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Private and Confidential

For Equity Shareholders of the Company only

DRAFT LETTER OF OFFER

 

Chettinad Cement Corporation Limited

(Incorporated on December 11, 1962 under the Indian Companies Act, 1956)

Registered Office: Rani Seethai Hall Building, No.603 Anna Salai, Chennai 600 006

Telephone No.(044) 829 2727 Fax No.(044) 829 1558

Grams: BESTCEMENT Telex : 041-7829 CCC-IN

Email : chtdmds@vsnl.com URL : www.chettinadcement.com

OFFER OF 84,31,700 EQUITY SHARES OF RS.10/- EACH FOR CASH AT A PREMIUM OF RS.26 PER SHARE AGGREGATING RS.3035.41 LAKHS ON A RIGHTS BASIS IN THE RATIO OF TWO EQUITY SHARES FOR EVERY FIVE EQUITY SHARES (2:5) HELD ON ______ (HEREINAFTER REFERRED TO AS THE "RECORD DATE")

GENERAL RISKS:

Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Offer unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this offering. For taking an investment decision, investors must rely on their own examination of the Issuer and the offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Attention of the investors is drawn to the statement of Risk Factors on Page Nos.78 to 85 of the Letter of Offer.

ISSUER’S ABSOLUTE RESPONSIBILITY :

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Letter of Offer is true and correct in all material 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 make this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING :

The existing equity shares of the company are listed on Madras Stock Exchange Limited and traded in the permitted category in the The Stock Exchange, Mumbai. The equity shares to be issued through this Rights Issue would also be listed on the Madras Stock Exchange. In-principal approval for listing has been obtained from the Madras Stock Exchange Limited on __________.

CREDIT RATING:

This being an issue of equity shares, no credit rating is required.

ISSUE PROGRAMME:

Issue Opens on

Last date for receiving requests for split forms

Issue Closes on

     
     

LEAD MANAGERS TO THE ISSUE

REGISTRARS TO THE ISSUE

 

 

INDBANK MERCHANT BANKING SERVICES LIMITED

(a subsidiary of Indian Bank)

Third Floor, Krest Building

26/27, Jehangir Street, Second Line Beach

Chennai 600 001

Tel: (044) 522 4693 / 5224694

Fax: (044) 522 7059

e-mail : imssbc@md3.vsnl.net.in

SEBI Registration No.INM000001394

INTEGRATED ENTERPRISES (INDIA) LIMITED

Second Floor, "Kences Towers"

1, Ramakrishna Street, North Usman Road

T Nagar

Chennai 600 017

Tel: (044) 814 0801 / 814 0802 / 814 0803

Fax: (044) 814 2479

e-mail : kannan@iepindia.com

SEBI Registration No.INR000000544

GLOSSARY OF TERMS / ABBREVATIONS

Act

The Companies Act, 1956 and amendments thereto

Articles

Articles of Association of the Company

Board

Board of Directors

MSE

Madras Stock Exchange Limited

CDSL

Central Depository Services Limited

NSDL

National Securities Depository Limited

EGM

Extra-ordinary General Meeting

CAF(s)

Composite Application Form

LoF

Letter of Offer

RBI

Reserve Bank of India

SEBI

Securities & Exchange Board of India

CCCL

Chettinad Cement Corporation Limited

FEMA

Foreign Exchange Management Act, 1999

PAT

Profit after Tax

MPTA

Million Tons Per Annum

 

INDEX

RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF…………..…………………………

I

GENERAL INFORMATION ……………………….……………………………….……….…………………………

2

NAME OF THE COMPANY AND ADDRESS OF THE REGD OFFICE.……….…………..……………………

2

IMPORTANT……………………..…………………………….………………………………………..……………………

2

ELIGIBILITY FOR THE ISSUE…………………………….…………………………………..…..……………………

2

GOVERNMENT APPROVALS / LICENCES…………………………….…………….……..…..……………………

2

DISCLAIMER CLAUSE…………………………….……………………………….………..………..……………………

2

CAUTION…………………………….……………………………….……………………………..…..……………………

2

DISCLAIMER WITH RESPECT TO JURISDICTION…………………………….….…..…..……………………

4

DISCLAIMER CLAUSE OF THE MADRAS STOCK EXCHANGE LIMITED (MSE)….…..…………………

5

IMPERSONATION…………………………….…………………………….……………………..…..……………………

5

FILING…………………………….…………………………….…………………………………….…..……………………

5

MINIMUM SUBSCRIPTION…………………………….……………………………………….…..……………………

6

ALLOTMENT LETTERS / REFUND ORDERS …………………………….……………….…..……………………

6

ISSUE PROGRAMME …………………………….…………………………….………………..…..……………………

7

ISSUE MANAGEMENT TEAM…..………………………..………………………..………………………..………….

7

CREDIT RATING…..………………………..………………………..………………………..…………………………..

9

UNDERWRITING / STANDBY ARRANGEMENTS…………..………………………..……………………………

9

CAPITAL STRUCTURE…………………..………………………..………………………..…………………………

10

TERMS OF THE ISSUE…………………..………………………..………………………..…………………………

16

AUTHORITY TO THE ISSUE ……..………………………..………………………..…………………….

16

BASIS OF THE ISSUE ……..………………………..………………………..………………………………

16

RIGHTS ENTITLEMENT …………………………………..………………………..…………………………..

16

FRACTIONAL ENTITLEMENT ………….………………………..………………………..……………………

16

OFFER TO NON-RESIDENT EQUITY SHAREHOLDERS …………..…………..……………………

16

NOMINATION FACILITY TO THE INVESTOR …………..………………………..………………….

17

PRINCIPAL TERMS AND CONDITIONS OF THE ISSUE .………………………..………………….

17

ACCEPTANCE OF OFFER …..………………………..………………………..……………………………

18

ADDITIONAL SHARES …..………………………..………………………..………………………………..

18

RENUNCIATION …….………………………..………………………..………………………………………..

19

TO RENOUNCE IN WHOLE …..………………………..………………………..…………………………

19

TO RENOUNCE IN PART ………………..………………………..………………………..………………………

19

SPLIT FORMS ………..………………………..………………………..……………………………………………

19

INSTRUCTIONS FOR EQUITY SHAREHOLDERS ……………..……………………………………………

20

HOW TO APPLY……………………..…………………………………………………………………..……………

20

PAYMENTS - HOW AND WHERE TO BE MADE……………………..………………………………………

21

PROCEDURE FOR PAYMETN BY MEANS OF STOCKINVEST……………………..……………………

22

NON-RESIDENT SHAREHOLDERS INCLUDING NRIs/OCBs/FIIs………………..……………………

24

ON REPATRIATION BASIS………………..……………………………………..…………………………………

24

NON-REPATRIATION BASIS………………..……………………………………..………………………………

24

GENERAL………………..……………………………………..……………………………………..…………………

25

RENUNCIATION BY NRIs………………..……………………………………..…………………………………

25

JOINT APPLICANTS………………..……………………………………..……………………………………..……

25

DISPOSAL OF APPLICATIONS AND APPLICATION MONEY………………..…………………………..

25

AVAILABILITY OF DUPLICATE CAF(s) ………………..……………………………………..………………

26

APPLICATION ON PLAIN PAPER………………..……………………………………..…………………………

26

LAST DATE OF APPLICATION………………..……………………………………..……………………………

27

GENERAL INSTRUCTIONS TO THE APPLICANTS ………..……………………………………..………

27

ARRANGEMENT FOR ODD LOT EQUITY SHARES ………….……………………………………..………

28

OPTION TO RECEIVE EQUITY SHARES IN DEMATERIALISED FORM ………..……………………

29

PROCEDURE FOR AVAILING THIS FACILITY FOR ALLOTMENT OF EQUITY SHARES IN THIS ISSUE IN THE ELECTRONIC FORM IS AS UNDER …………………………………..……

29

UNDERTAKING BY THE COMPANY …………..……………………………………..…………………………

30

BASIS OF ALLOTMENT ………..……………………………………..……………………………………..……

30

UTILISATION OF ISSUE PROCEEDS ………..……………………………………..………………………..

31

TAX BENEFITS ………..……………………………………..……………………………………..…………………

32

   

PARTICULARS OF THE ISSUE………………..……………………………………..……………………………

36

   

OBJECT OF THE ISSUE …………..……………………………………..……………………………………..……

36

REQUIREMENT OF FUNDS AND MEANS OF FINANCE …………..……………………………………..…

36

   

COMPANY, PROMOTERS & MANAGEMENT………………..……………………………………..………..

37

BRIEF HISTORY OF THE COMPANY………………………………………………………………………………

37

DETAILS OF AWARDS AND CITATIONS AND CERTIFICATES RECEIVED BY CCCL ……………..

37

MAIN OBJECTS OF THE COMPANY………………………………………………………………………………..

39

BACKGROUND OF PROMOTERS……………………………………………………………………………………

40

DETAILS OF GROUP/ASSOCIATE COMPANIES……………………………………………………………….

40

TRANSACTION BETWEEN GROUP/ ASSOCIATE COMPANIES……………………………………………

43

MANAGEMENT…………………………………………………………………………………………………………….

44

BOARD OF DIRECTORS…………………………………………………………………………………………………

44

SHAREHOLDINGS OF THE DIRECTORS………………………………………………………………………….

46

CHANGES IN THE DIRECTORS IN THE LAST 3 YEARS…………………………………………………….

46

KEY MANAGERIAL PERSONNEL…………………………………………………………………………………….

46

CHANGES IN THE KEY MANAGERIAL PERSONNEL IN THE LAST 1 YEAR……………………………

47

CHANGES IN THE AUDITORS IN THE LAST 3 YEARS………………………………………………………

47

CORPORATE GOVERNANCE………………………………………………………………………………………….

48

AUDIT COMMITTEE…………………………………………………………………………………………………….

48

REMUNERATION COMMITTEE………………………………………………………………………………………

48

SHAREHOLDERS' COMMITTEE………………………………………………………………………………………

49

THE CEMENT INDUSTRY

49

INDUSTRY, MARKET AND COMPETITIVE ENVIRONMENT - (EXCERPTS FROM

ICRA INDUSTRY WATCH SERIES - THE INDIAN CEMENT INDUSTRY (REVISED

EDITION MARCH 2002) BY ICRA INFORMATION SERVICES…………………………………………

 

49

POTENTIAL DRIVERS OF DEMAND……………………………………………………………………………….

49

HOUSING DEMAND…………………………………………………………………………………………………….

50

DEMAND FORECAST……………………………………………………………………………………………………

50

CAPACITY UTILISATION………………………………………………………………………………………………..

52

ICRA'S SUPPLY PROJECTIONS……………………………………………………………………………………….

52

THREAT OF CEMENT IMPORT……………………………………………………………………………………..

52

INTER REGIONAL MOVEMENT OF CEMENT…………………………………………………………………..

52

DEMAND SUPPLY SITUATION………………………………………………………………………………………

53

EXCERPTS FROM ICRA INDUSTRY WATCH SERIES - THE INDIAN CEMENT

INDUSTRY (REVISED EDITION MARCH 2002) BY ICRA INFORMATION

SERVICES ENDS………………………………………………………………………………………………………

 

53

COMPETITIVE POSITION OF CHETTINAD CEMENT………………………………………………………..

54

PRESENT BUSINESS OF THE COMPANY

54

BRAND NAME……………………………………………………………………………………………………………..

54

PRODUCT DETAILS……………………………………………………………………………………………………..

55

CAPACITY UTILISATION……………………………………………………………………………………………….

55

MANUFACTURING FACILITIES………………………………………………………………………………………

56

PLANT & MACHINERY………………………………………………………………………………………………….

56

MANUFACURING PROCESS…………………………………………………………………………………………..

56

    1. CEMENT……………………………………………………………………………………………………….

56

    1. READY MIX CONCRETE………………………………………………………………………………….

56

POWER………………………………………………………………………………………………………………………..

58

POLLUTION CONTROL…………………………………………………………………………………………………

58

UTILITIES…………………………………………………………………………………………………………………..

59

QUALITY CONTROL……………………………………………………………………………………………………..

59

RESEARCH & DEVELOPMENT………………………………………………………………………………………

59

MARKETING AND DISTRIBUTION………………………………………………………………………………….

59

 

   

EXPORT OBLIGATIONS………………………………………………………………………………………………..

60

TECHNOLOGY AND TECHNICAL COLLABORATION………………………………………………………….

60

FINANCIAL PERFORMANCE FOR THE LAST FIVE YEARS…………………………………..

61

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS……………………………………………………………………………………….

72

STOCK MARKET DATA……………………………………………………………………………….

74

RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF……………………………..

78

INTEREST OF PROMOTERS/ DIRECTOS………………………………………………………..

85

PROMISE VS PERFORMANCE IN THE LAST ISSUE…………………………………………..

85

OUTSTANDING LITIGATIONS, DEFAULTS, LIABILITIES AND

MATERIALL DEVELOPMENTS…………>>>>>>>>>>>>>……………………………………………………………………………

87

PARTICULARS REGARDING LISTED COMPANIES UNDER THE SAME

MANAGEMENT WHICH HAVE MADE ANY CAPITAL ISSUE DURING THE LAST

THREE YEARS………………………………………………………………………………………..

 

89

MECHANISM EVOLVED BY THE COMPANY FOR THE REDRESSAL OF

INVESTOR GRIEVANCES………………………………………………………………………….

89

DETAILS OF ADVERSE EVENTS AFFECTING THE COMPANY SINCE THE

LAST FINANCIAL STATEMENTS…………………………………………………………………..

90

EXPERT OPINION……………………………………………………………………………………

90

OPTION TO SUBCRIBE……………………………………………………………………………..

90

MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS……………………………..

90

DECLARATION………………………………………………………………………………………..

93

 

RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF:

The Investors should consider the following risk factors together with all other information included in this Letter of Offer carefully, in evaluating the Company and its business before making any investment decision. Any projections, forecasts and estimates contained herein are forward-looking statements that involve risk and uncertainties. Such statements can be identified by the use of forward looking terminology such as "may", "believes", "will", "expect", "anticipate", "estimate", "plan" or other similar words. The company’s actual results could differ from those anticipated in these forward-looking statements as a result of certain factors including those, which are set forth in the "Risk Factors".

The Letter of Offer also includes statistical and other data regarding the cement industry. This data has been obtained from ICRA Industry Watch Series – The Indian Cement Industry , Revised Edition March 2002 by ICRA Information Services that the company and the Lead Manager believe to be reliable. Neither the company nor the Lead Manager have independently verified such data.

INTERNAL RISK FACTOR

INTERNAL RISK FACTOR 1:

The company has incurred a net loss of Rs.1190 lakhs for the year ended 31.03.2002 and has not declared dividend on equity shares. The company has also incurred losses for the half year ended 30.09.2002 to the extent of Rs.2742 Lacs.

MANAGEMENT PERCEPTION

The performance of the company in last three years is as follows:

(Rs. In Lakhs)

Year ended March 31,

2000

2001

2002

Operating Profit

3410.00

3217.00

2814.00

Profit before tax and extraordinary items

728.00

734.00

-490.00

Profit after tax (including deferred tax) and extraordinary items

598.00

621.00

-1190.00

The Management believes that the performance of the last year is primarily a reflection of the economic slow down coupled with the full impact of the commissioning of the new plant. The management has put in place several financial and operational measures to control cost and improve sales realisation. It has also laid out plans to strengthen its processes and systems in the marketing area. With these measures the management expects to improve the performance of the company in the current year.

INTERNAL RISK FACTOR 2:

The company’s shares are listed on the Madras Stock Exchange. Trading on this exchange is limited and sporadic. The shares are not frequently traded.

MANAGEMENT PERCEPTION

The company’s shares is listed on the Madras Stock Exchange, because regional listing is compulsory as per the requirements of the listing agreement, overall trading in this exchange is limited and sporadic. However, the company’s shares are more actively traded on the The Stock Exchange, Mumbai where it is traded as a permitted security.

INTERNAL RISK FACTOR 3:

The company has, as on 30/09/02, Contingent liabilities with respect to Bank guarantee Rs.93 Lakhs (Rs.206.00 lakhs as on 31/3/02), Letters of Credit Rs.55.00 Lakhs (Rs.8.00 lakhs as on 31/3/02) and the disputed royalty on limestone Rs.547 Lakhs (Rs.547.00 lakhs as on 31/3/02).

MANAGEMENT PERCEPTION

The contingent liabilities are in the normal course of business. The company’s financial position is unlikely to be jeopardized on account of these contingent liabilities.

INTERNAL RISK FACTOR 4:

The funds raised from the Rights issue will be utilized for repayments of long term debts and to augment the long term sources for working capital requirements. The actual deployment of funds will be at the sole discretion of the Board of the company. It is brought to the attention of the investors that the requirement of funds and means of finance are estimated by the company and have not been appraised by any bank or financial institution.

MANAGEMENT PERCEPTION

Bankers advised the company to improve the debt equity ratio. The repayment of debts will improve the debt equity ratio and lead to reduction in interest outflow.

INTERNAL RISK FACTOR 5:

Litigation against the company: Under the Jute Packaging Materials (Compulsory Use of Packing Commodities) Act, 1987 a specified percentage of cement despatched is required to be packed in jute bags. The company could not pack cement in the jute bags at the specified percentage in view of the strong consumer resistance to jute bags as well as poor availability of jute bags. The ministry of textiles in its orders dated June 30, 1997 and December 15, 1998 specified the commodities to be packed in jute bags under the said Act for the period upto June 30, 1999 which do not include cement. Further vide its order dated 1st July 1999 the usage of jute bags for packing cement has been exempted upto June 30, 2000. Penalty if any, which may be levied under the said Act for the earlier period is not ascertainable.

MANAGEMENT PERCEPTION

The provisions of the said Act were challenged in the Supreme Court, which in its judgement dated April 25, 1996 upheld the constitutional validity of the Act. The Supreme Court however decided that the Central Government should give an opportunity to the user industries and ascertain their view before fixing the percentage for use of jute bags. Arising out of this, the cement industry has made representation to the authorities to exempt cement from the provisions of the aforesaid Act and thereafter the two above referred Orders have excluded cement. The Indian Jute Manaufacturers Association (IJMA) has filed a writ petition in the Calcutta High Court and on January 12, 1999 obtained stay against implementation of this order dated December 15, 1998. The High Court vide its order dated February 2, 1999 vacated the stay order and directed that the matter should appear in the list after three weeks for formal hearing. However, the matter has not been listed fo r final hearing. The Cement industry has also represented to the Central Government for exempting the industry from the purview of the order.

 

INTERNAL RISK FACTOR 6:

Litigation against the company: The Office of the Director General of Investigation and Registration, Government of India had filed a MRTP case against the Cement Manufacturers Association (CMA) alleging cartel arrangements amongst the cement manufacturers in raising the prices of cement. There is no fixed liability on the company in this MRTP case.

MANAGEMENT PERCEPTION

The constituents of Cement Manufacturers Association (CMA) had filed a counter statement before the MRTP Commission, New Delhi, claiming that the price of the cement are market driven and not controlled by the manufacturers and have denied any cartel arrangements in fixing the price.

INTERNAL RISK FACTOR 7:

The Director of Geology and Mining raised a demand of Rs.547 Lakhs on the company towards arrears on Royalty payable on limestone quarried from the mines as per the mining lease agreement. The company has filed a Writ Petition in the Madras High Court and obtained an interim stay.

MANAGEMENT PERCEPTION

The Director of Geology had originally raised a demand, against short payment of Royalty during the period 1989 to 1999 of Rs.369 Lakhs. The royalty was stated to have been calculated based on the quantity of cement produced. The consumption of limestone was calculated proportionate to the quantity of cement produced. The company replied to this notice mentioning that the Working Sheet prepared by the Department was not available with the company and that the department had calculated the consumption of limestone on the basis of cement, whereas as consumption of limestone can be related only to production of clinker, of which limestone is the main raw material. Various grades of cement contains different proportions of clinker and hence a standard unit of lime stone per unit of cement produced cannot be fixed. Further the company also stated that they have been paying the Royalty on limestone to be quarried, in advance before the dispatch of limesto ne and that the figures of clinker production and limestone consumption were being reconciled by the District office annually and were being issued with "No Dues Certificates" by the District Offices every time, so the question of short payment of royalty does not arise.

The company did not receive any reply to this letter. Then the company again received a notice dated 19/3/2002l from the Department of Geology and Mining demanding an amount of Rs.547 Lakhs for the period 1989 to 2001, wherein no reference for our earlier reply made. The notice also threatened penal action against the company. At this point, the company filed a writ petition numbered as 14447 of 2002 with the High Court of Madras obtained an interim stay of all further proceedings in the above matter.

INTERNAL RISK FACTOR 8:

The Tamil Nadu Civil Supplies Corporation Limited had filed a case in the Court of Subordinate Judge of Erode claiming refund of advance together with interest towards belated supply of cement. Their total claim is Rs.74,477.39 (Rs.2,663.14 towards principal and Rs.71,814.25 towards interest).

MANAGEMENT PERCEPTION

The company's admitted liability in this case is a mere Rs.360/-. The company has filed its counter and have denied the fact of belated supply of cement.

INTERNAL RISK FACTOR 9:

Dr. M A M Ramaswamy has a pending litigation against him in his individual capacity filed by State Bank of India as a guarantor to a loan extended by it to South India Artists Association. The Association has failed to repay the loan following which the Bank approached the debt recovery tribunal for a total claim of Rs.53,07,449.70. Dr.M A M Ramaswamy is the eighth defendant in a total of fourteen defendants.

MANAGEMENT PERCEPTION

Since Dr. M A M Ramaswamy, is one of the fourteen defendants in this case and as such has signed only as guarantor, the total liability arising out of the case would be negligible.

INTERNAL RISK FACTOR 10:

Loss making group companies:

Sl. No.

Associate Companies

For the year ended

Loss

(Rs. In lacs)

1

Chettinad MBF Hi Silica Limited

31.03.2002

1,46,38,071

2

Chettinad Transworld Micronised Garnet Private Limited

 

31.03.2002

 

51,34,457

3

Chettinad Ship Management Services P Ltd

31.03.2002

5,61,038

 

MANAGEMENT PERCEPTION

The losses in the group / associate companies are unlikely to have any material impact on the operations of the company.

 

INTERNAL RISK FACTOR 11:

The company faces competition from a large number of players in the sector.

MANAGEMENT PERCEPTION

The company is constantly taking steps to reduce costs, upgrade existing products, expanding dealers network thereby increasing sales potential and remains ahead of the competition. The strong brand image will enable the company to face competition.

INTERNAL RISK FACTOR 12:

As on 31st March 2002, the company has Rs.280 lakhs worth of contracts remaining to be executed on capital account and not provided for.

MANAGEMENT PERCEPTION

The aforesaid accounting treatment has no impact on the profits for the year.

INTERNAL RISK FACTOR 13:

The company owes an amount of Rs.5 lakhs due to small scale industrial undertakings as on 31st March 2002.

MANAGEMENT PERCEPTION

There are only 3 cases, which are outstanding for more than 30 days and the dues are in the normal course of business.

INTERNAL RISK FACTOR 14

Arrears in the Term Loan

The company is in arrears towards the payment of Term Loan Instalments and Interest with various lending banks as on 30.09.02 as below:

(Rs in Lakhs)

Sl No

Name of the bank

Arrears of

 

Project Loan

Principal

Interest

1

Central Bank of India

--

157.00

2

Indian Bank

600.00

67.00

3

Indian Overseas Bank

--

157.00

4

Canara Bank

--

79.00

5

State Bank of Patiala

--

80.00

6

State Bank of Mysore

--

31.00

7

UTI Bank

--

100.00

8

ICICI Bank Limited

--

337.00

 

Term Loan

   

9

Indian Bank

400.00

66.00

10

Indian Bank

--

24.00

 

Total

1000.00

1098.00

Note: In view of the losses incurred during the year ending 31.03.2002 and half year ending 30.09.2002, the company has made a request to various banks for rephasement of principal, which have lent to the recent expansion programme. The banks viz Central Bank of India and Canara Bank have extended the holiday period for commencing repayment of the Term Loan and the consent from other banks are also awaited. While computing the arrears of Term Loan, repayment obligation to banks to whom application for rephasement is made, is not taken into account. (Out of the above arrear amount, the company has since paid Rs.190 Lakhs towards Principal Amount of Rs.55 Lakhs and Interest Amount of Rs.135 Lakhs, thus reducing the principal arrears to Rs.945 Lakhs and Interest dues to Rs.963 Lakhs)

MANAGEMENT PERCEPTION:

The arrears are caused due to the losses incurred by the company, consequent to lower sales realisation of cement. The price realisation have started improving during the month of November 2002 and the company expects to have increased cash generation in the future, which will take care of the repayment obligations to the banks. Also the Board of Directors of the company, at their discretion will deploy funds out of the proceeds of the rights issue to pay the high cost long term debt. Hence the arrears of principal and interest is a temporary occurrence and the company has taken steps to pay the arrears of principal and interest on an ongoing basis not later than March 2003.

The Company has entered into a Deed of Agreement for Deemed Payment of Deferred Sales Tax, Deemed Re-loaning and Recovery of Loan on 4th March 2002 with the Government of Tamil Nadu represented by the Territorial Assistance Commissioner of Commercial Taxes in regard to eligibility of Interest Free Sales Tax Loan which is payable after 12 years from 31/3/2014. Any amount by way of IFST loan that will be available to the company will also be utilised for servicing the term loan instalments and interest.

