PROSPECTUS OF MUGHAL MANUFACTURING MODARABA

Transcription

1 ADVICE FOR GENERAL PUBLIC GENERAL PUBLIC IS STRONGLY ADVISED IN ITS OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THIS PROSPECTUS, ESPECIALLY THE RISK FACTORS GIVEN AT PARA 5.10 BEFORE MAKING ANY INVESTMENT DECISION. 1 SUBMISSION OF FALSE AND FICTITIOUS APPLICATIONS IS PROHIBITED AND SUCH APPLICATIONS MONEY MAY BE FORFEITED UNDER SECTION 87(8) OF THE SECURITIES ACT, 2015 (THE SECURITIES ACT) PROSPECTUS OF MUGHAL MANUFACTURING MODARABA MANAGED BY: MUGHAL MODARABA MANAGEMENT LIMITED This Public Issue consists of 10,000,000 Modaraba Certificates (40% of the Total Paid up Fund) of Rs.10/ each at par value to the General Public out of the Total Paid up Fund of 25,000,000 Modaraba Certificates AS PER REGULATION 3(11) OF THE PUBLIC OFFERING REGULATIONS, 2017 (THE PO REGULATIONS) READ WITH REGULATION OF PSX S LISTING OF COMPANIES AND SECURITIES REGULATIONS, THE DRAFT PROSPECTUS WAS PLACED ON THE WEBSITES OF PSX, MUGHAL MANUFACTURING MODARABA AND THE CONSULTANT TO THE ISSUE FOR SEEKING PUBLIC COMMENTS FOR SEVEN WORKING DAYS STARTING FROM MARCH/14/ 2018 TO MARCH/22/2018. NO COMMENTS WERE RECEIVED FROM THE GENERAL PUBLIC DURING THIS PERIOD. THE SUBSCRIPTION LIST WILL INSHA ALLAH OPEN AT THE COMMENCEMENT OF BANKING HOURS ON JULY/11/2018 AND WILL CLOSE ON JULY/12/2018 AT THE CLOSE OF BANKING HOURS CONSULTANT TO THE ISSUE BANKERS TO THE ISSUE Allied Bank Limited Askari Bank Limited Bank Alfalah Limited* Bank Islami Pakistan Limited Dubai Islamic Bank Pakistan Limited Faysal Bank Limited Habib Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited Soneri Bank Limited Summit Bank Limited* United Bank Limited* *In order to facilitate investors, Bank Alfalah Limited ( BAFL ) Summit Bank Limited ( SMBL ) and United Bank Limited ( UBL ) are offering electronic submission of application (e IPO) to their account holders. BAFL account holders can use BAFL Net Banking to submit their applications via link SMBL account holders can use SMBL Net Banking to submit their application via link UBL account holders can use UBL Net Banking to submit their application via link Please note that online applications can be submitted 24 hours a day during the subscription period which will close at midnight on July 12 th 2018 The Central Depository Company of Pakistan ( CDC ) in collaboration with 1 Link (G) Limited (1 Link) has developed a Centralized e IPO System ( CES ) through which applications for subscription of securities offered through IPOs can be made electronically. CES has been made available in this IPO which can be accessed through the web link Payment of subscription money can be made through 1LINK s member banks available for CES, list of which is available on the above mentioned website and in section 2.9. For making application though CES, investors must be registered with CES. Registration with CES is one time activity, free of cost and a self registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), International Bank Account Number (IBAN) with any of the commercial bank, address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: (CDCPL) and e mail: info@cdcpak.com or contact Mr. Farooq Ahmed Butt at Phone (021) and farooq_butt@cdcpak.com. For further details on CES, please refer para 2.9 of this prospectus. PUBLIC ISSUE UNDERWRITTEN BY AKD Securities Limited Dawood Equities Limited SHARIAH ADVISOR Mufti Imran Khan THE DATE OF PUBLICATION OF THIS PROSPECTUS IS JUNE/26/2018 Jama Punji is an investors education initiative of SECP. Investors may please visit and read the IPO Investor Guide placed at w link Prospectus and Modaraba Certificate Subscription Form can be downloaded from the following websites: For further queries you may contact Mughal Modaraba Management Limited AKD Securities Limited Mr. Muhammad Fahad Hafeez Mr. Tahir Maqsood Mr. Faiz Mehmood Ms. Zainab Abid modaraba@mughalsteel.com modaraba@mughalsteel.com faiz.mehmood@akdsecurities.net zainab.abid@akdsecurities.net

2 UNDERTAKING BY THE CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER January 12, 2018 WE, MUHAMMAD MUBEEN TARIQ MUGHAL, THE CHIEF EXECUTIVE OFFICER AND MUHAMMAD ZAFAR IQBAL, THE CHIEF FINANCIAL OFFICER OF MUGHAL MANUFACTURING MODARABA, CERTIFY THAT; i. THIS PROSPECTUS CONTAINS ALL INFORMATION WITH REGARDS TO THE ISSUER AND THE ISSUE, WHICH IS MATERIAL IN THE CONTEXT OF THE ISSUE AND NOTHING HAS BEEN CONCEALED IN THIS RESPECT; ii. iii. iv. THE INFORMATION CONTAINED IN THE PROSPECTUS IS TRUE AND CORRECT TO THE BEST OF OUR KNOWLEDGE AND BELIEF; THE OPINIONS AND INTENTIONS EXPRESSED HEREIN ARE HONESTLY HELD; THERE ARE NO OTHER FACTS AND INFORMATION, THE OMISSION OF WHICH MAKES THIS DOCUMENT AS A WHOLE OR ANY PART THEREOF MISLEADING; v. ALL REQUIREMENTS OF THE MODARABA COMPANIES AND MODARABA (FLOATATION AND CONTROL) ORDINANCE, 1980; THE SECURITIES ACT, 2015; THE PUBLIC OFFERING REGULATIONS, 2017 AND PSX REGULATIONS FOR LISTING OF COMPANIES AND SECURITIES RELATING TO APPROVAL AND DISCLOSURES HAVE BEEN FULFILLED; AND vi. NO CHARGES, FEES, EXPENSES, PAYMENTS ETC. HAVE BEEN COMMITTED TO BE PAID TO ANY PERSON IN RELATION TO THIS PUBLIC OFFERING EXCEPT FOR THOSE AS DISCLOSED IN PART 3 OF THE PROSPECTUS. For and on behalf of Issuer, Mughal Manufacturing Modaraba Managed by Mughal Modaraba Management Limited Sd Muhammad Mubeen Tariq Mughal Chief Executive Officer Mughal Modaraba Management Limited Sd Muhammad Zafar Iqbal Chief Financial Officer Mughal Modaraba Management Limited Page 2 of 82

3 SHARIAH ADVISOR S CERTIFICATE/SHARIAH PRONOUNCEMENT /FATWA Page 3 of 82

4 GLOSSARY OF TECHNICAL TERMS Board The Board of Directors of Modaraba Company CDA Central Depositories Act, 1997 CDC Central Depository Company of Pakistan Limited CDS Central Depository System CES Centralized e IPO system CNIC Computerized National Identity Card Commission/ SECP Securities and Exchange Commission of Pakistan Companies Act Companies Act, 2017 CGT Capital Gain Tax CVT Capital Value Tax CRO Company Registration Office e IPO Electronic IPO EPS Earnings per share FBR Federal Board of Revenue FED Federal Excise Duty GoP Government of Pakistan IBAN International Bank Account Number ICAP Institute of Chartered Accountants of Pakistan IPO Initial Public Offering ITO Income Tax Ordinance, 2001 NOC MT MISIL PST PKR or Rs. PSX / Exchange / Securities Exchange Stock Exchange RCC RBC No Objection Certificate Metric Ton Mughal Iron & Steel Industries Limited Punjab Sales Tax Pakistan Rupees Pakistan Stock Exchange Limited Reinforced Cement Concrete Reinforced Brick Concrete Securities Act Securities Act, 2015 SST Sindh Sales Tax TREC Trading Right Entitlement Certificate UIN Unique Identification Number WHT Withholding Tax Page 4 of 82

5 DEFINITIONS Application Money Application Form/ Modaraba Certificate Subscription Form Certificates or Modaraba Certificate e IPO The amount of money paid along with application for subscription of certificates which is equivalent to the product of the Issue Price per certificate and the number of certificates applied for. The form which shall be used for submitting applications to the Bankers to the Issue for subscribing to the certificates of the Modaraba Certificates of Mughal Manufacturing Modaraba having face value Rs.10/ each. e IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e IPO. The following two systems are available for e IPOs: (i) Centralized e IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) in collaboration with 1 Link (G) Limited (1 Link) has developed a Centralized e IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link ( Payment of subscription money can be made through 1 Link s member banks available for CES, list of which is available on the above mentioned website. For making application though CES, investors must be registered with CES. Registration with CES is one time activity, free of cost and a self registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), International Bank Account Number (IBAN) with any of the commercial bank, address, mobile phone number and CDS Account (Investor Account or sub Account) may registered themselves with CES. Investors who do not have CDS account may visit for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: (CDCPL) and e mail: info@cdcpak.com or contact Mr. Farooq Ahmed Butt at Phone and farooq_butt@cdcpak.com For further detail on CES, please refer to para 2.9. Page 5 of 82

6 (ii) e IPO facilities by Bankers to the Issue: Currently, Bank Alfalah Limited (BAFL), Summit Bank Limited (SMBL) and United Bank Limited (UBL) are providing e IPO facilities to their respective accountholders. BAFL account holders can use BAFL Net Banking to submit their application via link SMBL account holders can use SMBL Net Banking to submit their application via link and UBL account holders can use UBL Net Banking to submit their application via link Investors who are registered with CES or account holders of UBL, SMBL or BAFL can submit their applications through the above mentioned links 24 hours a day during the subscription period which will close at midnight on 12 th July, General Public Ingot All Pakistani Individual and Institutional Investors including resident and non resident Pakistanis and foreign investors. Semi finished solid metal form produced in a non continuous casting process by pouring liquid metal into large mold. Ingot is a key raw material for manufacturing of T Iron. Issuer Issue Issue Price Listing Committee Listing Regulations Modaraba Ordinance or Ordinance Mughal Manufacturing Modaraba. Initial Public Offering of 10,000,000 Modaraba Certificates of Mughal Manufacturing Modaraba (40% of the Total Paid Up Fund of the Modaraba) at issue price of Rs.10/ per certificate. The price at which Certificates are being offered i.e. is Rs.10/ per certificate. Listing Committee means PSX s listing committee which has approved Prospectus. Chapter 5 of the Rule Book of the Pakistan Stock Exchange Limited, titled Listing of Companies and Securities Regulation. The Modaraba Companies and Modaraba (Floatation and Control) Ordinance, Modaraba Rules The Modaraba Companies and Modaraba Rules, 1981 Page 6 of 82

7 Modaraba or MMM Mughal Manufacturing Modaraba Modaraba Management Company or Management Company or Modaraba Company Mughal Modaraba Management Limited PO Regulations The Public Offering Regulations, 2017 Prospectus Registrar or Registrar Modaraba Religious Board Sponsor Shariah Compliant Business Standard Scale Tolling Services Prospectus means the prospectus of the Modaraba for offer of its Certificates to the public. Registrar of the Modaraba Companies and Modaraba The Board constituted by the Federal Government as per Section 9 of the Modaraba Ordinance. The religious board certifies in writing that the Modaraba s business is not a business opposed to the injunctions of Islam. Mughal Holding (Private) Limited and the Modaraba Management Company Limited who have contributed 60% of the paid up fund of the Modaraba as detailed in Para 2.7 of this Prospectus. A business which meets all of the applicable requirements of Shariah Law and the principles articulated for Islamic Finance. Standard Scale as defined in Section 479 of Companies Act A manufacturing arrangement in which a party (which has a manufacturing setup) processes raw materials or semi finished goods for and on behalf of another party in consideration for tolling charges. Interpretation: ANY CAPITALIZED TERM CONTAINED IN THIS PROSPECTUS, WHICH IS IDENTICAL TO A CAPITALIZED TERM DEFINED HEREIN, SHALL, UNLESS THE CONTEXT EXPRESSLY INDICATES OR REQUIRES OTHERWISE AND TO THE EXTENT AS MAY BE APPLICABLE GIVEN THE CONTEXT, HAVE THE SAME MEANING AS THE CAPITALIZED/DEFINED TERM PROVIDED HEREIN. NTENTS Page 7 of 82

8 TABLE OF CONTENTS 1. APPROVALS, CONSENTS AND LISTING ON THE SECURITIES EXCHANGE VALUATION, MODARABA FUND AND RELATED MATTERS UNDERWRITING ARRANGEMENT, BROKERAGE AND EXPENSES TO THE ISSUE THE MODARABA MANAGEMENT COMPANY MODARABA OBJECTIVES, BUSINESS AND PROSPECTS FINANCIAL INFORMATION BOARD OF DIRECTORS AND ORGANIZATIONAL SET UP MISCELLANEOUS APPLICATION AND ALLOTMENT INSTRUCTIONS SIGNATORIES TO THE PROSPECTUS MEMORANDUM OF ASSOCIATION OF MUGHAL MODARABA MANAGEMENT LIMITED MODARABA CERTIFICATE SUBSCRIPTION FORM 81 Page 8 of 82

9 1 APPROVALS, CONSENTS AND LISTING ON THE SECURITIES EXCHANGE 1.1 APPROVAL OF THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Approval of the Securities and Exchange Commission of Pakistan (the Commission ) or (the SECP ) as required under Section 87(2) of the Securities Act, 2015 (the Securities Act ) read with Section 88(1) thereof has been obtained by the Mughal Manufacturing Modaraba (the Modaraba ) for issue, circulation and publication of this Prospectus vide their letter No. SMD/CIW/SA 88/01/2018 dated 03 rd May DISCLAIMER: IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS APPROVAL, SECP DOES NOT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE MODARABA AND ANY OF ITS SCHEMES STATED HEREIN OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARD TO THEM BY THE ISSUER AND/OR THE MODARABA COMPANY IN THIS PROSPECTUS. SECP HAS NOT EVALUATED QUALITY OF THE ISSUE AND ITS APPROVAL FOR ISSUE, CIRCULATION AND PUBLICATION OF THE PROSPECTUS SHOULD NOT BE CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE ISSUE BEFORE SUBSCRIBING. THE COMMISSION NEITHER TAKES RESPONSIBILITY FOR THE CORRECTNESS OF THE CONTENTS OF THIS PROSPECTUS NOR THE ABILITY OF THE COMPANY TO FULFILL ITS OBLIGATIONS THEREUNDER. 1.2 AUTHORIZATION FOR THE ISSUE FROM REGISTRAR MODARABA Authorization has been granted under the Modaraba Ordinance for the floatation of the Modaraba vide Registrar Modaraba s Authorization Certificate bearing No. SCD/M/PRDD/MMM/ dated December 14, The Religious Board constituted under Section 9 of the Modaraba Ordinance has certified that the business proposed to be undertaken by the Modaraba is not opposed to the injunctions of Islam. 1.3 APPROVAL OF THE PROSPECTUS BY PSX The Prospectus of the Modaraba has been approved by PSX vide its letter No.PSX/GEN 1662 dated 30 th March 2018 in accordance with the requirements of its Listing Regulations. Page 9 of 82

