Letter of Offer March 20, 2013 For our Eligible Equity Shareholders only ALOK INDUSTRIES LIMITED Our Company was incorporated by way of a certificate of incorporation dated March 12, 1986 as Alok Textile Private Limited, a private limited company under the provisions of the Companies Act, 1956, as amended. Subsequently, by way of a fresh certificate of incorporation dated November 17, 1992, the name of our Company was changed to Alok Textiles Industries Private Limited. Our Company was thereafter, by way of a certificate of incorporation dated February 11, 1993, converted into a public limited company. Consequently, by way of a fresh certificate of incorporation dated November 8, 2000, our Company s name was changed to Alok Industries Limited. Registered Office: 17/5/1 and 521/1, Village Rakholi / Saily, Silvassa 396 230, Union Territory of Dadra & Nagar Haveli, India Corporate Office: Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai 400 013, Maharashtra, India Tel: +91 22 2499 6200 / 6500; Fax: +91 22 2493 6078 Contact Person: Compliance Officer, Mr. K. H. Gopal, (Executive Director & Company Secretary) E-mail: alokrights@alokind.com Website: www.alokind.com PROMOTERS OF OUR COMPANY MR. ASHOK JIWRAJKA, MR. DILIP JIWRAJKA, AND MR. SURENDRA JIWRAJKA FOR PRIVATE CIRCULATION TO THE ELIGIBLE EQUITY SHAREHOLDERS OF ALOK INDUSTRIES LIMITED ( COMPANY OR ISSUER ) ONLY ISSUE OF 55,08,46,238 EQUITY SHARES WITH A FACE VALUE OF `10 EACH ( EQUITY SHARES ) FOR CASH AT PAR PER EQUITY SHARE FOR AN AGGREGATE AMOUNT OF ` 550.85 CRORE ON A RIGHTS BASIS TO THE ELIGIBLE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 2 EQUITY SHARE(S) FOR EVERY 3 FULLY PAID-UP EQUITY SHARE(S) HELD BY THE ELIGIBLE EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON FEBRUARY 19, 2013 ( ISSUE ). THE ISSUE PRICE IS ONE (1) TIME THE FACE VALUE OF THE EQUITY SHARES. FOR FURTHER DETAILS, PLEASE REFER TO TERMS OF THE ISSUE ON PAGE 73. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in the Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in the Issue. For taking an investment decision, Investors must rely on their own examination of the Company and the Issue including the risks involved. The securities being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India ( SEBI ) nor does SEBI guarantee the accuracy or adequacy of this Letter of Offer. Investors are advised to refer to the section Risk Factors on page xvi before making an investment in this Issue. THE COMPANY S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares are listed on the BSE Limited ( BSE ) and the National Stock Exchange of India Limited ( NSE ). We have received in-principle approvals from BSE and NSE for listing the Equity Shares to be allotted in the Issue vide their letters dated November 2, 2012 and October 23, 2012, respectively. For the purposes of the Issue, the Designated Stock Exchange is BSE. LEAD MANAGERS TO THE ISSUE REGISTRAR TO THE ISSUE SBI Capital Markets Limited 202, Maker Tower E, Cuffe Parade, Mumbai 400 005 Maharashtra, India Tel: +91 22 2217 8300 Fax: +91 22 2218 8332 Email: alokrights@sbicaps.com Investor Grievance E-mail.: investor.relations@sbicaps.com Website: www.sbicaps.com Contact Person: Ms. Shikha Agarwal SEBI Registration No: INM000003531 Axis Capital Limited 1, 1st floor, Axis House, C-2 Wadia International Centre, P.B. Marg, Worli, Mumbai- 400025 Maharashtra, India Tel: +91 22 4325 3101 Fax: +91 22 4325 3000 Email: alokrights@axiscap.in Investor Grievance E-mail.: complaints@axiscap.in Website: www.axiscapital.co.in Contact Person: Ms. Dipali Dalal SEBI Registration No: INM000012029 LEAD MANAGERS TO THE ISSUE Centbank Financial Services Limited 15-16 Bajaj Bhavan, 1 st Floor, Opp. Inox Multiplex, Nariman Point, Mumbai - 400021 Maharashtra, India Tel: +91 22 2202 2788/5018 Fax: + 91 22 2202 5043 Email: alok.rights@cfsl.in Investor Grievance E-mail: mbd@cfsl.in Website: www.cfsl.in Contact Person: Mr. Rakesh K. Singh SEBI Registration No: INM000011781 Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup West, Mumbai 400 078, Maharashtra, India Tel: +91 22 2596 7878 Fax: +91 22 2596 0329 E-mail: alok.rights@linkintime.co.in Investor Grievance E-mail: alok.rights@linkintime.co.in Website: www.linkintime.co.in Contact Person: Mr. Pravin Kasare SEBI Registration No: INR000004058 Emkay Global Financial Services Limited The Ruby, 7 th Floor, Senapati Bapat Marg, Dadar (West), Mumbai 400 028, Maharashtra, India Tel: +91 22 66121212 Fax: +91 22 66121299 Email:alok.rights@emkayglobal.com Investor Grievance E-mail: ibg@emkayglobal.com Website: www.emkayglobal.com Contact Person: Mr. Rajesh Ranjan SEBI Registration No: INM000011229 Fortune Financial Services (India) Limited K.K. Chambers, 2 nd Floor, Sir. P. T. Marg, Fort, Mumbai 400 001 Maharashtra, India Tel: +91 22 2207 7931 Fax: +91 22 2207 2948 Email: alok.rights@fortune.co.in Investor Grievance Email: mbdcompliance@fortune.co.in Website: www.fortune.co.in Contact Person: Mr. Abhishek Kumar Sureka SEBI Registration No.: INM000000529 IDBI Capital Market Services Limited 3 rd Floor, Mafatlal Centre, Nariman Point, Mumbai 400 021 Maharashtra, India Tel: +91 22 4322 1212 Fax: +91 22 2285 0785 E-mail: alok.rights@idbicapital.com Investor Grievance Email: redressal@idbicapital.com Website:www.idbicapital.com Contact Person: Mr. Swapnil Thakur SEBI Registration No.: INM000010866 ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON March 30, 2013 (Saturday) April 20, 2013, (Saturday) April 27, 2013 (Saturday) 1 The merchant banking business of Enam Securities Private Limited has vested with Axis Capital Limited which has been given SEBI registration under the SEBI (Merchant Bankers) Regulations, 1992, as amended in lieu of earlier registration.