INTERNAL RISK FACTOR 15

Details of outstanding litigations against the group companies:

  • South India Corporation Limited (SICL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

Civil suit filed against SICL vide case No.C.S.666/2001 in the High Court of Madras

DCW Limited, Tuticorin

Cargo shortage in Chemical cargo shipped of 100.874 MT. A sum of Rs.23.97 Lakhs being value of the shortage has been claimed.

Pending

2

Case No.5363/2001. Sole arbitrator appointed by Supreme Court

Glencore Intl., AG, Switzerland

Demurrage for delay in shipment of USD 1.05 Lakhs

Pending

3

M.P. No.7/2000 in Spl. Court, Mumbai

Fairgrowth Financial Services Limited

Claim of interest charges for delay in hire charges instalment payment of Rs.25.25 Lakhs

Pending

4

ID 77, 78, 79, 80, 81, 170, 172, 173, 187, 188 of 2000; ID 22, 69, 70, 76 and 83 of 2001; ID 86, 96 and 97 of 2002, all in Labour Court of Tuticorin

Drivers (Ex- employees_

Case filed in Labour Court demanding payment of retrenchment compensation and gratuity. Amount not quantified

Pending

 

  • South India Structural Corporation Limited (SISCL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

378 of 1996 with II Addl. Labour Court, Chennai

M Lakshmanan

(Ex-employee)

Terminated from services for wrongful behaviour. Party filed suit for claim of retrenchment compensation. Amount not quantified.

Pending.

MANAGEMENT PERCEPTION:

The items listed above are in the normal course of business of the respective companies and are unlikely to have an adverse impact on the company’s operations.


EXTERNAL RISK FACTOR

EXTERNAL RISK FACTOR 1

The profitability of cement business of the company is dependent upon the demand supply scenario prevailing in the market.

MANAGEMENT PERCEPTION

The company is relatively better placed to face competition even in the current temporary situation of oversupply since its products already command premium in most of the markets catered to.

EXTERNAL RISK FACTOR 2

Changes in Government fiscal, economic and monetary policies can affect costs including fuel, power, freight etc.,

MANAGEMENT PERCEPTION

It is expected that over a period of time the company shall be able to recover these costs increases in realisations and also improvements in productivity.

EXTERNAL RISK FACTOR 3

Government policy on investment in infrastructure and industrial sectors has a direct bearing on the demand for cement.

 

Notes to Risk Factors

 

 

*

Investors are advised to refer to the para on "Basis of Issue Price" before investing in this Issue.

*

Investors may note that in the event of over-subscription, allotment shall be made in consultation with the Madras Stock Exchange Limited.

*

Net Worth before the Issue (as on 31/3/2002) is Rs.10233 Lakhs and the issue size is Rs.3035.41 Lakhs

*

The average cost per share to the key Promoter Dr M A M Ramaswamy and Mr M A M R Muthiah is Rs.42.55 and Rs.51.43 respectively and the Book Value per share as on March 31, 2002 is Rs.48.54.

*

During the last six months (i.e., from May to October 2002), Smt Geetha Muthiah, belonging to the Promoters group has purchased 581246 ordinary shares of the company at a maximum price of Rs.83.11 on 17/06/02 and minimum price of Rs.69.24 on 18/09/02. The other key promoters have not purchased any shares of the company during the period from May 2002 to October 2002.

 

 

 

HIGHLIGHTS

*

Company operating in cement industry for over three decades.

*

One of the major players in South India catering to markets in Tamil Nadu and Kerala.

*

The company has a wide network of dedicated stockists numbering 1000 in Tamil Nadu and 450 in Kerala. Besides the company also has field officers posted in all districts who are in constant touch with the stockists.

*

Significant Market Share of 10.75% in Tamil Nadu and 9.98% in Kerala during April 2002 to September 2002 (Source: Cement Manufacturers’ Association Report for the month of September 2002).

*

One of the players manufacturing and marketing Sulphate Resistant Cement which is widely used in the coastal belt of the country.

*

The company has received various awards for productivity, safety, employees welfare, conservation of energy etc., (refer to Page No.37 for further details)

*

The company does not have any past history of worker unrest and enjoys excellent relations with its workforce.

*

The company’s current operations are ISO 9002 certified by the Bureau of Indian Standards.

Dear Shareholder(s),

Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on 16/09/2002 and vide resolutions passed on 29/10/2002 by the shareholders in the Extra-ordinary General Meeting (EGM) and resolution passed by the Board of Directors at its meeting held on 29/10/2002, it has been decided to make the following offer on a Rights Basis to the existing equity share holders of the company.

OFFER OF 84,31,700 EQUITY SHARES OF RS.10/- EACH FOR CASH AT A PREMIUM OF RS.26 PER SHARE AGGREGATING RS.3035.41 LAKHS ON A RIGHTS BASIS IN THE RATIO OF TWO EQUITY SHARES FOR EVERY FIVE EQUITY SHARES (2:5) HELD ON ______ (HEREINAFTER REFERRED TO AS THE "RECORD DATE").

GENERAL INFORMATION

NAME OF THE COMPANY AND ADDRESS OF THE REGISTERED OFFICE

Chettinad Cement Corporation Limited

Registered Office

Rani Seethai Hall Building

603, Anna Salai

Chennai 600 006

Tel: (044) 829 2727

Fax:(044) 829 1558

Email : chtdmds@vsnl.com

URL : www.chettinadcement.com

IMPORTANT

*

This issue is applicable to those equity shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the company at the close of business hours on the record date i.e., __________ 2002.

*

Your attention is drawn to the section on "Risk Factors" appearing on Page No.78 of this Letter of Offer.

*

Please ensure that you have received the CAF(s) with this Letter of Offer.

*

Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. Application is liable to be rejected for any non-compliance of the Letter of Offer or the CAF.

*

All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrars to the Issue, quoting the Registered Folio Number / DP and Client ID number and the CAF numbers as mentioned in the CAF.

ELIGIBILITY FOR THE ISSUE

M/s.Chettinad Cement Corporation Limited (CCCL) is a company under the Companies Act, 1956 whose equity shares are listed on The Madras Stock Exchange Limited (Regional Stock Exchange) and traded as a permitted security in The Stock Exchange, Mumbai. It is eligible to offer this Rights Issue in terms of clause 2.4.1(iv) of the Securities & Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000. The Company, its Promoters, its Directors or any of the Company’s associates or group companies and companies with which the Directors of the company are associated as Directors or Promoters, or Directors of the Promoters or promoter group companies have not been prohibited from accessing the capital market under any order or direction passed by SEBI.

GOVERNMENT APPROVALS /LICENCES

Products being manufactured by the company have been exempted from Industrial Licensing as per Notification No.477(E) dated July 25, 1991 issued under the Industries (Development and Regulation) Act, 1951. Hence the company does not require a licence to carry on the business. Prior to this notification, the company has obtained approval from Department of Industrial Development, Secretariat for Industrial Approvals vide their letter No.CIL/345/(87)/LA.II/Amend/89 dated 28th December 1989 for enhancement of production capacity from 4.00 lakh tonnes to 6.00 lakh tonnes per annum for Puliyur Unit. With respect to manufacture of 9.00 lakh tonnes of cement per annum at Karikalli, Dindugal Taluk, Tamil Nadu, the company has filed an Information Memorandum (IM) for manufacture of Portland Cement, Alumina Cement, Slag Cement and Similar Hydraulic Cement with Secretariat for Industrial Approval, Entrepreneurial Assistance Unit, Ministry of Industry, Government of India and obtained their Acknowledgement vide letter No.2018/SIA/IMO/99 dated 15/10/99. With respect to RMC Plant, the company has obtained an Industrial Licence from the Department of Industrial Policy & Promotion, Secretariat for Industrial Assistance, Ministry of Commerce & Industry vide letter No.LI: 77(2001) dated June 6, 2001.

DISCLAIMER CLAUSE

AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF LETTER OF OFFER TO THE SECURITIES & EXCHANGE BOARD OF INDIA (SEBI) SHOULD NOT, IN ANY WAY BE DEEMED/CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. THE LEAD MANAGER M/S.INDBANK MERCHANT BANKING SERVICES LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMP ANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT, THE LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGER M/S.INDBANK MERCHANT BANKING SERVICES LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 21/11/2002 WHICH READS AS FOLLOWS:

1

"We have examined various documents including those relating to litigation like commercial disputes, patent disputes with collaborators etc., and other material in connection with the finalisation of the Letter of Offer pertaining to the said issue

2

On the basis of such examination and the discussions with the Company, its Directors and other Officers, other agencies, independent verification of the statements concerning the objects of the issue, price justification and the contents of the documents mentioned in the Annexure and other papers furnished by the Company :

 

 

 

WE CONFIRM THAT:

(a)

the Letter of Offer forwarded to SEBI is in conformity with the documents, materials and papers relevant to the Issue;

(b)

all the legal requirements connected with the said issue as also the guidelines, instructions etc., issued by SEBI, the Government and any other competent authority in this behalf have been duly complied with;

(c )

the disclosures made in the Letter of Offer are true, fair and adequate to enable the investors to make a well informed decision as to investment in the proposed issue.

(d)

We confirm that besides ourselves, all the intermediaries named in the Letter of Offer are registered with SEBI and till date such registration is valid;

 

The filing of the Letter of Offer does not, however, absolve the Company from any liabilities under Section 63 or 68 of the Companies Act, 1956 or from the requirement of obtaining such statutory or other clearance as may be required for the purpose of the proposed issue. SEBI further reserves the right to take up, at any point of time, with the Lead Merchant Banker any irregularities or lapses in the Letter of Offer.

CAUTION

The company and the Lead Manager accept no responsibility for statements made otherwise than in this Letter of Offer or in any advertisement or any other material issued by the Company or by any persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk.

The Lead Manager and the Company shall make all information available to the Equity Shareholders and -no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc., after filing of the Letter of Offer with SEBI.

DISCLAIMER WITH RESPECT TO JURISDICTION

This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any disputes arising out of this issue will be subject to the jurisdiction of the appropriate court(s) in Chennai only.

DISCLAIMER CLAUSE OF THE MADRAS STOCK EXCHANGE LIMITED (MSE)

Madras Stock Exchange Limited do not in any manner: -

i)

warrant, certify or endorse the correctness or completeness of any of the contents of this offer document, or

ii)

warrant that the company's securities will be listed or will continue to be listed on the Madras Stock Exchanges, or

iii)

take any responsibility for the financial or other soundness of this company, its promoters, its management or any scheme or project of the company.

 

It should not, for any reason, be deemed or construed that this offer document has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of the company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Madras Stock Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.

 

IMPERSONATION

As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection (1) of Section 68A of the Companies Act, 1956 which is reproduced below:

"Any person who –

(a)

makes in a fictitious name an application to a Company for acquiring or subscribing for any shares therein, or

(b)

otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years."

FILING

A copy of the Letter of Offer is filed with SEBI at Ground Floor, Mittal Court "A" Wing, Nariman Point, Mumbai 400 021 and also with The Madras Stock Exchange Limited (Regional Stock Exchange) where the equity shares of the company to be issued in terms of this Letter of Offer are proposed to be listed.

LISTING

The existing equity shares of the company are listed on the MSE (The Regional Stock Exchange) and traded as a permitted security in The Stock Exchange, Mumbai. The company has made application to MSE for permission to deal in and for an official quotation in respect of the securities being offered in terms of this Letter of Offer. The company has received in-principle approvals from MSE vide its letter No._______ dated _______. The company will apply to the above exchange, where its existing equity shares are listed, for listing of the equity shares to be issued.

If the permission to deal in and for an official quotation of the securities is not granted by the Madras Stock Exchange Limited within six weeks from the issue closing date, the company shall forthwith repay, without interest, all monies received from applicants in pursuance of this Letter of Offer. If such money is not paid within eight days after the company becomes liable to repay it, then the company and every Director of the Company who is an officer in default shall on and from expiry of eight days be jointly and severally liable to repay the money with interest as prescribed under the Section 73 of the Act.

MINIMUM SUBSCRIPTION

 

If the Company does not receive the minimum subscription of 90% of the issue, the entire subscription shall be refunded to the applicants within forty two days from the date of closure of the issue.

If there is delay in the refund of subscription by more than 8 days after the company becomes liable to pay the subscription amount (i.e. forty two days after closure of the issue), the company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.

ALLOTMENT LETTERS / REFUND ORDERS

The company will issue and dispatch letters of allotment / share certificates and/or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of six weeks from the date of closure of the issue. If such money is not repaid within 8 days from the day the company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act.

Letters of allotment / share certificates / refund orders above the value of Rs.1500/- will be dispatched by Registered Post / Speed Post to the sole/first applicant’s registered address. However, refund orders for value not exceeding Rs.1500/- shall be sent to the applicants under postal certificate. Such cheques or refund orders will be payable at par at all the centres where the applications were originally accepted and will be marked "A/c Payee" and would be drawn in the name of the sole/first applicant. Adequate funds would be made available to the Registrars to the Issue for dispatch of the Letters of Allotment/ Share Certificates/ Refund orders.

In case the company issues Letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Company Law Board under Section 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for the Share Certificates.

ISSUE PROGRAMME

 

The subscription list will open at the commencement of banking hours and will close at the close of banking hours on the dates mentioned below or on such extended date (subject to a maximum of 60 days) as may be determined by the Rights Committee/Board, subject to necessary approval.

Issue Opening Date

 

Last date for receiving requests for split forms

 

Issue Closing Date

 

 

ISSUE MANAGEMENT TEAM

i. Lead Managers to the Issue

Indbank Merchant Banking Services Limited

(a subsidiary of Indian Bank)

Third Floor

Krest Building

26/27, Jehangir Street

Chennai 600 001

Tel: (044) 522 4693 / 5224694

Fax: (044) 522 7059

email : imssbc@md3.vsnl.net.in

SEBI Registration No.INM000001394

ii. Registrars to the Issue

Integrated Enterprises (India) Limited

Second Floor, "Kences Towers"

1, Ramakrishna Street, North Usman Road

T Nagar

Chennai 600 017

Tel: (044) 814 0801 / 814 0802 / 814 0803

Fax: (044) 814 2479

Email: kannan@iepindia.com

SEBI Registration No.INR000000544

iii. Auditors to the Company

M/s.P B Vijayaraghavan & Co.,

Chartered Accountants

New No.14, (Old No.27) Cathedral Garden Road

Nungambakkam

Chennai 600 034

Tel No.(044) 826 3918 / 3490

Fax No.(044) 827 6519

M/s.Seshadri & Jayaraman

Chartered Accountants

Catholic Centre, Third Floor

64, Armenian Street

Chennai 600 001

Tel No.(044) 538 5851

M/s.Krishaan & Co.,

Chartered Accountants

Flat No.10, "C" Wing

VI Floor

Parsn Manere

602, Anna Salai

Chennai 600 006

Tel No.(044) 827 2569

iv. Legal Advisor to the Issue

Mr T V Padmanabhan

Advocate

7, Coats Road

T Nagar

Chennai 600 017

Tel No.(044) 815 6430

 

v. Bankers to the Company

ICICI Bank Limited

No.1, Cenotaph Road,

Teynampet,

Chennai 600 018

Central Bank of India

Industrial Finance Branch

48/49, Montieth Road

Egmore

Chennai 600 008

Canara Bank

Spencer Towers, Second Floor

770-A, Anna Salai

Chennai 600 002

Indian Overseas Bank

C & I C Branch, Auras Corporate Centre

98 A, Dr. Radhakrishnan Road

Mylapore

Chennai - 600 004.

State Bank of Mysore

M.O.H. Building, Second Floor

576, Anna Salai

Chennai - 600 006.

State Bank of Patiala

No. 27, Whites Road,

Chennai - 600 014.

Indian Bank

Thousand Lights Branch

Kannammai Building

611, Anna Salai

Chennai 600 006.

vi. Bankers to the Issue

Central Bank of India

Industrial Finance Branch

48/49, Montieth Road

Egmore

Chennai 600 008

Tel: (044) 855 4882 / 3471

vii. Company Secretary & Compliance Officer

Mr S Hariharan

Company Secretary

Chettinad Cement Corporation Limited

Rani Seethai Hall Building

603, Anna Salai

Chennai 600 006

Tel: (044)-8292727

Fax: (044)-8291558

Email:chtdmds@vsnl.com

Note: The investors are advised to contact the Registrars to the Issue/Compliance Officer in case of any pre-issue/post-issue related problems such as non-receipt of Letter of Offer/Letter of Allotment/Share Certificates/Refund Orders/Cancelled Stockinvests etc.

CREDIT RATING

This being an issue of equity shares, no credit rating is required.

UNDERWRITING/STANDBY ARRANGEMENTS

The present issue is not underwritten. The company has not entered into any standby arrangements in this regard.

IMPORTANT

 

*

The Issuer and the Lead Manager are obliged to update the Letter of Offer and keep the public informed of any material changes till the commencement of trading.

*

All information shall be made available by the Lead Manager and the Issuer to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales report etc.

CAPITAL STRUCTURE

 

as at March 2002

Face Value

Issue Price

Rs.

Rs.

Authorised Capital

100000000

equity shares of Rs.10/- each

1000000000

Issued Capital

21168400

equity shares of Rs.10/- each

211684000

Subscribed & Paid up Capital

21075350

equity shares of Rs.10/- each (includes 4215850 equity shares of Rs.10/- each allotted as fully paid bonus shares by capitalisation of reserves)

210753500

Present issue being offered to the equity

shareholders through this Letter of Offer

8431700

equity shares of Rs.10/- each for cash at a premium of Rs.26 per share in the ratio of two equity shares for every five equity shares (2:5) held on _________.

84317000

303541200

Paid up capital after the issue

29505490

Equity shares of Rs.10/- each

295054900

514294700

Share Premium Account

Before the Issue

278160300

Share Premium Collected in the Issue

219183640

Share Premium After the Issue

497343940

*

the existing paid-up equity shares of the company exclude 3900 equity shares, which are the subject matter pending in the court, for which the order from the Court is awaited. Hence the rights on these shares will have to be kept in abeyance pending disposal of the case. However, the rights entitlement at 84,31,700 shares is arrived at taking into account the rights entitlement for 3900 shares which are the subject matter pending in the court. If the shareholders of these 3900 shares apply under the present issue, the allotment will be subject to the decision by the Court. The rights entitlement of 1560 shares towards these shareholders are not included to arrive at the post issue paid up capital as stated elsewhere in the Letter of Offer.

NOTES TO CAPITAL STRUCTURE

1

The authorised capital of the company has been increased to Rs.100.00 Crores from Rs.50.00 Crores at the Annual General Meeting of the Company held on 20/09/2000

2

Share Capital History:

 

 

Date of Issue

Equity Shares

Issue Price

Rs.

Percentage of

pre-issue

capital

Consideration

Remarks

Allotted

Face Value

Rs.

25-Jun-65

2100000

10.00

10.00

9.96

Cash

Original Capital

01-Jan-89

2115850

10.00

10.00

10.04

Rights Issue

Ratio 1:1

18-Dec-95

4215850

10.00

-

20.00

Bonus Issue

Ratio 1:1

23-Aug-00

12643650

10.00

32.00

59.99

Rights Issue

Ratio 3:2

Total

21075350*

100.00

*

Out of the shares issued as on date 42,15,850 equity shares of face value of Rs.10/- each have been issued out of capitalization of free reserve

3)

The shareholding of the present promoters group of CCCL in the paid up equity capital of the company is 14435350 equity shares having face value of Rs.10/- each. This constitutes 68.49% of the present equity capital of the company as on 21/11/2002. Their entitlement in the proposed rights issue based on the above holdings in the company is 5774140 equity shares of Rs.10/- each at a premium of Rs.26/- per share and the promoters group [excluding (late) Rani Lady Meyyammai Achi & (Late) Kumararajah Muthiah Chettiar] intend to subscribe to their rights entitlement. The aggregate holding of the two deceased shareholders as on 21/11/2002 is 1,53,000 equity shares of Rs.10/- each. Transmission of these shares to their legal heirs have not been effected so far as the company has not received necessary documents from the claimants.

 

4)

Promoters Shareholding History

Date of Allotment

No. of Equity Shares

Face Value

(in Rs.)

Issue Price

(in Rs.)

Nature of Payment

% of issued capital

Date upto which locked-in

25.6.65

98000

10/-

10/-

Allotment

0.46

N.A

1.1.89

846087

10/-

10/-

Rights Issue

4.01

N.A

18.12.95

1880481

10/-

--

Bonus Issue

8.92

N.A

23.8.2000

7506176

10/-

32/-

Rights Issue

35.62

N.A

Total

10330744

     

49.01

 

In addition to the above, the market purchases net of sales as on 21/11/2002 constitute 4104606 equity shares (representing 19.48% of the total issued capital) having face value of Rs.10/-. The equity shares allotted/held to by the present promoter group are fully paid up.

5) Current Shareholding pattern of the company as on 21/11/2002

 

 

Share holders

No. of equity

Shares held

% of pre issue

capital

Post Issue Share

holding from the

rights issue

*

% of post issue capital

Promoters Group

14435350

68.49

20209490

68.49

Financial Institutions

3040792

14.43

4257109

14.43

Mutual Funds

2400

0.01

3360

0.01

Foreign Institutional Investor

2000

0.01

2800

0.01

Banks

2800

0.01

3920

0.01

Private Body Corporates

373178

1.77

522449

1.77

Indian Public

3185830

15.12

4460162

15.12

NRIs/OCBs

33000

0.16

46200

0.16

21075350

100.00

29505490

100.00

*

assuming all the applicants exercise their rights in full. Please also refer to notes of Point No.6.

6) Details of the shareholding of the promoters, promoter group and Directors of the company as on 21/11/02.

 

Share holders

No. of equity

shares held

% of pre issue

capital

Post Issue Share holding from the rights issue

*

% of post issue

capital

Key Promoters

Dr M A M Ramaswamy

6058834

28.75

8482368

28.75

Sri M A M R Muthiah

3502546

16.62

4903564

16.62

Others

Relatives

4728686

22.44

6620160

22.44

South India Corporation Limited

123984

0.59

173578

0.59

Directors

21300

0.10

29820

0.10

Total

14435350

68.49

20209490

68.49

* assuming all the applicants exercise their rights entitlement in full except for the deceased shareholders. The rights entitlement of two deceased shareholders viz., Kumararajah M A M Muthiah Chettiar and Lady Rani Meyyammai Achi works out to 61200 shares. Please refer Point No.3 of "Notes to Capital Structure". In order to keep the promoters group shareholding unaltered, the key promoters viz., Dr M A M Ramaswamy and Mr M A M R Muthiah intend to apply for additional shares to cover this shortfall.

7

Details regarding Major shareholders

a) Top 10 shareholders as on 21/11/02

 

Name of the Share holders

No. of equity shares held

% of issued capital

Dr M A M Ramaswamy

6058834

28.75

Sri M A M R Muthiah

3502546

16.62

Smt Sigappi Ramaswamy

3197460

15.17

Life Insurance Corporation of India

1611432

7.65

Tamilnadu Industrial Investment Corp

1233910

5.85

Smt Geetha Muthiah

1078226

5.12

Dr Rajah Sir M A Muthiah Chettiar#

300000

1.42

Kumararajah M A M Muthiah Chettiar #

152500

0.72

Oriental Insurance Company Limited

125000

0.59

South India Corporation Limited

123984

0.59

# the said shareholders are no more and their holdings are vested in their legal estate

(b) Top 10 shareholders as on 11/11/2002 (10 days before the date of filing of the offer document)

 

Name of the Share holders

No. of equity shares

held

% of issued

capital

Dr M A M Ramaswamy

6058834

28.75

Sri M A M R Muthiah

3502546

16.62

Smt Sigappi Ramaswamy

3197460

15.17

Life Insurance Corporation of India

1611432

7.65

Tamilnadu Industrial Investment Corp

1233910

5.85

Smt Geetha Muthiah

1078226

5.12

Dr Rajah Sir M A Muthiah Chettiar #

300000

1.42

Kumararajah M A M Muthiah Chettiar #

152500

0.72

Oriental Insurance Company Limited

125000

0.59

South India Corporation Limited

123984

0.59

# the said shareholders are no more and their holdings are vested in their legal estate

(c) Top 10 shareholders as on 21/11/2000 (2 years before the date of filing of the offer document)

Share Holders

No. of equity

shares held

% of issued capital

Dr M A M Ramaswamy

795926

9.44

Life Insurance Corporation of India

676700

8.03

Chettinad Plantations Private Limited

661864

7.85

Chettinad Corporation Private Limited

596400

7.07

Chettinad Agencies Private Limited

572400

6.79

South India Corporation Limited

507468

6.02

Tamilnadu Industrial Investment Corporation Limited

493564

5.85

Mr M A M R Muthiah

206400

2.45

Madura South India Corporation Ltd

205604

2.44

Lotus Agency Private Limited

202200

2.40

8 The promoters group (excluding (Late) Rani Lady Meyyammai Achi & (Late) Kumararajah Muthiah Chettiar, who together between them hold 0.72% of the pre-issue share capital) intend to subscribe to their rights entitlement. Dr M A M Ramaswamy, Mr M A M R Muthiah, Smt Sigappi Ramaswamy and Smt Geetha Muthiah also intend to subscribe to the unsubscribed portion of the rights issue, if any, to achieve the subscription level of 90% of the Issue. The acquisition of additional shares or subscription to the shortfall shall be exempt under the proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Further this acquisition will not result in change of control of the management of the company.

 

 

9)

The company has also undertaken that no further issue of securities shall be made till the securities offered through this Letter of Offer are listed or till application moneys are refunded on account of non-listing, under-subscription etc.

 

10)

The present issue being a rights issue, as per extant SEBI guidelines, the requirement of promoters’ contribution is not applicable.

