alumex prospectus on cse site

8/13/2019 Alumex prospectus on CSE site

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7 | Alumex Limited Ini al Public Ofering

4.0 GLOSSARY OF TERMS RELATED TO THE OFFERING

Alumex Group/Group Alumex Limited and its subsidiaries

Applicant/s Any investor who submits an Application Formunder this Prospectus

Application Form/Application The application form that constitute part of thisProspectus through which the investor/s mayapply for the Offered Shares

Board/Board of Directors/Directors The Board of Directors of Alumex

Closure Date The date of closure of the subscription list as setout in Section 5.1 of this Prospectus

Company/Alumex Alumex Limited

Financial Advisors and Managers to theOffering/Managers to the Offering

NDB Investment Bank Limited (NDBIB)

Foreign Investor Citizens of Sri Lanka who are resident outsideSri Lanka and above 18 years of age;

Corporate bodies incorporated or establishedoutside Sri Lanka;

Foreign citizens above 18 years of age(irrespective of whether they are resident inSri Lanka or overseas);

Regional and country funds approved by theSEC

Please refer Section 5.13 of this Prospectus forfurther details

IPO/Offering The Offer for Subscription of New Shares andthe Offer for Sale of Vendor Shares proposed to

be offered simultaneously at the Share Price interms of this Prospectus.

Local Time Sri Lanka Time

Market Day Any day on which CSE is open for trading

New Shares Seventeen Million Eight Hundred and FiftySeven Thousand Two Hundred (17,857,200) newOrdinary Voting Shares to be offered by theCompany to the public at the Share Price


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Alumex Limited Ini al Public Ofering | 8

Non-Retail Investor Category Investors who do not fall under Retail IndividualInvestor Category and Unit Trust InvestorCategory

Offer for Sale An invitation to the Public by the Company forand on behalf of the Selling Shareholders topurchase existing Ordinary Shares of theCompany held by the Selling Shareholder, interms of Section 5.1

Offer for Subscription An invitation to the Public by the Company tosubscribe for New Shares in terms ofSection 5.1

Offered Shares Fifty Nine Million Eight Hundred and SixtyThousand Six Hundred (59,860,600) OrdinaryVoting Shares offered to the Public at the SharePrice through this Prospectus

Ordinary Shares/Issued and Paid up OrdinaryShares/Ordinary Voting Shares/Shares Ordinary voting shares of the Company

Public The investors qualifying as public as defined inAnnex A

Prospectus This prospectus dated February 17, 2014 issuedby Alumex

Retail Individual Investor Category Individual investors who subscribe for OfferedShares up to a value of Rs. 100,000/- (i.e. up toand inclusive of 7,100 Shares)

Selling Shareholders Shareholders of the Company offering existingOrdinary Shares of the Company as morefullydescribed in Section 5.2, to facilitate a listing ofthe Shares of the Company on the CSE

Share Price Rs. 14/- per Share

Stated Capital The stated capital of Alumex

Share Transfer Form The share transfer form, attached to theApplication Form/Application that constitutespart of this Prospectus which the Investors shallcomplete when completing the Application

Form/Application


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Unit Holder An individual who has made an investment inunits not exceeding the value ofRs. 10,000,000/- in a particular unit trust fundthat subscribes for Shares

[Ref: SEC/LEG/11/06/01]

Unit Trust Investor Category Growth or balanced unit trusts operated bymanaging companies licensed by the SEC tooperate such unit trusts, where such unit trustcomprises of not less than 500 Unit Holdersresident in Sri Lanka who together hold at least50% of that unit trust

Vendor Shares Forty Two Million Three Thousand and FourHundred (42,003,400) Ordinary Voting Sharesoffered for sale by the Selling Shareholders tothe P ublic at the Share Price as detailed inSection 5.2


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5.0 DETAILS OF THE OFFERING

5.1 The O ffer ing

The Offe ring contemplated herein shall cons t tute an invita t on made to the Public to subscribe forFif y Nine Million Eight Hun dr ed and Sixty Thousand Six Hun dr ed (59,860,600) Ordinary VotingShares at the Share Price.

The Offe ring cons t tutes two tranches, details of which are listed below:

Table 5-1: O fferi ng T ranches

Desc rip t onNumbe r of

Ordina ry Sha res on O ffer

Per centageof Offer ing

The Offe r for Subscrip t on of New Shares cons t tu t ng

5.97% of the Ordinary Shares (post IPO)17,857,200 29.83%

The Offe r for Sale of Vendor Shares cons t tu t ng 14.03% ofthe Ordinary Shares (post IPO)

42,003,400 70.17%

Total 59,860,600 100.00%

The Offer ed Shares would be allo ed/transferred to the extent possible based on the Applica t onsfor Offe red Shares, among the following broad investor categories in the propor t ons given below.

Table 5-2: Catego ries of Investo rsCatego ry Per centage of O fferi ng

Retail Individual Investor Category 40%Unit Trust Investor Category 10%Non-Retail Investor Category 50%

100%

5.2 Selling Sha rehold ers

Shareholders men t oned below are o ff ering for sale, a total of Forty Two Million Three Thousand andFour Hundred (42,003,400) exis tn g Ordinary Shares cons t tu t ng approximately 14.03% of theOrdinary Vo t ng Shares (post IPO) in order to facilitate the lis t ng of the Ordinary Shares on the CSE.

Table 5-3: Dives t tu re of Exis t ng Sha resSelling Sha rehold er

Numbe r of Sha re sOffered

Date of Acquisi t on

Hayleys PLC 18,687,700 November 04, 2010Rosewood (Private) Limited 9,159,700 November 22, 2010Akbar Brothers (Private) Limited 9,159,700 November 22, 2010Star Pack Investments (Private) Limited 4,996,300 November 22, 2010Total 42,003,400

The above listed Selling Shareholders have complied with Rule 2.1.1 (e) (i) of the CSE Lis t ng Rules.

The Selling Shareholders will own approximately 75.95% of the total number of Shares of theCompany, post IPO.


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5.3 Nature of the New Shares/Nature of the Existing Shares on Offer

From the date of allotment, the New Shares shall rank equal and pari passu in all respects with theexisting Ordinary Voting Shares and each New Share shall confer on the holder thereof the right toone vote on a poll at a meeting of the Company on any resolution, the right to an equal share in any

dividend that may be paid by the Company and the right to an equal share in the distribution of thesurplus assets of the Company in a liquidation.

From the date of completion of the transfer of the Vendor Shares to the Applicant, which date shallbe even to the date of allotment of the New Shares, referred to above, such Shares shall rank pari

passu , in all respects with the existing other Ordinary Shares and the New Shares allotted in terms ofthis Prospectus, and such Share shall confer on the holder thereof the right to one vote on a poll at ameeting of the Company on any resolution, the right to an equal share in any dividend that may bepaid by the Company and the right to an equal share in the distribution of the surplus assets of theCompany in a liquidation.

5.4 Share Price

The IPO Share Price is Rs. 14/- per Share. The Board of Directors is of the opinion, that the IPO SharePrice of the tranche, pertaining to the Offer for Subscription, is fair and reasonable to the Companyand to all existing shareholders of the Company.

5.5 Size of the Offering

If the Offering is fully subscribed, the Company and the Selling Shareholders, shall receiveRupees Two Hundred and Fifty Million Eight Hundred (Rs. 250,000,800/-) and Rupees Five Hundredand Eighty Eight Million Forty Seven Thousand Six Hundred (Rs. 588,047,600/-) respectivelyconstituting a total of Rupees Eight Hundred and Thirty Eight Million Forty Eight Thousand FourHundred (Rs. 838,048,400/-).

5.6 Objectives of the Offering

(i) Alumex has experienced a significant increase in demand for its powder coated products in therecent past and at present operates at almost 100% of its existing powder coating facility. TheCompany plans to acquire a new powder coating plant which would double the Companysexisting powder coating capacity of 1800MT per annum to cater to the said increased demand.Further, it also plans to invest in die manufacturing equipments to cater to the excess demandarising from powder coated products. Funds amounting to Rupees Two Hundred and Fifty

Million Eight Hundred (Rs. 250,000,800/-) raised via the issue of Seventeen Million EightHundred and Fifty Seven Thousand Two Hundred (17,857,200) New Shares, would be utilised tofinance the proposed production capacity expansion in the powder coating facility of Alumex,subsequent to meeting the IPO expenses in relation to the New Shares amounting toapproximately Rupees Ten Million (Rs. 10,000,000/-) (refer Section 5.8).


