Department of Disinvestment, Ministry of Finance, Govt. of India

21 May 2012 8:37:13 AM

 

            PRELIMINARY INFORMATION

            MEMORANDUM

            (PIM)

OF

HINDUSTAN ORGANIC CHEMICALS LIMITED

(HOCL)

January 2003

 

Disclaimer

M/s. A. F. Ferguson & Co. (“AFF”) has prepared this Preliminary Information Memorandum (PIM) on the basis of information provided by Hindustan Organic Chemicals Limited (“HOCL”).  The sole purpose of this PIM is to assist the recipients interested in being the ‘Strategic Partner’ to participate in the process leading to the proposed sale of 32.61% equity of HOCL by the Government of India (“GOI”).

This document is not intended to form the basis of any investment decision or any decision to purchase any securities or any decision to participate in the process. It does not constitute an offer or invitation or solicitation of an offer, to subscribe to or purchase any securities.

While this document has been prepared in good faith, no representation or warranty, express or implied, is or will be made, and no responsibility or liability will be accepted by HOCL, AFF or the GOI or any of their employees, advisors or agents as to or in relation to the accuracy or completeness of this document or any other oral or written information made available to any interested recipient or its advisors at any time during the disinvestment process and any liability thereof is hereby expressly disclaimed. Any liability is accordingly expressly disclaimed even if any loss or damage is caused by any act or omission on part of the aforesaid, whether negligent or otherwise.

Neither this document nor anything contained herein shall form a basis of any contract or commitment whatsoever. Any prospective purchaser will be required to acknowledge in the Transaction agreements that he has not relied on or been induced to enter into such agreement by any representation or warranty, save as expressly set out in such an agreement.

Accordingly, interested parties are advised to carry out their own due diligence, investigations and analysis of any information contained or referred to herein or made available at any stage in the disinvestment process.

AFF, HOCL and GOI undertake no obligation to provide the recipient with any additional information or update this document and reserve the right, at any time and without notice, to change or modify the procedure or process for disinvestment, terminate the due diligence or negotiations or any part of or the entire disinvestment process.

              This document has not been filed, registered or approved in any jurisdiction. Recipients of this document, particularly in jurisdictions outside India, should inform themselves of and observe any applicable legal requirements.


TABLE OF CONTENTS

 

1        SUBMISSION OF EXPRESSION OF INTEREST (EOI)               3

  2        CORPORATE & MANAGEMENT INFORMATION                     9

  3        BUSINESS REVIEW                                                                      11

  4        FINANCIAL SUMMARY                                                               15

  5        Restructuring  package                                                     17

 


 

1.   Submission of expression of interest (EOI)

1.        Introduction

1.1              Hindustan Organic Chemicals Limited (“HOCL”) was incorporated on December 12, 1960 as a wholly owned Government of India enterprise under the Companies Act, 1956. The company is under the administrative control of Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers. As a part of its disinvestment programme, the Government of India (“GOI”) intends to disinvest 32.61% equity in HOCL to a Strategic Partner.

1.2              M/s. A. F. Ferguson & Co. (“AFF”) have been appointed as advisors to the GOI through Ministry  of Disinvestment (“MODI”) for the proposed disinvestment process and matters relating thereto.

1.3              GOI has approved in-principle a conditional restructuring package for HOCL consisting of cash support of Rs. 200 crores and non-cash support through continuation of exiting government guarantee of Rs. 1000 million, which shall be implemented only if the GOI can conclude the disinvestment of 32.61% shareholding of HOCL to the Strategic Partner. The restructuring is expected to significantly improve the financial position of HOCL. The details of restructuring package have been provided in Chapter 5.

Invitation of EoIs

1.4              An advertisement has been issued in the newspapers inviting interested parties to submit their ‘Expression of Interest’ to participate in the disinvestment process, a copy of which is enclosed as Annexure I.

1.5              Expression of Interest may be submitted by domestic/international companies (whether currently existing or to be formed specifically to participate in the joint venture formation process), either individually or as a consortium, for holding up to 32.61% equity of HOCL. In case of consortium bids, a lead bidder would need to be identified.

1.6              The parties who had submitted their Expression of Interest’ (EOI) in response to the previous Advertisement dated September 1, 2001 issued for inviting EOIs and were declared as Qualified Interested Parties (QIPs) would continue to be treated as QIPs in response to the above advertisement subject to their continuity to fulfill the eligibility criteria, continued interest and submission of Statement of Legal Capacity in the format at Annexure IV.  AFF would inform such parties about their continuation as QIPs separately.

 

Pre-eligibility criteria

1.7              The interested party(ies) should have a combined turnover in excess of Rs.2500 million as per the latest annual accounts and a satisfactory business and management track record.

1.8              In case of a consortium bid, the financial parameters of the lead bidder must be at least 51% of the amount indicated in paragraph 1.7 above.

1.9              Where the financial statement is expressed in currency other than Indian Rupee, the eligible amount as described above shall be computed by taking the equivalent US Dollars at the exchange rates (as stipulated by Foreign Exchange Dealers Association of India) prevailing on the date(s) of such financial statement. 

1.10          Definition

v          Turnover

Turnover = Turnover net of excise and excluding trading turnover.

Where Turnover in the Annual Accounts is inclusive of excise, a statement showing Turnover net of excise is to be provided by the party.

