KAMDHENU ISPAT LIMITED - Securities and Exchange Board of India

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The private sector expanded its capacities after de-licensing the iron and steel industry. The share of Main Producers (i.e SAIL, RINL, TISCO) and secondary producers in the total production of Finished (Carbon) steel was 39% and 61% respectively during the period April-July, 2005. However, compared with other countries, especially China, India’s steel production and consumption levels are very low. Hence, as a market India has a good potential with a low per capita consumption level of around 20 kg as against 80 kg in China, 405 kg in Malaysia and 925 kg in South Korea. Opportunities for growth of Iron and Steel in Private Sector The New Industrial Policy Regime The New Industrial policy has opened up the iron and steel sector for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario. The Growth Profile (i) Steel The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/ expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. At present, total (crude) steel making capacity is over 34 million tonnes and India, the 8th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious “ World Steel Dynamics”, Indian HR Products are classified in the Tier II category quality products – a major reason behind their acceptance in the world market. EU, Japan have qualified for the top slot, while countries like South Korea, USA share the same class as India. (ii) Pig Iron In pig iron also, the growth has been substantial. Prior to 1991, there was only one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned 21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have already been commissioned. The production of pig iron has also increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-04, the production of Pig Iron was 5.221 million tonnes. B. Components and structure of the industry I. Raw materials: Raw material required to produce steel by primary route are iron ore and coal/coke. Power is another significant cost in the production of steel. a) Iron ore Availability of iron ore has been a key issue confronting steel players globally. Iron ore prices in the past three years have seen sharp rises even as Chinese steel output doubled since 2001. Iron ore prices are expected to stay near record levels as global demand continues to outpace supply. Mining giants Vale, Rio Tinto and BHP Billiton, which meet three quarters of world iron ore demand, are raising output – though capacities are not expected to take off until 2006 to 2009. Iron ore prices are set annually beginning April 1, after individual negotiations between mining companies and steel makers. The annual contract price for fine ores, accounting for 60% of the global iron ore trade has jumped 71.5% year-on-year to USD 40 per ton from April 2005. The iron ore found in India has among the highest grades (65% ferrous content) in the world. Australian Mines, for example, have ore with 55-58% ferrous content. Moreover, India is one of the largest producers and exporters of iron-ore and hence availability of iron-ore has never been an issue. In India, a substantial proportion of mines are in the government sector. However, large local and international players too have been mining iron ore for substantial time. However, prices have exhibited a sharp volatility and the recent firming up of iron ore prices worldwide has led to smaller players exploring the possibility of owning mines. Prospecting ones iron ore resources will drastically cut down raw material costs of companies. This rush for iron ore mines is also fuelled by the realization that if India has 34
to compete with the likes of China, the only way is cost competitiveness. On the global front, trade in iron-ore has increased at a pace faster than that of steel production on account of increasing imports by China. China imported approximately 200MT in 2004 and is expected to import around 240MT in 2005, accounting for 42% of total sea-borne trade. Indian iron ore accounted for approximately 25% of these Chinese imports. As a result of the lack of iron ore availability, a large spot market has developed with prices well above the benchmark (the long term price) in the most liquid Chinese market. Further, freight rates have significantly widened the pricing differential between Brazil/Australia to North Asia – making locally sourced ore cheaper on a delivered basis. Indian manufacturers of iron-ore have taken full benefit of the situation to the detriment of their contract benchmark customers as they exhibited a preference to export rather than cater to the domestic market. The steel units with captive mines are expected to benefit from integration of the entire steel making production process. They will also be able to acquire raw materials at competitive costs compared with other global manufacturers. This will insulate them from any volatility that ore prices may witness, globally. However, pricing may move in tandem with global demand-supply dynamics – with an expectation that additional global mining capacities would ease pressures steel prices in the medium term. In fact, the world’s two biggest manufacturers of steel namely Mittal Steel and Arcelor SA have cut down production in 2005 to buoy prices as manufacturers run down inventories. In conclusion, owning mines and captive iron ore supply will benefit steel manufacturers in a big way. b) Coal India has large reserves of coal, a substantial proportion of which is high-ash coal that is suitable for thermal power plants with limited usage in the steel industry. It is essential to use non-coking coals with high reactivity characteristics and high ash fusion temperatures for rotary kiln coal based iron manufacturing processes. In the sponge iron manufacturing process, coal acts as feedstock than as fuel to provide heat to the process. Moreover, only a few select collieries have high-grade coal available with them. This limited coal is wasted as mere heating fuels in cement kilns and power plants rather than being reserved for sponge iron manufacturing. Coal forms an important raw material to manufacture sponge iron . Integrated manufacturers of steel through blast furnace route are dependent largely on imported coal (hard coking coal or coke). Production and prices of domestic coal are controlled by Coal India Limited, which along with its subsidiaries controls 95% of India’s production. Despite the 17% hike announced in CY04, prices are significantly lower than international prices giving a cost advantage to Indian sponge iron players. On the flip side, as allocation of coal is done on an annual basis, a linkage with