10 DISCLAIMER: PSX HAS NOT EVALUATED THE QUALITY OF THE ISSUE AND ITS APPROVAL SHOULD NOT BE CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC / INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT INVESTIGATION AND ANALYSIS REGARDING THE QUALITY OF THE ISSUER BEFORE SUBSCRIBING. THE PUBLICATION OF THIS DOCUMENT DOES NOT REPRESENT SOLICITATION BY PSX. THE CONTENTS OF THIS DOCUMENT DO NOT CONSTITUTE AN INVITATION BY PSX TO INVEST IN MODARABA CERTIFICATES OR SUBSCRIBE FOR ANY SECURITIES OR OTHER FINANCIAL INSTRUMENT, NOR SHOULD IT OR ANY PART OF IT FORM THE BASIS OF, OR BE RELIED UPON IN ANY CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER OF THE PSX. IT IS CLARIFIED THAT INFORMATION IN THIS PROSPECTUS SHOULD NOT BE CONSTRUED AS ADVICE ON ANY PARTICULAR MATTER BY PSX AND MUST NOT BE TREATED AS A SUBSTITUTE FOR SPECIFIC ADVICE. PSX, DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM OR IN RELIANCE UPON THIS DOCUMENT TO ANYONE, ARISING FROM ANY REASON, INCLUDING, BUT NOT LIMITED TO, INACCURACIES, INCOMPLETENESS AND / OR MISTAKES, FOR DECISIONS AND /OR ACTIONS TAKEN, BASED ON THIS DOCUMENT. PSX NEITHER TAKES RESPONSIBILITY FOR THE CORRECTNESS OF CONTENTS OF THIS DOCUMENT NOR THE ABILITY OF THE ISSUER TO FULFILL ITS OBLIGATIONS THEREUNDER. ADVICE FROM A SUITABLY QUALIFIED PROFESSIONAL SHOULD ALWAYS BE SOUGHT BY INVESTORS IN RELATION TO ANY PARTICULAR INVESTMENT. Page 10 of 82

11 1.4 FILING OF THE PROSPECTUS WITH REGISTRAR MODARABA The Modaraba Company, as required under rule 20(2) of the Modaraba Rules, has filed with the Registrar Modaraba, a copy of this Prospectus signed by all the Directors of the Modaraba Company. 1.5 LISTING AT PSX Application has been made to PSX for permission to deal in and for quotation of the Certificates of the Modaraba. If for any reason the application for formal listing is not accepted by PSX or approval for formal listing is not granted by PSX before the expiration of twenty one days from the date of closing of the subscription period / list or such longer period not exceeding forty two days as may, within the said twenty one days, be notified to the applicants for permission by the securities exchange, the Issuer undertakes that a notice to that effect will immediately be published in the press and will refund application money to the applicants without surcharge as required under the provisions of the section 69 of the Companies Act. If any such money is not repaid within eight (08) days after the issuer becomes liable to repay it, the Directors of the Company shall be jointly and severally liable to repay that money from the expiration of the eight day together with surcharge at the rate of two per cent (2.0%) for every month or part thereof from the expiration of the eight day and, in addition, shall be liable to a penalty of level 3 on the standard scale in accordance with the provisions of sub section (2) of Section 69 of the Companies Act. As required under sub section (3) of Section 69 of the Companies Act, the Application Money shall be deposited and kept in a separate bank account in a scheduled bank so long as the issuer may become liable to repay it under sub section (2) of Section 69 of the Companies Act; and, if default is made in complying with the said sub section (3), the issuer and every officer of the issuer who authorizes or permits the default shall be liable to a penalty of level 2 on the standard scale as prescribed in the Companies Act. However, the issuer is determined to refund the subscription money on time without any delay. The Modaraba shall not pay any surcharge as surcharge paid in case of delayed payment is considered Riba according to Shariah injunctions. Page 11 of 82

12 1.6 CONDITIONS IMPOSED BY REGISTRAR MODARABA ON MODARABA MANAGEMENT COMPANY While granting registration to the Modaraba Company, the Registrar Modaraba has imposed the following conditions, inter alia: i. Mughal Modaraba Management Limited ( the Company ) shall make such investments as may be required in terms of the Prospectus for floatation of a Modaraba. ii. iii. iv. Subscription in compliance to Section 17(3) of Ordinance, will be in the nature of permanent investment of the Company in the Modaraba free from encumbrances for all time, which will not be disinvested during the life of the Modaraba. The Company shall undertake such business as is approved by the Registrar in terms of the Prospectus. The promoters, sponsors or persons holding controlling interest shall not transfer any shares held by them without the prior permission in writing of the Registrar. v. The Company shall furnish its annual audited accounts along with the Directors Report to the Registrar immediately on issue of the same to the shareholders. vi. vii. viii. ix. An amount of not less than Rs.2.5 million shall be set aside apart free from any encumbrance in respect of each Modaraba to be floated and managed by the Company and that the particulars thereof shall be furnished to the Registrar along with the application for floatation of each Modaraba. No change shall be made in the Company s major shareholders as well as Chief Executive/Directors without the prior approval of the Registrar. The Company shall not engage itself in any business except the floatation and management of Modaraba, unless it has raised the Paid up Capital as prescribed by the Modaraba Companies and Modaraba Rules, The promoters/major shareholders of the Company shall deposit their shares (D mat form) in a blocked account at the Central Depository Company of Pakistan Limited (CDC). Any subsequent allotment/subscription, either in the form of right or bonus shares or in any other manner whatsoever, to the existing Modaraba Company s promoters/major shareholders shall also be deposited with the CDC. x. The promoters/major shareholders of the Company shall not raise any financing or create encumbrance against the shares mentioned in preceding condition. xi. xii. xiii. The company shall not raise deposit in any form from the public or any institution. The Company shall not undertake any real estate business activity without the prior written approval of the Registrar and Securities and Exchange Commission of Pakistan. The Chief Executive Officer or one of the directors of the Company shall have sound knowledge or working experience in the area of Islamic banking and finance and/or appoint Page 12 of 82

13 at least one director or chief executive officer having hands on experience with Islamic banking and finance. xiv. xv. The Company shall float a Modaraba within one year from the date of its registration. In the case of removal of its Chief Executive before the expiration of his/her term or where the Chief Executive decides to tender his resignation, the Company shall inform the Registrar at least one month before the change upon receipt of advance notice for resignation from the Chief Executive. The Company shall appoint a new Chief Executive within time prescribed under the law and seek approval of the Registrar within thirty days from the date of the office of Chief Executive has fallen vacant. In the ordinary course of business, the Company shall not relieve the outgoing Chief Executive unless a new incumbent is appointed to takeover charge from him/her. However, in the case of removal of the Chief Executive before the expiration of his/her term, the Company shall also furnish reasons for such removal/termination to the Registrar while conveying the information of change in the management. 1.7 CONDITIONS IMPOSED BY REGISTRAR MODARABA ON THE MODARABA While granting approval for the floatation of the Modaraba vide their Modaraba authorization certificate dated December 14, 2017, the Registrar Modaraba has prescribed the following conditions, inter alia: 1. Mughal Manufacturing Modaraba ( the Modaraba ) shall be floated within twelve months from the date of this authorization. 2. The Modaraba shall not undertake any business other than those specified in the prospectus. 3. Mughal Modaraba Management Limited ( the Modaraba Company ) shall not disinvest or create encumbrance in favor of any person on any part of the investment in the Modaraba. 4. The Modaraba Certificates shall be listed for trading on the Stock Exchange. 5. If the application for listing of the Modaraba is refused by the Securities Exchange, the Modaraba Company shall forthwith repay the money received by it from the applicants in a manner as prescribed in the Modaraba Companies and Modaraba Rules, Dates of execution of material contracts shall be incorporated in the Prospectus and verified photo copies thereof submitted to the Registrar before issue/publication of the Prospectus. 7. Dates of opening and closing of subscription lists as agreed by the Securities Exchange shall be incorporated in the Prospectus. If these dates go beyond three months of the date of this certificate, the Prospectus shall be required to be cleared afresh by the Registrar before publication. 8. A duly signed final copy of the Prospectus containing original certificate of the auditors shall be filed with the Registrar before issue/publication of the Prospectus. 9. The Prospectus shall be published in the press not less than seven days and not more than thirty days before the date on which subscription list will open. Page 13 of 82

14 10. Five published copies of the Prospectus along with copies of all newspaper in which Prospectus has been advertised shall be filed with the Registrar within seven days of its publication. 11. The contents of the Prospectus shall not be altered without prior written approval of the Registrar. 12. The Modaraba Company shall take a decision within ten days of the closure of subscription list as to which applications have been accepted, and shall refund, within ten days of the decision, the application money to the applicants whose applications have not been accepted. 13. A report about the public offer and subscription, allotment basis, fulfillment of underwriting obligations and related matters shall be furnished to the Registrar within two months of the date of publication of the Prospectus. 14. The Modaraba Certificates to be subscribed by the Modaraba Company and/or sponsors of the Modaraba Company, shall not be transferred except with the prior written authorization of the Registrar. 15. The Modaraba shall not undertake any real estate business activity without the prior written approval of the Registrar. 16. The Modaraba shall not raise finances of any kind from the public, except with the prior approval of the Registrar. 17. The Modaraba Company shall comply with the conditions, if any, imposed by the Securities and Exchange Commission of Pakistan in the approval granted under Section 88 of the Securities Act, 2015 read with Section 87 thereof. 18. The Modaraba Company shall file all the periodic returns/statements as required and prescribed under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules and Regulations framed thereunder. 19. The Modaraba Company shall not engage in any business, which is of the same nature and competes with the business of the Modaraba. 20. The objects outlined in the Prospectus shall be achieved and the business operation conducted on the basis of business arrangements and agreements as already approved by the Religious Board. In case any new arrangement is to be entered into, approval of the Religious Board shall be obtained. 21. Future business plans, scheme, prospectus, expected rate of return and mode of distribution of profit etc. shall be filed with Registrar within seven days, after a decision is made by Board of Directors, for further issue of Modaraba Certificates. 22. The business of the Modaraba shall be conducted in line with the provisions of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules and Page 14 of 82

15 Regulations framed thereunder, the Prospectus of the Modaraba and the Shariah Audit and Shariah Compliance Mechanism for the Modarabas. 23. The Modaraba shall appoint its auditor, with prior approval of the Registrar, from the panel of auditors circulated by the Registrar. 24. Any violation of the condition of Authorization Certificate or Prospectus of the Modaraba shall be cognizable under the Modaraba Companies and Modaraba (Floatation and Control) ordinance, The promoters/major certificate holders of the Modaraba shall place their modaraba certificates in a blocked account at the Central Depository Company of Pakistan limited (CDC). Any subsequent allotment/subscription, either in the form of right or bonus modaraba certificates or in any other manner whatsoever, to the existing promoters/major certificates holders of the Modaraba shall also be deposited with CDC. 26. Any other condition imposed by the Registrar Modaraba from time to time. Page 15 of 82

16 1.8 CERTIFICATE BY CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER OF THE ISSUER January 12, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi We being the Chief Executive Officer and Chief Financial Officer of the Issuer accept absolute responsibility for the disclosures made in this Prospectus. We hereby certify that the Prospectus contains all necessary information with regard to the Issuer and the Issue and constitutes full, true and plain disclosures of all material facts relating to the Modaraba Certificates being offered through this Prospectus and that nothing has been concealed. The information contained in this Prospectus is true and correct to the best of our knowledge and the opinions and intentions expressed herein are honestly held. There are no other facts, the omission of which makes this Prospectus as a whole or any part thereof misleading. For and on behalf of Issuer, Mughal Manufacturing Modaraba Managed by Mughal Modaraba Management Limited Sd Muhammad Mubeen Tariq Mughal Chief Executive Officer Mughal Modaraba Management Limited Sd Muhammad Zafar Iqbal Chief Financial Officer Mughal Modaraba Management Limited Page 16 of 82

17 2 VALUATION, MODARABA FUND AND RELATED MATTERS 2.1 VALUATION SECTION The Modaraba Certificates of Mughal Manufacturing Modaraba are being issued at par value of Rs.10/ per certificate without any premium. The Public Issue at par value is based on the following factors: (a) Out of the total paid up fund of the Modaraba of Rs.250,000,000/, the Management Company and Mughal Holding (Private) Limited, being the sponsors, have subscribed Rs.150,000,000 at par value of Rs.10/ per certificate as detailed in para 2.7 of this Prospectus. (b) The Registrar Modaraba has also approved the Prospectus for present issue to the general public at par value of Rs.10/ each vide its letter No. SCD/M/PRDD/MMM/ dated December 14, (c) The Modaraba has not yet commenced its operations and the breakup value of its certificates at present is Rs.10/ per certificate. (d) The Consultant to the Issue has reviewed the business plan and objectives of the Modaraba as abridged in section 5.3 and in their opinion the issue price of Rs.10/ per certificate is justified based on: 1. Strong Sponsor/Group Profile The sponsors of the Modaraba have been engaged in the industry for over a decade with a tremendous track record and repute. The sponsors have strong management prowess with a track record of successful business operations which is evident from performance of Mughal Iron & Steel Industries ( MISIL ), an associated listed company, carrying a strong brand name and has a considerable footprint in the market of Long Rolled Steel products. 2. Steel demand to remain robust Pakistan s steel consumption has grown at a staggering 5 year CAGR of 25.9% per annum between 2012 and Pakistan s steel use in 2016 was 7.6 million MT translating into ~39.5 kg per capita. 2 Going forward, Pakistan s steel requirement is much lower than that of its N 11 peer countries like Egypt (122.1 kg per capita), Mexico (199.1 kg per capita), Vietnam (236.1 kg per capita) and Indonesia (48.5 kg per capita). The demand is expected to swell on the back of improved macro economic conditions and strong infrastructure and development spending. (The N 11 countries (Next Eleven Countries) include Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam.) With real GDP growth projected above 5.5% over the next two years (FY18E 5.50% and FY19E 5.80%) 3 and enhanced private and public sector spending on housing and infrastructure demand for construction materials including steel is likely to remain strong. 1 Steel Statistical Yearbook 2017-Apparent Steel Use per Capita (finished goods equivalent) 2 Steel Statistical Yearbook 2017-Apparent Steel Use per Capita (finished goods equivalent) 3 World Bank Staff Estimates Pakistan Development Update (Nov 2017) Page 17 of 82