 

Format for submission of EOIs

1.11          The interested parties should submit the Expression of Interest (“EoI”), which shall comprise of the Expression Letter (Annexure II), Request for Qualification (the “RFQ” in Annexure III), and Statement of Legal Capacity (the “SLC” in Annexure IV). The Expression Letter, RFQ and SLC should be duly signed by the interested party/designated lead bidder of the consortium.  However, the RFQ and SLC will have to be submitted by each member of the consortium duly signed by an authorised official of the member. The RFQ should be duly filled in and accompanied by the following details:

v          In case of a sole bidder

Ø      The Audited Balance Sheet and Profit & Loss Account of the sole bidder (Indian company/Foreign company) for the last 3 financial years

Ø      Write-up on:

-         Profile of the sole bidder

-         A statement of reasons for strategic interest in HOCL

-         Any other information considered material

v          In case of a consortium bid

Ø      The audited Balance Sheet and the Profit & Loss Account for the last 3 financial years of the lead bidder and other member companies associated in the bid.

Ø      Write-up on:

-         Name of the lead bidder and its profile

-         Profile of other member companies in the consortium

-         A statement of reasons for strategic interest in HOCL

-         Any other information considered material

1.12          Any change by way of withdrawal/substitution of any member of the consortium or any change affecting the composition of the consortium may be permitted up to the stage of submission of financial bid.  GOI has the sole discretion to determine the impact of the change in membership on the quality of the consortium and reject a proposal for such reason.

1.13          The EOI must be in English and each copy shall be bound in a separate volume.  Submission of the aforesaid documents by electronic means will not be acceptable.  The EOI duly completed along with the details should be submitted not later than 17.30 Hrs. (IST) on 17th February, 2003 in a sealed envelope superscribed “Private and Confidential – Expression of Interest for HOCL” at the following address:

 


Disqualification

1.14          Without prejudice, a company/consortium may be disqualified and its EOI dropped from further consideration for any of the reasons listed below:

v          Material misrepresentation by such company/member of consortium in the EOI, RFQ and/or SLC.

v          Failure by such company/consortium to provide the information required to be provided in the EOI, RFQ and SLC, and

v          Submission of EOI, RFQ and SLC in respect of any company/ consortium, where such company or member had already submitted an EOI or is a member of a consortium, which has already submitted an EOI.

1.15          If any information becomes known after the interested party has been qualified to receive the Confidential Information Memorandum which would have entitled Government of India/HOCL to reject or disqualify the relevant company/consortium, Government of India/HOCL reserves the right to reject the interested party at the time or at any time after such information becomes known to GOI or HOCL.  GOI shall not consider for the purpose of qualification of EOI, which has been found to be incomplete in content or attachments or authenticity.

1.16          Further, Government of India issued guidelines for disqualification of bidders seeking to acquire any public sector enterprises through the process of disinvestment vide Department of Disinvestment OM No.6/4/2001-DD-II dated 13th July 2001, a copy of which is enclosed as Annexure-IV.  The interested party(ies) are required to read the guidelines and satisfy themselves that they are qualified to bid for the stake in HOCL through the process of disinvestment and give an undertaking to the effect that they are qualified to bid for the stake in HOCL in the Expression of Interest to be submitted by them.  Further, interested parties would be required to provide the information on the criteria, laid down in the guidelines of 13.7.2001 along with their Expressions of Interest (EOI).  The bidders shall be required to provide with their EOI an undertaking to the effect that no investigation by a regulatory authority is pending against them.  In case any investigation is pending against the concern or its sister concern or against its CEO or any of its Directors/Managers/employees, full details of such investigation including the name of the investigating agency, the charge/offence for which the investigation has been launched, name and designation of persons against whom the investigation has been launched and other relevant information should be disclosed, to the satisfaction of the Government.  For other criteria also, a similar undertaking shall be provided along with EOI.

1.17          Where the interested party is a consortium, GOI may disqualify the entire consortium for any of the reasons specified above, even if it applied to only one member of the consortium.

1.18          The companies/consortia not satisfying the eligibility and requisite qualification criteria specified in the above sections are not eligible.

Other terms

1.19          The EOI submitted by interested parties shall be evaluated on the basis of the criteria specified elsewhere in this document.  If at any time during the evaluation process, GOI require any clarification, it reserves the right to request such information from any or all of the companies/consortia and the companies/consortia will be obliged to provide the same within reasonable time frame. All pre-qualified parties will be required to execute a Confidentiality Undertaking. The Confidential Information Memorandum shall be issued only to the pre-qualified parties which execute the Confidentiality Undertaking.

1.20          This document constitutes no form of commitment on the part of the GOI or AFF other than to provide further information on HOCL. Furthermore, this document confers neither the right nor an expectation on any party to participate in the proposed divestment process.

1.21          GOI reserves the right to withdraw from the process or any part thereof, to accept or reject any /all offer(s) at any stage of the process and/or modify the process or any part thereof or to vary any terms without assigning any reasons. No financial obligations will accrue to GoI or AFF in such an event. Neither GoI nor AFF shall be responsible for non-receipt of correspondence sent by post / e-mail / courier / fax.

