PENNA CEMENT INDUSTRIES LIMITED · PENNA CEMENT INDUSTRIES LIMITED Our Company was incorporated as Penna Cement Industries Limited on October 24, 1991 at Hyderabad, Telangana, India

DRAFT RED HERRING PROSPECTUS

Dated:November 1, 2018 (The Draft Red Herring Prospectus will be updated upon filing with the RoC)

(Please read Section 32 of the Companies Act, 2013)

100% Book Built Offer

PENNA CEMENT INDUSTRIES LIMITED Our Company was incorporated as Penna Cement Industries Limited on October 24, 1991 at Hyderabad, Telangana, India as a public limited company under the Companies Act, 1956 and received the

certificate of commencement of business from the Registrar of Companies on November 8, 1991. The name of our Company was thereafter changed to Penna Cement Industriies Limited and a fresh certificate

of incorporation consequent upon change of name was issued on September 28, 2010. The name of our Company was subsequently changed to Penna Cement Industries Limited and a fresh certificate of

incorporation consequent upon change of name was issued on July 26, 2012. For details of change in the name and registered office of our Company, see “History and Certain Corporate Matters” on page

171.

Registered Office: H.No. 8-2-268/A/1/S & S1, Plot No. 705, Road No. 3, Banjara Hills, Hyderabad 500 034, Telangana, India

Contact Person: Raj Kumar Singh, Company Secretary and Compliance Officer; Tel: +91 40 4456 5100; Fax: +91 40 4456 5222 / +91 40 4456 5310

E-mail: [email protected]; Website: www.pennacement.com

Corporate Identification Number: U26942AP1991PLC013359

OUR PROMOTERS: P. PRATHAP REDDY, PIONEER BUILDERS AND P R CEMENT HOLDIINGS LIMITED

INITIAL PUBLIC OFFER OF UP TO [] EQUITY SHARES OF FACE VALUE OF `10 EACH (“EQUITY SHARES”) OF PENNA CEMENT INDUSTRIES LIMITED (“COMPANY” OR “ISSUER”) FOR CASH

AT A PRICE OF `[●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF `[●] PER EQUITY SHARE) AGGREGATING UP TO `15,500 MILLION (“OFFER”) COMPRISING A FRESH ISSUE OF

UP TO [] EQUITY SHARES AGGREGATING UP TO `13,000 MILLION (“FRESH ISSUE”) AND AN OFFER FOR SALE OF UP TO [] EQUITY SHARES BY OUR PROMOTER, P R CEMENT HOLDIINGS

LIMITED (“SELLING SHAREHOLDER”) AGGREGATING UP TO `2,500 MILLION (“OFFER FOR SALE”). THE OFFER WILL CONSTITUTE [●]% OF OUR POST-OFFER PAID-UP EQUITY SHARE

CAPITAL.

THE FACE VALUE OF THE EQUITY SHARES IS `10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY OUR COMPANY AND THE SELLING SHAREHOLDER IN

CONSULTATION WITH THE THE BOOK RUNNING LEAD MANAGERS ( THE “BRLMS”), AND WILL BE ADVERTISED IN [] EDITIONS OF [], [] EDITIONS OF [] AND [] EDITIONS OF [] (WHICH

ARE WIDELY CIRCULATED ENGLISH, HINDI AND TELUGU NEWSPAPERS, TELUGU BEING THE REGIONAL LANGUAGE OF TELANGANA, WHERE OUR REGISTERED OFFICE IS LOCATED)

AT LEAST FIVE WORKING DAYS PRIOR TO THE BID/OFFER OPENING DATE AND SHALL BE MADE AVAILABLE TO THE BSE LIMITED (“BSE”) AND THE NATIONAL STOCK EXCHANGE

OF INDIA LIMITED ((“NSE”), AND TOGETHER WITH BSE, THE “STOCK EXCHANGES”) FOR THE PURPOSE OF UPLOADING ON THEIR RESPECTIVE WEBSITES.

In case of any revision to the Price Band, the Bid/Offer Period will be extended by at least three additional Working Days after such revision of the Price Band, subject to the Bid/Offer Period not exceeding 10 Working Days.

Any revision in the Price Band and the revised Bid/Offer Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a press release, and also by indicating the change on the website of the BRLMs and at the terminals of the members of the Syndicate and by intimation to Self-Certified Syndicate Banks (“SCSBs”) and other Designated Intermediaries, as applicable. .

The Offer is being made in terms of Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended (“SCRR”). The Offer is being made in accordance with Regulation 26(1) of the SEBI ICDR Regulations and

through the Book Building Process wherein not more than 50% of the Offer shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), provided that our Company in consultation with the Selling

Shareholder and BRLMs may allocate up to 60% of the QIB Portion to Anchor Investors on a discretionary basis in accordance with the SEBI ICDR Regulations, out of which one-third shall be reserved for domestic Mutual Funds only, subject to valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Offer Price, in accordance with the SEBI ICDR Regulations. 5% of the QIB Portion (excluding the Anchor Investor

Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIB Bidders (other than Anchor

Investors), including Mutual Funds, subject to valid Bids being received at or above the Offer Price. Further, not less than 15% of the Offer shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Offer shall be available for allocation to Retail Individual Bidders in accordance with the SEBI ICDR Regulations, subject to valid Bids being received at or above the Offer Price. All potential

investors, other than Anchor Investors, are required to mandatorily utilise the Application Supported by Blocked Amount (“ASBA”) process providing details of their respective bank accounts which will be blocked by the Self

Certified Syndicate Banks (“SCSBs”). For details, see “Offer Procedure” on page 411.

RISK IN RELATION TO THE FIRST OFFER

This being the first public issue of our Company, there has been no formal market for the Equity Shares of our Company. The face value of the Equity Shares is `10 and the Floor Price is [●] times the face value and the Cap

Price is [●] times the face value. The Offer Price (decided by our Company in consultation with the Selling Shareholder and the BRLMs as stated under “Basis for Offer Price” on page 111) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded

after listing.

GENERAL RISKS

Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in the Offer unless they can afford to take the risk of losing their entire investment. Investors are advised to read the risk factors carefully before taking an investment decision in the Offer. For taking an investment decision, investors must rely on their own examination of our Company and the Offer, including the risks involved. The

Equity Shares in the Offer have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of the contents of this Draft Red Herring

Prospectus. Specific attention of the investors is invited to “Risk Factors” on page 14.

ISSUER’S AND SELLING SHAREHOLDER’S ABSOLUTE RESPONSIBILITY

Our Company and the Selling Shareholder, having made all reasonable inquiries, accept responsibility for and confirm that this Draft Red Herring Prospectus contains all information with regard to our Company and the Offer,

which is material in the context of the Offer, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and

intentions expressed herein are honestly held and that there are no other facts, the omission or inclusion of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. Further, the Selling Shareholder accepts responsibility that this Draft Red Herring Prospectus contains all information about it as Selling Shareholder in the context of

the Offer for Sale and further severally assumes responsibility for statements in relation to it included in this Draft Red Herring Prospectus and the Equity Shares offered by it in the Offer and that such statements are true and

correct in all material respects and not misleading in any material respect.

LISTING

The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the BSE and the NSE. Our Company has received an ‘in-principle’ approval from the BSE and the NSE for the listing of the Equity

Shares pursuant to letters dated [●] and [●], respectively. For the purposes of the Offer, the Designated Stock Exchange shall be [●]. A copy of the Red Herring Prospectus and the Prospectus shall be delivered for registration

to the Registrar of Companies, Telangana and Andhra Pradesh at Hyderabad in accordance with Section 26(4) of the Companies Act, 2013. For details of the material contracts which were made available for inspection from the date of the Red Herring Prospectus up to Bid/Offer Closing Date, see “Material Contracts and Documents for Inspection” on page 500.

BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE OFFER

Edelweiss Financial Services Limited 14th Floor, Edelweiss House

Off CST Road, Kalina

Mumbai 400 098 Maharashtra, India

Tel: +91 22 4009 4400

Fax: +91 22 4086 3610 E-mail: [email protected]

Investor Grievance e-mail:

[email protected]

Website: www.edelweissfin.com Contact Person: Nishita John/ Mohit

Kapoor

SEBI Registration No.: INM0000010650

IIFL Holdings Limited 10th Floor, IIFL Centre, Kamala City

Senapati Bapat Marg,

Lower Parel (West) Mumbai 400 013

Maharashtra, India

Tel: +91 22 4646 4600 Fax: +91 22 2493 1073

E-mail: [email protected]

Investor grievance e-mail:

[email protected] Website: www.iiflcap.com

Contact Person: Devendra Maydeo /

Anant Gupta SEBI Registration No.: INM000010940

JM Financial Limited 7th Floor

Cnergy

Appasaheb Marathe Marg Prabhadevi

Mumbai 400 025

Maharashtra, India Tel: +91 22 6630 3030

Fax: +91 22 6630 3330


Investor grievance e-mail: [email protected]

Website: www.jmfl.com

Contact Person: Prachee Dhuri SEBI Registration No.: INM000010361

YES Securities (India) Limited IFC, Tower 1&2, Unit No. 602 A

6th Floor, Senapati Bapat Marg,

Elphinstone (W), Mumbai 400 013 Maharashtra, India

Tel: +91 22 3012 6776

Fax: +91 22 2421 4508 E-mail: [email protected]

Investor grievance e-mail:

[email protected]

Website: www.yesinvest.in Contact Person: Nikhil Bhiwapurkar/

Ronak Shah

SEBI Registration No.: MB/INM000012227

Karvy Computershare Private

Limited

Karvy Selenium, Tower – B

Plot 31 and 32, Gachibowli Financial District, Nanakramguda

Hyderabad 500 032

Telangana, India Tel: +91 40 6716 2222

Fax: +91 40 2343 1551


Investor grievance e-mail: [email protected]

Website: www.karisma.karvy.com

Contact Person: Murali Krishna M SEBI Registration No.: INR000000221

BID/OFFER PROGRAMME

BID/OFFER OPENS ON [●](1)

BID/OFFER CLOSES ON [●](2)

(1) Our Company may, in consultation with the Selling Shareholder and the BRLMs, consider participation by Anchor Investors in accordance with the SEBI ICDR Regulations. The Anchor Investor Bid/Offer

Period shall be one Working Day prior to the Bid/Offer Opening Date

(2) Our Company may, in consultation with the Selling Shareholder and the BRLMs, consider closing the Bid/Offer Period for QIBs one Working Day prior to the Bid/Offer Closing Date in accordance with

the SEBI ICDR Regulations

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=zY01bB5FIILHJM&tbnid=2DpSz5rlzrnfqM:&ved=0CAcQjRw&url=http://www.jmfinancialmf.com/&ei=KCo2VNeWO823uAT_lIGoDA&bvm=bv.76943099,d.c2E&psig=AFQjCNGXC5qM9_wQbqPn6jmQ9MkdP-3Egw&ust=1412922139917355

TABLE OF CONTENTS

SECTION I: GENERAL ........................................................................................................................................................ 2

DEFINITIONS AND ABBREVIATIONS ........................................................................................................................... 2 PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ..................................................................... 11 FORWARD-LOOKING STATEMENTS .......................................................................................................................... 13

SECTION II: RISK FACTORS .......................................................................................................................................... 14

SECTION III: INTRODUCTION ....................................................................................................................................... 44

SUMMARY OF INDUSTRY ............................................................................................................................................ 44 SUMMARY OF OUR BUSINESS..................................................................................................................................... 51 SUMMARY OF FINANCIAL INFORMATION .............................................................................................................. 61 THE OFFER ....................................................................................................................................................................... 68 GENERAL INFORMATION............................................................................................................................................. 69 CAPITAL STRUCTURE ................................................................................................................................................... 76 OBJECTS OF THE OFFER ............................................................................................................................................. 104 BASIS FOR OFFER PRICE ............................................................................................................................................. 111 STATEMENT OF TAX BENEFITS ................................................................................................................................ 114

SECTION IV: ABOUT OUR COMPANY ....................................................................................................................... 116

INDUSTRY OVERVIEW ................................................................................................................................................ 116 OUR BUSINESS .............................................................................................................................................................. 143 REGULATIONS AND POLICIES .................................................................................................................................. 168 HISTORY AND CERTAIN CORPORATE MATTERS ................................................................................................. 171 OUR MANAGEMENT .................................................................................................................................................... 178 OUR PROMOTERS AND PROMOTER GROUP ........................................................................................................... 195 OUR GROUP COMPANIES ........................................................................................................................................... 200 RELATED PARTY TRANSACTIONS ........................................................................................................................... 208 DIVIDEND POLICY ....................................................................................................................................................... 209

SECTION V: FINANCIAL INFORMATION ................................................................................................................. 210

FINANCIAL STATEMENTS .......................................................................................................................................... 210 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS ................................................................................................................................................................. 333 FINANCIAL INDEBTEDNESS ...................................................................................................................................... 362

SECTION VI: LEGAL AND OTHER INFORMATION ............................................................................................... 365

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ....................................................................... 365 GOVERNMENT APPROVALS ...................................................................................................................................... 381 OTHER REGULATORY AND STATUTORY DISCLOSURES ................................................................................... 384

SECTION VII: OFFER INFORMATION ....................................................................................................................... 404

TERMS OF THE OFFER ................................................................................................................................................. 404 OFFER STRUCTURE ..................................................................................................................................................... 409 OFFER PROCEDURE ..................................................................................................................................................... 411 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ................................................................. 452

SECTION VIII: MAIN PROVISIONS OF ARTICLES OF ASSOCIATION .............................................................. 453

SECTION IX: OTHER INFORMATION ........................................................................................................................ 500

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ......................................................................... 500 DECLARATION ............................................................................................................................................................. 502

2

SECTION I: GENERAL

DEFINITIONS AND ABBREVIATIONS

This Draft Red Herring Prospectus uses certain definitions and abbreviations which, unless the context otherwise indicates

or implies, shall have the meaning as provided below. References to any legislation, act or regulation shall be to such

legislation, act or regulation, as amended from time to time.

General Terms

Term Description

“our Company”, “the Company”,

“the Issuer”

Penna Cement Industries Limited, a company incorporated under the Companies Act, 1956 and

having its Registered Office at H.No. 8-2-268/A/1/S & S1, Plot No. 705, Road No. 3, Banjara

Hills, Hyderabad 500 034, Telangana, India

“we”, “us” or “our” Our Company, our Subsidiaries and Associate Company

Company Related Terms

Term Description

Articles of Association Articles of Association of our Company, as amended

Associate Company Parasakti Cement Industries Limited

Auditors/Statutory Auditors C. Ramachandram & Co., Chartered Accountants

Board/Board of Directors Board of directors of our Company or a duly constituted committee thereof as disclosed in “Our

Management” on page 178

Director(s) Director(s) of our Company as disclosed in “Our Management” on page 178

Equity Shares Equity shares of our Company of face value of `10 each

Executive Directors Executive Directors of our Company as disclosed in “Our Management” on page 178

Group Companies Our Group Companies namely:

1. Anrak Aluminium Limited 2. Pioneer Builderrs Limited 3. Pioneer Genco Limited 4. Pioneer Holiday Resorts Limited 5. Krishna Hydro Energy Limited 6. Lakshmi Jalavidyut (Krishna) Limited 7. Parasakti Cement Industries Limited 8. Pioneer Power Corporation Limited 9. P R Enerrgy Holding Limited

For details, see “Our Group Companies” on page 200

Key Management Personnel Key management personnel of our Company in terms of Regulation 2(1)(s) of the SEBI ICDR

Regulations, the Companies Act, 2013 and disclosed in “Our Management” on page 178

Chairman and Managing Director Chairman and Managing Director of our Company namely, P. Prathap Reddy

MCL Marwar Cement Limited

Memorandum of Association Memorandum of Association of our Company, as amended

NCD 350 redeemable listed non convertible debentures of `1,000,000 each of our Company

Non-Executive Directors Non-Executive Directors of our Company as disclosed in “Our Management” on page 178

Non-Executive Independent

Directors

Non-Executive Independent Directors of our Company as disclosed in “Our Management” on

page 178

Offered Shares [] Equity Shares aggregating up to ` 2,500 million offered by P R Cement Holdiings Limited in

the Offer For Sale

Parasakti Parasakti Cement Industries Limited

PCIL Pioneer Cement Industries Limited

Promoter Group Persons and entities constituting the promoter group of our Company in terms of Regulation

2(1)(zb) of the SEBI ICDR Regulations

For details, see “Our Promoters and Promoter Group” on page 195

Promoters Promoters of our Company namely, P. Prathap Reddy, Pioneer Builders and P R Cement

Holdiings Limited

For details, see “Our Promoters and Promoter Group” on page 195

PRCHL P R Cement Holdiings Limited

Registered Office Registered office of our Company located at H.No. 8-2-268/A/1/S & S1, Plot No. 705, Road No.

