IDCOL CEMENT LIMITED
PRELIMINARY
INFORMATION MEMORANDUM
November
2002
Deloitte
Touche Tohmatsu India Private Limited
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1. This
document is being provided in connection with the proposed disinvestment of 86.79% equity
by the Government of Orissa (hereinafter referred to as “GoO”), held through
Industrial Development Corporation Orissa Limited (hereinafter referred to as “ IDCOL”) in IDCOL Cement Limited (hereinafter referred to
as “ICL”).
2. Deloitte Touche
Tohmatsu India Private Limited (herein after referred to as “Deloitte”) has been
appointed as the Advisors for the disinvestment by GoO.
3. The sole purpose
of this document is to assist the recipient in deciding whether they wish to proceed with
further investigation of the proposed transaction, but
is not intended to form the basis of any investment decision or any decision to purchase
the equity offered for sale by GoO. This
document does not constitute nor should it be interpreted as an offer or invitation for
the sale or purchase of securities described herein.
4. This document is
meant to provide information only and upon the express understanding that recipients will
use it only for the purposes set out above. It
does not purport to be all-inclusive or contain all the information about ICL or be the
basis of any contract. No representation or
warranty, expressed or implied, is or will be made as to the reliability, accuracy or the
completeness of any of the information contained herein. It should not be assumed that
there shall be no deviation or change in any of the herein mentioned information on ICL. While this document has been prepared in good
faith, neither IDCOL nor ICL nor GoO nor Deloitte nor any of their respective officers or
employees make any representation or warranty or shall have any responsibility or
liability whatsoever in respect of any statements made or omissions herefrom. Any liability is accordingly expressly disclaimed
by ICL, IDCOL, GoO, Deloitte and any of their respective officers or employees even if any
loss or damage is caused by any act or omission on the part of ICL, IDCOL, GoO, Deloitte
or any of their respective officers or employees, whether negligent or otherwise.
5. By
acceptance of this document, the recipient agrees that any information herein will be
superseded by any later written information on the same subject made available to the
recipient by or on behalf of ICL, IDCOL and GoO. GoO, Deloitte, ICL, IDCOL and any of
their respective officers or employees undertake no obligation, among others, to provide
the recipient with access to any additional information or to update this document or to
correct any inaccuracies herein which may become apparent, and they reserve the right, at
any time and without advance notice, to change the procedure for the sale of all or any
part of the Interest or terminate negotiations or the due diligence process prior to the
signing of any binding purchase agreement.
6. Accordingly,
interested recipients should carry out an independent assessment and analysis of ICL and
of the information and observations contained herein.
7. This
document has not been filed, registered or approved in any jurisdiction. Recipients of this document resident in
jurisdictions outside India should inform themselves of and observe any applicable legal
requirements.
CONTENTS
Section |
Title |
Page
no. |
Part
A |
Submission
of Expression of Interest (EoI)
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3 |
Part
B |
IDCOL
Cement Limited |
9 |
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Annexure 1
– A copy of the Advertisement
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17 |
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Annexure
2 – Expression of
Interest |
18 |
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Annexure
3 – Statement of Legal Capacity |
20 |
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Annexure 4 –
Request for Qualification |
21 |
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Annexure 5 –
Guidelines for Qualification of Bidders |
22 |
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A.
SUBMISSION
OF EXPRESSION OF INTEREST (EOI)
1.
INTRODUCTION
1.1 The Government of
Orissa (“GoO”) intends to disinvest its entire equity shareholding (86.79%) in
IDCOL Cement Limited (“ICL” or the “Company”) along with transfer of
management through a strategic sale held through Department of Public Enterprises (DPE),
Government of Orissa and Industrial Development Corporation of Orissa Limited (IDCOL).
1.2 Deloitte Touche
Tohmatsu India Private Limited (“Deloitte”) has been appointed as the Advisors
for the disinvestment by the GoO.
2. ADVERTISEMENT
INVITING EOI
3. EXPRESSION
OF INTEREST
The process of
participating in the disinvestment process and the requirements relating to information to
be provided by interested parties when submitting their EoI is set out in the ensuing
sections.