TABLE OF CONTENTS SECTION I GENERAL... I DEFINITIONS AND ABBREVIATIONS... I NOTICE TO OVERSEAS SHAREHOLDERS... IX CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCY OF PRESENTATION... XII FORWARD LOOKING STATEMENTS... XIV SECTION II - RISK FACTORS... XVI SECTION III INTRODUCTION... 1 SUMMARY OF THE ISSUE... 1 SUMMARY FINANCIAL INFORMATION... 2 GENERAL INFORMATION... 13 CAPITAL STRUCTURE... 19 OBJECTS OF THE ISSUE... 27 SECTION IV - STATEMENT OF TAX BENEFITS... 34 SECTION V - OUR MANAGEMENT... 35 SECTION VI FINANCIAL INFORMATION... 45 STOCK MARKET DATA FOR EQUITY SHARES... 46 MATERIAL DEVELOPMENTS... 49 ACCOUNTING RATIOS AND CAPITALISATION STATEMENT... 55 SECTION VII LEGAL AND OTHER INFORMATION... 57 OUTSTANDING LITIGATIONS... 57 GOVERNMENT APPROVALS... 58 OTHER REGULATORY AND STATUTORY DISCLOSURES... 61 SECTION VIII OFFERING INFORMATION... 73 TERMS OF THE ISSUE... 73 SECTION IX STATUTORY AND OTHER INFORMATION... 110 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION... 110 DECLARATION... 113
SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS In this Letter of Offer, unless the context otherwise requires, the terms defined and abbreviations expanded below shall have the same meaning as stated in this section. References to statutes, rules, regulations, guidelines and policies will be deemed to include all amendments and modifications notified thereto. Further, unless otherwise indicated or the context otherwise requires, all references to Alok Industries Limited or to the Company is to Alok Industries Limited, references to we, us or our is to Alok Industries Limited and its Subsidiaries and Joint Ventures, on a consolidated basis, and references to you are to the prospective investors in the Equity Shares. Conventional and General Terms/ Abbreviations Term AGM Air Act AS AIFs BSE CARE CDSL Companies Act Depositories Act Depository Depository Participant/ DP DIN DP ID EBITDA EGM EPS FDI FEMA FII Financial Year/ Fiscal/ FY Description Annual General Meeting Air (Prevention and Control of Pollution) Act, 1981, as amended Accounting Standards issued by the Institute of Chartered Accountants of India Alternative investment funds as defined in and registered with SEBI under the SEBI (Alternative Investments Funds) Regulations, 2012 BSE Limited Credit Analysis & Research Limited Central Depository Services (India) Limited Companies Act, 1956, as amended Depositories Act, 1996, as amended A depository registered with SEBI under Depositories Act A depository participant as defined under the Depositories Act Director Identification Number Depository Participant Identity Earnings before Interest, Tax, Depreciation and Amortisation Extra-Ordinary General Meeting Earnings per Share Foreign Direct Investment Foreign Exchange Management Act, 1999, as amended, including the regulations framed thereunder Foreign Institutional Investor as defined under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as amended, registered with SEBI under applicable laws in India Period of 12 months ended on March 31 of that particular year i
Term FVCIs GAAP GoI HUF ICAI Indian Boiler Act ISIN Description Foreign Venture Capital Investors as defined under the SEBI (Foreign Venture Capital Investors) Regulations, 2000, as amended, registered with SEBI under applicable laws in India Generally Accepted Accounting Principles Government of India Hindu Undivided Family Institute of Chartered Accountants of India Indian Boiler Act, 1923, as amended International Securities Identification Number allotted by the depository. Insider Trading Regulations Securities and Exchange Board of India (Prohibition of Insider Trading Regulations), 1992 IT Act Indian GAAP LIC MICR Mutual Fund NECS NEFT NR NRI NRE Account NRO Account NSDL NSE OCBs PAN PAC PBT RBI Registrar of Companies/ RoC Regulation S Rupees/ INR/ `/ Rs. RTGS Income Tax Act, 1961, as amended Generally accepted accounting principles followed in India Life Insurance Corporation of India Magnetic Ink Character Recognition A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended National Electronic Clearing Services National Electronic Funds Transfer Non-Resident Non-Resident Indian Non-Resident External Account Non-Resident Ordinary Account National Securities Depository Limited National Stock Exchange of India Limited Overseas Corporate Body(ies) Permanent Account Number under the IT Act Persons Acting in Concert Profit Before Tax Reserve Bank of India Registrar of Companies, Gujarat at Ahmedabad Regulation S under the Securities Act Indian Rupees Real Time Gross Settlement ii
