MSTC Limited

 

 

DISCLAIMER AND IMPORTANT NOTICE

 

This Preliminary Information Memorandum (“PIM”) is being made available with the sole purpose of assisting the recipient to participate in the process leading to the proposed disinvestment of the entire portion of the equity held by the Government of India (“GoI”), which is equivalent to 89.85% of the total voting equity share capital in MSTC Limited (“MSTC” or “Company”).

This document is being provided with the sole purpose of providing information to the interested parties and is not intended to form the basis of any investment decision or any decision to purchase the equity offered for sale.  This document does not constitute nor should it be interpreted as an offer, invitation or recommendation for the sale or purchase of securities described herein.

It does not purport to be all-inclusive or contain all the information about MSTC or be the basis of any contract. No representation or warranty, expressed or implied, is or will be made as to the reliability, accuracy or the completeness of any of the information contained herein. It should not be assumed that there shall be no deviation or change in any of the herein mentioned information on MSTC.  While this document has been prepared in good faith, neither MSTC nor GoI nor any of their respective officers, employees, advisors or agents make any representation or warranty or shall have any responsibility or liability whatsoever in respect of any statements made or omissions herein. Any liability is accordingly expressly disclaimed by MSTC, GoI, and any of their respective officers, employees, advisors and agents even if any loss or damage is caused by any act or omission on the part of MSTC, GoI, or any of their respective officers, employees, advisors or agents.

This PIM would be subject to any notifications or guidelines that may be issued by GoI, from time to time, which may have a bearing on the proposed disinvestments including EoI by the Management / employees of MSTC.

Nothing in this PIM is, or should be relied on, as a promise or representation as to the future.  In furnishing this PIM, neither GoI nor MSTC undertakes to (i) provide the recipient with access to any additional information; or (ii) update this PIM; or  (iii) correct any inaccuracies therein, which may become apparent. GoI reserves the right to, inter-alia, change the procedure for the sale of strategic stake in MSTC and/or terminate discussions and/or refuse the delivery of information, at any time prior to the execution of the Transaction documents without any prior notice or stating any reasons therefor and without incurring any liability in respect thereof. Further, by acceptance of this document, the recipient agrees that any information herein will be superseded by any later written information on the same subject made available to the recipient by or on behalf of MSTC and GoI.

Accordingly, interested recipients should carry out an independent assessment and analysis of MSTC and of the information, facts and observations contained herein.

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

 

Glossary of terms

CE	Capital Employed
EoI	Expression of Interest
FSNL	Ferro Scrap Nigam Limited
GoI	Government of India
MMTC	Minerals and Metal Trading Corporation of India Limited
MSTC	MSTC Limited
NW	Net Worth
OGL	Open General Licence
PAT	Profit After Tax
PBT	Profit Before Tax
PIM	Preliminary Information Memorandum
RFQ	Request for Qualification
RINL	Rashtriya Ispat Nigam Limited
SAIL	Steel Authority of India Limited
SI	Strategic Investor

 

 

Contents

1            Submission of Expression of Interest       

1.1         Introduction         

1.2          Advertisement Inviting EoI         

1.3          The Process         

1.4          Preliminary Eligibility Criteria         

1.5          Disqualification         

1.6          Terms and Conditions for Submission         

1.7          Enquiries         

1.8          Governing Law/Jurisdiction         

2              MSTC Limited       

2.1          Background and History         

2.2          Incorporation and Share Capital         

2.3          Management         

2.4          Key locations         

2.5          MSTC'S activities         

2.6          Key Performance Indicators         

2.7          Industrial relations         

3             Financial Performance of MSTC       

3.1          Summarised Balance Sheet         

3.2          Summarised Profit and Loss Account         

4             Ferro Scrap Nigam Limited       

4.1          Background          

4.2          Activities and Objectives         

4.3          Location of Units         

4.4          Physical Performance         

5             Financial Performance of FSNL       

5.1          Summarised Balance Sheet         

5.2          Summarised Profit and Loss Account         

A              Annexures       

A.1          Annexure 1 - Expression Letter         

A.2          Annexure 2 - Request For Qualification         

A.3          Annexure 3 - Statement of Legal Capacity         

A.4          Annexure 4 - Government of India’s Disqualification Guidelines         

A.5          Annexure 5 - Guidelines for management-employee bids         

A.6          Annexure 6 - Advertisement Inviting Expression of Interest       

 

1                   Submission of Expression of Interest

1.1            Introduction

1.1.1          The Government of India (“GoI”) presently holds 89.85% of the total voting equity share capital in MSTC Limited (“MSTC") and intends to disinvest its equity, which is equivalent to 89.85% of the total voting equity share capital in MSTC to a strategic investor along with management control of MSTC and its wholly owned subsidiary Ferro Scrap Nigam Limited (“FSNL”) through a competitive bidding process which shall be handled solely by GoI. The proposed disinvestment by GoI is hereinafter referred to as the “Transaction”.

1.1.2          This Preliminary Information Memorandum (“PIM”) has been prepared to enable potential bidders to submit their Expression of Interest (“EoI”) only at this stage, subject to the ‘Disclaimer and Important Notice’ set out earlier.