4. ELIGIBILITY/
PRE-QUALIFICATION CRITERIA
4.1 The interested
party(ies)/consortium should have a combined net worth in excess of Rs. 800 million as
well as sales turnover in excess of Rs. 1000 million as per the annual accounts of
financial year 2001-02. The definition of networth and sales for the purpose of the
qualifying criteria are set out below:
Definitions
Ø Net Worth
Net Worth =
Equity Share Capital + Reserves & Surplus (excluding Revaluation Reserves)
As per Part I
of Schedule VI of the Companies Act, 1956
Ø Sales
Sales = Sales including subsidies (if any) and net of
any taxes and duties levied, such as excise duty, sales tax, etc., if any.
Where sales in
the Balance Sheet is inclusive of any taxes and duties, a statement showing sales net of
such levies need be provided.
4.2 In case of a
consortium bid, the financial parameters of the lead bidder must be at least 51.00% of the
amount indicated in para 4.1 above.
4.3
Where the financial statements are expressed
in currency other than the Indian Rupee, the eligible amount as described above shall be
computed by taking the equivalent US Dollars at the exchange rates (as stipulated by State
Bank of India’s) prevailing on the date(s) of such financial statements.
4.4 This Preliminary
Information Memorandum (“PIM”) along with its enclosures does not constitute any
commitment on the part of the GoO or ICL or IDCOL or Deloitte, whether in respect of the
disinvestment process or otherwise. Furthermore,
this invitation confers neither any right nor expectation to any party to participate in
the said process.
4.5
GoO and IDCOL
reserve the right to withdraw from the process or any part thereof, to accept or reject
any or all offers at any stage of the process and/or modify the process or any part
thereof or to vary any terms at any time without assigning any reason whatsoever. No financial obligation whatsoever shall accrue to
the GoO or ICL or IDCOL or Deloitte in such an event.
5.
INITIAL PROCESS
5.1
Following
receipt of this PIM, interested parties will be required to submit an EoI Package
comprising an Expression of Interest, a Statement of Legal Capacity and a Request for
Qualification in formats specified in Annexures II, III, and IV.
5.2
Based on an
evaluation of the EoI Package received, interested parties which are deemed to be
qualified by the GoO (“Qualified Interested Parties” or “QIPs”) will
be allowed to participate in the subsequent selection process (without conferring any
right or expectation whatsoever to the QIPs).
5.3
Following
signing of a Confidentiality Undertaking (“CU”) by duly authorised personnel,
QIPs will be provided with the Bid Packet comprising the Confidential Information
Memorandum (“CIM”) and the Request for Proposal (“RFP”) and will be
invited to participate further in the process as detailed in the RFP.
6.
FILING REQUIREMENTS
6.1
Interested
parties must submit, in duplicate, their EoI
accompanied by a Statement of Legal Capacity and Request for Qualification (“RFQ”)
the “EoI Package”, as per the formats given in Annexures II, III & IV of
this PIM.
6.2
EoIs must be
signed by a duly authorised representative of the interested party. In the case of a consortium or joint venture the
EoI must be signed by a duly authorised representative for the group. In addition, Statements of Legal Capacity and RFQs
have to be submitted by interested parties and each member of any consortium or joint
venture. This comprises the EoI Package.
6.3
All EoI
Packages must be in English and each copy shall be bound in a separate volume. Submission of the aforesaid documents by
fax, e-mail or other electronic means will not be acceptable. It is the
responsibility of the interested party(ies) alone to ensure that its EoI with required
documents is delivered at the address given below by the stated time and date. The covering envelope containing the aforesaid
document should be clearly marked “Expression of Interest – IDCOL CEMENT
LIMITED”. Neither
the GoO nor ICL nor Deloitte shall be responsible for non-receipt of correspondence.
6.4
The EoI Package must be submitted by no later than 17.00 hours (Indian Standard
Time) on 16th December 2002 at the following
address
The
Director
Deloitte
Touche Tohmatsu India Private Limited
14th
Floor, Dr. Gopal Das Bhawan
28,
Barakhamba Road
New Delhi 110 001.