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The total cost of the powder coa ng pla n t to gether with the die ma nuf act u ring equ ipm en t isapproximately Rs. 240 millio n and comprise of the follow ing,

Table 5-4: Cost Break Down of Powder Coa t ng Facility

Item Descrip t on

Approximate

Cost(Rs. million)

Powder Coa t ng Plant

- Italtec hn o Powder Coa ng Plant - Building - Freight/ Insu ra nce , Taxes- Power Supply/Air Dryer/Waste Water System/ Installa on /Other

100323523

190Die Manufacturing Process

- Die Polishi ng Plant - Wire C u er

221840

General Power Supply- 1000 KVA Gene rator 10

10

Total 240

Alumex has s uccess fully eva luated the qu ota ons from the s uppliers for the powder coa ngpla n t a nd has s ub sequen tly placed the pu rchase order with Italtec no , Italy. Alum ex expects themachi ne to be delivered d u ring the Q uarter 4 of the Financial Year (FY) 2013/14. With re gard to

the p urchase of the eq u ipmen t for the die ma nuf act uring process men oned a bove , qu ota onshave been ob ta ine d from s up pliers , and Alumex has already placed the p urchase order withMicro Tec hn ica Tec hn olo gies with the expected delivery du ring the Qu arter 4 of the FY 2013/14.

Addi onally, with respect to the bui lding, it is s ll at the ini al sta ge of n alis ing the desi gn and isexpected to comme nce co nstr uc on work by March 2014.

Other e qui pmen ts s uch as Air Drye r, Waste Water System , Wire C u er etc. wo uld be proc ured atthe appropriate me s ub sequen t to a proper eva lua on by the ma nageme n t a nd the tec hn icalsta ff .

The f und s raised thro ugh the New Shares wo uld be u li sed i n f u ll and the new powder coa ng facility wo u ld be in opera on du ring FY 2014/15. The Compa ny will not receive a ny proceedsraised via the O ffe r for Sale tra nche of the O ffering detailed i n Sec on 5.1 a bove. All proceedsfrom the sale of Vend or Shares wo uld be for the acco un t of the Sel ling Shareholders.

Cost overr un s in implem en ng the project (if a ny) will be n anced by Alume x using bankborrow ing s a nd in ter nally gene rated f und s.

Sub seq uen t to the comple on of the ne w powder coa ng pla n t , it is expected that theCompa ny s rev enu e from the powder coa ng seg men t wo uld increase grad ually over the yearsand ther eb y have a posi ve impact o n the pro ta b ility of the Compa ny . The vo lume s a nd the

rev enue recorded thro ugh the exis ng powder coa ng pla n t , which has a similar capacity to thene w pla n t , are prese n ted i n Sec on 11.2.1 a nd Sec on 11.3.1 of this Prospect us.


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(ii) In order to be eligible for the reduced rate of corporate tax for the period commencing fromthe year of assessment 2013/2014 to 2015/2016 in terms of Section 59D(1) of the InlandRevenue Act No. 10 of 2006 as amended by Act No. 18 of 2013 (Inland Revenue Act).Section 59D(1) reads as follows;

59D (1)the tax rate applicable on the profits and income within the meaning of paragraph(a) of section 3 (other than any profits and income from the sale of any capital assets), ofany company which lists its shares on or after April 1, 2013 but prior to April 1, 2014, in theColombo Stock Exchange licensed by the Securities and Exchange Commission of Sri Lankaand issues by way of Initial Public Offering not less than twenty per centum of its shares tothe general public, shall be reduced by fifty per centum for the year of assessment in whichsuch shares are listed and for another two years of assessment immediately succeeding thatyear of assessment subject where such company after listing continues to maintain not lessthan twenty per centum of holding of its shares by the general public.

(iii) A listing of the Shares on the CSE shall provide the Company access to the capital market ofSri Lanka thereby enabling the Company to raise equity funds for future expansions andgrowth.

(iv) The listing through the IPO would facilitate Alumex to broad-base the ownership of theCompany as per the Public Holding Rule of the CSE, which would strengthen its identitythrough increased visibility and brand image amongst the public.

5.7 Listing

The Offering herein contemplated comprises of Fifty Nine Million Eight Hundred and Sixty ThousandSix Hundred (59,860,600) Ordinary Shares. If fully subscribed, the Offered Shares will amount to 20%

of the Issued and Paid up Ordinary Shares subsequent to the Offering.

An application has been made to the CSE for permission for a listing of Two Hundred and Ninety NineMillion Three Hundred and Two Thousand Eight Hundred and Forty (299,302,840) Ordinary VotingShares, being the entirety of the Issued and Paid up Ordinary Shares represented in the StatedCapital subsequent to the IPO.

It is expected that the Company will meet the minimum Stated Capital requirement [CSE Listing Rule2.1.3(a)] and the minimum Public Holding requirement [CSE Listing Rule 2.1.3(c)] of the CSE on thecompletion of the Offering pursuant to which the listing of the entire Ordinary Voting Shares will takeplace on the Diri Savi Board of the CSE. The minimum Stated Capital requirement of the CSE

stipulates that the stated capital of the entity for which a listing is sought on the Diri Savi Board of theCSE, should not be less than Rupees One Hundred Million (Rs. 100,000,000/-) at the time of listingwhilst the minimum Public Holding requirement stipulates that, 10% of the total number of sharesfor which a listing is sought should be in the hands of a minimum number of 200 Public shareholders.If in the event the Company being not able to comply with Rule 2.1.3(a) and Rule 2.1.3(c) of the CSEListing Rules, the Company will return all Application monies received by it.

Alumex has positive net assets as per the consolidated audited financial statements for the yearimmediately preceding the date of application and an operating history of more than one (01) year,thus has complied with Rule 2.1.3(b) and Rule 2.1.3(d) of the CSE Listing Rules respectively.


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What constitutes Public Holding is ascertained in terms of the Directive issued by the Securities andExchange Commission of Sri Lanka, under Section 13(c) and 13(cc) of the Securities and ExchangeCommission Act No. 36 of 1987 (as amended) issued on December 20, 2013(Ref: SEC/LEG/13/12/37) , Public Holding definition is set out in Annex A of this Prospectus.

5.8 Cost of the OfferingThe total costs associated with the Offering are estimated to be approximately Rs. 33 million. Theseinclude all direct costs and expenses associated with the Offering, inclusive of but not limited to theinitial listing fees to the CSE, management/advisory fees to the Financial Advisors and Managers tothe Offering, fees for the registrar function, advisory fees, certain legal, consultancy and accountancyfees, advertising and promotional costs, printing costs, brokerage commissions and stamp duty. Suchcosts will be recovered from the proceeds of the Offering and internally generated cash ofRs. 10 million and Rs. 23 million respectively.

5.9 Brokerage

Brokerage at the rate of zero decimal six per centum (0.6%) of the value of the Offered Shares will bepaid in respect of the number of Shares allotted/transferred on Applications bearing the original sealof any bank operating in Sri Lanka or a member/trading member of the CSE or Financial Advisors andManagers to the Offer or any other intermediary appointed by the Company and/or FinancialAdvisors and Managers to the Offering involved in the marketing of the Offering.

5.10 Minimum Subscription and Underwriting

The total amount of funding required by the Company (to be raised on the Offer for Subscriptiontranche) to meet the cost of the powder coating facility and to meet part of the cost of the Issue, isRupees Two Hundred and Fifty Million (Rs. 250,000,000/-), (cost of the powder coating facility beingRs. 240,000,000/- and to meet part of the cost of the Issue of Rs. 10,000,000/-, the balance sum ofRs. 23,000,000/- being funded by the Company out of its internally generated funds as set out inSection 5.8 of the Prospectus). Any amount undersubscribed of the said Rs. 250,000,000/- except theRs. 66,265,400/- referred to in the paragraph below, would be funded by the Company out of itsinternally generated funds and out of debt capital to be secured.

Subject to CSE Listing Rule 2.1.3 being complied with, in the event of an undersubscription, thesubscribers will be allocated the Shares they have applied for and the funds raised thereby will beutilised in the first instance to fulfil the Offer for Subscription tranche, of the Offering detailed inSection 5.1 above. In terms of CSE Listing Rule 2.1.3 (a), the Company is required to raise a minimumsum of Rs. 66,265,400/- on the Offer for Subscription tranche in order to increase its Stated Capital toRs. 100,000,000/- in order to qualify for a listing.

As set out in Section 5.7 of this Prospectus, if in the event the Company being not able to complywith Rule 2.1.3(a) and Rule 2.1.3(c) of the CSE Listing Rules (having already complied with Rule2.1.3(b) and 2.1.3(d)), the Company will return all Application monies received by it.

The Company shall seek a listing even if the Offering is not fully subscribed [subject to the Companysatisfying the requirements of the CSE Listing Rule 2.1.3(a) and 2.1.3(c)].

Accordingly, the Company has not entered into any underwriting arrangement with regards to this

Offering.


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5.11 Opening of Subscription List and Closure Date

The subscription list for the Offered Shares will open at 9.00 a.m. on March 06, 2014 and shall,subject to the occurrence of the events in the following paragraph, remain open for fourteen (14)Market Days (including the date of opening) until closure at 4.30 p.m. on March 25, 2014.

In the event of an oversubscription of the Offering prior to March 25, 2014, the Company shall informthe CSE in writing immediately of such fact and the subscription list will be closed at 4.30 p.m. on thesame day on which it is fully subscribed. Also, the Board reserves the discretion to close thesubscription list on any Market Day within the period of fourteen (14) Market Days irrespective ofwhether the Offering is oversubscribed or not, by providing one (01) Market Days prior notice to theCSE.