Further Process

1.22          Based on an evaluation of EOIs received, interested parties, which are deemed fit (“qualified interested parties” “QIP”), will be qualified to participate in the subsequent selection process (without conferring any right or expectation whatsoever to QIP).  QIP will be provided with the Confidential Information Memorandum (CIM) and shall be invited to participate further in the process described in detail in the CIM.  QIP will get an opportunity to conduct a due diligence and take up plant visits and will also have access to data rooms and hold discussions with the management of HOCL/officials of Department of Chemicals & Petrochemicals/Ministry of Disinvestment, Government of India.  The rules regarding access to information in the data rooms will be provided to QIPs later. QIPs will be invited to submit  proposal detailing their technical, financial and commercial capabilities and a binding price bid.

1.23          The interested parties are expected to undertake due-diligence at a short notice after intimation of their qualification for further process. The QIPs would be required to submit their price bids immediately thereafter. 

1.24          QIPs will be provided with a copy of the draft Shareholders Agreement and draft Share Purchase Agreement (the “Transaction Documents”) which has been prepared by the GOI for the proposed disinvestment transaction. It should be noted that the GOI may not consider any amendments to the draft Shareholders Agreement and draft Share Purchase Agreement except for certain limited changes which may be imperative. 

Governing Laws/Jurisdiction

1.25          The laws of Union of India shall govern all matters relating to the joint venture formation process and the bidding procedure.  Only Courts at New Delhi (with exclusion of all other Courts) shall have the jurisdiction to decide or adjudicate on any matter, which may arise out of or in connection with the joint venture participation.

 

2.    Corporate Information

2.1              HOCL was set up as a conglomerate of small chemical plants, with the intention of promoting indigenous manufacture of basic chemicals and reducing the country’s dependence on import of vital organic chemicals. It manufactures basic organic chemicals essential for industries such as dyes and dye-intermediates, drugs and pharmaceutical, rubber, chemicals, laminates and solvent industries.

2.2              At present, HOCL produces aniline, nitrobenzene, hydrogen, acetanilide, formaldehyde, monochlorobenzene, nitrochlorobenzene, nitrotolouene, conc. nitric acid and sulphuric acid at Rasayani and phenol, acetone and hydrogen peroxide (H2O2) at Cochin.

Corporate and Branch Offices

2.3              HOCL’s registered office is located at Rasayani, and the Corporate office is located at Mumbai.  The Company’s branch offices are situated at Cochin, Chennai, Hyderabad, Baroda and Delhi. The addresses of its registered and corporate offices are given below:

 

 

ATTRACTIVENESS OF HOCL 

2.4              Key features of HOCL have been summarized below:

Ø      Established player in the organic chemical market for nearly 50 years.

Ø      Wide product portfolio including products such as phenol, acetone, nitrobenzene, aniline, nitrotoluenes, chlorobenzenes and nitrochlorobenzenes. 

Ø      Multi-locational production consisting of facilities at Rasayani (Maharashtra, Western India) and Cochin (Kerala, South India).

Ø      HOCL’s products conform to international standards. It’s quality assurance system at Rasayani and Kochi units has been recognised with ISO 9002 Certification by Bureau of Veritas Quality International (BVQI). The Cochin unit has recently been awarded the ISO 14000 Quality certification.

Ø      HOCL has attained ‘Export House’ status from the Department of Foreign Trade, Ministry of Commerce through its sustained efforts to develop its export market.

Ø      HOCL’s R&D efforts have been recognised by various manufacturing associations such as All India Manufacturers’ Organisation (AIMO), Indian Chemicals Manufacturers Association (ICMA), Dyestuff Manufacturing Industries Association (DMIA), etc.

Equity Share Capital

2.5              HOCL’s equity base comprises of authorized capital of Rs. 700 million divided into 7,00,00,000 equity shares of Rs. 10/- each. The issued and paid up capital of the company as on March 31, 2002 is Rs. 673.66 million divided into 6,73,66,100 shares of Rs. 10/- each.

2.6              The Government of India held 100% of the equity in HOCL till 1992. Between 1992 and 1994, GOI disinvested 20 per cent of its share in favour of Mutual Funds and the Unit Trust of India (UTI). In November 1994, HOCL raised Rs.96.65 crore by way of a rights-cum-public issue of equity shares at a premium of Rs.40 per share thereby reducing its stake to 58.61%. The GOI intends to further disinvest 32.61% of its equity stake in HOCL in favour of a Strategic Partner.

2.7              HOCL’s equity shares are listed at both the major stock exchanges of the country viz., Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) as well as other stock exchanges at Ahmedabad, Cochin, Calcutta, Delhi and Hyderabad.

Employee Strength

2.8              The employee strength of HOCL on September 30, 2002 was 1568 persons (1100 employees in Rasayani and 468 employees in Kochi). The Company implemented VRS schemes over the last four years which was opted by more than 500 employees.

 

SUBSIDIARIES

2.9              In 1987-88, HOCL set up Hindustan Flourocarbons Limited (HFL), a wholly owned subsidiary, at Hyderabad. The subsidiary manufactures polytetrafluoroethylene (PTFE), a versatile and high engineering plastic. It also manufactures chloro di fluoro methane (CFM22). The subsidiary company was referred to the BIFR in April, 1994. IDBI has been approached with a proposal to identify new buyers to invest in the company. The proposal is still pending with IDBI.

 

3.   Business Review

3.1              This chapter provides information on HOCL’s production facilities, end-user analysis of its products, raw materials used in the course of production, sales and product mix, capacity utilisation, contract manufacturing arrangements, environment record, quality standards and research and development.