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7.
EOI FILED BY CONSORTIA/JOINT
VENTURES
7.1
If a Consortium or Joint Venture is formed, or proposed to be
formed, specifically for the purpose of this investment, details of the members of the
Consortium or Joint Venture and the extent of their interest herein must be provided in
the EoI Package.
7.2
In case of a Consortium or a Joint Venture, there will be a
lead bidder, which will acquire not less than 51.00% of the total equity disinvested.
7.3 Any change by
way of withdrawal/substitution/inclusion of any member of the consortium/joint venture or
any change affecting the composition of the consortium may be permitted prior to the stage
of submission of financial bid, but only with the specific approval of GoO. GoO or ICL or
IDCOL or Deloitte have the sole discretion to determine the impact of the change in
membership on the quality of the consortium and reject a proposal for such reason.
The RFQ should
be duly filled in and accompanied by the following details:
Ä The
Audited Balance Sheet and Profit & Loss Account of the sole bidder (Indian
company/Foreign company) for the last 3 financial years.
Ä Write-up
on:
·
Profile
of the sole bidder
·
A
statement of reasons for strategic interest in ICL
·
Any
other information considered material
Ø In
case of a consortium bid
Ä The
Audited Balance Sheet and Profit & Loss Account for the last 3 financial years of the
lead bidder and other member companies associated in the bid.
Ä Write-up
on:
·
Lead
bidder
o Profile
of the lead bidder
o A
statement of reasons for strategic interest in ICL
o Any
other information considered material by the lead bidder
·
Other
member companies
o Profile
of member companies in the consortium
o Any
other information considered material
8.
DISQUALIFICATION
8.1
GoO shall not
consider for the purpose of qualification, an EoI which is found to be incomplete in
content and/or attachments and/or authentication, etc.
8.2
Without
prejudice to any other rights or remedies available to GoO, a company/consortium/joint
venture may be disqualified and its EoI dropped from further consideration for any reason
whatsoever including those listed below:
Ø Material misrepresentation by such company/any member of such
consortium/joint venture whether, in the EoI along with the RFQ or otherwise.
Ø Failure by such company/consortium/joint venture to provide the
information required to be provided in the EoI, along with the RFQ, pursuant to relevant
sections of the PIM.
Ø Submission of an EoI along with RFQ in respect of any
company/consortium/joint venture, where such company or any member of such consortium/
joint venture which has already submitted an EoI.
8.3
If
information becomes known which would have entitled GoO to reject or disqualify the
relevant company/ consortium/ joint venture, even after the interested party has been
qualified to receive the Bid Packet, GoO reserves the right to reject the interested party
at the time, or at any time after, such information becomes known to GoO.
8.4 Where the interested party is a consortium/ joint venture, GoO
may disqualify the entire consortium/ joint venture for any of the reasons set out above,
even if it applied to only one member of the consortium/ joint venture.
8.5 Further,
Government of India has issued guidelines for disqualification of bidders seeking to
acquire any public sector enterprises through the process of disinvestment vide Department
of Disinvestment OM No.6/4/2001-DD-II dated 13 July, 2001, a copy of which is enclosed as Annexure-V. The interested party(ies) are required to read
the guidelines and satisfy themselves that they are qualified to bid for the stake in ICL
through the process of disinvestment and give an undertaking to the effect that they are
qualified to bid for the stake in ICL in the Expression of Interest to be submitted by
them. Interested parties would be required to
provide the information on the criteria laid down in the guidelines of 13 July 2001 along
with their Expression of Interest. The
Interested parties shall be required to provide with their EoI an undertaking to the
effect that no investigation by a regulatory authority is pending against them. In case any investigation is pending against the
concern or its sister concern or against its CEO or any of its
Directors/Managers/employees, full details of such investigation including the name of the
investigating agency, the charge/offence for which the investigation has been launched,
name and designation of persons against whom the investigation has been launched and other
relevant information should be disclosed, to the satisfaction of GoO. For other criteria also, a similar undertaking
shall be provided along with EoI.