5.12 Inspection of Documents

Articles of Association, Auditors Reports and Audited Financial Statements for the five (05) financialyears ended March 31, 2013 (i.e. the five (05) financial years immediately preceding the date of thisProspectus) and Interim Financial Statements for the nine (09) month period ended December 31,2013 and all other documents, including material contracts and management agreements enteredinto by the Company would be made available for inspection by the Public during normal workinghours at Hayleys Group Services (Private) Limited, No. 400, Deans Road, Colombo 10, for a period notless than fourteen (14) Market Days as per Rule 3.1.19(a) of the CSE Listing Rules.

The Prospectus, Application Form and Articles of Association of the Company will be available on thewebsite of the CSE, www.cse.lk, the website of the Company, www.alumexgroup.com and thewebsite of the Financial Advisors and Managers to the Offering, www.ndbib.com for a period notless than fourteen (14) Market Days as stipulated in Rule 3.1.19(b) of the CSE Listing Rules.

5.13 Eligible Applicants

In order to achieve the objective referred in Section 5.6 (ii), Applications from investors qualifyingas Public (as defined in Annex A) will be given priority in accepting and allocation of the OfferedShares.

Applications are invited from the following categories of investors having a valid CDS Account:

Citizens of Sri Lanka who are resident in or outside Sri Lanka and above 18 years of age; or

Companies, corporations or institutions incorporated or established within Sri Lanka; or

Corporate bodies incorporated or established outside Sri Lanka; or

Approved unit trusts licensed by the SEC; or

Approved provident funds and contributory pension schemes registered/incorporated/established in Sri Lanka (in this case, Applications should be in the name of the trustee/board ofmanagement in order to facilitate the opening of the CDS account); or

Foreign citizens above 18 years of age (irrespective of whether they are resident in Sri Lanka oroverseas); or

Regional and country funds approved by the SEC.

Applications made by individuals under 18 years of age or those in the names of soleproprietorships, partnerships, unincorporated trusts and non-corporate bodies will be rejected .


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Applications submitted under the Unit Trust Investor Category should conform to the criteriadefined by the SEC Directive dated June 6, 2011 ( Ref: SEC/LEG/11/06/01 ).

Eligible Applicants may fall into one of the following categories.

Retail Individual Investor Category

Unit Trust Investor Category

Non-Retail Investor Category

Please refer Section 4.0 Glossary of Terms Related to the Offering for definitions of theaforementioned categories.

5.14 Procedure for Application

Applicants applying for the Offered Shares should submit their Applications in the manner as set outin this Prospectus.

The Prospectus will be made available free of charge from the collection points listed in Annex B. TheProspectus can also be downloaded from www.cse.lk, www.alumexgroup.com andwww.ndbib.com .

5.14.1 How to Apply

APPLICANTS SHOULD APPLY ONLY THROUGH ONE INVESTOR CATEGORY (INCLUDING JOINTAPPLICANTS) AND WOULD BE PERMITTED TO SUBMIT ONLY ONE APPLICATION FORM. TWO ORMORE APPLICATIONS SUBMITTED BY THE SAME APPLICANT EITHER UNDER THE SAME CATEGORYOR DIFFERENT CATEGORIES WILL BE CONSTRUED AS MULTIPLE APPLICATIONS AND WILL BEREJECTED.

Applicants falling under Retail Individual and Non-Retail Investor Categories should apply for theOffered Shares on the Application Form printed for this purpose, which constitutes part of thisProspectus. Such Application Forms will be made available from the collection points listed in AnnexB and can also be downloaded from www.cse.lk, www.alumexgroup.com and www.ndbib.com.

Applicants applying under the Unit Trust Investor Category must apply for Offered Shares using theseparate YELLOW coloured Application Form printed for this purpose, which constitutes part of thisProspectus. Such Application Forms will be made available through the registered office of theCompany, Alumex Limited, Sapugaskanda, Makola, Registrars to the Offering, P W CorporateSecretarial (Private) Limited, 3/17, Kynsey Road, Colombo 08, and Financial Advisors and Managers tothe Offering, NDB Investment Bank Limited, No. 40, Navam Mawatha, Colombo 02. Exact size copiesof the Application Form printed on YELLOW coloured paper as specified herein will also bepermissible under the Unit Trust Investor Category.

Applications submitted under the Unit Trust Investor Category should accompany a confirmationby the trustee confirming that such unit trust is in conformity with the criteria defined by the SEC

Directive dated June 6, 2011 ( Ref: SEC/LEG/11/06/01 ) and CSE Listing Rule 3.1.5(b)(iii).

Applicants applying under Retail Individual, Non-Retail and Unit Trust Investor Categories shouldsubmit their Application Forms to the Registrars to the Offering in terms of Section 5.14.8.

An Applicant of a joint Application, applying through another Application Form is deemed to havemade multiple Applications and will be rejected.


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All resident Applicants should indicate in the Application for Shares, their NIC number or the company registrationnumber as the case may be. The passport number may be indicated only if the Applicant does not have aNIC number.

As per the Directive of the Securities and Exchange Commission made under Circular No. 08/2010 datedNovember 22, 2010 and Circular No. 13/2010 issued by the Central Depository System (Private) Limited datedNovember 30, 2010, all Shares allotted must be directly uploaded to the CDS accounts. Existing Shares transferredto Applicants allocated on the Offer for Sale tranche would similarly be directly uploaded to the CDS account of theApplicant. As such, all Applicants should indicate their CDS account number in the Application Form. Applicants who

do not have a CDS account are advised to open a valid CDS account prior to submitting the Application, in order tofacilitate the uploading of allotted/transferred Shares to their CDS account.

Please note that upon the allotment/transfer of Shares under this Offering, the allotted/transferred Shares would becredited to the Applicants CDS account so indicated. Please note that a SHARE CERTIFICATE SHALL NOT BE ISSUED.

Any Application which does not carry a valid CDS account number or indicates a number of a CDS account which isnot opened at the time of the closure of the subscription list or which indicates an inaccurate/incorrect CDS accountnumber, shall be rejected and no allotment/transfer of Shares will be made.

You can open a CDS account through any member/trading member of the CSE as set out in Annex B or through anycustodian banks as set out in Annex C of this Prospectus.

An Applicant who has made an Application under a margin trading account should not applyindividually or jointly on a separate Application Form. Such Applications will also be construed asmultiple Applications and will be rejected .

Subject to the above, the Company reserves the right to reject multiple Applications and suspected

multiple Applications which are not allowed. Please note that Applicant information such as full name, address, NIC number/passport numberand residency will be downloaded from the database of CDS, based on the CDS account numberindicated in the Application Form. Such information shall take precedence over informationprovided in the Application Form.

Application Forms stating third party CDS accounts instead of their own CDS account numbers,except in the case of margin trading accounts, will be rejected.

Care must be taken to follow the instructions on the reverse of the Application Form. Applicationsthat do not strictly conform to such instructions and additional conditions set out hereunder orwhich are illegible may be rejected.

PLEASE NOTE THAT ALLOTMENT/TRANSFER OF SHARES WILL ONLY BE MADE IF YOU HAVE A VALIDCDS ACCOUNT AT THE TIME OF SUBMISSION OF APPLICATION.

Applicants have the option of having their Shares locked in the CDS as described below. Sharesthat are locked will not be available for trading purposes and will not be visible to the participant.Such Applicants would have to fill in the relevant section provided in the Application Form for thispurpose. If the Applicant has not specified that the Shares need to be deposited to the lockedbalance in the CDS account, the said Shares would be deposited to Applicants trading balance inthe CDS account.

Operation of a locked balance in the CDS

In order to preserve the confidentiality of shareholder information and to ensure that securities arenot made available for trading for those shareholders who do not want to trade the securities, theCDS provides a mechanism where securities can be locked in the CDS account.


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The CDS maintains two balances for each CDS account, namely a trading balance and a lockedbalance. The trading balance would be visible to the CDS participant and all dealings and tradingwould be permitted on the said trading balance, as done normally.

As opposed to the trading balance, the locked balance will not be visible to the CDS participant and

all dealings on such locked balance would be suspended thereby maintaining the confidentiality ofthe information and also safeguarding the account holder from any unauthorised sale by a broker.

At the option and request of an account holder, the CDS would transfer a named quantity ofsecurities from the locked balance to the trading balance of a CDS account and/or from the tradingbalance to the locked balance.

5.14.2 Number of Shares Applied

Applications should be for a minimum of one hundred (100) Shares [for a value of Rupees onethousand four hundred (Rs.1,400/-)] and in multiples of hundred (100) Shares thereof.

Applications for less than one hundred (100) Shares or for a number which is not in multiples ofhundred (100) Shares will be rejected and the accompanying cheques, bank drafts or bankguarantees will not be sent for clearing but be returned via ordinary post at the risk of the Applicant,or in the case of joint Applicants, the first named Applicant. The cheque or bank draft or bankguarantee or RTGS transfer should be issued to the exact value of the number of Shares applied formultiplied by the Share Price. Cheques, bank drafts, bank guarantees or RTGS transfers notconforming to the above requirement will be rejected at the outset.