 

11)

The company has not availed any bridge loans to be repaid from the proceeds of this rights issue.

 

12)

The promoters, directors and lead merchant banker of the Issue have not entered into any buyback, standby or similar arrangements for purchase of securities being issued through this Letter of Offer.

 

13)

The terms of issue to Non-resident equity shareholders/applicants have been presented under the "Terms of the Issue" section of this document.

 

14)

At any given time, there shall be only one denomination of the equity shares of the company.

15)

The directors, promoters and promoters group of the company have not entered into any purchase or sale transactions of the company’s share in the last six months from May 2002 to October 2002 except for the shares purchased by Smt Geetha Muthiah. Smt Geetha Muthiah has purchased 581246 ordinary shares of the company at a maximum price of Rs.83.11 on 17/06/02 and minimum price of Rs.69.24 on 18/09/02.

16)

No further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner which will affect the equity capital of the company shall be made during the period commencing from the filing of the Letter of Offer with SEBI and the date on which the equity shares issued under this Letter of Offer are listed or application moneys are refunded on account of the failure of the issue. Further presently the company does not have any intention to alter the equity capital structure by way of split/consolidation of the denomination of the shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities within a period of six months from the date of opening of the present issue.

17)

The equity shareholders of the company do not hold any warrant, option or convertible loan or any debenture, which would entitle them to acquire further shares in the company.

18)

As per FEMA Regulations 2000, a general permission has been given to (a) Indian companies to Issue Rights/Bonus shares to Non-residents and to send such shares out of India and (b) Non-Residents to acquire such shares, subject to stipulated conditions. Hence the company does not need an in principle permission from RBI for issue of shares to Non-residents, up to their entitlement and the non-resident shareholders need not apply to RBI for any such approval.

TERMS OF THE ISSUE

 

The equity shares now being offered are subject to the provisions of the Act, the terms and conditions of this Letter of Offer, the CAF, the Memorandum & Articles of Association of the Company, Foreign Exchange Management Act, 1999 (FEMA) and the Letters of Allotment or share certificate. Over and above such terms and conditions, the equity shares shall also be subject to applicable laws, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by SEBI/the Government of India/RBI and /or other authorities.

AUTHORITY TO THE ISSUE

The Rights Issue is being made pursuant to the Board resolution dated 16/09/2002, resolution dated 29/10/02 passed by the shareholders in the Extra-Ordinary General Meeting (EGM) and resolution passed by the Board of Directors at its meeting held on 29/10/02.

BASIS OF THE ISSUE

The equity shares are being offered for subscription for cash to those existing equity shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company in respect of the shares held in the physical form at the close of business hours on the record date ________ fixed in consultation with The Madras Stock Exchange Limited (The Regional Stock Exchange).

The equity shares are being offered for subscription in the ratio of 2 equity shares for every 5 equity shares held by the equity shareholders.

RIGHTS ENTITLEMENT

As you were an equity shareholder on the record date, you are being made this issue as shown in Part A of the enclosed composite application form.

FRACTIONAL ENTITLEMENT

If the shareholding of any of the equity shareholders is less than 5 or is not in multiples of 5, then the fractional entitlement of such holders shall be rounded up to the next higher integer. The additional equity shares so issued will be adjusted from the promoters entitlement at the time of allotment.

OFFER TO NON-RESIDENT EQUITY SHAREHOLDERS

As per FEMA Regulations 2000, a general permission has been given to (a) Indian companies to Issue Rights/Bonus shares to Non-residents and to send such shares out of India and (b) Non-Residents to acquire such shares, subject to stipulated conditions. Hence the company does not need an in principle permission from RBI for issue of shares to Non-residents, up to their entitlement and the non-resident shareholders need not apply to RBI.

NOMINATION FACILITY TO THE INVESTOR

In accordance with Section 109A of the Act, the sole or first applicant along with other applicants may nominate any one person in whom in the event of the death of the sole applicant or in case of joint applicants, death of all applicants as the case may be, the equity shares allotted, if any shall vest with a person, being a nominee, becoming entitled to the equity shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Act, be entitled to the same advantages to which he/she would be entitled if he/she were the registered holder of the equity share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to equity share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale of equity shares by the person nominating in the manner prescribed. F resh nomination can be made only on the prescribed form available on request at the Registered Office of the company or the Registrars to the Issue.

Any person who becomes a nominee by virtue of the provisions of Section 109A of the Act, shall upon the production of such evidence as may be required by the Rights Committee/Board should select either:

*

To register himself as holder of equity shares, or

*

To make such transfer of the equity shares, as the deceased holder could have made.

Further, the Rights Committee/Board may at any time give notice requiring any nominee to elect either to be registered himself or to transfer the equity shares, and if the notice is not complied within 90 days, the Rights Committee/Board may thereafter withhold payments of all dividends, bonuses or other monies payable in respect of the equity shares, until the requirements of the notice have been complied with.

PRINCIPAL TERMS AND CONDITIONS OF THE ISSUE

  1. Face Value
  2. Each equity shares shall have the face value of Rs.10/-

  3. Issue Price
  4. Each equity share is being offered at a price of Rs.36/- per share (at a premium of Rs.26/- per share)

  5. Entitlement Ratio
  6. The equity shares are being offered on a rights basis to the existing equity shareholders of the company in the ratio of 2 equity shares for every 5 equity shares held.

    Market Lot

    The market lot for equity shares held in dematerialized mode is one. In case of physical certificates, the company would issue one certificate for the equity shares allotted to one person ("Consolidated Certificate"). In respect of the consolidated certificate, the company will only upon receipt of a request from the equity shareholders, split such consolidated certificate into smaller denomination within three days from the receipt of the request from the equity shareholders. No fee would be charged by the company for splitting the Consolidated Certificate but stamp duty payable if any will be borne by the equity shareholder.

  7. Terms of payment
  8. The full amount per equity shares shall be payable along with the application.

  9. Ranking of the equity shares

The equity shares shall be subject to the Memorandum and Articles of Association of the company and shall rank pari-passu in all respects including dividend with the existing equity shares of the company.

ACCEPTANCE OF OFFER

You may accept and apply for the equity shares hereby offered wholly or in part by filling in PART A of the enclosed CAF and submit the same along with the application money to the collection centres as listed in the CAF before the close of business hours on ___________. The Rights Committee/Board may extend the last date for receipt of the CAF for such period as it may deem fit but in no case would the offer for subscribing to the issue be kept open for more than 60 days.

If the CAF together with the amount payable is not received by the collection centres as listed in the CAF on or before the closing of the business hours on _______ or by such extended date as may be determined by the Rights Committee/Board in conformity to the Act, the offer contained in the LoF shall be deemed to have been declined.

ADDITIONAL SHARES

You are eligible to apply for additional equity shares provided you have applied for all the equity shares offered to you without renouncing them in full or in part.

The application for additional equity shares shall be considered and allotment shall be made at the sole discretion of the Rights Committee/Board and in consultation, if necessary, with the Madras Stock Exchange Limited. This allotment of additional equity shares will be made on an equitable basis with reference to the number of equity shares held by you on the record date i.e., __________.

Renouncees who have applied for full entitlement renounced in their favour only can apply for additional shares.

In the case of Non-resident shareholders, the allotment of additional shares shall be subject to the approval of Reserve Bank of India.

If you desire to apply for additional equity shares, you may fill in the number of additional equity shares in BLOCK IV of PART A of the enclosed CAF.

RENUNCIATION

The rights offer is renounciable wholly or in part, in favour of Indian nationals residing in India, minors through natural/legal guardians, limited companies, statutory corporations / institutions, trusts or societies (if such trusts or societies are registered under the Societies Registration Act, 1860 or other applicable laws and are authorised under their Memorandum and Articles of Association and/or their rules and bye-laws to hold shares in or debentures of a company).

Any renunciation from residents to non-residents or any renunciation for consideration from non-residents to residents is subject to the renouncer(s)/renouncee(s) obtaining the necessary RBI approval, if required, under FEMA and the said permission should be attached to the CAF. Allotment of equity shares to renouncee(s) of Non-resident shareholders shall be subject to the approval of RBI under FEMA.

A person in whose favour the shares are renounced has no further right to renounce. Renouncees are eligible to apply for additional shares. They are requested to fill in BLOCK VIII to XI of CAF.

TO RENOUNCE IN WHOLE

If you wish to renounce this offer in whole, please complete PART B of the CAF. In case of joint holdings, all joint holders must sign in the same order as per the specimen signatures recorded with the company. The renouncee i.e., the person in whose favour your offer has been renounced, should complete and sign PART C of the CAF.

TO RENOUNCE IN PART

If you wish to accept this offer in part and renounce the balance or renounce this offer in favour of one or more renouncees, the CAF must first be split by applying to the Registrars to the Issue. Please indicate your requirements of the split forms in the space provided for this purpose in PART D and return the entire CAF to the Registrars to the Issue so as to reach them latest by the close of business hours on or before ______. On receipt of the required number of split forms from the Registrars, the procedure as mentioned under "To renounce in whole" should be followed.

If the applicant wishes to apply for shares jointly with any other persons (upto 3) who are not already joint holders with the applicant, it would amount to renunciation and the procedure for renunciation as stated above would apply viz., PARTS B & C of the CAF will have to be filled in.

SPLIT FORMS

i.

Split forms cannot be re-split

ii.

Only the person to whom the offer is made and not the renouncee(s) shall be entitled to obtain split forms.

iii.

Requests for split forms should be sent to the Registrars to the Issue, not later than _______ by filing in PART-D of the CAF.

iv.

Requests for split forms will be entertained only once.

INSTRUCTIONS FOR EQUITY SHAREHOLDERS

HOW TO APPLY

The enclosed CAF for equity shares should be completed in all respects in entirety before submission to the collection centres as they appear in the CAF. The CAF should not be detached under any circumstances; otherwise the application will be rejected forthwith.

Options available

Action Required

i.

Accept whole or part of the equity shares offered to you without renouncing the balance

Indicate in Block III of PART A, the number of equity shares accepted. If you accept all the equity shares offered in Block II, you may apply for additional equity shares. Indicate in Block IV, the additional equity shares required. Complete Block V and VI.

ii.

Renounce all the equity shares offered to you to one person (joint renouncees are deemed as one person) without your applying for any of the equity shares offered to you.

Fill in and sign PART B indicating the number of shares renounced in Block VII and hand over the entire CAF to the renouncees. The renouncee/ joint renouncees must fill in and sign PART C.

iii.

Accept a part of your entitlement and renounce the balance or part of it to one or more persons

(or)

Fill in and sign PART D for required number of split forms and send the entire CAF to the Registrars to the Issue.

iv.

Renounce your entitlement or part of it to one or more persons (joint renouncees are deemed as one person)

On receipt of the split forms:

a.

For the equity shares you are accepting, fill in and sign PART A.

b.

For the equity shares you are renouncing, fill in and sign PART B indicating the number of equity shares renounced in Block VII. Each of the renouncees should fill in and sign PART C.

NOTES:

1

The last date for receipt of request for split forms is _______________.

2

The last date for submission of completed forms after taking into account the full allotment under clauses (i), (ii), and (iii) above, if there is still any under subscription, the unsubscribed portion shall be disposed by the Rights Committee/Board upon such terms and conditions and to such person(s) and in such manner as the Rights Committee/Board may in its discretion deem fit.

 

 

 

3

PART A of the CAF must not be used by any person(s) in whose favour this entitlement has been renounced. This will render the application invalid.

4

A renouncee is not entitled to a split form.

5

While applying for or renouncing equity shares, joint holders must sign in the same order and as per the specimen signatures registered with the company.

6

Shareholders cannot utilise both PART A and PART B simultaneously i.e., accepting the offer as well as renouncing the offer. If all the parts are filled in, the allotment will be made under PART B & C i.e., to the renouncee only and the entry in PART A shall be ignored.

7

Please check the number of shares registered in your name. In case of any discrepancy in the number of shares held by you as appearing in the form, the company shall be entitled to amend the same on the basis of the entry in the Register of Members.

8

The CAF contains space for indicating number of shares subscribed for in demat and physical shares or both. The shareholders are requested to fill the relevant blocks.

9

In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares.

PAYMENTS - HOW AND WHERE TO BE MADE

Only one mode of payment should be used. Payment must be made at the rate of 36/- per share by cash or cheque/demand draft/stockinvest drawn on any Bank (including a Co-operative Bank) which is situated at and is a member or sub-member of the Bankers Clearing House in the city/town at which the CAF is submitted. A separate cash amount or cheque/demand draft/stockinvest, must accompany each CAF. Outstation/post dated cheques and postal/money orders will not be accepted and CAFs accompanied by such cheques, postal/money orders are liable to be rejected. Payments in cash to the Registrars will not be accepted. Returned cheques shall not be re-presented and the accompanying application will not be considered. The cheque/demand draft accompanying the application must be drawn in favour of "Central Bank of India A/c.CCCL - Rights Issue" and marked Account Payee only. You are requested to mention the folio number, DP ID/Client ID Number and the CAF number on the reverse of the cheque/demand draft/stockinvest. If a cheque or demand draft is drawn on a bank that is not participating in clearing, the CAF accompanying such cheque/demand draft shall, at the discretion of the Rights Committee, be liable to be rejected. Particulars of applicant’s savings bank/current account number must be given in the space provided for in the CAF, so as to enable the Registrars to the Issue to print the same on the refund order, if any. Applications without such details are liable to be rejected. Where the application is for shares of the total value of Rs.50,000/- or more, the applicant or in the case of application of joint names, each of the applicants should mention his/her Permanent Account Number/GIR Number allotted under the Income Tax Act, 1961. In case where the Permanent Account Number/GIR Number has not been allotted, the fact of non-allotment should be mentioned in the application form. Without this information, the CAF will be considered incomplete and will be liable to be rejected.

The completed CAF (duly signed by all joint holders, if any) together with the cheque/demand draft/stockinvest for the amount payable on application should be forwarded to any of the collection centres as mentioned in the CAF on or before _________. Application(s) will not be accepted by the Lead Merchant Bankers to the Issue or by the Company directly at any of their offices. The shareholders residing at places other than the collection centres mentioned in the CAF and applicants who wish to send their applications by post are requested to send their applications directly to the Registrars to the Issue together with their demand draft drawn in favour of the "Central Bank of India A/c.CCCL - Rights Issue" and marked "Account Payee only", payable at Chennai so as to reach them on or before the closure of the Issue. In such cases, the applicants may make payment net of demand draft and postal charges, since these charges will be borne by the company. In the interest of the members, it is advised that such applications be sent by the Registered Post. The company or the Registrars to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

PROCEDURE FOR PAYMENT BY MEANS OF STOCKINVEST

Individual investors and mutual funds have the option to use stockinvest for applying for the shares offered in terms of this LoF. Stockbrokers, Corporate Bodies, Banks and Financial Institutions cannot avail of this facility. The Reserve Bank of India has further prescribed a ceiling of Rs.50,000/- per individual per capital issue for issue of stockinvests by Banks. The ceiling would, however, not be applicable to Mutual Funds. The prospective investor may approach the issuing bank with which he maintains an account for issue of stockinvest for payment of the application money. The stockinvest would be issued only against term deposits and credit balances available in savings and current accounts of the individual investor/mutual funds.

1)

The prospective investor, at the time of request for issue of stockinvest to the Issuing Bank may have to:

 

a)

Indicate that he agrees to abide by the terms of the issue and encashment of the stockinvest.

 

b)

Give irrevocable authority to his/her bank to mark a lien for the value of the stockinvest against the balance held in his savings/current/other term deposit account.

 

c)

Agree for lifting of the bankers lien on expiry of the currency of the stockinvest or in case of intimation of partial/non-allotment of shares; and

 

d)

Agree that the issuing bank will not be liable for any damages or consequences arising out of the loss of these instruments.

2)

The stockinvest should bear "Account Payee only" and non-negotiable crossing and will be payable only to the account of the payee and to the purchaser/investor on cancellation

3)

The stockinvest should be utilised by the purchaser(s) and the purchaser’s name / name of one of the purchasers should be invariably indicated as the first applicant in the CAF.

4)

The investors should use only one stockinvest along with each CAF.

5)

The currency of stockinvest shall not exceed 4 months. The stockinvest should be used within 10 days from the date of its issue, to ensure that it remains valid till the time of collection.

6)

The stockinvest will be issued to the applicant in the name of "Chettinad Cement Corporation Limited" after authentication of the date of issue by the designated branch.

 

The above information is given for benefit of investors and the company is not liable for any modification of the terms of stockinvest or procedure thereof by the issuing banks.

Applicants using stockinvest should submit the CAF along with the instrument to the collection centres as mentioned in the CAF. Applications accompanied partly by stockinvest and partly by cheque/draft will not be accepted and such applications are liable to be rejected.

The applicant has to fill in the following particulars:

1. Titile of the Account - Chettinad Cement Corporation Limited

2. The number of equity shares applied for; and

3. The amount payable on the equity shares applied for.

The instrument should thereafter be signed by the applicant. It should also bear the stamp of the Bank issuing the instrument and should be crossed "A/c Payee only". Service charges for issuing the stockinvest must be borne by the applicant.

The applicant should not fill in the portion to be filled up by the Registrars to the Issue (right hand portion of the instrument). The Registrars to the Issue will fill up the right hand portion of the stockinvest indicating the equity shares allotted to the applicant and also the amount calculated as follows:

*

In case of full allotment, the number of equity shares and the amount on the right hand side will be the same as on the left hand side of the instrument.

*

In case of partial allotment, the number of equity shares and the amount filled up by the Registrars to the Issue (on the right side of the instrument) will be less than the number filled up by the applicant (on the left hand side).

*

In case the allotment is nil, the number of equity shares and the amount filled up by the Registrars to the Issue on the right hand side of the instrument will be nil.

*

In case of non-allotment of equity shares, the cancelled stockinvest would be returned to the investors by the Registrars to the Issue.

 

The Registrars to the Issue have been authorised by the Rights Committee/Board vide its resolution dated 14/11/02 to sign on behalf of the company to realise the proceeds of the stockinvest from the issuing bank or to affix non-allotment advice on the instrument or cancel the stockinvest of the non-allottees or partially successful allottees. Such cancelled stockinvest shall be sent back by the Registrars directly to the investors within a period of 30 days from the date of closure of the issue.

NON-RESIDENT SHAREHOLDERS INCLUDING NRIs/OCBs/FIIs

Applications received from Non-Resident Indian(s)/Persons of Indian origin, resident abroad, for allotment of equity shares shall be inter alia, subject to the conditions as may be imposed from time to time by the Reserve Bank of India in the matter of refund of application monies, allotment of equity shares, issue of letters of allotment/share certificates, payment of interests, dividends etc. No permission is necessary for the issue of equity shares to Non-resident Indians/Overseas Corporate Bodies as a general permission is given by the Reserve Bank of India under FEMA Regulations, 2000.

Mode of payment by Non-resident Indian (NRI) shareholders will depend on whether the equity shares to be allotted to them are on repatriation or non-repatriation basis.

ON REPATRIATION BASIS

Payment is to be made by such NRIs in any of the following modes:

a.

Indian rupee draft purchased from abroad drawn on any bank in India and made payable at Chennai or

b.

Cheques/stockinvests drawn on Non-resident External Account (NRE Account) with any Bank at Chennai.

c.

Indian rupee draft/stockinvest purchased out of NRE/FCNR accounts maintained anywhere in India and payable at Chennai.

d.

Payments through NR(O) account will not be permitted.

e.

Payments by FIIs must be made through the special NRE Account.

In case of NRIs who remit their application money through Indian rupee drafts from abroad, refunds, payment of interest and other disbursements, if any, will be made in the relevant foreign currencies at the rate of exchange prevailing at such time subject to the permission of the RBI. The company will not be liable for any loss on account of exchange fluctuations for converting their rupee amount in any foreign currency. In case of those NRIs who remit their application money from funds in NRE/FCNR accounts, refund, payment of interest and other disbursements, if any, shall be credited to such account, details of which account should be furnished in the appropriate column of the CAF.

NON-REPATRIATION BASIS

Payments are to be made by such NRIs either as mentioned above or by cheques drawn on Non-resident Ordinary A/c (NRO A/c) at Chennai or Rupee Demand Draft purchased out of NRO A/c maintained anywhere in India, but payable at Chennai. In such cases, refund, interest and other disbursement, if any, will be payable in Indian rupees only. The application should be accompanied by a non-repatriation undertaking.

GENERAL

Whether the application being made for the equity shares is on repatriation/non-repatriation basis, a separate cheque/demand draft/stockinvest must accompany each CAF. All cheques/demand drafts must be crossed "A/c payee only" drawn in favour of Central Bank of India - "CCCL-Rights Issue-Non Resident". Stockinvests should be drawn in favour of the company viz., "Chettinad Cement Corporation Limited". Further, the applicants are requested to mention the folio number and the CAF number on the reverse of the cheque/demand draft/stockinvest.

An account debit certificate from the Bank issuing the draft confirming that the draft has been issued by debiting the FCNR/NRE/NRO account must be attached in all cases where drafts have been purchased from FCNR/NRE/NRO accounts along with the form, failing which the application may be considered incomplete and liable for rejection. The duly completed CAF with a cheque/demand draft/stockinvest for the amount payable must be lodged before the close of banking hours on _______ with the Registrars to the Issue. In no circumstances should the CAF be delivered to the Lead Merchant Bankers to the Issue or to the Company at their respective office.

Applicants should note that the CAF provides for space for the investor to mention his bank account number, the name of the bank and the branch, where the account is maintained so that the refund orders are printed with the said details after the name of the investor to ensure that the amount is credited to the right account thereby preventing fraudulent encashment of the refund orders.

In case where repatriation benefit is available, dividend and sale proceeds derived from the investment in shares can be remitted outside, subject to tax as applicable, accordingly to Income Tax Act, 1961. In case of shares allotted on non-repatriation basis, the dividend/sale proceeds of the new equity cannot be remitted outside India.

RENUNCIATION BY NRIs

Renunciation by an NRI in favour of any other person will be as per the extant RBI guidelines.

JOINT APPLICANTS

In case of renouncees however the application may be made in the name of three joint holders. In case of joint application, refund pay orders (if any) dividend etc., will be made in favour of and all communications will be addressed to the applicant whose name appears first at his/her address stated in the CAF.

DISPOSAL OF APPLICATIONS AND APPLICATION MONEY

No separate receipt will be issued for application money received. However, the collection centres as listed in the CAF, will acknowledge its receipt by stamping and returning the acknowledgement slip at the bottom of each CAF. In the event of shares not being allotted in full, the excess amount paid on application will be refunded to the applicant within six weeks of the date of closure of the issue.

No permission is necessary for the issue of equity shares upto their entitlement to Non-resident Indians/ Overseas Corporate Bodies as a general permission is given by the Reserve Bank of India under clause 6 of FEMA Regulations, 2000. According to the notification issued by the Reserve Bank of India, NRIs are allowed to sell the shares originally allotted in primary market or in secondary market without prior permission from the Reserve Bank of India.

The Rights Committee/Board reserves its full, unqualified and absolute right to reject any application in whole or in part, if the same is not in terms of the offer. In case an application is rejected in full, the whole of the application money received will be refunded to the applicant. Where an application is rejected in part, the excess application money, if any, will be refunded to the applicant.

AVAILABILITY OF DUPLICATE CAF(s)

In case the original CAF(s) is not received, or is misplaced by the applicant, the Registrars to the Issue will issue a duplicate CAF(s) on the request of the applicant who should furnish the registered folio number/DP and Client ID number and his/her full name and address to the Registrars to the Issue. Please note that those who are making the application in the duplicate form should not utilize the original CAF(s) for any purpose including renunciation, even if it is received/found subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications.

APPLICATION ON PLAIN PAPER

An equity shareholder who has neither received the original CAF(s) nor is in a position to obtain the duplicate CAF(s) may make an application to subscribe to the rights issue on plain paper, along with an account payee cheque drawn on a local bank at Chennai / demand draft (net of demand draft and postal charges) payable at Chennai or along with stockinvest which should be drawn in favour of the company and send the same by registered post directly to the Registrars to the Issue.

The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with the company, must reach the office of the Registrars to the issue before the date of closure of the issue and should contain the following particulars.

*

Name of Issuer

*

Name and address of the equity share holder including joint holders

*

Registered Folio Number / DP and Client ID Number

*

Number of shares held as on record date

*

Number of rights equity shares entitled

*

Number of rights equity shares applied for

*

Number of additional equity shares applied for, if any

*

Total number of equity shares applied for

*

Total amount paid @ Rs.36/- per equity share

*

Particulars of cheque/draft/stockinvest

*

Savings/Current Account Number and name and address of the Bank where the equity shareholder will be depositing the refund order.

*

PAN/GIR number and Income Tax Circle/Ward/District where the application is for equity shares of a total value of Rs.50,000/- or more for the applicant and for each applicant in case of joint names, and

*

Signature of equity share holders to appear in the same sequence and order as they appear in the records of the company.

Payments in such cases should be through a cheque/demand draft payable at Chennai to be drawn in favour of the Bankers to the Issue marked "A/c Payee" and marked "Chettinad Cement Corporation Limited – Rights Issue" or through a stockinvest to be drawn in the name of the company.

Please note that those who are making the application otherwise than on original CAF(s) shall not be entitled to renounce their Rights and should not utilize the original CAF(s) for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications.

LAST DATE OF APPLICATION

The last date for submission of CAF(s) is _________. The Rights Committee/Board will have the right to extend the said date for such period as it may determine from time to time but not exceeding 60 days from the date of issue opens.