Term SCRA SEBI SEBI ICDR Regulations Securities Act Takeover Regulations Trademark Act US/ USA/ United States VCFs Water Act Description Securities Contracts (Regulation) Act, 1956, as amended Securities and Exchange Board of India Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended U.S. Securities Act of 1933, as amended Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 Trade Marks Act, 1999, as amended United States of America Venture capital funds as defined under the SEBI (Venture Capital Funds) Regulations, 1996, as amended, registered with SEBI under applicable laws in India Water (Prevention and Control of Pollution) Act, 1974, as amended Issue Related Terms Term Abridged Letter of Offer or ALoF Allotment Allottees Application Supported by Blocked Amount/ ASBA ASBA Account ASBA Investor Axis Capital Centbank Description The abridged letter of offer to be sent to the Eligible Equity Shareholders with respect to the Issue Unless the context otherwise requires, the allotment of Equity Shares pursuant to the Issue Persons to whom our Equity Shares will be issued pursuant to the Issue The application (whether physical or electronic) used by an ASBA Investor to make an application authorizing the SCSB to block the amount payable on application in the ASBA Account Account maintained with an SCSB and specified in the CAF or plain paper application, as the case may be, for blocking the amount mentioned in the CAF, or the plain paper application, as the case may be Eligible Equity Shareholders proposing to subscribe to the Issue through ASBA process and (i) who are holding our Equity Shares in dematerialized form as on the Record Date and have applied for their Rights Entitlements and/ or additional Equity Shares in dematerialized form; (ii) who have not renounced their Rights Entitlements in full or in part; (iii) who are not Renouncees; and (iv) who are applying through blocking of funds in a bank account maintained with SCSBs. It is clarified that QIBs and Non-Institutional Investors are mandatorily required to make use of ASBA. Furthermore, Eligible Equity Shareholders not being individuals or HUFs are mandatorily required to make use of ASBA, even if the application amount does not exceed ` 2,00,000 Axis Capital Limited Centbank Financial Services Limited Composite Form/ CAF Application The form used by an Investor to make an application for the Allotment of Equity Shares in the Issue iii
Term Consolidated Certificate Controlling Branches of the SCSBs Designated Branches Draft Letter of Offer Description The single certificate issued by the Company to each Allotee to whom Equity Shares are allotted in physical form pursuant to the Issue Such branches of the SCSBs which coordinate with the Lead Managers, the Registrar to the Issue and the Stock Exchanges, a list of which is available on http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/recognised-intermediaries Such branches of the SCSBs which shall collect application forms used by ASBA Investors and a list of which is available on http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/recognised-intermediaries The draft letter of offer dated September 26, 2012, filed with SEBI for its observations, which does not contain complete particulars of the Issue Eligible Shareholders Emkay Equity Equity Shareholders of the Company as on the Record Date, i.e., February 19, 2013 Emkay Global Financial Services Limited Equity Shares / Shares Equity Shareholders Fortune Financial IDBICAPS Investor(s) Issue/ Rights Issue Issue Closing Date Issue Opening Date Issue Price Gross Proceeds Issue Size Lead Managers Letter of Offer/ LoF Listing Agreement Monitoring Agency Net Proceeds Fully paid up equity shares of our Company having a face value of `10 each Holders of Equity Shares of our Company Fortune Financial Services (India) Limited IDBI Capital Market Services Limited Eligible Equity Shareholders and Renouncees applying in this Issue. Issue of 55,08,46,238 Equity Shares with a face value of `10 each for cash at par per Equity Share for an amount aggregating ` 550.85 crore on a rights basis to the Eligible Equity Shareholders in the ratio of 2 Equity Shares for every 3 Equity Shares held by them on the Record Date (i.e. February 19, 2013) April 27, 2013 (Saturday) March 30, 2013 (Saturday) ` 10 per Equity Share as determined by our Board in consultation with the Lead Managers The proceeds of the Issue that are available to our Company The issue of 55,08,46,238 Equity Shares aggregating to ` 550.85 crore SBI Capital Markets Limited, Axis Capital Limited, Centbank Financial Services Limited, Emkay Global Financial Services Limited, Fortune Financial Services (India) Limited and IDBI Capital Market Services Limited This Letter of Offer dated March 20, 2013 to be filed with the Stock Exchanges after incorporating the observations received from SEBI on the Draft Letter of Offer The listing agreements entered into between us and each of the Stock Exchanges Axis Bank Limited The Gross Proceeds less the Issue related expenses. For further details, please refer to Objects of the Issue on page 27 Non - Institutional Non - institutional investor(s) as defined under Regulation 2(1)(w) of the SEBI iv
Term Investor(s) Qualified Investors / QFIs Foreign Description ICDR Regulations Non-resident investors, other than SEBI registered FIIs or sub-accounts or SEBI registered FVCIs, who meet know your client requirements prescribed by SEBI and are resident in a country which is (i) a member of Financial Action Task Force or a member of a group which is a member of Financial Action Task Force; and (ii) a signatory to the International Organisation of Securities Commission s Multilateral Memorandum of Understanding or a signatory of a bilateral memorandum of understanding with SEBI. Provided that such non-resident investor shall not be resident in a country which is listed in the public statements issued by Financial Action Task Force from time to time on: (i) jurisdictions having a strategic anti-money laundering/combating the financing of terrorism deficiencies to which