Please refer Section 5.15.1 for details with respect to the mode of remittance.

5.14.3 Identification Information

All Applicants should provide in the Application, their CDS account number in the appropriate cageprovided.

Applicants are requested to state their residency and nationality in the appropriate spacesprovided in the Application Form.

The NIC, passport, or company registration number as the case may be, must be stated in theApplication Form and any Application Form which does not provide the appropriate identificationinformation will be rejected.

Resident Applicants may use the Passport for purposes of identification only if they do not have a

NIC number.


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Tabulated below is the relevant iden t ca t on informa t on that a prospec t ve investor should providedepending on the legal status:

Table 5-5: Iden t ca t on Informa t on

Cit zenship/Legal Form

Iden t ca t on Informa t on

NICNumber

PassportNumber

CompanyRegistra t on

Number

CommonSeal or

RubberStamp

Sri Lankan Ci t zens Sri Lankan Ci t zens with no NIC Number - Note I Foreign Ci t zens - Note II Corporate En tte s - Note III

Note I: In the case of Sri Lankan ci t zens, the passport number will be accepted only when the

NIC number is not available. The CDS account must be for the same passport number.

Note II: Foreign ci t zens must state the passport number in the space provided.

Note III: The company registra t on number must be provided. The common seal or rubber stamp

should be a ffi xed and the Applica ton Form duly signed as s t pulated in the cons t tu t onal

documents of such Applicants.

A valid CDS account number must be stated in the Applica t on Form, and any Applica t on Formwhich does not provide the appropriate iden t ca t on informa t on will be rejected. All informa t onabout the Applicant (i.e. name, address, na t onality and NIC or passport number) will be

downloaded from the database of CDS, based on the number given in the Applica t on Form. In theevent of any discrepancy between the informa t on in the CDS and in the Applica t on, theinforma t on in the CDS shall take precedence.

If the CDS account number is not indicated in the Applica t on Form, or the number indicated in theform is found to be inaccurate/incorrect, or the account number indicated is not opened at thetme of closing the O ffer ing such Applica t on will be rejected and no allotments of Shares will bemade.

5.14.4 Key Responsibility of a Non-Resident Investor

Non-resident investors may be a ffected by the laws of the jurisdic t on of their residence. If thenon-resident investors wish to apply for the Shares, it is their responsibility to comply with the lawsrelevant to the jurisdic t on of their residence and of Sri Lanka.

5.14.5 Margin Trading

Applicants who wish to apply through their margin trading account, should submit the Applica t on inthe name of the margin provider/Applicants name signed by the margin provider.

The Applicants should state the relevant CDS account number rela tng to the margin trading accountin the space provided for the CDS account number in the Applica t on Form. The Shares shall beuploaded to the CDS account number of the margin trading account.

A photocopy of the margin trading agreement must be submi ed along with the Applica t on.


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Please note that the margin provider can apply under its own name and such Applications will not beconstrued as multiple Applications. Details of multiple Applications are available underSection 5.14.1.

5.14.6 Applications Made Under Power of Attorney

In the case of Applications made under Power of Attorney (POA), a copy of the said POA, certified bya Notary Public to be a true copy of the original, should be lodged with the Registrars to the Offeringalong with the Application Form. The original POA should not be attached.

5.14.7 Joint Applications

If the ownership of Shares is desired in the name of one Applicant, full details should be given onlyunder the heading, SOLE/FIRST APPLICANTin the Application Form. In the case of joint Applicants,the signatures and particulars in respect of all Applicants must be given under the relevant headingsin the Application Form.

Joint Application Forms are permitted only for natural persons not exceeding three Applicants. JointApplicants should note that all parties should either be residents of Sri Lanka or non-residents. AnApplicant of a joint Application shall not apply through a separate Application Form eitherindividually or jointly.

5.14.8 Submission of Applications

Application Forms properly and legibly filled in accordance with the instructions thereof, along withthe applicable remittance (cheque or bank draft or bank guarantee or RTGS transfer only) for the fullamount payable on Application should be enclosed in an envelope marked Alumex Limited InitialPublic Offering on the top left-hand corner and be addressed and dispatched by post or courier or

delivered by hand to the Registrars to the Offering at the following address prior to 4.30 p.m. LocalTime on the Closure Date.

P W Corporate Secretarial (Pvt) Ltd3/17, Kynsey RoadColombo 08.

Applications may also be handed over to the Financial Advisors and Managers to the Offering,Bankers to the Offering and their designated branches, members and trading members of the CSE asset out in Annex B, prior to 4.30 p.m. Local Time on the Closure Date .

In the case of Applications dispatched by courier or post, such Applications should reach theRegistrars to the Offering not later than 4.30 p.m. Local Time on the Market Day immediatelyfollowing the Closure Date . Any Applications received after the above deadline shall be rejectedeven though the courier or postmark is dated prior to the Closure Date.

5.15 Payment of Application Monies

5.15.1 Mode of Remittance

Payment should be made separately in respect of each Application by way of a cheque or bank draftor bank guarantee for the full amount payable on application. Remittances on Applications will bedeposited in a separate bank account in the name of Alumex Limited Initial Public Offering .


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Payment for Applications for Shares of a value below Rs. 100,000,000/- may be supported by acheque or bank draft or bank guarantee . In such instances, Application Form should be accompaniedby only one cheque or bank draft or bank guarantee and should be issued for the full amount indicated in the Application Form. Any Application for Shares of a value below Rs. 100,000,000/-accompanied by two or more cheques or bank drafts or bank guarantees will be rejected at theoutset.

Applicants making Applications for Shares of a value above and inclusive of Rs. 100,000,000/- willbe permitted to submit multiple bank drafts (not cheques) or multiple bank guarantees or RTGStransfers. Such Applicants are required to attach a list to the Application Form giving details ofpayment, such as amount of bank draft/bank guarantee, name of bank, name of branch and bankdraft number/bank guarantee number . Applications for Shares of a value above and inclusive ofRs. 100,000,000/- accompanying multiple bank drafts (not cheques) or multiple bank guaranteeswill not be rejected.

Cash will not be accepted. Anyone wishing to pay cash should obtain a bank draft from any LicensedCommercial Bank (LCB) in Sri Lanka.

5.15.2 Cheques or Bank Drafts - Resident Sri Lankan Investors

Cheques or bank drafts should be drawn on any LCB in Sri Lanka and crossed Account Payee Only and made payable to Alumex Limited Initial Public Offering.

Cheques or bank drafts accompanying Application Forms made for less than one hundred (100)Shares, i.e. Rupees One Thousand Four Hundred (Rs. 1,400/-) or for a number which is not inmultiples of hundred (100) Shares (as mentioned in Section 5.14.2) will not be sent for clearing andshall be returned via ordinary post at the risk of the Applicant, or in the case of joint Applicants, to

the first named Applicant.

In the event that cheques are not realised within two (02) Market Days from the day of presentingthe same to the bank for clearing, the Directors reserve the right to reject the Applications and returnthe Application monies. No allocation of Shares will be made to such Applicants.

Applicants residing in outstation areas from which cheque clearance may take over two (02)Market Days are advised to make payment via bank drafts to avoid any delays.

Cheques must be honoured on first presentation to the bank for the Application to be valid.Applications supported by cheques which are not honoured on first presentation will be rejected.

5.15.3 Bank Guarantees Resident Sri Lankan Investors

Applications made by resident Sri Lankan investors backed by bank guarantees presented in line withthe requirements set out in Section 5.15.1 will be accepted. Bank guarantees will be presented to therespective banks only after the Offered Shares have been allotted/transferred. Bank guaranteesshould be issued by any LCB in Sri Lanka and in favour of Alumex Limited Initial Public Offering ina manner acceptable to the Company and be payable on demand.

Bank guarantees should be valid for a minimum of one (01) month from the date of opening of theOffering (i.e. March 06, 2014).

Investors are encouraged to discuss with their relevant bankers with regard to the issuance of bankguarantees and all related charges that would be incurred by the investors.

Foreign Investors and non-resident Sri Lankan investors should refer Section 5.15.5.


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5.15.4 RTGS Transfers - Resident Sri Lankan Investors

In case of RTGS transfers, such transfers should be made to the credit of Alumex Limited Initial

Public Offering bearing the account number 0001 1008 6210 at Sampath Bank PLC with value onthe Opening Date of Offering (i.e. the funds to be made available to the above account on the

Opening Date of Offering).The Applicant should obtain a confirmation from the Applicants bank, to the effect thatarrangements have been made to transfer payment for the full amount payable on application to thecredit of Alumex Limited Initial Public Offering bearing the account number 0001 1008 6210 atSampath Bank PLC with value on the opening date of Offering (i.e. the funds to be made available tothe above account on the opening date of Offering) and should be attached with the ApplicationForm.

5.15.5 Foreign Currency Remittance

This section is applicable to:

Citizens of Sri Lanka who are above 18 years of age and resident overseas;

Corporate bodies incorporated or established outside Sri Lanka;

Regional or country funds approved by the SEC;

Foreign citizens (irrespective of whether they are resident in Sri Lanka or overseas) who areabove 18 years of age.

