premier explosives limited issuer company on ... explosives limited (the “issuer” or...
TRANSCRIPT
Placement Document
Not for circulation
Private and confidential
Serial No. ___
PREMIER EXPLOSIVES LIMITED
Premier Explosives Limited (the “Issuer” or “Company”) was incorporated as “Premier Explosives Private Limited” on February 14, 1980 in the Republic of India as a private
limited company under the provisions of the Companies Act, 1956 with the Registrar of Companies, Andhra Pradesh and Telangana, Hyderabad (the “RoC”). Pursuant to conversion
of our Company to a public limited company, the name of our Company was changed to ‘Premier Explosives Limited’ and a fresh certificate of incorporation consequent upon
change of name on conversion to public limited company was issued by the RoC on October 29, 1987. For further details with respect to change of name, please see section “General
Information” on page 197. Our Corporate Identity Number isL24110TG1980PLC002633.
Registered Office: Premier House, 11, Ishaq Colony, Near AOC Centre, Trimulgherry, Secunderabad – 500 015, Telangana, India; Telephone: +91 40 6614 6801/2; Fax: +91 44
2784 3431; Website: www.pelgel.com; Email: investor@ pelgel.com
Our Company is issuing up to 16,51,000 equity shares of face value ₹ 10 each (the “Equity Shares”) at a price of ₹ 400.00 per Equity Share, including a premium of ₹ 390.00 per
Equity Share, aggregating up to ₹ 6,604.00 Lacs (the “Issue”).
ISSUE IN RELIANCE UPON CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2009, AS AMENDED (THE “ICDR REGULATIONS”) AND SECTION 42 OF THE COMPANIES ACT, 2013 AND THE RULES
MADE THEREUNDER
THIS ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED
UNDER THE ICDR REGULATIONS (“QIBs”) IN RELIANCE UP ON CHAPTER VIII OF THE ICDR REGULATIONS AND SECTION 42 OF THE COMPANIES
ACT, 2013, READ WITH RULE 14 OF THE COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014. THIS PLACEMENT DOCUMENT
IS PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO
THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN TO QIBs. THIS PLACEMENT
DOCUMENT WILL BE CIRULATED ONLY TO SUCH QIBs WHOSE NAMES ARE RECORDED BY OUR COMPANY PRIOR TO MAKING AN INVITATION TO
SUBSCRIBE TO EQUITY SHARES.
YOU MAY NOT AND ARE NOT AUTHORIZED TO (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2) REPRODUCE THIS
PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF THIS PLACEMENT DOCUMENT IN WHOLE
OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF THE ICDR REGULATIONS OR
OTHER APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
Invitations, offers and sale of the Equity Shares shall only be made pursuant to the Preliminary Placement Document, the Application Form, this Placement Document and the
Confirmation of Allocation Note. See the section “Issue Procedure” beginning on page 161. The distribution of this Placement Document or the disclosure of its contents to any
person other than QIBs (as defined in the ICDR Regulations) and persons retained by QIBs to advise them with respect to their purchase of the Equity Shares is unauthorized and
prohibited. Each prospective investor, by accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and to make no copies of the Preliminary
Placement Document or any documents referred to in this Placement Document.
INVESTMENTS IN EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST IN THIS ISSUE UNLESS THEY
ARE PREPARED TO RISK LOSING ALL OR PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY READ THE
SECTION “RISK FACTORS” BEGINNING ON PAGE 42 BEFORE MAKING AN INVESTMENT DECISION IN THIS ISSUE. EACH PROSPECTIVE INVESTOR
IS ADVISED TO CONSULT ITS OWN ADVISORS ABOUT THE PARTICULAR CONSEQUENCES TO IT OF AN INVESTMENT IN THE EQUITY SHARES
PROPOSED TO BE ISSUED PURSUANT TO THIS PLACEMENT DOCUMENT.
Our Company’s outstanding Equity Shares are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (the “NSE”) (the BSE and the NSE collectively the
“Stock Exchanges”). The closing price of the outstanding Equity Shares on BSE and NSE on May 12, 2017 was ₹ 430.30 and ₹ 431.50 per Equity Share, respectively. In-principle
approvals under regulation 28(1) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“Listing
Regulations”) for listing of the Equity Shares have been received from BSE and NSE on May 15, 2017. Applications to the Stock Exchanges will be made for the listing of the
Equity Shares offered through this Placement Document. The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports
contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of the business of our Company or the Equity
Shares.
OUR COMPANY HAS PREPARED THIS PLACEMENT DOCUMENT SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH THE PROPOSED
ISSUE.
A copy of the Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 under the Companies (Prospectus and Allotment of Securities) Rules,
2014, as amended (as defined hereinafter) has been delivered to the Stock Exchanges. A copy of this Placement Document (which will include disclosures prescribed under Form
PAS-4 (as defined hereinafter)) will be filed with the Stock Exchanges. Our Company shall also make the requisite filings with the RoC and the Securities and Exchange Board of
India (“SEBI”) within the stipulated period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014.
This Placement Document has not been reviewed by SEBI, the Reserve Bank of India (the “RBI”), the Stock Exchanges, the RoC or any other regulatory or listing
authority. The Equity Shares offered in the Issue have not been recommended or approved by SEBI, nor does SEBI guarantee the accuracy or adequacy of this Placement
Document. This Placement Document has not been and will not be registered as a prospectus with any Registrar of Companies in India, will not be circulated or distributed
to the public in India or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction. This Placement Document will be circulated or
distributed to Qualified Institutional Buyers (as defined in the ICDR Regulations), only and will not constitute an offer to any other class of investors in India or any other
jurisdiction. The placement of Equity Shares proposed to be made pursuant to this Placement Document is meant solely for QIBs on a private placement basis and is not
an offer to the public or to any other class of investors.
Information on our Company’s website or any website directly or indirectly linked to our Company’s website or the websites of the Book Running Lead Manager or its affiliates
does not form part of this Placement Document and prospective investors should not rely on such information contained in, or available through, such websites.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the
United States and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S.
Securities Act and applicable state securities laws. The Equity Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S
under the U.S. Securities Act (“Regulation S”). For a description of the selling restrictions in certain other jurisdictions, see “Selling Restrictions” beginning on page 173. The Equity
Shares are transferable only in accordance with the restrictions described in “Transfer Restrictions” beginning on page 177.
This Placement Document is dated May 20, 2017.
BOOK RUNNING LEAD MANAGER
EMKAY GLOBAL FINANCIAL SERVICES LIMITED.
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TABLE OF CONTENTS
REPRESENTATIONS BY INVESTORS ..................................................................................................................... 4
DISCLAIMER CLAUSE OF STOCK EXCHANGES ................................................................................................. 9
CERTAIN CONVENTIONS, CURRENCY OF PRESENTATION AND FINANCIAL DATA .............................. 10
INDUSTRY AND MARKET DATA.......................................................................................................................... 12
FORWARD – LOOKING STATEMENTS ................................................................................................................ 13
ENFORCEMENT OF CIVIL LIABILITIES .............................................................................................................. 14
EXCHANGE RATES .................................................................................................................................................. 15
DEFINITIONS AND ABBREVIATIONS .................................................................................................................. 16
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES ACT,
2013 ............................................................................................................................................................................. 22
SUMMARY OF THE ISSUE ...................................................................................................................................... 25
SUMMARY OF BUSINESS ....................................................................................................................................... 27
SUMMARY OF FINANCIAL INFORMATION ....................................................................................................... 34
RISK FACTORS ......................................................................................................................................................... 42
MARKET PRICE INFORMATION ........................................................................................................................... 65
USE OF PROCEEDS .................................................................................................................................................. 68
CAPITALIZATION STATEMENT ............................................................................................................................ 69
CAPITAL STRUCTURE ............................................................................................................................................ 70
DIVIDEND POLICY .................................................................................................................................................. 73
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ............................................................................................................................................................ 74
INDUSTRY OVERVIEW ........................................................................................................................................... 99
BUSINESS ................................................................................................................................................................ 112
REGULATIONS AND POLICIES ........................................................................................................................... 133
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ................................................................................. 145
PRINCIPAL SHAREHOLDERS .............................................................................................................................. 158
ISSUE PROCEDURE ............................................................................................................................................... 161
PLACEMENT AND LOCK UP ................................................................................................................................ 171
SELLING RESTRICTIONS ..................................................................................................................................... 173
TRANSFER RESTRICTIONS .................................................................................................................................. 177
THE SECURITIES MARKET OF INDIA ................................................................................................................ 178
DESCRIPTION OF EQUITY SHARES ................................................................................................................... 182
TAXATION .............................................................................................................................................................. 189
LEGAL PROCEEDINGS .......................................................................................................................................... 192
INDEPENDENT ACCOUNTANTS ......................................................................................................................... 196
GENERAL INFORMATION .................................................................................................................................... 197
FINANCIAL STATEMENTS ................................................................................................................................... 199
DECLARATION ....................................................................................................................................................... 200
DECLARATION IN ACCORDANCE WITH PAS-4 .............................................................................................. 201
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NOTICE TO INVESTORS
Our Company has furnished and accepts full responsibility for all of the information contained in this Placement
Document and confirms that to its best knowledge and belief, having made all reasonable enquiries, this Placement
Document contains all information with respect to our Company and the Equity Shares that is material in the context
of the Issue. The statements contained in this Placement Document relating to our Company and the Equity Shares
are, in all material respects, true and accurate and not misleading. The opinions and intentions expressed in this
Placement Document with regard to our Company and the Equity Shares are honestly held, have been reached after
considering all relevant circumstances and are based on reasonable assumptions and information presently available
to our Company. There are no other facts in relation to our Company and the Equity Shares, the omission of which
would, in the context of the Issue, make any statement in this Placement Document misleading in any material respect.
Further, our Company has made all reasonable enquiries to ascertain such facts and to verify the accuracy of all such
information and statements.
Emkay Global Financial Services Limited, the Book Running Lead Manager (“BRLM”) has made reasonable
enquiries but has not separately verified the information contained in this Placement Document (financial, legal or
otherwise). Accordingly, neither the BRLM, nor any of its shareholders, employees, counsel, officers, directors,
representatives, agents or affiliates make any express or implied representation, warranty or undertaking, and no
responsibility or liability is accepted by the BRLM or any of their shareholders, employees, counsels, officers,
directors, representatives, agents or affiliates, as to the accuracy or completeness of the information contained in this
Placement Document or any other information supplied in connection with the Equity Shares or their distribution.
Each person receiving this Placement Document acknowledges that such person has not relied on either of the BRLM
or on any of their shareholders, employees, counsel, officers, directors, representatives, agents or affiliates in
connection with its investigation of the accuracy of such information or its investment decision, and each such person
must rely on its own examination of our Company and the merits and risks involved in investing in the Equity Shares.
Prospective investors should not construe the contents of this Placement Document as legal, tax, accounting or
investment advice.
No person is authorized to give any information or to make any representation not contained in this Placement
Document and any information or representation not so contained must not be relied upon as having been authorized
by or on behalf of our Company or by or on behalf of the BRLM. The delivery of this Placement Document at any
time does not imply that the information contained in it is correct as of any time subsequent to its date.
The Equity Shares to be issued pursuant to the Issue have not been approved, disapproved or recommended
by any regulatory authority in any jurisdiction. No authority has passed on or endorsed the merits of the Issue
or the accuracy or adequacy of this Placement Document. Any representation to the contrary is a criminal
offense in the United States and may be a criminal offense in other jurisdictions.
The distribution of this Placement Document and the issuance of Equity Shares pursuant to this Issue may be restricted
by law in certain jurisdictions. The Equity Shares have not been recommended by any foreign, federal or state
securities commission or regulatory authority. As such, this Placement Document does not constitute, and may not be
used for or in connection with, an offer or solicitation by any one in any jurisdiction in which such offer or solicitation
is not authorised or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has
been taken by our Company and the BRLM which would permit an issue of the Equity Shares or distribution of this
Placement Document in any jurisdiction, other than India, where action for that purpose is required. Accordingly, the
Equity Shares may not be offered or sold, directly or indirectly, and neither this Placement Document nor any other
Issue-related materials in connection with the Equity Shares may be distributed or published in or from any country
or jurisdiction, except under circumstances that will result in compliance with any applicable rules and regulations of
any such country or jurisdiction.
The Equity Shares have not been and will not be registered under the U.S. Securities Act or the securities laws of any
state of the United States and may not be offered or sold in the United States except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities
laws. Accordingly, the Equity Shares are being offered and sold only outside the United States in offshore transactions
in reliance on Regulation S. For a description of the selling restrictions in certain other jurisdictions, see “Selling
Restrictions” beginning on page 173. The Equity Shares are transferable only in accordance with the restrictions
described in the section titled “Transfer Restrictions” beginning on page 177.
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The distribution of this Placement Document or the disclosure of its contents without the prior consent of the Company
to any person, other than QIBs whose names are recorded by our Company prior to the invitation to subscribe to the
Issue, in consultation with the BRLM or its representatives, and those retained by QIBs to advise them with respect
to their purchase of the Equity Shares is unauthorised and prohibited. Each prospective investor, by accepting delivery
of this Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Placement
Document or any documents referred to in this Placement Document.
As such, this Placement Document does not constitute, and may not be used for or in connection with, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom
it is unlawful to make such offer or solicitation. In particular, no action has been taken by our Company and the BRLM
which would permit an offering of the Equity Shares or distribution of this Placement Document in any jurisdiction,
other than India, where action for that purpose is required. Accordingly, the Equity Shares may not be offered or sold,
directly or indirectly, and neither this Placement Document nor any offering material in connection with the Equity
Shares may be distributed or published in or from any country or jurisdiction, except under circumstances that will
result in compliance with any applicable rules and regulations of any such country or jurisdiction.
In making an investment decision, prospective investors must rely on their own examination of our Company, its
Subsidiaries and the terms of the Issue, including the merits and risks involved. Investors should not construe the
contents of this Placement Document as legal, tax, accounting or investment advice. Investors should consult their
own counsel and advisors as to business, legal, tax, accounting and related matters concerning this Issue. In addition,
neither our Company nor the BRLM is making any representation to any offeree or purchaser of the Equity Shares
regarding the legality of an investment in the Equity Shares by such offeree or purchaser under applicable legal,
investment or similar laws or regulations.
Each subscriber of the Equity Shares in the Issue is deemed to have acknowledged, represented and agreed
that it is eligible to invest in India and in our Company under Indian law, including Chapter VIII of the ICDR
Regulations and Section 42 of the Companies Act, 2013, and that it is not prohibited by SEBI or any other
statutory authority from buying, selling or dealing in the securities including the Equity Shares. Each
subscriber of the Equity Shares in the Issue also acknowledges that it has been afforded an opportunity to
request from our Company and review information relating to our Company and the Equity Shares.
This Placement Document contains summaries of the terms of certain documents, which are qualified in their entirety
by the terms and conditions of such documents.
The information on our Company’s website, www.pelgel.com, or any website directly or indirectly linked to our
Company’s website does not constitute or form part of this Placement Document. Prospective investors should not
rely on the information contained in, or available through such websites. This Placement Document contains
summaries of certain terms of certain documents, which summaries are qualified in their entirety by the terms and
conditions of such document.
NOTICE TO INVESTORS IN CERTAIN OTHER JURISDICTIONS
For information for investors in certain other jurisdictions, please see sections “Selling Restrictions” and “Transfer
Restrictions” on pages 173 and 177, respectively.
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REPRESENTATIONS BY INVESTORS
All references herein to “you” or “your” is to the prospective investors in the Issue. By subscribing to any Equity
Shares in the Issue, you are deemed to have represented, warranted, acknowledged and agreed to our Company and
the BRLM, as follows:
you (i) are a QIB as defined in Regulation 2(1)(zd) of the ICDR Regulations and are not excluded pursuant to
Regulation 86(1)(b) of the ICDR Regulations; (ii) have a valid and existing registration under applicable laws
and regulations of India (as applicable); and (iii) undertake to acquire, hold, manage or dispose of any Equity
Shares that are Allocated to you in accordance with Chapter VIII of the ICDR Regulations and undertake to
comply with the ICDR Regulations, the Companies Act to the extent applicable and all other applicable laws,
including any reporting obligations;
if you are not a resident of India, but a QIB, (i) you are an Eligible FPI as defined in this Placement Document
including a FII (including a sub-account other than a sub-account which is a foreign corporate or a foreign
individual) have a valid and existing registration with SEBI under the applicable laws in India; or (ii) a multilateral
or bilateral development financial institution or (iii) an FVCI and have a valid and existing registration with SEBI
under applicable laws in India. Further, you are aware and understand that non-resident QIBs may only invest in
the Issue under the portfolio investment scheme pursuant to Schedule 2 and 2A of FEMA 20. You will make all
necessary filings with appropriate regulatory authorities, including the RBI, as required pursuant to applicable
laws. Further, if you are a non-resident QIB, then the investment amount will be paid out of inward remittance of
foreign exchange received through normal banking channels and as per RBI’s notification no. FEMA 20/2000 -
RB dated May 3, 2000, as amended from time to time;
you are eligible to invest in India under applicable laws, including the Foreign Exchange Management (Transfer
or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended and any notification,
circulars or clarification issued thereunder, and have not been prohibited by SEBI or any other regulatory authority
from buying, selling or dealing in securities;
you will make all necessary filings with the appropriate regulatory authorities including with the RBI, as required,
pursuant to applicable laws;
if you are Allotted Equity Shares pursuant to this Issue, you shall not, for a period of one year from the date of
Allotment, sell the Equity Shares so acquired except on floor of the Stock Exchanges;
you are aware that this Placement Document has not been, and will not be, registered as a prospectus under the
Companies Act, 2013 and the ICDR Regulations or under any other law in force in India. You are aware that this
Placement Document has not been reviewed, verified or affirmed by SEBI, RBI or the Stock Exchanges or RoC
or any other regulatory or listing authority and is intended for use only by QIBs. The Preliminary Placement
Document and this Placement Document has been filed with the Stock Exchanges for record purposes only and
this Placement Document has been displayed on the websites of our Company and the Stock Exchanges;
you are entitled and have necessary capacity subscribe for , and acquire, the Equity Shares under the laws of all
relevant jurisdictions which apply to you and that you have fully observed such laws and obtained all such
governmental and other consents in each case which may be required there under and complied with all necessary
formalities and have obtained all necessary consents and authorities to enable you to commit to participation in
this Issue and to perform your obligations in relation thereto (including, in the case of any person on whose behalf
you are acting, all necessary consents and authorisations to agree to the terms set out or referred to in this
Placement Document), and will honour such obligations;
neither our Company nor the BRLM nor any of their respective shareholders, directors, officers, employees,
counsel, representatives, agents or affiliates is making any recommendation to you or, advising you regarding the
suitability of any transactions it may enter into in connection with this Issue; your participation in this Issue is on
the basis that you are not, and will not, up to Allotment, be a client of the BRLM and that neither the BRLM nor
its shareholders, directors, officers, employees, counsel, representatives, agents or affiliates have any duty or
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responsibilities to you for providing the protection afforded to their clients or customers for providing advice in
relation to this Issue and are not in any way acting in any fiduciary capacity;
you confirm that, either: (i) you have not participated in or attended any investor meetings or presentations by us
or our agents (“Company Presentations”) with regard to us or this Issue; or (ii) if you have participated in or
attended any Company Presentations: (a) you understand and acknowledge that the BRLM may not have
knowledge of the statements that we or its agents may have made at such Company Presentations and are therefore
unable to determine whether the information provided to you at such Company Presentations may have included
any material misstatements or omissions, and, accordingly you acknowledge that the BRLM has advised you not
to rely in any way on any information that was provided to you at such Company Presentations, and (b) confirm
that you have not been provided any material information relating to our Company and this Issue that was not
publicly available;
all statements other than statements of historical fact included in this Placement Document, including, without
limitation, those regarding our financial position, business strategy, plans and objectives of management for future
operations (including development plans and objectives relating to our products), are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties and other important factors
that could cause actual results to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding our present and future business strategies and environment in which we will
operate in the future. You should not place reliance on forward looking statements, which speak only as at the
date of this Placement Document. We assume no responsibility to update any of the forward-looking statements
contained in this Placement Document;
You are aware and understand that the Equity Shares are being offered only to QIBs and are not being offered to
the general public, and the Allotment of the same shall be on a discretionary basis at the discretion of our Company
and the BRLM;
You are aware that if you are Allotted more than 5% of the Equity Shares in this Issue, our Company shall be
required to disclose your name and the number of the Equity Shares Allotted to you to the Stock Exchanges and
the Stock Exchanges will make the same available on their websites and you consent to such disclosures. Also if
you are a top 10 shareholder in our Company, our Company will be required to make a filing with the ROC within
15 days of the change, as per Section 93 of the Companies Act, 2013;
you have been provided a serially numbered copy of the Preliminary Placement Document and this Placement
Document and have read in its entirety including, in particular “Risk Factors” on page 42;
in making your investment decision (i) you have relied on your own examination of our Company and the terms
of this Issue, including the merits and risks involved; (ii) you have made your own assessment of our Company,
the Equity Shares and the terms of this Issue based solely on the information contained in this Placement
Document and no other disclosure or representation by us or any other party; (iii) you have consulted your own
independent advisors (including tax advisors) or otherwise have satisfied yourself concerning, without limitation,
the effects of local laws and taxation matters; (iv) you have relied solely on the information contained in this
Placement Document and no other disclosure or representation by us or the BRLM or any other party; (v) you
have received all information that you believe is necessary or appropriate in order to make an investment decision
in respect of us and the Equity Shares; and (vi) relied upon your investigation and resources in deciding to invest
in this Issue. You are seeking to subscribe to/acquire the Equity shares in this Issue for your own investment and
not with a view to resale or distribution;
neither the BRLM nor any of its shareholders, directors, officers, employees, counsels, advisors, representatives,
agents or affiliates has provided you with any tax advice or otherwise made any representations regarding the tax
consequences of purchase, ownership and disposal of the Equity Shares (including but not limited to the Issue
and the use of the proceeds from the Equity Shares). You will obtain your own independent tax advice from a
reputable service provider and will not rely on the BRLM or any of their shareholders, directors, officers,
employees, counsels, advisors, representatives, agents or affiliates when evaluating the tax consequences in
relation to the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Equity
6
Shares). You waive, and agree not to assert any claim against our Company or the BRLM or any of their
shareholders, directors, officers, employees, counsels, advisors, representatives, agents or affiliates with respect
to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever situated;
you are a sophisticated investor and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of the investment in the Equity Shares and you and any accounts for
which you are subscribing to the Equity Shares: (i) are each able to bear the economic risk of the investment in
the Equity Shares; (ii) will not look to us, the BRLM or its respective shareholders, directors, officers, employees,
counsel, representatives, agents or affiliates for all or part of any such loss or losses that may be suffered including
losses arising out of nonperformance by our Company of any of its respective obligations or any breach of any
representations and warranties by our Company, whether to you or otherwise; (iii) are able to sustain a complete
loss on the investment in the Equity Shares; (iv) have no need for liquidity with respect to the investment in the
Equity Shares; and (v) have no reason to anticipate any change in your or their circumstances, financial or
otherwise, which may cause or require any sale or distribution by you or them of all or any part of the Equity
Shares. You acknowledge that an investment in the Equity Shares involves a high degree of risk and that the
Equity Shares are, therefore, a speculative investment. You are seeking to subscribe to the Equity Shares in the
Issue for your own investment and not with a view to resell or distribute;
where you are acquiring the Equity Shares for one or more managed accounts, you represent and warrant that you
are authorised in writing, by each such managed account to acquire the Equity Shares for each managed account
and to make (and you hereby make) the representations, warranties, acknowledgements and agreements herein
for and on behalf of each such account, reading the reference to “you” to include such accounts;
you agree and acknowledge that in terms of Section 42(7) of the Companies Act, 2013, we shall file the list of
QIBs (to whom the Preliminary Placement Document is circulated) along with other particulars with the RoC
within 30 days of circulation of this Placement Document and other filings required under the Companies Act,
2013;
you are not a ‘Promoter’ of our Company, as defined under the Companies Act, 2013 and the ICDR Regulations,
and are not a person related to the Promoter or to group companies of the Promoter, either directly or indirectly
and your Bid does not directly or indirectly represent the Promoter or Promoter Group or persons related to the
Promoter of our Company or to group companies of the Promoter of our Company;
you have no rights under a shareholders’ agreement or voting agreement with the Promoter or persons related to
the Promoter, no veto rights or right to appoint any nominee director on the Board of Directors of our Company
other than such rights acquired, if any, in the capacity of a lender not holding any Equity Shares of our Company,
the acquisition of which shall not deem you to be a Promoter, a person related to the Promoter;
you have no right to withdraw your Bid after the Issue Closing Date;
you are eligible to Bid and hold the Equity Shares so Allotted together with any Equity Shares held by you prior
to this Issue. You further confirm that your aggregate holding upon this Issue of the Equity Shares shall not exceed
the level permissible as per any applicable regulations;
the Bid submitted by you would not eventually result in triggering a tender offer under the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended
(“Takeover Code”);
your aggregate holding, together with other QIBs participating in this Issue that belong to the same group or are
under common control as you, pursuant to the Allotment under the present Issue, shall not exceed 50% of this
Issue. For the purposes of this representation:
(a) the expression “belongs to the same group” shall be interpreted by applying the concept of “companies under
the same group” as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and
(b) “Control” shall have the same meaning as is assigned to it under Regulation 2 (i)(e) of the Takeover Code;
7
you shall not undertake any trade in the Equity Shares credited to your beneficiary account until such time that
the final listing and trading approval for the Equity Shares is issued by the Stock Exchanges;
you are aware that (i) applications for in-principle approval, in terms of Regulation 28(1) of the Listing
Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were made
and an approval has been received from each of the Stock Exchanges, and (ii) the application for the listing and
trading approval will be made only after Allotment. There can be no assurance that the approvals for listing and
trading in the Equity Shares will be obtained in time or at all. We shall not be responsible for any delay or non-
receipt of such approvals for listing and trading or any loss arising from such delay or non-receipt;
You are aware that if you are Allotted any Equity Shares, our Company is required to disclose details such as
your name, address, Permanent Account Number, E-mail ID and the number of Equity Shares Allotted to the
RoC and you consent to such disclosures;
you are aware and understand that the BRLM has entered into a placement agreement with our Company (the
“Placement Agreement”) whereby the BRLM has, subject to the satisfaction of certain conditions set out therein,
agreed to manage the Issue and use their reasonable endeavors to seek to procure subscriptions for the Equity
Shares on the terms and conditions set forth herein;
the contents of this Placement Document are our exclusive responsibility and neither the BRLM nor any person
acting on their behalf, nor any of its shareholders, directors, officers, employees, counsel, advisors,
representatives, agents or affiliates has, or shall have, any liability for any information, representation or statement
contained in this Placement Document or any information previously published by or on behalf of us and will not
be liable for your decision to participate in this Issue based on any information, representation or statement
contained in this Placement Document or otherwise. By accepting a participation in this Issue, you agree and
confirm that you have neither received nor relied on any other information, representation, warranty or statement
made by or on behalf of either of the BRLM or us or any other person and neither the BRLM, nor we or our
respective directors, officers, employees, counsel, advisors, representatives, agents or affiliates or any other
person will be liable for your decision to participate in this Issue based on any other information, representation,
warranty or statement that you may have obtained or received;
the only information you are entitled to rely on, and on which you have relied in committing yourself to acquire
the Equity Shares, is contained in this Placement Document, such information being all that you deem necessary
to make an investment decision in respect of the Equity Shares issued in pursuance of this Issue and that you have
neither received nor relied on any other information given or representations, warranties or statements made by
BRLM (including any view, statement, opinion or representation expressed in any research published or
distributed by the BRLM or its affiliates or any view, statement, opinion or representation expressed by any staff
(including research staff) of the BRLM or its respective affiliates) or our Company or any of their respective
shareholders, directors, officers, employees, counsel, advisors, representatives, agents or affiliates and neither the
BRLM nor our Company or any of their respective shareholders, directors, officers, employees, counsel, advisors,
representatives, agents or affiliates will be liable for your decision to accept an invitation to participate in the
Issue based on any other information, representation, warranty, statement or opinion;
you understand that neither the BRLM nor its affiliates have any obligation to purchase or acquire all or any part
of the Equity Shares purchased by you in this Issue or to support any losses directly or indirectly sustained or
incurred by you for any reason whatsoever in connection with this Issue, including non-performance by us of any
of our obligations or any breach of any representations or warranties by us, whether to you or otherwise;
you agree to indemnify and hold us and the BRLM and its respective affiliates harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach
of the representations, warranties, acknowledgements and agreements made by you in this Placement Document.
You agree that the indemnity set forth in this section shall survive the resale of the Equity Shares by, or on behalf
of, the managed accounts;
you agree that any dispute arising in connection with the Issue will be governed by and construed in accordance
with the laws of India, and the courts in Hyderabad, Telangana, India shall have exclusive jurisdiction to settle
8
any disputes which may arise out of or in connection with the Preliminary Placement Document and this
Placement Document;
each of the representations, warranties, acknowledgements and agreements set out above shall continue to be true
and accurate at all times up to and including the Allotment, listing and trading of the Equity Shares in the Issue;
we, the BRLM, their respective affiliates and others will rely on the truth and accuracy of the foregoing
representations, warranties, acknowledgements, undertakings and agreements which are given to the BRLM on
its own behalf and on behalf of us and are irrevocable and it is agreed that if any of such representations,
warranties, acknowledgements, undertakings and agreements are no longer accurate, you will promptly notify to
the BRLM;
you are a sophisticated investor who is seeking to purchase the Equity Shares for your own investment and not
with a view to distribution. In particular, you acknowledge that (i) an investment in the Equity Shares involves a
high degree of risk and that the Equity Shares are, therefore, a speculative investment, (ii) you have sufficient
knowledge, sophistication and experience in financial and business matters so as to be capable of evaluating the
merits and risk of the purchase of the Equity Shares, and (iii) you are experienced in investing in private placement
transactions of securities of companies in a similar stage of development and in similar jurisdictions and have
such knowledge and experience in financial, business and investment matters that you are capable of evaluating
the merits and risks of your investment in the Equity Shares;
Offshore Derivative Instruments (P-Notes)
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the Securities and Exchange Board of India (Foreign Portfolio Investors Regulations, 2014 (“SEBI
FPI Regulations”), a FPI (other than a Category III foreign portfolio investors and unregulated broad based funds
which are classified as Category II FPI by virtue of their investment manager being appropriately regulated), including
the affiliates of the BRLM, may issue, subscribe or otherwise deal in offshore derivative instruments as defined under
the SEBI (FPI) Regulations as any instrument, by whatever name called, which is issued overseas by a FPI against
securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its underlying
and all such offshore derivative instruments are referred to herein as “P-Notes” for which they may receive
compensation from the purchasers of such P-Notes. These P-Notes may be issued only in favour of those entities
which are regulated by any appropriate foreign regulatory authorities in the countries of their incorporation or
establishment subject to compliance with “know your client” requirements. An FPI must ensure that the P-Notes are
issued in compliance with all applicable laws including Regulation 22 of the SEBI (FPI) Regulations and circular no.
CIR/IMD/FIIC/20/2014 dated November 24, 2014 issued by SEBI. P-Notes have not been and are not being offered
or sold pursuant to this Placement Document. This Placement Document does not contain any information concerning
P-Notes, including, without limitation, any information regarding any risk factors relating thereto. Any P-Notes that
may be issued are not securities of our Company and do not constitute any obligations of, claim on, or interests in our
Company. Our Company has not participated in any offer of any P-Notes, or in the establishment of the terms of any
P-Notes, or in the preparation of any disclosure related to any P-Notes.
Any P-Notes that may be offered are issued by, and are solely the obligations of, third parties that are unrelated to our
Company. Our Company and the BRLM do not make any recommendation as to any investment in P-Notes and do
not accept any responsibility whatsoever in connection with any P-Notes. Any P-Notes that may be issued are not
securities of the BRLM and do not constitute any obligations of, or claims on, the BRLM. FPI affiliates (other than
Category III FPI and unregulated broad based funds which are classified as FPI by virtue of their investment manager
being appropriately regulated) of the BRLM may purchase, to the extent permissible under law, Equity Shares in this
Issue, and may issue P-Notes in respect thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate disclosure
as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the issuer(s) of such
P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any P-Notes or any
disclosure related thereto. Prospective investors are urged to consult with their own financial, legal, accounting
and tax advisors regarding any contemplated investment in P-Notes, including whether P-Notes are issued in
compliance with applicable laws and regulations.
9
DISCLAIMER CLAUSE OF STOCK EXCHANGES
As required, a copy of the Preliminary Placement Document has been submitted and this Placement Document will
be submitted to each of the Stock Exchanges. The Stock Exchanges do not in any manner:
(1) warrant, certify or endorse the correctness or completeness of any the contents of this Placement Document;
(2) warrant that the Equity Shares pursuant to this Issue will be listed or will continue to be listed on the Stock
Exchanges; or
(3) take any responsibility for the financial or other soundness of our Company, its Promoters, its management or
any scheme or project of our Company,
and it should not for any reason be deemed or construed to mean that the Preliminary Placement Document and this
Placement Document has been cleared or approved by the Stock Exchanges. Every person who desires to apply for or
otherwise acquires any Equity Shares of our Company may do so pursuant to an independent inquiry, investigation
and analysis and shall not have any claim against the Stock Exchanges whatsoever, by reason of any loss which may
be suffered by such person consequent to or in connection with, such subscription or acquisition, whether by reason
of anything stated or omitted to be stated herein, or for any other reason whatsoever.
10
CERTAIN CONVENTIONS, CURRENCY OF PRESENTATION AND FINANCIAL DATA
Certain Conventions
In this Placement Document, unless the context otherwise indicates or implies, references to ‘you’, ‘your’, ‘offeree’,
‘purchaser’, ‘subscriber’, ‘recipient’, ‘investors’, ‘prospective investors’ and ‘potential investor’ are to the prospective
investors of the Equity Shares to be issued pursuant to the Issue. References to ‘Premier Explosives’, the ‘Company’,
or ‘our Company’, or ‘the Issuer’ or ‘we’, ‘our’ or ‘us’ are to Premier Explosives Limited. All references in this
Placement Document to “India” are to the Republic of India, to the “Government” or the “Central Government” are
to the Government of India and to any “State Government” is to the relevant state government in India. All references
herein to the “U.S.” or the “United States” are to the United States of America and its territories and possessions.
Currency of Presentation
In this Placement Document, all references to ‘US$’, ‘U.S. dollars’ “U.S. Dollar”, “dollars”, “US Dollars”, “USD” or
“$” are to the legal currency of the United States of America. All references to ‘INR’, ‘Rs.’, ‘Re.’, ‘Indian Rupees’
and ‘Rupees’ are to the legal currency of India. All references to “Yen”, “Japanese Yen” and “Japanese YEN” is to
the legal currency of Japan. All references to “euro”, “EUR” or “€” are to the single currency of the participating
Member States in the Third Stage of European Economic and Monetary Union of the Treaty Establishing the European
Community, as amended from time to time. All references to “British pounds-sterling” or “£” are to the lawful
currency of the United Kingdom.
Financial Data
The unaudited financial results for the nine months ended December 31, 2016 together with the limited review report
have been prepared and presented in accordance with Standard on Review Managements (SRE) 2410 (“Unaudited
Financial Statements”), the audited standalone financial statements of our Company for the years ended March 31,
2014, March 31, 2015 and March 31, 2016 together with the respective reports thereon (“Audited Standalone
Financial Statements”) and the audited consolidated financial statements for the year ended March 31, 2016
(“Audited Consolidated Financial Statements” together with the Audited Standalone Financial Statements
“Financial Statements”), have been prepared and audited in accordance with accounting principles generally
accepted in India, or Indian GAAP, and the requirements under the Listing Regulations with the Stock Exchanges and
have been included in this Placement Document and are referred to herein as the “Financial Statements”.
Our Company publishes its financial statements in Indian Rupees. Our Company prepares its financial statements in
accordance with Indian Generally Accepted Accounting Principles (“Indian GAAP”). Indian GAAP differs in certain
significant respects from International Financial Reporting Standards (“IFRS”) and United States Generally Accepted
Accounting Principles (“U.S. GAAP”). We do not provide a reconciliation of our financial statements to IFRS or U.S.
GAAP. We also do not provide a summary of differences between Indian GAAP, IFRS and U.S. GAAP. Accordingly,
the degree to which the financial statements prepared in accordance with Indian GAAP included in this Placement
Document will provide meaningful information is entirely dependent on the reader’s level of familiarity with the
respective accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial
disclosures presented in this Placement Document should accordingly be limited and we urge you to consult your own
advisors regarding such differences and their impact on the financial data.
In this Placement Document, certain monetary thresholds have been subjected to rounding adjustments; accordingly,
figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
The financial year of our Company commences on April 1 of each calendar year and ends on March 31 of the
succeeding calendar year, so, unless otherwise specified or if the context requires otherwise, all references to a
particular ‘Financial Year’, ‘fiscal year’ or ‘Fiscal’ or ‘FY’ are to the twelve month period ended on March 31 of that
year.
References to the singular also refer to the plural and one gender also refers to any other gender, wherever applicable.
Our Company has presented certain numerical information in this Placement Document in “lakh” units. One lakh
represents 1,00,000.
11
12
INDUSTRY AND MARKET DATA
Information regarding markets, market size, market share, market position, growth rates and other industry data
pertaining to our businesses contained in this Placement Document consists of estimates based on data reports
compiled by government bodies, professional organizations and analysts, data from other external sources. Unless
stated otherwise, the statistical information included in this Placement Document relating to the industry in which we
operate has been reproduced from various trade, industry, government publications and websites and publicly
available information.
This data is subject to change and cannot be verified with complete certainty due to limits on the availability and
reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many cases, there
is no readily available external information (whether from trade associations, government bodies or other
organizations) to validate market-related analyses and estimates, thus requiring our Company to rely on internally
developed estimates. For further details, please refer to the section titled “Industry Overview” beginning on page 99.
We have not commissioned any report for purpose of the Placement Document. This data is subject to change and
cannot be verified with certainty due to limits on the availability and reliability of the raw data and other limitations
and uncertainties inherent in any statistical survey. Industry publications generally state that the information contained
in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness
are not guaranteed and their reliability cannot be assured. Although we believe that industry data used in this Placement
Document are reliable, neither our Company nor the BRLM has independently verified this data and do not make any
representation regarding and take any responsibility for the accuracy and completeness of such data. Accordingly, no
investment decision should be made on the basis of such information.
Similarly, while we believe our internal estimates to be reasonable, such estimates have not been verified by any
independent source and neither the BRLM nor we can assure potential investors as to their accuracy. Similarly, internal
estimates and surveys, industry forecasts and market research, while believed to be reliable, have not been
independently verified and neither we nor the BRLM make any representation as to the accuracy and completeness of
information based on trade, industry and government publications and websites, data reports compiled by government
bodies, professional organisations and analysts, or from other external sources
The extent to which the market and industry data used in this Placement Document is meaningful depends on the
reader’s familiarity with and understanding of the methodologies used in compiling such data. There are no standard
data gathering methodologies in the industry in which we conduct our business, and methodologies and assumptions
may vary widely among different industry sources. Accordingly, investment decisions should not be based solely on
such information. Potential investors should not place undue reliance on such information forming a part of this
Placement Document.
The extent to which the market and industry data used in this Placement Document is meaningful depends on
the reader’s familiarity with and understanding of the methodologies used in compiling such data.
13
FORWARD – LOOKING STATEMENTS
Certain statements contained in this Placement Document that are not statements of historical fact constitute ‘forward-
looking statements’. Investors can generally identify forward-looking statements by terminology such as ‘aim’,
‘anticipate’, ‘believe’, ‘continue’, ‘could’, ‘estimate’, ‘expect’, ‘intend’, ‘may’, ‘objective’, ‘plan’, ‘potential’,
‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of similar import. Similarly, statements
that describe our Company’s strategies, objectives, plans or goals are also forward looking statements. All statements
regarding our Company’s expected financial condition and results of operations; business plans, including potential
acquisitions and prospects are forward-looking statements. These forward-looking statements include statements as
to our Company’s liquidity, growth, business strategy, revenue, dividend policy and profitability, new business and
other matters discussed in this Placement Document that are not historical facts. These forward-looking statements
and any other projections contained in this Placement Document (whether made by our Company or any third party),
are predictions and involve known and unknown risks, uncertainties, assumptions and other factors that may cause
our Company’s actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements or other projections. All
forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results
to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could
cause actual results, performance or achievements to differ materially from any of our Company’s forward-looking
statements include, among others:
Failure to comply with stringent regulations in domestic and international markets for obtaining registrations and
pre-qualifications;
Inability to launch new products from time to time and commercialization of the same;
Any manufacturing or quality control problems or inability to maintain the quality control as per good
manufacturing practices;
Decline of the incentive/ allocation of funds by the government for the industry we operate;
Inability to effectively manage our growth or to successfully implement our business plan and growth strategy;
Any delay in production at, or shutdown of, any of our manufacturing facility;
Volatility in cost of raw materials;
Any failure on our part to comply with applicable regulations; or
Our inability to compete effectively with our competitors.
Additional factors that could cause actual results, performance or achievements to differ materially include, but are
not limited to, those discussed under the sections titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, “Industry Overview” and “Business” beginning on pages 74, 99 and 112,
respectively. The forward-looking statements contained in this Placement Document are based on the beliefs of
management, as well as the assumptions made by, and information currently available to, the management. Although
our Company believes that the expectations reflected in such forward-looking statements are reasonable at this time,
it cannot assure investors that such expectations will prove to be correct. Given these uncertainties, investors are
cautioned not to place undue reliance on such forward-looking statements. If any of these risks and uncertainties
materialize, or if any of our Company’s underlying assumptions prove to be incorrect, our Company’s actual results
of operations or financial condition could differ materially from that described herein as anticipated, believed,
estimated or expected. All subsequent written and oral forward-looking statements attributable to us are expressly
qualified in their entirety by reference to these cautionary statements.
14
ENFORCEMENT OF CIVIL LIABILITIES
Our Company is a public limited company incorporated under the laws of India. All of our directors, senior
management personnel and executive officers of our Company are residents of India and a substantial portion of the
assets of such persons and of our Company are located in India. As a result, it may be difficult or may not be possible
for investors to affect service of process upon our Company or such persons outside India, or to enforce judgments
obtained against such parties in courts outside of India.
Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Code of
Civil Procedure, 1908 (the “Civil Procedure Code”), as amended. Section 13 of the Civil Procedure Code provides
that a foreign judgment shall be conclusive regarding any matter directly adjudicated upon between the same parties
or parties litigating under the same title, except: (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it appears on
the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to
recognize the law of India in cases in which such law is applicable; (iv) where the proceedings in which the judgment
was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the
judgment sustains a claim founded on a breach of any law then in force in India.
Under Section 14 of the Civil Procedure Code, a court in India shall, upon the production of any document purporting
to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of competent
jurisdiction, unless the contrary appears on record; but such presumption may be displaced by proving want of
jurisdiction. A foreign judgment which is conclusive under Section 13 of the Civil Procedure Code can be enforced
in India (i) by instituting execution proceedings; or (ii) by instituting a suit on such judgment.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
Foreign judgments may be enforced by proceedings in execution in certain cases. Section 44A of the Civil Procedure
Code provides that a foreign judgment rendered by a superior court, (within the meaning of that section) in any country
or territory outside India which the GoI has by notification declared to be a reciprocating territory, may be enforced
in India by proceedings in execution as if the judgment had been rendered by an appropriate court in India. However,
Section 44A of the Civil Procedure Code is applicable only to monetary decrees not being in the nature of any amounts
payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalties and does not apply
to arbitration awards.
Each of the United Kingdom, Singapore and Hong Kong (among others) are some of the countries that have been
declared by the GoI to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code, but
the United States of America has not been so declared. A judgment of a court of a country which is not a reciprocating
territory may be enforced only by a suit upon the judgment and not by proceedings in execution. The suit must be
brought in India within three years from the date of such foreign judgment in the same manner as any other suit filed
to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a
foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign
judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian public policy.
A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the RBI to repatriate
outside India any amount recovered pursuant to the execution of such a judgment, and any such amount may be subject
to income tax in accordance with applicable laws. Further, any judgment or award in a foreign currency would be
converted into Rupees on the date of such judgment or award and not on the date of payment.
15
EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and the U.S. Dollar will affect the U.S. Dollar equivalent of the
Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the conversion into U.S.
Dollars of any cash dividends paid in Rupees on the Equity Shares. The exchange rate between the Rupee and the
U.S. Dollar has been volatile over the past year.
The following table sets forth information concerning exchange rates between the Rupee and the U.S. dollar for the
periods indicated. Exchange rates are based on the reference rates released by the RBI. No representation is made that
any Rupee amounts could have been, or could be, converted into U.S. dollars at any particular rate, the rates stated
below or at all. On May 12, 2017 the exchange rate (RBI reference rate) was ₹ 64.30 to US$1.00.
(₹ per US$1.00)
Period End Average(1) High(1) Low(1)
Fiscal Year Ended:
March 31, 2017 64.84 67.09 68.72 64.84
March 31, 2016 66.33 65.46 68.78 62.16
March 31, 2015 62.59 61.15 63.75 58.43
Month ended:
April 30, 2017 64.22* 64.51 65.04 64.00
March 31, 2017 64.84 65.88 66.85 64.84
February 28, 2017 66.74 67.08 67.65 66.72
January 31, 2017 67.81 68.08 68.23 67.79
December 31, 2016 67.95** 67.90 68.37 67.43
November 30, 2016 68.53 67.63 68.72 66.43 Source: www.rbi.org.in
(1) Represents the high, low and average of the reference rates released by the RBI on every working day of the relevant period and rounded off to
two decimal places
*Exchange rate as on April 28, 2017, as April 29, 2017 and April 30, 2017 were non – trading days.
** Exchange rate as on December 30, 2016, as December 31, 2016 was a non-trading day.
16
DEFINITIONS AND ABBREVIATIONS
Unless otherwise defined or the context otherwise indicates or requires, certain capitalized terms used in this
Placement Document have the meanings set forth below:
Company Related Terms
Term Description
Premier Explosives
Limited, the Issuer, we, us,
our Company, our
Company
Premier Explosives Limited, a company incorporated under the laws of Republic
of India and whose registered office is situated at Premier House, 11, Ishaq
Colony, Near AOC Centre, Trimulgherry, Secunderabad – 500 015, Telangana,
India.
Articles or Articles of
Association
The articles of association of our Company, as amended.
Auditors M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants, the statutory
auditor of our Company.
Board of Directors or
Board
The board of directors of our Company and any committee constituted thereof.
Chairman The chairman of the Board of Directors.
Director(s) The director(s) of our Company.
Equity Shares or Shares
Equity Shareholders
The equity shares of our Company of face value ₹ 10 each.
Equity Shareholders of our Company.
Memorandum or
Memorandum of
Association
The memorandum of association of our Company, as amended.
Promoter Dr. Amar Nath Gupta
Promoter Group Promoter group of our Company as per the definition provided in Regulation
2(1)(zb) of the ICDR Regulations.
Registered Office The registered office of our Company located at Premier House, 11, Ishaq
Colony, Near AOC Centre, Trimulgherry, Secunderabad – 500 015, Telangana,
India.
Registrar of Companies or
RoC
The Registrar of Companies, Andhra Pradesh and Telangana at Hyderabad.
Subsidiaries PEL Next Defence Systems Limited and Premier Wire Products Limited
Issue Related Terms
Term Description
Allocated or Allocation The allocation of Equity Shares following the determination of the Issue Price to
QIBs on the basis of Application Forms submitted by such QIBs, in consultation
with the Book Running Lead Manager and in compliance with Chapter VIII of
the ICDR Regulations.
Allottees Successful Bidders to whom Equity Shares are issued and Allotted pursuant to
the Issue.
Allotment / Allotted The issue and allotment of Equity Shares pursuant to this Issue.
Application or Bid Indication of interest from a QIB to subscribe for a specified number of Equity
Shares in this Issue on the terms set out in the Application Form to our Company.
Application Form or Bid
cum Application Form
The form, including all revisions and modifications thereto, pursuant to which a
QIB submits an Application.
Bidder
Any prospective investor, being a QIB, who makes a Bid pursuant to the terms of
the Preliminary Placement Document and the Application Form.
Bidding / Issue Period The period between the Bid/Issue Opening Date and Bid/Issue Closing Date,
inclusive of both dates, during which prospective Bidders can submit Bids.
Book Running Lead
Manager / BRLM
Emkay Global Financial Services Limited
17
Term Description
CAN or Confirmation of
Allocation Note
Note or advice or intimation to successful Bidders confirming Allocation of
Equity Shares to such successful Bidders after determination of the Issue Price
and requesting payment for the entire applicable Issue Price for all Equity Shares
Allocated to such successful Bidders.
Category III foreign
portfolio investor(s)
FPIs who are registered as “Category III foreign portfolio investors” under the
SEBI (FPI) Regulations
Closing Date On or about May 20, 2017, the date on which the Allotment is expected to be
made.
Cut-off Price The Issue Price of the Equity Shares, which shall be determined by our Company,
in consultation with the Book Running Lead Manager.
Designated Date The date of credit of Equity Shares pursuant to the Issue to the Allottee’s demat
account, as applicable to the relevant Allottee
Eligible FPIs FPIs that are eligible to participate in this Issue and do not include qualified
foreign investors or Category III foreign portfolio investors (who are not eligible
to participate in the Issue)
Escrow Bank Yes Bank Limited
Escrow Cash Account The non-interest bearing, no-lien, escrow bank account without any cheque or
overdraft facilities opened by our Company with the Escrow Bank under the
arrangement between our Company and the Escrow Bank.
Floor Price The floor price of ₹ 414.97 per Equity Share, calculated in accordance with
Regulation 85 of the ICDR Regulations.
ICDR Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009, as amended.
Issue The offer and sale of the Equity Shares to QIBs, pursuant to Chapter VIII of the
ICDR Regulations and the provisions of Companies Act, 2013.
Issue Closing Date or Bid
Closing Date
May 18, 2017, the date on which our Company (or the Book Running Lead
Manager on behalf of our Company) shall cease acceptance of Application Forms.
Issue Opening Date or
Bid Opening Date
May 15, 2017, the date on which our Company (or the Book Running Lead
Manager on behalf of our Company) shall commence acceptance of Application
Forms.
Issue Price The price per Equity Share of ₹ 400.00. Under the ICDR Regulations, the Issue
Price cannot be lower than the Floor Price subject to discount of not more than
5% on the Floor Price which may be considered by our Company.
Issue Size The issue of 16,51,000 Equity Shares aggregating ₹ 6,604.00 Lacs.
Listing Agreement The agreement entered into between our Company and each of the Stock
Exchanges in relation to listing of the Equity Shares on each of the Stock
Exchanges pursuant to requirements of Regulation 109 of the Listing Regulations.
Pay-in Date The last date specified in the CAN for payment of application monies by the QIBs.
Placement Agreement The Placement Agreement, dated May 15, 2017, among our Company and the
Book Running Lead Manager.
Placement Document This placement document dated May 20, 2017 being issued by our Company in
accordance with Chapter VIII of the ICDR Regulations and Section 42 of the
Companies Act, 2013.
Preliminary Placement
Document
The preliminary placement document dated May 15, 2017 issued in accordance
with Chapter VIII of the ICDR Regulations and Section 42 of the Companies Act,
2013.
QIBs or Qualified
Institutional Buyers
Any Qualified Institutional Buyers as defined under Regulation 2(1)(zd) of
Chapter VIII of the ICDR Regulations.
QIP or Qualified
Institutions Placement
Private placement to QIBs under Chapter VIII of the ICDR Regulations and
Section 42 of the Companies Act, 2013 and the Rules made thereunder.
Relevant Date May 15, 2017 which is the date of the meeting of the Board of Directors or any
committee duly authorised by the Board of Directors deciding to open the Issue.
18
Industry Related Terms
Term Description
AAP Annual Acquisition Plan
APIIC Andhra Pradesh Industrial Infrastructure Corporation
APFSDS Armour-piercing finstabilized discarding-sabot
BMCS Bi-Modular Charge Systems
CSO Central Statistics Organisation
DAC Defence Acquisition Council
D&D Design and Development
DDP Department of Defence Production
DIPP Department of Industrial Policy and Promotion
DGMs Directorates of Geological Mining
DOS Department of Space
DPP Defence Procurement Procedure
DPSUs Defence Public Sector Undertakings
DRDE Defence Research Development Establishment
DRDO Defence Research and Development Organisation
DPR Detailed Project Report
DSIR Department of Scientific and Industrial Research
DTS Departmental Testing Station
ERV Exchange Rate Variation
GISAT Geo Imaging Satellite
GSAT Geostationary Satellite
GSI Geological Survey of India
GSLV Geosynchronous Satellite Launch Vehicle
ILs Industrial Licences
IACCS Integrated Air Command and Control System
IDDM Indigenously Designed, Developed and Manufactured
INSAT Indian National Satellite System
IMF International Monetary Fund
IRNSS Indian Regional Navigation Satellite System
ISRO Indian Space Research Organisation
LLQRM Low Level Quick Reaction Surface to Air Missile
MIP Moon Impact Probe
MoD Ministry of Defence
M-SIPS Modified Special Incentive Package Scheme
MECL Mining Exploration Corporation Limited
MRSAM Medium Range Surface to Air Missile
MSME Ministry of Small and Medium Enterprises
NHN Nickel hydrazine nitrate
NIMZs National Investment and Manufacturing Zones
NMP National Manufacturing Policy
OFB Ordnance Factory Board
OGP Obvious Geological Potential
PESO Petroleum and Explosives Safety Organisation
PGM Precision Guided Munitions
PETN Pentaerythritol tetranitrate
PPP Public Private Partnership
PSLV Polar Satellite Launch Vehicle
PSU Public Sector Undertakings
QRSAM Quick Reaction Surface to Air Missiles
RCS Radar Cross Section
R&D Research and Development
19
Term Description
RISAT Radar Imaging Satellite
SCAP Services Capital Acquisition Plan
SHAR Satish Dhawan Space Centre
SME Small and Medium Enterprises
SPAD Self-Propelled Air Defence
SRSAM Short Range Surface to Air Missile
TOT Imported Transfer of Technology
UAV Unmanned Aerial Vehicles
VSHORADS Very Short Range Air Defence System
General Terms / Abbreviations
Term Description
AGM Annual General Meeting
AIFs Alternative investment funds (as defined under Regulation 2(1)(b) of the Securities
and Exchange Board of India (Alternative Investment Funds) Regulations, 2012,
as amended) registered with the SEBI under applicable laws in India.
AS Accounting Standards issued by ICAI
AY Assessment year
Act or Companies Act The Companies Act, 1956 or the Companies Act, 2013, as applicable.
BSE BSE Limited.
Category III Foreign
Portfolio Investors
An FPI registered as a category III foreign portfolio investor under the SEBI FPI
Regulations.
Companies Act The Companies Act, 1956 and/or the Companies Act, 2013, as applicable
Companies Act, 1956 The Companies Act, 1956 and the rules made thereunder (without reference to the
provisions thereof that have ceased to have effect upon the notification of the
Notified Sections)
Companies Act, 2013 The Companies Act, 2013 and the rules made thereunder, as amended
Civil Procedure Code The Code of Civil Procedure, 1908, as amended.
Competition Act The Competition Act, 2002, as amended
Control It shall have the same meaning as is assigned to it under Regulation 2(1)(e) of the
Takeover Code.
CDSL Central Depository Services (India) Limited.
Delisting Regulations The Securities and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2009, as amended.
Depository Any depository registered with the SEBI under the Securities and Exchange Board
of India (Depositories and Participants) Regulations, 1996, as amended.
Depositories Act The Depositories Act, 1996, as amended.
Depository Participant Any depository participant, as defined under the Depositories Act, as amended.
DIN Director Identification Number
EGM Extraordinary general meeting
Eligible FPIs FPIs that are eligible to participate in the Issue and does not include qualified
foreign investors and Category III Foreign Portfolio Investors (who are not eligible
to participate in the Issue)
EBITA Earnings before interest, tax and amortization expenses
EBITDA Earnings before interest, taxes, depreciation and amortization
EPS Earnings per Share.
EPF Act The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, as
amended.
ESI Act The Employees’ State Insurance Act, 1948, as amended.
Factories Act Factories Act, 1948, as amended.
FDI Foreign Direct Investment.
FDI Policy Consolidated Foreign Direct Investment Policy notified under Circular No. D/o IPP
F. No. 5(1)/2016-FC-1, effective from June 7, 2016, as amended from time to time
20
Term Description
FEMA The Foreign Exchange Management Act, 1999, as amended.
FEMA 20 The Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000, as amended.
FI Financial Institution.
FIIs Foreign institutional investors as defined under the SEBI FPI Regulations.
FII Regulations The Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, as amended.
FIPB Foreign Investment Promotion Board.
Financial Year / Fiscal
Year / Fiscal / FY
A period of 12 months ending March 31, unless otherwise stated
FPI(s)
Foreign portfolio investors as defined under the SEBI FPI Regulations and includes
a person who has been registered under the SEBI FPI Regulations. Any foreign
institutional investor or qualified foreign investor who holds a valid certificate of
registration is deemed to be a foreign portfolio investor till the expiry of the block
of three years for which fees have been paid as per the Securities and Exchange
Board of India (Foreign Institutional Investors) Regulations, 1995
Form PAS-4 Form PAS-4 as prescribed under the Companies (Prospectus and Allotment of
Securities) Rules, 2014
FSMA The U.K. Financial Services and Markets Act, 2000, as amended.
FVCI Any foreign venture capital investor (as defined under the Securities and Exchange
Board of India (Foreign Venture Capital Investors) Regulations, 2000, as amended)
registered with the SEBI under applicable laws in India.
GAAP Generally Accepted Accounting Principles.
GDP Gross Domestic Product.
GoI/Government Government/ Government of India/ Central Government.
Gratuity Act The Payment of Gratuity Act, 1972, as amended.
IAS International Accounting Standards.
ICAI The Institute of Chartered Accountants of India.
ICDR Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009, as amended
Ind(AS) IFRS synchronized Accounting Standards in India
IFRS International Financial Reporting Standards of the International Accounting
Standards Board.
Indian GAAP Generally accepted accounting principles followed in India.
Insider Trading
Regulations
The Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 2015, as amended.
IT Act or the Income
Tax Act
The Income Tax Act, 1961, as amended.
ITAT Income Tax Appellate Tribunal
Lakh One hundred thousand.
Listing Regulations Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015, as amended.
MAT Minimum alternative tax.
MCA Ministry of Corporate Affairs, Government of India
Minimum Wages Act Minimum Wages Act, 1948, as amended.
MoU Memorandum of Understanding.
Mutual Fund Any mutual fund registered with the SEBI under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996, as amended.
Notified Sections Sections of Companies Act, 2013 that have been notified by the Government of
India
NRI Non-Resident Indian.
NSDL The National Securities Depository Limited.
NSE The National Stock Exchange of India Limited.
p.a. Per annum.
21
Term Description
P/E Ratio Price/earnings ratio.
PAN Permanent Account Number.
PAT Profit after tax
Payment of Bonus Act Payment of Bonus Act, 1965, as amended.
Payment of Wages Act Payment of Wages Act, 1936, as amended.
PCB Pollution Control Board of the relevant states of the republic of India.
Portfolio Investment
Scheme
The portfolio investment scheme of RBI specified in Schedule 2 of the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident Outside
India) Regulations, 2000, as amended.
Private Placement
Regulations
Section 42 of the Companies Act, 2013, read with Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rules, 2014
RBI The Reserve Bank of India.
₹ or Re. or Rs. or Rupees
or INR
Indian Rupees.
Regulation S Regulation S under the U.S. Securities Act.
SCR (SECC) Rules Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2012, notified by the SEBI
SCRA The Securities Contracts (Regulation) Act, 1956, as amended.
SCRR The Securities Contracts (Regulation) Rules, 1957, as amended.
Securities Shall have the meaning given to such term under the SCRA.
SEBI The Securities and Exchange Board of India
SEBI Act The Securities and Exchange Board of India Act, 1992, as amended
SEBI AIF Regulations The Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012, as amended
SEBI FPI Regulations The Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014, as amended
SENSEX An index of 30 constituent stocks traded on BSE representing a sample of large,
liquid and representative companies
SICA The Sick Industrial Companies (Special Provisions) Act, 1985, as amended.
Stock Exchanges The BSE and the NSE
STT Securities and Transaction Tax
Takeover Code The Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011, as amended.
TDS Tax Deducted at Source.
U.K. United Kingdom.
U.S. or U.S.A. United States of America, its territories and its possessions and the District of
Columbia.
USD or US Dollar or
U.S. Dollar
United States Dollar
U.S. GAAP Generally accepted accounting principles followed in the United States.
U.S. Securities Act The U.S. Securities Act of 1933, as amended.
VAT Value Added Tax
VCF A venture capital fund as defined under the erstwhile Securities and Exchange
Board of India (Venture Capital Funds) Regulations, 1996
22
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT, 2013
The table below sets out the disclosure requirements as provided in Form PAS-4 and the relevant pages in this
Placement Document where these disclosures, to the extent applicable, have been provided.
Sr.
No.
Disclosure Requirements Relevant Page of
this Placement
Document
1. GENERAL INFORMATION
a. Name, address, website and other contact details of our Company indicating both
Registered Office and corporate office
Cover Page, 202
b. Date of incorporation of our Company Cover Page, 197
c. Business carried on by our Company and its subsidiaries with the details of branches
or units, if any.
111 – 132
d. Brief particulars of the management of our Company. 145 – 157
e. Names, addresses, DIN and occupations of the Directors. 145 – 157
f. Management’s perception of risk factors 41 – 63
g. Details of default, if any, including therein the amount involved, duration of default
and present status, in repayment of:
(i) Statutory dues; NIL
(ii) Debentures and interest thereon; NIL
(iii) Deposits and interest thereon; and NIL
(iv) Loan from any bank or financial institution and interest thereon. NIL
h. Names, designation, address and phone number, email ID of the nodal/ compliance
officer of our Company, if any, for the private placement offer process.
198, 202
2. PARTICULARS OF THE OFFER
a. Date of passing of board resolution. 25, 197
b. Date of passing of resolution in the general meeting, authorising the offer of
securities.
25, 197
c. Kinds of securities offered (i.e. whether share or debenture) and class of security. 25
d. Price at which the security is being offered including the premium, if any, along with
justification of the price.
25
e. Name and address of the valuer who performed valuation of the security offered. Not Applicable
f. Amount which our Company intends to raise by way of securities. 25 and 26
g. Terms of raising of securities:
(i) Duration, if applicable; Not Applicable
(ii) Rate of dividend; Not Applicable
(iii) Rate of interest; Not Applicable
(iv) Mode of payment; and 168 – 169
(v) Repayment. Not Applicable
h. Proposed time schedule for which the offer letter is valid. 17
i. Purposes and objects of the offer. 67
j. Contribution being made by the promoters or directors either as part of the offer or
separately in furtherance of such objects.
Not Applicable
k. Principle terms of assets charged as security, if applicable. Not Applicable
3. DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS,
LITIGATION ETC
a. Any financial or other material interest of the directors, promoters or key managerial
personnel in the offer and the effect of such interest in so far as it is different from
the interests of other persons.
149, 156
b. Details of any litigation or legal action pending or taken by any Ministry or
Department of the Government or a statutory authority against any promoter of the
offeree company during the last three years immediately preceding the year of the
circulation of the offer letter and any direction issued by such Ministry or
194 – 195
23
Sr.
No.
Disclosure Requirements Relevant Page of
this Placement
Document
Department or statutory authority upon conclusion of such litigation or legal action
shall be disclosed.
c. Remuneration of Directors (during the current year and last three financial years). 151 – 152
d. Related party transactions entered during the last three financial years immediately
preceding the year of circulation of offer letter including with regard to loans made
or, guarantees given or securities provided.
199
e. Summary of reservations or qualifications or adverse remarks of auditors in the last
five financial years immediately preceding the year of circulation of offer letter and
of their impact on the financial statements and financial position of our Company
and the corrective steps taken and proposed to be taken by our Company for each of
the said reservations or qualifications or adverse remark.
96 – 97
f. Details of any inquiry, inspections or investigations initiated or conducted under the
Companies Act or any previous company law in the last three years immediately
preceding the year of circulation of offer letter in the case of company and all of its
subsidiaries. Also if there were any prosecutions filed (whether pending or not) fines
imposed, compounding of offences in the last three years immediately preceding the
year of the offer letter and if so, section-wise details thereof for our Company and
all of its subsidiaries.
195
g. Details of acts of material frauds committed against our Company in the last three
years, if any, and if so, the action taken by our Company.
195
4. FINANCIAL POSITION OF THE COMPANY
a. The capital structure of our Company in the following manner in a tabular form:
(i)(a) The authorised, issued, subscribed and paid up capital (number of securities,
description and aggregate nominal value);
69
(b) Size of the present offer; and 25
(c) Paid up capital: 69
(A) After the offer; and 69
(B) After conversion of convertible instruments (if applicable); Not Applicable
(d) Share premium account (before and after the offer). 69
(ii) The details of the existing share capital of the issuer company in a tabular form,
indicating therein with regard to each allotment, the date of allotment, the number
of shares allotted, the face value of the shares allotted, the price and the form of
consideration.
69 – 70
Provided that the issuer company shall also disclose the number and price at which
each of the allotments were made in the last one year preceding the date of the offer
letter separately indicating the allotments made for considerations other than cash
and the details of the consideration in each case.
69 – 70
b. Profits of our Company, before and after making provision for tax, for the three
financial years immediately preceding the date of circulation of offer letter.
35, 38
c. Dividends declared by our Company in respect of the said three financial years;
interest coverage ratio for last three years (Cash profit after tax plus interest
paid/interest paid).
72
d. A summary of the financial position of our Company as in the three audited balance
sheets immediately preceding the date of circulation of offer letter.
33 – 40
e. Audited Cash Flow Statement for the three years immediately preceding the date of
circulation of offer letter.
36, 39, 40
f. Any change in accounting policies during the last three years and their effect on the
profits and the reserves of our Company.
97
5. A DECLARATION BY THE DIRECTORS THAT
a. Our Company has complied with the provisions of the Act and the rules made
thereunder.
200 – 201
24
Sr.
No.
Disclosure Requirements Relevant Page of
this Placement
Document
b. The compliance with the Act and the rules does not imply that payment of dividend
or interest or repayment of debentures, if applicable, is guaranteed by the Central
Government.
201
c. The monies received under the offer shall be used only for the purposes and objects
indicated in the Offer letter.
201
25
SUMMARY OF THE ISSUE
The following is a general summary of the terms of the Issue. This summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information appearing elsewhere in this Placement Document, including
under the sections “Risk Factors”, “Use of Proceeds”, “Placement”, “Issue Procedure” and “Description of the
Equity Shares”.
