Zuari Agro Chemicals Limited

378 Pages·2012·2.59 MB·English

INFORMATION MEMORANDUM

ZUARI AGRO CHEMICALS LIMITED
(Formerly known as Zuari Holdings Limited)

Zuari Agro Chemicals Limited (“Company”) was incorporated on 10th September, 2009under the
Companies Act, 1956 (“Companies Act”). The corporate identification number assigned to our
Company is U65910GA2009PLC006177.

Registered Office: Jai Kisaan Bhawan, Zuarinagar, Goa-403726, Tel: [phone]
Corporate Office: Global Business Park, Tower ‘A’, 5th Floor, M.G. Road, Gurgaon 122002,
Haryana, Website: www.zuari.in
Compliance Officer & Contact Person: Mr. R.Y. Patil, Chief General Manager & Company Secretary
Phone: [phone], Fax: [phone], Email-id: [email protected]

Information memorandum for the listing of 42,058,006 Equity Shares of Rs. 10 each fully paid up
pursuant to the Scheme of Arrangement and Demerger
NO EQUITY SHARES ARE PROPOSED TO BE SOLD OR OFFERED PURSUANT TO
THIS INFORMATION MEMORANDUM
FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY
GENERAL RISKS
Investment in equity and equity related securities, involves a degree of risk and investors should
not invest any funds in the equity shares of the Company unless they can afford to take the risk of
losing their investment. Investors are advised to read the risk factors carefully before taking a
decision of investing in the equity shares of the Company. For taking an investment decision,
investors must rely on their own examination of the Company, including the risks involved. The
securities have not been recommended or approved by Securities and Exchange
Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Information
Memorandum. Specific attention of investors is invited to the Section titled “Risk Factors” in this
Information Memorandum.
ISSUER’S ABSOLUTE RESPONSIBILITY
The Company, having made all reasonable inquiries, accepts responsibility for and confirms that
this Information Memorandum contains all information with regard to the Company, which is
material, that the information contained in this Information Memorandum is true and correct in all
material respects, that the opinions and intentions expressed herein are honestly held and that
there are no other facts, the omission of which makes this Information Memorandum as a whole or
any of such information or the expression of any such opinions or intentions misleading in any
material respect.
LISTING ARRANGEMENT
The Equity Shares of the Company are proposed to be listed on the BSE Limited (BSE), and the
National Stock Exchange of India Limited (NSE). The Company has submitted this Information
Memorandum with BSE and NSE and the same has been made available on the Company’s
website viz. www.zuari.in. The Information Memorandum would also be made available on the
website of BSE (www.bseindia.com) and NSE (www.nseindia.com).
REGISTRAR AND SHARE TRANSFER AGENT

LINK INTIME INDIA PRIVATE LIMITED
C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West), Mumbai 400 078
Tel: [phone] Fax: [phone] Website: www.linkintime.co.in
E-mail: [email protected]
Investor Grievance Email: [email protected]
Contact Person: N Mahadevan Iyer
SEBI Registration No.: INR000004058
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Table of Contents

Sr. No. Particulars Page No.
I Definitions & Abbreviations 3
II Risk Factors 7
III General Information 17
IV Capital Structure 22
V Objects And Rationale Of The Scheme 37
VI Salient Features Of The Scheme 39
VII Statement Of Possible Tax Benefits 43
VIII Company History & Management 58
IX Overview Of Organisation Structure 71
Promoter, Promoter Group and Subsidiary Companies and
X 72
Companies Under Same Management
XI Industry Overview 111
XII Our Business 114
XIII Financial Statements 116
XIV Management’s Discussion and Analysis 117
XV Outstanding Litigations, Defaults And Material Developments 120
XVI Articles Of Association 190
XVII Documents For Inspection 246
DECLARATION 247
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I: DEFINITIONS & ABBREVIATIONS