3, Banjara Hills, Hyderabad 500 034, Telangana, India

Registrar of Companies/RoC Registrar of Companies, Telangana and Andhra Pradesh, situated at Hyderabad, India

Restated Consolidated Financial

Statements

The restated consolidated financial statements of our Company, along with our subsidiaries and

associates for the Financial Years ended March 31, 2018, March 31, 2017, March 31, 2016, March

31, 2015 and March 31, 2014 and the three months period ended June 30, 2018 presented in

3

Term Description

accordance with Ind AS, and comprises the restated consolidated balance sheet, the restated

consolidated statement of profit and loss (including other comprehensive income), the restated

consolidated statement of changes in equity and the restated consolidated statement of cash flow

together with the annexures and the notes thereto, which have been prepared in accordance with

the Companies Act and restated in accordance with the SEBI ICDR Regulations

Restated Financial Statements Collectively, the Restated Consolidated Financial Statements and the Restated Standalone

Financial Statements

Restated Standalone Financial

Statements

The restated standalone financial statements of our Company for the Financial Years ended March

31, 2018, March 31, 2017, March 31, 2016, March 31, 2015 and March 31, 2014 and the three

months period ended June 30, 2018 presented in accordance with Ind AS which comprises the

restated standalone balance sheet, the restated standalone statement of profit and loss (including

other comprehensive income), the restated standalone statement of changes in equity and the

restated standalone statement of cash flow together with the annexures and the notes thereto,

which have been prepared in accordance with the Companies Act and restated in accordance with


Shareholders Shareholders of our Company from time to time

Subsidiaries or individually known

as Subsidiary

Subsidiaries of our Company, namely,

1. Pioneer Cement Industries Limited 2. Marwar Cement Limited

For details, see “History and Certain Corporate Matters” on page 171

Offer Related Terms

Term Description

Acknowledgement Slip The slip or document issued by the Designated Intermediary to a Bidder as proof of registration

of the Bid cum Application Form

Allot/Allotment/Allotted Unless the context otherwise requires, allotment of the Equity Shares pursuant to the Fresh Issue

and transfer of the Equity Shares offered by the Selling Shareholder pursuant to the Offer for Sale

to the successful Bidders

Allotment Advice Note or advice or intimation of Allotment sent to the Bidders who have been or are to be Allotted

the Equity Shares after the Basis of Allotment has been approved by the Designated Stock

Exchange

Allottee A successful Bidder to whom the Equity Shares are Allotted

Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor Portion in accordance with


Anchor Investor Allocation Price The price at which Equity Shares will be allocated to Anchor Investors at the end of the Anchor

Investor Bid/Offer Period

Anchor Investor Application Form The form used by an Anchor Investor to make a Bid in the Anchor Investor Portion and which

will be considered as an application for Allotment in terms of the Red Herring Prospectus and

the Prospectus

Anchor Investor Bid/Offer Period The day, one Working Day prior to the Bid/Offer Opening Date, on which Bids by Anchor

Investors shall be submitted and allocation to Anchor Investors shall be completed

Anchor Investor Offer Price Final price at which the Equity Shares will be Allotted to Anchor Investors in terms of the Red

Herring Prospectus and the Prospectus, which price will be equal to or higher than the Offer Price

but not higher than the Cap Price

The Anchor Investor Offer Price will be decided by our Company in consultation with the Selling

Shareholder and the BRLMs

Anchor Investor Pay-in Date In case of Anchor Investor Offer Price being higher than Anchor Investor Allocation Price, no

later than two days after the Bid/Offer Closing Date

Anchor Investor Portion Up to 60% of the QIB Portion which may be allocated by our Company in consultation with the

Selling Shareholder and the BRLMs to Anchor Investors on a discretionary basis

One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to

valid Bids being received from domestic Mutual Funds at or above the Anchor Investor

Allocation Price

Application Supported by Blocked

Amount or ASBA

An application, whether physical or electronic, used by ASBA Bidders to make a Bid and

authorizing an SCSB to block the Bid Amount in the ASBA Account

ASBA Account A bank account maintained with an SCSB and specified in the ASBA Form submitted by ASBA

Bidders for blocking the Bid Amount mentioned in the ASBA Form

ASBA Bidders All Bidders except Anchor Investors

ASBA Form An application form, whether physical or electronic, used by ASBA Bidders which will be

considered as the application for Allotment in terms of the Red Herring Prospectus and the

Prospectus

Banker(s) to the Offer/Escrow

Collection Bank(s)

Banks which are clearing members and registered with SEBI as bankers to an issue and with

whom the Escrow Account will be opened, in this case being [●]

Basis of Allotment Basis on which Equity Shares will be Allotted to successful Bidders under the Offer and which

is described in “Offer Procedure” on page 411

4

Term Description

Bid An indication to make an offer during the Bid/Offer Period by an ASBA Bidder pursuant to

submission of the ASBA Form, or during the Anchor Investor Bid/Offer Period by an Anchor

Investor pursuant to submission of the Anchor Investor Application Form, to subscribe to or

purchase the Equity Shares of our Company at a price within the Price Band, including all

revisions and modifications thereto as permitted under the SEBI ICDR Regulations

The term “Bidding” shall be construed accordingly

Bid Amount The highest value of optional Bids indicated in the Bid cum Application Form and, in the case of

Retail Individual Bidders Bidding at the Cut Off Price, the Cap Price multiplied by the number

of Equity Shares Bid for by such Retail Individual Bidder and mentioned in the Bid cum

Application Form, and payable by the Bidder or blocked in the ASBA Account of the Bidder, as

the case may be, upon submission of the Bid in the Offer

Bid cum Application Form The Anchor Investor Application Form or the ASBA Form, as the context requires

Bid Lot [●]

Bid/Offer Closing Date Except in relation to any Bids received from the Anchor Investors, the date after which the

Designated Intermediaries will not accept any Bids, which shall be notified in two national daily

newspapers, one each in English and Hindi, and in one Telugu daily newspaper, each with wide

circulation (Telgu being the regional language of Telangana, the place where the Registered

Office of our Company is situated), and in case of any revision, the extended Bid Closing Date

also to be notified on the website and terminals of the Syndicate and SCSBs, as required under

the SEBI Regulations.

Our Company may, in consultation with the Selling Shareholder and the BRLMs, consider

closing the Bid/Offer Period for the QIB Category one Working Day prior to the Bid/Offer

Closing Date in accordance with the SEBI ICDR Regulations

Bid/Offer Opening Date Except in relation to any Bids received from the Anchor Investors, the date on which the

Designated Intermediaries shall start accepting Bids, which shall be notified in two national daily

newspapers, one each in English and Hindi, and in one Telugu daily newspaper, each with wide

circulation

Bid/Offer Period Except in relation to Anchor Investors, the period between the Bid/Offer Opening Date and the

Bid/Offer Closing Date, inclusive of both days, during which prospective Bidders can submit

their Bids, including any revisions thereof

Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus

and the Bid cum Application Form and unless otherwise stated or implied, includes an ASBA

Bidder and an Anchor Investor

Bidding Centers Centers at which at the Designated Intermediaries shall accept the ASBA Forms, i.e, Designated

Branches for SCSBs, Specified Locations for Syndicate, Broker Centres for Registered Brokers,

Designated RTA Locations for RTAs and Designated CDP Locations for CDPs

Book Building Process Book building process, as provided in Schedule XI of the SEBI ICDR Regulations, in terms of

which the Offer is being made

BRLMs or Book Running Lead

Managers or Managers

The book running lead managers to the Offer namely, Edelweiss, IIFL, JM Financial and YES

Securities

Broker Centres Broker centres notified by the Stock Exchanges where Bidders can submit the ASBA Forms to a

Registered Broker

The details of such Broker Centres, along with the names and contact details of the Registered

Brokers are available on the respective websites of the Stock Exchanges

CAN/Confirmation of Allocation

Note

Notice or intimation of allocation of the Equity Shares to be sent to Anchor Investors, who have

been allocated the Equity Shares, after the Anchor Investor Bid/Offer Period

Cap Price The higher end of the Price Band, above which the Offer Price and the Anchor Investor Offer

Price will not be finalised and above which no Bids will be accepted

Cash Escrow Agreement The agreement to be entered into by our Company, the Selling Shareholder, the Registrar to the

Offer, the BRLMs, the Escrow Collection Bank(s), the Public Issue Account Bank, Syndicate

Members and the Refund Bank(s) for, inter alia, collection of the Bid Amounts from Anchor

Investors, transfer of funds to the Public Issue Account and where applicable, refunds of the

amounts collected from the Anchor Investors, on the terms and conditions thereof

Client ID Client identification number maintained with one of the Depositories in relation to the demat

account

Collecting Depository Participant

or CDP

A depository participant as defined under the Depositories Act, 1996, registered with SEBI and

who is eligible to procure Bids at the Designated CDP Locations in terms of circular no.

