1.0             Government decision

1.1       The Government of India intends to disinvest out of its 87.15% shareholdings in National Aluminium Company Ltd. (NALCO), shareholding to the extent of 10% through domestic issue (retail and institutional) in the first stage and 20% through ADR in the second stage, to be followed by the strategic sale, in the third stage, of about 29.15% share, bringing down GOI equity to 26%,   after reserving upto 2% for employees at the time of strategic sale. The timing of the strategic sale will be decided by the Government later.  Expressions of Interest are invited by 27.3.2002 for engaging  a Global Coordinator cum Advisor to assist  and advise the Government in the process.

1.2             Incorporated in 1987, NALCO is one of India’s largest and low cost aluminium producers and accounts for  about one-third of the primary aluminium produced in the country.  NALCO’s product mix includes Alumina and primary aluminium in ingot, rod and billet form. The quality of the ore from NALCO mines is among the best in the world. Its bauxite mine in Orissa has the largest bauxite reserve in Asia.  It has its own locomotives and wagons for transportation of alumina, a captive power plant and access to its own port facility at Visakhapatnam. With world-class deposits, and modern processing technology, NALCO is a  company of international standard and has an excellent record of performance.  Its strong fundamentals provide it with distinct long-term competitive advantage in the aluminium sector.   The company has a very impressive track record over the past five years and its net profit for the year 31^st March, 2001 was Rs.6,558.30 million. For further details on the company, the Annual Report of NALCO (2000-2001) may be seen at website www.nalcoindia.com.

2.0             Responsibilities  of the Jt. Global Coordinator and Advisor

2.1       For Stage I & II: The Global Coordinator-cum-Advisor(GCA) would be required, inter alia,  to advise  on the timings  of   the capital market offer, to ensure best returns to the Government. They would be required to advise on all aspects of the domestic and ADR offering including identification and selection  of lawyers and accountants  and coordinate their work under the guidance of the Government, complete  due-diligence, draft offering documents, red herring  document etc. for the issue,   coordinate with printers for timely completion and distribution of offering documents and other relevant material needed for sale. Their responsibilities would include pre-market survey (if needed), road shows, book building and generation of interest amongst prospective investors. The GCA will also be required to do the market research alongwith pricing and allocation of shares and after sale support in case of domestic as well as international issues. They would also guide and facilitate in obtaining necessary approvals, completion of regulatory requirements  including Listing etc. and perform all other responsibilities connected with such offerings.  For an ADR of this size, it is desirable that two Joint Global Coordinators would be required, having adequate experience in similar offerings. The selected party would be required to form a team with another party (together, as Joint Global Coordinators) from among the final shortlisted parties, in consultation with Ministry of Disinvestment and Department of Mines, only for Stage-II of the transaction.  The GCA selected will also have to  form a syndicate including co-lead managers, co-managers etc. in consultation with Ministry of Disinvestment and Department of Mines.

The fees quoted by the Global Coordinator–cum-Advisor should be separate for  the two stages, along with separate drop dead fees, and should include provisions for the Joint Global Coordinator and all other syndicate members.

2.2       For Stage –III

In case of strategic sale, the responsibilities of the Advisor would involve advising and assisting Government of India in the privatisation of NALCO and would, inter alia, cover assessment and valuation of NALCO, suggesting measures to enhance sale value, preparing   detailed information memorandum, marketing of the offer, inviting and evaluating the bids, assisting during the negotiations with prospective buyers, drawing up the sale/other agreements and advising on post sale matters. The exact time for strategic sale will be decided by Government separately.

3.0             Submission of Expression of Interest

3.1             Reputed merchant/investment banks, consulting firms and financial institutions with adequate and specific expertise in disinvestment through capital market offering (domestic and ADR) and strategic sales, are invited to submit Expressions of Interest for selection as GCA to Director(Finance), NALCO at Bhubneswar or at NALCO’s Delhi Office, 303, Mercantile House, 15 K.G. Marg, New Delhi – 110 001 (Tel. No. 370 6089). The bidders would be required to deposit along with the Expression of Interest, a non-refundable earnest fee of INR 40,000   by way of demand draft drawn in favour of Director(Finance), NALCO, payable at Bhubneswar or New Delhi. GOI reserves the sole right to accept or reject any or all Expressions of Interest without assigning any reasons therefor.  Together with the Expression of Interest, the following details are to be sent:

(i)            Full particulars of the constitution, ownership and main business activities of the prospective Global Coordinator-cum Advisor (bidder). In case of consortium bids, the particulars of the coordinating firm having the principal responsibility for the mandate as well as those of other partners.