Issuer Premier Explosives Limited
Face value ₹ 10 per Equity Share
Issue Price per Equity Share ₹ 400.00.
Issue Size The issue of 16,51,000 Equity Shares aggregating to ₹ 6,604.00 Lacs.
A minimum of 10 % of the Issue Size i.e. 1,65,100 Equity Shares shall be
available for Allocation to Mutual Funds only, and 14,85,900 Equity Shares
shall be available for Allocation to all QIBs, including Mutual Funds. In
case of under-subscription in the portion available for Allocation only to
Mutual Funds, such portion or part thereof may be Allocated to other
eligible QIBs.
Date of Board Resolution April 14, 2017
Date of Shareholders’ Resolution May 12, 2017
Equity Shares issued and
outstanding immediately prior to
the Issue
88,58,575 Equity Shares at a face value of ₹ 10 per share.
Equity Shares issued and
outstanding immediately after
the Issue
1,05,09,575 Equity Shares at a face value of ₹ 10 per share.
Eligible Investors QIBs as defined in regulation 2(1)(zd) of the ICDR Regulations and
Chapter VIII of the ICDR Regulations and not excluded pursuant to
Regulation 86 of the SEBI Regulations. Only QIBs which are FIIs and
Eligible FPIs are permitted to participate in this Issue. For further details,
see the sections “Issue Procedure – Qualified Institutional Buyers” and
“Transfer Restrictions” beginning on pages 161 and 177 respectively. The
list of QIBs to whom the Preliminary Placement Document, this Placement
Document and Application Form will be delivered shall be determined by
the BRLM in consultation with our Company, at their sole discretion.
Dividend See “Description of Equity Shares”, “Dividend Policy” and “Taxation”
on page 182, 73 and 189, respectively
Indian Taxation See “Taxation” on page 189
Floor Price ₹ 414.97 per Equity Share, calculated in accordance with Regulation 85 of
the ICDR Regulations. Under the ICDR Regulations, the Issue Price cannot
be lower than the Floor Price. Our Company offered a discount of 3.61%
i.e. ₹ 14.97 on the Floor Price in terms of Regulation 85 of the ICDR
Regulations.
Listing (i) Applications for approval, in terms of regulation 28(1) of the Listing
Regulations with the Stock Exchanges were made and (ii) the application
for the final listing and trading approval, for listing and admission of the
Equity Shares and for trading on the Stock Exchanges, will be made only
after Allotment of the Equity Shares in the Issue and after credit of Equity
Shares to the beneficiary account with the Depository Participant,
respectively.
Transferability Restrictions The Equity Shares being Allotted pursuant to this Issue cannot be sold for
a period of one year from the date of Allotment, except if sold on the floor
of the Stock Exchanges. For further details, see the section “Transfer
Restrictions” beginning on page 177
Closing Date The Allotment of the Equity Shares offered pursuant to the Issue is expected
to be made on or about May 20, 2017 (the “Closing Date”).
26
Ranking The Equity Shares being issued in the Issue are subject to the provisions of
our Memorandum of Association and Articles of Association and shall rank
pari passu in all respects with the existing Equity Shares, including with
respect to dividend rights. Shareholders will be entitled to participate in
dividends and other corporate benefits, if any, declared by us after the
Closing Date, in compliance with the Companies Act, 2013. Shareholders
may attend and vote in shareholders’ meetings in accordance with the
provisions of the Companies Act, 2013. Please see the section “Description
of the Equity Shares” beginning on page 182.
Use of Proceeds The gross proceeds of the Issue are expected to be approximately ₹ 6604.00
Lacs. The net proceeds from the Issue, after deducting fees, commissions
and expenses of the Issue, will be approximately ₹ 238.66 Lacs. For further
details, please see the section “Use of Proceeds” beginning on page 68.
Pay-in Date Last date specified in the CAN sent to the successful Bidders for payment
of application money.
Lock-up Please see the sub-section titled “Lock-up” of “Placement Agreement” on
page 171 for a description of restrictions on our Company and our
Promoters in relation to Equity Shares
Risk Factors For a discussion of certain risks in connection with an investment in the
Equity Shares, please see the section “Risk Factors” beginning on page 42.
Security codes: ISIN: INE863B01011;
BSE Code: 526247;
NSE Symbol: PREMEXPLN
27
SUMMARY OF BUSINESS
We are manufacturers and suppliers of high energy materials for industrial and defence applications. We manufacture
and supply complete range of industrial explosives and accessories including bulk and cartridge explosives, cast
boosters, detonators, detonating fuse etc. We also manufacture solid propellants used in tactical and strategic missiles,
rockets for defence services. We also manufacture tear gas grenades used in mob dispersion and riot control by law
enforcement departments. We also manufactures various Pyro devices such as, Explosive bolts, Pyro actuators, Gas
generators, IR flares, Smoke markers and Cable cutters for defence services. As of March 31, 2017, we had an Order
Book of ₹ 24,300.12 Lacs, consisting an order book for supply of explosives and explosives accessories and
propellants.
Further, we provide operations and maintenance services for defence and space establishments. We are providing
operations and maintenance services for solid propellant plants of Satish Dhawan Space Centre SHAR of ISRO at
Sriharikota, Andhra Pradesh since 2007 and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur,
Chattisgarh since 2010.
We supply industrial explosives and accessories to various public sector undertakings including Coal India, Singareni
Collieries Company Limited, Neyveli Lignite, NMDC Limited and other mining companies. We also export our
products to several countries including Greece, Jordan, Turkey, Egypt, Nepal, Thailand, Philippines, Uganda, etc.
We manufacture and supply solid propellants to Government undertakings in defence sector for missiles like Akash,
Astra, Long Range Surface to Air Missile (“LRSAM”), Medium Range Surface to Air Missile (“MRSAM”), AGNI
etc. We have delivered the 1000th booster grain for Akash missile on July 9, 2016 to Bharat Dynamics Limited. We
believe, with our wide experience in handling explosive substances and energetic materials, we have created notable
infrastructure and facilities to manufacture critical high energy materials, propellants and pyro devices required by the
defence and para-military forces. We have received orders, from ISRO for supply of developmental motor for use in
the Polar Satellite Launch Vehicle and from Ministry of Defence for supply of chaffs and flares. Recently, we have
received industrial licenses received from DIPP to manufacture thirteen (13) new products including ammunition,
warheads and other defence products under explosive segment.
Our manufacturing facilities are located at Peddakandukuru, Telangana; Manuguru, Telangana; Godavarikhani,
Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu. We have a research and
development facility at Peddakandukuru, Telangana, recognized by the Department of Science and Industrial Research
(“DSIR”) and dedicated for research in high energy materials. Our laboratory located at Peddakandukuru, Telangana
was accredited by the National Accreditation Board for Testing and Calibration Laboratories till August, 2016 and an
application for renewal of the same is pending as on date. We have entered into MoU/collaboration with Gulbarga
University, Karnataka, IIT, Madras and BITS, Pilani for research in high energy materials.
Through our research and development in the Fiscal 2013, we commenced commercial production of detonators with
Nickel Hydrazine Nitrate (“NHN”) as primary charge. We have applied for a patent for Novel Safe Lead Free
Detonator before the Controller of Patents, Chennai and the same are pending as on date of this Placement Document.
We have successfully transferred the NHN technology for use in Detonators to an American company.
We are committed to provide quality products to our customers and in this relation hold various certifications,
approvals and accreditations including ISO 9001; 2008 for manufacture and supply of explosives like industrial
explosives, boosters, detonators, detonating fuse, propellants, special devices and explosive chemicals and ISO
9001:2008, AS9100C for development, manufacture and supply of high energy materials (propellants, pyrotechnics,
special devices and other chemicals) for aerospace and defence applications. In recognition of our technical excellence,
we received various awards and recognition including appreciation for development of Propellant composition for
LRSAM without combustion instability, Inc. India Innovative 100 Award for plant-scale manufacture of NHN
detonators, appreciation for development of Propellant Casting of Motors and Igniters for First and Second Stages of
Agni-4, appreciation for development of Pyrogen Igniters for Agni A4.
We have trained engineers and professionally qualified personnel experienced in commercial explosives, accessories
and propellants manufacturing. Our Promoter, Chairman and Managing Director, Dr. Amar Nath Gupta holds a
Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad. He is a recipient of
28
Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is bestowed with the
Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four decades of experience
in the product development and processes of explosives industry and is sphere heading the entire operations of the
Company since its inception. As on March 31, 2017, we had 1,163 permanent employees. Besides our permanent
employees, we are hiring contract labours pursuant to the requirements of business.
For fiscal year ended March 31, 2016, March 31, 2015 and March 31, 2014, our total revenue from operations was ₹
20,285.14 Lac, ₹ 16,390.05 Lac, ₹ 15,950.76 Lac, respectively. We earned a profit after tax of ₹ 565.08 Lac, ₹ 532.03
Lac, ₹ 921.31 Lac for the fiscal year ended on March 31, 2016, March 31, 2015 and March 31, 2014 respectively. The
table below provides information regarding revenue from operations relating to business segments during fiscal years
March 31, 2016, March 31, 2015 and March 31, 2014 as per the standalone audited financial statements:
(₹ in lacs)
Segment
For nine month
period ending
December 31, 2016
Fiscal 2016 Fiscal 2015 Fiscal 2014
Revenue % Revenue % Revenue % Revenue %
Industrial
explosives 8,632.24 49.41% 10,271.37 50.63% 8,306.8 50.68% 6,719.09 42.12%
Detonators 2,293.22 13.13% 2,537.75 12.51% 2,315.46 14.13% 3,345.27 20.97%
Others 4,947.94 28.32% 5,533.16 27.28% 3,944.93 24.07% 4,102.45 25.72%
wind power 39.07 0.22% 27.79 0.14% 45.88 0.28% 67.29 0.42%
Sales of
products 15,912.47 91.08% 18,370.07 90.56% 14,613.07 89.16% 1,4234.1 89.24%
sale of traded
good 26.66 0.15% 38.01 0.19% 150.99 0.92% 178.39 1.12%
Operation and
maintenance
services
1,440.53 8.25% 1,808.86 8.92% 1,576.28 9.62% 1,468.92 9.21%
other operating
revenues 90.07 0.52% 68.2 0.34% 49.71 0.30% 69.35 0.43%
Revenue From
Operation 17,469.73 100.00% 20,285.14 100.00% 16,390.05 100.00% 15,950.76 100.00%
OUR COMPETITIVE STRENGTHS
We believe that the following strengths enable us to compete successfully in the market:
Our research and development and technological capabilities
We place a strong focus on research and development, with an emphasis on product design and continuous
improvement in product performance, cost and reliability. Our focus on research and development has been
instrumental in enabling the number of products we have introduced over the years like bulk explosives with
indigenous technologies in early 1980, emulsion explosives in late 1980, detonators with Nickel Hydrazine Nitrate as
primary charge in year 2013, which we believe improves the performance of our business. We have a research and
development facility at Peddakandukuru, Telangana, recognized by the DSIR and dedicated for research in defence
sector products. Our laboratory located at Peddakandukuru, Telangana was accredited by the National Accreditation
Board for Testing and Calibration Laboratories till August, 2016 and an application for renewal of the same is pending
as on date. Our research and development team comprises of post-graduates and technicians. We have entered into
MoU/collaboration with Gulbarga University, Karnataka, IIT, Madras and BITS, Pilani for research and development
of high energy materials.
We believe that we have developed strong product design capabilities, which allow us to develop new products and
meet the requirement of our customers, especially in defence applications. Our research and development capability
allows us to absorption of technology transferred from various defence laboratories. We have been transferred
technologies from DRDO for commercialisation and further application, which includes, SQUIB(Cartridge Electrical)
29
for IFDSS, 1200CC, 2400CC and 6000CC pellet Type gas generator, manufacturing of Fuel Rich, Sustainer Grains
for Akash Missile, manufacturing of BKNO3 pellets, of ME-445 Composition Chemical – CR Oleoresin based
Grenades, Energetic propellant casting in case bonded rocket motors (Pinaka Mk-II propellant) & Igniter for Pinaka
MKII, Pyrocartridge PC -110 DQ, manufacturing of Igniter for Akash Booster, manufacturing of Igniter for Akash
Sustainer, manufacturing of Propellant for LRSAM P II Grains, manufacturing of propellant and Igniter for 122 mm
ERR.
We have been credited for contribution to various DRDO Projects/ Program such as Booster, Sustainer and Cartridge
loaded propellant for different class of rockets, BKNO3 pellets for igniters and gas generators. We believe our research
and development and technological capabilities helps us in participation into product development from initial stages,
which we believe provide us technological edge over our competitors. We have received an appreciation award from
Naval Science and Technological Laboratory, Visakhapatnam for contribution in development of smoke marker,
explosive bolt, detonator and pyro cartridge and Defence Technology Absorption award from Defence Research and
Development Organisation for production of pyro – cartridges, explosive bolt, pyrogen igniter and rocket motor in the
year 2007. We have received an appreciation from Ministry of Defence for development of pyrogen igniters for Agni
A3-03 mission in the year 2008. We have also received appreciations from Defence Research and Development
Laboratory for development of non-aluminized propellant composition for ASTRA programme and from Ministry of
Defence for development of propellant of casting of second stage motors for Agni – 4 mission.
We have created design capability in the defence sector, which puts our Company at a very competitive and is now
regarded as a designer for defence products with strong capability. We are working with DRDO and have been
instrumental in designing the propellant compositions for ASTRA Missile, LRSAM Missile and MRSAM Missile.
This design we were able to convert to the production stage.
Our strategically located manufacturing facilities
As on date of this Placement Document, we have six manufacturing plants located at key areas and in proximity to
our customers’ plants. Our plant at Peddakandukur, Telangana is for detonator, detonating fuse, packaged explosives
and defence products. Our bulk explosives plants are located at Singrauli, Madhya Pradesh, Chandrapur, Maharashtra,
Godavarikhani, Telangana, Manuguru, Telangana and Neyveli, Tamil Nadu. For example, our bulk explosive plants
are located in proximity to our customers’ mines, Neyveli, Plant is close to Neyveli Lignite Limited, Singrauli plant
is near to mines owned by Coal India Limited. Further, our research and development facility at Peddakandukur,
Telangana is in proximity of DRDO. Our multi-location strategy provides us an opportunity to expand our customer
base, thereby helping us in our constant effort to reduce transportation risk associated with our products and timely
delivery. The following chart shows the presence of our manufacturing facilities:
30
We believe, our strategically located manufacturing facilities allows us to achieve greater economies of scale and cost
efficiencies, reduce logistics cost, manage product flow and eliminate duplication of business functions.
Long standing client relations with pre-qualification credentials
We have long standing client relations with number of public sector undertakings such as Coal India Limited,
Singareni Collieries Company Limited, Neyveli Lignite Limited, NMDC Limited in the commercial Explosive
domain. In the defence sector we are the trusted partners of Bharat Dynamics Limited, DRDO and their laboratories,
Bharat Electronics Limited and ISRO. We believe that our long standing and growing relationships with such
customers is a testimony to our ability to successfully serve and meet their requirements. We have significantly
benefitted from our strong relationship with our customers, which has been one of our key growth drivers. We believe
that our long term relationships with various public sector and private sector clients enable us to better understand our
clients’ requirements and better evaluate the scope of work.
Our business and growth are significantly dependent on our ability to bid for and secure more orders. Bidding for such
orders are dependent on various criteria, including, financial and bid capacity, pre-qualification capability, and
equipment and past performance. Many of tenders are limited party bids and many time a single party bid for which
we can only participate pursuant to our prequalification credentials. We believe our long standing client relations with
pre-qualification credentials helps us in securing pre bid qualification and helps us in participating into various bids.
Further, we believe our long standing client relations not only helps us getting repeat orders but new orders from our
customers.
Leverage from our operation and maintenance services into our existing product offering
Past ten years, we are involved in the operation and maintenance services of propellant plants on Government Owned
and Company Operated basis (“GOCO”). We have entered into service contract agreement in December 2006 for
providing operations and maintenance services for solid propellant plant of Satish Dhawan Space Centre SHAR of
ISRO at Sriharikota, Andhra Pradesh for ten years with effect from July 2007. We have also entered into a services
contract with solid fuel complex of Advance System Laboratory at Jagdalpur in October, 2009 for 5 years and now
been renewed for further period of 5 years. As on March 31, 2017, 204 employees of our Company are working at
Satish Dhawan Space Centre SHAR of ISRO at Sriharikota, Andhra Pradesh and 220 employees of our Company at
Advance System Laboratory, Jagdalpur. We derived 8.92%, 9.62% and 9.21% of our total revenue for the Fiscal 2016,
Fiscal 2015 and Fiscal 2014, respectively from our operation and maintenance services of such propellant plants. We
believe, working at these facilities helps us in gaining experience in various fields and in development of new
applications in defence and aerospace sectors. We have received an order, from ISRO for supply of developmental
motor for use in the Polar Satellite Launch Vehicle. Further we believe these operation and maintenance services
agreement helped us in getting associated for new product development, which we believe provides us a competitive
advantage in the sectors we operate.
Experienced management and workforce
We are managed by a team of qualified and experienced professionals. Our management team has a successful track
record in the sector we operate. Our Promoter, Chairman and Managing Director, Dr. Amar Nath Gupta holds a
Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad. He is a recipient of
Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is bestowed with the
Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four decades of experience
in the product development and processes of explosives industry and is sphere heading the entire operations of the
Company since its inception. Our Deputy Managing Director, Tripuraneni Venkaiah Chowdary, has experience in
production of explosives, detonator, petrochemicals, coal tar pitches and solid propellants.
We have trained engineers and professionally qualified personnel experienced in commercial explosives, accessories
and propellants manufacturing. As on March 31, 2017, we had 1,163 permanent employees. Our Company is run on
an employee-enabled philosophy which has been one of the motivating factors. Our management team's skills include
marketing, sales management, strategic sourcing, supply chain management, and implementing expansion projects.
We believe that our experienced and dynamic senior management team have been key to our success. The vision and
foresight of our management enables us to explore and seize new opportunities and to introduce new products to
capitalize on the growth opportunities in high energy materials and defence sectors. For further details of our key
31
managerial personnel, please refer to chapter titled ‘Board of Directors and Senior Management’ beginning on page
145.
Some of our employees under operation and maintenance contracts, work on premises of ISRO and Advance System
Laboratory, which help them gain experiences. We believe our experienced management and workforce helps us in
conceptualising new products, application and making our current products more effective and cost efficient.
OUR STRATEGIES
Our strategy is to build upon our competitive strengths and business opportunities to become one of the high energy
materials companies in the world. We envisage to be a global leader in our segment through relentless research and
development of knowledge-based products for defence applications, mines, infrastructure and allied sectors. We
intend to achieve this by implementing the following strategies:
Leverage our experience and track record
With over three decades of manufacturing experience, we have been evolved to become an integrated manufacturing
company for commercial explosives. We will continue scanning the opportunities in bulk explosives market and will
increase the capacities in appropriate regions. We also gained considerable manufacturing experience in
manufacturing propellants in last one decade. We manufacture and supply solid propellants, explosive bolts, pyro
actuators, smoke markers, cable cutters and various other products for the Indian defence services. We have received
industrial licenses from DIPP to manufacture thirteen (13) new products including ammunition, warheads and other
defence products under explosive segment. We have received an order, from ISRO for supply of developmental motor
for use in the Polar Satellite Launch Vehicle and from the Ministry of Defence for supply of chaffs and flares. We
intend to leverage our experience and track record in the defence sector to foray into new products and actively
participate in the domestic tenders for new products and enhance our product portfolio. We further intend to leverage
our experience for manufacturing and supply of Pyro devices such as Pyro Cartridges; Explosive Bolts; Cable cutters;
Gas generators; Pyro Cutters; Smoke Generators; Smoke Markers; Squibs; BKNO3, ammunition such as 20mm;
23mm; 30mm; 30mm UBGL; 40mm UBGL; 120mm APFSDS; 125mm APFSDS; BMCS; Fuses; Mines either on our
own or in association with suitable domestic or international partners as and when domestic opportunities arises.
Participate into defence manufacturing program of Government of India
We are diversifying and expanding our manufacturing capabilities from commercial explosives to foray into
manufacturing and supply of new defence products like ammunitions in the future. Recently, we have received an
order from the Ministry of Defence for supply of chaffs and flares.
Pursuant to New Defence Procurement Policy, 2016, the Government of India, boost for private sector participation
for all types of defence acquisition i.e. ‘Buy Indian-IDDM’ (Indigenously Designed, Developed and Manufactured).
We have received Industrial license for manufacture of military fuses of all types including filling and assembling,
munition 20 mm and above and war heads of all types, manufacture of MOB dispersion devices , manufacture of
production of ammunition fired from artillery, tanks, helicopters, aircrafts and naval crafts (excluding small arms
ammunition), design, development, refurbishment and upgrade of ready to use rockets and missiles (tactical),
mines all type for army / navy / air force and bombs – conventional /semi-guided / smart bombs / bomb with multiple
war heads.
We intend to participate in indigenisation of defence supplies in the coming periods and we have already received
industrial licenses for manufacture of ammunition and other products at our proposed manufacturing facility at
Katepally, Yadadri district, Telangana. As on date of this Placement Document, some seven (7) tender are active for
the products for which we have industrial licenses. We intend to participate in current as well as future tenders and
other future opportunities and Participate into defence manufacturing program of Government of India.
Continually improve our research and design capabilities in order to focus on technology application
We are determined to meet our customers' demand for higher performance and quality products. Accordingly, we
place an emphasis on maintaining a high quality product design and development capability and a key part of our
strategy is to continually improve our research and design capabilities so that we can focus on providing advanced
32
technology, high value-added products. We intend to continue the expansion of installed capacity thereby increasing
our manufacturing capacities in order to, address emerging demand, leverage economies of scale, widen geographic
presence and provide unique and value-added products and services to our customers. We believe that there is
significant growth potential in manufacturing the aforesaid products and we intend to capitalize on the opportunities
presented by the markets.
We currently have certain agreement with IIT, Madras and BITS, Pilani for research and development of high energy
materials. We will continue to look for such opportunities to improve our research and design capabilities. We may in
future look for acquisition of certain niche companies which add to our capabilities in future. We have signed MOU
with Israel Aerospace Industries Limited (IAI), Licensing agreement and a Sales agreement with Lacroix, France for
the Counter measures (Chaffs and Flares), with Nexter Munitions, France by the Company for the production of Bi-
Modular Charge Systems. We will keep on looking such arrangement in future as well. By providing high-value
added and innovative products, we believe that we will be able to become a preferred supplier to our customers, thus
giving us the opportunity to consolidate our position with our customers and increase the share of their supply needs
that we fulfil. To enhance our R&D capabilities we are undertaking a number of short-term and long-term R&D
initiatives. We intend to improve our research and design capabilities in order to focus on technology application for
new product development and continue our focus on technology application either on our own or in consultation with
some partners.
Expanding our manufacturing capacity and capability
We have six manufacturing facilities in India located at Peddakandukuru, Telangana; Manuguru, Telangana;
Godavarikhani, Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu.
Presently, we hold industrial licenses to manufacture solid propellants at Peddakandukuru facility, Telangana and for
proposed manufacturing at Katepally facility, Yadadri district, Telangana. These facilities are primarily dedicated for
production of defence products. In order to cater to the requirements of space sector, we intend to set up a dedicated
plant to manufacture solid propellants at Chittoor district, Andhra Pradesh. In continuance of the same intent, Andhra
Pradesh Industrial Infrastructure Corporation (“APPIC”) has provisionally allotted 202 acres land to our Company at
Routhsurmala village in Chittoor district, Andhra Pradesh. Further, we have received industrial licenses from DIPP to
manufacture thirteen (13) new products including ammunition, warheads and other defence products under explosive
segment. Based on award of manufacturing rights we intend to expand our manufacturing capacity.
We also intend to increase our industrial explosive capacity and capability through application of most recent
technology. Supplementary, we intend to buy technology for some of the products for which we may not possess
capabilities as on date of this Placement Document. To expand our manufacturing capability, we may look for
backward integration and in house production of certain raw materials subject to receipt of requisite regulatory
approvals, licences and certifications. Additionally, we intend to enhance our capability and proposed to manufacture
thermal lining for defence and aerospace applications. We intend to add our capability and capacity for manufacturing
ammunition, solid propellants, aerial targets imitators, Pyrogen igniters, Pyro devices, counter measures like chaffs
and flares, high energy chemicals etc.
Continue to collaboration with domestic and international companies
We have received industrial licenses for ammunition, warheads and other defence products and are in the process of
collaborating with foreign defence companies for technologies to manufacture ammunition including Bi-Modular
Charge Systems (BMCS) and Armour-piercing fin stabilized discarding-sabot (APFSDS). We have been operating
and maintaining solid propellant plant of ISRO at SHAR, Sriharikota for the past 10 years. ISRO intends on increasing
its space explorations for which they require larger number of strap on motors. We have already received trial order
for one such motor and we are preparing to set up a solid propellant manufacturing plant for exclusive supply to ISRO.
Further, we have entered into a memorandum of understanding with Israel Aerospace Industries Limited for exploring
potential business opportunities. We have executed a memorandum of understanding with Israel Aerospace Industries
Limited, a licensing agreement and a Sales agreement with LaCroix, France for the sale of components necessarily
required for amiably of the chaff cartridges 50 mm, and letter of intent with Nexter Munitions, France for the
production of Bi-Modular Charge Systems. We intend to collaborate with various suitable domestic and international
companies for technological collaboration in order to increase our capabilities to manufacture a variety of products in
defence sectors. With the aid of strategic tie-ups with global majors, we intend to capitalize on growth opportunities
under the “Make in India” program.
33
34
SUMMARY OF FINANCIAL INFORMATION
The following selected information is extracted from and should be read in conjunction with our Financial Statements
and notes thereto prepared in accordance with Indian GAAP, which appear in the section “Financial Statements”
beginning on page 199 and should be read together with “Management's Discussion and Analysis of Financial
Condition and Results of Operations” beginning on page 74.
Standalone unaudited financial results for nine months ended December 31, 2016 and December 31, 2015
(₹ in lacs)
PARTICULARS December 31,
2016
December 31,
2015
1. Income from Operations
Gross sales / income from operations 17,379.66 13,834.60
Less: excise duty 1,644.67 1,248.75
Net sales / income from operations 15,734.99 12,585.85
Other operating income 90.07 40.74
Total income from operations 15,825.06 12,626.59
2. Expenses
Cost of raw materials consumed 8,826.60 6,872.35
Purchase of stock in trade 25.60 6.97
Changes in inventories of finished goods, work-in-progress and scrap (300.17) (26.98)
Employee benefits expense 3,635.05 2,937.61
Research and development expenses 79.53 68.20
Depreciation (net) and amortization expense 255.25 249.47
Other expenses 2,108.45 1,701.83
Total expenses 14,630.31 11,809.45
3. Profit from operations before other income, finance costs and
exceptional items
1,194.75 817.14
4. Other income 40.71 34.20
5. Profit from ordinary activities before finance costs and
exceptional items (3+4)
1,235.46 851.34
6. Finance costs 287.90 274.79
7. Profit from ordinary activities after finance costs but before
Exceptional items (5-6)
947.56 576.55
8. Exceptional items
(a) Profit on sale of land
(b) Payments under voluntary retirement scheme
-
83.51
(369.56)
9. Profit from ordinary activities before tax (7+8) 947.56 290.50
10. Tax expense 301.93 62.98
11. Net profit from ordinary activities before tax (9-10) 645.63 227.52
12. Extraordinary items (net of tax expenses) - -
13. Net profit for the period (11-12) 645.63 227.52
14. Paid-up equity shares capital (face value of ₹ 10/-) at the end
of the quarter / year
885.86 885.86
15. Reserves excluding revaluation reserves as per balance sheet of
Previous accounting year
- -
16. (i) Earning per share (before extraordinary items) (of ₹ 10/-
each) (not annualized)
a) Basic
b) Diluted
7.29
7.29
2.57
2.57
(ii) Earning per share (after extraordinary items) (of ₹ 10/-
each) (not annualized)
a) Basic
b) Diluted
7.29
7.29
2.57
2.57
35
Consolidated balance sheet as at March 31, 2016
(₹ in lacs)
PARTICULARS March 31, 2016
EQUITY AND LIABILITIES
Shareholders' funds
Share capital 885.86
Reserves and surplus 5,656.83
6,542.69
Non-current liabilities
Long-term borrowings 31.85
Deferred tax liabilities (Net) 408.50
Other long – term liabilities 73.35
Long – term provisions 233.84
747.54
Current liabilities
Short-term borrowings 2,177.36
Trade payables:
Total outstanding dues of micro enterprises and small enterprises 17.31
Total outstanding dues of creditors other than micro enterprises and small enterprises 1,170.63
Other current liabilities 2,055.11
Short-term provisions 257.71
5,678.12
Total 12,968.35
ASSETS
Non-current assets
Fixed assets
Tangible assets 3,942.26
Intangible assets 2.94
Net block 3,945.20
Capital work-in-progress 241.82
4,187.02
Non-current investments 522.77
Long-term loans and advances 336.13
Other non-current assets 175.33
5,221.25
Current assets
Inventories 2,232.61
Trade receivables 4,237.24
Cash and cash balances 664.89
Short – term loans and advances 550.33
Other current assets 62.03
7,747.10
Total 12,968.35
36
Consolidated statement of profit and loss as at March 31, 2016
(₹ in lacs) PARTICULARS March 31, 2016
Revenue
Revenue from operations
Sale of Products 18,370.07
Sale of traded goods 38.01
Sale of services 1,808.86
Other operating revenues 68.20
20,285.14
Less: Excise duty 1,786.49
18,498.65
Other income 46.45
Total Revenue 18,545.10
EXPENSES
Cost of raw materials consumed 9,688.80
Purchase of stock in trade 34.49
Changes in inventories of finished goods, work-in-progress and scrap 418.48
Employee benefits expense 4,031.54
Finance costs 374.49
Research and development expense 89.78
Depreciation (net) and amortization expense 332.41
Other expenses 2,480.02
Total Expenses 17,450.01
Profit before exceptional items and tax 1,095.09
Exceptional items (net) 269.46
Profit before tax 825.63
Tax expense
Current tax 445.00
Deferred tax (178.77)
Income tax adjustments (2.90)
263.33
Profit after tax and before share of associate 562.30
Add: Share in profit of associate 2.78
Profit after tax and share of profit of associate 565.08
Earnings per equity share (Face value: ₹ 10/- per share)
Basic – ₹ 6.38
Diluted – ₹ 6.38
37
Consolidated cash flow statement as at March 31, 2016
(₹ in lacs) PARTICULARS March 31, 2016
A. Net cash flow from operating activities
Net profit before exceptional items and before tax 1,095.09
Adjustments for
Depreciation 332.41
Interest expense 251.68
Interest income (30.39)
Provision for liabilities no longer required, written back (3.82)
Book deficit on assets discarded 3.94
(Profit) on sale of assets (100.10)
Unrealized foreign exchange gain(net) (7.23)
Operating Profit Before Working Capital Changes 1,541.58
Adjustments for
Decrease in inventories 181.72
(Increase) in trade receivables (901.74)
(Increase) in long-term loans and advances (42.05)
(Increase) in other non-current assets (47.40)
(Increase) in short-term loans and advances (236.76)
(Increase) in other current assets (40.04)
Increase in trade payables 378.99
Increase in other current liabilities 743.09
Increase in short-term provisions 1.87
Increase in long-term provisions 56.29
(Decrease) in other long-term liabilities (2.62)
Cash generated from operations 1,632.93
Income tax paid (342.03)
Net cash generated from operations before exceptional items 1,290.90
Exceptional items (net) (269.46)
Total 1,021.44
B. Cash Flow From Investing Activities
Capital expenditure (514.76)
Proceeds from disposal of fixed assets 115.27
Investments in bank deposits (original maturity of more than three months) (net) (36.05)
Interest received 26.22
Total (409.32)
C. Cash Flow From Financing Activities
Proceeds/(repayment) of long-term borrowings (net) (30.65)
Increase in short-term borrowings 395.54
Interest paid (217.56)
Dividend and dividend tax paid (417.81)
Total (270.48)
D. Exchange difference on translation of foreign currency cash and cash equivalents (1.92)
E. Cash and cash equivalents at the end of the year
Net increase in cash and cash equivalents 339.72
Cash and cash equivalents at the beginning of the year 27.50
Total 367.22
Standalone balance sheet as at March 31, 2016, March 31, 2015 and March 31, 2014
38
(₹ in lacs)
PARTICULARS March 31, 2016 March 31, 2015 March 31, 2014
EQUITY AND LIABILITIES
Shareholders' funds
Share capital 885.86 885.86 835.86
Reserves and surplus 5,659.27 5,305.00 4,809.80
Money received against share warrants - - 77.21
6,545.13 6,190.86 5,722.87
Non-current liabilities
Long-term borrowings 31.85 62.50 286.32
Deferred tax liabilities (Net) 408.50 587.27 638.59
Other long – term liabilities 73.35 75.97 103.98
Long – term provisions 233.66 177.55 124.80
747.36 903.29 1,153.69
Current liabilities
Short-term borrowings 2,177.36 1,781.82 737.82
Trade payables:
Total outstanding dues of micro enterprises and small
enterprises
17.31 8.16 -
Total outstanding dues of creditors other than micro
enterprises and small enterprises
1,169.62 806.15 811.95
Other current liabilities 2,055.01 1,276.32 1,897.82
Short-term provisions 257.52 359.85 408.69
5,676.82 4,232.30 3,856.28
Total 12,969.31 11,326.45 10,732.84
ASSETS
Non-current assets
Fixed assets
Tangible assets 3,942.11 4,094.23 4,113.26
Intangible assets 2.94 4.14 1.37
Net block - - 4,114.63
3,945.05 4,098.37 8,229.26
Capital work-in-progress 241.82 41.40 166.17
4,186.87 4,139.77 4,280.80
Non-current investments 525.00 520.00 520.00
Long-term loans and advances 336.13 168.55 283.54
Other non-current assets 175.33 161.38 124.33
5,223.33 4,989.70 5,208.67
Current assets
Inventories 2,232.61 2,414.33 1,838.16
Trade receivables 4,237.24 3,336.08 2,949.91
Cash and cash balances 664.77 253.00 261.59
Short – term loans and advances 549.33 313.57 359.29
Other current assets 62.03 19.77 115.22
7,745.98 6,336.75 5,524.17
Total 12,969.31 11,326.45 10,732.84
39
Standalone statement of profit and loss as at March 31, 2016, March 31, 2015 and March 31, 2014
(₹ in lacs)
PARTICULARS March 31, 2016 March 31, 2015 March 31,
2014
Revenue
Revenue from operations
Sale of Products 18,370.07 14,613.07 14,234.10
Sale of traded goods 38.01 150.99 178.39
Sale of services 1,808.86 1,576.28 1,468.92
Other operating revenues 68.20 49.71 69.35
20,285.14 16,390.05 15,950.76
Less: Excise duty 1,786.49 1,440.89 1,410.38
18,498.65 14,949.16 14,540.38
Other income 46.45 74.04 140.67
Total Revenue 18,545.10 15,023.20 14,681.05
EXPENSES
Cost of raw materials consumed 9,688.80 8,127.21 7,135.47
Purchase of stock in trade 34.49 123.72 174.89
Changes in inventories of finished goods, work-in-
progress and scrap
418.48 (289.86) (10.38)
Employee benefits expense 4,026.90 3,557.53 3,485.68
Finance costs 374.49 236.08 236.15
Research and development expenses 89.78 73.87 69.15
Depreciation (net) and amortization expense 332.39 330.07 235.22
Other expenses 2,479.47 2,102.35 2,059.37
Total Expenses 17,444.80 14,260.97 13,385.55
Profit before exceptional items and tax 1,100.30 762.23 1,295.50
Exceptional items (net) 269.46 - -
Profit before tax 830.84 762.23 1,295.50
Tax expense
Current tax 445.00 255.00 325.00
Deferred tax (178.77) (16.04) 76.03
Income tax adjustments (2.90) (8.78) (26.84)
263.33 230.18 374.19
Profit after tax 567.51 532.05 921.31
Earnings per equity share (Face value: ₹ 10/- per
share)
Basic – ₹ 6.41 6.10 11.25
Diluted – ₹ 6.41 6.10 11.17
40
Standalone cash flow statement as at March 31, 2016, March 31, 2015 and March 31, 2014
(₹ in lacs)
PARTICULARS March 31, 2016 March 31, 2015 March 31,
2014
A. Net cash flow from operating activities
Net profit before exceptional items and before tax 1,100.30 762.23 1,295.50
Adjustments for
Depreciation 332.39 330.07 235.22
Interest expense 251.68 193.69 176.76
Interest income (30.39) (26.87) (20.09)
Provision for liabilities no longer required, written
back (3.82)
(4.15) -
Dividend on non-current investment - (13.03) -
Book deficit on assets discarded 3.94 2.92 -
(Profit) / Loss on sale of assets (net) (100.10) 1.01 0.12
Loss on sale of investments - - 68.45
Provision for diminution in book value of investments
no longer required, written back -
- (68.45)
Unrealized foreign exchange gain (net) (7.23) (1.19) 1.25
Operating Profit Before Working Capital Changes 1,546.77 1,244.68 1,688.76
Adjustments for
(Increase) / Decrease in inventories 181.72 (576.17) (155.41)
(Increase) in trade receivables (901.74) (385.38) (1,203.93)
(Increase) / Decrease in long-term loans and advances (42.05) 22.40 12.88
(Increase) / Decrease in other non-current assets (47.40) 32.97 (76.81)
(Increase) / Decrease in short-term loans and
advances (235.76)
45.72 20.48
(Increase) / Decrease in other current assets (40.04) 92.31 (71.42)
Increase in trade payables 377.98 2.44 104.67
Increase / (decrease) in other current liabilities 742.99 (468.18) 514.12
Increase in short-term provisions 1.68 3.31 (47.23)
Increase in long-term provisions 56.11 52.75 39.84
(Decrease) in other long-term liabilities (2.62) - (3.50)
Cash generated from operations 1,637.64 66.85 822.45
Income tax paid (342.03) (257.15) (213.89)
Net cash generated from operations before
exceptional items
1,295.61 (190.30) 608.56
Exceptional items (net) (269.46) - -
Total 1,026.15 (190.30) 608.56
B. Cash Flow From Investing Activities
Capital expenditure (514.59) (331.43) (389.46)
Proceeds from disposal of fixed assets 115.27 4.92 0.58
Investments in bank deposits (original maturity of
more than three months) (net) (36.05)
(53.23) (12.08)
Interest received 26.22 26.21 19.79
Investment in joint venture (5.00) - -
Dividend income on non-current investment - 13.03 -
Total (414.15) (340.50) (381.17)
C. Cash Flow From Financing Activities
Proceeds/(repayment) of long-term borrowings (net) (30.65) (223.82) (118.61)
Increase in short-term borrowings 395.54 1,044.00 57.28
Proceeds from issue of share capital including
securities premium -
231.64 142.70
Proceeds from issue of share warrants - - 77.21
Interest paid (217.56) (238.44) (172.10)
41
PARTICULARS March 31, 2016 March 31, 2015 March 31,
2014
Dividend and dividend tax paid (417.81) (279.83) (237.72)
Total (270.48) 533.55 (251.24)
D. Exchange difference on translation of foreign
currency cash and cash equivalents (1.92)
(0.13) (0.13)
E. Cash and cash equivalents at the end of the year
Net increase in cash and cash equivalents 339.60 2.62 (23.98)
Cash and cash equivalents at the beginning of the year 27.50 24.88 48.86
Total 367.10 27.50 24.88
42
RISK FACTORS
This offering and an investment in Equity Shares involve a high degree of risk. You should carefully consider the risks
described below as well as other information contained in this Placement Document before making an investment
decision in the Issue. If anyone or some combination of the risks described below actually occurs, our business,
prospects, financial condition, results of operation and cash flows could be seriously harmed, the trading price of our
Equity Shares could decline and you may lose all or part of your investment. Unless specified in the risk factors below,
we are not in a position to quantify the financial implications of any of the risks mentioned below. We have described
the risks and uncertainties that our management currently believes are material but the risks set out in this Placement
Document may not be exhaustive or complete and additional risks and uncertainties not presently known to us, or
which we currently deem to be immaterial, may arise or may become material in the future. This section should be
read together with “Industry Overview”, “Business” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” as well as the financial statements, including the notes thereto, and other
financial information included elsewhere in this Placement Document. This Placement Document also contains
forward-looking statements that involve risks and uncertainties. Our results could differ materially from such forward-
looking statements as a result of certain factors including the considerations described below and elsewhere in this
Placement Document. Additional risks not described below or not currently known to us or that we currently deem
immaterial may also adversely affect the market price of our Equity Shares. In making an investment decision,
prospective investors must rely on their own examination of our Company and the terms of the Issue including the
merits and the risks involved.
In this section, any reference to “we”, “us” or “our” refers to Premier Explosives Limited, as the context requires,
and any reference to "Company" refers to Premier Explosives Limited.
Product manufactured by us are in highly regulated sector. Any failure to obtain registrations for our products or
our inability to comply with the regulations could adversely affect our business, results of operations, cash flows
and financial condition.
We, primarily, manufacture and supply a wide range of explosives and accessories including bulk and cartridge
explosives, cast boosters, detonators, detonating fuse etc. catering to mining and infrastructure sectors, and solid
propellants used in strategic missiles and rockets for defence and aerospace sectors. We have, in the past, and will, in
the future, continue to focus on seeking registrations for explosives and related products to widen our product portfolio.
Recently, we have received industrial licenses from DIPP to manufacture thirteen (13) new products including
ammunition, warheads and other defence products under explosive segment. The legal and procedural requirements
for seeking registration is fairly complex, stringent and time consuming.
Further, the registration process is capital intensive and requires us to make significant investments. We invest
substantial capital on creating the dossier and registration fees, laboratory tests etc. to ensure compliance with
applicable regulatory requirements, safety standards etc. If we are unable to obtain the necessary registration in a
timely manner or at all, we may lose any such market opportunity. Consequently, our returns may be lower than
anticipated which may result in our failure to recover the costs incurred towards seeking the registration, which could
adversely affect our growth, profitability, financial condition and market position.
The quality of raw materials and final products are open to verification by our customers. Our customers carry out
quality inspections of raw materials and final products. In case the raw materials and final products does not comply
with the quality norms prescribed by the government or are defective, it could lead to issuance of show cause notices.
Failure to meet the quality standards could lead to suspension of sales of those batches of our products. Any such
events are likely to impact our reputation, business, results of operations and cash flows.
Most of the applicable regulations are stringent and they may become stricter in the future. The penalties for non-
compliance with these regulations can vary from revocation or suspension of the registration to imposition of fines or
confiscation of the products. Moreover, if we fail to comply with various conditions attached to such registrations and
permissions once received, the relevant regulatory body may suspend, curtail or revoke our ability to manufacture
such products. If we fail to obtain or comply with the conditions in such registrations and other related approvals, in
a timely manner or at all, our business, results of operations, cash flows and financial condition could be adversely
affected.
43
Some of raw materials used and products manufactured by our Company are hazardous in nature. If any accidents
occur involving such hazardous raw materials and products, we may be held liable for consequent damages and
litigation.
Our business is prone to accidents as some of raw materials used in our manufacturing facilities and products are
highly inflammable and hazardous in nature. We use ammonium nitrate and ammonium perchlorate as a primary raw
material for manufacturing commercial explosives and propellants, which can be very volatile and extremely
hazardous. Further some of products manufactured by us are highly inflammable. Any mishandling or accident while
storing or transporting raw materials or finished products may cause severe damage or injury to property, environment
and human health, as well as a possible disruption of supplies and markets. For instance, on July 16, 2012, there was
an accident at our ASA section of detonator plant at Peddakandukuru, Telangana resulting in damage of assets and
loss of stocks and production as well as human capital. Such an event could result in civil lawsuits, fines, penalties
and regulatory enforcement proceedings, all of which could lead to significant liabilities.
Damage to persons, equipment or property or other disruption of our ability to produce or supply our products could
result in a significant decrease in operating revenues and significant additional cost to replace or repair and insure our
assets, which could have a material adverse effect on our results of operations and financial condition. We follow all
safety norms which include distribution of manufacturing activities into small portion housing them into distantly
placed buildings so as to contain the impact of any mishap. Further, we depend on third party storage and transportation
capabilities to store and transport raw materials and finished products. While we maintain comprehensive general
liability insurance policy for our products, any mishandling of raw materials and finished products by these carriers
could affect our business adversely and liabilities incurred as a result of these events have the potential to adversely
impact our business, results of operations, cash flows and financial condition.
Our business is significantly dependent on various Public Sector Undertakings and Government entities and could
be materially and adversely affected if there are adverse changes in the policies of such Government entities.
We manufacture and supplies wide range of industrial explosives, accessories and propellants to various Public Sector
Undertakings and Government entities. The Government or State Governments in India are making substantial
investments in mining, infrastructure and defence projects. Consequently, our business is highly dependent on projects
undertaken by Government, State Governments and associated entities. In fiscal 2016, 2015 and 2014, the total income
from contracts with government entities and public sector undertakings was ₹ 17,486.48 Lac, ₹ 13,141.49 Lac, ₹
11,704.86 Lac, comprising 79.15%, 73.71% and 67.74%, respectively, of the total income, for such years. We expect
that contracts awarded by government entities and public sector undertakings will continue to account for a high
proportion of our business. Although the Government of India has encouraged greater private sector participation in
the defence and aerospace sectors, and in the past has increased budgetary allocation in such sectors, there can be no
assurance that this will continue.
The projects in which Government and associated entities participate may be subject to delays, extensive internal
processes, policy changes, Government or external budgetary allocation and insufficiency of funds. So long as
Government entities are responsible for awarding contracts to us and are a critical party to the development and
ongoing operations of order, our business is directly and significantly dependent on projects awarded by them. Further,
with reference to tenders where we have submitted successful bids, there may be delays in award of the orders and/or
notification of appointed dates, which may result in our having to retain resources which remain unallocated, thereby
affecting our results of operations. Any adverse changes in the Government or State Government policies or the
budgetary allocation made by them for defence and mining sectors may lead to slowdown of our orders and could also
materially and adversely affect our financing, capital expenditure, revenues, development, cash flows or operations
relating to our existing projects as well as our ability to participate in competitive bidding for our future projects.
Manufacturing and supply of commercial explosives and propellants are subject to strict quality requirements and
any failure to comply with quality standards may lead to cancellation of existing and future orders.
We are currently engaged in manufacturing of commercial explosives and accessories used in mining and
infrastructure sector and solid propellants used in defense based on technical specifications and designs provided by
our customers. Given the nature of our products and sector in which we operate, our customers have high and exacting
standards for product quality and quantity as well as delivery schedules. Our manufacturing facilities are accredited
with ISO 9001; 2008 for manufacture and supply of explosives like industrial explosives, boosters, detonators,
44
detonating fuse, propellants, special devices and explosive chemicals and ISO 9001:2008, AS9100C for development,
manufacture and supply of high energy materials (propellants, pyrotechnics, special devices and other chemicals) for
aerospace and defence applications. Certain of our products are also certified to be compliant with various national
and international quality standards. Such specifications and standards of quality is an important factor in the success
and wide acceptability of our products.
Adherence to quality standards is a critical factor in our manufacturing process as any defect in products manufactured
by our Company or failure to comply with the design specifications of our customers may lead to reworking or
cancellation of the supply orders placed by our customers or non-renewal of contracts or reduction in the volume of
orders given to us or disqualify us to participate in future tender. For instance, purchase contracts with some of our
customers contain provisions whereby our customer will levy the penalty of 1% of the supply value if the sample fails
to perform quarterly random tests. Further, our agreements with our customer contains a warranty provision such as
i) to comply with all specifications, ii) be free from defects in materials and workmanship iii) to comply with
applicable health, safety and environment laws, rules and regulations applicable to manufacturing of the components
etc. Failure to deliver the products as per specifications of our customers may result in invocation of such warranties.
Further, any failure to make timely deliveries of products as per our customers’ requirements could result in the
cancellation or non-renewal of purchase contracts.
We are subject to a stringent quality control mechanism at each stage of the manufacturing process and are required
to maintain the quality and precision level for each product. As a result, we are required to incur significant expense
to maintain our quality assurance systems such as periodic checking to ensure there is no defect, forming a separate
team of engineers responsible for quality assurance both in the manufacturing facilities, plant and machineries, and in
the manufacturing processes. We will continue to incur substantial portion of our future revenues to manage our
product quality and to maintain our existing quality control which may impact our profitability.
We operate mainly on a tender based business. There are several inherent risks associated with a tender-based
business which could affect our profit margins thereby materially affecting our business and results of operations.
We derive majority of our revenue through participation into the tenders. Any tender-based business is subject to
certain inherent risks. Considering that the commercial explosives and propellant manufacturing industry is highly
competitive and it is critical that we maintain a low cost bid rating to be able to bid and procure contracts, there can
be no assurance that we will be successful each time in biding and procuring contracts under the tenders. Further, there
may be instances where the tenders may be subject to unrealistic covenants in terms of time, cost or performance and
our negotiating ability may be limited. There are several inherent risks associated with a tender-based business of this
kind which could affect our profit margins thereby materially effecting our business and results of operations. Tenders
are typically for a long term, and while we endeavor to achieve suitable escalation and other contractual protection to
provide for increased costs and risks during execution, there can be no assurance that we would receive such
contractual protection, or that the same would be adequate to meet the contingencies arising in the course of contract
execution, to enable us to meet our costs and to provide for a reasonable profit margin on the same. Our inability to
successfully bid and procure contracts or sufficiently provide for increased costs and risks to provide for suitable
margins may adversely affect our business and results of operations.
Failure to meet our production timelines could impact our reputation and could also lead to penalty or cancellation
of our contracts.
We manufacture and supply wide range of industrial explosives and accessories including bulk and cartridge
explosives, cast boosters, detonators, detonating fuse etc. We also manufacture solid propellants used in tactical and
strategic missiles and rockets for defence services. As per the terms of certain contracts, we are expected to supply
varying quantities at different points in time, as per the schedule provided in the contract. For instances, if the supply
of the products not being effected within the contractual delivery schedule, liquidated damage at the rate of 1% of the
basic price, of the value of the material per week of delay or part thereof subject to a maximum of 10% is recoverable
from our Company without prejudice to the rights of the purchaser to procure the balance material at the risk and cost
of our Company. Our operations are streamlined to take into account our delivery schedule. While a certain amount
of time is always calculated as buffer, any serious disruption in our manufacturing units will impact our ability to meet
our production timelines. Such failure could adversely affect our reputation and require us to incur additional charges/
penalty which may adversely impact our profit margins. Further, this may also lead to cancellation of contracts.
45
Our inability to successfully diversify our product offerings to defence and aerospace sectors may adversely affect
our growth and negatively impact our profitability.
Presently, we manufacture commercial explosives, accessories for industrial and mining sectors, and solid propellants
for defence applications. We manufacture and supply solid propellants for missiles like Akash, Astra, Long Range
Surface to Air Missile, etc. and have delivered the 1000th booster grain for Akash missile on July 9, 2016 to Bharat
Dynamics Limited. We have received an order, from ISRO for supply of developmental motor for use in the Polar
Satellite Launch Vehicle and from Ministry of Defence for supply of chaffs and flares. As part of our growth strategy,
we intend to further diversify/expand our business operations to defense and aerospace sectors and to participate into
defense manufacturing program/ make in India program of Government of India through bidding into various tenders.
We are also in the process of setting up a new facility at Katepally, Yadadri district, Telangana to manufacture
ammunition and other products for which we have already received industrial licenses from DIPP. In the event of
insufficient demand for such products or any change in policy or less attention from the Government on defence or
aerospace sectors, there can be no assurance that we will be successful in selling the increased production of such
products. This may result in lower capacity utilization and adversely affect our business, financial condition and result
of operations. As a result, we may not be able to achieve projected or satisfactory levels of sales, profits and/or return
on investment on our new products since there is no assurance that we will receive orders from our customers. Further,
we cannot assure you that the transition of our manufacturing facilities and resources to fulfill production under new
product programs will not impact production rates or other operational efficiency measures at our facilities.
Venturing into a new product line may require methods of operations and marketing and financial strategies different
from those currently employed in our Company, therefore we cannot assure you that we will be able to successfully
develop our new product lines. Further, we will be subject to the risks generally associated with new product
introductions and applications, including unproven know-how, unreliable technology, delays in product development
and possible failure of products to operate properly.
Our Order Book may not be representative of our future results. Contracts included in our Order Book may be
delayed, cancelled or not fully paid for by our clients, which could materially harm our cash flow position, revenues
and earnings.
As of March 31, 2017, we had an Order Book of ₹ 24,300.12 Lacs, consisting an order book for supply of explosives
and explosives accessories and propellants. Our Order Book as of any particular date consists of value of unexecuted
portions of our outstanding orders. Our Order Book does not necessarily indicate future earnings related to the
performance of that work. We could also encounter problems executing the project as ordered, or executing it on a
timely basis. Moreover, factors beyond our control or the control of our clients could postpone a contract or cause
cancellation of such project fully or partially, including delays or failures to obtain necessary permits, authorizations,
permissions, and other types of difficulties or obstructions for successful completion of such contracts.
These changes in the Order Book could be as a result of exercises of our clients’ discretion, problems we encounter
in contract execution, or reasons outside our control or the control of our clients, we cannot predict with certainty
when, if or to what extent an Order Book project will be performed. Even relatively short delays or surmountable
difficulties in the execution of a contract could result in our failure to receive on a timely basis or at all, all payments
otherwise due to us.
Volatility in the supply and pricing of our raw materials may have an adverse effect on our business, financial
condition and results of operations.
The principal raw materials used in our manufacturing process include ammonium nitrate, furnace oil, calcium nitrate
– melt, ammonium perchlorate. For nine months period ended December 31, 2016 and Fiscals 2016, 2015 and 2014
ammonium nitrate accounted for 53.85%, 59.79%, 55.04% and 49.45%, respectively, furnace oil accounted for 3.79%,
3.44%, 5.20%, and 5.92%, respectively, and GI wires accounted for 1.92%, 1.53%, 1.83% and 2.70%, respectively,
of our total cost of raw material consumed. We procure all these most of raw materials from third party domestic
suppliers or International market based on the availability and cost of such raw materials. For nine months period
ended December 31, 2016 and Fiscals 2016, 2015 and 2014 and 2013, imports of raw material accounted for 19.34%,
8.23%, 0.02% and 0.01%, respectively, of our total cost of raw material consumed. We do not have long term
agreements with any of our raw material suppliers and we purchase such raw materials on spot order basis. While we
are not significantly dependent on any single raw material supplier, raw material supply and pricing can be volatile
46
due to a number of factors beyond our control, including global demand and supply, general economic and political
conditions, transportation and labor costs, labor unrest, natural disasters, competition, import duties, tariffs and
currency exchange rates, and there are inherent uncertainties in estimating such variables, regardless of the
methodologies and assumptions that we may use. Therefore, we cannot assure you that we will be able to procure
adequate supplies of raw materials in the future, as and when we need them on commercially acceptable terms.
In terms of our understating with most of our customers, we have flexibility to pass on raw-material cost fluctuations
to them through quarterly pricing arrangements. However any inability to pass on the increased costs of raw materials
to our customers in future, may affect our profitability.
Pricing for ammonium nitrate, furnace oil, calcium nitrate – melt, ammonium perchlorate and certain industrial
chemicals are linked to internationally traded commodities (e.g. ammonia); price fluctuations in these products could
adversely affect the prices of the finished product. The pricing of internationally traded commodities is based on
international benchmarks and is affected by global supply and demand forces.
Further, due to nature of our raw materials, we do not have warehousing capabilities for raw materials at any of our
manufacturing facilities and maintain an inventory stock for longer period. As a result, in the event there is any
disruption in the timely supply of our raw materials due to transportation strikes or any other external factors, we may
not be able to dispatch our orders on time which may result in monetary claims from our customers. We are also
dependent on our raw materials, parts, sub-assemblies, and components being of high quality and meeting relevant
technical specifications and quality standards. Production errors may lead to compensation claims and significantly
damage our reputation and the confidence of present and potential customers and could have an adverse effect on our
business, financial condition, results of operations and cash flows.
Our bids may not always be accepted. Our financial condition would be materially and adversely affected if we fail
to obtain new contracts.
As a part of our business, we bid for tenders on an ongoing basis. Tenders are awarded on the basis of competitive
bidding processes and satisfaction of prescribed pre-qualification criteria. While past performance, technological
capacity and size of previous contracts in similar projects, financial strength like net-worth and work experience of
execution team, as well as reputation and experience and sufficiency of financial resources are important
considerations in customer decisions, there can be no assurance that we would be able to meet such qualification
criteria. Further, once the prospective bidders satisfy the pre-qualification requirements of the tender, the project is
usually awarded based on the basis of the quote by the prospective bidder and reverse auction. We generally incur
significant costs in the preparation and submission of bids, which are one-time costs. For example, in the event of bid
for a defence product like propellants, we have to check feasibility of such products, design and development of the
project and as provide us with drawings and specification. Our Company would provide the standard acceptance test
procedure (“ATP”) with at least one month before first delivery. Our Customer reserves the right to modify the ATP.
The item should be of the latest manufacture, confronting to the current production standard and having 100% defined
life at the time of delivery. Our research and design center enables us to further analysis of the various aspects of the
products and allows us to make a more informed bid. We cannot assure you that we would bid where we have been
prequalified to submit a bid or that our bids, when submitted or if already submitted, would be accepted. If we are not
able to pre-qualify in our own right to bid for large defence orders, we may be required to partner and collaborate with
other companies in bids for such tender.
Further, for some of tenders we may bid in association with some of domestic and/or international players. For
example, we have memorandum of understanding with Israel Aerospace Industries Limited for exploring potential
business opportunity. We have also signed a licensing agreement and sales agreement with Etienne Lacroix Tous
Artifices, France for the product-Chaff Cartridges 50 mm, with Nexter Munitions, France for the production of Bi-
Modular Charge Systems for its sale to and end use by the Ministry of Defense. Our association with these domestic
and / or international players may not be successful or fruitful.
Our business is substantially dependent on certain key clients, the loss of any significant clients or reduction of
their purchase capacity may have a material and adverse effect on our business and results of operations.
We derive a high proportion of revenues from a small number of customers. The top ten customers contributed
75.88%, 79.96% and 76.50% of our total income in Fiscal 2016, 2015 and 2014. We manufacture and supplies wide
47
range of explosives, accessories for industrial and mining sectors, and solid propellants for defence applications. These
contracts are provided by public sector undertakings such as the Coal India Limited, Singareni Collieries Company
Limited, Neyveli Lignite Limited, NMDC Limited, Bharat Dynamics Limited etc. These contracts are typically
awarded through a bidding process where the tender documents specify certain pre-qualification criteria which may
vary from customer to customer and from project to project. Our major customers vary from period to period
depending on the demand and completion schedule of contracts. The loss of a significant client or a number of
significant clients or projects from such clients for any reason, including as a result of disqualification or dispute, may
have a material and adverse effect on our business and results of operations. There can be no assurance that our
business relationships with our key customers would continue in similar manner.
If we are unable to effectively manage our working capital cycles or generate sufficient cash flow to satisfy any
increased working capital requirements and make required payments for our business, our results of operations
may be negatively impacted.
Our business is capital intensive including working capital requirement for sourcing our raw materials and
manufacture and supply of our products before we receive payments from our customers. Depending upon our product
range and payment terms of our customers, we have medium to long term working capital cycles and consequent
working capital requirements. We normally provide credit period of thirty to sixty days, however any delay in
payments by such customers over the usual payment cycles may also affect the results of our operations and financial
conditions. Our working capital requirements may also increase in the event we undertake a large number of
simultaneous orders in the event of growth in our business. For instance, as at March 31, 2016, 2015 and 2014, our
working capital was ₹ 1,667.99 Lac, ₹ 1,522.20 Lac and ₹ 585.11 Lac, constituting 8.99%, 10.13% and 3.99% of our
total income for the respective years.
In certain cases our tenders require us to incur significant amounts of working capital on account of contractual terms.
It is customary in the industry in which we operate to provide bank guarantees or performance bonds in favour of
clients to secure obligations under contracts. Typically, we are required to issue bank guarantees or performance bonds
varying from 5 – 10 % of the contract value at the time of commencement of the contract. The amount and period of
retention money varies from customer to customer on the basis of contract entered into by us. These may extend,
wholly or partly, during the contract period and even after the date of completion of the project for an additional period
of twelve to thirty six months. Further, we also need to provide for deposit as an earnest money for participation in
bids. As on March 31, 2017, ₹ 86.84 Lacs have been deposited with our clients as an earnest money for participation
in bids. Further, some of our customers may not off take the product orders for considerable period of time.
Our working capital requirements may also increase if, in certain contracts, payment terms include reduced advance
payments or payment schedules that specify payment towards the end of a contract or are less favorable to us. Delays
in progressive payments or release of retention money or bank guarantees from our clients may increase our working
capital needs. To secure our bank guarantees, banks require us to hold certain amounts in the form of fixed deposits
as margin money and also pay certain bank charges up front. This also increases our working capital requirements.
We may also experience significant cash outflows to satisfy any indemnity and liability claims. Due to any liquidity
issues, we might be unable to arrange for the appropriate earnest money deposit which might affect our ability to bid
for new contracts. We may need to incur additional indebtedness and capital expenditures in the future to satisfy our
working capital needs. Continued increases in working capital requirements may have an adverse effect on our
financial condition and results of operations.
Our revenues depend upon the award of new contracts and renewal of existing contracts. Consequently, our failure
to win new contracts or failure to renew the existing contracts will adversely affect our results of operations and
our cash flows may fluctuate materially from period to period.
Our revenues are derived primarily from contracts awarded to us on a project-by-project basis valid from one to three
years. Generally, it is very difficult to predict whether and when we will be awarded a new contract since many
potential contracts involve a lengthy and complex bidding and selection process that may be affected by a number of
factors, including changes in existing or assumed market conditions, financing arrangements, technical and financial
qualifications, governmental approvals and environmental matters. For instances, we have entered into a running
contract for supply of bulk explosives to the subsidiary companies of Coal India Limited, valid for 2 years commencing
from August 1, 2015 to July 31, 2017.
48
We have entered into service contract agreement in December 2006 for providing operations and maintenance services
for solid propellant plant of Satish Dhawan Space Centre SHAR of ISRO at Sriharikota, Andhra Pradesh for ten years
with effect from July 2007. We have also entered into a services contract with solid fuel complex of Advance System
Laboratory at Jagdalpur in October, 2009 for 5 years and now been renewed for further period of 5 years. We derived
8.92%, 9.62% and 9.21% of our total revenue for the Fiscal 2016, Fiscal 2015 and Fiscal 2014, respectively from our
operation and maintenance services of such propellant plants. If we fail to renew the abovementioned service contract
or renew such service contracts on terms and conditions that are unfavorable to us or is terminated prior to its tenure,
our business and results of operations may be adversely affected.
Because our revenues are derived significantly from these contracts, our results of operations and cash flows may be
adversely affected or fluctuate materially from period to period depending on our ability to win new contracts. For
example, seven large tenders are active by the Government of India for the products for which we have industrial
licenses. We intend to participate in such current as well as future tenders. The uncertainty associated with the award
of new contracts may increase our cost of doing business. Further, we may decide to maintain and bear the cost of a
workforce in excess of our current contract needs in anticipation of future contract awards. If an expected contract
award is delayed or not received, we could incur costs in maintaining an idle workforce that may have a material
adverse effect on our results of operations.
Our majority of agreements and contracts with our customer are not on long term basis.
In Fiscal 2016, 2015 and 2014, we generated 75.34%, 68.44% and 59.29%, respectively, of our total revenues, from
contracts with Singareni Colleries Company Limited, Coal India Limited, Bharat Dynamics Limited and Nyveli
Lignite Corporation. Majority of these contracts are not long term agreements with our customers and valid from one
to three years. Furthermore, we do not have long term arrangements with our customers to purchase our products and
services in the future, at the current prices or at all. We may not be successful in winning significant business each
year from our existing or future clients as the award of project is dependent on various factors. There is no assurance
that we will be able to maintain historic levels of business from the existing customers or to retain existing customers,
or that we will be able to replace our customer base in a timely manner or at all, in the event our existing customers
do not continue to purchase products manufactured by us at the same rate as in the past or at all. Such loss of customers
or customer orders may have an adverse effect on our business, financial condition and results of operations.
The contracts from our customers, public sector undertakings or government entities may be modified or cancelled,
which could adversely affect our revenues and results of operations.
The contracts received from our customers may not necessarily indicate future income due to factors, including
unanticipated variations of scope and schedule adjustments. There can be no assurance that the revenues anticipated
from the contracts will be realized, or, if realized, will be realized on time or result in profits. In addition, it is possible
that contracting parties may default on the amounts owed to us. Any delay, cancellation or payment default could
adversely affect our cash flows, revenues and results of operations.
Government contracts frequently include provisions that are not standard in private commercial transactions and are
subject to laws and regulations that give the Government and remedies not typically found in commercial contracts,
including provisions permitting the Government to (1) terminate our existing contracts; (2) reduce potential future
income from our existing contracts; (3) modify some of the terms and conditions in our existing contracts; (4) suspend
or permanently prohibit us from doing business with the Government authorities or with any specific government
agencies; (5) impose fines and penalties; (6) subject us to criminal prosecution; (7) suspend work under existing
multiple year contracts and related task orders if the necessary funds are not appropriated by the Government; (8)
decline to exercise an option to extend an existing multiple year contract; and (9) claim rights in technologies and
systems invented, developed or produced by us.
In addition, government contracts are frequently awarded only after formal competitive bidding processes, which have
been and may continue to be protracted and typically impose provisions that permit cancellation in the event that
necessary funds are unavailable to the government agency. Competitive procurements impose substantial costs and
managerial time and effort in order to prepare bids and proposals for contracts that may not be awarded to us. We may
not be awarded contracts for which we bid, and substantial delays or cancellation of purchases may follow our
successful bids. We believe that this environment of protracted competitive bidding processes and competitor bid
protests will continue. If a customer does not perform any or all such actions in a timely manner or at all and if the
49
remedy for such failure is not provided for in the contract or if the customer reneges on the contract, our results of
operations and our financial condition may be adversely affected.
We are dependent on a few suppliers for our raw materials. Our inability to obtain raw material in a timely manner
or at all, or in sufficient quantities and/or at competitive prices could adversely affect our operations, financial
condition and/or profitability.
