The Government of India has taken a number of measures to encourage foreign investment into India, generally, with a particular focus on the export of goods and services out of India. These measures include the introduction in 2005 of a SEZ regime under which specified land is deemed to be “foreign territory” for the purposes of Indian customs controls, duties and tariffs. SEZs provide an internationally competitive and relatively unregulated environment for export-oriented activities.
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The SEZ scheme has been designed to assist Indian companies overcome the various disadvantages and costs that may otherwise prevent investment and development. The rationale for SEZ in India includes: Ã¢â‚¬Â¢ Infrastructure – According to industry estimates, it is estimated that the cost of infrastructure would be lower by approximately 20%, as materials and services purchased by the SEZ developer are exempted from customs, excise duty, service tax and central sales tax. Investments in SEZs are treated as infrastructure development and are thus eligible for exemption. Ã¢â‚¬Â¢ Financing – The SEZ regime also provides for financing at international rates. It allows a company to establish offshore banking units (“OBUs”) and international financing centres (“IFCs”) in the SEZs. OBUs are entitled to an income-tax exemption for 10 years and they are exempt from the requirement of statutory liquidity ratio, which results in the availability of more sources of funds. Such OBUs and IFCs will be exempted from tax deducted at the source on its borrowings and deposits from Non-Resident Indians. These measures are intended to reduce the OBU’s cost of credit for SEZ-approved institutions. The services provided by an SEZ-approved institution are free from service tax and income tax, dividend payments are also free in the hands of payer and payee and a stamp duty exemption has been provided for SEZ estate transactions. Ã¢â‚¬Â¢ Exports – India’s share in global trade is only 0.9% despite it being one of the fastest growing economies in the world. SEZ will help boost the exports of the country, particularly non traditional once, by making the same feasible and attractive. This will also in turn affect the foreign exchange earning capacity and contribute to the exchange rate stability. Ã¢â‚¬Â¢ Development – Locations for SEZ plays a very important role in the development of backward regions. New industries are setup which creates jobs and raises the standard of living for the region. Various parties are involved the establishment, development and operation of a SEZ, including the following: Ã¢â‚¬Â¢ government and related governmental authorities that grant development rights for an SEZ establish policies and guidelines, assist with implementation and are empowered to provide financial support to an SEZ-approved institution. They are the most important party as they forgo the direct revenues and provide incentives for setting up of SEZ; Ã¢â‚¬Â¢ Developers, including co-developers, which are enterprises engaged in the establishment and development of the zone, including to provide infrastructure such as roads, water and drainage systems; Ã¢â‚¬Â¢ Operators, which are the enterprises engaged in the operation and/or maintenance of infrastructure facilities in the SEZ; Ã¢â‚¬Â¢ Tenants/units, which are the occupant enterprises within the SEZ and include enterprises engaged in a wide range of industries, including manufacturing, services and trading; and Ã¢â‚¬Â¢ Residents, who are people employed by enterprises located in the SEZ and who reside within the SEZ boundary.
MPSEZ is the developer and operator of the Mundra Port, one of the leading non-captive private sector ports in India based on volume of cargo during fiscal 2007. It has got the exclusive right to develop and operate Mundra Port and related facilities for 30 years pursuant to the Concession Agreement entered on February 17, 2001 with the GMB and the Government of Gujarat. MPSEZ received approval as a developer of a multi-product SEZ at Mundra and the surrounding areas from the Government of India on April 12, 2006, making it one of the first port-based multi-product SEZs in India. MPSEZ is a part of the Adani Group, which has interests in different industries including commodities trading, coal mining, power trading, power generation, real estate development, agro processing and logistics, shipping and port operations. Mundra port is principally engaged in providing port services for: (i) bulk cargo, (ii) container cargo, (iii) crude oil cargo, and (iv) value-added port services, including railway services. In addition, it also generates income from land related and infrastructure activities. Container cargo handling and related operations are provided by the Container Sub-concessionaire. It commenced trial operations at Mundra Port in October 1998 and commercial operations in October 2001 as part of its phased operations plan, initially handling only bulk dry and liquid cargo. It has experienced growth in throughput at Mundra Port as a result of both increased volume of bulk cargo imports and exports and the addition of services, particularly container cargo and crude oil cargo capabilities and railway services.