1.1.3          For the purposes of this Transaction, the potential bidder shall ascertain the applicability of all laws including Indian laws and shall ensure compliance with the same.

1.2            Advertisement Inviting EoI

1.2.1          An advertisement has been issued in the newspapers inviting interested parties to submit their EoI to participate in the disinvestment process of MSTC, a copy of which is enclosed as Annexure 6.

1.3            The Process

1.3.1          The process has been divided into two stages:

Stage I

1.3.2          In the first stage, all interested parties would be required to submit an Expression of Interest (“EoI”), which shall comprise of the Expression Letter (provided in Annexure 1), Request for Qualification (“RFQ”, provided in Annexure 2) and Statement of Legal Capacity (provided in Annexure 3).  The EoI will be used for pre-qualifying the interested parties on the criteria specified, without conferring any right or expectation whatsoever.

Stage II

1.3.3          In the second stage, appointment of Advisor will be done by the Ministry of Disinvestment only if, enough interested eligible parties are found, and thereafter the usual procedure will be followed.

 

1.4            Preliminary Eligibility Criteria

1.4.1          The EoI may be submitted by domestic or foreign incorporated entities either as a sole bidder or as part of a consortium, for acquiring the total voting equity share capital in MSTC being disinvested subject to the terms and conditions specified in this PIM and any other subsequent additions and modifications.

1.4.2          The interested bidders should be parties dealing with industrial bulk raw material preferably related to steel plants.

1.4.3          The interested bidders should have a net worth of Rs.75,00,00,000 or more. In the event of consortium bid, the above criterion would apply to the consortium as a whole and the net worth of the lead bidder must be at least 51% of the stipulated Net Worth criterion of Rs. 75,00,00,000. Further in the case of consortium bid, the Net Worth of only those members of the consortium shall be counted who propose to take at least 15% of the total voting equity share capital in MSTC being disinvested in case of a direct consortium bid, or who propose to take at least 15% of the total voting equity stake in the company promoted / to be promoted by the consortium members for acquiring the total voting equity share capital in MSTC being disinvested.

1.4.4          In addition to minimum net worth specified, the interested parties should have a turnover of Rs.1000 crore and more in the last concluded financial year. In the case of consortium bid, the turnover of the members of the consortium would be taken into account in the same manner as specified for the net worth criteria.

1.4.5          Bids by management/employees of MSTC directly and independently or in consortium or Joint Venture or a Special Purpose Vehicle (SPV), along with a bank, venture capitalist or a financial institution will be considered if the legal entity so formed is qualified as per the criteria laid down in the PIM and the guidelines issued by Ministry of Disinvestment as per Annexure 5.

1.4.6          Those parties who have defaulted in payment to MSTC and or FSNL and against whom legal proceedings have been initiated by MSTC and or FSNL shall not be considered.

1.4.7          Where the financial statement is expressed in currency other than Indian Rupees, the eligible amount as described above shall be computed by taking the equivalent amount at the exchange rates prevailing on the date(s) of such financial statement as stipulated by Foreign Exchange Dealers Association of India. In the event that the date(s) are not co-terminus, the latest audited statements as approved by the Board of Directors or the closest exchange rates shall be reckoned for the purpose.

1.4.8          Net Worth = Equity Share Capital + Free Reserves & Surplus - deferred revenue / miscellaneous expenditure not written off – debit balance in Profit and loss account.

 

1.4.9          This PIM along with its enclosures does not constitute any commitment on the part of the GoI or MSTC, whether in respect of the disinvestment process or otherwise.  Furthermore, this invitation confers neither any right nor expectations to any party to participate in the said process.  Further, this process would be in accordance with the provisions of the articles of association of the Company.

1.4.10      The GoI reserve the right to withdraw from the process or any part thereof without assigning any reason whatsoever. No liability whatsoever shall accrue to the GoI or MSTC in such an event.

1.5            Disqualification

1.5.1          The GoI shall not consider for the purpose of qualification, an EoI, which is found to be incomplete in content and/or attachments and/or authentication, etc.

1.5.2          Without prejudice, a sole bidder or a consortium may be disqualified and its EoI dropped from further consideration for, but not limited to, any of the reasons listed below:

n        misrepresentation by the bidder or any member of the consortium; or

n        failure by the parties mentioned above to provide necessary and sufficient information required to be provided in the EoI; or

n        where a party has already submitted an EoI as sole bidder and such party submits another EoI as a member of a consortium; or

n        where a party has already submitted an EoI as a member of a consortium and such party submits another EoI either as a sole bidder or a member of another consortium.

1.5.3          Further, the GoI has issued guidelines for disqualification of bidders seeking to acquire any public sector enterprises through the process of disinvestment vide Department of Disinvestment OM No.6/4/2001 – DD-II dated 13th July 2001, and clarification issued on 10th January 2002, as may be modified from time to time (“Eligibility Guidelines”).  A copy of the Eligibility Guidelines is enclosed as Annexure 4.  The interested party(ies) are required to read the guidelines and satisfy themselves that they are qualified to bid for the stake in MSTC through the process of disinvestment and give an undertaking to the effect that they are qualified to bid for the stake in MSTC along with the EoI to be submitted by them.  Further, interested parties would be required to provide certain information on the criteria, laid down in the Eligibility Guidelines along with their EoI.  The interested party(ies) 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 chief executive officer (“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 GoI.