Our business is dependent on few suppliers for supply of raw materials required for manufacturing our products. We
procure most of our raw materials from suppliers in India. Our key raw material, ammonium nitrate and ammonium
perchlorate are manufactured by limited number of companies in India. Some of our major suppliers are Rashtriya
Chemical and Fertiliser Limited, Deepak Fertilisers and Perto-chemicals Corporation Limited, Gujarat Narmada
Fertiliser Corporation and Chemicals Limited, and National Fertilisers Limited etc. Raw material consumed as a
percentage of total revenue was 52.24%, 54.10% and 48.60% for the Fiscal 2016, 2015 and 2014 respectively. We do
not have any supply agreement with any of our raw material suppliers. Any disruption, irregularity or discontinuation
of supply of raw material by our suppliers or a failure of these suppliers to adhere to the delivery schedule or the
required quality and quantity could hamper manufacturing process thereby adversely affecting our business, financial
condition and results of operation.
There can be no assurance that our suppliers will continue to be associated with us on reasonable terms, or at all. Our
timely execution of projects is dependent on timely supply and delivery of raw materials. We may face the risk of our
suppliers not being able to deliver on time and/or non-delivery of materials. In the event we are unable to find an
alternative supplier at a short notice, this may affect our obligations towards our customers. Although, we maintain
the inventory for some of our major raw materials, however, there may be instances when we do not have a particular
raw material in our inventory. Any such delay or failure by our supplier to deliver the raw materials on time shall
affect our obligations with our customers thereby adversely affecting our financial performance and our operating
cash flows.
Invocation of an outstanding guarantee/ security issued in relation to our business could adversely affect our
financial condition and results of operation.
We are required to deliver a performance security to our customers in terms of the contract entered into with the
customers and are also required to ensure that the performance security is valid and enforceable until we have
completed the works and remedied any defects during the defects liability period or such other period as is stipulated
under the relevant contract.. If we are unable to provide sufficient collateral to secure the letters of credit, bank
guarantees or performance bonds, our ability to enter into new contracts. Providing security to obtain letters of credit,
bank guarantees and performance bonds increases our working capital needs. We may not be able to continue
obtaining new letters of credit, any guarantees, and performance bonds in sufficient quantities on commercially
acceptable terms or at all, to match our business requirements.
In the event we fail to honor any of the commitments entered into under the agreement with our clients or in the event
of termination of contract under the integrity pact and/or in respect of any amount due from us to the contract providing
companies, such companies shall have unconditional option to invoke the guarantee/security. This performance
guarantee/security will be released after completion of the contract awarded to us. As on March 31, 2017, we have
total outstanding performance bank guarantees amounting to ₹ 2,721.35 Lac. In case of an event of default by us or
failure by us to meet the conditions precedent under the relevant agreement, our customer is entitled to encash the
relevant performance security. In the event that a significant amount of performance guarantee/security provided by
us is required to be encashed, our cash flows will be adversely affected.
Our research and development efforts may not always result in a successful viable product, which may hinder the
introduction of new products, thereby affecting our business, financial condition and results of operation.
In order to remain competitive we must continue to be innovative and successfully develop and manufacture new
products which meet our customers’ expectations as well as requisite regulatory approvals and standards. In order to
achieve optimum results in our research and development activities, we are required to constantly dedicate substantial
funds, resources time and efforts. There can be no assurance that all our research and development initiatives would
be successful at all times. We incur investments from time to time on our research and development for new products
and there can be no assurance that we will be able to derive adequate benefits and profits from such investments. Our
50
expenses on research and development accounted for 0.48%, 0.49% and 0.47% of our total revenue in Fiscals 2016,
2015 and 2014 respectively. We would continue to further invest a substantial portion of our funds for research and
development activities which would result in higher costs without a guarantee of a proportionate increase in revenues.
Further, registration or receipt of licenses for the new products developed by us may also be a costly and time
consuming process and there can be no guarantee that all products will receive registration or license in a timely
manner or at all. Delays in any part of the research and development process or our inability to materialize the expenses
made on our research and development facility or failure of a product to be successful at any stage could adversely
affect our business, financial conditions and results of operation.
If we fail to keep pace with technical and technological developments in the industry we operate, it could adversely
affect our business and results of operations.
To meet the needs of our business operations, we must regularly update existing technology and acquire or develop
new technology for our products and services. In the past, certain technologies were transferred to us from DRDO for
commercialisation and further application, which includes, SQUIB(Cartridge Electrical) for IFDSS, 1200CC, 2400CC
and 6000CC pellet Type gas generator, manufacturing of Fuel Rich, Sustainer Grains for Akash Missile,
manufacturing of BKNO3 pellets, of ME-445 Composition Chemical – CR Oleoresin based Grenades, Energetic
propellant casting in case bonded rocket motors (Pinaka Mk-II propellant) and Igniter for Pinaka MKII, Pyrocartridge
PC -110 DQ, manufacturing of Igniter for Akash Booster, manufacturing of Igniter for Akash Sustainer,
manufacturing of Propellant for LRSAM P II Grains, manufacturing of propellant and Igniter for 122 mm ERR. If we
fail to keep pace with technical and technological developments from DRDO, it could adversely affect our business
and results of operations. In addition, rapid and frequent technology and market demand changes can often render
existing technologies and equipment obsolete, requiring substantial new capital expenditures and/or write-downs of
assets. Our future success will depend in part on our ability to respond to technological advances and emerging unduly
standards and practices on a cost-effective and timely basis. Our failure to anticipate or to respond adequately to
changing technical, market demands and/or client requirements could adversely affect our business and results of
operations. Further, the cost of implementing new technologies could be significant and could adversely affect our
financial condition and results of operations.
Our success depends on our ability to retain and attract technical personnel and various other professionals
including consultants. If we are not able to retain them or recruit additional qualified personnel, we may not be
able to successfully develop our business.
We are assisted by various technical personnel and experienced professionals including consultants to provide us with
critical market and regulatory information applicable to the jurisdictions where they operate. These consultants are
familiar with the application processes for seeking registrations in different jurisdictions and are involved in
preparation of dossiers. We benefit from their experience and the loss of their association with us may significantly
delay or prevent the development of our business.
Since, high energy materials are very niche market, competition among explosives and propellant manufacturing
companies for qualified professionals is intense and the ability to retain or associate with qualified individuals is
critical to our success. Furthermore, as we expect to continue to expand our operations and seek registrations for
formulations and generic active ingredients, we will need to continue to attract and retain such professionals.
There can be no assurance that we will be able to retain and attract such professionals in the future on acceptable
terms, or at all, and the failure to do so may have an adverse effect on our business and results of operations.
If we suffer a large uninsured loss or if we suffer an insured loss that significantly exceeds our insurance coverage,
our financial condition and results of operations may be adversely affected.
Our business and assets could suffer damage from fire, natural calamities, misappropriation or other causes, resulting
in losses, which may not be fully compensated by insurance. For instance, on November 14, 2013, there was an
accident in our maintenance material store at Sriharikota where we operate and maintain solid propellant plant of
Satish Dhawan Space Centre. Stocks of ₹ 108.00 Lacs was damaged against which we have received ₹ 101.88 Lacs
from insurance company. While we believe that we maintain insurance coverage in amounts consistent with industry
norms, our insurance policies do not cover all risks and are subject to exclusions and deductibles. We enter into
warehousing arrangements with warehouses in different locations to store emulsifiers, explosives, formulations and
51
generic active ingredients. Although in most jurisdictions, liabilities arising due to third party premises are covered
by insurance, such coverage may not cover all risks and may be restricted to only certain kinds of damage. There can
be no assurance that such formulations or generic active ingredients are adequately insured.
Further, we are required to renew these insurance policies from time to time and in the event, we fail to renew the
insurance policies within the time period prescribed in the respective insurance policies or not obtain at all, we may
face significant uninsured losses. If we suffer a large uninsured loss or if any insured loss suffered by us significantly
exceeds our insurance coverage, our business, financial condition and results of operations may be adversely affected.
Our Promoter plays key role in our functioning and we heavily rely on their knowledge and experience in operating
our business and therefore, it is critical for our business that our Promoter remains associated with us. Our success
also depends upon the services of our key managerial personnel and our ability to attract and retain key managerial
personnel and our inability to attract them may affect our operations.
We benefit from our relationship with our Promoter and our success depends upon the continuing services of our
Promoter who has been responsible for the growth of our business and is closely involved in the overall strategy,
direction and management of our business. Our Promoter, Dr. Amar Nath Gupta is the Chairman and Managing
Director and has been actively involved in the day to day operations and management since the incorporation of our
Company. Accordingly, our performance is heavily dependent upon the services of our Promoter. If our Promoter is
unable or unwilling to continue in his present position, we may not be able to replace him easily or at all. Further, we
rely on the continued services and performance of our key executives and senior management for continued success
and smooth functioning of the operations of the Company. If we lose the services of any of our key managerial
personnel, we may be unable to locate suitable or qualified replacements, and may incur additional expenses to recruit
and train new personnel, which could adversely affect our business operations and affect our ability to continue to
manage and expand our business. We do not maintain key person insurance to insure against the loss of key personnel.
Our Promoter, along with the key managerial personnel, has over the years, built relations with customers and other
persons who are connected with us. The loss of their services could impair our ability to implement our strategy, and
our business, financial condition, results of operations and prospects may be materially and adversely affected.
Compliance with, and changes in, safety, health and environmental laws and other related laws and regulations
impose additional costs and may adversely affect our results of operations and our financial condition.
We are subject to adequate industrial safety measure and environmental laws and related laws and regulations in the
jurisdictions in which we operate, and may also be required by our clients to meet certain additional criteria with
respect to safety, environment, health and labor. Such safety, health and environmental laws and regulations impose
controls inter alia on the disposal and storage of raw materials, noise emissions, air and water discharges, on the
storage, handling, discharge and disposal of chemicals, employee exposure to hazardous substances and other aspects
of our operations and products. For example, laws in India limit the amount of hazardous and pollutant discharge that
our manufacturing facility may release into the air and water. While we believe we are currently in compliance with
all applicable safety, health and environmental laws and regulations, the discharge of our or such third parties’ raw
materials that are chemical in nature or of other hazardous substances or other pollutants into the air, soil or water may
nevertheless cause us to be liable to the Government of India or other governments where we operate or to third
parties.
Our business, operations and growth prospects could be materially adversely affected by changes in any of these
regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation
or application of existing laws, policies and regulations. There can be no assurance that we will succeed in obtaining
all requisite regulatory approvals in the future for our operations or that compliance issues will not be raised in respect
of our operations, either of which could have a material adverse effect on our business, financial condition and results
of operations.
The cost and management time required to comply with these requirements could be significant. The measures we
implement in order to comply with these new laws and regulations may not be deemed sufficient by Government
authorities and our compliance cost may significantly exceed our estimates. Further, we may be required to incur
additional costs to remedy the damage caused by such discharges, pay fines or other penalties or close down the
production facilities for non-compliance. We cannot assure you that we will not be involved in future litigation or
52
other proceedings or be held responsible in any such future litigation or proceedings relating to safety, health and
environmental matters. In addition, we may be required to incur costs to remedy the damage caused by such
discharges, pay fines or other penalties for non-compliance. Complying with, and changes in, these laws and
regulations may increase our compliance costs and adversely affect our business, prospects, results of operations and
financial condition. Furthermore, non-compliance with the limits prescribed by the relevant laws and regulations may
lead to the suspension of our manufacturing licences, which will halt our manufacturing activities and adversely affect
our business, financial condition and result of operation.
An inability to manage our growth could disrupt our business and reduce our profitability.
We have experienced growth in recent years and expect our business to continue to grow. We expect this growth to
place significant demands on us and require us to continuously evolve and improve our operational, financial and
internal controls across our organization. In particular, continued expansion increases the challenges involved in:
making accurate assessments of the resources we will require;
preserving a uniform culture, values and work environment across our projects;
developing and improving our internal administrative infrastructure, particularly our financial, operational,
communications, internal control and other internal systems;
acquiring new customers and increasing or maintaining contribution from existing customer;
recruiting, training and retaining sufficient skilled management, technical and marketing personnel;
maintaining high levels of client satisfaction; and
adhering to expected performance and quality standards.
Any inability to manage the above factors may have a material adverse effect on our business, financial condition,
results of operations and cash flows.
Our cash flows from operation have been volatile and we may experience such negative cash flows in the future.
An inability to generate sufficient cash flows in the future may adversely affect our business operations and
financial performance.
We had negative cash flows from operating activities in Fiscal 2015 primarily due to decrease in trade and other
receivables and inventories, negative cash flow from investing activities in Fiscal 2016, Fiscal 2015 and Fiscal 2014
due to purchase of fixed assets and negative cash flows in financing activities in Fiscal 2016 and Fiscal 2014 due to
repayments towards fixed deposits, borrowings and finance cost. Details of which are provided under:
Particulars Fiscal 2016 Fiscal 2015 Fiscal 2014
₹ in Lacs ₹ in Lacs ₹ in Lacs
Net cash flow from operating activities 1,021.44 (190.30) 608.56
Net cash flow used in investing activities (409.32) (340.50) (381.17)
Net cash flow from financing activities (270.48) 533.55 (251.24)
Cash flow is a key financial indicator of cash generated from operations to meet our capital expenditure, pay dividends,
repay loans and make new investments without raising finance from external resources. If we are not able to generate
sufficient cash flows in the future, it may adversely affect our business prospects and financial performance.
Our statutory auditors have included certain qualifications/observations and matters of emphasis in their audit
report with respect to our Company for Fiscals 2013, 2014, 2015 and 2016.
Statutory auditors of our Company have included certain qualifications/ observations and matters of emphasis in their
respective audit reports of our Company in the last five financial years immediately preceding the Preliminary
Placement Document, including with respect to the Companies (Auditor‘s Report) Order, 2003, 2015 and 2016, as
applicable, which are discussed in our standalone and consolidated financial information. For the further details, please
53
refer to the “Financial Statements” and “Management's Discussion and Analysis of Financial Condition and Results
of Operations” on page 199 and 74, respectively.
If we are required to restate the accounts for any reason including due to accounting standards or regulatory
requirements or otherwise, we may be required to expense all of the expenses specified in these qualifications which
may result in a loss for the subsequent period or we being unable to meet our financial covenants/obligations. Further,
there can be no assurance that our auditors will not qualify their opinion in the future.
Any shutdown or disruption of activities in our manufacturing facilities may have an adverse effect on our business,
financial condition and results of operations.
Presently we have six manufacturing facilities located at Peddakandukuru, Telangana; Manuguru, Telangana;
Godavarikhani, Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu. Our
manufacturing facilities are subject to operating risks, such as breakdown or failure of equipment, power supply
failure, reduction or stoppage of water supply, performance below expected levels of efficiency, natural disasters,
industrial accidents and the need to comply with the directives of relevant government authorities. A shutdown of any
of our facilities or disruption due to local social unrest in any of the areas where our facilities are located, natural
disaster or breakdown of services and utilities could have material adverse effect on the business, financial condition
and results of our operations. In the event we are forced to shut down any of our manufacturing facilities briefly or for
a significant period of time, it would have a material adverse effect on our business, earnings, results of operations
and our financial condition as a whole.
Our ability to pay dividends in the future will depend upon our future earnings, financial condition, cash flows,
capital expenditure, long-term target payout ratios, current capital ratios, current and prospective financial
performance and other macro & micro-economic factors.
We have paid dividend per equity share of ₹ 2.70, ₹ 2.00 and ₹ 2.00 for Fiscal 2014, Fiscal 2015 and Fiscal 2016,
respectively. Our ability to pay dividends in the future will depend on our earnings, financial condition and capital
requirements. Further, dividends distributed by us will attract dividend distribution tax and may be subject to other
requirements. We have a board-approved dividend policy to govern our dividend payout. We may not generate
sufficient income to cover our operating expenses and therefore may be unable to pay dividends to our shareholders.
In addition, dividends that we have paid in the past may not be reflective of the dividends that we may be able to pay
in the future. For details, see section titled “Dividend Policy” on page 73.
Our inability to procure and/or maintain adequate insurance cover in connection with our business may adversely
affect our operations and profitability.
Our business operations are subject to inherent risks and hazards which may adversely impact our profitability, such
as breakdown, malfunctions, fire, riots, accidents and natural disasters. At present our insurance policies provide for
coverage against risk money insurance, burglary, fire, fidelity etc. however, there can be no assurance that any claim
under the insurance policies maintained by us will be honoured fully, in part or on time. While we maintain insurance
coverage in amounts consistent with industry norms, our insurance policies may not cover all risks, specifically risks
such as loss of profits etc. There can be no assurance that our insurance policies will be adequate to cover the losses
in respect of which the insurance had been availed. If we suffer a significant uninsured loss or if insurance claim in
respect of the subject-matter of insurance is not accepted or any insured loss suffered by us significantly exceeds our
insurance coverage, our business, financial condition and results of operations may be materially and adversely
affected.
Further, there is no assurance that the insurance premium payable by us will be commercially viable or justifiable.
Additionally, our insurance coverage expires from time to time. We renew our insurance in the normal course of our
business, but we cannot assure you that such renewals will be granted in a timely manner, at acceptable cost or at all.
To the extent that we suffer loss or damage which is not covered by insurance or exceeds the coverage or where our
insurance claims are rejected, the loss would have to be borne by us. This could adversely affect our results of
operations, cash flows and financial performance.
54
Some of our manufacturing facility and offices are located on premises which have been obtained on lease basis.
Disruption of our rights as lessee or termination of the agreements with our lessors would adversely impact our
manufacturing operations and, consequently, our business, financial condition and results of operation.
Some of manufacturing facility and offices from which we operate or are used by our Company for the purposes of
our operations are situated at lease hold premises. In the event that we are required to vacate the lease and relocate our
manufacturing facilities or offices, we will be required to expend time and financial resources to locate suitable land
to set up a manufacturing unit, which may adversely affect our financial condition. Also, we may be unable to relocate
to an appropriate location in a timely manner, or at all. Additionally, for our other offices, we enter into lease or license
arrangements as and when required.
If the owner of such premises does not renew the agreement under which we occupy the premises or renew such
agreements on terms and conditions that are unfavorable to us or is terminated prior to its tenure, our business and
results of operations may be adversely affected. In addition, any adverse impact on the title and ownership rights of
the owners from whose premises we operate or any breach of the contractual terms of such lease or leave and license
agreements may adversely impact us.
We may be unable to obtain, renew or maintain statutory and regulatory permits, licenses and approvals required
to operate our business and operate our manufacturing facilities, which could adversely affect our results of
operations.
We require certain statutory and regulatory permits, licenses and approvals to operate our business such as consents
to establish and operate from the state pollution control boards (where our manufacturing facilities are located),
industrial licenses to manufacture explosives, propellants, detonators, ammunition, importer-exporter code,
registration and licenses issued under the Factories Act for our manufacturing facilities, fire safety licenses,
registration certificates issued under various labour laws, including contract labour registration certificates and
licenses as well as various taxation related registrations. Our licenses, permits and approvals impose certain strict
terms and conditions that require us to incur significant costs and inter alia, restrict certain activities. While we
endeavor to strictly adhere to the terms and conditions laid down, there can be no assurances that such approvals,
licenses, permits and registrations will not be revoked/cancelled or suspended in the event of any non-compliance
with any terms or conditions imposed thereof.
Further, in the future, we will be required to regularly renew permits, licenses and approvals for our business, and to
obtain new permits, licenses and approvals for any proposed expansion or manufacture or development of new
products. There can be no assurance that the relevant authorities will issue such approvals within our anticipated
timeframe or at all. An inability to renew, maintain or obtain any required permits, licenses or approvals may result in
the interruption of our manufacturing operations and may have a material adverse effect on our business, financial
condition and results of operations.
We are subject to stringent labour laws or other industry standards and any strike, work stoppage or increased
wage demand by our employees or any other kind of disputes with our employees could adversely affect our
business, financial condition, results of operations and cash flows.
Our manufacturing activities are labour intensive, which requires our management to undertake significant labour
interface, and expose us to the risk of industrial action. As at March 31, 2017, we had 559 workmen and 250 contract
labourers. We are also subject to a number of stringent labour laws that protect the interests of workers, including
legislation that sets forth detailed procedures for dispute resolution and employee removal and legislation that imposes
financial obligations on employers upon retrenchment. We have recognized registered labour unions at our
manufacturing facilities. While we have entered in wages settlement agreement with labour unions at our
manufacturing facilities, there can be no assurance that we will not experience disruptions to our operations due to
disputes or other problems with our work force such as strikes, work stoppages or increased wage demands, which
may adversely affect our business.
While we consider our relations with our employees to be amicable and we presently are not involved in any dispute
with our workforce, the employees at our manufacturing units, we have experienced certain disputes in the past. If
labour laws become more stringent or are more strictly enforced, it may become difficult for us to maintain flexible
55
human resource policies, discharge employees or downsize, any of which could have an adverse effect on our business,
financial condition, results of operations and cash flows.
We also enter into contracts with independent contractors who, in turn, engage on-site contract labour to perform
certain operations. Although we generally do not engage such labour directly, it is possible under Indian law that we
may be held responsible for wage payments to the labour engaged by contractors should the contractors default on
wage payments. Any requirement to fund such payments will adversely affect us, our business, financial condition,
results of operations and cash flows.
We are exposed to foreign currency exchange risks, which we may not be able to manage effectively. Currency
exchange rate fluctuations could adversely affect our results of operations and financial condition.
Presently, we exports our products to several countries including Greece, Jordan, Turkey, Egypt, Nepal, Thailand,
Philippines, Uganda, etc. Our earning in foreign exchange contributed 8.95%, 7.02% and 7.78% of our revenue from
operations for the fiscal year ended March 31, 2016, March 31, 2015 and March 31, 2014, respectively. Further, we
import certain raw material based on the availability and our requirement. Consequent, a significant portion of our
revenues is denominated in foreign exchange. The exchange rate between the Rupee and the other foreign currencies
has changed substantially in recent years and may continue to fluctuate significantly in the future. Accordingly, our
operating results may be impacted by fluctuations in the exchange rate between the Indian Rupee and other foreign
currencies.
Depreciation of the Indian rupee against the U.S. Dollar and/ or other foreign currencies may adversely affect our
results of operations by increasing the cost of our raw materials or any proposed capital expenditure in foreign
currencies. Volatility in the exchange rate and/or sustained appreciation of the Indian Rupee will negatively impact
our revenue and operating results and which may have an adverse effect on our financial condition.
The terms under which credit facilities are availed by us from our lenders contain restrictive covenants and may
be altered by the bank at any time without assigning any reason.
As of March 31, 2016, our Company had a total indebtedness of ₹ 2,344.80 Lac. Pursuant to the loan facilities availed
by us, we have entered into various financing documents with our lenders and which contain certain restrictive
covenants. Pursuant to our facility agreements, our lenders may alter certain terms of lending at any time without
assigning any reason. Our ability to borrow and the terms of such borrowings depend on several factors including our
financial condition, the stability of our cash flows and our capacity to service debt. We may not be successful in
obtaining these additional funds in a timely manner, or on favourable terms or at all, which could adversely affect our
results of operations. We cannot assure you that we will have adequate funds at all times to repay such credit facilities.
Some of our facility agreements contain covenants that may be onerous and commercially restrictive in nature. For
example, some of our borrowing agreements impose a condition on us to for any change in our Company’s capital
structure where the shareholding of the Promoter gets diluted or dilution of controlling stake of the Promoter,
commencement of any new project / scheme of expansion / acquisition of fixed assets, enter into any further capex
plan, etc. Violation of any of these covenants result in attracting penal interest, causing claims to be brought against
us or termination of the agreements as well as acceleration of payment obligations.
Additionally, we may require to fund capital expenditure by way of availing further debt. Such an event may require
us to be placed under similar restrictions which may, among other things, limit our ability to pursue our growth plans
as envisaged; require us to dedicate a substantial portion of our cash flow from operations to make payments on our
debt, thereby reducing the availability of our cash flow to fund other capital expenditure, meet working capital
requirements and use funds for other general corporate purposes. Such restrictions or conditions may limit our
flexibility in planning for, or reacting to changes in our business and industry thereby adversely limiting our
Company's operations and financial flexibility, and adversely affect its business, results of operations and financial
condition.
Increase in interest rates may materially impact our results of operations.
As on March 31, 2016, we had total borrowings of ₹ 2,290.82 Lacs. Majority all of our borrowings carry interest at
floating rates or at rates that are subject to adjustments at specified intervals. We are exposed to interest rate risk in
56
respect of contracts for which we have not entered into any swap or interest rate hedging transactions, although we
may decide to engage in such transactions in the future. We may further be unable to pass any increase in interest
expense to our existing customers. Any such increase in interest expense may have a material adverse effect on our
business, financial condition, results of operations and cash flows. Furthermore, if we decide to enter into agreements
to hedge our interest rate risk, there can be no assurance that we will be able to do so on commercially reasonable
terms, that our counterparties will perform their obligations, or that these agreements, if entered into, will protect us
fully against our interest rate risk.
We have, in the past entered into related party transactions and may continue to do so in the future, which may
potentially involve conflicts of interest with the equity shareholders.
During the course of our business, we have entered into, and will continue to enter into, several transactions with our
related parties. For details, see the section titled “Financial Statements - Related Party Transactions” on page 199.
While we believe that all such transactions and have carried them out on an arms-length basis and on commercially
reasonable terms, there can be no assurance that we could not have achieved more favorable terms had such
transactions been entered into with unrelated parties. The transactions we have entered into and any further
transactions with our related parties have involved or could potentially involve conflicts of interest which may be
detrimental to our Company.
Further, the Companies Act, 2013 has brought into effect significant changes to the Indian company law framework
including specific compliance requirements such as obtaining prior approval from the audit committee, board of
directors and shareholders for certain related party transactions. We cannot assure you that such transactions,
individually or in the aggregate, will not have an adverse effect on our business and financial results, including because
of potential conflicts of interest or otherwise.
We have contingent liabilities and our financial condition could be adversely affected if any of these contingent
liabilities materializes.
As of March 31, 2016, the contingent liabilities amounting to ₹ 3,547.12 lacs is disclosed in the notes to our audited
financial statements. Set forth below are our contingent liabilities as of March 31, 2016:
(₹ in Lac)
Particulars As at March 31, 2016
Contingent liabilities
On account of guarantees issued by the banks on behalf of the Company 3,129.84
Sales tax demands disputed by the company pending in appeal 151.31
Note: It is not practicable for the Company to estimate the timings of cash flows, if any,
in respect of the above pending resolution of the respective proceedings.
Commitments
Estimated amount of contracts remaining to be executed on capital account and not
provided for (net of advances)
265.97
In the event that any of the contingent liabilities materialize, our financial condition may be adversely affected.
Some of our Company’s records relating to filings made with the registrar of companies for the period between
1980 – 1996 are not traceable.
We are unable to locate some of the corporate records which include copies of filings made by our Company with the
Registrar of Companies, Andhra Pradesh and Telangana, Hyderabad. These filings include certain changes to its
authorized share capital, return of allotments and forfeiture of equity shares, etc. since incorporation of our Company
until 1996. While our Company believes that these forms were duly filed with the registrar of companies, it has been
unable to obtain copies of these documents, including from the RoC.
Since copies of these are unavailable with us, we cannot assure you that these forms or reports were duly filed on a
timely basis, or at all. We cannot assure you that records of these filings will be available in the future or that we will
not be subject to any penalty imposed by the competent regulatory authority in this respect. If RoC imposes any
penalty or takes any action against us, it may have an adverse effect on our financial condition.
57
Our Promoter has significant influence over our operations, which will enable him to influence the outcome of
matters submitted to shareholders for approval which may potentially involve conflicts of interest with the other
shareholders.
As of March 31, 2017, our Promoter and Promoter Group owned 47.67 % of our paid up share capital. Please see
section titled “Principal Shareholders” on page 158. Resultantly, our Promoters may be in a position to influence
decisions relating to our business and the outcome of matters submitted to shareholders for approval. This control
could delay, defer or prevent a change in control of our Company, impede a merger, consolidation, takeover or other
business combination involving our Company, or discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our Company even if it is in our Company’s best interest. In addition, for so
long as the Promoter and Promoter Group continues to exercise significant control over our Company, it may influence
the material policies of our Company in a manner that could conflict with the interests of our other shareholders. Our
Promoter and Promoter Group may have interests that could be adverse to the interests of our other shareholders and
may take such decisions with which our shareholders do not agree.
Our Promoter has provided personal guarantees for a significant portion of our borrowings to secure certain
amount of our loans. Our business, financial condition, results of operations, cash flows and prospects may be
adversely affected by the revocation of all or any of the personal guarantees provided by our Promoters in
connection with our Company’s borrowings.
Our Promoter has provided personal guarantees for a significant portion of our borrowings to secure certain of our
loans. If any of these guarantees are revoked, our lenders may require alternative guarantees or collateral or
cancellation of such facilities, entailing repayment of amounts outstanding under such facilities. If we are unable to
procure alternative guarantees satisfactory to our lenders, we may need to seek alternative sources of capital, which
may not be available to us at commercially reasonable terms or at all, or agree to more onerous terms under our
financing agreements, which may limit our operational flexibility. Accordingly, our business, financial condition,
results of operations, cash flows and prospects may be adversely affected by the revocation of all or any of the personal
guarantees provided by our Promoters in connection with our Company‘s borrowings.
The interests of our Directors and senior management personnel may cause conflicts of interest in the ordinary
course of our business.
Conflicts may arise in the ordinary course of decision-making by our Board. Some of our Directors and senior
managerial personnel may also be on the board of directors of certain companies engaged in businesses similar to or
complementary to or supplementary to our business including that of our Promoter. In accordance with the procedure
laid down in the Companies Act, our Directors and senior managerial personnel are required to disclose any conflict
of interest to our Board, following which they are allowed to participate in any discussions concerning the matters
tabled before our Board.
Further, certain of our Directors and key management personnel also hold Equity Shares and are interested to the
extent of any dividend payable to them in respect of the same. There is no assurance that our Directors and/or our
senior managerial personnel will not provide competitive services or otherwise compete in business lines in which we
are already present or will enter into in the future.
Conflicts of interest may arise out of common business objects between our Company and certain of our Promoters’
companies.
Our Promoter and some of senior managerial personnel have interests in other companies that may undertake the same
business as our Company. For example, Godavari Explosives Limited, a company in which our Promoter has an
interest, is authorized to carry out, or engage in business similar to that of our Company. Conflicts of interests may
arise in the Promoters’ allocating or addressing business opportunities and strategies among our Company and
Godavari Explosives Limited in circumstances where our respective interests diverge. Our Promoter has not signed
any non-compete agreement with our Company as of date and in any event, we cannot assure you that such agreements
are enforceable under Indian law. Any such present and future conflicts could have a material adverse effect on our
business, reputation, financial condition and results of operations.
58
We are involved in legal proceedings, which if determined in favour of such parties may have an adverse effect on
our reputation, business and results of operations.
We are involved in certain legal proceedings and tax related matters, which are pending at different levels of
adjudication before various courts and tribunals. For details see “Legal Proceedings” on page 192. In addition, should
any new developments arise, such as a change in Indian law or rulings against us by appellate courts or tribunals, we
may need to make provisions in our financial statements, which could increase our expenses and our liabilities. We
can give no assurance that these legal proceedings will be decided in our favor. Any adverse decision may have an
adverse effect on our reputation, business and results of operations.
Our Joint Venture, BF Premier Energy Systems Private Limited incurred losses in the past and there can be no
assurance that the business of BF Premier Energy Systems Private Limited will grow or its will not continue to
incur significant losses in the future.
BF Premier Energy Systems Private Limited, jointly with Kalyani Strategic Systems Limited incurred losses in the
previous financial years. BF Premier Energy Systems Private Limited has been incorporated to reap the opportunities
in defence supplies field with synergy of forging expertise of Kalyani Group and high energy materials knowledge of
Premier Explosives Limited. The joint venture is yet to commence commercial operations. We cannot assure that in
future the business of our joint venture will revive or will be in line with those estimated or that there has not been
any material adverse change in their financial condition or results of operations. There can be no assurance that the
business of BF Premier Energy Systems Private Limited will grow or will be in line with those estimated or historically
achieved financial condition or results of operations, or historically will not continue to incur significant losses in the
future.
We have not entered into any definitive agreements to utilize the net proceeds of the Issue.
We intend to use the net proceeds of the Issue to fund our capital expenditure, meet our working capital requirements
and for general corporate purposes. For more information, see “Use of Proceeds” on page 68. Pending use of the funds
for these purposes, we intend to invest the funds in high quality, interest/ dividend bearing liquid instruments,
including money market mutual funds and deposits with the banks for the applicable period. If we are unable to spend
the amount on expansion, the balance funds will be used for general corporate purposes. The Use of Proceeds has not
been appraised by any bank or other financial institution. We have not entered into any definitive agreements to use
such net proceeds.
External Risk Factors
Statistical and industry data in this Placement Document may be incomplete or unreliable
Statistical and industry data used throughout this Placement Document has been obtained from various government
and industry publications. We believe the information contained herein has been obtained from sources that are
reliable, but we have not independently verified it and the accuracy and completeness of this information is not
guaranteed and its reliability cannot be assured. The market and industry data used from these sources may have been
reclassified by us for purposes of presentation. In addition, market and industry data relating to India, its economy or
its industries may be produced on different bases from those used in other countries. As a result data from other market
sources may not be comparable. The extent to which the market and industry data presented in this Placement
Document is meaningful will depend upon the reader's familiarity with and understanding of the methodologies used
in compiling such data.
Further, this market and industry data has not been prepared or independently verified by us or the Book Running
Lead Manager or any of their respective affiliates or advisors. Such data involves risks, uncertainties and numerous
assumptions and is subject to change based on various factors. Accordingly, investment decisions should not be based
on such information.
Public companies in India, including our Company, may be required to prepare financial statements under a
variation of IFRS, referred to as Indian Accounting Standard (“Ind AS”) that are different from Indian GAAP.
The transition to Ind AS in India is very recent and unclear and our Company may be negatively affected by such
transition.
59
Our financial statements, including the financial statements included in this Placement Document, are prepared in
accordance with Indian GAAP. The Ministry of Corporate Affairs released a notification on February 16, 2015
advising that the Companies (Indian Accounting Standards) Rules, 2015 (the “Indian Accounting Standard Rules”)
will come into force on April 1, 2015. Under the terms of the notification, all public companies in India, including our
Company but other than banking companies, insurance companies and non-banking finance companies, with a net
worth exceeding ₹ 5,000 million as of March 31, 2014 or as of the end of the immediately succeeding fiscal period
for which audited financial statements are prepared, will be required to prepare annual and interim financial statements
under Indian Accounting Standard 101 “First-time Adoption of Indian Accounting Standards” (“Ind AS”) with effect
from April 1, 2016. In addition, any holding, subsidiary, joint venture or associate companies of the companies
meeting the net worth threshold shall also be required to comply with Ind AS from the respective periods specified
above. Accordingly, if we meet the net worth threshold in any financial year then we may have to convert our
respective balance sheet in accordance with Ind AS. We may also be required to convert our previous balance sheet
in accordance with Ind AS for preparing comparable financial statements for the previous year.
As there is not yet a significant body of established practice on which to draw in-forming judgments regarding the
implementation and application of Ind AS, we have not determined with any degree of certainty the impact that the
adoption of Ind AS will have on our financial reporting. There can be no assurance, however, that our financial
condition, results of operations, cash flows or changes in shareholders’ equity will not appear materially different, or
worse, under Ind AS than under current Indian GAAP. As we transition to reporting under Ind AS, we may encounter
difficulties or challenges in the ongoing process of implementing and enhancing our management information
systems. Our management may also have to divert its time and other resources for successful and timely
implementation of Ind AS. Moreover, our transition to Ind AS may be hampered by increasing competition and
increased costs due to the small number of Ind AS experienced accounting personnel as more Indian companies begin
to prepare Ind AS financial statements. There can be no assurance that our adoption of Ind AS will not adversely affect
our reported results of operations or financial condition. Any failure to successfully adopt Ind AS when required under
Indian law could have a material adverse effect on the trading price of the Equity Shares.
Terrorist attacks, civil disturbances, wars, regional and communal conflicts, natural disasters, fuel shortages, and
epidemics may have a material adverse effect on our Company's business and on the market for securities in India.
Our Company is subject to operating risks, such as the risk of substantial disruption or shutdown due to natural
disasters, storms, fires, explosions, earthquakes, floods and other catastrophic events, actual, potential or suspected
epidemic outbreaks, terrorist attacks and wars, loss of services of our external contractors, and industrial accidents.
The occurrence of any such event could result in a temporary or long-term closure of our manufacturing facilities
which will severely disrupt our business operations and materially and adversely affect our financial condition.
Additionally, any of these events could lower confidence in India’s economy and create a perception that investments
in companies with Indian operations involve a high degree of risk, which could have a material adverse effect on the
price of the Equity Shares. Any discontinuation of business or loss of profits due to such extraneous factors may affect
our operations.
Political instability or a change in economic liberalization and deregulation policies could seriously harm business
and economic conditions in India generally and our business in particular.
The Government of India has traditionally exercised and continues to exercise influence over many aspects of the
economy, especially the defence, mining and aerospace sectors. The business and the market price and liquidity of the
Equity Shares may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and
other political, economic or other developments in or affecting India. The Government of India has in recent years
sought to implement economic reforms and the current government has implemented policies and undertaken
initiatives that continue the economic liberalization policies pursued by previous governments. There can be no
assurance that liberalization policies will continue in the future. The rate of economic liberalization could change, and
specific laws and policies and other matters affecting investment in the securities could change as well. Any significant
change in such liberalization and deregulation policies could adversely affect business and economic conditions in
India, generally, and our business, prospects, financial condition and results of operations, in particular.
The Central Government is in process of implementing a new national tax regime by imposing GST. We are unable
to quantify the impact of this development at this stage due to limited information available in the public domain.
60
If we are taxed at a higher rate than the current tax rates, our financial condition and results of operations may be
adversely affected.
The Central Government is in process of implementing of a comprehensive national goods and services tax (“GST”)
regime that will combine taxes and levies by the Central and State Governments into a unified rate structure. Although
the legislative bill has been passed by both houses of Parliament, we are unable to provide any assurance as to the
exact date of when GST is to be introduced or any other aspect of the tax regime following implementation of the
GST. Further, any disagreements between certain state governments may also create further uncertainty towards the
implementation of the GST. Any such future increases or amendments may affect the overall tax efficiency of
companies operating in India and may result in significant additional taxes becoming payable.
The proposed new taxation system in India could adversely the trading price of the Equity Shares.
The Government of India is presently in the process of reforming Indian tax laws primarily through the introduction
of the goods and services tax, the direct taxes code and provisions relating to the general anti avoidance rule
(“GAAR”). The direct taxes code aims to simplify the direct tax laws in India. The direct tax code will revise and
consolidate the structure of direct taxes into a single legislation. Whilst, a draft of the direct tax code was released on
March 31, 2014, the implementation of the direct taxes code is presently uncertain. The GAAR provisions are intended
to cover arrangements which are structured to deliberately avoid paying tax in India. If GAAR provisions are invoked,
then the tax authorities have wide powers, including denial of tax benefit or a benefit under a tax treaty. As the taxation
system in India will see significant changes, its consequent effects cannot be determined at present and there can be
no assurance that such effects would not adversely affect the sentiments of the foreign investors in India and results
into high volatility in stock markets, impacting our trading price of the Equity Shares.
Under Indian law, foreign investors are subject to investment restrictions that limit our ability to attract foreign
investors, which may adversely impact the trading price of the Equity Shares.
Under foreign exchange regulations currently in force in India, transfer of shares between non -residents and residents
are freely permitted (subject to certain exceptions), if they comply with the valuation and reporting requirements
specified by the RBI. If a transfer of shares is not in compliance with such requirements and does not fall under any
of the exceptions specified by the RBI, then the RBI’s prior approval is required. Further, our Company is under prior
permission list of RBI for further investment by NRI in the Company Equity Shares. Additionally, shareholders who
seek to convert Rupee proceeds from a sale of shares in India into foreign currency and repatriate that foreign currency
from India require a no-objection or a tax clearance certificate from the Indian income tax authorities. We cannot
assure you that any required approval from the RBI or any other government agency can be obtained on any particular
terms or at all
The market value of an investor’s investment may fluctuate due to the volatility of the Indian securities markets.
Indian securities markets are more volatile than the securities markets in certain countries which are members of the
OECD. Stock Exchanges in India have in the past experienced substantial fluctuations in the prices of listed securities.
The market price of our Ordinary Shares could fluctuate significantly as a result of market volatility. The Indian Stock
Exchanges have experienced problems which, if they were to continue or recur, could affect the market price and
liquidity of the securities of Indian companies, including the equity shares. These problems have included temporary
exchange closures, broker defaults, settlement delays and strikes by brokerage firm employees. In addition, the
governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain
securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have
occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have
had a negative effect on market sentiment.
A downgrade in India’s credit rating may have an adverse effect on our business, results of operations or Equity
Shares.
Any downgrade to India's sovereign credit rating by any rating agency, as well as negative changes to the perceived
creditworthiness of Indian Government-related obligations, could have an adverse impact on financial markets and
economic conditions in India and worldwide. Any volatility in the capital markets in India or in other developed or
61
emerging countries, whether resulting from a downgrade of the sovereign credit rating of Indian debt obligations or
otherwise, may have an adverse effect on our business and the trading price of our Equity Shares.
After this Issue, the price of our Equity Shares may be volatile.
The Issue Price will be determined by us in consultation with the Book Running Lead Manager in compliance with
Chapter VIII of the ICDR Regulations, and it may not necessarily be indicative of the market price of the Equity
Shares after this Issue is completed. The trading price of our Equity Shares may fluctuate after this Issue due to a
variety of factors, including our results of operations and the performance of our business, competitive conditions,
general economic, political and social factors, the performance of the Indian and global economy and significant
developments in India’s fiscal regime, volatility in the Indian and global securities market, changes in the estimates
of our performance or recommendations by financial analysts and announcements by us or others regarding contracts,
acquisitions, strategic partnerships, joint ventures, or capital commitments. Due to which the market value of an
investor’s investment may fluctuate
In addition, if the stock markets in general experience a loss of investor confidence, the trading price of our Equity
Shares could decline for reasons unrelated to our business, financial condition or operating results. The trading price
of our Equity Shares might also decline in reaction to events that affect other companies in our industry even if these
events do not directly affect us. Each of these factors, among others, could adversely affect the price of our Equity
Shares. There can be no assurance that an active trading market for the Equity Shares will be sustained after this Issue,
or that the price at which the Equity Shares have historically traded will correspond to the price at which the Equity
Shares are offered in this Issue or the price at which the Equity Shares will trade in the market subsequent to this Issue.
A slowdown in economic growth in India could cause our business to suffer.
We are incorporated in India, and all of our assets and employees are located in India. As a result, we are highly
dependent on prevailing economic conditions in India and our results of operations are significantly affected by factors
influencing the Indian economy. A slowdown in the Indian economy could adversely affect our business, including
our ability to grow our assets, the quality of our assets, and our ability to implement our strategy.
Factors that may adversely affect the Indian economy, and hence our results of operations, may include:
Changes in policies pertaining to the defence, mining and aerospace sectors;
any increase in Indian interest rates or inflation;
any scarcity of credit or other financing in India;
prevailing income conditions among Indian consumers and Indian corporations;
volatility in, and actual or perceived trends in trading activity on, India’s principal stock exchanges;
variations in exchange rates;
changes in India’s tax, trade, fiscal or monetary policies;
political instability, terrorism or military conflict in India or in countries in the region or globally, including
in India’s various neighbouring countries;
prevailing regional or global economic conditions; and
other significant regulatory or economic developments in or affecting India
Any slowdown in the Indian economy or in the growth of the sectors we participate in or future volatility in global
commodity prices could adversely affect our borrowers and contractual counterparties. This in turn could adversely
affect our business and financial performance and the price of our Equity Shares.
Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
62
Our Articles of Association, which include regulations applicable to our Board of Directors, and Indian law govern
our corporate affairs. Legal principles relating to these matters and the validity of corporate procedures, directors'
fiduciary duties and liabilities, and shareholders' rights may differ from those that would apply to a company
incorporated in another jurisdiction. Shareholders' rights under Indian law may not be as extensive as shareholders'
rights under the laws of other countries or jurisdictions. Investors may have more difficulty in asserting their rights as
our shareholders than as shareholders of a corporation in another jurisdiction.
Investors in the Equity Shares may not be able to enforce a judgment of a foreign court against us, our directors
or executive officers.
We are a limited liability company incorporated under the laws of India and all of our directors, senior management
personnel and executive officers of our Company are residents of India and a substantial portion of the assets of such
persons and of our Company are located in India. Further, all assets of our Company are located in India. As a result,
it may not be possible for investors to effect service of process upon us or such persons outside India, or to enforce
judgments obtained against such parties in courts outside of India.
Recognition and enforcement of foreign judgments are provided for under Section 13 and Section 44A of the Civil
Procedure Code on a statutory basis. Section 13 of the Civil Procedure Code provides that foreign judgments shall be
conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom
they or any of them claim litigating under the same title except: (a) where it has not been pronounced by a court of
competent jurisdiction; (b) where it has not been given on the merits of the case; (c) where it appears on the face of
the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in
cases in which such law is applicable; (d) where the proceedings in which the judgment was obtained are opposed to
natural justice; (e) where it has been obtained by fraud; and (f) where it sustains a claim founded on a breach of any
law in force in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if
an action were to be brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments
if that court was of the view that the amount of damages awarded was excessive or inconsistent with public policy,
and is uncertain whether an Indian court would enforce foreign judgments that would contravene or violate Indian
law.
Any future issuance of Equity Shares may dilute the shareholding of investors and any future sales of Equity
Shares by our major shareholders may adversely affect the trading price of the Equity Shares.
We may be required to finance our growth through additional equity offerings. Any future issuances of our Equity
Shares could dilute the holdings of investors in our Company and could adversely affect the market price of our Equity
Shares.
Our promoters or large shareholders may dispose or pledge Equity Shares as security and are seeking to enforce such
security, or the perception that such issuance or sales may occur, may significantly affect the trading price of the
Equity Shares. Except for the restrictions described in the sections “Placement” and “Description of the Shares”, there
is no restriction on our ability to issue Equity Shares or the ability of any of our shareholders to dispose of, pledge or
otherwise encumber their Equity Shares, and there can be no assurance that we will not issue Equity Shares or that
our shareholders will not dispose of, pledge or otherwise encumber their Equity Shares.
An investor will not be able to sell any of the Equity Shares subscribed in this Issue other than on a recognized
Indian stock exchange for a period of 12 months from the date of the issue of the Equity Shares.
Pursuant to the ICDR Regulations, for a period of 12 months from the date of the issue of the Equity Shares in this
Issue, QIBs subscribing to the Equity Shares may only sell their Equity Shares on the recognized stock exchange and
may not enter into any off-market trading in respect of these Equity Shares. We cannot be certain that these restrictions
will not have an impact on the price of the Equity Shares. This may affect the liquidity of the Equity Shares purchased
by investors and it is uncertain whether these restrictions will adversely impact the market price of the Equity Shares
purchased by investors.
Investors may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares.
63
Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian company are
generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange held for more than
12 months will not be subject to capital gains tax in India if STT has been paid on the transaction. STT will be levied
on and collected by a domestic stock exchange on which the Equity Shares are sold. Any gain realized on the sale of
equity shares held for more than 12 months to an Indian resident, which are sold other than on a recognized stock
exchange and on which no STT has been paid, will be subject to long term capital gains tax in India. Further, any gain
realized on the sale of listed equity shares held for a period of 12 months or less will be subject to short term capital
gains tax in India. Capital gains arising from the sale of the Equity Shares will be exempt from taxation in India in
cases where the exemption from taxation in India is provided under a treaty between India and the country of which
the seller is resident. Generally, Indian tax treaties do not limit India’s ability to impose tax on capital gains. As a
result, residents of other countries may be liable for tax in India as well as in their own jurisdiction on a gain upon the
sale of the Equity Shares.
There are restrictions on daily movements in the price of the Equity Shares, which may adversely affects
shareholder’s ability to sell, or the price at which it can sell Equity Shares at a particular point in time.
We are subject to a daily “circuit breaker” imposed by recognized stock exchanges in India, which does not allow
transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operates
independently of the index-based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges.
The percentage limit on our circuit breakers is set by the stock exchanges based on the historical volatility in the price
and trading volume of the Equity Shares. The stock exchanges do not inform us of the percentage limit of the circuit
breaker, and may change it without our knowledge from time to time. This circuit breaker limits the upward and
downward movements in the price of the Equity Shares. This may be triggered by an extremely high degree of
volatility in the market activity (among other things). Due to the existence of this circuit breaker, there can be no
assurance that shareholders will be able to sell the Equity Shares at their preferred price or at all at any particular point
in time.
Applicants to the Issue are not allowed to withdraw their Bids after the Bid/Issue Closing Date.
In terms of the Regulations 86 of the ICDR Regulations, applicants in the Issue are not allowed to withdraw their Bids
after the Bid/Issue Closing Date. The Allotment of the Equity Shares in this Issue and the credit of such Equity Shares
to the applicant’s demat account with its depository participant could take approximately seven days and up to ten
days from the Bid/Issue Closing Date. There is no assurance, however, that material adverse changes in the national
and international monetary, financial, political or economic conditions or other events in the nature of force majeure,
material adverse changes in our business, results of operation or financial condition, or other events affecting the
applicant’s decision to invest in the Equity Shares, would not arise between the Bid/Issue Closing Date and the date
of Allotment of Equity Shares in the Issue. Occurrence of any such events after the Bid/Issue Closing Date could also
impact the market price of the Equity Shares. The applicants shall not have the right to withdraw their Bids in the
event of any such occurrence.
Investors will be subject to market risks until the Equity Shares credited to the investor’s demat account are listed
and permitted to trade by the Stock Exchanges.
Our Company will apply to the stock exchanges for final listing and trading approval post allotment of the Equity
Shares. Investors can start trading the Equity Shares allotted to them only after the Equity Shares have been credited
to an investor’s demat account, are listed and permitted to trade by the Stock Exchanges. Since our Equity Shares are
currently traded on the BSE and the NSE, investors will be subject to market risk from the date they pay for the Equity
Shares to the date when trading approval is granted for the same. Further, there can be no assurance that the Equity
Shares allocated to an investor will be credited to the investor’s demat account or that trading of the Equity Shares
will commence in a timely manner.
Holders of Equity Shares could be restricted in their ability to exercise pre-emptive rights under Indian law and
could thereby suffer future dilution of their ownership position.
Under the Companies Act, a company incorporated in India must offer holders of its equity shares pre-emptive rights
to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to
64
the issuance of any new equity shares, unless the pre-emptive rights have been waived by the adoption of a special
resolution by holders of three-fourths of the equity shares who have voted on such resolution.
However, if the law of the jurisdiction that you are in does not permit the exercise of such pre-emptive rights without
our filing an offering document or registration statement with the applicable authority in such jurisdiction, you will be
unable to exercise such pre-emptive rights, unless we make such a filing. If we elect not to file a registration statement,
the new securities may be issued to a custodian, who may sell the securities for your benefit. The value such custodian
receives on the sale of any such securities and the related transaction costs cannot be predicted. To the extent that you
are unable to exercise preemptive rights granted in respect of our Equity Shares, your proportional interests in our
Company may be reduced.
65
MARKET PRICE INFORMATION
The Equity Shares are listed and traded on the BSE and NSE. The stock market data presented below is given for the
NSE and the BSE separately.
The following tables set forth the reported high, low, the number of Equity Shares traded and the total trading volume
on the dates on which such high and low prices were recorded and the average closing prices of the Equity Shares, on
the NSE and the BSE during the fiscal years ended March 31, 2015, March 31, 2016 and March 31, 2017.
NSE
Fiscal
Year
High
(₹)(1)
Date of
High
Number of
Equity
Shares
traded on
date of
high
Volume
on date
of high
(₹ in
Lakhs)
Low
(₹)(2)
Date of
low
Number of
Equity
Shares
traded on
date of low
Volume
on date of
low (₹ in
Lakhs)
Average
price for
the
Fiscal
Year*
(₹)
Total
Number
of Equity
Shares
traded
Total
Volume
(₹ in
Lakhs)
FY2017(3) 404.35 3-Nov-16 2,37,679 933.74 305.00 November
21, 2016
6,153 19.93 351.07 21,82,731 7,906.14
FY2016 Not applicable
FY2015 Not applicable
Source: www.nseindia.com
* Average of the daily closing price
(1) High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(2) Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(3) Company listed on NSE with effect from June 17, 2016
BSE
Fiscal
Year
High
(₹)(1)
Date of
High
Number of
Equity
Shares
traded
on date
of high
Volume on
date of high
(₹ in Lakhs)
Low
(₹)(2)
Date of
low
Number
of Equity
Shares
traded on
date of
low
Volume
on date of
low (₹ in
Lakhs)
Average
price for
the
Fiscal
Year*
(₹)
Total
Number of
Equity
Shares
traded
Total
Volume (₹
in Lakhs)
FY2017 417.90 21-Apr-16 17,108 69.08 304.50 November
23, 2016
5,149 16.09 354.67 20,87,994 7,652.41
FY2016 519.00 7-Jan-16 2,24,868 1,115.20 222.00 June 11,
2015
25,856 59.61 337.30
1,09,91,696
40,531.48
FY2015 329.70 8-Jan-15 1,34,184 427.92 70.30 April 22,
2014
12,694 9.47 197.54 76,74,159 17,314.33
__________
Source: www.bseindia.com
* Average of the daily closing price
(1) High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(2) Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(ii) The following tables set forth the reported high, low, the number of Equity Shares traded and the total trading
volume on the dates on which such high and low prices were recorded and the average closing prices of the
Equity Shares, on the NSE and the BSE during the last six months:
66
NSE
Month,
Year
High
(₹)(1)
Date of
High
Number of
Equity Shares
traded on date
of high
Volume
on date
of high
(₹ in
Lakhs)
Low
(₹)(2)
Date of
low
Number
of Equity
Shares
traded on
date of
low
Volume on
date of low
(₹ in
Lakhs)
Average
price
for the
Month*
(₹)
Total
Number of
Equity
Shares
traded
Total
Volume (₹ in
Lakhs)
Apr-17 423.00 13-Apr-17 1,28,530 526.20 350.00 3-Apr-17 35,484 128.62 391.83 5,55,802
2,190.49
Mar-17 361.00 15-Mar-17 12,947 46.07 330.00 30-Mar-17 18,550 61.78 344.40 1,83,102
630.19
Feb-17 382.05 10-Feb-17 3,885 14.39 341.00 15-Feb-17 4,141 14.83 359.38
97,701
352.03
Jan-17 392.00 25-Jan-17 19,187 72.06 343.20 2-Jan-17 70,304 248.81 368.23 2,42,244
886.50
Dec-16 347.00 1-Dec-16 5,003 17.04 324.00 8-Dec-16 14,039 46.95 332.82 1,65,039
552.28
Nov-16 404.35 3-Nov-16 2,37,679 933.74 305.00 21-Nov-16 6,153 19.93 345.26 4,57,086
1,704.83
Source: www.nseindia.com
* Average of the daily closing price
(1) High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(2) Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
BSE
Month,
Year
High
(₹)(1)
Date of
high
Number of
Equity Shares
traded on
date of high
Volume
on date
of high
(₹ in
Lakhs)
Low
(₹)(2)
Date of
low
Number
of Equity
Shares
traded on
date of
low
Volume on
date of low
(₹ in
Lakhs)
Average
price
for the
Month*
(₹)
Total
Number of
Equity
Shares
traded
Total
Volume (₹ in
Lakhs)
Apr-17 422.30 13-Apr-17 62,225 253.92 352.00 3-Apr-17 23,585
85.66
391.78 2,43,751
960.59
Mar-17 362.00 15-Mar-17 4,284 15.23 328.00 24-Mar-17 6,035
20.10
343.86 1,21,457
419.55
Feb-17 375.00 10-Feb-17 2,660 9.85 345.00 22-Feb-17 1,545
5.38
359.21 37,218
133.35
Jan-17 385.90 4-Jan-17 34,947 130.37 342.10 2-Jan-17 25,257
89.23
367.89 1,27,492
469.29
Dec-16 347.00 20-Dec-16 3,651 12.25 325.90 26-Dec-16 1,972
6.52
332.55 51,728
172.75
Nov-16 403.00 3-Nov-16 94,487 371.13 304.50 23-Nov-16 5,149
16.09
344.99 2,17,753
801.45
Source: www.bseindia.com
* Average of the daily closing price
(1) High of Intraday Highs. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
(2) Low of Intraday Lows. In case the price is the same on 2 dates then the date on which the volume is higher has
been considered.
67
(iii) The following table sets forth the market price on the Stock Exchanges on April 17, 2017, the first working
day following the approval of the Board of Directors for the Issue:
Date NSE BSE
April 17, 2017 Open High Low Close Open High Low Close
Price of the Equity Shares
(₹)
408.00 414.00 399.00 405.20 413.05 413.05 398.05 404.50
Volume (number of Equity
Shares)
21,610 13,746
Source : www.nseindia.com, www.bseindia.com
68
USE OF PROCEEDS
The gross proceeds from the Issue will be ₹ 6,604.00 Lacs. The net proceeds from the Issue after deducting fees,
commissions and expenses of approximately ₹ 238.66 Lacs, will be approximately ₹ 6,365.34 Lacs. (“Net Proceeds”)
Subject to compliance with applicable laws and regulations, our Company intends to use the Net Proceeds primarily
for funding the capital expenditure, working capital requirements, general corporate purposes and any other purposes
as may be permissible under applicable law.
We have not yet determined all of our expected expenditures, and we cannot estimate the amounts to be used for the
purposes set forth above. In accordance with the decision of the Board of Directors, our Company’s management will
have the flexibility in deploying the Net Proceeds. The amount and timing of any expenditure will depend on the
amount of cash generated by our operations, competitive and market developments.
Pending utilization of the Net Proceeds for the purposes described above, our Company intends to temporarily invest
the funds in creditworthy instruments, including money market Mutual Funds and deposits with banks and corporates.
Such investments would be in accordance with the investment policies as approved by the Board from time to time
and all applicable laws and regulations and in accordance with the investment policy.
Our Promoters or Directors are not making any contribution either as part of the Issue or separately in furtherance of
the Objects of the Issue.
69
CAPITALIZATION STATEMENT
The following table sets forth our Company’s capitalisation and total debt, as on March 31, 2016 derived from our
Company’s audited financial statements for the Fiscal March 31, 2016. This table should be read with the section
“Summary Financial Information”, “Risk Factors” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and “Financial Information” beginning on page 34, 42, 74 and 199 respectively.
(In Lacs)
As of March 31, 2016 As Adjusted for the Issue
Indebtedness
Long Term borrowings 31.85 31.85
Short Term borrowing 2,177.36 2,177.36
Current Maturities of Long-Term Borrowings 81.61 81.61
Total borrowing(A) 2,290.82 2,290.82
Shareholder’s funds:
Share capital 885.86 1,050.96
Reserves and Surplus 5,656.83 11,857.07*
Total shareholder’s funds (B) 6,542.69 12,908.03
Total capitalisation (A) + (B) 8,833.51 15,198.85
Note:
* Reserves and Surplus as adjusted for the Issue, is net of adjustments for estimated issue expenses of approximately ₹ 238.66 Lacs.
70
CAPITAL STRUCTURE
The Equity Share capital of our Company, as on the date of this Placement Document is set forth below:
No. Particulars Amount in Lacs
Aggregate nominal value
A. Authorised Share Capital
1,50,00,000 Equity Shares of ₹ 10 each 1,500.00
B. Issued, Subscribed and Paid-Up Share Capital before the Issue
88,58,575 Equity Shares of ₹ 10 each 885.86
C. Present Issue in terms of this Placement Document
16,51,000 Equity Shares of ₹ 10 each(1) 165.10
D. Subscribed and Paid-Up Share Capital after the Issue
1,05,09,575 Equity Shares of ₹ 10 each 1,050.95
E. Securities Premium Account
Before the Issue 551.78
After the Issue (2) 6,752.02
Note:
1. The Issue has been authorized by the Board of Directors vide a resolution passed at its meeting held on April 14,
2017 and by the shareholders of our Company vide a special resolution passed pursuant to sections 42 and 62(1)I
of the Companies Act at the EGM held on May 12, 2017.
2. The Securities Premium Account has been calculated on the basis of net proceeds from the Issue after adjustments
for estimated issue expenses of approximately ₹ 238.66 Lacs.
NOTES TO THE CAPITAL STRUCTURE
1. History of Equity Share Capital of our Company
The history of the equity share capital of our Company is provided in the following table:
Date of
Allotment
No. of Equity
Shares
allotted
Face
Value (₹)
Issue
Price (₹)
Nature of
consideration
Nature of Allotment
February 20,
1980
18 100 100 Cash Subscription to
Memorandum of
Association dated
February 7, 1980
August 4, 1980 4,332 100 100 Cash Preferential Allotment
September 3,
1981
1,525 100 100 Cash Preferential Allotment
May 23, 1983 509 100 100 Cash Preferential Allotment
June 25, 1984 116 100 100 Cash Preferential Allotment
October 25,
1984
500 100 100 Cash Preferential Allotment
June 30, 1986 1,940 100 100 Cash Preferential Allotment
71
Date of
Allotment
No. of Equity
Shares
allotted
Face
Value (₹)
Issue
Price (₹)
Nature of
consideration
Nature of Allotment
December 6,
1986
2060 100 100 Cash Preferential Allotment
May 6, 1987 11,000 100 - Other than
cash
Bonus issue in the ratio of
1:1
September 24,
1987
4,550 100 100 Cash Preferential Allotment
Sub-division of nominal value of Equity Shares of our Company from ₹ 100 per equity share to ₹ 10 per
equity share pursuant to the approval of the shareholder in EGM dated September 28, 1987.
December 5,
1987
2,38,950 10 - - Subdivision of 26,550
equity shares of face value
₹ 100 each into 2,65,500
Equity Shares of face
value of ₹ 10 each
March 18,
1988
53,500 10 10 Cash Preferential Allotment
May 29, 1988 37,500 10 10 Cash Preferential Allotment
September 5,
1988
1,26,890 10 10 Cash Rights Issue
October 27,
1988
52,000 10 10 Cash Rights Issue
July 6, 1989 4,610 10 10 Cash Preferential Allotment
July 14, 1989 2,00,000 10 10 Cash Preferential Allotment
August 17,
1989
1,95,000 10 10 Cash Preferential Allotment
December 11,
1989
1,95,000 10 10 Cash Preferential Allotment
March 4, 1990 50,000 10 10 Cash Preferential Allotment
January 13,
1992
69,225 10 10 Cash Preferential Allotment
February 19,
1992
6,000 10 10 Cash Preferential Allotment
August 10,
1992
5,68,186 10 10 Cash Rights Issue
July 31, 1993 9,11,705 10 Other than
cash
Bonus issue in the ratio of
1:2
November 19,
1993
15,41,000 10 15 Cash Initial Public Issue
May 22, 1996 38,54,059 10 12.5 Cash Rights Issue
November 20,
1996
(2.600) – – – Forfeiture of Equity
Shares
December 27,
2013
2,31,000 10 51.77 Cash Allotment against
conversion of warrants
July 12, 2014 5,00,000 10 51.77 Cash Allotment against
conversion of warrants a. Forfeiture of equity shares on account of non – payment of allotment/call monies of equity shares of our Company.
Pursuant to the meeting of the Board of Directors of the Company held on May 12, 2017, the Board of Directors,
subject to the approval of the members of the Company, inter-alia considered and approved the proposed funds raising
72
through Preferential Issue of total 1,38,000 warrants and 6,13,000 Equity Shares to the Promoter, Promoter Group and
non- promoters entities at a price of ₹ 408.00 per Equity Share, including a premium of ₹ 398.00 per Equity Share,
aggregating up to ₹ 3,064.08 Lacs (“Proposed Preferential Issue”).
2. Details of allotments made in the last one year
Our Company has not issued any Equity Shares in the last one year preceding the date of the Preliminary Placement
Document.
3. Employee Stock Option Plan
Our Company does not have an employee stock option plan.
73
DIVIDEND POLICY
The declaration and payment of dividend by our Company is governed by the applicable provisions of the Companies
Act and our Articles of Association. Under the Companies Act, the board of directors of a company recommends the
payment of a dividend and the shareholders approve of the same at a general meeting. In case of final dividend, it is
recommended by the board of directors and approved by the shareholders at the annual general meeting (AGM) and
is distributed and paid to shareholders in proportion to the paid-up value of their shares as on the record date for which
such dividend is payable. Under the Companies Act, dividends can only be paid in cash to shareholders listed on the
register of shareholders or those persons whose names are entered as beneficial owner in the record of the depositary
on the date specified as the ‘record date’ or ‘book closure date’. Under the Companies Act, a company may pay
dividends only out of (i) its profits in the year in which the dividend is declared (after providing for depreciation); or
(ii) out of money provided by the Central Government or a State Government for the payment of dividend by the
company in pursuance of a guarantee given by that Government; or (iii) accumulated profits earned by the company
in the previous years and transferred by the company to the reserves in accordance with the Companies (Declaration
and Payment of Dividend) Rules, 2014.
Financial Year
ended
Dividend per
Equity Share
(₹)
Amount of dividend
declared exclusive of
tax (₹ in Lacs)
Dividend tax (₹
in Lacs)
Total (₹ in
Lacs)
Rate of
dividend (in
%)
March 31, 2016 2.00 177.17 36.07 213.24 20% March 31, 2015 2.00 177.17 36.07 213.24 20% March 31, 2014 2.70 239.18 40.65 279.83 27%
As on date of this Placement Document, our Company does not have any dividend policy. The amounts paid as
dividends in the past are not necessarily indicative of the dividend policy of our Company or dividend amounts, if
any, in the future. There is no guarantee that any dividends will be declared or paid or that the amount thereof will not
be decreased in the future.
Dividends are payable within 30 days from the date of its declaration. Any shareholder who ceases to be a shareholder
prior to the record date or who becomes a shareholder after the record date will not be entitled to the dividend declared
by our Company.
74
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations is based upon, and should
be read in conjunction with, our limited reviewed unaudited Standalone Financial Statements as of and for the nine
months ending December 31, 2016, the Audited Consolidated Financial Statements for the Fiscal Year 2016,and the
Standalone Audited Financial Statements for the Fiscal Years 2015 and 2014, including the schedules, annexures and
notes thereto, included in the section “Financial Information” on page 199 and our assessment of the factors that
may affect our prospects and performance in future periods. Our financial statements for the Financial Year ended
March 31, 2014 and 2015 are prepared on standalone basis as we did not have any subsidiaries in this period. Our
audited financial statements are prepared in accordance with Indian GAAP. Indian GAAP differs in certain material
respects from IFRS and U.S. GAAP and GAAP in other countries. Accordingly, the degree to which our Financial
Statements will provide meaningful information to a prospective investor in countries other than India is entirely
dependent on the reader’s level of familiarity with Indian GAAP.
