PFS IM Series 1 Infra Bonds 7 Feb 2011 - rrfinance.com IM.pdf · Capital Structure of the Company...
Transcript of PFS IM Series 1 Infra Bonds 7 Feb 2011 - rrfinance.com IM.pdf · Capital Structure of the Company...
Private & Confidential- Not for Circulation (This is a Disclosure Document prepared in conformity with
Securities and Exchange Board of India (Issue and Listing of Debt
Securities) Regulations, 2008 issued vide circular no. LAD-
NRO/GN/2008/13/127878 dated June 06, 2008)
PRIVATE PLACEMENT OF PFS SECURED LONG TERM INFRASTRUCTURE
BONDS - SERIES 1 OF Rs.5,000/- EACH FOR CASH AT PAR WITH BENEFITS UNDER
SECTION 80CCF OF THE INCOME TAX ACT, 1961
Registered Office: 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place, New Delhi 110 066
Corporate Office: 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place, New Delhi 110 066 Tel: 011 41595122 Fax: 011 41595155, website: www.ptcfinancial.com
PRIVATE PLACEMENT OF PFS LONG TERM INFRASTUCTURE NON-
CONVERTIBLE BONDS OF Rs. 5,000/- (RUPEES FIVE THOUSAND ONLY) EACH
FOR CASH AT PAR WITH BENEFITS UNDER SECTION 80 CCF OF THE INCOME
TAX ACT, 1961 FOR Rs. 30 CRORES (RUPEES THIRTY CRORE ONLY) WITH AN
OPTION TO RETAIN OVER-SUBSCRIPTION UP TO AN ADDITIONAL AMOUNT OF
Rs. 70 CRORES (RUPEES SEVENTY CRORE ONLY), THUS AGGREGRATING TO
Rs. 100 CRORES (RUPEES ONE HUNDRED CRORE ONLY)
Credit Rating
‘Brickwork’ has assigned “BWR AA” (Pronounced Double A) (Outlook: Stable) rating. Instrument with this rating are considered to offer High Credit quality in terms of timely payment of debt obligations.
‘ICRA’ has assigned “LA+” (pronounced L A plus) positive outlook rating. This rating is considered to offer adequate credit quality for timely servicing of debt obligations.
The above ratings are not recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future.
Listing
The Secured Redeemable Taxable Non-Convertible Bond are proposed to be listed on the WDM segment of National Stock Exchange of India Limited (NSE).
REGISTRAR TO THE ISSUE
Karvy Computershare Private Limited
Plot No. 17 to 24, Vithalrao Nagar Madhapur, Hyderabad 500 086 Telephone: +91 40 2342 0815 Fax +91 40 2342 0814
TRUSTEE FOR THE BONDHOLDERS
IDBI Trusteeship Services Limited
Asian Building, Ground Floor 17, R. Kamani Marg Ballard Estate, Mumbai – 400 021 Tel No. 022 – 66311771/2/3 Fax No. 022 – 66311776
* An Investor may invest any amount but the maximum tax benefit under section 80 CCF of Income Tax Act 1961, would be available
on the maximum investment of up to Rs. 20,000 only
Note: This information memorandum is neither a prospectus nor a statement in lieu of prospectus. This is only an information
brochure intended for private use and should not be construed to be prospectus and/or an invitation to the public for subscription to
Bonds. PFS can at its sole and absolute discretion change the terms of the offer. The investors are advised to check the terms and
conditions including rate of interest prevailing at the time of applying for the Bonds. The issuer also reserves the right to close the
issue earlier/extend from the @aforesaid date or change the issue time table including the Deemed Date of Allotment at its sole
discretion, without giving any reasons or prior notice.
INFORMATION MEMORANDUM
Minimum Application Size: Rs. 5000/- Maximum Application Size: No Limit*
ISSUE OPEN ON: February 09, 2011 @ISSUE CLOSES ON : March 15, 2011
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
ARRANGERS TO THE ISSUE
Almondz Global Securities Limited
2nd Floor, 3 Scindia House
Janpath, New Delhi 110001
Tel No. 011-41514666-669
Fax No. 011-41514665
Bajaj Capital Limited
Bajaj House, 5th Floor
97 Nehru Place , New Delhi 110019
Tel No. 011-66161111 Fax No. 011-66608888
Edelweiss Capital Limited
14th Floor, Express Towers
Nariman Point
Mumbai 400021
Tel No. 022 – 6623 3405
Fax No. 022 – 4342 8029
JM Financial Service Pvt Limited
2,3 & 4, Kamanwala Chambers
Sir P. M. Road Fort
Mumbai 400001
Tel No. 022- 22665577 to 80
Fax No. 022-22665902
R R Investors Capital Services Pvt Limited
47, M M Road
Rani Jhansi Marg, Jhandelwalan
New Delhi 110055
Tel No. 011-23508908
Fax No. 011-23636745
SPA Merchant Bankers Limited
25 ‘C’ Block Community Centre
Janak Puri
New Delhi 110058
Tel No. 011- 45675536
Fax No. 011-25532644
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
TABLE OF CONTENT
Title Page No.
Definitions/ Abbreviations 4
Disclaimer 6
Issue Structure 8
Risk Factors 11
General Information 16
Terms of the Issue 18
Statement of Tax Benefit 26
Procedure of Application 28
Brief Profile of Directors of the Company 31
Company Profile 33
PTC India Limited (Promoter) 34
Shareholding Pattern of Company 34
Financial Performance 35
Product & Services 36
Investments In Energy Value Chain 37
Industry Outlook 38
Capital Structure of the Company
(A) Details of Share Capital 49
(B) Details of other borrowings 50
Material Contracts & Agreements Involving Financial Obligations of the Issuer 56
Declaration 57
ANNEXURES
A Credit rating letter from ICRA LTD
B Credit rating letter from BRICKWORK RATINGS INDIA PVT LTD
C Consent letter from Karvy Computershare Private Limited
D Consent letter from IDBI Trusteeship Services Ltd
E RBI Certificate for conferring Infrastructure Finance Company status to PFS
F List of Collecting Banks
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
DEFINITIONS/ ABBREVIATIONS
Board/ Board of Directors The Board of Directors of PTC India Financial Services Limited
or Committee thereof
Bonds Secured, Redeemable, Non-Convertible Bonds Series 1 having
benefits under section 80 CCF of the Income Tax, 1961 for Long
Term Infrastructure Bonds
Book Closure/ Record Date The date of closure of register of Bonds for payment of interest
and repayment of principal
CAR Capital Adequacy Ratio
CDSL Central Depository Services (India) Ltd.
Depository A Depository registered with SEBI under the SEBI (Depositories
and Participant) Regulations, 1996, as amended from time to time
Depositories Act The Depositories Act, 1996, as amended from time to time
Depository Participant A Depository participant as defined under Depositories Act
Designated Stock Exchange National Stock Exchange of India Ltd.
DER Debt Equity Ratio
Director(s) Director(s) of PTC India Financial Services Limited unless
otherwise mentioned
DP Depository Participant
EPS Earnings Per Share
FIs Financial Institutions
FIIs Foreign Institutional Investors
Financial Year/ FY Period of twelve months period ending March 31, of that
particular year
GoI Government of India/ Central Government
HUF Hindu Undivided Family
Issuer/ PFS/ Company PTC India Financial Services Ltd
Disclosure Document Disclosure Document dated February 07, 2011 for Private
Placement of Secured, Redeemable, Non-Convertible Bonds
Series 1 having benefits under section 80 CCF of the Income Tax,
1961 for long term Infrastructure Bonds
I.T. Act The Income Tax Act, 1961, as amended from time to time
Arrangers Almondz Global Securities Ltd, Bajaj Capital Ltd, Edelweiss
Capital Limited, JM Financial Service Pvt Limited, R R Investors
Capital Services Pvt Ltd & SPA Merchant Bankers Ltd
Listing Agreement Listing Agreement for Debt Securities issued by Securities and
Exchange Board of India vide circular no.
SEBI/IMD/BOND/1/2009/11/05 dated May 11, 2009 and
Amendments to Simplified Debt Listing Agreement for Debt
Securities issued by Securities and Exchange Board of India vide
circular no. SEBI/IMD/DOF-1/BOND/Cir-5/2009 dated
November 26, 2009 and Amendments to Simplified Debt Listing
Agreement for Debt Securities issued by Securities and Exchange
Board of India vide circular no. SEBI/IMD/DOF-1/BOND/Cir-
1/2010 dated January 07, 2010
MoF Ministry of Finance
NPAs Non Performing Assets
NSDL National Securities Depository Ltd.
PAN Permanent Account Number
Rs. Indian National Rupee
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
RBI Reserve Bank of India
RTGS Real Time Gross Settlement
Registrar Registrar to the Issue, in this case being IDBI Trusteeship
Services Limited
SEBI The Securities and Exchange Board of India, constituted under the
SEBI Act, 1992
SEBI Act Securities and Exchange Board of India Act, 1992, as amended
from time to time
SEBI Regulations Securities and Exchange Board of India (Issue and Listing of Debt
Securities) Regulations, 2008 issued vide Circular No. LAD-
NRO/GN/2008/13/127878 dated June 06, 2008
TDS Tax Deducted at Source
The Companies Act/ The Act The Companies Act, 1956 as amended from time to time
The Issue/ The Offer/ Private
Placement
Issue through Private Placement of 60,000 Secured, Redeemable,
Non-Convertible Bonds Series 1 having benefits under section 80
CCF of the Income Tax, 1961
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
DISCLAIMER
GENERAL DISCLAIMER
This Information Memorandum (“document”/”IM”) is neither a Prospectus nor a Statement in Lieu of
Prospectus or an invitation to the Public to subscribe to the Infrastructure Bonds issued by PTC India
Financial Services Limited (PFS) (the “Issuer”/ “the Company”) and is prepared in accordance with
Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 issued
vide Circular No. LAD-NRO/GN/2008/13/127878 dated June 06, 2008. This IM is not intended for
distribution and is for the consideration of the person to whom it is addressed and should not be
reproduced / redistributed by the recipient. It cannot be acted upon by any person other than to whom it
has been specifically addressed. Multiple copies hereof given to the same entity shall be deemed to be
offered to the same person. The securities mentioned herein are being issued strictly on a private
placement basis and this offer does not constitute a public offer/invitation.
This Information Memorandum is not intended to form the basis of evaluation for the potential investors
to whom it is addressed and who are willing and eligible to subscribe to these Infrastructure Bonds issued
by PFS. This IM has been prepared to give general information regarding PFS to parties proposing to
invest in this issue of Infrastructure Bonds and it does not purport to contain all the information that any
such party may require. PFS and the Arrangers do not undertake to update this Information Memorandum
to reflect subsequent events and thus it should not be relied upon without first confirming its accuracy
with PFS.
Potential investors are required to make their own independent valuation and judgment before making the
investment and are believed to be experienced in investing in debt markets and are able to bear the
economic risk of investing in the Bonds. It is the responsibility of potential investors to have obtained all
consents, approvals or authorizations required by them to make an offer to subscribe for, and purchase the
Bonds. Potential investors should not rely solely on information in the Information Memorandum or by
the Arrangers nor would providing of such information by the Arrangers be construed as advice or
recommendation by the Issuer or by the Arrangers to subscribe to and purchase the Bonds. Potential
investors also acknowledge that the Arrangers do not owe them any duty of care in respect of their offer to
subscribe for and purchase of the Bonds. It is the responsibility of potential investors to also ensure that
they will sell these Bonds in strict accordance with this IM and other applicable laws, and that the sale
does not constitute an offer to the public within the meaning of the Companies Act, 1956. Potential
investors should also consult their own tax advisors on the tax implications of the acquisitions, ownership,
sale and redemption of Bonds and income arising thereon.
DISCLAIMER OF THE SECURITIES & EXCHANGE BOARD OF INDIA
This Disclosure Document has not been filed with Securities & Exchange Board of India (SEBI). The
Securities have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or
adequacy of this document. It is to be distinctly understood that this document should not, in any way, be
deemed or construed to have been cleared or vetted by SEBI. SEBI does not take any responsibility either
for the financial soundness of any scheme or the project for which the Issue is proposed to be made, or for
the correctness of the statements made or opinions expressed in this document. The issue of Bonds being
made on private placement basis, filing of this document is not required with SEBI. However, SEBI
reserves the right to take up at any point of time, with PFS, any irregularities or lapses in this document.
DISCLAIMER OF THE ISSUER
The Issuer confirms that the information contained in this Disclosure Document is true and correct in all material respects and is not misleading in any material respect. All information considered adequate and relevant about the Issue and the company has been made available in this Disclosure Document for the use and perusal of the potential investors and no selective or additional information would be available for a section of investors in any manner whatsoever. The company accepts no responsibility for statements made otherwise than in this Disclosure Document or any other material issued by or at the instance of the
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
company and anyone placing reliance on any other source of information would be doing so at his/her/their own risk. Neither the Company nor the arrangers take any responsibility for any future changes in the Income Tax Rules by the Government of India, which may affect the status of these Bonds. PTC India Financial Services Limited proposes, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offer of its equity shares and has filed a draft red herring prospectus (“DRHP”) with the Securities and Exchange Board of India (“SEBI”). The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1993, as amended (“U.S. Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act and the applicable laws of the jurisdiction where those offers and sales occur. The DRHP is available on SEBI website at www.sebi.gov.in as well as on the websites of the Book Running Lead Managers at (“BRLMs”) associated with the Issue (i.e. the website of SBI Capital Markets Limited- www.sbicaps.com , JM Financial Consultants Private Limited- www.jmfinancial.in , ICICI Securities Limited- www.icicisecurities.com , Almondz Global Securities Limited- www.almondzglobal.com ) and the Co-Book Running Lead Manager (“Co- BRLM”) associated with the Issue ( i.e. website of Avendus Capital Private Limited- www.avendus.com).
DISCLAIMER OF THE ARRANGERS
It is advised that company has exercised self due-diligence to ensure complete compliance of prescribed
disclosure norms in this Disclosure Document. The role of the Arrangers in the assignment is confined to
marketing and placement of the Bonds on the basis of this Disclosure Document as prepared by the
Company. The Arrangers have neither scrutinized/ vetted nor have they done any due-diligence for
verification of the contents of this Disclosure Document. The Arrangers shall use this document for the
purpose of soliciting subscription from qualified institutional investors in the Bonds to be issued by the
company on private placement basis. It is to be distinctly understood that the aforesaid use of this
document by the Arrangers should not in any way be deemed or construed that the document has been
prepared, cleared, approved or vetted by the Arrangers; nor do they in any manner warrant, certify or
endorse the correctness or completeness of any of the contents of this document; nor do they take
responsibility for the financial or other soundness of this Issuer, its promoters, its management or any
scheme or project of the company. The Arrangers or any of its directors, employees, affiliates or
representatives do not accept any responsibility and/or liability for any loss or damage arising of whatever
nature and extent in connection with the use of any of the information contained in this document.
DISCLAIMER OF THE STOCK EXCHANGE
As required, a copy of this Disclosure Document has been submitted to the National Stock Exchange of
India Ltd. (hereinafter referred to as “NSE”) for hosting the same on its website. It is to be distinctly
understood that such submission of the document with NSE or hosting the same on its website should not
in any way be deemed or construed that the document has been cleared or approved by NSE; nor does it in
any manner warrant, certify or endorse the correctness or completeness of any of the contents of this
document; nor does it warrant that this Issuer’s securities will be listed or continue to be listed on the
Exchange; nor does it take responsibility for the financial or other soundness of this Issuer, its promoters,
its management or any scheme or project of the company. Every person who desires to apply for or
otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry, investigation
and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which
may be suffered by such person consequent to or in connection with such subscription/ acquisition
whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
ISSUE STRUCTURE
PRIVATE PLACEMENT - LONG TERM INFRASTRUCTURE BONDS
SUMMARY TERM SHEET
Issuer PTC India Financial Services Limited (the “Issuer”)
Offering 60,000 Secured, Redeemable, Non-Convertible Long Term Infrastructure Bonds of Series 1 of Rs. 5,000/- each aggregating to Rs. 30,00,00,000 (Rupees Thirty Crore only) with a green-shoe option to retain over-subscription for issuance of additional Infrastructure Bonds up to Rs. 70,00,00,000 (Rupees Seventy Crore only) resulting the cumulative amount up to of Rs. 100,00,00,000/- (Rupees One Hundred Crore Only) to be raised through issuance of Non-Convertible Long Term Infrastructure Bonds Series 1
Objects of the Issue The proceeds shall be utilized towards infrastructure lending as defined by the
Reserve Bank of India in the Guidelines issued by it time to time.
Type of Issue Private Placement Basis
Instrument Secured, Redeemable, Non-Convertible Long Term Infrastructure Bonds with
benefits under section 80CCF of the Income Tax, 1961, Series 1
Credit Rating “BWR AA” by Brickwork Ratings &“LA+” (positive outlook) by ICRA
Eligible Investors Resident Indian Individual (Major) and HUF through Karta of the HUF
Security First charge on the receivables of the assets created from the proceeds of current
Bond issue and other unencumbered receivables of the Company to provide the
100% security coverage
Face Value Rs. 5,000/- per Bond
Issue Price At par i.e. Rs. 5,000/- per Bond
Minimum Application 1 Bond and in multiples of 1 Bond thereafter
Lock-in For first 5 years from date of allotment
Tenure 10 years, with or without buyback option after five years
Options for Subscription
The Bonds are proposed to provide the following options-
Option I - Annual Coupon and Buyback after 5 years
Option II- Cumulative Coupon and Buyback after 5 years
Option III - Annual Coupon and No Buyback (maturity at the end of 10 years)
Option IV- Cumulative Coupon and No Buyback (maturity at the end of 10 years)
Redemption/ Maturity For Option I and III: At par at the end of 10th year from the deemed date of
allotment.