The key aspects of MPSEZ performance during the financial year 2009-10 are as follows: Cargo volume increased by 12.79% from 35.72 million tones in 2008-09 to 40.29 million tones in 2009-10. Turnover increased by 20.70% from Rs. 1,17,944.66 Lacs in 2008-09 to Rs. 1,42,359.67 Lacs in 2009-10. Profit after Tax increased by 52.03% from Rs. 46,108.52 Lacs in 2008-09 to Rs. 70,097.56 Lacs in 2009-10. Earning Per Share (EPS) for the year increased by 51.95% from Rs. 11.51 in 2008-09 to Rs. 17.49 in 2009-10. Financials Indicators
In view of continuing consistent good and profitable performance, MPSEZ declared and paid Interim Dividend of Rs. 2.50 per share (25%) during the year 2009e Board of Directors recommended a Final Dividend of Rs. 1.50 per share (15%) making aggregate dividend of Rs. 4.00 per share (40%) on 40,06,78,820 Equity shares of Rs. 10.00 each and Dividend on 0.01% Non Cumulative Redeemable Preference Shares of Rs. 10.00 each for the Financial Year 2009-10. The total outgo on account of dividend was Rs.16, 028.89 Lacs.
In its efforts towards continuous cost reduction and financial re-engineering, during the year 2009 Company issued Secured Redeemable Non-Convertible Debentures (NCDs) of face value of Rs.10,00,000/- each at par on private placement basis aggregating to Rs.1,100 crores and Commercial Papers aggregating to Rs. 750 Crores. This will result into savings in interest cost thereby lowering financial expenses. The Company’s NCDs are listed on the Wholesale Debt Market Segment of Bombay Stock Exchange (BSE).
MPSEZ was given the strong credit rating by leading rating agencies. The NCDs aggregating to Rs. 250 crores have been rated AA (SO) by CARE Ratings and NCDs aggregating to Rs. 850 crores have been rated LAA by ICRA Ltd. The Commercial Papers have been rated A1+ by ICRA Ltd. Benefits Provided to MPSEZ under the SEZ act, 2005 Overriding Effect of SEZ Act over other laws Under Section 51 (1) of the SEZ Act, all the benefits granted under SEZ Act will be available to the company irrespective of the inconsistent provisions in other laws like Income Tax Act, Central Excise Act, Customs Act, Finance Act,1994 (Service tax). To the Company – Under the SEZ Act, 2005 (“the Act”) Benefits available to the Company as an SEZ Developer 3.2.1 Under Section 26(1) of the Act, the company is entitled to the following exemptions, drawbacks and concessions, subject to the fulfilment of terms and conditions prescribed by the Central govt. in this regard, namely: – (a) Exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in a Special Economic Zone to carry on the authorized operations by the developer; (b) Exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone, to any place outside India: (c) Exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone, to carry on the authorized operations by the developer (d) Drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or services provided in a Special Economic Zone by the service providers located outside India to carry on the authorized operations by the developer (e) Exemption from service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a developer to carry on the authorized operations in a Special Economic Zone; (f) Exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre (g) Exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorized operations by the developer. 3.2.2 As per Rule 12(8) of SEZ Rules, 2006, as a developer, the company is allowed to make DTA clearance without any upper limits subject to permission of Specified Officer. 3.2.3 As per Section 3(13) of SEZ Act, 2005, subject to the provisions of this section and the letter of approval granted to a Developer, the Developer may allocate space or built up area or provide infrastructure services to the approved units in accordance with the agreement entered into by him with the entrepreneurs of such Units, purely on commercial basis on mutually agreed terms and conditions. There are no restrictions as to minimum number of units or minimum land area requirements for allotment of land to units and the developer has full freedom in allocation of developed land to units. 