If the CAF(s) together with the amount payable is not received by the Bankers to the Issue/Registrars on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Rights Committee, the offer contained in this Letter of Offer shall be deemed to have been declined and the Rights Committee shall be at liberty to dispose off the equity shares hereby offered as provided under the heading "Basis of Allotment".

GENERAL INSTRUCTIONS TO THE APPLICANTS

Applications should be made only on the prescribed CAFs provided by the company and should be complete in all respects. Applications which are not complete or which are not accompanied with remittance of the proper amount calculated as aforesaid are liable to be rejected and the money paid in respect thereof will be refunded without interest.

The company will not allot any equity shares in favour of:

a.

More than three persons as joint holders (including the first holder), in case of renouncees.

b.

A partnership firm

c.

A trust or society (unless such trust or society is registered under the Societies Registration Act, 1860 and it is authorised under its Memorandum & Articles of Association and/or its Rules & Bye-Laws to hold shares in a company).

d.

A minor (unless application is made through a guardian).

In case the above categories are already shareholders of the company, they will be eligible for their entitlement. In case of applications made under a Power of Attorney (PoA) or by limited companies or body corporate or societies, a certified true copy of the relevant PoA or the relevant resolution or authority to make the application as the case may be, along with the copy of Memorandum & Articles of Association and/or bye laws must be lodged for scrutiny giving the serial number of the CAF with the Registrars to the Issue, simultaneously with the submission of the CAF failing which the application is liable to be rejected. In case the PoA is already registered with the company, the same need not be furnished again. However, the serial number under which the PoA has been registered with the company must be mentioned below the signature(s) of the concerned applicant(s).

The CAF must be filled in English in BLOCK Letters.

In case of joint holders, all joint holders must sign the CAF at the appropriate places in the same order as per the specimen signatures recorded in the Register of Members of the company.

Signatures in languages other than those prescribed in the 8th Sechedule of the Constitution of India or thumb impressions must be attested by a Magistrate or notary public or a special executive magistrate under his/her official seal.

In case of renouncee(s), the name of the applicant(s), details of occupation, addresss and father’s / husband’s name must be filled in block letters.

The CAF must be presented to the colllection centres as mentioned in the CAF in its entirety. If any of the Parts A, B, C, D and the acknowledgement of the CAF is/are detached or separated, such applications will be rejected forthwith.

Any dispute or suit or action proceeding or arising out of or in relation to this LoF or in respect of any matter or thing contained therein and any claim by either party against the other shall be instituted or adjudicated upon or decided solely by the appropriate Court in Chennai.

All communications in connection with your application for the equity shares should be addressed to the Registrars to the Issue or the Compliance Officer.

ARRANGEMENT FOR ODD LOT EQUITY SHARES

The company has not made any arrangements for the disposal of odd lot equity shares arising out of this issue. The company will issue certificates of denomination equal to the number of shares being allotted to the equity share holder.

OPTION TO RECEIVE EQUITY SHARES IN DEMATERIALISED FORM

Applicants to the equity shares of the company issued through this Rights Issue shall be allotted the equity shares in dematerialized (electronic) form at the option of the applicant. The company and the Registrars to the Issue have signed a tripartite agreement with National Securities Depository Limited (NSDL) on 27/03/2000 and with Central Depository Services (India) Limited (CDSL) on 27/03/2000 which enables the investors to hold and trade in equity shares in a dematerialized form, instead of holding the equity shares in the form of physical certificates.

In this Rights Issue, the allottees who have opted for the equity shares in dematerialized form will receive their equity shares in the form of an electronic credit to the beneficiary account with a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF(s). Applications, which do not accurately contain this information, will be given share certificate in physical form. No separate applications for shares in physical and demat form should be made. If such applications are made, the application for physical share certificates will be treated as a multiple applications and is liable to be rejected. Investors may note that the equity shares of the company can only be traded in dematerialized form.

The equity shares of the company will be listed on The Madras Stock Exchange Limited (The Regional Stock Exchange). The equity shares of the company are also traded as a permitted security on the Stock Exchange, Mumbai.

PROCEDURE FOR AVAILING THIS FACILITY FOR ALLOTMENT OF EQUITY SHARES IN THIS ISSUE IN THE ELECTRONIC FORM IS AS UNDER:

1.

Open a Beneficiary Account with any Depository Participant (care should be taken that the Beneficiary Account should carry the name of the holder in the same manner as is exhibited in the records of the company. In case of joint holding, the Beneficiary Account should be opened carrying the names of the holders in the same order as with the company). In case of investors having various folios in the company with different joint holders, the investors will have to open separate accounts for such holdings. Those equity shareholders who have already opened such beneficiary account(s) need not adhere to this step.

2.

For equity shareholders already holding equity shares of the company in dematerialized form as on record date, the beneficial account number shall be printed on the CAF(s). For those who open accounts later or those who change their accounts and wish to receive their rights equity shares by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF(s). It may be noted that the allotment of equity shares arising out of this issue may be made in dematerialized form even if the original equity shares of the company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the equity shareholders and the names are in the same order as in the records of the Company.

3.

Responsibility for correctness of applicant’s age and other details given in the CAF(s) vis-à-vis those with the applicant’s depository participant would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF(s) should be same as registered with the applicant’s Depository Participant.

4.

If incomplete/incorrect Beneficiary Account details are given in the CAF(s),the applicant will get equity shares in physical form.

5.

The rights equity shares allotted to investors opting for dematerialized form, would be directly credited to the Beneficiary Account as given in the CAF(s) after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrars to the Issue but the applicant’s Depository Participant will provide to him the confirmation of the credit of the Rights Equity Shares to the applicant’s Depository Account.

6.

Renouncees will also have to provide the necessary details about their Beneficiary Account for allotment of securities in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

 

UNDERTAKING BY THE COMPANY

 

*

The complaints received in respect of the Rights Issue shall be attended to by the Company expeditiously and satisfactorily.

*

All steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the securities are to be listed will be taken within 7 working days of finalisation of basis of allotment.

*

The issuer company shall apply in advance for the listing of equity shares.

*

The funds required for dispatch of refund orders / allotment letters / certificates by registered post shall be made available to the Registrars to the rights issue.

*

The certificates of the securities / refund orders to the non-resident Indians shall be dispatched within the specified time.

*

No further issue of securities affecting equity capital of the company shall be made till the securities issued/offered through the Rights Issue are listed or till the application moneys are refunded on account of non-listing, under-subscription etc.,

BASIS OF ALLOTMENT

 

1

Subject to provisions contained in this Letter of Offer, the Articles of Association of the Company and approval of the Regional Stock Exchange, the Rights Committee will proceed to allot the equity shares in the following order of priority:

 

a)

Full allotment to those equity shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/have applied for equity shares renounced in their favour, in full or in part.

 

b)

Allotment to the equity shareholders who have applied for all the equity shares offered to them as rights and have also applied for additional equity shares will be made as far as possible on an equitable basis having due regard to the number of equity shares held by them on the record date, provided there is an under-subscribed portion after making full allotment in (a) above. The allotment of such equity shares will be at the sole discretion of the Rights Committee/Board in consultation with the Regional Stock Exchange, as a part of the rights issue and not preferential allotment.

 

c)

Allotment to the renouncees who having applied for the equity shares renounced in their favour have also applied for additional equity shares, provided there is an under-subscribed portion after making full allotment in (a) and (b) above. The allotment of such additional equity shares will be made on a proportionate basis at the sole discretion of the Rights Committee but in consultation with the Regional Stock Exchange, as a part of the rights issue and not preferential allotment.

2)

After taking into account the full allotment under 1(a) and 1(b) above, allotment shall be made in terms of 1(c) above.

3)

No over subscription shall be retained by the company.

4)

The issue will become under-subscribed after considering the number of shares applied as per entitlement plus additional shares. The under-subscribed portion can be applied for only after the close of the issue. The key promoters or any other persons can subscribe to such under-subscribed portion. If the promoters desire to subscribe such under-subscribed portion and if disclosure is made pursuant to SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 such allotment of the under-subscribed portion will be governed under Regulation 3(1)(b) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997.

5)

After taking into account, the allotments made under 1(a), 1(b) and 1(c) above, if there is still any under subscription, the unsubscribed portion shall be disposed off by the Rights Committee/Board authorized in this behalf by the Board upon such terms and conditions, through equity shares and to such person/persons and in such manner as the Rights Committee/Board may in its absolute discretion deem fit, as a part of the rights issue and not preferential allotment.

Partial allotment will be done only in case of application for additional equity shares.

 

UTILISATION OF ISSUE PROCEEDS

The application monies received will be kept in a separate bank account and the company will not have access to such funds unless it satisfies the Madras Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the issue has been received.

The Company will be permitted to have access to the funds upto the extent of the size of the issue on obtaining clearance from the Madras Stock Exchange Limited, with suitable documentary evidence that the minimum subscription amount of 90% of the issue size has been received. No interest will be paid on application monies received.

For further instruction, please read the Composite Application Form carefully.

IMPORTANT:

1.

Please read this Letter of Offer carefully before taking any action. The instruction contained in the accompanying Composite Application Form (CAF(s)) are an integral part of the conditions of this Letter of Offer and must be carefully followed; otherwise the application is liable to the rejected.

2.

All inquiries in connection with this Letter of Offer or accompanying Composite Application Form and requests for split application forms must be addressed (quoting the Registered Folio Number/DP and Client ID Number, the CAF(s) number and the name of the first equity shareholder as mentioned on the CAF(s) and superscribed "Chettinad Cement Corporation Limited - Rights Issue" on the envelope) to the Registrars to the Issue at the following address:

Integrated Enterprises (India) Limited

Second Floor, "Kences Towers"

1, Ramakrishna Street, North Usman Road

T Nagar

Chennai 600 017

Tel: (044) 814 0801 / 814 0802 / 814 814 0803

Fax: (044) 814 2479

e-mail: kannan@iepindia.com

It is to be specifically noted that this issue of equity shares is subject to Risk Factors appearing on page No.78 of this letter of offer.

3.

The rights issue will not be kept open for more than 30 days unless extended in which case it will be kept open for a maximum of 60 days.

 

TAX BENEFITS

The Board of Directors of the company has been advised by M/s.P B Vijayaraghavan & Co., M/s.Seshadri & Jayaraman, and M/s.Krishaan & Company, Chartered Accountants that under the Income Tax Act, 1961 and other applicable tax laws for the time being in force, the following principal tax benefits and deductions will, inter alia, be available to the Company and its Members.

I

BENEFITS AVAILABLE TO THE COMPANY

 

Under the Income tax Act, 1961 (hereinafter referred to as the IT Act):-

 

i.

The Company will be entitled to claim depreciation allowance at the prescribed rates on tangible and intangible assets under Section 32 of the IT Act.

 

ii.

The Company will be entitled to deduction of the whole of the capital expenditure (other than on land) incurred on scientific research related to the business carried on by the Company in the year in which such expenditure is incurred, in accordance with the provision of Section 35 of the IT Act.

II

BENEFITS TO THE MEMBERS OF THE COMPANY

 

1.

Under the Income tax Act, 1961 (hereinafter referred to as the IT Act):-

 

a)

RESIDENTS

 

I.

Dividend Income earned by an individual and Hindu Undivided Family is eligible for deduction under section 80L subject to limits prescribed. Dividend income earned by a Domestic Company is eligible for deduction under section 80M to the extent of dividend declared upto the due date for filing the Income Tax return.

 

II.

As per the provisions of Section 112 (1) (a) and (b) read with proviso to Section 112(1) of the IT Act, long term capital gains on transfer of the shares by an Individual, Hindu Undivided Family and domestic companies, computed without indexation of cost of acquisition, would be taxed at the concessional rate of 10% (plus applicable surcharge) in accordance with the provisions of Section 112 of the IT Act. In case of individuals and HUF’s, where the total taxable income as reduced by long term capital gain is below the basic exemption limit, the long term capital gain will be reduced to the extent of the shortfall and only the balance long term capital gain will be subjected to such tax in accordance with the proviso to sub-section (1) of Section 112 of the IT Act.

 

III.

In accordance with Section 48 of the IT Act, long term capital gains arising out of sale of shares of the Company shall be computed after indexing the cost of acquisition/improvement. Under Section 112 of the IT Act, such gains shall be taxed at the rate of 20% (subject to surcharge as applicable), provided that (the Company’s shares being listed securities, as defined) where the tax so payable exceeds 10% (subject to surcharge as applicable) of the amount of capital gains computed before indexing the cost of acquisition / improvement, then such excess shall be ignored.

 

IV.

In accordance with, and subject to the conditions and to the extent specified in Section 54EC of the IT Act, long term capital gains tax arising on transfer of the share of the Company shall be exempt from capital gains tax if the gains are invested within six months from the date of transfer in the purchase of long term specified assets.

 

V.

In accordance with, and subject to the conditions and to the extent specified in Section 54ED of the IT Act, long term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax if the gains are invested within six months from the date of transfer in acquiring equity shares forming part of an eligible issue of capital.

 

VI.

In accordance with, and subject to the conditions and to the extent specified in Section 54F of the IT Act, long term capital gains tax arising on transfer of the shares of the Company held by an individual or Hindu Undivided Family shall be exempt from capital gains tax if the net sales consideration is utilised, within a period of one year before, or two years after the date of transfer, in the purchase of a new residential house, or for construction of a residential house within three years.

 

b)

NON – RESIDENTS:

 

i.

Dividend Income earned by the individual shareholders is eligible for deduction under section 80L subject to limits prescribed.

 

ii.

As per the provisions of Section 115A of the IT Act, the tax payable on the dividend, by a Non-Resident or a Foreign Company shall be taxed @ 20% of such income. It shall not be necessary in terms of sub-section (5) of Section 115A for them to furnish the Return of Income if their only source of income is inter alia, as aforesaid, and tax has been deducted at source from such income under the provision of Chapter XVIIB of the IT Act, 1961.

 

iii.

In accordance with, and subject to Section 48 of the IT Act, capital gains arising out of transfer of capital assets being shares in the Company shall be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer of the capital assets into the same foreign currency as was initially utilised in the purchase of shares and the capital gains computed in such foreign currency shall be reconverted into Indian currency, such that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing/arising from every reinvestment thereafter and sale of shares of the Company.

 

iv.

In accordance with, and subject to the conditions and to the extent specified in Section 54 EC of the IT Act, long term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax if the gains are invested within six months from the date of transfer in the purchase of long term specified assets.

 

v.

In accordance with, and subject to the conditions and to the extent specified in Section 54ED of the IT Act, long term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax if the gains are invested within six months from the date of transfer in acquiring equity shares forming part of an eligible issue of capital.

 

vi.

In accordance with, and subject to the conditions and to the extent specified in Section 54F of he IT Act, long term capital gains tax arising on transfer of the shares of the Company held by an individual shall be exempt from capital gains tax if the net sales consideration is utilised, within a period of one year before or two years after the date of transfer, in the purchase of a new residential house, or for construction of a residential house within three years.

 

c)

NON – RESIDENT INDIANS

   

Dividend Income earned is eligible for deduction under section 80L subject to limits prescribed. Moreover, a Non-Resident Indian has the option to be governed by the provisions of Chapter XII-A of the IT Act according to which :

 

i.

Under Section 115E of the IT Act, any income from investment acquired out of convertible foreign exchange will be taxable at 20% (subject to surcharge as applicable) while income from long term capital gains on transfer of shares of the Company acquired out of convertible foreign exchange shall be taxed at the rate of 10% (subject to surcharge as applicable).

 

ii.

Under Section 115F of the IT Act, and subject to the conditions and to the extent specified therein, long term capital gains arising to a Non-Resident Indian from transfer of shares of the Company acquired out of convertible foreign exchange shall be exempt from capital gains tax if the net consideration is invested within six months of the date of transfer of the asset in any specified asset or in any saving certificates referred to in clause (4B) of Section 10 of the IT Act.

 

iii.

Under Section 115G of the IT Act, it is not necessary for a Non-Resident Indian to file a return of income under Section 139 (1) of the IT Act, if his total income consists only of investment income and/or long term capital gains earned on transfer of such investment acquired out of convertible foreign exchange, and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the IT Act.

 

iv.

Under Section 115H of the IT Act, where a Non-Resident Indian becomes assessable as resident in India in any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with the return of income for the assessment year for which he is so assessable to the effect that the provisions of Chapter XII-A of the IT Act shall continue to apply to him in relation to the investment income (other than on shares in the Company) derived from any foreign exchange asset as defined therein. On doing so, the provisions of Chapter XII-A of the IT Act shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion into money of such assets.

 

v.

Under Section 115 I of the IT Act, where a Non-Resident Indian opts not to be governed by the provisions of Chapter XII-A of the IT Act for any assessment year, his total income for that assessment year (including taxable income arising from investment in the Company) will be computed according to the other provisions of the IT Act, and he will therefore be eligible to get concessions applicable to a resident individual and will be liable to tax accordingly.

 

d)

FOREIGN INSTITUTIONAL INVESTORS (FIIs)

   

In accordance with the provisions of Section 115AD of the IT Act, FIIs will be taxed at 20% on income at 10% on long term capital gains and at 30% on short term capital gains arising on the sale of the shares of the Company. Such taxes will be subject to applicable surcharge in case of non-corporate members.

 

e)

MUTUAL FUNDS

   

Under Section 10 (23D) of the IT Act, any income inclusive of dividends from shares, earned by a Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Securities and Exchange Board of India or the Reserve Bank of India will be exempt from income tax, subject to such conditions as the Central Government may by notification in the Official Gazette specify in this behalf.

 

2)

WEALTH TAX AND GIFT TAX:

 

a)

Asset as defined under Section 2 (ea) of the Wealth Tax Act, 1957 do not include shares in companies and hence, these are not liable to wealth tax.

 

b)

Gift tax is not leviable in respect of any gifts made on or after 1st October 1998. Therefore, any gift of shares will not attract gift tax.

PARTICULARS OF THE ISSUE

 

OBJECT OF THE ISSUE

The Objects of the present issue are as follows:

The company has a total debt outstanding of Rs.34,537 Lakhs as on 30/09/2002.

Company’s Debt equity ratio as at 30/9/2002 was (debt equity ratio as on 31/3/2002 was 2.77). The Bankers to the Company advised the company to improve the debt equity ratio and the company decided to go for a rights issue and utilise the proceeds towards reducing the long term debt, thus improving the debt : equity ratio and to augment the long term sources for working capital requirements.

REQUIREMENT OF FUNDS AND MEANS OF FINANCE

Through this Rights Issue of 84,31,700 equity shares of Rs.10/- each for cash at a premium of Rs.26 per share, the company will raise an amount aggregating Rs.3035.41 Lakhs.

The company will utilise the sum of Rs.3035.41 Lakhs raised from the rights issue for repayment of long term debts and augment the long term sources for working capital requirements as may be decided by the Board of Directors in the best interest of the company.

The actual deployment of funds will be at the sole discretion of the Board of the Company. It is brought to the attention of the investors that the requirement of funds and means of finance are estimated by the Company and have not been appraised by any bank or financial institution.

COMPANY, PROMOTERS & MANAGEMENT

BRIEF HISTORY OF THE COMPANY

M/s.Chettinad Cement Corporation Limited (CCCL) was incorporated on December 11, 1962 with the Registrar of Companies Tamil Nadu, Chennai. The certificate of commencement of business was obtained on February 07, 1963. The company commenced commercial production in 1967 at its production facility in Puliyur, Karur District, Tamil Nadu and at Karikalli Unit, Dindugal Disrict, Tamil Nadu from October 2001. The present capacity of the unit is 15.0 Lakh tonnes per annum. The plant at Puliyur, Karur District was modernised in 1989 to move over from the wet to the dry process of manufacturing cement.

The company undertook further modernisation of its operation at Puliyur, Karur District in 1997-98 by installation of stacker-cum-reclaimer earthmoving equipment at its limestone mines, primary crushers, construction of silos for clinker and finished goods, vertical roller mill for cement grinding and automated packing machines. The manufacturing process uses state -of-the-art computerised controls. The company has an ISO 9002 certification in place for its current manufacturing facility.

The company started its second cement plant in Karikkali Village in the year 2001-02 with a capacity of 0.9 million tonnes per annum and a ready mix concrete plant at Madukarai village near Coimbatore.

The company also took up wind energy generation activity by installation of 66 windmills at Poolavadi near Udumalpet. This division has generated 2,45,41,716 units of power from April 2002 to September 2002 which is fed into the State’s power grid regularly. The total power generated out of this 66 windmills is adjusted against Puliyur Unit power consumption.

 

DETAILS OF AWARDS AND CITATIONS AND CERTIFICATES RECEIVED BY CCCL

 

SL.NO

AWARDS

YEAR

1

NATIONAL SAFETY AWARD

( FOR OUTSTANDING PERFORMANCE IN INDUSTRIAL SAFETY IN ACHIEVING LOWEST FREQUENCY RATE IN INDUSTRY).

RUNNERS UP.

HIGHEST % REDUCTION IN FREQUENCY RATE

 

 

1976

1977

2

MERIT AWARDS FROM REGIONAL DIRECTORATE OF WORKERS EDUCATION

1982

1985

3

TAMILNADU FILM ARTS ASSOCIATION,CHENNAI.

SHIELD

1978

4

a) NATIONAL PRODUCTIVITY AWARD

(BEST PRODUCTIVITY PERFORMANCE IN CEMENT INDUSTRY ISSUED BY NPC)

SECOND BEST

BEST

BEST

SECOND BEST

SECOND BEST

b) BEST PRODUCTIVITY AWARD (ISSUED BY GOVT.OF TAMILNADU)

 

1985-86

1986-87

1995-96

1996-97

1998-99

1994-95

1995-96

5

NATIONAL SAFETY AWARD

(MINES - FOR LOWEST INJURY FREQUECY RATE IN METAL MINES MECHANISED OPEN CAST).

LONGEST ACCIDENT FREE PERIOD

HIGHEST % REDUCTION IN FREQUENCY RATE.

BEST PERFORMANCE OF THE YEAR

 

1986

1986

1987

1989

6

CONSERVATIONIST OF THE YEAR

(FOR OUTSTANDING PROGRESS in the FIELD OF CONSERVATION OF ENERGY, METAL COMPONENTS & MACHINERY)

1987

7

NCBM NATIONAL AWARDS (IMPROVEMENT IN ENERGY PERFORMANCES)

SECOND BEST

BEST

BEST (MANUFACTURER OF BLENDED CEMENT )

BEST (MANUFACTURER OF BLENDED CEMENT )

BEST (MANUFACTURER OF BLENDED CEMENT )

 

1994-95

1995-96

1998-99

1999-2000

2000-01

8

TNEB ENERGY CONSERVATION AWARD (ONE AMONG THE 15 ENERGY EFFICIENT H.T.INDUSTRIES OF 2000 KVA)

1998-99

9

NCBM NATIONAL AWARDS

(IMPROVEMENT IN ELECTRICAL ENERGY PERFORMANCE)

SECOND BEST

 

1998-99

10

NCBM NATIONAL AWARDS

AWARD FOR ENERGY EFFICIENCY \

1st PRIZE

BEST IMPROVEMENT IN THERMAL ENERGY PERFORMANCE

 

2000-01

11

MINISTRY OF ENERGY

NATIONAL ENERGY CONSERVATION AWARD

2000-01

MAIN OBJECTS OF THE COMPANY

The main objects of the company as stated in the Memorandum of Association of the Company, inter alia, include:

1

To produce, manufacture, purchase, refine, prepare, process, import, export, sell and generally to deal in cement, portland cement, alumina cement, white and coloured cement, lime and lime stone, kankar and or by-products thereof and building materials, generally, non-ferrous, metals, ferro-alloys and in connection therewith, to acquire, erect, construct, establish, operate and maintain factories, mines and quarries, workshops and other works.

2

To purchase, take on lease, or otherwise acquire, the undertaking business and property or any part thereof any company or companies carrying on business as manufacturers of cement and mineral industries in India or elsewhere, or any other business which the company is entitled to carry on.

3

To produce, manufacture, process, refine, prepare, treat, purchase, sell, export, import, or otherwise deal with, either as Principals or as Agents, either solely or in partnership with others, cement, alumina cement, white and coloured cement, lime, plaster of paris and other building materials of all kinds, plastic and plastic goods, glass, glass sheets, chemicals of all kinds including acids, alkalies and salts, manures, fertilizers and dyes, paints of all kinds, caustic soda, soda ash, sulphur, magnesite, dry ice, calcium carbide, catechu, celotex, asbestos and other building boards to be used in ceiling, floor or walls, made from fibrous materials, such as begasse, bamboo, wood paper, jute hemp, and grasses, pottery fireclay and firebricks, flooring tiles, roofing materials, etc.

4

To carry on all or any of the business of manufacturers and sellers of and dealers and workers in, cement of all kinds, concrete, asbestos, gypsum, coal, jute, hessian cloth, gunny bags, paper bags, lime, plasters, whitting, clay, bauxite, soapstone ochres, paints, fixing materials, gravel, sandbricks, tiles, pipes, pottery earthenware, artificial stone, and manufacturers’, builders and dyers requisites and conveniences of all kinds.

5

To carry on the business of miners, metallurgists, builders, contractors, engineers, merchants, importers and exporters, and to buy, sell and deal in, properties of all kinds.

6

To search for, get, manufacture, work, make merchantable, sell and deal in iron, coal, iron ore, limestone, manganese, aluminium, tin, copper, silver, gold, cobalt, mica, nickel, clay, fireclay, and other metals, minerals and substances; and to buy, sell, manufacture, import, export and deal in minerals and mineral products, plant and machinery capable of being used in connection with mining or metallurgical operations or required by workmen and others employed by the company.