18 3. Demand for T Iron based on demand for Girder T Iron is product that is used in construction of roofs of houses in rural areas and sheds in various industries. However, major usage of T iron is in rural housing sector. During construction of roofs T Iron and Girders are used simultaneously. Girder is used as a main beam while T Iron is used to provide support to bricks and slabs to cover the roof. As per general market practice and based upon the experience of the sponsors approximately 3 MT of T Iron is used for every 1 MT use of Girder. The demand of T Iron can be ascertained from the fact that (MISIL) on a standalone basis has sold more than 100,000 MT of girder in FY17, based upon which approximate complementary demand of 300,000 MT of T Iron is present in market from only MISIL s girder. Further, the sponsors believe that there is approximately 1 million MT demand for T Iron in the market. 4. T Iron and Girder is the prominent material used in house roof According to the Pakistan Social and Living Standards Measurement Survey T Iron and Girder are the predominantly used material for housing roofs accounting for 39% of roofs across Pakistan in The percentage is higher, 45% in rural areas compared to 28% in urban areas. Provincially Punjab has the highest % use of Girder/T Iron for roofs at 50%. Proportion (%) of roofs by material Pakistan RCC/RBC WOOD SHEET T IRON/GIRDER OTHERS FY13 FY15 Source: Pakistan Social and Living Standards Measurement Survey Back log of housing units shortage and increased housing demand will keep demand of construction materials high The World Bank in its Pakistan Housing Finance Project report (Report #114473) has highlighted the shortfall in housing units to be around 10 million units. The estimated new housing units built every year stand at 100, ,000 formal units while demand stands around 400, ,000 units. In the backdrop of increased population and emergence of nuclear family in rural areas the demand for housing is on the rise which is a trigger to the demand of T Iron and Girder which are the predominantly used material in housing across Pakistan. 4 4 Based on Pakistan Social and Living Standards Measurement Survey Page 18 of 82

19 6. Justification Based on the above the Consultant to the Issue is of the opinion that the Issue price of Rs.10/ per certificate is justified. 2.2 POST ISSUE FREE FLOAT IN TERMS OF THE NUMBER OF CERTIFICATES AND PERCENTAGE Based upon the number of certificates being offered to general public, the post issue free float in terms of number of certificates and percentage will be as follows: Sr. No Description Number of Certificates Percentage 1 General Public 10,000,000 40% 2.3 CONSULTANT TO THE ISSUE AKD Securities Limited has been appointed by the Issuer as Consultant to this Issue. AKD Securities Limited has a valid license for acting as Consultant to the Issue issued to it by SECP under the Public Offering (Regulated Securities Activities Licensing) Regulations, 2017 (the POL Regulations ). 2.4 INTEREST OF CONSULTANT TO THE ISSUE OTHER THAN THEIR ROLE AS CONSULTANT The Consultant to the Issue is deemed to be interested to the extent of fees payable to it by the Issuer for the services as Consultant and as Underwriter. The Consultant to the Issue has no other interest in any property or profits of the Modaraba. Page 19 of 82

20 2.5 STATEMENT BY THE ISSUER January 12, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi On behalf of Mughal Manufacturing Modaraba (the Modaraba ), we hereby confirm that all material information as required under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Securities Act, 2015, the Public Offering Regulations, 2017 and the Listing of Companies and Securities Regulations of the Pakistan Stock Exchange Limited has been disclosed in the Prospectus and that whatever is stated in Prospectus and the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed. For and on behalf of Mughal Manufacturing Modaraba Managed by Mughal Modaraba Management Limited Sd Muhammad Mubeen Tariq Mughal Chief Executive Officer Mughal Modaraba Management Limited Sd Muhammad Zafar Iqbal Chief Financial Officer Mughal Modaraba Management Limited Page 20 of 82

21 2.6 STATEMENT BY THE CONSULTANT TO THE ISSUE February 27, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi Dear Sir, Being mandated as the Consultant to this Initial Public Offering of Mughal Manufacturing Modaraba (the Modaraba ), we hereby confirm that all material information as required under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Securities Act, 2015, the Listing of Companies and Securities Regulations of the Pakistan Stock Exchange Limited and the Public Offering Regulations, 2017 has been disclosed in this Prospectus and that whatever is stated in Prospectus and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed. For and behalf of AKD Securities Limited, Sd Faiz Mehmood, Associate, Investment Banking Page 21 of 82

22 2.7 MODARABA FUND Number of Certificates Amount in Rs. AUTHORIZED MODARABA FUND 30,000,000 Modaraba Certificates of Rs.10/ each 300,000,000 SUBSCRIBED & PAID UP FUND Modaraba Certificates of Rs.10/ each fully paid in cash by: 2,500,000 12,500,000 Modaraba Management Company Mughal Modaraba Management Limited (10%) Other Sponsors Mughal Holding (Private) Limited (50%) 25,000, ,000,000 Notes: 15,000,000 Sub Total (60%) 150,000,000 Present Issue Now offered for subscription at par in cash, by full payment on application, as follows: 10,000,000 General Public (40%) 100,000,000 10,000,000 Sub Total (40%) 100,000,000 25,000,000 Grand Total (100%) 250,000,000 I. As per Section 17(3) of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Modaraba Management Company will hold not less than 10% of the total amount of Modaraba Certificates offered for subscription. II. III. IV. As per rule 3 (iv) of the Companies (Issue of Capital) Rules, 1996, and regulation 5(1) of the PO Regulations, the sponsors shall retain their entire shareholding in the Modaraba for a period of not less than 12 months from the last date of public subscription or from the date of commencement of the business of the Modaraba, which ever is later. As per rule 3 (v) of the Companies (Issue of Capital) Rules, 1996, and regulation 5(2) of the PO Regulations, the sponsors shall retain not less than twenty five percent (25%) of the capital of the Modaraba for not less than three financial years from the last date of public subscription or from the date of commencement of the business of the Modaraba, which ever is later. As per regulation 5(3) of the PO Regulations, the certificates held by the sponsors mentioned at (II) and (III) above shall be kept unencumbered in a block account with central depository company. V. Subject to compliance with (II) and (III) above, and with the approval of the Securities Exchange, the sponsors of the issuer may sell their certificate holding through block sale to any other person who shall be deemed sponsor for the purpose of the Companies (Issue of Capital) Rules, 1996 and the PO Regulations. Page 22 of 82

23 VI. The Commission vide letter SMD/CIW/SA 88/01/2018 dated February 08, 2018 and the Pakistan Stock Exchange vide letter PSX/GEN 720 dated February 6, 2018 have allowed relaxation from the requirement of regulation of the Listing of Companies and Securities Regulations of the PSX regarding the allocation of capital of forty percent (40%) to the public instead of requirement of seventy percent (70%) of the total size of the Modaraba. 2.8 OPENING AND CLOSING OF THE SUBSCRIPTION LIST The subscription list will open at the commencement of banking hours at 9:00 a.m. on July 11 th, 2018 and will close on July 12 th, 2018 at the close of banking hours at 5:00 pm. Please note that online applications can be submitted 24 hours during the subscription period which will close at 12:00 midnight on July 12 th, PUBLIC SUBSCRIPTION THROUGH e IPO e IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e IPO. The following two systems are available for e IPOs: (i) Centralized e IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) in collaboration with 1Link (G) Limited has developed a Centralized e IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link ( Payment of subscription money can be made through 1Link s member banks available for CES, list of which is available on the above mentioned website. For making application though CES, investors must be registered with CES. Registration with CES is one time activity, free of cost and a self registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), International Bank Account Number (IBAN) with any of the commercial bank, address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: (CDCPL) and e mail:info@cdcpak.com or Mr. Farooq Ahmed Butt at Phone and farooq_butt@cdcpak.com Payments for CES can be made through the following channels and banks Internet Banking Mobile App Automated Teller Machine Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Askari Bank Limited Habib Bank Limited Meezan Bank Limited Bank Alfalah Limited Meezan Bank Limited Page 23 of 82

24 BankIslami Pakistan Limited Faysal Bank Limited Habib Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited (ii) e IPO facilities by Bankers to the Issue: 2.10 BENEFITS OF e IPO Currently, Bank Alfalah Limited (BAFL), Summit Bank Limited (SMBL) and United Bank Limited (UBL) are providing e IPO facilities to their respective accountholders. BAFL account holders can use BAFL Net Banking to submit their application via link SMBL account holders can use SMBL Net Banking to submit their application via link and UBL account holders can use UBL Net Banking to submit their application via link Investors who are registered with CES or account holders of BAFL, SMBL and UBL can submit their applications through the above mentioned links 24 hours a day during the subscription period which will close at midnight on July 12 th, e IPO has the following benefits: i. It enables the investors to make application for subscription of Modaraba certificates through the internet without going to the bank, and waiting in long queues. ii. It is efficient and simultaneously facilitative for both the Issuer and the investors. iii. It is available for use 24 hours during the subscription period. iv. If you are registered with CES or accountholder of a bank providing e IPO facility, you may get SMS for new IPOs. v. By applying through CES you can also track your application status ELIGIBILITY OF INVESTORS FOR INVESTMENT IN THIS ISSUE Eligible investors include: i. Pakistani citizen resident in or outside Pakistan or persons holding two nationalities including Pakistani Nationality; ii. Foreign nationals whether living in or outside Pakistan; iii. Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their respective constitutive documents and existing regulations, as the case may be); iv. Mutual Funds, Provident / Pension / Gratuity Funds / Trusts (subject to the terms of their respective Trust Deeds and existing regulations); and v. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan. Page 24 of 82

25 2.12 FACILITIES AVAILABLE TO NON RESIDENT PAKISTANI AND FOREIGN INVESTORS Companies are permitted under paragraph 6 (with specific reference to sub para (B) (I)) of Chapter 20 of the State Bank of Pakistan s ( SBP ) Foreign Exchange Manual (the Manual ) to issue shares/certificates on repatriation basis to non residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual, i.e. (I) A Pakistan national resident outside Pakistan, (II) A person who holds dual nationality including Pakistan nationality, whether living in or outside Pakistan, (III) A foreign national, whether living in or outside Pakistan and (IV) A firm (including a partnership) or trust or mutual fund registered and functioning outside Pakistan, excluding entities owned or controlled by a foreign government, provided the issue price, is paid in foreign exchange through normal banking channel by remittance from abroad or out of foreign currency account maintained by the subscriber/purchaser in Pakistan. Non residents who wish to subscribe certificates out of the General Public portion may contact any of the Bankers to the Issue for taking instructions regarding payment of subscription money against certificates offered to General Public /Retail Investors. List of Bankers to the Issue is available on page 1 and paragraph 8.11 of this Prospectus. The certificates issued to non resident certificate holders shall be intimated by the Company to the designated Authorized Dealer, along with the documents prescribed in the Manual within 30 days of issue. Non residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual do not require SBP s approval to invest in the certificates being issued in terms of this Prospectus. Furthermore, under paragraph 7 (vii) of Chapter 20 of the Manual the Authorized Dealer shall allow repatriation of dividends, net of applicable taxes and proceeds on sale of listed shares (i.e. divestment proceeds) not exceeding the market value less brokerage/commission on provision of prescribed documents. Payments made by foreign investors shall be supported by proof of receipt of foreign currency through normal banking channels. Such proof shall be submitted along with the application by the non residents MINIMUM AMOUNT OF APPLICATION AND BASIS OF ALLOTMENT OF MODARABA CERTIFICATES The basis and conditions of allotment to the general public shall be as follows: a) Application for certificates must be made for 500 certificates or in multiple of 500 certificates only. Applications which are neither for 500 certificates nor for multiples of 500 certificates shall be rejected. b) The minimum amount of application for subscription of 500 certificates is Rs.5,000 (Issue Price x 500 certificates). Any cost incurred in issuance of certificates as part of the Issue shall be borne by Issuer. c) Application for certificates below the minimum amount shall not be entertained. Page 25 of 82

26 d) SUBMISSION OF FALSE AND FICTITIOUS APPLICATIONS ARE PROHIBITED AND SUCH APPLICATION S MONEY MAY BE FORFEITED UNDER SECTION 87(8) OF THE SECURITIES ACT, e) If the certificates issued to the General Public are sufficient to accommodate all applications, all applications shall be accommodated. f) If this Issue is oversubscribed in terms of number of applications, the certificates shall be allotted by conducting computer balloting in the presence of the representative(s) of PSX in the following manner: i. If all applications for 500 certificates can be accommodated, then all such applications shall be accommodated first. If all applications for 500 certificates cannot be accommodated then balloting will be conducted among applications for 500 certificates only. ii. iii. iv. If all applications for 500 certificates have been accommodated and certificates are still available for allotment, then all applications for 1,000 certificates shall be accommodated. If all applications for 1,000 certificates cannot be accommodated then balloting will be conducted among applications for 1,000 certificates only. If all applications for 500 certificates and 1,000 certificates have been accommodated and certificates are still available for allotment, then all applications for 1,500 certificates shall be accommodated. If all applications for 1,500 certificates cannot be accommodated then balloting will be conducted among applications for 1,500 certificates only. If all applications for 500 certificates, 1,000 certificates and 1,500 certificates have been accommodated and certificates are still available for allotment, then all applications for 2,000 certificates shall be accommodated. If all applications for 2,000 certificates cannot be accommodated then balloting will be conducted among applications for 2,000 certificates only. g) After the allotment in the above mentioned manner, the balance certificates, if any, shall be allotted in the following manner: i. If the remaining certificates are sufficient to accommodate each application for over 2,000 certificates, then 2,000 certificates shall be allotted to each applicant and the remaining certificates shall be allotted on pro rata basis. ii. If the remaining certificates are not sufficient to accommodate all the remaining applications for at least 2,000 certificates, then balloting shall be conducted for allocation of 2,000 certificates to successful applicants. h) If the Issue is oversubscribed in terms of amount only then the allotment of certificates shall be made on the following basis: i. First preference will be given to the applicants who applied for 500 certificates; ii. iii. iv. Next preference will be given to the applicants who applied for 1,000 certificates; Next preference will be given to the applicants who applied for 1,500 certificates; and Next preference will be given to the applicants who applied for 2,000 certificates. v. After allotment of the certificates in the above mentioned manner, the balance Page 26 of 82