Production Facilities

3.2              HOCL is an established player in the field of organic chemicals and has its manufacturing units located at Rasayani (near Mumbai, Maharashtra) and Cochin (Kerala).  The manufacturing facilities available are as under:

Ø      Integrated Nitroaromatic Complex at Rasayani

Ø      Phenol Complex at Cochin

3.3              The Company’s first production unit commenced operations at Rasayani in the year 1970. It was one of the earliest chemical plants set up in Rasayani, which developed later into an important chemical hub in India. In the first phase, between 1970 and 1976, nitrobenzene, aniline, hydrogen, monochlorobenzene, nitrochlorobenzene, and nitrotoluene plants were set up. The second phase of expansion was done in 1980-81 when nitrobenzene, aniline, hydrogen and concentrated nitric acid were added. The third phase was commissioned during 1994-95.

3.4              In March 1988, the company commissioned the phenol complex at Cochin, with facilities to manufacture Phenol and Acetone through the Cumene route. Subsequently, facilities to manufacture propylene and hydrogen peroxide were added as a part of backward integration initiative.

3.5              In addition, two new projects were implemented viz. 20000 TPA caustic soda lye/ chlorine at Rasayani and 5225 TPA hydrogen peroxide at Cochin as a backward integration/ diversification strategy.

END USES OF HOCL'S PRODUCTS

3.6              HOCL manufactures organic chemicals which serve as basic inputs for vital user industries such as dye-intermediates and dyes industry, drugs and pharmaceuticals, rubber chemicals, paper and textile, resin industry for plywood, particle boards, laminated sheets, foundry, leather and explosives. The approximate end-use of various products has been given below in Exhibit 3.1

 

Exhibit 3.1

End–User Analysis  

Sales and Product-mix

3.7              HOCL’s income from operations from its major products has been presented in Exhibit 3.2.

Exhibit 3.2

Product-wise revenue

Rs. in million

Products

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

 

Amt

%

Amt

%

Amt

%

Amt

%

Amt

%

Amt

%

Amt

%

Phenol

1522.4

34.90

1357

33.70

1618.7

35.70

1420.2

34.50

1348.6

32.90

1862.3

45.71

1074.9

35.72

Aniline

648.3

14.90

770.8

19.10

782.7

17.20

667.4

16.20

673.3

16.40

408.4

10.03

699.9

23.26

Acetone

994.8

22.80

513.6

12.80

709.7

15.60

595.1

14.40

726.9

17.70

952.5

23.38

544.7

18.10

Nitroproducts

638.4

14.60

762.6

18.90

649.3

14.30

602.6

14.60

527.9

12.90

220

5.40

169.5

5.63

Formaldehyde

206.3

4.70

232.1

5.80

293.9

6.50

261

6.30

238.2

5.80

217.1

5.33

190.3

6.32

Acetanilide

176.1

4.00

211.5

5.30

232.4

5.10

235.8

5.70

201

4.90

40.1

0.98

-0.17

-0.01

Others including by-products

173.4

4.00

179.1

4.40

252.8

5.60

339.3

8.20

385

9.40

373.4

 

9.17

330.47

10.98

Total Sales

4359.8

100

4026.7

100

4539.6

100

4121.3

100

4100.9

100

4073.8

100

3009.6

100

Note : Other products include chlorobenzene, byproducts, caustic soda, acids, acetyl products etc.

Source : Annual Report of Hindustan Organic Chemicals Limited

3.8              The major products of HOCL comprise phenol, aniline, acetone, nitroproducts, formaldehyde and acetanilide, together constituting 85-90 per cent of the total sales.

Production Capacities and Utilisation

3.9              Production units at Cochin and Rasayani have been well maintained. Over the years, HOCL’s management has undertaken several upgradations to maintain the quality of their products. The product-wise details of installed capacity and capacity utilisation are shown in Exhibit 3.3.

Exhibit 3.3

Capacity Utilisation

Products

Inst.Capacity

Production

Utilisation

Production

Utilisation

Production

Utilisation

 

TPA

2000

2001

2002

 

 

MT

%

MT

%

MT

%

Nitroproducts

55430

44492

80.27%

17911

32.31%

23400

42.22%

Hydrogen

1600

1485

92.81%

622

38.88%

1014

63.38%

Aniline

25100

21304

84.88%

8727

34.77%

14505

57.79%

Acetanilide

3000

4572

152.40%

762

25.40%

0

0.00%

Acids

63000

68500

108.73%

30679

48.70%

30468

48.36%

Formaldehyde

33000

39821

120.67%

25154

76.22%

26637

80.72%

Chlorobenzene

15650

4811

30.74%

63

0.40%

0

0.00%

Caustic soda

36000

1734

4.82%

0

0.00%

0

0.00%

Phenol

40000

39261

98.15%

39054

97.64%

28562

71.41%

Acetone

24640

24627

99.95%

24397

99.01%

17918

72.72%

Hydro.Peroxide

5225

5293

101.30%

5903

112.98%

5475

104.78%

Propylene

29000

22215

76.60%

27132

93.56%

17348

59.82%

Cumene

54000

44549

82.50%

51373

95.14%

35335

65.44%

Source: Annual Report of Hindustan Organic Chemicals Limited

 

ENVIRONMENTAL TRACK RECORD

3.10          HOCL’s environmental policy aims at prevention of pollution, minimization of waste, conservation of natural resources and promotion of safety at work place. It adopts a zero pollution system in treating its effluent and has also focused on the green belt around its plant. Safety, occupational health and environmental protection continue to be accorded priority and safety standards are constantly reviewed. HOCL is one of the signatories to the ‘Responsible Care’ movement, which renders international focus to the chemical world. The company has made investments in various pollution control systems at its production unit.