For Option II and IV: At par with cumulated interest thereon.
Coupon Rate Option I (Annual Coupon and Buyback after 5 years) –8.25% p.a.
Option III (Annual Coupon and No Buyback) – 8.30 % p.a.
Option II and IV will have cumulative payment at the end of the Buyback period or 10 years, as per the option opted by the Investor (Refer Table on Page 10)
Registrar & Transfer
Agent
Karvy Computershare Private Limited
Trustees IDBI Trusteeship Services Ltd
Listing Proposed on the Wholesale Debt Market (WDM) Segment of National Stock
Exchange of India Limited (NSE)
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Compliance All provisions/ clauses/ regulations specified by GoI/ SEBI/ RoC with respect to
issue of Secured Redeemable Non Convertible Bonds shall be complied with by
the PFS.
Form of Issuance Physical and Dematerialized form
Depository National Securities Depository Ltd. and Central Depository Services (India) Ltd
Mode of Payment ECS/ At par Cheques/ Demand Drafts or any other mode as may be permissible
at time of such payment/s
Issuance Demat and Physical Form
Trading Demat mode only following expiry of lock-in period
Record Date 3 days prior to each interest payment and/ or principal repayment date.
Issue Opening Date February 9, 2011
Issue Closing Date * March 15, 2011. The issuer would have an option to pre-close/extend the issue by
giving notice to the Arrangers without giving any reason to any third party
Deemed Date of
Allotment
March 25, 2011
Buy Back Dates March 25, 2011 every year commencing from year 2016 to year 2020
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
AVAILABLE OPTIONS FOR INVESTMENT IN INFRASTRUTURE BONDS OF PFS
Options I II III IV
Buyback/
Non
Cumulative
Option
Buyback/
Cumulative
Option
Non Buyback/
Non Cumulative
Option
No Buyback/
Cumulative Options
Face Value (Rs.) 5,000/- 5,000/- 5,000/- 5,000/-
Minimum
Application
1 Bond 1 Bond 1 Bond 1 Bond
In Multiples of 5,000/- 5,000/- 5,000/ 5,000/-
Buy Back Option Yes Yes No No
Interest Payment Yearly NA Yearly NA
Coupon 8.25% per annum
8.25% per annum to be compounded annually
8.30% per annum 8.30% per annum to be compounded annually
Yield on Redemption 8.25% 8.25% 8.30% 8.30%
Coupon Payment
Date
March 25 every year
NA March 25 every year NA
Maturity Date March 25, 2021 March 25, 2021 March 25, 2021 March 25, 2021
Buy Back
Intimation Period Every Year Between January 1 to January 31, starting from Year 2016 till Year 2020
Every Year Between January 1 to January 31, starting from Year 2016 till Year 2020
NA NA
Buy Back After 5/6/7/8/9 Years 5/6/7/8/9 Years NA NA
Redemption Amount (Rs.)
5,000/- 11,047/- 5,000/- 11,098/-
Annual Interest Payment and Interest on application money
The First Annual Interest shall be paid on March 25, 2012. Interest on application money at the above rate from the date of credit in PFS bank account to the previous date of allotment shall be paid with the first annual Interest Payment.
Redemption Amount in case ‘Buy Back’ option is exercised (in Rs.)
Year 5 5,000 7,432 -- --
Year 6 5,000 8,045 -- --
Year 7 5,000 8,709 -- --
Year 8 5,000 9,427 -- --
Year 9 5,000 10,205 -- --
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
RISK FACTORS
(A) FORWARD-LOOKING STATEMENTS While no forecasts or projections relating to the Company’s financial performance are included in this Information Memorandum, this document contains certain “forward-looking statements” like intends/believes/expects and other similar expressions or variations of such expressions. These statements are primarily meant to give Investors an overview of the Company’s future plans, as they currently stand. The Company operates in a highly competitive, regulated and ever-changing business environment, and a change in any of these variables may necessitate an alteration of the Company’s plans. Further, these plans are not static, but are subject to continuous internal review, and may be altered if the altered plans are perceived to suit the Company’s needs better. Further, many of the plans may be based on one or more underlying assumptions (all of which may not be contained in this Information Memorandum) which may not come to fruition. Thus, actual results may differ materially from those suggested by the forward-looking statement. The Company cannot be held liable by estoppel or otherwise for any forward-looking statement contained herein. The Company and all intermediaries associated with this Information Memorandum do not undertake to inform Investors of any changes in any matter in respect of which any forward-looking statements are made. All statements contained in this Information Memorandum that are not statements of historical fact constitute “forward-looking statements” and are not forecasts or projections relating to the Company’s financial performance. All forward-looking statements are subject to risks, uncertainties and assumptions that may cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that may cause actual results to differ materially from the Company’s expectations include, among others:
• General economic and business conditions in India;
• The Company’s ability to successfully implement its strategy and growth plans;
• The Company’s ability to compete effectively and access funds at competitive cost;
• Changes in Indian or international interest rates;
• The level of non-performing assets in its portfolio;
• Rate of growth of its loan assets;
• Potential mergers, acquisitions or restructurings and increased competition;
• Changes in tax benefits and incentives and other applicable regulations, including various tax laws;
• The Company’s ability to retain its management team and skilled personnel;
• Changes in laws and regulations that apply to NBFCs in India, including laws that impact its lending rates and its ability to enforce its collateral; and
• Changes in political conditions in India. (These are only illustrative and not exhaustive)
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. Neither the Company nor any of its Directors nor any of their respective affiliates have any obligation, or intent 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 come to fruition.
(B) PRESENTATION OF FINANCIALS AND USE OF MARKET DATA Unless stated otherwise, the financial information used in this Information Memorandum is derived from the Company’s financial statements for the period April 1, 2009 to March 31, 2010, being the statutory year ended March 31, 2010 and prepared in accordance with Indian GAAP and the Companies Act, 1956 as stated in the report of the Company’s Statutory Auditors, Price Waterhouse, Chartered Accountants (statutory auditors of the company for financial year 2008-09), included in this Information Memorandum. In addition to the financial information for the financial year 2009-10, the financial information related to audited accounts for the half year ended on September’10 is also used and the same has been audited by Company’s Statutory
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Auditor for FY 2010-11, M/s Deloitte Haskins & Sells. The Issuer’s fiscal year commences on April 01 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a Fiscal Year are to the Fiscal Year ended March 31 of the reference year. “Fiscal 2010” for instance, refers to the Fiscal year ended March 31, 2010. In this Information Memorandum, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding-off.
Unless stated otherwise, macroeconomic and industry data used throughout this Information Memorandum has been obtained from publications prepared by providers of industry information, Government sources and multilateral institutions. Such publications generally state that the information contained therein 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 the Issuer believes that industry data used in this Information Memorandum is reliable, it has not been independently verified.
(C) INTERNAL/EXTERNAL RISK FACTORS The following are the risks envisaged by the management, and Investors should consider the following risk factors carefully for evaluating the Company and its business before making any investment decision. Unless the context requires otherwise, the risk factors described below apply to PTC India Financial Services Limited only. The risks have been quantified wherever possible. If any one of the following stated risks actually occur, the Company’s business, financial conditions and results of operations could suffer and therefore the value of the Company’s debt securities could decline.
Note: Unless specified or quantified in the relevant risk factors, the Company is not in a position to quantify the financial or other implications of any risk mentioned herein below:
INTERNAL RISK FACTORS
(a) Bond Redemption Reserve
No Bond Redemption Reserve is being created for issue of BONDs in pursuance of this Information Memorandum.
Management Perception: Creation of Bond Redemption Reserve is not required for the propose issue of Bonds. The MCA vide General Circular No.9/2002; No. 6/3/2001-CL.V dated April 18, 2002 has clarified that NBFCs need not create a Bond Redemption Reserve as specified under section 117C of the Companies Act, 1956, in respect of privately placed Bonds.
(b) Credit Risk
The Company carries the risk of default by borrowers and other counterparties.
Management Perception: Any lending and investment activity is exposed to credit risk arising from the risk of repayment default by the borrowers and counterparties. The Company has institutionalized a systematic credit evaluation process monitoring the performance of its asset portfolio on a regular and continual basis to detect any material development, and also constantly evaluates the changes and developments in sectors to which it has substantial exposure. The Company also undertakes a periodic review of its entire asset portfolio with a view to determine the portfolio valuation, identify potential areas of action and devise appropriate strategies thereon. The Company follows a conservative provisioning and write-off policy, which is in line with what is prescribed by the RBI.
(c) Contingent Liabilities
The Company’s contingent liabilities could adversely affect its financial condition.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Management Perception: As on September 30, 2010, PFS had no contingent liabilities on account of income-tax/interest-tax/sales-tax liabilities in respect of matters in appeal and bond executed in respect of legal matters.
(d) Non-Performing Assets (NPA)
If the level of NPAs in the Company’s portfolio were to increase, its business would suffer.
Management Perception: The Gross and Net NPAs of PFS as on September 30, 2010, were zero respectively. PFS is fully complying with the RBI Guidelines/Directives in connection with the same. The Company believes that its overall financial profile, capitalization levels and risk management systems, provide significant risk mitigation.
(e) Interest Rate Risk
The Company’s business is largely dependent on interest income from its operations.
Management Perception: The Company is exposed to interest rate risk principally as a result of lending to customers at interest rates and in amounts and for periods, which may differ from its funding sources (institutional/bank borrowings and debt offerings). The Company seeks to match its interest rate positions to minimize interest rate risk. Despite these efforts, there can be no assurance that significant interest rate movements will not have an effect on its results of operations. Interest rates are highly sensitive to many factors beyond its control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions, inflation and other factors. Due to these factors, interest rates in India have historically experienced a relatively high degree of volatility. Nevertheless the endeavor of the Company will be to keep the interest rate risk at minimum levels by proactively synchronizing resource raising and lending activities on an ongoing basis.
(f) Access to Capital Markets and Commercial Borrowings
The Company’s growth will depend on its continued ability to access funds at competitive rates.
Management Perception: With the growth of its business, the Company is increasingly reliant on funding from the debt capital markets and commercial borrowings. The market for such funds is competitive and its ability to obtain funds at competitive rates will depend on various factors, including its ability to maintain its credit ratings. While its borrowing costs have been competitive in the past due to its credit rating and the quality of its asset portfolio, if the Company is unable to access funds at an effective cost that is comparable to or lower than its competitors, the Company may not be able to offer competitive interest rates for its loans. This may adversely impact its business, its future financial performance. The value of its collateral may decrease or the Company may experience delays in enforcing its collateral when its customers default on their obligations, which may result in failure to recover the expected value of collateral and adversely affect its financial performance. The Company has also filed its Draft Red Herring Prospectus with market regulator i.e. SEBI on December 22, 2010, for its proposed fund raising exercise through Initial Public Offering (“IPO”).
(g) Availment of foreign currency borrowings in the future, which will expose Company to
fluctuations in currency exchange rates, which could adversely affect its business, financial
condition and results of operations.
While PFS currently do not have any foreign currency borrowings, it may avail foreign currency borrowings in the future. As an IFC, PFS is eligible to raise external commercial borrowings without prior RBI approval up to 50.00% of its Owned Funds and are likely to avail significant external commercial borrowings in the future. In October 2010, the Company has also entered into a loan agreement with Deutsche Investitions - und Entwicklungsgesellschaft mbH ("DEG") for an aggregate amount of U.S.$26 million for on-lending to renewable energy projects and therefore may be exposed to fluctuations in currency exchange rates in the future. Although PFS may enter
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
into hedging transactions with respect to its foreign currency borrowings, there can be no assurance that any such measure will be effective or that PFS will enter into effective hedging with respect to any new foreign currency borrowings. Volatility in currency exchange rates could adversely affect Company’s business, financial condition and results of operations and the price of its Equity Shares.
(h) Failure to recover the expected value of collateral when borrowers default on their
obligations to Company may adversely affect its financial performance.
As of September 30, 2010, all loans were secured by project assets. For debt provided on a senior basis, PFS generally seek a first ranking pari passu charge on the project assets. For loans provided on a subordinated basis, PFS generally seek to have a pari passu charge on the project assets. Although we seek to maintain a collateral value to loan ratio of at least 1.25:1 for our secured loans, an economic downturn or other project risks could result in a fall in collateral values. Moreover, foreclosure of such collateral may require court or tribunal intervention that may involve protracted proceedings and the process of enforcing security interests against collateral can be difficult. Additionally, the realizable value of all collateral in liquidation may be lower than its book value.
PFS cannot guarantee that it will be able to realize the full value of its collateral, due to, among other things, defects in the perfection of collateral, delays on its part in taking immediate action in bankruptcy foreclosure proceedings, stock market downturns, claims of other lenders, legal or judicial restraint and fraudulent transfers by borrowers. In the event a specialized regulatory agency gains jurisdiction over the borrower, creditor actions can be further delayed. In addition, to put in place an institutional mechanism for the timely and transparent restructuring of corporate debt, the RBI has devised a corporate debt restructuring system. Any failure to recover the expected value of collateral security could expose PFS to a potential loss. Apart from the RBI guidelines, PFS may be a part of a syndicate of lenders the majority of whom elect to pursue a different course of action than the Company would have chosen. Any such unexpected loss could adversely affect business, prospects, results of operations and financial condition.
EXTERNAL RISK FACTORS
(a) Material changes in Regulations to which the Company is subject could cause the
Company’s business to suffer
Management Perception: NBFCs in India are subject to detailed supervision and regulation by the RBI. NBFCs not accepting public deposits are exempt from most such provisions. The Company is subject generally to changes in Indian law, as well as to changes in Government regulations and policies and accounting principles. The RBI also requires the Company to make provisions in respect of NPAs. The provision made is equal to or higher than that prescribed under the prudential norms. Any changes in the regulatory framework affecting NBFCs including the provisioning for NPAs or capital adequacy requirements could adversely affect the profitability of the Company or its future financial performance, by requiring a restructuring of its activities, increasing costs or otherwise.
(b) Risk of competition in lending and resource raising could cause the Company’s business to
suffer
Management Perception: PFS offers a financial products and services, such as Term Loans and Bridge Loans, catering to varied cross section of customers. The management believes that the Company’s brand equity, reach and strategic alliances along with its resource base would provide the necessary strength to perform well in a competitive market.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
(c) A slowdown in economic growth in India could cause the Company’s business to suffer
Management Perception: The Company’s performance and the quality and growth of its assets are necessarily dependent on the health of the overall Indian economy. A slowdown in the Indian economy could adversely affect its business, including its ability to grow its asset portfolio, the quality of its assets, and its ability to implement its strategy. India’s economy could be adversely affected by a general rise in interest rates, or various other factors affecting the growth of industrial, manufacturing and services sector or general down trend in the economy.
Notes to Risk Factors:
Save, as stated elsewhere in this Information Memorandum, since the date of publishing audited financial accounts contained in this Information Memorandum:
(a) no material developments have taken place that are likely to materially affect the performance or prospects of the Company; and
(b) no developments have taken place in the last nine months which materially and adversely affect the profitability of the Company or the value of its assets, or its ability to pay its liabilities within the next 12 months.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
GENERAL INFORMATION
PTC India Financial Services Ltd (“PFS” or “Issuer” or “Company”) is offering for subscription, on private placement basis, secured, redeemable, non-convertible Long Term Infrastructure Bonds of the face value of Rs. 5,000/- each for cash at par with benefits under Section 80CCF of the Income Tax Act, 1961 termed as PFS LONG TERM INFRASTRUCTURE NON- CONVERTIBLE BONDS (“INFRASTRUCTURE BONDs”). The minimum application shall be for 1 Bond of Rs. 5,000/- each and in multiples of 1 Bond thereafter.
AUTHORITY FOR THE ISSUE
This issue is being made pursuant to the Resolution of the Board of Directors of the Company passed at its meeting held on March 22, 2010 and the Committee of Directors for Bond Issuance of the Company, passed at its Meeting held on January 27, 2011 and is made under appropriate provisions of the Income Tax Act, 1961.
ISSUE SIZE
PFS (the “Issuer” or the “Company”) proposes to raise Rs. 30 Crore, with a green-shoe option, to retain over-subscription by issuance of additional Infrastructure Bonds up to Rs. 70 Crore, in that case the total issue size may be up to Rs. 100 Crore, through issue of Secured, Redeemable, Non-Convertible Long Term Infrastructure Bonds face value of Rs.5,000 each for cash at par with benefits under section 80CCF of the Income Tax Act, 1961 termed as PFS LONG TERM INFRASTRUCTURE BONDS - SERIES 1 (“Infrastructure Bonds”) by way of private placement (‘the Issue”). The allotment of Bonds will be made on First-cum-first serve basis (as per records of Company) and Company will monitor the Issue collection on daily basis. In case of over subscription of the issue, the applications received over and above of the Issue size may be rejected or the Company may allot the entire application/s received on Closing date through pro-rata basis or draw of lot or the Company may adopt any other mode as may be deemed fit by the Company at its sole discretion so that the total Issue size could not exceed Rs. 100 Crore.
OBJECTS OF THE ISSUE
The proceeds shall be utilized towards infrastructure lending as defined by the Reserve Bank of India in the Guidelines issued by it from time to time, after meeting the expenditures of, and raised through this issue.