27 certificates, if any, shall be allotted on a pro rata basis to the applicants who applied for more than 2,000 certificates. i) Allotment of certificates will be subject to scrutiny of the applications for subscription. j) Applications which do not meet with the above requirements or which are incomplete will be rejected REFUND / UNBLOCKING OF SUBSCRIPTION MONEY TO UNSUCCESSFUL APPLICANTS As per the regulation 6(10) of the PO Regulations, within ten (10) working days of the close of public subscription period, the certificates shall be allotted and issued against the accepted and successful applications and the subscription money of the unsuccessful applicants shall be unblocked / refunded. As per sub section (2) of Section 68 of the Companies Act, if refund as required under sub section (1) of Section 68 of the Companies Act is not made within the time specified therein, the directors shall be jointly and severally liable to repay the money with surcharge at the rate of two percent (2% ) for every month or part thereof from the expiration of the 15th day and, in addition, shall be liable to penalty of level 3 on the standard scale as defined in Section 479 of the Companies Act, Provided that the directors of the Issuer shall not be liable if it proves that the default in making the refund was not on their own account and was not due to any misconduct or negligence on their part MINIMUM SUBSCRIPTION FOR ALLOTMENT In the opinion of the directors of the Modaraba Company, the amount that must be raised as a minimum subscription in order to provide for the business operations and expenses is the whole amount of present issue of Rs.250,000,000 out of which Rs.150,000,000 has already been subscribed in cash by the Modaraba Management Company and Mughal Holding (Private) Limited as detailed in para 2.7 of this Prospectus PRINCIPAL PURPOSE OF THE USE OF SUBSCRIPTION MONEY The Modaraba has planned to take on Ijarah a small section re rolling mill for manufacturing and sale of T Iron. The mill with an annual capacity of 24,000 M.T. is being taken from Mughal Steel Metallurgies Corporation Limited under an Ijarah arrangement (operating lease). The primary purpose of the issue is to finance working capital (raw material, manufacturing overheads and other expenses) requirements via equity financing instead of debt financing in accordance with injunctions of Shariah. This equity injection will allow the Modaraba to smoothly and efficiently manage its operations. Approximate utilization of proceeds is as follows: Sr. No Description Figures (Rs.) 1 Raw material 200,000,000 2 Security deposit refundable 3,000,000 3 Manufacturing overheads & other expenses 47,000,000 Total 250,000,000 *Small section represents the technical term used to refer to the type of the products as defined in section of the Prospectus which the re rolling mill is capable of manufacturing. Page 27 of 82

28 2.17 INTEREST OF CERTIFICATE HOLDERS Except as disclosed elsewhere, none of the certificate holders of the issued certificates of the Modaraba have any special or other interest in the property or profit of the Modaraba other than that as holders of the certificates in the funds of the Modaraba ISSUE AND CREDIT OF MODARABA CERTIFICATES Within ten (10) working days of the close of public subscription period, the certificates shall be allotted, issued and credited against the accepted and successful applications and the subscription money of the unsuccessful applicants shall be unblocked / refunded, as required under regulation 6(10) of the PO Regulations. Certificates will be issued only in the book entry form and will be credited into the respective CDS Accounts of the successful applicants. Therefore, the applicants must provide their CDS Account Number in the Certificate Subscription Application. If the Modaraba Company makes a default in complying with the above requirements, it shall pay to PSX a penalty of Rs. 5,000/ per day during which the default continues. PSX may also notify the fact of such default and the name of the Modaraba Company by notice and also by publication in the Ready Board Quotation of PSX. The name of the Modaraba will also be notified to the TREC holders of the PSX and placed on the website of the PSX TRANSFER OF CERTIFICATES The Modaraba certificates shall be transferred in accordance with the provisions of Section 74 of the Companies Act, read with Section 75 thereof and the Central Depositories Act, 1997 and the CDCPL Regulations CERTIFICATES SUBSCRIBED SINCE FLOATATION OF MODARABA Since obtaining authorization for floatation of Modaraba on December 14, 2017, the following Modaraba certificates have been subscribed: No. of Modaraba Consideration Total value Subscribed by Date of certificates (Rs.) subscription 2,500,000 Cash 25,000,000 Mughal Modaraba 12/02/2018 Management Limited 12,500,000 Cash 125,000,000 Mughal Holding (Private) 12/02/2018 Limited 15,000, ,000,000 Total Page 28 of 82

29 2.21 DIVIDEND POLICY The rights in respect of capital and dividends attached to each certificate would be the same. The Board of Directors of the Modaraba Company may from time to time pay to certificate holders such annual/interim dividend as appear to the directors to be justified by the profits of the Modaraba. No dividend shall be paid otherwise than out of the profits of the Modaraba for the year or any other undistributed profits. No unpaid dividends shall bear interest or mark up against the Modaraba. The dividends shall be paid within the period laid down in the Companies Act, THE CASH DIVIDEND, IF ANY, SHALL BE DISTRIBUTED THROUGH DIRECT CREDIT IN THE CERTIFICATE HOLDERS RESPECTIVE IBAN. THE INVESTORS, THEREFORE, MUST FILL IN THE RELEVANT PART OF THE CERTIFICATES SUBSCRIPTION FORM UNDER THE HEADING DIVIDEND MANDATE AND PROVIDE THEREIN THEIR IBAN FOR CREDIT OF THEIR CASH DIVIDENDS, IF ANY. Covenants / Restriction on Payment of Dividends It is stated that there is no restriction on the Modaraba by any regulatory authority, creditor, stakeholder etc. on the distribution and capitalization of its profits except as mentioned in this Prospectus MODE OF DISTRIBUTION OF PROFIT Modaraba shall distribute 90% of its net annual profit after appropriation to reserve, if any, as stipulated in SECP s Prudential Regulations for Modarabas, 2004 except in case the dividend for any year may be omitted or passed on if the distribution of dividend is un economical and hence not in the interest of the certificate holders ELIGIBILITY FOR DIVIDEND All Modaraba certificate holders shall be eligible for any distribution whenever declared. Except to the extent otherwise specified by the Registrar Modaraba for reasons to be recorded, the new Modaraba certificates shall rank pari passu with existing certificates in all matters including the right to such bonus and dividend as may be declared subsequent to the date of issue of such new certificates DEDUCTION OF ZAKAT Dividend distribution will be subject to deduction of zakat at source pursuant to the provision of the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) as may be applicable from time to time (except where the Zakat and Ushr Ordinance does not apply to any certificate holder or where such certificate holder is otherwise exempt or has claimed exemption from payment/ deduction of Zakat in terms of and as provided in the Zakat and Ushr Ordinance). Page 29 of 82

30 2.25 TAX EXEMPTION Currently, any income, not being income from trading or manufacturing activity, of a Modaraba registered under the Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980 (XXXI of 1980), is exempt from tax, provided that not less than ninety per cent of its total profits in the year as reduced by the amount transferred to mandatory reserve, as required under the provisions of the Modaraba Ordinance or the Rules, has been distributed amongst the certificate holders SALES TAX Sales tax on service provided by the Modaraba would be applicable as per relevant provincial Sales Tax laws at applicable rates for respective provinces DEFERRED TAX The Modaraba will account for deferred taxation on all material temporary difference using the liability method arising between the amounts attributed to assets and liabilities for financial reporting purposes and financial statements used for taxation purposes SALES TAX ON SALE / PURCHASE OF MODARABA CERTIFICATES Under the Constitution of Pakistan and Articles 49 of the 7th NFC Award, the Government of Sindh, Government of Punjab, Government of Khyber Pakhtunkhwa and Government of Baluchistan have promulgated the Sindh Sales Tax on Services Act, 2011, Punjab Sales Tax on Services Act, 2012, Khyber Pakhtunkhwa Sales Tax on services through Khyber Pakhtunkhwa Finance Act, 2013 and the Baluchistan Sales Tax on services Act, 2015 respectively. The Sindh Revenue Board, the Punjab Revenue Authority, the Khyber Pakhtunkhwa Revenue Authority and the Baluchistan Revenue Authority administer and regulate the levy and collection of the Sindh Sales Tax ( SST ), Punjab Sales Tax ( PST ), Khyber Pakhtunkhwa Sales Tax ( KST ) and Baluchistan Sales Tax ( BST ) respectively on the taxable services provided or rendered in Sindh, Punjab, Khyber Pakhtunkhwa and Baluchistan provinces respectively. The value of taxable services for the purpose of levy of sales tax is the gross commission charged from clients in respect of purchase or sale of certificates in a Stock Exchange. The above mentioned Acts levy a sales tax on Brokerage at the rate of 13 % in Sindh, 16% in Punjab and in Baluchistan and Khyber Pakhtunkhwa the rate is 15%. Sales tax charged under the aforementioned Acts is withheld at source under statutory requirements TAX CREDIT FOR INVESTMENT IN IPO Under Section 62 of the Income Tax Ordinance, 2001, a resident person other than a Company, shall be entitled to a tax credit, as mentioned in the said section, for a tax year in respect of the cost of acquiring in the year, new certificates offered to the public by a public company listed on a stock exchange in Pakistan, provided the resident person is the original allottee of the shares or the shares are acquired from the Privatization Commission of Pakistan. As per section 62(3) (b) of the Income Tax Ordinance, 2001, the time limit for holding certificates has been designated as 24 months to avail tax credit. Page 30 of 82

31 2.30 FUTURE CAPITALIZATION The Modaraba Company may make a right or a bonus issue of Modaraba certificates, subject to approval of the Registrar Modaraba, as deemed necessary for the business operations of the Modaraba, in accordance with the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Modaraba Companies and Modaraba Rules, WITHHOLDING TAX ON DIVIDENDS Dividend distribution to certificate holders will be subject to withholding tax under section 150 of the Income Tax Ordinance, 2001 as specified in Part III Division I of the First Schedule of the said ordinance or any time to time amendments therein. In terms of the provision of Section 8 of the said ordinance, said deduction at source, shall be deemed to be full and final liability in respect of such profits in case of individuals only. The following are the rates: For filers of Income Tax Return: 15% For non filers of Income Tax Return: 20% 2.32 TAX ON BONUS CERTIFICATES As per section 236 M of the Income Tax Ordinance 2001, tax at the rate of 5% of the value of bonus certificates determined on the basis of the day end ex price was required to be collected by the Modaraba issuing the bonus certificates, which was the final tax liability on such income of the certificate holder. However as per the Finance Act 2018 the tax on bonus certificates has been withdrawn CAPITAL GAINS Under section 37A of the Income Tax Ordinance, 2001, capital gain on securities acquired after July 01, 2016 are subject to for filers and 20% for non filers CAPITAL VALUE TAX ( CVT ) & WITHHOLDING TAX ( WHT ) ON SALE/PURCHASE OF CERTIFICATES On April 24, 2012, Finance (Amendment) Ordinance, 2012 was introduced whereby clause (F) was introduced in sub section (2) of the Finance Act, This amendment reintroduced the Capital Value Tax at the rate of 0.01% of the purchase value on the purchase of shares/certificates of a company listed on PSX. Page 31 of 82

32 3 UNDERWRITING ARRANGEMENT, BROKERAGE & EXPENSES TO THE ISSUE 3.1 UNDERWRITING The present public offer of 10,000,000 Modaraba certificates of Rs.10/ each, offered at a par, has been fully underwritten as under: Sr. No Underwriters No. of Certificates Amount (Rs.) 1 AKD Securities Limited 5,000,000 50,000,000 2 Dawood Equities Limited 5,000,000 50,000,000 Total 10,000, ,000,000 If and to the extent, Modaraba certificates hereby offered are not subscribed and paid for in cash in full by the closing of the subscription list, the Underwriters shall within 15 days of being duly called upon by the Modaraba Company to do so, subscribe and pay for or procure subscribers to subscribe and pay for in cash in full those Modaraba certificates not so subscribed. In the opinion of the directors of the Modaraba Company, the resources of the Underwriters are sufficient to discharge their underwriting commitments. 3.2 NO BUYBACK / REPURCHASE AGREEMENT NEITHER THE UNDERWRITERS NOR ANY OF THEIR ASSOCIATES HAVE ENTERED INTO ANY BUYBACK OR REPURCHASE AGREEMENT WITH THE SPONSORS, THE MODARABA COMPANY OR ANY OTHER PERSON IN RESPECT OF THIS PUBLIC ISSUE. ALSO, NEITHER THE MANAGEMENT COMPANY NOR ANY OF ITS ASSOCIATES HAVE ENTERED INTO ANY BUY BACK / RE PURCHASE AGREEMENT WITH THE UNDERWRITERS OR THEIR ASSOCIATES. THE MANAGEMENT COMPANY AND ITS ASSOCIATES SHALL NOT BUY BACK / RE PURCHASE CERTIFICATES FROM THE UNDERWRITERS AND THEIR ASSOCIATES. 3.3 UNDERWRITING EXPENSES The Underwriters have been paid an underwriting 1.50% on the amount of the public issue underwritten by them. In addition a take up shall be paid to the Underwriters on the amount of certificates actually taken up by them. 3.4 FEE AND EXPENSES FOR CENTRALIZED E IPO SYSTEM (CES) The commission on applications received through CES will be paid to CDC, which shall not be more than 0.80% of the amount of the successful applications. CDC will share the fee with other participants of CES at a ratio agreed amongst them. 3.5 COMMISSION TO THE BANKERS TO THE ISSUE A commission not exceeding 0.50% of the amount collected on allotment in respect of successful applicants of the Modaraba certificates will be paid to the bankers to the issue for services to be Page 32 of 82