COMPANY / INDUSTRY RELATED TERMS

Term Description
“Zuari Global Limited” or Zuari Global Limited (formerly known as Zuari Industries
“ZGL” or “ZIL” Limited), a public limited company having its registered
office at Jai Kisaan Bhawan, Zuarinagar, Goa-403726
Articles / Articles of
Articles of Association of our Company
Association
Board of Directors / Board Board of Directors of the Company
Demerged Undertaking Demerged Undertaking shall have the meaning ascribed to
such term in “Scheme of Arrangement and Demerger”
Demerger Appointed Date 1st July, 2011
Effective Date Date of filing the Orders along with Form 21 with Registrar
of Companies, i.e., 21st March, 2012
Equity Share(s) or Share(s) Equity Share of our Company having a face value of `10/-
unless otherwise specified in the context thereof
Group Companies Group Companies of our Company as listed in “Promoters
and Group Companies”
This document filed with the Stock Exchanges is known as
Information Memorandum
and referred to as the Information Memorandum.
Zuari Agro Chemicals Limited (formerly known as Zuari
“ZACL” or “Company” or “Our
Holdings Limited), a public limited company having its
Company” or “we” or “us” or
registered office at Jai Kisaan Bhawan, Zuarinagar, Goa-
“our” or “ZHL”
403726
The listing agreement to be entered into between our
Listing Agreements
Company and theStock Exchanges

Memorandum/ Memorandum Memorandum of Association of the Company
of Association
Orders Orders of the Hon’ble High Court of Bombay at Goa dated
2nd March, 2012, approving the Scheme, and filed with the
RoC on 21st March, 2012
Promoter Group as defined in “Promoter, Promoter Group
Promoter Group and Subsidiary Companies and Companies Under Same
Management”
Zuari Global Limited (Formerly known as Zuari Industries
Promoters
Limited)
Zuari Global Limited (Formerly known as Zuari Industries
Transferor Company
Limited)
Zuari Agro Chemicals Limited (Formerly known as Zuari
Transferee Company
Holdings Limited)
Record date 10th April, 2012
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Term Description
Registrar and Share Transfer Link Intime India Private Limited
Agents
The Registrar of Companies of Goa located at Company Law
RoC
Bhawan, EDC Complex, Plot No. 21, Patto, Panaji - 403001
Scheme of Arrangement and Demerger dated 14th July,
Scheme
2011
Statutory Auditor S. R. Batliboi & Co.
Stock Exchanges NSE and BSE

CONVENTIONAL / GENERAL TERMS AND ABBREVIATIONS

COMPANY / INDUSTRY RELATED TERMS

Term Description
Articles / Articles of Articles of Association of the Issuer, as amended
Association / AOA
Auditors / Statutory Auditors M/s. S.R. Batliboi & Co
Board / Board of Directors The Board of Directors of the Issuer
BSE BSE Limited
BTU British Thermal Units
Committee of Directors The Committee of Directors of the Issuer
CDSL Central Depository Services Limited
DP Depository Participant
Memorandum / MOA Memorandum of Association of the Issuer, as amended
MOP Muriate of Potash
MT Metric Tonne
NBS Nutrient Based Subsidy
NSDL National Securities Depository Limited
NSE National Stock Exchange of India Limited
Registered Office Jai Kisaan Bhawan, Zuarinagar, Goa-403726
SCRR Securities Contracts (Regulations) Rules, 1957
SEBI Securities and Exchange Board of India
USD United States Dollar, the official currency of the United
States of America

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In the Information Memorandum all reference to ` refer to Rupees, the lawful currency of
India, reference to one gender also refers to another gender and the word ‘Lakh’ or ’Lac’
means ‘one hundred thousand’ and the word ‘million’ means ‘ten lacs’ and the word ‘crore’
means ‘ten million’.

Certain Conventions; Use of Market Data

Unless stated otherwise, the financial data in this Information Memorandum is derived from
our restated financial statements. The fiscal year commences on April 1 and ends on March
31 of each year, so all references to a particular fiscal year are to the twelve month period
ended March 31 of that year. In this Information Memorandum, any discrepancies in any table
between the total and the sums of the amounts listed are due to rounding.

All references to “India” contained in this Information Memorandum are to the Republic of
India. All references to “Rupees” or “`” are to Indian Rupees, the official currency of the
Republic of India.

For additional definitions, please see the section titled “Definitions, Abbreviations and
Industry Related Terms” of this Information Memorandum.

Unless stated otherwise, industry data used throughout this Information Memorandum has
been obtained from the published data and industry publications. Industry publications
generally state that the information contained in those publications has been obtained from
sources believed to be reliable but that their accuracy and completeness are not guaranteed
and their reliability cannot be assured. Although we believe that industry data used in this
Information Memorandum is reliable, it has not been independently verified.

The information included in this Information Memorandum about various other Companies is
based on their respective Annual Reports and information made available by the respective
companies.