CREDIT RATING
‘Brickwork’ has assigned “BWR AA” (Pronounced Double A with Stable outlook) rating to the Bonds of
the Company aggregating to Rs. 100 Crores letter Ref No. BWR/BLR/RA/2010-11/0274 on January 31,
2011. A copy of rating letter from Brickwork is enclosed elsewhere in this Disclosure Document
Instrument with this rating are considered to offer High Credit quality in terms of timely payment of debt
obligations. A copy of rating letter from Brickwork is enclosed elsewhere in this Disclosure Document
‘ICRA’ has assigned “LA+” (pronounced L A plus) rating to the Bonds of the Company aggregating to
Rs.100 crores letter Ref no. D/RAT/2010-11/P48/9 on February 3, 2011. This rating is considered to offer
adequate credit quality for timely servicing of debt obligations. A copy of rating letter from ICRA is
enclosed elsewhere in this Disclosure Document.
Other than rating mentioned hereinabove, the Company has not sought any other credit rating from any
other credit rating agency (ies) for the Bonds offered for subscription under the terms of this Disclosure
Document.
The above ratings are not a recommendation to buy, sell or hold securities and investors should take their
own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating
agencies and each rating should be evaluated independently of any other rating. The ratings obtained are
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
subject to revision at any point of time in the future. The rating agencies have the right to suspend,
withdraw the rating at any time on the basis of new information etc.
LISTING
The Secured Redeemable Long Term Infrastructure Non-Convertible Bonds Series 1 of PFS is proposed
to be listed on the Wholesale Debt Market (WDM) Segment of the National Stock Exchange of India Ltd.
(“NSE”). The Company has obtained an in-principle approval from the NSE for listing of said Bonds on
its Wholesale Debt Market (WDM) Segment. The Company shall make an application to the NSE to list
the Bonds to be issued and allotted under this Disclosure Document and complete all the formalities
relating to listing of the Bonds within 70 days from the date of closure of the Issue. If such permission is
not granted within 70 days from the date of closure of the Issue or where such permission is refused
before the expiry of the 70 days from the closure of the Issue, the Company shall forthwith repay without
interest, all monies received from the applicants in pursuance of the Disclosure Document, and if such
money is not repaid within 8 days after the Company becomes liable to repay it (i.e. from the date of
refusal or 70 days from the date of closing of the subscription list, whichever is earlier), then the Company
and every director of the Company who is an officer in default shall, on and from expiry of 8 days, will be
jointly and severally liable to repay the money, with interest at the rate of 15 per cent per annum on
application money, as prescribed under Section 73 of the Companies Act, 1956.
REGISTRAR
M/s Karvy Computershare Pvt Limited has been appointed as Registrar to the Issue. The Registrar will monitor the applications while the private placement is open and will coordinate the post private placement activities of allotment, dispatch of interest warrants etc. Investors can contact the Registrar in case of any post-issue problems such as non receipt of letters of allotment; demat credit, refund orders, interest on application money.
TRUSTEES
IDBI Trusteeship Services Limited has given its consent to act as the Trustee to the proposed Issue and for its name to be included in this Information Memorandum. All remedies of the Bond holder(s) for the amount due on the Bond will be vested with the Trustees on behalf of the Bond holders. The holders of the Bond shall without any further act or deed be deemed to have irrevocably given their consent to and authorised the trustees to do inter-alia, all acts, deeds, and things necessary for servicing the Bond being offered including any payment by the Company to the Bond holders / Bond Trustee, as the case may be, shall, from the time of making such payment, completely and irrevocably discharge the Company pro tanto from any liability to the Bond holders..
FUTURE RESOURCE RAISING
PFS will be entitled to borrow/raise loans or avail financial assistance both from domestic and international market as also issue Bonds/Equity Shares/Preference Shares/other securities in any manner having such ranking pari passu or otherwise and on terms and conditions as PFS may think fit without the consent of or intimation to Bond holders or Trustees in this connection.
PERMISSION/ CONSENT FROM PRIOR CREDITORS
The Company hereby confirms that it is entitled to raise money through current issue of Infrastructure Bonds without the consent/permission/approval from the Bond holders/Trustees/ Lenders/other creditors of PFS. Further the Bonds proposed to be issued under the terms of this Information Memorandum being secured there is no requirement for obtaining permission/consent from the prior creditors.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
TERMS OF THE ISSUE
The following are the terms and conditions of Bonds being offered under this Information Memorandum for an aggregate amount of up to Rs. 100 Crore for the financial year 2010-2011.
1. STATUS OF THE BOND
The Infrastructure Bonds shall be non-convertible and secured. These bonds carry tax benefit under section 80CCF of Income Tax Act, 1961 (up to a maximum of Rs.20,000/- per applicant) and these Long Term Infrastructure Bonds are being issued in terms of Notification No. [48/2010/F No 149/84/2010-SO (TPL)] dated 09th July, 2010 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, and RBI certificate no. N-14.03116, dated 23rd August 2010; a copy of the RBI certificate is annexed to this Memorandum.
In accordance with Section 80CCF of the Income Tax Act, 1961 the amount, not exceeding Rs. 20,000 per annum, paid or deposited as subscription to Long-Term Infrastructure Bonds during the previous year relevant to the assessment year beginning April 01, 2011 shall be deducted in computing the taxable income of a resident individual or HUF. In the event that any Applicant subscribes to the Bonds in excess of Rs. 20,000, the aforestated tax benefit shall be available to such Applicant only to the extent of Rs. 20,000.
Eligible investors can apply for up to any amount of the Bonds across any of the Series(s) or a combination thereof. The investors will be allotted the total number of Bonds applied for in accordance with the Basis of Allotment.
2. FORM
a) The allotment of the Bonds shall be made in physical and dematerialized form both. The Company has made depository arrangements with National Securities Depository Limited ("NSDL") and Central Depository Services (India) Limited ("CDSL", and together with NSDL, the "Depositories") for issue of the Bonds in a dematerialized form. The Company shall take necessary steps to credit the Depository Participant account of the Applicants with the number of Bonds allotted.
b) In case of Bonds that are rematerialized and held in physical form, the Company will issue one certificate to the Bond holder for the aggregate amount of the Bonds that are rematerialized and held by such Bond holder (each such certificate a "Consolidated Bond Certificate"). In respect of the Consolidated Bond Certificate(s), the Company will, upon receipt of a request from the Bond holder within 30 days of such request, split such Consolidated Bond Certificates into smaller denominations, subject to a minimum denomination of one Bond. No fees will be charged for splitting any Consolidated Bond Certificates but, stamp duty, if payable, will be paid by the Bond holder. The request to split a Consolidated Bond Certificate shall be accompanied by the original Consolidated Bond Certificate which will, upon issuance of the split Consolidated Bond Certificates, be cancelled by the Company.
3. FACE VALUE
The face value of each Bond is Rs. 5,000/-.
4. TITLE
In case of:
1. Bonds held in the dematerialized form, the person for the time being appearing in the register
of beneficial owners maintained by the Depository; and
2. the Bond held in physical form, the person for the time being appearing in the Register of
bondholders (as defined below) as Bond holder,
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
shall be treated for all purposes by the Company, the Bond Trustee, the Depositories and all other
persons dealing with such person as the holder thereof and its absolute owner for all purposes
whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or
any writing on, theft or loss of the Consolidated Bond Certificate issued in respect of the Bonds
and no person will be liable for so treating the Bond holder.
No transfer of title of a Bond will be valid unless and until entered on the Register of Bond holders
or the register of beneficial owners maintained by the Depository prior to the Record Date. In the
absence of transfer being registered, interest, Buyback Amount and/or Maturity Amount, as the
case may be, will be paid to the person, whose name appears first in the Register of Bond holders
maintained by the Depositories and/or the Company and/or the Registrar, as the case may be. In
such cases, claims, if any, by the purchasers of the Bonds will need to be settled with the seller of
the Bonds and not with the Company or the Registrar. The provisions relating to transfer and
transmission and other related matters in respect of the Company's shares contained in the Articles
of Association of the Company and the Companies Act shall apply, mutatis mutandis (to the
extent applicable) to the Bond (s) as well.
5. LISTING
The Bonds are proposed to be listed on NSE.
6. NOMINATION
In accordance with Section 109A of Companies Act, 1956, the sole Bond holder or first bondholder, along with other joint bondholders [being individual(s)] may nominate any one person (being an individual) who, in the event of death of sole holder or all the joint holders, as the case may be, shall become entitled to the Bond(s). Nominee shall be entitled to the same rights to which he will be entitled if he were the registered holder of the Bond(s). Where nominee is a minor, the Bondholders may make a nomination to appoint any person to become entitled to the Bond(s), in the event of their death, during the minority. A buyer will be entitled to make a fresh nomination in the manner prescribed. When the Bond is held by two or more person, the nominee shall become entitled to receive the amount only on the demise of all the Bond holders. The Bond holders are advised to provide the specimen signature of the nominee to the company to expedite the transmission of Bond(s) to the nominee in the event of demise of Bond holders. In dematerialized mode, there is no need to make a separate nomination with the Company.
7. TRANSFER OF BONDs
a) Register of Bondholders: The Company shall maintain at its registered office or such other place as permitted by law a register of Bondholders (the "Register of Bondholders") containing such particulars as required by Section 152 of the Companies Act. In terms of Section 152A of the Companies Act, the Register of Bondholders maintained by a Depository for any Bond in dematerialized form under Section 11 of the Depositories Act shall be deemed to be a Register of Bondholders for this purpose.
b) Lock in Period: In accordance with the Notification, the Bondholders shall not sell or transfer the Bonds in any manner for a period of 5 years from the Deemed Date of Allotment (the "Lock-in Period"). The Bondholders may sell or transfer the Bonds after the expiry of the Lock-in Period on the stock exchange where the Bonds are listed. These Bonds can also be pledged, hypothecated or given on lien for obtaining loans from Scheduled Commercial Banks after the lock-in period of five years.
c) Transmission of Bonds: However, transmission of the Bonds to the legal heirs in case of death of the Bondholder / Beneficiary to the Bonds is allowed.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
d) Transfer of Bonds held in dematerialized form: In respect of Bonds held in the dematerialized form, transfers of the Bonds may be effected only through the Depository(ies) where such Bonds are held, in accordance with the provisions of the Depositories Act, 1996 and/or rules as notified by the Depositories from time to time. The Bondholder shall give delivery instructions containing details of the prospective purchaser's Depository Participant's account to his Depository Participant. If a prospective purchaser does not have a Depository Participant account, the Bondholder may rematerialize his or her Bonds and transfer them in a manner as specified below.
The transferee(s) should ensure that the transfer formalities are completed prior to the Record Date. If a request for transfer of the Bond is not received by the Registrar before the Record Date for maturity, the Maturity Amount for the Bonds shall be paid to the person whose name appears as a Bondholder in the Register of Bondholders. In such cases, any claims shall be settled inter se between the parties and no claim or action shall be brought against the Company.
e) Succession: In the event of demise of the holder(s) of the Bonds, PFS will recognise the executor or administrator of deceased bondholder, being an individual / HUF, or the holder of the succession certificate or other legal representative, being an individual / HUF as having title to the Bonds. PFS shall not be bound to recognise such executor, administrator, or holder of succession certificate, unless such executor or administrators obtains probate or letter of administration or such holder is the holder of succession certificate or other legal representation, as the case may be, from a Court of India having jurisdiction over the matter. PFS may at its absolute discretion, where it thinks fit, dispense with production of probate or letter of administration or succession certificate or other legal representation, in order to recognise such holder, being an individual / HUF as being entitled to the Bonds standing in the name of the deceased bond holder(s) on production of documentary proof or indemnity. All requests for registration of transmission along with requisite documents should be sent to the Registrars.
8. DEEMED DATE OF ALLOTMENT
The Deemed Date of Allotment shall be March 25, 2011. All benefits under the Bond including
payment of interest will accrue to the Bondholders from the Deemed Date of Allotment.
9. SUBSCRIPTION
Issue opens on February 09, 2011
Issue closes on *March 15, 2011
* Issue date may be change at sole discretion of Company.
10. INTEREST
a) Annual Payment of Interest: For Option I (subject to buyback, as applicable) & Option
III Bonds, interest will be paid annually commencing from the Deemed Date of Allotment
and on the equivalent date falling every year thereafter.
b) Cumulative Payment of Interest: Interest on Option II & IV Bonds shall be
compounded annually commencing from the Deemed Date of Allotment and shall be
payable on the Maturity Date or the Buyback Date, as the case may be.
c) Day Count Convention: Interest shall be computed on a 365 days-a-year basis on the
principal outstanding on the Bonds. However, where the interest period (start date to end
date) includes February 29, interest shall be computed on 366 days-a-year basis, on the
principal outstanding on the Bonds.
d) Interest on Application and Refund Money: The Company shall not pay any interest on
refund of Application Amount, in whole or part. However, interest on Application Money,
to the extent of allotment of bonds, shall be paid on first interest payment date (i.e. 25
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
March 2012 for all options), from the date of credit of this money to the bank account of
PFS to the date immediately preceding the deemed date of allotment at the respective
coupon rates.
11. REFUND
In case of rejection of the application on account of technical grounds or receipt of application
after the closure of the issue, refund without interest will be made within a period of 30 days from
the deemed date of allotment of the bonds.
12. REDEMPTION
Unless previously redeemed as per the terms of the Bond, the Company shall redeem the Bonds
on the Maturity Date i.e. March 25, 2021 PFS’s liability to Bondholder(s) towards all their rights
including payment of face value shall cease and stand extinguished up on redemption of the
Bonds Series 1 in all events. Further PFS will not be liable to pay any interest, income or
compensation of any kind after the date of such Redemption of the Bonds(s).
Bonds held in electronic form: No action is required on the part of Bondholders at the time of maturity of the Bonds. On the redemption date, redemption proceeds would be paid by NECS/At Par Cheque/Demand Drafts to those Bondholders, whose names appear on the list of beneficial owners given by the depository to PFS. These names would be as per the depository’s record on the record date/book closure date fixed for the purpose of redemption. These Bonds will be simultaneously extinguished.
Bonds held in physical form: No action will ordinarily be required on the part of the Bondholder at the time of redemption and the maturity amount will be paid to those Bondholders whose names appear in the Register of Bondholders maintained by the Company or Registrar on the Record Date fixed for the purpose of redemption. However, the Company may require that the Consolidated Bond Certificate(s), duly discharged by the sole holder or all the joint-holders (signed on the reverse of the Consolidated Bond Certificate(s) to be surrendered for redemption on Maturity Date and sent by registered post with acknowledgment due or by hand delivery to the Registrar or Company or to such persons at such addresses as may be notified by the Company from time to time. Bondholders shall have to surrender the Consolidated Bond Certificate(s) in the manner as stated above, not more than three months and not less than two months prior to the Maturity Date so as to facilitate timely payment. In case of transmission applications pending on the record date, the redemption proceeds will be issued to the legal heirs after the confirmation of the adequacy and correctness of the documentation submitted with such application till such time, the redemption proceeds will be kept in abeyance.
13. INTERIM EXIT ROUTES
These Bonds shall be listed at NSE. The investors shall have the right to exit through the secondary market, but only after completion of the lock-in period of five years from the date of allotment. In respect of the Bonds having buyback facility, the investors can exit either through secondary market or through buyback route.
14. BUYBACK OF BONDS
In respect of Bonds with buyback option, exit facility shall be available at the end of 5th, 6th,7th, 8th and 9th year. The investors, who opt and are allotted Bonds with buyback facility and wish to exit
through this facility shall have to apply for buy back by writing to the Company (‘Early
Redemption Notice for PFS Long Term Infrastructure Bond Series 1”) of his/her intention to redeem all the Bonds held by him/her under the buyback option. Such early Redemption Notice from the Bondholder should reach the Registrar or the Company between January 1 to January 31, starting from year 2016 to year 2020 (‘Early Redemption Date’) for redeeming the Bonds in that particular financial year. The Bonds will be redeemed on March 25 of the same financial year. Partial buyback of the bonds held under the buyback option shall not be permissible.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Bonds held in dematerialized form
The Company or the Registrar upon receipt of the notice from the Bondholders would undertake appropriate corporate action to effect the buyback. The bank details will be obtained from the Depositories for payments. Investors who have applied or who are holding the Bonds in electronic form, are advised to immediately update their bank account details as appearing on the records of Depository Participant. Failure to do so could result in delays in credit of the payments to investors at their sole risk and neither the Arrangers nor the Company shall have any responsibility and undertake any liability for such delays on part of the investors
Bonds held in physical form
On receipt of the notice from the investor for exercise of buy back option, no action would ordinarily be required on the part of the Bondholder on the Buyback Date and the Buyback Amount would be paid to those Bondholders whose names appear first in the Register of Bondholders. However, the Company may require the Bondholder to duly surrender the Consolidated Bond Certificate to the Company/Registrar for the buyback. While exercising the buyback option, Bondholder are required to furnish any change of address or bank details etc. Upon payment of the Buyback Amounts, the Bonds shall be deemed to have been repaid to the Bondholders and all other rights of the Bondholders shall terminate and no interest shall accrue on such Bonds thereafter. Subject to the provisions of the Companies Act, where the Company has bought back any Bond(s) under the Buyback Facility, the Company shall have and shall be deemed always to have had the right to keep such Bonds alive without extinguishment for the purpose of resale and in exercising such right, the Company shall have and be deemed always to have had the power to resell such Bonds.