(ii)          Unabridged Annual Reports or audited financial accounts for the last three years of all the partners.

(iii)       Details of the pending litigation and contingent liabilities, if any, that could affect the performance of the bidder under the mandate, as also details of any past conviction and pending litigation against sponsors/partners, Directors etc., and any areas of possible conflicts of interest.

(iv) For Stage – I & II  (Domestic and ADR)

a)       Details of Domestic issues managed as Lead Manager;

b)      Issues managed  as Global Coordinator or  Joint Global Coordinator/Book Runners, in respect of issue size of more than US $ 100 million only.

                        (Value US $ Million)

b)             Understanding of the Company

Details of understanding and SWOT analysis of  NALCO may be furnished.

c)             Experience and presence in India

A brief note evidencing the prospective GCA’s strength in India indicating the number and addresses of offices, manpower and investment, if any , in the Indian capital market as follows:

(a) Commitment to India, indicating net investment In Indian capital market

(b) The quality and quantity of presence in India with specific reference to research team

(c) Number and places of offices with address, manpower with the investment banking  team.

d)             Broad Scheme for the issue

i) Optimal syndicate structure suggested to maximize quality and quantity of demand.

            ii)             Proposal  on syndicate incentivisation.

            iii)             Strategy for pre-marketing.

            iv)        Proposed Road Show  venues and reasons for 

 suggesting the same.

                        v)             Commitment(s) which may act either as a constraint or                                          as a conflicting interest to your involvement in                                          the   proposed ADR issue

e)             Manpower commitment

Details of team who will be handling the proposed issue, their status in the organization, their background, qualification, experience and present addresses.

f)             Marketing and Demand Analysis

Details of the following should be furnished:

i) Equity sales and distribution capacity with demonstrated capability of selling Indian issues in particular, Asian equity and global equity along with distribution network.

ii) Demand analysis as projected and details of sectors influencing demand.

ii) Strategy for marketing shares and identification of target investor groups.

iv)             Identification of key selling points.

g)             Valuation Methodology

Details of the valuation methodology to be followed in determining the final pricing of the issue, indicating clearly the pricing level proposed to be underwritten.

h)             Quality Research

Research strength in the country, sector, region, world based on rating as established by independent global surveys.  Details should be given relating to  research capabilities and experience and background of  the research team.

i)             After-market support

Strength in lending after market support, with specific reference to Indian issues managed in the past.

j)             Underwriting capabilities

Underwriting capabilities including details of capital base of the Investment Bank available to support such underwriting, record of past underwriting commitments and experience.  Also, details of any of the underwriting commitments (including hard underwriting) which could not be met.

k)             Time Schedule

A realistic time schedule for launching the proposed Domestic and ADR issue with complete break up of activities to be undertaken by various agencies involved in the issue.

(v)        For Stage – III (Strategic Sale)

(a)  Privatisation experience as Advisor

(b)  Details of similar transactions (Government, quasi Government and private sector, separately) executed/under execution by the bidder in a similar sector/industry. This should cover the role played by the Advisor in deal structuring, valuation, transaction marketing, preparation of information and sale memorandum, Shareholders and Share Purchase Agreement etc. and bid evaluation and negotiations.

(c)   Proposed methodologies of the Disinvestment / Strategic sale transaction indicating the issues involved including;

(i)         Valuation of NALCO

(ii)                Structure of the sale transaction

(iii)              Marketing Strategy

(iv)               Bid evaluation methodology

(v)                 Tentative time frame

(d)   Details of deal team:

(i)             Experience and qualifications

(ii)                Team members located abroad

(iii)              Team members located in India

3.2       All the information sought above, and any other addition/information considered necessary by the bidder, should be sent, in 10 copies , maximum of  10 pages( font size 12) to the Director(Finance), NALCO by 27.3.2002.

