KARNATAKA STATE FINANCIAL CORPORATION Head Office, KSFC Bhavana, No.1/1, Thimmaiah Road, BANGALORE 560 052 Telephone: 22261476/22250134/9945034376, Fax: 22250126, 22250136 BID DOCUMENT FOR APPOINTMENT OF MERCHANT BANKER AS ARRANGER FOR Rs 200 CRORE PRIVATE PLACEMENT BONDS ISSUE
KARNATAKA STATE FINANCIAL CORPORATION BID DOCUMENT FOR APPOINTMENT OF MERCHANT BANKER AS ARRANGER Table of contents Sl. No. Particulars Page No. 01 About KSFC 3 02 Proposed borrowing program and details of instrument 3 03 Scope of work 4 04 Criteria for bids and other terms and conditions 4 05 Procedure and other terms and conditions 6 06 Schedule of events 8 07 Annexure I [Format for pre-qualification bid] 9 08 Annexure II [Format of CA Certificate] 10 09 Annexure III [Format for financial bid ] 11 2
BID DOCUMENT FOR APPOINTMENT OF MERCHANT BANKER AS ARRANGER 1. ABOUT KSFC The Karnataka State Financial Corporation (herein after referred as KSFC) was established under SFCs Act 1951 by the Government of Karnataka in 1959 and is a Public Financial Institution as defined under Section 4(A) of the Companies Act 1956. KSFC is engaged in providing finance to MSME segment in the State of Karnataka and functions as a state level developmental institution. As on 31.03.2012, KSFC has assisted 1,65,128 units amounting to nearly Rs 11,282 crore over the last 53 years in the State of Karnataka. The Corporation has been availing refinance from SIDBI for its lending activities, besides accessing the market through Private Placement Bonds. 2. KSFC s PROPOSED BORROWING PROGRAMME: The KSFC intends to mobilise Rs 200 crore through private placement of bonds for augmenting the resources for its operations. The bonds would be un-secured, redeemable, non-convertible, taxable and in the nature of debentures. The Government of Karnataka unconditionally and irrevocably guarantees the bonds. 3. DETAILS OF THE INSTRUMENT Issue size Rs 200 crore Face value of each bond Rs10 lakh Tenure of the instrument 12 years Redemption 25% each at the end of 9 th, 10 th, 11 th and 12 th year Call Option At the end of 7 th year Put Option Nil Payment of interest Half yearly Credit Rating The proposed instrument carries an indicative rating of AA-(SO) Stable from CRISIL and rating of AA-(SO) from CARE Guarantee Government of Karnataka unconditionally and irrevocably guarantees payment of interest and repayment of principal Listing Proposed to list on National Stock Exchange. 3
4. SCOPE OF WORK: For mobilising the funds, KSFC desires to appoint the merchant banker/s as arrangers. The scope of work of the arranger comprises the following: i. To assist KSFC in the preparation Information Memorandum for Private Placement. ii. To advise on timing of the bond issue, viz., date of opening the issue depending upon the prevailing market conditions. iii. To liaise with Stock Exchange for obtaining in-principle approval for listing iv. To identify the eligible investors, provide them information memorandum, reply the investors queries, etc. v. To ensure that investors fill up the application forms properly, enclose the necessary supporting documents and deposit the application money with the collecting Banker/s vi. To report to KSFC on daily basis, the status of funds mobilsation and ensure that the issue is fully mobilised within the stipulated time vii. To liaise with the NSDL and CDSL for allotting the bonds in demat form viii. To finalise subscription list with all necessary documents. ix. To liaise with Stock Exchange for listing of bonds 5. CRITERIA FOR BIDS AND OTHER TERMS AND CONDITIONS. i. The Merchant Banker shall hold valid SEBI registration certificate as Category I Merchant Banker and registration shall be valid during the bond mobilisation period. In case the registration has expired or is due for expiry any time before the closure of the issue, the Merchant banker has to produce the proof of application submitted to SEBI for renewal of the registration, to the satisfaction of the KSFC. The merchant banker is required to furnish copy(ies) of the SEBI registration certificate(s), duly certified by a practicing Chartered Accountant. ii. The Merchant Banker should have participated in the mobilisation of at least Rs 500 crore in the previous two years period ending on 30.09.2012 in the private placement bond issue/s either as sole arranger or collectively with other arrangers, 4
certified by a practicing Chartered Accountant as per Annexure II and supported by the letters issued to the merchant banker by the issuers. iii. The Merchant Banker shall enclose a Demand Draft for Rs 10 lakh (Rupees Ten lakh) drawn on any scheduled commercial bank in favour of Karnataka State Financial Corporation payable at Bangalore towards EMD, to the pre-qualification bid. The EMD will not carry interest. The KSFC will not open the financial bids of the Merchant Bankers who fail to furnish the required EMD. iv. Non fulfillment of any of the pre-qualification criteria amounts to disqualification for participating in the financial bid. The EMD of those Merchant Bankers who fail to qualify in the pre-qualification bid will be returned. v. The EMD of the selected Merchant Banker/s will be retained till the listing of bonds on the stock exchange. The arranger