Quality Standards

3.11          HOCL’s products conform to international standards. Its quality assurance system in its Cochin and Rasayani units has been recognised with ISO 9002 certificate by Bureau Veritas Quality International (BVQI). The Cochin unit has also received ISO 14001 certification in Environmental Management System.

Research and Development

3.12          R&D forms an integral part of the corporate strategy at HOCL to provide in-house support to operations and development of new products with focus on technology absorption, cost reduction in various plants, improvement of yield, quality of end products, reduction of waste etc. A team of qualified personnel currently mans the R&D group. HOCL’s R&D efforts aims at developing new molecules or to develop in-house process for the products with established application thereby responding to new markets for HOCL. It has also entered into collaborations with reputed institutions such as Indian Institute of Chemical Technology, Hyderabad and National Chemical Laboratory, Pune to give more value addition to its endeavours in R&D.

 

4.1              This chapter presents a brief background on the financials of HOCL.

BALANCE SHEET

4.2              The Balance Sheet of HOCL for the last seven years has been presented in Exhibit 4.1

Exhibit 4.1 - Balance Sheet

Rs. in Million

Particulars

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

Sources of Funds

 

 

 

 

 

 

 

Share Capital

672.53

672.63

672.66

672.66

672.69

672.69

672.69

Reserves

3234.9

3206

3083.12

2818.96

1759.63

1348.45

1016.61

Shareholder's Funds

3907.43

3878.63

3755.77

3491.62

2432.32

2021.14

1689.3

Secured Loans

847.35

2041.12

2355.07

2339.25

1916.89

2149.46

2959.99

Unsecured Loans

418.19

365.94

458.34

482.88

1307.48

1400.73

1173.89

Loan Funds

1265.54

2407.07

2813.41

2822.13

3224.37

3550.19

4133.88

Total Sources of Funds

5172.97

6285.69

6569.18

6313.75

5656.69

5571.33

5823.18

Application of Funds

 

 

 

 

 

 

 

Gross Block

4484.12

5138.19

6459.56

6684.24

6750.23

6727.25

6721.78

Less: Depreciation

1571.65

1745.09

1988.21

2253.64

2538.52

2767.36

3039.31

Net Fixed Assets

2912.47

3393.1

4471.35

4430.61

4211.72

3959.89

3682.47

New projects under erection

632.11

1214.66

343.4

378.14

366.5

349.6

358.23

Investments

124.69

122.19

118.19

118.19

118.19

118.19

114.74

Current Assets, Loans & advances

 

 

 

 

 

 

 

Inventories

727.36

802.11

796.43

717.14

599.58

654.99

406.50

Sundry Debtors

811.76

915.07

989.26

865.89

816.67

565.20

432.40

Cash and Bank Balances

104.9

87.06

82.32

64.83

49.84

54.38

128.00

Loans and Advances

696.46

723.48

729.27

836.48

670.85

583.03

552.01

Other Current Assets

62.8

71.94

93.87

94.9

98.76

100.8

88.76

Current Assets, loans and advances

2403.28

2599.65

2691.15

2579.24

2235.69

1958.4

1607.67

Less: Current Liabilities & Provns.

943.45

1082.3

1087.81

1221.64

1305.58

857.24

726.65

Net Current Assets

1459.83

1517.35

1603.34

1357.59

930.11

1101.16

881.02

Misc. Expenditure

43.87

38.39

32.9

29.22

30.18

42.49

165.19

Deferred Tax Assets

 

 

 

 

 

 

488.04

Profit & Loss Account

 

 

 

 

 

 

133.49

Total Application of Funds

5172.97

6285.69

6569.18

6313.75

5656.69

5571.33

5823.18

Source: Annual Report of Hindustan Organic Chemicals Limited

PROFIT AND LOSS STATEMENT 

4.3              The Profit and Loss Statement for the last seven years has been presented in Exhibit 4.2.

Exhibit 4.2
Profit and Loss Statement

Rs. in million

Particulars 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

6 mths. ended Sept. 02

Income

 

 

 

 

 

 

 

 

Sales

4359.82

4026.72

4539.64

4121.34

4100.9

4073.82

3009.59

2078.40

Sales of trading goods

249.95

264.72

223.72

44.00

110.93

4.81

0.77

-

Other Income

104.92

94.47

201.29

216.92

99.92

118.42

81.94

29.40

Profit on sale of assets

0.04

0

0.15

0.01

0.01

4.30

0.97

-

Increase/(decrease) in stock-in-trade

57.32

-87.42

50.73

-3.06

-206.89

52.42

-113.81

45.20

Total          (A)

4772.06

4298.49

5015.54

4379.21

4104.85

4253.77

2979.46

2153.00

Expenditure

 

 

 

 

 

 

 

 

Raw Mat. & Mfg Exps.