33 rendered by them in connection with this issue. No commission shall be paid to the bankers in respect of Modaraba certificates subscribed by the underwriters by virtue of their underwriting commitments. 3.6 BROKERAGE Brokerage shall be paid to the TREC holders of PSX, at the rate of 1.0% of paid up value of Modaraba certificates actually sold through them. No brokerage shall be payable in respect of Modaraba certificates taken up by the Underwriters by virtue of their underwriting commitment. 3.7 PRELIMINARY EXPENSES AND EXPENSES TO THE ISSUE The preliminary expenses payable by the Modaraba and expenses of the proposed issue to the public inclusive of cost of organization and floatation of the Modaraba, cost of printing, publication and distribution of this Prospectus, underwriting expenses, commission to the bankers to the issue and brokerage etc. are estimated at Rs.15,309,000/. The estimated preliminary expenses and expenses to the issue as detailed and described below, shall be paid by the Modaraba and shall be charged to the Profit & Loss Account of the Modaraba during the first year of operations. Expenses Rate Amount in (Rs.) Fee to Consultants to the Issue 3,750,000 Underwriting expenses 1.50% 1,500,000 Commission to Bankers to the Issue * 0.50% 500,000 Bankers to the Issue out of pocket expenses* 339,000 Bankers to the Issue e IPO expenses 775,000 Brokerage to TREC Holders of PSX* 1.00% 1,000,000 Expenses on centralized e IPO system* 0.80% 800,000 Authorized Modaraba Fund Fee 3,050,000 CDC annual fee for being eligible security 220,000 CDC Fresh Issue fee 0.16% 400,000 PSX annual listing fee 182,500 PSX initial listing fee 0.10% 250,000 PSX service charges 50,000 SECP application and processing fee 0.025% 562,500 SECP supervisory fee 43,250 Balloter Fee 260,000 Shariah advisor fee 25,000 Auditors fee 220,000 Printing 500,000 Marketing Charges 700,000 Miscellaneous costs 181,750 TOTAL 15,309,000 Note: The above figures are indicative and may change at the time of IPO. * Indicate the maximum possible cost under these heads Page 33 of 82

34 4 THE MODARABA MANAGEMENT COMPANY 4.1 INTRODUCTION TO MANAGERS OF THE MODARABA Mughal Modaraba Management Limited is an unlisted public limited company incorporated in the province of Punjab under the Companies Act, 2017 (previously Companies Ordinance, 1984). It was registered as a Modaraba Management Company with the Registrar Modaraba, on April 13, Presently the Board of the Modaraba Company comprises of the following persons: NAME Mr. Khurram Javed Mr. Muhammad Mubeen Tariq Mughal Mr. Fazeel Bin Tariq DESIGNATION Director/Chairman Director/CEO Director The Directors of Mughal Modaraba Management Limited shall ensure smooth operations and functioning of the Modaraba. 4.2 CAPITAL OF THE MODARABA MANAGEMENT COMPANY The authorized capital of Mughal Modaraba Management Limited is Rs.120,000,000 divided into 12,000,000 shares of Rs. 10/ each and the paid up capital of the Modaraba Management Company is Rs.3,000,000 divided into 300,000 shares of Rs.10/ each as of January 31 st, OBJECTIVES OF THE MODARABA COMPANY To initiate, sponsor, promote, float, organize, manage, administer and operate Modaraba companies, multipurpose and specific purpose Modaraba and Modarabas of all types and description, Modaraba funds and other similar concerns either in syndicates or otherwise subject to approval of Registrar of Modarabas, under the Modaraba Companies & Modaraba (Floatation & Control) Ordinance, PROMOTERS AND MANAGERS OF THE MODARABA COMPANY The Modaraba Company with Mughal Group as the main sponsors would provide strong support to Modaraba. The Board, including the Chief Executive Officer of the Modaraba Company, consists of 3 members who will ensure smooth operation and functioning of the Modaraba. Page 34 of 82

35 5 MODARABA OBJECTIVES, BUSINESS AND PROSPECTS 5.1 TYPE OF MODARABA The MUGHAL MANUFACTURING MODARABA is a multi purpose and perpetual Modaraba. 5.2 OBJECTIVES OF THE MODARABA The mission of Mughal Manufacturing Modaraba is to seek pleasure of Almighty Allah through making its humble contribution in the transformation of our manufacturing in accordance with the principles enshrined in Shariah. We seek Allah s guidance and blessing in understanding and implementing Allah s will in the matter of manufacturing in accordance with practices of His Prophet. The fundamental mission that since Islam has prohibited Riba and have blessed trade, Mughal Manufacturing Modaraba will promote manufacturing activities according to the spirit of Islam. In the business dealings of the Modaraba, its internal environment and inter personal relations; the rights of Allah, the rights of all certificate holders, the rights of investors and customers and all others will sincerely be recognized and safeguarded. 5.3 DESCRIPTION OF THE MODARABA BUSINESS MODE OF TRANSACTIONS Modaraba shall not enter into any transactions or business dealings which are opposed to the injunction of Islam and shall not enter into any sale or purchase or any transactions which are in violation of the injunctions of Islam. All transactions of the Modaraba will be in accordance with Shariah Rules. All transactions of the Modaraba will be in accordance with the modes already approved by the Religious Board or that may be approved or modified by the Religious Board in the future. All transactions of the Modaraba will be in accordance with the Modaraba Ordinance, Modaraba Rules and Prudential Regulations for Modarabas and other applicable laws, rules and regulations approved by the SECP MODARABA S BUSINESS OBJECTIVES i. To carry on all or any of the business of manufacturer and dealer of all kinds of steel products, including but not limited to, T Iron, sheets, beams / billets, girders, rebars, channels and angles etc. ii. iii. To carry on the business of manufacturer of ferro and ferro alloys. To carry on business as generator, purchaser, transformer, converter, distributor and supplier, of electricity and all other forms of energy and products or services associated therewith and of promoting the conservation and efficient use of electricity and to perform all other acts which are necessary or incidental to generation, transmission, distribution and supply of electricity. Page 35 of 82

36 iv. To carry on the business of manufacturing, producing, refining, procuring, preparing, importing, exporting, exchanging, buying, selling, acquiring, distributing and dealing in sugar of any variety or varieties. v. To carry on business of producing, manufacturing, preparing, treating, processing, refining, and dealing etc., in all kinds of cement and its allied products. Currently the Modaraba as an initial initiative has proposed to enter in business of steel by undertaking the manufacturing and selling of T Iron through acquiring on Ijarah (operating lease) a small section re rolling mill as detailed in section 2.16 section and section Going forward, in case the demand for T Iron changes unfavorably,the Modaraba has the additional benefit and flexibility of using the said re rolling mill for production of other steel products like steel re bars, channels, angles etc. by easily and cost effectively modifying / or replacing the existing rollers of the mill. Nevertheless by virtue of being a multi purpose modaraba, the Modaraba will always have the option and benefit of diversifying into different business segments as disclosed in (i) to (v) above, if and when a viable business opportunity arises. This option of diversifying will also remain available to the Modaraba if it decides to or is unable to extend the Ijarah agreement upon expiration of tenor of 10 years RESOURCES AND MOBILIZATION The Modaraba can mobilize additional resources from Islamic financial institutions, Corporates and general public by using the following permissible modes: i. Musharakah; ii. Murabahah; iii. Mudarabah; iv. Istisna; v. Salam; vi. Sukuk; vii. Other permissible Islamic modes of financing and/or investment approved by the Religious Board and the SECP from time to time. All the operations and transactions shall be inconformity with the injunctions of the Shariah and in accordance with the arrangements and / or instruments approved by the Religious Board from time to time. The Modaraba shall not invite or raise deposit in any form from the general public without the prior written approval of the Registrar Modaraba / Securities and Exchange Commission of Pakistan INDUSTRY AND OPERATIONS Steel industry is considered as the backbone of the modern society and has direct correlation with the industrial development, given its utility in all industrial processes and sectors ranging from infrastructure, construction, automobiles, and transportation and home appliances. Demand for steel in Pakistan is estimated at 6 million MT and has seen a rising trend over the last few years Page 36 of 82

37 due to strong growth in construction activity. As per the State Bank of Pakistan s annual report for FY17, the domestic steel production grew by percent. The State Bank s report also indicates that the outlook for the industry remains encouraging in view of expected strong growth in the allied industries, such as automobile (especially the two/three wheelers) which depend mostly on local vendors for the supply of raw materials such as steel and construction (where a focus on higher infrastructure spending would increase the demand for steel pipes and other related construction products). Pakistan is still amongst the lowest per capita consumers of steel at 39.5kg/capita 6 which is well below the world average approximately 207.3kg/capita and indicates the immense potential for growth in the domestic steel manufacturing and processing industry. T Iron is product that is used in construction of roofs of houses in rural areas and sheds in various industries. However, major usage of T Iron is in rural housing sector. During construction of roofs T Iron and Girders are used simultaneously along with each other. Girder is used as a main beam while T Iron is used to provide support to bricks and slabs to cover the roof. As per general market practice and based upon the experience of the sponsors approximately 3 MT of T Iron is used for every 1 MT use of Girder. Various applications of T Iron Demand for each product in the steel category is not reported separately, however the sponsors believe that there is approximately 1 million MT demand for T Iron in the market. This can also be ascertained from the fact that MISIL on a standalone basis has sold approximately 100,000 MT of girder in FY 17, based upon which approximate demand of 300,000 MT based on the ratio identified above only from the girder sold by MISIL. The envisaged plan is to take on Ijarah a small section re rolling mill for a minimum period of ten years to manufacture and sale T Iron. The re rolling mill will be taken on Ijarah from Mughal Steel Metallurgies Corporation Limited ( an associated undertaking due to common directorship ). The agreement will be irrevocable for the first ten years and can only be cancelled by the Modaraba 5 State of the Economy-Annual Report ( ) 6 Apparent Steel Use per capita (finished steel products) 2016-Steel Statistical Yearbook 2017 Page 37 of 82

38 Company during that tenure. After ten years, the agreement can be mutually extended. The mill has annual capacity of 24,000 MT and is currently being used for providing tolling services by third party. As indicated above, since T Iron and Girder have same client base and are used simultaneously, therefore, the existing clientele is available to ensure the sale of T Iron quantity to be produced by the Modaraba and to ensure operations of the mill at full capacity. Infact, the sponsors believe that the demand is greater than the installed capacity of the re rolling mill. Sponsors believe that margin in tolling services is limited and if working capital is made available then there is potential for enhanced profit making by generating efficiencies in value chain. Also due to their steel industry knowledge and experience, the management is confident that they can better manage the operations as well including but not limited to procurement of raw material, production and sales activity, therefore, Modaraba will manufacture and sale its own T Iron in market. Consequently, the Modaraba will purchase steel ingot from market, convert it into T Iron and sell it in market. Currently the key competitors are AMK Steel, Kamran Steel, Subhan Steel Mills and Tauqeer Steel. Historical production and sales records of the re rolling mill to be taken on Ijarah and MISIL are provided as follows: M.Tons FY 2017 FY 2016 FY 2015 FY 2014 MISIL Girder Production 106, ,169 72,793 78,705 Sales 107, ,661 76,459 71,952 T Iron Production 1,740 34,828 44,665 22,246 Sales 1,740 35,054 44,337 22,147 Re rolling mill to be taken on Ijarah T Iron 7 Production 18,347 19,482 16,700 15,145 Sales 18,347 19,482 16,700 15,145 The tables above represent the quantities of T Iron and Girder manufactured and sold by MISIL along with quantities of T Iron manufactured and sold by the mill that is being planned to be taken on Ijarah. The decline in the quantity sold by MISIL has been due to focus on production of re bars. It is pertinent to add that since the re rolling mill being taken on Ijarah was being used by third party for the Tolling Services, accordingly, quantity produced was dependent on availability of orders, which would not be the issue in case of the Modaraba due to reasons mentioned above PRODUCT RANGE The Modaraba will manufacture T Iron on the re rolling mill. T Iron is used in residential and industrial structures. The following different categories of T Iron will be manufactured: gram gram gram gram gram gram gram gram These represent product categories. Gram represents gram per foot. 7 This represents the quantity produced by the mill (being undertaken on Ijarah by the Modaraba) under MSMCL or by third party tollers. Page 38 of 82

39 5.3.6 SPONSOR STRENGTH Modaraba has an associated company, Mughal Iron & Steel industries Limited ( MISIL ) which is listed on Pakistan Stock Exchange. The sponsors and management of Modaraba are also part of the Board of Directors of MISIL. They have in depth knowledge of steel market and its dynamics. MISIL was incorporated in 2010 and took over the running business of Mughal Steel (Partnership concern). In 2015, MISIL got listed on Pakistan Stock Exchange Limited and since then has shown tremendous growth and profitability MEANS OF FINANCING AND UTILIZATION OF PROCEEDS Means of financing & break up of utilization of proceeds from the issue is as follows: Means of Financing Sr. No Description Number of Certificates Amount (Rs.) 1 Mughal Modaraba 2,500,000 certificates of 25,000,000 Management Limited Rs. 10/ each 2 Mughal Holding (Private) 12,500,000 certificates 125,000,000 Limited of Rs. 10/ each 3 Present issue to general Public 10,000,000 certificates 100,000,000 of Rs. 10/ each Total 250,000,000 Utilization of Funds Sr. No Description Amount (Rs.) 1 Raw material 200,000,000 2 Security deposit refundable 3,000,000 3 Manufacturing overheads and other expenses 47,000,000 Total 250,000,000 The Raw Material purchase will consist of purchase of Ingots which will be the key raw material for production of T Iron. The security deposit consists of the 6 month advance rental at Rs.500,000 per month required under the Ijarah agreement (for details refer to section 8.13 of the Prospectus) and is refundable upon maturity of the contract, if not renewed. Manufacturing overheads and other expenses include the expenses incurred in production in the initial months of operation including production, administrative and distribution expense as well as the expenses incurred in the floatation of the Modaraba (expenses for floatation of Modaraba have been detailed in section 3.7). The Modaraba Company proposes to deploy the net proceeds in the aforesaid purpose during financial year June 30, Page 39 of 82