15. PAYMENT OF INTEREST/ REDEMPTION/BUYBACK AMOUNT
Payment of Interest Payment of interest on the Bonds will be made to those holders of the Bonds, whose name appears first in the Register of Bondholders maintained by the Depositories and/or the Company and/or the Registrar, as the case may be, as on the Record Date.
Record Date The record date for the payment of interest or the Buyback Amount or the Maturity Amount shall be 3 days prior to the date on which such amount is due and payable ("Record date").
Effect of holidays on payment
If the date of payment of interest or principal or any date specified does not fall on a Working Day, then the succeeding Working Day will be considered as the effective date. Interest and principal or other amounts, if any, will be paid on the succeeding Working Day. Payment of interest will be subject to the deduction of tax as per Income Tax Act or any statutory modification or re-enactment thereof for the time being in force. In case the Maturity Date falls on a holiday, the payment will be made on the next Working Day, without any interest for the period overdue.
Payment on Redemption or Buyback
Bonds held in electronic form On the Maturity Date or the Buyback Date as the case may be, the Maturity Amount or the Buyback Amount as the case may be, will be paid as per the Depositories' records on the Record Date fixed for this purpose. No action is required on the part of Bondholders. The bank details will be obtained from the Depositories for payments. Investors who have applied or who are holding the Bond in electronic form are advised to immediately update their bank account details as appearing on the records of Depository Participant. Failure to do so could result in delays in
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
credit of the payments to investors at their sole risk and neither the Lead Arrangers nor the Company shall have any responsibility and undertake any liability for such delays on part of the investors.
Bonds held in physical form Payments with respect to maturity or buyback of Bonds will be made by way of cheques or pay orders or electronically. The bank details will be obtained from the Registrar for effecting payments. However, if the Company so requires, payments on maturity may be made on surrender of the Consolidated Bond Certificate(s). Dispatch of cheques or pay orders in respect of payments with respect to redemptions will be made on the Maturity Date or Buyback Date within a period of 30 days from the date of receipt of the duly discharged Consolidated Bond Certificate, if required by the Company.
The Company's liability to the Bondholders including for payment or otherwise shall stand extinguished from the Maturity Date or upon dispatch of the Maturity Amounts to the Bondholders.
Further, the Company will not be liable to pay any interest, income or compensation of any kind from the Maturity Date.
Mode of Payment All payments to be made by the Company to the Bondholders shall be by cheques or demand drafts or through National Electronic Clearing System ("NECS")
16. TAXATION
The interest on Bonds will be subject to deduction of tax at source at the rates prevailing from time to time under the provisions of the Income Tax Act or any statutory modification or re-enactment thereof. As per the current provisions of the Income Tax Act, on payment to all categories of resident Bondholders, tax will not be deducted at source from interest on Bonds, if such interest does not exceed Rs. 2,500 in a financial year.
As per clause (ix) of Section 193 of the Income Tax Act, no income tax is required to be withheld on any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India in accordance with the Securities Contracts Regulation Act, 1956, as amended, and the rules notified there under. Accordingly, no income tax will be deducted at source from the interest on Bonds held in dematerialized form. In case of Bonds held in a physical form no tax may be withheld in case the interest does not exceed Rs. 2,500. However, such interest is taxable income in the hands of resident Bondholders.
If interest on Bonds exceeds the prescribed limit of Rs. 2,500 in case of resident individual Bondholders, to ensure non-deduction or lower deduction of tax at source, as the case may be, the Bondholders are required to furnish either (a) a declaration (in duplicate) in the prescribed form i.e. Form 15G which may be given by all Bondholders other than companies, firms and non-residents subject to provisions of section 197A of the Income Tax Act; or (b) a certificate, from the assessing officer of the Bondholder, in the prescribed form under section 197 of the Income Tax Act which may be obtained by the Bondholders. Senior citizens, who are 65 or more years of age at any time during the financial year, can submit a self-declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A even if the aggregate income credited or paid or likely to be credited or paid exceeds the maximum limit for the financial year. These certificates may be submitted to the Company or to such person at such address as may be notified by us from time to time, quoting the name of the sole or first Bondholder, Bondholder number and the distinctive number(s) of the Bond(s) held, at least one month prior to the interest payment date.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Tax exemption certificate or document, if any, must be lodged at the office of the Registrar prior to the Record Date or as specifically required. Tax applicable on coupon will be deducted at source on accrual thereof in the Company's books and / or on payment thereof, in accordance with the provisions of the Income Tax Act and / or any other statutory modification, re-enactment or notification as the case may be. A tax deduction certificate will be issued for the amount of tax so deducted on annual basis.
17. RIGHTS OF BONDHOLDERS The Bonds shall not confer upon the holders thereof any rights or privileges including the right to receive notices or annual reports of, or to attend and/or vote, at a General Meeting of PFS. If any proposal affecting the rights attached to the Bonds is considered by PFS, the said proposal will first be placed before the registered Bondholders or Trustees for their consideration. The Bonds comprising the present Private Placement shall rank pari passu inter se without any preference to or priority of one over the other or others over them and shall also be subject to the other terms and conditions to be incorporated in the Agreement / Trust Deed(s) to be entered into by PFS with the Trustees and the Letters of Allotment/Bond Certificates that will be issued. A register of Bondholders will be maintained and sums becoming due and payable in respect of the Bonds will be paid to the Registered Holder thereof. The Bonds are subject to the provisions of the Act and the terms of this Information Memorandum. Over and above such terms and conditions, the Bonds shall also be subject to other terms and conditions as may be incorporated in the Agreement/Bond Trust Deed/Letters of Allotments/Bond Certificates, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by the Government of India and/or other authorities and other documents that may be executed in respect of the Bonds.
18. MODIFICATION OF RIGHTS The rights, privileges and conditions attached to the Bonds may be varied, modified and / or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction of the Trustees, provided that nothing in such consent or sanction shall be operative against PFS, where such consent or sanction modifies or varies the terms and conditions governing the Bonds, if the same are not acceptable to PFS.
19. NOTICES
The communications to the Bondholder(s) required to be sent by PFS or the Trustees shall be deemed to have been given if sent by an ordinary post to the registered holder of the Bonds. All communications to be given by the Bondholder(s) shall be sent by registered post or by hand delivery to the Registrar and Transfer Agents or to PFS or to such person, at such addresses as may be notified by PFS from time to time.
20. MISCELLANEOUS
Loan against Bonds
The Bonds cannot be pledged or hypothecated for obtaining loans from scheduled commercial banks during the Lock-in Period of five years.
Lien
The Company shall have the right of set-off and lien, present as well as future on the moneys due and payable to the Bondholder, whether in single name or joint name, to the extent of all outstanding dues by the Bondholder to the Company.
Lien on Pledge of Bonds
The Company, at its discretion, may note a lien on pledge of Bonds if such pledge of Bond is accepted by any bank or institution for any loan provided to the Bondholder against pledge of
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
such Bonds as part of the funding after completion of lock-in period of five years as notified time to time.
Right to Reissue Bond(s)
Subject to the provisions of the Act, where the Company has redeemed or repurchased any Bond(s), the Company shall have and shall be deemed always to have had the right to keep such Bonds alive without extinguishment for the purpose of resale or reissue and in exercising such right, the Company shall have and be deemed always to have had the power to resell or reissue such Bonds either by reselling or reissuing the same Bonds or by issuing other Bonds in their place. This includes the right to reissue original Bonds.
Joint-holders
Where two or more persons are holders of any Bond (s), they shall be deemed to hold the same as joint holders with benefits of survivorship subject to Articles and applicable law.
Sharing of Information
The Company may, at its option, use its own, as well as exchange, share or part with any financial or other information about the Bondholders available with the Company, its subsidiaries and affiliates and other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither the Company nor its subsidiaries and affiliates nor their agents shall be liable for use of the aforesaid information.
Issue of Duplicate Consolidated Bond Certificate(s)
If any Consolidated Bond Certificate is mutilated or defaced it may be replaced by the Company against the surrender of such Consolidated Bond Certificates, provided that where the Consolidated Bond Certificates are mutilated or defaced, they will be replaced only if the certificate numbers and the distinctive numbers are legible.
If any Consolidated Bond Certificate is destroyed, stolen or lost then upon production of proof thereof to the RTA/Company’s satisfaction and upon furnishing such indemnity/security and/or documents as we may deem adequate, duplicate Consolidated Bond Certificate(s) shall be issued.
Jurisdiction
The courts of New Delhi shall have jurisdiction to settle any disputes which may arise out of or in connection with the Bond Trust Deed or the Bonds and that accordingly any suit, action or proceedings (together referred to as "Proceedings") arising out of or in connection with the Bond Trust Deed and the Bonds may be brought in the courts of New Delhi.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
STATEMENT OF TAX BENEFITS
TAX BENEFITS UNDER THE INCOME TAX ACT, 1961
Under the current tax laws (existing as well as proposed) the following tax benefits, inter alia, will be available to the Bond Holder as mentioned below. The benefits are given as per the prevailing tax laws and may vary from time to time in accordance with amendments to the law or enactments thereto. The Bond Holder is advised to consider in his own case the tax implications in respect of subscription to the Bond after consulting his tax advisor as alternate views are possible. PFS or the Trustees shall not be liable to the Bond Holder in any manner for placing reliance upon the contents of this statement of tax benefits.
A. INCOME TAX:
Tax Benefits to the Resident Bond Holders
According to section 80CCF an amount not exceeding rupees twenty thousand invested in long term infrastructure Bonds shall be allowed to be deducted from the total income of an Individual or Hindu Undivided Family, This deduction shall be available over and above the aggregate limit of Rs. One Lakh as provided under sections 80C, 80CCC and 80CCD read with section 80CCE.
Section 80CCF reads as “In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, the whole of the amount, to the extent such amount does not exceed twenty thousand rupees, paid or deposited, during the previous year relevant to the assessment year beginning on the 1st day of April, 2011, as subscription to long-term infrastructure Bonds as may, for the purposes of this section, be notified by the Central Government”
Taxability of Interest
Taxability of interest on Bonds would depend upon the method of accounting adopted by the resident Bondholder as mentioned in the provisions of the IT Act.
Withholding Tax No income tax is deductible at source on interest on Bonds as per the provisions of section 193 of the I.T. Act in respect of the following:
a) In case the payment of interest on Bonds to resident individual Bond Holder by company by an account payee cheque and such Bonds being listed on a recognized stock exchange in India, provided the amount of interest or the aggregate of the amounts of such interest paid or likely to be paid during the financial year does not exceed Rs. 2500;
b) When the Assessing Officer issues a certificate on an application by a Bond Holder on satisfaction that the total income of the Bond Holder justifies nil/lower deduction of tax at source as per the provisions of Section 197(1) of the I.T. Act;
c) When the resident Bond Holder (not being a company or a firm or a senior citizen) submits a declaration to the payer in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on his estimated total income of the financial year in which such income is to be included in computing his total income will be ‘nil’ as per the provisions of Section 197A (1A) of the I.T. Act. Under Section 197A (1B) of the I.T. Act, Form 15G cannot be submitted nor considered for exemption from deduction of tax at source if the aggregate of income of the nature referred to in the said section, viz. dividend, interest, etc as prescribed therein, credited or paid or likely to be credited or paid during the financial year in which such income is to be included exceeds the maximum amount which is not chargeable to tax. To illustrate, the maximum amount of income not chargeable to tax in case of individuals (other than women assesses and senior citizens) and HUFs is Rs 160,000, in case of women assesses is Rs.190, 000 and in case of senior citizen is Rs. 240,000 for financial year 2009-10. Senior citizens, who are 65 or more years of age at any time during the financial year, enjoy the special privilege to submit a self declaration to the payer in the prescribed Form 15H for non-deduction of tax
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
at source in accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid exceed the maximum amount not chargeable to tax i.e. Rs 240,000 for FY 2009-10, provided tax on his estimated total income of the financial year in which such income is to be included in computing his total income will be nil.
d) On any securities issued by a company in a dematerialized form listed on recognized stock exchange in India. (w.e.f. 1.06.2008).
In all other situations, tax would be deducted at source as per prevailing provisions of the I.T. Act;
Transfer before maturity: Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer.
Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of the cost of acquisition. The capital gains will be computed by deducting expenditure incurred in connection with such transfer and cost of acquisition of the Bonds from the sale consideration.
In case of an individual or HUF, being a resident, where the total income as reduced by the long term capital gains is below the maximum amount not chargeable to tax i.e. Rs. 1,60,000 in case of all individuals, Rs. 1,90,000 in case of women and Rs. 2,40,000 in case of senior citizens, the long term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of ten per cent in accordance with and the proviso to sub-section (1) of section 112 of the I.T. Act read with CBDT Circular 721 dated September 13, 1995.
A 2% education cess and 1% secondary and higher education cess on the total income tax (including surcharge) is payable by all categories of tax payers as per the current tax laws.
Short-term capital gains on the transfer of listed Bonds, where Bonds are held for a period of not more than 12 months, would be taxed at the normal rates of tax in accordance with and subject to the provision of the I.T. Act. The provisions related to minimum amount not chargeable to tax, surcharge and education cess as described above would also apply to such short-term capital gains.
In case the Bonds are held as stock in trade, the income on transfer of Bonds would be taxed as business income or loss in accordance with and subject to the provisions of the IT Act.
B. WEALTH TAX
Wealth-tax is not levied on investment in Bonds under section 2(ea) of the Wealth-tax Act, 1957.
C. GIFT TAX
Gift-tax is not levied on gift of Bonds in the hands of the donor as well as the donee as the provisions of the Gift-tax Act, 1958 have ceased to apply in respect of gifts made on or after 1st October, 1998.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
PROCEDURE OF APPLICATION
Who can apply: 1. Resident Indian Individuals who are major 2. Hindu Undivided Families (HUF) through the Karta of HUF
Joint Application: Maximum of three individuals can apply through a Joint Application and should be in the similar sequence as mentioned in the Demat Account.
How to apply: Investors are required to submit the Application Form duly filled in along with necessary enclosures at the specified Collecting Bankers as indicated in the Information Memorandum under “List of Collecting Branches.
All Applicants are required to make payment of the full Application Amount along with the Application Form.
Applications are required to be for a minimum of one (1) Bond and multiples of one (1) Bond thereafter.
The investor must complete the application for the Bonds in the prescribed form, and in block letters in English. The complete Application Form must be accompanied by either a Demand Draft or crossed
Cheque of the amount as desired by the investor and made payable in favour of “PFS INFRA BOND
ACCOUNT”. Demand Draft charges, if any, shall be borne by the applicant.
Cheques/Demand Drafts may be drawn on any designated collection centre (as mentioned in the Information Memorandum) where application form is being deposited. The investors may attach a self attested copy of proof of DP ID and Client ID (desirable to avoid mismatch). All other details would be taken from the demat account.
Rejection of Applications: The Company reserves its full, unqualified and absolute right to accept or reject any Application in whole or in part and in either case without assigning any reason thereof. Application would be liable to be rejected on one or more technical grounds, including but not restricted to:
• Number of Bonds applied for is less than the minimum Application size;
• Applications not duly signed by the sole/joint Applicants;
• Application amount paid not tallying with the number of Bonds applied for;
• Applications for a number of Bonds which is not in a multiple of one;
• Investor category not ticked;
• Bank account details not given;
• Applications by persons not competent to contract under the Indian Contract Act, 1872, as amended;
• In case of Applications under Power of Attorney where relevant documents not submitted;
• Application by stockinvest;
• Applications accompanied by cash;
• Applications without PAN;
• DP ID, Client ID and PAN mentioned in the Application Form do not match with the DP ID, Client ID and PAN available in the records with the depositories; and
• Multiple Applications. The collecting bank shall not be responsible for rejection of the Application on any of the technical grounds mentioned above. Application form received after the closure of the Issue shall be rejected. In the event, if any Bond(s) applied for is/are not allotted, the Application monies of such Bonds will be refunded, as may be permitted under the provisions of applicable laws, without any interest.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Basis of Allotment The allotment of Bonds will be made on First-cum-first serve basis (as per records of Company) and Company will monitor the Issue collection on daily basis. In case of over subscription of the issue, the applications received over and above of the Issue size may be rejected or the Company may allot the entire application/s received on Closing date through pro-rata basis or draw of lot or the Company may adopt any other mode as may be deemed fit by the Company at its sole discretion so that the total Issue size could not exceed Rs. 100 Crore.
Letters of Allotment/ Refund Orders PFS reserves, in its absolute and unqualified discretion and without assigning any reason thereof, the right to reject any application in whole or in part. The unutilized portion of the application money will be refunded to the Applicant by an account payee cheque/demand draft. In case the cheque payable at par facility is not available, PFS reserves the right to adopt any other suitable mode of payment. PFS shall credit the allotted Bond to the respective beneficiary accounts/dispatch the Letter(s) of Allotment or Letter(s) of Regret/ Refund Orders in excess of Rs. 2,500 as the case may be, by registered/speed post at the Applicant’s sole risk, within 30 days from the date of allotment of the Bonds. Refund Orders up to Rs.2,500 will be sent under certificate of posting. Further,
a) Allotment of the Bonds shall be made on March 25, 2011 b) Credit to dematerialized accounts will be made within two Working Days from the date of
Allotment; c) The letters of allotment will be sent within 30 days of the date of allotment. d) In case of rejection of the application on account of technical ground or for any other reason,
refund of application money without interest will be made within a period of 30 days from the date of allotment of the Bonds.
Payment of interest on application money: In respect of allotted Bonds, interest on the application money shall be paid on first interest payment date (i.e. 25 March 2012 for all options) to the investors from the date of realization of the instrument to one day before deemed date of allotment as the case may be, at the interest rates as applicable to the various options for subscriptions.