3.2.4 As per Section 7 of the SEZ Act, 2005, any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by, -a Developer; shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. The company is exempt for payment of taxes and cess payable under Agricultural Produce Cess Act, Oil Industry (Development) Act, Tobacco Cess Act, Research and Development (R&D) Cess Act, 1986 etc. 3.2.5 In line with Rule 5(5)(c) of SEZ Rules, 2006 the company is allowed to carry on generation, transmission and distribution of power within a Special Economic Zone subject to the provisions of the Electricity Act, 2003 (No. 36 of 2003); 3.2.6 As per Section 14 (2) of the Gujarat SEZ Act, 2004, the company is allowed to levy user charges or fees as may be approved by the Development committee for providing infrastructural facilities, amenities like Electricity, Water, Waste Treatment plant, Telecom Connectivity and roads etc. Hence the company has full freedom to fix the user charges or other fees. 3.2.7 In line with Section 50(a) of SEZ Act, 2005 and as per Section 21(1) of the Gujarat SEZ Act, 2004, the company is entitled to exemption from stamp duty and registration fees payable on transfer of land, exemption from levy of stamp duty and registration fees on loan agreements, credit deeds and mortgages executed by the company, exemption from sales tax, purchase tax, motor spirit, luxury tax, entertainment tax and other taxes and cess payable on sales and transactions within the entire SEZ. In line with Section 50(a) of SEZ Act, 2005 and as per Section 21(2) and 21(3) of the Gujarat SEZ Act, 2004, inputs (goods and services) purchased by the company from Domestic Tariff Area will be exempt from sales tax and other taxes under the State law. 3.2.8 As per Rule 27(4) of the SEZ Rules, 2006 Company may also source capital goods, without payment of duty, taxes or cess from a domestic or foreign leasing company, under a valid lease agreement and in such cases Developer shall jointly file documents for import or domestic procurement, as the case may be. Financial Indebtness Adani Group (MPSEZ) Adani Groups aggregate borrowings (consolidated) as of July 14, 2007 was as follows; Serial No Nature of Borrowing Amount ( Rs. Million) 1. Secured Borrowing 14474.9 2. Unsecured Borrowing 8.4 The details of Adani Group secured borrowings are as follows: Sl. No
11 1 Term Loan of Rs. 650.0 million vide agreement dated August 9, 2004 from State Bank of India Rs. 635.1 Repayable in 20 equal half yearly instalments commencing after 8 quarters from commercial operations. Interest rate is 1.75 % below SBAR 1 2 Term Loan of Rs. 400.0 (eq. USD 8.4 million) million vide agreement dated August 9, 2004 from State Bank of India USD 8.4 Equivalent to Rs. 339.8 Repayable in 12 equal quarterly instalments of Rs.33.3 millions each commencing after the moratorium of 3 years. Interest rate is 1.75 % below SBAR 3 Standard loan agreement dated April 11,2005 with Bayerische Hypo-Und Vereins Bank Akiengesellschaft, Munich for USDcounter value of Euros 4.4 million (eq. USD 5.2 million) USD 4.2 equivalent to Rs. 167.9 Repayable in 14 equal consecutive semiannual instalments, starting from six months after the commissioning date or September 30, 2005, whichever is earlier.Interest rate is LIBOR plus 0.65% 4 Contract dated October 2, 2002 with Kowa Company Limited for JPY 392.9 (includes interest) for the purchase of the Tug NIL Repayable in 12 equal quarterly instalments of JPY 32.7 million starting from July 15, 2003 5 Loan of Rs. 270.0 million vide agreement dated May 30, 2001 with Life InsuranceCorporation of India. Rs. 86.3 Repayable in 40 equal quarterly instalments of Rs. 6.8 million starting from July 1, 2003 Interest rate is 2 % above the PLR 6 Loan of USD 13.9 million vide agreement dated April 29, 1997 with the Industrial Finance Corporation of India USD 6.9 equivalent to Rs. 280.5 Repayable in 22 equal half yearly instalments starting from August 14, 2001. Interest rate is LIBOR + 3.25 % Term loan of Rs. 250.0 million vide agreement dated November 30, 2004 with Oriental Bank of Commerce Rs. 164.2 Repayable in 20 half yearly instalments starting from April 2008 Interest rate is 3.50% below PLR 7 Conversion of rupee term loan to USD 8.0 million loan vide sanction letter dated April 19, 2004 with State Bank of India USD 5.4 equivalent to Rs. 219.0 Repayable in 40 consecutive equal quarterly instalments commencing from August 31, 2004 Interest rate is 3.50 % over LIBOR 8 Term loan of Rs. 500.0 million vide loan agreement dated May 12, 2001 with the Canara Bank Rs. 300.0 Repayable in 20 equal half yearly instalments commencing from August 2003 Interest rate is 3.25% below PLR 9 Subscription agreement dated February 9,2000 with Life Insurance Corporation of India for allotment of 1,400,000 Secured Redeemable Non Convertible Debentures of face value of Rs. 100. Rs. 70.0 Debentures to be redeemed in 40 quarterly instalments beginning August 1, 2002 Interest rate is 15 % per annum. 