2922.78

2794.63

3123.56

2573.55

2716.03

3335.77

2600.52

1683.80

Employee Remuneration

377.44

411.78

461.21

480.22

492.81

463.05

479.15

202.10

Overheads

637.69

728.51

944.99

923.41

921.88

*

*

*

Provisions

4.49

-

4.49

5.3

167.45

45.13

71.34

*

Loss on sale of assets

2.94

0.04

0.03

3.64

0.05

8.02

*

*

Total         (B)

3945.35

3934.95

4534.27

3986.13

4298.23

3851.97

3151.01

1885.90

OPBIDT          (A-B)

826.71

363.54

481.26

393.08

-193.37

401.80

-171.55

267.10

Interest

59.19

93.87

288.18

321.36

469.34

492.05

460.19

226.30

OPBDT

767.52

269.67

193.08

71.73

-662.72

-90.25

-631.74

40.80

Depreciation

129.74

173.77

243.97

271.71

284.23

284.54

282.77

141.40

PBT

637.78

95.9

-50.89

-199.98

-946.95

-374.79

-914.51

-100.60

Prior Period Adj (Net)

57.85

63.65

42.68

-30.68

-103.24

15.8

34.06

-

NPBT

695.63

159.55

-8.22

-230.66

-1,050.19

-390.59

-948.57

-100.60

Tax for the year

94.78

3.15

0.03

0.03

0.01

0.00

321.79

-

Profit After Tax

600.85

156.4

-8.25

-230.69

-1,050.20

-390.59

-626.78

-100.60

                Source: Annual Report of Hindustan Organic Chemicals Limited

                * : Not shown separately

4.4              For the six months ending September 2002, the Company has reported turnover of Rs.2078.4 million, PBDIT of Rs. 267.10 million, net loss of Rs. 100.60 million and cash profit of Rs. 40.8 million.

 

5.     Restructuring Package

5.1       The details of the conditional restructuring package as approved in-principle by the GOI are as follows. It should be noted that the restructuring package shall be implemented only if the GOI can conclude the disinvestment of 32.61% shareholding of HOCL to the Strategic Partner.

Non-Cash Based

5.2       The existing Government Guarantee of Rs. 1000 million, which has been given to HOCL for raising an existing loan, shall be continued after disinvestment.

5.3       The terms of the above Government Guarantee (GG) shall be as follows:

(1)               GG shall be available for a maximum period of 3 years from the closing date and the tenure of the GG shall be linked with the ‘Call and Put’ option period defined in the Transaction Documents.

(2)               Validity period of GG will be three years from the closing date.

(3)               Strategic Partner (SP) shall release the GG if the Put option is exercised by the GOI or the Call option is exercised by the Strategic Partner.

(4)               GG shall be backed by charge on HOCL assets.

(5)               In case of default by SP, it shall be a major event of default and GOI shall have the right to buy back the shares from SP as per the default clause apart from other recourses contained in the Transaction Documents.

Cash Based

5.4       GOI shall support upto a maximum of  Rs. 2000 million towards implementation of voluntary retirement scheme (VRS) for about 500 employees and other requirements indicated below.

(1)               To provide support upto a maximum of Rs. 310 million to fund the VRS given in the past (which at present has been funded by loan).

(2)               To provide support upto a maximum of Rs. 300 million to fund fresh VRS after the disinvestment to retire about 500 employees.  The SP has to implement the VRS within a period of 3 years and the VRS fund shall be given only against the actual use.

(3)               To provide support upto a maximum of Rs. 780 million to fund part of past cash losses.

(4)               To provide upto a maximum of Rs 350 million to fund the non core assets (detailed in subsequent paragraph) of HOCL. HOCL, after the disinvestment, shall dispose off the identified assets, and the sales realisation shall be paid to the Government of India.

(5)               To provide upto a maximum of Rs.260 million  for transfer of existing loan  given by HOCL to its sick subsidiary, Hindustan Fluorocarbons Ltd.

5.5       The above funding by GOI to the extent of Rs.1700 million (i.e. other than upto a maximum of Rs. 300 million towards fresh VRS) shall be used by HOCL only towards the retirement of the old loans

5.6       The details of non core assets are as follows:

S. No.

Particulars

Book Value (Rs. million)

1.

Tank Farm Facility at JNPT Project

298.60

2.

1000 Sq. Mtrs. Plot at Kharghar

30.80

3.

Residential Flats (10 Nos.) at Nestle Apartments, Worli, Mumbai

16.40

4.

8 Acres Land at Panvel for Housing Colony

6.90

 

 

 


ANNEXURE-I

GOVERNMENT OF INDIA

Strategic Sale of Shareholding in Hindustan Organic Chemicals Limited (HOCL)

This announcement is neither a prospectus nor an offer or Invitation for sale to the public of securities

Expression of Interest (EOI)

The Government of India ("GOI"), wishes to disinvest a part of its shareholding in Hindustan Organic Chemicals Limited (HOCL), amounting to 32.61% of the equity capital to a Strategic Partner (SP) and to transfer control to manage the affairs of HOCL to the SP. A. F. Ferguson & Co. (AFF) has been appointed as Advisor to the GOI in connection with the proposed sale.

 

HOCL is one of the leading manufacturers of organic chemicals and petrochemicals having ISO 9002 certification. HOCL’s turnover for twelve months ended March 31, 2002 was Rs.3009.59 million and for six months ended September 30, 2002 was Rs. 2078.40 million.