Governing Law The Bonds are governed by and shall be construed in accordance with the existing laws in India. Any dispute arising thereof will be subject to the jurisdiction of courts at New Delhi.
Investor’s relations and grievances redressal: Arrangements have been made to redress investor grievances expeditiously as far as possible. PFS endeavours to resolve the investors’ grievances within 30 days of its receipt. All grievances related to the issue quoting the Application Number (including prefix), number of Bonds applied for, amount paid on
application and place where the application was submitted, may be addressed to the Registrar and
Transfer Agents, M/s Karvy Computershare Private Limited at the address as mentioned elsewhere in this Memorandum or Registered & Corporate Office of PFS.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
i. Name and address of the registered office of the Issuer:
Name PTC INDIA FINANCIAL SERVICES LIMITED
Registered office 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place, New Delhi 110 066
Tel No. 011 – 41595122
Fax No. 011 – 41595155/ 41659144
Website www.ptcfinancial.com
ii. Name and addresses of the Directors of the issuer: (as on 31 Jan 2011)
Name of Director Designation Residential Address
Mr. Tantra Narayan
Thakur
Chairman &
Managing Director
B 1/46 2nd Floor
Safdarjung Enclave, New Delhi 29
Dr. Ashok Haldia Whole-Time
Director and Chief
Financial Officer
Suraj Kuteer,
A-76, Sector 30,
Gautam Budh Nagar, Noida 201 303.
Mr. Sudhir Kumar Independent
Director
Type VI/41, Railway Officers, Enclave,
San Martin Marg, Chanakya Puri, New
Delhi – 110 021
Mr. M K Goel Non-executive
Director
#278-D, Pocket II,
Mayur Vihar, Phase I,
Delhi – 110 091
Mr. Prathipati Abraham Independent
Director
D-71, Nivedita Kunj, Sector 10, RK Puram, New Delhi – 110022
Mrs. Rama Murali Independent
Director
155, Shriniketan CGHS Ltd
Plot 1, Sector 7, Dwarka
New Delhi 75
Dr. Uddesh Kohli Independent
Director
S 50, GK-I, New Delhi 110048
Mr. Ramarao
Muralidharan Coimbatore
Independent
Director
29 A, Kamala Street
Nehru Nagar, Chramepet, Chennai 600044
Mr. Neil Kant Arora Non-Executive
Director
Villa 3, Street 3, Terranova, Arrabian Ranches, Dubai, United Arab Emirates
Mr. Surinder Singh Kohli Independent
Director
J -70 Rajouri Garden New Delhi 110027
� Mr. Tantra Narayan Thakur, aged 61 years, is the Chairman and Managing Director of our Company. He is the founder of our Company and has been on the Board since our incorporation. He holds a Bachelors degree in Science in engineering. Mr. Thakur has more than 30 years of experience as a member of the Indian Audit and Accounts Service. Mr. Thakur has also served as a Director (Finance and Financial Operations), Power Finance Corporation Limited, where he was responsible for mobilizing resources for the company for on-lending to power projects in addition to accounting and compliance
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
related matters. Currently he is also the chairman and managing director of our Promoter namely PTC India Limited.
� Dr. Ashok Haldia aged 54 years, is a Whole Time Director and Chief Financial Officer
of our Company. He is a member of the Institute of Chartered Accountants of India,
Institute of Company Secretaries of India and the Institute of Cost and Works Accountants
of India. He holds a Ph.D. degree in ‘Privatization of Public Enterprises in India’ from
University of Rajasthan. He has been on the Board of the Company since August 13,
2008, prior to which he served as a Secretary, Institute of Chartered Accountants of India,
New Delhi for about a decade. Dr. Haldia has been associated with the Bureau of Public
Enterprises, State Enterprises Department, Government of Rajasthan and Power Finance
Corporation Limited
� Mr. Sudhir Kumar, aged 54 years, is an Independent Director of our Company and has
been on the Board of our Company since March 22, 2010. He holds a Masters degree in
Commerce from the Delhi School of Economics, University of Delhi. He is an Indian
Administrative Services officer presently serving as Joint Secretary in Ministry of Power,
Government of India. He has also served as the officer on special duty to Minister for
Railways, Government of India. Presently, he is also on the board of our Promoter, PTC
India Limited.
� Mr. M.K. Goel aged 53, is a Non Executive Director of our Company and has been on
the Board of our Company since January 12, 2010. He holds a Bachelors degree in
technology specializing in electrical engineering from Kanpur University. Currently he is
associated with Power Finance Corporation Limited (“PFC”) as director (commercial)
besides heading the human resources, administration, institutional appraisal and legal
functions. Prior to joining PFC, Mr. Goel was working with NHPC Limited for about a
decade. Presently, he is also on the board of our Promoter, PTC India Limited.
� Mr. P Abraham aged 71 years, is an Independent Director of our Company and has been
on the Board of our Company since June 4, 2007. He holds a Masters degree in Arts from
Andhra University, Visakhapatnam. Mr Abraham has served as the Secretary to the
Ministry of Power, Government of India and is presently serving as the chairman of
Maharashtra State Electricity Board. Presently, he is also on the board of our Promoter,
PTC India Limited
� Mrs. Rama Murali aged 62 years, is an Independent Director of our Company and has
been on the Board of our Company since April 21, 2009. She holds a Bachelors of Arts
(Hons) degree from Maharani College, Jaipur, University of Rajasthan. She is a retired
Indian Audit and Accounts Service officer. Mrs. Murali has served as the Joint Secretary,
Department of Economic Affairs, Ministry of Finance. She has also served as the
financial advisor in the Department of Scientific and Industrial Research, the Council of
Scientific and Industrial Research, Government of India, and the New Delhi Municipal
Committee where she was also the overall in-charge of finance and accounts. She is also a
life member of the Indian Institute of Public Auditors.
� Dr. Uddesh Kohli aged 69 years, is an Independent Director of our Company and has
been on the Board of our Company since September 25, 2009. He holds a Bachelors
degree (Hons) in Engineering from the Indian Institute of Technology, Roorkee. He also
holds a Ph.D. degree in Economics from the Delhi School of Economics. Presently, Dr.
Kohli is the chairman of Engineering Council of India and Construction Industry
Arbitration Association. He was the chairman and managing director of Power Finance
Corporation Limited and former adviser, Planning Commission (Government of India)
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
and has also been associated with international bodies such as Asian Development Bank,
United Nations Industrial Development Organization, United Nations Development
Programme and United Nations Office for Project Services.
� Mr. C. R. Muralidharan aged 63 years, is an Independent Director of our Company and has been on the Board of our Company since January 11, 2010. He holds a Bachelors of Science degree from Madras University and is a certified associate of Indian Institute of Bankers. Mr. Muralidharan has served as a whole-time member (finance and accounts) of Insurance Regulatory and Development Authority (“IRDA”). Prior to joining IRDA, he served in the Reserve Bank of India (“RBI”) for more than three decades in various capacities and was also heading the Department of Banking Policy and Regulation, RBI between 1998 to 2005 as the chief general manager. He has also been a member of the International Monetary Fund missions on financial sector assessment project of Uganda in 2001 and the assessment of the regime for insolvency of banks in Kuwait in 2004.
� Mr. Neil Kant Arora aged 41 years, is a Non Executive Director of our Company and
has been on the Board of our Company since January 31, 2008. He holds a first class
honours degree in Actuarial Science from the London School of Economics. At present,
Mr. Arora is serving as an executive director with Macquarie Capital Group
(“Macquarie”), Dubai and heads the Middle Eastern advisory team. Prior to this, he was
based out of the Singapore office of Macquarie and heading the Asian infrastructure team.
Mr. Neil Kant Arora is a resident of the United Arab Emirates
� Mr. Surinder Singh Kohli aged 65 years, in an Independent Director of our Company
and has been on the Board of our Company since December 13, 2010. He holds Bachelors
degree in Science (Mechanical Engineering) from Banaras Hindu University and a
diploma in Industrial Finance from Indian Institute of Bankers. Prior to joining our
Company he was the chairman and managing director of India Infrastructure Finance
Company Limited, Punjab National Bank, Small Industries Development Bank of India
and Punjab and Sind Bank respectively. He was also the chairman of the India Banks
Association for two terms.
iii. A brief summary of the business activities of the Issuer and its line of business
COMPANY PROFILE
PTC India Financial Services Limited (“PFS”) is an Indian non-banking financial institution promoted by
PTC India Limited (“PTC") to make principal investments in, and provide financing solutions for
companies with projects across the energy value chain, which inter-alia includes investing in equity and/or
extending debt to power projects in generation, transmission, distribution; fuel sources, fuel related
infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers and EPC contractors etc.
PFS is regulated by the Reserve Bank of India (“RBI”) as a systemically important non-deposit taking,
non-banking financial company ("NBFC"), and have recently been classified by the RBI as an
Infrastructure Finance Company, or IFC. PFS also believes that it is one of few NBFCs that have been
granted this status. The IFC status enhances PFS’s ability to raise funds on a cost-competitive basis and
enables Company to assume higher debt exposure in infrastructure projects.
PFS is a one stop solution provider offering a comprehensive range of financial products and services that add value throughout the life cycle of projects across all areas of the energy value chain. PFS believes this has enabled it to establish itself as a preferred financing provider for power projects. PFS believes its power sector knowledge and experience enables it to identify investment opportunities with high potential and effectively manage risks associated with such opportunities. PFS also believes its
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
exclusive focus on the power sector has enabled it to develop strong relationships and become a preferred financing provider for power projects, particularly for smaller and medium sized projects, compared to competitors that are not similarly focused on the power sector.
The investment decision by PFS into the equity and/or debt is based on many factors such as the valuation
offered by the power projects, commitment shown by the developers and overall techno-economic
viability. The investment made by PFS adds to the valuation of the project (investee company) by bringing
the core competency of its promoter i.e. PTC in off-take and marketing of power, side by side the brand
value of Goldman Sachs and Macquarie, which assists in tying up the balance funding requirements for
the project.
PTC INDIA LIMITED (PROMOTER)
PTC India Limited (PTC) was established in 1999 through an initiative of the Government of India, in
consonance with the Mega Power Policy, to establish a power market in India as well as to act as a credit
mitigating agency for Mega Power Projects by buying electricity from them through long term Power
Purchase Agreements (PPAs) and sell the same through back-to-back Power Sale Agreements (PSAs) to
various state utilities.
In the meantime, PTC started the concept of short term trade of electricity in a perennially electricity
starved country.
In addition to the development of the short term market, PTC has also focused on the long term market
through facilitation of power projects being set up by Independent Power Producers (IPPs) with whom it
enters into long term PPAs and sells the electricity being generated in the plant to various utilities through
long term back-to-back PSAs. PTC’s total portfolio size has grown to more than 14,185 MW of PPAs
(including cross border) and more than 11,781 MWs of MoUs for power purchase with various IPPs
across the country.
Additionally, PTC has started various ancillary services in the form of Advisory as well as fuel
intermediation to support the growth of such power projects in the country.
OTHER SHAREHOLDERS
� G S Strategic Investments Limited
G S Strategic Investments Limited, a company incorporated with limited liability under the laws of
Mauritius is a 100% subsidiary of Goldman Sachs. Goldman Sachs is a leading global investment
banking, securities and investment management firm that provides a wide range of services to a
substantial and large client base that includes corporations, financial institutions, governments and
high-net-worth individuals;.
� Macquarie India Holdings Limited
Macquarie India Holdings Limited is a part of the Macquarie Group. Macquarie Group is a provider
of specialist investment, advisory and financial services.
SHAREHOLDING PATTERN:
Particulars No. of Equity Shares Shareholding
(%)
1 PTC India Ltd* 337,250,001 77.60%
2 G S Strategic Investments Ltd 48,666,667 11.20%
3 Macquarie India Holdings Limited 48,666,667 11.20%
TOTAL 434,583,335 100.00%
*PTC India Limited is holding 6 equity shares through 6 of its nominees.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
MANAGEMENT
PFS is a professionally managed company with day-to-day affairs being handled by a team of senior
executives who have extensive experience in their line of business. The Board of Directors consists of a
number of eminent personalities and is headed by Mr. T. N. Thakur in his capacity as Chairman.
Refer to point no ii, page 9, for details of Directors
FINANCIAL PERFORMANCE
PROFITABILITY SNAPSHOT
Rs. in million
FINANCIAL PARAMETERS 31/03/07# 31/03/08 31/03/09 31/03/10 30/09/10
Audited Audited Audited Audited Audited
No. of months 12 12 12 12 6
Profit and Loss:
Total Interest Income - - 0.14 135.74 314.06
Total Interest Expense - - 0.18 116.04 160.17
Other Income (Income from Investments,
Fees etc)
- 31.09 115.87 399.16 221.99
Operating Profit - (5.87) 87.04 367.47 361.85
Depreciation - 0.08 0.24 0.47 26.93
PBT - (5.95) 86.81 367.00 334.93
PAT - (0.97) 85.30 254.52 255.10
-
Balance Sheet: -
WC/ST Debt - - - 246.00 846.58
LT Debt - - 200.00 2,862.01 4,373.69
Total Debt - - 200.00 3,108.01 5,220.26
Tangible Net Worth(TNW) 40.00 1,106.79 6,093.45 6,359.37 6,359.37
Current Assets 41.63 5.60 4,101.12 2,510.66 1,630.83
Current Liabilities (incl. CPLTD, ST Loans) 19.00 23.08 12.01 79.24 83.29
Investment - 1,117.87 2,000.12 4,067.04 3,978.53
Net Fixed Assets - 0.41 0.60 350.66 324.17
Gross NPAs - - - - -
Key Ratios:
EBITDA - (5.87) 87.22 483.51 522.02
Total Debt/ EBITDA - - 2.29 6.43 10.00
Total Debt/ TNW - - 0.03 0.49 0.82
Current Ratio 2.19 0.24 341.46 31.69 19.58
Net NPA as % of Loan - - - - -
Net NPA as % of Net Worth - - - - -
# The first P&L account was prepared for the period ending March 31, 2008
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
PRODUCT & SERVICES
1. Equity
PFS do strategic equity investments in companies in the energy value chain in India, including in
greenfield and brownfield projects. The nature and extent of our equity participation in such companies
vary in accordance with the requirements, opportunities and risks associated with the relevant project,
but we typically do not retain management control. Our investment horizon tends to focus on the short
to medium term. As of September 30, 2010, our Board had approved equity commitments for ten
companies for an aggregate amount of Rs.4,838.46 million, with projects aggregating 2,621 MW of
power generation capacity.
2. Lending
PFS offers debt assistance to projects subject to exposure limits stated earlier. PFS structure the debt
assistance taking into consideration factors like needs of the borrowing entity, the market conditions,
regulatory requirements, risks and rewards from the projects. PFS offers the following debt
instruments:
• Term Loans
• Bridge Loans
• Short Term Loans
PFS also considers mezzanine funding debt against promoter’s contribution in equity or in any other
form depending upon the requirements of the project.
PFS provides debt assistance to projects in the entire energy value chain i.e. power projects, fuel
sources, related infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers like
transformers, conductors, insulators, cables etc; which are technically and economically viable PFS
extends finance assistance to all kinds of borrowing entities as well as private sector in the entire
energy value chain. However, the priority of PFS would be private sector, followed by Joint sector/
Government sector projects.
The interest rate to be charged by PFS shall take into account the cost of funds of PFS, rates being
charged by other institutions/bank, and condition of the financial market While providing for a
reasonable margin, PFS may provide for charging differential interest rate form the borrowers
depending upon the type of project, and grading based on the entity appraisal.
As of September 2010, our Board had approved debt sanctions (including long term and short
term/mezzanine funding) for 27 companies for an aggregate amount of approx Rs 18,815 million, with
projects aggregating 8,853 MW of power generation capacity.
3. Fee Based Services
With a core team of in-house power sector professionals, PFS strives to help its clients to become more
competitive, effective and successful. PFS has already started its loan syndication activities in current
financial year.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
INVESTMENTS IN ENERGY VALUE CHAIN (as on September 30, 2010)
• Indian Energy Exchange, in which PFS as promoter, had subscribed for a 26% equity stake for Rs. 69.39 million. It is India’s first exchange to facilitate the trading of power. The exchange was commissioned on June 27, 2008 and has a market share of approx 84% of the electricity traded on any power exchange. In September 2010, we liquidated a portion of shareholding in IEX for a consideration of Rs. 135.3 million after which our shareholding comes to 21.12%.
• Varam Bioenergy Private Limited, in which PFS subscribed for a 26% equity stake for Rs.43.90 million, has developed a 10 MW biomass project, based primarily on rice husk, in Bhandara, Maharashtra, that was commissioned in February 2009.
• RS India Wind Energy Private Limited, in which PFS subscribed for a 37% equity stake for Rs.611.21million under a subscription agreement, is setting up a 99.45 MW wind based power project in Satara, Maharashtra of which 39.60 MW is commissioned and in process of setting up a 3 MW solar power project in Haryana. Meenakshi Energy Private Limited is setting up a 900 MW imported coal based tolling power project in Nellore, Andhra Pradesh. The project has been bifurcated into phase I of 300 MW (2 x 150 MW) and phase II of 600 MW. PFS has subscribed for a 26% equity stake for Rs. 996.80 million for phase I and has disbursed Rs. 603.41 million in the company. Project is under advance stage of development and expected to commission by December 2011.