7

To carry on investigations to discover places where cement can be profitably made, or where any materials, minerals for any manufacturing work, the company is entitled to carry on, can be obtained and to obtain prospecting or research work in that behalf.

8

To work mines or quarries and to prospect for, search for, find, win, get work, crush, smelt, manufacture or otherwise deal with, limestone, chalk, clay, ores, metals, minerals, oils, precious and other stones, or deposits or products and generally to carry on the business of mining in all its branches and aspects.

9

To acquire by concession, grant, purchases, barter, lease, licence or otherwise, either absolutely or conditionally, and either solely or jointly with others, any lands, buildings, mines, minerals, potteries, pottery works, easements, way leaves, privileges, rights, licences, powers and concessions; and in particular, any water rights or concessions for the purpose of obtaining motive power and any machinery, plant utensils, goods, trade marks and other movable and immovable property of any description which the company may think necessary for convenient for purposes of its business or which may seem to the company capable of being turned to account.

 

BACKGROUND OF PROMOTERS

 

The house of Chettinad was founded by Dr Rajah Sir Annamalai Chettiar. His son, Dr Rajah Sir Muthiah Chettiar and grandson Dr M A M Ramaswamy have transformed it into a present day Rs.8500 Million business house. With a vision to strive, save and serve, the promoters have looked upon business as a means of social transformation through quality products. Based on this vision, the house of Chettinad saw cement production playing a crucial role in giving a concrete shape to the dreams and aspirations of people, thus promoting the Chettinad Cement Corporation Limited.

Dr M A M Ramaswamy, the present Chairman and the key promoter of the company is an industrialist by profession. He is the founder, Pro-Chancellor of Annamalai University, Annamalai Nagar. He was a former Member of Chennai Metropolitan Development Authority, Tamil Nadu State Planning Commission and Tamil Nadu Temple Administrative Board. He was nominated by the Government of Tamil Nadu as Sheriff of Madras for two terms. He was conferred Doctorate of Literature in the 1979 by the Annamalai University for outstanding contribution in the field of sports.

Mr M A M R Muthiah, Managing Director and a key promoter in the company is a software professional with B.E. in Computer Science and Engineering from the Bangalore University. He is working as President of South India Corporation Limited. He has also worked as a Cost Control Engineer with Jurong Engineering Limited, a Singapore based construction and engineering company. In this capacity, he was involved with the design and development of software systems for engineering project management systems applications.

DETAILS OF GROUP/ASSOCIATE COMPANIES

Name of the Company

Main Activity

Date of

Incorporation

Promoter

Share

Face Value

No. of

shares held

% of holding

in the Co.

South India Corporation Limited

Engineering Contractors,

5/9/1935

Smt Sigappi Ramaswamy

1000/-

332849

61.71

Clearing & Forwarding

Rani Lady Meyyammai Achi

1000/-

18650

3.46

Agents, Fleet Operation

Mrs Geetha Muthiah

1000/-

18

Ship Owners

Chettinad Corporation Pvt Ltd

Trading and Fabrication

11/2/1930

Smt Sigappi Ramaswamy

1000/-

40

8.73

Mrs Geetha Muthiah

1000/-

40

8.73

South India Corporation Ltd

1000/-

168

36.68

Chettinad Plantations Pvt Ltd

Coffee Estate at Karnataka

06/02/1974

South India Corporation Ltd

10/-

12500

50.00

SIC (Travancore) Private Limited

Trading Activities

01/08/1942

Sigappi Ramaswamy

10/-

4578

59.07

Chettinad Ship Manage-ment Services Private Ltd

Technical & Personnel Ship Management Services

23/09/1998

Smt Sigappi Ramaswamy

10/-

50000

50.00

Mrs Geetha Muthiah

10/-

50000

50.00

Chettinad Logistics Private Ltd

Trading & handling of imported coal, Fleet Operators

17/12/1999

Smt Siggappi Ramaswamy

10/-

250000

50.00

Mrs Geetha Muthiah

10/-

250000

50.00

Chettinad MB-F Hi Silica Ltd

Manufacture of High purity silica powder

30/01/1991

Dr MAM Ramaswamy

10/-

9147620

60.01

Chettinad Transworld Micronised Garnet P Ltd

Manufacture of Garnet Powder

14/12/1998

Dr MAM Ramaswamy

10/-

887510

24.99

Smt Sigappi Ramaswamy

10/-

887510

24.99

Chettinad Quartz Products Pvt Limited

Manufacture of high purity fused silica poducts and exports of granular raw quartz

21/7/1999

Dr MAM Ramaswamy

10/-

2831580

60.00

Smt Sigappi Ramaswamy

10/-

943860

20.00

Mrs Geetha Muthiah

10/-

943860

20.00

South India Structural Corporation Limited

Erection & fabrication, steel trading

16/09/66

Smt Sigappi Ramaswamy

10/-

1346000

41.82

Mrs Geetha Muthiah

10/-

1300000

40.39

South India Corporation Limited

10/-

182850

5.68

Dr MAM Ramaswamy

10/-

748

0.02

 

FINANCIALS OF GROUP COMPANIES

 

South India Corporation Limited

Chettinad Corporation Private Limited

For the year ended March 31

2002

2001 *

2000

for the year ended March 31

2001

2000

1999

(Rs in Lakhs)

(Rs in Lakhs)

Sales & Other Income

31912.79

39173.98

30413.67

Trading & Other Income

266.56

304.22

370.71

Net Profit (PAT)

654.15

567.00

280.42

Net Profit (PAT)

14.61

18.48

5.49

Equity Capital

4314.80

4314.80

3000.00

Equity Capital

4.58

4.58

4.58

Reserves

1917.62

2425.55

1888.65

Reserves

74.18

53.07

34.89

Networth

6174.22

6729.83

4888.85

Networth

78.76

57.65

39.47

EPS (Rs.)

151.61

141.77

93.47

EPS (Rs.)

3189.96

4034.93

1198.69

Book Value (Rs.)

1430.94

1682.79

1629.62

Book Value (Rs.)

17196.51

12587.34

8617.90

* The group companies viz., Madura South India Corporation Limited,

Chettinad Agencies Private Limited, Lotus Agency Private Limited and

Viruti Investments Private Limited got merged with South India Corpn

-Limited w.e.f 1/4/2000 as per Scheme of Amalgamation sanctioned by

High Court of Judicature at Chennai vide their order dated 3/8/2001.

Chettinad Plantations Private Limited

SIC (Travancore) Private Ltd

for the year ended March 31

2002

2001

2000

for the year ended March 31

2002

2001

2000

(Rs in Lakhs)

(Rs in Lakhs)

Total Income

161.08

302.84

70.93

Total Income

0.39

4.52

12.70

Net Profit (PAT)

120.45

245.66

15.87

Net Profit (PAT)

0.20

1.12

7.11

Equity Capital

2.50

2.50

2.50

Equity Capital

7.75

7.75

7.75

Reserves

991.57

910.68

710.42

Reserves

34.00

33.78

33.26

Networth

994.07

913.18

712.92

Networth

41.75

41.53

41.01

EPS (Rs.)

481.80

982.64

63.48

EPS (Rs.)

2.58

14.45

91.74

Book Value (Rs.)

3976.28

3652.72

2851.68

Book Value (Rs.)

538.71

535.87

529.16

Chettinad Ship Management Services Private Limited

Chettinad Logistics Private Limited

for the year ended March 31

2002

2001

2000

for the year ended March 31

2002

2001

(Rs in Lakhs)

(Rs in Lakhs)

Ship Management Services & Other Income

67.31

72.72

72.84

C & F & Other Income

1725.48

210.15

Net Profit (PAT)

-5.61

3.97

4.44

Net Profit (PAT)

297.14

8.23

Equity Capital

10.00

10.00

10.00

Equity Capital

50.00

50.00

Reserves

6.06

11.67

7.70

Reserves

304.65

8.23

Networth

16.00

21.54

17.51

Networth

354.35

57.82

EPS (Rs.)

3.97

4.44

EPS (Rs.)

59.43

1.65

Book Value (Rs.)

16.00

21.54

17.51

Book Value (Rs.)

70.87

11.56

* incorporated on 17/12/99. The company has started doing transactions only from 2000-01.

Chettinad MB-F Hi Silica (P) Limited

Chettinad Transworld Miconised Garnet Private Limited

for the year ended March 31

2002

2001

2000

for the year ended March 31

2002

2001

2000

(Rs in Lakhs)

(Rs in Lakhs)

Sales & Other Income

1168.13

3849.28

3138.32

Sales & Other Income

5.80

3.51

0.62

Net Profit/Loss

-226.16

-72.45

959.30

Net Profit/Loss

-51.34

-83.34

-16.23

Equity Capital

1524.40

1524.40

1318.00

Equity Capital *

356.00

338.27

300.82

Reserves

807.15

953.53

883.34

Reserves

Networth

2331.55

2477.93

2201.34

Networth

202.23

235.48

283.75

EPS (Rs.)

-

-

7.28

EPS (Rs.)

-

-

-

Book Value (Rs.)

15.29

16.26

16.70

Book Value (Rs.)

-

-

-

* including share application money pending allotment

Chettinad Quartz Products Private Limited

(Rs Lakhs)

South India Structural Corporation Limited

(Rs Lakhs)

for the year ended March 31

2002

2001

2000

For the year ended March 31

2002

2001

2000

Sales & Other Income

209.00

357.44

73.52

Contract & Other Income

2684.17

2298.66

1117.83

Net Profit

22.65

35.64

4.87

Net Profit

27.37

17.81

28.71

Equity Capital *

471.93

311.26

231.26

Share Capital

327.61

227.61

63.61

Reserves

62.95

40.00

4.18

Reserves

40.42

18.85

1.04

Networth

534.88

351.26

235.44

Networth

368.03

246.46

64.65

EPS (Rs.)

0.48

1.15

0.54

EPS (Rs.) #

0.43

0.80

4.96

Book Value (Rs.)

11.33

11.29

26.32

Book Value (Rs.) #

11.44

11.11

11.18

* including share application money pending allotment in the year 1999-2000

# excluding preference capital

TRANSACTION BETWEEN GROUP/ASSOCIATE COMPANIES

South India Corporation Limited (SICL) a group company of CCCL buys cement from CCCL at the prevailing market price whenever they require. Likewise, CCCL place business orders with SICL for civil construction and Chettinad Logistics Private Limited, another group company for their goods transportation at prevailing rates as when the need arises. As of now CCCL is buying imported coal from SICL out of their stock on monthly basis to the extent of its requirement only. Besides that SICL and Chettinad Logistics are among several transport conctractors for transportation, clearing and forwarding of cement at CCCL factory and its various depot points.

(Rs. in lakhs)

Company/ Nature of Transacton

Purchase of Goods

Sale of Goods

Sale of Fixed Assets

Rendering of services

South India Corporation Limited

--

64.00

27.00

191.00

South India Structural Corporation Limited

16.00

--

--

42.00

Chettinad Logistics Private Limited

940.00

--

--

720.00

MANAGEMENT

Board of Directors

The Board of Directors of M/s.Chettinad Cement Corporation Limited is as follows:

Name, Designation and Address of the Director

Age

(in years)

Other Directorships

Dr M A M Ramaswamy

Chairman

Chettinad House

Greenways Road

Raja Annamalaipuram

Chennai 600 028

Industrialist

71

* Chettinad MBF Hi Silica Limited

* Madras Race Club

* Madura Coats Limited

* Chennai Container Terminal Private Limited

Sri M A M R Muthiah

Managing Director

Chettinad House

Raja Annamalaipuram

Greenways Road

Chennai 600 028

Industrialist

31

* Chettinad MBF Hi Silica Limited

* Chennai Container Terminal Private Limited

Sri N Thiagarajan

Director

42, Bharathi Park Road

8th Cross

Coimbatore 641 011

Industrialist

68

* Raj Narayan Textiles Limited

* Southern Auto Finance Limited

* The Mercara Agro Auctioneers (P) Ltd

* Raja Narayan Investments (P) Limited

* Raja Narayan Hosiery Exports (P) Limited

* Raja Narayan Chits Private Limited

* Raja Narayan Capital Markets Services Limited

* Narayan Krishna Spinners Private Limited

* Aishwarya Textiles Private Limited

* Tamil Nadu Industries Captive Power Co Limited.

Sri M Nataraj

Director

95, Poonurangam Road

R S Puram

Coimbatore 641 002

Industrialist

74

* Annamalai Finance Limited

* Sri Kumaran Mills Limited

* Sree Ananta Kumar Mills Limited

* Sri Mathavalakshmi Mills Limited

* Kesavalaxmi Textiles Limited

Sri Ramanathan Palaniappan

Director

Sri Bhuvaneswari

3362 AX, 11th Main Road

Anna Nagar (West)

Chennai 600 040

Engineering Consultant

70

* Cafoma Autoparts Limited

* SRP Tools Limited

* Productivity Elements Private Limited

* Primachs Auto Components Private Limited

* Pentagon Machines & Services Private Limited

Sri R Krishnamoorthy

Director

No.9, Masilamani Road

Balaji Nagar

Chennai 600 014

Senior Advocate

72

NIL

Sri SP.ST. Palaniappan

Director

"Karumugil"

8, Maharajah Surya Rao Road

Alwarpet

Chennai 600 018

Chartered Accountant

74

* Thulsi Spinnings Private Limited

* Southern Pressings Private Limited

* Amusement & Picnic Resorts Private Limited

* Rajan Universal Exports (MDFRS) (P) Limited

Sri K Ganapathy

Director

12, Kanakasabhai Nagar

Chidambaram 608 001

Banker

66

NIL

Sri C S Pani

Director

D-301, Adarsh Gardens

47th Cross, 8th Block

Jayanagar

Bangalore 560 082

Executive Director, IDBI (Retd)

72

* Protchem Industries (I) Limited

* Restile Ceramics Limited

* Bhoruka Gases Limited

* IQF Foods Limited

* Dhandapani Finance Limited

* SI Property Development Limited

Sri K Bharathan

Nominee Director - ICICI

ICICI Bank Limited

1, Cenotaph Road

Teynampet

Chennai 600 018

Regional Manager, ICICI Bank Limited

52

* Medicorp Technologies India Limited

* Industrial & Technical Consultancy - Organisation of India Limited

* Tamilnadu Urban Infrastructure - Trustee Company Limited

* Sakthi Sugars Limited

* Mysore Cements Limited

Sri V Subramanian

LIC Representative Director

32, Bishop Gardens

Opp. Greenways Road

Chennai 600 028

Executive Director, LIC (Retd)

63

* Precot Mills Limited

Smt D Sabitha

Nominee Director - TIIC Limited

435, Anna Salai

Chennai 600 035

43

* State Industries Promotion Corporation of Tamil Nadu Limited

* Tamil Nadu Small Industries Development Corporation Limited

 

SHAREHOLDING OF THE DIRECTORS

Name of the Director

No. of shares held as on 31/10/02

% of holdings

Dr M A M Ramaswamy

6058834

28.75

Sri M A M R Muthiah

3502546

16.62

Sri N Thiagarajan

2000

0.01

Sri M Nataraj

9000

0.04

Sri Ramanathan Palaniappan

3000

0.01

Sri R Krishnamoorthy

1000

0.005

Sri SP.ST. Palaniappan

2300

0.01

Sri K Ganapathy

3000

0.01

Sri C S Pani

500

0.002

Smt D Sabitha (TIIC Nominee)

Nil

0.00

Sri K Bharathan (ICICI Nominee)

Nil

0.00

Sri V Subramanian (LIC Representative)

500

0.002

CHANGES IN THE DIRECTORS IN THE LAST 3 YEARS

Name of the Director

Date of appointment

Date of cessation

Reason

Mr T G Menon

 

29/11/99

Withdrawal of nominee by GIC

Mr C R Pattabi Raman

 

19.06.2001

Expired

Mr K Desikan

 

27.07.2000

Withdrawal of Nominee by IFCI

Mr P Prabhakaran

 

22.01.2002

Withdrawal of Nominee by TIIC

Mr N Sivaraman

27.07.2000

26.06.2001

Withdrawal of nominee by IFCI

Smt D Sabitha

22.01.2002

 

Appointment of Nominee by TIIC

Sri K Bharathan

24.01.2001

 

Appointment of Nominee by ICICI

Sri V Subramanian

24.01.2001

 

Appointment by LIC

Sri K K Bhargawa

22.10.2001

22.05.2002

Withdrawal of nominee by IFCI

Sri T K Subramanian

26.06.2001

18.09.2001

Withdrawal of nominee by IFCI

KEY MANAGERIAL PERSONNEL

The Management of the company is vested in the Board of Directors chaired by Dr M A M Ramaswamy, the day to day management of the company is overseen by Mr M A M R Muthiah, the Managing Director. A team of experienced and qualified professionals assists the Board. The team of senior managers of the company is summarised below:

Sl.

No.

Name

Age

Designation

Date of

Joining

Qualification

No. of

Years of Service

Previous

Employment

1.

Sri.M.A.M.R.Muthiah

31

Managing

Director

28/09/99

B.E

3

----

2.

Sri.L.Muthukrishnan

58

Vice President (Fin.)

02/09/70

B.Com ,

F.C.A

33

Palaniappan & Viswanathan, Chartered Accountants

3.

Sri. V.K.Rama Rao

65

Vice President (Marketing)

04/12/67

B.A.,

B.L.

35

Advocate

4.

Sri. M.Chidambaram

45

General Manager (Fin.)

16.9.1983

B.Com.,

ACA

19

Gedee Associates (P) Ltd.

5.

Sri.P. Udaya Shankar

51

General Manager (Marketing)

2.5.2001

B.Sc.,

B.E.(Mech.)

1

ACC

6.

Sri. S.Hariharan

33

Company Secretary

02/07/2001

B.Com.,

ACS

1

Terra Agro Technologies Ltd.

7.

Sri. C.Sudhakar

54

Chief General Manager

12/04/89

MSc.

(Chem.)

14

Malabar Cement

8.

Sri. A.Subramanian

54

General Manager

(A&A)

3.4.1967

M.Com.

35

----

9.

 

Sri. K. Ramanathan

58

Sr.General

Manager

(Mines)

13/11/80

MSc.

(Applied Geo.), Processing 1 Class Mines Manager’s Certificate

22

Tamilnadu Cement Corp. Ltd.

10.

Sri N.Muthusamy

45

General Manager

(Engg.)

14.12.1979

B.E.(Mech.)

AMIE(Elec.Br.)

23 Years)

-------

11.

Sri N.Selvaraj

52

General Manager

(Tech.)

24.4.1991

B.E.(Electronics

& Communication

10 ½

Years

ACC

12.

Sri S.Balakrishnan

55

General Manager

(Engg.)

30.8.2001

B.E.(Mech.)

1Year

Dalmia Cements (Bharat) Ltd.

The persons whose name appear as key managerial personnel are on the rolls of the company as Permanent Employees.

CHANGES IN THE KEY MANAGERIAL PERSONNEL IN THE LAST 1 YEAR

 

Sl No.

Name

Age

Designation

Date of Change

Qualification

Experience

Previous Employment

1.

Sri R. Narayanan

66

Executive Director & Secretary

Retired on

15.2.2002

B.Com. (Hons.)

B.L.., FCS,Dip. in Company Law

40 years

Advocate

2.

Sri A.P.Arasappan

67

Chief General Manager

Retired on

30.9.2002

B.Sc. (Engg.)

2 Years & 8 Months.

India Cements

Ltd.

MANPOWER

The existing human resources in the company are as follows:

Location

Executive Managerial

Staff Non-Managerial

Workers

Total

     

Permanent

Contract

 

Puliyur

27

161

321

202

711

Karikalli

15

57

66

217

355

Windmill

1

6

3

1

11

RMC

1

2

--

8

11

Head Office

66

101

--

--

167

CHANGES IN THE AUDITORS IN THE LAST THREE YEARS

There have been no changes in the statutory auditors in the last three years.

CORPORATE GOVERNANCE

The company has embraced a philosophy on Corporate Governance which values the highest levels of accountability, transparency, responsibility and fairness in all facets of its operations and in its relationship and interaction with all its stakeholders including shareholders, investors, customers, regulatory authorities, lenders and employees. It is committed to achieving the highest standards of Corporate Governance and believes that all its actions must lead to effective control and enhancement of overall shareholder value, over a sustained period of time.

The Board comprising of 12 Directors including the Managing Director functions either as a full Board or through Committees. In compliance of the Corporate Governance norms, the company has set up three committees:

AUDIT COMMITTEE

The company had constituted an Audit Committee on 24/01/2001 to conform with the requirements of Section 292 A of the Companies Act, 1956 and the Clause 49 of the listing agreement with Madras Stock Exchange Limited. The audit committee presently comprises of 4 Directors viz., Sri SP ST Palaniappan, Sri K Ganapathy, Sri V Subramanian and Sri M A M R Muthiah. Sri SP.ST. Palaniappan is the Chairman of the Audit Committee.

It activities includes:

*

To review the company’s financial reporting process and financial statement

*

To recommend the appointment of Statutory Auditors and internal auditors and fix their remuneration.

*

To review the accounting and financial policies and practices.

*

To review the internal control mechanism and monitor risk management policies adopted by the company and ensure compliance with regulatory guidelines.

*

To review reports furnished by the Internal and Statutory Auditors and ensure that suitable follow-up action is taken.

*

To examine the accountancy, taxation and disclosure aspects of all the significant transactions.

*

Any other matters coming under reference.

REMUNERATION COMMITTEE

The Board has constituted a remuneration committee on 26/3/2002 with three Directors as its members, viz., Sri SP.ST. Palaniappan, Sri K Ganapathy and Sri V Subramanian. Sri V Subramanian is the Chairman of the Committee. It is authorised to determine the payment of minimum remuneration to the Managing Director in compliance with the amendment of Schedule XIII of the Companies Act, 1956.

SHAREHOLDERS’ COMMITTEE

The company has a Share Transfer Committee consisting of 3 Directors viz., Sri M A M R Muthiah, Sri SP.ST. Palaniappan and Sri R Krishnamurthy as its members. Sri SP.ST. Palaniappan is the Chairman of the Committee. The committee is also performing the functions of catering to the shareholders grievances.

THE CEMENT INDUSTRY

Industry, Market and Competitive Environment - (Excerpts from ICRA Industry Watch Series – The Indian Cement Industry (Revised Edition March 2002) by ICRA Information Services.

The Cement intensity of GDP - the rate of growth of cement consumption relative to GDP growth - varies according to the stage of economic development. In the initial stages of development, production is restricted to essential commodities such as food and clothing. This leads to a low cement intensity of less than 1. Once the industrialisation process is initiated, significant investment is made in various industrial and social infrastructure such as buildings, roads, dams and housing, among others. The cement intensity of GDP in such phases tends to increase to a level between 1.25 and 1.75. For India, during the period (FY1991-FY2001), cement consumption outpaced GDP growth by 1.14 times.

The last few Union budgets have seen the Government placing greater emphasis on the housing and infrastructure sectors. This has provided the necessary impetus to growth and accordingly the cement consumption grew by over 15% during financial year 2000. However financial year 2001 witnessed a reversal of this trend. Economic slowdown, drought conditions, floods in several parts of the country and the earthquake in Gujarat had a negative impact in the cement industry with demand growth being negative at 1.9% in that year. A reversal was seen with a strong growth in cement consumption in October- November 2001 and the improved results of the housing finance companies during H-1 FY 2002 are probably indicators of the likely future trend.

Potential drivers of demand

The potential drivers of demand for the Indian cement industry in the near to medium term are discussed at length here.

Concrete roads: The Plan outlay for the road sector has been raised by 93% to Rs.87,270 million. The National Highway Development Programme (NHDP) has been formulated and involves construction of a 5,851-km Golden Quadrilateral (linking the four metros) and a 7334-km North-South-East-West Corridor. Roads over 1,600 km in the Golden Quadrilateral are expected to be made of concrete. The cement demand from such concrete construction is expected to be over 4 million tonnes.

Reconstruction activity in Gujarat: The post-earthquake reconstruction activity in Gujarat has picked up during the last few months. In fact, during the first eight months of FY 2001, the cement consumption demand in Gujarat was 8.8% versus an all-India consumption growth of 5.9%. Cement demand to the tune of 2 million tonnes would be required just to rebuild the housing and municipal infrastructure. The balance demand is expected to accrue from reconstruction of roads, bridges, public utilities and other infrastructure. The government has initiated a number of steps to facilitate the reconstruction activities, including:

 

 

 

-

Allocation of Rs.5 billion towards immediate relief to the earthquake affected victims.

-

Arrangement of loans of US$800 million from the World Bank and the Asian Development Bank for undertaking rehabilitation activities

-

Allocation of Rs.20 billion to the National Housing Board (NHB) and Housing and Urban Development Company (HUDCO) for housing reconstruction activities.

-

Exemption on excise duty on cement and steel used for reconstruction purpose.

-

Provision of assistance to the State Government under various Centrally Sponsored Schemes for reconstruction of roads, bridges, power installations, school buildings, public utilities and other public infrastructure.

Housing demand:

Low property prices, declining housing finance rates, and increased repayment tenure for housing loans (upto 20-30 years from the traditional 10-15 years) besides the fiscal incentives provided to the housing sector (such as increase in tax deduction on housing loan by Rs.50,000 to Rs.0.15 million) are expected to raise the demand for housing. Accordingly, housing finance companies have reported good results during the first half (H1) of FY2002. For instance, HDFC’s disbursement and approval were higher by 29% during H - 1 FY2002 over the corresponding previous. Housing demand may get a further boost if the Urban Land Ceiling Regulation Act (ULCRA) is repealed. The ULCRA has been repealed at the centre and in several States (such as Delhi, Karnataka, Punjab, Haryana and Gujarat). However, it is still to be repealed in many States.