 

GOI has approved in-principle a restructuring package for HOCL consisting of cash support upto a maximum of Rs. 2000 million and non-cash support upto a maximum of Rs. 1000 million, which shall be implemented only if the GOI can conclude the disinvestment of 32.61% shareholding of HOCL to the Strategic Partner.  The restructuring is expected to significantly improve the financial position of HOCL.

Interested Parties are required to submit their Expression of Interest (EOI) in the prescribed formats specified in the Preliminary Information Memorandum (PIM) at the under-mentioned address by not later than 17.30 hours (IST) on 17th February, 2003. (The parties who have responded to the earlier advertisement dated 1.9.2001 may specifically refer to paragraph 1.6 of the PIM.)

The PIM containing eligibility requirements, formats of EOI, further information about HOCL, details of restructuring package etc. can be obtained either from the under-mentioned persons or accessed from the websites: www.hoclindia.com and www.divest.nic.in.

 

All queries and questions related to the EOI may be addressed to the under-mentioned person. 

 

Mr. Monish Shah, Manager,

A. F. Ferguson & Co.

11th Floor, Express Towers, Mumbai-400 021, India     

Tel  : 0091-22-22022427, Fax  : 0091-22-22022769            

e-mail : affmum@vsnl.com                 

GOI reserves the right to withdraw from the process or any part thereof, to accept or reject any /all offer(s) at any stage of the process and/or modify the process or any part thereof or to vary any terms without assigning any reasons. No financial obligations will accrue to GOI or AFF in such an event. Neither GOI nor AFF shall be responsible for non-receipt of correspondence sent by post / e-mail / courier / fax. 


ANNEXURE-II

 

EXPRESSION OF INTEREST

 

(To be forwarded on the letterhead of the interested party(ies)/lead

bidder/member(s) of the consortium submitting the EOI)

 

Reference No.______________                                                        Date ___________

 

Mr. Monish Shah                                                           

Manager                                                                      

A.F. Ferguson & Co.                                                  

11th Floor, Express Towers,                                        

Nariman Point,                                                

Mumbai-400 021.                                                     

 

Expression of Interest for Disinvestment in Hindustan Organic Chemicals Limited

 

Sir,

 

This is with reference to the advertisement dated ________ inviting Expression of Interest for Hindustan Organic Chemicals Ltd.  As specified in the advertisement, the Preliminary Information Memorandum was made available to us.

 

We have read and understood the contents of PIM and are desirous of participating in the above disinvestment process, and for this purpose:

 

We propose to submit our EOI in individual capacity as __________________

 

We have formed/propose to form a consortium comprising of ____members as follows:

1.         ____________________________

2.         ____________________________

3.         ____________________________

 

We state that we/our consortium/proposed consortium satisfies the eligibility criteria set out in relevant sections of the PIM including the guidelines for qualification of bidders seeking to acquire stakes in Public Sector Enterprises through the process of disinvestment issued by the Government of India vide Department of Disinvestment OM No.6/4/2001-DD-II dated 13th July 2001, as amended. 

 

We certify that in regard to matters other than security and integrity of the country, we have not been convicted by a Court of law or indicted or adverse orders passed by a regulatory authority which would cast a doubt on our ability to manage the public sector unit when it is disinvested or which relates to a grave offence that outrages the moral sense of the community.

 

We further certify that in regard to matters relating to security and integrity of the country we have not been convicted by a court of Law for any offence committed by us or by any of our sister concern and no charge sheet has been filed by any agency of the Government for any offence committed by us or by any of our sister concern.

 

We further certify that no investigation by a regulatory authority is pending either against us or against our sister concern or against our CEO or any of our Directors/Managers/employees.

 

The Request of Qualification as per format duly signed by us/respective members, who jointly satisfy the eligibility criteria, is enclosed.

 

We shall be glad to receive further communication on the subject.

 

Yours faithfully,

 

 

Authorised Signatory

For and on behalf of

 

Enclosure: Request for Qualification                                                   

 

 


 

ANNEXURE-III

 

REQUEST FOR QUALIFICATION

 

(To be submitted in respect of each member of the consortium)

 

Name of the interested Party(ies)/Member(s) ___________________________

Constitution (Tick, wherever applicable)         Sector (Tick, wherever applicable)

 

-           Public Limited Company                     

-          Public Sector

-           Private Limited Company

-           Joint Sector

-           Others, If any

 

   -          If others, please specify                                     :

  -          Nature of business/products dealt with               :

   -          Date of incorporation                                         :

   -          Date of commencement of business                    :

  -           Full address including phone No./fax No.           :

  -           Registered Office                                               :

  -          Head Office                                                        :

 -          Address for correspondence                                :

 

Basis of eligibility for participation in the process for induction of Strategic Partner  : ------------------- (Please mention details of your eligibility)

 

Please attach supporting documents e.g. Audited Statement of Accounts/Annual Report / Certified Provisional : -------------------.

 

Contact Person(s)

 

Yours faithfully,

 

 

Authorised Signatory

For and on behalf of

Place :

Date :

 

 


 

Annexure IV  - Statement of Legal Capacity

(To be forwarded on the letterhead of the interested party/each member of the consortium submitting the EoI).