• PTC Bermaco Green Energy Systems Limited, in which PFS has subscribed for a 26% equity stake for Rs. 13.75 million, is a joint venture arrangement between Bermaco Energy Systems Limited. Under the joint venture agreement it will set up a series of biomass projects across India.
• East Coast Energy Private Limited is developing a 1320 MW thermal power project, comprising of two units of 660 MW each, in Andhra Pradesh. The project is expected to be commissioned by May 2014. The estimated cost of the project is Rs.65,700 million and financial closure for the project has been achieved. East Coast has entered into a PPA with PTC partly on long-term and partly on a short-term basis. PFS has committed an equity investment of Rs. 1333.85 million and as on 30 Sep 2010, we have invested Rs. 1250 million in project.
• Ind Barath Powergencom Limited, in which PFS has subscribed for a 26% equity stake for Rs.556.30 million, under a share subscription agreement, is developing three units of each 63 MW, totaling to 189 MW coal fired power project, in Thoothukkudi District, Tamilnadu. Two of the units of the project have already been synchronized with the grid.
• Ind Barath Energy (Utkal) Ltd, in which PFS has subscribed for a 13% equity stake for Rs.1050 million, under a share subscription agreement, is developing a 700 MW thermal power project in Orissa. Financial closure has been achieved for the project. The project is due for commissioning in March 2012.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
INDUSTRY OUTLOOK
Overview of the Indian Economy
India is the fifth largest economy in the world after the European Union, United States of America,
China and Japan in purchasing power parity terms with an estimated GDP (purchasing power parity)
of US$3.68 trillion in 2009. India is also among the fastest growing economies globally and has grown
at an average rate of more than 7.0% since 1997. An industrial slowdown early in 2008, followed by
the global financial crisis, led annual GDP growth to slow to 6.5% in 2009, still the second highest
growth in the world among major economies (Source: CIA World Factbook website). India escaped
the brunt of the global financial crisis because of cautious banking policies and a relatively low
dependence on exports for growth. According to the revised estimates of the Central Statistical
Organisation (CSO) India’s GDP grew at a rate of 7.4% in the fiscal year 2010.
The following table presents a comparison of India’s real GDP growth rate with the real GDP growth
rate of certain other countries:
Countries 2007* 2008* 2009*
Australia 4.8% 2.3% 1.3%
Brazil 6.1% 5.1% -0.2%
China 13.0% 9.0% 9.1%
Germany 2.5% 1.3% (4.9%)
India 9.0% 7.4% 7.4%
Japan 2.3% (1.2%) (5.3%)
South Korea 5.1% 2.3% 0.2%
Malaysia 6.5% 4.7% (1.7%)
Russia 8.1% 5.6% (7.9%)
Thailand 4.9% 2.5% (2.2%)
United Kingdom 2.7% (0.1%) (4.9%)
United States 1.9% 0.0% (2.6%)
* Estimated
(Source: CIA World Factbook, website: https://www.cia.gov/library/publications/the-world-factbook)
Investment in India has, remained relatively stable despite the global slowdown and has been growing
at a rate higher than that of GDP. There has been upward trend in the growth of the private
investment. The recovery was broad based with mining and quarrying, manufacturing, and electricity,
gas and water supply recording impressive growth rates. (Source: Ministry of Finance: Economic
Survey, 2009-10)
India’s ability to recover from the global slowdown and its own domestic liquidity crunch has been
driven by the country’s large domestic savings (including corporate retained earnings) and private
consumption. Further, the GoI’s fiscal policies and the monetary policies of the Reserve Bank of India
have also played an important role in the revival of economic growth. In particular, the GoI as part of
its fiscal stimulus package took the following initiatives to promote consumption in the economy: (i)
increased GoI expenditure especially on infrastructure; and (ii) reduced taxes to spur consumption.
The RBI has also taken various other steps to stimulate the economy including by (a) reducing the
cash reserve ratio (CRR) to 6.00%; (b) maintaining the statutory liquidity ratio (SLR) at 25.00%; (c)
reducing the repo rate to 6.25%; and (d) reducing the reverse repo rate to 5.35%. (Source: RBI)
A strong recovery in the industrial sector combined with a resilient services sector muted the impact
of a deficient South-West monsoon on overall output. The contribution of the industrial sector to the
overall growth increased sharply from 9.5% in 2008-2009 to 28.0% in 2009-2010. (Source: RBI,
2009-2010 Annual Report)
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Source: RBI, 2009-2010 Annual Report
The Indian economy witnessed robust recovery in growth in the last quarter of fiscal 2010. Most of
the business expectation surveys suggest continuation of the growth momentum in fiscal 2011. The
Industrial Outlook Survey of the Reserve Bank indicates further improvement in several parameters of
the business environment for the three months ended September 30, 2010 quarter. The Professional
Forecasters’ Survey conducted by the Reserve Bank in June 2010 places overall (median) GDP
growth rate for fiscal 2011 at 8.4%, higher than 8.2% reported in the previous round of the survey.
(Source: Macroeconomic and Monetary Developments: First Quarter Review Fiscal 2011).
Organization of the Power Industry in India
The following diagram depicts the current structure of the Indian power industry:
Overview of Indian Power Industry
India has continuously experienced shortages in energy and peak power requirements. According to
the Monthly Review of the Power Section ("Monthly Review") published by the CEA in October
2010, the total energy deficit and peak power deficit during April 2010 to October 2010 was
approximately 9.2% and 10.1%, respectively.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
The shortages in energy and peak power have been primarily due to the sluggish progress in capacity
addition. During the 10th Five Year Plan (fiscal 2002 to fiscal 2007), capacity addition achieved
compared to target capacity addition was 51.5%. During the 11th Five Year Plan (fiscal 2008 to fiscal
2012), capacity addition achieved was 9,263 MW or 56.7% of target capacity addition of 16,335 MW
in fiscal 2008, while in fiscal 2009, capacity addition achieved was 3,454 MW, or 31.2% of target
capacity addition of 11,061 MW, while in fiscal 2010, capacity addition achieved was 9,585 MW, or
66.1% of target capacity addition of 14,507 MW. According to the Monthly Review (October 2010),
the total installed power generation capacity in India was 167278.36 MW as of August 31, 2010.
Power Consumption
The per capita consumption of power in India has grown from 566.7 kWh/year in fiscal 2003 to 733.5
kWh/year in fiscal 2009, at a CAGR of 4.39% (Source: Monthly Review (July 2010)). The following
table sets forth information relating to India's per capital consumption of power for the periods
indicated:
Year Per Capita Consumption (kWh)
2002-03 566.7
2003-04 592.0
2004-05 612.5
2005-06 631.5
2006-07 671.9
2007-08 717.1
2008-09 733.5
(Source: Monthly Review (October 2010))
The total energy consumption in India is estimated to grow from 566 Mtoe in 2006 to 1280 Mtoe in
2030. (Source: World Economic Outlook 2008, IEA). This implies growth at a CAGR of 3.5% CAGR
in India's energy requirement over the next 25-30 years and hence, there is a huge potential for
investments in the energy sector in India.
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
Can
ada
United States
Aus
tralia
Japa
n
Franc
e
German
y
United Kingd
om
Rus
sia
Brazil
China
India
Ele
ctric
ity C
onsum
ption p
er capita (kwH)
The GoI has set a goal of 1,000 kWh per capita by fiscal 2012 in its mission of “Power for All by
2012” under the National Electricity Policy.
According to the CIA Factbook, India is sixth largest consumer of electricity in the world after the
United States, China, European Union, Russia and Japan with an estimated 568 billion kWh in total
electricity generated plus imports and minus exports in 2007.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Power Demand-Supply Overview
The Indian power sector has historically been beset by energy shortages which have been rising over
the years. In fiscal 2010, peak energy deficit was 12.7% and total energy deficit was 10.1%. The
following table provides the peak and normative shortages of power in India from fiscal year 2003 to
June 2010:
Peak
Demand
(MW)
Peak
Met
(MW)
Peak
Deficit/
Surplus
(MW)
Peak
Deficit/
Surplus
(%)
Power
Require
ment
(MU)
Power
Availabil
ity (MU)
Power
Deficit/
Surplus
(MU)
Power
Deficit/
Surplus
(%)
2002-03 81,492 71,547 -9,945 -12.2 545,983 497,890 -48,093 -8.8
2003-04 84,574 75,066 -9,508 -11.2 559,264 519,398 -39,866 -7.1
2004-05 87,906 77,652 -10,254 -11.7 591,373 548,115 -43,258 -7.3
2005-06 93,255 81,792 -11,463 -12.3 631,757 578,819 -52,938 -8.4
2006-07 100,715 86,818 -13,897 -13.8 690,587 624,495 -66,092 -9.6
2007-08 108,866 90,793 -18,073 -16.6 739,345 666,007 -73,338 -9.9
2008-09 109,809 96,685 -13,124 -12.0 774,324 689,021 -85,303 -11
2009-10 119,166 104,009 -15,157 -12.7 830,594 746,644 -83,950 -10.1
April-
October 2010
119,437 107,394 -12,043 -10.1 503,510 457,239 -46,271 -9.2
(Source: Power Scenario at a Glance, November 2010)
The deficits in electric energy and peak power requirements vary across different regions in India. The
peak deficit was 17.2% in the Western Region, followed by 18.5% in the North Eastern Region in the
period from April to October 2010. The deficit is a result of the slow development progress of
additional power generation capacity in those areas.
The following table outlines the peak and normative power shortages in India in fiscal year 2010
across the regions of India:
Peak
Demand
(MW)
Peak Met
(MW)
Peak
Deficit/
Surplus
(MW)
Peak
Deficit/
Surplus
(%)
Power
Require
ment
(MU)
Power
Availabili
ty (MU)
Power
Deficit/
Surplus
(MU)
Power
Deficit/
Surplus
(%)
Northern 37,159 31,439 -5,720 -15.4 254,231 224,661 -29,570 -11.6
Western 39,609 32,586 -7,023 -17.7 258,528 223,127 -35,401 -13.7
Southern 32,178 29,049 -3,129 -9.7 220,576 206,544 -14,032 -6.4
Eastern 13,220 12,384 -836 -6.3 87,927 84,017 -3,910 -4.4
N.
Eastern
1,760 1,445 -315 -17.9 9,332 8,296 -1,036 -11.1
All India 119,166 102,009 -15,157 -12.7 830,594 746,644 -83,950 -10.1
(Source: CEA, April 2010 Monthly Review)
Demand Projections
According to the Integrated Energy Policy (“IEP”) report dated August 2006 issued by the Planning
Commission, India would require additional capacity of about 220-233 gigawatt (“GW”) by 2012,
306-337 GW by 2017 and 425-488 GW by 2022, respectively, based on normative parameters in order
to maintain a 8-9% GDP growth rate (Source: GoI, "Integrated Energy Policy, Report of the Expert
Committee", August 2006, available at
http://planningcommission.gov.in/reports/genrep/rep_intengy.pdf).
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
The table below lays out the additional capacity needed by 2012, 2017 and 2022 under different GDP
growth rate scenarios:
Assumed
GDP Growth
(%)
Electricity
Generation
required
(BU)
Peak
Demand
(GW)
Installed
Capacity
(GW)
Capacity
Addition
Required
(GW)*
By fiscal 8.0 1,097 158 220 71
2012 9.0 1,167 168 233 84
By fiscal 8.0 1,524 226 306 157
2017 9.0 1,687 250 337 188
By fiscal 8.0 2,118 323 425 276
2022 9.0 2,438 372 488 339
* Based on the existing installed capacity of 149 GW in India.
Source: IEP report, Expert Committee on Power
Power Generation
Historical Capacity Additions
The energy deficit in India is a result of insufficient progress in the development of additional energy
capacity. The Indian economy is based on planning through successive five year plans (“Five-Year
Plans”) that set out targets for economic development in various sectors, including the power sector.
In the last three Five-Year Plans (the Eighth, Ninth, and Tenth Five-Year Plans, covering fiscal years
1992 to 2007), less than 55% of the targeted additional energy capacity level was added. According to
the White Paper on Strategy for Eleventh Plan, prepared by CEA and Confederation of Indian
Industry, August 2007 (the “White Paper”)),India added an average of approximately 20,000 MW to
its energy capacity in each of the 9th and 10th Five-Year Plan periods (fiscal years 1997 to 2002 and
2002 to 2007).
The following table sets forth the targeted energy capacity addition, the installed capacity actually
achieved at the end of those fiscal year and the installed capacity actually achieved as a percentage of
the targeted capacity additions for each of those fiscal years:
Five-Year Plan/Year Target
(MW)
Achievement
(MW)
Achievement
(% of MW)
10th Plan 39258.72 21,094.6 53.7%
FY 2008 16,335 9,263 56.7%
FY 2009 11,061 3,454 31.2%
FY 2010 14,507 9,585 66.1%
October 2010 21441.2 7020.0 32.7
(Source: CEA, October, 2010 Monthly Review)
The total capacity addition during the past 25 years between the 6th and the 10th Five-Year Plans was
approximately 91,000 MW. A total capacity addition of 78,700 MW is planned for the 11th Five-Year
Plan which should result in significant investments in the power generation sector.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Installed Generation Capacity
The following table sets forth a summary of India's energy generation capacity as of October 31, 2010
in terms of fuel source and ownership:
Sector Thermal Nuclear Hydro RES* Total
Central 38,622.23 4,560.00 8,685.40 0.00 51,867.63
State 52,186.73 0.00 27,218.00 2,822.32 82,227.05
Private 17,794.02 0.00 1,425.00 13,964.66 33,183.68
TOTAL 108,602.98 4,560.00 37,328.40 16,786.98 167,278.36
*RES = Renewable energy sources
(Source: CEA, Monthly Review (October 2010))
The private sector has historically been hesitant to enter into the market for power plants because of
onerous governmental regulations on the construction and operation of power plants and sourcing of
fuel for such plants. The participation of the private sector has, however, been increasing over time,
thanks to some key power sector reforms.
Future Capacity Additions
The proposed capacity addition during the 11th Five-Year Plan is 78,700.4 MW according to Monthly
Review (October 2010), published by CEA.
Thermal Nuclear Hydro Total
Central 24,840 3,380 8,654 36,874
State 23,301 0.00 3,482 26,783
Private 11,552 0.00 3,491 15,043
TOTAL 59,693 3,380 15,627 78,700
(Source: CEA, Monthly Review (October 2010))
This represents a growth in capacity of 9.8% per annum during the 11th Plan period. According to the
White Paper, the total fund requirement has been assessed to ` 10.32 trillion.
Planned Expansion
The aim for the 11th Plan i.e. by 2012 is a capacity addition of 15,000 MW from renewables. By the
end of the 11th Plan, renewable power capacity could be 25,000 MW in a total capacity of 2,00,000
MW accounting for 12.5% and contributing around 5% to the electricity mix. A capacity addition of
around 30,000MW is envisaged for the 12th and 13th Plans. Renewable power capacity by the end of
the 13th plan period i.e. by 2022 is likely to reach 54,000 MW, comprising 40,000 MW wind power,
6,500 MW small hydro power and 7,500 MW bio-power, which would correspond to a share of 5% in
the then electricity-mix. (Source: 11th Five Year Plan MNRE)
Investments in generation
The total fund requirement for generation projects, during the Twelfth Plan period is estimated at
approximately ` 4,950,830 million, with approximately ` 1,266,490 million being required for the
hydro sector, approximately ` 3,306,680 million being required for the thermal sector and
approximately ` 377,660 million being required for the nuclear sector. (Source: Base Paper,
International Conclave on Key Inputs for Accelerated Development of Indian Power Sector for
Twelfth Plan and Beyond, 18-19 August 2009, MoP and CEA)
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Capacity Utilisation
Capacity utilization in the Indian power sector is measured by the plant load factor (“PLF”) of
generating plants.
Coal
The average PLF for coal-fired plants in India has increased from 69.0% in the fiscal year 2001 to
76.65% in the fiscal year 2010. The following table sets forth the average PLF for coal-fired plants in
India:
Fiscal
Year Central State Private Overall
2001 74.3 65.6 73.1 69.0
2002 74.3 67.0 74.7 69.9
2003 77.1 68.7 78.9 72.1
2004 78.7 68.4 80.5 72.7
2005 81.7 69.6 85.1 74.8
2006 82.1 67.1 85.4 73.6
2007 84.8 70.6 86.3 76.8
2008 86.7 71.9 90.8 78.6
2009 84.3 71.2 91.0 77.2
2010* 84.13 69.72 84.43 76.65
Source: MoP, 2009-2010 Annual Report * Up to January, 2010
PLF varies significantly across ownership segments. According to the MoP, 2008-2010 Annual
Report, coal-fired generating plants owned by the state electricity boards (“SEBs”) operated at an
average PLF of around 69.72% as of January 31, 2010, while those owned by private companies
operated at an average PLF of 84.43%. The average PLF of central public sector undertakings
(“CPSUs”) was 84.13% during the same period.
Renewable Power
Power from renewable energy sources such as wind, biomass, small hydro and solar energy is being
generated for meeting the electricity requirements in different locations across the country. 15,691
MW grid power from renewable sources of power has been installed up to December 31, 2009. In
addition, renewable energy sources are being utilised for off-grid power generation to meet electricity
requirements at decentralised locations. Renewable power projects based on wind power, biomass,
small hydro and solar are mainly private investment driven with favorable tariff policy regimes
established by State Electricity Regulatory Commissions (SERC), and almost all-renewable power
capacity addition during the year has come through this route. (Source: Annual Report 2009-10
MNRE)
Wind Power
Wind energy, today, has emerged as the most promising renewable energy technology for generating
grid connected power amongst various renewable energy sources. A total capacity of 10,925 MW has
been established up to December, 2009 in the country. India is now the fifth largest wind power
producer in the world, after USA, Germany, Spain and China. The on shore wind power potential has
been estimated at about 48,500 MW, assuming 1% land availability in potential areas for setting up
wind farms @12 ha/MW in sites having wind power density greater than 200 W/sq.m at 50 m height.