The abovementioned Applicants should make their payments using one of the following methods asthe case may be.

(a) A Foreign Investor may invest through a SIA maintained with any LCB in Sri Lanka. The procedurefor arranging payments through a SIA is presented below:

- A Foreign Investor may use the services of a custodian bank as an intermediary wheninvesting in the Sri Lankan securities market;

- The intermediary may open a SIA, on investors behalf;- In conjunction with the SIA, an account with the CDS must be opened in case the investor

does not already possess a valid CDS account;

- In respect of regional or country funds investing for the first time in Sri Lanka, theintermediary will facilitate the approval process regulated by the SEC;

- Payment for Offered Shares should be made through a bank draft or bank guarantee or RTGStransfer issued by a LCB against the funds arranged through the SIA and made payable toAlumex Limited Initial Public Offering.

(b) A Foreign Investor may invest through inward remittances of foreign currency held in a FCBUaccount of the Applicant maintained with any LCB in Sri Lanka:

- The Applicant should forward the Application Form supported by an unconditional bankguarantee drawn on the Applicants FCBU account pending allotment/transfer of OfferedShares, with confirmation from the LCB that upon notification of the allotment/transfer ofshares, the allotment/transfer value would be remitted through the Applicants SIA;


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- Upon allotment/transfer of Offered Shares, foreign currency to the extent of the Sri LankaRupee equivalent value of Offered Shares allotted/transferred would be called on the bankguarantee drawn on the Applicants FCBU account. The requisite funds would then becredited to a SIA opened in favour of the Applicant via the aforementioned FCBU account;

- This procedure would protect a prospective investor from any losses accruing due tofluctuating exchange rates.

(c) In addition to the payments made through FCBU and SIA mentioned above, a foreign citizenresident in Sri Lanka under the Resident Guest Scheme may invest through theRGFCA/RGRCA-Investors maintained with any LCB in Sri Lanka. An investor who wishes to availhim/herself of this facility should make the payment for Offered Shares through a bank draft oran unconditional bank guarantee or RTGS transfer in Sri Lanka Rupees or by converting foreigncurrency funds available in the RGFCA/RGRCA-Investors as the case may be (based on theguidelines provided by the Exchange Control Department of CBSL) and made payable to AlumexLimited Initial Public Offering.

The endorsement must be clearly indicated on the cheque or bank draft or the bank guarantee orthe RTGS transfer confirmation to the effect that, arrangements have been made to facilitate suchpayment to be made against funds available in the individuals SIA/FCBU/RGFCA/RGRCA-Investorsaccount. Alternatively, a document detailing the endorsement could be submitted along with thepayment and Application.

Applications supported by foreign currency remittances should be made in conformity withrequisite declarations accompanied by the documentation stipulated by the Controller ofExchange.

5.15.6 Restrictions Applicable to Foreign Citizens Resident in Sri LankaForeign citizens resident in Sri Lanka may make payments through Sri Lanka Rupee Accounts only ifthey possess dual citizenship where one such citizenship is Sri Lankan. Foreign citizens havingSri Lankan citizenship should attach a certified copy of the citizenship certificate with theApplication Form.

Foreign citizens residing in Sri Lanka having valid residency visas should note that they cannot makeremittances via cheques or bank drafts or bank guarantees or RTGS transfers drawn on Sri LankaRupee accounts maintained with any LCBs in Sri Lanka but may do so viaSIA/FCBU/RGFCA/RGRCA-Investors account as detailed in Section 5.15.5 above. Applications made

by foreign citizens not in accordance to the foregoing shall be rejected.

5.16 Rejection of Applications

Application Forms which are incomplete in any way and/or are not in accordance with the termsand conditions set out in Section 5.0 of this Prospectus will be rejected at the absolute discretionof the Company.

Any Application which does not carry a CDS account number, or indicates a number of a CDSaccount which is not opened at the time of the closure of the subscription list or which indicatesan inaccurate or incorrect CDS account number, shall be rejected and no allotment/transfer ofShares will be made.

Application Forms stating third party CDS accounts instead of their own CDS account numbers,except in the case of margin trading accounts, will be rejected.


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Applications delivered by hand after 4.30 p.m. Local Time on the Closure Date of the Offering willbe rejected. Applications received by courier/post after 4.30 p.m. Local Time on the succeedingMarket Day immediately following the Closure Date of the Offering, will also be rejected even ifthey carry a courier acceptance date/postmark date earlier than the Closure Date.

Applications made for less than one hundred (100) Shares or for a number which is not inmultiples of hundred (100) Shares will be rejected.

Applicants should apply only through one investor category and would be permitted to submitonly one Application Form. Two or more Applications submitted by the same Applicant eitherunder the same category or different categories will be construed as multiple Applications andwill be rejected .

The Company reserves the right to reject multiple Applications and suspected multipleApplications which are not allowed, as mentioned in Section 5.14.1.

Payment for Applications of Offered Shares of a value below Rs. 100,000,000/- accompanyingtwo or more cheques or bank drafts or bank guarantees as mentioned in Section 5.15.1, will berejected at the outset.

Applications made by individuals below 18 years of age or those in the names of soleproprietorships, partnerships, unincorporated trusts and non-corporate bodies will be rejected.

Notwithstanding any provision contained herein, the Board of Directors shall reserve the right torefuse any Application or to accept any Application in full or part.

5.17 Banking of Payments

All cheques or bank drafts or bank guarantees in respect of Applications will not be banked or calledon until the Market Day after the Closure Date of the subscription list, in terms of the CSE Listing

Rules.5.18 Returning of Monies of Rejected Applications

Where an Application Form is rejected, the cheque or bank draft or bank guarantee received inrespect of the Application will be returned via ordinary post at the risk of the Applicant. In the case of

joint Applicants, the cheque or bank draft or bank guarantee received in respect of the Applicationwill be returned to the first named Applicant.

Where the Application Form is accepted and the cheque or bank draft or bank guarantee is nothonoured by the bank at the first presentation, the Application will also be rejected and thedishonoured cheque or bank draft or bank guarantee will be returned via ordinary post at the risk ofthe Applicant. In the case of joint Applicants, the dishonoured cheque or bank draft or bankguarantee will be returned to the first named Applicant.

5.19 Allocation of Shares on Offer/Basis of Allocation

The allotment /transfer of Shares on Offer will be made to the various categories of Applicants, as setout in Section 5.1 , treating all Applicants in a fair manner as may be decided by the Board at itsdiscretion.

In determining the basis of allocation within the Retail Individual Investor Category, individualinvestors who subscribe for a smaller number of shares shall be given priority in terms of theCSE Listing Rule 3.1.5 (b) (ii) (2).

In the event of an undersubscription in the Retail Individual Investor Category, the Unit Trust InvestorCategory shall be given first priority in the allocation of the unsubscribed Shares.


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In the event of an undersubscription in the Unit Trust Investor Category, the Retail Individual InvestorCategory shall be given first priority in the allocation of the unsubscribed Shares.

In the event of an undersubscription in the Non-Retail Investor Category, the quantum of Sharesunsubscribed may be redistributed to the other two categories that may be oversubscribed in a fair

manner at the discretion of the Board of Directors.In the event of an undersubscription in the Retail Individual Investor Category and the Unit TrustInvestor Category, the quantum of Shares unsubscribed may be redistributed to the Non-RetailInvestor Category that may be oversubscribed.

In the event of an oversubscription in any one or more of the categories, in spite of theaforementioned distribution, the Offered Shares will be allocated at the discretion of the Board ofDirectors of the Company in a fair manner.

Redistribution will not apply in the event of an oversubscription or undersubscription in all thecategories.

The Board of Directors of the Company will endeavour to decide and announce to the CSE the basisof allocation as soon as practicable so as to ensure compliance with the Listing Rules. Upon theallocation being decided, an announcement will be made to the CSE.

A written confirmation informing successful Applicants on their allocation of Offered Shares will bedispatched within ten (10) Market Days from the Closure Date as required by the CSE.

5.20 Refunds on Applications

Where an Application is accepted only in part or rejected in its entirety subsequent to cheques beingrealised, the balance/entirety of the monies received on Application as the case may be, will be

refunded. Such refunds will be made on or before the expiry of ten (10) Market Days from theClosure Date (excluding the Closure Date) as required by the CSE Listing Rules. Applicants would beentitled to receive interest at the last quoted AWPLR published by the CBSL plus 5%, on any refundsnot made by the expiry of the abovementioned period.

Refunds via SLIPS

The refund payment will be made to the bank account specified by the Applicant through the SLIPSon or before the expiry of ten (10) Market Days from the Closure Date (excluding the Closure Date) asrequired by the CSE Listing Rules and a payment advice shall be issued to the Applicant provided thatthe Applicant has submitted accurate and complete details of Applicants bank account in theApplication Form.

However, SLIPS transfers are subject to a maximum limit of Rupees Five Million (Rs. 5,000,000/-)imposed by the CBSL with effect from October 29, 2010 as per Operating Instruction CircularNo. 11/2010 dated October 25, 2010.