counter measures apply; and (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the Financial Action Task Force to address the deficiencies. QIBs / Qualified Institutional Buyers Qualified institutional buyers as defined under Regulation 2(1)(zd) of the SEBI ICDR Regulations Record Date February 19, 2013 Registrar to the Issue/ Registrar and Transfer Agent/ RTA Renouncee(s) Link Intime India Private Limited Any person(s) who has/ have acquired Rights Entitlements from the Eligible Equity Shareholders Retail Investor(s) Individual Retail individual investor as defined under Regulation 2(1)(ze) of the SEBI ICDR Regulations Rights Entitlement SAF(s) SBICAP SCSB(s) Share Certificate Stock Exchange(s) The number of Equity Shares that an Eligible Equity Shareholder is entitled to, that is determined as a proportion to the number of Equity Shares held by such Eligible Equity Shareholder on the Record Date, i.e., 2 Equity Shares for 3 Equity Shares held on February 19, 2013 Split application form(s) SBI Capital Markets Limited Self Certified Syndicate Bank(s), registered with SEBI, which acts as a banker to the Issue and which offers the facility of ASBA. A list of all SCSBs is available at http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/recognised-intermediaries. The certificate in respect of the Equity Shares allotted to a folio BSE and NSE, where our Equity Shares are presently listed Company Related Terms Term AOA / Articles/ Articles of Association Articles of Association of our Company Description v
Term Alok/ Company/ Issuer Alok ESOS 2010 Associates Audit Committee Auditors Board/ Board of Directors Committee of Directors Continuous Polymerisation Plant Corporate Office Director(s) Garment Units Hemming Unit Joint Ventures KMP Knitting Unit Made-ups Units MOA/ Memorandum / Memorandum of Association Packing Unit POY/Texturising Unit Description Except as stated otherwise, refers to Alok Industries Limited, a company incorporated under the Act having its Registered Office at 17/5/1 and 521/1, Village Rakholi / Saily, Silvassa 396 230, Union Territory of Dadra & Nagar Haveli, India Alok Industries Limited Employees Stock Option Scheme 2010, as amended Associates as per AS 23 namely Next Creations Holdings LLC, Ashford Infotech Private Limited and Alspun Infrastructure Limited The audit committee of our Board constituted pursuant to Section 292A of the Companies Act and Clause 49 of the Listing Agreement comprising Mr. Ashok Rajani, Mr. Kandarp Modi, Mr. Dilip Jiwrajka and Mr. M. V. Muthu M/s. Deloitte Haskins & Sells, Chartered Accountants, the statutory auditors of our Company The Board of Directors of our Company, unless specified otherwise The committee of Directors of our Board constituted in relation to this Issue and comprising Mr. Dilip Jiwrajka, Mr. Surendra Jiwrajka, Mr. Kandarp Modi, Mr. Ashok Rajani and Mr. M. V. Muthu 17/5/1 and 521/1 Rakholi/Saily, Silvassa, Union Territory of Dadra and Nagar Haveli Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai 400 013, Maharashtra, India Director(s) on the Board of our Company, unless specified otherwise 374/2/2 Saily, Silvassa, Union Territory of Dadra and Nagar Haveli; 17/5/1 Rakholi, Silvassa, Union Territory of Dadra and Nagar Haveli; 273/1/1 Hingraj Industrial Estate, Atiawad, Daman Union Territory; and 50/P2, 52/P1 Morai, Taluka Pardi District Valsad, Gujarat. 103/2 Rakholi, Silvassa, Union Territory of Dadra and Nagar Haveli Joint ventures as per AS 27 namely Aurangabad Textiles & Apparel Parks Limited and New City of Bombay Manufacturing Mills Limited Key Managerial Personnel 412 (15) Saily, Silvassa, Union Territory of Dadra and Nagar Haveli 374/2/2 Saily, Silvassa, Union Territory of Dadra and Nagar Haveli; and 149/150 Morai, Taluka Pardi District Valsad, Gujarat Memorandum of Association of our Company 87/1/1 and 96/1 Village Falandi, Silvassa, Union Territory of Dadra and Nagar Haveli 17/5/1 and 521/1 Rakholi/Saily, Silvassa, Union Territory of Dadra and Nagar Haveli vi
Term Processing Units Promoters Promoter Group Registered Office Share Transfer and Investors Grievance Committee Spinning Unit Subsidiaries Terry Towel Unit Weaving Units We / Us / Our Description C-16/2 Village Pawane, TTC Industrial Estate MIDC, Navi Mumbai District Thane; 261/268, Village Balitha, Taluka Pardi, District Valsad, Gujarat; and 254, Village Balitha, Taluka Pardi, District Valsad, Gujarat Promoters of our Company, namely, Mr. Ashok Jiwrajka; Mr. Dilip Jiwrajka; and Mr. Surendra Jiwrajka Promoter group shall mean the persons and entities forming part of our promoter group in accordance with the SEBI ICDR Regulations and such persons and entities disclosed as promoter group in filings made by the Company with the Stock Exchanges pursuant to Clause 35 of the Listing Agreement 17/5/1 and 521/1, Village Rakholi / Saily, Silvassa - 396230, Union Territory of Dadra and Nagar Haveli, India The share transfer and investors grievance committee of our Board constituted pursuant to Clause 49 of the Listing Agreement comprising Mr. Ashok Rajani, Mr. Dilip Jiwrajka, Mr. Surendra Jiwrajka and Mr. Ashok Jiwrajka 412 (15) Saily, Silvassa, Union Territory of Dadra and Nagar Haveli The subsidiaries of our Company as of this Letter of Offer, namely, our direct Subsidiaries, i.e. (1) Alok Apparels Private Limited; (2) Alok H & A Limited; (3) Alok Infrastructure Limited; (4) Alok International Inc. (5) Alok Land Holdings Private Limited; (6) Alok Retail (India) Limited; (7) Alok International (Middle East) FZE; and (8) Alok Singapore Pte. Ltd. and our step-down Subsidiaries, i.e. (1) Alok European Retail s.r.o.; (2) Alok Realtors Private Limited; (3) Kesham Developers and Infotech Private Limited (under liquidation); (4) Mileta a.s.; (5) Springdale Information and Technologies Private Limited (under liquidation); (6) Alok Industries International Ltd.; (7) Grabal Alok International Limited; and (8) Grabal Alok (UK) Limited 263/P1/P1 and 251/2/P1 Village Balitha, Taluka Pardi, District Valsad, Gujarat Babla Compound Kalyan Road, District Bhiwandi, Thane; 17/5/1 and 521/1 Rakholi/Saily, Silvassa, Union Territory of Dadra and Nagar Haveli; and 209/1 and 209/4 Silvassa, Village Dadra, Union Territory of Dadra and Nagar Haveli Alok Industries Limited, unless specified otherwise Technical/ Industry Related Terms Term POY PTA MEG FDY DTY Description Partially Oriented Yarn Purified Terephthalic Acid Mono Ethylene Glycol Fully Drawn Yarn Drawn Texturising Yarn vii
Term MPLS-VPN NCD SAP EPCG RM WIP FG TUFs MT Description Multiprotocol Label Switching to create Virtual Private Networks Non Convertible Debentures Systems Applications and Products Export Promotion Capital Goods Scheme Raw Material Work in Progress Finished Goods Technology Upgradation Fund Scheme Metric Tonnes The words and expressions used but not defined herein shall have the same meaning as is assigned to such terms under the SEBI ICDR Regulations, the Companies Act, the SCRA, the Depositories Act and the rules and regulations made thereunder. viii
NOTICE TO OVERSEAS SHAREHOLDERS The distribution of the Draft Letter of Offer, Letter of Offer, Abridged Letter of Offer and the Issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession the Draft Letter of Offer, Letter of Offer, Abridged Letter of Offer or CAF may come are required to inform themselves about and observe such restrictions. We are making this Issue of Equity Shares on a rights basis to the Eligible Equity Shareholders and will dispatch the Letter of Offer/ Abridged Letter of Offer and CAFs to such shareholders who have a registered address in India or who have provided an Indian address. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose, except that the Draft Letter of Offer has been filed with SEBI for observations. Accordingly, the rights or Equity Shares may not be offered or sold, directly or indirectly, and this Letter of Offer/ Abridged Letter of Offer may not be distributed in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction. Receipt of this Letter of Offer/ Abridged Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, under those circumstances, this Letter of Offer/ Abridged Letter of Offer must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this Letter of Offer/ Abridged Letter of Offer should not, in connection with the issue of the rights or Equity Shares, distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this Letter of Offer/ Abridged Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the rights or Equity Shares referred to in this Letter of Offer/ Abridged Letter of Offer. Neither the delivery of this Letter of Offer/ Abridged Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as at any time subsequent to this date. European Economic Area Restrictions In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State ), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date ), no offer may be made to the public of any rights or Equity Shares which are the subject of the offering contemplated by this Letter of Offer in that Relevant Member State except that, with effect from and including the Relevant Implementation Date, an offer to the public of such rights or Equity Shares may be made in that Relevant Member State: (i) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; (ii) to any legal entity which has two or more of (1) an average of at least 250 employees during the last Fiscal; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; (iii) to fewer than 100 natural or legal persons (other than qualified investors as defined in Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of the underwriters for any such offer; or (iv) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of rights or Equity Shares shall require us or the Lead Managers to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. ix
For the purposes of this section, the expression an offer to the public in relation to any ordinary shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any ordinary shares to be offered so as to enable an investor to decide to purchase any ordinary shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. Each purchaser of the rights or Equity Shares described in this Letter of Offer located within a Relevant Member State will be deemed to have represented, acknowledged and agreed that it is a qualified investor within the meaning of Article 2(1) (e) of the Prospectus Directive. In the case of any rights or Equity Shares in this Issue being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, the Lead Managers will use their reasonable endeavours, by the inclusion of appropriate language in this Letter of Offer, to procure that such financial intermediary will be deemed to have represented, acknowledged and agreed that the rights or Equity Shares acquired by it in the Issue have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any Equity Shares in this Issue