Coal India needs to be in place to source domestic coal. Since requirement for hard coking coal and coke are met through imports, the largest impact of its price volatility is felt by integrated steel manufacturers who use the blast furnace route. The impact on manufacturers has been marginalized due to long-term contracts for the supply of coking coal and increase in sales realizations, which too have more than offset the increase in raw material prices. The increasing tendency of Indian companies to acquire majority stake in Australian and South African mines is likely to provide assured supplies with some pricing benefits. The global outlook for hard coking coal is similar to that of iron-ore – with an expectation of strong global demand from the coke-oven batteries being set up in India and China. c) Power Power is another important input in the steel industry. Most of the steel units, earlier, were dependent on the state for the supply of power that was available at prohibitive costs. Moreover, generation was low with large-scale frequency fluctuations. The plant load factor was also not maintained high levels throughout India. However, bigger steel units have set up captive power plants as government’s power policy was altered. These plants use flue gases and coal for generating power. In this manner, power generated is 20-25% cheaper to commercially available power. This has reduced substantially the power costs for steel units. Since this power does not use conventional fuel for generation, it can avail of carbon credits as per the Kyoto protocol. II. Sponge Iron (i) Background Sponge iron, also known as direct reduced iron (DRI), is a high quality metallic product manufactured by reducing iron ore lumps/pellets. Two major raw materials required to produce sponge iron are iron ore and coal. The sponge iron industry comprises two kinds of producers: · Gas based · Coal based As the distinction is drawn on the basis of fuel used, gas based sponge iron is purer compared to coal based sponge iron and therefore gets a premium. 35
Page 1 and 2: KAMDHENU ISPAT LIMITED DRAFT PROSPE
Page 3 and 4: DEFINITIONS AND ABBREVIATIONS Gener
Page 5 and 6: Abbreviations Abbreviation Full For
Page 7 and 8: RISK FACTORS An investment in equit
Page 9 and 10: mentioned under Class 1 to 42 cover
Page 11 and 12: (b) Any disruption/ discontinuance
Page 13 and 14: affect our operating results. We ar
Page 15 and 16: The central and state tax scheme in
Page 17 and 18: SUMMARY The following summary is qu
Page 19 and 20: THE ISSUE Equity Shares offered by
Page 21 and 22: of the Stabilisation Period allot,
Page 23 and 24: For the year ended August March Mar
Page 25 and 26: LEGAL ADVISOR TO THE ISSUE Luthra &
Page 27 and 28: 2. Capital Buildup: The existing sh
Page 29 and 30: B. Promoter Group 1. Saurabh Agarwa
Page 31 and 32: Sl. Name of Date of Consid- No. of
Page 33 and 34: Sl. Name of Date of Consid- No. of
Page 35 and 36: 7. The Pre-issue and Post-issue sha
Page 37 and 38: (b) Our top ten shareholders and sh
Page 39 and 40: OBJECTS OF THE ISSUE The proceeds f
Page 41 and 42: BASIS FOR ISSUE PRICE QUALITATIVE F
Page 43 and 44: STATEMENT OF TAX BENEFITS The Compa
Page 45 and 46: loss, such long -term capital loss
Page 47 and 48: Benefit available to Mutual Funds I
Page 49: Restrictions in external trade, bot
Page 53 and 54: III. Flat Products Flat products in
Page 55 and 56: · In China and other Asian countri
Page 57 and 58: BUSINESS OVERVIEW Kamdhenu Ispat Li
Page 59 and 60: PROCESS PROCESS FLOW CHART FOR PROD
Page 61 and 62: POWER The Company sources Power fro
Page 63 and 64: The sponge iron is one of the raw m
Page 65 and 66: We help them to get right people to
Page 67 and 68: 23. A.S. CEMENT INDUSTRIES, Patiala
Page 69 and 70: PROPERTY A. Properties owned by the
Page 71 and 72: S No. 6. 7. 8. Date & Tenure Name &
Page 73 and 74: OUR INDEBTEDNESS Sr. No 1 Lender &
Page 75 and 76: Main Objects The main objects of th
Page 77 and 78: OUR MANAGEMENT As per the Articles
Page 79 and 80: C. MR. SUNIL KUMAR AGARWAL Designat
Page 81 and 82: Company Secretary Secretarial & Leg
Page 83 and 84: PROMOTERS OUR PROMOTERS MR. SATISH
Page 85 and 86: 2. and accessories, automobile part
Page 87 and 88: The Board of Directors Kamdhenu Isp
Page 89 and 90: Annexure - II Statement of Assets a
Page 91 and 92: 7 The company is manufacturing CTD/
Page 93 and 94: Annexure - VII Performance Ratios:
Page 95 and 96: Principal Terms of Sanctioned Loans
Page 97 and 98: Financial Statements of Group Compa
Page 99 and 100: The Board of Directors of the Compa
Page 101 and 102:
List of Shareholders as on 30.9.200
Page 103 and 104:
MANAGEMENT’S DISCUSSION AND ANALY
Page 105 and 106:
DEPRECIATION Depreciation on fixed
Page 107 and 108:
of excise duty was 8% thereafter up
Page 109 and 110:
Administrative and Other Expenses W
Page 111 and 112:
Cost Of Goods Traded In The company
Page 113 and 114:
Information required as per clause
Page 115 and 116:
SL. NO. 5 6 7 8 9 10 11 12 ASSESSME
Page 117 and 118:
3.2 CENTRAL EXCISE Commissioner of
Page 119 and 120:
4.2 M/s. Kamdhenu Ispat Limited vs.
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II Outstanding litigations involvin
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Sales Tax ASSESSMENT YEAR PARTICULA
Page 125 and 126:
11. The Company has obtained consen
Page 127 and 128:
BEHALF AND TOWARDS THIS PURPOSE, TH
Page 129 and 130:
Public Issue expenses are estimated
Page 131 and 132:
ISSUE INFORMATION Terms of the Issu
Page 133 and 134:
Applications by Hindu Undivided Fam
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Payment Instructions 1. Payments sh
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5. Investors can contact the Compli
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for public subscription and the bal
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POWER TO MODIFY RIGHT 11. (i) If at
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without any deduction or allowance
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there be no such Chairman or if at
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69. The Director shall not be requi
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fit and any such appointment may (i
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present and entitled to vote there
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MATERIAL CONTRACTS AND DOCUMENTS FO
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DECLARATION All the relevant provis
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KAMDHENU ISPAT LIMITED - Securities and Exchange Board of India

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