Even though the Applicant has requested for SLIPS transfer for refund amounts and submittedaccurate and complete details of the bank account in the Application Form, refund amountsexceeding Rupees Five Million (Rs. 5,000,000/-) will be made by a crossed cheque in favour of theApplicant and sent by ordinary post at the risk of the Applicant.

In the case of a joint Application, a crossed cheque will be drawn in favour of the Applicant whosename appears first in the Application Form.


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In the event the refund payment is effected via SLIPS based on the bank account details provided bythe Applicant in the Application Form, but is rejected by the Applicants bank due to inaccurate orincomplete information, such refund payments would be made via a crossed cheque in favour of theApplicant and sent by ordinary post at the risk of the Applicant. In such instances, the Companytogether with the Registrars to the Offering will send the refund cheques to such Applicants at theearliest possible and the Applicant should not hold the Company or the Registrars to the Offeringaccountable for such delays.

Bank codes and branch codes could be obtained from the website, www.lankaclear.com through theQuick Links access.

Refunds via Crossed Cheque

If the Applicant has not provided details of the bank account in the Application Form or has providedinaccurate or incomplete details of the bank account with respect to refunds via SLIPS, the refundpayment will be made by a crossed cheque in favour of the Applicant and sent by ordinary post at the

risk of the Applicant. In the case of a joint Application, a crossed cheque will be drawn in favour ofthe Applicant whose name appears first in the Application Form.

A request for cancellation of crossing on the refund cheque, in instances where the Applicant doesnot maintain a current account, should be addressed to the Registrars to the Offering in writing,stating the cheque number and the fact that the Applicant does not maintain a current account. Therefund cheque and a clear photocopy of the Applicants NIC should accompany the letter.

In the event of a refund cheque being delivered by hand by a third party to the Registrars to theOffering for cancellation of crossing, a letter of authorisation signed by the Applicant stating theNIC number of such third party should also be presented with the refund cheque. Refund cheques on

which the crossings have been cancelled by the Registrars to the Offering should preferably becollected in person or by a third party authorised by the Applicant. Where an Applicant has requestedthe delivery of the cheque on which the crossing has been cancelled via post, such cheque will besent at the risk of the Applicant.


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5.21 Successful Applicants and CDS Lodgement

The Offered Shares allotted/transferred (allocated) will be directly uploaded to the respective CDSaccount given in the Application Form before the expiry of eighteen (18) Market Days from theClosure Date of the Offering as required by the CSE Listing Rules.

A written confirmation, upon the completion of crediting the respective CDS accounts will be sent tothe Applicant within two (02) Market Days of crediting the CDS accounts by ordinary post to theaddress provided by each Applicant in their respective Applications.

Applicants have the option of having their Shares locked in the CDS. Shares that are locked wouldnot be available for trading purposes and would not be visible to the participant. Such Applicantswould have to fill in the relevant section provided in the Application Form for this purpose. If theApplicant has not specified that the Shares need to be deposited to the locked balance, the saidShares would be deposited to Applicants trading balance.

Refer Section 5.14.1 for definition of locked.

Shares shall not be transferable by the Applicant/Shareholders during the period between the date ofallotment/transfer of the Offered Shares and up to the date of listing (excluding the date of listing) ofthe Ordinary Voting Shares on the CSE.

Upon the Ordinary Voting Shares being listed on the CSE, such Shares shall be freely transferableexcept for those Shares described in Section 10.3 and 10.5 of this Prospectus.

5.22 Declaration to the CSE and Secondary Market Trading

The Company will submit to the CSE a declaration on the Market Day immediately following the dayon which Applicants CDS accounts are credited with the Offered Shares. Trading of Ordinary VotingShares on the secondary market will commence on or before the third (3 rd) Market Day from thereceipt of the declaration by the CSE as per the CSE Listing Rules.

All resident Applicants should indicate in the Application for Shares, their NIC number or the company registrationnumber as the case may be. The passport number may be indicated only if the Applicant does not have aNIC number.

As per the Directive of the Securities and Exchange Commission made under Circular No. 08/2010 datedNovember 22, 2010 and Circular No. 13/2010 issued by the Central Depository System (Private) Limited datedNovember 30, 2010, all Shares allotted shall be directly uploaded to the CDS accounts. Existing shares transferredto Applicants allocated on the Offer for Sale tranche would similarly be directly uploaded to the CDS Account of theApplicant. As such, all Applicants should indicate their CDS account number in the Application Form. Applicantswho do not have a CDS account are advised to open a valid CDS account prior to submitting the Application, inorder to facilitate the uploading of allotted Shares to their CDS account.

Please note that upon the allotment/transfer of Shares under this Offering, the allotted/transferred Shares would be

credited to the Applicants CDS account so indicated. Please note that a SHARE CERTIFICATE SHALL NOT BE ISSUED.Any Application which does not carry a valid CDS account number or indicates a number of a CDS account which isnot opened at the time of the closure of the subscription list or which indicates an inaccurate/incorrect CDS accountnumber, shall be rejected and no allotment/transfer of Shares will be made.

You can open a CDS account through any member/trading member of the CSE as set out in Annex B or through anycustodian banks as set out in Annex C of this Prospectus.


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6.0 OVERVIEW OF THE ALUMINIUM INDUSTRY

6.1 Overview

Aluminium is one of the most versa tle , sustainable and widely used metals. It represents the second

largest metals market in the world. At present, aluminium has outpaced steel, copper and zinc interms of consump t on growth. It is believed that produc t on of aluminium is one of the mostenvironmentally friendly processes across the metals and mining industry as it can be endlesslyrecycled while keeping its dis tn ct ve proper te s.

At present, rising prices for subs t tute metals, such as zinc and copper have s tmul ated a directincrease in demand for aluminium. Further, due to its unique combina t on of proper t es, the varietyof applica t ons of aluminium con t nues to increase. Performance proper t es and applica t on ofaluminium are depicted in the table below.

Table 6-1: Performance Proper te s and Applica t ons of Aluminium

Performance Proper t es Applica t onsHigh conduc t vity of heat and electricity Condenser tubes, radiators and air condi t oners in

the automobile industry, and in nuclear reactors,boilers, cookers and cookware

Low density and strength Aircra f , lightweight vehicles, and ladders

Durability Weather-proof and corrosion-resistant

Easy shaping and corrosion resistance Curtain walling, window frames, rolling blinds,doors, exterior cladding and roo ng , suspendedceilings, wall panels and par tt ons

6.2 Aluminium Production Process

The main source of aluminium is bauxite.Bauxite is a rock containing a mixture ofhydrous Al oxides. Production of bauxite iswidely available in bauxite-rich areas inWestern and Central Africa, SouthAmerica, Caribbean, Oceania and SouthernAsia, China, Mediterranean and Russia. As thenext stage of the production process, alumina isrefined from bauxite via the Bayer Process. It isbelieved that countries like India, Iceland,China, Russia, and UAE will enjoy growthand development of aluminium production.

Figure 6-1: Aluminium Production Plant


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In 2013, the total world aluminiumproduction was approximately47 million metric tons according to thestatistics provided by the International

Aluminium Institute.Moreover, China produced a total of 20million metric tons whilst other Asiancountries have produced2.2 million metric tons during 2013.Further, India is expected to be rankedas the second most promising aluminiummarket globally due to the rapidurbanization. Source: RUSAL

The global aluminium industry is fairly concentrated and majority of the key producers are majorcorporations such as Alcoa Inc., Dubai Aluminum Co. Ltd. (DUBAL), RUSAL United Co. (RUSAL) andBHP Billiton Limited. However, given the high capital intensity and energy consumption in theproduction of aluminium, major firms now invest in smelting operations which have access to cheappower resources.

The increase in the world population along with a rapid development and urbanization of thedeveloping countries have contributed mainly towards the rising global demand for aluminium. Asper the industry research carried out by Infiniti Research Limited, the global aluminium market is

expected to grow at a Compound Annual Growth Rate (CAGR) of 5.90% over next five years.Moreover, the global consumption of aluminium is forecast to reach approximately 58 million tons in2015 based on a research carried out by RUSAL as depicted in Figure 6-4.

Figure 6-2: Major Bauxite Producing Countries

Figure 6-3: Primary Aluminium Production January - October 2013


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Source: RUSAL

Figure 6-4: Global Aluminium Consump t on

Thus far the construction industry represents as the biggest consumer of aluminium in developingcountries owing to the substantial investments in the infrastructure development. Construction andtransportation industries are known to be the major consumers of most of the aluminium producedin the above countries.

6.3 Markets for Aluminium

Aluminium is widely used in many products. Transportation, beverage cans and other packaging, andbuilding/construction are well known markets for aluminium. Thus far, the construction industry is

considered as the biggest consumer of aluminium in developing countries owing to the substantialinvestments in the infrastructure development.

Building and Construction: Aluminium is a widely used product in the residential, industrial,commercial, farm, and highway sectors.

Transportation: The majority of the aluminium is currently being used in automotive and light truckapplications, as vehicle manufacturers continue to opt for lightweight aluminium solutions toimprove fuel economy, reduce emissions and enhance vehicle performance.

