(f)
(g)
(h)
(j)
(k)
(l)
(m) Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain split forms. (n) (o) Applicants must write their CAF number at the back of the cheque / demand draft. 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, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing 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 cheques / demand drafts or post-dated cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. (For payment against application in cash please refer point (f) above) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at the bottom of the CAF .
(p)
(q)
Amount paid does not tally with the amount payable for; Bank account details (for refund) are not given; Age of first applicant not given; PAN photocopy/ PAN Communication/ Form 60 / Form 61 declaration not given if Application is for Rs. 50,000 or more; In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted; If the signature of the existing shareholder does not match with the one given on the Application Form and for renouncees if the signature does not match with the records available with their depositories; If the Applicant desires to have shares in electronic form, but the Application Form does not have the Applicants
309
Application Forms are not submitted by the Applicants within the time prescribed as per the Application Form and the Letter of Offer; Applications not duly signed by the sole/joint Applicants; Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue; Applications accompanied by Stockinvest; In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Applicants (including the order of names of joint holders), the Depositary Participants identity (DP ID) and the beneficiarys identity; Applications by US persons; Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided.
G G
G G
G G
(iii) Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against this Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by the Company.
3.
6.
7.
Important
G
Please read this Letter of Offer carefully before taking any action. The instructions contained in the accompanying Composite Application Form (CAF) are an integral part of the conditions of this Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected. All enquiries in connection with this Letter of Offer or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID number, the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed Hindalco Industries Limited - Rights Issue on the envelope) to the Registrar to the Issue at the following address: Karvy Computershare Private Limited Unit: Hindalco Rights Issue Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034, Tel: (91 40) 2343 1546 Fax: (91 40) 2343 1551
It is to be specifically noted that this Issue of Equity Shares is subject to the section entitled Risk Factors beginning on page vii of this Letter of Offer.
The Issue will not be kept open for more than 31 days unless extended, in which case it will be kept open for a maximum of 60 days.
311
HINDALCO INDUSTRIES LIMITED SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND US GAAP
The consolidated and unconsolidated financial statements included in this Prospectus have been prepared in accordance with applicable Indian GAAP and the applicable provisions of the Companies Act, 1956 and the SEBI Guidelines. Indian GAAP differs in certain respects from US GAAP . The following table summarizes the significant differences between Indian GAAP and US GAAP in so far as they are relevant to the consolidated and unconsolidated financial statements of the Company. The following summary may not include all the differences that exist between US GAAP and Indian GAAP US GAAP is generally more prescriptive . and comprehensive than Indian GAAP regarding recognition and measurement of transactions, account classification and disclosure requirements. No attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial statements and the notes thereto. Various US GAAP and Indian GAAP pronouncements, including guidance provided by the US Securities and Exchange Commission, have been issued for which the mandatory application date is later than March 31, 2005. These together with standards that are in the process of being developed in both jurisdictions could have a significant impact on future comparisons between Indian GAAP and US GAAP . S r . Particulars No. 1 Contents of financial statements Indian GAAP Companies are required to present balance sheets and profit and loss accounts for two years along with the relevant accounting policies and notes. US GAAP Companies are required to present balance sheets, statements of operations, statements of cash flows and statements of changes in Stockholders equity for two years along with the relevant accounting policies and notes to accounts. Public companies are required to present statements of operations, statements of cash flows and statements of changes in stockholders equity for three years. They need not present the balance sheet for the third year.
Additionally all listed Companies (including companies in the process of getting listed), companies with turnover exceeding Rs. 500 million and insurance companies are required to present cash flow statements. (Applicable for financial years beginning on April 1, 2005 for other than listed companies).
There is no standard or requirement for A statement of comprehensive income comprehensive income statement. (comprising primarily of unrealized gains and losses) is required and is generally presented as part of stockholder s equity. 2 Changes in accounting The effect of a change in accounting policy must be recorded in the income policies statement of the period in which the change is made except as specified in certain standards where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. Correction of errors The effect of correction of errors must be included in the current year income statement with appropriate disclosure as a prior period item.
312
The effect of a change in accounting policy is generally included (net of taxes) in the current year income statement, after extraordinary items. Pro-forma comparatives reflecting the impact of the change is generally disclosed. The correction of material errors usually results in the restatement of relevant prior periods.
In accordance with AS 27, Financial Investment in Joint Ventures is generally reporting of Interests in joint ventures accounted for under the equity method the venturer recognizes in its separate of accounting and consolidated financial statements its share of jointly controlled assets, any liabilities it has incurred, its share of any liabilities incurred jointly with other venturers in relation to the joint venture, any income from sale or use of its share of output of the joint venture, together with its share of expenses incurred by joint venture and any expenses which it has incurred in respect of interest in joint venture. There is no specific guidance with respect to Variable Interest Entities For financial statements, disclosure is Companies are required to evaluate if required for the share of interest in the they have any interest in Variable Joint Venture. Interest Entities, as defined by the standard. Consolidation of such entities may be required if certain conditions are met.