Our fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year are to the twelve
month period ended March 31 of that year.
Some of the information contained in the following discussion, including information with respect to our Company's
plans and strategies, contain forward-looking statements that involve risks and uncertainties. You should read the
section “Forward-Looking Statements” for a discussion of the risks and uncertainties related to those statements and
also the section “Risk Factors” for a discussion of certain factors that may affect our Company's business, results of
operations or financial condition. Our actual results may differ materially from those expressed in or implied by these
forward-looking statements.
Overview
We are manufacturers and suppliers of high energy materials for industrial and defence applications. We manufacture
and supply complete range of industrial explosives and accessories including bulk and cartridge explosives, cast
boosters, detonators, detonating fuse etc. We also manufacture solid propellants used in tactical and strategic missiles,
rockets for defence services. We also manufacture tear gas grenades used in mob dispersion and riot control by law
enforcement departments. We also manufactures various Pyro devices such as, Explosive bolts, Pyro actuators, Gas
generators, IR flares, Smoke markers and Cable cutters for defence services. As of March 31, 2017, we had an Order
Book of ₹ 24,300.12 Lacs, consisting an order book for supply of explosives and explosives accessories and
propellants.
Further, we provide operations and maintenance services for defence and space establishments. We are providing
operations and maintenance services for solid propellant plants of Satish Dhawan Space Centre SHAR of ISRO at
Sriharikota, Andhra Pradesh since 2007 and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur,
Chattisgarh since 2010.
We supply industrial explosives and accessories to various public sector undertakings including Coal India, Singareni
Collieries Company Limited, Neyveli Lignite, NMDC Limited and other mining companies. We also export our
products to several countries including Greece, Jordan, Turkey, Egypt, Nepal, Thailand, Philippines, Uganda, etc.
We manufacture and supply solid propellants to Government undertakings in defence sector for missiles like Akash,
Astra, Long Range Surface to Air Missile (“LRSAM”), Medium Range Surface to Air Missile (“MRSAM”), AGNI
etc. We have delivered the 1000th booster grain for Akash missile on July 9, 2016 to Bharat Dynamics Limited. We
believe, with our wide experience in handling explosive substances and energetic materials, we have created notable
infrastructure and facilities to manufacture critical high energy materials, propellants and pyro devices required by the
defence and para-military forces. We have received orders, from ISRO for supply of developmental motor for use in
the Polar Satellite Launch Vehicle and from Ministry of Defence for supply of chaffs and flares. Recently, we have
received industrial licenses received from DIPP to manufacture thirteen (13) new products including ammunition,
warheads and other defence products under explosive segment.
75
Our manufacturing facilities are located at Peddakandukuru, Telangana; Manuguru, Telangana; Godavarikhani,
Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu. We have a research and
development facility at Peddakandukuru, Telangana, recognized by the Department of Science and Industrial Research
(“DSIR”) and dedicated for research in high energy materials. Our laboratory located at Peddakandukuru, Telangana
was accredited by the National Accreditation Board for Testing and Calibration Laboratories till August, 2016 and an
application for renewal of the same is pending as on date. We have entered into MoU/collaboration with Gulbarga
University, Karnataka, IIT, Madras and BITS, Pilani for research in high energy materials.
Through our research and development in the Fiscal 2013, we commenced commercial production of detonators with
Nickel Hydrazine Nitrate (“NHN”) as primary charge. We have applied for a patent for Novel Safe Lead Free
Detonator before the Controller of Patents, Chennai and the same are pending as on date of this Placement Document.
We have successfully transferred the NHN technology for use in Detonators to an American company.
We are committed to provide quality products to our customers and in this relation hold various certifications,
approvals and accreditations including ISO 9001; 2008 for manufacture and supply of explosives like industrial
explosives, boosters, detonators, detonating fuse, propellants, special devices and explosive chemicals and ISO
9001:2008, AS9100C for development, manufacture and supply of high energy materials (propellants, pyrotechnics,
special devices and other chemicals) for aerospace and defence applications. In recognition of our technical excellence,
we received various awards and recognition including appreciation for development of Propellant composition for
LRSAM without combustion instability, Inc. India Innovative 100 Award for plant-scale manufacture of NHN
detonators, appreciation for development of Propellant Casting of Motors and Igniters for First and Second Stages of
Agni-4, appreciation for development of Pyrogen Igniters for Agni A4.
We have trained engineers and professionally qualified personnel experienced in commercial explosives, accessories
and propellants manufacturing. Our Promoter, Chairman and Managing Director, Dr. Amar Nath Gupta holds a
Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad. He is a recipient of
Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is bestowed with the
Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four decades of experience
in the product development and processes of explosives industry and is sphere heading the entire operations of the
Company since its inception. As on March 31, 2017, we had 1,163 permanent employees. Besides our permanent
employees, we are hiring contract labours pursuant to the requirements of business.
Significant factors affecting our business, financial condition and results of operations
Set out below are some of the significant factors that have affected our results of operations in the past, as well as
factors that are currently expected to affect our results of operations in the foreseeable future. These factors include:
Raw material availability and cost
Our ability to maintain our position as an efficient manufacturer and to increase our cost competitiveness is dependent
on the efficient management of our production costs. The availability of key raw materials at competitive prices is
critical and any price fluctuations may affect our results of operations. The key raw material used for manufacturing
our products is ammonium nitrate, ammonium perchlorate, Furnace Oil and GI Wire. Raw material consumed as a
percentage of total revenue was 52.24%, 54.10% and 48.60% for the Fiscal 2016, 2015 and 2014 respectively. We do
not have any long-term supply agreement with any of our raw material suppliers. In terms of our supply agreements
with respect to most of our sales, we have flexibility to pass on raw-material cost fluctuations to the customers through
quarterly pricing adjusted for variations in cost of raw materials and inflationary impacts. However any inability to
pass on the increased costs of raw materials to our customers in future, may affect our profitability.
Product development
Our R&D department are focused on developing processes for new product for expansion of our current product
portfolio and improve existing processes and production cost efficiency. To develop our product pipeline, we commit
substantial time, efforts, funds and other resources for R&D. The R&D process is often time consuming and costly,
and obtaining an approval or patent protection in any one jurisdiction would not ensure approval in other jurisdictions.
Our processes and products that are currently under development, if and when fully developed and tested, may not
76
perform as expected, necessary regulatory approvals or registrations may not be obtained in a timely manner, if at all,
and we may not be able to successfully and profitably produce and utilize such products or processes.
Further, as a part of our strategy we continue to focus on seeking registrations for licenses to increase our portfolio of
defense products, explosive. The legal and procedural requirements for seeking registrations pursuant to the rules and
regulations under which we operate, are fairly complex, stringent and time consuming. The registration process is also
capital intensive and requires large financial commitment. We invest substantial capital on creating the dossier and
registration fees, field trials, fees to consultants and other intermediaries to ensure compliance with applicable
regulatory requirements and safety standards. Accordingly, our profitability, financial condition and market position
is dependent on our ability to obtain the necessary registration in a timely manner and to successfully launch and
market our products.
Competition
We sell our products to public sector undertakings and Government entities and export customers and face competition
from international and domestic players. We also face competition from domestic public sector undertakings who
have established manufacturing unit long time back. In order to remain competitive, we must continuously strive to
innovate, reduce our costs of production, transportation and improve our operating efficiencies. If we fail to do so,
other producers may be able to sell better products or products at lower prices, which may have an adverse effect on
our market share and results of operations. We believe that our manufacturing facilities, wide range of products and
ability to provide comprehensive solutions closer to our customers provide us certain competitive advantages.
Our ability to implement our growth strategies
Our total revenue from operations has grown from ₹ 14,681.05 Lacs in the Fiscal 2014 to ₹ 18,545.10 Lacs in the
Fiscal 2016. We propose to make further investments towards registration of our products expansion and additional
facilities etc. Our growth strategy involves risks and difficulties, many of which are beyond our control and,
accordingly, there may be no assurance that we will be able to complete our plans on schedule or at all, or without
incurring additional unforeseen material capital expenditure.
Any inability on our part to manage our growth effectively or to ensure the continued adequacy of our current systems
to support our growth strategy could have an adverse effect on our growth plans. Furthermore, if market conditions
change or if our operations do not generate sufficient funds or for any other reasons, we may decide to delay, modify
or forgo some aspects of our growth strategy which could have a material and adverse effect on our business prospects.
Taxation
Though presently we are not enjoying any indirect tax benefits, we intend to avail applicable and eligible indirect tax
benefits and incentives in respect of our forthcoming projects and the possible such tax benefits include power subsidy,
sales tax deferment, interest subsidy and such other incentives. Further, if the applicable laws relating to our tax
liabilities are amended or if there is a change in interpretation of such taxation laws which increase our tax liabilities,
there may be an adverse impact on our financial condition and results of operations.
Other factors beyond those identified above may materially affect our results of operations. For further details, see the
sections entitled “Risk Factors” and “Business” on page 42 and 112, respectively.
Exchange rates
8.95% of our revenue from operation in Fiscal 2016 was from exports and denominated in foreign currency. The
Indian Rupee has depreciated 10.37% against the U.S. Dollar from March 31, 2014 to March 31, 2016. We expect
that a significant portion of our revenues will continue to be generated in foreign currencies. Accordingly, our
operating results have been and will continue to be impacted by fluctuations in the exchange rate between the Indian
Rupee and other foreign currencies.
New Accounting Standards (Ind AS)
77
The financial statements have been prepared to comply with Indian GAAP, including the Accounting Standards
notified under the relevant provisions of the Companies Act, 2013. The financial statements are prepared on accrual
basis under the historical cost convention. Accounting Policies not specifically referred to otherwise, are consistent
and in consonance with GAAP. GAAP as applied in India differs in certain significant respects from IFRS. As part of
the convergence towards IFRS, the Institute of Chartered Accountants of India has notified a list of new Accounting
Standards termed as Ind AS. We shall begin preparing our financial statements under Ind AS in Financial Year 2018.
We are currently evaluating the impact of this change with our accounting and financial advisers.
Significant Accounting Policies
The Accounting Policies have been consistently applied by the Company and are consistent with those applied in
previous year. The principles of the significant accounting policies followed by us in the preparation of our financial
statements are set out below:
1) Basis of preparation of Financial Statements
The financial statements have been prepared in accordance with the generally accepted accounting principles in India
under the historical cost convention on an accrual basis in compliance with all material aspects of the Accounting
Standards specified under Section 133 of the Companies Act, 2013 (“the Act”), read with Rule 7 of the Companies
(Accounts) Rules, 2014, other relevant provisions of the Act, other pronouncements of the Institute of Chartered
Accountants of India, and also the guidelines issued by the Securities and Exchange Board of India. The accounting
policies have been consistently applied by the Company and are consistent with those used in the previous year.
The financial statements are presented in Indian rupees rounded off to the nearest lakh. All assets and liabilities have
been classified as current or non-current as per the company’s normal operating cycle and other criteria set out in
Schedule III to the Act. Based on the nature of products and time between acquisition of assets for processing and
their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the
purpose of current/non-current classification of assets and liabilities.
2) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities on the date of financial statements and reported amounts of revenues and expenses for the
year. Although these estimates are based upon management’s best knowledge of current events and actions, actual
results could differ from these estimates. Difference between actual results and estimates are recognised in the period
in which the results are known / materialized.
3) Tangible Fixed Assets
i. Tangible fixed assets are stated at historical cost less accumulated depreciation thereon and impairment
losses, if any. Historical cost is inclusive of freight, duties and taxes and incidental expenses related to
acquisition and net of CENVAT wherever applicable. In respect of projects involving construction,
related pre-operational expenses form part of the cost of the assets capitalised.
ii. Revenue expenditure incurred during the construction period of the project is shown under “Unallocated
Expenditure Pending Capitalisation” till the commencement of the commercial production or their
intended use and the same is capitalised by allocating to relevant assets in the ratio of their direct costs.
4) Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any
such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the
asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is
recognised in the statement of Profit and Loss. If at the balance sheet date there is an indication that if a previously
78
assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of amortized historical cost.
5) Depreciation
i. Depreciation is computed on a straight line basis so as to write off cost of assets over the useful lives of
tangible fixed assets in the manner prescribed in Schedule II of the Act. The useful life of the assets are
periodically reviewed and re-determined based on a technical evaluation and expected use and the
unamortized depreciable amount is charged over the remaining useful life of such assets. Deprecation is
provided at one hundred percent for assets costing ₹ 5,000 or less.
ii. Leasehold land is amortized over the lease period.
6) Intangible assets and amortisation
Intangible assets are stated at historical cost less accumulated amortisation thereon and impairment loss, if any. These
assets are amortised over a period of 3 years, which is based on their estimated useful life.
7) Inventories
i. Raw materials and stores and spares are valued at lower of cost, calculated on weighted average basis,
and net realizable value. Items held for use in the production of inventories are not written down below
cost if the finished product in which these will be incorporated are expected to be sold at or above cost.
ii. Finished goods and work-in-progress are valued at lower of cost and net realizable value. Cost includes
materials, labour and a proportion of appropriate overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined on a weighted average basis.
iii. Scrap is valued at net realisable value.
iv. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
v. Obsolete, defective and unserviceable inventories are duly provided for.
8) Borrowing costs
i. Borrowing cost includes interest, ancillary costs incurred in connection with the arrangement of
borrowings and exchange differences arising from foreign currency borrowings to the extent they are
regarded as an adjustment to the interest cost.
ii. Borrowing costs directly attributable to acquisition or construction of Fixed Assets which necessarily
take a substantial period of time to get ready for their intended use, incurred till the time of
commencement of commercial production or their intended use are capitalized. All other borrowing
costs are expensed in the period they occur.
9) Investments
i. Investments that are readily realizable and intended to be held for not more than one year from the date
on which such investments are made, are classified as current investments. All other investments are
classified as long term investments.
ii. Current investments are carried at lower of cost and fair value determined on individual investment basis.
iii. Long-term investments are carried at cost of acquisition. Provision is made for decline, other than
temporary, in the value of investments.
iv. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is
charged or credited to the Statement of profit and loss.
10) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be readily measured.
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i. Sales
Revenue from sales is recognised when the significant risks and rewards of ownership are transferred to the
customers which is based upon the terms of the applicable contract, which coincides with the delivery of the
goods. Gross revenue includes excise duty and adjustments for price variation and liquidated damages.
ii. Service income
Service income is recognised as per the terms of the contracts with customers when the related services are
performed or the agreed milestones are achieved.
iii. Interest
Revenue is recognised on an accrual basis and on a time proportion basis taking into account the amount
outstanding and the applicable rate.
iv. Dividend
Revenue is recognised when the shareholders’ right to receive payment is established by the balance sheet
date.
11) Excise duty
Excise duty recovered is included in “Gross Sales”. Excise duty on sales is shown as an item of expense and deducted
from gross sales. Value of closing stock of finished goods includes excise duty paid / payable on such stocks wherever
applicable.
12) Employee benefits
Short term employee benefits
Short term employee benefits are recognised as an expense as per the company’s scheme based on expected obligation
on undiscounted basis.
Long term employee benefits
i. Defined contribution plans
Provident fund: Contribution to provident fund is made at the prescribed rates to the Employees Provident Fund
Scheme of the Central Government and is charged to the Statement of profit and loss.
ii. State plans
Employer’s contribution to Employee’s State Insurance is charged to Statement of profit and loss.
iii. Defined benefit plans
a. Gratuity
The Company makes contribution to a scheme administered by the Life Insurance Corporation of India (‘LIC’) to
discharge gratuity liabilities to the employees. Annual contribution to the fund as determined by the LIC is charged to
Statement of profit and loss in the year of contribution. The shortfall between the accumulated funds available with
LIC and liability as determined on the basis of an actuarial valuation is provided for at the year-end. The actuarial
gains / losses are taken to the Statement of profit and loss.
b. Leave encashment
The company records its unavailed leave liability based on actuarial valuation using projected unit credit method.
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c. Actuarial gains / losses arising during the year are recognised in the Statement of profit and loss.
iv. Terminal benefits are recognised as an expense as and when incurred.
13) Foreign exchange transactions
i. Initial Recognition: Foreign currency transactions are recorded in the reporting currency, by applying to
the foreign currency amount the exchange rate between the reporting currency and foreign currency at
the date of the transaction.
ii. Conversion: Foreign currency monetary items are reported at year-end rates. Nonmonetary items which
are carried in terms of historical cost denominated in foreign currency are reported using the exchange
rate at the date of the transaction.
iii. Exchange difference: Exchange differences arising on the settlement of monetary items or on reporting
monetary items of Company at rates different from those at which they were initially recorded during
the year, or reported in previous financial statements, are recognised as income or as expense in the year
in which they arise.
iv. Forward exchange contracts not intended for trading purpose: In case of forward exchange contracts,
difference between forward rate and the exchange rate on the date of transaction is recognised as expense
or income over the life of the contract. Exchange differences on such contracts are recognised in the
Statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on
cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
14) Research and development
Revenue expenditure on research and development is charged to the Statement of profit and loss. Capital expenditure
on research and development is shown as an addition to fixed assets.
15) Operating leases
Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified
as operating leases. Lease payments under operating leases are recognised as an expense on a straight-line basis over
the lease term.
16) Taxation
i. Tax expense (or tax saving), the aggregate of current year tax and deferred tax, is charged (or credited)
to the Statement of profit and loss.
ii. Current year tax
The provision for taxation is based on assessable profits of the company as determined under the Income Tax Act,
1961. The company also provides for such disallowances made on completion of assessments pending appeals, as
considered appropriate depending on the merits of each case.
iii. Deferred tax
Deferred Income Taxes are recognised for the future tax consequences attributable to timing differences between the
financial statement determination of income and their recognition for tax purposes. The effect of a change in tax rates
on deferred tax assets and liabilities is recognized in income using the tax rates and tax laws that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be realized. In situations where the company has
unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized against future taxable profits.
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In the situations where the company is entitled to tax holiday under Income tax Act, 1961 no deferred tax is recognised
in respect of timing differences which reverse during the tax holiday period, to the extent company’s gross total income
is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognised in the year in which timing difference originate.
Unrecognised deferred tax assets of earlier years are reassessed and recognized to the extent that it has become
reasonably certain or virtually certain, as the case may be that future taxable income will be available against which
such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the
carrying amount of a deferred tax asset to the extent that it is no longer reasonably certainty or virtually certainty, as
the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised.
Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may
be, that sufficient future taxable income will be available.
iv. Minimum Alternate Tax (MAT) Credit
MAT credit is recognised, as an asset only when and to the extent there is convincing evidence that the company will
pay normal income tax during the specified year. In the year in which the Minimum Alternative Tax (MAT) credit
becomes eligible to be recognised as an asset in accordance with the recommendation contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and
loss account and shown as MAT Credit Entitlement. The company reviews the same at each balance sheet date and
writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to
the effect that company will pay normal income tax during the specified period.
17) Provisions, Contingent liabilities and Contingent assets
i. Provisions, involving substantial degree of estimation in measurement, are recognized when there is a
present obligation as a result of past events and it is probable that there will be an outflow of resources.
ii. Contingent liabilities, which are possible or present obligations that may but probably will not require
outflow of resources, are not recognised but are disclosed in the Notes to the financial statements.
iii. Contingent assets are neither recognized nor disclosed in the financial statements.
18) Earnings per share
i. The basic earnings per share (EPS) is calculated by dividing the net profit or loss for the year attributable
to equity shareholders by the weighted average number of equity shares outstanding during the year.
ii. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable
to equity shareholders and the weighted average number of equity shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
19) Proposed dividend
A provision is made in the books of account for the dividend proposed by the Board, pending approval at the Annual
General Meeting.
20) Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and in hand and short-term investments with an original maturity
of three months or less.
Principal Components of our Revenue and Expenses under Indian GAAP
Total Revenue
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Our total revenue consists of (a) revenue from operations and (b) other income.
Revenue from operations
Our revenue from operations, comprises of sale of our products, sale of traded goods, sale of services and other
operating revenues. We manufacture defense products viz. solid propellants, tear gas grenades, explosive bolts, pyro
actuators, smoke markers. We also manufacture commercial explosives such as bulk explosives, packaged explosives,
cast booster, emulsion booster, detonators, and detonating fuses. In addition to sale of manufactured goods, our
revenue from operations also comprised of sale of traded goods such as trading of safety detonating fuse and stores
etc. Our revenue from sale of services comprises income from operation and maintenance services, job work and other
services, royalty and technology transfer fees. Our other operating revenues includes revenue from sale of scrap arising
out of manufacturing process and export incentives. Revenue from operations accounted for 99.75%, 99.50%, and
99.04% of our total revenue for Fiscal Years 2016, 2015 and 2014, respectively.
Other Income
Our other income comprises interest income on our fixed deposits, provision for liabilities no longer required, written
back and other non-operating income. Other income accounted for 0.25%, 0.49%, and 0.96% of our total revenue for
Fiscal Years 2016, 2015 and 2014, respectively.
Expenses
Our total expenses comprised of cost of raw materials consumed, purchase of stock in trade, changes in inventories of
finished goods, work-in-progress, scrap, employee benefit expenses, finance costs, research and development
expenses, depreciation (net) and amortization expenses and other expenses.
Cost of raw materials consumed
Cost of raw materials and components used in the manufacture of our products which predominantly comprises of
ammonium nitrate, ammonium perchlorate, gelatin wire, aluminium strips. Cost of materials consumed indicated the
difference between the opening and closing stock, as adjusted for materials purchased during the period. Cost of raw
material consumed accounted for 52.24%, 54.10%, and 48.60% of our total revenue for Fiscal Years 2016, 2015 and
2014, respectively.
Changes in inventories of finished goods, work-in-progress and scrap
This expense comprises primarily consumption of raw materials and costs relating to completion of work in progress.
Change in inventories of finished goods, work in progress and stock in trade accounted 2.26%, -1.93%, and -0.07%
of our total revenue for Fiscal Years 2016, 2015 and 2014, respectively.
Employee benefit expenses
Employee benefit expenses comprises directors’ remuneration, salaries and wages, contribution to provident fund and
employees’ welfare and other amenities. Employee benefit expenses accounted for 21.74%, 23.68% and 23.74% of
our total revenue for Fiscal Years 2016, 2015 and 2014, respectively.
Financial costs
Financial costs comprises interest on loans, cash and other credits, interest on delayed payment of TDS and advance
tax, and other borrowing costs. Financial costs accounted for 2.02%, 1.57% and 1.61% of our total revenue for Fiscal
Years 2016, 2015 and 2014, respectively.
Research and development expenses
Research and development expenses comprises of expenses towards raw material consumed for such research and
development, salaries, wages, bonus, provident fund and other employment benefits to our scientists and other research
83
and development employees. Research and development expenses accounted for 0.48%, 0.49% and 0.47% of our total
revenue for Fiscal Years 2016, 2015 and 2014, respectively.
Depreciation (net) and amortization expenses
Depreciation and amortization comprises (i) depreciation of tangible assets, including our equipment, plants and
furniture, office equipment, vehicles; and (ii) amortization of intangible assets, including our licenses and software’s.
Depreciation and amortization accounted for 1.79%, 2.20% and 1.60% of our total revenue for Fiscal Years 2016,
2015 and 2014, respectively.
Other expenses
Other expenses mainly comprises of consumption of packing materials, power and fuels, repairs to machinery,
building and other assets, carriage and freight charges, sales commissions, travelling and conveyance, consumption
of stores and spare parts, rent, insurance, audit fees for statutory audits performed by our auditors, expenses relating
to handling our tax matters, books and periodicals, business promotion expenses, service tax, telephone charges, tender
expenses etc. Other expenses accounted for 13.37%, 13.99% and 14.03% of our total revenue for Fiscal Years 2016,
2015 and 2014, respectively.
Tax expenses: Tax expenses represent the sum of taxes currently payable and deferred taxes under the laws of each
jurisdiction where we carry on our business. Tax expenses accounted for 1.42%, 1.53% and 2.55% of our total revenue
for Fiscal Years 2016, 2015 and 2014, respectively.
Review of Financial Results
The following tables set forth a summary of our Company's revenue from operations for the periods indicated, in
absolute terms and expressed as a percentage of revenue from operations/total revenue
Particulars
Fiscal 2016 Fiscal 20151 Fiscal 20141
₹ in Lacs % of total
revenue
₹ in Lacs % of total
revenue
₹ in Lacs % of total
revenue
Revenue
Revenue from operations
Sale of Products 18,370.07 99.06% 14,613.07 97.27% 14,234.10 96.96%
Sale of traded goods 38.01 0.20% 150.99 1.01% 178.39 1.22%
Sale of services 1,808.86 9.75% 1,576.28 10.49% 1,468.92 10.01%
Other operating revenues 68.2 0.37% 49.71 0.33% 69.35 0.47%
20,285.14 109.38% 16,390.05 109.10% 15,950.76 108.65%
Less: Excise duty 1,786.49 9.63% 1,440.89 9.59% 1,410.38 9.61%
18,498.65 99.75% 14,949.16 99.50% 14,540.38 99.04%
Other income 46.45 0.25% 74.04 0.49% 140.67 0.96%
Total Revenue 18,545.10 100.00% 15,023.20 100.00% 14,681.05 100.00%
EXPENSES
Cost of raw materials
consumed 9,688.80
52.24% 8,127.21 54.10% 7,135.47 48.60%
Purchase of stock in trade 34.49 0.19% 123.72 0.82% 174.89 1.19%
Changes in inventories of
finished goods, work-in-
progress and scrap
418.48 2.26% (289.86) (1.93%) (10.38) (0.07%)
Employee benefits expense 4,031.54 21.74% 3,557.53 23.68% 3,485.68 23.74%
Finance costs 374.49 2.02% 236.08 1.57% 236.15 1.61%
Research and development
expenses 89.78 0.48%
73.87 0.49%
69.15 0.47%
Depreciation (net) and
amortization expense 332.41 1.79%
330.07 2.20%
235.22 1.60%
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Particulars
Fiscal 2016 Fiscal 20151 Fiscal 20141
₹ in Lacs % of total
revenue
₹ in Lacs % of total
revenue
₹ in Lacs % of total
revenue
Other expenses 2,480.02 13.37% 2,102.35 13.99% 2,059.37 14.03%
Total Expenses 17,450.01 94.09% 14,260.97 94.93% 13,385.55 91.18%
Profit before exceptional
items and tax 1,095.09
5.91% 762.23 5.07% -
Exceptional items (net) 269.46 1.45% - -
Profit before tax 825.63 4.45% 762.23 5.07% 1,295.50 8.82%
Tax expense
Current tax 445.00 2.40% 255.00 1.70% 325.00 2.21%
Deferred tax (178.77) -0.96% (16.04) -0.11% 76.03 0.52%
Income tax adjustments (2.90) -0.02% (8.78) -0.06% (26.84) -0.18%
263.33 1.42% 230.18 1.53% 374.19 2.55%
Profit after tax and before
share of associates 562.30 3.03%
532.05 3.54%
921.31 6.28%
Add: Share in profit of
associate 2.78 0.01%
- - - -
Profit after tax and share of
profit of associate 565.08 3.05%
- - - -
Earnings per equity share (Face value: ₹ 10/- per share)
Basic – ₹ 6.38 - 6.10 - 11.25 - Diluted – ₹ 6.38 - 6.10 - 11.17 -
1 The financials for Fiscals 2015 and 2014 are on a standalone basis as the Company did not report consolidated
financials for that year
Financial Year 2016 compared with Financial Year 2015
Revenue
Revenue from operations
Revenue from operations increased by 23.76% from ₹ 16,390.05 Lacs for the Fiscal 2015 to ₹ 20,285.14 Lacs for
Fiscal 2016.
Increase in revenue from operations was primarily driven by 25.71% increase in sale of products from ₹ 14,613.07
Lacs for the Fiscal 2015 to ₹ 18,370.07 Lacs for the Fiscal 2016. This was primarily on account of increase in sale of
industrial explosives. Our sale of products from industrial explosives increased from ₹ 8,306.80 lac for the fiscal 2015
to ₹ 10,271.37 lac for the fiscal 2016 mainly on account of increase supply to Coal India Limited. Our sale of products
from detonators increased from ₹ 2,315.46 lac for the fiscal 2015 to ₹ 2,537.75 lac for the fiscal 2016. Our sale of
products from other products increased from ₹ 3,944.93 lac for the fiscal 2015 to ₹ 5,533.16 lac for the fiscal 2016 on
account of higher supplies of defence products. Sales of industrial explosives, detonators, other products as a
percentage of the Total Revenue were 55.39%, 13.68% and 29.84%, respectively in Fiscal 2016 compared to 55.29%,
15.41% and 26.26%, respectively in Fiscal 2015.
Our sale of services increased by 14.75% from ₹ 1,576.28 Lacs for the Fiscal 2015 to ₹ 1,808.86 Lacs in Fiscal 2016.
This was primarily on account of increase in annual maintenance fees as well as increase in scope of services. Under
sale of services, we have received ₹ 1,600.57 Lacs from operation and maintenance services of solid propellant plants
owned by space and defence establishments, ₹ 141.71 Lac from job work and other services and ₹ 66.56 Lac from
royalty and technology fee for the Fiscal 2016 for transfer of technology developed by us for NHN as primary charge
for detonators and ₹ 1,486.24 Lacs from operation and maintenance services of solid propellant plant owned by space
and defence establishment and ₹ 90.04 Lac from job work and other services for the Fiscal 2015.
The contribution of other operating revenues increased by 37.20% from ₹ 49.71 Lac for the Fiscal 2015 to ₹ 68.20
Lac in the Fiscal 2016, which was mainly due to higher sale of scrap and export incentives. Our other operating
85
revenue constitutes sale of scrap arising out of manufacturing process and export incentives. We received other
operating revenue of ₹ 44.11 Lac from sale of scrap arising out of manufacturing process and ₹ 24.09 Lac from export
incentives for the Fiscal 2016 and ₹ 32.39 Lac from sale of scrap arising out of manufacturing process and ₹ 17.32
Lac from export incentives for the Fiscal 2015.Our exports increased from ₹ 1,049.03 Lac for the fiscal 2015 to ₹
1,455.16 Lac for the fiscal 2016 on account of higher exports of industrial explosives.
Further, our revenue from sale of traded goods decreased by 74.83% from ₹ 150.99 Lac for the Fiscal 2015 to ₹ 38.01
Lac in the Fiscal 2016. This decrease of sale of traded goods were primarily on account of lower exports of traded
items.
Other Income
₹ in Lacs
Particulars Fiscal 2016 Fiscal 2015 % Change
Interest Income 30.39 26.87 13.10%
Dividend income on non-current investment - 13.03 -
Net gain on foreign currency transactions and translations - 2.20 -
Provision for liabilities no longer required, written back 3.82 4.15 -7.95%
Prior year income (net of expenditure of ₹ 0.31 lakhs) - 25.78
Other non-operating income 12.24 2.01 508.96%
Total 46.45 74.04 -37.26%
Other income from operation decreased by 37.26% from ₹ 74.04 Lacs for the Fiscal 2015 to ₹ 46.45 Lacs for the
Fiscal 2016, primarily on account of:
(a) receipt of other income of ₹ 13.03 from dividend income on non-current investment, ₹ 25.78 Lac as a prior year
income (net of expenditure of ₹ 0.31 lac) and ₹ 2.20 Lac from net gain on foreign currency transactions and
translations for Fiscal 2015.
(b) increase in interest income by 13.10% from ₹ 26.87 Lacs for Fiscal 2015 to ₹ 30.39 Lacs in Fiscal 2016, being
increased interest earned from surplus liquidity parked with banks in the form of deposits;
(c) increase in other non-operating income by 508.96% from ₹ 2.01 Lacs for Fiscal 2015 to ₹ 12.24 Lacs in Fiscal
2016, mainly on account of receiving insurance claims
Total Revenue
Total Revenue increased by 23.44% from ₹ 15,023.20 Lacs for the Fiscal 2015 to ₹ 18,545.10 Lacs for Fiscal 2016,
primarily due to an increase in revenue from operations as explained above.
Expenses
Cost of materials consumed
₹ in Lacs
Particulars Fiscal 2016 Fiscal 2015 % Change
Ammonium nitrate 5,792.71 4,473.57 29.49%
GI wire 147.96 148.77 -0.54%
Aluminium strip 167.10 147.40 13.36%
Others 3,581.03 3,357.47 6.66%
Total 9,688.80 8,127.21 19.21%
Cost of materials consumed increased by 19.21% from ₹ 8,127.21 Lacs for the Fiscal 2015 to ₹ 9,688.80 Lacs for the
Fiscal 2016, primarily due to increased sales of industrial explosives. However, there was a decrease in the cost of the
material consumed as a percentage of the Total Revenue to 52.24% in Fiscal 2016 compared to 54.10% in Fiscal 2015.
This decrease was primarily on account of mix of the products sold and fall in prices of key raw material.
Purchase of stock in trade
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Expenses towards purchase of stock in trade decreased by 72.12% from ₹ 123.72 Lac for the Fiscal 2015 to ₹ 34.49
Lac for the Fiscal 2016. We have purchased detonating fuse of ₹ 21.95 Lac for the Fiscal 2016 and ₹ 61.20 Lac for
Fiscal 2015. Further, the expenses towards store for stock in trade was ₹ 12.54 Lacs for the Fiscal 2016 and ₹ 62.52
Lac for the Fiscal 2015.
Changes in inventories of finished goods, work-in-progress
Our inventories of finished goods, work-in-progress and scrap increased by ₹ 418.48 Lacs for Fiscal 2016 as against
a decrease in inventories by ₹ 289.86 Lacs for Fiscal 2015.
Employee benefits expenses
₹ in Lacs
Particulars Fiscal 2016 Fiscal 2015 % Change
Salaries, wages, bonus and other benefits 3,530.77 3,134.56 12.64%
Contribution to provident fund and other funds 326.15 273.81 19.12%
Contribution to ESI 8.14 12.32 -33.93%
Staff welfare expenses 166.48 136.84 21.66%
Total 4,031.54 3,557.53 13.32%
Employee benefits expenses increased by 13.32% from ₹ 3,557.53 Lacs in Fiscal 2015 to ₹ 4,031.54 Lacs in Fiscal
2016. This increase was primarily due to higher outlay on Director’s remuneration apart from increase in salaries,
wages, bonus, gratuity and perquisites. Employee benefits expenses as a percentage of Total Revenue marginally
reduced from 23.68% in Fiscal 2015 to 21.74% in Fiscal 2016.
a. Managerial Remuneration - We have paid ₹ 323.59 Lac and 260.19 Lac towards managerial remuneration
for the Fiscal 2016 and Fiscal 2015 respectively.
b. Director Sitting fees- We have paid ₹ 9.50 Lac and 9.75 Lac towards sitting fees for the Fiscal 2016 and
Fiscal 2015 respectively.
c. Salaries, Wages and Bonus- As on March 31, 2015 total employees were 1,173 which reduced to 1,152 as
on March 31, 2016. The expense on salaries, wages and bonus was ₹ 3,530.77 Lacs for the Fiscal 2016 as
against ₹ 3,134.56 Lacs in Fiscal 2015 which indicates an increase of 12.64% primarily on account of normal
revision in salaries and increased sales and reduction in number of employees on account of voluntary
retirement scheme.
d. Contributions to PF, Gratuity and other contributions- There was an increase of 19.12% in contributions to
PF, Gratuity and other contributions from ₹ 273.81 Lacs for the Fiscal 2015 to ₹ 326.15 Lacs in Fiscal 2016.
e. Staff welfare expenses / other benefits- Expenditure towards staff welfare expenses/other benefits increased
by 21.66% to ₹ 166.48 Lacs for the Fiscal 2016 as against ₹ 136.84 Lacs in Fiscal 2015.
Finance cost
Finance cost increased by 58.63% from ₹ 236.08 Lacs for Fiscal 2015 to ₹ 374.49 Lacs for Fiscal 2016. This increase
in finance cost expenses was primarily due to increase in our short term borrowing, which increase the Interest expense
paid to banks during Fiscal 2016 to ₹ 251.68 Lacs from ₹ 193.69 Lacs for Fiscal 2015. As on March 31, 2015 our total
short term borrowings was ₹ 1,781.82 lacs which increased to ₹ 2,177.36 lacs as on March 31, 2016. The other
borrowing cost also increased to ₹ 122.81 Lac for Fiscal 2016 from ₹ 42.39 Lac for Fiscal 2015 primarily on account
of commissions for bank guarantees. As on March 31, 2015 our outstanding bank guarantee was ₹ 2,699.66 lacs which
increased to ₹ 3,129.84 lacs as on March 31, 2016.
Research and development expenses
₹ in Lacs
Particulars Fiscal 2016 Fiscal 2015 % Change
Material consumed 3.85 4.74 -18.78%
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Particulars Fiscal 2016 Fiscal 2015 % Change
Salaries, wages, bonus and other benefits 80.18 62.62 28.04%
Contribution to provident fund and other funds 5.75 6.10 -5.74%
Contribution to ESI - 0.41 -
Total 89.78 73.87 21.54%
Research and development expenses increased by 21.54% from ₹ 73.87 Lacs in Fiscal 2015 to ₹ 89.78 Lacs in Fiscal
2016. This increase was primarily due to higher salaries, wages, bonus and other benefits to our employees of research
and development department.
Depreciation and amortization expenses
Depreciation and amortization expenses marginally increased by 0.71% from ₹ 330.07 Lacs for Fiscal 2015 to ₹
332.41 Lacs for Fiscal 2016. The increase in depreciation and amortization expenses was primarily on account of full
year depreciation for fixed assets added in preceding year.
Other expenses
Other expenses increased by 17.96% from ₹ 2,102.35 Lacs in Fiscal 2015 to ₹ 2,480.02 Lacs for Fiscal 2016. The
increase in other expenses was primarily on account of increase in carriage and freight expanses, repairs to machinery
expenses, sales commission and general expenses:
a) Consumption of packing materials: Expenses towards consumption of packing materials marginally
decreased by 6.44% from ₹ 457.6 Lacs in Fiscal 2015 to ₹ 428.12 Lacs for the Fiscal 2016 which was
primarily on account of lower consumption of packing materials due to the reuses of certain packaging
materials.
b) Carriage and freight: Carriage and freight expenses for our products increased by 38.21% from ₹ 413.61 Lacs
in Fiscal 2015 to ₹ 571.64 Lacs for the Fiscal 2016 which was primarily on account of increase in higher
export sale.
c) Power and fuel charges: Expenses towards purchase of power and fuel for manufacturing process was
marginally increased by 3.80% from ₹ 166.03 Lacs in Fiscal 2015 to ₹ 172.34 Lacs for the Fiscal 2016 which
was primarily on account of increase in electricity tariff and higher production.
d) Repairs to machinery and other assets: Expenses towards repair of tools, machineries and other assets was
increased by 28.99% from ₹ 367.26 Lacs in Fiscal 2015 to ₹ 473.72 Lacs for the Fiscal 2016 which was
primarily on account of improvement and preventive maintenance.
e) Travelling and conveyance: Travelling and conveyance expenses was increased by 8.87% from ₹ 226.8 Lacs
in Fiscal 2015 to ₹ 246.91 Lacs for the Fiscal 2016.
f) Sales commission: Expenses towards sale commission was increased by 49.29% from ₹ 118.9 Lacs in Fiscal
2015 to ₹ 177.50 Lacs for the Fiscal 2016.
g) General expenses: General expenses increased by 36.49% from ₹ 146.96 Lacs in Fiscal 2015 to ₹ 200.59
Lacs for the Fiscal 2016 which was primarily on account of testing fees, security charges and factory
maintenance.
Other expenses accounted for 13.37% of the Total Revenue in Fiscal 2016 compared to 13.99% in Fiscal 2015.
Exceptional Items:
We have made a payment of ₹ 369.56 Lac towards payment for voluntary retirement scheme for the Fiscal 2016. Also
we have made a profit of ₹ 100.10 from the sale of land in the Fiscal 2016.
Total Expenses
Total expenditure increased by 22.36% from ₹ 14,260.97 Lacs in Fiscal 2015 to ₹ 17,450.01 Lacs in Fiscal 2016. The
increase is primarily attributable to increased sales. Total Expenses as a percentage of total revenues decreased to
94.09% in Fiscal 2016 as against 94.93% in Fiscal 2015 for the factors as explained above.
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Profit before tax
Our profit before tax increased by 8.32% from ₹ 762.23 Lacs in Fiscal 2015 to ₹ 825.63 Lacs in Fiscal 2016 mainly
on account of factors mentioned above.
Tax Expense
Tax expense increased to ₹ 263.33 Lacs for Fiscal 2016 as against ₹ 230.18 Lacs for Fiscal 2015, due to higher profit
before tax.
Profit after tax
Our profit after tax increased by 6.21% from ₹ 532.05 Lacs in Fiscal 2015 to ₹ 565.08 Lacs in Fiscal 2016, mainly
due to factors as explained above.
Financial Year 2015 compared with Financial Year 2014
Revenue
Revenue from operations
Revenue from operations marginally increased by 2.75% from ₹ 15,950.76 Lacs for the Fiscal 2014 to ₹ 16,390.05
Lacs for Fiscal 2015. This increase in revenue from operations was primarily driven by 2.66% increase in sale of
products from ₹ 14,234.10 Lacs for the Fiscal 2015 to ₹ 14,613.07 Lacs for the Fiscal 2015. This was primarily on
account of increase in sale of industrial explosives despite of reduction in sales of detonators. Our sale of products
from industrial explosives increased from ₹ 6,719.09 lac for the fiscal 2014 to ₹ 8,306.80 lac for the fiscal 2015
mainly on account of increase supply to Coal India Limited. Our sale of products from detonators decreased to ₹
2,315.46 lac for the fiscal 2015 from ₹ 3,345.27 lac for the fiscal 2014 on account of acceptability related issue of
NHN based detonators and discontinuation of AHN based detonators. Our sale from other products decreased
marginally to ₹ 3,944.93 lac for the fiscal 2015 from ₹ 4,102.45 lac for the fiscal 2014. Sales of industrial explosives,
detonators and other products as a percentage of the Total Revenue was 54.29%, 15.41% and 26.26%, respectively in
Fiscal 2015 compared to 45.77%, 22.79% and 27.94%, respectively in Fiscal 2014.
Our sale of services increased by 7.31% from ₹ 1,468.92 Lacs for the Fiscal 2014 to ₹ 1,576.28 Lacs for the Fiscal
2015. This was primarily on account of increase in annual maintenance fees as well as increase in scope of services.
Under sale of services, we have received ₹ 1,486.24 Lacs from operation and maintenance services of solid propellant
plant owned by space and defence establishment and ₹ 90.04 Lac from job work and other services for the Fiscal 2015
and ₹ 1,302.99 Lacs from operation and maintenance services of solid propellant plant owned by space and defence
establishment, ₹ 165.93 Lac from job work and other services for the Fiscal 2014.
The contribution of other operating revenues decreased by 28.32% from ₹ 69.35 Lac for the Fiscal 2014 to ₹ 49.71
Lac in the Fiscal 2015, which was mainly due to Lower sales of scrap inspite of increase in export incentives. Our
other operating revenue constitutes sale of scrap arising out of manufacturing process and export incentives. We
received other operating revenue of ₹ 32.39 Lac from sale of scrap arising out of manufacturing process and ₹ 17.32
Lac from export incentives for the Fiscal 2015 and ₹ 60.15 Lac from sale of scrap arising out of manufacturing process
and ₹ 9.20 Lac from export incentives for the Fiscal 2014.
Further, our revenue from sale of traded goods decreased by 15.36% from ₹ 178.39 Lac for the Fiscal 2014 to ₹ 150.99
Lac in the Fiscal 2015. This decrease of sale of traded goods were primarily on account of lower exports of traded
items.
Other Income
₹ in Lacs
Particulars Fiscal 2015 Fiscal 2014 % Change
Interest Income 26.87 20.09 33.75%
Dividend income on non-current investment 13.03 - -
89
Particulars Fiscal 2015 Fiscal 2014 % Change
Net gain on foreign currency transactions and translations 2.20 - -
Provision for liabilities no longer required, written back 4.15 40.38 -89.72%
longer required, written back - 68.45
Prior year income (net of expenditure of ₹ 0.31 lakhs) 25.78 -
Other non-operating income 2.01 11.75 -82.89%
Total 74.04 140.67 -47.37%
Other income from operation decreased by 47.37% from ₹ 140.67 Lacs for the Fiscal 2014 to ₹ 74.04 Lacs for the
Fiscal 2015, primarily on account of:
(a) Decrease in other income due to lesser provision made for liabilities no longer required, written back by
89.72% from ₹ 40.38 Lac for Fiscal 2014 to ₹ 4.15 Lac in the Fiscal 2015.
(b) increase in interest income by 33.75% from ₹ 20.09 Lacs for Fiscal 2014 to ₹ 26.87 Lacs in Fiscal 2015,
being increased interest earned from surplus liquidity parked with banks in the form of deposits;
(c) decrease in other non - operating income by 82.89% from ₹ 11.75 Lacs for Fiscal 2014 to ₹ 2.01 Lacs in
Fiscal 2015.
We have received other income of ₹ 13.03 from dividend income on non-current investment, ₹ 25.78 Lac as a prior
year income (net of expenditure of ₹ 0.31 lakhs) and ₹ 2.20 Lac from net gain on foreign currency transactions and
translations for Fiscal 2015.
Total Revenue
Total Revenue marginally increased by 2.33% from ₹ 14,681.05 Lacs for the Fiscal 2014 to ₹ 15,023.20 Lacs for
Fiscal 2015, primarily due to an increase in revenue from operations as explained above.
Expenses
Cost of materials consumed
₹ in Lacs
Particulars Fiscal 2015 Fiscal 2014 % Change
Ammonium nitrate 4,473.57 3,528.32 26.79%
GI wire 148.77 192.66 -22.78%
Aluminium strip 147.40 149.73 -1.56%
Others 3,357.47 3,264.76 2.84%
Total 8,127.21 7,135.47 13.90%
Cost of materials consumed increased by 13.90% from ₹ 7,135.47 Lacs for the Fiscal 2014 to ₹ 8,127.21 Lacs for the
Fiscal 2015, primarily due to increased sales of industrial explosives. Also, there was an increase in the cost of the
material consumed as a percentage of the Total Revenue to 54.10% in Fiscal 2015 compared to 48.60% in Fiscal 2014.
This increase was primarily on account of higher production of industrial explosives and product mix sold.
Purchase of stock in trade
Expenses towards purchase of stock in trade decreased by 29.26% from ₹ 174.89 Lac for the Fiscal 2014 to ₹ 123.72
Lac for the Fiscal 2015. We have purchased detonating fuse of ₹ 61.20 Lac for Fiscal 2015 and ₹ 11.70 Lac for the
Fiscal 2014. Further, the expenses towards store for stock in trade was ₹ 62.52 Lacs for the Fiscal 2015 and ₹ 163.19
Lac for the Fiscal 2014.
Changes in inventories of finished goods, work-in-progress
Our inventories of finished goods, work-in-progress decreased by ₹ 289.86 Lacs for Fiscal 2015 as against a decrease
in inventories by ₹ 10.38 Lacs for Fiscal 2014.
Employee benefits expenses
90
₹ in Lacs
Particulars Fiscal 2015 Fiscal 2014 % Change
Salaries, wages, bonus and other benefits 3,134.56 3,001.95 4.42%
Contribution to provident fund and other funds 273.81 323.56 -15.38%
Contribution to ESI 12.32 32.28 -61.83%
Staff welfare expenses 136.84 127.89 7.00%
Total 3,557.53 3,485.68 2.06%
Employee benefits expenses marginally increased by 2.06% from ₹ 3,485.68 Lacs in Fiscal 2014 to ₹ 3,557.53 Lacs
in Fiscal 2015. This increase was primarily due to marginal increase in salaries and lower contract labour wages.
Employee benefits expenses as a percentage of Total Revenue were 23.68% in Fiscal 2015 and 23.74% in Fiscal 2014.
a. Managerial Remuneration - We have paid ₹ 260.19 Lac and ₹ 247.86 Lac towards managerial remuneration
for the Fiscal 2015 and Fiscal 2014 respectively.
b. Director Sitting fees- We have paid ₹ 9.75 Lac and ₹ 4.05 Lac as a sitting fees for the Fiscal 2015 and Fiscal
2014 respectively.
c. Salaries, Wages and Bonus- As on March 31, 2014 total employees were 1,148 which increased to 1,173 as
on March 31, 2015. The expense on salaries, wages and bonus was ₹ 3,134.56 Lacs for the Fiscal 2015 as
against ₹ 3,001.95 Lacs in Fiscal 2014 which indicates an increase of 4.42% primarily on account of increase
in employee.
d. Contributions to PF, Gratuity and other contributions- There was decrease of 15.38% in contributions to PF,
Gratuity and other contributions from ₹ 323.56 Lacs for the Fiscal 2014 to ₹ 273.81 Lacs in Fiscal 2015.
e. Staff welfare expenses / other benefits- Expenditure towards staff welfare expenses/other benefits increased
by 7.00% to ₹ 136.84 Lacs for the Fiscal 2015 as against ₹ 127.89 Lacs in Fiscal 2014.
Finance cost
Finance cost marginally decreased by 0.03% from ₹ 236.15 Lacs for Fiscal 2014 to ₹ 236.08 Lacs for Fiscal 2015.
This decrease in finance cost expenses was primarily due to reduction in other borrowing cost. As on March 31, 2014
our total short term borrowings was ₹ 737.82 lacs which increased to ₹ 1,781.82 lacs as on March 31, 2015. The other
borrowing cost also decreased to ₹ 42.39 Lac for Fiscal 2015 from ₹ 59.39 Lac for Fiscal 2015 primarily on account
of commissions for bank guarantees. As on March 31, 2014 our outstanding bank guarantee was ₹ 3,480.26 lacs which
decreased to ₹ 2,699.66 lacs as on March 31, 2015.
Research and development expenses
₹ in Lacs
Particulars Fiscal 2015 Fiscal 2014 % Change
Material consumed 4.74 7.44 -36.29%
Salaries, wages, bonus and other benefits 62.62 58.81 6.48%
Contribution to provident fund and other funds 6.10 1.84 231.52%
Contribution to ESI 0.41 1.06 -61.32%
Total 73.87 69.15 6.83%
Research and development expenses increased by 6.83% from ₹ 69.15 Lacs in Fiscal 2014 to ₹ 73.87 Lacs in Fiscal
2015. This increase was primarily due to higher salaries, wages, bonus, contribution towards provident fund and other
benefits to our employees of research and development department.
Depreciation and amortization expenses
Depreciation and amortization expenses increased by 40.32% from ₹ 235.22 Lacs for Fiscal 2014 to ₹ 330.07 Lacs
for Fiscal 2015. The increase in depreciation and amortization expenses was primarily on account of full year
depreciation for fixed assets added in preceding year.
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Other expenses
Other expenses marginally increased by 2.09% from ₹ 2,059.37 Lacs in Fiscal 2014 to ₹ 2,102.35 Lacs for Fiscal
2014. The increase in other expenses was primarily on account of increase in consumption of packaging materials,
and general expense and decrease in carriage and freight expanses, sales commission:
a) Consumption of packing materials: Expenses towards consumption of packing materials increased by32.65%
from ₹ 344.96 Lacs in Fiscal 2014 to ₹ 457.6 Lacs for the Fiscal 2015 which was primarily on account of
increase purchase of reusable packaging materials.
b) Carriage and freight: Carriage and freight expenses for our products decreased by 22.88% from ₹ 168.50
Lacs in Fiscal 2014 to ₹ 129.95 Lacs for the Fiscal 2015 which was primarily on account of lower sale of
detonators.
c) Power and fuel charges: Expenses towards purchase of power and fuel for manufacturing process was
marginally decreased by -0.91% from ₹ 167.56 Lacs in Fiscal 2014 to ₹ 166.03 Lacs for the Fiscal 2015
which was primarily on account of product mix.
d) Repairs to machinery and other assets: Expenses towards repair of tools, machineries and other assets was
marginally decreased by -5.37% from ₹ 388.09 Lacs in Fiscal 2014 to ₹ 367.26 Lacs for the Fiscal 2015.
e) Travelling and conveyance: Travelling and conveyance expenses was increased by 4.03 from ₹ 218.02 Lacs
in Fiscal 2014 to ₹ 226.80 Lacs for the Fiscal 2015.
f) Sales commission: Expenses towards sale commission was decreased by 39.83%% from ₹ 118.9 Lacs in
Fiscal 2015 to ₹ 197.60 Lacs for the Fiscal 2014.
g) General expenses: General expenses increased by 37.41% from ₹ 106.95 Lacs in Fiscal 2014 to ₹ 146.96
Lacs for the Fiscal 2015 which was primarily on account of of testing fees, security charges and factory
maintenance.
Other expenses accounted for 13.99% of the Total Revenue in Fiscal 2015 compared to 14.03% in Fiscal 2014.
Total Expenses
Total expenditure increased by 22.36% from ₹ 14,260.97 Lacs in Fiscal 2015 to ₹ 17,450.01 Lacs in Fiscal 2016. The
increase is primarily attributable to increased sales. Total Expenses as a percentage of total revenues improved to
94.09% in Fiscal 2016 as against 94.93% in Fiscal 2015 for the factors as explained above.
Profit before tax
Our profit before tax increased by 8.32% from ₹ 762.23 Lacs in Fiscal 2015 to ₹ 825.63 Lacs in Fiscal 2016 mainly
on account of factors mentioned above.
Tax Expense
Tax expense increased to ₹ 230.18 Lacs for Fiscal 2015 as against ₹ 374.19 Lacs for Fiscal 2014, primarily due to
higher profit before tax.
Profit after tax
Our profit after tax decreased by 42.25% from ₹ 921.31 Lacs in Fiscal 2014 to ₹ 532.05 Lacs in Fiscal 2015, mainly
due to factors as explained above.
Results for the nine months period ended December 31, 2016 compared to the results for the nine months period
ended December 31, 2015
The following table sets forth certain information with respect to our revenues, expenses and profits, also expressed
as a percentage of our total revenue, for nine months ended December 31, 2016 and nine months ended December 31,
2015 as derived from our Unaudited Interim Financial Statements:
92
PARTICULARS
Nine month period
ended December 31,
2016
Nine month period
ended December 31,
2015
₹ in Lacs
% of
total
revenue
₹ in Lacs
% of total
revenue
Income from Operations
Gross sales / income from operations 17,379.66 109.82% 13,834.60 109.57%
Less: excise duty 1,644.67 10.39% 1,248.75 9.89%
Net sales / income from operations 15,734.99 99.43% 12,585.85 99.68%
Other operating income 90.07 0.57% 40.74 0.32%
Total income from operations 15,825.06 100% 12,626.59 100%
Expenses
Cost of raw materials consumed 8,826.60 55.78% 6,872.35 54.43%
Purchase of stock in trade 25.60 0.16% 6.97 0.06%
Changes in inventories of finished goods, work-in-
progress and scrap
(300.17) -1.90%
(26.98) -0.21%
Employee benefits expense 3,635.05 22.97% 2,937.61 23.27%
Research and development expenses 79.53 0.50% 68.20 0.54%
Depreciation (net) and amortization expense 255.25 1.61% 249.47 1.98%
Other expenses 2,108.45 13.32% 1,701.83 13.48%
Total expenses 14,630.31 92.45% 11,809.45 93.53%
Profit from operations before other income, finance costs
and exceptional items
1,194.75 7.55%
817.14 6.47%
Other income 40.71 0.26% 34.20 0.27%
Profit from ordinary activities before finance costs and
exceptional items
1,235.46 7.81%
851.34 6.74%
Finance costs 287.90 1.82% 274.79 2.18%
Profit from ordinary activities after finance costs but
before Exceptional items
947.56 5.99% 576.55 4.57%
Exceptional items
Profit on sale of land
Payments under voluntary retirement scheme
-
83.51
(369.56)
Profit from ordinary activities before tax 947.56 5.99% 290.50 2.30%
Tax expense 301.93 1.91% 62.98 0.50%
Net profit from ordinary activities before tax 645.63 4.08% 227.52 1.80%
Extraordinary items (net of tax expenses) - -
Net profit for the period 645.63 4.08% 227.52 1.80%
Paid-up equity shares capital (face value of ₹ 10/-) at the
end of the quarter / year
885.86 5.60% 885.86 7.02%
Reserves excluding revaluation reserves as per balance
sheet of previous accounting year
- -
Nine months period ended December 31, 2016 compared to the results for the nine months period ended
December 31, 2015
Revenue
Income from operations
Gross sales/ income from operations increased by 25.62% from ₹ 13,834.60 Lacs for the nine months period ended
December 31, 2015 to ₹ 17,379.66 Lacs for the nine months period ended December 31, 2016.
93
Net sales/ income from operations, net of excise duty, increased by 25.02% from ₹ 12,585.85 Lacs for the nine months
period ended December 31, 2015 to ₹ 15,734.99 Lacs for the nine months period ended December 31, 2016. This
increase in income from sale/ income from operation was primarily driven by industrial explosives and defence supply.
Other Income
Other income from operation increased by 121.08% from ₹ 40.74 Lacs for the nine months period ended December
31, 2015 to ₹ 90.07 Lacs for the nine months period ended December 31, 2016 on account of sale scrap and export
incentives.
Total income from operation
Total Revenue increased by 25.33% from ₹ 12,626.59 Lacs for the nine months period ended December 31, 2015 to
₹ 15,825.06 Lacs for the nine months period ended December 31, 2016, primarily due to an increase in revenue from
operations as explained above.
Expenses
Cost of materials consumed
Cost of materials consumed increased by 28.44% from ₹ 6,872.35 Lacs for the nine months period ended December
31, 2015 to ₹ 8,826.60 Lacs for the nine months period ended December 31, 2016, primarily due to increased sales of
industrial explosives and product mix. Also, there was an increase in the cost of the material consumed as a percentage
of the Total Income from operation to 55.78% in the nine months period ended December 31, 2016 compared to
54.43% in the nine months period ended December 31, 2015.
Purchase of stock in trade
Expenses towards purchase of stock in trade decreased by 267.29% from ₹ 6.97 Lac for the nine months period ended
December 31, 2015 to ₹ 25.6 Lac for the nine months period ended December 31, 2016. This increase was primarily
on account of purchase of spare parts required for operation maintenance contract.
Changes in inventories of finished goods, work-in-progress
Our inventories of finished goods, work-in-progress and scrap sale decreased by ₹ 300.17 Lacs for the nine months
period ended December 31, 2016 as against a decrease in inventories by ₹ 26.98 Lacs for the nine months period ended
December 31, 2015.
Employee benefits expenses
Employee benefits expenses increased by 23.74% from ₹ 2,937.61 Lacs in the nine months period ended December
31, 2016 to ₹ 3,635.05 Lacs in the nine months period ended December 31, 2015. This increase was primarily due to
revision of wages with labur unions and productivity linked variable benefits. Employee benefits expenses as a
percentage of Total Revenue were 22.97% in the nine months period ended December 31, 2016 and 23.27% in the
nine months period ended December 31, 2015.
Research and development expenses
Research and development expenses increased by 16.61% from ₹ 68.2 Lacs in the nine months period ended December
31, 2015 to ₹ 79.53 Lacs in in the nine months period ended December 31, 2016. This increase was primarily due to
higher salaries, wages, bonus, contribution towards provident fund and other benefits to our employees of research
and development department.
Depreciation and amortization expenses
Depreciation and amortization expenses marginally increased by 2.32% from ₹ 249.47 Lacs for the nine months period
ended December 31, 2015 to ₹ 255.25 Lacs for the nine months period ended December 31, 2016. The increase in
94
depreciation and amortization expenses was primarily on account of full year depreciation for fixed assets added in
preceding year.
Other expenses
Other expenses increased by 23.89% from ₹ 1,701.83 Lacs in the nine months period ended December 31, 2015 to ₹
2,108.45 Lacs for the nine months period ended December 31, 2016. The increase in other expenses was primarily on
account of increase in carriage and freight expanses, sales commission, repairs maintenance, power, travelling
expenses etc.
Other expenses accounted for 13.32% of the Total Revenue in the nine months period ended December 31, 2016
compared to 13.48% in the nine months period ended December 31, 2015.
Total Expenses
Total expenditure increased by 23.89% from ₹ 11,809.45 Lacs in the nine months period ended December 31, 2015
to ₹ 14,630.31 Lacs in the nine months period ended December 31, 2016. The increase is primarily attributable to
increased sales. Total Expenses as a percentage of total revenues decrease to 92.45% in the nine months period ended
December 31, 2016 as against 93.53% in the nine months period ended December 31, 2015.
Profit before tax
Our profit before tax increased by 226.18% from ₹ 290.50 Lacs for the nine months period ended December 31, 2015
to ₹ 947.56 Lacs for the nine months period ended December 31, 2016 mainly on account of factors mentioned above.
Profit after tax
Our profit after tax decreased by 183.77% from ₹ 227.52 Lacs for the nine months period ended December 31, 2015
to ₹ 645.63 Lacs for the nine months period ended December 31, 2016, mainly due to factors as explained above
CASH FLOW
Our cash is generated by sales of our products that is used to fund investments and service loans and interest towards
borrowings. The table below summarizes our cash flows for the Financial Years 2016, 2015 and 2014:
(₹ in Lacs)
Fiscal 2016 Fiscal 20151 Fiscal 20141
Profit before exceptional Items and tax 1,095.09 762.23 1,295.50
Operating profit before working capital
changes
1,541.58 1,244.68 1,688.76
Cash generated from operations 1,632.93 66.85 822.45
Net cash flow from operating activities (A) 1,021.44 (190.30) 608.56
Net cash flow used in investing activities (B) (409.32) (340.50) (381.17)
Net cash flow from financing activities (C) (270.48) 533.55 (251.24)
Net cash inflow/(outflow) (A+B+C) 367.22 27.50 24.88 1 The financials for Fiscals 2015 and 2014 are on a standalone basis as the Company did not report consolidated
financials for that year
Cash flow from operating activities
Net cash from operating activities includes funds generated from our operating activities and net cash inflows or
outflows from changes in operating assets and liabilities
Cash generated from operating activities for Fiscal 2016 was ₹ 1,021.44 Lacs while our net profit before exceptional
items and taxation was ₹ 1,095.09 Lacs. We had an operating profit before working capital changes of ₹ 1,541.58
Lacs. The difference in net profit before taxation and operating profit before working capital changes was primarily
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on account of depreciation and interest charges compensated by profit on sale of land. .Cash were generated from
decrease in inventories of ₹ 181.72 Lacs, increase in trade payables of ₹ 378.99 Lacs, increase in other current
liabilities and provisions of ₹ 743.09 Lacs, increase in long-term provisions of ₹ 56.29 Lac and increase in short term
provisions ₹ 1.87 Lac, which were used for increase in trade receivables of ₹ 901.74 Lacs increase in other loans and
advances of ₹ 42.05 Lacs, increase in other non-current assets of ₹ 47.40 Lac, increase in other current assets ₹ 40.04
Lac, increase in short-term loans and advances of ₹ 236.76 Lac and decrease in other long term liabilities ₹2.62 Lac,
resulting into cash flow from working capital, operating profit before working capital changes of ₹ 1,541.58 Lacs
whereas Cash generated from operation were 1632.93 on account of better working capital management whereas
Cash generated from operating activities for Fiscal 2016 was ₹ 1,021.44 Lacs on account of income tax paid and
exceptional items of payments under voluntary retirement scheme and profit on sale of land.
We had a negative cash generated from operating activities for Fiscal 2015 of ₹ 190.30 Lacs while our net profit before
exceptional items and taxation was ₹ 762.23 Lacs. We had an operating profit before working capital changes of ₹
1,244.68 Lakhs. The difference in net profit before taxation and operating profit before working capital changes was
primarily on account of depreciation and interest charges. Cash were used towards increase in inventories of ₹ 576.17
Lacs, increase in trade receivables of ₹ 385.38 Lacs, decrease in current liabilities of ₹ 468.18 Lac whereas cash were
generated from decrease in other loans and advances of ₹ 22.40 Lacs, decrease in non-current assets ₹ 32.97 Lac,
decrease in other current assets of ₹ 92.31 Lacs, decrease in trade payables 2.44, decrease in short term loan and
advances of ₹ 45.72 Lac, increase in short term provisions ₹ 3.31 Lacs and increase in long term provisions of ₹ 52.75
Lacs, resulting cash flow from operation of₹ 66.85 lacs Cash were used in operating activates for Fiscal 2015 of ₹
190.30 lakhs on account of income tax paid and money used for working capital.
Cash generated from operating activities for Fiscal 2014 was ₹ 608.56 Lacs while our net profit before exceptional
items and taxation was ₹ 1,295.50 Lacs. We had an operating profit before working capital changes of ₹ 1,688.76
Lacs. The difference in net profit before taxation and operating profit before working capital changes was primarily
on account of depreciation and interest charges. Cash were used for increase in inventories of ₹ 155.41 Lacs, increase
in trade receivables of ₹ 1,203.93 Lacs, increase in in other non-current assets of ₹ 76.81 Lac, increase in other current
assets of ₹ 71.42 Lacs and decrease in other long term liabilities ₹ 3.50 lacs whereas cash were generated from increase
in trade payable of ₹ 104.67 Lac, , increase of other current liabilities of ₹ 514.12 Lac, decrease in long term loans
and advances ₹12.88 Lac, decrease in short term loans and advances ₹ 20.48 Lac and increase in long term provisions
of ₹ 39.84 Lacs, resulting into cash generated from operations of ₹ 822.45 lacs. Cash generated from operating
activities for Fiscal 2014 was ₹ 608.56 Lacs on account of income tax paid and money used for working capital.
Cash flow from investing activities
Net cash used in investing activities was ₹ 409.32 Lacs for Fiscal 2016, consisting of cash used towards purchase of
fixed assets of ₹ 514.76 Lacs which included purchase of land, plant and equipment and capital work in progress of ₹
259.79 lacs and investment in bank deposit of ₹ 36.05 Lac, as adjusted for proceeds received from disposal of fixed
assets of ₹ 115.27 Lac including disposal of plant and machinery and land, and interest received worth ₹ 26.22 Lacs.
Net cash used in investing activities was ₹ 340.50 Lakhs for Fiscal 2015, consisting of cash used towards purchase
of fixed assets of ₹ 331.43Lacs including purchase of plant and equipment’s, roads and buildings, vehicles, land and
investments in bank deposits of ₹ 53.23 Lacs, as adjusted for the proceeds received from disposal of fixed assets of ₹
4.92 Lac including , cash flow from dividend income on non-current investment of ₹ 13.03 Lac and cash inflow from
interest received worth ₹ 26.21 Lacs.
Net cash used in investing activities was ₹ 381.17 Lacs for Fiscal 2014, consisting of cash outflow towards fixed assets
of ₹ 389.46 Lacs, including towards plant and equipment’s, roads and buildings, data processing equipment’s, office
furniture, as adjusted for the proceeds received from disposal of fixed assets of ₹ 0.58 Lac, investment in bank deposit
of ₹ 12.08 Lac and cash inflow from interest receipt worth ₹ 19.79 Lacs.