10 Loan of Rs. 682.4 million vide agreement dated March 18, 2006 with Allahabad Bank Rs.684.5 Repayable in 40 equal quarterly instalments starting from 44 months from the date of the month in which first disbursement under the facility took place or on December 31, 2009 whichever is earlier. Interest rate is 2.00 % per annum below Bank’s PLR 11 Dollar loan up to the limit of USD 13.9 million vide agreement dated September 5,1997 with Export-Import Bank of India USD 5.0 equivalent to Rs. 200.6 Repayable in 22 substantially equal half yearly instalments commencing from April 2001 Rate of interest is 3.25% over LIBOR 12 Loan in USD 2.9 Mn (equivalent of Deutsche Mark 6, 375,000.00) vide agreement dated May 3, 2000 with Westdeutsche Landesbank Girozentrale, Dusseldorf USD 0.2 equivalent to Rs. 8.4 Repayable in 14 equal consecutive, semiannual instalments starting 6 months after the average weighted delivery or May 31, 2001.Rate of Interest is 0.6 % p.a. above USDLIBOR 13 Term Loan of Rs. 750.0 million vide agreement dated November 30, 2004 with Oriental Bank of Commerce. Rs. 743.6 Repayable in 20 half yearly instalments starting from April 2008. Rate of Interest is 3.50% below PLR 14 Term loan of Rs. 1,500.0 million vide agreement dated February 25, 2005 withAllahabad Bank. The loan availed is Rs.817.6 million. Rs. 613.5 Repayable in 16 equal half yearly installments commencing at the end of 6months from the date of disbursement.Rate of Interest is PLR minus 3.50% 15 Loan of Rs. 500.0 million vide agreement dated March 25, 2004 with Syndicate Bank Rs. 228.0 Repayable in 20 equal half yearly installments starting from August 2004 Interest rate is 3.0% less than the Bank’s PLR with a reset option at the end of the 5th year. 16 Loan of Rs. 3,000.0 million vide agreement dated May 20, 2005 with Infrastructure Development Finance Company Limited Rs. 2,768.9 Repayable in 180 monthly instalments commencing from July 25, 2005 Interest rate is the rate equal to the benchmark plus the spread for each disbursed tranche. 17 Term loan of Rs. 1,200.0 million vide loan agreement dated March 3, 2006 from UTI Bank Limited* * This sanctioned term loan includes L/C facilities of Rs. 495 million that shall get converted to term loan upon L/C retirement. Rs. 921.7 Repayable in 20 equal half yearly instalments starting from the end of 44 months from the month in which first disbursement took place or December 31, 2009, whichever is earlier. Interest rate is Bank’s PLR-3.75 %. 18 Loan of Rs. 1,000.0 million vide agreement dated June 30, 2006 with Syndicate Bank Rs. 775.0 Repayable in 20 equal half yearly installments after a moratorium of 44 months from the date of first draw down or December 21, 2009 whichever is earlier. Rate of interest is 2 % less than the Bank’s PLR. 19 Term Loan of Rs. 1,000.0 million vide agreement dated June 27, 2006 with Corporation Bank Rs. 330.0 Repayable in 40 equal quarterly instalments starting from the 24 months from the date of commercial operations, or December 31, 2009 or whichever is earlier Interest rate is 2% below Corporation Bank Bench Mark Advance Rate (COBAR) 20 Loan of Rs. 500.0 million vide agreement 2, 2004 with Syndicate Bank Rs. 332.6 Repayable in 16 equal half yearly instalments starting from August 2004 Interest rate is 2.5% less than the Bank’s PLR. 21 Term loan of Rs. 1,500.0 million vide sanction letter dated June 2, 2006 with State Bank of India and Term loan of Rs. 1440.0 million. Rs.2127.4 Repayable in 14 equal half yearly instalments commencing from December 31, 2009 or 24 months from date of commercial operations, whichever is earlier. Interest rate is 1.25% below SBAR 22 Loan for Rs.1,000.0 million vide sanction letter dated March 10, 2006 with Allahabad Bank Rs. 303.8 Repayable in 40 equal quarterly instalments, commencing at the end of 44 months from the month in which first disbursement took place or on December 31, 2009 whichever is earlier. Interest rate is 2% below PLR 23 Loan for Rs.1,000.0 million vide sanction letter dated July 11, 2006 with Canara Bank Rs. 973.2 Repayable in 20 equal half yearly instalments, commencing at the end of 44 months from the month in which first disbursement took place or on December31, 2009 whichever is earlier Interest rate is 9% 24 Loan for Rs.1,000.0 million vide sanction letter dated July 11, 2006 with Canara Bank Rs. 353.6 Repayable in 40 equal quarterly instalments, commencing at the end of 24 months from the commercial operations date or on December 31, 