Business Combinations
Restricts the use of pooling of interest method to circumstances, which meet the criteria listed for an amalgamation in the nature of a merger. In all other cases, the purchase method is used
Business combinations are accounted for by the purchase method only (except as discussed below). Several differences can arise in terms of date of combination, calculation of share value to use for purchase price, especially if the Indian GAAP method is amalgamation or pooling In the event of combinations of entities under common control, the accounting for the combination is done on a historical cost basis in a manner similar to a pooling of interests for all periods presented. Goodwill is not amortized but, tested for impairment annually.
Goodwill
Goodwill is capitalized amortized over its useful life, except for Enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of directors resolution in this regard, or All other commercial, industrial and business reporting enterprises, whose turnover for the
313
Segment Information
10
Dividends
Dividends are reflected in the financial statements of the year to which they relate even if proposed or approved after the year end.
314
13
Applicable for accounting periods beginning from April 1, 2004 onwards for: Enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of directors resolution in this regard, or All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds Rs. 500 millions. (Applicable for financial years beginning on April 1, 2005 for other than listed companies).
315
15
Leases
Leases are classified as finance or operating in accordance with specific criteria. Judgement is required to determine if the criteria are met or not.
16
Derivatives and other financial instruments measurement of derivative instruments and hedging activities
The accounting for derivative instruments has not clearly emerged in the Indian context. Currently what is applicable is the Guidance Note on Accounting for Equity Index and Equity Stock Futures and Options are the pronouncements, which address the accounting for derivatives. However, the accounting treatment recommended in the guidance note is applicable to all contracts entered into for Equity Derivative Instruments irrespective of the motive. The impact of derivative instruments are correlated with the movement of the underlying assets and liabilities and accounted pursuant to the principles of hedge accounting. The related amount receivable from and payable to the swap counter parties is included in the other
316
There is specific accounting guidance required for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (fair value hedge), (b) a hedge of the exposure to variable cash flows of a forecasted transaction (cash flow hedge), or
317
The tax rate applied on deferred tax The tax rate applied on deferred tax items is the substantially enacted tax items is the enacted tax rate. rate. 18 Revenue recognition Revenues are recognized when all significant risks and rewards of ownership are transferred. US GAAP has extensive literature on revenue recognition topics and application of these guidelines could result in revenue recognition that is different from Indian GAAP . Entities have a choice of accounting methods for determining the costs of benefits arising from employees stock compensation plans. They may either follow an intrinsic value method or a fair value method. Under the intrinsic value method, the compensation cost is the difference between the market price of the stock at the measurement date and the price to be contributed by the employee (Exercise price). The measurement date is typically the date of the grant, on which date, both the number of shares and the exercise price would be known. This method is widely used in practice. The fair value method is based on the fair value of the option at the grant date. This is estimated using an option-pricing model. If an entity chooses to follow the intrinsic value method, it must make pro-forma disclosures of net income and earnings per share as if the fair value method had been applied. There is a new standard effective 2005, which requires a fair value method to be used for all options (June 15, 2005 for Public companies and December 15, 2005 for Private companies). 20 Options employees to Non- No specific guidance Complex guidance with respect to measurement date and timing of recognition of expense. All options to non-employees are recognized at fair value. Requires costs of start-up activities and organization costs to be expensed as incurred.
19
Stock compensation
based There is no specific guidance on accounting for employee stock compensation under Indian GAAP SEBI . has issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999, which are effective for listed companies for all stock-option schemes established after 19 June 1999. In accordance with these guidelines, the excess of the market price/fair valuation of underlying equity shares as of the date of grant of the options over the exercise price of the options, including up-front payments, if any, is to be recognized and amortized on a straight-line basis over the vesting period.
21
and
318
25
Guarantees
A guarantor is required to recognize at inception a liability for the fair value of the obligation undertaken in issuing the guarantee, except for certain types of guarantees that are accounted as derivatives or are reported as equity or guarantees between parents and subsidiaries. A liability for costs to terminate a contract before the end of its term should be recognised and measured at fair value when the entity terminates the contract in accordance with the contract terms. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity should be recognized and measured at its fair value when the entity ceases to use the right conveyed by the contract.
26
Onerous Contracts
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Under Indian GAAP the Company does not recognize , any provision on account of onerous contracts.