to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined who are not financial intermediaries or in circumstances in which the prior consent of the Lead Managers has been obtained to each such proposed offer or resale. This European Economic Area selling restriction is in addition to any other selling restriction set out below. United Kingdom The Lead Managers: a. have not offered or sold, and prior to the expiry of a period of six months from the issue date of any rights or Equity Shares, will not offer or sell any securities of the Company to persons in the United Kingdom except to qualified investors as defined in section 86(7) of the Financial Services and Markets Act, 2000 ( FSMA ) or otherwise in circumstances which have not resulted in an offer to the public in the United Kingdom; b. have complied and will comply with an applicable provisions of FSMA with respect to anything done by it in relation to the rights or Equity Shares in, from or otherwise involving the United Kingdom; and c. in the United Kingdom, will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) to persons that are qualified investors within the meaning of Article 2(J)(e) of the Prospectus Directive who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order ); and/or (ii) are high net worth entities falling within Article 49(2)(a) to (d) of the Order; and (iii) other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This Letter of Offer and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents. NO OFFER IN THE UNITED STATES The Rights Entitlement and Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended ( Securities Act ), or any U.S. state securities laws and may not be offered, sold, resold or x
otherwise transferred within the United States of America or the territories or possessions thereof (the United States or U.S. ), or to, or for the account or benefit of U.S. Persons (as defined in Regulation S of the Securities Act ( Regulation S )), except in a transaction exempt from the registration requirements of the Securities Act. The offering to which this Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any Equity Shares or rights for sale in the United States or as a solicitation therein of an offer to buy any of the said Equity Shares or Rights Entitlement. Accordingly, this Letter of Offer or the Abridged Letter of Offer and the CAF should not be forwarded to or transmitted in or into the United States at any time. Neither we nor any person acting on behalf of us will accept subscriptions or renunciation from any person, or the agent of any person, who appears to be, or who we or any person acting on behalf of us has reason to believe is, either a U.S. Person (as defined in Regulation S) or otherwise in the United States when the buy order is made. Envelopes containing a CAF should not be postmarked in the United States or otherwise dispatched from the United States or any other jurisdiction where it would be illegal to make an offer, and all persons subscribing for the Equity Shares in this Issue and wishing to hold such Equity Shares in registered form must provide an address for registration of the Equity Shares in India. We are making the Issue on a rights basis to Eligible Equity Shareholders and the Letter of Offer and CAF will be dispatched only to Eligible Equity Shareholders who have an Indian address. Any person who acquires rights and the Equity Shares offered in this Issue will be deemed to have declared, represented, warranted and agreed, (i) that it is not and that at the time of subscribing for such Equity Shares or the Rights Entitlements, it will not be, in the United States when the buy order is made, (ii) it is not a U.S. Person (as defined in Regulation S) and does not have a registered address (and is not otherwise located) in the United States, and (iii) it is authorised to acquire the rights and the Rights Issue Equity Shares in compliance with all applicable laws and regulations. We reserve the right to treat any CAF as invalid which: (i) does not include the certification set out in the CAF to the effect that the subscriber is not a U.S. Person (as defined in Regulation S) and does not have a registered address (and is not otherwise located) in the United States and is authorized to acquire the Equity Shares or Rights Entitlement in compliance with all applicable laws and regulations; (ii) appears to us or our agents to have been executed in or dispatched from the United States; (iii) appears to us or our agents to have been executed by a U.S. Person (as defined in Regulation S); (iv) where a registered Indian address is not provided; or (v) where we believe that CAF is incomplete or acceptance of such CAF may infringe applicable legal or regulatory requirements; and we shall not be bound to allot or issue any Equity Shares or Rights Entitlement in respect of any such CAF. xi
CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCY OF PRESENTATION Certain Conventions References in this Letter of Offer to India are to the Republic of India and the Government or the Central Government is to the Government of India. All references to the US, or the U.S.A. or the United States are to the United States of America and all references to UK or the U.K. are to the United Kingdom. Financial Data Unless stated otherwise, financial data in this Letter of Offer with respect to our Company is derived from our audited consolidated financial statements. Our Fiscal Year commences on April 1 for a year and ends on March 31 of the next year. In this Letter of Offer, the standalone and consolidated audited financial statements for Fiscal 2012 and the standalone and consolidated limited review financial statements for the half year ended September 30, 2012 have been included. For details of such financial statements, please refer to Financial Information on page 45. We have included the limited review results for the nine-month and quarter ending December 31, 2012, as disclosed to the Stock Exchanges. We have also included our working results, on a standalone basis, for the ten month period from April 1, 2012 till January 31, 2013. For further details, please refer to Material Developments on page 49. We prepare our financial statements in accordance with the Indian GAAP, which differ in certain respects from generally accepted accounting principles in other countries. Indian GAAP differs in certain significant respects from IFRS. We publish our financial statements in Indian Rupees. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Letter of Offer should accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. In this Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off, and unless otherwise specified, all financial numbers in parenthesis represent negative figures. Numerical values have been rounded off to two decimal places. Industry and Market Data Unless stated otherwise, market, industry and demographic data used in this Letter of Offer has been obtained from market research, publicly available information, industry publications and government sources. Industry publications generally state that the information that they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of that information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified and neither we nor the Lead Managers makes any representation as to the accuracy of that information. Accordingly, Investors should not place undue reliance on this information. Currency and Units of Presentation All references in this Letter of Offer to Rupees, `, Indian Rupees and INR are to Indian Rupees, the official currency of India. All references to U.S. $, U.S. Dollar, USD or $ are to United States Dollars, the official currency of the United States of America. Exchange Rates xii
Fluctuations in the exchange rate between the Rupee and the U.S. Dollar will affect the U.S. Dollar equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the conversion into U.S. Dollars of any cash dividends paid in Rupees on the Equity Shares. The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Rupee and the U.S. Dollar (in Rupees per U.S. Dollar) based on the reference rates released by the RBI. No representation is made that the Rupee amounts actually represent such amounts in U.S. Dollars or could have been or could be converted into U.S. Dollars at the rates indicated, at any other rates or at all. Year ended March 31 Period End Average* High* Low* (in `) (in `) (in `) (in `) 2010 45.14 47.42 50.53 44.94 2011 44.65 45.27 45.95 44.65 2012 51.15 47.94 54.23 43.94 Month ended Period End Average* High* Low* (in `) (in `) (in `) (in `) September 2012 52.69 54.60 55.97 52.69 October 2012 54.11 53.02 54.16 51.61 November 2012 54.52 54.77 55.70 53.66 December 2012 54.77 54.64 55.08 54.20 January 2013 53.28 54.31 55.32 53.28 February 2013 53.77 53.77 54.48 52.97 Source: RBI website at www.rbi.org.in *Note: High, low and average are based on the RBI reference rate RBI reference rates as of February 28, 2013-1 USD = ` 53.77 xiii
FORWARD LOOKING STATEMENTS Certain statements in this Letter of Offer are not historical facts but are forward-looking in nature. Forward looking statements appear throughout this Letter of Offer, including, without limitation, under the chapters Risk Factors. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or financial performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industry and the political and legal environment, and geographical locations, in which we operate, and other information that is not historical information. Words such as aims, anticipate, believe, could, continue, estimate, expect, future, goal, intend, is likely to, may, plan, predict, project, seek, should, targets, would and similar expressions, or variations of such expressions, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. These risks, uncertainties and other factors include, among other things, those listed under Risk Factors on page xvi of this Letter of Offer, as well as those included elsewhere in this Letter of Offer. Prospective investors should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited, to: Our indebtedness and the conditions and restrictions imposed by our financing and other agreements; Any failure or disruption of our information technology systems; Delivery of adequate and uninterrupted supply of electrical power and water at a reasonable cost; Fluctuations in the prices of our raw materials including raw cotton, PTA and MEG; Our ability to retain our customers and our ability to sell our products at competitive prices; Increase in our Company s working capital cycle; General economic and business conditions in the markets in which we operate and in the local, regional and national economies; Increasing competition in or other factors affecting the industry segments in which our Company operates; Changes in laws and regulations relating to the industries in which we operate; Our ability to successfully implement our growth strategy and expansion plans, and to successfully launch and implement various projects and business plans; Our ability to meet our capital expenditure requirements and/or increase in capital expenditure; Fluctuations in operating costs and impact on the financial results; Our ability to attract and retain qualified personnel; Changes in technology in future; xiv