CIR/CFD/POLICYCELL/11/2015 dated November 10, 2015 issued by SEBI, as per the list

available on the websites of the BSE and the NSE

Cut-off Price Offer Price, decided by our Company in consultation with the Selling Shareholder and the

BRLMs

Only Retail Individual Bidders are entitled to Bid at the Cut-off Price. No other category of

Bidders is entitled to Bid at the Cut-off Price

Demographic Details Details of the Bidders including the Bidder’s address, name of the Bidder’s father/husband,

investor status, occupation and bank account details

5

Term Description

Designated CDP Locations Such locations of the CDPs where Bidders can submit the ASBA Forms

The details of such Designated CDP Locations, along with names and contact details of the

Collecting Depository Participants eligible to accept ASBA Forms are available on the respective

websites of the Stock Exchanges (www.bseindia.com and www.nseindia.com), as updated from

time to time

Designated Date The date on which funds are transferred from the Escrow Account and the amounts blocked by

the SCSBs are transferred from the ASBA Accounts, as the case may be, to the Public Issue

Account or the Refund Account, as appropriate, after filing of the Prospectus with the RoC Designated Intermediaries Syndicate, sub-syndicate members/agents, SCSBs, Registered Brokers, CDPs and RTAs, who

are authorized to collect ASBA Forms from the ASBA Bidders, in relation to the Offer

Designated RTA Locations Such locations of the RTAs where Bidders can submit the ASBA Forms to RTAs

The details of such Designated RTA Locations, along with names and contact details of the RTAs

eligible to accept ASBA Forms are available on the respective websites of the Stock Exchanges

(www.bseindia.com and www.nseindia.com), as updated from time to time

Designated SCSB Branches Such branches of the SCSBs which shall collect the ASBA Forms, a list of which is available

on the website of SEBI at

http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes or at such other

website as may be prescribed by SEBI from time to time

Designated Stock Exchange []

Draft Red Herring Prospectus or

DRHP

This Draft Red Herring Prospectus dated November 1, 2018, issued in accordance with the SEBI

ICDR Regulations, which does not contain complete particulars, including of the price at which

the Equity Shares will be Allotted and the size of the Offer

Edelweiss Edelweiss Financial Services Limited

Eligible NRI(s) NRI(s) from jurisdictions outside India where it is not unlawful to make an offer or invitation

under the Offer and in relation to whom the ASBA Form and the Red Herring Prospectus will

constitute an invitation to subscribe for or purchase the Equity Shares

Escrow Account Account opened with the Escrow Collection Bank(s) and in whose favour the Anchor Investors

will transfer money through direct credit/NEFT/RTGS in respect of the Bid Amount when

submitting a Bid

Escrow Agent Escrow agent appointed pursuant to the Share Escrow Agreement, namely, [●]

First Bidder Bidder whose name appears first in the Bid cum Application Form or the Revision Form and in

case of joint Bids, whose name shall also appear as the first holder of the beneficiary account

held in joint names

Floor Price The lower end of the Price Band, subject to any revision thereto, at or above which the Offer

Price and the Anchor Investor Offer Price will be finalised and below which no Bids will be

accepted

Fresh Issue The fresh issue of up to [] Equity Shares aggregating up to `13,000 million by our Company

General Information

Document/GID

The General Information Document prepared and issued in accordance with the circular

(CIR/CFD/DIL/12/2013) dated October 23, 2013 and updated pursuant to the circular

(CIR/CFD/POLICYCELL/11/2015) dated November 10, 2015 and

(SEBI/HO/CFD/DIL/CIR/P/2016/26) dated January 21, 2016 and notified by SEBI, suitably

modified and included in “Offer Procedure” on page 411

Gross Proceeds The Offer Proceeds less the amount to be raised pursuant to the Offer for Sale by the Selling

Shareholder

IIFL IIFL Holdings Limited

JM Financial JM Financial Limited

Mutual Fund Portion 5% of the QIB Portion (excluding the Anchor Investor Portion), or [] Equity Shares which shall

be available for allocation to Mutual Funds only

Mutual Funds Mutual funds registered with SEBI under the Securities and Exchange Board of India (Mutual

Funds) Regulations, 1996

Net Proceeds Gross Proceeds less our Company’s share of the Offer expenses

For further information about use of the Offer Proceeds and the Offer expenses, see “Objects of

the Offer” on page 104

Non-Institutional Bidders/NIBs All Bidders including Category III Foreign Portfolio Investors that are not QIBs or Retail

Individual Bidders and who have Bid for Equity Shares for an amount more than `200,000 (but

not including NRIs other than Eligible NRIs)

Non-Institutional Portion The portion of the Offer being not less than 15% of the Offer consisting of [] Equity Shares

which shall be available for allocation on a proportionate basis to Non-Institutional Bidders,

subject to valid Bids being received at or above the Offer Price

Non-Resident A person resident outside India, as defined under FEMA and includes a non resident Indian, FPIs

and FVCIs

Offer The initial public offering of up to [●] Equity Shares of face value of `10 each for cash at a price

of `[●] each, aggregating to ₹15,500 million comprising the Fresh Issue and the Offer for Sale

Offer Agreement The agreement dated November 1, 2018 between our Company, the Selling Shareholder and the

BRLMs, pursuant to which certain arrangements are agreed to in relation to the Offer

http://www.nseindia.com/http://www.nseindia.com/

6

Term Description

Offer for Sale The offer for sale of up to Equity Shares by the Selling Shareholder at the Offer Price

aggregating up to `2,500 million in terms of the Red Herring Prospectus

Offer Price The final price at which Equity Shares will be Allotted to Bidders other than Anchor Investors.

Equity Shares will be Allotted to Anchor Investors at the Anchor Investor Offer Price in terms of

the Red Herring Prospectus

The Offer Price will be decided by our Company in consultation with the Selling Shareholder

and the BRLMs on the Pricing Date

Offer Proceeds The proceeds of this Offer that will be available to our Company and the Selling Shareholder

Price Band Price band of the Floor Price and the Cap Price including any revisions thereof

The Price Band and the minimum Bid Lot size for the Offer will be decided by our Company and

the Selling Shareholder in consultation with the BRLMs and will be advertised, at least five

Working Days prior to the Bid/Offer Opening Date, in [●] edition of the English national

newspaper [●], [●] edition of the Hindi national newspaper [●], and [●] edition of the Telugu

(Telugu being the regional language of Telangana, where our Registered Office is located)

newspaper [●], each with wide circulation. It shall also be made available to the Stock Exchanges

for the purpose of uploading on their websites

Pricing Date The date on which our Company, in consultation with the Selling Shareholder and BRLMs, will

finalise the Offer Price

Prospectus The Prospectus to be filed with the RoC after the Pricing Date in accordance with Section 26 of

the Companies Act, 2013 and the SEBI ICDR Regulations, containing, inter-alia, the Offer Price

that is determined at the end of the Book Building Process, the size of the Offer and certain other

information including any addenda or corrigenda thereto

Public Issue Account Bank The bank with which the Public Issue Account(s) shall be maintained, in this case being [●]

Public Issue Account(s) Bank account opened under Section 40(3) of the Companies Act, 2013 to receive monies from

the Escrow Account and ASBA Accounts on the Designated Date

QIB Category/QIB Portion The portion of the Offer (including the Anchor Investor Portion) being not more than 50% of the

Offer consisting of [] Equity Shares which shall be allocated to QIBs (including Anchor

Investors)

Qualified Institutional Buyers or

QIBs or QIB Bidders

Qualified institutional buyers as defined under Regulation 2(1)(zd) of the SEBI ICDR

Regulations

Red Herring Prospectus or RHP The Red Herring Prospectus to be issued in accordance with Section 32 of the Companies Act,

2013 and the provisions of the SEBI ICDR Regulations, which will not have complete particulars

of the price at which the Equity Shares will be offered and the size of the Offer including any

addenda or corrigenda thereto

The Red Herring Prospectus will be registered with the RoC at least three days before the

Bid/Offer Opening Date and will become the Prospectus upon filing with the RoC after the

Pricing Date

Refund Account(s) The account opened with the Refund Bank, from which refunds, if any, of the whole or part of

the Bid Amount to the Anchor Investors shall be made

Refund Bank(s) The Bankers to the Offer with whom the Refund Account(s) will be opened, in this case being

[●]

Registered Brokers Stock brokers registered with the stock exchanges having nationwide terminals, other than the

BRLMs and the Syndicate Members and eligible to procure Bids in terms of Circular No.