If ULCRA is effectively repealed, it may result in release of around 150,000 hectares of land for property development. Even if 1% of the total surplus land is released in the market every year and developed, it would lead to a rise in cement consumption by over 1.7 million tonnes.

DEMAND FORECAST:

The following assumptions have been made in forecasting cement demand in India:

Assumption on Region-wise consumption:

The Northern region accounted for 37.2% of the total demand for cement during FY2001. The Southern region accounted for 26.8%, the Western region for 21.6% and the Eastern region for the balance 14.4%. While the Northern and Southern regions witnessed growth of 8.9% and 8.2% per annum respectively, during FY1994-99, the Western region saw a higher growth of 9.6% per annum, while the Eastern region registered a growth of 6.8% per annum.

Assumption on GDP Growth and GDP Cement consumption co-relation:

With few signs of the economy picking up, GDP growth has been assumed to average 5.8% per annum over the next three years. For demand projection at a conservative assumption of cement consumption-GDP linkage of 1.2 times for FY 2002 and 1.4 times for the next two years – has been made. This figure is moderately higher than the linkage of 1.14 experienced in India during FY 1991-2001 and below the upper limit (1.75) of the linkage experienced in other developing economies. Based on these assumptions the cement demand in India translates into a growth rate of 7.4% per annum for the period FY 2001 to FY 2004.

Projected Demand:

Based on the assumptions stated ICRA has made the following projections for domestic cement consumption and cement exports for the next three years.

(in MTPA)

 

FY 1998

FY 1999

FY 2000

FY 2001

FY 2002P

FY 2003P

FY 2004P

Projected Annual Growth

North

26.3

28.8

34.3

33.6

35.1

37.2

39.5

5.5%

East

9.6

9.8

12.0

13.0

13.9

15.2

16.6

8.5%

South

20.9

22.3

25.7

24.2

25.6

27.6

29.8

7.2%

West

17.2

18.9

20.0

19.5

21.2

23.6

26.1

10.1%

Total

73.9

79.8

92.1

90.3

95.9

103.7

112.1

7.4%

Exports

2.7

2.1

1.9

3.1

3.1

3.1

3.1

--

Grand Total

76.6

81.8

94.0

93.4

99.1

106.8

115.3

4.3%

New Capacity Additions:

The list of projects that are scheduled to be completed region wise are as follows:

(in mtpa)

Year

2001-02

2002-03

2003-04

North

1.46

--

--

South

10.95

--

2.00

East

1.50

--

--

West

2.15

3.70

--

Debottle necking

2.00

3.00

3.00

Total

18.06

6.70

5.00

 

Significant capacities have come up in 2000 and 2001. The abolition of sales tax benefit in January 2000 has resulted in a rush for capacity additions so as to obtain sales tax benefit, before it is eventually stopped. In 2000, all States decided to withdraw the incentive of sales tax waiver/deferment granted to new cement plants. A grace period of about 18 months was given to units that had registered their intent to set up new capacities. Most of the new capacities were in the form of grinding units as these have shorter gestation period.

Capacity Utilisation:

During FY 2001, while the Northern region witnessed an average capacity utilisation of 84.4%, the Southern region companies operated at 82.2%. The Western companies operated at 76.2% and the Eastern region at 76% capacity utilisation. The average capacity utilisation for the industry at 81.6% was 5% lower than the capacity utilisation of 86.6% in FY 2000. This was because of several factors at play-such as, addition of 9.2 mtpa of new capacity, slowdown in domestic demand and regulation of cement supplies by the cement manufacturers to increase cement prices. While the average capacity utilisation for PSU companies was a low 21%, the private sector companies operated at 84.3%. Region-wise capacity utilisation for the private sector companies was North 90.2%, East 71.4%, South 82.3% and West 71.3%. Similar capacity utilisation levels have been taken into account during the next three years to arrive at the potential demand supply gap.

ICRA’s Supply Projections:

Based on the above assumptions, projections for the emerging region-wise supply scenario are as follows:

(in MTPA)

Region Wise

FY 2003P

FY 2004P

North

47.0

47.7

East

9.1

9.7

South

39.1

41.4

West

22.3

22.9

Total

117.6

121.6

Threat of Cement Import:

The customs duty on cement was lowered from 38.5% to 25% in the Union Budget for 2001-2002 and further lower to 20% in the Budget for 2002-03. The import cement may become competitive vis-à-vis domestic cement in the coastal locations. However, large scale imports are unlikely because of infrastructure constraints at Indian ports. The major Indian ports do not have dedicated cement-handling terminals. The cement terminals that exist in few States such as Gujarat, Maharashtra and Karnataka are themselves controlled by the cement companies. Thus, cement dumping is unlikely to be a major threat for cement companies targeting the coastal locations. Further, freight costs would make imported cement even more uncompetitive in the interior parts of the country.

Inter-regional movement of cement:

Although the high freight cost makes cement a regional commodity, regional manufacturers tapped the distance markets also to sell their products. The inter-region movement happens on account of several reasons such as over supply in their local region, attractive realisatons in the other regions and central location of plants.

The following trend has been observed in the inter regional movement of cement during the past six years:

*

The Northern regional has increased its despatches to the Western region and to the export markets.

*

The Western region has increase its despatches to the export markets

*

Cement plants based in the South region have marginally enhanced their despatches to the Western region.

*

The cement plants in the Eastern region are enhancing their local focus.

 

Apart from the past trend on inter-regional movement, the following factors have been considered for projecting the inter-regional movement of cement:

*

Most of the cement intensive infrastructure projects are likely to come up in the Western region, followed by the Northern region, the Southern region and the Eastern region in that order.

*

The reconstruction activities in Gujarat should see greater offtake of cement in that region.

*

The golden quadrilateral road project should see equal demand for cement in the four regions.

   

Based on the arguments stated, the following inter-regional movement has been considered in supply projections:

East

West

South

Total

North

77.0%

15.0%

8.0%

0.0%

100.0%

East

3.0%

97.0%

0.0%

0.0%

100.0%

West

3.0%

0.0%

87.0%

10.0%

100.0%

South

0.0%

0.0%

16.0%

84.0%

100.0%

Demand Supply Situation:

On analysis of the demand and supply position adjusting for the inter-regional movement of cement, it is found that the surplus/ deficit in the various regions assuming a growth rate of 7.5% is expected to be as follows:

(in MTPA)

Region Wise

FY 2003P

FY 2004P

North

-0.1

-1.8

East

0.7

-0.1

South

7.5

7.2

West

5.8

4.2

Total

13.9

9.5

 

Excerpts from ICRA Industry Watch Series – The Indian Cement Industry (Revised Edition March 2002) by ICRA Information Services ends.

Competitive Position of Chettinad Cement:

With the implementation of the project at Karikali Village, the total capacity of Chettinad Cement is 1.5 million tonnes per annum. It’s current production is mainly sold in two states viz., Tamil Nadu and Kerala. Over 70% of the total production is sold in Tamil Nadu. CCCL had a market share of 10.75% in Tamil Nadu and 9.98% in Kerala during April 2002 to September 2002 [Source: Cement Manufacturers’ Association Report for the month of September 2002]. The company's products are distributed through a wide net work of dedicated stockists numbering 1000 in Tamil Nadu and 450 in Kerala, who ensure the availability of the product to the end users keeping at all times sufficient stocks in their retail outlets. Besides extensive network of stockists the company also has field officers posted in all districts who are in constant touch with the stockists to promote the use of the company’s brand. The company plans to appoint field staff both in Ker ala and Tamil Nadu where some pockets are untapped. These especially include certain regions in South Kerala and North Tamil Nadu. The company is also planning to participate in Government tenders in a bigger way by offering competitive prices. In view of the strong brand image created by the company over the last few decades it is confident that it will be able to market the entire cement output from the new plant.

PRESENT BUSINESS OF THE COMPANY

M/s.Chettinad Cement Corporation Limited is mainly engaged in the business of manufacture and marketing of cement. The company currently has two cement manufacturing units at Puliyur, Karur District and Karikkali Village, Dindugal District, Tamil Nadu. The present capacity of the two unit is 15.0 Lakh tonnes per annum. The company has an ISO 9002 certification in place for its current manufacturing facility.

The company also has a Ready Mix concrete plant at Madukkarai Village near Coimbatore. The rated capacity of the plant is 30 cu.m/hr and supplies four grades of concrete as per the market demand. During the financial year 2001-02, the plant had produced 4381 cu/m of ready mix concrete.

The company owns 66 wind mills located at Pulavadi near Udumalpet. The power generated from these wind mills are fed into the local power grid regularly and is adjusted towards the power consumption of Puliyur Unit. These windmills have been contributing to the income of the company by reducing the power costs. During the year 2001-02, the production of energy from the windmills was 2.83 crore units. For the current year 2002-03, the windmills had generated 2,45,41,716 units for the period from April 2002 to September 2002.

BRAND NAME

The company’s Trade Mark is registered with the Trade Marks registry office of the Government of India vide Registration No.247898. The registration of trade mark was renewed for a period of 7 years from March 18, 1997 and the same was advertised in the Trade Mark Journal No.1196.

PRODUCT DETAILS

The company manufactures various types of cement like Portland Pozzolana Cement (PPC), Ordinary Portland Cement (OPC) Grade 43 and Grade 53, Sulphate Resistant Cement and Slag Cement.

The company’s PPC and OPC Grade 43 cement is sold through a network of stockists spread throughout Tamilnadu, Karnataka and Kerala. The sulphate resistant cement and slag cement find specific use in coastal areas because of inherent in-built qualities of these products suited to these regions. The company is one of the few manufacturers of these types of cement in South India.

Apart from the trade segment, the company also sells their products directly to institutional clients like Government, Corporates and Builders.

For the year ended 31/3/2002, the company has produced 937510 MTs of various grades of cement, the details of which are as follows:

* OPC 53

20606

* OPC 43

273575

* PPC

606156

* Slag

18352

* SRC

18821

* Total

937510

For the current half year ended 30/09/2002, the segment wise production of the company is as follows:

 

Puliyur Unit

(in MTs)

Karikkali Unit

(in MTs)

OPC 43

133177

125609

OPC 53

42452

 

PPC

203376

245570

SRC

14001

 

SLAG

19753

 

Total Production

412759

371179

CAPACITY UTILISATION

The following table provides a snapshot of installed capacity, production and capacity utilisation for cement and ready mix concrete as reported in the previous years:

Product

31/3/98

31/3/99

31/3/00

31/3/01

31/3/02

Installed Capacity

         

- Cement (in MTs)

600000

600000

600000

600000

1500000*

- Ready Mix Concrete (cu.m/hr)

       

30 #

           

Actual Production

         

- Cement

802332

832553

827414

777332

937510*

- Clinker

786870

750060

801305

804210

850855

- Ready Mix Concrete (cu.m)

       

4381 #

           

Capacity Utilisation

         

- Cement (in %)

134

139

138

130

93.00

* Capacity addition : The second plant at Karikkali with installed capacity of 9,00,000 tonnes was commissioned during October 2001

# The RMC plant was commissioned in November 2001. The production of RMC is based on the demand and hence capacity utilisation is not determinable.

MANUFACTURING FACILITIES

The company has 2 cement plants at Puliyur and Karikkali Village for manufacture of Cement and Ready Mix Concrete Plant at Madukarai Village near Coimbatore. The details of the same are as under:

Location

Product

Total Land Area

Total Built-up Area

Puliyur

Cement

86.45 acres

2.39 acres

Karikkali Village

Cement

136.669 acres

29.90 acres

Madukarai

Ready Mix Concrete

5.17 acres

0.20 acres

 

PLANT & MACHINERY

Puliyur & Karikalli Units

The significant items of plant and machinery at Puliyur and Karikalli units comprise of Lime Stone Crushing Machine, Lime Stone Storage & Prehomogenising Machines, Raw Material Drying and Grinding Machines, Raw Meal Storage and Homogenising Machines, Pyro Processing Machines, Clinker Storage, Coal Drying & Grinding Machines, Coal Storage & Homogenising Machines, Clinker Grinding Mill, Cement Silos, Packing and Loading Machines. Electrical and control Instrumentation Systems.

Madukarai Unit (RMC)

The significant items of plant & machinery at Madukarai Unit comprise of Batching Plant, Concrete Pump, Silo and other electrical installations.

MANUFACTURING PROCESS

A. CEMENT

DRY PROCESS

The limestone quarried from the mines near the factory sites is transported to the factory. It is then crushed to uniform and usable size, blended with certain additives (such as iron ore and bauxite) and discharged on to the vertical roller mill where the raw meal is grounded into fine powder with the retention of 15% residue on 170 sq. mesh. The raw meal is then stored in silos for further stages of blending. The homogenized raw meal is then pumped to the top of preheater and from there into the precalciner. During the process, the raw meal undergoes a process of calcination (in which the carbonates present are reduced to oxides. It is then fed to kiln, the remaining calcination and clinkerisation reaction are then completed in the kiln where the temperature is raised to 1450 degree C - 1500 degree C. The clinker formed is cooled and stored in clinker silos from where it is extracted and transported to cement mills for producing cement. For produ cing ordinary Portland Cement (OPC) clinker and gypsum are used and for production of Portland Pozzolana Cement (PPC), clinker, gypsum and flyash are interground. For producing Portland Slag Cement, clinker, gypsum and slag are used.

 

RAW MATERIALS

Limestone

The company has approximately 931.84 acres of leasehold limestone deposit at the Seethainagar in Tamil Nadu which according to the company has sufficient reserves to last the life of the plant.

Iron Ore

The company is currently purchasing its requirement of iron ore Bhadravathi, Andhra Pradesh. The company is of the opinion that the sources of supply is abundant and is able to get quality supplies to meet its requirements.

Bauxite

Bauxite is purchased from from Kolli Hills. The company is of the opinion that the sources of supply is abundant and is able to get quality supplies to meet its requirements.

Gypsum

The chemical gypsum is purchased from Tuticorin. The company is of the opinion that the sources of supply is abundant and is able to get quality supplies to meet its requirements.

Fly Ash

Fly Ash is purchased from Mettur Thermal Power Station, Mettur that is available in abundant quantities.

Coal

The company’s 98% requirment of fuel is met by coal imports. Imported coal is cheaper then raw lignite and Indian coal. The quality of imported coal also is very good with low ash and high calorific value.

Raw Lignite

The company is procuring its entire requirements of raw lignite from Neyveli Lignite Corporation Limited (NLC), Neyveli. The company uses only 2% of raw lignite in its fuel composition.

 

B. READY MIX CONCRETE

Different grades of aggregates, cement and admixtures are stored after assessing their suitability. A computerized batching plant weighs and batches cement, aggregates and water and admixtures at the fixed proportion preset in the computer, so as to produce the concrete of designated quality. The batched mix is discharged into a revolving truck mixer, which delivers the ready mix concrete at the construction site for placement into the forms through concrete pump.

POWER

The total annual requirement of power manufacture of cement is as follows:

1

Puliyur Unit

66.60 million KWH

2

Karikkali Unit

67.50 million KWH

 

The company has a contracted power requirement of 11 MVA and 17 MVA for Puliyur Unit and Karikkali Units respectively. The company also has wind electric generators (WEGs) at Poolavady near Coimbatore with an installed capacity of 17.365 MW and an average generation of 28 million KwH per year. This power is fed into the Tamil Nadu Electricity Grid and adjusted towards the power consumption of the Puliyur Unit.

The company also has 12.24 MW (comprising Wartisila HSD 4.6 x 2 and Yanmar HSD 1.5 x 2) diesel genset at Puliyur Unit, which contributes about 45% of the company’s total power requirement.

POLLUTION CONTROL

The company has obtained renewal consent from Tamil Nadu Pollution Control Board for Water and Air for its unit at Puliyur, Karikalli and Madukarai Units. The details of the renewal pollution control consent for Water and Air is as follows:

Location

Consent No. & Date

Valid upto

Remarks

Puliyur

Renewal Consent No.848 (Air)

Renewal Consent No.2290 (Water)

31/3/2001

31/3/2001

The company has applied to Tamil Nadu Pollution Control Board for renewal along with the requisite fee vide application /letter dated 23/3/2001 and 7/6/2002 respectively for the years 2001-02 and 2002-03. Renewal Consent Awaited.

Karikalli

Consent No.19236 dated 24/7/2001 (Water)

Consent No.15318 dated 28/08/2001 (Air)

31/3/2002

31/03/2002

The company has applied to Tamil Nadu Pollution Control Board for renewal along with the requisite fee vide letter dated 16/2/2002. Renewal Consent Awaited.

Madukarai

087 dt 18/6/02 (Water)

088 dt 18/6/02 (Air)

31/3/2003

31/3/2003

---

UTILITIES

Water

The water requirements per day for the company’s manufacturing operations is as follows:

 

Puliyur Works

KL/Day

Karikkali Works

KL/Day

Ready Mix Concrete

KL/Day

Water consumption

1400

500

20

The requirement of water for Puliyur Unit is met through Borewell situated at Kovil Palayam and an open well at Somour River Bed. With respect to Karikalli Unit, the requirement is met from Reservoir at abandoned Alambadi mines pit.

Compressed Air

Puliyur Works

M3/Hr

Karikkali Works

M3/Hr

Ready Mix Concrete

M3/Hr

3000

5640

Minimal requirement

Adequate compressed air are available to meet the above requirements in the respective factories.

QUALITY CONTROL

The company possesses International Certificate ISO 9002 for quality control. The company has latest sophisticated gammametrics, x-ray fluorescence, x-ray diffraction and laser particle size analyzer to monitor quality of materials at all stages of operation and final product. Further the entire plant is operated from the central room with the latest computer, PLCs and windows based operating stations.

 

RESEARCH & DEVELOPMENT

The company has set up a concrete testing laboratory at its Puliyur Works catering to the need of Ready Mix concrete Plant and other agencies in the area of mix design and usage of admixtures in concrete, usage of substitute raw materials and alternate fuels to reduce the cost of production in the cement manufacturing process.

The company is also in the process of setting up an optical microscopy lab for efficient control of clinker morphology (Mineralogical structure).

MARKETING AND DISRIBUTION

Chettinad Cement is mainly selling its product in the states of Tamilnadu, Kerala and Karnataka. In the first half of the current financial year, the company dispatched 794757 lakh tonnes of Cement, compared to 406244 Lakh tonnes during the same period last year, showing an increase of about 96 %.

Chettinad Cements is a premium brand in the primary markets of Coimbatore, Trichy, Tanjore, Salem, Periyar, Madurai, Anna and Dharmapuri districts. CCCL has a market share of 10.75% and 9.98% in Tamilnadu and Kerala respectively.

The Company’s products are distributed through a wide network of dedicated stockists numbering 1000 in Tamilnadu, 450 in Kerala and 20 in Karnataka, who ensure uninterrupted supply of the products to the users keeping at all times sufficient stocks in the retail outlets. Besides extensive network of stockists the companyalso has field officers posted in all districts who are in constant touch with the stockists to promote the use of the company’s brand.

In view of the strong brand image created by the company over the last few decades, it is confident that it will able to market the entire cement output from both its plants running at optimum capacity, in the coming years.

 

EXPORT OBLIGATIONS

The company currently has no export obligations.

TECHNOLOGY AND TECHNICAL COLLABORATION

The company has not entered into any technical collaboration for the manufacture of cement.

FINANCIAL PERFORMANCE FOR THE LAST FIVE YEARS

AUDITORS’ REPORT

To

Chettinad Cement Corporation Ltd

No.603, Anna Salai

CHENNAI 600 006.

We have examined the accompanying statement of Adjusted Profits and Losses of Chettinad Cement Corporation Ltd (hereinafter referred to as the Company) for each of the years/periods ended 31st March 1998, 31st March 1999, 31st March 2000, 31st March 2001, 31st March 2002 and six months ended 30th September 2002. These statements reflect the Profits and Losses for each of the relevant years / period and Assets and Liabilities as on 31st March 1998, 31st March 1999, 31st March 2000, 31st March 2001, 31st March 2002 and 30th September 2002, as extracted from the Profit and Loss Account for those years/period and Balance Sheet of the Company as at those dates audited by us after making therein the disclosures and adjustments required to be made in accordance with the provisions of paragraph 6.18.7 of the Securities and Exchange Board of India (Disclosures and Investor Protection) Guidelines, 2000, except as indicated otherwise, in the notes to the statement.

We further report that we have examined the accompanying statement of rates of dividend paid by the Company in respect of each of the years/periods ended 31st March 1998, 31st March 1999, 31st March 2000, 31st March 2001, 31st March 2002 and six months ended 30th September 2002, on the Shares of the Company.

We have also examined the accompanying statement of accounting ratios of the Company for each of the year/periods ended 31st March 1998, 31st March 1999, 31st March 2000, 31st March 2001, 31st March 2002 and six months ended 30th September 2002 and report that, in our opinion, they have been correctly computed from the figures as stated in the statements of Adjusted Profits and Losses and Adjusted Assets and Liabilities of the Company referred to in paragraph 1 above.

This report is intended solely for your information and for inclusion in the Letter of Offer document in connection with the proposed Rights Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for P.B.Vijayaraghavan & Co

for Seshadri & Jayaraman

for Krishaan & Co

Chartered Accountants

Chartered Accountants

Chartered Accountants

 

PARTNER

PARTNER

PARTNER

 

Place : Chennai 600 006

Date : 8th November 2002

 

STATEMENT OF ASSETS AND LIABILITIES

(Rs.in Lacs)

6 months

ended

Year ended 31st March

1998

1999

2000

2001

2002

30.9.2002

A. Fixed Assets :

Gross Block

42550

43951

44410

39133

61917

63026

Less Depreciation

13261

15002

17729

17510

16999

18383

Net Block

29289

28949

26681

21623

44918

44643

Add: Work in Progress

385

375

1242

18079

852

76

Net Block

29674

29324

27923

39702

45770

44719

B. Current Assets, Loans and

Advances

Inventories

3611

3519

3448

4076

4939

3896

Sundry Debtors

710

672

787

1304

2102

2940

Cash and Bank Balances

432

630

631

841

1092

1059

Loans and Advances

1972

1656

1450

2545

2889

1717

Other Current Assets

17

12

10

16

17

51

6742

6489

6326

8782

11039

9663

C. Liabilties and Provisions :

Secured Loans

17881

17042

15317

23628

32571

31464

Unsecured Loans

3220

3113

3364

4450

3632

3073

Deferred tax liabilities - Net

-

-

-

-

5324

5834

Current Liabilities

3757

3395

2998

3779

4895

6428

Provisions

894

964

885

619

154

70

25752

24514

22564

32476

46576

46869

D. Networth

E. Represented by

1. Share Capital

843

843

843

2108

2108

2108

2. Reserves

9821

10456

10842

13900

8125

5405

Networth

10664

11299

11685

16008

10233

7513

 

STATEMENT OF PROFITS AND LOSSES

(Rs.in Lacs)

6 months

ended

Year ended 31st March

1998

1999

2000

2001

2002

30.9.2002

Income

Sales

21564

20017

20248

20102

23228

15264

Charter Income

1998

1771

1948

1261

439

-

Other Income

103

116

116

138

111

46

Increase (Decrease)

in Inventories

(254)

38

59

664

373

(1020)

Total Income

23411

21942

22371

22165

24151

14290

Expenditure

Raw Materials consumed

2519

2444

2597

2371

2844

1833

Staff Costs

1499

1551

1627

1418

1535

703

Other manufacturing expenses

6727

5726

5425

6055

7235

5390

Excise Duty

3038

2979

3210

2853

3486

2746

Administration Expenses

699

792

747

730

628

244

Selling and Distribution Expenses

2549

2543

2556

2385

2674

1863

Loss on sale of asset

_

4

1

1046

731

_

Interest

3102

2955

2682

2483

3304

2359

Depreciation

1947

1846

2798

2090

2204

1384

Total Expenditure

22080

20840

21643

21431

24641

16522

Net Profit/(loss) before tax

1331

1102

728

734

(490)

(2232)

Taxation including Dividend Tax

169

141

107

113

-

-

Net Profit/(loss) after tax

1162

961

621

621

(490)

(2232)

Deferred tax Liability - Net

_

_

_

_

700

510

1162

961

621

621

(1190)

(2742)

Basic & diluted value per share

Face value Rs.10/- per share

13.78

11.40

7.37

3.86

-2.32

-10.59

 

NOTES FORMING PART OF ACCOUNTS

1

Significant Accounting Policies

       
 

a)

The Financial statements are prepared under historical cost convention and in accordance with generally accepted accounting practices. Revenues are recognised and expenses are accounted on accrual basis.

 

b)

Sales are inclusive of excise duty and net of freight, discount and rebate but exclusive of sales tax.

 

c)

Fixed assets including capital work in progress are stated at cost net of CENVAT. The borrowing cost directly attributable to the acquisition, construction or production of qualifying assets are capitalised. In respect of new projects the interest on loans and expenses (net) relating thereto are capitalised as part of cost till the commencement of Commercial Production.

 

d)

(1)

Depreciation is provided on assets under the straight line method

   

(i)

For assets acquired prior to 01.07.1987 at the rates prevailing then in accordance with the circular dated 21.05.86 issued by the Department of Company Affairs.

   

(ii)

For rest of the assets other than ships at the rates prescribed under Schedule XIV of the companies Act, 1956.

   

(iii)

For ships at a rate arrived at based on a technical evaluation of the remaining useful life of the ships.