 

Statement Of Legal Capacity For Disinvestment In Hindustan Organic Chemicals Limited

 

To,

Mr. Monish Shah

Manager

A.F. Ferguson & Co.

11th Floor, Express Towers,

Nariman Point,  

Mumbai-400 021.

 

Sir,

 

This is with reference to the advertisement dated ________ inviting Expression of Interest for the sale of 32.61% shareholding of GOI in HOCL.

We have read and understood the contents of the PIM and the advertisement and pursuant to this hereby confirm that:

 

1.         We satisfy the eligibility criteria laid out in the PIM and the advertisement.

 

2.        We are a member of the consortium (constitution of which has been described in the Expression of Interest) which jointly satisfies the eligibility criteria as detailed in the PIM.*

 

3.        We have agreed that ________(insert member’s name) will act as the lead member of our consortium.*

 

4.        We have agreed that ______________(insert individual’s name) will act as our representative on our behalf and has been duly authorized to submit the EoI. Signatures of ______________(insert individual’s name) are attested hereinbelow. Further, the authorized signatory is vested with requisite powers to furnish such letter and Request for Qualification and authenticate the same.*

 

5.        We have agreed that _________________(insert the name of the individual) will be the representative of our consortium and is duly authorized to submit the EoI on our behalf.  Further, the authorized signatory is vested with requisite powers to furnish such letter and Request for Qualification and authenticate the same.*

 

Yours faithfully,

 

 

 Authorised Signatory

 For and on behalf of (party/member)

 

 

 

 

Signatures of ______________(insert individual’s name) Attested

 

Attested

 

Authorised Signatory

 For and on behalf of (party/member)

 

 

*Strike off whichever clause is not applicable

 


/2001-DD-I

ANNEXURE-V

 

No. 6/4/2001-DD-II

Government of India

Department of Disinvestment

Block 14, CGO Complex

New Delhi.

Dated 13th July, 2001.

 

 

OFFICE MEMORANDUM

 

Sub:        Guidelines for qualification of Bidders seeking to acquire stakes in Public Sector Enterprises through the process of disinvestment

 

Government has examined the issue of framing comprehensive and transparent guidelines defining the criteria for bidders interested in PSE-disinvestment so that the parties selected through competitive bidding could inspire public confidence.  Earlier, criteria like net worth, experience etc. used to be prescribed.  Based on experience and in consultation with concerned departments, Government has decided to prescribe the following additional criteria for the qualification / disqualification of the parties seeking to acquire stakes in public sector enterprises through disinvestment:

(a)                 In regard to matters other than the security and integrity of the country, any conviction by a Court of Law or indictment / adverse order by a regulatory authority that casts a doubt on the ability of the bidder to manage the public sector unit when it is disinvested, or which relates to a grave offence would constitute disqualification.  Grave offence is defined to be of such a nature that it outrages the moral sense of the community.  The decision in regard to the nature of the offence would be taken on case to case basis after considering the facts of the case and relevant legal principles, by the Government.

  (b)                 In regard to matters relating to the security and integrity of the country, any charge-sheet by an agency of the Government / conviction by a Court of Law for an offence committed by the bidding party or by any sister concern of the bidding party would result in disqualification.  The decision in regard to the relationship between the sister concerns would be taken, based on the relevant facts and after examining whether the two concerns are substantially controlled by the same person/persons.

 

(c)           In both (a) and (b), disqualification shall continue for a period that Government deems appropriate.

 

(d)           Any entity, which is disqualified from participating in the disinvestment process, would not be allowed to remain associated with it or get associated merely because it has preferred an appeal against the order based on which it has been disqualified.  The mere pendency of appeal will have no effect on the disqualification.

 

(e)           The disqualification criteria would come into effect immediately and would apply to all bidders for various disinvestment transactions, which have not been completed as yet.

 

(f)            Before disqualifying a concern, a Show Cause Notice why it should not be disqualified would be issued to it and it would be given an opportunity to explain its position.

 

(g)           Henceforth, these criteria will be prescribed in the advertisements seeking Expression of Interest (EOI) from the interested parties. The interested parties would be required to provide the information on the above criteria, along with their Expressions of Interest (EOI).  The bidders shall be required to provide with their EOI an undertaking to the effect that no investigation by a regulatory authority is pending against them.  In case any investigation is pending against the concern or its sister concern or against its CEO or any of its Directors/Managers/employees, full details of such investigation including the name of the investigating agency, the charge/offence for which the investigation has been launched, name and designation of persons against whom the investigation has been launched and other relevant information should be disclosed, to the satisfaction of the Government.  For other criteria also, a similar undertaking shall be obtained along with EOI.

 

-sd/-

(A.K. Tewari)

Under Secretary to the Government of India.

 

CLARIFICATION

Note : Vide clarification dated : 10.1.2002 to the above guidelines it has been provided that the following offence be treated as a grave offence

(1)     Orders of Securities and Exchange Board of India which directly relates to “fraud” as defined in the Securities and Exchange Board of India Act, 1992 and/or regulations made thereunder;

(2)   Orders of Securities and Exchange Board of India which cause a doubt on the ability of the Strategic Partner to manage the Company after the sale of the Transaction Shares by the Government to the Strategic Partner;

(3)     Any conviction by a Court of Law;

(4)     In cases in which Securities and Exchange Board of India also passes a prosecution order, disqualification of the Strategic Partner should arise only on conviction by the Court of Law.

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