 

1.5.4          Where the interested party is a consortium, GoI may disqualify the entire consortium for any of the reasons (but not limited to) specified above, even if it applies to only one member of the consortium.

1.5.5          If an information becomes known which would have entitled the GoI to reject or disqualify the interested party(ies)/Bidder, the GoI reserves the right to reject such interested party(ies)/Bidder at any time after such information becomes known to the GoI.

1.5.6          The sole bidder, lead bidder, member of a consortium and the consortium as a whole not satisfying the eligibility and requisite qualification criteria specified in the above sections are not eligible. It must be noted that the sole bidder, lead bidder, member of a consortium and the consortium as a whole must be eligible, as per the criteria mentioned above, on the date of submission of the EoI and shall continue to be eligible throughout the Transaction.

1.6            Terms and Conditions for Submission

1.6.1          The interested parties should submit their EoI, in duplicate.  The EoI is to be duly signed by the authorized signatory of the interested party / designated lead bidder of the consortium.  However in the case of a consortium, the Statement of Legal Capacity and RFQ will also have to be submitted by each member of the consortium duly signed by an authorised official of the member of such consortium.

1.6.2          The RFQ as given in Annexure 2 should be duly filled in and accompanied by the following details.

1.6.3          In case of a sole bidder  the following shall be furnished together with the EoI:

n         Audited Balance Sheet and Profit & Loss Account of the sole bidder as approved by the Board of Directors (Indian /Foreign incorporated entity) for the last 3 financial years.

n        Write-up on:

-           Background of the sole bidder.

-           A statement of reasons for strategic interest in MSTC.

-           Details of litigation and/or legal/ statutory enquiry if any, including litigation by the bidder against MSTC.

-           Any other information considered material.

-           Statement as regards any indictment by any income tax, sales tax, customs and excise authorities. 

1.6.4          In case of a consortium bid the following shall be furnished together with the EoI :

n         Audited Balance Sheets and the Profit & Loss Accounts as approved by the Board of Directors for the last 3 financial years of all the members (Indian /Foreign incorporated entity(ies)) of the consortium.

 

n        Write-up on:

-           Background of the lead bidder.

-           A statement of reasons for strategic interest in MSTC as a consortium.

-           Background of all member companies in the consortium.

-           Details of litigations and/or legal/statutory enquiry, if any, of the lead bidder and every member of the consortium including litigation by any of them against MSTC.

-           Any other information considered material.

-           Statement as regards any indictment by any income tax, sales tax, customs and excise authorities. 

1.6.5          The EoI must be in English and each copy of the EoI shall be bound in separate volumes. Submission of the aforesaid documents by electronic means and/or facsimile will not be accepted. The EoI duly completed should be submitted on or before 17:30 hours of 4^th August, 2003 the publication of the advertisement in a sealed envelope superscribed “Private and Confidential-Expression of Interest for MSTC” at the following address:

 

Mr. S. K. Bandopadhyay, Deputy Secretary Government of India, Ministry of Disinvestment Block No.11 & 14, CGO Complex Lodi Road, New Delhi 110003 India

 

1.6.6          Any change by way of withdrawal/substitution of any member of the consortium or any change affecting the composition of the consortium or formation of a consortium by a sole bidder may be permitted by the GoI upto the stage of submission of final bid or such time as the GoI may in its sole discretion decide. The 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.

 

1.6.7          The EoI submitted by interested parties shall be evaluated on the basis of the criteria specified in the Preliminary Eligibility Criteria, the EoI submitted, public sources of information and the Disqualifications in this document.  If at any time during the evaluation process, GoI require any clarifications, they reserve the right to request such information from the interested party(ies) and such interested party(ies) shall be obliged to provide the same  forthwith.

 

1.6.8          GoI reserves the right to accept or reject any EoI without stating any reasons thereof. Only those parties that are found eligible, in the sole discretion of the GoI will be informed of the same, and provided further information.  No liability whatsoever shall accrue to the GoI in such an event.

 

1.6.9          The bidder shall bear all costs associated with the preparation and submission of the EoI.  The GoI or MSTC shall not, under any circumstances, be responsible or liable for any such costs, whether direct, incidental or consequential.

 

1.7            Enquiries

1.7.1          GoI reserves the right, in their sole discretion, not to respond to any questions raised or provide clarifications sought, if considered inappropriate or prejudicial to do so. Nothing in this section shall be taken or read as compelling or requiring the GoI to respond to any question or provide any clarification. No extension of any time and date referred to in this PIM shall be granted on the basis or grounds that the GoI has not responded to any question or provided any clarification.

1.8            Governing Law/Jurisdiction

1.8.1          This Transaction shall be governed by the laws of India. All disputes arising out of the disinvestment process shall be subject to the exclusive jurisdiction of the courts at New Delhi.