27
Provisions
Discounting of liabilities is not permitted Where the effect of the time value of and all provisions are carried at their full money is material, the amount of a provision may be the present value of values. the expenditures expected to be required to settle the obligation. The discount rate should be pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The discount rate should not reflect risks for which future cash flow estimates have been adjusted and, any change in present value of Provision is recognized as Interest Cost.
319
320
Capital
Allotment of Shares Article 6 provides that subject to the provisions of these Articles shares in the Capital of the Company for the time being shall be under the control of the Board of Directors who may allot or dispose of the same or anyof them on such terms and conditions and at such times and either at a premium or at par or (subject to the provisions of Section 79 of the Act) at a discount as the Board may think fit. Provided that where at any time subsequent to the first allotment of shares it is proposed to increase the subscribed capital of the Company by the issue of new shares then subject to any directions to the contrary which may only validly be given by Special Resolution of the Company in General Meeting the Board shall issue such shares in the manner set out in Section 81(1) of the Act. Minimum Application Money Article 7 provides that if the Company shall offer any of its shares to the public for subscription, the amount payable on application on each share shall not be less than 5 per cent of the nominal amount of the share. Compliance for the purposes of Allotment Article 8 provides that as regards all allotments from time to time made, the Directors shall duly comply with the provisions of the Act. Uniform Conditions as to Calls Article 11 provides that where any calls for further share capital are made on shares such calls shall be made on a uniform basis on all shares falling under the same class. For the purposes of this Article shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class. Installments on shares to be duly paid Article 12 provides that if by the conditions of allotment of any shares, the whole or part of the amount or issue price thereof be payable by installments, every such installment shall, when due, be paid to the Company by the person who for the time being shall be registered holder of the share. Restrictions on purchase by Company or loans by Company for purchase of its own shares Article 13 provides that except as provided in these Articles, none of the funds of the Company shall be employed in the purchase of, or lent on the security of shares of the Company and the Company shall not, except as permitted by Section 77 of the Act, give any financial assistance for the purpose of or in connection with any purchase of shares in the Company. Who may be members Article 15 provides that shares may at the discretion of the Directors be registered in the name of any limited company or other corporate body or in any other collective name.
Shares
Shares to be numbered progressively and no share to be sub-divided Article 17 provides that the shares in the Capital shall be numbered progressively, according to their several denominations, and except in the manner herein mentioned no share shall be sub-divided. Restriction on Allotment Article 18 provides that the Board of Directors shall observe the restrictions as to allotment of shares to the Public contained in Section 69 of the Act, and shall cause to be made the returns as to allotment provided for in Section 75 of the Act.
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Calls
Calls Article 27 provides that the Directors may, from time to time, subject to Section 91 of the Act and the terms on which any shares may have been issued, make such calls as they think fit upon the members in respect of all moneys unpaid on the shares held by them respectively (whether on account of nominal value of shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the persons and at the times and places appointed by the Directors. A call may be made payable by installments. A call may be revoked or postponed at the discretion of the Directors. When call deemed to have been made. Article 28 provides that a call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. Article 29 provides that not less than 21 days notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid. Provided that the Directors may by notice in writing to the members revoke the call or extend the time for payment thereof.
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323
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Alteration of Capital
Power to alter capital Article 65 provides that the Company in General Meeting may from time to time by Special Resolution alter the condition of its Memorandum to increase the share capital by such amount, to be divided into shares of such amount as may be specified in the resolution. Article 66 provides that the Company may by Special Resolution alter the conditions of its Memorandum to consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum, and/or Articles of Association subject, nevertheless, to the provisions of Clause (d) of sub-section (1) of Section 94. cancel any shares, which at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. On what condition new shares to be Issued Article 67 provides that subject to the provisions of any special rights or privileges for the time being attached to any issued shares, the new shares shall be issued upon such terms and conditions and with such right and privileges attached thereto, as the Company in General Meeting or the Board of Directors (as the case may be) resolving upon the creation thereof shall direct and in particular such shares may be issued with a preferential or qualified right to dividends and subject to the provisions of Section 85 of the Act in the distribution of the assets of the Company and subject to the provisions of Section 87 of the Act with a special or without any right of voting. New shares to be offered first to the existing members Article 68 provides that subject to the other provisions of these Articles and subject to any directions to the contrary that may be given by the meeting that resolves upon the increase of capital where the Directors decide to increase the capital of the Company by the issue of further shares, such shares shall be offered to the persons who at the date of the offer, are holders of the equity shares of the Company, in proportion as nearly as circumstances admit to the capital paid up on those shares at that date, and such offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined; and after the expiration of such time, or on receipt of an earlier intimation from the members to whom such notice is given that he declines to accept the shares offered, the Directors
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Modification of Rights
Article 72 provides that whenever the capital, by reason of the issue of preference shares or otherwise, is divided into different classes of shares all or any of the rights and privileges attached to any class may be modified, commuted, affected, abrogated or dealt with according to the procedure and with sanctions prescribed in Section 106 of the Act or any statutory modification or re-enactment thereof from time to time and for the time being in force; and in respect of any general meeting of members holding shares of that class to be held for the purpose all the provisions hereinafter contained as to general meetings shall mutatis mutandis, apply but so that the quorum thereof shall be two persons, being members holding shares of that class. This clause is not to derogate from any power the Company would have had if this clause were omitted.