8.6 The
company/consortium/joint venture not satisfying the eligibility and requisite
qualification criteria specified in the above sections is not eligible.
9. FUTURE PROCESS
9.1
Based on the
EoI submitted by the interested parties, GoO, advised by Deloitte will carry out an
evaluation of the qualification of such interested parties. If at any time during the
evaluation process, GoO or Deloitte requires any clarification in order to carry out the
evaluation, it reserves the right to request such information from any or all of the
companies/ consortium/ joint ventures and the companies/ consortium/ joint venture will be
obliged to respond to any reasonable request for such information and to supply the same
to Deloitte within such reasonable timeframe as GoO or Deloitte may require.
9.2 Based on an
evaluation of EoIs received, interested parties, which are deemed fit (“Qualified
Interested Parties” “QIP”) will be invited to participate in the subsequent
selection process (without conferring any right or expectation whatsoever to QIPs). QIPs will be provided with the Request For
Proposal (RFP) and the Confidential Information Memorandum (CIM) and shall be invited to
participate further in the process described in detail in the RFP. QIPs will get an opportunity to conduct a due
diligence and take up plant visits and will also have access to data rooms and hold
discussions with the management of ICL/IDCOL / officials of GoO. The rules regarding access to information in the
data rooms will be provided to QIPs later. QIPs
will be invited to submit their proposal and a binding price bid.
9.3 This document
constitutes no form of commitment on the part of GoO or ICL other than to provide further
information on ICL. Furthermore, this
document confers neither the right nor an expectation on any party to participate in the
proposed disinvestment process. GoO and ICL
reserve the right to withdraw from the process or any part thereof or vary any terms at
any time without assigning any reasons. GoO
reserves the right to accept or reject any/all offer(s) without assigning any reasons.
10. ENQUIRIES
10.1 GoO and Deloitte reserve the
right, in their sole discretion, not to respond to any questions raised or provide
clarification sought, if it is considered that it would be inappropriate to do so. Nothing
in this section shall be taken or read as compelling or requiring GoO and Deloitte to
respond to any question or to provide any clarification. No extension of any time and date
referred to in this PIM shall be granted on the basis or grounds that GoO and Deloitte has
not responded to any question/ provided any clarification.
11. GOVERNING LAWS/
JURISDICTION/ ARBITRATION
11.1 All matters relating to the
divestment process and biding procedure shall be governed by the legal proceedings under
Indian Arbitration & Conciliation Act 1956 and the laws of Union of India and shall be
cogniable and trable only in the appropriate Courts at Bhubaneswar exercising territorial
jurisdiction over the subject matter and no other Courts shall have jurisdiction to
entertain the matter. In case of Arbitration, the Arbitration shall be nominated by the
parties to the agreement after mutual discussion.
B. IDCOL CEMENT LIMITED
Name |
: |
IDCOL CEMENT
LIMITED
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Registered Office |
: |
Cement Nagar,
Bardol – 768 038
(District
Baragarh) Orissa, India
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Year of incorporation |
: |
1993
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1. HISTORY
1.1
Formation
IDCOL Cement Limited (ICL) was incorporated in 1993
as a subsidiary of Industrial Development Corporation Orissa Limited (IDCOL), to take over
the erstwhile Hira Cement Works, established in 1968, then a division of IDCOL. ICL is a
government company as per the definition of Companies Act 1956 having its registered
office at Cement Nagar, Bardol, in the district of Baragarh, Orissa.