Forward-Looking Statements

We have included statements in this Information Memorandum which contain words or
phrases such as “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”,
“anticipate”, “estimate”, “intend”, “plan”, contemplate”, “seek to”, “future”, “objective”,
“goal”, “project”, “should”, “will pursue” and similar expressions or variations of such
expressions, that are “forward looking statements”. Similarly, statements that describe our
objectives, plans or goals also are forward-looking statements, actual results may differ
materially from those suggested by the forward looking statements due to risks or
uncertainties associated with our expectations with respect to, but not limited to:

• General economic and business conditions in India and other countries;
• Regulatory changes and our ability to respond to them;
• Our ability to successfully implement our strategy, our growth and expansion plans;
• Technological changes;
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• Our exposure to market risks, general economic and political conditions in India
which have an impact on our business activities or investments;
• The monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence
in interest rates, foreign exchange rates, equity prices or other rates or prices, the
performance of the financial markets in India and globally;
• Changes in domestic and foreign laws, regulations and taxes and changes in
competition in our industry

For further discussion of factors that could cause our actual results to differ, see the section
titled “Risk Factors” of this Information Memorandum. By their nature, certain market risk
disclosures are only estimates and could be materially different from what actually occurs in
the future. As a result, actual future gains or losses could materially differ from those that
have been estimated.

We do not have any obligation to, and do not intend to, update or otherwise revise any
statements reflecting circumstances arising after the date hereof or to reflect the occurrence
of underlying events, even if the underlying assumptions do not materialize.

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II - RISK FACTORS

The following is the summary of the risk factors. The more detailed information about the
Company and its financial statements has been included elsewhere in this Information
Memorandum. Unless specified or quantified in the relevant risk factors below, the Company
is not in a position to quantify the financial or other implication of any of the risks described in
this Section. The numbering of the risk factors has been done to facilitate ease of reading and
reference and does not in any manner indicate the importance of one risk over another.

An investment in equity shares involves a high degree of risk. The investor should carefully
consider all the information in this Information Memorandum including the risks and
uncertainties mentioned below. If any of the following risks actually occur, the business,
financial condition and operations of the Company could suffer, the trading price of the Equity
Shares could decline and the investor may lose all or part of their investments.

MATERIALITY

The Risk Factors have been determined on the basis of their materiality. The following factors
have been considered for determining the materiality:

• Some events may not be material individually but may be found material collectively.
• Some events may have material impact qualitatively instead of quantitatively.
• Some events may not be material at present but may be having material impact in
future.

The risk factors are as envisaged by the management along with the proposals to address the
risk if any.

INTERNAL RISK FACTORS

Risk factors related to our Company and Business

1. Our Company may be involved in legal proceedings in various states in India, both
as plaintiff and as defendant, in which we may not prevail.
Pursuant to the clause 13 of the Scheme of Arrangement and Demerger, all legal and
other proceedings by or against Zuari Global Limited ( formerly known as Zuari
Industries Limited) and relating to the Fertiliser Undertaking shall be continued and
enforced by or against Zuari Agro Chemicals Limited (formerly known as Zuari
Holdings Limited) only. If proceedings are taken against Zuari Global Limited, Zuari
Global Limited will defend on notice as per advice of Zuari Agro Chemicals Limited at
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the costs of Zuari Agro Chemicals Limited and Zuari Agro Chemicals Limited will
indemnify and keep indemnified Zuari Global Limited from and against all liabilities,
obligations, actions, claims, and demands in respect thereof.
There are certain claims pending against us, which are discussed elsewhere in the
Information Memorandum. Some of these actions against us may result in financial
Settlements and penalties that may affect our earnings. If we are sued by our
customers or end users in case of any defects in our Fertilisers, our reputation and
business may be adversely affected.
For further details, kindly refer to the section titled “Outstanding Litigations, Defaults
And Material Developments.”

2. Our sales are to a large extent dependent on the overall area under cultivation and
the cropping pattern adopted by the farming community in India

The Company has taken over the Fertilizer Undertaking of the Zuari Industries
Limited(now Zuari Global Limited) pursuant to Demerger scheme approved by the
High Court of Bombay at Goa. The Company shall derive profits primarily from sales
of Urea, Diammonium phosphate (DAP), Muriate of Potash (MOP) and NP/NPK
Complex in various parts of India. Any significant reduction (10% or more) in the area
under cultivation or any shortfall of rainfall may significantly reduce the demand for
our Fertilisers. Also the demand of our Fertilisers is dependent on the cropping
pattern which may vary year on year for the major crops. Any significant changes in
the cultivable area, rain distribution and the cropping pattern in India may impact our
sales and profitability. Fortunes of the fertilizer industry as a whole depend on the
status of the agriculture sector which in turn depends on the adequacy of monsoons.
Erratic or inadequate monsoons could have an adverse impact on the fertilizer
industry and the Company.