Cash flow from financing activities
Net cash outflow from financing activities was ₹ 270.48 Lacs for Fiscal 2016, consisting of repayment of long term
borrowings of ₹ 30.65 Lac, cash flow from increase in short term borrowings of ₹ 395.54 Lacs, interest paid of ₹
217.56 Lac and dividend paid of ₹ 417.81 Lacs (including of dividend distribution tax).
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Net cash inflow from financing activities was ₹ 533.55 Lacs for Fiscal 2015, consisting of repayment of long term
borrowings of ₹ 223.82 Lac, cash flow from increase in short term borrowings of ₹ 1,044.00 Lacs, proceeds from
issue of share capital including securities premium of ₹ 231.64 Lac, interest paid of ₹ 238.44 Lac and dividend paid
of ₹ 279.83 Lacs (including of dividend distribution tax).
Net cash outflow from financing activities was ₹ 251.24 Lacs for Fiscal 2014, consisting of repayment of long term
borrowings of ₹ 118.61 Lac, cash flow from increase in short term borrowings of ₹ 57.28 Lacs, proceeds from issue
of equity shares at premium of ₹ 142.70 Lac, proceeds from issue of share warrants of ₹ 77.21 Lac, interest paid of ₹
172.10 Lac and dividend paid of ₹ 237.72 Lacs (including of dividend distribution tax).
Indebtedness
As on Fiscal 2016, we had ₹ 31.85 Lac of long-term debt and ₹ 2,177.36 Lac of short term borrowing outstanding on
a consolidated basis and standalone basis as well. As of Fiscal 2015 and Fiscal 2014, we had ₹ 62.50 Lac and ₹ 286.32
Lac respectively, of long-term borrowings outstanding on a standalone basis. We also had ₹ 1,781.82 Lac and ₹ 737.82
Lac of short-term debt outstanding on a standalone basis as on Fiscal 2015 and 2014 respectively.
The total consolidated indebtedness as on March 31, 2016, is set as follows:
(₹ in Lac)
Particulars March 31, 2016
Long Term Borrowing
Secured -
Unsecured 31.85
Short Term Borrowings
Secured 1,518.03
Unsecured 659.33
Total Short-term Borrowings 2,177.36
Current Maturities of Long-Term Borrowings 81.61
Total 2,290.82
Contingent Liabilities and Capital Commitments
(₹ in Lac)
Particulars As at March 31, 2016
A. Contingent liabilities
a) On account of guarantees issued by the banks on behalf of the Company 3,129.84
b) Sales tax demands disputed by the company pending in appeal 151.31
B. Commitments
Estimated amount of contracts remaining to be executed on capital account
and not provided for (net of advances)
265.97
Note: It is not practicable for the company to estimate the timings of cash flows, if any, in respect of the above pending
resolution of the respective proceedings.
Interest service coverage ratio
The following table details the Company’s interest coverage ratio as per its consolidated financial statements as of
March 31, 2016, 2015 and 2014:
(₹ in Lac)
Particulars Fiscal 2016 Fiscal 20161 Fiscal 20151 Fiscal 20141
Profit for the year* 1,532.53 1,537.72 1,328.28 1,766.87
Interest Expense** 374.49 374.49 236.08 236.15
Interest Coverage Ratio*** 4.09 4.11 5.63 7.48
* Profit for the year before tax plus finance cost plus depreciation and amortisation;
**Finance Costs as per Profit & Loss Statement is considered Interest Expense. This will include loan processing
charges, bank guarantee commission and other financial charges; and
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*** Interest Coverage Ratio = Profit for the year plus finance cost plus depreciation and amortization divided by
interest expense 1 Figures are on Standalone basis. The financials for Fiscal 2015 and 2014 are on a standalone basis as the Company
did not report consolidated financials for those years
Related Party Transactions
For information on related party transactions, see the section “Financial Statements” beginning on page F-1.
Quantitative and Qualitative Disclosure about Market Risks
We are, during the normal course of business, exposed to various types of market risks. Market risk is the risk of loss
related to adverse changes in market prices, including interest rate risk and commodity risk. We are exposed to
commodity risk, interest rate risk, foreign exchange risk in the normal course of our business.
Commodity Risk
We are exposed to risks in respect of price availability of certain raw materials, which are used as key inputs in our
manufacturing process. Ammonium nitrate, ammonium perchlorate and fuel oil form major part of raw materials in
manufacture of explosives and those raw material prices are influenced by international dynamics as there only few
domestic manufacturers. Historically, as a practice, we have passed on an increase in the cost of raw materials through
price escalation clauses in supply contracts whereby selling prices are periodically adjusted for the changes in prices
of main raw materials to our customers. However, our cash flows may still be adversely affected because of any gap
in time between the date of procurement of those primary raw materials and the date on which we can reset the
component prices for our customers to account for the increase in the prices of such raw materials.
Exchange Rate Risks
Changes in currency exchange rates influence our results of operations. We face foreign exchange risk in respect of
(i) raw materials and components imported, (ii) sale of products (iii) royalty and technical know-how fees paid or
payable (iv) capital expenditure in the nature of imports (v) currency mismatches between our income and our
expenditures, which we seek to manage as much as possible by matching income currency to expenditure currency.
Interest Rate Risks
Our business is capital intensive and we are exposed to interest rate risks. Our current debt facilities carry interest at
variable rates as well as fixed rates with the provision for periodic reset of interest rates. An increase of interest expense
may have an adverse effect on our debt funding and our results of operations and financial condition. For further
information see “Risk Factors” beginning on page 42.
Credit risk
Our credit risk exposure relates to our operating activities and our financing activities, including deposits with banks
and financial institutions, foreign exchange transactions and other financial instruments. In relation to our operating
activities, our net trade receivables as of March 31, 2016 and as of December 31, 2016, was ₹ 4,237.24 Lac and ₹
5,055.77 Lac, respectively.
Auditors Qualification
Set out below are certain matters that our auditors have drawn attention to in their reports on our financial statements
for the last five Fiscals ended March 31, 2016:
Emphasis of Matter
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Fiscal Observation/matter
2013 “The managerial remuneration paid to Chairman and Managing Director as detailed in Note no 30.2.7
is in excess of the limits laid down under Section 198 and 309 read with Schedule XIII of the Companies
Act, 1956 by ₹ 51.29 lakhs and is subject to the approval of Central Government”
2014 “The managerial remuneration paid to the Whole Time Directors as detailed in Note no 30.2.7 is in
excess of the limits laid down under Section 198 and 309 read with Schedule XIII of the Companies
Act, 1956 by ₹ 95.47 Lakhs and is subject to the approval of Central Government for which necessary
applications have already been made by the Company”
2015 “We draw attention to Note No. 29.2.8 to the financial statements. As referred to in this note, the
managerial remuneration paid to the Chairman and Managing Director for the year ended 31st March,
2015 is in excess of the limits laid down under Section 197 read with Schedule V of the Act by ₹ 40.91
Lakhs. In this regard we have been informed by the Management of the Company that they are in the
process of seeking approval from the Central Government in respect of the above said amount”
2016 “We draw attention to Note No. 29.2.7 to the financial statements. As referred to in this note, the
managerial remuneration paid to the Chairman and Managing Director for the year ended 31st March,
2016 is in excess of the limits laid down under Section 197 read with Schedule V of the Act by ₹ 65.47
lakhs. In this regard we have been informed by the Management of the Company that they have already
sought the approval from the Central Government in respect of the above said amount, which is yet to
be received.”
Change in Accounting Policies during the last three years and their effect on the profits and the reserves of the
Company
None
Significant developments after March 31, 2016 that may affect our future results of operations
During Fiscal 2017, our Company has revalued its freehold land effective from December 31, 2016 based on the report
of Independent Registered Valuers who has ascertained the fair value of assumptions of market value, realisable value
and distress sale value, after observing the recent arm length prices in the vicinity of the land. Our Company has
adopted the realisable values reported by the valuer at ₹ 6,129.30 Lacs as against the original cost of ₹ 425.15 Lacs.
Except as stated above and in this Placement Document, to our knowledge no circumstances have arisen since the date
of the last financial statements as disclosed in this Placement Document which materially and adversely affect or are
likely to affect, our operations or profitability, or the value of our assets or our ability to pay our material liabilities
within the next twelve months.
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INDUSTRY OVERVIEW
The information in this section has been extracted from certain publications prepared by third party sources as cited
in this section. Industry sources and publications generally state that the information contained therein has been
obtained from sources generally believed to be reliable but their accuracy, completeness and underlying assumptions
are not guaranteed and their reliability cannot be assured. While we have exercised reasonable care in compiling and
reproducing such official, industry, market and other data in this document, it has not been independently verified by
us or any of our advisors, or the of the Book Running Lead Manager or any of its advisors, and should not be relied
on as if it had been so verified.
OVERVIEW OF INDIAN ECONOMY
India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO)
and International Monetary Fund (IMF). The steps taken by the government in recent times have shown positive
results as India's gross domestic product (GDP) at factor cost at constant (2011-12) prices 2014-15 is ₹ 106.4 trillion
(US$ 1.58 trillion), as against ₹ 99.21 trillion (US$ 1.47 trillion) in 2013-14, registering a growth rate of 7.3 per cent.
(Source: https://www.ibef.org/economy/indian-economy-overview)
The Indian economy has emerged as a bright spot in the world economy, becoming one of the fastest growing large
economies in the world. The 7.6 per cent growth in the GDP at constant market prices in 2015-16, according to the
advanced estimates of the Central Statistics Office, compares favourably with growth in the previous three years; 7.2
per cent in 2014-15, 6.6 per cent in 2013-14 and 5.6 per cent in 2012-13. It is noteworthy that this growth is estimated
to be achieved despite subdued global demand that dampened India's exports significantly, and two consecutive below-
normal monsoons that impacted farm output and productivity. (Source: RBI, Macro-Economic Framework Statement,
2016-17).
The Union Budget for 2017-18 has been announced by the Union Minister for Finance, Government of India, in
Parliament on February 1, 2017 and the Economic growth is expected at 6.5 per cent in 2016-17. IMF expects India
to grow at 7.2 per cent in 2017 and 7.7 per cent in 2018. (Source: Union Budget for Financial Year 2017-18)
MAKE IN INDIA INITIATIVE
The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-
building initiatives. Devised to transform India into a global design and manufacturing hub, Make in India was a
timely response to a critical situation: by 2013, the much-hyped emerging markets bubble had burst, and India’s
growth rate had fallen to its lowest level in a decade. The promise of the BRICS Nations (Brazil, Russia, India, China
and South Africa) had faded, and India was tagged as one of the so-called ‘Fragile Five’. Global investors debated
whether the world’s largest democracy was a risk or an opportunity. India’s 1.2 billion citizens questioned whether
India was too big to succeed or too big to fail. India was on the brink of severe economic failure, a few years ago.
The Make in India initiative has been built on layers of collaborative effort. DIPP initiated this process by inviting
participation from Union Ministers, Secretaries to the Government of India, state governments, industry leaders, and
various knowledge partners. Next, a National Workshop on sector specific industries in December 2014 brought
Secretaries to the Government of India and industry leaders together to debate and formulate an action plan for the
next three years, aimed at raising the contribution of the manufacturing sector to 25% of the GDP by 2020.
The most striking indicator of progress is the unprecedented opening up of key sectors – including Railways, Defence,
Insurance and Medical Devices – to dramatically higher levels of Foreign Direct Investment. (Source:
http://www.makeinindia.com/about)
OVERVIEW OF MANUFACTURING SECTOR
Manufacturing has emerged as one of the high growth sectors in India. India’s manufacturing sector has the potential
to touch US$ 1 trillion by 2025. There is potential for the sector to account for 25-30 per cent of the country’s GDP
and create up to 90 million domestic jobs by 2025. Foreign Direct Investment (FDI) inflows in India’s manufacturing
sector grew by 82 per cent year-on-year to US$ 16.13 billion during April – November 2016.
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The Government of India has taken several initiatives to promote a healthy environment for the growth of
manufacturing sector in the country. Some of the notable initiatives and developments are:
The Government of India has introduced several policy measures in the Union Budget 2017-18 to provide impetus
to the manufacturing sector. Some of which include reduction of income tax rate to 25 per cent for MSME
companies having turnover up to ₹ 50 crore (US$ 7.5 million), MAT credit carry forward extended to 15 years
from 10 years and abolishment of Foreign Investment Promotion Board (FIPB) by 2017-18.
The Union Cabinet has approved the Modified Special Incentive Package Scheme (M-SIPS) in which, proposals
will be accepted till December 2018 or up to an incentive commitment limit of ₹ 10,000 crore (US$ 1.5 billion).
The Ministry of Labour and Employment plans to relax compliance measures for MSMEs by exempting them
from inspections related to key labour laws in order to encourage entrepreneurs to help promote manufacturing
in India.
The Government of India plans to give a big boost to local manufacturing by introducing the new 'Make in India
green channel', which will reduce the time taken for cargo clearance at ports from about a week to a few hours
without any upfront payment of duties.
The Ministry of Heavy industries and Public Enterprises, in partnership with industry associations, has announced
creation of a start-up centre and a technology fund for the capital goods sector to provide technical, business and
financial resources and services to start-ups in the field of manufacturing and services.
Industrial licensing regime for Indian manufacturers has been liberalised and most of the components / parts /
sub-systems have been taken out from the list of defence products requiring Industrial Licence. This has reduced
entry barriers for new entrants in this sector, particularly small and medium enterprises. (Source: Press release
dated March 11, 2016 of Press Information Bureau, Government of India, Ministry of Defence – Manufacturing
of Defence Equipment)
The initial validity of industrial licence has been increased from 3 years to 15 years with a provision to further
extend it by 3 years on a case to case basis. (Source: Press release dated March 11, 2016 of Press Information
Bureau, Government of India, Ministry of Defence – Manufacturing of Defence Equipment)
Issues related to level-playing field between Indian vs. foreign manufacturers and public sector vs private sector
have also been addressed. These include Exchange Rate Variation (ERV) protection for Indian vendors, offset
obligations in ‘Buy (Global)’ cases, Excise / Custom duties on defence equipment, etc. (Source: Press release
dated March 11, 2016 of Press Information Bureau, Government of India, Ministry of Defence – Manufacturing
of Defence Equipment)
New category of capital procurement – Buy Indian – IDDM (Indigenously Designed, Developed and
Manufactured) introduced to encourage indigenous design, development and manufacturing of defence
equipment. (Source: http://www.makeinindia.com/sector/defence-manufacturing)
Preference to ‘Buy (Indian-IDDM)’, ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ over ‘Buy (Global)’ categories
of capital acquisition. (Source: http://www.makeinindia.com/sector/defence-manufacturing)
(Source: https://www.ibef.org/industry/manufacturing-sector-india.aspx)
National Manufacturing Policy
The Department notified the National Manufacturing Policy (NMP) through a Press Note dated November 4, 2011
with the objective of enhancing the share of manufacturing in GDP to 25% and creating 100 million jobs over a decade
or so. The policy is based on the principle of industrial growth in partnership with the states. The Central Government
will create the enabling policy frame work, provide incentives for infrastructure development on a Public Private
Partnership (PPP) basis through appropriate financing instruments, and State Governments are encouraged to adopt
the instrumentalities provided in the policy.
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The important instruments / features of NMP are as follows:
National Investment and Manufacturing Zones (NIMZs);
Rationalization and simplification of business regulations;
Simple and expeditious exit mechanism for manufacturing units;
Incentives for SMEs;
Industrial training and skill up gradation measures;
Financial and institutional mechanisms for technology development, including green technologies;
Government procurement; and
Special Focus Sectors.
(Source: Press release dated November 26, 2014 of Press Information Bureau, Government of India, Ministry of
Commerce and Industry – Implementation of National Manufacturing Policy)
EXPLOSIVES INDUSTRY
The Petroleum and Explosives Safety Organisation (“PESO”) is headed by Chief Controller of Explosives with it’s
headquarter located at Nagpur (Maharashtra). It is the nodal Organization to look after safety requirements in
manufacture, storage, transport and use of explosives and petroleum. It has a Departmental Testing Station (DTS) at
Gondkhairy, Nagpur where tests on explosives, safety fittings of road tanker, cylinders / containers are carried out.
The major activities and functions of PESO are as follows:
To approve layout and construction plans / licence for explosives manufacturing units and other installations;
To scrutinize returns of purchase, use and sale of explosives;
To regulate and implement safety regulation norms in over 2.56 lakh licensed premises / units used for
manufacture, storage, transport and handling of hazardous substances;
To advise Port, Airport and Railway authorities in respect of transportation of explosives & other dangerous
substance whenever asked for;
To impart training to police personnel, security and other officers in safe handling of explosives.
There are 120 explosives plants and 141 site mixed explosives plants in the medium and small scale sector, engaged
in the production of explosives. The installed and production capacity are as under:-
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The production of explosives for the last five years is as follows –
(Source: Annual Report 2016 – 2017 of Department of Industrial Policy and Promotion)
The Departmental Testing Station carries out necessary statutory tests to assist Chief Controller of Explosives in
administration of Explosives Act, 1884 and Petroleum Act, 1934 and rules framed there under. The Testing Station
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also renders services of quality control and other tests for different materials and equipment’s to the user industries
especially manufacturers of explosives, which also includes UN Classification Tests which is first of its kind in India
for facilitating export of explosives and its accessories. During the year 2015-2016, 101 licenses were issued for
importation of short delay detonators and specific type of explosives for use in exploration and 324 licenses were
granted for exportation of explosives and value of explosives exported was worth ₹ 285 crores. (Source: Annual Report
2015 – 2016 of Petroleum & Explosives Safety Organisation, Ministry of Commerce and Industry)
INDUSTRIAL EXPLOSIVES APPLICATIONS
The explosives industry was founded in this country during its very beginnings, when black powder was used to mine
for minerals, break rock, clear fields and make roads. It is not an overstatement to say that this nation was built with
the help of explosives. In the 1860s, Alfred Nobel, a Swede, invented dynamite and the blasting cap required to make
it explode. He licensed it in the United States and the industrial revolution began.
With dynamite, mines could be dug deeper and more quickly, and uneconomical deposits thus became profitable. The
extracted tonnage of copper, coal and iron ore increased a hundred fold. New industries began; some seem so basic
today that is difficult to imagine that they were not always there.
Quarrying delivered materials such as limestone, cement and concrete which became common building products,
replacing bricks and cobblestones. Harbors were deepened and widened, railways and roads pushed into the wilds and
dams were built creating enough electricity to pave the way into the 20th Century. America found in dynamite, a new
set of muscles to be applied to all forms of industry, including oil and gas exploration, power production, mineral
mining and pipeline, tunnel and highway construction.
In the age between the closing of the Civil War and the end of World War II, no single engineering tool surpassed the
achievement of dynamite. Over the last 50 years, this workhorse of industrial progress has been joined by even more
efficient and safer products known as water gels and emulsions and much more economical and less sensitive bulk
delivery systems.
Today, we rely on explosives engineering more than ever in our quest for electrical energy, better roadways and
mineral harvesting. (Source: https://www.ime.org/content/industrial_explosives_applications).
MINING
Mining sector is one of the core sectors of economy. It provides basic raw materials to many important industries.
Mining sector (including fuel, atomic, major and minor minerals) contributed about 2.4% of GDP in 2014-15 as per
the data released by Central Statistical Organization under Ministry of Statistics & Programme implementation. India
is a mineral rich country and has favourable geological milieu which is yet to be fully explored, assessed and exploited.
Its geological setup is similar in many ways to that of resource rich countries like Canada, Australia, Brazil, South
Africa, Chile and Mexico etc. Exploration activities in India are mostly carried out by Geological Survey of India
(GSI), Mining Exploration Corporation Limited (MECL), various State Directorates of Geological Mining (DGMs),
public sector undertakings (PSU) and private sector entities both domestic and subsidiaries of many global companies.
India total land area 3.2875 million sq. km out of which, GSI has identified 0.571 million sq. km. as Obvious
Geological Potential (OGP) area for minerals.
Obvious Geological Potential (OGP) Area –
Minerals Area (sq. km.)
Gold 1,02,809
Diamond and Precious Stones 3,00,000
Base Metals 1,81,150
Platinum Group of Elements 8,130
Iron ore 5,135
Manganese ore 4,600
Chromite 2,690
Manganese 6,000
Tin and Tungsten 1,300
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Bauxite 32,520
India produces as many as 88 minerals which includes 4 fuels minerals, 3 atomic minerals, 26 metallic and non-
metallic minerals and 55 minor minerals (including building and other materials).
India’s Mineral Production
Mineral India’s Production India’s rank India’s Reserves India’s Rank
Iron Ore 6 % 4th 4 % 6th
Manganese 5 % 6th 8 % 5th
Bauxite 5 % 6th 3 % 8th
Chromite 14 % 3rd 12 % 3rd
Barytes 19 % 2nd 13 % 2nd
Zinc 6 % 6th 5 % 5th
Talc 15 % 2nd 8% 6th
GROWTH IN MINING SECTOR
With the Indian economy expected to grow by approximately 7% in the years to come, sectors such as infrastructure
and automobiles will receive a renewed thrust, which would further generate demand for power and steel in the
country. This is expected to provide a major thrust to the demand of minerals like coal and iron ore. The growth in the
mining sector in terms of production of minerals has significantly improved in comparison to recent past. It is pertinent
to recall that the sector recorded a negative growth of 0.6% for two consecutive years (2011-12 and 2012-13). There
has been a notable turn around ever since government has taken initiative for policy reforms. This turnaround is very
much visible in terms of growth in Gross Value Added (GVA) in mining and quarrying sector. The sector grew by
5.4% and 2.4% in 2013-14 and 2014-15 respectively. During 2015-16, so far the sector has recorded a growth of 3.6%
in comparison to similar period last year. The results of Index of Industrial Production for 2015-16 up to the month of
Mar, 2016 indicate that during the period, mining and quarrying segment showed an increase of 2.2% in comparison
to same period last year. There is a noticeable surge in mineral production in India.
Production of major minerals during the current financial year up to March has recorded the growth of 9 % in
comparison to same period last year. The real contributors to this growth have been Bauxite (27%), Chromite (33%),
Copper Conc. (30%), Iron ore (21%) and Lead Conc. (32%) in the metallic segment. This growth story is significant
as international commodity market is in state of turmoil owing to weak signals coming from the Chinese economy.
Minerals like manganese, lead, copper, alumina are expected to witness double digit growth in the years ahead. There
is significant scope for new mining capacities in iron ore, bauxite, and coal. India has an advantage in the cost of
production and in conversion costs of steel and alumina. Sustained growth in India’s automotive sector has been
driving demand for steel and aluminium. Infrastructure projects continue to provide lucrative business opportunities
for steel, zinc and aluminium producers.
(Source: http://www.makeinindia.com/sector/mining)
TREND OF CONSUMPTION OF EXPLOSIVES IN COAL MINING
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(Source: Directorate General of Mines Safety Report of Statistics of Mines in India Volume – I (Coal) 2014)
DEFENCE
India has the third largest armed forces in the world. The allocation of Defence in the India's union budget is approx
USD 34.53 billion and 31.1% of the defence budget is spent on capital acquisitions. 60% of defence related
requirements are met by imports which offer a huge opportunity for import substitution. (Source:
http://www.makeinindia.com/sector/defence-manufacturing).
DEFENSE EXPENDITURE / ESTIMATES
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(Source: MOD Annual Report 2016-17)
UPGRADING OF ARMY AIR DEFENSE
The Corps of Army Air Defence is taking major strides in upgrading its guns, missiles and radar systems. Procurement
of Medium Range Surface to Air Missile (MRSAM), Short Range Surface to Air Missile (SRSAM), Quick Reaction
Surface to Air Missiles (QRSAM), Self-Propelled Air Defence (SPAD) Gun Missile System and Very Short Range
Air Defence System (VSHORADS) is being carried out to replace the existing vintage equipment. Upgrade of existing
equipment is also being carried out.
(Source: MOD Annual Report 2016-17)
UPGRADING OF WEAPONS & MISSILES
In order to complement state-of-the-art platforms being inducted into the IAF, advance weapons with high precision
and lethality are being inducted. Beyond Visual Range missiles, precision weapons, smart bombs, Anti-Ship missiles
etc. are being procured. Emphasis is being laid on Design and Development (D&D) and production of modern
weapons indigenously.
Brahmos Surface to Surface Missile firing:
IAF successfully fired the first Brahmos Surface to Surface Missile on May 27, 2016 at Pokhran Field Firing Range.
MICA Air-To-Air Missile:
Indian Air Force successfully fired long range ‘Beyond Visual Range’ Air-to-Air MICA missile from Mirage-2000
upgrade aircraft on a manoeuvring target. In spite of the complexities associated with small target, the mission was
executed with remarkable accuracy. The launch ranges offered by the onboard systems were validated and with the
success of this mission, IAF has become one of the few Air Forces in the world with the capability of such long range
Air-to-Air missiles.
Medium Range Surface to Air Missile (MRSAM):
MRSAM is a Joint D&D project of DRDO with Israel. MRSAM is capable of engaging targets from extreme low
altitude to high altitude and very close range to medium ranges. This extremely capable Area Air Defence weapon
networked in the modern Integrated Air Command and Control System (IACCS) system of IAF would defeat all types
107
of hostile targets within its engagement zone including those with extremely low Radar Cross Section (RCS) even in
a dense jamming environment.
Spyder LLQRM System:
IAF is in the process of inducting Spyder Low Level Quick Reaction Surface to Air Missile (LLQRM) system which
is equipped with Python 5 and Derby missiles. It is an excellent system to counterattack the enemy aircraft, helicopters,
cruise missiles, Unmanned Aerial Vehicles (UAVs) and Precision Guided Munitions (PGMs). The system enables
operational flexibility and multi-shot capability for short to medium range intercepts. The system provides a
comprehensive response to the saturation attacks with multiple target engagement.
Akash Missile System:
IAF has already contracted for indigenous Akash short range surface-to-air missile system. Delivery of these systems
is in progress. In future, IAF plans to induct more firing units of advance version of Akash missile system. These
missile systems are important element for providing Air Defence cover to vital areas and vital points.
DEFENSE FOR PRIVATE PLAYER PARTICIPATION
Department of Industrial Policy and Promotion (DIPP) has so far issued 342 Industrial Licences (ILs) covering 205
companies till June 2016 for manufacture of a wide range of defence items to private companies. 52 licensed
companies covering 83 industrial licenses have so far reported commencement of production.
After opening up of the Defence Industry sector for Indian Private Sector Participation, so far 36 FDI proposals/ Joint
Ventures have been approved in defence sector for manufacture of various defence equipment’s, both in public and
private sector. FDI amounting to ₹ 25.84 crore (US$ 5.12 Million) has been received in the Defence Industry Sector
from April 2000 to September 2016.
Indian Ordnance Factories are the oldest and largest industrial setup which functions under Ordnance Factory Board
(OFB) with the primary objective of achieving self-reliance in equipping the armed forces with state-of-the-art
battlefield equipment.
Core competence of Ordnance Factories
As part of the implementation of the report of the Group of Ministers on reforming the National Security System, new
Defence Procurement Management Structures and Systems were set up in the Ministry of Defence (MoD) vide MoD
order No SA/01/104/2001 dated September 10, 2001 and No 17179/2001-Def Secy/IC/2001 dated October 11, 2001.
In order to implement the provisions laid out in the new Defence Procurement Management Structures and Systems,
the procedure for Defence Procurement laid down vide MoD ID No 1(1)/91/PO (Def) dated February 28, 1992 was
revised. The Defence Procurement Procedure - 2002 (DPP-2002) came into effect from December 30, 2002 and was
applicable for procurements flowing out of „Buy‟ decision of Defence Acquisition Council (DAC). The scope of the
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same was enlarged in June 2003 to include procurements flowing out of „Buy and Make‟ through Imported Transfer
of Technology (ToT) decision. The Defence Procurement Procedure has since been revised in 2005, 2006, 2008, 2009,
2011 and 2013, enhancing the scope to include Make, Buy and Make (Indian) categories, concept of Offsets and Ship
Building procedure.
In order to achieve enhanced self-reliance in defence manufacturing and to leverage the economic opportunity present
in developing the Indian defence industry, MoD constituted a Committee of Experts, to recommend suitable
amendments to DPP-2013.
Defence acquisition is not a standard open market commercial form of procurement and has certain unique features
such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and
geo-political ramifications. While maintaining highest standards of transparency, probity and public accountability, a
balance between competing requirements such as expeditious procurement, high quality standards and appropriate
costs needs to be established. As a result, decision making pertaining to defence procurement remains unique and
complex.
DPP focuses on institutionalizing, streamlining and simplifying defence procurement procedure to give a boost to
Make in India initiative of the Government of India, by promoting indigenous design, development and manufacturing
of defence equipment, platforms, systems and sub-systems. “Make” procedure has also been refined to ensure
increased participation of the Indian industry. Enhancing the role of MSMEs in defence sector is one of the defining
features of DPP. Cutting down permissible timeframes for various procurement activities and institutionalizing robust
mechanisms to monitor for probity at various stages of the procurement process are the cornerstones of DPP.
Defence procurement involves long gestation periods and delay in procurement will impact the preparedness of our
forces, besides resulting in opportunity cost. The needs of the armed forces being a non-negotiable and an
uncompromising aspect, flexibility in the procurement process is required, which has also been provisioned for. Thus
the DPP favours swift decision making, provides for suitable timelines and delegates powers to the appropriate
authorities to ensure an efficient and effective implementation of the procurement process, by all stakeholders
concerned.
The aim of the DPP is to ensure timely procurement of military equipment, systems and platforms as required by the
Armed Forces in terms of performance capabilities and quality standards, through optimum utilisation of allocated
budgetary resources; while enabling the same, DPP will provide for the highest degree of probity, public
accountability, transparency, fair competition and level-playing field. In addition, self-reliance in defence equipment
production and acquisition will be steadfastly pursued as a key aim of the DPP.
Except for medical equipment, the DPP will cover all Capital Acquisitions undertaken by the Ministry of Defence,
Defence Services and Indian Coast Guard both from indigenous sources and ex-import. Defence Research and
Development Organisation (DRDO), Ordnance Factory Board (OFB) and Defence Public Sector Undertakings
(DPSUs) will, however, continue to follow their own procurement procedure.
Capital Acquisition schemes are broadly classified as, “Buy”, “Buy and Make” and “Make”. Under the “Buy” scheme
procurements are categorised as “Buy (Indian - IDDM)”, “Buy (Indian)” and “Buy (Global)”. The three categories
under the “Buy” scheme refer to an outright purchase of equipment. Under the “Buy and Make” scheme, the
procurements are categorised as “Buy and Make (Indian)” and “Buy and Make”. The two categories under „Buy and
Make‟ scheme refer to an initial procurement of equipment in Fully Formed (FF) state in quantities as considered
necessary, from the appropriate source, followed by indigenous production in a phased manner through comprehensive
Transfer of Technology (ToT), pertaining to critical technologies as per the specified range, depth and scope.
In decreasing order of priority the procurement of defence equipment, under this procedure are categorised as follows:-
(a) Buy (Indian - IDDM) (b) Buy (Indian) (c) Buy and Make (Indian) (d) Buy and Make (e) Buy (Global).
In addition to the above listed categorisation, the “Make” categorisation, aims at developing long-term indigenous
defence capabilities. Depending upon factors such as Indian industry’s capability, access to technology, time frame
required and available for development, the “Make” category of procurement would be pursued in isolation, in
sequence or in tandem with any of the five categories under “Buy” or “Buy and Make” classifications, with a separate
heading under Services Capital Acquisition Plan (SCAP) and Annual Acquisition Plan (AAP).
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(Source: http://mod.nic.in/writereaddata/dppm.pdf)
The Department of Defence Production (DDP) was set up in November 1962 with the objective of developing a
comprehensive production infrastructure to produce the weapons/systems/platforms/equipments required for defence.
Over the years, the Department has established wide ranging production facilities for various defence equipment’s
through the Ordnance Factories and Defence Public Sector Undertakings (DPSUs). The products manufactured
include arms and ammunition, tanks, armoured vehicles, heavy vehicles, fighter aircraft and helicopters, warships,
submarines, missiles, ammunition, electronic equipment, earth moving equipment, special alloys and special purpose
steels.
In May, 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened up to 100%
for Indian private sector participation, with Foreign Direct Investment (FDI) up to 26%, both subject to licensing.
However, recently Department of Industrial Policy & Promotion, Ministry of Commerce & Industry vide Press Note
No. 5 (2016 Series), has allowed FDI under automatic route up to 49% and above 49% wherever it is likely to result
in access to modern technology or for other reasons to be recorded.
The Department of Industrial Policy & Promotion (DIPP), in consultation with Ministry of Defence, has issued
detailed guidelines vide Press Note No. 2 (2002 Series) dated January 4, 2002 for licensing production of Arms and
Ammunition in January 2002. Consequently, the role of Private Sector has shifted from that of supplier of raw material,
components, sub systems to one of becoming partners in the manufacture of complete advanced equipment’s / systems.
The basic objective of allowing private sector participation is to harness available expertise in the private sector and
work towards attaining total self-reliance in defence manufacturing sector. In-built advantages of the private sector
are its reservoir of management, scientific and technological skills coupled with its ability to raise resources. After
opening up of the Defence Industry sector for Indian Private Sector Participation, so far 36 FDI proposals / Joint
Ventures have been approved in defence sector for manufacture of various defence equipment’s, both in public and
private sector. FDI amounting to ₹ 25.84 crore (US$ 5.12 Million) has been received in the Defence Industry Sector
from April 2000 to September 2016.
(Source: Annual Report 2016 – 2017 of Ministry of Defence, Government of India)
DEFENCE RESEARCH AND DEVELOPMENT ORGANISATION (DRDO)
Defence Research and Development Organization (DRDO) is the country’s leading organization involved in design
and development of indigenous Defence systems. The organization has set its sights on making India self-sufficient
in Defence equipment’s ranging from missiles, radars, sonars, electronic warfare, engineering systems, and
surveillance and recce systems, among others. DRDO is also looking at providing state-of-the-art communication
systems, electro-optics, night vision devices, information security products, naval & airborne weapons etc. Each of
these has been developed using indigenous manufacturing and testing facilities to maximum extent.
DRDO has typically worked together with Ordnance Factory Boards (OFBs) and Defence Public Sector Undertakings
(DPSUs) to build products/systems for the nation. However, DRDO has also drawn the Indian private sector into its
fold both because of requirement and with the view to broadening India’s defence industrial base. This is in sync with
the Government’s vision of ‘Make in India’ to transform India into a global manufacturing and innovation hub whose
products become synonymous with superior quality and inspire confidence among global consumers.
During the current financial year 2016- 17, DDR&D has been allocated ₹ 13,593.78 crore (BE) which about 5.5% of
the total Defence Budget is. A total of ₹ 6,865.73 crore has been allocated under Capital head and ₹ 6,728.05 crore
under Revenue head.
DRDO PROGRAMMES & PROJECTS
During the calendar year, 78 new projects have been sanctioned at a total cost of ₹ 3,723 crore and 42 projects at a
total cost of ₹ 1,353 crore have been completed. DRDO currently has 291 ongoing projects (excluding strategic
projects) amounting to approximately ₹ 49,030 crore (including User share). Out of 291 ongoing projects, 42 large
projects (cost ≥ R 100 crore) have a cost of ₹ 42,643 crore (DRDO’s share~ 70% of the total share).
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INDIAN AEROSPACE
Department of Space (DOS) has the primary responsibility of promoting the development of space science, technology
and applications towards achieving self-reliance and facilitating in all round development of the nation. The DOS is
committed to:
Carrying out research and development in satellite and launch vehicle technology with a goal to achieve total self
reliance
Provide national space infrastructure for telecommunications and broadcasting needs of the country
Provide satellite services required for weather forecasting, monitoring, etc.
Provide satellite imagery required for the natural resources survey, management of natural disasters, public good
services and monitoring of environment in the country
Provide satellite imagery and specific products and services required for the application of space science and
technology for developmental purposes through Central Government, State Governments, Quasi-Governmental
Organisations, Non-Government Organisations (NGOs) and the private sectors
Undertake proof of concept demonstration of space applications
Promote research in space sciences and development of applications programmes as per national needs
INDIAN SPACE RESEARCH ORGANISATION (ISRO) FUTURE PROGRAMMES
The new satellites being built for meeting the country’s future requirements include IRNSS-1H, and 1I, which are
planned to be launched onboard PSLV, GSAT-9 and GSAT-19 communication satellites to be launched by GSLV-
MkII and GSLV-MkIII respectively and GSAT-17 & GSAT-11 communication satellites planned to be launched
through procured launches. In the domain of earth observation satellites, it is planned to design, develop and build
Cartosat-2 Series and Cartosat-3 in the Cartosat series of satellites, Oceansat-3 in the Oceansat series, RISAT-1A in
the Radar Imaging Satellite series and GISAT-1 in the INSAT series for meteorological applications.
The future space science missions of ISRO include Chandrayaan-2, a follow-on mission to Chandrayaan-1 with an
Orbiter, Lander and Rover to explore the Moon, which is to be launched onboard GSLV and Aditya-L1, a scientific
mission for solar studies carrying five payloads including a Coronagraph. Aditya-L1 is planned to be placed into a
halo orbit around the L1 Legrangian point.
IRNSS-1H & IRNSS-1I IRNSS-1H and IRNSS-1I are two ground spare satellites planned to be realised as part of the
approved project. Both IRNSS 1H and 1I satellites will have a configuration similar to the current IRNSS spacecraft
bus and Navigation payload
FUTURE EARTH OBSERVATION MISSIONS
India’s future Earth Observation (EO) programme envisages the continuity of the thematic series of satellites, namely,
Resourcesat, Cartosat, Oceansat, RISAT, INSAT series for land, water, ocean Meteorological applications. It is also
envisaged to realise a Geo Imaging Satellite (GISAT) in the geostationary orbit to enable near real time imaging. The
overall aim is to maintain the continuity of services and carryout enhancements in technological capabilities with
respect to sensors and payloads to meet the operational applications. In this regard, it is planned to design, develop
and launch Cartosat-2 Series Satellite 3 and Cartosat-3 in the Cartosat series of satellites, Oceansat-3 and Oceansat
series, and continuation of INSAT series for meteorological applications.
A brief description of these future missions is given hereunder:
CHANDRAYAAN-2 Mission the Chandrayaan-2 mission is the next step of ISRO to reach, land and explore the
Moon. The Chandrayaan-2 spacecraft is a composite module consisting of Orbiter, Lander and Rover. Unlike
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Chandrayaan-1, where Moon Impact Probe (MIP) crash landed on the surface of the Moon, Chandrayaan-2 will soft
land its Lander with Rover on the Lunar surface to conduct next level of scientific studies. Many new technologies
are being developed indigenously to achieve the mission requirements. The Chandrayaan-2 is planned to be launched
by GSLV MkII launch vehicle during first quarter of 2018
(Source: Annual Report 2016 – 2017, ISRO Department of Space, Government of India)
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BUSINESS
Some of the information contained in the following discussion, including information with respect to our plans and
strategies, contain forward-looking statements that involve risks and uncertainties. You should read the section
“Forward-Looking Statements” for a discussion of the risks and uncertainties related to those statements and also
the section “Risk Factors” for a discussion of certain factors that may affect our business, financial condition or
results of operations. Our actual results may differ materially from those expressed in or implied by these forward-
looking statements.
Unless otherwise stated, references in this section to the “Company” are to Premier Explosives Limited and references
to “we”, “our” or “us” are to the Company. All financial information included herein is based on our financial
information included in the chapter titled “Financial Statements” beginning on page 199.
Overview
We are manufacturers and suppliers of high energy materials for industrial and defence applications. We manufacture
and supply complete range of industrial explosives and accessories including bulk and cartridge explosives, cast
boosters, detonators, detonating fuse etc. We also manufacture solid propellants used in tactical and strategic missiles,
rockets for defence services. We also manufacture tear gas grenades used in mob dispersion and riot control by law
enforcement departments. We also manufactures various Pyro devices such as, Explosive bolts, Pyro actuators, Gas
generators, IR flares, Smoke markers and Cable cutters for defence services. As of March 31, 2017, we had an Order
Book of ₹ 24,300.12 Lacs, consisting an order book for supply of explosives and explosives accessories and
propellants.
Further, we provide operations and maintenance services for defence and space establishments. We are providing
operations and maintenance services for solid propellant plants of Satish Dhawan Space Centre SHAR of ISRO at
Sriharikota, Andhra Pradesh since 2007 and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur,
Chattisgarh since 2010.
We supply industrial explosives and accessories to various public sector undertakings including Coal India, Singareni
Collieries Company Limited, Neyveli Lignite, NMDC Limited and other mining companies. We also export our
products to several countries including Greece, Jordan, Turkey, Egypt, Nepal, Thailand, Philippines, Uganda, etc.
We manufacture and supply solid propellants to Government undertakings in defence sector for missiles like Akash,
Astra, Long Range Surface to Air Missile (“LRSAM”), Medium Range Surface to Air Missile (“MRSAM”), AGNI
etc. We have delivered the 1000th booster grain for Akash missile on July 9, 2016 to Bharat Dynamics Limited. We
believe, with our wide experience in handling explosive substances and energetic materials, we have created notable
infrastructure and facilities to manufacture critical high energy materials, propellants and pyro devices required by the
defence and para-military forces. We have received orders, from ISRO for supply of developmental motor for use in
the Polar Satellite Launch Vehicle and from Ministry of Defence for supply of chaffs and flares. Recently, we have
received industrial licenses received from DIPP to manufacture thirteen (13) new products including ammunition,
warheads and other defence products under explosive segment.
Our manufacturing facilities are located at Peddakandukuru, Telangana; Manuguru, Telangana; Godavarikhani,
Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu. We have a research and
development facility at Peddakandukuru, Telangana, recognized by the Department of Science and Industrial Research
(“DSIR”) and dedicated for research in high energy materials. Our laboratory located at Peddakandukuru, Telangana
was accredited by the National Accreditation Board for Testing and Calibration Laboratories till August, 2016 and an
application for renewal of the same is pending as on date. We have entered into MoU/collaboration with Gulbarga
University, Karnataka, IIT, Madras and BITS, Pilani for research in high energy materials.
Through our research and development in the Fiscal 2013, we commenced commercial production of detonators with
Nickel Hydrazine Nitrate (“NHN”) as primary charge. We have applied for a patent for Novel Safe Lead Free
Detonator before the Controller of Patents, Chennai and the same are pending as on date of this Placement Document.
We have successfully transferred the NHN technology for use in Detonators to an American company.
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We are committed to provide quality products to our customers and in this relation hold various certifications,
approvals and accreditations including ISO 9001; 2008 for manufacture and supply of explosives like industrial
explosives, boosters, detonators, detonating fuse, propellants, special devices and explosive chemicals and ISO
9001:2008, AS9100C for development, manufacture and supply of high energy materials (propellants, pyrotechnics,
special devices and other chemicals) for aerospace and defence applications. In recognition of our technical excellence,
we received various awards and recognition including appreciation for development of Propellant composition for
LRSAM without combustion instability, Inc. India Innovative 100 Award for plant-scale manufacture of NHN
detonators, appreciation for development of Propellant Casting of Motors and Igniters for First and Second Stages of
Agni-4, appreciation for development of Pyrogen Igniters for Agni A4.
We have trained engineers and professionally qualified personnel experienced in commercial explosives, accessories
and propellants manufacturing. Our Promoter, Chairman and Managing Director, Dr. Amar Nath Gupta holds a
Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad. He is a recipient of
Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is bestowed with the
Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four decades of experience
in the product development and processes of explosives industry and is sphere heading the entire operations of the
Company since its inception. As on March 31, 2017, we had 1,163 permanent employees. Besides our permanent
employees, we are hiring contract labours pursuant to the requirements of business.
For fiscal year ended March 31, 2016, March 31, 2015 and March 31, 2014, our total revenue from operations was ₹
20,285.14 Lac, ₹ 16,390.05 Lac, ₹ 15,950.76 Lac, respectively. We earned a profit after tax of ₹ 565.08 Lac, ₹ 532.03
Lac, ₹ 921.31 Lac for the fiscal year ended on March 31, 2016, March 31, 2015 and March 31, 2014 respectively. The
table below provides information regarding revenue from operations relating to business segments during fiscal years
March 31, 2016, March 31, 2015 and March 31, 2014 as per the standalone audited financial statements:
(₹ in lacs)
Segment
For nine month
period ending
December 31, 2016
Fiscal 2016 Fiscal 2015 Fiscal 2014
Revenue % Revenue % Revenue % Revenue %
Industrial
explosives 8,632.24 49.41% 10,271.37 50.63% 8,306.8 50.68% 6,719.09 42.12%
Detonators 2,293.22 13.13% 2,537.75 12.51% 2,315.46 14.13% 3,345.27 20.97%
Others 4,947.94 28.32% 5,533.16 27.28% 3,944.93 24.07% 4,102.45 25.72%
wind power 39.07 0.22% 27.79 0.14% 45.88 0.28% 67.29 0.42%
Sales of
products 15,912.47 91.08% 18,370.07 90.56% 14,613.07 89.16% 1,4234.1 89.24%
sale of traded
good 26.66 0.15% 38.01 0.19% 150.99 0.92% 178.39 1.12%
Operation and
maintenance
services
1,440.53 8.25% 1,808.86 8.92% 1,576.28 9.62% 1,468.92 9.21%
other operating
revenues 90.07 0.52% 68.2 0.34% 49.71 0.30% 69.35 0.43%
Revenue From
Operation 17,469.73 100.00% 20,285.14 100.00% 16,390.05 100.00% 15,950.76 100.00%
Key milestones
The following table sets forth the key events and milestones in the history of our Company:
Year Events
1980 Our Company was incorporated as a private limited company.
1993 PEL went public through an Initial Public Offer.
2005 Best Technology Development in R&D Award from the Federation of Andhra Pradesh Chambers of
Commerce and Industry.
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Year Events
2007 Development of rocket motor propellant casting and igniters for Composite Rocket Motor.
Appreciation award from Naval Science and Technological Laboratory, Visakhapatnam for
contribution in development of smoke marker, explosive bolt, detonator and pyro cartridge.
Defence Technology Absorption award from Defence Research and Development Organisation for
production of pyro – cartridges, explosive bolt, pyrogen igniter and rocket motor.
2008 Appreciation from Ministry of Defence for development of pyrogen igniters for Agni A3-03 mission.
2010 Appreciation from Ministry of Defence for development of igniters for Agni A3 – 04 mission.
Manufacture of propellant grains for multi barrier rocket system code – Pinaka MBRS.
Appreciation from Defence Research and Development Laboratory for development of non-
aluminized propellant composition for ASTRA programme.
Appreciation from Ministry of Defence for development of propellant of casting of second stage
motors for Agni – 4 mission.
2012 Introduced NHN Detonator as superior alternative to ASA.
2013 Our Company participated in the production of Akash SAM – Target (2012-13) launched by Bharat
Dynamic Limited.
Certificate of excellence in recognition of exemplary growth from Inc. India Innovative 100.
Approval from GB Explosives, United Kingdom for affixation of CE mark on electric detonators.
2014 Appreciation from Defence Research and Development Laboratory for development of propellant
composition for LRSAM system development.
2015 Received industrial licenses from DIPP to manufacture thirteen (13) new products including
ammunition, warheads and other defence products under explosive segment.
2016 Delivered 1000th Booster grain for Akash missile.
Our R&D centre at Peddakandukuru, Telangana was certified by the Department of Scientific and
Industrial Research.
Receipt of certificate from DNV GL Business Assurance for conforming to Quality Management
System Standard: ISO 9001:2008 applicable for the manufacturing facilities of our Company situated
at Peddakandukur, Chandrapur, Manuguru, Waidhan, Godavarikhani and Neyveli plants.
2017 Receipt of certificate from DNV GL Business Assurance, USA for conforming to Quality
Management System Standard: ISO 9001:2008 and AS 9100c, applicable for aerospace and defence.
OUR COMPETITIVE STRENGTHS
We believe that the following strengths enable us to compete successfully in the market:
Our research and development and technological capabilities
We place a strong focus on research and development, with an emphasis on product design and continuous
improvement in product performance, cost and reliability. Our focus on research and development has been
instrumental in enabling the number of products we have introduced over the years like bulk explosives with
indigenous technologies in early 1980, emulsion explosives in late 1980, detonators with Nickel Hydrazine Nitrate as
primary charge in year 2013, which we believe improves the performance of our business. We have a research and
development facility at Peddakandukuru, Telangana, recognized by the DSIR and dedicated for research in defence
sector products. Our laboratory located at Peddakandukuru, Telangana was accredited by the National Accreditation
Board for Testing and Calibration Laboratories till August, 2016 and an application for renewal of the same is pending
as on date. Our research and development team comprises of post-graduates and technicians. We have entered into
MoU/collaboration with Gulbarga University, Karnataka, IIT, Madras and BITS, Pilani for research and development
of high energy materials.
We believe that we have developed strong product design capabilities, which allow us to develop new products and
meet the requirement of our customers, especially in defence applications. Our research and development capability
allows us to absorption of technology transferred from various defence laboratories. We have been transferred
technologies from DRDO for commercialisation and further application, which includes, SQUIB(Cartridge Electrical)
for IFDSS, 1200CC, 2400CC and 6000CC pellet Type gas generator, manufacturing of Fuel Rich, Sustainer Grains
for Akash Missile, manufacturing of BKNO3 pellets, of ME-445 Composition Chemical – CR Oleoresin based
Grenades, Energetic propellant casting in case bonded rocket motors (Pinaka Mk-II propellant) & Igniter for Pinaka
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MKII, Pyrocartridge PC -110 DQ, manufacturing of Igniter for Akash Booster, manufacturing of Igniter for Akash
Sustainer, manufacturing of Propellant for LRSAM P II Grains, manufacturing of propellant and Igniter for 122 mm
ERR.
We have been credited for contribution to various DRDO Projects/ Program such as Booster, Sustainer and Cartridge
loaded propellant for different class of rockets, BKNO3 pellets for igniters and gas generators. We believe our research
and development and technological capabilities helps us in participation into product development from initial stages,
which we believe provide us technological edge over our competitors. We have received an appreciation award from
Naval Science and Technological Laboratory, Visakhapatnam for contribution in development of smoke marker,
explosive bolt, detonator and pyro cartridge and Defence Technology Absorption award from Defence Research and
Development Organisation for production of pyro – cartridges, explosive bolt, pyrogen igniter and rocket motor in the
year 2007. We have received an appreciation from Ministry of Defence for development of pyrogen igniters for Agni
A3-03 mission in the year 2008. We have also received appreciations from Defence Research and Development
Laboratory for development of non-aluminized propellant composition for ASTRA programme and from Ministry of
Defence for development of propellant of casting of second stage motors for Agni – 4 mission.
We have created design capability in the defence sector, which puts our Company at a very competitive and is now
regarded as a designer for defence products with strong capability. We are working with DRDO and have been
instrumental in designing the propellant compositions for ASTRA Missile, LRSAM Missile and MRSAM Missile.
This design we were able to convert to the production stage.
Our strategically located manufacturing facilities
As on date of this Placement Document, we have six manufacturing plants located at key areas and in proximity to
our customers’ plants. Our plant at Peddakandukur, Telangana is for detonator, detonating fuse, packaged explosives
and defence products. Our bulk explosives plants are located at Singrauli, Madhya Pradesh, Chandrapur, Maharashtra,
Godavarikhani, Telangana, Manuguru, Telangana and Neyveli, Tamil Nadu. For example, our bulk explosive plants
are located in proximity to our customers’ mines, Neyveli, Plant is close to Neyveli Lignite Limited, Singrauli plant
is near to mines owned by Coal India Limited. Further, our research and development facility at Peddakandukur,
Telangana is in proximity of DRDO. Our multi-location strategy provides us an opportunity to expand our customer
base, thereby helping us in our constant effort to reduce transportation risk associated with our products and timely
delivery. The following chart shows the presence of our manufacturing facilities:
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We believe, our strategically located manufacturing facilities allows us to achieve greater economies of scale and cost
efficiencies, reduce logistics cost, manage product flow and eliminate duplication of business functions.
Long standing client relations with pre-qualification credentials
We have long standing client relations with number of public sector undertakings such as Coal India Limited,
Singareni Collieries Company Limited, Neyveli Lignite Limited, NMDC Limited in the commercial Explosive
domain. In the defence sector we are the trusted partners of Bharat Dynamics Limited, DRDO and their laboratories,
Bharat Electronics Limited and ISRO. We believe that our long standing and growing relationships with such
customers is a testimony to our ability to successfully serve and meet their requirements. We have significantly
benefitted from our strong relationship with our customers, which has been one of our key growth drivers. We believe
that our long term relationships with various public sector and private sector clients enable us to better understand our
clients’ requirements and better evaluate the scope of work.
Our business and growth are significantly dependent on our ability to bid for and secure more orders. Bidding for such
orders are dependent on various criteria, including, financial and bid capacity, pre-qualification capability, and
equipment and past performance. Many of tenders are limited party bids and many time a single party bid for which
we can only participate pursuant to our prequalification credentials. We believe our long standing client relations with
pre-qualification credentials helps us in securing pre bid qualification and helps us in participating into various bids.
Further, we believe our long standing client relations not only helps us getting repeat orders but new orders from our
customers.
Leverage from our operation and maintenance services into our existing product offering
Past ten years, we are involved in the operation and maintenance services of propellant plants on Government Owned
and Company Operated basis (“GOCO”). We have entered into service contract agreement in December 2006 for
providing operations and maintenance services for solid propellant plant of Satish Dhawan Space Centre SHAR of
ISRO at Sriharikota, Andhra Pradesh for ten years with effect from July 2007. We have also entered into a services
contract with solid fuel complex of Advance System Laboratory at Jagdalpur in October, 2009 for 5 years and now
been renewed for further period of 5 years. As on March 31, 2017, 204 employees of our Company are working at
Satish Dhawan Space Centre SHAR of ISRO at Sriharikota, Andhra Pradesh and 220 employees of our Company at
Advance System Laboratory, Jagdalpur. We derived 8.92%, 9.62% and 9.21% of our total revenue for the Fiscal 2016,
Fiscal 2015 and Fiscal 2014, respectively from our operation and maintenance services of such propellant plants. We
believe, working at these facilities helps us in gaining experience in various fields and in development of new
applications in defence and aerospace sectors. We have received an order, from ISRO for supply of developmental
motor for use in the Polar Satellite Launch Vehicle. Further we believe these operation and maintenance services
agreement helped us in getting associated for new product development, which we believe provides us a competitive
advantage in the sectors we operate.
Experienced management and workforce
We are managed by a team of qualified and experienced professionals. Our management team has a successful track
record in the sector we operate. Our Promoter, Chairman and Managing Director, Dr. Amar Nath Gupta holds a
Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad. He is a recipient of
Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is bestowed with the
Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four decades of experience
in the product development and processes of explosives industry and is sphere heading the entire operations of the
Company since its inception. Our Deputy Managing Director, Tripuraneni Venkaiah Chowdary, has experience in
production of explosives, detonator, petrochemicals, coal tar pitches and solid propellants.
We have trained engineers and professionally qualified personnel experienced in commercial explosives, accessories
and propellants manufacturing. As on March 31, 2017, we had 1,163 permanent employees. Our Company is run on
an employee-enabled philosophy which has been one of the motivating factors. Our management team's skills include
marketing, sales management, strategic sourcing, supply chain management, and implementing expansion projects.
We believe that our experienced and dynamic senior management team have been key to our success. The vision and
foresight of our management enables us to explore and seize new opportunities and to introduce new products to
capitalize on the growth opportunities in high energy materials and defence sectors. For further details of our key
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managerial personnel, please refer to chapter titled ‘Board of Directors and Senior Management’ beginning on page
145.
Some of our employees under operation and maintenance contracts, work on premises of ISRO and Advance System
Laboratory, which help them gain experiences. We believe our experienced management and workforce helps us in
conceptualising new products, application and making our current products more effective and cost efficient.
OUR STRATEGIES
Our strategy is to build upon our competitive strengths and business opportunities to become one of the high energy
materials companies in the world. We envisage to be a global leader in our segment through relentless research and
development of knowledge-based products for defence applications, mines, infrastructure and allied sectors. We
intend to achieve this by implementing the following strategies:
Leverage our experience and track record
With over three decades of manufacturing experience, we have been evolved to become an integrated manufacturing
company for commercial explosives. We will continue scanning the opportunities in bulk explosives market and will
increase the capacities in appropriate regions. We also gained considerable manufacturing experience in
manufacturing propellants in last one decade. We manufacture and supply solid propellants, explosive bolts, pyro
actuators, smoke markers, cable cutters and various other products for the Indian defence services. We have received
industrial licenses from DIPP to manufacture thirteen (13) new products including ammunition, warheads and other
defence products under explosive segment. We have received an order, from ISRO for supply of developmental motor
for use in the Polar Satellite Launch Vehicle and from the Ministry of Defence for supply of chaffs and flares. We
intend to leverage our experience and track record in the defence sector to foray into new products and actively
participate in the domestic tenders for new products and enhance our product portfolio. We further intend to leverage
our experience for manufacturing and supply of Pyro devices such as Pyro Cartridges; Explosive Bolts; Cable cutters;
Gas generators; Pyro Cutters; Smoke Generators; Smoke Markers; Squibs; BKNO3, ammunition such as 20mm;
23mm; 30mm; 30mm UBGL; 40mm UBGL; 120mm APFSDS; 125mm APFSDS; BMCS; Fuses; Mines either on our
own or in association with suitable domestic or international partners as and when domestic opportunities arises.
Participate into defence manufacturing program of Government of India
We are diversifying and expanding our manufacturing capabilities from commercial explosives to foray into
manufacturing and supply of new defence products like ammunitions in the future. Recently, we have received an
order from the Ministry of Defence for supply of chaffs and flares.
Pursuant to New Defence Procurement Policy, 2016, the Government of India, boost for private sector participation
for all types of defence acquisition i.e. ‘Buy Indian-IDDM’ (Indigenously Designed, Developed and Manufactured).
We have received Industrial license for manufacture of military fuses of all types including filling and assembling,
munition 20 mm and above and war heads of all types, manufacture of MOB dispersion devices , manufacture of
production of ammunition fired from artillery, tanks, helicopters, aircrafts and naval crafts (excluding small arms
ammunition), design, development, refurbishment and upgrade of ready to use rockets and missiles (tactical),
mines all type for army / navy / air force and bombs – conventional /semi-guided / smart bombs / bomb with multiple
war heads.
We intend to participate in indigenisation of defence supplies in the coming periods and we have already received
industrial licenses for manufacture of ammunition and other products at our proposed manufacturing facility at
Katepally, Yadadri district, Telangana. As on date of this Placement Document, some 7 tender are active for the
products for which we have industrial licenses. We intend to participate in current as well as future tenders and other
future opportunities and Participate into defence manufacturing program of Government of India.
Continually improve our research and design capabilities in order to focus on technology application
We are determined to meet our customers' demand for higher performance and quality products. Accordingly, we
place an emphasis on maintaining a high quality product design and development capability and a key part of our
strategy is to continually improve our research and design capabilities so that we can focus on providing advanced
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technology, high value-added products. We intend to continue the expansion of installed capacity thereby increasing
our manufacturing capacities in order to, address emerging demand, leverage economies of scale, widen geographic
presence and provide unique and value-added products and services to our customers. We believe that there is
significant growth potential in manufacturing the aforesaid products and we intend to capitalize on the opportunities
presented by the markets.
We currently have certain agreement with IIT, Madras and BITS, Pilani for research and development of high energy
materials. We will continue to look for such opportunities to improve our research and design capabilities. We may in
future look for acquisition of certain niche companies which add to our capabilities in future. We have signed MOU
with Israel Aerospace Industries Limited (IAI), Licensing agreement and a Sales agreement with Lacroix, France for
the Counter measures (Chaffs and Flares), with Nexter Munitions, France by the Company for the production of Bi-
Modular Charge Systems. We will keep on looking such arrangement in future as well. By providing high-value
added and innovative products, we believe that we will be able to become a preferred supplier to our customers, thus
giving us the opportunity to consolidate our position with our customers and increase the share of their supply needs
that we fulfil. To enhance our R&D capabilities we are undertaking a number of short-term and long-term R&D
initiatives. We intend to improve our research and design capabilities in order to focus on technology application for
new product development and continue our focus on technology application either on our own or in consultation with
some partners.
Expanding our manufacturing capacity and capability
We have six manufacturing facilities in India located at Peddakandukuru, Telangana; Manuguru, Telangana;
Godavarikhani, Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil Nadu.
Presently, we hold industrial licenses to manufacture solid propellants at Peddakandukuru facility, Telangana and for
proposed manufacturing at Katepally facility, Yadadri district, Telangana. These facilities are primarily dedicated for
production of defence products. In order to cater to the requirements of space sector, we intend to set up a dedicated
plant to manufacture solid propellants at Chittoor district, Andhra Pradesh. In continuance of the same intent, Andhra
Pradesh Industrial Infrastructure Corporation (“APPIC”) has provisionally allotted 202 acres land to our Company at
Routhsurmala village in Chittoor district, Andhra Pradesh. Further, we have received industrial licenses from DIPP to
manufacture thirteen (13) new products including ammunition, warheads and other defence products under explosive
segment. Based on award of manufacturing rights we intend to expand our manufacturing capacity.
We also intend to increase our industrial explosive capacity and capability through application of most recent
technology. Supplementary, we intend to buy technology for some of the products for which we may not possess
capabilities as on date of this Placement Document. To expand our manufacturing capability, we may look for
backward integration and in house production of certain raw materials subject to receipt of requisite regulatory
approvals, licences and certifications. Additionally, we intend to enhance our capability and proposed to manufacture
thermal lining for defence and aerospace applications. We intend to add our capability and capacity for manufacturing
ammunition, solid propellants, aerial targets imitators, Pyrogen igniters, Pyro devices, counter measures like chaffs
and flares, high energy chemicals etc.
Continue to collaboration with domestic and international companies
We have received industrial licenses for ammunition, warheads and other defence products and are in the process of
collaborating with foreign defence companies for technologies to manufacture ammunition including Bi-Modular
Charge Systems (BMCS) and Armour-piercing fin stabilized discarding-sabot (APFSDS). We have been operating
and maintaining solid propellant plant of ISRO at SHAR, Sriharikota for the past 10 years. ISRO intends on increasing
its space explorations for which they require larger number of strap on motors. We have already received trial order
for one such motor and we are preparing to set up a solid propellant manufacturing plant for exclusive supply to ISRO.
Further, we have entered into a memorandum of understanding with Israel Aerospace Industries Limited for exploring
potential business opportunities. We have executed a memorandum of understanding with Israel Aerospace Industries
Limited, a licensing agreement and a Sales agreement with LaCroix, France for the sale of components necessarily
required for amiably of the chaff cartridges 50 mm, and letter of intent with Nexter Munitions, France for the
production of Bi-Modular Charge Systems. We intend to collaborate with various suitable domestic and international
companies for technological collaboration in order to increase our capabilities to manufacture a variety of products in
defence sectors. With the aid of strategic tie-ups with global majors, we intend to capitalize on growth opportunities
under the “Make in India” program.
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Our products and services in India include:
We are engaged in the business of manufacturing high energy materials having applications in mining and
infrastructure activities and also defence applications. We also operate the high energy materials processing plants on
government owned and company operated basis.
A. Commercial explosives and explosives accessories
Explosives are mixtures of Oxidiser (Ammonium Nitrate, Sodium Nitrate Calcium Nitrate etc.), fuel oil (Diesel,
Furnace oil), emulsifiers and sensitizers like chemical gassing.
Commercial Explosives: We manufacture a comprehensive range of commercial explosives at various locations. The
range includes bulk explosives, cartridge explosives, cast booster, detonators, detonating fuse, etc. The products are
used by mining and infrastructure industries.
Cartridge Explosives: Cartridge Explosives are explosives packed in individual closed bags or tubes.
Bulk Explosives: These are essentially non-explosive systems which are used for large-scale blasting operations
where large quantities need to be charged every day. These are transported to mining sites through bulk delivery
vehicles and pumped down the bore holes, as per the mining strata wherein it becomes an explosive. In case of Bulk
Explosives, the emulsion Matrix is pumped into the bulk Delivery system and sensitizers are added at the user end
just before charging into hole. Bulk explosives are used in all large opencast mines, including coal, iron ore, limestone
etc. Bulk explosives in opencast blasting operation and also for tunnel blasting to control noise, ground vibration and
fly rock.
Cast Boosters: High detonation pressure explosives, used in blasting relatively insensitive bulk explosives. Detonator
initiates cast boosters, which in turn initiates bulk explosives.
Detonators: A device used to trigger the explosives. Detonator is a small tube of aluminium or copper or other
materials one end of which is closed and the other left open of the insertion of safety fuse for the purpose of initiating
explosion within the tube; or fitted with wires or other device for that purpose and sealed. Detonator is loaded with a
charge of initiating explosives. We are one the early entrant in the world to produce safer and greener NHN detonators
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on commercial scale replacing ASA detonators. In the Fiscal 2013, we started commercial manufacture of detonators
with Nickel Hydrazine Nitrate as primary charge emerging.
Premier Short Delay Detonator consist of an aluminium shell filled with desired quantity of PETN as base charge and
a mixture of NHN as primary charge. On top of the primary charge, a pyrotechnique delay element is placed to provide
requisite delay. Amardet Short Delay Detonators are specially designed for initiation of cap-sensitive explosives /
booster in underground metal mines. The product is non-electric. Premier cord is a reliable, flexible, waterproof
detonating fuse with high tensile strength and abrasion resistance. It is an ideal means of transmitting detonation from
a detonator to an explosive charge.
Detonating Fuse: Detonating fuse is a flexible, water proof cord having PETN core. It is a fuse for igniting charges
of other explosives which burn and does not explode and which does not contain its own means of ignition, and which
is of such strength and construction and contains an explosives in such quantity that the burning of such fuse would
not communicate laterally with other like fuse. Detonating fuse is used to simultaneously detonate explosive charges
across a fairly large area from a single detonator. PETN is a very high explosive “RDX” category and forms a
compulsory raw material for all types of detonators and detonating fuses.
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Manufacturing process of Bulk Explosives:
Liquor of Nitrate salts of specified concentration would be transported in tankers and off loaded into storage tanks.
Desired quantity of ammonium nitrate liquor would be pumped into the oxidiser preparation tank where required
amount of other oxides and buffering agents are added and thoroughly mixed before transferring to the oxidizer storage
tank. Specified quantities fuels and emulsifiers are pumped into the fuel blend tank and mixed thoroughly. An agitator
has been provided in the fuel blend tank to ensure proper mixing. The oxidiser solution is pumped to the blender, at a
pre-determined flowrate. Fuel blend is also pumped to the blender at a corresponding flowrate. The oxidiser droplets
(dispersed Phase) are dispersed in the Fuel Blend (continuous phase) leading to the formation of a stabilised emulsion.