(Source: Annual Report 2009-10 MNRE)
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Biomass
The current potential for power generation from surplus agro and forestry residues is estimated at
16,000 MW. With progressive higher steam parameters and efficient project configuration in new
sugar mills and modernization of existing ones, the potential of surplus power generation through
bagasse cogeneration in sugar mills is estimated at 5000 MW. Thus the total estimated biomass power
potential is approximately 21,000 MW. Between April and December 2009, biomass power and
bagasse cogeneration capacity addition of 384 MW (125 MW biomass projects and 259 MW bagasse
cogeneration) has been achieved in the States of Andhra Pradesh, Chhattisgarh, Karnataka,
Maharashtra, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal against a target of 400 MW.
Current trends indicate that it is likely that a total capacity of 450 MW would be added during fiscal
2009. The cumulative biomass power and cogeneration based power capacity has reached
approximately 2,136 MW which comprises of 829 MW of biomass power projects and 1307 MW of
bagasse cogeneration projects. (Source: Annual Report 2009-10 MNRE)
Power Transmission and Distribution
In India, the transmission and distribution system is a three-tier structure comprised of regional grids,
state grids and distribution networks. The five regional grids, configured on a geographical contiguity
basis, enable transfer of power from a power surplus state to a power deficit state. The regional grids
also facilitate the optimal scheduling of maintenance outages and better co-ordination between power
plants. These regional grids are to be gradually integrated to form a national grid, whereby surplus
power from a region could be redirected to another region facing power deficits, thereby allowing a
more optimal utilization of the national generating capacity.
Most inter-regional and interstate transmission links are owned and operated by Power Grid though
some are jointly owned by the State Electricity Boards (“SEBs”). Power Grid is the central
transmission utility of India and holds one of the largest transmission networks in the world. Power
Grid has a pan-India network presence of approximately 79,556 circuit kms of transmission network
(as of December 1, 2010), 132 substations (as of September 30, 2010), and a total transformation
capacity of 89,170 mega volt ampere (as of December 1, 2010). As of December 1, 2010,
approximately 51% of the entire generating capacity in India is sent through Power Grid's system.
(Source: http:powermin.nic.in and http:powergridindia.com).
Power Grid is pursuing the establishment of an integrated national power grid, in a phased approach,
in order to fortify the regional grids and to support the generation capacity addition program of about
78,577 MW during the Eleventh Five-Year Plan period. The existing inter-regional power transfer
capacity of 17,000 MW is expected to be boosted to 37,000 MW by 2012 through the use of
“Transmission Super Highways”. (Source: http:powergridindia.com) According to the White Paper,
the total fund requirement has been assessed to ` 10.32 trillion.
State grids and distribution networks are mostly owned and operated by the respective SEBs or state
governments (through state electricity departments). A direct consequence of the high AT&C losses is
the inadequate financial condition of SEBs, thereby holding back the SEBs from making any
meaningful investments in generation and in modernizing the transmission and distribution network.
Investments in generation, transmission and distribution
The total fund requirement for transmission system development and related schemes during the
Twelfth Plan period is estimated at ` 2,400,000 million, with ` 1,400,000 million being required for
the central sector and ` 1,000,000 million being required for the state sector. (Source: Base Paper,
International Conclave on Key Inputs for Accelerated Development of Indian Power Sector for
Twelfth Plan and Beyond, 18-19 August 2009, MoP and CEA)
The total fund requirement for the distribution sector, during the Twelfth Plan period is estimated at `
3,710,000 million. (Source: Base Paper, International Conclave on Key Inputs for Accelerated
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Development of Indian Power Sector for Twelfth Plan and Beyond, 18-19 August 2009, MoP and
CEA).
Power Trading
Historically the main suppliers and consumers of bulk power in India have been the various
government controlled generation and distribution companies who usually contracted power on a
long-term basis through power purchase agreements (“PPAs”) with regulated tariffs. However, in
order to encourage the entry of merchant power plants and private sector investment in the power
sector, the Electricity Act recognized power trading as a separate activity from generation and has
facilitated the development of a trading market for electricity in India by allowing for open access to
transmission networks for normative charges. Power trading involves the exchange of power from
suppliers with surplus to those with deficit. Seasonal diversity in generation and demand, as well as
the concentration of power generation facilities in the resources rich eastern region of India, have
created significant opportunities for the trading of power. Recent regulatory developments include the
announcement of rules and provisions for open access and licensing related to interstate trading in
electricity. Several entities have started trading operations or made application for trading licenses.
With the help of the reforms, the volume of power traded as well as its traded price has increased
rapidly over the last few years.
Tariffs
The main objectives of the National Tariff Policy (“NTP”) notified by the GoI on January 6, 2006,
include promoting competition, efficiency in operations and improvements in the quality of power
supply and ensuring the accessibility of electricity to consumers at reasonable and market-competitive
rates. The NTP reiterates the importance of implementing competition in different segments of the
electricity industry as highlighted in the Electricity Act and that competition will lead to significant
benefits to consumers through reduction in capital costs and improved efficiency of operations. It will
also facilitate the shaping of price through competition.
The NTP stipulates that all future power requirements should be procured competitively by
distribution licensees except in cases of expansion of pre-existing projects or where there is a state-
controlled or state-owned developer involved, in which case, regulators must resort to tariffs set by
reference to standards of the CERC, provided that expansion of generating capacity by private
developers for this purpose will be restricted to a one time addition of not more than 50% of the
existing capacity. Under the NTP, even for public sector projects, tariffs for all new generation and
transmission projects will be decided on the basis of competitive bidding after a certain time period.
Merchant Power Plants
Merchant power plants (“MPPs”) generate electricity for sale at market-driven rates in the open
wholesale market. Typically, the MPPs do not have long-term PPAs and are constructed and owned by
private developers. Merchant sales, however, include the sale of power under short-term PPAs and
on-spot basis. Many private sector newcomers are starting to adopt the MPP model for their projects
to generate higher returns as opposed to selling power through a long term PPA, as the off-take risk is
seen to be low in light of significant power shortages in the country. The MPPs can sell power to the
power trading companies (like the PTC India Ltd and Tata Power Trading Company), the SEBs and
industrial and bulk customers.
Captive Power Generation
Another segment of power generation in India is the captive power segment. Captive power refers to
power generation from a project established for industrial consumption. According to Monthly
Review of Power Sector, August 2010 (CEA), captive power capacity, at 19,509 MW, accounted for
11.86% of the 164,508.80 MW of total installed capacity in India. The dependence on captive power
has been rising, due to the continuing shortage of power and India's sustained economic growth.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
The Electricity Act 2003 provided further incentives to captive power generation companies to grow
by making them exempt from licensing requirements. This has resulted in an increase in captive power
capacity. Reliability of power supply and better economics are other variables pushing industries to
develop captive generation plants.
Indian Energy Exchange
Indian Energy Exchange (“IEX”) is India's first nation-wide automated and online electricity trading
platform. IEX seeks to catalyze the modernization of electricity trade in India by allowing trading
through a technology-enabled platform. On June 9, 2008, IEX received Central Electricity Regulatory
Commission approval to begin operations. IEX is a demutualised exchange that will enable efficient
price discovery and price risk management in the power trading market. IEX offers a broader choice
to generators and distribution licensees for sale and purchase of power facilitating trade in smaller
quantities. IEX enables participants to precisely adjust their portfolio as a function of consumption or
generation. The total volume of power traded on IEX amounted to 1,089.46 million units in October,
2010 (Source: http://www.cercind.gov.in/2010/MMC/MMC_Monthly_Report_Oct_2010.pdf).
Power Exchange India Limited
Power Exchange India Limited (“PXIL”) is a fully electronic, nation-wide exchange for trading of
electricity. It has been promoted by two of India's leading Exchanges, National Stock Exchange of
India Ltd (NSE) & National Commodities & Derivatives Exchange Ltd (NCDEX). PXIL received
regulatory approval from Central Electricity Regulatory Authority (CERC) on September 30, 2008 to
begin operations and PXIL successfully began its operations on October 22, 2008. The total volume of
power traded on PXIL amounted to 112.32 million units in October, 2010 (Source:
http://www.cercind.gov.in/2010/MMC/MMC_Monthly_Report_Oct_2010.pdf).
PROVIDERS OF FINANCE TO THE POWER SECTOR IN INDIA
The primary providers of power sector financing in India are power sector specific government
companies, financing institutions, public sector banks and other public sector institutions, multilateral
development institutions and private banks.
Power-Sector Specific Government Companies
Besides our Company, the other sector-specific companies engaged in power sector financing are as
follows:
Power Finance Corporation Limited
In order to provide funds for the power projects in India and to act as developmental financial
institution for the power sector in India, PFC was incorporated on July 16, 1986. PFC is a Public
Sector Undertaking and its main objective is to raise resources from international and domestic
sources at competitive rates and terms and conditions and on-ward lend these funds on optimum basis
to the power projects in India. PFC has been actively persuading State Governments to initiate reform
and restructuring of their power sector in order to make them commercially viable and in this regard,
is providing financial assistance to reform-minded States under relaxed lending criteria/exposure limit
norms. It is also providing funds based services like Term Loans, Equipment Leasing, Bill
Discounting, Buyers Line of Credit and also non funds based services like Guarantee Services and
Consultancy Services.
Rural Electrification Corporation
The Rural Electrification Corporation (“REC”) was incorporated on July 25, 1969 under the
Companies Act. REC is a wholly owned Government enterprise and its main objective is to finance
and promote rural electrification projects throughout India. It provides financial assistance to SEBs,
state government departments and rural electric cooperatives for rural electrification projects. REC
also promotes and finances rural electricity cooperatives; administers funds and grants from the GoI
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
and other sources for financing rural electrification; provides consultancy services and project
implementation in related fields; finances and executes small, mini and micro generation projects; and
develops other energy sources.
Indian Renewable Energy Development Agency Limited
The Indian Renewable Energy Development Agency Limited (“IREDA”) was incorporated on March
11, 1987 as a public sector NBFC under the administration of the Ministry of Non-Conventional
Energy Sources with the objective of promoting, developing and extending financial assistance for
renewable energy and energy efficiency, and energy conservation projects. IREDA plays a key role in
the development of renewable energy in India.
Financial Institutions
Financial institutions were established to provide medium-term and long-term financial assistance to
various industries for setting up new projects and for the expansion and modernization of existing
facilities. These institutions provide fund based and non-fund based assistance in the form of loans,
underwriting, direct subscription to shares, Bonds and guarantees. The primary long-term lending
institutions include IDFC Limited, IIFCL Limited, IFCI Limited, and Industrial Investment Bank of
India Limited and Small Industries Development Bank of India.
State Level Financial Institutions
State financial corporation’s operate at the state level and form an integral part of the institutional
financing system. State financial corporations were set up to finance and promote small and medium-
sized enterprises. At the state level, there are also state industrial development corporations, which
provide finance primarily to medium-sized and large-sized enterprises.
Public Sector Banks and other Public Sector Institutions
Public sector banks make up the largest category of banks in the Indian banking system. The primary
public sector banks providing finance to the power sector include the IDBI Bank Limited, State Bank
of India Limited, Punjab National Bank and the Bank of Baroda. Other public sector entities such as
the Life Insurance Corporation of India, India Infrastructure Finance Company Limited, etc. are also
providing financing to the power sector.
Private Sector Banks
After the first phase of bank nationalization was completed in 1969 the majority of Indian banks were
public sector banks. Some of the existing private sector banks, which showed signs of an eventual
default, were merged with state owned banks. In July 1993, as part of the banking reform process and
as a measure to induce competition in the banking sector, the RBI permitted entry by the private sector
into the banking system. This resulted in the introduction of nine private sector banks. These banks
are collectively known as the ''new'' private sector banks. These institutions also provide fund based
and non-fund based assistance in the form of loans, underwriting, direct subscription to shares, Bonds
and guarantees and also compete in the power sector.
Infrastructure Finance Companies
IFCs are a new category of infrastructure funding entities introduced by the RBI in February 2010.
Non-deposit taking NBFCs which satisfy the following conditions are eligible to apply to the RBI and
seek the IFC status:
• a minimum of 75.00% of its assets deployed in infrastructure loans;
• net owned funds of at least Rs. 3,000.0 million;
• minimum credit rating 'A' or equivalent of CRISIL, FITCH, CARE, ICRA or equivalent rating by
any other accrediting rating agencies; and
• CRAR of 15.00% (with a minimum Tier I capital of 10.00%).
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
IFCs enjoy benefits including a lower risk weight on their bank borrowings (from a flat 100.0% to as
low as 20.0% for AAA-rated borrowers), higher permissible bank borrowing (up to 20.0% of the
bank‘s net worth as against 15%. for an NBFC that is not an IFC), access to external commercial
borrowings (up to 50.0% of owned funds on an automatic basis) and relaxation in their single party
and group exposure norms. IFCs are also eligible for issuance of infrastructure bonds. These benefits
should enable a highly rated IFC to raise more funds, of longer tenors and at lower costs, and in turn
lend more to infrastructure companies.
International Development Financial Institutions
International development financial institutions are supportive of power sector reform and of more
general economic reforms aimed at mobilizing investment and increasing energy efficiency. The
primary international development financial institutions involved in power sector lending in India
include several international banking institutions such as Japan Bank for International Cooperation,
Kreditanstalt fur Wiederaufbau, the World Bank, the Asian Development Bank and the International
Finance Corporation.
In the early 1990s, the World Bank decided to finance mainly projects in states that “demonstrate a
commitment to implement a comprehensive reform of their power sector, privatize distribution, and
facilitate private participation in generation and environment reforms”. Recent loans from the World
Bank have gone to support the restructuring of SEBs. In general, the loans are for rehabilitation and
capacity increase of the transmission and distribution systems, and for improvements in metering the
power systems in states that have agreed to reform their power sector.
The overall strategy of the Asian Development Bank for the power sector is to support restructuring,
especially the promotion of competition and private sector participation. Like the World Bank, the
ADB also provides loans for restructuring the power sector in the states and improving transmission
and distribution.
Other Provisions for Power Sector Finance
There also exist several short term and long-term financing measures by the GoI to facilitate the
financial viability of the power sector, such as the implementation of the Electricity Act. As a long-
term financing measure, the process has been initiated for institutionalizing mechanism for facilitating
and accelerating private and foreign direct investment into the power sector.
iv. A brief history of the issuer since its incorporation giving details of its activities
including any reorganization, reconstruction or amalgamation, changes in its capital
structure, (authorized, issued and subscribed) and borrowings, if any
CAPITAL STRUCTURE OF THE COMPANY
Share Capital Amount in Rs.
Authorised
1,000,000,000 equity shares of Rs. 10/- each
10,000,000,000
Total 10,000,000,000
Issued, Subscribed and Paid up
434,583,335 equity shares of Rs. 10/- each
4,345,833,350
BUILD UP OF EQUITY SHARE CAPITAL
Date of Allotment No. of Equity
Shares
Face
Value
Consider-
ation
Remark
November 30, 2006 3,000,006 10 Cash Allotted to PTC India Ltd at par
November 30, 2006 1,000,000 10 Cash Allotted to PTC India Ltd at par
May 25, 2007 50,000,000 10 Cash Allotted to PTC India Ltd at par
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
January 31, 2008 36,000,004 10 Cash 18,000,002 equity shares each
allotted to G S Strategic
Investments Ltd and Macquarie
India Holdings Limited at a
premium of Rs. 6 per equity share
April 10, 2008 153,333,324 10 Cash • 91,999,994 equity shares
allotted to PTC India Ltd at
par.
• 30,666,665 equity shares each
allotted to G S Strategic
Investments Ltd and Macquarie
India Holdings Limited at a
premium of Rs. 6 per equity
share.
March 30, 2009 191,250,001 10 Cash • 10,000,000 equity shares
allotted to PTC India Ltd at
par.
• 181,250,001 equity shares
allotted to PTC India Ltd at a
premium of Rs. 6 per equity
share.
*Out of 3,000,006 equity shares, 6 equity shares of PFS, were allotted to and all are presently
held by 6 nominees of PTC India Limited.
v. Details of other borrowings including any other issue of debt securities in past Details of
Long Term outstanding Borrowings as per audited financial accounts on September 30,
2010.
Nature of Debts Sanctioned
Rs. in MM
Outstanding
Rs. in MM
SECURED BORROWINGS
- Long Term Loans 5,250.00 2,373.69
- Short Term Loans 346.58 346.58
- Non Convertible Bonds 2,000.00 2,000.00
- Total Secured 7,596.58 4,720.27
UNSECURED BORROWINGS
- Short Term Loans 500.00 500.00
- Total Unsecured 500.00 500.00
Total Long Term Borrowings 8,096.58 5,220.27
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
Non- Convertible Bonds issued by PTC India Financial Services Limited
Set forth below is a brief summary of our outstanding Bonds as on September 30, 2010 together with a
brief description of certain significant terms of such financing arrangements.
Secured Bonds issued by our company
Our Company had issued secured bonds, on private placement basis. The detail of the same as on
September 30, 2010 is mentioned below:
Sr.
No.