2                   MSTC Limited

2.1            Background and History

2.1.1          MSTC Limited (formerly known as Metal Scrap Trade Corporation Limited) was incorporated under the Companies Act, 1956 on 9^th September 1964. The status of the Company underwent a change in February 1974 to make it a subsidiary of Steel Authority of India (SAIL). In the year 1982-83, the Corporation was converted into a Government of India Company transferring the shares of SAIL to the President of India. It was the canalizing agency for import of carbon steel melting scrap, sponge iron, hot briquetted iron and re-rollable scrap till February 1992. It was also the canalizing agency for import of old ships for breaking, import of which was decanalised and put under OGL with effect from August 1991.

2.1.2          Presently the Company undertakes disposal of ferrous and non-ferrous scrap arising from integrated steel plants under SAIL, RINL, etc. and disposal of scrap, surplus stores, etc. from other PSUs and other Govt. departments on the basis of selling agency agreements. The Company also imports ferrous and non-ferrous scrap, coke, coal, finished steel and petroleum products for sale in India. The Company undertakes all these activities in competition with other establishments both in Private and Public Sector.

2.1.3          From 1997-98 to 2002-03, the company has consistently improved its performance both in terms of volume of sales and net profit (PAT). As per provisional results the volume of sales in 2002-03 was Rs.2645 crore and PAT was Rs.9.01 crore, excluding the operations of its wholly owned subsidiary FSNL.

2.1.4          MSTC engages 288 employees at present and in addition its subsidiary FSNL employs 1246 persons.

2.2            Incorporation and Share Capital

2.2.1          MSTC was incorporated under the Companies Act 1956 on 9^th September 1964 by the Government of India (through MMTC), members of Iron & Steel Scrap Association of India and of Steel Furnace Association of India. In July 1972 80% of the share holdings were transferred to the President of India, shareholdings of members of Iron & Steel Scrap Association of India and of Steel Furnace Association were reduced to 10% each. In 1973, after the formation of SAIL, Government’s holdings were transferred to SAIL and MSTC became a subsidiary of SAIL. In 1982, the status of the Company was again changed to that of an independent Company under Department of Steel.

 

2.2.2     Current authorised share capital of MSTC is Rs.5.00 crore and the paid up capital is Rs.2.20 crore. In FY 2002-03, the shareholding pattern of the Company was:

Figure 2 . 1 : Share holding pattern

Name of Shareholder	% Holding
Government of India	89.85
Private shareholders (93 nos. including individuals and corporates)	10.15
	100 .00

2.3            Management

2.3.1          A Board Of Directors nominated by the GoI manages the Company.  There are presently five Directors, including the Chairman-cum-Managing Director. Senior executives posted at the corporate office manage the day-to-day affairs of the Company. 

2.3.2          The following table sets out the Board Of Directors.

Figure 2 . 2 : Names of the Board of Directors

Name	Designation
Shri Malay Sengupta	Chairman-cum-Managing Director
Prof. Ashoke K. Dutta	Director
Shri B. N. Rath	Director
Shri S. Roychowdhury	Director
Shri A. Baranwal	Director

2.3.3          The following table sets out the names of the key executives of the Company.

Figure 2 . 3 : Names of  key executives

Name	Designation
Shri P. P. Ganguli	Chief General Manager (Operations)
Shri R. M. Roy	Chief General Manager (Finance & Accounts)
Shri K. N. Pandey	Chief Vigilance Officer
Shri K. K. Mookherjee	General Manager (Selling Agency)
Shri S. S. Chaudhuri	General Manager (Human Resources Management)
Shri Subrata Kumar Ray	Company Secretary

2.4            Key locations

 

2.4.1          The Company’s corporate office is located at Kolkata, West Bengal. It has four regional offices at Kolkata, New Delhi, Mumbai and Chennai and three branch offices at Bangalore, Visakhapatnam and Vadodara. It has also five resident offices at Surat, Bhopal, Trichy, Rourkela and Durgapur.

 

2.5            MSTC’S Activities

2.5.1          MSTC is the leading importer of scrap in India. After decanalisation in February in 1992, the demand for imported scrap was considerably reduced in the country. The Company, therefore, enlarged its import basket and it now undertakes import of other items such as petroleum products, coke, coal, DR pellets, etc. for sale in India.

2.5.2          The Company undertakes disposal of ferrous scrap and other secondary arisings generated in integrated steel plants and disposal of scrap and surplus stores from other public sector enterprises and Government departments. Some of the select customers of MSTC have been mentioned below:

n        Government Integrated Steel Plants, e.g., SAIL, RINL, etc.

n        Private Sector Steel Plants, e.g., ESSAR Steel, Ispat Industries Ltd., etc.

n        Central PSUs, e.g., BHEL, NTPC, etc.

n        State PSUs, e.g., DPL, MSRTC, etc.

n        Defence units and Ordnance Factories.