The emulsion matrix from the blender goes to the storage tanks. Emulsion matrix from the storage tanks is pumped
into the Bulk Delivery System. Gassing agent is also charged into the gassing agent tank on the delivery system. For
doped products, AN Prills are also charged into the bin provided on the delivery system. The bulk delivery system
now proceeds to the mine site where various operations are done in the bulk delivery system in order to manufacture
explosives ready for use from the non-explosives ingredients stored in different bins.
Bulk explosives manufacturing
Pre-mixing
Static mixing
Transfer Matrix to
Pump Truck
Drive the
pump truck to mining site
Mix all the ingredients
Discharge the bulk explosive down the
mining hole
Fill the gassing solution in pump
truck
Fill the AN solution in pump truck
Make
Oxygen Blend
Make
Fuel Blend
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Manufacturing process for cartridge / packaged explosives
Liquor of Nitrate salts of specified concentration would be transported in tankers and off loaded into storage tanks.
This AN liquor of desired quantity would be pumped into the oxidiser preparation tank where required amount of
other oxides and buffering agents are added and thoroughly mixed before transferring to the oxidizer storage tank.
Oxidiser and fuel blend are pumped via measuring vessels into a blender where emulsification is carried out. Once the
emulsification process is over, the remaining solid ingredients like AN prill and aluminium power are added to the
emulsion matrix and mixed till a homogeneous mass is obtained. This is then dropped into the hopper below the
blender. The emulsion matrix in the hopper is pumped by a roto pump, attached to the hopper, to the top of the KP
machine. Just before the emulsion enters the KP machine, gassing agent solution is pumped into the emulsion pipeline
before entering the KP machine. These packaged cartridges are later packed in approved corrugated boxes.
Cartridgedexplosives
manufacturing
Pre-mixing
Blending
Matrix
hopper
Matrix pumping
Cartridging
Chilling the cartridges
Air drying the cartridges
Inject gassing solution into
Matrix
Add AN prillsAdd Aluminium
Powder
Make Oxygen Blend
Make
Fuel Blend
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Manufacturing process of Detonators:
Manufacture of detonators involves making certain intermediates like Nickel Hydrazine Nitrate which is the primary
charge, Pentaerythritol tetranitrate which is the secondary charge, fuse head, etc. Empty shells of Aluminium or steel
of desired size are filled with PETN and NHN compound in pre-determined quantities. These are pressed under high
pressure to form filled shells. Fuse Heads are soldered to lead wires and the Fuse Head assembly is crimped to the
filled shells to form detonator. The same are then packed and dispatched.
Detonator manufacturing
Fill PETN in Shell
Fill NHN in Shell
Solder Fuse Head to Lead Wire
Crimping Lead Wire to Shell
Packing
Make NHNMake
Shell
Make PETNMake Lead
Wire
Make Fuse Head
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Manufacturing process of detonating fuse:
For manufacturing Detonating Fuse first Wet PETN is to be dried in specially constructed stainless steel vessels with
hot air. Dry PETN is kept in a hopper and this PETN is filled in BOPP tape having a centre cotton yarn in spinning
machines, which are countered with Poly propylene yarn which produces semifuse. The semifuse is coated with PVC
compound to get the finished product called detonating fuse. The detonating fuse is crushed and reeled on spools. The
quantity per spool varies form 100 meters to 375 meters depending upon size of detonating fuse and customer’s
specific requirement. 4 such spools are packed in a Fibre Board case.
B. Defence explosives:
We manufacture and supply solid propellants to Indian defence services for missiles like Akash, Astra, Long Range
Surface to Air Missile, etc. We have delivered the 1000th booster grain for Akash missile on July 9, 2016 to Bharat
Dynamics Limited. We also manufactures explosive bolts, pyro actuators, smoke markers, cable cutters and many
other products including blazer plates for the Indian defence services.
Solid Propellants: We manufacture and supply solid propellants to Indian defence services used in a propulsion
systems for rockets and missiles. Solid propellants includes pyrogen igniters, case-bonded propellants, free standing
grains, fuel rich gas generators. Solid propellants are used as rocket motors as propellant grains in missiles and rockets
Polar Satellite Launch Vehicle (“PSLV”), AKASH, ASTRA, Pinaka Rockets, LRSAM, MRSAM.
Pyros Devices: Pyro dives is an electrical initiator used to ignite the contents of the igniter for propellant combustion.
Pyros cartridage includes Pyro cartridges, Pyro actuators, Smoke / flash generators, IR generators, Specialized squibs.
We manufacture verity of pyro devices such as Pyro Cartridges, Explosive Bolts, Cable cutters, Gas generators, Pyro
Cutters, Smoke Generators, Smoke Markers, Squibs, BKNO3 etc.
Detonating fuse manufacturing
Spinning of the above into a rope
PVC coating over the cord spun as above
Reeling
Packing
Make PETNBought out
BOPP film
Bought out
Poly Propylene Yarn
Bought out
Cotton Yarn
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Explosive Bolts: We manufacture explosive bolts used for opening the front and rear covers of the transport and
launch vehicles or disconnecting two parts in emergency situations as a safety measure
Riot Control Devices: Under Riot Control Devices, we manufacture tear gas grenades and shells, used for mob
dispersion and riot control by law enforcement departments. We had developed tear gas grenades and shells in
collaboration with Defence Research Development Establishment, Gwalior.
Chaff and flares: We have received an order from the Ministry of Defence for supply of chaffs and flares. Chaffs
and flares are defensive mechanisms employed from military aircraft to avoid detection and/or attack by adversary air
defence systems. Chaff consists of small fibres that reflect radar signals and, when dispensed in large quantities from
aircraft, form a cloud that temporarily hides the aircraft from radar detection.
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Manufacturing process of solid propellant motor:
Ammonium perchlorate undergoes grinding, drying and sieving. Other items like Binders, Plasticizers, Bonding
agents and other items are added to Ammonium perchlorate for pre-mixing in sigma / vertical planetary mixer.
Curative is added and a final mixing is performed. The mixed material is transferred into casting motors for pressure
casting / vacuum casting and cured at specified temperature and for specified duration of time. Then the material is
de-cored, tested for density, mechanical properties, strand burn rate, ballistic properties, etc. and sent for packing.
C. Operations & Maintenance services:
We undertake operations and maintenance services for government owned solid propellant plants on Government
Owned and Company Operated basis (“GOCO”). We have entered into service contract agreement in December 2006
for providing operations and maintenance services for solid propellant plant of Satish Dhawan Space Centre SHAR
of ISRO at Sriharikota, Andhra Pradesh for ten years with effect from July 2007. We have also entered into a services
contract with solid fuel complex of Advance System Laboratory at Jagdalpur in October, 2009 for 5 years and now
been renewed for further period of 5 years. Our operations responsibility includes prevention and breakdown
maintenance of all equipment and instrumentation systems in these facilities, maintenance services from the original
equipment manufacturers, provide administrative support etc. As on March 31, 2017, 204 employees of our Company
are working at Satish Dhawan Space Centre SHAR of ISRO at Sriharikota, Andhra Pradesh and 220 employees of
our Company at Advance System Laboratory, Jagdalpur. We derived 8.92%, 9.62% and 9.21% of our total revenue
for the Fiscal 2016, Fiscal 2015 and Fiscal 2014, respectively from our operation and maintenance services of such
propellant plants.
OUR MANUFACTURING FACILITIES
With over three decades of manufacturing experience, we have evolved to become an integrated multi-locational
manufacturing company. Our manufacturing facilities are located at Peddakandukuru, Telangana; Manuguru,
Solid propellant motor
manufacturing
Pre-mixing
Final mixing
Casting
Curing
De-coring
Testing and inspection
Packing
Hardware preparation
Add Curative
Preparation of AP
Binders, etc.
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Telangana; Godavarikhani, Telangana; Singrauli, Madhya Pradesh; Chandrapur, Maharashtra and Neyveli, Tamil
Nadu. All our manufacturing facilities are equipped with engineering development facilities which primarily cater to
in-house requirements of our Company in material science, new product design and development, product
optimization and test validation. We believe we have strong design and engineering capabilities with in-depth
knowledge of explosives, propellants and other defence products.
Details of our manufacturing facilities are follows:
Sr. No. Manufacturing facilities Product Offerings
1. Peddakandukur Village, Yadagirigutta Mandal,
Nalgonda District, Telangana
Detonating fuse, packaged explosives, research
center for defence products, solid propellants
2. C-16, MIDC, Gugus Road, Chandrapur,
Maharashtra
Bulk Explosives
3. Manuguru, Khammam District, Telangana Bulk Explosives 4. Plot No.42, Industrial Area, Udyog Deep,
Waidhan, Sidhi District, Madhya Pradesh
Bulk Explosives
5. Godavarikhani, Karimanagar District, Telangana Bulk Explosives 6. 116,Melpathi, Mandarakuppam, Neyveli Block,
29 Cuddalore, Tamil Nadu
Bulk Explosives
Raw material and procurement
The principal raw materials that we use in the manufacturing of our products include Ammonium Nitrate, GI Wire
and Aluminium Strip. The major producers of Ammonium Nitrate in India are Rashtriya Chemical and Fertiliser
Limited, Deepak Fertilisers and Perto-chemicals Corporation Limited, Gujarat Narmada Fertiliser Corporation and
Chemicals Limited, and National Fertilisers Limited. Besides these, the raw materials are easily available through
imports especially from Russia, Ukraine and Iran. For making solid propellants, our current major defence product,
the primary raw material is ammonium perchlorate. Raw material consumed as a percentage of total revenue was
52.24%, 54.10% and 48.60% for the Fiscal 2016, 2015 and 2014 respectively. We do not have any supply agreement
with any of our raw material suppliers. In terms of our understating with our major customers, we have flexibility to
pass on raw-material cost fluctuations to them through quaterly pricing arrangements.
Business Development
We enter into contracts primarily through a competitive bidding process or tender process. Public Sector Undertakings,
Indian Defence Department, Government of India and other clients typically advertise potential projects in leading
national newspapers or on their websites. Our tendering department regularly reviews newspapers and websites to
identify projects that could be of interest to us. Some of detonators is sold in open market either directly by us or by
our consignment agent. Further we export detonators to various country.
Tendering
We have a centralized tender department, which is responsible for applying for all pre-qualifications and tenders. The
tender department evaluates the credentials of our Company vis-à-vis the stipulated eligibility criteria. We endeavor
to qualify on our own for projects in which we propose to bid. In the event that we do not qualify for a project in which
we are interested due to eligibility requirements relating to the size of the project or other reasons, we may seek to
form project-specific joint ventures/collaboration with other relevant experienced and qualified suppliers, using the
combined credentials of the cooperating companies to strengthen our chances of pre-qualifying and winning the bid
for the project.
A notice inviting bids may either involve pre-qualification, or short listing of manufacturers, or a post-qualification
process. In a pre-qualification or short listing process, the client stipulates technical and financial eligibility criteria to
be met by the potential applicants. Pre-qualification applications generally require us to submit details about our
organizational set-up, financial parameters (such as turnover, net worth and profit and loss history), employee
information, plant and equipment owned, portfolio of executed and ongoing projects and details in respect of
litigations and arbitrations in which we are involved. In selecting companies for major projects, clients generally limit
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the issue of tender to companies they have pre-qualified based on several criteria, including experience, technical
ability and performance, reputation for quality, safety record, financial strength, bonding capacity and size of previous
contracts in similar projects, although the price competitiveness of the bid is usually a selection criterion.
Prequalification is key to our winning major projects and we continue to develop our pre-qualification status by
executing a diverse range of projects and building our financial strength.
Alternatively, the client may choose to invite bids through a post-qualification process wherein the company is
required to submit the financial bid along with the information mentioned above in two separate envelopes. In such a
situation, the client typically evaluates the technical bid or pre-qualification application initially and then opens the
financial bids only of those company who meet the stipulated criteria.
Open tender system
The end-user organizations advertise in newspapers inviting tenders for their annual requirement and also intimate
vendors who are existing suppliers. Where we are not existing suppliers we respond to paper advertisement or our
field officers who liase with these customers procure the tender papers. Public Sector Undertakings source their
requirements through such a tendering process.
Limited Tender System
Where customers go in for limited tender, we have to register ourselves with the organization which has floated the
tender. Customers, in this case, have different criteria for selecting a vendor under this mechanism. For some
companies, we first need to provide free trials on the basis of which we get their acceptance for further orders. Our
field offices located in proximity of such consumers follow up regularly with them to ensure our participation in such
tendering processes.
Non Tender Market
In the Non Tender markets many consumers place orders on the basis of vendor reputation and relationship. By virtue
of our having a wide range of products, we are considered as a reputed vendor. Moreover, some sectors such as in the
mining segments like cement industry, iron ore mining in the private Sector, and in small and medium projects where
company procure the Explosives on month to month basis would also into this category. In these cases, our field
officers consistently maintain relationships with such consumers and provide regular services wherever necessary.
Pre-qualification parameters
Typically a project owner/client conceives of a specific project and follows it up with the appointment of a consultant
who prepares a detailed project report. This report addresses various aspects of project implementation commencing
from obtaining clearances, right of ways, scope of work, technical parameters, etc., to related costs which define the
approximate estimated cost of the project.
At the next level the project owner invites pre-qualifications from prospective bidders to assess and identify company
who are capable of bidding for the project and subsequently implementing the same, if awarded. The detailed project
report data is utilized to define the pre-qualification criteria by the project owner. For projects across the various
sectors, the project owner /client normally specify the qualifying criteria, which include:
Technical Capability: The company should have the experience of having implemented projects of similar nature,
necessary manpower with a relevant profile to suit the project and the experience to execute it. Depending on the
project, relevant machinery as specified by the client should be available with the company. This may be owned
or outsourced / hired from a third party.
Financial Strength: This includes the minimum annual turnover, net worth requirement as well as working capital
requirements.
Joint Venture Participation: Generally, we bid for projects as the sole party of the project with full responsibility
for the entire project. On certain large projects that require commitment of resources in excess of those which are
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currently available, such as financial strength, technical advancement or local content resources, we seek to make
alliances through the formation project-specific joint ventures with other contracting, engineering and
manufacturing companies.
In a project-specific joint venture, each member of the joint venture shares the risks and revenues of the project
according to a predetermined agreement. The agreements specifically assign the work to be performed by each party
and the responsibilities of each party with respect to the joint venture, including how the joint venture will be managed
and the equipment, personnel or other assets that each party will contribute or make available to the joint venture. The
agreements also set forth the manner in which any disputes among the members will be resolved.
Defect Liability Period
Our contracts often stipulate a defect liability period of between 12 and 36 months from the date of final dispatch of
our products. We are responsible for defects that may arise during this defect liability period. At the end of this defect
liability period, any sum of money (as adjusted for any defects) retained by the client at completion is transferred to
us without interest. In the event of no defects/liabilities the performance guarantee/ bank guarantee for retention money
is returned to the company at the end of the defect liability period.
Performance Guarantees
We are required to issue performance guarantees varying from 5 - 10% of the contract value at the time of
commencement of the project, pursuant to the award of the contract / agreement. The performance guarantees are
given by us to our different clients / customers for execution of different contacts in normal course of business. These
performance guarantees are typically valid up to twelve to thirty six months post the completion of the contract. As
on March 31, 2017, we have given performance bank guarantees amounting to ₹ 2,721.35 Lacs to our various
principles / employers in normal course of business.
Order Book
Our order book as of any particular date consists of value of unexecuted portions of our outstanding orders, that is,
the total contract price of the existing contracts secured by us as reduced by the value of work executed and billed
until the date of such order book (“Order Book”). As of March 31, 2017, we had an Order Book of ₹ 24,300.12 Lacs,
consisting an order book for supply of explosives and explosives accessories and propellants.
Our order book is not audited and does not necessarily indicate our future earnings. We may not be able to achieve
our expected margins or may even suffer losses on one or more of these contracts. For further information, please see
the section entitled “Risk Factors – Our Order Book may not be representative of our future results. Contracts
included in our Order Book may be delayed, cancelled or not fully paid for by our clients, which could materially
harm our cash flow position, revenues and earnings” on page 42.
Quality Standards and Assurance
We are committed to providing quality products to our customers and endeavor to maintain a quality system, which
provides products and services in a timely manner and at competitive prices to the satisfaction of customers by meeting
their specified and implied needs. We are also committed to continually improve this quality system. Quality Control
personnel also check at each level of production (Intermediates) to ensure that approved manufacturing process is
strictly followed. Our manufacturing facilities have various certifications, approvals and accreditations including ISO
9001; 2008 for manufacture and supply of explosives like industrial explosives, boosters, detonators, detonating fuse,
propellants, special devices and explosive chemicals and ISO 9001:2008, AS9100C for development, manufacture
and supply of high energy materials (propellants, pyrotechnics, special devices and other chemicals) for aerospace
and defence applications. Certain of our products are also certified to be compliant with various national and
international quality standards. In recognition of our technical excellence, we received various awards and recognition
including appreciation for development of Propellant composition for LRSAM without combustion instability, Inc.
India Innovative 100 Award for plant-scale manufacture of NHN detonators, appreciation for development of
Propellant Casting of Motors and Igniters for First and Second Stages of Agni-4, appreciation for development of
Pyrogen Igniters for Agni A4 This enables us to offer our products built uniquely around our customer’s needs.
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We continue to strive to upgrade and customise to meet our customers' specific requirements, to have edge on
competitors and to deliver quality products which give customer satisfaction. We invest in upgrading our equipment
and technology and add new equipment from time to time.
Research and Development and Technology
We have a research and development facility at Peddakandukuru, Telangana, recognized by the DSIR and dedicated
for research in defence sector products. Our research and development facility is engaged in design validation and
optimization, analysis and prototyping and testing and analysis of our products. This enables our Company to provide
end-to-end solutions built uniquely around our customer’s needs. This division aims at conferring competitive
advantages through optimal solutions, shorter design cycles and higher design quality. Our Company has been
recognized by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government
of India as a “Recognized in-house R&D unit”. We develop commercial scale production of detonators with nickel
hydrazine nitrate which is a superior alternative to widely used ASA. NHN assures higher safety in production and
post-production handling. We have been developing many products for import substitution and they include Bomb
dropping mechanism, Pyro cartridges for Indian Navy. We have also developed a smokeless solid propellant for one
of the important missiles and has been developing similar compositions for other missiles in association with DRDO.
Our laboratory located at Peddakandukuru, Telangana was accredited by the National Accreditation Board for Testing
and Calibration Laboratories till August, 2016 and an application for renewal of the same is pending as on date. We
have entered into MoU/collaboration with Gulbarga University, Karnataka, IIT, Madras and BITS, Pilani for research
in high energy materials.
To meet the needs of our business operations, we must regularly update existing technology and acquire or develop
new technology for our products and services. We have been transferred technologies from DRDO for
commercialisation and further application, which includes, SQUIB(Cartridge Electrical) for IFDSS, 1200CC, 2400CC
and 6000CC pellet Type gas generator, manufacturing of Fuel Rich, Sustainer Grains for Akash Missile,
manufacturing of BKNO3 pellets, of ME-445 Composition Chemical – CR Oleoresin based Grenades, Energetic
propellant casting in case bonded rocket motors (Pinaka Mk-II propellant) & Igniter for Pinaka MKII, Pyrocartridge
PC -110 DQ, manufacturing of Igniter for Akash Booster, manufacturing of Igniter for Akash Sustainer,
manufacturing of Propellant for LRSAM P II Grains, manufacturing of propellant and Igniter for 122 mm ERR. If we
fail to keep pace with technical and technological developments from DRDO, it could adversely affect our business
and results of operations.
Competition
Over the period of time, we have evolved into commercial explosives and defence company and caters to a diverse
range of customers in the defence, mining and infrastructure sector. While there are multiple domestic and global
competitors in the commercial explosives, the defence industry has less competition as only few companies have the
industrial licences. We believe we compete effectively on a domestic and international level with other major
suppliers. We also believe that there are several significant barriers to entry into the defence sector, including the fact
that the Government agencies prefer companies with an operational track record and financial capabilities, the capital-
intensive nature of business and it being a highly-regulated industry requiring the procurement of various licences in
order to operate effectively.
Environment, Health and Safety
We follow stringent safety and quality standards at every stage of our manufacturing process – design, development,
manufacture, storage, transport or distribution. We are committed to providing a safe workplace for our employees
and subcontractors. We endeavour to comply with the environmental, health and safety regulations of countries where
we work. We are committed to carrying out our operations in an environmentally safe and responsible manner. To
achieve this, we seek to ensure compliance with all applicable environmental laws and regulations by providing
appropriate resources and infrastructure.
Since our employees deal with explosives, we follow the highest standards of safety. We, therefore, conduct training
as a continuous, on-going practice to improve the safety consciousness of our employees. We are also providing
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continuous training to the entire workforce and have built various check points in the system to monitor safety
processes. We also conduct safety training workshops for our people through internal and external experts.
Employees and manpower
We have always believed in investing well in human capital. We lay more emphasis on training and development.
The selected candidates are given induction. Then job specific training needs of individuals are identified and
accordingly in-house or external training programs are arranged. The experienced personnel and top management
provide necessary guidance and on-the-job training in key disciplines such as productivity, application techniques,
safety, and quality are conducted. We pursue the policy of on-going training and development, for all categories of
employees so as to project them as future managers. Periodically the employees’ performance is reviewed and
refresher courses are held to hone their skills. As on March 31, 2017, we have 1,163 permanent employees.
In addition, we also employ casual and temporary contract labor on our project sites on a need basis. The number of
contract laborers varies from time to time based on the nature and extent of work contracted to Independent
Contractors. We enter into contracts with independent contractors to complete specified assignments. The existing
manpower is though sufficient to handle the estimated growth of our Company; it may change from time to time as
per the need of the project. Our personnel policies are aimed towards recruiting the talent that we need, facilitating the
integration of our employees into the Company and encouraging the development of skills in order to support our
performance and the growth of our operations. We have received the Best Industrial Relations Award from
Government of Andhra Pradesh.
Property
We own the premises on which our Registered Office in Hyderabad is located. As part of its normal course of business,
our Company owns and leases properties for certain manufacturing facilities and warehouses for carrying on its
business. As on April 30, 2017, we own 2 manufacturing facilities situated at Peddakandukur, Telangana and
Singrauli, Madhya Pradesh and have leased land for our manufacturing facilities situated at Chandrapur, Maharashtra,
Manuguru, Telangana and Cuddalore, Tamil Nadu. As one of our strategies, we intend to expand our manufacturing
capacity and capability and to set up a dedicated plant to manufacture Solid Propellant to cater to the requirements of
space sector. APPIC provisionally allotted 202 acres land of at Routhsurmala village in Chittoor district of Andhra
Pradesh. Further, our facility at Godavarikhani, Telangana is situated on the premises owned by our Subsidiary,
Premier Wire Products Limited.
Intellectual Property
We have applied for a patent for Novel Safe Lead Free Detonator before the Controller of Patents, Chennai and the
same are pending as on date of this Placement Document.
Insurance
Our operations are subject to various risks inherent in the defence and commercial explosives industry. We maintain
insurance policies for our manufacturing facilities, buildings, plant and machinery, stocks of raw materials, R&D
equipment’s against damage due to fire, earthquakes, floods and other natural disasters. Additionally we maintain
burglary policy, money insurance policy to insure certain raw materials and money for payment of wages and other
earnings. Typically, we are not insured against consequential damages and war related events. We have also availed
public liability insurance policy and workmen compensation policy to insure our employees at various manufacturing
facilities and warehouses.
We believe that our insurance coverage is in accordance with industry custom, including with respect to the terms of
and the coverage provided by such insurance. For further details, see “Risk Factors – Our inability to procure and/or
maintain adequate insurance cover in connection with our business may adversely affect our operations and
profitability” on page 42.
Corporate Social Responsibility (“CSR”)
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Our Company’s CSR Policy was adopted in May 24, 2014 in accordance with Section 135 of the Companies Act,
Companies (Corporate Social Responsibility Policy) Rules, 2014 and Schedule VII of the Companies Act. This Policy
is aimed at addressing specific social concerns, contributing to local communities where our Company has presence
and involving our Company’s employees in our Company’s CSR initiatives. The Companies Act introduced
provisions relating to CSR, pursuant to which our Company is required to spend, in each financial year, at least 2.0%
of its average net profits during the three immediately preceding financial years towards one of the specified CSR
activities. Under CSR activities, we have entered into a memorandum of understanding with Helpage India to provide
medical care for elderly people in villages around the factory through mobile medical unit. Under CSR activities, we
have provided mobile medical unit attending to elderly people, education to visually challenged people, tribal orphan
girls, supported schools and merit scholarships, village developments.
Subsidiaries and Joint Venture
PEL Next Defence Systems Private Limited (“PEL Next”)
PEL Next was incorporated on July 15, 2016 as a private limited company under the Companies Act, 2013 and a
certificate of incorporation was issued by Deputy Registrar of Companies, Hyderabad. The CIN of PEL Next is
U24304TG2016PTC110919 and is a wholly owned subsidiary of our Company.
The main objects of PEL Next, inter alia, include to undertake, engage in, conduct, carry on the business of
manufacturing, producing, upgrading, building, repairing, refitting, inventing, experimenting, testing, originating,
fabricating, refabricating, sub-contracting, importing, exporting, bidding, dealing in, selling and supply of defence
products such as ammunition, armour piercing fin, stabilized discarding sabot (APFSDS), penetrators of all calibers,
bi-modular charge systems (BMCS) and warheads and to act as consultants, developers, designers and advisors for
such products as mentioned above.
Presently PEL Next is not carrying on any business activities.
Premier Wire Products Limited (“PWPL”)
PWPL was incorporated on September 6, 2007 as a private limited company under the Companies Act, 1956 and a
certificate of incorporation was issued by the Registrar of Companies, Andhra Pradesh. The CIN of PWPL is
U74990AP2007PLC055427 and our Company is holding 80% of the equity share capital of PWPL.
The main objects of PWPL, inter alia, include to manufacture, produce, prepare, buy, sell, export, import, transport,
store and deal in all types of wire products viz; low carbon galvanized iron wire and related bye products, to carry out
metal coating like zinc, tin, copper etc. on wires or any other metallic components by hot dip process or electro plating,
to carry out heat treatment for annealing, hardening, tampering and all other metal treatment processes, to carry on
research and development activities, to develop new products, substitute for imported products, to develop and
maintain testing house and laboratory for own use and for others subject to prior approval from concerned government
authorities and to carry out metal cutting, casting, flow farming, welding and other fabrication works.
Presently PWPL is not carrying on any business activities.
Joint Venture
BF Premier Energy Systems Private Limited (“BFPES”)
BEFPS was incorporated on March 9, 2015 as a private limited company under the Companies Act, 2013 and a
certificate of incorporation was issued by the Registrar of Companies, Pune. The CIN of BFPES is
U24292PN2015PTC154278.
BFPES is a joint venture company with Kalyani Strategic Systems Limited and Premier Explosives Limited and our
Company is holding 50% of the equity share capital of BFPES. BFPES has been incorporated to reap the opportunities
in defence supplies field with synergy of forging expertise of Kalyani Group and high energy materials knowledge of
our Company. BFPES is yet to commence commercial operations.
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REGULATIONS AND POLICIES
The following description is a summary of relevant regulations and policies as prescribed by the Government of India,
and other regulatory bodies that are applicable to our Company. The information detailed in this chapter has been
obtained from various legislations, including rules and regulations promulgated by the regulatory bodies and the bye
laws of the respective local authorities that are available in the public domain. The description of laws and regulations
set out below are not exhaustive, and are only intended to provide general information to investors and is neither
designed nor intended to be a substitute for professional legal advice. The statements below are based on the current
provisions of Indian law, and the judicial and administrative interpretations thereof, which are subject to change or
modification by subsequent legislative, regulatory, administrative or judicial decisions.
BUSINESS RELATED LAWS
The Industries (Development and Regulation) Act, 1951.
The Industries (Development and Regulation) Act, 1951(“Industries Regulation Act”) is an act which governs the
development and regulation of industries in India. The main objectives of the Industries Regulation Act is to empower
the Government:- (i) to take necessary steps for the development of industries; (ii) to regulate the pattern and direction
of industrial development; (iii) to control the activities, performance and results of industrial undertakings in the public
interest. The Industries Regulation Act applies to the 'Scheduled Industries' listed in the First Schedule of the Act.
However, small scale industrial undertakings and ancillary units are exempted from the provisions of the Industries
Regulation Act.
The Industries Regulation Act is administered by the Ministry of Industries & Commerce through its Department of
Industrial Policy & Promotion (“DIPP”). The DIPP is responsible for formulation and implementation of promotional
and developmental measures for growth of the industrial sector. It monitors the industrial growth and production, in
general, and selected industrial sectors. Certain categories of industries such as electronic aerospace, defense
equipment and Industrial explosives require industrial licensing under the Industries Regulation Act. Such industries
have to file an Industrial Entrepreneur Memoranda (“IEM”) with the Secretariat of Industrial Assistance (SIA),
Department of Industrial Policy and Promotion to obtain an acknowledgement.
A manufacturer willing to participate in the defense manufacturing sector for items listed is required to obtain an
Industrial License from Ministry of Home Affairs (Arms Section) under the Arms Rules, 2016 for obtaining
manufacturing licenses for Defense Items. Additionally a manufacturer willing to participate in the manufacture of
Industrial explosives and Electronic aerospace sector are required to obtain an Industrial License from DIPP under
Industries (Development & Regulation) Act 1951.
The Explosives Act, 1884 and the rules framed thereunder (“Explosives Act”)
The Explosives Act is an act which regulates the manufacture, possession, use, and sale of explosives. In exercise of
the powers conferred under the Explosives Act and in supersession of Explosives Rules, 1983, the Central Government
has established the Explosives Rules, 2008 (“Explosives Rules”) to regulate or prohibit, the manufacture, possession,
use, sale, transport, import and export of explosives, or any specified class of explosives. When an application is made
for license, the prescribed authority shall, subject to the provisions of the Explosives Act, either grant the license or
refuse to grant the same. Under rule 7 of the Explosives Rules, the licensing authority may grant a license where it is
required for the purpose of manufacture of explosives if the licensing authority is satisfied that the person by whom
license is required possesses technical know-how and experience in the manufacture of explosives and where it is
required for any other purpose, if the licensing authority is satisfied that the person by whom license is required has a
good reason for obtaining the same. Rule 106 of the Explosives Rules further states that the licensing authority may
grant a license for a period of 6 months for import export of explosives or for 5 financial years or part thereof in case
of manufacture of explosives or storage magazine. The Explosives Act and Explosives Rules are administered by the
Petroleum and Explosives Safety Organisation (“PESO”) through DIPP, Ministry of Industries & Commerce.
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Defense Procurement Procedure, 2016 (“DPP 2016”)
DPP 2016, which came into effect on April 1, 2016, focuses on institutionalizing, streamlining and simplifying defense
procurement procedure to further the “Make in India” initiative of the Government of India, by promoting indigenous
design, development and manufacturing of defense equipment, platforms, systems and sub-systems.
The DPP are succinctly stated as follows:
1. New category of capital procurement - Buy Indian —IDDM (Indigenously Designed, Developed and
Manufactured) has been introduced to encourage indigenous design, development and manufacturing of
defense equipment.
2. Preference to ‘Buy (Indian-IDDM)’, ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ over ‘Buy (Global)’
categories of capital acquisition.
3. Clear and unambiguous definition of indigenous content.
4. Provision for Maintenance TOT (Transfer of Technology) to Indian Industry partners.
5. Provisions to allow foreign OEM (Original Equipment Manufacturer) to select Indian Production agency.
6. Requirement of minimum indigenous content has been enhanced/ rationalised.
7. DPP2016 has institutionalized the request for information (RFI) process
8. Services’ as an avenue for discharging offsets have been re-introduced.
9. Defense products list for industrial licensing, has been articulated in June 2014, wherein large numbers of
parts/components, castings/ forgings etc. have been excluded from the purview of industrial licensing.
10. The defense security manual for the private sector defense manufacturing units has been finalised and put in
public domain by the Department of Defence Production. The manual clarifies the security architecture
required to be put in place by the industry while undertaking sensitive defense equipment.
11. The MAKE procedure, which aims to promote research & development in the industry with support from the
government and the placement of orders, has been promulgated with provision for 90% funding by
Government and preference to MSMEs in certain category of projects.
Defence Production Policy, 2011 (“DPP 2011”)
The DPP 2011 came into force on January 1, 2011 superseding the Defence Production Policy, 2008. The objectives
of the Policy is to achieve substantive self-reliance in the design, development and production of equipment/ weapon
systems/ platforms required for defense in as early a time frame as possible; to create conditions conductive for the
private industry to take an active role in the endeavor; to enhance potential of SMEs in indigenization and to broaden
the defense R&D base of the country.
The Aerospace and Defence Manufacturing Policy 2015-2020
The Aerospace and Defence Manufacturing Policy 2015-2020 (“AP Policy”) was introduced by Industries and
Commerce (Policy & Investment) Department, the Government of Andhra Pradesh on July 23, 2015 vide G.O.MS.No.
54 for development of Aerospace and Defence industry in the State. The AP Policy is aimed at establishing state-of
the art infrastructure, providing conducive regulatory environment for investors, fostering innovation, promoting skill
development and creating employment opportunities in Aerospace and Defence Manufacturing sector. Various policy
instruments have been detailed in the policy to catalyze the same.
The Department of Scientific and Industrial Research (“DSIR”)
DSIR was formed vide Presidential Notification, dated January 4, 1985 (74/2/1/8 Cab.) contained in the 164th
Amendment of the Government of India (Allocation of Business) Rules, 1961 under the department of Ministry of
Science and Technology. The DSIR has a mandate to carry out the activities relating to indigenous technology
promotion, development, utilization and transfer. The primary endeavour of DSIR is to promote R&D conducted by
the industries, support a larger cross section of small and medium industrial units to develop state-of-the art globally
competitive technologies of high commercial potential, catalyze faster commercialization of lab-scale R&D, enhance
the share of technology intensive exports in overall exports, strengthen industrial consultancy & technology
management capabilities and establish user friendly information network to facilitate scientific and industrial research
in the country. It also provides a link between scientific laboratories and industrial establishments for transfer of
technologies through National Research Development Corporation (“NRDC”) and facilitates investment in R&D
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through Central Electronics Limited (“CEL”). The Central Board of Direct Taxes (“CBDT”) has issued notification
No. 29/2016 dated April 28, 2016 amending the Income Tax rules 1962 which provides for certain tax deductions and
exemptions and for filing of certain forms with respect to expenditure on scientific research under Section 35 of
Income Tax Act 1961. The amended rules have come into effect from July 1, 2016.
Arms Act of 1959(“Arms Act”) and the rules framed thereunder
The Arms Act makes provisions for the acquisition, possession, manufacture, sale, transportation, import and export
of arms and ammunition in India. Section 5 of the Arms Act states that no person shall use, manufacture, sell, transfer,
convert, repair, test or prove, or expose or offer for sale or transfer or have their possession for sale, transfer,
conversion, repair, test or proof, any firearm or any other arms of such class or description as may be prescribed or
any ammunition, unless they hold a license issued in accordance with the provisions of the Arms Act and the rules
made there under. Section 7 of the Arms Act further forbids the manufacture, sale, and use of prohibited arms and
ammunition unless specially authorised by the central government. Any contravention under Section 5 and Section 7
is punishable with imprisonment for the terms mentioned therein.
The Arms Rules, 2016(“Arms Rules”) have been notified on July 15, 2016 by the Ministry of Home Affairs. Every
applicant applying for a license under the Arms Act is required to complete the arms and ammunition safety training
course. The license granted by the licensing authority has to clearly state the categories and descriptions of the arms
or ammunition allowed to be manufactured or proof tested or both, under the licensee granted as specified in the Arms
Rules. Proof-testing of firearms manufactured by a licensed manufacturer is to be carried out only in accordance with
the provisions contained in Rule 59. Separate licenses shall be issued for each unit in the event the applicant company
is applying for a multi-unit facility for grant of a license. A licensing committee within the Ministry of Home Affairs
has been constituted to review and process the applications for grant of licenses for manufacture of arms and
ammunitions for the new manufacturers and for all matters related to existing manufacturers including applications
for capacity revision by issuance of general or special order under the Arms Rules.
Each licensee is required to setup a facility for manufacture or proof test of arms and/or ammunition, recruit technical
and administrative staff, develop and proof test proto-types of arms and ammunition, conduct trial runs and any other
activity related to the setting up of the facility for the manufacture or proof-test of arms and ammunition, within 7
years of the grant of license failing which the license shall lapse. Every subsequent renewal of the license shall be
granted for a period of five years. The licensee is permitted to conduct trial runs and develop proto-types within the
initial validity period of license. The licensee is required to comply with obligations of licensee’s stated in Rule 56 of
Arms Rules. The licensee is not permitted to sell any firearm manufactured by him, unless such firearm - (a) is duly
proof-tested at a Government establishment or a proof house licensed under these rules or in case of a composite
license proof-tested in house; (b) bears proof-mark; and (c) bears identification marks required by rule 58 of the Arms
Rules.
Missile Technology Control Regime (“MTCR”)
The MTCR is a multilateral export control regime established in 1987. During its 30-year history, the MTCR extended
its membership from 7 to 35 states and has proven to be an effective multilateral nonproliferation mechanism. India
applied for membership of the MTCR in 2015, and formally joined the regime as a full member on June 27, 2016.
The aim of the MTCR is to restrict the proliferation of missiles, complete rocket systems, unmanned air vehicles, and
related technology for those systems capable of carrying a 500 kilogram payload at least 300 kilometres, as well as
systems intended for the delivery of weapons of mass destruction (“WMD”).
The Regime’s documents include the MTCR Guidelines and the Equipment, Software and Technology Annex. The
Guidelines define the purpose of the MTCR and provide the overall structure and rules to guide the member countries
and those adhering unilaterally to the Guidelines. The Equipment, Software and Technology Annex are designed to
assist in implementing export controls on MTCR Annex items. The Annex is divided into “Category I” and “Category
II” items. It includes a broad range of equipment and technology, both military and dual-use, which are relevant to
missile development, production, and operation. Partner countries exercise restraint in the consideration of all transfers
of items contained in the Annex. All such transfers are considered on a case by case basis. The MTCR rests on
adherence to common export policy guidelines applied to an integral common list of controlled items listed in
the MTCR Equipment, Software and Technology Annex. The MTCR does not take export licensing decisions as a
group. Rather, individual partners are responsible for implementing the Guidelines and Annex on the basis of
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sovereign national discretion and in accordance with national legislation and practice. MTCR partner countries are
keen to encourage all countries to observe the MTCR Guidelines on transfers of missiles and related technology as a
contribution to common security. A country can choose to adhere to the Guidelines without being obligated to join
the group and a number have done so. MTCR Partners welcome opportunities to conduct broader dialogue on
proliferation issues with such countries.
Mines Act, 1952 and Mines Rules, 1955
Mines Act, 1952 (“Mines Act”) is an act for regulation of labour and their safety in mines. It imposes certain
obligations on any person who is the owner, agent or manager of a mine. Such person shall, before the commencement
of any mining operation, give to the Chief Inspector, the Controller, Indian Bureau of Mines and the District Magistrate
of the district in which the mine is situated, notice in writing in such form and containing such particulars relating to
the mine, as may be prescribed. Such persons are also obliged to provide certain facilities to ensure the health and
safety of the workers in such mines. The Mines Act also provides that notice must be given of the occurrence of any
accident in the mines to the prescribed authorities; such notice must also be posted on a special notice- board for the
inspection of the workers and trade unions, if any, for not less than 14 days. A register must also be maintained with
respect to such accidents. The health and safety of the workers is governed by the Mines Rules, 1955 created under
the jurisdiction of the Mines Act, 1952.
Mines and Minerals (Development and Regulation) Act, 1957 and the rules made thereunder
Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR”) and the Mines Act, 1952, together with
the rules and regulations framed under them, constitute the basic laws governing the mining sector in India. As per
the MMDR, no person shall undertake any reconnaissance, prospecting or mining operations in any area, except under
and in accordance with the terms and conditions of reconnaissance permit or of a prospecting license or, as the case
may be, a mining lease, granted under MMDR and the rules made thereunder. Mining leases are granted under the
MMDR, which was expressly enacted to provide for the development and regulation of mines and minerals under the
control of the Union of India, pursuant to Entry 54 of the Union List in the Seventh Schedule of the Constitution of
India. A mining lease must be executed with the relevant State Government. The mining lease agreement governs the
terms on which the lessee can use the land for the purposes of mining operations. If the land on which the mines are
located belongs to private parties, the lessee would have to acquire the surface rights from such private party. If such
private party refuses to grant such surface rights, the lessee is to inform the same to the State Government and deposit
the compensation for the acquisition of the surface rights with the State Government, and if the State Government
deems that such amount is fair and reasonable, then the State Government will order the private occupier to permit
the lessee to enter the land and carry out such operation as may be necessary for the purpose of the mining lease. For
determining compensation to be paid to such private party, the State Government is guided by the principles of the
Land Acquisition Act. In case of Government land, the surface right to operate in the lease area is granted by the
Government upon application and as per the norms of that State Government. Surface rights of private land can be
directly negotiated with the owner and the rights obtained.
The maximum period for which a mining lease may be granted shall not exceed thirty years, provided that the
minimum period for which any such mining lease may be granted shall not be less than twenty years. A mining lease
may be renewed for a period not exceeding twenty years with the previous approval of the Central Government. The
renewals are subject to the lessee not being in default of any applicable laws (including environmental laws) and in
respect of certain specified minerals,the previous approval of the Government of India.
The Mines and Minerals (Development and Regulation) Amendment Act, 2015 (“MMDR 2015”) received the assent
of the President on March 26, 2015 and has come into force on January 12, 2015 to give effect to further amendments
to MMDR. Some of the important changes brought about by the MMDR 2015 are as under:
a. Under the MMDR, a mining lease is permitted to be granted for a maximum of period of 30 years and a minimum
of 20 years and can be further renewed for a period not exceeding 20 years. The MMDR 2015 provides that the
lease period for coal and lignite remains unchanged. However all minerals other than coal, lignite and atomic
minerals, mining leases shall be granted for a period of 50 years. All mining leases granted for such minerals
before MMDR 2015 was enacted shall be valid for 50 years. On expiry of the lease, the leases shall be put up for
auction instead of being renewed, as specified.
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b. A new Fourth Schedule has been added to the MMDR. It includes bauxite, iron ore, limestone and manganese
ore and are defined as notified minerals.
c. The prospecting license-cum-mining lease was introduced as a new category of mining lease. It is defined to mean
a two stage concession granted for the purpose of undertaking prospecting operations followed by mining
operations.
d. Section 6 of the MMDR provides that no person shall acquire in respect of any mineral or prescribed group of
associated minerals in a State – (a) one or more prospecting licenses covering a total area of more than twenty-
five square kilometers; or (aa) one or more reconnaissance permit covering a total area of ten thousand square
kilometers, provided that the area granted under a single reconnaissance permit shall not exceed five thousand
square kilometers; or (b) one or more mining leases covering a total area of more than ten square kilometers. The
MMDR provides for a provisio to Section 6 of the MMDR permitting the central government to increase the area
limits for mining from the above prescribed limits.
e. The periods for which leases had been grated before the commencement of the MMDR 2015 have been extended
as follows (i) for minerals used for captive purpose (specific end-use)- up to March 31, 2030 and (ii)for minerals
used for other than captive purpose-up to March 31, 2020, or (ii) till the completion of renewal period, or (iii) for
a period of 50 years from the date of grant of such lease, whichever is later.
f. MMDR 2015 provides for the State Government, shall grant mining leases and prospecting license-cum-mining
leases for both notified and other minerals. Prospecting license-cum-mining lease for notified minerals shall be
granted with the approval of central government. All leases shall be granted through auction by competitive
bidding, including e-auction method. The central government shall prescribe the terms and conditions, and
procedure for auction, including parameters for the selection of bidders. For mining leases, the central
government may reserve particular mines for a specific end use and allow only eligible end users to participate in
the auction, if found necessary.
g. A holder of a mining lease or a prospecting licence-cum-mining lease may transfer his mining lease or prospecting
licence-cum-mining lease to any person eligible to hold such mining lease or prospecting license-cum- mining
lease, with the previous approval of the State Government and in such manner as may be prescribed by the Central
Government. If the state government does not convey its previous approval for such transfer within 90 days of
receiving the notice, the transfer shall be construed that the State Government has no objection to such
transfer. No such transfer shall take place if the state government communicates within the notice period, in
writing, that the transferee is not eligible. The transfer of mineral concessions shall be allowed only for
concessions which are granted through auction.
h. MMDR 2015 provides for the creation of District Mineral Foundation (“DMF”) and a National Mineral
Exploration Trust (“NMET”). The DMF is to be established by the state government for the benefit of persons
in districts affected by mining related operations. The NMET shall be established by the central government for
regional and detailed mine exploration. The holders of a mining lease or prospecting licence-cum-mining leases
shall in addition to the royalty, pay the DMF an amount not more than one-third of the royalty and a sum
equivalent to two percent of royalty to the NMET in the manner prescribed by the prescribed by the central
government.
The Mines and Minerals (Development and Regulation) Amendment Act, 2016 (“MMDR 2016”) received the assent
of the President on May 6, 2016 to further amend MMDR. The MMDR 2016 adds a definition of leased area, as the
area within which mining operations can be undertaken. This will also include the non-mineralised area required for
the activities defined under mine in the Mines Act, 1952. The Mines Act, 1952 defines mine as any excavation where
any operation for searching or obtaining of minerals is being carried out. It includes (i) borings, bore wells, and oil
wells, (ii) all opencast workings, (iii) all workshops and stores within the precinct of a mine, and (iv) any premises
being used for depositing waste from a mine or where any operations in connection with such waste is being carried
out. The MMDR 2016 further amends section 12 A of the MMDR allowing for the transfer of mining leases which
have been granted through procedures other than auction, and where the minerals are used for captive purpose. Captive
purpose has been defined as the use of the entire quantity of mineral extracted in the lessee’s own manufacturing
unit. Such lease transfers will be subject to terms and conditions, and transfer charges as prescribed by the central
government. These transfers will be in addition to the existing transfers that are allowed.
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The Mineral Concession Rules, 1960 outline the procedures and conditions for obtaining a Prospecting License or
Mining Lease. The Mineral Conservation and Development Rules, 1988 lays down guidelines for ensuring mining on
a scientific basis, while at the same time, conserving the environment. The provisions of Mineral Concession Rules
and Mineral Conservation and Development Rules are, however, not applicable to coal, atomic minerals and minor
minerals.
Ammonium Nitrate Rules, 2012
Ammonium Nitrate Rules, 2012 (“Ammonium Nitrate Rules”) are applicable for regulating the manufacturing,
conversion, import, export, possession, sale, transport etc of ammonium nitrate. The Ammonium Nitrate Rules
prohibit the manufacture, conversion, storage etc of ammonium nitrate except after obtaining a valid license as per
schedule II part 2 of the Rules. It further lays down the restrictions on storage of ammonium nitrate in populated areas,
conversion in any other place apart from the one stated in the license, extraction from any fertilizer by chemical or
physical process, import-export, transportation with any other explosives, inflammable substance etc.
OTHER LAWS
The Foreign Trade (Regulation and Development) Act, 1992 and the rules framed thereunder (“FTA”)
The FTA is the main legislation concerning foreign trade in India. The FTA read along with Foreign Trade
(Regulation) Rules, 1993 provides for the development and regulation of foreign trade by facilitating imports into,
and augmenting exports from, India and for matters connected therewith or incidental thereto. As per the provisions
of the Act, the Government:- (i) may make provisions for facilitating and controlling foreign trade; (ii) may prohibit,
restrict and regulate exports and imports, in all or specified cases as well as subject them to exemptions; (iii) is
authorised to formulate and announce an export and import policy and also amend the same from time to time, by
notification in the Official Gazette; (iv) is also authorised to appoint a 'Director General of Foreign Trade' for the
purpose of the Act, including formulation and implementation of the Export-Import (“EXIM”) Policy. Under the
EXIM Policy, export of defense equipment falls under the restrictive Special Chemicals, Organisms, Materials,
Equipment and Technologies list and requires an license.
The FTA prohibits anybody from undertaking any import or export except under an Importer-Exporter Code number
(“IEC”) granted by the Director General of Foreign Trade pursuant to section 7. Hence, every entity in India engaged
in any activity involving import/export is required to obtain an IEC unless specifically exempted from doing so. The
IEC shall be valid until it is cancelled by the issuing authority.
Directorate General of Foreign Trade vide Notification No. 115(RE-2013)/2009-2014 dated March 13, 2015 has
provided that a No Objection Certificate (NOC) has to be obtained from the Department of Defence Production,
Ministry of Defence, New Delhi as per the provisions of Standard Operating Procedure (SOP) for export of military
stores.
The Foreign Exchange Management Act, 1999 (“FEMA”) and Regulations framed thereunder
Foreign investment in India is governed primarily by the provisions of the FEMA, and the rules, regulations and
notifications thereunder, as issued by the RBI from time to time, and the policy prescribed by the Department of
Industrial Policy and Promotion, which provides for whether or not approval of the Foreign Investment Promotion
Board ("FIPB") is required for activities to be carried out by foreigners in India. The RBI, in exercise of its power
under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000 ("FEMA Regulations") to prohibit, restrict or regulate, transfer by or issue security
to a person resident outside India. As laid down by the FEMA Regulations, no prior consents and approvals is required
from the RBI, for FDI under the "automatic route" within the specified sectoral caps. In respect of all industries not
specified as FDI under the automatic route, and in respect of investment in excess of the specified sectoral limits under
the automatic route, approval may be required from the FIPB and/or the RBI. The Consolidated FDI Circular dated
June 07, 2016 further amended by Press Note No. 5 (2016 Series) issued by the DIPP prescribes a cap of 100% on the
foreign investments in Defense Industry subject to Industrial license under the Industries (Development & Regulation)
Act, 1951 and manufacturing small arms and ammunition under the arms act 1959. Therefore, foreign investment up
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to 49% is permitted under the automatic route. Above 49% Foreign Investment is allowed under Government route
on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country
The Consolidated FDI Circular dated June 07, 2016 prescribes a cap of 100% on the foreign investments in
Construction development projects through the automatic route.
Greater Hyderabad Municipal Corporations Act, 1955
The Greater Hyderabad Municipal Corporations Act, 1955 came into force on February 15, 1956 and extends to
the city comprised by Greater Hyderabad Municipal Corporation. The Municipal Corporation has been assigned with
the functions like facilitation in the collection of taxes and non-taxes; preparation of list of beneficiaries for beneficiary
oriented schemes, pensions and subsidies; prepare an annual ward development plan in a manner consistent with the
rules to be prescribed; preparation of inventory of municipal assets; assistance in the implementation of all government
schemes; supervision and any other function as may be prescribed.
Electricity Act, 2003 and Electricity Rules, 2005
The Electricity Act, 2003 was enacted to consolidate the laws relating to the generation, transmission, distribution,
trading and use of electricity and generally for taking measures conducive to the development of the power industry.
These include promoting competition, protecting interests of consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and
environmentally benign policies, the constitution of the Central Electricity Authority and regulatory commissions, and
the establishment of an appellate tribunal. The Electricity Rules, 2005 were framed under the Electricity Act, 2003
and lay down the requirements of captive generating plants and generating stations. The authorities constituted under
these rules may give appropriate directions for maintaining the availability of the transmission system of a
transmission licensee.
Bureau of Indian Standards Act, 1986(“BIS Act”)
The BIS Act provides for the establishment of bureau for the standardisation, marking and quality certification of
goods. The BIS Act provides for the functions of the bureau which includes, among others (a) recognize as an Indian
standard, any standard established for any article or process by any other institution in India or elsewhere; (b) specify
a standard mark to be called the, Bureau of Indian Standards Certification Mark, which shall be of such design and
contain such particulars as may be prescribed to represent a particular Indian standard; and (c) make such inspection
and take such samples of any material or substance as may be necessary to see whether any article or process in
relation to which the standard mark has been used conforms to the Indian Standard or whether the standard mark has
been improperly used in relation to any article or process with or without a license.
The Legal Metrology Act, 2009 and the Legal Metrology (Packaged Commodities) Rules, 2011
The Legal Metrology Act, 2009 (“Legal Metrology Act”) was enacted with the objectives to establish and enforce
standards of weights and measures, regulate trade and commerce in weights, measures and other goods which are sold
or distributed by weight, measure or number and replaces the Standard of Weights and Measures (Enforcement) Act,
1985. The Legal Metrology (Packaged Commodities) Rules, 2011(the “Legal Metrology Rules”) were issued by the
Central Government under the Legal Metrology Act. Under the Legal Metrology Act, every unit of weight or measure
shall be in accordance with the metric system based on the international system of units. Using or keeping any weight
or measure otherwise than in accordance with the provisions of the Legal Metrology Act is an offence, as is tampering
or altering any reference standard, secondary standard or working standard. Pursuant to section 19 of the Legal
Metrology Act, no person shall import any weight or measure unless he is registered with the Director in such manner
and on payment of such fees, as may be prescribed. Further section 23 of the Act provides that no person shall
manufacture, repair or sell, or offer, expose or possess for repair or sale, any weight or measure unless he holds a
license issued by the Controller. According to the Legal Metrology Rules, no person shall pre-pack or cause or permit
to be pre-packed any commodity for sale, distribution or delivery unless a declaration is made on the package as
required under the Legal Metrology Rules. Every manufacturer, packer and importer who pre-packs or imports any
commodity for sale, distribution or delivery is required to be registered. On September 7, 2016, the Indian Ministry
of Consumer Affairs, Food, and Public Distribution’s Department of Legal Metrology amended the Legal Metrology
(Packaged Commodities) Rules, 2011. The Legal Metrology (Packaged Commodities) (Amendment) Rules, 2016
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empowers the Government of India (GOI) and state-level competent authorities to establish prices and quantity limits
for retail-sale price of anything deemed an “essential commodity” under the Essential Commodities Act, 1955
The Indian Boilers Act, 1923
The Indian Boilers Act, 1923 (“Boilers Act”), as amended, contains provisions relating to steam-boilers. The Boilers
Act prohibits any owner of a boiler to use the boiler or permit it to be used without previous registration. For
registration, the owner is required to make an application to the inspector along with the prescribed fee. The inspector
shall, after measuring and examining the boiler and determining in the maximum pressure in the prescribed manner,
report the same to the Chief Inspector. The Chief Inspector may register the boiler or refuse the same with reasons.
Pursuant to the application for registration, the certificate for the use of the boiler is issued for a period not exceeding
twelve months provided that a certificate in respect of an economiser or an unfired boiler which forms an integral part
of a processing plant in which steam is generated solely by the use of oil, asphalt or bitumen as a heating medium may
be issued for a period not exceeding twenty four months. When the certificate authorizing the use of the boiler expires
or there is an addition, renewal or any structural alteration to the boiler or an accident occurs to the boiler, the owner
shall apply for the renewal of the certificate. Any owner using the boiler without a certificate shall be punishable with
fine which may extend to five hundred rupees, and in the case of a continuing offence, with an additional fine which
may extend to one hundred rupees for each day after the first day of convicting the owner for continuing offence.
LAWS RELATING TO EMPLOYMENT
Factories Act, 1948
Factories Act, 1948 (“Factories Act”) regulates the provisions relating to labour in factories. The factories Act defines
a factory as any premises on which ten or more workers are employed or were employed on any day of the preceding
twelve months and on which an electronic manufacturing process is carried on. Further, it also includes any premises
on which twenty or more workers are employed or were employed on any day of the preceding twelve months and on
which a manufacturing process is ordinarily carried on without the use of electricity. The applicant needs to submit
the prior plans and obtain the approval of the respective State Government for the establishment, registration and
licensing of factories. The provisions for the same are contained in the rules made by the respective State
Governments. The Factories Act provides for provisions relating to health and safety, cleanliness and safe working
conditions. Employment of women and children in the factories is prohibited under the Factories Act. Violations to
any of the provisions of the Factories Act or the rules framed there under may lead to the imprisonment of the occupier
or the manager of the factory for a term not exceeding two years and/or with a fine of ₹ 1,00,000 or both. If any
continuing violation after conviction is observed, a fine of up to ₹ 1,000 per day of violation may be levied.
The Ministry of Labour and Employment proposes to amend the Factories Act, 1948 vide Office Memorandum dated
June 5, 2014 wherein it is proposed to redefine the term “hazardous process” as a process in which a hazardous
substance is used and the term “hazardous substance” would have the same meaning as assigned in the Environment
Protection Act, 1986. An Occupier would now be required to take permission from the State Government for
expansion of a factory within certain prescribed limits. Various safety precautions have been taken by the State
Government to prevent persons to enter any confined space unless a written certificate has been given by a competent
person and such person is wearing a suitable breathing apparatus. The occupier of a factory which is engaged in a
hazardous process is required to inform the Chief Inspector within 30 days before the commencement of such process.
An Inquiry Committee will be appointed by the Central Government to inquire into the standards of health and safety
observed in the factory.
The following is an indicative list of labour laws applicable to the business and operations of Indian companies
engaged in manufacturing activities:
Contract Labour (Regulation and Abolition) Act, 1970;
Workmen's Compensation Act, 1923;
Employees’ Compensation Act, 1923;
Industrial Disputes Act, 1947;
Industrial Employment (Standing orders) Act 1946;
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Child Labour (Prohibition and Regulation) Act, 1986
Minimum Wages Act, 1948;
Payment of Wages Act, 1936;
Public Liability Insurance Act, 1991
Employees’ State Insurance Act, 1948;
Payment of Bonus Act, 1965;
Payment of Gratuity Act, 1972;
Trade Union Act, 1926;
Equal Remuneration Act, 1976;
The Employees Provident Fund and Miscellaneous Provisions Act, 1952
The Apprentices Act, 1961
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013; and
The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
TAX RELATED LEGISLATIONS
Finance Act, 2017
The Finance Act, 2017 received the assent of the President on March 31, 2017 and came into force on April 1, 2017
to give effect to the financial proposals of the Central Government for the financial year 2017-2018. The Finance Act
contains necessary amendments in the direct taxes (e.g. income tax and wealth tax) and indirect taxes (e.g. excise
duties, custom duties and service tax) signifying the policy decisions of the Union Government for the year 2017-
2018. The act states that Income-tax shall be charged at the rates specified in Part I of the First Schedule.
The following is an indicative list of tax laws applicable to the business and operations of Indian companies engaged
in manufacturing activities:
Income Tax Act, 196;
The Customs Act, 1962;
Central Sales Tax Act, 1956;
The Central Excise Act, 1944;
Central Excise Tariff Act, 1985;
The Central Goods and Services Tax Act, 2017;
The Integrated Goods and Services Tax Act, 2017; and
Customs Tariff Act, 1975
Tax on profession, trade, callings and employment
Every person engaged in profession, trade, callings and employment is liable to pay tax at the rate prescribed. It is
considered necessary to levy tax on profession, trade callings and employment in order to augment state revenues.
Every state is empowered to make laws relating to levy of tax on profession, trade, callings and employment that shall
serve as the governing provisions in that state.
LAWS RELATING TO INTELLECTUAL PROPERTY
Intellectual Property Rights
Intellectual property rights in India enjoy protection under both statutory and under common law. The key legislations
governing intellectual property in India are the Copyright Act, 1957 and the Trade Marks Act, 1999. India is also a
party to several international agreements for the protection of intellectual property rights.
The Trademarks Act, 1999 (“TM Act”)
The TM Act provides for the application and registration of trademarks in India. The purpose of the TM Act is to
grant exclusive rights to marks such as a brand, label and heading and to obtain relief in case of infringement for
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commercial purposes as a trade description. The registration of a trademark is valid for a period of 10 years, and can
be renewed in accordance with the specified procedure.
Application for trademark registry has to be made to Controller-General of Patents, Designs and TM Act who is the
Registrar of Trademarks for the purposes of the TM Act. The TM Act prohibits any registration of deceptively similar
trademarks or chemical compound among others. It also provides for penalties for infringement, falsifying and falsely
applying trademarks.
Indian Copyright Act, 1957 (“Copyright Act”)
The Copyright Act governs copyright protection in India. Under the Copyright Act, copyright may subsist in original
literary, dramatic, musical or artistic works, cinematograph films, and sound recordings. Following the issuance of
the International Copyright Order, 1999, subject to certain exceptions, the provisions of the Copyright Act apply to
nationals of all member states of the World Trade Organization.
While copyright registration is not a prerequisite for acquiring or enforcing a copyright, registration creates a
presumption favoring ownership of the copyright by the registered owner. Copyright registration may expedite
infringement proceedings and reduce delay caused due to evidentiary considerations. Once registered, the copyright
protection of a work lasts for 60 years.
The remedies available in the event of infringement of a copyright under the Copyright Act include civil proceedings
for damages, account of profits, injunction and the delivery of the infringing copies to the copyright owner.
The Patents Act, 1970 (“Patent Act”)
The purpose of the Patent Act in India is to protect inventions. Patents provide the exclusive rights for the owner of a
patent to make, use, exercise, distribute and sell a patented invention. The patent registration confers on the patentee
the exclusive right to use, manufacture and sell his invention for the term of the patent. An application for a patent can
be made by (a) person claiming to be the true and first inventor of the invention; (b) person being the assignee of the
person claiming to be the true and first inventor in respect of the right to make such an application; and (c) legal
representative of any deceased person who immediately before his death was entitled to make such an application.
The Information Technology (Amendment) Act, 2000 (“IT Act”)
The Information Technology Act, 2000 has been enacted to provide legal recognition for transactions carried out by
means of electronic data interchange and other means of electronic communication, commonly referred to as
"Electronic Commerce", which involve the use of alternatives to paper-based methods of communication and storage
of information etc. Additionally, the said Act also provides for civil and criminal liabilities including fines and
imprisonment for various computer related offences. These include offences relating to unauthorized access to
computer systems; it also recognizes contracts concluded through electronic means, creates liability for failure to
protect sensitive personal data and gives protection to intermediaries in respect of third party information liability. It
also provides civil and criminal Liabilities. The Information Technology Act also provides punishment for offences
committed outside India.
The Department of Information and technology under the Ministry of Communications & information Technology,
Government of India, has notified the Information Technology (Reasonable Security Practices and Procedures and
Sensitive personal Data or Information) Rules 2011 (the “Personal data Protection Rules”) which gives directions for
the collection, disclosure, transfer and protection of sensitive personal data by a body corporate or any person acting
on behalf of a body corporate. The said Rules also require the body corporate to provide a privacy policy for handling
and dealing on personal information, including sensitive personal data.
ENVIRONMENT RELATED LAWS
Environmental Laws
Manufacturing units or plants must ensure compliance with environmental legislation, such as the Water (Prevention
and Control of Pollution) Act 1974, as amended, the Air (Prevention and Control of Pollution) Act, 1981, as amended,
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the Environment Protection Act, 1986, as amended and and the rules and regulations thereunder. The basic purpose
of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, Pollution Control
Boards (“PCBs”), which are vested with diverse powers to deal with water and air pollution, have been set up in each
state. The PCBs are responsible for setting the standards for maintenance of clean air and water, directing the
installation of pollution control devices in industries and undertaking inspection to ensure that units or plants are
functioning in compliance with the standards prescribed. These authorities also have the power of search, seizure and
investigation. All industries and factories are required to obtain consent orders from the PCBs, which are indicative
of the fact that the plant in question is functioning in compliance with the pollution control norms. These consent
orders are required to be renewed. These various environmental laws give primary environmental oversight authority
to the Ministry of Environment and Forest (“MoEF”), the Central Pollution Control Board (the “CPCB”) and the
respective State Pollution Control Boards. The MoEF is the key national regulatory agency responsible for policy
formulation, planning and co-ordination of all issues related to environmental protection. The CPCB is the law
enforcing body at the national level. It enforces environmental legislation, coordinates the activities of State Pollution
Control Committees, establishes environmental standards and plans and executes a nationwide programme for the
prevention, control and abatement of pollution.
On September 14, 2006 the Environmental Impact Assessment Notification S.O. 1533 (the “2006 Notification”) was
issued by the Ministry of Environment and Forest. Under the 2006 Notification, the environmental clearance process
for new projects consists of four stages – screening, scoping, public consultation and appraisal. After completion of
public consultation, the applicant is required to make appropriate changes in the Draft Environment Impact
Assessment Report and the Environment Management Plan. The final Environment Impact Assessment Report has to
be submitted to the concerned regulatory authority for appraisal. The regulatory authority is required to give its
decision within 105 days of the receipt of the final Environment Impact Assessment Report.
Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016
The Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2016, has been enacted in in
supersession of the Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008. It
imposes an obligation on each occupier generating hazardous waste to handle such hazardous wastes in a safe and
environmentally sound manner. Every person who is engaged in the handling of hazardous wastes is required to obtain
an authorization from the relevant the State Pollution Control Board (“SPCB”). The occupier and operator of the
facility shall be liable for all damages caused to the environment or a third party due to improper handling or disposal
of the hazardous wastes and the SPCB may levy financial penalties for violation of these rules. The salient features of
Hazardous and Other Wastes (Management & Transboundary Movement) Rules, 2016 include the following:-
i. The ambit of the Rules has been expanded by including ‘Other Waste’.
ii. Waste Management hierarchy in the sequence of priority of prevention, minimization, reuse, recycling, recovery,
co-processing; and safe disposal has been incorporated.
iii. All the forms under the rules for permission, import/export, filing of annual returns, transportation, etc. have been
revised significantly, indicating the stringent approach for management of such hazardous and other wastes with
simultaneous simplification of procedure.
iv. The basic necessity of infrastructure to safeguard the health and environment from waste processing industry has
been prescribed as Standard Operating Procedure (SOPs), specific to waste type, which has to be complied by the
stakeholders and ensured by SPCB/PCC while granting such authorisation.
v. Procedure has been simplified to merge all the approvals as a single window clearance for setting up of hazardous
waste disposal facility and import of other wastes.
vi. Co-processing as preferential mechanism over disposal for use of waste as supplementary resource, or for
recovery of energy has been provided.
vii. The approval process for co-processing of hazardous waste to recover energy has been streamlined and put on
emission norms basis rather than on trial basis.
viii. The process of import/export of waste under the Rules has been streamlined by simplifying the document-based
procedure and by revising the list of waste regulated for import/export.
ix. The import of metal scrap, paper waste and various categories of electrical and electronic equipments for re-use
purposehas been exempted from the need of obtaining Ministry’s permission.
x. The basic necessity of infrastructure to safeguard the health and environment from waste processing industry has
been prescribed as Standard Operating Procedure (SOPs) specific to waste type.