2009 whichever is earlier. Interest rate is 9% 25 Term loan of Rs. 500.0 million vide sanction letter dated April 28, 2006 with State Bank of Hyderabad and Term loan of Rs. 500.0 million Rs 364.1 Repayable in 14 equal half yearly instalments commencing from December 31, 2009 or 24 months from date of commercial operations, whichever is earlier. Interest rate is 2.25% below SBHPLR 26 Bills accepted under letters of credit issued against Secured Term Loans sanctioned by banks Rs. 500.8 Repayment and Interest terms as per the respective Secured Term Loans 2 Vehicle Loan from ICICI Bank Rs. 0.5 Repayable under Equated Monthly Instalment scheme (Note: 1 USD = Rs. 40.47; 100 JPY = Rs. 33.05) 1. As security for the repayment of the loans, Adani Group created charge on a variety of its assets for the repayment of its loans and debt obligations. These assets are as follows: (i) The immovable and movable assets and properties (including the tugs and other marine vessels) including the proposed Terminal 2 assets, fixed assets of the SPM project and all its intangible assets including the goodwill and future immovable assets acquired for the project; (ii) Adani Group’s revenue/receivables from the operations of Mundra Port and the SPM facility, TRA account and other bank accounts except in relation to IOC’s SPM project; (iii) Groups rights under the concession agreement and various sub concession agreements, insurance contracts, lease deeds and other port services agreements excluding the agreements related to IOC’s SPM project; (iv) A first charge on all the revenue/receivables of the Company from the project or otherwise; and (v) Capital goods required for implementation of railway project at Mundra. 2. Adani Group can also not undertake the following actions without the prior approval of its lenders: (i) Change its capital structure or the Memorandum of Association/Articles of Association; (ii) Formulate any scheme of amalgamation or reconstruction or undertake any merger or compromise with its creditors; (iii) Invest in shares or advance funds to or place a deposit with any other concern other than in the normal course of business; (iv) Declare dividends for any year except out of profit relating to that year; (v) Sell or transfer whole or substantial part of its business; (vi) Change its management control or its promoter’s control or material change in composition of its Board of Directors; (vii) Undertake any guarantee/obligations on behalf of any other company; (viii) Undertake any new project or change the scope of present projects; and (ix) Take loans from other lenders In addition, in the event of default on payment of the loans, some of its lenders have the right to appoint directors Under the loan agreement dated August 9, 2004 with the State Bank of India, the Adani Group has undertaken to maintain a minimum share holding of 51 % in Adani Group throughout the tenor of the loan. Material Agreements
Adani Group has entered into a concession agreement on February 17, 2001 (Concession Agreement) with the GMB and the Government of Gujarat (acting as a confirming party). The Concession Agreement grants us the right to develop, operate and maintain a port at Mundra and supersedes all previous permissions granted in this regard. The Concession Agreement is valid for 30 years and upon its expiry, we shall transfer the port to GMB. It has also entered into a separate Lease and Possession Agreement whereby requisite land necessary for the port has been leased to the group. The Group has been granted the following rights and entitlements under the Concession Agreement: Ã¢â‚¬Â¢ Develop both ‘Core Assets’ such as multi purpose jetty, jetty approach head and dry bulk/container jetty and ‘Contracted Assets’ such as a multi purpose terminal, container/dry bulk, shared services, liquid and other terminal and other intangible assets for the port; Ã¢â‚¬Â¢ Grant sub-concessions for all assets except core assets. However, all sub-concessions shall be consistent with the Concession Agreement and shall automatically terminate upon termination or expiry of the Concession Agreement. Ã¢â‚¬Â¢ The key promoters, such as the Government of Gujarat, Adani Group’s Promoters and their associates, shall have a minimum shareholding of 51% in us for at least seven years after the signing of the Concession Agreement. Further, any acquisition of 10% or more shareholding in the group will require the prior approval of the GMB. The GMB also has the right to nominate one director on the group’s Board of Directors.