CIR/CFD/14/2012 dated October 4, 2012 issued by SEBI

Registrar and Share Transfer

Agents or RTAs

Registrars to an issue and share transfer agents registered with SEBI and eligible to procure Bids

at the Designated RTA Locations in terms of circular no. CIR/CFD/POLICYCELL/11/2015

dated November 10, 2015 issued by SEBI

Registrar to the Offer or Registrar Karvy Computershare Private Limited

Retail Individual Bidder(s)/RIB(s) Individual Bidders who have Bid for the Equity Shares for an amount of not more than `200,000

in any of the bidding options in the Offer (including HUFs applying through their Karta and

Eligible NRIs)

Retail Portion The portion of the Offer being not less than 35% of the Offer consisting of [] Equity Shares

which shall be available for allocation to Retail Individual Bidder(s) in accordance with the SEBI

ICDR Regulations, subject to valid Bids being received at or above the Offer Price

Revision Form Form used by the Bidders to modify the quantity of the Equity Shares or the Bid Amount in any

of their ASBA Form(s) or any previous Revision Form(s)

QIB Bidders and Non-Institutional Bidders are not allowed to withdraw or lower their Bids (in

terms of quantity of Equity Shares or the Bid Amount) at any stage. Retail Individual Bidders

can revise their Bids during the Bid/Offer Period and withdraw their Bids until Bid/Offer Closing

Date

Self Certified Syndicate Bank(s) or

SCSB(s)

The banks registered with SEBI, offering services in relation to ASBA, a list of which is available

on the website of SEBI at

http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes

Selling Shareholder P R Cement Holdiings Limited

Share Escrow Agreement The agreement to be entered into among the Selling Shareholder, our Company, the BRLMs and

7

Term Description

the Escrow Agent in connection with the transfer of Equity Shares under the Offer for Sale by

the Selling Shareholder and credit of such Equity Shares to the demat account of the Allottees

Specified Locations Bidding Centres where the Syndicate shall accept Bid cum Application Form

Syndicate The BRLMs and the Syndicate Members

Syndicate Agreement Agreement to be entered into among the BRLMs, the Syndicate Members, our Company and the

Selling Shareholder in relation to collection of Bid cum Application Forms by the Syndicate

Syndicate Members Intermediaries registered with SEBI who are permitted to carry out activities as an underwriter,

namely, [●]

Underwriters []

Underwriting Agreement The agreement among the Underwriters, our Company and the Selling Shareholder to be entered

into on or after the Pricing Date

Working Day “Working Day” means all days, other than second and fourth Saturday of the month, Sunday or

a public holiday, on which commercial banks in Mumbai are open for business; provided

however, with reference to (a) announcement of Price Band; and (b) Bid/Offer Period, “Working

Day” shall mean all days, excluding all Saturdays, Sundays or a public holiday, on which

commercial banks in Mumbai are open for business; and with reference to the time period

between the Bid/Offer Closing Date and the listing of the Equity Shares on the Stock Exchanges,

“Working Day” shall mean all trading days of Stock Exchanges, excluding Sundays and bank

holidays, as per the SEBI Circular SEBI/HO/CFD/DIL/CIR/P/2016/26 dated January 21, 2016

YES Securities YES Securities (India) Limited

Technical/Industry Related Terms/Abbreviations

Term Description

AMRUT Atal Mission for Rejuvenation and Urban Transformation mission

BIS Bureau of Indian Standards

Contribution per tonne Contribution per tonne represents revenue from operations (less: excise duty, cost of raw

materials, power and fuel, freight and forwarding expense) divided by total cement sales volume

CPP Captive Power Plant

EBITDA margin EBITDA margin represents EBITDA (revenue from operations less excise duty, raw materials

costs, freight charges/ logistics costs, power and fuel expenses, employee benefit expenses/

labour expenses and other expenses) divided by revenue from operations (less excise duty)

EBITDA per tonne EBITDA per tonne represents EBITDA (revenue from operations less excise duty, raw materials

costs, freight charges/ logistics costs, power and fuel expenses, employee benefit expenses/

labour expenses and other expenses) divided by total cement sales volume

F&S Report

“Report on the Indian Cement Industry” dated August 2018 prepared and issued by Frost &

Sullivan India Private Limited

ISO International Organization for Standardization

OHSAS Occupational Health and Safety Assessment Series

Kg Kilogram

KWh kilowatt hour

Kcal Kilocalorie

Logistics cost per tonne Logistics cost per tonne represents total freight and forwarding expenses divided by total

cement sales volume.

MT Metric tonne or tonne

MMTPA Million Metric tonne per annum

MW Mega watts

OPC Ordinary Portland Cement

PPC Portland Pozzolana Cement

PSC Portland Slag Cement

Pet coke Petroleum coke

Power and fuel cost per tonne Power and fuel cost per tonne represents total power and fuel expense divided by total cement

sales volume.

Return on Equity Return on Equity represents net income divided by average shareholders’ equity.

Return on Capital Employed (pre-

tax)

Return on Capital Employed (pre-tax) represents profit before tax and interest divided by

average capital employed (debt plus shareholders equity.

SLSI Sri Lanka Standards Institution

SCCL The Singareni Colliery Company Limited

WHR Waste heat recovery

8

Conventional and General Terms or Abbreviations

Term Description

AGM Annual General Meeting

AIF Alternative Investment Fund as defined in and registered with SEBI under the SEBI AIF

Regulations

Air Act Air (Prevention and Control of Pollution) Act, 1981

AS/Accounting Standards Accounting Standards issued by the ICAI

BIS Bureau of Indian Standard

BSE BSE Limited

BMW Rules Bio-Medical Waste Management Rules, 2016

Boilers Act Indian Boilers Act, 1923

CAGR Compounded Annual Growth Rate

CBI Central Bureau of Investigation

CCI Competition Commission of India

Category I Foreign Portfolio

Investors

FPIs who are registered as “Category I foreign portfolio investors” under the SEBI FPI

Regulations

Category II Foreign Portfolio

Investors

FPIs who are registered as “Category II foreign portfolio investors” under the SEBI FPI

Regulations

Category III Foreign Portfolio

Investors

FPIs who are registered as “Category III foreign portfolio investors” under the SEBI FPI

Regulations which shall include investors who are not eligible under Category I and II foreign

portfolio investors such as endowments, charitable societies, charitable trusts, foundations,

corporate bodies, trusts, individuals and family offices

CEIG Chief Electrical Inspector of Government

CDSL Central Depository Services (India) Limited

CENVAT Central Value Added Tax

CESTAT Customs, Excise and Service Tax Appellate Tribunal

CIN Corporate Identity Number

CLRA Contract Labour (Regulation & Abolition) Act, 1970

Companies Act Companies Act, 1956 and/or the Companies Act, 2013, as applicable

Companies Act, 1956 Companies Act, 1956, and the rules thereunder (without reference to the provisions thereof that

have ceased to have effect upon the notification of the Notified Sections)

Companies Act, 2013 The Companies Act, 2013, and the rules and clarifications issued thereunder to the extent in force

pursuant to the notification of the Notified Sections Depositories NSDL and CDSL

Depositories Act Depositories Act, 1996

DGMS Directorate General of Mines Safety

DMG Department of Mines and Geology

DIN Director Identification Number

DP ID Depository Participant’s Identification

DP/ Depository Participant A depository participant as defined under the Depositories Act

DTCP Director of Town and Country Planning

EBITDA EBITDA represents revenue from operations less excise duty, raw materials costs, freight

charges/ logistics costs, power and fuel expenses, employee benefit expenses/ labour expenses

and other expenses.