2.6            Key Performance Indicators

2.6.1          Key financial indicators of MSTC’s performance have been set out below:

Figure 2 . 4 : Key financial indicators                                                                           Rs. in crore

Particulars	1997-98	1998-99	1999-2000	2000-01	2001-02
Share Capital	2.20	2.20	2.20	2.20	2.20
Reserve & Surplus	48.77	50.32	52.96	55.91	59.53
Borrowings	15.31	15.68	40.68	72.09	57.79
Net Block	2.24	2.00	1.71	1.60	1.52
Working Capital	58.85	60.99	88.93	123.40	96.99
Capital Employed	61.09	62.99	90.64	125.00	98.51
Profit Before Tax	2.85	3.06	5.73	6.33	7.15
Profit After Tax	1.83	2.16	3.53	3.80	4.54
Ratio Analysis :
PBT to CE	5.00	5.00	6.32	5.06	7.26
PBT to NW	6.00	5.82	10.39	10.89	11.59
Earning per share (Rs.)	8.33	9.80	16.05	17.26	20.65

2.6.2          The physical performance of the Company during the last five years is indicated below:

Figure 2 . 5 : Physical statistics                                                                                     Rs. in crore

Particulars	1997-98	1998-99	1999-2000	2000-01	2001-02
Foreign Trade Activities	-	82	285	274	413
Disposal of Scrap from domestic sources	497	486	565	601	598
Total	497	568	850	875	1011

2.6.3          The business of MSTC is conducted by availing non-fund based and fund-based limit sanctioned by Indian Overseas Bank (IOB), on the basis of hypothecation of current assets of the Company. No consortium arrangement has been made with any other bank.

2.7            Industrial relations

2.7.1          Industrial Relations continued to be cordial and peaceful during the year 2001-2002.

3                   Financial Performance of MSTC

3.1            Summarised Balance Sheet

3.1.1          The summarised balance sheet for MSTC for the last 5 years is shown below.

Figure 3 . 1 : Summarised balance sheet                                                                                                                                                                                                                                          Rs '000

	1997-98	1998-99	1999-2000	2000-01	2001-02
Sources of funds
Shareholders Funds
Capital	22000	22000	22000	22000	22000
Reserves and Surplus	487666	503180	529624	559119	595313
Total Shareholders Funds	509666	525180	551624	581119	617313
Loan Funds	153148	156762	406765	720897	577851
Total sources of funds	662814	681942	958389	1302016	1195164
Application of funds
Fixed Assets
Gross Block	51209	51970	54292	55892	58069
Accumulated depreciation	28856	31924	37203	39924	42814
Net Block	22353	20046	17089	15968	15255
Investments	52000	52000	52000	52000	210000
Current Assets, Loans & advances
Interest accrued on Investment	511	1850	1850	1469	10253
Stock-in-trade	26148	141090	480418	-	256747
Sundry Debtors	429221	471181	944737	1414448	1617599
Cash and Bank Balances	249558	309987	432901	480268	616037
Other Current Assets	72612	70181	63981	62170	67543
Loans and advances	497258	366636	492303	522473	320949
Total current assets	1275308	1360925	2416190	2480828	2889128
Current Liabilities & Provisions	686847	751029	1526890	1246780	1919219
Net Current Assets	588461	609896	889300	1234048	969909
Total application of funds	662814	681942	958389	1302016	1195164
Source: Audited financial statements of MSTC

 

3.2            Summarised Profit and Loss Account

3.2.1          The summarised profit and loss account for MSTC for the last 5 years is shown below:

Figure 3 . 2 : Summarised profit and loss account    

                                                                                                                                  Rs '000

	1997-98	1998-99	1999-2000	2000-01	2001-02
Income
Sales	142067	765342	2038235	3241949	4227659
Service Charges	75787	80696	112479	120127	113562
Other Income	77942	84366	98942	131129	165874
Provision no longer required written	1	-	-	-	30364
Back
Total revenue	295797	930404	2249656	3493205	4537459
Expenditure
Cost of Sales	144850	769528	2005606	3201261	4176389
Employees Remuneration & Benefits	53456	58951	71468	81524	80918
Administrative Expenses	36805	39886	48079	46350	47050
Financial Charges	11991	16341	45287	78751	57268
Auction/Tender Expenses	9760	11035	12001	14276	17448
Stockyard Expenses	900	1012	-	-	-
Provision for Doubtful Debts	6524	364	4676	3722	83658
Adjustment pertaining to earlier years	-442	-359	-61	-	-
	263844	896758	2187056	3425884	4462731
Gross profit	31953	33646	62600	67321	74728
Depreciation	3428	3082	5299	4041	3194
Profit Before Tax	28525	30564	57301	63280	71534
Provision for Tax	10200	9000	22000	25300	26100
PAT	18325	21564	35301	37980	45434
Source: Audited financial statements of MSTC

 

4                   Ferro Scrap Nigam Limited

4.1            Background

4.1.1          Ferro Scrap Nigam Limited (FSNL) is a 100% subsidiary of MSTC. As on 31.03.03, the Company’s authorized share capital and issued and paid up capital was Rs.2.00 crore.

4.2            Activities and Objectives

4.2.1          The Company undertakes the recovery and processing of scrap from slag and refuse dumps in the six steel plants at Rourkela, Burnpur, Bhilai, Bokaro, Visakhapatnam, Durgapur and in Ispat Metalics India Limited, Dolvi.

4.2.2          The scrap recovered is returned to the steel plants for recycling / disposal and the Company is paid processing charges on the quantity recovered at varying rates depending on the category of scrap. Scrap is generated during Iron and Steel making and also in Rolling Mills.