40 5.4 TRANSACTIONS WITH BENEFICIAL OWNERS OF THE MODARABA COMPANY The Modaraba Company, on behalf of the Modaraba, has entered into an Ijarah agreement of a small section re rolling mill with Mughal Steel Metallurgies Corporation Limited for a period of 10 years (Agreement dated 11 th January 2018). The director(s) of the Modaraba Company are also the director(s) of Mughal Steel Metallurgies Corporation Limited. 5.5 CONFLICT OF INTEREST i. The Modaraba shall not make any transaction with any person, except in connection with the normal business of the Modaraba. Such funds or advances shall be under Islamic modes of finance. ii. The Modaraba Company or any of its directors, officers or their relatives shall not obtain funds, advance or credit from the funds of the Modaraba or on the security of the assets of the Modaraba. 5.6 As per part III (1) of the Prudential Regulations for Modaraba, the Modaraba shall maintain for the first two years of its operation a ratio of equity to liabilities of a maximum of 1:7 (one to seven) and thereafter this ratio maybe increased up to a maximum of 1:10 (one to ten). The ratio may further be increased only after obtaining the consent of the Registrar Modaraba. 5.7 NON COMPETING CLAUSE The Modaraba Company will not engage in any business, which is of the same nature and competes with the business of the Modaraba. 5.8 ACQUISITION OF CONTROLLING INTEREST Except where it is necessary to protect its investment, the Modaraba shall not seek to acquire a controlling interest in any undertaking in which it has invested or has any other interest which would involve the Modaraba in primary responsibilities of management. 5.9 ADHERENCE TO SHARIAH IN ALL MATTERS The Modaraba shall not enter into any business, investment or other transactions that is repugnant to the injunctions of Islam; and involves an element of Riba either directly or indirectly RISKS FACTORS The directors wish to highlight the major factors, which may affect the profitability of the Modaraba, these are: a. CHANGES IN TAXATION POLICY Currently, any income, not being income from trading or manufacturing activity, of a Modaraba registered under the Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980 (XXXI of 1980), is exempt from tax, provided that not less than ninety per cent of its total profits in the year as reduced by the amount transferred to Page 40 of 82

41 mandatory reserve, as required under the provisions of the Modaraba Ordinance or the Rules, has been distributed amongst the certificate holders. b. GEO POLITICAL RISK Any political unrest could undermine the GoP s efforts to restore investors confidence. However, any political risk is not expected to have any major effect on the business and its operations due to the nature of the product and target market. c. SHARIAH RISK Shariah non compliance risk is the risk that arises from Modaraba s failure to comply with the Shariah rules and principles prescribed by Shariah Advisor. Shariah compliance is critical to Modaraba s operations and such compliance requirements must permeate throughout the organization and its activities. In this regard, Shariah compliance is considered as falling within a higher priority category in relation to other identified risks. d. DEMAND RISK Decrease in demand for Modaraba s products may have an adverse impact on its operations and profitability. T Iron is a commodity and the industry is cyclical in nature. If there is an economic slowdown, demand for all T Irons is likely to decline. e. OPERATIONAL RISK Risk of damage to Property, Plant, Machinery and Equipment due to any unforeseen event could halt production and the ability of the Modaraba Company to service its clients. If the shutdown of the plant is for a long period of time, finished goods inventory may not be sufficient to meet customer demand. f. LIQUIDITY RISK Investors face possible risk of not being able to sell their certificates on the secondary market without adversely affecting the price. g. COMPETITOR RISK Since T Iron is a commodity, and there are various players in the market, competition could reduce selling prices and thus margins for the Company. This risk increases especially when there is excess production in the industry and low demand. h. CANCELLATION OF IJARAH AGREEMENT Ijarah agreement might be cancelled anytime, which would halt the operations of the Modaraba. i. FORCE MAJEURE The performance of the Modaraba may be affected on account of force majeure events which are as follows: Page 41 of 82

42 i. Natural events a) Any material effect of the natural calamities including fire, earthquake etc; b) Explosion; c) Epidemic or plague; d) Any event or circumstance of a nature or having an effect analogous to any of the foregoing. ii. Political Events a) Poor law and order situation due to political uncertainty, strikes, terrorism etc. j. UNDER SUBSCRIPTION RISK There is a risk that the IPO might be under subscribed on account of lack of investors interest in the Modaraba sector or any other reason specific to the nature of business of the Modaraba, the management company etc. and the required fund is not raised. k. CAPITAL MARKET RISK After being listed the price of the certificates of the Modaraba will be determined by the market behavior, macro economic events and performance of the Modaraba. The fluctuation of the value of the certificates will be affected by movement in securities market. l. ECONOMIC RISK The risk that performance of Modaraba may be affected on account of changes in economic conditions by factors such as market growth, interest rates, exchange rates etc. m. CREDIT RISK The risk that the counterparties will fail to oblige on their financial commitments. n. HUMAN RESOURCE RISK Increasing competition for skilled human resources may lead to high turnover causing deterioration in service standards or increased payroll cost, or both. o. POWER SUPPLY RISK Non availability of power would impact the Modaraba s ability to operate at optimal capacity. p. REGULATORY AND LEGAL RISK Any adverse revision in industrial/sector policies, Imposition/enhancement of duties, taxes, levies and other conditions may affect the Modaraba and its business. q. SECTOR RISK Page 42 of 82

43 The risk that macro economic and sector specific conditions change and the steel industry including demand for T Irons as a whole suffers. r. PRICING RISK The risk that the prices of raw materials may move adversely and affect the earnings of the Modaraba. s. SPECIALIZATION RISK Risk of producing only one type of product rather than a portfolio of products shrinks the market that is being catered to by Modaraba which will be adversely affected by any policy change to the sector. t. BUSINESS CONTINUITY RISK The risk that the Modaraba operations might cease after the useful life of the plant and machinery ends and/or the Ijarah Agreement is not extended. Note: It is stated that all material risk factors have been disclosed and nothing has been concealed to the best of our knowledge and belief with respect to this Prospectus COMMENCEMENT OF BUSINESS OF THE MODARABA The full fledged business of the Modaraba will be started after the present issue, issuance of commencement of business certificate by the Registrar Modaraba and completion of necessary formalities which is expected within thirty (30) days of the close of public subscription TRANSACTIONS WITH RELATED PARTY AND ASSOCIATED COMPANIES OF THE MODARABA The Modaraba will not engage in related party transactions except in the normal course of business and where any transactions are made such will be at arm s length basis in accordance with applicable laws. Page 43 of 82

44 6 FINANCIAL INFORMATION 6.1 AUDITOR S REPORT UNDER CLAUSE 1 OF SECTION 2 OF THE FIRST SCHEDULE TO THE PUBLIC OFFERING REGULATIONS, 2017 AND THE MODARABA COMPANIES AND MODARABA RULES, 1981 FOR THE PURPOSE OF INCLUSION IN THIS PROSPECTUS Page 44 of 82

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47 6.2 AUDITOR S CERTIFICATE ON PAID UP MODARABA FUND Page 47 of 82

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49 6.3 AUDITOR S CERTIFICATE ON BREAKUP VALUE OF MODARABA CERTIFICATE Page 49 of 82

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51 7 BOARD OF DIRECTORS AND ORGANIZATIONAL SETUP 7.1 DIRECTORS OF THE MODARABA MANAGEMENT COMPANY The current Board of Directors comprises of: Name and Address Mr. Khurram Javed House No. 130 F Street No. 05 Phase V DHA, Lahore (Marketing and Sales Executive) (CNIC# ) Muhammad Mubeen Tariq Mughal House no. 71 G Phase V, (DHA) Lahore (Corporate & Finance Executive) (CNIC# ) Designation Past Directorships Directorship in Other Companies Chairman/Director Nil 1. Mughal Iron & Steel Industries Limited (CEO/Director) 2. Indus Engineering (Private) Limited (CEO/Director) 3. Mughal Steel Re Rolling Industries (Private) Limited (CEO/Director) 4. Al Bashir (Private) Limited (Director) 5. Mughal International IMPEX Limited (CEO) 6. Mughal Energy Limited (CEO/Director) 7. Mughal Holding (Private) Limited (Director) CEO/Director 1. Mughal Energy Limited 1. Mughal Iron & Steel Industries Limited 2. Al Bashir (Private) Limited. 3. Mughal Steel Metallurgies Corporation Limited. 4. Indus Engineering (Private) Limited. 5. Kalabagh Steel Mills Corporation Limited. 6. Mughal Steel Re Rolling Industries (Private) Limited. 7. Mughal International IMPEX Limited. 8. Mughal Holding (Private) Limited 9. Mughal Steel Logistics (Private) Limited Fazeel Bin Tariq House no. 71 G Phase V, (DHA) Lahore (Production Executive) (CNIC# ) Director 1. Mughal Steel Re Rolling Industries (Private) Limited 1. Mughal Iron & Steel Industries Limited. 2. Indus Engineering (Private) Limited. Page 51 of 82

52 7.2 UNDERTAKING BY THE MODARABA AND ITS SPONSORS The Modaraba and its sponsors undertake: 1. That neither the Issuer nor its directors, sponsors or substantial shareholders have been holding the office of the directors, or have been sponsors or substantial shareholders in any company: i. which had been declared defaulter by the securities exchange or futures exchange; or ii. iii. whose TRE Certificate has been cancelled or forfeited by the Exchange, PMEX or any other registered stock exchange of Pakistan that existed prior to integration of stock exchanges pursuant to Integration Order number 01/2016 dated January 11, 2016 issued by the Commission due to noncompliance of any applicable rules, regulations, notices, procedures, guidelines etc. which has been de listed by the securities exchange due to non compliance of its regulations. which was de listed by the Exchange due to its non compliance of any applicable provision of PSX Regulation. 2. That none of the Sponsors, Major Shareholders, Directors or Management of the Modaraba as well as the Modaraba itself or its Associated Company / undertaking /Entity have been found guilty of being engaged in any fraudulent activity. The management Company have made full disclosure regarding any / or all cases in relation to involvement of the person named above in any alleged fraudulent activity i.e., pending before any Court of Law / Regulatory Body / Investigation Agency in or outside of the Country. 7.3 OVERDUE LOANS There are no overdue loans (local and/or foreign currency) on the Modaraba Company or its directors. The Modaraba Management Company, the Modaraba, its CEO, its directors and its sponsors, under the oath, undertake that they have no overdue payment to any financial institution. 7.4 DIVIDEND PAYOUT BY LISTED ASSOCIATED COMPANY Name of Company Dividend Mughal Iron & Steel Industries Limited Cash 26% 30% 5% Bonus 15% 7.5 PROFILE OF THE BOARD OF DIRECTORS Mr. Khurram Javed Chairman Mr. Khurram Javed holds a degree in MBA from the Coventry University, UK and a BSc. from the Lahore School of Economics in Pakistan. He is also the Chief Executive of Mughal Iron & Steel Industries Limited. He himself has been in the steel business since 2007 and since then has developed in depth knowledge and expertise relating to steel production, procurement of rawmaterial and & sales network. Page 52 of 82

53 Mr. Khurram Javed has successfully completed the Directors training Program as prescribed by Securities & Exchange Commission of Pakistan and a Certified Director from Institute of Chartered Accountants of Pakistan. Mr. Muhammad Mubeen Tariq Mughal Chief Executive Officer Mr. Mubeen has academic background in economics & finance and is currently pursuing his Executive MBA (Strategy) from London Business School (LBS). Mr. Mubeen also holds the position of Executive Director in Mughal Iron & Steel industries Limited and comes from a family which has over 50 years of expertise in the steel sector. He himself has been involved in the steel business since 2007 and is very well versed with the re rolling process and related activities. He has vast and in depth experience in financial management including treasury, investments, accounting, internal control systems, budgetary controls and corporate governance. At personal, professional as well as business level, Mr. Mubeen strongly believes in Social and Sustainable Development and he has proven his involvement in various social philanthropic activities. Mr. Mubeen has also successfully completed the Directors training Program as prescribed by Securities & Exchange Commission of Pakistan and is a Certified Director from Institute of Chartered Accountants of Pakistan. Mr. Fazeel Bin Tariq Director Mr. Fazeel holds a Bachelor s Degree in Business Administration from the Lahore School of Economics, Pakistan and a Postgraduate degree in Professional Accounting from the Swinburne University of Technology, Australia. He has also done Masters in Leadership from Northeastern University, Boston, USA. He has extensive knowledge and experience of manufacturing processes. He has played pivotal role in the successful operations of steel re rolling mills. Mr. Fazeel Bin Tariq has successfully completed the Directors training Program as prescribed by Securities & Exchange Commission of Pakistan and is a Certified Director from Institute of Chartered Accountants of Pakistan. Mr. Fazeel has been associated with Mughal Iron & Steel Industries Limited since 2011 as member of the Board of Directors and has extensive knowledge and experience of re rolling production processes. 7.6 PROFILE OF CHIEF FINANCIAL OFFICER Mr. Muhammad Zafar Iqbal is a Fellow Member of the Institute of Chartered Accountants of Pakistan. With over 16 years of experience in leadership positions, he has a vast experience of dealing in accounts, finance, taxation and company law related matters. He is currently also the Chief Financial Officer of Mughal Iron & Steel Industries Limited and Mughal Modaraba Management Limited. 7.7 PROFILE OF COMPANY SECRETARY Muhammad Fahad Hafeez is the Company Secretary of Mughal Modaraba Management Limited. Mr. Hafeez brings with him over 8 years of multidimensional experience within the financial and corporate sector. During this period, he has held senior positions in corporate, audit and financial management. He is currently also the Company Secretary of Mughal Iron & Steel Industries Limited. Mr. Hafeez is an fellow member of the Association of Certified Chartered Accountants. Page 53 of 82