ED Directorate of Enforcement, Government of India

EGM Extraordinary General Meeting

Electricity Act Electricity Act, 2003

EPA Environment Protection Act, 1986

EPF Act Employees’ Provident Fund and Miscellaneous Provisions Act, 1952

EPS Earnings Per Share

Factories Act Factories Act, 1948

FCNR Foreign Currency Non-Resident

FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act, 1999, and the rules and regulations thereunder

FEMA Regulations Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside

India) Regulations, 2017

FPI(s) Foreign portfolio investors as defined under the SEBI FPI Regulations

Financial Year/Fiscal/FY Unless stated otherwise, the period of 12 months ending March 31 of that particular year

FVCI Foreign venture capital investors as defined and registered under the SEBI FVCI Regulations

GDP Gross Domestic Product

GIR General Index Register

GoI Government of India

GST Goods and Services Tax

Hazardous Waste Rules Hazardous and Other Wastes (Management and Handling) Rules, 2016

HUF Hindu Undivided Family

ICAI The Institute of Chartered Accountants of India

IFRS International Financial Reporting Standards as adopted by the International Accounting

9

Term Description

Standards Board

Income Tax Act, IT Act The Income-tax Act, 1961

India Republic of India

Ind AS Indian Accounting Standards referred to in the Companies (Indian Accounting Standards) Rules,

2015

Indian GAAP Generally Accepted Accounting Principles in India

IPO Initial public offering

IRDAI Insurance Regulatory and Development Authority of India

IST Indian Standard Time

Legal Metrology Act Legal Metrology Act, 2009

LIBOR London Interbank Offered Rate

Listing Regulations Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015

MICR Magnetic Ink Character Recognition

Mineral Rules Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016

MMDR Act Mines and Minerals (Development and Regulation) Act, 1957

MoEF Ministry of Environment and Forests

MTPA Million Tonnes Per Annum

Mutual Fund(s) Mutual funds registered under the SEBI (Mutual Funds) Regulations, 1996

MW MegaWatt

N.A./ NA Not Applicable

NAV Net Asset Value

NCLT National Company Law Tribunal

NECS National Electronic Clearing Services

NEFT National Electronic Fund Transfer

Non-Resident A person resident outside India, as defined under FEMA and includes a Non Resident Indian and

FPIs

Notified Sections The sections of the Companies Act, 2013 that have been notified by the Ministry of Corporate

Affairs, Government of India, and are currently in effect

NR Non-resident

NRE Account Non Resident External Account

NRI An individual resident outside India who is a citizen of India or is an ‘Overseas Citizen of India’

cardholder within the meaning of section 7(A) of the Citizenship Act, 1955

NRO Account Non Resident Ordinary Account

NSDL National Securities Depository Limited

NSE The National Stock Exchange of India Limited

OCB/ Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly to the extent

of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest

is irrevocably held by NRIs directly or indirectly and which was in existence on October 3, 2003

and immediately before such date had taken benefits under the general permission granted to

OCBs under FEMA. OCBs are not allowed to invest in the Offer

OCI Other Comprehensive Income

p.a. Per annum

P/E Ratio Price/Earnings Ratio

PAN Permanent Account Number

PAT Profit After Tax

PCB Pollution Control Board

PESO Petroleum and Explosives Safety Organisation

PMLA Prevention of Money Laundering Act, 2002

Previous GAAP Financial statements in accordance with Companies (Accounting Standards) Rules, 2006,

notified under Section 133 of the Companies Act, 2013 and other relevant provisions of the

Companies Act, 2013

RBI The Reserve Bank of India

Regulation S Regulation S under the U.S. Securities Act

RoNW Return on Net Worth

Rule 144A Rule 144A under the U.S. Securities Act

`/Rs./Rupees/INR Indian Rupees

RTGS Real Time Gross Settlement

SCRA Securities Contracts (Regulation) Act, 1956

SCRR Securities Contracts (Regulation) Rules, 1957

SEBI The Securities and Exchange Board of India constituted under the SEBI Act

SEBI Act Securities and Exchange Board of India Act, 1992

SEBI AIF Regulations Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012

SEBI ESOP Regulations Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014

SEBI FPI Regulations Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

SEBI FVCI Regulations Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000

SEBI ICDR Regulations Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)

10

Term Description

Regulations, 2009

SEBI VCF Regulations The erstwhile Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996

SHWW Act Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

SIA Secretariat for Industrial Assistance, Ministry of Commerce and Industry, Government of India

SICA Sick Industrial Companies (Special Provisions) Act, 1985

STT Securities Transaction Tax

State Government The government of a state in India

State PCB State Pollution Control Board

Stock Exchanges The BSE and the NSE

Systemically Important NBFCs Systemically important non-banking financial company registered with the RBI and having a net

worth of more than `5,000 million as per the last audited financial statements

Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011

TPH Tonnes Per Hour

Trade Marks Act Trade Marks Act, 1999

U.S./USA/United States United States of America

US GAAP Generally Accepted Accounting Principles in the United States of America

USD/US$ United States Dollars

US QIBs

As defined in Rule 144A under the U.S. Securities Act and referred to in this Draft Red Herring

Prospectus as “U.S. QIBs”. For the avoidance of doubt, the term “U.S. QIBs” does not refer to a

category of institutional investor defined under applicable Indian regulations and referred to in

this Draft Red Herring Prospectus as - QIBs

U.S. Securities Act U.S. Securities Act of 1933, as amended

VAT Value Added Tax

VCFs Venture Capital Funds as defined in and registered with SEBI under the SEBI VCF Regulations

or the SEBI AIF Regulations, as the case may be

Water Act Water (Prevention and Control of Pollution) Act, 1974

Water Cess Act Water (Prevention & Control of Pollution) Cess Act, 1977

Water Cess Rules Water (Prevention & Control of Pollution) Cess Rules, 1978

The words and expressions used but not defined herein shall have the same meaning as is assigned to such terms under the

SEBI ICDR Regulations, the Companies Act, the SCRA, the Depositories Act and the rules and regulations made thereunder.

Notwithstanding the foregoing, terms in “Statement of Tax Benefits”, “Financial Statements” and “Main Provisions of Articles

of Association” on pages 114, 210 and 453, respectively, shall have the meaning given to such terms in such sections. Page

numbers refer to page number of this Draft Red Herring Prospectus, unless otherwise specified.

11

PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

Certain Conventions

All references in this Draft Red Herring Prospectus to “India” are to the Republic of India, all references to the “US”, “USA”

or “United States” are to the United States of America.

Unless stated otherwise, all references to page numbers in this Draft Red Herring Prospectus are to the page numbers of this

Draft Red Herring Prospectus.

Financial Data

Unless stated otherwise, the financial information in this Draft Red Herring Prospectus is derived from the Restated

Standalone Financial Statements or the Restated Consolidated Financial Statements prepared in accordance with the

Companies Act, 2013, Ind AS and restated in accordance with the SEBI ICDR Regulations. Certain other financial information

pertaining to our Group Companies is derived from their respective financial statements. The Restated Financial Statements

have been included in “Financial Statements” beginning on page 210.

Our Company’s financial year commences on April 1 and ends on March 31 of the next year. Accordingly, all references to

a particular financial year, unless stated otherwise, are to the 12 month period ended on March 31 of that year.

Our Restated Financial Statements have been prepared in accordance with Ind AS as applicable. There are significant

differences between Ind AS and US GAAP and IFRS. Our Company does not provide reconciliation of its financial

information to IFRS or US GAAP. Our Company has not attempted to explain those differences or quantify their impact on

the financial data included in this Draft Red Herring Prospectus and it is urged that you consult your own advisors regarding

such differences and their impact on our Company’s financial data.

For details in connection with risks involving differences between Ind AS, US GAAP and IFRS see “Risk Factors –

“Significant differences exist between Ind AS and other accounting principles, such as Indian GAAP, IFRS and U.S. GAAP,

which may be material to investors' assessment of our financial condition” on page 31. Accordingly, the degree to which the

financial information included in this Draft Red Herring Prospectus will provide meaningful information is entirely

dependent on the reader’s level of familiarity with Indian accounting policies and practices, the Companies Act and the SEBI

ICDR Regulations. Any reliance by persons not familiar with Indian accounting policies and practices on the financial

disclosures presented in this Draft Red Herring Prospectus should accordingly be limited.