Name of
Trustee
Nature of
Bond
Redemption Security
1. IDBI
Trusteeship
Services
Limited
Secured,
redeemable,
taxable, non
convertible
Bond series I
of aggregate
nominal
value of Rs.
1000 million
allotted on
October 1,
2009 with a
coupon of
10.60% per
annum
payable
annually
Tenure/
maturity: 5
years
commencing
from the date
of allotment.
Redemption:
staggered
redemption at
par in 3 equal
annual
installments
beginning at
the end of the
3rd year from
the date of
allotment.
The Series I Bonds have been secured by the following: Memorandum of hypothecation dated December 29, 2009 executed by the Company in favour of the Trustee amended by a first addendum dated July 27, 2010*, wherein the following securities have been created for securing an amount of Rs. 1250 million:
• First charge on the receivables of the assets created by the proceeds of the Series I Bonds
• Pari-passu charge on the receivables of the loan assets created by the Company out of its own sources which are not charged to any other lenders of the Company.
• Letter of comfort dated September 7, 2009 issued by PTC India Limited.
2. IDBI
Trusteeship
Services
Limited
Secured,
redeemable,
taxable, non
convertible
Bond series 2
of aggregate
nominal
value of Rs.
1000 million
allotted on
February 3,
2010 with a
coupon of
9.35% per
annum
payable
annually
Tenure/Maturity: 2 years commencing from the date of allotment. Redemption: bullet redemption at par in 1 installment at the end of the 2nd year from the date of allotment.
The Series II Bonds have been secured by the following: Memorandum of hypothecation dated April 29, 2010 executed by the Company in favour of the Trustee amended by the first addendum dated July 27, 2010*, wherein the following securities have been created for securing an amount of Rs. 1000 million:
• First charge on the receivables from the assets created by the proceeds of the Series II Bonds to provide 100% security coverage:
• Letter of comfort dated January 27, 2010 issued by PTC India Limited.
Note :
• For Series I : Mortgage deed dated December 29, 2009 executed by the Company in favour of the
Trustee for creating a first charge in favour of the Trustee over the Company’s property situated at
Janta Flat No. 1584, First Floor, Pocket B, Sector 16B, Dwarka, Phase II, New Delhi 110 075
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
• For Series II: Mortgage deed dated April 29, 2010 executed by the Company in favour of the
Trustee for creating a first charge in favour of the Trustee over the Company’s property situated at
Janta Flat No. 1584, First Floor, Pocket B, Sector 16B, Dwarka, Phase II, New Delhi 110 075.
vi. Any material event/ development or change at the time of issue or subsequent to the issue which
may affect the issue or the investor’s decision to invest/ continue to invest in the debt securities
The Company hereby declares that there has been no material event, development or change at the time
of issue which may affect the issue or the investor’s decision to invest/ continue to invest in the debt
securities of the Company.
vii. Particulars of the debt securities issued (i) for consideration other than cash, whether in whole or
part, (ii) at a premium or discount, or (iii) in pursuance of an option
The Company confirms that other than and to the extent mentioned elsewhere in this Disclosure
Document, it has not issued any shares or debt securities or agreed to issue any shares or debt securities
for consideration other than cash, whether in whole or in part, at a premium or discount or in pursuance
of an option since inception
viii. A list of highest ten holders of each class or kind of securities of the issuer as on the date of
application along with particulars as to number of shares or debt securities held by them and the
address of each such holder.
a) List of top ten largest equity shareholders of the Company as on September 30, 2010
Sr.
No.
Name of the Shareholder No. of Shares % of Equity
Capital
1 PTC India Ltd* 337,250,001 77.60%
2 G S Strategic Investments Ltd 48,666,667 11.20%
3 Macquarie India Holdings Limited 48,666,667 11.20%
Total 434,583,335 100.00
* PTC India Limited is holding 6 equity shares through 6 if its nominees.
b) List of top ten / maximum available Banks/Bond Holders of the Company as on September
30, 2010:
Sr.
No.
Name of Banks Long Term Loan
(Rs. in million)
1. Corporation Bank (Long Term Loan) 1,000.00
2. Punjab National Bank (Long Term Loan) 545.80
3. Union Bank of India (Long Term Loan) 318.72
4. Indian Bank (Long Term Loan) 254.72
5. Oriental Bank of Commerce (Long Term Loan) 254.45
Sr. No. Name of Bank/FI/other lenders NCD (Rs. in million)
1. Templeton India Short-Term Income Plan 1,000
2. MTNL Gratuity Trust 150
3. Parle Biscuits Pvt Ltd 100
4.. Hooghly District Central Co-Operative Bank Limited 50
5. Urvashi D Morarji 50
6. Rajkot Nagrik Sahakari Bank Ltd 50
7. Telecommunication Consultants India Limited
Employees Provident Funds Trust 33
8. APSCSC Employees Provident Fund Trust 30
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
9. Wallace Flour Mills Co Pvt Ltd 30
10. Radha Govind Samiti 27
ix. An undertaking that the issuer shall use a common form of transfer.
The Bonds shall be transferred subject to and in accordance with the rules/ procedures as prescribed by
the NSDL/ CDSL/ Depository Participant of the transferor/ transferee and any other applicable laws and
rules notified in respect thereof. The normal procedure followed for transfer of securities held in
dematerialized form shall be followed for transfer of these Bonds held in electronic form. The seller
should give delivery instructions containing details of the buyer’s DP account to his depository
participant.
The transferee(s) should ensure that the transfer formalities are completed prior to the Record Date. In the
absence of the same, interest will be paid/ redemption will be made to the person, whose name appears in
the records of the Depository. In such cases, claims, if any, by the transferee(s) would need to be settled
with the transferor(s) and not with the Company.
The Company undertakes that it shall use a common form/ procedure for transfer of Bonds issued under
terms of this Disclosure Document.
AUTHORITY FOR THE ISSUE
This private placement of Bonds is being made pursuant to the resolutions of the Board of Directors of
PFS passed at its meeting held on March 22, 2010 and Committee of Directors for issuance of Bond in its
meeting held on January 27, 2011. The current private placement of Bonds is within the overall borrowing
limits of the Company.
SECURITY
The Bonds together with interest, trustees’ remuneration, charges, expenses and all other monies payable
in respect thereof shall be secured by a First charge on the receivables of the assets created from the
proceeds of current Bond issue and other unencumbered receivables of the Company to provide the 100%
security coverage, during the currency of the current Bond Series 1 of Company.
The said security shall be created in favour of the Trustees within 3 (three) months from the Date of
Closure of the proposed Issue or such extended period as may be permitted by the relevant authority(ies).
The security will be created by the Company as aforesaid in favour of the Trustees on such of the assets
for which the Company obtains, after all due diligence and efforts, the requisite consents and permissions
applicable under laws or in accordance with conditions of holding of such assets for creating the above
mentioned charge. The creation of such security shall be sufficient compliance of the Company’s
obligation to create security.
On creation of the final security, the Bonds will have a security cover of not less than 100% of the total
amount outstanding on the Bonds Series 1. The Trustee shall have the power to substitute or release any
property charged in its favour without approval of the Bond holders.
FORCE MAJEURE
The Company reserves the right to withdraw the issue prior to the closing date in the event of any
unforeseen development adversely affecting the economic and regulatory environment. The Company
reserves the right to change the Issue Schedule.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
COMPLIANCE OFFICER & COMPANY SECRETARY
Mr. Vishal Goyal
Company Secretary
PTC India Financial Services Limited
2nd Floor, NBCC Tower, 15, Bhikaji Cama Place,
New Delhi 110 066
Tel: 011 41595122
Fax: 011 41595155/ 41659144
e-mail: [email protected]/ [email protected]
Shri Vishal Goyal will also act as Investor Relationship Manager and for the Grievance Redressal if
any. PFS endeavours to resolve the investors’ grievances within 30 days of its receipt. All grievances
related to the issue quoting the Application Number (including prefix), number of bonds applied for,
amount paid on application and Bank and Branch/PFS Collection Centre where the Application was
submitted, may be addressed to the Shri Vishal Goyal. All investors are hereby informed that the company
has appointed a Compliance Officer who may be contacted in case of any problem related to this issue.
x. The discount at which such offer is made and the effective price for the investor as a result
of such discount
The Bonds are being issued at face value and not at discount to offer price.
xi. The debt equity ratio prior to and after issue of the debt security:
(a) Debt Equity Ratio prior to issue of the Debt security 0.72 as on unaudited accounts of
December 31, 2010.
(b) Debt Equity Ratio after issue of the Debt security 0.87 as on unaudited accounts of
December 31, 2010 and the Rs. 100
Crore (Rupees One Hundred Crore Only)
to be raised through proposed PFS Long
Term Infrastructure Bond Series 1
issuance.
xii. Servicing behavior on existing debt securities, payment of due interest on due dates on
term loans and debt securities
The Company hereby confirms that the
1. The Company has been servicing all its principal and interest liabilities on time and there has been
no instance of delay or default since inception.
2. The Company has neither defaulted in repayment/ redemption of any of its borrowings nor
affected any kind of roll over against any of its borrowings in the past.
xiii. That the permission/ consent from the prior creditor for a second or pari passu charge
being created in favour of the trustees to the proposed issue has been obtained
The Company hereby confirms that it is entitled to raise money through current issue of Bonds without
the consent/ permission/ approval from the Bond holders/ Trustees/ Lenders/ other creditors of the
Company. The Company hereby undertakes that it shall seek consent from the existing charge holders
for creating of security for the Bonds on pari passu basis. In future, the Trustees shall provide consent to
create pari-passu charge subject to Company’s complying with the requisite terms of the Bonds issued.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
xiv. Name of the Bond Trustee
In accordance with the provisions of Section 117B of the Companies Act, 1956 (1 of 1956) and
Securities and Exchange Board of India (Bond Trustees) Regulations, 1993, the PTC India Financial
Services Ltd has appointed IDBI Trusteeship Services Ltd. (ITSL) to act as Trustees (“Trustees”) for
and on behalf of the holder(s) of the Bonds. The address and contact details of the Trustees are as
under:
IDBI Trusteeship Services Limited
Asian Building, Ground Floor
17, R. Kamani Marg
Ballard Estate,
Mumbai – 400 021
Tel No. 022 – 66311771/2/3
Fax No. 022 – 66311776
A copy of letter from IDBI Trusteeship Services Ltd. conveying their consent to act as Trustee for the
current issue of Bonds is enclosed elsewhere in this Disclosure Document.
The Company hereby undertakes that a Trust Deed shall be executed by it in favour of the Trustees
within three months of the closure of the Issue. The Trust Deed shall contain such clauses as may be
prescribed under section 117A of the Companies Act, 1956 and those mentioned in Schedule IV of the
Securities and Exchange Board of India (Bond Trustees) Regulations, 1993. Further the Trust Deed
shall not contain any clause which has the effect of (i) limiting or extinguishing the obligations and
liabilities of the Trustees or the Company in relation to any rights or interests of the holder(s) of the
Bonds, (ii) limiting or restricting or waiving the provisions of the Securities and Exchange Board of
India Act, 1992 (15 of 1992); Securities and Exchange Board of India (Issue and Listing of Debt
Securities) Regulations, 2008 and circulars or guidelines issued by SEBI, (iii) indemnifying the
Trustees or the Company for loss or damage caused by their act of negligence or commission or
omission.
The Bond holder(s) shall, without further act or deed, be deemed to have irrevocably given their
consent to the Trustees or any of their agents or authorized officials to do all such acts, deeds, matters
and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deem
necessary or require to be done in the interest of the holder(s) of the Bonds. Any payment made by the
Company to the Trustees on behalf of the Bond holder(s) shall discharge the Company pro tanto to the
Bond holder(s). The Trustees shall protect the interest of the Bond holders in the event of default by
the Company in regard to timely payment of interest and repayment of principal and shall take
necessary action at the cost of the Company. No Bond holder shall be entitled to proceed directly
against the Company unless the Trustees, having become so bound to proceed, fail to do so. In the
event of Company defaulting in payment of interest on Bonds or redemption thereof, any distribution
of dividend by the Company shall require approval of the Trustees
xv. Names of all the recognized stock exchanges where securities are proposed to be listed clearly
indicating the designated stock exchange and also whether in principle approval from the
recognized stock exchange has been obtained
The Secured Redeemable Non-Convertible Bonds are proposed to be listed on the Wholesale Debt
Market (WDM) Segment of the National Stock Exchange of India Ltd. (“NSE”). The Company has
obtained an in-principle approval from the NSE for listing of said Bonds on its Wholesale Debt Market
(WDM) Segment. The Company shall make an application to the NSE to list the Bonds to be issued and
allotted under this Disclosure Document and complete all the formalities relating to listing of the Bonds
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
within 70 days from the date of closure of the Issue. If such permission is not granted within 70 days
from the date of closure of the Issue or where such permission is refused before the expiry of the 70
days from the closure of the Issue, the Company shall forthwith repay without interest, all monies
received from the applicants in pursuance of the Disclosure Document, and if such money is not repaid
within 8 days after the Company becomes liable to repay it (i.e. from the date of refusal or 70 days from
the date of closing of the subscription list, whichever is earlier), then the Company and every director of
the Company who is an officer in default shall, on and from expiry of 8 days, will be jointly and
severally liable to repay the money, with interest at the rate of 15 per cent per annum on application
money, as prescribed under Section 73 of the Companies Act, 1956.
In connection with listing of Bonds with NSE, the company hereby undertakes that:
1. It shall comply with conditions of listing of Bonds as may be specified in the Listing Agreement
with NSE.
2. Ratings obtained by the company shall be periodically reviewed by the credit rating agencies and
any revision in the rating shall be promptly disclosed by the company to NSE.
3. Any change in rating shall be promptly disseminated to the holder(s) of the Bonds in such manner
as NSE may determine from time to time.
4. The company, the Trustees and NSE shall disseminate all information and reports on Bonds
including compliance reports filed by the company and the Trustees regarding the Bonds to the
holder(s) of Bonds and the general public by placing them on their websites.
5. Trustees shall disclose the information to the holder(s) of the Bonds and the general public by
issuing a press release in any of the following events:
a. default by the company to pay interest on Bonds or redemption amount;
b. revision of rating assigned to the Bonds;
6. The information referred to in para (e) above shall also be placed on the websites of the Trustees,
company and NSE
xvi. Material Contracts & Agreements Involving Financial Obligations of the issuer
By very nature and volume of its business, the Company is involved in a large number of
transactions involving financial obligations and therefore it may not be possible to furnish details
of all material contracts and agreements involving financial obligations of the Company.
However, the contracts referred to in Para A below (not being contracts entered into in the
ordinary course of the business carried on by the Company) which are or may be deemed to be
material have been entered into by the Company. Copies of these contracts together with the
copies of documents referred to in Para B may be inspected at the Registered Office of the
Company between 10.00 a.m. and 2.00 p.m. on any working day until the issue closing date.
A. Material Contracts
a. Copy of letter appointing Registrar and Transfer Agents.
b. Copy of letter appointing from IDBI Trusteeship Services Ltd, as Trustees to the Bond
holders.
B. Documents
a. Memorandum and Articles of Association of the Company as amended from time to time.
b. Certificate of Incorporation of the Company dated September 8, 2006.
c. Certificate of Commencement of Business dated March 30, 2007.
d. Certificate of NBFC (Infrastructure Finance Company) issued by Reserve Bank of India dated
August 23, 2010
e. Board Resolution dated March 22, 2010 and resolution of Committee of Directors for Bond
Issuance dated January 27, 2011 authorizing issue of Bonds offered under terms of this
Disclosure Document.
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
f. Letter of consent from IDBI Trusteeship Services Ltd for acting as Trustees for and on behalf
of the holder(s) of the Bonds.
g. Letter of consent from Karvy Computershare Pvt Limited for acting as Registrars to the Issue.
h. Letter from ICRA conveying the credit rating for the Bonds of the Company and the rating
rationale pertaining thereto
i. Letter from Brickwork conveying the credit rating for the Bonds of the Company and the
rating rationale pertaining thereto
j. Tripartite Agreement between the Company, NSDL and Karvy Computershare Pvt Limited
for issue of Bonds in dematerialised form.
k. Tripartite Agreement between the Company, CDSL and Karvy Computershare Pvt Limited
for issue of Bonds in dematerialised form.
xxii. Declaration
It is hereby declared that this Disclosure Document contains full disclosures in accordance with
Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008
issued vide Circular No. LADNRO/ GN/2008/13/127878 dated June 06, 2008.
The Company also confirms that this Disclosure Document does not omit disclosure of any
material fact which may make the statements made therein, in light of the circumstances under
which they are made, misleading. The Disclosure Document also does not contain any false or
misleading statement.
The Company accepts no responsibility for the statement made otherwise than in the Disclosure
Document or in any other material issued by or at the instance of the Company and that any one
placing reliance on any other source of information would be doing so at his own risk.
Signed pursuant to the authority granted by Board of Directors of the Company at its meeting held
on March 22, 2010 and Committee of Directors for Issuance of Bonds on January 27, 2011
For PTC India Financial Services Limited
VISHAL GOYAL
Company Secretary
Place: New Delhi
Date: February 07, 2011
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
RATING LETTER – ICRA LIMITED
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
RATING LETTER – Brickwork RATINGS INDIA PVT LTD
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
CONSENT LETTER FROM KARVY COMPUTERSHIP PRIVATE LIMITED
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
CONSENT LETTER from IDBI TRUSTEESHIP SERVICES LIMITED
PFS Tax Saving Long Term Infrastructure Bonds Series 1: Information Memorandum
RBI Certificate for conferring Infrastructure Finance Company status to PFS