4.3            Management

4.3.1     A Board Of Directors nominated by the GoI manages the Company.  There are presently three Directors. 

4.3.2     The following table sets out the Board Of Directors.

Figure 4.1: Names of the Board of Directors

Name	Designation
Shri Malay Sengupta	Chairman
Shri K. B. Singh	Managing Director
Shri A. Baranwal	Director

 

4.4            Location of Units

4.4.1          The Corporate Office of the Company is situated at Bhilai and the Corporation has seven fields units situated at Bhilai, Burnpur, Rourkela, Bokaro, Visakhapatnam, Durgapur, Dolvi and Dubri.

4.5            Physical Performance

4.5.1     The production performance of the Company during the last five years is indicated below:

Figure 4.2: Production statistics                                                                 ‘000 MT

Particulars	1997-98	1998-99	1999-2000	2000-01	2001-02
Recovery and despatch of scrap	1473	1498	1505	1504	1497

 

5                   Financial Performance of FSNL

5.1            Summarised Balance Sheet

5.1.1          The summarised balance sheet for FSNL for the last 5 years is shown below.

Figure 5. 1 : Summarised balance sheet                                                                                                                           (Rs. ‘000)

	1997-98	1998-99	1999-2000	2000-01	2001-02
Sources of funds
Shareholders Funds
Capital	20000	20000	20000	20000	20000
Reserves and Surplus	772677	870134	969934	1079102	1156270
Total Shareholders Funds	792677	890134	989934	1099102	1176270
Loan Funds	9538	12266	-	26704	-
Total sources of funds	802215	902400	989934	1125806	1176270
Application of funds
Fixed Assets
Gross Block	737054	817094	892773	990264	1072780
Accumulated depreciation	488330	521900	568645	596114	646586
Net Block	248724	295194	324128	394150	426194
Capital Work-in-Progress	5505	56655	58281	36562	41952
Net fixed assets	254229	351849	382409	430712	468146
Current Assets, Loans & advances
Accrued Interest on STD	-	7290	29576	46162	75519
Inventories	57563	55816	55584	57815	60191
Sundry Debtors	535099	536271	306742	291928	240618
Cash and Bank Balances	116805	124619	430067	478619	540416
Loans and advances	50214	43776	45273	41153	20035
Total current assets	759681	767772	867242	915677	936779
Current Liabilities & Provisions	211695	217221	259716	220583	228655
Net Current Assets	547986	550551	607526	695094	708124
Miscellaneous Expenditure
Total application of funds	802215	902400	989934	1125806	1176270
Source: Audited financial statements of FSNL

5.2            Summarised Profit & Loss Account

5.2.1          The summarised balance sheet for FSNL for the last 5 years is shown below.

Figure 5. 2 : Summarised profit & loss account                                                                                                        (Rs. ‘000)

	1997-98	1998-99	1999-2000	2000-01	2001-02
Income
Service Charges	705964	690094	826572	791113	777501
Other Income	10894	17769	32629	59248	57283
Provision written back	4590	5662	178	17780	1083
Total revenue	721448	713525	859379	868141	835867
Expenditure
Consumption of stores & spares	182957	182401	164685	157927	168651
Electricity & Water	7772	4599	6255	7689	9658
Employees remuneration & benefits	175268	195450	207825	289816	247852
Lease Rent	166	-	-	-	-
Repairs & Maintenance	17240	19443	24508	22834	25882
Services through contractors	80564	83257	117811	113374	106916
Other Expenses	27153	27360	50131	43622	70192
Interest	1554	1260	473	2471	284
Provision for bad & doubtful debts	807	10819	14999	1810	-
Depreciation	55223	66659	64091	62923	76803
	548704	208798	650778	702466	706238
Profit for the Year	172744	122277	208601	165675	129629
Prior Period Adjustments	8972	44022	-16119	-4253	11243
Profit Before Tax	181716	166299	192482	161422	140872
Provision for Tax	69874	62242	85362	45642	57704
PAT	111842	104057	107120	115780	83168
Source: Audited financial statements of FSNL

 

A                         Annexures

A.1          Annexure 1 - Expression Letter

(To be forwarded on the letterhead of the sole bidder/lead bidder submitting the EoI)

 

Reference No.______________                                                  Date ___________

 

Shri S. K. Bandopadhyay, Deputy Secretary

Government of India, Ministry of Disinvestment

Block No,11 & 14, CGO Complex

Lodi Road, New Delhi – 110003

India

 

Sub: Invitation of Expression of Interest for the strategic sale of 89.85% of the total voting equity share capital in MSTC Limited (MSTC)

 

Sir,

This is with reference to the advertisement dated ________ inviting Expression of Interest for sale of 89.85% of the total voting equity share capital in MSTC.

As specified in the advertisement, we have read and understood the contents of the Preliminary Information Memorandum (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 __________________ (insert name)

 

OR

We have formed a consortium comprising of ____members as follows:

 

1.            ____________________________ (Insert name)

2.            ____________________________ (Insert name)

3.            ____________________________ (Insert name)

We understand that 89.85% equity stake of MSTC is proposed to be divested and we are interested in bidding for the same.