Adani Group has entered into a lease and possession agreement (LPA) on September 28, 2000 with the GMB for the lease of 3,404.37 acres at Navinal Island and village Dhrub, Taluka Mundra, Kutch, along with a right to use the foreshore land and water front for 30 years. The lease has been granted for the development and operation of a port and the group has been granted exclusive rights. The lease rent payable is Rs. 2,380,182.25 per annum, payable by April 30 every year. The rent shall increase by 20% every three years. Adani Group and all sub-lessees are entitled to mortgage all assets (except Core Assets) for payment of dues to a bank or financial institution without the prior permission of the GMB.
Paras Tradelinks Private Limited and Amerzinc Products Private Limited (Purchasers) had purchased 15 million Equity Shares of Adani Group from Adani Port Infrastructure Limited and Adani Properties Private Limited (Sellers) for Rs. 1,200 million. The Equity Shares sold to the Purchasers comprise 14 million Equity Shares sold by APIPL and 1 million Equity Shares sold by Adani Properties Private Limited. The Purchasers had also entered into a Share Purchase and Shareholders Agreement (“PMC SPSA”) dated October 14, 2005 with the Sellers, Adani Group and the Promoters (Adani Infrastructure Services Limited), to evidence the share purchase and to determine the rights and obligations of the Purchasers within the company. Subsequently, the Purchasers have, through a Share Purchase Agreement (“PMC SPA”) dated January 27, 2006 sold the 15 million Equity Shares held by them to PMC for Rs. 1,200 million. All the rights and obligations of the Purchasers under the PMC SPSA have also been assigned in favour of PMC. PMC has signed a deed of adherence along with the Purchasers, Sellers and the Company on January 27, 2006 (a) Amendment of Memorandum or Articles of Association of the Company or any additional borrowings resulting in a change in debt: equity ratio from 2.5:1; (b) Related party transactions in excess of Rs. 25 million; (c) Any sale/merger/acquisition/joint venture/subsidiary having an aggregate value in excess of Rs. 2,500 million per fiscal year or any capital investment of more than Rs. 2,5000 million in a fiscal year except for the Terminal 2 and second stage assets; and (d) Dividend of more than Rs. 1,500 million in any fiscal year or amendment/ termination of agreement with key partners. As per the PMC SPSA, Adani Group was required to inform PMC 45 days prior to filing of any offer document for an initial public offering. Group was also required to inform PMC of the price band for such initial public offering 30 days prior to filing of the offer document. The said clauses have been amended vide an amendment letter dated February 16, 2007 and PMC has waived its right to receive prior information in relation to filing of the offer document and the price band for the initial public offering. Pursuant to the amendment letter dated February 16, 2007, Adani Group is required to inform the Purchasers of the filing of the DRHP within three days of such filing. Further, the Sellers and Adani Group are also required to inform PMC of the indicative price band for the initial public offering simultaneously along with the intimation of the filing of the DRHP. Prior to the listing of the Equity Shares, PMC also has a right of first refusal, in proportion to its shareholding, with respect to any fresh shares issued by the Company. PMC has a tag-along right for any transfer of Equity Shares by the Sellers, if such transfer is (a) more than 5% of Adani Group’s issued, subscribed and paid up equity capital in one transaction or series of transactions within 12 months, or (b) in excess of aggregate of 10% of share capital of Adani Group held by the Sellers for a pre IPO placement. No transfer of Equity Shares by the Sellers shall take place if such transferee refuses to purchase the Equity Shares offered by PMC. This tag-along right shall survive the initial public offering of Equity Shares of Adani Group. Any transfer of Equity Shares in violation of such tag-along right shall be treated as a breach of the PMC SPSA and will be void. The PMC SPSA shall terminate upon PMC or any of its assignees not having any Equity Shares. Except for the tag-along rights granted to PMC, the other rights and obligations of the parties under the PMC SPSA shall also terminate upon the listing of MPSEZ Equity Shares. Any dispute in relation to the PMC SPSA, including in relation to any alleged breach or termination of the PMC SPSA will be resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996. The Sellers, PMC, Purchasers and Adani Group have also entered into a Representation and Warranty