54 7.8 PROFILE OF SHARIAH ADVISOR Mufti Imran Khan is the Shariah advisor of the Modaraba. He has done MA in Islamiat from University of Science and Technology Bannu, KPK and currently pursuing M.Phil in Islamic Commercial Law from IIUI, Islamabad. He holds vast experience in matters of Shariah teachings and advisory as he has been teaching various courses in Islamic Studies. Currently, he is teaching in Darul Ifta wal Ihsan, Islamabad. 7.9 ASSOCIATED LISTED COMPANIES Name of Company Mughal Iron & Steel Industries Limited Date of incorporation Registration No. Relationship 16/02/ Associated company due to common directorship 7.10 PERFORMANCE FOR THE LAST THREE YEARS OF ASSOCIATED LISTED COMPANY UNDER THE SAME MANAGEMENT Name of Company Mughal Iron & Steel Industries Limited Date of incorporation February 16, 2010 Registration number Date of Public Offer March 08,2015 Date of listing April 15, 2015 Amount of Public Offer 27,350,000 shares at Rs. 34/share inclusive of premium of Rs. 24/ per share. Name of securities Pakistan Stock Exchange Limited Exchange where the company is listed Date of completion of October 07, 2016 Project Financial Information Paid up Capital (Rs) 2,515,996,500 1,257,998,250 1,093,911,530 Total Equity (Rs) 6,637,098,287 4,235,429,579 3,404,958,432 Total Assets (Rs) 16,023,726,703 11,780,293,292 11,467,360,712 Total Liabilities(Rs) 9,386,628,416 7,544,863,713 8,062,402,280 Profit before taxation (Rs) 1,222,297,788 1,292,247, ,095,879 Profit after taxation (Rs) 990,759, ,411, ,166,169 Rate of cash dividends 26% 30% 5% paid Bonus shares issued (%) Nil Nil 15% Right shares issued (%) 100% at par Nil Nil Break up Value per share Earnings per share Return on Equity 14.93% 21.09% 19.36% Return on Assets 6.17% 7.58% 5.75% 8 Numbers have been restated where required Page 54 of 82

55 7.11 FINANCIAL PERFORMANCE OF MUGHAL STEEL METALLURGIES CORPORATION LIMITED The Modaraba will undertake on Ijarah the mill from Mughal Steel Metallurgies Corporation Limited ( MSMCL ) for production of T Iron. MSMCL is engaged in trading of steel products, production of T Iron and Ferro Alloys. The Financial performance of the MSMCL is as follows: Name of Company Date of incorporation Registration number Mughal Steel Metallurgies Corporation Limited 24 Jun 08 Financial Information Paid up Capital (Rs) 11,140,000 11,140,000 11,140,000 Total Equity (Rs) 31,428,298 22,906,173 7,548,552 Total Assets (Rs) 909,763, ,637, ,705,228 Total Liabilities(Rs) 878,335, ,731, ,156,676 Profit before taxation (Rs) 20,799,739 24,822,680 31,075,636 Profit after taxation (Rs) 8,522,125 15,357,621 31,075,636 Rate of cash dividends paid Nil Nil Nil Bonus shares issued (%) Nil Nil Nil Right shares issued (%) Nil Nil Nil Break up Value per share Earnings per share Return on Equity 27.12% 67.05% % Return on Assets 0.94% 4.76% 15.26% *Face value of shares is Rs. 100 per share. FINANCIAL PERFORMANCE OF THE RE ROLLING MILL BEING UNDERTAKEN ON IJARAH Rs. in Millions Sales Gross Profit Operating Expenses Profit before tax The above numbers present performance of the re rolling mill exclusively ASSOCIATES OF THE COMPANY DUE TO COMMON DIRECTORSHIP Name of Company Mughal Steel Metallurgies Corporation Limited Mughal International Impex Limited Mughal Energy Limited Mughal Steel Re Rolling Industries (Private)Limited Kalabagh Steel Mills Corporation Indus Engineering (Private) Limited Al Bashir Private Limited Mughal Holding Private Limited Mughal Steel Logistics (Private) Limited Mughal Iron & Steel Industries Limited Page 55 of 82

56 7.13 ADMINISTRATION AND MANAGEMENT OF MUGHAL MANUFACTURING MODARABA i. The Modaraba Company shall maintain a Register of Modaraba Certificate holders and only certificate holders registered in the said Register shall be deemed to be owners thereof. ii. iii. iv. The Modaraba Company shall keep separate books of accounts relating to its own income and expenditure and to income and expenditure of and connected with the Modaraba or other Modarabas. The said books of accounts shall be open to inspection by the directors and auditors of the Modaraba Company and the auditors of the Modarabas. The Modaraba Company shall, within two months of the end of first half of the financial year, prepare and submit the financial position of the Modaraba whether audited or otherwise, besides any other statements or information that the board of the Modaraba Company may like to include, to the Registrar Modarabas and to all registered certificate holders. Within three months of the close of the accounting year of the Modaraba, the Modaraba Company shall prepare and circulate to the holders of Modaraba certificates: a) the annual balance sheet and profit and loss account; b) a report of the auditors on the balance sheet and profit and loss account; c) a report by the Modaraba Company on the activities and business prospects of the Modaraba and the profits for distribution to the certificate holders; d) any other statement or information as required under the Code of Corporate Governance and/or Listing Regulations; and e) any other statement or information that the Board of the Modaraba Company may like to include. v. Fazal Mahmood & Company, Chartered Accountants are the auditors of the Modaraba Company. vi. vii. viii. ix. Ilyas Saeed & Company, Chartered Accountants have given their consent to act as auditors of the Modaraba. The Registrar Modarabas has approved their appointment as the auditors of the Mughal Manufacturing Modaraba for the first accounting year at a fee of Rs. 300,000/. The Modaraba s auditors will be appointed and approved on an annual basis as required under Modaraba Ordinance and Rules. The accounting record of Mughal Manufacturing Modaraba will be kept on the basis of fiscal year ending on the last day of June in each financial year. The Modaraba Company will provide management services and charge a management fee not exceeding 10% per annum of the net annual profit of the Modaraba. The net profit shown in the annual audited profit & loss account of the Modaraba shall form the basis for calculating the management fee. Page 56 of 82

57 x. The Modaraba Company shall be authorized to do all other acts which in its opinion may be necessary to promote the interest of the Certificate holders based on investment climate in Pakistan and elsewhere and the condition of the capital market and as may be warranted by commercial consideration in accordance with the provisions of the Modaraba Ordinance, 1980, Modaraba Rules, 1981 and Prudential Regulations for Modaraba SAFEGUARDS i. The directors of the Modaraba Company shall exercise strict vigilance over the business of the Modaraba. All decisions will be made on sound business principles and based on the best possible advice. ii. iii. iv. Suitably qualified and experienced personnel for the Modaraba will be engaged by the Modaraba Company for Modaraba. Separate bank accounts will be maintained by the Modaraba Company in respect of the Modaraba. These will be operated by authorized directors and officers of the Modaraba Company. Collection accounts for subscription towards the Modaraba Certificates will be operated singly /jointly by any authorized directors of the Modaraba Company. v. The Modaraba shall not enter into any business transaction with any person, except in connection with the normal business of the Modaraba. vi. vii. viii. ix. All business dealings, transactions shall be conducted in accordance with the applicable laws and regulations in Pakistan but no transactions will be entered into which are in any manner in conflict with injunctions of Islam or which involves the element of Riba. Reasonable financial and business prudence shall be observed in resource mobilization, investments and financial advisory services. Risks will be managed on sound professional basis. All the Modaraba activities and transactions shall be in conformity with the rules and regulations issued by the Registrar Modarabas, the SECP and/or any other relevant authority from time to time. iii. iv. The Modaraba shall comply with all the conditions of the Modaraba Authorization Certificate of Registrar Modaraba. In order to ensure adherence with Shari ah in all its business transactions, the Modaraba has appointed a Shari ah Advisor in compliance with the Shari ah Compliance and Shari ah Audit Mechanism for Modarabas, issued by the Registrar Modaraba. Page 57 of 82

58 7.15 COMPLIANCE WITH PRUDENTIAL REGULATIONS The chief executive and directors of the Modaraba Company will ensure that the business transactions undertaken by the Modaraba are in compliance with the Prudential Regulations for Modarabas (as amended from time to time) issued by the SECP COMPLIANCE WITH LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2017 The Modaraba will ensure compliance of all the requirements applicable to it under the Listed Companies (Code of Corporate Governance, CCG ) 2017, including but not limited to composition of the board, powers of the board, formation of Audit and Human Resource & Remuneration committees and other requirements under the CCG immediately upon listing on the Pakistan Stock Exchange Limited. All three directors of the Modaraba Company as disclosed in section 7.5 of the Prospectus have completed the Directors training Program as prescribed by Securities & Exchange Commission of Pakistan and are Certified Directors from Institute of Chartered Accountants of Pakistan INTEREST OF THE MODARABA COMPANY, ASSOCIATED CONCERNS, ITS DIRECTORS AND OFFICERS The Modaraba Company is interested to the extent of its capital investment in the Modaraba, in management fee to the extent of 10% of the annual profits of the Modaraba and reimbursement of expenses incurred by it on behalf of the Modaraba. The directors and their relatives may also be deemed to be interested in the dividends payable on certificates of Mughal Manufacturing Modaraba that may be acquired by them. The chief executive / directors / officers appointed to work as full time in the management committee of the Modaraba will be paid remuneration according to the terms of their appointment. No other directors, except for other executive directors working full or part time in the Modaraba Company, shall be entitled to a monthly remuneration. However all other directors will be entitled to the fees payable for attending meeting of the board of directors. Except for the above, the promoters and directors of the Modaraba Company or the Modaraba are not interested in any property or assets of the Modaraba BENEFITS TO PROMOTERS AND OFFICERS Except as disclosed elsewhere, no amount or benefit has been paid or given or is intended to be paid or given to any promoter, director or to any officer of the Modaraba Company from the funds of Modaraba SUBSIDIARY COMPANIES The Modaraba has no subsidiary company INVESTMENT IN ASSOCIATED COMPANIES The Modaraba has no investment in any of its associated companies. Page 58 of 82

59 7.21 PENAL PROVISIONS The provisions of section 31 and 32 of the Modaraba Ordinance shall ipso facto apply to the Modaraba Management Company, its chief executive and directors for contravening any provision of this Prospectus. Page 59 of 82

60 8 MISCELLANEOUS 8.1 NAME OF MODARABA Mughal Manufacturing Modaraba 8.2 PRINCIPAL PLACE OF BUSINESS Noor Road Badami Bagh, Lahore, Pakistan Ph # Fax # MODARABA COMPANY AND ITS REGISTERED OFFICE Mughal Modaraba Management Limited 31 A, Shadman I, Lahore, Pakistan Ph # Fax # AUDITORS OF THE MODARABA Ilyas Saeed & Company Chartered Accountants A 4, Sea Breeze Homes Shershah Block, New Garden Town Lahore, Pakistan 8.5 AUDITORS OF THE MODARABA MANAGEMENT COMPANY Fazal Mahmood & Company Chartered Accountants 147 Shadman Colony I Lahore, Pakistan 8.6 LEGAL ADVISORS OF THE MODARABA MANAGEMENT COMPANY Mirza Bilal Zafar, Advocate High Court Office# 104, 1 st floor, Ali plaza, 14 Temple Road Lahore, Pakistan Page 60 of 82

61 8.7 LEGAL ADVISORS OF THE ISSUE Muhammad Younas & Associates Ejaz Law Associates, Fazal Miran Chohan Building, 4 A Mozang Road, Lahore, Pakistan 8.8 CONSULTANT TO THE ISSUE AKD Securities Limited Office 602, Continental Trade Centre, Block 8, Clifton Karachi, Pakistan 8.9 BANKERS TO THE MODARABA Summit Bank Limited MCB Bank Limited 8.10 BANKERS TO THE MODARABA MANAGEMENT COMPANY Faysal Bank Limited Summit Bank Limited 8.11 BANKERS TO THE ISSUE Allied Bank Limited Askari Bank Limited Bank Alfalah Limited BankIslami Pakistan Limited Dubai Islamic Bank Limited Faysal Bank Limited Habib Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited Summit Bank Limited Soneri Bank Limited United Bank Limited 8.12 COMPUTER BALLOTERS AND CERTIFICATES REGISTRAR THK Associates (Pvt) Limited 1 ST floor, 40 C, Block 6, P.E.C.H.S., Karachi, Pakistan Page 61 of 82

62 8.13 MATERIAL CONTRACTS IJARAH AGREEMENT Ijarah agreement dated 11 th day of January 2018 for Ijarah of small section re rolling mill has been entered into between Modaraba through its Management Company and Mughal Steel Metallurgies Corporation Limited (MSMCL) (an associated company due to common directorship). The agreement is irrevocable for the first ten years and can only be cancelled by the Modaraba Company during that tenure. After ten years, the agreement can be mutually extended or cancelled. The monthly rental will be Rs.500,000 which will increase 10% per annum. Refundable security will be Rs.3,000,000. The mill to be taken on Ijarah is located at Noor Road, Badami Bagh, Lahore. All the dues / expenses / government taxes related to the running of the re rolling mill including but not limited to security deposit, Ijarah rent, electricity, gas, routine repair & maintenance, income tax, sales tax or any other dues will be borne by the Modaraba from the date of transfer of possession of the re rolling unit which will be subject to official listing of Modaraba. MSMCL has also undertaken that the land of the re rolling mill measuring approximately 9 Kanal and 9 Marla including the vacant area, if any, will remain under sole possession and usage of Mughal Manufacturing Modaraba during the period of Ijarah agreement and during this period neither the owner nor any third party on behalf of the owner shall be allowed to use such land or any part. Since the mill is being undertaken on operating lease (Ijarah) from MSMCL the certificate holders of the Modaraba will have no right or claim on the assets of MSMCL including the re rolling mill in case MSMCL is wound up. VALUATION REPORT ON USEFUL LIFE The Plant and Machinery consisting of the re rolling mill along with ancillary equipment that is being rented by the Modaraba through the Ijarah agreement dated 11 th January 2018 has been assessed and valued by M/s. Negotiators (Approved Valuator of Pakistan Bank Association). The valuer in its report dated January 08, 2018 [Ref ACF/2K18 (2)] has assessed the production capacity of the plant at 24,000 MT per annum and a useful life of 20 years subject to routine maintenance and repair. TAKAFUL/INSURANCE ARRANGEMENT As per the arrangement under the Ijarah Agreement between the Modaraba through its Management Company and Mughal Steel Metallurgies Corporation Limited (the Owner ), the Owner will make arrangements for takaful/insurance. The owner has arranged for fire and burglary insurance from Security General Insurance Company Limited vide policy number COR/T/02/25471/02/18 which covers factory building and plant & machinery. The annual renewal of the insurance will be the responsibility of the Owner for the tenor of the Ijarah agreement. In case the business is disrupted on account of any unforeseen circumstances the Modaraba intends to secure tolling arrangements from third party vendors until the plant and machinery are restored to operational condition. Page 62 of 82