We believe that we/our consortium satisfies the eligibility criteria set out in 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 13^thJuly, 2001 and clarification issued on 10^th January 2002.

We certify that as regards 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 charge-sheeted by any agency of the Government or convicted by a Court of Law for any offence committed by us or by any of our sister concerns.

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

We undertake that in case, due to any change in facts or circumstances during the pendency of the disinvestment process, we are attracted by the provisions of disqualification in terms of the PIM and/or such other communication as may be addressed to us by GoI, we would intimate GoI of the same forthwith.

The Statement of Legal Capacity and Request for Qualification as per formats indicated hereinafter, duly signed by us/respective consortium members, who jointly satisfy the eligibility criteria, are enclosed.

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

Yours faithfully,

 

 

Authorised Signatory

For and on behalf of the party/consortium

 

Enclosure:

1. Request for Qualification

2. Statement of Legal Capacity 

3. Undertakings in terms of Eligibility Guidelines

 

 

A.2          Annexure 2 - Request For Qualification

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

 

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

 

1.       Constitution (Tick, wherever applicable) 

i)                    Public Limited Company  

ii)                   Private Limited Company

iii)                 Others, if any (Please specify)

                  If the interested party is a foreign company/ OCB, specify list of statutory approvals from GoI/ RBI/ FIPB applied for/ obtained/ required:

 

2.       Sector (Tick, wherever applicable)

i)        Public Sector

ii)       Joint Sector

iii)     Others, If any (Please specify)

 

3.       Details of Shareholding

 

4.       Role/ Interest of each Member in the Consortium (if applicable)

 

5.       Nature of business/products dealt with:

 

6.       Date & Place of incorporation:

 

7.       Date of commencement of business:

 

8.       Full address including Phone No./Fax No.:

i)        Registered Office:

ii)       Head Office:             

 

9.       Address for correspondence:

 

10.   The Audited Balance Sheets and the Profit & Loss Accounts as approved by the Board of Directors for the last 3 financial years is attached. Also attached is a certificate from the chartered accountant/auditor certificate certifying the Net Worth according to the latest audited financial statements as approved by the Board of Directors.

 

11.   Please provide details of all contingent liabilities that, if materialized, would have or would reasonably be expected to have a material adverse affect on the business, operations (or results of operations), assets, liabilities and/or financial condition of the Company, or other similar business combination or transaction.

 

 

12.   Contact Person(s):

i)                                Name:

ii)                              Designation:

iii)                             Phone No.:

iv)                            Mobile No.:

v)                              Fax No.:

vi)                            Email:

 

13.   Please find attached the relevant information pursuant to Clause 1.6 of the Preliminary Information Memorandum.

 

Yours faithfully,

 

 

 

Authorised Signatory For and on behalf of the (party/member)

Authorised Signatory For and on behalf of the consortium

 

Place :

Date :

Note: Please follow the order adopted in the Format provided.  If the interested party is unable to respond to a particular question/ request, the relevant number must nonetheless be set out with the words “ No response given” against it.

 

A.3          Annexure 3 - Statement of Legal Capacity

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

 

Reference No.______________                                                  Date ___________

 

Shri S. K. Bandopadhyay, Deputy Secretary

Government of India, Ministry of Disinvestment

Block No,11 & 14, CGO Complex

Lodi Road, New Delhi - 110003

India

 

Sub: Invitation of Expressions of Interest for the strategic sale of 89.85% of the total voting equity share capital in MSTC Limited

 

Sir,

 

This is with reference to the advertisement dated ________ inviting Expression of Interest for the sale of 89.85% of the total voting equity share capital in MSTC.

 

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

 

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

 

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.*

 

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

 

We have agreed that ______________(insert individual’s name) will act as our representative on our behalf and has been duly authorized (vide board resolution dated_______**) 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.*

 

We have agreed that _________________(insert the name of the individual) will be the representative of our consortium and is duly authorized (vide board resolution dated_______**) 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

**Please attach a certified true copy of the extract of the relevant board resolution

 

A.4          Annexure 4 - Government of India’s Disqualification Guidelines

No.6/4/2001-DD-II

Government of India

Department of Disinvestment

Block 14, CGO Complex

New Delhi.

Dated 13^th 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.

To

As per list attached.

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  cast 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.

 

A.5          Annexure 5 - Guidelines for management-employee bids

No. 4/38/2002/DD-II

Government of India

Ministry of Disinvestment

 

Block No.14, CGO Complex,

Lodi Road, New Delhi.

Dated: 25^th April, 2003

 

OFFICE MEMORANDUM

Subject:- Guidelines for management-employee bids in strategic sale.

Employee participation and protection of employee interests is a key concern of the disinvestment process.   The practice of reserving a portion of the equity to be disinvested for allocation to employees, at concessional prices, has been adopted in a number of cases.  It is necessary and expedient to evolve and lay down guidelines to encourage and facilitate management-employee participation in the strategic sales and thus to acquire controlling stakes and manage disinvested public sector undertakings.  The undersigned is directed to state that Government has, therefore, decided to lay down the following guidelines for evaluating employee/management bids:-

 

(i)      The term ‘employee’ will include all permanent employees of a PSU and the whole time directors on the board of the PSU.  A bid submitted by employees or a body of employees will be called an “employee bid”.