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xi. List of processes generating hazardous wastes has been reviewed taking into account technological evolution in
the industries.
xii. State Government is authorized to prepare integrated plan for effective implementation of these provisions, and
have to submit annual report to Ministry of Environment, Forest and Climate Change.
xiii. State Pollution Control Board is mandated to prepare an annual inventory of the waste generated; waste recycled,
recovered, utilised including co-processed; waste re-exported and waste disposed and submit to the Central
Pollution Control Board by the 30th day of September every year.
xiv. Responsibilities of State Government for environmentally sound management of hazardous and other wastes have
been introduced as follows:
To set up/ allot industrial space or sheds for recycling, pre-processing and other utilization of hazardous or other
waste
To register the workers involved in recycling, pre-processing and other utilization activities.
To form groups of workers to facilitate setting up such facilities.
To undertake industrial skill development activities and ensure safety and health of workers.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Overview
Our Board currently consists of nine (9) Directors. Our Articles of Association provide that the number of directors
shall not be less than three (3) or more than 15 (fifteen). Further, our Articles of Association provides that one – third
of the strength of the Board of Directors shall be liable to retire by rotation at every AGM. A retiring Director shall
be eligible for re – appointment. Subject to the Articles of Association, the quorum for meetings of the Board is one
third of the total number of Directors or two (2) Directors, whichever is higher as provided under section 174 of the
Companies Act, 2013. Where the number of interested Directors exceeds or is equal to two – third of the total number
of Directors, the number of remaining Directors i.e. the number of Directors who are not interested and are present at
the meeting not being less than two (2), shall be quorum during such time.
Directors
The following table sets forth details regarding the Board as on the date of this Placement Document:
Name, Designation, Address, Occupation, DIN,
Term and Nationality
Age (in
years)
Other Directorships
Dr. Amar Nath Gupta*
Designation: Chairman and Managing Director
Address: H. No. 81, Jyoti Colony, Trimulgherry,
Secunderabad – 500015, Andhra Pradesh, India
Occupation: Business
DIN: 00053985
Term: 3 years with effect from February 14, 2016
Nationality: Indian
72 1. Godavari Explosives Limited;
2. BF Premier Energy Systems Private
Limited;
3. Pelnext Defence Systems Private
Limited
Tripuraneni Venkaiah Chowdary
Designation: Deputy Managing Director
Address: Plot No. 9A, Defence R&D Enclave, Sikh
Village, Secunderabad – 500009, Andhra Pradesh,
India
Occupation: Service
DIN: 00054220
Term: 3 years with effect from July 1, 2016
Nationality: Indian
59 1. Octane Chemicals Private Limited;
2. BF Premier Energy Systems Private
Limited;
3. Pelnext Defence Systems Private
Limited;
4. Premier Wire Products Limited
Col. Vikram Mahajan (Retd.)
Designation: Director (Marketing)
Address: C – 186, Vikas Puri, New Delhi – 110018,
India
Occupation: Service
57 1. Godavari Explosives Limited;
2. Premier Wire Products Limited
146
Name, Designation, Address, Occupation, DIN,
Term and Nationality
Age (in
years)
Other Directorships
DIN: 06613483
Term: 3 years with effect from November 6, 2014
Nationality: Indian
Dr. Kailash Gupta
Designation: Non – Executive Director
Address: H. No. 81, Jyoti Colony, Trimulgherry,
Secunderabad – 500015, Andhra Pradesh, India
Occupation: Doctor
DIN: 00054045
Term: Liable to retire by rotation
Nationality: Indian
71 1. Premier Wire Products Limited
Anil Kumar Mehta
Designation: Independent Director
Address: Flat No. 201, Gulmarg Enclave 65, Srinagar
Colony, Hyderabad – 500073, Telangana, India
Occupation: Chartered Accountant
DIN: 00040517
Term: 5 years with effect from August 13, 2014
Nationality: Indian
71 Nil
Prabhakar Ram Tripathi
Designation: Independent Director
Address: Plot – 2, NCL, North Avenue, Kompally,
Hakimpet, Qutubullapuram, Hyderabad – 500014,
Telangana, India
Occupation: Retired
DIN: 00376429
Term: 5 years with effect from August 13, 2014
Nationality: Indian
73 1. Sarda Energy & Minerals Limited;
2. IVRCL Limited;
3. Rihim Developers Private Limited;
4. IOT Utkal Energy Services Limited;
5. HDO Technologiess Limited;
6. Minman Consultancy Services Private
Limited;
7. Hindustan Dorr Oliver Limited
Dr. Venkataraman Abbaraju
58 Nil
147
Name, Designation, Address, Occupation, DIN,
Term and Nationality
Age (in
years)
Other Directorships
Designation: Independent Director
Address:2-907/77/44, Swasa, opposite to Bhavani
temple, Gubbi Colony, Gulbarga – 585105, Karnataka,
India
Occupation: Professor
DIN: 02669952
Term: 5 years with effect from August 13, 2014
Nationality: Indian
Ramarao Kathirisetti
Designation: Independent Director
Address: 109 – A, road no – 12, M.L.A. Colony,
Banjara Hills, Hyderabad – 500034, Telangana, India
Occupation: Retired
DIN: 02678860
Term: 5 years with effect from August 13, 2014
Nationality: Indian
82 Nil
Lt. Gen. Peruvemba Ramachandran Kumar (Retd.)
Designation: Independent Director
Address: 24, Tughlak Crescent, Delhi – 110001, India
Occupation: Retired
DIN: 07352541
Term: 5 years with effect from November 2, 2016
Nationality: Indian
61 1. RKEC Projects Limited
*Our Company has made an application dated November 20, 2015 to the Central Government seeking its approval
for the remuneration paid to Dr. Amar Nath Gupta, for the period April 1, 2015 to February 13, 2016, in excess of
the limits envisaged in Schedule V of the Companies Act, 2013. As on the date of this Placement Document, the
abovementioned application is pending before the Central Government.
Brief Profile of the Directors
Amar Nath Gupta, aged 72 years, is the Chairman and Managing Director of our Company. He holds a Diploma in
Mining Engineering and a Master’s degree of Science in Mining Engineering from Indian School of Mines, Dhanbad.
He is a recipient of Outstanding Entrepreneurship Award from Asia Pacific Entrepreneurship Award 2015 and is
bestowed with the Honorary Fellowship from High Energy Materials Society of India in 2016. He has over four
148
decades of experience in the product development and processes of explosives industry and is sphere heading the
entire operations of the Company since its inception.
Tripuraneni Venkaiah Chowdary, aged 59 years, is the Deputy Managing Director of our Company. He holds a
Bachelor’s degree in Science Technology from Nagpur University. He has experience in manufacturing of explosives,
detonators, petrochemicals, coal tar pitches and enamels, mushrooms and solid propellants. He has been on the Board
of our Company since August 31, 2005 and is responsible for looking after the overall operations of our Company.
Col. Vikram Mahajan (Retd.), aged 57 years, is the Director (Marketing) of our Company. He holds a Bachelor’s
degree in Technology (Electronical Engineering) and a Bachelor’s degree in Science from Jawaharlal Nehru
University. He also holds a Master’s degree in Engineering, Mechanical (guided missile) from University of Pune and
a Master’s degree of Business Administration from Indira Gandhi National Open University. Prior to joining our
Company, he was working with Indian Army and has knowledge in the defence sector. He has been on the Board of
our Company since November 6, 2014 and is responsible for looking after the marketing activities of our Company.
Dr. Kailash Gupta, aged 71 years, is the Non-Executive Director of our Company. She is an M.B.B.S from Indore
University and has experience in handling the corporate social responsibility initiatives of our Company. She has been
on the Board of our Company since May 27, 1999.
Anil Kumar Mehta, aged 71 years, is an Independent Director of our Company. He is a qualified chartered accountant
and a partner at M/s. Bhaskara Rao & Co. He has over 40 years of experience in taxation and accounting matters and
has been on the Board of our Company since May 17, 2003.
Prabhakar Ram Tripathi, aged 73 years, is an Independent Director of our Company. He holds a Bachelor’s degree
in Science (Mining) from Ranchi University and holds a Diploma from the Indian School of Mines, Dhanbad. He is
involved in the development of mineral industry in India. He has been on the Board of our Company since September
28, 2007.
Dr. Venkataraman Abbaraju, aged 58 years, is an Independent Director of our Company. He holds a Bachelor’s
degree in Science and a Master’s degree in Science from Karnataka University. He has also been conferred with the
Degree of Doctor of Philosophy in Chemistry from University of Pune. He has experience in materials chemistry,
nanomaterials chemistry, polymer nano composites, etc. and is currently working as a professor in Gulbarga
University. He has been on the Board of our Company since April 27, 2009.
Ramarao Kathirisetti, aged 82 years, is an Independent Director of our Company. He holds a Bachelor’s degree in
Science from Andhra University. Additionally, he has participated in various courses pertaining to technology and
project management conducted by various institutes. He is a graduate of the Royal Aeronautical Society and an
associate member of Aeronautical Society of India. He has experience in technology development and retired as an
associate director of Defence Research and Development Laboratory. He has been on the Board of our Company since
April 27, 2009.
Lt. Gen. Peruvemba Ramachandran Kumar (Retd.), aged 61 years, is an Independent Director of our Company.
He holds a Diploma in Management from Indira Gandhi National Open University and Bachelor’s degree in Science
from Jawaharlal Nehru University. He also holds a Master’s degree of Science in Defence Studies and Masters of
Philosophy in Defence and Strategic Studies from University of Madras. Additionally, he holds a degree of Master in
Philosophy from Devi Ahilya Vishwavidyalaya, Indore. He has experience in defence sector and then retired as
Lieutenant General from the services of the Indian Army in 2015. He has been on the Board of our Company since
November 2, 2016.
Relationship with other Directors
Except for Dr. Amar Nath Gupta and Dr. Kailash Gupta who are spouses, none of our Directors are related to each
other.
Borrowing powers of the Board
149
Our Board of Directors including any committee thereof vide a special resolution passed by the shareholders at the
AGM held on September 24, 2015 is authorised to borrow such amounts in excess of the aggregate of the paid up
share capital and free reserves of the Company, provided that the total amount borrowed and outstanding at any point
of time, apart from temporary loans obtained / to be obtained from the Company’s bankers in the ordinary course of
business, shall not be in excess of ₹ 10,000 Lacs over and above the aggregate of the paid up capital and free reserves
of the Company.
Interest of Directors
All of the Directors, other than the Executive Directors, may be deemed to be interested to the extent of fees payable
to them for attending meetings of the Board or a committee thereof as well as to the extent of reimbursement of
expenses payable to them. The Executive Directors may be deemed to be interested to the extent of remuneration paid
to them for services rendered as officers of our Company.
All of the Directors may also be regarded as interested in our Company to the extent of the Equity Shares held by
them and also to the extent of any dividend payable to them and other distributions in respect of such Equity Shares
held by them. Other than as disclosed in this Placement Document, there were no outstanding transactions other than
in the ordinary course of business undertaken by our Company, in which the Directors were interested parties.
All Directors may also be regarded as interested in the Equity Shares held by, or subscribed by and allotted to, the
companies, firms and trusts, in which they are interested as directors, members, partners or trustees or where the
Equity Shares of the Company are held by the relatives of the Directors.
Our Company has not entered into any contract, agreement or arrangement during the preceding two years from the
date of this Placement Document in which any of the Directors are interested, directly or indirectly, and no payments
have been made to them in respect of any such contracts, agreements, arrangements which are proposed to be made
with them.
For details of related party transactions entered into by our Promoter, Promoter Group and Company during the two
years preceding the date of this Placement Document, the nature of transactions and the cumulative value of
transactions, see “Related Party Transactions” in the section “Financial Statements” on page 199.
Shareholding of Directors
The following table sets forth details regarding the shareholding of Directors as on March 31, 2017:
Name of the Director Number of Equity Shares % shareholding in our Company
Dr. Amar Nath Gupta 24,88,579 28.09%
Dr. Kailash Gupta 10,77,798 12.17%
Tripuraneni Venkaiah Chowdary 26,000 0.29%
Col. Vikram Mahajan (Retd.) 26,463 0.30%
Anil Kumar Mehta 3,000 0.03%
Terms and Compensation of Directors
Remuneration of Chairman and Managing Director
Pursuant to a resolution passed by the Board of Directors at the meeting held on August 11, 2015 and by the
shareholders of our Company at the AGM held on September 24, 2015, Dr. Amar Nath Gupta was re-appointed as the
Chairman and Managing Director of our Company for a period of 3 years with effect from February 14, 2016 along
with the terms of remuneration. The details of his remuneration are as under:
Particulars Remuneration
Salary ₹ 8.05 lacs per month with an annual increment of 15% rounded off to nearest ₹ 100 due on 1st
April every year due on 1st April every year
Commission 1.5 % p.a. of the net profits calculated in accordance with section 198 of Companies Act, 2013
150
Perquisites and
Allowances Unfurnished accommodation or house rent allowance at 30% of basic salary in lieu of
unfurnished accommodation
Gas, electricity, water, servant, security, gardener and soft furnishing subject to maximum
of 10% of the basic salary. These shall be valued as per the Income Tax Rules, 1962 for the
purpose of calculation of managerial remuneration under the Sections 196, 197 and Schedule
V annexed to the Companies Act, 2013.
Medical reimbursement for self and family to the extent of one month basic salary which can
also be availed cumulatively up to 3 years or his tenure whichever is earlier, as per the rules
of the Company.
Leave travel concession for self and family once in a year to the extent of one month basic
salary.
Club fees (Maximum 2 clubs)
Medi claim and personal accident insurance as per rules of the Company.
Company’s contribution towards Provident Fund.
Leave encashment at the end of tenure as per rules of the Company. In computing monetary
ceiling of perquisites, the company’s contribution to provident fund and leave encashment at
the end of the tenure shall not be taken into account
Use of Company’s car with driver and telephone at residence for official purposes.
In the event of loss or inadequacy of profits in any financial year, the Chairman and
Managing Director shall be paid remuneration by way of salary, perquisites and benefits, as
specified above as minimum remuneration.
Remuneration of Deputy Managing Director
Pursuant to a resolution passed by the Board of Directors at the meeting held on May 24, 2016and by the shareholders
of our Company at the AGM held on September 23, 2016, Tripuraneni Venkaiah Chowdary was re-appointed as the
Whole-time Director with the designation as Deputy Managing Director of our Company for a period of 3 years with
effect from July 1, 2016 alongwith the terms of remuneration. The details of his remuneration are as under:
Particulars Remuneration
Salary ₹ 2.75 lacs per month with revision in basic salary every year by the Nomination and
Remuneration Committee based on his performance and he may be awarded an annual
increment of 10-20% (rounded off to nearest ₹ 100/-) with effect from 1st of April
Commission 0.5% p.a. of the net profits of the Company in accordance with section 198 of the Companies
Act, 2013 every year.
Perquisites and
Allowances Unfurnished accommodation or House Rent Allowance at the rate of 30% of the basic salary
in lieu of unfurnished accommodation.
Gas, electricity, water, servant, security, gardener and soft furnishing subject to maximum
of 10% of the basic salary. These shall be valued as per the Income Tax Rules, 1962 for the
purpose of calculation of managerial remuneration under the Sections 196, 197 and Schedule
V annexed to the Companies Act, 2013.
Medical reimbursement for self and family to the extent of one month basic salary which can
also be availed cumulatively up to 3 years or his tenure whichever is earlier, as per the Rules
of the Company.
Leave travel concession for self and family once in a year to the extent of one month basic
salary
Club fees (maximum 2 clubs)
Medi claim and personal accident insurance as per rules of the Company.
Company’s contribution towards Provident Fund as per the rules and regulations prescribed
under Employees Provident Fund and Miscellaneous Provisions Act, 1952.
Leave encashment at the end of tenure as per rules of the Company. In computing monetary
ceiling of perquisites, the company’s contribution to provident fund and leave encashment at
the end of the tenure shall not be taken into account
Use of Company’s car with driver and telephone at residence for official purposes.
151
Particulars Remuneration
In the event of loss or inadequacy of profits in any financial year, the Executive Director
shall be paid remuneration by way of salary and perquisites as specified above as minimum
remuneration.
Remuneration of Director (Marketing)
Pursuant to a resolution passed by the Board of Directors at the meeting held on November 06, 2014 and by the
shareholders of our Company at the AGM held on September 24, 2015, Col. Vikram Mahajan (Retd.) was appointed
as the Whole-time Director designated as Director (Marketing) of our Company for a period of 3 years with effect
from November 6, 2014 alongwith the terms of remuneration. The details of his remuneration are as under:
Particulars Remuneration
Salary ₹ 1.25 lacs per month with effect from 6th November 2014 with a revision in basic salary every
year by the Nomination and Remuneration Committee based on his performance and he may be
awarded an annual increment of 10-20% (rounded off to nearest ₹ 100/-) with effect from 1st of
April starting from April 2015
Commission 0.5% p.a. of the net profits of the Company in accordance with section 198 of the Companies
Act, 2013 every year.
Perquisites and
Allowances Unfurnished accommodation or house rent allowance at the rate of 30% of the basic salary
in lieu of unfurnished accommodation.
Gas, electricity, water, servant, security, gardener and soft furnishing subject to maximum
of 10% of the basic salary. These shall be valued as per the Income Tax Rules, 1962 for the
purpose of calculation of managerial remuneration under the Sections 197, 198, 199 and 200
and Schedule V annexed to the Companies Act, 2013.
Medical reimbursement for self and family to the extent of one month basic salary which can
also be availed cumulatively up to 3 years or his tenure whichever is earlier, as per rules of
the Company.
Leave travel concession for self and family once in a year to the extent of one month basic
salary as per rules of the Company.
Club fees (membership fee in any one club not being admission and life membership fee)
Medi claim and personal accident insurance as per rules of the Company.
Company’s contribution towards Provident Fund as per the rules and regulations prescribed
under Employees Provident Fund and Miscellaneous Provisions Act, 1952
Leave encashment at the end of tenure as per rules of the Company. In computing monetary
ceiling of perquisites, the company’s contribution to provident fund and leave encashment at
the end of the tenure shall not be taken into account.
Use of Company’s car with driver and telephone at residence for official purposes.
In the event of loss or inadequacy of profits in any financial year, the Director (Marketing)
shall be paid remuneration by way of salary, perquisites and benefits as specified above as
minimum remuneration.
Remuneration of Executive Directors
The following table sets forth the remuneration paid by our Company to the present executive directors during April
2017 and for the Fiscal years 2017, 2016 and 2015:
(₹ in Lacs)
Salary and Perquisites
Name of Director For the month of
April 2017#
Fiscal 2017# Fiscal
2016
Fiscal 2015
Dr. Amar Nath Gupta 15.16 179.97 180.74 133.67##
Tripuraneni Venkaiah
Chowdary
3.92 60.84 57.84 47.27
Col. Vikram Mahajan (Retd.) 2.25 30.78 35.05 11.25
Dr. N .V. Srinivasa Rao** - 26.96 49.96 36.54
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Salary and Perquisites
Name of Director For the month of
April 2017#
Fiscal 2017# Fiscal
2016
Fiscal 2015
K. Chalil*** - - - 31.46
Total 21.33 298.55 323.59 260,19 *Our Company has made an application dated November 20, 2015 to the Central Government seeking its approval for the
remuneration paid to Dr. Amar Nath Gupta, for the period April 1, 2015 to February 13, 2016, in excess of the limits envisaged in
Schedule V of the Companies Act, 2013.
** Ceased to be a director with effect from October 01, 2016
*** Ceased to be a director with effect from September 30, 2015
# excluding director’s commission.
###The Company had paid a remuneration of ₹. 133.67 lacs for Fiscal 2015. However, the Ministry of Corporate Affairs vide its
order dated May 25, 2016 bearing no. SRN C65724130/3/2015 – CL.VII directed to recover excess remuneration of ₹ 5.30 lacs
for the period April 1, 2014 to March 31, 2015.
Sitting Fees of the Non-Executive Directors
Our Non-executive Directors are paid sitting fees which is determined by the Board of Directors of ₹ 20,000 for each
meeting of the Board and ₹ 10,000 for attending each meeting of the committee.
The following table sets forth the sitting fees paid by our Company to the current Non-Executive Directors during
April, 2017 and in the Fiscal years 2017, 2016 and 2015:
(₹ in Lacs)
Name of Director For the month of
April 2017
Fiscal 2017 Fiscal
2016
Fiscal
2015
Dr. Kailash Gupta 0.30 2.10 2.30 2.10
Anil Kumar Mehta 0.30 2.60 2.50 2.45
Prabhakar Ram Tripathi 0.20 1.50 1.80 1.90
Dr. Venkataraman Abbaraju 0.20 0.60 0.90 0.90
Ramarao Kathirisetti Nil 1.40 1.70 1.70
Lt. Gen. Peruvemba Ramachandran
Kumar (Retd.)*
0.20 0.40 Nil Nil
Arun Kapoor** - - 0.30 0.70
Total 1.20 8.60 9.50 9.75
*Appointed as an Additional Director (Independent) with effect from November 2, 2016 and regularized on May 12,
2017.
**Ceased to be a director with effect from July 29, 2016
Corporate Governance
Our Company has been complying with the requirements of applicable law, including the Companies Act, SEBI ICDR
Regulations, Listing Regulations and other SEBI guidelines, in respect of corporate governance including constitution
of the Board of Directors and committees thereof.
The Board of Directors presently consists of nine (9) directors. In compliance with the requirements of the Listing
Regulations and the Companies Act, the Board of Directors includes five (5) Independent Directors. We are in
compliance with the corporate governance provision of the Listing Regulations which requires at least one woman
director on our Board at all times. The corporate governance framework, inter alia, is based on an effective
independent Board, separation of the Board’s supervisory role from the executive management team and constitution
of committees of the Board, as required under law. The Board functions either as a full Board or through various
committees constituted to oversee specific operational areas.
Committee of the Board of Directors
The Board of Directors has five (5) committees, which have been constituted and function in accordance with the
relevant provisions of the Companies Act and Chapter IV the Listing Regulations. The committees are as follows: (i)
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Audit Committee, (ii) Nomination and Remuneration Committee, (iii) Stakeholders Relationship Committee,
(iv)Corporate Social Responsibility Committee and (v) Securities Allotment Committee.
The following table sets forth the members of the aforesaid committees as of the date of this Placement Document:
Committee Members Designation
Audit Committee Prabhakar Ram Tripathi Chairman
Anil Kumar Mehta Member
Ramarao Kathirisetti Member
Nomination and Remuneration Committee Prabhakar Ram Tripathi Chairman
Anil Kumar Mehta Member
Ramarao Kathirisetti Member
Stakeholders Relationship Committee Anil Kumar Mehta Chairman
Tripuraneni Venkaiah Chowdary Member
Dr. Kailash Gupta Member
Corporate Social Responsibility Committee Prabhakar Ram Tripathi Chairman
Dr. Kailash Gupta Member
Tripuraneni Venkaiah Chowdary Member
Securities Allotment Committee Anil Kumar Mehta Chairman
Col. Vikram Mahajan (Retd.) Member
Ramarao Kathirisetti Member
Prabhakar Ram Tripathi Member
Tripuraneni Venkaiah Chowdary Member
154
Organization Structure
155
Senior Managerial Personnel
Below are brief details of the senior managerial personnel of our Company.
For brief details of our Chairman and Managing Director, Dr. Amar Nath Gupta, Deputy Managing Director,
Tripuraneni Venkaiah Chowdary and Director (Marketing), Col. Vikram Mahajan (Retd.) please refer to the paragraph
titled ‘Brief Profile of the Directors’ beginning on page 145.
Yachamaneni Durga Prasada Rao, aged 54 years, is the President (Production) of our Company. He holds a
Bachelor’s degree of Technology in Mechanical Engineering from Sri Venkateswara University. He has experience
in production of explosives, propellants and project execution. He has been associated with our Company since July
1, 1989 and is currently responsible for heading the production activities of our Company.
Rishi Pal Sharma, aged 47 years, is the Vice President (Production) of our Company. He holds a Bachelor’s degree
in Science and a Master’s degree in Science (Chemistry) from Meerut University. He has experience in production
sector. He has been associated with our Company since June 1, 2016 and is currently responsible for handling the
production activities of our Company.
Col. Shailendra Pathak, aged 50 years, is the Vice President (Marketing) of our Company. He holds a Bachelor’s
degree in Technology (Mechanical Engineering) from Jawaharlal Nehru University. He has experience in marketing
sector and other allied activities. He has been associated with our Company since October 1, 2016 and is currently
responsible for handling the marketing activities of our Company.
P. Ravinder Rao, aged 48 years, is the General Manager (Marketing) of our Company. He holds a Diploma in mining
engineering from State Board of Technical Education and Training, Andhra Pradesh. He has experience in marketing
sector. He has been associated with our Company since August 30, 1992 and is currently responsible for handling the
marketing activities of our Company.
Subba Rao Chitiprolu, aged 56 years, is the Chief Financial Officer of our Company. He holds a Bachelor’s degree
in Commerce from Andhra University and is a Chartered Accountant from the Institute of Chartered Accountants of
India. He has experience in the field of financial management, project financing and budget planning. Prior to joining
our Company, he was working with Aga Khan Education Service, Tanzania, Aga Khan Health Service, Tajikistan and
GMR Varalakshmi Foundation. He has been associated with our Company since February 24, 2010 and is currently
responsible for handling the financial and accounting matters of the Company.
V. Narasimha Charvulu, aged 47 years, is the General Manager (Operations and Maintenance – SHAR) of our
Company. He holds a Diploma in mechanical engineering from State Board of Technical Education and Training and
Bachelor’s degree in Engineering (mechanical) from Andhra University. He has experience in production sector. Prior
to joining our Company, he was working with Kadevi Engineering Company Private Limited, Aster Teleservices
Private Limited, Shalivahana Green Energy Limited and Beta Wind Farm Private Limited. He has been associated
with our Company since June 14, 2016 and is currently responsible for looking after the operation and maintenance
of utilities and equipment’s.
Rahuveer Tangirala, aged 54 years, is the General Manager (Operations and Maintenance – SFC) of our Company.
He holds a Diploma in Industrial Safety from Annamalai University and a Bachelor’s degree in Science from Andhra
University. He has experience in production sector. He has been associated with our Company since April 1, 1984
and is currently responsible for looking after the operation and maintenance of utilities and equipment’s.
Mohammad Abdul Subhan, aged 61 years, is the General Manager (Purchase) of our Company. He holds a
Bachelor’s degree in Arts from Gandhi Institute of Technology and Management University and a degree of Master’s
in Business Administration (Materials Management) from Karnataka State Open University. He has experience in
purchasing sector. He has been associated with our Company since September 1, 1981 and is currently responsible
for handling the purchasing activities of our Company.
Vijayashree Kueumilla, aged 44 years is the Company Secretary and Compliance Officer of our Company. She holds
a Bachelor’s degree in Commerce and is a law graduate from Osmania University. She is a qualified company
secretary and is a member of the Institute of Company Secretaries of India. Prior to joining or Company, she was
156
working with Sembmarine Kakinada Limited, Compulearn Tech India Limited and Karvy Consultants Limited. She
has been associated with our Company since May 20, 2015 and is currently responsible for the secretarial matters of
our Company.
Relationship with the Directors and other senior managerial personnel
None of our senior managerial personnel are related to the directors or with each other.
Shareholding of Senior Managerial Personnel
Except as stated under, none of our senior managerial personnel hold any shares in our Company as on March 31,
2017.
Name of Senior Managerial Personnel Number of Equity Shares
P. Ravinder Rao 2,600
Subba Rao Chitiprolu 2,000
Mohammad Abdul Subhan 200
Payment or Benefit to Directors and Senior Managerial Personnel of our Company
The perquisites and allowances that may be payable to the Directors are in accordance with the Companies Act, 2013.
The perquisites and allowances that may be payable to the senior managerial personnel of our Company are in
accordance with our Company’s human resources policies. Further, the senior managerial personnel of our Company
are entitled to profit sharing bonus wherein certain percentage, to be decided by whole time directors, of the profit is
divided among them in proportion of their basic salary.
Except as disclosed above, our Directors and senior managerial personnel are not entitled to any other non-salary
related amount or benefit.
Interests of Senior Managerial Personnel
The senior managerial personnel of our Company do not have any interest in our Company other than to the extent of
the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of
expenses incurred by them and to the extent of the Equity Shares held by them or their dependents in our Company,
if any, held by them.
Other than as disclosed in this Placement Document, there were no outstanding transactions other than in the ordinary
course of business undertaken by our Company in which the key managerial personnel were interested parties.
Related Party Transactions
For details in relation to the related party transactions entered by our Company during the last three Fiscal Years
immediately preceding the date of this Placement Document, as per the requirements under the Companies Act, 2013
and Accounting Standard 18 issued by the Institute of Chartered Accountants in India, see “Related Party
Transactions” in the section “Financial Statements” on page 199.
Employees’ Stock Option Plan
At present, our Company does not have any stock option scheme for its employees or management.
Loans to Directors and Senior Managerial Personnel
As on the date of this Placement Document, there are no amounts which are due to our Company, from any of its
Directors or senior managerial personnel in the nature of loans and advances, except advances made, if any, in the
ordinary course of business. Our Company has not given any guarantees in favour of any Director or any senior
managerial personnel.
157
Policy on disclosure and internal procedure for prevention of insider trading
Regulation 9(1) of the Insider Trading Regulations applies to us and our employees and requires us to implement a
code of internal procedures and conduct for the prevention of insider trading. Our Company is in compliance with the
same and has implemented a code of conduct for prevention of insider trading and procedure for fair disclosure of
unpublished price sensitive information in accordance with the Insider Trading Regulations. The Company Secretary
acts as the Compliance Officer of our Company under the aforesaid code of conduct.
158
PRINCIPAL SHAREHOLDERS
The table below represents the shareholding pattern of our Company in accordance with Regulation 31 of the Listing
Regulations, as on March 31, 2017:
Summary statement holding of Equity Shares
Category of
shareholder
Nos. of
shareho
lders
No. of fully
paid up
equity
shares held
Total nos.
shares
held
Shareholding as
a % of total no.
of shares
(calculated as per
SCRR, 1957)As a
% of (A+B+C2
Number of Locked in
shares
Number of
equity shares
held in
dematerializ
ed form No.(a) As a % of
total Shares
held(b)
(A) Promoter
& Promoter
Group
3 42,23,074 42,23,074 47.67 4,42,000 10.47 42,23,074
(B) Public 9,712 46,35,501 46,35,501 52.33 0.00 43,95,740
(C1) Shares
underlying
DRs
0.00 0.00
(C2) Shares
held by
Employee
Trust
0.00 0.00
(C) Non
Promoter-Non
Public
0.00 0.00
Grand Total 9,715 88,58,575 88,58,575 100.00 4,42,000 4.99 86,18,814
Note: C=C1+C2
Grand Total=A+B+C
Statement showing shareholding pattern of the Promoter and Promoter Group
Category of
shareholder
Nos. of
shareh
olders
No. of
fully paid
up equity
shares
held
Total nos.
shares
held
Shareholding as
a % of total no.
of shares
(calculated as
per SCRR,
1957)As a % of
(A+B+C2)
Number of Locked in
shares
Number of
equity
shares
held in
dematerial
ized form No.(a) As a % of
total Shares
held(b)
A1) Indian
Individuals/Hindu
undivided Family
3 42,23,074
42,23,074
47.67 4,42,000 10.47 42,23,074
Amarnath Gupta
(HUF)
1 6,56,697 6,56,697 7.41 88,000 13.40 6,56,697
Kailash Gupta 1 10,77,798 10,77,798 12.17 1,40,000 12.99 10,77,798
Amarnath Gupta 1 24,88,579 24,88,579 28.09 2,14,000 8.60 24,88,579
Sub Total A1 3 42,23,074 42,23,074 47.67 4,42,000 10.47 42,23,074
A2) Foreign 0.00 0.00
A=A1+A2 3 42,23,074 42,23,074 47.67 4,42,000 10.47 42,23,074
159
Statement showing shareholding pattern of the Public shareholders
Category &
Name of the
Shareholders
No. of
shareh
older
No. of fully
paid up
equity
shares
held
Total no.
shares
held
Sharehol
ding %
calculate
d as per
SCRR,
1957 As a
% of
(A+B+C2
)
No. of
Voting
Rights
Total
as a
% of
Total
Votin
g
right
Number of
Locked in
shares
Number of
equity
shares held
in
demateriali
zed
form(Not
Applicable
) No(
a)
As a %
of total
Shares
held(b)
B1) Institutions 0 0 0.00 0.00 0.00
Mutual Funds 3 5,14,772 5,14,772 5.81 5,14,772 5.81 0.00 5,13,572
Sundaram
Mutual Fund
A/C Sundaram
Select Microcap
Series V
1 3,18,172 3,18,172 3.59 3,18,172 3.59 0.00 3,18,172
L & T Mutual
Fund Trustee
Limited-L&T
Business Cycles
Fund
1 1,95,400 1,95,400 2.21 1,95,400 2.21 0.00 1,95,400
Foreign
Portfolio
Investors
1 18,269 18,269 0.21 18,269 0.21 0.00 18,269
Financial
Institutions/
Banks
4 4,896 4,896 0.06 4,896 0.06 0.00 4,796
Sub Total B1 8 5,37,937 5,37,937 6.07 5,37,937 6.07 0.00 5,36,637
B2) Central
Government/
State
Government(s)/
President of
India
0 0 0.00 0.00 0.00
B3) Non-
Institutions
0 0 0.00 0.00 0.00
Individual
share capital
upto ₹ 2 Lacs
9,388 25,39,850 25,39,850 28.67 25,39,850 28.67 0.00 23,10,290
Individual
share capital in
excess of ₹ 2
Lacs
13 5,21,129 5,21,129 5.88 5,21,129 5.88 0.00 5,21,129
Shaktiprakash
Kailwoo
1 94,180 94,180 1.06 94,180 1.06 0.00 94,180
NBFCs
registered with
RBI
2 48,268 48,268 0.54 48,268 0.54 0.00 48,268
Any Other
(specify)
301 9,88,317
9,88,317
11.16 9,88,317
11.16 0.00 9,79,416
NRI – Non –
repat
16 36,331 36,331 0.41 36,331 0.41 0.00 36,331
Wallfort
Financial
Services
Limited
1 1,00,000 1,00,000 1.13 1,00,000 1.13 0.00 1,00,000
Gandhi
Securities &
1 1,24,500 1,24,500 1.41 1,24,500 1.41 0.00 1,24,500
160
Category &
Name of the
Shareholders
No. of
shareh
older
No. of fully
paid up
equity
shares
held
Total no.
shares
held
Sharehol
ding %
calculate
d as per
SCRR,
1957 As a
% of
(A+B+C2
)
No. of
Voting
Rights
Total
as a
% of
Total
Votin
g
right
Number of
Locked in
shares
Number of
equity
shares held
in
demateriali
zed
form(Not
Applicable
) No(
a)
As a %
of total
Shares
held(b)
Investment
Private Limited
Bodies
Corporate
236 5,20,788 5,20,788 5.88 5,20,788 5.88 0.00 5,11,887
Clearing
Members
39 21,822 21,822 0.25 21,822 0.25 0.00 21,822
Atim Kabra 1 4,06,291 4,06,291 4.59 4,06,291 4.59 0.00 4,06,291
NRI 10 4,09,376 4,09,376 4.62 4,09,376 4.62 0.00 4,09,376
Sub Total B3 9,704 40,97,564 40,97,564 46.26 40,97,564 46.26 0.00 38,59,103
B=B1+B2+B3 9,712 46,35,501 46,35,501 52.33 46,35,501 52.33 0.00 43,95,740
161
ISSUE PROCEDURE
The following is a summary intended to present a general outline of the procedure relating to the application, payment,
Allocation and Allotment of the Equity Shares to be issued pursuant to the Issue. The procedure followed in the Issue
may differ from the one mentioned below, and investors are presumed to have apprised themselves of the same from
our Company or the Book Running Lead Manager. Investor is advised to inform themselves of any restrictions or
limitations that may be applicable to them. See the sections “Selling Restrictions” and “Transfer Restrictions”
beginning on pages 173 and 177, respectively.
Qualified Institutions Placement
The Issue is being made to QIBs in reliance upon Chapter VIII of the ICDR Regulations and Section 42 of the
Companies Act, 2013, through the mechanism of a QIP. Under Chapter VIII of the ICDR Regulations and Section 42
of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules,
2014, a company may issue equity shares to QIBs provided that certain conditions are met by our Company. Certain
of these conditions are set out below:
the shareholders of the issuer have passed a special resolution approving such QIP. Such special resolution
must specify (a) that the allotment of securities is proposed to be made pursuant to the QIP; and (b) the relevant
date;
equity shares of the same class of such issuer, which are proposed to be allotted through the QIP, are listed on
a recognised stock exchange in India having nation-wide trading terminals for a period of at least one year
prior to the date of issuance of notice to its shareholders for convening the meeting to pass the above-
mentioned special resolution;
the aggregate of the proposed issue and all previous QIPs made by the issuer in the same financial year does
not exceed five times the net worth (as defined in the ICDR Regulations) of the issuer as per the audited
balance sheet of the previous financial year;
the issuer shall be in compliance with the minimum public shareholding requirements set out in the SCRR;
the issuer shall have completed allotments with respect to any prior offer or invitation made by the issuer or
shall have withdrawn or abandoned any prior invitation or offer made by the issuer;
the issuer shall offer to each Allottee at least such number of the securities in the issue which would aggregate
to at least ₹ 20,000 calculated at the face value of the securities;
the offer must be made through a private placement offer letter and an application form serially numbered and
addressed specifically to the QIB to whom the offer is made and is sent within 30 days of recording the names
of such QIBs;
the offering of securities by issue of public advertisements or utilisation of any media, marketing or
distribution channels or agents to inform the public about the issue is prohibited
At least 10% of the equity shares issued to QIBs must be allotted to Mutual Funds, provided that, if this portion or any
part thereof to be allotted to mutual funds remains unsubscribed, it may be allotted to other QIBs.
Prospective purchasers will be deemed to have represented to us and the Book Running Lead Manager in order to
participate in the Issue that they are outside the United States and purchasing the Equity Shares in an offshore
transaction in accordance with Regulation S under the Securities Act and the applicable laws of the jurisdictions where
those offers and sales occur.
Bidders are not allowed to withdraw their Bids after the Issue Closing Date.
162
Additionally, there is a minimum pricing requirement under the ICDR Regulations. The Floor Price shall not be less
than the average of the weekly high and low of the closing prices of the Equity Shares of the same class of the Equity
Shares of the Issuer quoted on the stock exchange during the two weeks preceding the Relevant Date. However, a
discount of up to 5% of the Floor Price is permitted in accordance with the provisions of the ICDR Regulations.
The “Relevant Date” referred to above, for Floor Price, will be the date of the meeting in which the Board of Directors
decides to open the Issue and “stock exchange” means any of the recognised stock exchanges in India on which the
equity shares of the issuer of the same class are listed and on which the highest trading volume in such equity shares
has been recorded during the two weeks immediately preceding the Relevant Date.
Our Company has applied for and received the in-principle approval of the Stock Exchanges under regulation 28(1)
of the Listing Regulations for the listing of the Equity Shares on the Stock Exchanges. Our Company has also delivered
a copy of the Preliminary Placement Document and this Placement Document to each of the Stock Exchanges.
Our Company shall also make the requisite filings with the RoC and SEBI within the stipulated period as required
under the Companies Act, 2013, as ameded and the Companies (Prospectus and Allotment of Securities) Rules, 2014.
The Issue has been authorized by (i) the Board pursuant to a resolution passed on April 14, 2017, and (ii) the
shareholders, pursuant to a resolution passed at the EGM held on May 12, 2017.
The Equity Shares will be Allotted within 12 months from the date of the shareholders’ resolution approving the QIP
and within 60 days from the date of receipt of subscription money from the successful Bidders. For details of refund
of application money, please see the section “Issue Procedure – Pricing and Allocation – Designated Date and
Allotment of Equity Shares” beginning on page 161.
The Equity Shares issued pursuant to the QIP must be issued on the basis of the Preliminary Placement Document and
this Placement Document that shall contain all material information including the information specified in Schedule
XVIII of the ICDR Regulations and the requirements prescribed under Form PAS-4. The Preliminary Placement
Document and this Placement Document are private documents provided to only select investors through serially
numbered copies and are required to be placed on the website of the concerned Stock Exchanges and of our Company
with a disclaimer to the effect that it is in connection with an issue to QIBs and no offer is being made to the public
or to any other category of investors.
The minimum number of allottees for each QIP shall not be less than:
two, where the issue size is less than or equal to ₹ 25,000 Lacs; and
five, where the issue size is greater than ₹ 25,000 Lacs
No single allottee shall be allotted more than 50% of the issue size.
QIBs that belong to the same group or that are under common control shall be deemed to be a single allottee. For
details of what constitutes “same group” or “common control”, please see the section “Issue Procedure—Application
Process—Application Form” beginning on page 161.
Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of allotment
except on the floor of a recognised stock exchange in India. Allotments made to VCFs and AIFs in the Issue are
subject to the rules and regulations that are applicable to them, including in relation to lock-in requirements.
The Equity Shares have not been and will not be registered under the U.S. Securities Act or the securities laws of any
state of the United States and may not be offered or sold in the United States except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities
laws. Accordingly, the Equity Shares are being offered and sold only outside the United States in offshore transactions
in reliance on Regulation S. For a description of the selling restrictions in certain other jurisdictions, see “Selling
Restrictions” beginning on page 173. The Equity Shares are transferable only in accordance with the restrictions
described in the section titled “Transfer Restrictions” beginning on page 177.
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The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such
jurisdiction, except in compliance with the applicable laws of such jurisdiction.
Issue Procedure
1. Our Company and BRLM have circulated serially numbered copies of the Preliminary Placement Document and
the serially numbered Application Form, either in electronic or physical form, to the QIBs and the Application
Form will be specifically addressed to such QIBs. In terms of Section 42(7) of the Companies Act, 2013, our
Company shall maintain complete records of the QIBs to whom the Preliminary Placement Document and the
serially numbered Application Form have been dispatched. Our Company will make the requisite filings with the
RoC and SEBI within the stipulated time period as required under the Companies Act, 2013 and the Companies
(Prospectus and Allotment of Securities) Rules, 2014.
2. Unless a serially numbered Preliminary Placement Document along with the serially numbered Application Form
is addressed to a particular QIB, no invitation to subscribe shall be deemed to have been made to such QIB. Even
if such documentation were to come into the possession of any person other than the intended recipient, no offer
or invitation to offer shall be deemed to have been made to such person and any application that does not comply
with this requirement shall be treated as invalid.
3. Bidders shall submit Bids for, and our Company shall issue and Allot to each Allottee at least such number of
Equity Shares which would aggregate to ₹ 20,000 calculated at the face value of the Equity Shares.
4. QIBs may submit an Application Form, including any revisions thereof, during the Bidding Period to the BRLM.
5. Bidders will be required to indicate the following in the Application Form:
name of the QIB to whom Equity Shares are to be Allotted;
number of Equity Shares Bid for;
price at which they are agreeable to subscribe for the Equity Shares, provided that QIBs may also indicate
that they are agreeable to submit a Bid at “Cut-off Price”; which shall be any price as may be determined by
our Company in consultation with the Book Running Lead Manager at or above the Floor Price or a price
with not more than 5% discount on the Floor Price in terms of Regulation 85 of the ICDR Regulations;
details of the depository participant account to which the Equity Shares should be credited; and
a representation that it is outside the United States, at the time it places its buy order for the Equity Shares, it
is acquiring the Equity Shares in an offshore transaction in reliance on Regulation S and it has agreed to
certain other representations set forth in “Representation by Investors” and “Transfer Restrictions” on pages
4 and 177, respectively and certain other representations made in the Application Form.
Note: Each sub-account of an FII other than a sub-account which is a foreign corporate or a foreign individual
will be considered as an individual QIB and separate Application Forms would be required from each such
sub-account for submitting Bids. FIIs or sub-accounts of FIIs are required to indicate SEBI FII/ sub-account
registration number in the Application Form.
6. Once a duly completed Application Form is submitted by a QIB, such Application Form constitutes an irrevocable
offer and cannot be withdrawn after the Issue Closing Date. The Issue Closing Date shall be notified to the Stock
Exchanges and the QIBs shall be deemed to have been given notice of such date after receipt of the Application
Form.
7. The Bids made by asset management companies or custodians of Mutual Funds shall specifically state the names
of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid can be made in
respect of each scheme of the Mutual Fund registered with SEBI. Upon receipt of the duly completed Application
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Form, after the Issue Closing Date, our Company shall determine the final terms, including the Issue Price of the
Equity Shares to be issued pursuant to the Issue in consultation with the Book Running Lead Manager. Upon
determination of the final terms of the Equity Shares, the Book Running Lead Manager will send the serially
numbered CAN and this Placement Document, either in electronic form or through physical delivery, to the QIBs
who have been Allocated the Equity Shares. The dispatch of a CAN shall be deemed a valid, binding and
irrevocable contract for the QIBs to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
The CAN shall contain details such as the number of Equity Shares Allocated to the QIB and payment instructions
including the details of the amounts payable by the QIB for Allotment of the Equity Shares in its name and the
Pay-In Date as applicable to the respective QIB. Please note that the Allocation will be at the absolute discretion
of our Company and will be based on the recommendation of the Book Running Lead Manager and may not be
proportionate to the number of Equity Shares applied for.
8. Pursuant to receiving a CAN, each successful Bidder shall be required to make the payment of the entire
application monies for the Equity Shares indicated in the CAN at the Issue Price, only through electronic transfer
to our Company’s designated bank account by the Pay-In Date as specified in the CAN sent to the respective
successful Bidder. No payment shall be made by successful Bidder in cash. Please note that any payment of
application money for the Equity Shares shall be made from the bank accounts of the relevant QIBs applying for
the Equity Shares. Monies payable on Equity Shares to be held by joint holders shall be paid from the bank
account of the person whose name appears first in the application. Pending Allotment, all monies received for
subscription of the Equity Shares shall be kept by our Company in a separate bank account with a scheduled bank
and shall be utilised only for the purposes permitted under the Companies Act, 2013.
9. Upon receipt of the application monies from the QIBs, our Company shall Allot Equity Shares as per the details
in the CANs sent to the successful Bidder.
10. After passing the resolution for Allotment and prior to crediting the Equity Shares into the depository participant
accounts of the successful Bidders, our Company shall apply to the Stock Exchanges for listing approvals. Our
Company will intimate to the Stock Exchanges the details of the Allotment.
11. After receipt of the listing approvals of the Stock Exchanges, our Company shall credit the Equity Shares Allotted
pursuant to this Issue into the Depository Participant accounts of the respective Allottees.
12. Our Company will then apply for the final trading approvals from the Stock Exchanges.
13. The Equity Shares that would have been credited to the beneficiary account with the Depository Participant of
the QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing
approvals from the Stock Exchanges.
14. Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, our Company shall
inform the Allottees of the receipt of such approval. Our Company and the Book Running Lead Manager shall
not be responsible for any delay or non-receipt of the communication of the final trading and listing permissions
from the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and trading approvals
granted by the Stock Exchanges are also placed on their respective websites. QIBs are advised to apprise
themselves of the status of the receipt of the permissions from the Stock Exchanges or our Company.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(zd) of the ICDR Regulations and not otherwise excluded pursuant to
Regulation 86(1)(b) of the ICDR Regulations are eligible to invest. Currently, under Regulation 2(1)(zd) of the ICDR
Regulations, a QIB means:
alternate investment funds registered with SEBI
Eligible FPIs including FIIs and eligible sub-accounts;
foreign venture capital investors registered with SEBI;
insurance companies registered with Insurance Regulatory and Development Authority;
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insurance funds set up and managed by army, navy or air force of the Union of India;
insurance funds set up and managed by the Department of Posts, India;
multilateral and bilateral development financial institutions;
Mutual Funds registered with SEBI;
pension funds with minimum corpus of ₹ 2,500 Lacs;
provident funds with minimum corpus of ₹ 2,500 Lacs;
public financial institutions as defined in Section 4A of the Companies Act, 1956 (Section 2(72) of the
Companies Act, 2013);
scheduled commercial banks;
state industrial development corporations;
the National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of
the Government published in the Gazette of India; and
foreign venture capital funds registered with SEBI;
FIIs (other than a sub-account which is a foreign corporate or a foreign individual) and Eligible FPIs are
permitted to participate through the portfolio investment scheme under Schedule 2 and Schedule 2A of FEMA
20 respectively, in this Issue. FIIs and Eligible FPIs are permitted to participate in the Issue subject to
compliance with all applicable laws and such that the shareholding of the FPIs do not exceed specified limits as
prescribed under applicable laws in this regard.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which means
the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to exceed 10% of our
post-Issue Equity Share capital. Further, in terms of the FEMA 20, the total holding by each FPI shall be below 10%
of the total paid-up Equity Share capital of our Company and the total holdings of all FPIs put together shall not
exceed 24% of the paid-up Equity Share capital of our Company. The aggregate limit of 24% may be increased up to
the sectoral cap by way of a resolution passed by the Board of Directors followed by a special resolution passed by
the shareholders of our Company. The existing limit for FIIs and FPIs in our Company is 24% of the paid up capital
of our Company.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions which
may be specified by the Government from time to time.
An FII who holds a valid certificate of registration from SEBI shall be deemed to be an FPI until the expiry of the
block of three years for which fees have been paid as per the SEBI FII Regulations. An FII or sub-account (other than
a sub-account which is a foreign corporate or a foreign individual) may participate in the Issue, until the expiry of its
registration as a FII or sub-account, or until it obtains a certificate of registration as FPI, whichever is earlier. If the
registration of an FII or sub-account has expired or is about to expire, such FII or sub-account may, subject to payment
of conversion fees under the SEBI FPI Regulations, participate in the Issue. An FII or sub-account shall not be eligible
to invest as an FII after registering as an FPI under the SEBI FPI Regulations.
In terms of the FEMA 20, for calculating the aggregate holding of FPIs in a company, holding of all registered FPIs
as well as holding of FIIs (being deemed FPIs) shall be included.
The FPI regime has recently come into effect from June 1, 2014. FPI’s investing in this Issue should ensure that they
are eligible under the applicable law or regulation to apply in this Issue.
Allotments made to FVCIs, VCFs and AIFs are subject to the rules and regulations that are applicable to them,
including in relation to lock-in requirements.
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Under Regulation 86(1)(b) of the ICDR Regulations, no Allotment shall be made pursuant to the Issue, either directly
or indirectly, to any QIB being, or any person related to, the Promoter. QIBs which have all or any of the following
rights shall be deemed to be persons related to the Promoter:
rights under a shareholders’ agreement or voting agreement entered into with the Promoter or persons related
to the Promoter;
veto rights; or
a right to appoint any nominee director on the Board.
Provided, however, that a QIB which does not hold any shares in our Company and which has acquired the aforesaid
rights in the capacity of a lender shall not be deemed to be related to the Promoter.
Our Company and the Book Running Lead Manager are not liable for any amendment or modification or
change to applicable laws or regulations, which may occur after the date of this Placement Document. QIBs
are advised to make their independent investigations and satisfy themselves that they are eligible to apply. QIBs
are advised to ensure that any single application from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable law or regulation or as specified in this
Placement Document. Further, QIBs are required to satisfy themselves that their Bids would not eventually
result in triggering a tender offer under the Takeover Code.
Note: Affiliates or associates of the Book Running Lead Manager who are QIBs may participate in the Issue in
compliance with applicable laws.
Application Process
Application Form
QIBs shall only use the serially numbered Application Forms (which are addressed to them) provided by our Company
and the Book Running Lead Manager in either electronic form or by physical delivery for the purpose of making a
Bid (including revision of a Bid) in terms of the Preliminary Placement Document.
By making a Bid (including the revision thereof) for Equity Shares through Application Forms and pursuant to the
terms of the Preliminary Placement Document, the QIB will be deemed to have made the following representations
and warranties and the representations, warranties and agreements made under the sections “Representations by
Investors”, “Selling Restrictions” and “Transfer Restrictions” beginning on pages 4, 173 and 177, respectively:
1. The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the ICDR Regulations and is not excluded
under Regulation 86 of the ICDR Regulations, has a valid and existing registration under the applicable laws in
India (as applicable) and is eligible to participate in this Issue;
2. The QIB confirms that it is not a Promoter and is not a person related to the Promoter, either directly or indirectly
and its Application Form does not directly or indirectly represent the Promoter or Promoter Group or persons
related to the Promoter;
3. The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the Promoter
or persons related to the Promoter, no veto rights or right to appoint any nominee director on the Board other
than those acquired in the capacity of a lender which shall not be deemed to be a person related to the Promoter;
4. The QIB acknowledges that it has no right to withdraw its Application after the Issue Closing Date;
5. The QIB confirms that if Equity Shares are Allotted through this Issue, it shall not, for a period of one year from
Allotment, sell such Equity Shares otherwise than on the Stock Exchanges;
6. The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted. The QIB further confirms
that the holding of the QIB, does not and shall not, exceed the level permissible as per any applicable regulations
applicable to the QIB;
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7. The QIB confirms that its Bids would not eventually result in triggering a tender offer under the Takeover Code;
8. The QIB confirms that to the best of its knowledge and belief, the number of Equity Shares Allotted to it pursuant
to the Issue, together with other Allottees that belong to the same group or are under common control, shall not
exceed 50% of the Issue Size. For the purposes of this representation:
The expression ‘belong to the same group’ shall derive meaning from the concept of ‘companies under
the same group’ as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and
‘Control’ shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the Takeover Code;
9. The QIBs shall not undertake any trade in the Equity Shares credited to its beneficiary account maintained with
the Depository Participant until such time that the final listing and trading approvals for the Equity Shares are
issued by the Stock Exchanges.
QIBS MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, PAN, THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS MUST ENSURE THAT THE
NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE
DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUB ACCOUNTS OF AN FII
WOULD BE CONSIDERED AS AN INDEPENDENT QIB.
Demographic details such as address and bank account will be obtained from the Depositories as per the Depository
Participant account details given above.
The submission of an Application Form by a QIB shall be deemed a valid, binding and irrevocable offer for the QIB
to pay the entire Issue Price for the Equity Shares (as indicated by the CAN) and becomes a binding contract on the
QIB upon issuance of the CAN by our Company in favour of the QIB.
Submission of Application Form
All Application Forms must be duly completed with information including the number of Equity Shares applied for.
All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter shall
be submitted to the Book Running Lead Manager either through electronic form or through physical delivery at the
following address:
Name Address Contact Person Contact Details
Emkay Global Financial
Services Limited
7th Floor, The Ruby,
Senapati Bapat Marg,
Dadar - West,
Mumbai - 400 028
Rajesh Ranjan
Deepak Yadav
Tel : +91 22 66121212
Mobile: +91 93249 22212
Fax: +91 22 66121299
Email: [email protected]
The Book Running Lead Manager shall not be required to provide any written acknowledgement of receipt of the
Application Form.
Permanent Account Number or PAN
Each QIB should mention its PAN allotted under the IT Act in the Application Form. The copy of the PAN card or
PAN allotment letter is required to be submitted with the Application Form. Applications without this information
will be considered incomplete and are liable to be rejected. QIBs should not submit the GIR number instead of the
PAN as the Application Form is liable to be rejected on this ground.
Pricing and Allocation
Build-up of the Book
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The QIBs shall submit their Bids (including the revision of bids) within the Bidding Period to the Book Running Lead
Manager. Such Bids cannot be withdrawn after the Issue Closing Date. The book shall be maintained by the Book
Running Lead Manager.
Price Discovery and Allocation
Our Company, in consultation with the Book Running Lead Manager, shall determine the Issue Price, which shall be
at or above the Floor Price. However, our Company may offer a discount of not more than five % on the Floor Price
in terms of Regulation 85 of the ICDR Regulations.
After finalization of the Issue Price, our Company has updated the Preliminary Placement Document with the Issue
details and filed the same with the Stock Exchanges as this Placement Document.
Method of Allocation
Our Company shall determine the Allocation in consultation with the Book Running Lead Manager on a discretionary
basis and in compliance with Chapter VIII of the ICDR Regulations. Bids received from the QIBs at or above the
Issue Price shall be grouped together to determine the total demand.
The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up to a minimum of
10 % of the Issue Size shall be undertaken subject to valid Bids being received at or above the Issue Price.
THE DECISION OF OUR COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD
MANAGER IN RESPECT OF ALLOCATION SHALL BE FINAL AND BINDING ON ALL QIBS. QIBS
MAY NOTE THAT ALLOCATION OF EQUITY SHARES IS AT THE SOLE AND ABSOLUTE
DISCRETION OF OUR COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD
MANAGER AND QIBS MAY NOT RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED
VALID APPLICATION FORMS AT OR ABOVE THE ISSUE PRICE. NEITHER OUR COMPANY NOR
THE BOOK RUNNING LEAD MANAGER IS OBLIGED TO ASSIGN ANY REASON FOR ANY NON-
ALLOCATION.
CAN
Based on the Application Forms received, our Company, in consultation with the Book Running Lead Manager, in
their sole and absolute discretion, shall decide the successful Bidder to whom the serially numbered CAN shall be
sent, pursuant to which the details of the Equity Shares Allocated to them and the details of the amounts payable for
Allotment of such Equity Shares in their respective names shall be notified to such successful Bidder. Additionally,
the CAN will include details of the relevant Escrow Cash Account into which such payments would need to be made,
address where the application money needs to be sent, Pay-In Date as well as the probable designated date, being the
date of credit of the Equity Shares to the respective successful Bidder’s account.
The successful Bidders would also be sent a serially numbered Placement Document either in electronic form or by
physical delivery. The dispatch of the serially numbered CAN to the QIBs shall be deemed a valid, binding and
irrevocable contract for the QIB to furnish all details that may be required by Company and the Book Running Lead
Manager and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
QIBS ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE EQUITY
SHARES THAT MAY BE ALLOTTED TO THEM PURSUANT TO THE ISSUE.
Bank Account for Payment of Application Money
Our Company has opened the “Premier Explosives Limited – QIP Escrow Account” with Yes Bank Limited in terms
of the arrangement among our Company, the Book Running Lead Manager and Yes Bank Limited as escrow bank.
The QIB will be required to deposit the entire amount payable for the Equity Shares Allocated to it by the Pay-In Date
as mentioned in, and in accordance with, the respective CAN.
Payments are to be made only through electronic fund transfer.
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Note: Payments through cheques are liable to be rejected.
If the payment is not made favoring “Premier Explosives Limited – QIP Escrow Account” within the time stipulated
in the CAN, the Application Form and the CAN of the QIB are liable to be cancelled. Pending Allotment, our Company
undertakes to utilise the amount deposited in “Premier Explosives Limited – QIP Escrow Account” only for the
purposes of (i) adjustment against Allotment of Equity Shares in the Issue; or (ii) refund of application money if our
Company is not able to Allot Equity Shares in the Issue.
In case of cancellations or default by the QIBs, our Company, the Book Running Lead Manager has the right to
reallocate the Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion.
Designated Date and Allotment of Equity Shares
1. The Equity Shares will not be Allotted unless the QIBs pay the Issue Price to the Escrow Account as stated above.
2. Subject to the satisfaction of the terms and conditions of the Placement Agreement, our Company will ensure that
the Allotment of the Equity Shares is completed by the Designated Date provided in the CAN for the QIBs who
have paid the aggregate subscription amounts as stipulated in the CAN.
3. In accordance with the ICDR Regulations, Equity Shares will be issued and Allotment shall be made only in the
dematerialised form to the Allottees. Allottees will have the option to re-materialise the Equity Shares, if they so
desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.
4. Our Company reserves the right to cancel this Issue at any time up to Allotment without assigning any reasons
whatsoever.
5. Post receipt of the listing approval of the Stock Exchanges, the Issuer shall credit the Equity Shares into the
Depository Participant account of the QIBs.
6. Following the Allotment and credit of Equity Shares into the QIBs Depository Participant account, our Company
will apply for final listing and trading approval from the Stock Exchanges. In the case of QIBs who have been
Allotted more than five % of the Equity Shares in the Issue, our Company shall disclose the name and the number
of the Equity Shares Allotted to such QIB to the Stock Exchanges and the Stock Exchanges will make the same
available on their website. The Escrow Bank shall release the monies lying to the credit of the Escrow Bank
Account to our Company after the receipt of the final listing and trading approval from the Stock Exchanges.
7. In the event our Company is unable to Issue and Allot the Equity Shares or on cancellation of the Issue, within
60 days from the date of receipt of application money, in accordance with section 42 of the Companies Act, 2013
our Company shall repay the application money within 15 days from expiry of 60 days, failing which our
Company shall repay that money with interest at the rate of 12% per annum from expiry of the 60th day. The
application money to be refunded by us shall be refunded to the same bank account from which application money
was remitted by the QIBs.
Other Instructions
Right to Reject Applications
Our Company, in consultation with the Book Running Lead Manager, may reject Bids, in part or in full, without
assigning any reason whatsoever. The decision of our Company and the Book Running Lead Manager in relation to
the rejection of Bids shall be final and binding.
Equity Shares in Dematerialized form with NSDL or CDSL
1. The Allotment of the Equity Shares in this Issue shall be only in dematerialised form, (i.e., not in the form of
physical certificates but be fungible and be represented by the statement issued through the electronic mode).
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2. A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant of
either NSDL or CDSL prior to making the Bid.
3. Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the
Depository Participant) of the QIB.
4. Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with
NSDL and CDSL. The Stock Exchange have electronic connectivity with NSDL and CDSL. The trading of the
Equity Shares to be issued pursuant to the Issue would be in dematerialised form only for all QIBs in the demat
segment of the respective Stock Exchanges.
5. Our Company will not be responsible or liable for the delay in the credit of the Equity Shares due to errors in
the Application Forms or on part of the QIBs.
Release of funds to our Company
The Escrow Bank shall not release the monies lying to the credit of the Escrow Account till such time, that it receives
an instruction in pursuance to the Escrow Agreement, along with the listing and trading approval of the Stock
Exchanges for the Equity Shares offered in the Issue.
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PLACEMENT AND LOCK UP
Placement Agreement
The Book Running Lead Manager has entered into a placement agreement with our Company dated May 15, 2017
(the “Placement Agreement”), pursuant to which the Book Running Lead Manager has agreed manage the Issue and
act as placement agent in connection with the proposed Issue and procure subscriptions for the Equity Shares on a
reasonable efforts basis pursuant to Section 42 of Companies Act, 2013, read with Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rules, 2014, and Chapter VIII of ICDR Regulations and the Companies Act,
2013 read with rules thereunder..
The Placement Agreement contains customary representations and warranties as well as indemnities from us and the
BRLM and is subject to certain conditions and termination provisions contained therein.
Applications will be made to list the Equity Shares and admit them to trading on the Stock Exchanges. No assurance
can be given as to the liquidity or sustainability of the trading market for the Equity Shares, the ability of holders of
the Equity Shares to sell their Equity Shares or the price at which holders of the Equity Shares will be able to sell their
Equity Shares.
This Placement Document has not been, and will not be, registered as a prospectus with the RoC in India and no
Equity Shares will be offered in India or overseas to the public or any members of the public in India or to any class
of investors other than QIBs.
In connection with the Issue, the Book Running Lead Manager (or their affiliates) may, for their own accounts, enter
into asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares at the same time as
the offer and sale of the Equity Shares, or in secondary market transactions. As a result of such transactions, the Book
Running Lead Manager may hold long or short positions in such Equity Shares. These transactions may comprise a
substantial portion of the Issue and no specific disclosure will be made of such positions. Affiliates of the Book
Running Lead Manager may purchase Equity Shares and be allocated Equity Shares. See also the section
“Representations by Investors — Off-shore Derivative Instruments (P-Notes)”.
From time to time, the Book Running Lead Manager and its affiliates may engage in transactions with and perform
services for our Company, Subsidiaries, group companies or affiliates in the ordinary course of business and have
engaged, or may in the future engage, in commercial banking and investment banking transactions with our Company,
Subsidiaries and group companies or affiliates, for which they have received compensation and may in the future
receive compensation.
Lock-up
Except for Proposed Preferential Issue, our Company undertakes that it will not for a period of 180 days from the date
of Allotment under the Placement, without the prior written consent of the Book Running Lead Manager, directly or
indirectly, (a) purchase, lend, sell, offer, issue, contract to issue, issue or offer any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, any Equity Shares or any securities convertible into or exercisable for Equity Shares (including, without limitation,
securities convertible into or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially
owned), or file any registration statement under the U.S. Securities Act, with respect to any of the foregoing, or (b)
enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any
of the economic consequences associated with the ownership of any of the Equity Shares or any securities convertible
into or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions described in clause
(a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or otherwise), or (c) deposit
Equity Shares with any other depositary in connection with a depositary receipt facility, or (d) publicly announce any
intention to enter into any transaction falling within (a) to (c) above or enter into any transaction (including a
transaction involving derivatives) having an economic effect similar to that of an issue or offer or deposit of Equity
Shares in any depositary receipt facility or publicly announce any intention to enter into any transaction falling within
(a) to (c) above. Provided that the foregoing restriction shall not apply to an issuance of Equity Shares or options
pursuant to any employee stock option scheme formulated by the Company.
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Proposed Preferential Issue, our Promoter agree that they shall not without the prior written consent of the Book
Running Lead Manager, during the period commencing on the date hereof and ending 180 days after the date of
allotment of the Equity Shares (the “Lock-up Period”), directly or indirectly: (a) sell, lend, contract to sell, purchase
any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any Lock-up Shares, or any securities convertible into or exercisable or exchangeable for Lock-
up Shares or publicly announce an intention with respect to any of the foregoing; (b) enter into any swap or other
agreement that transfers, directly or indirectly, in whole or in part, any of the economic consequences of ownership
of Lock-up Shares or any securities convertible into or exercisable or exchangeable for Lock-up Shares; (c) sell, lend,
contract to sell, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise
transfer or dispose of, directly or indirectly, any shares or interest in an entity which holds any Lock-up Shares or (d)
publicly announce any intention to enter into any transaction whether any such transaction described in (a), (b) or (c)
above is to be settled by delivery of Equity Shares, or such other securities, in cash or otherwise, or enter into any
transaction (including a transaction involving derivatives) having an economic effect similar to that of an issue or
offer or deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into any
transaction falling within (a) to (c) above.
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SELLING RESTRICTIONS
The distribution of this Placement Document and the offer, sale or delivery of the Equity Shares is restricted by law
in certain jurisdictions. Persons who come into possession of this Placement Document are advised to take legal
advice with regard to any restrictions that may be applicable to them and to observe such restrictions. This Placement
Document may not be used for the purpose of an offer or sale in any circumstances in which such offer or sale is not
authorized or permitted.