1.2
Shareholding Pattern
The shareholding
pattern of ICL as at 31 March 2002 is set out below:
Particulars |
Amount
(Rs. in
million) |
Percentage |
90,000,000 equity shares
of Rs.10 each fully paid by IDCOL, the holding company |
900.0 |
|
Advance against share
capital. 115,131,841 equity shares of Rs.10 each by IDCOL |
1,151.3 |
|
Shareholding
of IDCOL |
2,051.3 |
85.42 |
35000000 equity shares of
Rs.10 each fully paid, held by Unit Trust of India (UTI) |
350.0 |
|
Shareholding
of UTI |
350.0 |
14.58 |
Total |
2401.3 |
100.00 |
However, the above
share holding in ICL has undergone a change with IDCOL and GoO converting most of its loan
into equity. The latest share holding in ICL as on 31st October 2002 is
mentioned below;
Particulars |
Amount
(Rs. in
million) |
Percentage |
23,00,00,070 equity
shares of Rs.10 each fully paid by IDCOL, the holding company |
2300.0 |
|
Shareholding
of IDCOL |
2300.0 |
86.79 |
35000000 equity shares of
Rs.10 each fully paid, held by UTI |
350.0 |
|
Shareholding
of UTI |
350.0 |
13.21 |
Total |
2650.0 |
100.00 |
2.
PRODUCT PROFILE
The details of the products manufactured by ICL are
set out
Product |
Grade |
Ordinary Portland Cement |
33 |
Ordinary Portland Cement |
43 |
Portland Slag Cement |
- |
In addition, ICL
has obtained licence to produce Portland Pozzolana Cement (PPC).
3.
SALES AND MARKETING
The sales break-up of ICL
for the year ended 31 March, 2002 is set out below:
Product |
Sales |
(in MT) |
(in Rs
Millions) |
Ordinary Portland Cement |
2,18,687.65 |
500.12 |
Portland Slag Cement |
4,79,295.55 |
1090.79 |
Total |
6,97,983.20 |
1590.91 |
The products are sold under the brand name of ‘IDCOL
Cement’ and have a market share of 0.68% nationally. The cement is predominantly sold
in Orissa and other East Indian states, where its market share varies from 20% to 22%.
In terms of share of cement market, ICL enjoys
a healthy market share of over 25% in Orissa while in West Bengal, it has a 5% share of
the market. Further, ICL in its drive to expand markets has entered into neighboring
states of Andhra Pradesh, Chatisgarh, Bihar and North-Eastern states, where the current
focus is on developing a reliable dealer network.
The customers of ICL can be bifurcated into two
broad types - trade and non-trade. The trade customers are serviced through a
well-organized dealers network while the non-trade customers are supplied directly
following success in open tender offer.
The
sales and marketing of ICL is organised into two main divisions as set out below:
Ø Field Sales Organisation, which operates through a
number of zones, and
Ø Office Organisation, which is entirely based at
Baragarh.
Currenly, the Field Sales Organisation is divided
into six zones i.e. 4 in Orissa, 1 in West Bengal and 1 in Ranchi headed by Zonal
Managers, which is then divided into 12 Branch Offices headed by Branch Managers.
ICL has a total of 27 Depots, 16 in Orissa, 5 in West
Bengal and 6 in Jharkhand, from where Dealers lift their requirements and 500 dealers.
Cement from ICL is transported to these Depots through transport contractors.
4.
MANUFACTURING
FACILITIES
4.1 Manufacturing
Facilities
The installed capacity of ICL is 0.96 million metric
tones per annum based on dry technology.
The ICL cement plant
in Bargarh is a modern facility, firmly based on high-quality raw materials and the latest
technology available to the manufacturers in 1990s.
The
limestone presently available from the quarry has a chemical composition that enables it
to satisfy the raw mix requirements with only small addition of other ingredients
(sweetener, iron ore). Low alkali content
contributes to the product quality, as well as largely preventing potential problems with
the preheater operation.
The raw
mill - kiln system, manufactured or designed by F.L. Smidth-Fuller Engineering Group
(Denmark-USA), is among those recognised as the best in the world. The system presently exceeds the design capacity
and operates with a satisfactory degree of fuel economy.
The closed-circuit finish grinding system with roller presses (HPGR) helps
to save electric power demand for grinding cement, which is usually the most
energy-intensive part of the cement manufacturing process.
The
major innovation, implemented in the plant process design, is separate grinding of clinker
and slag with subsequent blending. This
permits improvement in performance of Portland slag cement through better control of
particle size distribution. The success of
this approach can be seen, when cements produced by this process are compared with those
made in the old ball mills.