4.0             Presentation:  Qualified interested parties would be required to make a presentation of their credentials and the proposed transaction, before the Inter-Ministerial Group (IMG) at New Delhi in the Committee Room of Ministry of Disinvestment, Room No.515, Block No.14, CGO Complex, New Delhi – 110003.  The exact date and time of the presentation will be intimated separately. The parties will be assessed broadly on the following criteria:

For Public offer

a)             Experience and capabilities in handling similar transactions as Advisors/Global Coordinators.

b)         Sector expertise and experience

c)             Understanding of the PSE.

d)         Deal team qualification and manpower commitment to the deal.

e)             Marketing strategy and after market support

f)          Local presence and level of commitment to India.

g)         Global presence and distribution capabilities.

h)             Research capabilities.

For Strategic sale

a)             Strategic sale experience

b)         Sector expertise and experience

c)         Local presence and level of commitment to India.

d)             Understanding of the PSE.

e)         Deal team and manpower commitment.

f)             Research capability

g)         Global presence.

5.0       Fee : The Global Coordinator-cum-Advisor will need to quote a separate fee ,for each of the three stages (domestic/ADR/strategic), as a percentage of disinvestment proceeds in each stage, gross of all taxes, which will be payable after successful completion of each stage. . Separate drop dead fees will also  have to be quoted for each stage, to  be payable in case at any stage the particular mode of disinvestment is abandoned by the Government, after the work on that particular stage has been started by the Government/Advisor.

The bid should be unconditional. Expenditure on account of fees to legal/accounting or any other consultant, as well as to printers, if appointed by GOI and / or NALCO, should not be included in the financial bid. Expenses of Road Shows, conferences and travel, boarding and lodging, only of Government/NALCO officials will be borne by the Government. The expenses of the Custodian will also be borne by the Government/Company.  Contributions made by the depositary shall be directly remitted to the account of the Government/Company and shall be excluded from any appropriation in relation to the Gross amount payable to the GCA. The GCA will, however, pay the travel related expenses and all the other expenses including those related to their due diligence, their road show expenses and pre-marketing expenses in connection with the offerings, expenses of legal counsels, accountants and other experts appointed by them for communication and for preparation of offering circular and prospects etc. The GCA will be liable to pay taxes for their professional services as per laws of the land.

5.2             Exclusively for the ADR offer, the Global Coordinator selected will have to take another Global Coordinator ( from among the parties finally  shortlisted by the Inter–Ministerial Group)  who, together as Joint Global Coordinators, will form a syndicate including lead managers etc. in consultation with Ministry of Disinvestment and Department of Mines.  The fee quoted by the selected Global Coordinator–cum-Advisor shall include provisions for such other Joint Global Coordinator and syndicate members who should be included, in consultation with Department of Mines and Ministry of Disinvestment.

5.3       The fee will be quoted by the Party, in a sealed cover separately for all the three stages along with separate drop dead fee and handed over to the Chairman of the Inter-Ministerial-Group, immediately after presentation is over. The fee quoted should be unconditional.

6.0             Eligibility

Government of India has recently issued guidelines prescribing certain qualifications for Advisors for disinvestment process. A copy of the guidelines (OM No. 6/4/2001-DD-II dated 13^th July, 2001) is enclosed. The GCA is  requested to carefully go through the guidelines and after satisfying that they are qualified to act as Jt. Global Coordinator-cum-Advisor, furnish the following certificate as a part of the proposal

“We certify that there has been no conviction by a Court of Law or indictment/adverse order by a regulatory authority for a grave offence against us or any of our sister concern. It is further certified that there is no investigation pending against us or our sister concern or the CEO, Directors/Managers / Employees of our concern or of our sister concern. It is certified that no conflict of interest exists as on date and if in future such a conflict of interest arises we will intimate the Government of India of the same.”

If any further clarification is needed, the undersigned may be contacted.

Director (Finance)

National Aluminium Company Ltd.,

NALCO Bhawan,

P/1, Nayapalli,

Bhubaneswar-751013

INDIA

Tel.No.91-674- 301988 to 301999

Fax-91-674-300 550, 300612 and 301608                                  

Email :  venkataramana@nalcoindia.co.in