General
No action has been taken or will be taken in any jurisdiction by our Company or the Lead Manager that would permit
a public offering of the Equity Shares or the possession, circulation or distribution of this Placement Document or any
other material relating to our Company or the Equity Shares in any jurisdiction where action for such purpose is
required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this Placement
Document nor any offering materials or advertisements in connection with the Equity Shares may be distributed or
published in or from any country or jurisdiction except under circumstances that will result in compliance with any
applicable rules and regulations of any such country or jurisdiction. The Issue will be made in compliance with the
applicable ICDR Regulations. Each purchaser of the Equity Shares in this Issue will be deemed to have made
acknowledgments and agreements as described under “Notice to Investors – Representation by Investors”, “Selling
Restrictions” and “Transfer Restrictions”.
India
This Placement Document may not be distributed, directly or indirectly, in India or to residents of India and any Equity
Shares may not be offered or sold, directly or indirectly, in India to, or for the account or benefit of, any resident of
India except as permitted by applicable Indian laws and regulations, under which an offer is strictly on a private and
confidential basis and is limited to eligible QIBs. This Placement Document is neither a public issue nor a prospectus
under the Companies Act or an advertisement and should not be circulated to any person other than to whom the offer
is made.
Dubai International Financial Centre
This Placement Document relates to an exempt offer in the Dubai International Financial Centre (the “DIFC”) in
accordance with the Markets Rules (MKT) (“Markets Rules”) adopted by the Dubai Financial Services Authority
(the “DFSA”) pursuant to Markets Law DIFC Law No. 1 of 2012. The Equity Shares may only be offered in the Issue
to Professional Clients other than natural Persons and this Placement Document may not be delivered to, or relied on
by, any other person.
The DFSA has not approved this Placement Document nor taken steps to verify the information set out in it and has
no responsibility for it.
Capitalized terms not defined in this sub-section have the meaning given to those terms in the Markets Rules.
European Economic Area
In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive
(each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is or
was implemented in that Relevant Member State (the “Relevant Implementation Date”), the Equity Shares may not
be offered or sold to the public in that Relevant Member State prior to the publication of a prospectus in relation to
the Equity Shares which has been approved by the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive (defined below) and the 2010 Amending Directive
(defined below), except that the Equity Shares, with effect from and including the Relevant Implementation Date, may
be offered to the public in that Relevant Member State at any time:
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(a) to persons or entities that are “qualified investors” as defined in the Prospectus Directive or, if that Relevant
Member State has implemented the 2010 Amending Directive, as defined in the 2010 Amending Directive;
(b) to (i) fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus
Directive); or (ii) if that Relevant Member State has implemented the 2010 Amending Directive, fewer than 150
natural or legal persons (other than “qualified investors” as defined in the 2010 Amending Directive), in each case
subject to obtaining the prior consent of the BRLM; and
(c) in any circumstances falling within Article 3(2) of the Prospectus Directive as amended (to the extent implemented
in that Relevant Member State) by Article 1(3) of the 2010 Amending Directive, provided that no such offering of
Equity Shares shall result in a requirement for the publication by our Company or the Book Lead Running Managers
of a prospectus pursuant to Article 3 of the Prospectus Directive as amended (to the extent implemented in that
Relevant Member State) by Article 1(3) of the 2010 Amending Directive.
For the purposes of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity
Shares in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to
purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive
2003/71/EC and includes any relevant implementing measure in each Relevant Member State and the expression
“2010 Amending Directive” means Directive 2010/73/EU and includes any relevant implementing measure in each
Member State.
Neither our Company nor the BRLM has authorised, nor do they authorise, the making of any offer of Equity Shares
through any financial intermediary on their behalf, other than offers made by our Company or the BRLM.
Hong Kong
The Placement Document has not been reviewed or approved by any regulatory authority in Hong Kong. In particular,
this Placement Document has not been, and will not be, registered as a “prospectus” in Hong Kong under the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“CO”) nor has it been authorized by
the Securities and Futures Commission (“SFC”) in Hong Kong pursuant to the Securities and Futures Ordinance (Cap
571) (“SFO”). Recipients are advised to exercise caution in relation to the Offer. If recipients are in any doubt about
any of the contents of this Placement Document, they should obtain independent professional advice.
The Placement Document does not constitute an offer or invitation to the public in Hong Kong to acquire any Equity
Shares nor an advertisement of the Equity Shares in Hong Kong. The Placement Document must not be issued,
circulated or distributed in Hong Kong other than:
to “professional investors” within the meaning of the SFO and any rules made under that ordinance
(“Professional Investors”); or
in other circumstances which do not result in this Placement Document being a prospectus as defined in the
CO nor constitute an offer to the public which requires authorization by the SFC under the SFO.
Unless permitted by the securities laws of Hong Kong, no person may issue or have in its possession for issue, whether
in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Equity Shares, which is directed
at, or the content of which is likely to be accessed or read by, the public of Hong Kong other than with respect to the
Equity Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to Professional
Investors.
Any offer of the Equity Shares will be personal to the person to whom this Placement Document is delivered, and a
subscription for the Equity Shares will only be accepted from such person. No person who has received a copy of this
Placement Document may issue, circulate or distribute this Placement Document in Hong Kong or make or give a
copy of this Placement Document to any other person. No person allotted Equity Shares may sell, or offer to sell, such
Shares to the public in Hong Kong within six months following the date of issue of such Equity Shares.
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Mauritius
In accordance with The Securities Act 2005 of Mauritius, no offer of the Equity Shares may be made to the public in
Mauritius without, amongst other things, the prior approval of the Mauritius Financial Services Commission. This
Placement Document has not been approved or registered by the Mauritius Financial Services Commission.
Accordingly, this Placement Document does not constitute a public offering. This Placement Document is for the
exclusive use of the person to whom it is addressed and is a private concern between our Company and the addressee.
This Placement Document is confidential and should not be disclosed or distributed in any way without the express
written permission of our Company.
Singapore
The Placement Document has not been and will not be registered as a prospectus with the Monetary Authority of
Singapore (“MAS”) under the Securities and Futures Act (Chapter 289) of Singapore (“SFA”). Accordingly, the
Equity Shares may not be offered or sold, or made the subject of an invitation for subscription or purchase nor may
this Placement Document or any other document or material in connection with the offer or sale, or invitation for
subscription or purchase of the Equity Shares be circulated or distributed, whether directly or indirectly, in Singapore
other than (i) to an “institutional investor” within the meaning of Section 274 of the SFA and in accordance with the
conditions of an exemption invoked under Section 274, (ii) to a relevant person pursuant to Section 275(1), or any
person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or
(iii) other pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Equity Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which
is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an
accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and
units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in
that trust shall not be transferred within six months after that corporation or that trust has acquired the Equity Shares
pursuant to an offer made under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or
to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms
that such shares, debentures and units of shares and debentures of that corporation or such rights or interest in that
trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each
transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for
a corporation, in accordance with the conditions specified in Section 275 of the SFA; (2) where no consideration is or
will be given for the transfer; or (3) where the transfer is by operation of law.
United Arab Emirates (excluding the Dubai Financial Centre)
The Equity Shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab
Emirates (“U.A.E.”) other than in compliance with the laws of the U.A.E. The information contained in this Placement
Document does not constitute a public offer of securities in the U.A.E. in accordance with the Federal Law No. 2 of
2015 on Commercial Companies, as amended, or otherwise and is not intended to be a public offer. The Company
and the Equity Shares have not been approved or licensed by or registered with the Central Bank of the United Arab
Emirates, the Emirates Securities and Commodities Authority or any other relevant licensing authorities or
governmental agencies in the U.A.E. This Placement Document has not been approved by or filed with the Central
Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or the Dubai Financial Services
Authority. This Preliminary Placement Document is being issued to a limited number of selected institutional and
sophisticated investors, is not for general circulation in the U.A.E. and may not be provided to any person other than
the original recipient or reproduced or used for any other purpose. If you do not understand the contents of this
Preliminary Placement Document, you should consult an authorised financial adviser. This Placement Document is
provided for the benefit of the original recipient only, and should not be delivered to, or relied on by, any other person.
United Kingdom (in addition to the European Economic Area selling restrictions above)
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The Equity Shares offered in the Issue cannot be promoted in the United Kingdom to the general public. The contents
of this Placement Document have not been approved by an authorised person within the meaning of Financial Services
and Markets Act 2000, as amended (the “FSMA”). The BRLM (a) may only communicate or caused to be
communicated and will only communicate or cause to be communicated an invitation or inducement to engage in
investment activity (within the meaning of Section 21 of the FSMA), to persons who (i) are investment professionals
falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as
amended (the “Financial Promotion Order”), or (ii) fall within any of the categories of persons described in article
49(2)(a) to (d) of the Financial Promotion Order or otherwise in circumstances in which section 21(1) of the FSMA
does not apply to our Company; and (b) have complied and will comply with all applicable provisions of the FSMA
with respect to anything done by them in relation to the Equity Shares in, from or otherwise involving the United
Kingdom. Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA)
in connection with, or relating to, the sale or purchase of any Equity Shares, may only be communicated or caused to
be communicated in circumstances in which Section 21(1) of the FSMA does not apply. It is the responsibility of all
persons under whose control or into whose possession this document comes to inform themselves about and to ensure
observance of all applicable provisions of FSMA in respect of anything done in relation to an investment in Equity
Shares in, from or otherwise involving, the United Kingdom.
United States of America
The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and
applicable state securities laws. The Equity Shares are not being offered or sold in the United States in the Issue. The
Equity Shares are being offered and sold in the Issue only outside the United States in “offshore transactions” (as
defined in Regulation S) in reliance on Regulation S. To help ensure that the offer and sale of the Equity Shares in the
Issue was made in compliance with Regulation S, each purchaser of Equity Shares in the Issue will be deemed to have
made the representations, warranties, acknowledgements and undertakings set forth in “Transfer Restrictions” on page
177.
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TRANSFER RESTRICTIONS
Allottees are not permitted to sell the Equity Shares for a period of one year from the date of Allotment except through
the Stock Exchanges. In addition to the above, allotments made to QIBs, including FVCIs, VCFs and AIFs in the Issue,
may be subject to lock-in requirements, if any, under the rules and regulations that are applicable to them.
Accordingly, purchasers are advised to consult their own legal counsel prior to making any offer, re-sale, pledge or
transfer of the Equity Shares.
Due to the following restrictions, investors are advised to consult legal counsel prior to making any resale, pledge or
transfer of the Equity Shares.
The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and
applicable state securities laws.
Each purchaser of the Equity Shares, by accepting delivery of this Placement Document, will be deemed to:
Represent and warrant to our Company, the BRLM and its affiliates that the offer and sale of the Equity
Shares to it is in compliance with all applicable laws and regulations.
Represent and warrant to our Company, the BRLM and its affiliates that it was outside the United States
(within the meaning of Regulation S) at the time the offer of the Equity Shares was made to it and it was
outside the United States (within the meaning of Regulation S) when its buy order for the Equity Shares was
originated.
Represent and warrant to our Company, the BRLM and its affiliates that it did not purchase the Equity Shares
as a result of any “directed selling efforts” (as defined in Regulation S).
Acknowledge that the Equity Shares have not been and will not be registered under the U.S. Securities Act
or the securities law of any state of the United States and warrant to our Company, the BRLM and its affiliates
that it will not offer, sell, pledge or otherwise transfer the Equity Shares except in an offshore transaction
complying with Rule 903 or Rule 904 of Regulation S or pursuant to any other available exemption from
registration under the U.S. Securities Act and in accordance with all applicable securities laws of the states
of the United States and any other jurisdiction, including India.
Represent and warrant to our Company, the BRLM and its affiliates that if it acquired any of the Equity
Shares as fiduciary or agent for one or more investor accounts, it has sole investment discretion with respect
to each such account and that it has full power to make the foregoing acknowledgments, representations and
agreements on behalf of each such account.
Acknowledge that our Company, the BRLM and its affiliates, and others will rely upon the truth and accuracy
of the foregoing acknowledgements, representations and warranties.
Any resale or other transfer, or attempted resale or other transfer, of the Equity Shares made other than in compliance
with the above-stated restrictions will not be recognized by our Company.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the Stock
Exchange and has not been prepared or independently verified by our Company or the BRLM or any of its respective
affiliates or advisors.
The Indian Securities Market
India has a long history of organised securities trading. In 1875, the first stock exchange was established in Mumbai.
The BSE and the NSE are the significant stock exchanges in terms of the number of listed companies, market
capitalisation and trading activity.
Indian Stock Exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry of
Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the “SCRA”) and the
Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in exercise of its powers under
the SCRA and the Securities and Exchange Board of India Act, 1992, as amended from time to time (the “SEBI Act”),
notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (the
“SCR (SECC) Rules”), which regulate inter alia the recognition, ownership and internal governance of stock
exchanges and clearing corporations in India together with providing for minimum capitalisation requirements for
stock exchanges. The SCRA, the SCRR and the SCR (SECC) Rules along with various rules, bye-laws and regulations
of the respective stock exchanges, regulate the recognition of stock exchanges, the qualifications for membership
thereof and the manner, in which contracts are entered into, settled and enforced between members of the stock
exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and intermediaries
in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent and unfair trade
practices. Regulations and guidelines concerning minimum disclosure requirements by public companies, investor
protection, insider trading, substantial acquisitions of shares and takeover of companies, buy-backs of securities,
employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds, FIIs, FPIs, credit rating
agencies and other capital market participants have been notified by the relevant regulatory authority.
Listing of Securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws including
the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by SEBI and
the Listing Regulations. The SCRA empowers the governing body of each recognised stock exchange to suspend
trading of or withdraw admission to dealings in a listed security for breach of or noncompliance with any conditions
or breach of a company’s obligations under the Listing Regulations or for any reason, subject to the issuer receiving
prior written notice of the intent of the exchange and upon granting of a hearing in the matter. SEBI also has the power
to amend the Listing Regulations and bye-laws of the stock exchanges in India, to overrule a stock exchange’s
governing body and withdraw recognition of a recognized stock exchange.
All listed companies are required to ensure a minimum public shareholding at 25%. Further, where the public
shareholding in a listed company falls below 25% at any time, such company is required to bring the public
shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed
company may be delisted from the stock exchanges for not complying with the above-mentioned requirement. Our
Company is in compliance with this minimum public shareholding requirement.
Delisting
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges which were significantly
modified in 2015. In addition, certain amendments to the SCRR have also been notified in relation to delisting.
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Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply daily
circuit breakers which do not allow transactions beyond a certain level of price volatility. The index based market-
wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement, at 10%,
15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity and equity
derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the SENSEX of
the BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price
bands of up to 20% movements either up or down. However, no price bands are applicable on scrips on which
derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, the BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in India
to obtain permanent recognition from the Government under the SCRA. It has evolved over the years into its present
status as one of the premier stock exchanges of India. Pursuant to the BSE (Corporatisation and Demutualisation)
Scheme 2005 of the SEBI, with effect from August 19, 2005, the BSE was incorporated and is now a company under
the Companies Act.
NSE
The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked, screen-
based trading facilities with market-makers and electronic clearing and settlement for securities including government
securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange under the SCRA
in April 1993 and commenced operations in the wholesale debt market segment in June 1994. The capital market
(equities) segment commenced operations in November 1994 and operations in the derivatives segment commenced
in June 2000.
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading systems for
execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant stock
exchange and also have to comply with certain minimum conditions stipulated under applicable law. The NSE became
the first exchange to grant approval to its members for providing internet based trading services. Internet trading is
possible on both the “equities” as well as the “derivatives” segments of the NSE. The NSE became the first exchange
to grant approval to its members for providing internet-based trading services. Internet trading is possible on both the
“equities” and the “derivatives” segments of the NSE.
Trading Hours
Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST (excluding
the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m.). The BSE and the NSE are closed on public holidays.
The recognised stock exchanges have been permitted to set their own trading hours (in the cash and derivatives
segments) subject to the condition that (i) the trading hours are between 9.00 a.m. and 5.00 p.m.; and (ii) the stock
exchange has in place a risk management system and infrastructure commensurate to the trading hours.
Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (or
“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice nationwide.
This has enhanced transparency in dealings and has assisted considerably in smoothening settlement cycles and
improving efficiency in back-office work.
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The NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth in
the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.
Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended
(“Takeover Code”), which provides specific regulations in relation to substantial acquisition of shares and takeover.
The Takeover Code came into effect on October 22, 2011 and replaced the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“Takeover Code 1997”). Once the equity shares
of a company are listed on a stock exchange in India, the provisions of the Takeover Code will apply to any acquisition
of the company’s shares/voting rights/control. The Takeover Code prescribe certain thresholds or trigger points in the
shareholding a person or entity has in the listed Indian company, which give rise to certain obligations on part of the
acquirer. Acquisitions up to a certain threshold prescribed under the Takeover Code mandate specific disclosure
requirements, while acquisitions crossing particular thresholds may result in the acquirer having to make an open offer
of the shares of the target company. The Takeover Code also provides for the possibility of indirect acquisitions,
imposing specific obligations on the acquirer in case of such indirect acquisition.
The key changes from the Takeover Code 1997 under the Takeover Code include:
the trigger for making a public offer upon acquisition of shares or voting rights has been increased from 15%
to 25%;
every public offer has to be made for at least 26% of all the shares held by other shareholders;
creeping acquisition of up to 5% is permitted up to a limit of 75% of the shares or voting rights of a company;
acquisition of control in a target company triggers the requirement to make a public offer regardless of the
level of shareholding and the acquisition of shares; and
if the indirect acquisition of a target company is a predominant part of the business or entity being acquired,
it would be treated as a direct acquisition.
Insider Trading Regulations
The SEBI (Prohibition of Insider Trading) Regulations, 2015 have been notified by SEBI to prohibit and penalise
insider trading in India. An “insider” is defined to include any person who has received or has access to unpublished
price sensitive information (“UPSI”) or a “Connected Person”. A “Connected Person” includes, inter alia, any person
who is or has directly or indirectly, been associated with the company in any capacity whether contractual, fiduciary
or employment or has any professional or business relationship with the company whether permanent or temporary,
during the six months prior to the concerned act which would allow or reasonably expect to allow access, directly or
indirectly, to UPSI.
The Insider Trading Regulations also provide disclosure obligations for promoters, employees and directors, with
respect to their shareholding in our company, and the changes therein. An insider is, inter alia, prohibited from trading
in securities of a listed or proposed to be listed company when in possession of UPSI and to provide access to any
person including other insiders to the above referred UPSI except where such communication is for legitimate
purposes, performance of duties or discharge of legal obligations. UPSI shall include any information, relating to a
company or its securities, directly or indirectly, that is not generally available which upon becoming generally
available, is likely to materially affect the price of the securities. The Insider Trading Regulations also provide
disclosure obligations for shareholders holding more than 5% of equity shares or voting rights, and the changes therein.
Initial disclosures are required from promoters, key managerial personnel, directors as well as continual disclosures
by every promoter, employee or director in case value of trade exceed monetary threshold of ten lacs rupees over a
calendar quarter, within two days of reaching such threshold. The board of directors of all listed companies are
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required to formulate and publish on the company’s website a code of procedure for fair disclosure of UPSI along
with a code of conduct for its employees for compliances with the Insider Trading Regulations.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership details and
effect transfers in book-entry form. Further, SEBI framed regulations in relation to, among other things, the formation
and registration of such depositories, the registration of participants as well as the rights and obligations of the
depositories, participants, companies and beneficial owners. The depository system has significantly improved the
operation of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in February
2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA. Trading in
derivatives in India takes place either on separate and independent derivatives exchanges or on a separate segment of
an existing stock exchange. The derivatives exchange or derivatives segment of a stock exchange functions as a self-
regulatory organisation under the supervision of the SEBI.
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DESCRIPTION OF EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of some of the provisions of the
Memorandum of Association, Articles of Association and the Companies Act. Prospective investors are urged to read
the Memorandum of Association, Articles of Association carefully, and consult with their advisers, as the
Memorandum of Association and the Articles of Association and applicable Indian law, and not this summary, govern
the rights attached to the Equity Shares.
General
Our authorized capital is ₹ 1,500.00 Lacs divided into 150.00 Lacs Equity Shares of ₹ 10 each. As on the date of the
Preliminary Placement Document, the issued, subscribed and paid-up share capital of our Company is ₹ 885.86 Lacs
comprising of 88,58,575 Equity Shares of ₹ 10 each. For further details please see section “Capital Structure”
beginning on page 70.
Dividend
Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by a
majority of the shareholders at the AGM held each Fiscal. Under the Companies Act, 2013, unless the board of
directors of a company recommends the payment of a dividend, the shareholders at a general meeting have no power
to declare a dividend. Subject to certain conditions laid down by Section 123 of the Companies Act, 2013 no dividend
can be declared or paid by a company for any Fiscal except out of the profits of our company for that year, calculated
in accordance with the provisions of the Companies Act or out of the profits of our company for any previous Fiscal(s)
arrived at as laid down by the Companies Act.
The Articles of Association of the Company states that the Company in general meeting may declare dividends, but
no dividend shall exceed the amount recommended by the Board but the Company in general meeting may declare a
lesser dividend. Further, subject to the provisions of the Act, the Board may from time-to time pay to the members
such interim dividends of such amount on such class of shares and at such times as it may think fit.
Further, as per the Companies (Declaration and Payment of Dividend) Rules, 2014, in the absence of profits in any
year, company may declare dividend out of surplus, provided: (a) the rate of dividend declared shall not exceed the
average of the rates at which dividend was declared by it in the three years immediately preceding that year; (b) the
total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid up share
capital and free reserves as per the latest audited balance sheet; (c) the amount so drawn shall be first utilized to set
off the losses incurred in the financial year in which the dividend is declared before any dividend in respect of equity
shares is declared; and (d) the balance of reserves after such withdrawal shall not fall below 15% of its paid up share
capital as per the latest audited balance sheet of our company.
The Articles of Association states that subject to the rights of persons, if any, entitled to shares with special rights as
to dividends, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares
in respect whereof the dividend is paid, but if and so long as nothing is paid upon any of the shares in the Company,
dividends may be declared and paid according to the amounts of the shares. No amount paid or credited as paid on a
share in advance of calls shall be treated for as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in
respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as
from a particular date such share shall rank for dividend accordingly. The Board may deduct from any dividend
payable to any member all sums of money, if any, presently payable by him to the Company on account of calls or
otherwise in relation to the shares of the Company. The Board may retain dividends payable upon shares in respect of
which any person is, under the Transmission Clause hereinbefore contained, entitled to become a member, until such
person shall become a member in respect of such shares. No dividend shall bear interest against the Company.
In terms of Section 124 of the Companies Act 2013, our Company shall credit such unclaimed dividends to the unpaid
dividend account of our Company, and any money transferred to the unclaimed dividend account of our Company
which remains unpaid and unclaimed for a period of seven years from the date they became due for payment, shall be
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transferred by our Company to the ‘Investor Education and Protection Fund’, established by the GoI, in accordance
with Section 125 of the Companies Act 2013.
Further, as per regulation 43 of the Listing Regulations, a listed company shall declare and disclose the dividend on
per share basis only and shall not forfeit unclaimed dividends before the claim becomes barred by law and such
forfeiture, if effected, shall be annulled in appropriate cases. The listed company shall recommend or declare all
dividend and/or cash bonuses at least five working days (excluding the date of intimation and the record date) before
the record date fixed for the purpose.
The Equity Shares issued pursuant to this Placement Document shall rank pari passu with the existing Equity Shares
in all respects including entitlements to any dividends that may be declared by our Company.
The Articles of Association further states that waiver in whole or in part of any dividend on any share by any document
(whether or not under seal) shall be effective only if such document is signed by the member (or the person entitled
to the share in consequence of the death or bankruptcy of the holder) and delivered to the Company and if or to the
extent that the same is accepted as such or acted upon by the Board.
Capitalization of Profits
In addition to permitting dividends to be paid out of current or retained earnings as described above, the Companies
Act, 2013 permits the board of directors, if so approved by the shareholders in a general meeting, to capitalise the
company’s profits or reserves for the purpose of issuing fully paid-up bonus shares, which are similar to stock
dividend. The Companies Act, 2013 permits the issue of fully paid up bonus shares from its free reserves, securities
premium account or capital redemption reserve account, provided that bonus shares shall not be issued by capitalizing
reserves created by revaluation of assets. These bonus Equity Shares must be distributed to shareholders in proportion
to the number of Equity Shares owned by them as recommended by the board of directors.
Any issue of bonus shares by a listed company would be subject to the SEBI ICDR Regulations. The relevant SEBI
ICDR Regulations prescribe that no company shall make a bonus issue of equity shares if it has outstanding fully or
partly convertible debt instruments at the time of making the bonus issue, unless it has made reservation of the equity
shares in the same class in favour of the holders of the outstanding convertible debt instruments in proportion to the
convertible part thereof and the equity shares reserved for the holders of fully or partly convertible debt instruments
shall be issued at the time of conversion of such convertible debt instruments on the same terms or same proportion
on which the bonds were issued. Further, for issuance of such bonus shares, a company should not have defaulted in
the payment of interest or principal in respect of fixed deposits and interest on existing debentures or principal on
redemption of such debentures. The declaration of bonus shares in lieu of a dividend cannot be made. The bonus
issuance shall be made out of free reserves built out of genuine profits or share premium collected in cash only. The
reserves created by revaluation of fixed assets cannot be capitalised.
The Articles of association state the sum aforesaid shall not be paid in cash but shall be applied, subject to the provision
contained, either in or towards:
a) paying up any amounts for the time being unpaid on any shares held by such members respectively;
b) paying up in full, unissued shares or other securities of the Company to be allotted and distributed, credited
as fully paid-up, to and amongst such members in the proportions aforesaid;
c) partly in the way specified in sub-clause (a) and partly in that specified in sub-clause (b).
Whenever such a resolution as aforesaid shall have been passed, the Board shall a) make all appropriations and
applications of the amounts resolved to be capitalized thereby, and all allotments and issues of fully paid shares or
other securities, if any; and b) generally do all acts and things required to give effect thereto.
The Board shall have power to make such provisions, by the issue of fractional certificate / coupons or by payment
in cash or otherwise as it thinks fit, for the case of shares or other securities becoming distributable in fractions; and
to authorize any person to enter, on behalf of all the members entitled thereto, into an agreement with the Company
providing for the allotment to them respectively, credited as fully paid-up, of any further shares or other securities to
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which they may be entitled upon such capitalization, or as the case may require, for the payment by the Company on
their behalf, by the application thereto of their respective proportions of profits resolved to be capitalized, of the
amount or any part of the amounts remaining unpaid on their existing shares.
A bonus issue may be made out of free reserves built out of genuine profits or share premium collected in cash and
not from reserves created by revaluation of fixed assets. The issue of bonus shares must take place within fifteen days
from the date of approval by the board, if the Articles of Association of a company do not require such company to
seek shareholders’ approval for capitalization of profits or reserves for making bonus issues. If a company is required
to seek shareholders’ approval for capitalization of profits or reserves for making bonus issues, then the bonus issue
should be implemented within two months from the date of the board meeting wherein the decision to issue bonus
shares was taken subject to shareholders’ approval.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act, 2013, our Company can increase its share capital by issuing new
equity shares. Such new equity shares must be offered to existing shareholders registered on the record date in
proportion to the amount paid-up on those equity shares at that date. The offer shall be made by notice specifying the
number of equity shares offered and the date (being not less than fifteen days and not exceeding thirty days from the
date of the offer) after which the offer, if not accepted, will be deemed to have been declined. After such date the
Board may dispose of the equity shares offered in respect of which no acceptance has been received, in such manner
as they think is not disadvantageous to the shareholders and our Company. The offer is deemed to include a right
exercisable by the person concerned to renounce the shares in favor of any other person provided that the person in
whose favor such shares have been renounced is approved by the Board in their absolute discretion.
However, under the provisions of the Companies Act, 2013 and the Companies (Share Capital and Debentures) Rules,
2014, new shares may be offered to any persons, whether or not those persons include existing shareholders or
employees to whom shares are allotted under a scheme of employees stock options, either for cash or for consideration
other than cash, if a special resolution to that effect is passed by the shareholders of our Company in a general meeting.
The issue of the Equity Shares pursuant to the Issue has been approved by a special resolution of our Company’s
shareholders and such shareholders have waived their pre-emptive rights with respect to such Equity Shares.
The Articles of Association provide that, subject to the provisions of the Act, the Company may by ordinary resolution:
a) increase the share capital by such sum, to be divided into shares of such amount as it thinks expedient;
b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares:
Provided that any consolidation and division which results in changes in the voting percentage of members
shall require applicable approvals under the Act;
c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of
any denomination;
d) sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the memorandum;
e) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken
by any person.
The Articles of Association further provides that the Company may, by resolution as prescribed by the Act, reduce, in
any manner and in accordance with the provisions of the Act and the Rules, -
a) its share capital; and / or
b) any capital redemption reserve account; and / or
c) any securities premium account; and/ or
d) any other reserve in the nature of share capital.
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General Meetings of Shareholders
There are two types of general meetings of the shareholders, namely, AGM and EGM. Our Company is required to
hold its AGM within six months after the expiry of each Fiscal provided that not more than 15 months shall elapse
between one AGM and next one, unless extended by the RoC at our request for any special reason for a period not
exceeding three months. Our Board of Directors may convene an EGM when necessary or at the request of a
shareholder or shareholders holding in the aggregate not less than one tenth of our Company’s issued paid up capital
(carrying a right to vote in respect of the relevant matter on the date of receipt of the requisition).
Section 101 of the Companies Act 2013 provides that notices, along with statement containing material facts
concerning each special item, either in writing or through electronic mode, convening a meeting setting out the date,
day, hour, place and agenda of the meeting must be given to every member or the legal representative of a deceased
member, auditors of our company and every director of our company, at least 21 clear days prior to the date of the
proposed meeting. A general meeting may be called after giving shorter notice if consent is received, in writing or
electronic mode, from not less than 95% of the shareholders entitled to vote. Unless, the Articles of Association
provide for a larger number, (i) five shareholders present in person, if the number of shareholders as on the date of
meeting is not more than 1,000; (ii) 15 shareholders present in person, if the number of shareholders as on the date of
the meeting is more than 1,000 but up to 5,000; and (iii) 30 shareholders present in person, if the number of
shareholders as on the date of meeting exceeds 5,000, shall constitute a quorum for a general meeting of our Company,
whether AGM or EGM. The quorum requirements applicable to shareholder meetings under the Companies Act have
to be physically complied with.
The accidental omission to give any such notice to or its non-receipt by any member or other person to whom it should
be given shall not invalidate the proceedings of the meeting. The quorum requirements for a general meeting are as
prescribed under Section 103 of the Companies Act, 2013, and no business is to be transacted at the general meeting
unless the requisite quorum is present at the commencement of the same. If the quorum is not present within half an
hour of the time appointed for a meeting, the meeting, if convened upon such requisition as aforesaid, shall be
dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place,
or such other day and at such time and place as the Board may by notice appoint.
The Articles of association of the company provide that the Chairperson may, suo motu, adjourn the meeting from
time to time and from place to place. No business shall be transacted at any adjourned meeting other than the business
left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty days
or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, and
save as provided in the Act, it shall not be necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
A listed company intending to pass a resolution relating to matters such as, but not limited to, an amendment in the
objects clause of the memorandum of association, a buy-back of shares under the Companies Act, 2013, the giving of
loans or extending a guarantee in excess of limits prescribed under the Companies Act, 2013 is required to pass the
resolution by means of a postal ballot instead of transacting the business in the general meeting of our Company.
A notice to all the shareholders shall be sent along with a draft resolution explaining the reasons there of and requesting
them to send their assent or dissent in writing on a postal ballot within a period of 30 days from the date of dispatch
of the notice. Postal ballot includes voting by electronic mode.
Voting Rights
Subject to the provisions of the Companies Act, 2013 and the Memorandum and Articles of Association, votes may
be given either personally or by proxy, or in the case of a body corporate, by a duly authorized representative under
Section 113 of the Companies Act, 2013.
At a general meeting, upon a show of hands, every member holding shares and entitled to vote and present in person
has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or by proxy is
in the same proportion as the capital paid up on each share held by such holder bears to our Company’s total paid up
capital. The Chairman of the meeting has a casting vote.
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Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions require that
the votes cast in favour of the resolution must be at least three times the votes cast against the resolution. A shareholder
may exercise his voting rights by proxy to be given in the form required by the articles of association. The Articles of
association provides that a member may exercise his vote at a meeting by electronic means or ballot or polling paper
(as may be provided by the Company) in accordance with the Act and shall vote only once. The instrument appointing
a proxy and the power of attorney or other authority, if any, under which it is signed or a notarized copy of that power
or authority, shall be deposited at the registered office of the Company not less than 48 hours before the time for
holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and in default
the instrument of proxy shall not be treated as valid. A vote given in accordance with the terms of an instrument of
proxy shall be valid, notwithstanding the previous death or insanity of the principal or the revocation of the proxy or
of the authority under which the proxy was executed, or the transfer of the shares in respect of which the proxy is
given: Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received
by the Company at its office before the commencement of the meeting or adjourned meeting at which the proxy is
used.
According to the regulation 44 of Listing Regulations, our Company has to provide the facility of remote e-voting to
the shareholders, in respect of all shareholders' resolutions. The e-voting facility to be provided to shareholders shall
be provided in compliance with the conditions specified under the Companies (Management and Administration)
Rules, 2014, or amendments made thereto. Our Company shall submit to the stock exchange, within forty eight hours
of conclusion of its General Meeting, details regarding the voting results in the required format. Further, our Company
shall send proxy forms to holders of securities in all cases mentioning that a holder may vote either for or against each
resolution.
The articles of association of the company state that, no member shall be entitled to vote at any general meeting unless
all calls or other sums presently payable by him in respect of shares in the Company have been paid or in regard to
which the Company has exercised any right of lien.
Register of Members and Record Dates
The Company is obliged to maintain a register of shareholders kept at the registered office of the company. In the case
of shares held in physical form, transfers of shares are registered on the Register of Members upon lodgment of the
share transfer form duly complete in all respects accompanied by a share certificate or, if there is no certificate, the
letter of allotment in respect of shares transferred together with duly stamped transfer forms. Every person holding
Securities of the Company and whose name is entered as the beneficial owner in the record of the Depository shall be
deemed to be a member of the Company. The beneficial owner of Securities shall be entitled to all the rights and
benefits and be subject to all the liabilities in respect of his Securities which are held by a Depository. Under the
Companies Act, 2013, our Company is also required to maintain a register of debenture holders and a register of any
other security holders.
For the purpose of determining the shareholders, the register of members or register of debenture holders or a register
of any other security holders may be closed for periods not exceeding 45 days in any one year or 30 days at any one
time at such times, as the Board may deem expedient in accordance with the provisions of the Companies Act, 2013.
Directors
The Articles of Association provide that the number of Directors shall be not less than three and not more than fifteen.
The Directors shall be appointed by our Company in the general meeting subject to the provisions of the Companies
Act, 2013 and the Articles of Association. The articles of association provide that, the Executive Chairman or
Managing Director shall be a director not liable to retire by rotation. The Board shall have the power to determine the
directors whose period of office is or is not liable to determination by retirement of directors by rotation. The same
individual may, at the same time, be appointed as the Chairperson of the Company as well as the Managing Director
or Chief Executive Officer of the Company.
Pursuant to the articles of association, the Board may appoint an alternate director to act for a director (hereinafter in
this Article called "the Original Director") during his absence for a period of not less than three months from India.
No person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed
as an independent director under the provisions of the Act. An alternate director shall not hold office for a period
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longer than that permissible to the Original Director in whose place he has been appointed and shall vacate the office
if and when the Original Director returns to India. The Company may agree with any financial institution or any
authority or person or State Government that in consideration of any loan or financial assistance of any kind
whatsoever, which may be rendered by it to the Company, it shall till such time as the loan or financial assistance is
outstanding have power to nominate one or more Directors on the Board of the Company (Nominee Director) and
from time-to-time remove and reappoint such Directors and to fill in any vacancy caused by the death or resignation
of such Directors otherwise ceasing to hold office. Such Nominee Directors shall not be required to hold any
qualification shares nor shall they be liable to retire by rotation. The Board may, subject to the provisions of the Act,
form committees and delegate any of its powers to Committees consisting of such member or members of its body as
it thinks fit.
In terms of the Companies Act, 2013, our Board is required to meet at least four times in a year not exceeding more
than 120 days between two meetings, for the dispatch of business, adjourn and otherwise regulate its meetings and
proceedings as it thinks fit. The quorum for a meeting of our Board is one-third of the total number of Directors (any
fraction contained in that one-third being rounded off as one) or two Directors, whichever is higher.
The articles of association further provides that the continuing directors may act notwithstanding any vacancy in the
Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board,
the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the
quorum, or of summoning a general meeting of the Company, but for no other purpose.
Transfer and Transmission of shares
The articles of association of the Company states that for shares in physical form, the instrument of transfer of any
equity share in the Company shall be duly executed by or on behalf of both the transferor and transferee. The transferor
shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members
in respect thereof. The Companies Act 2013 provides that the shares or debentures of a publicly listed company shall
be freely transferable. Under Section 58 of the Companies Act 2013, if a public company without sufficient cause
refuses to register a transfer of shares, the transferee may appeal to the Tribunal against the refusal within a period of
thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of
sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was
delivered to the company. However the articles of association of the company provides that the Board may, subject to
the right of appeal conferred by the Act decline to register the transfer of a share, not being a fully paid share, to a
person of whom they do not approve; or any transfer of shares on which the Company has a lien. In case of shares
held in physical form, without prejudice to the other requirements of the Act and the Rules, the Board may decline to
recognize any instrument of transfer unless:
a) the instrument of transfer is duly executed and is in the form as prescribed in the Rules made under the Act;
b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other
evidence as the Board may reasonably require to show the right of the transferor to make the transfer; and
c) the instrument of transfer is in respect of only one class of shares.
Further the articles of association provides that on giving of previous notice of at least seven days or such lesser period
in accordance with the Act and Rules made there under, the registration of transfers may be suspended at such times
and for such periods as the Board may from time-to-time determine: Provided that such registration shall not be
suspended for more than thirty days at any one time or for more than forty five days in the aggregate in any year.
Pursuant to the Listing Regulations, in the event our Company has not effected the transfer of shares within 15 days
or where our Company has failed to communicate to the transferee any valid objection to the transfer within the
stipulated time period of 15 days, our Company is required to compensate the aggrieved party for the opportunity loss
caused during the period of the delay.
Shares held through depositories are transferred in the form of book entries or in electronic form in accordance with
applicable SEBI regulations. These regulations provide the regime for the functioning of the depositories and their
participants and set out the manner in which the records are to be kept and maintained and the safeguards to be
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followed in this system. Transfers of beneficial ownerships of shares held through a depository are exempt from stamp
duty.
A transfer may also be by transmission. Subject to the provisions of the Articles of Association, any person becoming
entitled to shares in consequence of the death or insolvency of any member may, upon producing such evidence as
may from time to time properly be required by the Board, be registered as a member in respect of such shares, or may,
subject to the regulations as to transfer contained in the Articles of Association, transfer such shares. The Articles of
Association provide that the Company shall be fully indemnified by such person from all liability, if any, by actions
taken by the Board to give effect to such registration or transfer
Liquidation Rights
The Articles of Association of our Company provide that Subject to the provisions of the Act and the Rules made
thereunder:-
a) If the Company shall be wound-up, the liquidator may, with the sanction of a special resolution of the
Company and any other sanction required by the Act, divide amongst the members, in specie or kind, the
whole or any part of the assets of the Company, whether they shall consist of property of the same kind or
not.
b) For the purpose aforesaid, the liquidator may set such value as he deems fair upon any property to be divided
as aforesaid and may determine how such division shall be carried out as between the members or different
classes of members.
c) The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such
trusts for the benefit of the contributories if he considers necessary, but so that no member shall be compelled
to accept any shares or other securities whereon there is any liability.
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TAXATION
The information provided below sets out the possible tax benefits available to the shareholders in a summary manner
only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal
of equity shares under the current tax laws presently in force in India. Several of these benefits are dependent on us
or our shareholders fulfilling conditions prescribed under relevant tax laws. We may not choose to fulfill such
conditions. This information is not exhaustive or comprehensive and is not intended to be a substitute for professional
advice. Investors are advised to consult their own tax consultant with respect to the tax implications of an investment
in the Equity Shares. Investors should note that a draft of the Direct Tax Code Bill has been placed before the Indian
Parliament. If that law comes into effect, there could be an impact on the tax provisions mentioned below.
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO OUR COMPANY’S SHAREHOLDERS
UNDER THE INCOME TAX ACT, 1961 (“IT ACT”) AND OTHER DIRECT TAX LAWS PRESENTLY IN
FORCE IN INDIA
The Board of Directors,
Premier Explosives Limited
"Premier House", 11,
Ishaq Colony, (Near AOC Centre),
Secunderabad – 500015,
Telangana, India
Sub: Qualified Institutions Placement of equity shares of face value of ₹ 10 each (“Equity Shares”) of Premier
Explosives Limited (the “Company”) under Chapter VIII of the Securities and Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2009, as amended (the “ICDR Regulations”) and Section
42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities)
Rules, 2014 (the “QIP”)
Sub: Statement on possible tax benefits available to the Company and its potential shareholders, i.e. Qualified
Institutional Buyers (“QIBs”).
We refer to the proposed issue of the shares of Premier Explosives Limited (the “Company”). We enclose herewith
the statement showing the current position of possible tax benefits available to the Company and to its shareholders
as per the provisions of the Income-tax Act, 1961 (‘the Act’) as applicable to the assessment year 2017-18 relevant to
the financial year 2016-17 for inclusion in the Preliminary Placement Document and the Placement Document for the
proposed issue of shares.
Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under
the relevant provisions of the Act. Hence, the ability of the Company or its shareholders to derive these direct tax
benefits is dependent upon their fulfilling such conditions.
The benefits discussed in the enclosed statement are neither exhaustive nor conclusive. The contents stated in the
Annexure are based on the information and explanations obtained from the Company. This statement is only intended
to provide general information to guide the investors and is neither designed nor intended to be a substitute for
professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each
investor is advised to consult their own tax consultant with respect to the specific tax implications arising out of their
participation in the issue. We are neither suggesting nor are we advising the investor to invest money or not to invest
money based on this statement.
We do not express any opinion or provide any assurance whether:
the Company or its shareholders will continue to obtain these benefits in future;
the conditions prescribed for availing the benefits have been / would be met;
the revenue authorities / courts will concur with the views expressed herein.
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We hereby give our consent to include enclosed statement regarding the possible tax benefits available to the Company
and to its shareholders in the Preliminary Placement Document & Placement Document for the proposed QIP which
the Company intends to submit to the Stock Exchanges & Securities and Exchange Board of India provided that the
below statement of limitation is included in the Preliminary Placement Document & Placement Document.
Limitations
Our views expressed in the statement enclosed are based on the facts and assumptions indicated above. No assurance
is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the
existing provisions of law and its interpretation, which are subject to change from time to time. We do not assume
responsibility to update the views consequent to such changes. Reliance on the statement is on the express
understanding that we do not assume responsibility towards the investor who may or may not invest in the proposed
issue relying on the statement.
This statement has been prepared solely in connection with the offering of Equity shares by the Company through
Qualified Institution Placement under the Securities and Exchange Board of India (“SEBI”) (Issue of Capital and
Disclosure Requirements) Regulations, 2009, as amended (the Offerings).
Yours faithfully,
For P.V.R.K. Nageswara Rao & Co.
Chartered Accountants
Firm’s Registration Number: 002283S
N. Anka Rao
Partner
Membership Number: 23939
Date: 15.05.2017
Place: Hyderabad
191
ANNEXURE TO THE STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO PREMIER
EXPLOSIVES LIMITED AND ITS SHAREHOLDERS UNDER INCOME TAX ACT, 1961 (‘ACT’)
The following overview is not exhaustive or comprehensive and is not intended to be a substitute for professional
advice. Investors are advised to consult their own tax consultant with respect to the tax implications of an investment
in the shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal
precedent or may have a different interpretation on the benefits, which an investor can avail.
Our views expressed in this statement are based on the facts and assumptions as indicated in the statement. No
assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based
on the existing provisions of law and its interpretation, which are subject to change from time to time. We do not
assume responsibility to update the views consequent to such changes. Reliance on this statement is on the express
understanding that we do not assume responsibility towards the investors who may or may not invest in the proposed
issue relying on this statement.
This statement has been prepared solely in connection with the offering of Equity shares by the Company through
Qualified Institutional Placement under the Securities and Exchange Board of India (“SEBI”) (Issue of Capital and
Disclosure Requirements) Regulations, 2009, as amended (the Offerings).
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX CONSULTANT WITH RESPECT TOTHE
INDIAN TAX IMPLICATIONS AND CONSEQUENCES OF PURCHASING, OWNING ANDDISPOSING
OF EQUITY SHARES IN THEIR PARTICULAR SITUATION.
STATEMENT OF POSSIBLE DIRECT TAX BENEFITS AVAILABLE TO THE COMPANY AND TO ITS
SHAREHOLDERS
A) Special Tax Benefit available to the Company
There are no special tax benefits available to the Company
B) Special Tax Benefit available to the Shareholders
There are no special tax benefits available to its shareholders
Yours faithfully,
For P.V.R.K. Nageswara Rao & Co.
Chartered Accountants
Firm’s Registration Number: 002283S
N.Anka Rao
Partner
Membership Number: 23939
Date: 15.05.2017
Place: Hyderabad
192
LEGAL PROCEEDINGS
Except as described below, we are not involved in any material legal proceedings, and we are not aware of any
threatened legal proceedings, which if determined adversely, could result in a material adverse effect on our business,
financial condition or results of operations. We believe that the number of proceedings in which we are involved is
not unusual for a company of our size in the context of doing business in India. We have no outstanding defaults in
relation to repayment of statutory dues payable, dues payable to holders of any debentures and interest thereon, and
in respect of deposits and interest thereon, repayment of loans from any bank or financial institution and interest
thereon.
A. Litigations involving our Company
Cases filed against our Company
Criminal Cases
i. A criminal complaint no. 1063 / 2013 is filed by Kanna Ravi (“Complainant”) against our Company under
section 304(A), 337 and 338 of the Indian Penal Code. On July 16, 2012, an explosion took place in the
manufacturing facility of the Company situated at Peddakundukuru, Nalgonda, Andhra Pradesh, resulting in the
structural damage and subsequent death of two workers in the manufacturing facility of the Company.
Consequently, the Complainant filed an FIR no. 134 / 2012 and later filed a criminal complaint before Judicial
Magistrate First Class, Alair which is currently pending. Further, our Company has paid a compensation of
approximately ₹ 20 lacs each to the families of both the workers.
Civil Cases
i. An original suit no. 180 of 2012 is filed by Rudraboina Rangaiah (“Plaintiff”) against our Company for
declaration of title and recovery of possession of the land bearing survey no. 52/ VOO/1 admeasuring
approximately 1 acre situated at Peddakundukuru village, Yadagirigutta, Nalgonda. The Plaintiff had sold the
land bearing survey no. 51 / A and survey no. 52/VOO/1 admeasuring approximately 2 acres each (“Suit
Property”) and was still the owner of the land bearing survey no. 52/ VOO/1 admeasuring approximately 1 acre
situated at Peddakundukuru village. It is alleged by the Plaintiff that our Company encroached and illegally
occupied the land admeasuring approximately 1 acre without any valid title or right. The Plaintiff then filed the
suit before the Junior Civil Judge, Bhongir which is currently pending.
Cases filed by our Company
Criminal Cases
i. Our Company has filed a criminal complaint dated December 26, 2016 against Hariram Loodha, proprietor of
M/s. Ashish Enterprises (“Accused”) under section 138 of Negotiable Instruments Act, 1938. Our Company had
supplied certain explosives to the Accused pursuant to which the Accused was entitled to pay ₹ 11.73 lacs to our
Company. However, the Accused issued a cheque of ₹ 3 lacs as a part payment which was dishonoured. Our
Company then filed the complaint before XI Additional Chief Metropolitan Magistrate, Secunderabad which is
currently pending.
Civil Cases
i. Our Company has filed a writ petition no. 26764 of 2008 against the Assistant Commissioner (CT) (LTU),
Begumpet division, Hyderabad (“ACT”) pursuant to the order dated October 6, 2008 passed by ACT for the
assessment year 2007 – 2008 (“Order”). The Order stated that our Company had entered into rate contract
agreement with Cola India Limited for supply of certain products to Coal India Limited and its subsidiaries
which were liable to be treated as inter-state sales falling under section 3 (a) of Central Sales Tax, 1956 and
were, therefore, entitled to tax at the rate of 12.5%. Aggrieved by the Order passed by ACT, our Company then
filed the writ petition in the nature of writ of certiorari under article 226 of the Constitution of India before the
High Court of Andhra Pradesh and Telangana which is currently pending.
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ii. Our Company has filed a writ petition no. 29392 to 29396 of 2015 against Assistant Commissioner (CT),
Virudhachalam, Tamil Nadu (“Respondent”) to grant interim stay and quash the proceedings dated July 31,
2015 and August 6, 2015 (“Proceedings”) for the assessment years 2009 – 2010 to 2013 – 2014. Our Company
had supplied certain explosives to Neyveli Lignite Corporation Limited for the generation of power which was
taxable at 4% upto July 11, 2011 and 5% beyond July 11, 2011 pursuant to the notification dated March 27,
2002 issued by Government of Tamil Nadu under Tamil Nadu Value Added Tax Act, 2006. However, the
Respondent pursuant to the Order stated that the explosives cannot be used in the generation of electricity and
further imposed a tax of 14.5% on the explosives supplied to Neyveli Lignite Corporation Limited. Aggrieved
by the Proceedings of the Respondent, our Company has filed the writ petition in the nature of writ of certiorari
under article 226 of the Constitution of India before the High Court of Madras which is currently pending. The
High Court of Madras vide its order dated September 18, 2015 has granted an interim stay on the Proceedings
of the Respondent.
iii. Our Company has filed a writ petition no. 7854 of 2010 against State of Madhya Pradesh and District Magistrate,
Singarauli (together referred to as the “Respondents”) against the order dated March 29, 2010 passed by the
District Magistrate, Singrauli (“Order”). On July 12, 2009, the Chief Minister of Madhya Pradesh, during his
visit, issued directions for shifting of certain factories manufacturing explosives to the new industrial area at
Daga, Singrauli due to the explosion caused at one of the factories resulting in the death of few workers. In view
of the aforesaid direction, our Company had applied to Madhya Pradesh Audyogik Kendra Vikas Nigam (Rewa)
Limited for allotment of land to shift the manufacturing facility. However due to the encroachment by the natives
of the industrial area of Daga, Singrauli, our Company was not allotted any land and was therefore unable to
shift its manufacturing facility. The District Magistrate, Singrauli then passed an Order directing the cancellation
of the no objection certificate and the explosives license issued by the Chief Controller of Explosives to our
Company for violation of the directions issued by the Chief Minister of Madhya Pradesh. Aggrieved by the
Order, our Company filed the writ petition before the High Court of Madhya Pradesh, to grant stay on the
operation of the Order, which is currently pending.
iv. Our Company has filed a writ petition no. 18141 of 2011 against Madhya Pradesh State Industrial Corporation
and (“Respondent No. 1”) and Madhya Pradesh Audyogik Kendra Vikas Nigam (Rewa) Limited (“Respondent
No. 2”) against the order dated September 15, 2010 (“Order”). Our Company entered into a lease deed dated
February 4, 2000 for a plot admeasuring 3,116 meters approximately in Waidhan district, Singrauli, Madhya
Pradesh for establishment of factory for manufacturing emulsion matrix for a period of 99 years. Pursuant to the
lease deed our Company was entitled to pay rent and premium and start the commercial production of the factory.
However, Respondent No. 2 issued a notice for non – payment of rent and premium for the year 2009 – 2010
and non-establishment of the commercial production of the factory thereby violating certain conditions of the
lease deed. Subsequently, Respondent No. 2 passed an order for cancellation of lease deed and allotment order
issued by it to our Company. Our Company then preferred an appeal before Respondent No. 1 which was rejected
by it pursuant to the Order. The Company then filed the writ petition before the High Court of Madhya Pradesh
which is currently pending.
v. Our Company has filed a writ petition no. 728 and 729 of 2017 against the Assistant Commissioner (CT) (FAC),
Virudhachalam, Tamil Nadu (“Respondent”) to quash and grant stay on the proceedings of the Respondent
dated November 30, 2016 for the assessment years 2014 – 2015 and 2015 – 2016 (“Order”). Our Company had
supplied certain explosives to Neyveli Lignite Corporation Limited for the generation of power and which were
taxable at 4% upto July 11, 2011 and 5% beyond July 11, 2011 pursuant to the notification dated March 27,
2002 issued by Government of Tamil Nadu under Tamil Nadu Value Added Tax Act, 2006. However, the
Respondent pursuant to the Order stated that the explosives cannot be used in the generation of electricity and
further imposed a tax of 14.5% on the explosives supplied to Neyveli Lignite Corporation Limited. Aggrieved
by the Order of the Respondent, the Company has filed the writ petition in the nature of writ of certiorari under
article 226 of the Constitution of India before the High Court of Madras which is currently pending. The High
Court of Madras vide its order dated January 10, 2017 has granted an interim stay on the recovery proceedings.
vi. Our Company has filed a writ petition no. 39138 of 2012 against Andhra Pradesh Electricity Regulatory
Commission (“APERC”) and others challenging the order dated September 20, 2012 passed by APERC
(“Order”). APERC has vide its Order directed all the corporations to charge fuel surcharge at the rate of 15.13
paise per KWh on all the consumers, except agricultural consumers, for 3 months i.e. April, May and June 2010
on a monthly basis with effect from October, 2012. Aggrieved by the Order passed by APERC, our Company
194
has filed the writ petition in the nature of writ of mandamus under article 226 of the Constitution of India before
the High Court of Andhra Pradesh which is currently pending. Further, our Company has also filed a suspension
petition to suspend the operation of Order passed by APERC.
vii. Our Company has filed a civil suit no. 143 of 2007 against Coal India Limited (“Respondent”) and others before
the High Court of Calcutta. Our Company had entered into two running contracts for supply of explosives and
cartridges to the Respondent and its subsidiaries for the year 2005 – 2006 which expired on February 28, 2006.
Thereafter, the Respondent did not invite any tender for subsequent period and our Company continued the
supplies to the Respondent for further period of 4 months i.e. upto June 30, 2006 on the terms and conditions of
the previous contracts. However, on May 2, 2006, the Respondent issued notices for inviting tenders for the
period 2006 – 2007 on terms and conditions different from the previous contracts. Our Company participated in
the tender process and was awarded the running contracts for the year 2006 – 2007 wherein the effective date of
supplies was considered from July 28, 2006. The period from March 1, 2006 to June 30, 2006 for the supplies
was not covered for which our Company had supplied explosives to the Respondent and its subsidiaries.
Aggrieved by this action of the Respondent, our Company then filed the writ petition before the High Court of
Calcutta which is currently pending.
viii. Our Company has filed a writ appeal no. 431 of 2010 against Singareni Collieries Company Limited
(“Respondent”) for refund of ₹ 65.71 lacs alongwith the interest at 24% deducted by the Respondent towards
penalty and risk purchase from bills payable to our Company. Our Company had entered into a contract with the
Respondent for supply of SMS explosives and accessories for a period of 1 year i.e. upto April 9, 2007 pursuant
to which our Company had furnished bank guarantee of ₹ 25 lacs valid upto July 8, 2008. However after the
expiry of the contract, pursuant to mutual understanding, our Company continued to supply the explosives till
the alternate arrangements were made by the Respondent. The Respondent then finalized the tender with another
supplier and issued a notice to our Company to terminate the contract by forfeiting and invoking the performance
bank guarantee. Thereafter, our Company filed a writ petition no. 3885 / 2008 against the Respondent before the
High Court of Andhra Pradesh, wherein the court directed the Respondent to refund ₹ 40.71 lacs along with
interest at 24% i.e. the amount deducted towards penalty and risk purchase from bills only and did not consider
refunding the amount of bank guarantee invoked by the Respondent. Aggrieved by this direction, the Company
then filed an appeal before the High Court of Andhra Pradesh, which is currently pending.
B. Litigations involving our Subsidiaries
NIL
C. Tax Related Proceedings
Direct Tax Proceedings
There are two (2) income tax proceedings amounting to ₹ 34.39 Lacs approximately, involving our Company, pending
at various levels of adjudication.
Indirect Tax Proceedings
Except as disclosed in this chapter “Legal Proceedings”, there are no indirect tax proceedings involving our Company.
D. Litigations involving our Promoter
There is no litigation or legal action pending or taken by any ministry or department of the Government or statutory
authority against our Promoter during the last three years immediately preceding the year of the circulation of this
Placement Document and any direction issued by such ministry or department of the Government or statutory authority
upon conclusion of such litigation or legal action, except as disclosed below:
SEBI has issued show cause notices dated August 12, 2016 (“SCNs”) to Amar Nath Gupta, Shonika Gupta, daughter
of Amar Nath Gupta and Mahek Gupta, grand – daughter of Amar Nath Gupta, (together referred to as the
“Applicants”) for violation of regulation 29 (2) and 29 (3) of the Takeover Code and regulation 13 (4) and 13 (4A)
read with regulation 13(5) of the Insider Trading Regulations. The Applicants had failed to make disclosures regarding
195
the disposal of more than 2% of the share capital of the Company to the Company and stock exchanges within 2
working days of the transaction thereby violating regulation 29 (2) and 29 (3) of the Takeover Code. Further, the
Applicants had failed to make disclosure regarding the change in the shareholding exceeding 25,000 equity shares to
the Company and the stock exchanges within 2 working days of the transaction thereby violating regulation 13 (4)
and 13 (4A) of the Insider Trading Regulations. Pursuant to the SCNs, Amar Nath Gupta has vide letter dated
September 12, 2016 replied denying the allegations of SEBI and Shonika Gupta and Mahek Gupta have filed consent
applications with SEBI for settlement by consent order for delay in compliance by 1 year 11 months and 9 days and
the same is currently pending.
E. Litigation, inquiries, inspections or investigations under the Companies Act against our Company and / or
its Subsidiaries
There is no litigation, inquiries, inspections or investigations under the Companies Act initiated and/or taken against
our Company and / or its Subsidiaries in the last three years.
F. Prosecutions filed against, fines imposed on, or compounding of offences by our Company and / or its
Subsidiaries
There are no prosecutions filed against, fines imposed on, or compounding of offences by our Company and / or its
Subsidiaries in the last three years.
G. Material frauds committed against our Company in the last three years
There have been no material frauds committed against our Company in the last three years.
H. Summary of reservations or qualifications or adverse remarks of auditors in the last five financial years
immediately preceding the year of circulation of the Preliminary Placement Document and of their impact
on the financial statements and financial position of our Company and the corrective steps taken and
proposed to be taken by our Company for each of the said reservations or qualifications or adverse remarks
Except as provided in the section titled “Management's Discussion and Analysis of Financial Condition and Results
of Operations” beginning on page 74, there are no reservations or qualifications or adverse remarks of auditors in the
last five financial years immediately preceding the year of circulation of the Preliminary Placement Document.
196
INDEPENDENT ACCOUNTANTS
Our Company’s current statutory auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants, are
independent auditors with respect to our Company as required by the Companies Act and in accordance with the
guidelines issued by the Institute of Chartered Accountants of India. The Financial Statements, included in this
Placement Document, have been audited by M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants. Please see
the chapter titled “Financial Statements” beginning on page 199.
197
GENERAL INFORMATION
1. Our Company was incorporated as “Premier Explosives Private Limited” on February 14, 1980 in the Republic
of India as a private limited company under the provisions of Companies Act, 1956 with the Registrar of
Companies, Andhra Pradesh and Telangana, Hyderabad. Pursuant to conversion of our Company to a public
limited company, the name of our Company was changed to ‘Premier Explosives Limited’ and a fresh certificate
of incorporation consequent upon change of name on conversion to public limited company was issued by the
RoC on October 29, 1987. Our Corporate Identity Number is L24110TG1980PLC002633.
2. Our authorized capital is ₹ 1,500.00 Lacs divided into 150.00 Lacs Equity Shares of ₹ 10 each. As on the date
of the Preliminary Placement Document, the issued, subscribed and paid-up share capital of our Company is ₹
885.86 Lacs comprising of 88,58,575 Equity Shares of ₹ 10 each. For further details please see section “Capital
Structure” beginning on page 197.
3. Our Registered Office is located at Premier House, 11, Ishaq Colony, Near AOC Centre, Trimulgherry,
Secunderabad – 500 015, Telangana, India.
4. Under our Memorandum of Association, our principal objects are to carry out the business described in the
section “Business”. The objects are set out in Clause III of our Memorandum of Association.
5. The Issue was authorized and approved by our Board of Directors by resolutions dated April 14, 2017 and
approved by our shareholders, pursuant to a resolution passed at the EGM held on May 12, 2017.
6. We have applied for in-principle approvals from the Stock Exchanges under regulation 28(1) of the Listing
Regulations with the Stock Exchanges for the issue of the Equity Shares and have obtained in-principle approval
on May 15, 2017. We will apply for listing and final approvals to list our Equity Shares to be issued in the Issue
on the BSE and the NSE.
7. Copies of our Memorandum and Articles of Association will be available for inspection during usual business
hours on any weekday (except Saturdays and public holidays) during the offering period at our Registered
Office.
8. Other than as set forth in this Placement Document, there has been no significant change in our financial results
since March 31, 2016, the date of our last audited financial statements.
9. Except as disclosed in this Placement Document, we are not involved in any material legal proceedings and we
are not aware of any threatened legal proceedings, which, if determined adversely, could result in a material
adverse effect on our business, financial condition or results of operations.
10. Our Company has obtained necessary consents, approvals and authorisations required in connection with the
Issue.
11. Our Company‘s statutory auditors M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants have consented
to the inclusion of their reports on (i) the Financial Statements and (ii) certificate on the statement of tax benefits
dated May 15, 2017 in connection with the Issue.
12. We confirm that we are in compliance with minimum public shareholding requirements as specified under the
SCRR and as required under the Listing Regulations.
13. Our Company and the BRLM accept no responsibility for statements made otherwise than in this Placement
Document and anyone placing reliance on any other source of information, including our website
www.pelgel.com, would be doing so at his or her own risk.
198
14. The Floor Price for the Issue is ₹ 414.97 per Equity Share calculated in accordance with Regulation 85 of the
ICDR Regulations. Our Company offered a discount of 3.61% i.e. ₹ 14.97 on the Floor Price in terms of
Regulation 85 of the ICDR Regulations.
15. Details of the Compliance Officer:
Name: Vijayashree Kueumilla
Designation: Company Secretary and Compliance Officer
Address: Premier House, 11
Ishaq Colony, Near AOC Centre
Trimulgherry
Secunderabad – 500 015
Telangana, India
Telephone: +91 40 6614 6801/2
Fax: +91 44 2784 3431
Email: cs@ pelgel.com
199
FINANCIAL STATEMENTS
Financial Statements Page No
Limited review report and the unaudited financial statements for the nine months ended December
31, 2016
F – 1
Auditors Report and the audited financial statements for the Financial Year ended March 31, 2016 F – 11
Auditors Report and the audited financial statements for the Financial Year ended March 31, 2015 F – 76
Auditors Report and the audited financial statements for the Financial Year ended March 31, 2014 F – 111
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200
DECLARATION
Our Company certifies that all relevant provisions of Chapter VIII read with Schedule XVIII of the ICDR Regulations
have been complied with and no statement made in this Placement Document is contrary to the provisions of Chapter
VIII and Schedule XVIII of the ICDR Regulations and that all approvals and permissions required to carry on our
business have been obtained, are currently valid and have been complied with. Our Company further certifies that all
the statements in this Placement Document are true and correct.
Signed by
Col. Vikram Mahajan (Retd.)
Director (Marketing)
Date: May 20, 2017
Place: Secunderabad
201
DECLARATION IN ACCORDANCE WITH PAS-4
We the Board of Directors of the Company certify that:
(a) the Company has complied with the provisions of the Companies Act, 2013 and the rules made thereunder;
(b) the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and
(c) the monies received under the offer shall be used only for the purposes and objects indicated in the Placement
Document (which includes disclosures prescribed under Form PAS-4).
Signed by
________________
Col. Vikram Mahajan (Retd.)
Director (Marketing)
I am authorized by the Securities Allotment Committee, a committee of the Board of Directors of our Company vide
resolution dated May 20, 2017 to sign this form and declare that all the requirements of Companies Act, 2013 and the
rules made thereunder in respect of the subject matter of this form and matters incidental thereto have been complied
with. Whatever is stated in this form and in the attachments thereto is true, correct and complete and no information
material to the subject matter of this form has been suppressed or concealed and is as per the original records
maintained by the promoters subscribing to the Memorandum of Association and Articles of Association.
It is further declared and verified that all the required attachments have been completely, correctly and legibly attached
to this form.
Signed by
________________
Col. Vikram Mahajan (Retd.)
Director (Marketing)
Date: May 20, 2017
Place: Secunderabad
202
PREMIER EXPLOSIVES LIMITED
REGISTERED OFFICE
Premier House, 11, Ishaq Colony
Near AOC Centre, Trimulgherry
Secunderabad – 500 015
Telangana, India
Telephone: +91 40 6614 6801/2; Fax: +91 44 2784 3431
Website: www.pelgel.com, Email: investor@ pelgel.com
CIN:L24110TG1980PLC002633
ADDRESS OF THE COMPLIANCE OFFICER
Vijayashree Kueumilla
Premier House, 11, Ishaq Colony
Near AOC Centre, Trimulgherry
Secunderabad – 500 015
Telangana, India
Telephone: +91 40 6614 6801/2; Fax: +91 44 2784 3431
Email: cs@ pelgel.com
BOOK RUNNING LEAD MANAGER
Emkay Global Financial Services Limited
7th Floor, The Ruby
Senapati Bapat Marg, Dadar (West)
Mumbai – 400 028
Maharashtra, India
Telephone: +91– 22 – 6612 1212 Fax: +91– 22 – 6612 1299
Email: [email protected]
DOMESTIC LEGAL ADVISOR TO THE ISSUE
M/s. Crawford Bayley & Co.
State Bank Buildings, 4th Floor
N.G.N. Vaidya Marg, Fort
Mumbai 400 023
Maharashtra, India
SPECIAL INTERNATIONAL COUNSEL TO OUR COMPANY
Duane Morris & Selvam LLP
16 Collyer Quay, Floor 17
Singapore – 049 318
STATUTORY AUDITORS OF OUR COMPANY
M/s. P.V.R.K. Nageswara Rao & Co.
Chartered Accountants
109, Metro Residency
6-3-1247, Rajbhavan Road, Somajiguda
Hyderabad – 500 082
Telangana, India.
Firm’s Registration Number: 002283S