Packaging: Aluminium is also used in products such as beverage cans and bottles, food containers,and household and institutional foil. Furthermore, aluminium's low weight gives it a competitiveadvantage over other materials with regard to shipping costs.

Electrical: Aluminium has many advantages for electrical applications. It is lightweight, strong,corrosion resistant, and a highly efficient conductor. It is also infinitely recyclable, making it a perfectfit for todays environment.

6.4 Aluminium Industry in Sri Lanka

The Sri Lankan aluminium industry is poised for rapid expansion in downstream sectors such ascasting and fabricating. The demand and consumption of aluminium is expected to increase as aresult of the continuing trend of economic growth. Higher consumption levels in building and

infrastructure, power, consumer durables and other industrial sectors will contribute towards theaforementioned increase in consumption. As a result, the aluminium demand in Sri Lanka isanticipated to grow more than 50% by 2019 according to the industry experts.


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With the influx of high-rises and its ability to substitute timber products, aluminium extrusions havebecome an invaluable product. Sri Lankan aluminium extrusion market consists of the following asdepicted below.

Table 6-2: Aluminium Products in Sri Lanka

Extrusion Technologyand Services

Aging Ovens, Anodizing Chemicals, Anodizing Systems, AutomatedHandling Systems, Belts, Billet Casting

Equipment, Billet Suppliers, Computer Numerical Control (CNC)Fabrication Centres, Die Cleaning Equipment, Die Design, Die Ovens/DiePreheat

Furnaces, Die Polishing Equipment, Die Storage Systems, Dies, DrossTreatment/Removal, Furnaces Billet Heating, Gas Suppliers/Systems,Handling Systems and Materials

Extruded Profiles Building and Construction Transportation, Solar , Electrical, Industrial,

DefenceOther Products andServices

Metalworking Tools, Consulting, Software, Media, Publication

Source: Sri Lanka Aluminium Extrusion International

The development strategy and policy measures adopted by authorities during the post-conflictperiod in Sri Lanka have been well established to achieve the target of becoming aUS Dollar 100 billion economy. The stronger economic performance in Sri Lanka has lifted countrysper capita income substantially. Thus, the rapid growth in the economy indicates the need for adevelopment plan in Colombo and its immediate environs.

Consequently, the construction sector recorded a remarkable growth of 21.6% in 2012 compared to14.2% in 2011. This is considered as the highest growth registered by the sub sector in the past tenyears. Public infrastructure development projects such as road development, power projects, portand airport development and housing development projects contributed mainly towards the drivengrowth.

Table 6-3: Real GDP and Construc on at Constant (2002) PricesYear 2009 2010 2011 2012* 2013

(6 Months)*Real GDP (Rs.Mn) 2,449,214 2,645,542 2,863,715 3,047,277 1,575,418

Construc on (Rs.Mn) 162,790 177,912 203,204 247,091 134,471Share of GDP 6.65% 6.72% 7.10% 8.11% 8.54%

*Provisional Figures Source: Central Bank of Sri Lanka


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Source: Central Bank of Sri Lanka

As illustrated in the above figure, construction share as a percentage of GDP indicates a continuousgrowth and accounted to 8.11% in 2012 in comparison to 7.10% achieved in 2011. Aluminiumextrusion industry in Sri Lanka has experienced an expansion due to its wide application in industriessuch as construction, aviation, defence, solar, power and electrical. Therefore, demand foraluminium is seeing strong growth in Sri Lanka, underpinned by a rapid infrastructure development.

Figure 6-5: Real GDP Growth Rate and the Construction Sector Growth


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7.0 BUSINESS OPERATIONS OF ALUMEX GROUP

7.1 Group Structure

The current group structure of Alumex Group is presented below.vFigure 7-1: Group Structure of Alumex Group

7.1.1 Alumex Group

Alumex is a subsidiary company within the diversified conglomerate, Hayleys PLC (acquired onNovember 04, 2010). Hayleys PLC is a diversified Sri Lankan multinational with multifacetedmanufacturing operations and capabilities with products marketed in over 80 countries across theglobe. The Alumex Group currently holds over 50% of the local market share (source: Data Oneimport statistics and Annual Reports of the listed peers), in the business of manufacture ofAluminium extrusions in Sri Lanka, under the registered brand name Alumex. Alumex Group has along history of over twenty five years having commenced commercial operations in the aluminiumbusiness in 1988 through Alumex (Private) Limited which was incorporated in 1986 (Please referSection 7.13 of this Prospectus) and possesses a well-established customer base. Together, the Groupis shaping a future through a global reach and local presence within extrusions and building systems.

Alumex Group has three extru s ion plants, two powder coating lines, two anodizing lines and onewood effect coating facility in Sri Lanka.

7.1.2 Alumex Limited

Alumex Group is the premier manufacturer of aluminium extrusions in Sri Lanka. The manufacturingoperation is comprised of facilities for melting and casting, die manufacturing, extruding and surfacecoating profiles for industrial and architectural industry. Over the years, Alumex has developed itsprocesses to cater to the demands of the architectural industry by improving its quality and capacity.The Company has a 7 inch extruder which can cater to a majority of the demand in Sri Lanka. It alsoproduces the entire range of products required from mill finished, anodised, powder coated to woodeffect profiles. Alumex received international recognition from AluK of Italy and in recent times,Fletcher Aluminium of New Zealand certified Alumex to manufacture their profiles in Sri Lanka.Alumex is an ISO 9001:2008 certified company and an approved applicator for JOTUN and DGLInternational powders. It also operates as the parent company for two fully owned subsidiariesnamely, Avro Enterprise (Private) Limited and Alco Industries (Private) Limited.


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Alumex presently markets its products in Maldives, India and Bangladesh. In the past, Alumex hasdone several projects in Australia. In future, Alumex hopes to receive international certification forits own designs for windows and door systems which will create more opportunities in theinternational markets. The main objective of Alumex is to grow its exports and have a strongpresence in the South Asian region as morefully described in Section 7.18.

7.1.3 Alco Industries (Private) Limited

Alco Industries (Private) Limited, a company approved by the Board of Investments (BOI), wasincorporated in 2010. It has a modern facility which manufactures aluminium components requiredby industries such as building construction (interior and exterior), bus body/lorry body building andrail coach building hardware. It also manufactures components such as clamps and connectorsrequired by the Ceylon Electricity Board, door handles, rollers, brackets, tile and carpet edging,hinges, ladders, components required by the air conditioning industry and heat sinks required by theelectrical/electronics industry, etc.

The main objective of this company is to manufacture components and industrial tools required bythe Sri Lankan industries by introducing the latest technical advancements in components technologyto Sri Lanka. It has many environmental friendly features and exploits the emerging opportunities ofthe increasing market potential for components industry especially in the current development phasethat the country is marching towards.

Alco Industries (Private) Limiteds plant is equipped with a modern press machine of 1540US Tonscapacity, working tables (tables, stretcher systems, pullers, saw, cooling fans, etc.), multi log heatingfurnace, die furnace with three compartments, aging furnace, etc. The most important machinery inthe process is the hydraulic press machine, and the input to the press machine comes through log

pre-heater and log shear, whilst the output is transferred to the cooling bed. Die pre-heating is anauxiliary process to the press operation. Artificial aging is a strengthening mechanism to componentsproduced.

Alco Industries (Private) Limited utilises most energy efficient systems affiliated to the industry atpresent (e.g.: multi cell die pre-heating oven). Controlling of cooling rate is paramount importantparameter in the field of heat treatments for metals. For this, a sophisticated air cooling system hasbeen introduced to the initial table, which is the first part of the cooling bed. The operation of thepress machine and associated machinery is controlled by Programmable Logic Control (PLC) units; asa result utilisation of human beings in the process is minimised. Due to its superior manufacturingtechnology, the plant is highly energy efficient and is able to reduce the cost of productionsubstantially.

7.1.4 Avro Enterprises (Private) Limited

Avro Enterprises (Private) Limited was incorporated in 2008. In addition to performing as a retailchannel for aluminium extrusion and components, it has a product portfolio covering a range ofaluminium accessories and related products supplied by both manufacturing plants.

Avro Enterprises (Private) Limited is the national distributor for Alpolic Aluminium Composite panelsmanufactured by Mitsubishi Plastic Inc. Japan, Corian Composite panels manufactured by DuPont Inc.USA, Elumatec Aluminium and UPVC processing machines manufactured by Elumatec Germany and

Assa Abloy/Interlock Aluminium hardware accessories manufactured by Interlock New Zealand.


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The objective of Avro Enterprises (Private) Limited is to become the Leading Building System SolutionProvider in the Sri Lankan market.

7.2 Vision and Mission

Vision : To be the premieraluminium extrusions providerin the South Asian Region


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7.3 Values of Alumex Group

Integrity: Ethical and transparent in all our dealings

Enduring Customer Value : Enhancing experiences for every customer, from the rural farmerto the global consumer

A Will to Win : Exhibiting the will to win that which is important to Alumex and its shareholders

Respect for People : Treating everyone with respect and dignity, providing for the development ofour people and rewarding them for good performance

Good Citizenship : Caring for the communities in which they work, actively supporting their growthand being environmentally responsible in all we do

Teamwork : Working with each other and with partners across boundaries to make things happen

7.4 Business Processes

Aluminium is a flexible metal that exposed itself to many production methods which in turn lead tothe introduction of a range of different products that can be made out of aluminium.