 

(ii)     At least 15% of the total number of the employees in a PSU or 200 employees, which ever is lower, should participate in the bid.

 

(iii)    An employee bid would be exempted from any minimum turn over criterion but will be required to qualify in terms of the prescribed net worth criterion.  They will be required to follow the procedures prescribed for participation by Interested Parties in the process of strategic sale including, but not limited to, filing the expression of interest along with all details, as applicable to other investors, furnishing of bank guarantee for payment of the purchase price etc.

 

(iv)      Employees can either bid directly and independently or, for the purpose of meeting the financial criteria like net worth, can form a consortium or bid through a joint venture (JV) or a special purpose vehicle (SPV), alongwith a bank, venture capitalist or a financial institution.  However employees will not be permitted to form consortia with other companies.

 

(v)     If the bidding entity of the employees is a consortium, JV or SPV, employees must have a controlling stake and be in control of the bidding entity.

 

(vi)    If the bid is submitted through a consortium, JV or SPV, employees must contribute at least 10% of the financial bid.

 

(vii)   If the employees form a consortium, the consortium partners would be prohibited from submitting individual bids independently. 

 

(viii)   If it is not the highest bid, the employee bid shall be considered only if the said bid is within 10% of the highest bid.

 

(ix)    The employee bid shall, subject to fulfilling the conditions above, have the first option for acquiring the shares under offer provided they match the highest bid and the highest bid being equal to or more than the reserve price.

 

(x)     If the employee bid is not the highest bid and there are more than one employee bids within the 10% band, the highest of the employee bids will have precedence for purchase at the highest bid.  If such employee bidder is unwilling or unable to match the highest bid, the option will pass on to the next highest employee bid and so on till all the employee bids, within the 10% band, are exhausted.

 

(xi)    In the event of no employee bidder, within the 10% band, being willing or able to match the highest bid, the shares under offer will be sold to the highest bidding entity.

 

(xii)      There will be a lock in period of three years for the shares disinvested by the Government.

 

2.         All the bidders for the management-employee buy-outs will also have to satisfy the provisions of the ‘Guidelines for qualification of bidders seeking to acquire stakes in Public sector Enterprise through the process of disinvestment’ issued vide the then Department of Disinvestment’s Office Memorandum No.6/4/2001-DD-II dated 13^th July 2001 or as amended subsequently along with other qualification criterion as generally applicable and not specifically excluded herein.

-sd-

(T.S. Krishnamachari)

Deputy Secretary to the Government of India

 

 

A.6          Annexure 6 - Advertisement Inviting Expression of Interest

 

Government of India

Ministry of Disinvestment

Block No. 11 & 14, CGO Complex, Lodi Road, New Delhi - 110003

Invitation for "Expression of Interest (EoI)" from prospective bidders
for sale of 89.85% of the total voting equity share capital in
 MSTC Limited

225C, A. J. C. Bose Road, Kolkata - 700020, India

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

The Government of India (GoI) intends to disinvest 100% of its total voting equity share capital amounting to 89.85% of the total voting equity share capital in MSTC Limited to a Strategic Investor (SI) along with management control, through a competitive bidding process. 

MSTC Limited is a trading house dealing with industrial bulk raw materials mainly related to steel plants. MSTC is also having a wholly owned subsidiary company Ferro Scrap Nigam Limited (FSNL) who is engaged in recovery and processing of scrap generated in various steel plants.

As per provisional results, the total turnover of the group was around Rs.2780 crore and the combined net worth as on 31.03.03 was Rs.182 crore.

Additional information including Preliminary Information Memorandum (PIM) can be accessed at the website http://www.mstcindia.com/ and / or http://divest.nic.in/ and / or http://steel.nic.in or obtained from Shri R. M. Roy, Chief General Manager (F&A), MSTC Limited, 225-C A.J.C. Bose Road, Kolkata-700020. Tel. 2247-7211, Tel: 2247-7211, Fax: 91-33-2247-56 37/8547.

Interested party(ies) (sole bidder/ consortium) are required to submit their EoI as per the format and process specified in the PIM at the under mentioned address within 4 (four) weeks from the date of publication of the advertisement. All queries related to the EoI may  be addressed to

Shri R.M. Roy,

Chief General Manager(F&A),

MSTC Limited,

225-C A.J.C. Bose Road,

Kolkata-700020.

Tel. 2247-7211, Fax: 91-33-2247-5637/8547.

Only the parties that are found eligible, in the sole discretion of GoI will be informed of the same, and provided further information.

This advertisement does not constitute, and will not be deemed to constitute, any commitment on the part of GoI. Furthermore, this advertisement confers neither any right nor expectation on any party to participate. GoI reserves the right to withdraw from the process or any part thereof, to accept or reject any or all offers at any stage of the process and/or modify the process or any part there off or to vary any terms at any time without giving reasons. No financial obligation will accrue to GoI in such an event. Neither GoI shall be responsible for non-receipt of correspondences sent by post/e-mail/fax/courier.