Unless the context otherwise indicates, any percentage amounts, as set forth in “Risk Factors”, “Our Business” and

“Management’s Discussion and Analysis of Financial Conditional and Results of Operations” on pages 14, 143 and 333

respectively, and elsewhere in this Draft Red Herring Prospectus have been calculated on the basis of the Restated Financial

Statements prepared in accordance with Ind AS and the Companies Act and restated in accordance with the SEBI ICDR

Regulations. Certain figures contained in this Draft Red Herring Prospectus, including financial information, have been

subject to rounding adjustments. Any discrepancies in any table between the total and the sum of the amounts listed are due

to rounding off. All decimals have been rounded off to two decimal points. However, certain figures in percentage and certain

figures not derived from our Restated Financial Statements (including in “Summary of Industry”, “Industry Overview”,

“Summary of Business” and “Our Business”) have been rounded off to one decimal point. In certain instances, (i) the sum or

percentage change of such numbers may not conform exactly to the total figure given, and (ii) the sum of the figures in a

column or row in certain tables may not conform exactly to the total figure given for that column or row. However, figures

sourced from third-party industry sources may be expressed in denominations other than millions or may be rounded off to

other than two decimal points in the respective sources, and such figures have been expressed in this Draft Red Herring

Prospectus in such denominations or rounded-off to such number of decimal points as provided in such respective sources.

Currency and Units of Presentation

All references to:

“Rupees” or “`” or “INR” or “Rs.” are to Indian Rupee, the official currency of the Republic of India; and

“USD” or “US$” or “$” are to United States Dollar, the official currency of the United States

Our Company has presented all numerical information in this Draft Red Herring Prospectus in “million” units or in whole

numbers where the numbers have been too small to represent in millions. One million represents 1,000,000 and one billion

represents 1,000,000,000.

Exchange Rates

This Draft Red Herring Prospectus contains conversions of certain other currency amounts into Indian Rupees that have been

presented solely to comply with the SEBI ICDR Regulations. These conversions should not be construed as a representation

12

that these currency amounts could have been, or can be converted into Indian Rupees, at any particular rate or at all.

The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Rupee and

the respective foreign currencies:

Currency As on June 30,

2018*

(`)

As on March

31, 2018*

(`)

As on March 31,

2017*

(`)

As on March 31,

2016*

(`)

As on March 31,

2015*

(`)

As on March 31,

2014*

(`)

1 USD 68.56 65.04 64.84 66.33 62.59 60.10 Sources: RBI reference rate

* In case March 31 of any of the respective years, or June 30, 2018 was a public holiday, the previous calendar day not being a public holiday has been

considered

Land and Units of Presentation

Our Company has presented units of land in this Draft Red Herring Prospectus in ‘acres’.

Industry and Market Data

Unless stated otherwise, industry and market data used in this Draft Red Herring Prospectus has been obtained or derived

from the report titled “Report on The Indian Cement Industry” dated August 2018 by Frost & Sullivan India Private Limited

(“F&S Report”) and publicly available information as well as other industry publications and sources. The F&S Report has

been prepared at the request of our Company. For risks in relation to commissioned reports, see “Risk Factors – Industry

information included in this Draft Red Herring Prospectus has been derived from an industry report commissioned by us for

such purpose. There can be no assurance that such third-party statistical, financial and other industry information is either

complete or accurate”.

Industry publications generally state that the information contained in such publications has been obtained from publicly

available documents from various sources believed to be reliable but their accuracy and completeness are not guaranteed and

their reliability cannot be assured. Although we believe the industry and market data used in this Draft Red Herring Prospectus

is reliable, it has not been independently verified by us, the respective Selling Shareholder, the BRLMs or any of their affiliates

or advisors. The data used in these sources may have been reclassified by us for the purposes of presentation. Data from these

sources may also not be comparable. Such data involves risks, uncertainties and numerous assumptions and is subject to

change based on various factors, including those discussed in “Risk Factors” on page 14. Accordingly, investment decisions

should not be based solely on such information.

Certain information in “Summary of Industry”, “Summary of our Business”, “Industry Overview” and “Our Business” on

pages 44, 51, 116 and 143, respectively of this Draft Red Herring Prospectus has been obtained from the Report on the Indian

Cement Industry dated August 2018 prepared and issued by Frost & Sullivan India Private Limited.

In accordance with the SEBI ICDR Regulations, “Basis for the Offer Price” on page 111 includes information relating to our

peer group companies. Such information has been derived from publicly available sources, and neither we, nor the BRLMs

have independently verified such information.

The extent to which the market and industry data used in this Draft Red Herring Prospectus is meaningful depends on the

reader’s familiarity with and understanding of the methodologies used in compiling such data. There are no standard data

gathering methodologies in the industry in which the business of our Company is conducted, and methodologies and

assumptions may vary widely among different industry sources.

13

FORWARD-LOOKING STATEMENTS

This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward-looking statements

generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”,

“objective”, “plan”, “project”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly,

statements that describe our Company’s strategies, objectives, plans or goals are also forward-looking statements. All forward-

looking statements are based on our current plans, estimates, presumptions and expectations and are subject to risks,

uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the

relevant forward-looking statement.

Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties or

assumptions associated with the expectations with respect to, but not limited to, regulatory changes pertaining to the industry

in which our Company has businesses and our ability to respond to them, our ability to successfully implement our strategy,

our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions

which have an impact on our business activities or investments, the monetary and fiscal policies of India, inflation, deflation,

unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the

financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in its

industry. Important factors that could cause actual results to differ materially from our Company’s expectations include, but

are not limited to, the following:

The ongoing proceedings filed by the Central Bureau of Investigation, and the Directorate of Enforcement against our Company, our Promoter and others, relating to alleged corruption in the allotment of certain land parcels, mining leases

and a prospecting license being determined against us;

An inability to effectively manage our growth and expansion;

Our existing operations and revenues being majorly concentrated in the southern region of India and our inability to retain and grow our business in this region;

Our proposed capacity expansion plans relating to our facilities are subject to the risk of unanticipated delays and cost overruns;

Our reliance on the demand for cement from various industries such as housing, infrastructure, and commercial real estate and any downturn in such industries;

The highly competitive environment in which we operate;

The capital intensive nature of the cement industry and our need to seek additional financing in the future to support our growth strategies;

Our dependence on our ability to mine/ procure sufficient limestone for our operations. Any inability to mine/ procure sufficient limestone or our rights being revoked or not being renewed, or significant restrictions on the usage of the rights

being imposed or us being required to pay substantially more royalties;

Our dependence upon the pricing and continued supply of coal and raw materials, the costs and supply of which can be subject to significant variation due to factors outside our control; and

Adverse outcomes in respect of outstanding legal proceedings against our Company, Subsidiaries, Directors, Promoters and Group Companies, including investigations by the CBI against our Promoters.

For further discussion of factors that could cause the actual results to differ from the expectations, see “Risk Factors”, “Our

Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 14, 143

and 333, respectively. 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 and are not a guarantee of future performance.

Although we believe that the assumptions on which such forward-looking statements are based are reasonable, we cannot

assure investors that the expectations reflected in these forward-looking statements will prove to be correct. Given these

uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and not to regard such

statements as a guarantee of future performance.

Forward-looking statements reflect the current views of our Company as of the date of this Draft Red Herring Prospectus and

are not a guarantee of future performance. Neither our Company, our Directors, the Selling Shareholder, the BRLMs nor any

of their respective affiliates have any obligation 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. In accordance with SEBI requirements, our Company and the Selling Shareholder shall severally ensure that investors

in India are informed of material developments from the date of the Draft Red Herring Prospectus in relation to the statements

and undertakings made by it in this Draft Red Herring Prospectus until the time of the grant of listing and trading permission

by the Stock Exchanges for this Offer. Further, in accordance with Regulation 51A of the SEBI ICDR Regulations, our

Company may be required to undertake an annual updation of the disclosures made in the Draft Red Herring Prospectus and

make it publicly available in the manner specified by SEBI.