   

(2)

No depreciation is provided on quarry freehold lands.

   

e)

Retirement Benefits:

   

Liability towards Gratuity is covered by a group gratuity scheme with Life Insurance Corporation Of India and annual contribution is paid /provided based on actuarial valuation.

   

Contribution to Superannuation Fund is accounted as per Company’s scheme. Provident Fund contribution is made at the prescribed rates under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and under the Seamen’s Provident Fund Act, 1966.

   

Leave encashment is accounted on the basis of actuarial valuation.

   

Expenditure in respect of voluntary retirement as per Company’s Scheme is written off in the year in which they are incurred.

 

f)

Transactions in foreign currencies are accounted at exchange rates prevailing on the dates such transactions take place.

 

Foreign currency loans obtained for acquisition of fixed assets and monetary items denominated in foreign currencies not covered by forward contracts, are translated at the exchange rate on the Balance sheet date.

 

Exchange difference arising on translation of Foreign currency loans availed for acquisition of fixed assets are adjusted in the carrying amount of the respective fixed assets and in respect of others such exchange differences are recognised as income or as expenses in the period in which they arise.

 

Gains/Losses on account of Forward Exchange contracts are recognised as income or expense over the life of the contract, except in respect of fixed asses where gains or losses are adjusted in the carrying amount of the respective fixed assets.

 

Profit/Loss arising on cancellation or renewal of Forward Exchange contracts are accounted as income/expenses for period except in case of Forward exchange contracts relating to liabilities incurred for acquiring Fixed Assets in which case such Profit/Loss are adjusted in the carrying amount of the respective fixed assets.

 

g)

Inventories are valued at lower of cost computed on weighted average method and net realisable value.

 

h)

Liabilities of contingent nature have been disclosed separately.

 

i)

Government grants relating to specific fixed assets are shown as deduction from gross value of such assets.

 

j)

Excise duty payable is accounted on production of finished goods.

 

k)

Current tax is the amount of tax payable in respect of taxable income for the year.

   

Deferred tax is recognised, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets will not be recognised on unabsorbed depreciation and carry forward losses unless there is no virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

2)

The Company did not use jute bags in packing cement as per Jute Packaging Materials (Compulsory use in the Packing Commodities) Act 1987, in view of the consumer’s preference and resistance from workers who are handling the packing materials. The Supreme Court upheld the validity of the said Act. The Government did not include cement for compulsory packaging in Jute bags from 1st July 1997. The Liability that may arise for non compliance of the said Act for the earlier period is not ascertainable.

3)

The Unsecured Non Convertible Debentures of Rs.200 Lakhs are redeemable at the end of 42 months from the date of allotment. There is a put/call option at the end of 2 years from the date of allotment on the entire amount. The Company has not created any reserve as stipulated u/s 117C of the Companies Act, 1956 in view of loss.

4)

The Company is mainly engaged in the business of manufacturing cement. All other activities of the company revolve around such main business and as such there are no separate reportable segments.

5)

Buildings include ownership Flat at Bombay and value of shares in Bombay Middle Class Cooperative Housing Society Ltd., in the name of the representative of the Company.

6)

During the year 2001-02, the Company for the first time adopted Accounting Standard 22 "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India.

DETAILS FORMING PART OF NOTES

(Rs.in Lacs)

6 months

ended

Year ended 31st March

1998

1999

2000

2001

2002

30.9.2002

a) Allocation to other heads

Salaries, Wages, PF & ESI

183

192

192

196

219

99

Power

64

67

89

89

116

85

Stores and Spares

32

55

70

61

54

23

b) Contingent Liabilities

Claims against the Company

not acknowledged as debts

53

55

168

159

2

2

Letter of credit opened by banks

182

43

_

243

8

55

Guarantee given by the banks

100

187

165

172

206

93

Cess and Cess surcharge demand including interest pending before courts

1156

3613

3613

3613

_

_

Royalty on Limestone

_

_

_

_

547

547

Estimated contracts remaining to be executed on Capital A/C

47

10

12707

7835

280

250

c) Sales includes self consumption

80

19

19

342

148

43

d) Exchange Difference

Accounted in Profit & Loss A/C

7

4

(1)

10

5

_

Included in carrying amount of

Fixed Assets

787

705

190

343

25

_

e) Sundry Creditors due to Small

Scale Industries exceeding

Rs.1 Lakh due for more than

30 days

_

6

9

4

5

2

f) Amount of borrowing cost

capitalised

_

_

_

_

1748

_

g) Tax Credit available in future

under section 115 JAA of IT Act

1961

140

253

337

407

365

365

h) Preoperative Expenses &

borrowing cost

Establishment & other charges

_

_

_

630

1219

_

Interest & Financial charges

_

_

_

456

1748

_

Depreciation

_

_

_

16

49

_

1102

3016

Less: Interest & other income

82

83

1020

2933

Capitalised during

_

_

_

_

2933

_

i) Deferred Tax Liability

accounted in P&L A/C

_

_

_

_

1062

822

Deferred Tax Asset

accounted in P&L A/C

_

_

_

_

362

312

j)Wind Energy Income adjusted

in Power & Fuel

640

791

942

876

926

773

k) Remuneration to MD

11

11

5

_

22

12

l) Related party disclosures

Key Management Personnel

- Dr. M.A.M. Ramaswamy

- Sri. M.A.M.R. Muthiah

Sitting Fees

- Dr. M.A.M. Ramaswamy

_

_

_

_

12

6

- Sri. M.A.M.R. Muthiah

_

_

_

_

42

24

Associates

Purchase of Goods

_

_

_

_

1571

956

Sale of Goods

_

_

_

_

7

64

Sale of Fixed Assets

_

_

_

_

2900

27

Rendering of Services

_

_

_

_

2631

953

Name of Associates

South India Corporation Ltd

_

_

_

_

2391

282

South India Structural Corpn.Ltd

_

_

_

_

874

58

Chettinad Ship Management P.Ltd

_

_

_

_

2900

_

Chettinad Logistics P.Ltd

_

_

_

_

944

1660

 

TAX SHELTER STATEMENT

(Rs.in Lacs)

Six

months

ended

Year ended 31st March

31.3.98

31.3.99

31.3.00

31.3.01

31.3.02

30.9.02

Profit/(Loss) as per

Profit & Loss A/C

1331

1102

728

734

(490)

(2232)

Notional Tax payable

466

386

280

290

_

_

Adjustments

For exemption and deduction

_

_

_

(639)

_

_

Difference between book and

I.T depreciation

(1774)

(2298)

(431)

92

(2679)

(2278)

Short term capital gain

_

_

_

_

1483

_

Other adjustments (Net)

188

35

56

1160

864

_

Total

(1586)

(2263)

(375)

613

_

_

Tax Savings/burden

555

792

144

(242)

_

_

Minimum Alternate Tax

140

113

61

70

_

_

SECURED LOANS

LOANS FROM BANKS/ FINANCIAL INSTITUTIONS:

(Rs. in crores)

Name of the Bank

Principal outstanding as on 30.09.2002

Rate of interest

(%)

Repayment Schedule

Security

Term Loan Facility

1. ICICI Banik

2. Central Bank of India

3. Indian Overseas Bank

4. Canara Bank

5. State Bank of Patiala

6. State Bank of Mysore

7. Indian Bank

8. Indian Bank

49.71

50.00

50.00

25.00

25.00

9.67

5.10

20.00

13.34

12.50

12.50

12.50

12.75

12.75

12.50

13.00

28 Qtly from 15.08.03

30 Qtly from 30.12.03

30 Qtly from 30.06.02

26 Qtly from 30.06.02

30 Qtly from 30.06.02

30 Qtly from 30.06.02

5 Half’ly from 30.04.01

10 Qtly from 30.06.02

Pari Passu First Mortgage and Charge on the whole and moveable and immoveable properties of the company, both present and future, subject to charges created and/or to be created in favour of company’s bankers on current assets for securing working capital facilities.

9. Indian Bank

21.00

12.50

8 Qtly from 31.03.02

Pari Passu First Charge on the Fixed Assets of the company, both present and future pertaining to its new plant at Karikali village subject to charges created and/or to be created in favour of company’s bankers on current assets for securing working capital facilities.

10. UTI Bank

30.00

13.25

12 Qtly from 15.05.03

Secured by a second charge by way of hypothecation and mortgage on all company’s moveable and immoveable properties, both present and future, subject to charges created and/or to be created in favour of Company’s bankers on current assets for securing working capital facilities.

Working Capital facility

11. Central Bank of India

29.16

12.50

 

Secured by hypothecation of raw materials, stores, spares, packing materials, fuel, process stock, finished goods and book debts of the company and also secured by the mortgage of immoveable properties on second charge basis.

Note: Loans mentioned in serial Nos.7, 10 & 11 are also guaranteed by the Chairman in his personal capacity.

UNSECURED LOANS

(Rs.in Lacs)

as on 30.9.02

as on 31.3.02

a)

Fixed Deposit - Public

832

1094

b)

Short Term Loan from Banks

- Karur Vysya Bank

1000

1000

- IndusInd Bank

-

1000

- Vysya Bank

1004

-

c)

Non convertible Debentures

200

500

d)

HDFC- Housing Loan

37

38

3073

3632

ANALYTICAL DETAILS OF LOANS & ADVANCES OUTSTANDING

(Rs.in Lacs)

6 months

ended

31.3.2001

31.03.2002

30.9.2002

Secured

Housing Loan to Employees

40

34

32

Unsecured - Considered Good

Advances, Deposits and Prepaid Expenses recoverable

in cash or in kind or for value to be received

2505

2855

1685

Unsecured - Considered Doubtful

-

51

51

2545

2940

1768

B

Analytical detail of Debtors Outstanding

Debts outstanding for a period exceeding six months

Considered Good

39

77

99

Considered Doubtful

65

59

59

Other debts - considered good

1265

2025

2842

1369

2161

3000

DIVIDEND DETAILS

six months

ended

Year ended 31st March

1998

1999

2000

2001

2002

30.9.2002

Rate of Dividend - Equity (in %)

35

30

25

20

_

_

No.of Equity Shares (Nos.in Lacs)

84.32

84.32

84.32

210.75

210.75

210.75

Paid-up capital (Rs.in Lacs)

843

843

843

2108

2108

2108

Amount of Dividend (Rs.in Lacs)

295

253

211

422

_

_

Tax on Dividend (Rs.in Lacs)

30

28

46

43

_

_

ACCOUNTING RATIO

For the Financial Year ended

6months

31.3.98

31.3.99

31.3.00

31.3.01

31.3.02

ended

30.9.02

Earning per share (Rs.)

13.78

11.40

7.37

3.86

-2.32

-10.59

(before deferred tax)

Earning per share (Rs.)

13.78

11.40

7.37

3.86

-5.65

-13.01

(After deferred tax)

Cash Earnings per share (Rs.)

(before deferred tax)

36.88

33.30

40.56

16.84

8.13

-4.02

Return on Net worth (%)

10.90

8.51

5.31

3.88

_

_

Net Asset Value per share (Rs.)

126.50

134.03

138.61

75.96

48.54

35.64

CAPITALISATION STATEMENT

Pre-Issue as at

Post Issue assuming all shareholders

30.9.2002

subscribe 2 shares for every 5 shares held

(6 months)

at a premium of Rs.26/- per share

Borrowings

(Rs.in Lacs)

Short Term Debt

5454

5454

Long Term Debt

29083

29083

Total Debt

34537

34537

Shareholders Fund

Share Capital

2108

2951

Reserves & Surplus

5405

7598

Total Shareholders fund

7513

10549

Total capitalisation

42050

45086

Long Term Debt/Equity Ratio

3.87

2.76

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS:

1. Financial Year ended March 31, 2002 compared with Financial year ended March 31, 2001.

Production:

Clinker production in 2001-2002 was 850855 M.T. compared to 804210 MT in 2000-01.

The Production of Cement in 2001-02 was 937510 MT compared to 777332 MT produced in 2000-01.

Sale of Clinker and Cement during 2001-02 was 1043980 MT compared to 877030 MT in 2000-01.

Turnover & Profit

The total income in 2001-02 was Rs. 23778 Lakhs as compared to Rs.21501 lakhs in 2000-01.

Manufacturing and other expenses for the year 2001-02 was Rs. 19133 lakhs compared to Rs. 16858 lakhs in the year 2000-01. The increase was more due to operation of the second plant commissioned in October’2001 than due to increase in cost.

Interest expenses for the year 2001-2002 was Rs.3304 Lakhs as against Rs.2483 Lakhs in the year 2000-01. Depreciation for the year 2001-02 was Rs. 2204 Lakhs as compared to Rs. 2090 Lakhs in the year 2000-01.

There was a loss before tax for the year 2001-02 of Rs.490 lakhs as compared to a profit of Rs.734 lakhs for the year 2000-01.

 

 

2. Financial Year ended March 31, 2001 compared with Financial year ended March 31,

2000.

Production:

Clinker production in 2000-2001 was 804210 M.T. compared to 801305 MT in 1999-2000.

The Production of Cement in 2000-01was 777332 MT compared to 827414 MT produced in 1999-2000.

Sale of Clinker and Cement during 2000-01was 877030 MT compared to 949301 MT in 1999-2000.

Turnover & Profit

The total income in 2000-01 was Rs.21501 Lakhs as compared to Rs.22312 lakhs in 1999-2000.

Manufacturing and other expenses for the year 2000-01 was Rs.16858 lakhs compared to Rs.16163 lakhs in the year 1999-2000

Interest and Depreciation for the year 2000-01 was Rs. 2483 Lakhs and Rs. 2090 Lakhs respectively as against Rs.2682 Lakhs and Rs.2798 Lakhs respectively for the year 1999-2000.

There was a profit before tax for the year 2000-01of Rs.734 lakhs as compared to a profit of Rs.728 lakhs for the year 1999-2000.

The company had a profit after tax of Rs.621 Lakhs for the year 2000-01 as compared to a profit after tax of Rs.621 Lakhs for the year 1999-2000.

STOCK MARKET DATA

The equity shares of the company are listed on The Madras Stock Exchange Limited and traded under "Permitted Securities Category" in The Stock Exchange, Mumbai. With respect to the National Stock Exchange of India Limited, the equity shares were traded under "Permitted to trade category" for the period upto 30/09/2002.

1

The high and low closing prices in the last three years and period to date, recorded at The Madras Stock Exchange Limited, The Stock Exchange, Mumbai and The National Stock Exchange of India Limited as well as the monthly high or low closing prices during the last six months recorded at the above stock exchanges are shown below:

 

(A) Yearly Closing High and Low Price and volume of the shares during the last three years

(i) Madras Stock Exchange Limited

Year

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average price *

Rs.

1999-2000

114.50

27/03/2000

100

80.00

03/03/2000

100

2000-01 $

100.00

04/04/2000

100

100.00

04/04/2000

100

100.00

2000-01 @

45.00

13/3/2001

200

28.25

02/11/2000

1

2001-02

64.00

30/05/2001

50

39.00

01/08/2001

300

0

$ upto 3/5/2000 (cum rights)

@ from 4/5/2000 (Ex rights)

Ex-rights date - 4/5/2000

(ii) The National Stock Exchange of India Limited

Year

High

Rs.

Date of

High

Volume on

Date of High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average price *

Rs.

1999-2000

167.50

27/08/99

49900

58.00

26/04/99

4900

112.75

2000-01 $

100.00

03/04/00

2900

62.60

08/05/2000

2700

0

2000-01 @

93.85

19/06/00

13700

29.85

01/11/00

11830

61.85

2001-02

85.50

20/12/01

8200

37.30

16/08/2001

300

61.40

(Source: nseindia.com website)

$ upto 26/5/2000 (Cum Rights)

@ from 27/5/2000 - Ex-Rights

Ex-Rights date - 27/5/2000

In the year 2000-01, the company had come with a rights issue. As per the regulations, trading details are split into two periods viz., one period upto the record date where the shares was traded cum rights and other after the record date when the shares were traded ex-rights.

(iii) The Stock Exchange, Mumbai

Year ending March 31,

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average price *

Rs.

2000

Not applicable - As the securities of the company are permitted for dealings on the Exchange under "Permitted Securities Category" with effect from 22/4/2002 vide letter No.LIST/PSR/SM/2002 dated 18/4/2002.

2001

2002

(Source: bseindia.com website)

* Arithmetic Mean of Yearly high and low prices except for the year 2000-01, where the average price is calculated for cum rights and ex-rights and shown separately.

(B) Monthly Closing High and Low Price and volume of the shares during the current year 2002-03

(i) The Madras Stock Exchange Limited

Months

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average price for the month ++

Rs.

April 02

No trading

May 02

No trading

June 02

81.30

3500

17/06/2002

81.30

17/06/2002

3500

81.30

July 02

80.50

3300

08/07/2002

80.50

08/07/2002

3300

80.50

Aug 02

No trading

Sept 02

80.00

20000

06/09/2002

80.00

06/09/2002

20000

80.00

Oct 02

No trading

Nov 02

(upto 15/11/02)

No trading

(ii) The National Stock Exchange of India Limited

Months

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average Price for the month ++

Rs.

April 02

76.90

23/04/02

4245

70.00

15/04/02

5555

May 02

80.4

17/05/02

5810

70.25

22/05/02

748

75.33

June 02

84.2

14/06/02

5245

72.00

26/06/02

1750

78.10

July 02

80.7

08/0702

8900

67.70

17/07/02

2045

74.20

Aug 02

80.3

30/08/02

13970

69.40

19/08/02

730

74.85

Sept 02 *

80.25

05/09/02

19780

68.10

17/09/02

11486

74.18

(Source: nseindia.com website)

* Subsequent to the decision of The Executive Committee of National Stock Exchange of India Limited in withdrawing the trading of securities under "permitted to trade category" with effect from 30/09/2002, the trading of shares of the company under permitted category in NSE has since been withdrawn with effect from 1/10/2002. The NSE has communicated the same to the company vide its Letter No.NSE/LIST/20261 dated 9/7/2002.

(iii) The Stock Exchange, Mumbai

Months

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

Average price for the month ++

Rs.

April 02

77.25

23/04/02

571

75.00

25/04/02 & 30/04/02

1300

2800

76.13

May 02

81.00

17/05/02

3700

61.50

23/05/02

1501

71.25

June 02

84.00

18/06/02

2250

74.00

28/06/02

300

79.00

July 02

80.15

04/07/02

5250

68.00

17/07/02 &

18/07/02

2045

2700

74.08

Aug 02

80.60

30/08/02

1615

70.25

14/08/02

100

75.43

Sept 02

81.00

03/09/02

2450

69.25

18/09/02

10606

75.13

Oct 02

64.05

01/10/02

305

41.25

24/10/02

25

52.65

Nov-02

54.60

14/11/02

500

49.50

01/11/02

351

52.05

(Source: bseindia.com website)

++ Arithmetic Mean of monthly high and low prices.

(iv) The total volume of securities traded in each month during the last six months is as follows:

Month

No. of shares traded

 

Madras Stock Exchange

The Stock Exchange, Mumbai

National Stock Exchange Limited

May 2002

No trading

33231

89401

June 2002

No trading

27275

93516

July 2002

3300

48569

96926

August 2002

No trading

45424

102973

September 2002

20000

49765

161863

October 2002

No trading

10183

--

November 2002 (upto 15th)

No trading

6064

--

2) Weekend closing prices for the last four weeks at The Stock Exchange, Mumbai

Week ended on

Closing Price (Rs. Per share)

   

25/10/2002

41.50

01/11/2002

49.50

08/11/2002

50.80

15/11/2002

53.90

3) Closing High and Low Prices of the shares during the week end for last four weeks at the Stock Exchange, Mumbai

 

Week ended on

High

Rs.

Date of

High

Volume on

Date of

High

(No. of shares)

Low

Rs.

Date of Low

Volume on date of Low

(No. of Shares)

25/10/2002

43.25

23/10/02

300

41.25

24/10/02

25

01/11/2002

49.50

01/11/02

351

44.25

29/10/02

125

08/11/2002

50.80

08/11/02

56

50.00

04/11/02

4

15/11/2002

54.60

14/11/02

500

51.05

13/11/02

1410

(Source: bseindia.com website)

4

The closing share price on 17/09/2002 at The Stock Exchange, Mumbai under "permitted securities category" being the first day of trading after the Board of Directors passed a resolution approving the Rights Issue was Rs.70.00. The closing share price at National Stock Exchange on 17/09/02 was Rs.68.10

5

The closing share price in the Stock Exchange, Mumbai as on ______ was ____ (ex-rights price)

BASIS FOR ISSUE PRICE

Quantitative Factors:

1. Adjusted Earnings per Share (EPS):

Year

EPS (Rs.)

Weight

1999 - 2000

7.37

1

2000 - 2001

3.86

2

2001 - 2002

0.00

3

Weighted Average

2.51

2. Price/ Earning Ratio (P/E):

The closing market price of the equity share of the company on the

BSE on the day after the Board approved the issue (17.09.2002) was

Rs.70.00 (Source: bseindia.com website).

P/E based on the Weighted Average EPS is 27.89.

Industry P/E:

Highest

17.80*

Lowest

3.00*

Industry Average

(for North Based Cement Units)

13.60

(for South Based Cement Units)

8.70

(Source: Capital Market – November 11 – 24, 2002 Issue)

* on the basis of full year results

3. Return on Net Worth:

Year

RONW(%)

Weight

1999 – 2000

5.31

1

2000 - 2001

3.88

2

2001 - 2002

-11.63

3

Weighted Average

-3.64

4.Minimum Return on increased Net Worth required to maintain

Pre issue EPS:

Pre Issue Weighted Average EPS (Rs.)

2.51

Present Net Worth as on 31/3/2002 (Rs. In lacs)

10233

Increased Net Worth (Rs. In lacs)

13268

Minimum return required

5.58%

 

5. Net Asset Value (NAV):

As on 31.03.2002 (Rs.)

48.54

6. Net Asset Value after issue

Post issue Asset Value (Rs. In lacs)

13268

Post issue no of shares

29505490

Net Asset Value after issue (Rs.)

44.97

Issue Price (Rs.)

36.00

UNAUDITED WORKING RESULTS FOR THE LATEST PERIOD

Information as required to be given vide Ministry of Finance Circular No.82/5/SE/76 dated February 5, 1977 read with circular of even number dated 8th March 1977 is given below:

Working results of the company for the period ended 31/10/02 during the current financial year.

 

Particulars

Rs in Lakhs

Net Sales/Income from operations

14287.00

Other Income

52.00

Total Income

14339.00

Total Expenditure

12640.00

Gross Profit before Interest, Depreciation & Taxation

1699.00

Interest

2755.00

Depreciation

1618.00

Profit / Loss before taxation

(2674.00)

Provision for taxation

 

- Current Tax

--

- Deferred Tax

--

Net Profit/(Loss)

(2674.00)

Paid up equity share capital

2108.00

RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF:

INTERNAL RISK FACTORS

INTERNAL RISK FACTOR 1:

The company has incurred a net loss of Rs.1190 lakhs for the year ended 31.03.2002 and has not declared dividend on equity shares. The company has also incurred losses for the half year ended 30.09.2002 to the extent of Rs.2742 Lacs.

MANAGEMENT PERCEPTION

The performance of the company in last three years is as follows:

(Rs. In Lakhs)

Year ended March 31,

2000

2001

2002

Operating Profit

3410.00

3217.00

2814.00

Profit before tax and extraordinary items

728.00

734.00

-490.00

Profit after tax (including deferred tax) and extraordinary items

598.00

621.00

-1190.00

The Management believes that the performance of the last year is primarily a reflection of the economic slow down coupled with the full impact of the commissioning of the new plant. The management has put in place several financial and operational measures to control cost and improve sales realisation. It has also laid out plans to strengthen its processes and systems in the marketing area. With these measures the management expects to improve the performance of the company in the current year.

INTERNAL RISK FACTOR 2:

The company’s shares are listed on the Madras Stock Exchange. Trading on this exchange is limited and sporadic. The shares are not frequently traded.

MANAGEMENT PERCEPTION

The company’s shares is listed on the Madras Stock Exchange, because regional listing is compulsory as per the requirements of the listing agreement, overall trading in this exchange is limited and sporadic. However, the company’s shares are more actively traded on the The Stock Exchange, Mumbai where it is traded as a permitted security.

INTERNAL RISK FACTOR 3:

The company has, as on 30/09/02, Contingent liabilities with respect to Bank guarantee Rs.93 Lakhs (Rs.206.00 lakhs as on 31/3/02), Letters of Credit Rs.55.00 Lakhs (Rs.8.00 lakhs as on 31/3/02) and the disputed royalty on limestone Rs.547 Lakhs (Rs.547.00 lakhs as on 31/3/02).

MANAGEMENT PERCEPTION

The contingent liabilities are in the normal course of business. The company’s financial position is unlikely to be jeopardized on account of these contingent liabilities.

INTERNAL RISK FACTOR 4:

The funds raised from the Rights issue will be utilized for repayments of long term debts and to augment the long term sources for working capital requirements. The actual deployment of funds will be at the sole discretion of the Board of the company. It is brought to the attention of the investors that the requirement of funds and means of finance are estimated by the company and have not been appraised by any bank or financial institution.

MANAGEMENT PERCEPTION

Bankers advised the company to improve the debt equity ratio. The repayment of debts will improve the debt equity ratio and lead to reduction in interest outflow.