Figure 7-2: Business Process


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7.4.1 Raw Materials

Alumex Group imports semi-finished casting products (AluminiumAlloyed 6063/6061 logs) from internationally recognizedmanufacturers. Its main imported products are logs and ingots and

plays an integral role in the production of many aluminium products.Ingots and logs are used in the extrusion process. Plate, wire, sheet,foil, rod, and bar products are all produced by pressing or rollingingots and logs/billets. Groups average aluminium consumption isapproximately 400 metric tons per month out of which imported aluminium is approximately 300metric tons. The balance is sourced locally in scrap form for recycling through which aluminiumalloyed logs (6063/6061) are made.

All the material used in the plants are from world renowned manufacturers. The Company importsaluminium extrusion logs from international manufacturers such as DUBAL (UAE), Hydro Aluminiumand Rio Tinto Alcan. Chemicals for anodizing are supplied by SurTec (Germany). Powders for powdercoatings are supplied by Orica/Dulux (Australia/ New Zealand), Akzo Nobel (Europe) and JOTUN fromNorway.

7.4.2 Billet Casting (Melting)

In addition to the imported logs, Alumex produces logs locally from recycled aluminium mixed withvirgin ingots. This is a manufacturing process where a liquid material is (usually) poured into a mould,which contains a hollow cavity of the desired shape, and then allowed to solidify.

The log casting section has a modern foundry shop equipped withmelting furnaces (two), a vertical hot top casting machine and

homogenizing facilities for manufacturing of logs. It also has a hi-techspectrometer (a photon measuring device that captures the spectrumof the signal) to analyse the alloying components/metals to ensure thequality of the logs. Thus, Alumex Group is well equipped to meet thegrowing demand in wide array of aluminium products andcomponents.

7.4.3 Extrusion Die Designing and Manufacturing

Alumex Group is the sole designer/manufacturer ofaluminium extrusion dies for virtually any shape ofaluminium profiles in Sri Lanka and this ability providing theCompany with an advantage over its competitors. Thedesigns are done according to the customers/industryrequirements as well as to get the best out of extruder suchas reduction in pressure and maximum production. The dieshop is equipped with sophisticated CNC machinery withCAD/CAM software for wire cutting and spark erosion,milling machines and other die finishing facilities includingheat treatment and surface treatment equipment.


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The process of manufacture consists of the design being drawn on a BS: H13 high carbon die steelplate (blank) according to the specification given in the die drawing. Subsequently, it is processed bylathe machining, drilling, milling, grinding, CNC Electrical Discharge Machine (EDM), CNC wire cutmachines and sent through a heat treatment process to carry out case hardening work. The die(mould) will then be sent through a nitriding process. The experienced designers and productionengineers of Alumex create high quality dies within very short lead-times.

7.4.4 Plant Specifications

Table 7-1: Plant SpecificationsPlant SpecificationAlumex Limited Plant 1 - Extrusion Press 1000 metric tons

- Billet Size 5 (122mm)Alumex Limited Plant 2 - Extrusion Press 1850 metric tons

- Billet Size 7 (178mm)Alco Industries (Private) Limited Plant 1 - Extrusion Press 1540 metric tons for

Manufacturing of Component- Billet Size 6 (154mm)

7.4.5 Extrusion

Extruding is a process whereby aluminium logsare heated to approximately 450-500C andforcing the hot metal through a steel die. Theoutput of this process is called mill finishedaluminium extrusion . A smaller percentage ofextruded aluminium will be sent out to customers

as mill finished products upon request afteraging.

The use of aluminium extrusion has increasednoticeably due to its distinctive properties, whichfacilitate to produce multitude of products that can be readily formed into complex shapes. Extrudedaluminium is considered inexpensive and lead times for custom shapes are relatively brief. Extrudedaluminium is mostly used in architectural applications to form complex shapes and the life-cyclevalue of the product remains high due to aluminiums recyclability. It is the most abundant greenmetal in the world.

Alumex Group has three extrusion machines, out of which two are operating sixteen (16) hour perday, every day except Saturdays and Sundays and utilisescapacity up to 40% of its 1000 metric tons per monthavailable capacity. The third machine operates as andwhen it is necessary. Additionally, the Group is capable ofextruding any profile up to circumscribing diameter (CCD)220 mm. The present production capacity is in excess of12,000 metric tons per annum. The largest consumer ofthese products in Sri Lanka is the building industry, whichuses aluminium extrusions in window and door frames. Other applications for extruded aluminiumproducts include engineering applications, bicycle frames, structural automotive components, pipesand tubes, furniture, bus, lorry and rail coaches.


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7.4.6 Stretching and Cutting

As the extruded section emerges, it is cooled and cut to the desired length. A "stretcher" may beemployed after the profile has been quenched in order to straighten the extrusion and correct anytwist that may have occurred subsequent to extrusion. Thereafter, a finish cut saw is used to cut the

profile to the specified commercial lengths.7.4.7 Aging

Heat treatment is then used to optimise the materialsinherent mechanical properties and ensures maximumstrength, hardness, and elasticity for the specific extrusionprofile. Natural aging occurs at room temperature whilstartificial aging takes place through controlled heating in anaging oven.

7.4.8 Anodizing

Anodizing is an electrochemical process that forms a protectivecoating of aluminium oxide, which is a hard, durable, weatherresistant substance that protects the base metal, on the surface ofthe aluminium. Extruded and aged aluminium profiles will beimmersed into an acid electrolyte bath and an electric currentpassed through the medium to anodize. The two anodizing plantshave a combined capacity of over 5,400 metric tons per annum. The

process is capable of coating to a thickness range of 5 to 25 micron. Colour options available arenatural, bronze (light to dark) and black.

7.4.9 Powder Coating

Powder coating is a type of dry coating, which is applied as afree-flowing, dry powder. The coating is typically appliedelectrostatically and is then cured under heat to allow it toflow and form a "cover". The powder is made out ofpolyester and is usually used to create a hard finish that istougher than conventional paint.

Powder coating is the most favoured, durable, and cost-effective alternative for finished extrusionsas it increases protection from cold, heat, corrosion and scratching. Powder coating finishes are beingused widely in the production of thousands of consumer, commercial and industrial products in SriLanka at present. It provides an attractive finish for aluminium extrusion products whilst itsmechanical properties can be crafted to meet the varied requirements of customers.

Alumex Group has a polyester powder coating plant with a capacity of over 1,800 metric tons perannum and has planned to double its capacity. Polyester powder coating, also known as colourcoating on aluminium, is a solvent-free, durable, factory applied coating for aluminium substrates. It

is a thermosetting coating where the resin cross links after being stove at around 200 C (curing).Alumex Group offers a range of powder colours and powder qualities with 10 years, 15 years and20 years guarantees.


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7.4.10 Wood Coating

The woodex process at Alumex Group offers a range ofinnovative finishes such as wood, marble and granite toaluminium profiles. Alumex Group pioneered the wood

coating products in Sri Lanka and has gained a significantmarket share similar to the other segments. The processcombines a strong protective coating with a decorativeappearance whilst offering a real alternative to typicalarchitectural materials such as wood, marble or granite.Woodex has high weather resistantance and requires minimum maintenance.

It is expected that the wood finished extrusions will substitute wooden doors, windows, etc. andpenetrate the local construction and interior designing to a great extent. Designs produced compriseof teak, mahogany and rosewood finishes.

7.4.11 Polished Anodized Aluminium Extrusions

Polished anodized extrusions are a newly added products by Alumex Group. It is expected to capturea substantial share of the market both locally and internationally. This process provides the normalanodized product a more attractive and protective coating and it is expected to be successful in theextrusion market. Alumex Group anticipates the product to be popular with overseas buyers in thefuture.

7.4.12 Production Capacities and Utilised Capacities

Table 7-2: Production Capacity

Product /PlantCapacity

(Per Annum) Current UtilisationExtrusion 12,000 metric tons 40%Anodizing 5400 metric tons 40%Powder Coating* 3600 metric tons 50%Wood Effect 360 metric tons 50%Die Manufacturing 2400 units 40%Aluminium Melting 4800 metric tons 45%

*Includes the proposed state of the art Powder Coating Plant scheduled to start commercial production in April/May 2014 with a capacity of 2400 metric tons.

7.5 Current Product and Service PortfolioAlumex Group is renowned for its 26 years of industry expertise in design and development ofaluminium profiles. Alumex product innovations can be found in various industries from architecturalto engineering, including designs tailored to suit customer requirements.

7.5.1 Product Range

Alumex is the driving force in the local aluminium extrusion and fabrication market. As theundisputed market leader in Sri Lanka, it has introduced many designs, concepts, products to suit thelocal construction and engineering industry to propagate many applications. T