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Directors
Number of Directors Article 125 provides that subject of the provisions of Sections 252, 255, 256 and 259 of the Act, until otherwise determined by the Company in General Meeting, the number of Directors, shall not be less than four or more than twelve, excluding debenture Directors. Qualification of Directors Article 127 provides that the qualification of a Director shall be the holding of Ordinary and/or Preference shares or both in the Capital of the Company of the aggregate nominal value of Rs.2,500 (Rupees two thousand five hundred only). The first Directors named in the Articles, an Ex-officio Director or an alternate director appointed pursuant to Articles 76, 125, 126, 142 & 143 shall not be required to hold any qualification shares. Directors not to hold office of profit Article 132 provides that except with the previous consent of the Company accorded by a special resolution, no director of a company, no partner or relative of such a director, no firm in which such a director or relative is a partner, no private company of which such a director is a director or member, and no director or manager of such a private company shall hold any office or place of profit except that of Managing Director, Manager, legal or Technical Adviser, Banker, or Trustee for the holders of Debentures of the Company under the Company, or under any subsidiary of the Company, unless the remuneration received from such subsidiary in respect of such office or place is paid over to the Company or its holding company. Directors and Manager may contract with Company Article 133 provides that subject to the provisions of Sections 297, 299, 300, 302 and 314 of the Act, the Directors including a Managing Director and the Manager shall not be disqualified by reason of his or their office as such from contracting with the Company either as vendor, purchaser, lender, agent, broker, lessor or lessee or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any Director or the Manager or with any company or partnership of or in which any Director or the Manager shall be a member or otherwise interested be avoided nor shall any Director, or the Manager so contracting or being such member or so interested be liable to account to the Company for any profit realised by such contract or arrangement by reason only
330
Dividends
Division out of Profits Article 183 provides that subject to the provisions of these Articles the net profits of the Company (after making
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A.
1. 2.
Material Contracts
Memorandum of Understanding between the Company, JM Morgan Stanley Private Limited and DSP Merrill Lynch Limited dated September 22, 2005.
Memorandum of Understanding between the Company and Karvy Computershare Private Limited dated November 1, 2005.
B.
1. 2. 3. 4. 5. 6.
Documents
Memorandum and Articles of the Company. Certificate of Incorporation of the Company dated December 15, 1958. Fresh certificate of incorporation consequent on change of name from Hindustan Aluminium Corporation Limited to Hindalco Industries Limited dated October 9, 1989. Shareholders Resolution passed at the Annual General Meeting held on July 12, 2005 appointing Singhi and Co., as statutory auditors for the financial year 2005-2006. Copy of the Board Resolution dated September 20, 2005 approving this Issue. Consents of the Directors, Auditors, Lead Managers to the Issue, Legal Counsel to the Company, Legal Counsel to the Lead Managers, Bankers to the Issue and Registrars to the Issue, to include their names in the Letter of Offer to act in their respective capacities. Appointment of Company Secretary as Compliance Officer. Letter dated September 22, 2005 from the Auditors of the Company confirming Tax Benefits as mentioned in this Letter of Offer. The Report of the Auditors, Singhi & Co., as set out herein dated September 22, 2005 in relation to the restated financials of the Company for the last five financial years.
7. 8. 9.
10. Annual Report of the Company for the last five Financial Years. 11. Application made for In-principle listing approval dated September 23, 2005, and September 23, 2005 to the BSE and NSE respectively. 12. In-principle listing approval dated October 6, 2005 and October 11, 2005 from BSE and NSE. 13. Letter No. CFD/DIL/SM/51685/2005 dated October 13, 2005 issued by SEBI for the Issue. 14. Due Diligence Certificate dated September 23, 2005 from JM Morgan Stanley Private Limited and DSP Merrill Lynch Limited. 15. Tripartite Agreement dated May 10, 1999 between the Company, CDSL and MCS Ltd. to establish direct connectivity with Depository. 16. Bipartite Agreement dated December 26, 2003 between the Company and NSDL to establish direct connectivity with Depository.
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