Media Data Processing Computer and Research Private Limited and Amerzinc Products Private Limited (Purchasers) purchased 15 million Equity Shares of Adani Group from Adani Port Infrastructure Limited and Adani Properties Private Limited (Sellers) for Rs. 1,200 million. The Equity Shares sold to the Purchasers comprise 14 million Equity Shares sold by APIPL and 1 million Equity Shares sold by Adani Properties Private Limited. The Purchasers had also entered into a Share Purchase and Shareholders Agreement (Kudos SPSA) dated October 14, 2005 with the Sellers, MPSEZ and the Promoters (Adani Infrastructure Services Limited), to evidence the share purchase and to determine the rights and obligations of the Purchasers within Adani Group. Subsequently, the Purchasers have, through a Share Purchase Agreement (“Kudos SPA”) dated January 27, 2006 sold the 15 million Equity Shares held by them to Kudos for Rs. 1,200 million. All the rights and obligations of the Purchasers under the Kudos SPSA have also been assigned in favour of Kudos. Kudos has signed a deed of adherence along with the Purchasers, Sellers and the Company on January 27, 2006 whereby all parties have agreed that the Kudos SPSA is valid and subsisting and that all rights and obligations thereunder have been transferred in favour of Kudos. Kudos has been granted the same rights and is subject to the same obligations under the Kudos SPSA as have been granted to PMC under the PMC SPSA. The Kudos SPSA shall terminate upon Kudos or any of its assignees not having any Equity Shares. Except for the tag-along rights granted to Kudos, the other rights and obligations of the parties under the Kudos SPSA shall also terminate upon the listing of our Equity Shares. Any dispute in relation to the Kudos SPSA, including in relation to any alleged breach or termination of the Kudos SPSA will be resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996. Agreement dated January 27, 2006 whereby Adani Group and the Sellers have confirmed their representations and warranties under the Kudos SPSA and the Kudos SPA. The parties have also agreed that in case of default in payment on any bonds or other instruments by Kudos, all its rights and obligations under the Kudos SPA and Kudos SPSA shall be transferred in favour of the bondholder and/or lender. Kudos has currently issued bonds to 3i Group Plc.
Adani Group entered into a shareholders agreement (“Kutch SHA”) on April 22, 2004 with the Rail Vikas Nigam Limited (“RVNL”), Government of Gujarat (“GoG”), Kandla Port Trust (“KPT”) (RVNL, GoG, KPT.The Kutch Railway Company Limited (“KRC”) to regulate the mutual rights and obligations of RVNL, GoG, KPT and Adani Group in KRC, a special purpose vehicle incorporated for implementation of the gauge conversion of the railway line between Gandhidham and Palanpur stations. KRC has entered into a concession agreement with the Ministry of Railways, Government of India for implementing the gauge conversion. Adani Group have 20% shareholding in KRC whereas RVNL, GoG and KPT have 50%, 4% and 26% shareholding, respectively, in KRC. Each Investor is subject to a lock in whereby it cannot transfer any of its shares within one year after the commercial operations date. Any transfer during the lock-in period can only be done to other Investors in proportion of their shareholding. After the lock-in period, the other Investors have the first right to acquire the shareholding of the proposed transferor. In case the other Investors do not acquire the shares within 14 days of the offer, the proposed transferor can sell the shares to a third party at no more favourable terms. Matters such as (i) merger or acquisition of any other company by KRC or change in capital structure or amendment of memorandum or articles of association of KRC; (ii) declaration of dividend; (iii) proposal for listing of shares; or (iv) establishment of subsidiaries or joint ventures or diversification into new businesses, shall require a super majority resolution of both the Board of Directors of KRC and at shareholder meetings. Super majority resolution means the approval of all directors present at such board meeting or in the case of shareholders meeting, three fourths of shareholders present and voting. The Kutch SHA may be terminated upon the listing of the shares on a stock exchange, winding up or any other event which may result in termination.
Adani Group has also entered into a Shareholders Agreement with Mr. Madanlal Nahta and Mr. Javerilal Nahta (collectively, the “Nahtas”) and Adinath Polyifills Private Limited (“Adinath”) on June 6, 2006. Adinath is engaged in salt manufacturing and holds 2,200 acres of land on leasehold basis from the Government of Gujarat.
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