s fee shall not be payable and EMD shall be forfeited if the selected Merchant Banker/s fail/s to mobilise the entire issue amount within the stipulated time at the agreed coupon rate. KSFC reserves the right to disqualify such arrangers from participating in its subsequent bond issues. vi. The KSFC will open the pre-qualification bids first. The financial bids of the qualified Merchant Bankers will be opened thereafter. vii. The coupon quoted shall be specific and any bids with range/band of coupon shall be rejected. viii. Evaluation of financial bids will be based on the overall IRR for the entire period of the bond, computed on the basis of coupon rate and arranger s fee quoted by the merchant banker, including the service tax, if specifically mentioned. ix. The coupon and arranger fee shall be valid for at least 30 days from the date of submission of the bids and further, if appointed as arranger, the coupon and fee quoted by the arranger shall be valid until the closure date/extended closure date of the issue. x. The arranger shall not be eligible for the fee in respect of the applications directly received by KSFC xi. The arrangers shall mobilise the issue amount of Rs 200 crore fully, including the direct subscription received by KSFC, within 15 working days (including Saturdays but excluding Sundays and Public Holidays in Karnataka) from the date of opening the issue. The Merchant Banker shall submit a firm commitment letter to this effect as per format in Annexure III 5
xii. The KSFC reserves the right to extend the issue closure date beyond the specified number of days, if in the opinion of KSFC such an extension is warranted in the interest of KSFC. The arranger/s cannot seek the extension of issue closure date as a matter of right xiii. Conditional bids will be rejected forthright. xiv. If it is so warranted in the interest of KSFC, it reserves the right to cancel the process of appointment of arrangers at any stage without assigning any reason. Moreover, the KSFC is not bound to accept the lowest bid for fee or coupon, or both, if, in the sole opinion of the KSFC, such an action is warranted. xv. The KSFC, at its sole discretion, can reject the bids for freak coupon rate, if in the opinion of the Tender Evaluation Committee, the coupon quoted is freak based on the prevailing G-Sec rate, the interest rates in the market for similar rated instruments of respective tenors and any other conditions prevailing then. The decision of the Tender Evaluation Committee on deciding the freak interest rate shall be final. xvi. The KSFC may disqualify the Merchant Banker/s at any stage, if it comes to the notice of KSFC at a later date that any information(s)/documents produced by the Merchant Banker/s were factually incorrect/false. xvii. In matters of dispute, the decision of the Managing Director of KSFC shall be final and binding on both the parties. 6. PROCEDURE AND OTHER TERMS AND CONDITIONS: The pre-qualification bid and financial bid documents shall be submitted in the formats given in Annexure I and Annexure III respectively and they shall be signed by the authorised signatory of the Merchant banker. The authorisation letter from the competent authority of the Merchant banker shall be enclosed to pre-qualification bid i. The bids in the prescribed format shall be submitted in two separate sealed covers super-scribed pre-qualification bid and financial bid thereupon, as the case may be, to Mr Vasantkumar, Deputy General Manager (Controller), KARNATAKA STATE FINANCIAL CORPORATION Head Office, KSFC Bhavana No.1/1, Thimmaiah Road, BANGALORE 560 052 Ph: 080 22250134/22261476 ii. The name, contact address, telephone /mobile telephone No/s and e-mail address of the merchant banker shall be printed/written on the cover. 6
iii. The Cover I shall contain the following, in the same order a) Demand Draft for Rs 10 lakh drawn on any scheduled commercial bank in favour of Karnataka State Financial Corporation payable at Bangalore towards EMD b)authorisation letter from the competent authority of the Merchant banker for signing the pre-qualification bid and financial bid documents c) Copy(ies) of the SEBI registration certificate(s) as Category I Merchant banker, certified by a practicing Chartered Accountant d) Annexure I - Pre-qualification bid on the letter head of the Merchant banker) e)annexure II - Chartered Accountant s Certificate in support of mobilisation/subscription of bonds by the merchant bankers, supported by the letters issued to the merchant banker by the issuers iv. The Cover II shall contain the Financial bid (as per format in Annexure III). v. The bids will not be accepted after the stipulated last date and time. vi. The selection of the merchant banker/s will be based on overall IRR for the entire period of the bond, computed on the basis of coupon rate and arranger s fee quoted by the merchant banker, including the service tax, if specifically mentioned, and any other evaluation criteria as decided by the in house Evaluation Committee of the KSFC. If service tax is not mentioned specifically, it will not be taken for calculating IRR. In such cases, service tax will not be payable to the arranger/s. The KSFC reserves the right to appoint the sole arranger or consortium of arrangers for the mobilisation of the funds. vii. Once the bid is submitted to the KSFC, no further/additional information/correspondence will be entertained and KSFC is not bound to call for any clarification. viii. The KSFC reserves the right to accept or reject any bid without assigning any reason there for. The KSFC reserves the right to negotiate other terms and conditions with the selected Merchant Banker/s. ix. The Bids will be opened in the presence of the representatives of the Merchant Banker present at the time of opening the bids as per schedule of events indicated in para [7]. 7