63 UNDERWRITING AGREEMENTS Underwriting Agreements for the present issue of Rs.100,000,000 has been entered into between the Modaraba Company and the Underwriters as under: Name of underwriters No. of Certificates Amount (Rs.) Date of Agreement 1 AKD Securities Limited 5,000,000 50,000, rd February Dawood Equities Limited 5,000,000 50,000, rd February 2018 Total 10,000,00 100,000, INSPECTION OF DOCUMENTS AND CONTRACTS Copies of Memorandum and Articles of Association of the Management Company, the Registration Certificate, the Religious Board Certificate, Registrar s permission to float the Modaraba, the Auditors Certificates, copies of the agreements referred to in this Prospectus may be inspected during the usual business hours on any working day at the Registered Office of the Management Company from the date of publication of this Prospectus till the closing of the subscription list LEGAL PROCEEDINGS There are no legal proceedings against the Modaraba Company nor did the Company initiate any legal proceedings against any party CERTIFICATE OF RELIGIOUS BOARD The Religious Board constituted under Section 9 of the Modaraba Ordinance has certified that the business proposed to be undertaken by Mughal Manufacturing Modaraba as per the draft Prospectus submitted by Mughal Modaraba Management Limited is not opposed to the injunctions of Islam. The Registrar Modaraba after obtaining the Certificate from Religious Board had issued Modaraba Authorization Certificate with certain conditions as defined in para 1.7 of this Prospectus FINANCIAL YEAR Financial year of the Mughal Manufacturing Modaraba will be from July 01 to June REVALUATION OF ASSETS The Modaraba has not re valued any of its assets and no such provisions have been made in the accounts CAPITALIZATION Since the Modaraba has not yet commenced commercial operations, therefore, it has not capitalized any of its reserves. Page 63 of 82

64 8.20 FULFILLMENT OF THE REQUIREMENTS OF VARIOUS CLAUSES OF FOURTH SCHEDULE OF THE MODARABA COMPANIES AND MODARABA RULES, 1981 It is hereby stated that under clause 18 of the fourth Schedule of the Modaraba Rules, no certificate has been issued or agreed to be issued by the Modaraba, otherwise than in cash. As required under Clause 19, 20 & 26 of the said schedule, it is clarified that no property has so far been purchased or is proposed to be purchased or acquired and that no business has so far been carried out by the Modaraba. It is also confirmed that no amount has been paid or benefit given to the Modaraba Company. The requirements of Clauses 21 through 25 of the Fourth Schedule under reference have been suitably dealt MEMORANDUM OF ASSOCIATION The Memorandum of Association, inter alia, contains the objects for which the Management Company was incorporated and the business which the Management Company is authorized to undertake. A copy of the Memorandum of Association is annexed to this Prospectus and will be attached with every issue of the Prospectus except the one that is released in newspapers as advertisement. Page 64 of 82

65 9 APPLICATION AND ALLOTMENT INSTRUCTIONS GENERAL INSTRUCTIONS 9.1 ELIGIBLE INVESTORS INCLUDE: i. Pakistani citizen resident in or outside Pakistan or persons holding two nationalities including Pakistani Nationality; ii. Foreign nationals whether living in or outside Pakistan; iii. Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their respective constitutive documents and existing regulations, as the case may be); iv. Mutual Funds, Provident / Pension / Gratuity Funds / Trusts (subject to the terms of their respective Trust Deeds and existing regulations); and v. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan. 9.2 APPLICATION MUST BE MADE ON THE COMMISSION S APPROVED APPLICATION FORM OR A LEGIBLE PHOTOCOPY THEREOF ON A PAPER OF A4 SIZE WEIGHING AT LEAST 62 GM OR THROUGH E FORM AVAILABLE AT CES AND THE BANKERS TO THE ISSUE THAT ARE PROVIDING E IPO FACILITIES IN THIS IPO. BANK ALFALAH LIMITED (BAFL), SUMMIT BANK LIMITED (SMBL) AND UNITED BANK LIMITED (UBL) ARE THE BANKS PROVIDING E IPO FACILITIES IN THIS IPO. CDC S E IPO FORM WILL BE AVAILABLE AT DURING THE SUBSCRIPTION PERIOD. The accountholders of BAFL can use BAFL net banking to submit their applications online via link: The accountholders of SMBL can use SMBL net banking to submit their applications online via link: The accountholders of UBL can use UBL net banking to submit their applications online via link: COPIES OF THE PROSPECTUS Copies of this Prospectus and applications forms can be obtained from the Trading Rights Entitlement Certificate (TREC) of Pakistan Stock Exchange Limited, the Bankers to the Issue and their Branches and the registered office of the management company. The Prospectus and the Modaraba Certificate Subscription Form can also be downloaded from the following websites: and Modaraba Certificates shall be issued only in the book entry form. The applicants therefore must provide their CDS Account numbers in the subscription form. Page 65 of 82

66 Investors who do not have CDS account may visit for information and details. For further guidance and queries regarding CES and opening of CDC account, investors may contact CDC at phone number (CDCPL) and Names and Addresses must be written in full block letters, in English, and should not be abbreviated. 9.6 All applications must bear the name and signatures corresponding with that recorded with the applicant's banker. In case of difference of signatures with the bank and Computerized National Identity Card ( CNIC ) or National Identity Card for Overseas Pakistanis ( NICOP ) or Passport as the case maybe, both the signatures should be affixed on the application form. 9.7 APPLICATIONS MADE BY INDIVIDUAL INVESTORS i. An attested photocopy of the computerized NIC ( CNIC ) should be enclosed and the CNIC number should be written against the name of the applicant. Copies of CNIC can be attested by any Federal/Provincial Government gazette officer, councilor, oath Commissioner or Head Master of High School etc. ii. Original CNIC, along with one attested photocopy, must be produced for verification to the Banker to the issue and the applicant s banker (if different from the Banker to the issue) at the time of presenting an application. The attested photocopy will, after verification, be retained by the branch along with the application. 9.8 APPLICATION MADE BY INSTITUTIONAL INVESTORS i. Applications made by companies, corporate bodies, mutual funds, provident/pension/gratuity funds/trusts and other legal entities must be accompanied by an attested photocopy of their memorandum and articles of association or equivalent instrument/document. Where applications are made by virtue of power of attorney, the same should also be submitted along with the Application Form. Any federal/provincial government gazette officer, counselor, bank manager, oath Commissioner and head master of high school etc. can attest copies of such documents. ii. Attested photocopies of the documents mentioned in paragraph 9.8(i) must be produced for verification to the Banker to the Issue and the applicant s banker (if different from the banker to the issue) at the time of presenting the application. The attested copies, will after verification, be retained by the bank branch along with the application. 9.9 ADDITIONAL INSTRUCTIONS FOR INVESTORS Page 66 of 82

67 i. Only one application will be accepted against each account, however, in case of joint accounts, one application may be submitted in the name of each joint account holder. ii. iii. iv. Joint applications in the name of more than two persons will not be accepted. In case of joint application each applicant must sign the application form and submit attested copies of their CNICs. The certificates will be credited to the CDS account mentioned on the face of form and where any amount is refundable, in whole or in part, the same will be refunded by cheque or other means by post, or through the bank where the application was submitted, to the person named first on the application form, without interest, profit, or return. Please note that application will be considered as a single application for the purpose of allotment of certificates. Subscription money must be paid by cheque drawn on applicants own bank account or pay order/bank draft/ or by transfer of funds to one of the Bankers to the Issue in favor of A/C IPO MUGHAL MANUFACTURING MODARABA and crossed A/C PAYEE ONLY. For the application made through pay order/bank draft, it would be permissible for a Banker to the Issue to deduct the bank charges while making refund of subscription money to unsuccessful applicants through pay order/bank draft individually for each application. v. The applicant should have at least one bank account with any of the commercial banks. vi. vii. viii. ix. The applicants not having a bank account at all (non account holders) are not allowed to submit application for subscription of certificates. Applications are not to be made by minors and/or persons of unsound mind. Applicants should ensure that the bank branch, to which the application is submitted, completes the relevant portion of the application form. Applicants should retain the bottom portion of their application forms as provisional acknowledgment of submission of their applications. This should not be construed as an acceptance of the application or a guarantee that the applicant will be allotted the number of certificates for which the application has been made. x. Making of any false statements in the application or willfully embodying incorrect information therein shall make the application fictitious and the applicant or the bank shall be liable for legal action. xi. Bankers to the issue are prohibited to recover any charges from the subscribers for collecting subscription applications. Hence, the applicants are advised not to pay any extra charges to the Bankers to the issue. Page 67 of 82

68 xii. xiii. It would be permissible for a Banker to the Issue to refund subscription money to unsuccessful applicants having an account in its bank by crediting such account instead of remitting the same by cheque, pay order or bank draft, applicants should, therefore, not fail to give their bank account numbers. Submission of false and fictitious applications is prohibited and such Application Money may be forfeited under section 87(8) of Securities Act, ADDITIONAL INSTRUCTIONS FOR FOREIGN/NON RESIDENT INVESTORS a) In case of foreign investors who are not individuals, applications must be accompanied with a letter on applicant's letterhead stating the legal status of the applicant, place of incorporation and operations and line of business. A copy of Memorandum of Association or an equivalent document should also be enclosed, if available. Where applications are made by virtue of Power of Attorney, the same must be lodged with the application. Copies of these documents can be attested by the bank manager in the country of applicant's residence. b) Foreign / Non resident investors should follow payment instructions given in Section 2.12 of this Prospectus BASIS OF ALLOTMENT i. The basis and conditions of transfer of certificates to the General Public shall be as follows: a) The minimum amount of application for subscription of 500 certificates is Rs. 5,000/ (Issue Price x 500 certificates). Application for amount below the minimum value shall not be entertained. b) Application of certificates must be made for 500 certificates or in multiple thereof only. Applications, which are neither 500 certificates nor for multiple thereof, shall be rejected. c) Allotment/ transfer of certificates to successful applicants shall be made in accordance with the allotment criteria/ instructions disclosed in the Prospectus. d) The allotment of certificates shall be subject to scrutiny of applications in accordance with the criteria disclosed in the Prospectus and / the instructions by the Securities and Exchange Commission of Pakistan. e) Applications, which do not meet the above requirements, or applications which are incomplete will be rejected. The applicants are, therefore, required to fill in all the data fields in the application form. Page 68 of 82

69 f) The Modaraba Company will credit the respective CDS accounts of successful applicants CODE OF BANKERS TO THE ISSUE Code No. Bank 01. Allied Bank Limited 02. Askari Bank Limited 03. Bank Alfalah Limited* 04. BankIslami Pakistan Limited 05. Dubai Islamic Bank Limited 06. Faysal Bank Limited 07. Habib Bank Limited 08. JS Bank Limited 09. MCB Bank Limited 10. Meezan Bank Limited 11. Summit Bank Limited* 12. Soneri Bank Limited 13. United Bank Limited* * These banks are providing e IPO facility in this IPO CODE OF OCCUPATION Code No. Occupation Code No. Occupation 01. Business 06. Professional 02. Business Executive 07. Student 03. Service 08. Agriculturist 04. Housewife 09. Industrialist 05. Household 10. Others 9.14 NATIONALITY CODE Code No. Occupation Code No. Occupation 001. U.S.A 005. Oman 002. U.K 006. Bangladesh 003. U.A.E 007. China 004. K.S.A 008. Bahrain 009. Other 9.15 PUBLIC SUBSCRIPTION THROUGH e IPO: Page 69 of 82

70 e IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e IPO. The following two systems are available for e IPOs: (i) Centralized e IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) in collaboration with 1Link (G) Limited has developed a Centralized e IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link ( Payment of subscription money can be made through 1LINK s member banks available for CES, list of which is available on the above mentioned website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost one time activity and a self registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), International Bank Account Number (IBAN) with any of the commercial bank, address, mobile phone number and CDS Account (Investor Account or sub Account) may registered themselves with CES. Investors who do not have CDS account may visit for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: (CDCPL) and e mail: info@cdcpak.com. or Mr. Farooq Ahmed Butt at Phone and farooq_butt@cdcpak.com. For further detail on CES, please refer to para 2.9. (ii) e IPO facilities by Bankers to the Issue: Currently, Bank Alfalah Limited (BAFL), Summit Bank Limited (SMBL) and United Bank Limited (UBL) are providing e IPO facilities to their respective accountholders. BAFL account holders can use BAFL Net Banking to submit their application via link SMBL account holders can use SMBL Net Banking to submit their application via link and UBL account holders can use UBL Net Banking to submit their application via link Investors who are registered with CES or account holders of BAFL, SMBL or UBL can submit their applications through the above mentioned links 24 hours a day during the subscription period which will close at midnight on July 12 th, Payments for CES can be made through the following channels and banks Internet Banking Mobile App Automated Teller Machine Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Askari Bank Limited Habib Bank Limited Meezan Bank Limited Bank Alfalah Limited Meezan Bank Limited Page 70 of 82

71 BankIslami Pakistan Limited Faysal Bank Limited Habib Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited 9.16 BENEFITS OF e IPO: e IPO has the following benefits: i. It enables the investors to make application for subscription of certificates through the internet without going to the bank, and waiting in long queues. ii. iii. iv. It is efficient and simultaneously facilitative for both the Issuer and the investors. It is available for use 24 hours during the subscription period. If you are registered with CES or accountholder of a bank providing e IPO facility, you may get SMS for new IPOs. v. By applying through CES you can also track your application status. Page 71 of 82

72 10 SIGNATORIES TO THE PROSPECTUS Khurram Javed (Chairman / Director) Muhammad Mubeen Tariq Mughal (CEO / Director) Fazeel Bin Tariq (Director) Signed by the above in the presence of witnesses: Muhammad Fahad Hafeez Tahir Maqsood (Company Secretary) (Manager Corporate Affairs) CNIC# CNIC# Lahore Lahore Page 72 of 82

73 11 MEMORANDUM OF ASSOCIATION OF MUGHAL MODARABA MANAGEMENT LIMITED Page 73 of 82

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81 12. MODARABA CERTIFICATE SUBSCRIPTION FORM Page 81 of 82