INTERNAL RISK FACTOR 5:

Litigation against the company: Under the Jute Packaging Materials (Compulsory Use of Packing Commodities) Act, 1987 a specified percentage of cement despatched is required to be packed in jute bags. The company could not pack cement in the jute bags at the specified percentage in view of the strong consumer resistance to jute bags as well as poor availability of jute bags. The ministry of textiles in its orders dated June 30, 1997 and December 15, 1998 specified the commodities to be packed in jute bags under the said Act for the period upto June 30, 1999 which do not include cement. Further vide its order dated 1st July 1999 the usage of jute bags for packing cement has been exempted upto June 30, 2000. Penalty if any, which may be levied under the said Act for the earlier period is not ascertainable.

MANAGEMENT PERCEPTION

The provisions of the said Act were challenged in the Supreme Court, which in its judgement dated April 25, 1996 upheld the constitutional validity of the Act. The Supreme Court however decided that the Central Government should give an opportunity to the user industries and ascertain their view before fixing the percentage for use of jute bags. Arising out of this, the cement industry has made representation to the authorities to exempt cement from the provisions of the aforesaid Act and thereafter the two above referred Orders have excluded cement. The Indian Jute Manaufacturers Association (IJMA) has filed a writ petition in the Calcutta High Court and on January 12, 1999 obtained stay against implementation of this order dated December 15, 1998. The High Court vide its order dated February 2, 1999 vacated the stay order and directed that the matter should appear in the list after three weeks for formal hearing. However, the matter has not been listed fo r final hearing. The Cement industry has also represented to the Central Government for exempting the industry from the purview of the order.

 

INTERNAL RISK FACTOR 6:

Litigation against the company: The Office of the Director General of Investigation and Registration, Government of India had filed a MRTP case against the Cement Manufacturers Association (CMA) alleging cartel arrangements amongst the cement manufacturers in raising the prices of cement. There is no fixed liability on the company in this MRTP case.

MANAGEMENT PERCEPTION

The constituents of Cement Manufacturers Association (CMA) had filed a counter statement before the MRTP Commission, New Delhi, claiming that the price of the cement are market driven and not controlled by the manufacturers and have denied any cartel arrangements in fixing the price.

INTERNAL RISK FACTOR 7:

The Director of Geology and Mining raised a demand of Rs.547 Lakhs on the company towards arrears on Royalty payable on limestone quarried from the mines as per the mining lease agreement. The company has filed a Writ Petition in the Madras High Court and obtained an interim stay.

MANAGEMENT PERCEPTION

The Director of Geology had originally raised a demand, against short payment of Royalty during the period 1989 to 1999 of Rs.369 Lakhs. The royalty was stated to have been calculated based on the quantity of cement produced. The consumption of limestone was calculated proportionate to the quantity of cement produced. The company replied to this notice mentioning that the Working Sheet prepared by the Department was not available with the company and that the department had calculated the consumption of limestone on the basis of cement, whereas as consumption of limestone can be related only to production of clinker, of which limestone is the main raw material. Various grades of cement contains different proportions of clinker and hence a standard unit of lime stone per unit of cement produced cannot be fixed. Further the company also stated that they have been paying the Royalty on limestone to be quarried, in advance before the dispatch of limesto ne and that the figures of clinker production and limestone consumption were being reconciled by the District office annually were being issued with "No Dues Certificates" by the District Offices every time so the question of short payment of royalty does not arise.

The company did not receive any reply to this letter. Then the company again received a notice dated 19/3/2002l from the Department of Geology and Mining demanding an amount of Rs.547 Lakhs for the period 1989 to 2001, wherein no reference for our earlier reply made. The notice also threatened penal action against the company. At this point, the company filed a writ petition numbered as 14447 of 2002 with the High Court of Madras obtained an interim stay of all further proceedings in the above matter.

INTERNAL RISK FACTOR 8:

The Tamil Nadu Civil Supplies Corporation Limited had filed a case in the Court of Subordinate Judge of Erode claiming refund of advance together with interest towards belated supply of cement. Their total claim is Rs.74,477.39 (Rs.2,663.14 towards principal and Rs.71,814.25 towards interest).

MANAGEMENT PERCEPTION

The company's admitted liability in this case is a mere Rs.360/-. The company has filed its counter and have denied the fact of belated supply of cement.

INTERNAL RISK FACTOR 9:

Dr. M A M Ramaswamy has a pending litigation against him in his individual capacity filed by State Bank of India as a guarantor to a loan extended by it to South India Artists Association. The Association has failed to repay the loan following which the Bank approached the debt recovery tribunal for a total claim of Rs.53,07,449.70. Dr.M A M Ramaswamy is the eighth defendant in a total of fourteen defendants.

MANAGEMENT PERCEPTION

Since Dr. M A M Ramaswamy, is one of the fourteen defendants in this case and as such has signed only as guarantor, the total liability arising out of the case would be negligible.

INTERNAL RISK FACTOR NO.10

Loss making ventures of the company’s associates:

Sl. No.

Associate Companies

For the year ended

Loss

(Rs. In lacs)

1

Chettinad MBF Hi Silica Limited

31.03.2002

1,46,38,071

2

Chettinad Transworld Micronised Garnet Private Limited

 

31.03.2002

 

51,34,457

3

Chettinad Ship Management Services P Ltd

31.03.2002

5,61,038

MANAGEMENT PERCEPTION

The losses in the group / associate companies are unlikely to have any material impact on the operations of the company.

INTERNAL RISK FACTOR 11:

The company faces competition from a large number of players in the sector.

MANAGEMENT PERCEPTION

The company is constantly taking steps to reduce costs, upgrade existing products, expanding dealers network thereby increasing sales potential and remains ahead of the competition. The strong brand image will enable the company to face competition.

INTERNAL RISK FACTOR 12:

As on 31st March 2002, the company has Rs.280 lakhs worth of contracts remaining to be executed on capital account and not provided for.

MANAGEMENT PERCEPTION

The aforesaid accounting treatment has no impact on the profits for the year.

INTERNAL RISK FACTOR 13:

The company owes an amount of Rs.5 lakhs due to small scale industrial undertakings as on 31st March 2002.

MANAGEMENT PERCEPTION

There are only 3 cases, which are outstanding for more than 30 days and the dues are in the normal course of business.

INTERNAL RISK FACTOR 14

Arrears in the Term Loan

The company is in arrears towards the payment of Term Loan Instalments and Interest with various lending banks as on 30.09.02 as below:

(Rs in Lakhs)

Sl No

Name of the bank

Arrears of

 

Project Loan

Principal

Interest

1

Central Bank of India

--

157.00

2

Indian Bank

600.00

67.00

3

Indian Overseas Bank

--

157.00

4

Canara Bank

--

79.00

5

State Bank of Patiala

--

80.00

6

State Bank of Mysore

--

31.00

7

UTI Bank

--

100.00

8

ICICI Bank Limited

--

337.00

 

Term Loan

   

9

Indian Bank

400.00

66.00

10

Indian Bank

--

24.00

 

Total

1000.00

1098.00

Note: In view of the losses incurred during the year ending 31.03.2002 and half year ending 30.09.2002, the company has made a request to various banks for rephasement of principal, which have lent to the recent expansion programme. The banks viz Central Bank of India and Canara Bank have extended the holiday period for commencing repayment of the Term Loan and the consent from other banks are also awaited. While computing the arrears of Term Loan, repayment obligation to banks to whom application for rephasement is made, is not taken into account. (Out of the above arrear amount, the company has since paid Rs.190 Lakhs towards Principal Amount of Rs.55 Lakhs and Interest Amount of Rs.135 Lakhs, thus reducing the principal arrears to Rs.945 Lakhs and Interest dues to Rs.963 Lakhs)

MANAGEMENT PERCEPTION:

The arrears are caused due to the losses incurred by the company, consequent to lower sales realisation of cement. The price realisation have started improving during the month of November 2002 and the company expects to have increased cash generation in the future, which will take care of the repayment obligations to the banks. Also the Board of Directors of the company, at their discretion will deploy funds out of the proceeds of the rights issue to pay the high cost long term debt. Hence the arrears of principal and interest is a temporary occurrence and the company has taken steps to pay the arrears of principal and interest on an ongoing basis not later than March 2003.

The Company has entered into a Deed of Agreement for Deemed Payment of Deferred Sales Tax, Deemed Re-loaning and Recovery of Loan on 4th March 2002 with the Government of Tamil Nadu represented by the Territorial Assistance Commissioner of Commercial Taxes in regard to eligibility of Interest Free Sales Tax Loan which is payable after 12 years from 31/3/2014. Any amount by way of IFST loan that will be available to the company will also be utilised for servicing the term loan instalments and interest.

INTERNAL RISK FACTOR 15

Details of outstanding litigations against the group companies:

(1) South India Corporation Limited (SICL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

Civil suit filed against SICL vide case No.C.S.666/2001 in the High Court of Madras

DCW Limited, Tuticorin

Cargo shortage in Chemical cargo shipped of 100.874 MT. A sum of Rs.23.97 Lakhs being value of the shortage has been claimed.

Pending

2

Case No.5363/2001. Sole arbitrator appointed by Supreme Court

Glencore Intl., AG, Switzerland

Demurrage for delay in shipment of USD 1.05 Lakhs

Pending

3

M.P. No.7/2000 in Spl. Court, Mumbai

Fairgrowth Financial Services Limited

Claim of interest charges for delay in hire charges instalment payment of Rs.25.25 Lakhs

Pending

4

ID 77, 78, 79, 80, 81, 170, 172, 173, 187, 188 of 2000; ID 22, 69, 70, 76 and 83 of 2001; ID 86, 96 and 97 of 2002, all in Labour Court of Tuticorin

Drivers (Ex- employees_

Case filed in Labour Court demanding payment of retrenchment compensation and gratuity. Amount not quantified

Pending

(2) South India Structural Corporation Limited (SISCL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

378 of 1996 with II Addl. Labour Court, Chennai

M Lakshmanan

(Ex-employee)

Terminated from services for wrongful behaviour. Party filed suit for claim of retrenchment compensation. Amount not quantified.

Pending.

MANAGEMENT PERCEPTION

The items listed above are in the normal course of business of the respective companies and are unlikely to have an adverse impact on the company’s operations.

EXTERNAL RISK FACTOR

EXTERNAL RISK FACTOR 1

The profitability of cement business of the company is dependent upon the demand supply scenario prevailing in the market.

MANAGEMENT PERCEPTION

The company is relatively better placed to face competition even in the current temporary situation of oversupply since its products already command premium in most of the markets catered to.

EXTERNAL RISK FACTOR 2

Changes in Government fiscal, economic and monetary policies can affect costs including fuel, power, freight etc.,

MANAGEMENT PERCEPTION

It is expected that over a period of time the company shall be able to recover these costs increases in realisations and also improvements in productivity.

INTEREST OF PROMOTERS/DIRECTORS

Sri M A M R Muthiah has been appointed as the Managing Director for a period of five years with effect from September 28, 1999 and this has been approved by the shareholders at their meeting held on September 28, 1999. He will be paid a remuneration by way of commission which shall not exceed 5% of the net profits of the company each year and where in any financial year during the five year period of his appointment such 5% of the net profits is lower than the remuneration, as per the effective capital of the company, stipulated in Section II of Part II of Schedule XIII to the Companies Act, 1956, such remuneration as is specified in Section II of Part II of Schedule XIII be paid to him by way of salary, allowances and perquisites for the year.

All the other Directors are part time Directors of the company and apart from the sitting fees, they receive for attending the meeting of Board of Directors or for the committee meetings and reimbursement of incidental expenses incurred for attending these meetings they have no other interest in the company.

PROMISE VS PERFORMANCE IN THE LAST ISSUE

In June 2000, the company had made a rights issue of 1,26,47,550 equity shares of Rs.10/- each for cash at a premium of Rs.22/- per share aggregating Rs.4047.21 Lakhs on a rights basis in the ratio of three equity shares for every two equity to the existing shareholders of the company. The actual performance achieved by the company against the estimated projections is shown in the table below:

Estimated Projections vis-à-vis performance for 2000-01

 

Estimated

Actuals

 

(Rs in Lakhs)

     

Sales & Other Income

24726

21501

Gross Profit

5692

6353

Depreciation

2217

2090

Interest

2220

2483

Loss on Sale of Assets

1270

1046

Profit/(Loss)

(15)

734

Tax

Nil

113

Profit/(Loss) after Tax

(15)

621

The actual performance of the company against the objects of the issue for the last rights issue is shown below:

  • Cost of Project and Means of Financing of Karikkali Project :

a) Cost of the Project

Description

Projected

Actuals

     

Land and Site Development

658

602

Civil Cost of Building & other Civil Structures

4630

4656

Plant & Machinery

21917

21253

Technical Knowhow fees

300

247

Expenses on training

125

--

Misc. Fixed Assets

3834

2969

Preliminary & Capital Issue Expenses

61

43

Pre-operative Expenses

3649

2304

Contingency

579

--

Margin Money for Working Capital

518

407

Total

36271

32481

b) Means of Finance

Description

Projected

Actuals

Equity

   
     

Internal Accruals

4677

5035

Issue of rights shares

4047

4046

     

Sub-Total : Equity

8724

9081

     

Unsecured Long Term Interest Free Loans from Promoters

1303

--

     

Debt

   
     

Rupee Term Loan

Capitalised Interest

20386}

3011}

21000

     

STL for payment of duties & machinery

2847

2400

     

Sub-Total : Total Debt

26244

23400

Grand Total

36271

32481

  • Present Status of consent from TNPCB for commissioning and operation of the second Plant.

The Company has obtained necessary consent from TNPCB in respect of its Second Plant at Karikkali Village vide Consent No.19236 dated 24/7/2001 valid upto 31/3/2002. The company has applied to TNPCB for renewal along with requisite fee vide letter dated 16/2/2002. Renewal is awaited.

Commencement of Commercial Production.

Projected Date : 1/12/2001

Actual Date : 18/10/2001

 

OUTSTANDING LITIGATIONS, DEFAULTS, LIABILITIES AND MATERIAL DEVELOPMENTS

*

The Director of Geology and Mining raised a demand of Rs.547 Lakhs on the company towards arrears on Royalty payable on limestone quarried from the mines as per the mining lease agreement. The company has filed a Writ Petition in the Madras High Court and obtained an interim stay.

*

Under the Jute Packaging Materials (Compulsory Use of Packing Commodities) Act, 1987 a specified percentage of cement despatched is required to be packed in jute bags. The company could not pack cement in the jute bags at the specified percentage in view of the strong consumer resistance to jute bags as well as poor availability of jute bags. The ministry of textiles in its orders dated June 30, 1997 and December 15, 1998 specified the commodities to be packed in jute bags under the said Act for the period upto June 30, 1999 which do not include cement. Further vide its order dated 1st July 1999 the usage of jute bags for packing cement has been exempted upto June 30, 2000. Penalty if any, which may be levied under the said Act for the earlier period is not ascertainable.

*

The Office of the Director General of Investigation and Registration, Government of India had filed a MRTP case against the Cement Manufacturers Association (CMA) alleging cartel arrangements amongst the cement manufacturers in raising the prices of cement. There is no fixed liability on the company in this MRTP case. The constituents of Cement Manufacturers Association (CMA) had filed a counter statement before MRTP Commission, New Delhi, claiming that the price of the cement are market driven and not controlled by the manufacturers and have denied any cartel arrangements in fixing the price.

*

Dr. M A M Ramaswamy has a pending litigation against him in his individual capacity filed by State Bank of India as a guarantor to a loan extended by it to South India Artists Association. The Association has failed to repay the loan following which the Bank approached the debt recovery tribunal for a total claim of Rs.53,07,449.70. Dr. M A M Ramaswamy is the eighth defendant in a total of fourteen defendants.

*

The Tamil Nadu Civil Supplies Corporation Limited had filed a case in the Court of Subordinate Judge of Erode claiming refund of advance together with interest towards belated supply of cement. Their total claim is Rs.74,477.39 (Rs.2,663.14 towards principal and Rs.71,814.25 towards interest).

*

Arrears in the Term Loan

The company is in arrears towards the payment of Term Loan Instalments and Interest with various lending banks as on 30.09.02 as below:

(Rs in Lakhs)

Sl No

Name of the bank

Arrears of

 

Project Loan

Principal

Interest

1

Central Bank of India

--

157.00

2

Indian Bank

600.00

67.00

3

Indian Overseas Bank

--

157.00

4

Canara Bank

--

79.00

5

State Bank of Patiala

--

80.00

6

State Bank of Mysore

--

31.00

7

UTI Bank

--

100.00

8

ICICI Bank Limited

--

337.00

 

Term Loan

   

9

Indian Bank

400.00

66.00

10

Indian Bank

--

24.00

 

Total

1000.00

1098.00

Note: In view of the losses incurred during the year ending 31.03.2002 and half year ending 30.09.2002, the company has made a request to various banks for rephasement of principal, which have lent to the recent expansion programme. The banks viz Central Bank of India and Canara Bank have extended the holiday period for commencing repayment of the Term Loan and the consent from other banks are also awaited. While computing the arrears of Term Loan, repayment obligation to banks to whom application for rephasement is made, is not taken into account. (Out of the above arrear amount, the company has since paid Rs. Lakhs towards Principal Amount of Rs.55 Lakhs and Interest Amount of Rs.135 Lakhs, thus reducing the principal arrears to Rs.945 Lakhs and Interest dues to Rs.963 Lakhs)

*

Details of outstanding litigations against the group companies:

(1) South India Corporation Limited (SICL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

Civil suit filed against SICL vide case No.C.S.666/2001 in the High Court of Madras

DCW Limited, Tuticorin

Cargo shortage in Chemical cargo shipped of 100.874 MT. A sum of Rs.23.97 Lakhs being value of the shortage has been claimed.

Pending

2

Case No.5363/2001. Sole arbitrator appointed by Supreme Court

Glencore Intl., AG, Switzerland

Demurrage for delay in shipment of USD 1.05 Lakhs

Pending

3

M.P. No.7/2000 in Spl. Court, Mumbai

Fairgrowth Financial Services Limited

Claim of interest charges for delay in hire charges instalment payment of Rs.25.25 Lakhs

Pending

4

ID 77, 78, 79, 80, 81, 170, 172, 173, 187, 188 of 2000; ID 22, 69, 70, 76 and 83 of 2001; ID 86, 96 and 97 of 2002, all in Labour Court of Tuticorin

Drivers (Ex- employees)

Case filed in Labour Court demanding payment of retrenchment compensation and gratuity. Amount not quantified

Pending

 

  • South India Structural Corporation Limited (SISCL)

Sl No.

Suit/Petition

Filed by

Particulars

Status

1

378 of 1996 with II Addl. Labour Court, Chennai

M Lakshmanan

(Ex-employee)

Terminated from services for wrongful behaviour. Party filed suit for claim of retrenchment compensation. Amount not quantified.

Pending.

OTHER THAN THE ABOVE,

1.

There are no pending litigation, disputes, overdue, defaults to financial institutions/banks and instances of non-payment of statutory dues by the Issuer company, promoters and the other companies promoted by the Promoters.

2.

There are no litigation against the promoter or directors involving violation of statutory regulations or a criminal offence.

3.

There are no pending proceedings initiated for economic offences against the directors, the promoters, companies promoted by the promoters (irrespective of the fact whether they fall under the purview of Section 370(1B) of the Companies Act, 1956).

4.

There are no outstanding litigation, disputes, pertaining to matters likely to affect the operations and finances of the company including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII against issuer company, promoter and other companies promoted by the promoters

PARTCULARS REGARDING LISTED COMPANIES UNDER THE SAME MANAGEMENT WHICH HAVE MADE ANY CAPITAL ISSUE DURING THE LAST THREE YEARS

There are no listed companies under the same management

MECHANISM EVOLVED BY THE COMPANY FOR THE REDRESSAL OF INVESTOR GRIEVANCES

The company has a team of qualified and experienced staff in its Shares Department at the Registered Office of the company for attending to the correspondence / queries of its investors. The company has appointed M/s.Integrated Enterprises (I) Limited, a category I Registrar, registered with SEBI as its Registrar to the Rights Issue. The company ensures that all the correspondence / queries of its investors are replied to satisfactorily and promptly.

The company does not have any investor complaints pending as on the date of filing of this offer document except in the cases where the matter is pending before the Court of Law. In addition, the company has a share transfer committee comprising of 3 Directors viz., Sri M A M R Muthiah, Sri SP.ST. Palaniappan and Sri R Krishnamurthy which meets periodically to address any pending grievances.

DETAILS OF ADVERSE EVENTS AFFECTING THE COMPANY SINCE THE LAST FINANCIAL STATEMENTS

In the opinion of the Board of Directors of the company, there have not arisen, since the date of the last financial statement disclosed in the Letter of Offer any circumstances that materially and adversely affect or are likely to affect the trading or profitability of the company or the value of its assets or its ability to pay its liabilities within the next twelve months.

EXPERT OPINION

Save as otherwise stated in this Letter of Offer, the company has not obtained any expert opinion.

OPTION TO SUBSCRIBE

The equity shareholders are given the option to subscribe to the shares of the company either in the physical form or dematerialised form.

MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company), which are or may be deemed material have been entered or are to be entered into by the Company. These contracts and also the documents for inspection referred to hereunder, have been delivered to The Stock Exchange, Madras and may be inspected from _____ to _____ on all working days, from the date of this Letter of Offer until the date of closure of the subscription list.

Material Contracts

1.

Letter dated 30/09/2002 of Indbank Merchant Banking Services Limited offering their services to act as Lead Merchant Bankers to the Issue.

2.

Mandate Letter No.SEC/RIGHTS.2002/2002/12978 dated 1/10/2002 received from the company appointing Indbank Merchant Banking Services Limited as Lead Merchant Bankers to the Issue.

3.

Memorandum of Understanding dated 10/10/2002 entered into between the company and Indbank Merchant Banking Services Limited.

4.

Interse Allocation of Responsibilities dated 10/10/2002

5.

Letter dated 27/09/2002 of Integrated Enterprises (India) Limited offering their services to act as Registrars to the Issue.

6.

Mandate Letter No.SEC/RIGHTS/2002/2002/12979 dated October 1, 2002 received from the company appointing Integrated Enterprises (India) Limited as Registrars to the Issue.

7.

Memorandum of Understanding dated 11/10/2002 entered into between the company and Integrated Enterprises (I) Limited.

8.

Tripartite Agreement dated 27/03/2000 entered into between the company, registrars and NSDL for dematerialisation of shares.

9.

Tripartite Agreement dated 27/03/2000 entered into between the company, registrars and CDSL for dematerialisation of shares.

Material Documents

1.

Memorandum and Articles of Association of the Company.

2.

Certificate of Incorporation of the company dated 11/12/62.

3.

Certificate of commencement of business dated 7/2/63.

4.

Copy of the resolution passed by the Board of Directors at its meeting held on 16/09/2002 and copy of resolution passed by the shareholders at the Extra-ordinary General Meeting held on 29/10/2002 authorising the Board/Rights Committee to make an issue of Rights Shares.

5.

Copy of resolution dated 30/09/2002 authorising the Rights Committee to appoint Lead Merchant Bankers, Registrars to the Issue and other intermediaries related to the Rights Issue.

6.

Approval No.CIL/345/(87)/LA.II/Amend/89 dated 28/12/99 from Department of Industrial Development, Secretariat for Industrial Approvals for Puliyur Unit.

7.

Acknowledgement Leter No.2018/SIA/IMO/99 dated 15/10/99 from Secretariat for Industrial Approvals, Entrepreneurial Assistance, Ministry of Industry for Karikalli Unit.

8.

Industrial Licence Letter No.LI/77(2001) dated June 6, 2001 from Department of Industrial Policy & Promotion, Secretariat for Industrial Assistance, Ministry of Commerce & Industry for RMC Unit at Madukarai.

9.

Letters of intent from the promoters/promoters group for subscription to their rights entitlement and for unsubscribed portion in the rights issue.

10.

Copy of Board resolution authorising the Directors to make the necessary corrections to the letter of offer and to sign the same.

11.

Letter dated 8/11/02 from M/s.P B Vijayaraghavan & Co., M/s.Seshadri & Jayaraman, M/s.Krishnan & Co., regarding the Tax benefits available to the company and its members

12.

Letter dated 8/11/02 from M/s.P B Vijayaraghavan & Co., M/s.Seshadri & Jayaraman, M/s.Krishnan & Co., regarding the financial performance for the last 5 years from 1998 to 2002 adjusted as per the SEBI guidelines.

13.

Annual Reports of the company for the period from 1998 to 2002 and audited figures for the current year for the period upto 30/09/2002.

14.

Copy of the resolution dated 14/11/2002 authorising the Registrars to the Issue to sign the stockinvest.

   

15.

Consents of the Directors, Company Secretary & Compliance Officer, Auditors, Lead Manager to the Issue, Bankers to the Issue, Bankers to the Company, Legal Advisors and Registrars to the Issue to include their names in the Letter of Offer to act in their respective capacities.

16.

Observation letter No._________ dated _________ SEBI.

17.

Letter dated ________ of Madras Stock Exchange Limited giving inprincipal approval for listing of the proposed equity shares.

18.

Due Diligence Certificate dated 21/11/02 from Indbank Merchant Banking Services Limited.

DECLARATION

No statements made in this Letter of Offer shall contravene any of the provisions of the Companies Act, 1956 and the Rules made thereunder. All the legal requirements connected with the said issue as also the guidelines, instructions etc., issued by SEBI, Government and any other competent authority in this behalf have been complied with.

 

Yours faithfully,

By order of the Board of Directors

for CHETTINAD CEMENT CORPORATION LIMITED

 

SD/-

M A M R MUTHIAH

Managing Director

 

Place : Chennai

Date : __________

Encl: Composite Application Form