7. SCHEDULE OF EVENTS FOR BIDDING 1 Start date for issue of bid documents 27 th December 2012 2 Last date/time for submission of filled-in bid documents *15.00 hours on 2 nd January 2013. 3 Date/time for opening of Cover I Pre-qualification bid in the presence of the representatives of the Merchant Bankers present *15.30 hours on 2 nd January 2013. 4 Date/time for opening of Cover II Financial bid in the presence of the representatives of the Merchant Bankers present *16.15 hours on 2 nd January 2013. 5 Place of opening the bids Head Office of KSFC *Any change in the date and time of opening of the bid documents will be communicated to the bidders 8
ANNEXURE I FORMAT FOR PRE-QUALIFICATION BID [on the Letter Head of the Merchant Banker] 1 Name and address of the Merchant Banker : Name, address & Telephone/Fax/e-mail of the Contact Person(s) in Bangalore 2 SEBI Registration Particulars: i. SEBI Registration No. ii. Date of Registration (Original) iii. Currency of the present Certificate: From To [Practicing Chartered Accountant certified SEBI registration certificate to be enclosed] 3 Performance as Arranger in the Private Placement bond issues in the last two years ending on 30.09.2012 Particulars No of Amount (Rs crore) issues Participation in mobilistaion of Private Placement bond issues, either as sole arranger or collectively with other arrangers Total 4 Net worth of the Merchant banker as on 31.03.2012 (in Rs. crores): 5 Demand Draft No : Date : Bank: (Towards EMD) For [Name of the Merchant banker] (Authorised Signatory, Name and Designation) Signature with Seal [Copy of the authorisation letter from the competent authority of the Merchant banker shall be placed on top] 9
ANNEXURE - II To: The Managing Director, Karnataka State Financial Corporation, KSFC Bhavan, Head Office, No.1/1, Thimmaiah Road, BANGALORE 560 052. [on the Letter Head of the Chartered Accountant] C E R T I F I C A T E This is to certify that based on the documents and evidences produced to us for verification, the details of participation in mobilisation of (name of the Merchant Banker) in the Private Placement bond issues in the last two years ending on 30.09.2012 are as follows: Particulars No of issues Amount ( Rs crore) Participation in mobilistaion of Private Placement bond issues, either as sole arranger or collectively with other arrangers * Total For [Name of the Chartered Accountant/ s firm] Place: Name of the Chartered Accountant Date: [Membership No. ] [Firm Registration No. ] [Seal] *Please enclose the mandate letters (to the extent of minimum Rs 500 crores) issued to the merchant banker by the issuers. 10
To, The Managing Director Karnataka State Financial Corporation KSFC Bhavana, No.1/1, Thimmaiah Road, BANGALORE 560 052 Dear Sir, FORMAT FOR FINANCIAL BID [on the Letter Head of the Merchant Banker] ANNEXURE - III Date Sub: KSFC Private Placement Bond issue aggregating to Rs 200 crores Ref: i) KSFC Advertisement in Economic Times/ Business Line dated 27.12.2012 and ii) KSFC Bid document for appointment of merchant bankers as arrangers for Rs 200 crore private placement bonds issue, placed on KSFC Website With reference to the above, we state that we have read all the terms and conditions in the bid document and submit our financial bids as below a) COUPON on firm commitment basis Particulars Coupon in percentage, payable half yearly [Please note that coupon should be specific and any bids with range/band of coupon shall be rejected] b) ARRANGER S FEE*: As a percentage of the amount mobilised (excluding the direct subscription received by KSFC) * Service Tax payable has to be explicitly indicated; otherwise it will be taken as Nil c) MOBILSATION PERIOD: 15 working days (including Saturdays but excluding Sundays and Public Holidays in Karnataka) from the date opening the issue While agreeing to all the terms and conditions in the bid document, we give our firm commitment to mobilise/subscribe the entire quantum of Rs 200 crores, including the direct subscription received by KSFC, within 15 working days (including Saturdays but excluding Sundays and Public Holidays in Karnataka) from the date of opening the issue, either from the market or by ourselves, at the coupon rate and arranger s fee quoted by us. We also confirm that the coupon rate and arranger s fee will be valid for at least 30 days from the date of submission of the bids and if we are appointed as arranger, the coupon and fee will be valid until the closure date/extended closure date of the issue. Yours faithfully, For [Name of the Merchant banker] (Authorised Signatory, Name and Designation) Signature with Seal 11