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SECTION II: RISK FACTORS

An investment in Equity Shares involves a high degree of risk. Investors should carefully consider all the information in this

Draft Red Herring Prospectus, including the risks and uncertainties described below, “Our Business”, “Industry Overview”,

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements”

before making an investment in our Equity Shares. The risks described below are not the only ones relevant to us or our

Equity Shares or to industry in which we operate or to India. Additional risks and uncertainties, not currently known to us or

that we currently do not deem material may also adversely affect our business, results of operations, cash flows and financial

condition. If any of the following or a combination of risks, or other risks that are not currently known or are not currently

deemed material, actually occur, our business, results of operations, cash flows and financial condition could be adversely

affected, the price of our Equity Shares could decline, and investors may lose all or part of their investment. In order to obtain

a complete understanding of our Company and our business, prospective investors should read this section in conjunction

with “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on

pages 143 and 333, respectively, as well as the other financial information contained in this Draft Red Herring Prospectus.

In making an investment decision, prospective investors must rely on their own examination of us and our business and the

terms of the Offer including the merits and risks involved. Potential investors should consult their tax, financial and legal

advisors about the particular consequences of investing in the Offer. Unless specified or quantified in the relevant risk factors

below, we are unable to quantify the financial or other impact of any of the risks described in this section.

Prospective investors should pay particular attention to the fact that our Company, our Associate and our Subsidiaries are

incorporated under the laws of India and are subject to a legal and regulatory environment, which may differ in certain

respects from that of other countries. This Draft Red Herring Prospectus also contains certain forward-looking statements

that involve risks, assumptions, estimates and uncertainties. Our actual results could differ from those anticipated in these

forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this

Draft Red Herring Prospectus. See “Forward-Looking Statements” on page 13.

Our fiscal year ends on March 31 of each year, and references to a particular fiscal are to the twelve months ended March

31 of that year. Unless otherwise indicated, the financial information included herein is based on our Restated Consolidated

Financial Statements included in this Draft Red Herring Prospectus. For further information, see “Financial Statements” on

page 210.

Unless otherwise indicated or the context otherwise requires, in this section, references to “we”, “us”, or “our” refers to

Penna Cement Industries Limited on a consolidated basis and references to “the Company” or “our Company” refers to

Penna Cement Industries Limited on a standalone basis.

Unless otherwise indicated, industry and market data used in this section has been derived from industry publications and

other publicly available information, including, in particular, the report “Report on the Indian Cement Industry” dated

August 2018 (the “F&S Report”) prepared and issued by Frost & Sullivan India Private Limited commissioned by us. Unless

otherwise indicated, all financial, operational, industry and other related information derived from the F&S Report and

included herein with respect to any particular year refers to such information for the relevant calendar year.

Risks relating to our Business

1. There are ongoing proceedings filed by the Central Bureau of Investigation, the investigative agency in India and the Directorate of Enforcement against our Company, one of our Promoters and others, relating to alleged corruption in

the allotment of certain land parcels, mining lease and a prospecting license. If these proceedings are determined

against us, it could have a material adverse effect on our financial condition, results of operations and our reputation.

The Central Bureau of Investigation, Hyderabad (“CBI”), pursuant to an order passed by the High Court of Andhra Pradesh

(“High Court”) in a writ petition filed before it, registered a case under sections 120B (punishment for criminal conspiracy)

and 420 (cheating and dishonestly inducing delivery of property) of the Indian Penal Code, 1860 and various provisions of

the Prevention of Corruption Act, 1988, against our Company and 76 others including, one of our Promoters, P. Prathap

Reddy, Penna Tandur Cement Company Limited (which was subsequently amalgamated with our Company), P R Enerrgy

Holding Limited and Pioneer Holiday Resorts Limited which are a part of our Promoter Group as well as Group Companies

(“Accused”). It was alleged that the Accused received favours including allotment of public properties, licenses, projects,

mining lease and other benefits in exchange for certain quid pro quo investments in Jagati Publications Private Limited and

Carmel Asia Holdings Private Limited, entities owned by Mr. Y. S. Jagan Mohan Reddy, son of the then Chief Minister of

Andhra Pradesh and Late Y.S. Rajasekhara Reddy, the erstwhile chief minister of Andhra Pradesh. The CBI, in the charge

sheet filed in the matter, alleged that the following favours inter-alia were obtained by our Company in return for these

investments:

i. Our Company was allotted land to an extent of 231.09 acres at Yadiki Mandal of Anantapur District, in the year 2008 (“Anantapur Land”);

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ii. Prospecting license for limestone over an extent of 304.74 hectares in Kurnool District, was granted for a period of three years, in the year 2008 (the “Prospecting License”);

iii. Penna Tandur Cement Company Limited, which was subsequently amalgamated with our Company, was granted a mining lease for limestone for 822.13 acres in Ranga Reddy District in the year 2009 for a period of 20 years (the

“Mining Lease”); and

iv. Benefits given to Blitz Hotels Private Limited in favour of Pioneer Holiday Resorts Limited.

The Government of Andhra Pradesh, vide its order dated March 15, 2013, cancelled the Mining Lease. Subsequently, the Joint

Director, Directorate of Enforcement, Government of India (“ED”), pursuant to an order passed under Section 8 of the

Prevention of Money Laundering Act, 2002 (“PMLA”), attached the Anantapur Land. Our Company filed an appeal before

the Appellate Tribunal under the PMLA to grant stay on this order, which was granted by the said authority. Further, P.

Prathap Reddy, our Promoter filed a criminal petition before the High Court praying for quashing of the charge sheet filed by

the CBI (“Quash Petition”) and the High Court granted interim stay in the matter and ordered the CBI court not to frame

charges against the Accused till final hearing and disposal of Quash Petition. For details of these matters, see “Outstanding

Litigation and Material Developments – Litigation involving our Company” on page 365.

While these matters are currently pending, we cannot assure you that an adverse order for the alleged offences will not be

passed against us, for which we may be subjected to fines under applicable law. We also cannot assure you that our Promoter

will not be held liable for alleged offences, which cannot be determined at this stage. Further, we cannot assure you that the

ED will not proceed to initiate any further prosecution proceedings against our Company. These proceedings may divert our

management’s time and attention, and consume financial resources in our defence.

Unfavourable order(s) in the aforementioned proceedings may impact our interest in the Anantapur Land including relocating

certain utilities which may impact our supply chain, which could have an adverse effect on our business, results of operation,

reputation and our financial condition.

2. An inability to effectively manage our growth and expansion may have a material adverse effect on our business prospects and future financial performance.

We have experienced significant growth over the past five years and we have significantly expanded our operations. Our

EBITDA and restated profit for the period/year have grown at a CAGR of 22.20% and 47.34%, respectively, from Fiscal 2014

to Fiscal 2018 and were ₹ 674.87 million and ₹ 120.97 million, respectively, in the three months ended June 30, 2018. Our

cement sales have grown at a CAGR of 3.08% from 3.75 million MT in Fiscal 2014 to 4.24 million MT in Fiscal 2018 and

was 1.14 million MT in the three months ended June 30, 2018. We cannot assure you that our growth strategy will continue

to be successful or that we will be able to continue to expand further, or at the same rate.

The success of our business will depend greatly on our ability to effectively implement our business and growth strategy. Our

growth depends, amongst other factors, on increasing/ expanding presence across India, focusing on port based logistics

infrastructure and distribution, establishing new facilities, increasing manufacturing capacity, optimizing capacity utilization

levels, increasing sales of blended cement and improving operational efficiency. For further information, see “Our Business

– Strategies” on page 150. Our ability to achieve growth will be subject to a range of factors, including, ability to identify

trends and demands in the industry; competing with existing companies in our markets; continuing to exercise effective quality

control; recognition of our brand in the new regions; hiring and training qualified personnel; and ability to transport our

finished products efficiently. Many of these factors are beyond our control and there is no assurance that we will succeed in

implementing our strategy. Our future growth also depends on expanding our sales and distribution network to enter new

markets, through different sales and distribution channels. We face increased risks when we enter new markets in India. We

may find it more difficult to hire, train and retain qualified employees. In addition, we may have difficulty in finding reliable

suppliers with adequate supplies of raw materials meeting our quality standards and distributors with efficient distribution

networks. As a result, the products we introduce in new markets may be more expensive to produce and/or distribute and may

take longer to reach expected sales and profit levels than in our existing markets, which could affect the viability of these

operations or our overall profitability.

Our expansion plans and business growth could strain our managerial, operational and financial resources. For further

information on our expansion plans, see “Our Business - Expansion Plans” on page 160. Our ability to manage future growth

will depend on our ability to continue to implement and improve operational, financial and management information systems

on a timely basis and to expand, train, motivate and manage our workforce. We cannot assure you that our personnel, systems,

procedures an