3. Regulated industry and grant of Subsidies by the Government

Fertilizer industry is a regulated Industry in India. The Maximum Retail Price as well as
subsidy on fertilizers is dependent on Government regulations (policies vary on the
type of Fertilser). Any change in the Government policies with respect to fertilizers
and allied agro products especially covered under the subsidy scheme may affect the
company’s sales and profitability. Urea is presently under the Retention Pricing
Scheme, whereby the urea manufacturers get a specified return on the net worth.
Decontrol of Urea could affect the fortunes of the fertilizer industry and the Company.
In an endeavor to ensure a balanced use of fertilizers, the Government has
introduced Nutrient Based Subsidy on DAP and other complex fertilizers.. Delay in
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determination and receipt of subsidy from the Central Government may affect the
profitability of the Company.

4. Manufacturing Facilities and smooth operations of Plant and ability to adapt to
technological changes:

The operation of the units may be disrupted for reasons that are beyond the control
of the Company including explosions, fires, earthquakes and other natural disasters,
breakdown, failure or substandard performance of equipment, improper installation
or operation of equipment, accidents, operational problems, transportation
interruptions, other environmental risks and labour disputes. In addition, the
Company's projects may also be targets of terrorist attacks or other civil disturbances.
Furthermore, the Company relies on extremely sophisticated and complex machinery
that is built by third parties and may be susceptible to malfunction. The Company
cannot assure that it will successfully implement new technologies effectively or
adapt its systems to emerging industry standards. The loss of or shutdown of
operations at company’s manufacturing facility may have a material adverse effect on
its business, financial condition and results of operations. The Company’s operations
could be adversely affected by strikes, work stoppages or increased wage demands
by its employees.

5. Delay or non-receipt of relevant regulatory and' third party approvals may have an
adverse effect on the operations and financial condition of the Company.

As a result of the Scheme of Demerger approved by the High Court, the Company is
required to transfer the assets, properties, contracts and licenses and permits forming
part of the Demerged Undertaking, from Zuari Industries Limited (now Zuari Global
Limited) in favour of the Company. Some of the consent s have been obtained and
some are still pending. Any delay or non- receipt of these consents will hamper the
operations of the Company and may have an adverse impact on the financial
condition of the Company.

6. Our failure to obtain and renew Compliance requirements and regulatory approvals
required for our business may be detrimental for our business.

Most of Company’s approvals for manufacturing process are valid for certain period
and requires regular renewals. These renewals are required in ordinary course of
business and are subject to compliances with various conditions stipulated in those
approval/ Licenses. In case the Company is unable to get its licenses and approval
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renewed in time the operation of the manufacturing facilities and marketing of the
products may be hampered, which can affect its results of operations and financials.

7. Our inability to meet the quality norms prescribed by the Government.

Quality of Fertilizer products manufactured in India is open to independent verification
by Government agencies. Government agencies carry out surprise sample checking
of Fertilisers for their contents / nutrients. In case, the content / nutrients in the
sample does not comply with the quality norms prescribed by the Government, it
could lead to issuance of show cause notices. Any failure on quality control by the
Company could lead to suspension of sales of those batches and /or Fertilisers in that
particular state or the Fertilisers manufactured by the company being totally banned
for sales.

8. Risk on availability of raw material, transportation arrangements and Imports
restrictions.

The price and availability of imported raw materials for the manufacture of Phosphatic
Fertilisers could affect the profitability of the Company. The Company’s business may
be adversely affected if it is unable to renew its contracts with raw material suppliers.
The Company’s business is dependent on continued availability of raw materials
Naptha/LNG/Gas, phosphoric acid and Potash. Any interruption in the availability of
the abovementioned or other raw materials may adversely affect Company’s
business, financial condition and results of operations. Similarly, in the event that
suppliers face a plant shutdown or other problems which affect the continued supply
of aforementioned raw materials to the Company, financial condition and results of
operations may be adversely affected.

9. Risk in relation to usage of hazardous chemical / substances in our production

The Company is exposed to risk of usage of hazardous chemicals in production. Any
mishandling of hazardous chemicals / substances could lead to fatal accidents, which
may affect its business operations. In order to prevent such mishandling the
Company has established various measures including training of workers, no entry to
production area without safety devices, prominent display of safety measures and
precautionary measures in production area etc. Effluent water treatment plant has
been installed and recycled water is used in processes / gardens in the precincts.
Fresh air induction systems have been installed to create a better protection
environment.

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