Changes in political and social conditions in India or in countries that we may enter, the monetary policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; Variations in exchange rates; The performance of the financial markets in India and globally; and Any adverse outcome in the legal proceedings in which we are involved. For a further discussion of factors that could cause our actual results to differ, please refer to Risk Factors on page xvi. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither we nor the Lead Managers make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forwardlooking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Neither we nor the Lead Managers nor any of their respective affiliates or advisors have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI/ Stock Exchanges requirements, we and the Lead Managers will ensure that the Eligible Equity Shareholders are informed of material developments until the time of the grant of listing and trading permissions by the Stock Exchanges. xv
SECTION II - RISK FACTORS An investment in equity and equity related securities involves a high degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing all or a part of their investment. You should carefully consider all of the information in this Letter of Offer, including the risks and uncertainties described below, before making an investment in our Equity Shares. In making an investment decision, prospective Investors must rely on their own examination of us and terms of the Issue, including the merits and risk involved. If any of the following risks actually occur, our business, financial condition, results of operations and prospects could suffer, the trading price of our Equity Shares could decline and you may lose all or part of your investment. The risk and uncertainties described below are not the only risks that we currently face. Additional risk and uncertainties not presently known to us or that we currently believe to be immaterial may also have an adverse effect on results of operations and financial condition, which could result in a decline in the value of the Equity Shares. You should also pay particular attention to the fact that we are governed in India by a legal and regulatory environment which in some material respects may be different from that which prevails in other countries. This Letter of Offer also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Letter of Offer. The financial and other implications of material impact of risks concerned, wherever quantifiable, have been disclosed in the risk factors mentioned below. However there are a few risk factors where the impact is not quantifiable and hence the same has not been disclosed in such risk factors. Prospective Investors should carefully consider the following risk factors as well as other information included in this Letter of Offer prior to making any decision as to whether or not to invest in our Equity Shares. The risks described below and any additional risks and uncertainties not presently known to us or that currently are deemed immaterial could adversely affect our business, financial condition, liquidity or results of operations. As a result, the trading price of our Equity Shares could decline and Investors may lose part or all of their investment. Additional risks and uncertainties, including those that we are not aware of or deem immaterial, may also result in decreased revenues, increased expenses or other events that could result in a decline in the value of the Equity Shares. In this section, unless the context otherwise requires, a reference to the Company is to Alok Industries Limited, and a reference to we, us or our refers to Alok Industries Limited and its Subsidiaries and Joint Ventures on a consolidated basis. Unless otherwise stated, the financial information of our Company used in this section is derived from our consolidated financial statements prepared under Indian GAAP. Financial information provided herein as at and for the period up to March 31, 2012 on standalone and consolidated basis has been derived from audited numbers, however for the period beyond that and as at September 30, 2012 on standalone and consolidated basis have been subject to limited review. Internal Risks 1. Our substantial indebtedness of ` 16,427.24 crore and the conditions and restrictions imposed by our financing and other agreements could adversely affect our ability to conduct our business and operations. As of September 30, 2012, we had a total outstanding debt of ` 13,824.34 crore, on a standalone basis (including long term debt aggregating to ` 6,907.67 crore) and approximately ` 16,427.24 crore, on a consolidated basis, (including long term debt aggregating to ` 8,296.85 crore). Our Company s total debt to equity ratio and long term debt to equity ratio, on a consolidated basis, as on September 30, 2012, was 5.32 and 2.69, respectively. Our Company s total debt to equity ratio and long term debt to equity ratio, on a standalone basis, as on September 30, 2012, was 3.46 and 1.73, respectively. Our net debt outstanding xvi